4 Scope and scale |
"The public look to the BBC to provide
some of the essentials of their daily lives. But while it must
remain a great national institution, it should be as small as
its mission allows."Michael Grade, BBC Chairman, June
2004, in Building public value, the BBC's vision for its future
after its 2006 Charter expiry. 
86. Many of the criticisms we heard about the BBC
from competitors and commentators were to the effect that the
BBC does too muchspreading its remit too broadly, or otherwise
occupying space that others could, and would, fill. What the BBC
can do is limited by both what it is legally allowed to do and
the amount of money available to it. However, in neither of these
areas is the BBC merely a passive recipient. The BBC Trust maintains
that the scope and scale of the BBC is ultimately determined by
the purposes set for it and the amount of funding provided to
it. Yet the BBC
itself unquestionably has a significant role in determining how
big or small it is and the scope of its activities.
87. While the public purposes and the requirement
for the Trust to set multi-year purpose remits are fixed in the
Charter (along with the Trust function of "defining suitable
performance criteria and measures against which the effective
promotion of the public purposes will be judged"), they are
not set in stone for subsequent Charters, and the BBC can express
its view on their evolution, including any desired expansion,
contraction or redefinition. Moreover, the Trust sets the detail
and the content of the service licences (which define the scope
of each service, its aims and objectives, its headline budget
and, where appropriate, other important features). The Trust also
determines the BBC's priorities and the practical scope and scale
of the BBC. Put another way, the Trust has a significant degree
of power and discretion in determining what the BBC actually does.
88. Moreover, the amount of funding provided to
the BBC does not appear without any context: while the BBC cannot
guarantee the level of funding it receives, the BBC itself is
largely responsible for identifying its funding needs and putting
forth its funding requests, depending not only on its assessment
of licence fee payers' interests but the BBC's own ambitions for
its scope and scale. For instance, the BBC can seek to: launch
new or close existing services; propose new activities or reduce
existing ones; or alter the level of provision of individual services
or particular activities, subject to the parameters of the Charter
and Framework Agreement with the Secretary of State (the latter
of which also can be altered by agreement).
89. The brake on the ambitions of the BBC is provided
not only by the Trust but also by Government. In its bid in November
2005 for a new licence fee settlement, for instance, the BBC sought
a licence fee increase of RPI plus 2.3% a year from April 2007
to fund, among other things, a new requirement of £641 million
for local investment including "ultra-local" television
services. The then Minister for Media and Tourism, James Purnell,
stated that the BBC's licence fee proposal was being considered
by the Government as the BBC's "opening bid" and it
was ultimately awarded a lower sum than sought. Following the
BBC Executive's formal proposal for new local video services in
the new Charter period, the BBC Trust refused permission because
it would not improve services enough to justify either the investment
of licence fee funds or the negative impact on commercial media.
Instead, it believed "the BBC's priority should be improving
the quality of existing regional services."
90. The Trust claims that it is difficult to put
a complete stop to any significant parts of BBC activity, such
is the support and loyalty shown by audiences to the services
used. According to the BBC Executive, the BBC's remit requires
it to provide something of value for everyone and to offer a wide
range of programmes and services in doing so. It noted, for instance,
that when audiences are asked which of the 14 main genres covered
by the BBC are important, they support nearly all of them in terms
of the BBC serving the good of society as a whole.
91. While it is true that the BBC has had to change
plans to close down services because of the vociferous support
of people who valued the threatened services, any estimate as
to how widely listeners/viewers as a whole value specific services
or genres depends critically on the exact question put to those
surveyed. For example, different polls attempting to discover
the value of the BBC as a whole resulted in figures of 57% support
in a YouGov poll of May 2012 that asked "Do you think that
there should or should not be a publicly-funded broadcasting service,
such as the BBC?", compared with an 80% figure for a BBC
poll asking the question "Would you miss the BBC if it no
longer existed". Statistics from such broadly-worded surveys
are not helpful in determining what the BBC should be offering
and how much it should spend. Relevant follow-up questions to
such research, to get a fuller picture, would ideally ascertain
how willing respondents were to pay for all of the services for
the good of society, how much they were willing to pay, and the
extent to which they consumed content from particular genres.
92. Through the setting of the licence fee, the Government
of the day can, if they wish, either squeeze or boost the BBC's
funding and, therefore, affect the scale of the BBC's services
and ambitions, even within a secure Charter period. Moreover,
the Government is not required to pay to the BBC the whole of
the licence fee revenue received. Lesser sums can be paid out
as the Secretary of State may, with the consent of the Treasury,
we have set out above, the Government froze the licence fee and
the BBC agreed to its funding additional services and new responsibilities
under the 2010 settlement, at a time when all public spending
was being cut. The BBC has stated that the freeze will equate
to a 26% real terms cut in its funding by 2017.
93. In response, the BBC put in place a series of
productivity and savings measures as part of the DQF programme.
DQF involved some upfront service reductionsfor example
there are now no first-run daytime programmes on BBC Two and 'network'
programmes are aired as part of local radio schedules at non-peak
times. The more recent proposal to "re-invent" BBC Three
online was also, in part, a response to the financial challenges
of the licence fee settlement, although the BBC has also said
that "people who watch BBC Three are more likely to be online
and want new content and new forms of content online'" and
described the planned closure of the linear channel and move online
as "the direction of travel
earlier than what we might
have liked, but it is what we would have done in the long term
to give young audiences what they tell us they want".
A smaller BBC
94. In 2011, Mark Thompson, the then Director General,
spoke of a BBC that would become smaller in many ways but with
a breadth of services and a creative fire-power which remained
said that the 2010 Licence Fee settlement meant "some difficult
and sometimes painful choices for the BBC" but that everyone
inside the Corporation also had to accept that it would still
leave the BBC with resources and capabilities and strategic options
far greater than those enjoyed by almost all of its commercial
counterparts. The BBC 2010 strategy review laid out a series of
core principles, which included "doing fewer things better"
whilst maintaining distinctiveness. The question which arises,
though, is what is the optimal size for the BBC to deliver its
core public purposes and what practical limits can be put in place
to prevent it over-reaching itself.
95. As part of the debate into the future of the
BBC, Professor Patrick Barwise and Professor Robert G. Picard
completed a study comparing the 2012 television market with what
it might have looked like if there were no BBC television.
Their work was intended to provide a basis for examining the possible
long-term effects on UK-originated production if the BBC's funding
and share of industry revenue continued to reduce. The study also
was designed to test the claim that BBC television "crowds
out" content investment by commercial broadcasters. Overall,
their conclusion was that without BBC television there could be
as much as 25% less investment in content made by UK broadcasters
and that spend on first-run UK content would be between 25% and
96. The modelling applied assumed that commercial
broadcasters would continue to invest the same proportion of their
total income in content as before, despite their revenues growing
as a result of not being "crowded out" by the BBC. Under
this scenario, given there would be no BBC television, it was
predicted that the growth in commercial revenues would not be
sufficient to cover the loss of the BBC's licence fee-funded television
content. Again under these circumstances, assuming there would
be an uptake in pay-TV, overall people would either be "paying
slightly more for slightly less choice" on television than
they currently did with the licence fee, or "paying slightly
less for much less choice".
The study did not take into account the impact on BBC radio and
97. In 2012, the BBC's share of total television
industry revenue had fallen to 22.1%, from 47.8% in 1985, although
this reduction was not a steady fall: It was less severe in the
period between 1998 and 2012 owing to a more generous licence
fee settlement to enable the BBC to launch its new digital channels.
BBC television now accounts for about one-third of total television
viewing; by comparison it had nearly half of all viewing in 1985.
Professors Barwise and Picard forecast, based on current policy
and market trends, that by 2016, the last year of the current
BBC Charter, total industry revenue, including that from online
television, would have grown to £14.4bn, of which only £2.6bn
(18.5%) would be BBC income allocated to television. In their
view, a key policy question is what happens after 2016: If the
BBC licence fee were to remain frozen and more and more of it
was used to fund other activities whilst the rest of the market
grew, then within a generation the BBC could be reduced to a "minor
sideshow, the UK equivalent of PBS in America".
98. In a critique of the Barwise/Picard study, David
Elstein considered that it was risky to base a thesis on a snapshot
analysis. For instance, there was evidence from Ofcom's annual
public service broadcasting reviews to show that spending on first-run
origination could decline even while television revenues were
rising and that BBC spending on first-run origination has declined
even as the licence fee revenue increased. Mr Elstein argued that
if the BBC were to disappear from the scene, as was being hypothesized,
a whole raft of established and popular productions would suddenly
be available for others to do.
He thought it was simply illogical to imagine that no increase
in share of revenue would go on origination, which was an underlying
assumption of the study. He also noted:
To claim some special virtue for BBC TV as delivering
33% of viewing for 22% of TV revenues needs to be seen in the
context of ITV and Channel 4 also delivering 33% of viewing, but
for just 19% of total revenues.
All this shows is that
100% distribution, and priority position on the EPG, TV listings
and DTT multiplexes hugely influence the outcome.
The debate between Professor Barwise and Mr Elstein
continued in exchanges into which we were copied, but without
reaching an agreed conclusion.
99. We recognise that, when assessing the value of
the BBC, its contribution to UK originated content is just one
measure. Professor Beckett told us that to measure the BBC in
terms of the amount of first-run content as being the consumer's
primary judgement of whether they were getting good media is "nonsense".
There are of course many other measures including the reach, quality
and impact of programmes and services delivered that should be
considered but also, significantly, whether or not people regard
paying the television licence as good value in view of what is
provided for them as consumers and as citizens.
Something for everyone
100. Some, including the BBC itself, argue that,
given its funding basis, the BBC is obliged to provide something
Yet as Professor Beckett told us, universality should not mean
the BBC trying to do everything and while the BBC has made some
retreats, for example from major live football coverage, it needed
to reconsider what it was doing in a more systematic way. In his
view, the BBC has done an outstanding job of improving the quality
of its core mass services but, in a world where quality mass entertainment
was becoming ever more dominant in the commercial sphere, the
BBC should concentrate on the added value of more intelligent,
innovative, challenging content.
101. While none of the BBC's commercial competitors
is arguing for it to become a narrowly focused PSB broadcaster
producing only content that the market would not provide, there
is a fundamental view that its licence fee funding means that
it must act differently to the rest of the market. There is a
strong expectation that it must create innovative content and
formats and bring new talent to the fore.
Yet several witnesses complained that the BBC was by habit fixated
on audience share and ratings rather than understanding its place
in the broadcasting ecology and focusing on its distinctive role
and strengths. Gavyn Davies thought that the BBC paid too much
attention to ratings because there was no other "currency"
for them. He explained:
[The BBC] don't have revenue and they don't have
profits and it has been difficult to get other things like reach
and distinctiveness measured in terms of a currency that make
you a successful producer of television.
102. Similarly, while it is generally accepted that
the BBC does a lot of things that the market would not replicate
at the same scale or volume by itself, several witnesses found
that the BBC's schedules too often contain programmes and formats
that are seen elsewhere. For instance, we were told there was
no obvious justification for the BBC buying in formats such as
The Voice for the UK audience.
Lord Burns worried that over a 10-year period BBC One had ended
up looking too commercial and had relegated quite a lot of what
would be regarded as public service broadcasting to BBC Two, BBC
Four and its children's channels.
"the BBC finds it very difficult to see
success anywhere without wanting to have some of it for itself.
They argue they have to have something for everybody and
that is the very phenomenon that drives you towards the middle
ground and trying to get the very large audiences.
real issue] is between distinctiveness versus universality and
103. While ITV did not think that the BBC should
be precluded from providing popular content, they wanted its more
mainstream material to be produced in a distinctive way that perhaps
commercial broadcasters would find difficult to do themselves.
In their view, the BBC should not be relying on old tried and
tested formats or copying ideas of, or buying in formats from,
other broadcasters. Instead, it should be using the financial
security provided by the licence fee to develop new formats and
content and show that it was fostering new talent. ITV suggested
that one possible way to promote such behaviour could be to specify
a clear framework in a new BBC Charter and Agreement which set
out specific requirements for the distinctiveness of the BBC's
services and output.
For instance, requirements such as a minimum number of unique
titles in the evening schedule or a mandate for a variety of formats
and genres of programming on BBC One could be codified in the
Framework Agreement and regular reviews conducted to monitor compliance.
104. Many of our witnesses said that the BBC's public
funding means that it must take risks in addressing socially valuable
genres such as children's, arts, religious and regional programming
where there is under-provision. Nevertheless, according to Channel
4, the BBC could be accused of spreading itself too thinly or
attempting to be all things to all people.
They told us while appealing to the nation as a whole was a key
part of the BBC's mission, it should not be seeking to serve the
needs of niche groups at the expense of serving the needs of the
wider population. For instance, the BBC should not be replicating
provision where other PSBs had remits specifically designed to
cater for these audiences. In ITV's opinion the issue of the BBC
crowding out others was due to a significant extent to the disproportionate
size of the BBC's budgets compared with those of most of its competitors.
One of the things we see on BBC One versus ITV1
is that there is around £200 million of difference in budget
now, which is a pretty substantial difference between the two
It gets to a point where it becomes harder to compete
against a BBC that is funded with a disproportionately larger
amount of money than its key competitors.
105. In its third review of public service broadcasting,
Ofcom has noted that while the public service broadcasters as
a whole (BBC and commercial PSBs) continue to account for the
bulk of investment in first-run non-sport UK content, there has
been a substantial fall in spend on all programmes, and investment
in new first-run UK originations is substantially down since 2008,
with a 17.3% real-terms decline in programme spend by the PSBs.
However, non-PSB channels (the non-PSB portfolio channels of ITV
and Channel 4 such as ITV2 and E4 and other multichannel broadcasters
combined) have increased their investment in non-sport first-run
originations by 43% since 2008, accounting now for 15% of all
non-sport investment in first run programmes in 2013, up from
9% in 2008. Whereas in the past the BBC and commercial PSBs have
been the sole providers of public service content, other entrantswith
no public service funding, privileges or obligationsare
contributing. News, arts and documentary programmes are among
106. The Commercial Broadcasters Association (COBA)
pointed out that non-PSB broadcasters in the commercial sector
were one of the fastest growing parts of the UK television industry,
doubling direct employment in the last decade, raising investment
in UK content by 30% in the three years since 2011, albeit from
a very low base, and increasing commissioning from independent
producers by 50% in 2012. According to COBA, the multichannel
sector accounted for 18% of all new UK television production and
in many areas this commercially-funded content was comparable
to PSB content.
BSkyB told us that, in 2014, they planned to invest £600
million in their own production and origination of content. This
would be a significant increase, given that in 2013 the combined
spend by commercial PSBs on their portfolio channels
and the multichannel sector
on first-run UK originations, excluding spend on sports programming,
was only £345 million.
Even the 2013 spend represented a 43% increase in real terms from
the equivalent spend in 2008.
107. We were told that one of the ways in which the
marketplace has changed since the last Charter Review is the waning
ability of commercial broadcasters to finance public service content
by themselves. Gavyn Davies explained that, owing to the profound
changes in the advertising market, particularly the move from
expensive broadcast advertising to online advertising, it was
becoming increasingly difficult for the private sector to sustain
the traditional model of public service broadcasting, free-to-air,
funded by advertising.
Mr Davies also drew attention to a proclivity in broadcasting
towards a kind of natural market concentration and how such consolidation
could threaten the health of public service broadcasting. He told
I always thought that broadcasting was a kind
of natural market to have concentration in it; if you left it
to the private sector you would end up with a concentrated position
for one or two very large players. I believe that is happening
and I don't think it is healthy for the public.
108. A way in which the BBC might use its privileged
and publicly-funded position to help support public service contributions
by others is through taking a more collaborative approach to the
provision and production of content. Professor Beckett advocated
the BBC collaborating and commissioning externally much more,
including making partnerships with non-UK producers. He saw a
need for the BBC to become an "open source" studio organisation
that used its resources and facilities as the support structure
for local and national content creation rather than always seeking
to provide these services itself.
If more people participated in production in this way and more
organisations had a stake in the BBC, then the Corporation would
become more accountable and responsive. Similarly, Channel 4 believed
that if the BBC were to engage in considered partnerships in areas
where others had better expertise it could deliver an effective
means of maximising the value of the licence fee.
Undoubtedly, the BBC has had a record of working in partnerships
over the current Charter period.
Example of partnerships the BBC has undertaken since 2007
· Arts Council: several projects undertaken with the BBC such as The Space, a digital arts media service and commissioning programme.
· The BBC Academy partnered with Channel 4 and ITV on a number of initiatives to improve diversity in the media industry.
· BBC Alba and MG Alba's provision of a Gaelic television service.
· BBC Filmsco-produces approximately eight British films a year.
· Creative Skillset: joint work on training and qualifications for the creative industries.
· Open UniversityOU programmes co-produced by the BBC, as well as joint online initiatives.
· Playlisterlinks to online streaming sites to allow BBC users to tag and play back music and clips which have featured in BBC material.
· Radioplayerpartnership with commercial radio that allows audiences to access radio stations online via a single console.
· S4CBBC Cymru Wales provides a minimum of 10 hours of Welsh language programmes a week to S4C including its news service and the long-running TV-drama Pobol y Cwm.
· YouViewa partnership which built an open, internet-connected TV platform.
109. The Arts Council would like the BBC to engage in more joint
editorial relationships and create shared spaces within existing
BBC online platforms and channels to help bring the arts to wider
This, they suggested, could be achieved by re-defining the BBC's
remit in a future Charter and fundamentally increasing its partnership
potential by extending to other public bodies and cultural organisations
the special privileges it currently grants to the Open University.
The Arts Council believed this could address many of the current
barriers which prevent more collaboration, and could be an alternative
to distributing the licence fee to other players.
110. In his first major speech as Director General, Lord Hall
outlined his vision for a more personalised BBC, delivered through
the iPlayer, where the BBC would be in a position to recommend
content to individuals based on their viewing habits, and the
launch of the "BBC Store", a new commercial service
allowing the audience to buy and keep BBC programmes on a download-to-own
basis. Not all
were won over by his vision. Lis Howell, Deputy Head of the Journalism
department, City University, was critical of Lord Hall's speech,
describing it as "a very well-crafted piece of marketing
which dealt at great length on technological advances which
weren't that dramatic at all", and "not so much Netflix
as net curtaina thin veil with holes in it, stopping you
from looking too closely".
111. Nevertheless, the viewing of television content online is
growing in popularity. Ofcom reports that a third of adults (32%)
now use the internet to watch catch-up TV (such as BBC iPlayer,
Sky Go, ITV Player and 4OD) and that 14% of adults use their mobile
phone for watching TV programmes/catch-up content.
This being the case, interactive services and a personalised BBC
could and should increasingly over the coming years facilitate
a more direct engagement between the BBC and its viewers and listeners,
allowing them to provide feedback on BBC output and set out their
views on the breadth of the services provided.
112. We welcome
the fact that Lord Hall has made partnerships one of his key ambitions
over the next few years. We believe the BBC and its audiences
have gained greatly from the Corporation working with others during
the present Charter period. In order to ensure maximum public
value, the BBC must be required to harness such joint working
arrangements wherever it can appropriately do so if it is to continue
to benefit from the privilege of public funding. Increasing its
partnership potential should be a core purpose of the BBC.
113. While it
is the case that the BBC's purposes and funding will determine
some parameters for the BBC's scope and scale, it is also the
Framework Agreement between the BBC and the Secretary of State
and the interpretations and decisions taken by the Trust and any
successor oversight body that affect these. In practice the level
of the funding will be the main lever in preventing the BBC overreaching
its remit as set out in the Framework Agreement.
114. The BBC's
audience share of television, comprising about a third of all
UK television viewing, although it has fallen over the last couple
of decades, continues to demonstrate the BBC's central presence
in the life of the country.
115. We consider
that the BBC Trust's view that it is difficult to put a stop to
any significant parts of BBC activity, citing the support shown
by the audiences to individual services, is questionable. The
BBC must make the most effective use of licence fee payers' money
and should not be trying to do everything itself. The BBC needs
to be able to make bigger, braver decisions on its strategy and
inevitably must do less in some areas. Similarly, we challenge
the BBC's justification for doing all that it currently does in
order to provide "something for everyone".
116. It is not
incompatible for the BBC to provide "something for everyone"
across its output whilst also reducing provision in areas that
are over-served or where the public service characteristics of
its output are marginal, or where others are better placed to
deliver excellence and better value for money. The BBC has been
given a privileged position and substantial public funding to
serve under-served and under-represented audiences, as well as
mass audiences, with content not created for commercial gain,
allowing it to take risks and be distinctive, challenging, original
BBC One +1
117. As part of its proposal to move BBC Three online,
the BBC Executive wants to launch a time-shifted version of its
linear BBC One channel, a BBC One +1 service, in peak timebroadcasting
an additional version of the output one hour laterand to
extend CBBC, the BBC children's channel, by an hour each evening.
The BBC has said that the proposal for a plus-1 channel is simply
a case of it catching up with the rest of the market. ITV do not
share this view. While they support the proposal to move BBC Three
online, they oppose the move for a repeat channel, which they
think would offer very little new to viewers at a cost that could
instead be spent on creating new programming. They identified
a contradiction in the BBC's reason as follows:
the justification that was given for the
launch of One +1 was that it was what young people expected. They
expect to be able to watch a +1 channel. Six months later, the
closure of BBC Three was justified on the basis that young people
want their services on demand and they are all moving online.
So we struggle slightly to reconcile those two elements as well.
118. As part of a package of changes associated with
moving BBC Three online, Ofcom announced in January 2015 that
a market impact assessment would include the BBC's proposal to
launch a plus-1 channel for BBC One. The BBC Executive said that
their analysis indicated that the commercial impact of the plus-1
channel would be small and that impact on commercial advertising
revenues would be minimalpotentially leading to a loss
in revenues in the television advertising market of less than
do not find that the BBC has made a convincing case for launching
a BBC One +1 service. Whilst we appreciate how such channels can
be of particular value to commercial broadcasters, in bolstering
audience share and generating advertising revenue through the
additional viewing, we do not believe in the BBC's case such a
channel would represent public service value given the potential
adverse impact on competitors and the availability of most BBC
content on the iPlayer shortly after its initial airing. If the
BBC no longer requires the scarce digital terrestrial spectrum
it was granted and has used in the evenings for BBC Three, then
it should be obliged to give this valuable public resource up
for alternative, public value use.
119. We heard similar complaints about the BBC in
respect of some its national radio stations being too middle-of-the-road
and having an adverse impact on commercial radio's capacity to
generate advertising income. Given its receipt of the licence
fee, the BBC is expected to do a type of public service broadcasting
that would not be economically viable for commercial radio. Despite
this, RadioCentre, a trade body for commercial radio companies,
told us that the BBC has explicitly chosen to use its spending
power to grow audiences of its flagship national radio services,
particularly Radio 1 and Radio 2. Since 1999, they estimated that
the shift in listeners to the BBC had cost the commercial radio
industry around £54 million a year.
From 1999 to 2014, commercial radio's share of the market has
gone down from 48% to 42%.
BBC Radio in the UK
In 2013/14 the BBC spent a total of £650m on domestic radio, of which £115.4m was spent on output for English local radio services. Radio 1 cost £40.2m and had a weekly reach of 20% of the population. Radio 2 cost £47.8m and reached 28.9% of the population: it had the highest radio audience in the UK of any station.
120. According to RadioCentre, the BBC's presence in the marketplace
made it "a lot, lot harder" for commercial radio.
The combined programming budgets of Radios 1 and 2 were greater
than the equivalent budget for every commercial radio station
in the country.
Given that commercial radio stations depend on advertising revenue,
they need to maximise audiences. Despite BBC radio not being under
the same obligation, and there being an expectation of BBC content
being distinctive, Global
complained that Radio 1's daytime playlists were dominated by
music that was in the charts and widely played on commercial radio,
with new music and specialist music shows being broadcast only
off-peak or during the night.
The BBC, on the other hand, gave examples of how Radio 1 and 1Xtra's
schedules included a mix of news, speech and live events coverage.
Both stations run a 15-minute news programme twice a day, Newsbeat,
and shorter news bulletins throughout the schedule, which reach
over one million young people on average a week, and between them
they featured over 40 new documentaries a year. In addition, the
BBC set out how its music output on Radio 1 was different to comparable
stations in that:
of the songs played on Radio 1 in the daytime were not played
on any comparable station;
52% of the tracks played by Capital could be heard on Radio 1,
only 3% of the tracks played on Radio 1 could be heard on Capital;
a month (all hours), Radio 1 played 3,613 different trackscompared
to just 188 a month on Capital; and
of Radio 1's playlist included artists without a top 10 single,
compared to 9% on Capital.
121. Global argued that there should be a lot more
distinctive output on Radios 1 and 2. They believed that the BBC
concentrates too much on maximising listener numbers and hours
spent listening rather than focusing on high-quality and distinctive
content and underserved audiences. Will Harding, Group Director
of Strategy at Global, explained:
[The BBC] are chasing ratings with Radio 1 and
Radio 2, they are not chasing quality and they are not chasing
distinctiveness. If you sat in those radio stations four times
a year when the radio listening figures are published, they would
be looking at exactly the same metrics that we look at: share
and reach. They should not be. They should be looking at something
122. We also heard other complaints about Radio 5
Live and Radio 3. UTV Media, owners of TalkSPORT, described a
dilution of 5 Live's news remit which they also attributed to
the BBC's attempt to maximise ratings.
According to UTV's analysis, in 2010 just 45% of 5 Live's output
consisted of news, against a service licence requirement of 75%.
The Friends of Radio 3, a society of radio listeners, were concerned
that the BBC's attempting to make everything "accessible"
to everyone led to "dumbing down".
They argued that the BBC's allocation of services and funding
disproportionately centred on entertainment for a wide audience
and consequently audiences with a special interest in the arts
and other minority interests were particularly poorly served.
Global thought that the BBC's funding priorities were wrong. They
considered the BBC's local and regional stations were "very
poor relations" to its national stations.
Similarly, RadioCentre believed that if the BBC focused more on
underserved audiences, i.e. younger audiences and those over 65,
the scale and size of the BBC's footprint could reduce.
Undeniably, however, in radio as elsewhere the BBC faces a difficult
balancing act: the narrower the focus, the lower the reach and
the more likely it will be criticised for failing in terms of
audience reach. Regarding Radio 4, with its flagship news and
current affairs programmes, witnesses from the commercial sector
agreed that this station would not exist without funding from
the licence fee.
123. Several witnesses have questioned the effectiveness
of the current governance mechanisms in holding the BBC Executive
to account for delivery of public value on radio. While RadioCentre
was not necessarily arguing for an enforced reduction in the BBC's
market share, they wanted tighter, more demanding public service
targets in place. Instead, what had happened, in their view, was
that the Trust had largely endorsed the populist direction of
the BBC's radio services.
Put more bluntly, Global said that the Trust had simply failed
as the overseer of BBC output.
Patrolling the borders
124. Lord Grade described the BBC Trust's role as
one of patrolling the borders between the public and private sectors
in the media.
Since its formation, the Trust has issued and conducted service
licence reviews and public value tests as a way of monitoring
the BBC's public value and constraining any adverse impacts on
the commercial sector. David Liddiment, the longest serving BBC
how the BBC's service licences worked:
The service licences
set out what each
BBC service is supposed to be doing. We review that twice in the
charter period to first satisfy ourselves that the licence is
still fit for purpose, that audience needs and the market changes
perhaps mean that the service licence needs amendment, but particularly
to satisfy ourselves that the ambitions in the service licence
are being realised. To do that, we ask the public. We ask the
licence fee payers what they think. We invite stakeholders and
commercial competitors of the BBC to give their contribution to
the process, and we do a great deal of research with specialist
research organisations so that we understand how the licence fee
payers are feeling about the service.
125. According to the BBC, the service licence regime
has created a "step-change in accountability" inside
and outside the Corporation.
Lord Grade, who as Chairman of the Board of Governors was principally
behind the concept of service licences, described them as "instrumental".
Since their introduction, he noted that complaints from the private
sector against the BBC had been far fewer than they used to be.
However, while RadioCentre found the reviews a welcome improvement
on the previous regulation of BBC services, they believed the
licences suffered from imprecise and unquantifiable targets which
ultimately made it very difficult to judge the overall performance
of a service, and consequently the system failed to maximise public
value. They argued
that the conditions and targets laid out in service licences were
ultimately worthless if they were not enforced and accompanied
PUBLIC VALUE TESTS
126. Public value tests (PVT) were introduced at
the same time as service licences. Since 2007, any proposal by
the BBC to launch a new service, or make a significant change
to an existing one, should undergo a public value test by the
Trust which is informed by a market impact assessment conducted
by Ofcom. The Trust uses these tests to assess the value to the
public of a new BBC service and also to estimate the impact it
could have on the wider market. Proposed closures of BBC services
are also subject to a test. So far the Trust has completed only
four public value tests, just one of which was negative: a proposal
(discussed earlier) for online local video service. At the time
of publishing our report, the BBC Executive's plans for the closure
of BBC Three as a linear channel and the introduction of a BBC
One +1 service were before the Trust. In this case, we were surprised
by the length of time it had taken for the public value test process
to start. Despite Lord Hall announcing his proposal in March 2014,
it was not until December, nine months later, that the Trust confirmed
the formal proposal had been submitted which would allow the public
value test to begin. We note that Ofcom's market impact assessment
is taking a comprehensive approach, considering the impact of
transferring £30 million of funding from BBC Three to BBC
One's drama budget among the other changes announced.
127. The delay in the proposal reaching the PVT stage
illustrates a problem highlighted by the Commercial Broadcasters
Association: COBA were concerned that the BBC Executive was able
to announce significant proposals for new services without Trust
approval, creating significant and unnecessary uncertainty in
the market. They explained:
The changes to the iPlayer could have negative
consequences on the rest of the market. Yet [BBC] Management made
public announcements regarding the new iPlayer features as if
they were a near certainty, despite the fact that they had not
received Trust approval. In a highly competitive commercial online
marketplace, where UK media companies are striving to gain even
a minimal foothold, this creates unnecessary uncertainty, and
calls into question how the BBC is governed.
COBA also pointed out that the current governance
system did not allow industry views to be taken adequately into
account when the Trust was considering the market impact on existing
services. We note that BBC Store, the new download-to-own service,
was approved by the Trust without any formal, direct consultation
of industry by the Trust or Ofcom.
And more recently, the Trust, having sought Ofcom's advice, did
not consider it necessary to carry out a public value test for
a new Radio 1 video service.
In BSkyB's opinion, this only showed that "public value
trumps market impact every time".
BBC is a powerful player in broadcasting and, given the broad
scope of its public purposes and resources, there is a constant
danger that it will, by accident or design, swamp smaller rivals
and inhibit their ability to grow and develop. It therefore needs
some boundaries, to ensure that the market overall is working
to the public good and the licence fee payer is getting best value
for money. To this end, we welcome the current Charter's introduction
of service licences and public value tests and support their continuance.
However, given the infrequency of service reviews and high thresholds
for initiating public value tests, we believe that the body responsible
for overseeing the BBC should be more willing to react to reasonable
calls to test whether existing BBC services are fulfilling their
public purposes and service remits. We recommend an additional
means be developed to trigger public value and market impact tests
where there is prima facie evidence of the BBC crowding out others'
endeavours and having an adverse market impact. We believe the
independent panel and Charter Review process should consider this
as part of the review.
129. Under any
new governance arrangements we believe that Ofcom should continue
to provide market impact assessments that inform the public value
tests, which would be undertaken by the body holding the BBC Executive
to account for its public value. Ofcom should also be invited
to give advice in areas where the BBC's market impact should be
considered even where it does not involve a formal public value
115 Chairman's prologue to "Building public value:
Renewing the BBC for a digital world" Back
BBC Trust (FBB0096), para 27 Back
BBC (FBB0097), para 30 Back
Framework Agreement clause 75(1) Back
Speech by Mark Thompson, The BBC after DQF-speech at the
Radio Festival, Salford, 1 November 2011 Back
What if there were no BBC television-The net impact on UK
viewers, Patrick Barwise and Robert G. Picard, Reuter Institute
for the Study of Journalism, February 2014 Back
Ibid, page 7 Back
What if there were no BBC television-The net impact on UK
viewers, Patrick Barwise and Robert G. Picard, Reuter Institute
for the Study of Journalism, February 2014, page 63 Back
David Elstein response to Barwise/Picard report, para 28, February
Ibid, para 32, February 2014 Back
Q276 (Professor Beckett) Back
Ofcom-PSB Annual Report 2014, para 6.102 Back
Professor Beckett (FBB0022), para 2.1 Back
See Q98 & Q317 Back
ITV Plc (FBB0066) , para 20 Back
Channel 4 (FBB0067) Back
Commercial Broadcasters Association (FBB0072), para 1.1 Back
PSB portfolio channels are considered by Ofcom to be the following
CITV, ITV2, ITV3, ITV4, 4Seven, E4, Film4, 5* and 5USA. Back
Ofcom considers the multichannel sector to be made up of the
following broadcasters: Sky, Viacom, UKTV, BT, Discovery, A&E
Networks, Turner, Disney, CSC and the Baby Network. Back
Ofcom-PSB Annual Report 2014, para 3.27 Back
Q89 (Gavyn Davies) Back
Professor Beckett (FBB0022) para 2.4 Back
Channel 4 (FBB0067) Back
Partners included ITV, Channel 4, Five, BT, TalkTalk and Arqiva
Arts Council England (FBB0094), para 3.10 Back
Speech given by Lord Hall, BBC Director General, at the BBC Radio
Theatre in London on 8 October 2013 Back
Ofcom-PSB Annual Report 2014, page 53 Back
Up until now CBBC and BBC Three have shared the spectrum on Freeview,
with CBBC closing at 7pm when BBC Three begins broadcasting each
BBC (FBB0140) Back
RadioCentre (FBB0086), para 3 Back
Q156 (Kip Meek) Back
Q154 (Will Harding) Back
Owners of Capital Radio, Classic FM, Heart FM and LBC Back
Global Radio (FBB0091), Case study one Back
BBC (FBB0140) Back
UTV Media (GB), (FBB0110) Back
The Friends of Radio 3 (FBB0025), para 2.2 Back
Q175 (Will Harding) Back
RadioCentre (FBB0086), para 27 Back
RadioCentre (FBB0086), para 15 Back
David Liddiment was appointed to the Board of BBC Trustees in
January 2007. He stood down from the Trust, having served three
terms as a trustee, at the end of October 2014 Back
BBC Internal Governance Review, December 2013 Back
RadioCentre (FBB0086), para 14 Back
RadioCentre (FBB0086), para 16 Back
Ofcom, Proposed changes to BBC Three, BBC iPlayer, BBC One
and CBBC, MIA Terms of Reference, 20 January 2015 Back
Commercial Broadcasters Association (FBB0072), para 7.6 Back
BBC Store will be a commercial service run by BBC Worldwide.
BBC Trust approves Radio 1 iPlayer plans, BBC Trust Press
Release, 3 November 2014 Back
Q388 (David Wheeldon) Back