Select Committee on BBC Charter Review Minutes of Evidence


Examination of Witnesses (Questions 1160 - 1179)

WEDNESDAY 7 DECEMBER 2005

Mr Andy Duncan and Mr David Scott

  Q1160  Lord Kalms: A slight twist on the same question. The BBC has an obligation, does it not, to bid against everybody for certain sporting events? Do you think it is compatible with its obligation that it is always high competitive against people like yourselves? Does the BBC fulfil its public service obligation by being very competitive in its bidding? Can it get around the problem of its obligation to bid?

  Mr Duncan: My own sense is that it is valid for the BBC to do sport and to bid competitively to try to secure sports. That seems to me a perfectly reasonable thing for them to do. They are in a privileged position. They are able to put a lot more money in than might necessarily be economically justified. Where they perhaps need to be careful and where it can have an impact, radio is probably quite a good example of this, is where the funding of BBC Radio is at such a vast level compared to any other radio anywhere else in the world. BBC Radio is very good quality but there is very little public service competition for that and it would be almost impossible for somebody to come in and perhaps secure the sports rights on radio given the amount that the BBC will pay for football or cricket and, regardless of how well you think they might do it, if you take the television equivalent with cricket, the competition there really stimulates them to do a better job than for some of the rest of their sports. They need to be careful there, but I am not sure that you can prescribe that the BBC should keep out of something just because Channel 4 is trying to go for it, for example.

  Q1161  Lord Kalms: Could you twist this around? Could you say that as long as those sporting events are in the public domain on free-to-air or some of the other media such as Channel 4, why should the BBC artificially compete? Is it because the BBC feel they have to have it on their channel? In other words, they are creating a market for a product which they might not necessarily need but it might mean the consumer, the listener or the viewer, can have their product. Is it a slightly artificial pressure on that sports event?

  Mr Duncan: There is an element of truth to that. To be very specific, if the BBC got there and I do not think they are quite there but they almost got to the point, if the BBC were of the mindset that says "We must get sport no matter what and we are prepared to pay whatever it takes to get it", that would have an impact in artificially inflating the price; that is definitely true. Probably the move they made over the last few years to strengthen their sports portfolio was appropriate, but they probably have adequate sport now and if they were suddenly to decide they wanted to do even more, that would probably be quite distorting in terms of the market.

  Q1162  Lord Maxton: I am a bit confused about this public obligation to show sport. If you do have and the BBC do have it, it is to encourage people to take part in sport for the general health of the nation. Otherwise, if you are just putting on football matches between two bunches of foreigners, it is as much an entertainment as putting on a play or putting a film on really. You are not necessarily encouraging anything. If that is the public obligation on you to encourage people to take part, have you looked at minor sports? Probably as many people play badminton and squash and sports like that throughout the country as play cricket. Do you ever think about putting these minor sports on? It is relatively cheap to purchase the rights, in fact some sports may even pay you to put them on.

  Mr Duncan: We have had a tradition over time of trying some rather unusual and interesting sports. There was clearly a period when we did the American Football quite successfully. We actually do a very interesting range of sports that run overnight, extreme skateboarding amongst others. There are some quite niche and minority sports. We had a serious go at covering the World Rally Championships two or three years ago, a big investment which did not particularly work; audiences did not come to it. You get back into some of the same kind of economic problem.

  Q1163  Lord Maxton: American football and rallying is hardly high participation sport in Britain.

  Mr Duncan: No, not particularly, but you are back to some of the same economic issues, to take your badminton example, because you would find audiences were extremely low. This is the truth.

  Q1164  Lord Armstrong of Ilminster: I was wondering whether the European Commission's reform of the sale of Premier League broadcasting rights was going to present a genuine opportunity for terrestrial broadcasters to acquire live rights.

  Mr Duncan: The decision that was made was rather disappointing. The situation where effectively five out of six packages can still be bought by one broadcaster has not forced the extent of sharing that one might have anticipated or hoped for. We shall look at it. It is very unlikely that we should be able to justify paying the sort of money that will be needed to secure one of those packages. Most people think that Sky will bid very heavily to get the five packages. They even said to you yesterday and it was reported in the papers today that they would be prepared to pay virtually the same for five of the six packages. I am sure others will look at it, including the BBC and ITV. If you are only able to get 23 games, it is hard to do much with that in terms of really promoting it or driving a business. Presumably, somebody will pick up at least one of the packages, but it is quite difficult.

  Q1165  Chairman: Do you regard it as a sort of victory for Sky?

  Mr Duncan: I should have thought, given some of the possibilities that have been talked about, they would have been very satisfied with the eventual outcome.

  Q1166  Chairman: We talked to Sky yesterday and I am not sure they were particularly informative on this point. Did you do any lobbying yourself on this issue?

  Mr Duncan: No. We did not have a serious interest in bidding for the football. It is something we shall look at, but other broadcasters made various noises along the way. Obviously ITV and NTL put forward a suggestion of wanting to bid for up to half the matches. But no, this was not something we were lobbying behind the scenes on.

  Q1167  Lord Peston: It looks as though the Commission, having talked very loudly on the desirability of competition, suddenly lost their nerve on the six packages. I was astounded that they would allow that; to be able to sell five just makes no economic sense at all. Would there be any possibility of more than one terrestrial channel jointly bidding for one of the remaining packages? Would that make any economic sense to you or to the BBC?

  Mr Duncan: Back to the point, even having only one of six packages is quite hard to properly utilise as one broadcaster, so the idea of further splitting that and sharing would make it even more problematic. Football is quite complicated because you have also got the FA Cup, the Champions' League, international matches, big tournament events like the World Cup and the European Cup, so if you are ITV and you are showing some other football anyway or if you are the BBC and you are showing some other football anyway, I cannot speak on their behalf but I can imagine that you could think about how it is part of a wider football proposition. For Channel 4, we do not show any football now. We used to show Italian football.

  Q1168  Lord Peston: It was a marvellous way of showing it, if I may say so. Bravo are nowhere near your league.

  Mr Duncan: We are looking at it, but it is hard to see that with just 23 games you can really do enough.

  Q1169  Lord Peston: You were talking in terms of a kind of halo effect, when you were going back to the test cricket: it created a vision or view of you and that was part of the pay-off. Do you not think that might happen with one of the Premier League packages or something like that? Obviously you have thought about it.

  Mr Duncan: We are looking at it. We are yet to conclude whether we are going to bid and if so, on what basis we bid. It is less enticing than it might have been, given the decision that was taken by the Commission.

  Q1170  Chairman: If the Commission had given half and half or some other proportion, you would have been more persuaded, would you?

  Mr Duncan: It would have opened up many more options including partnership options and really given ourselves and other people more opportunities to do something very imaginative.

  Q1171  Baroness O'Neill of Bengarve: May I turn to the system of listing events? Do you think the present lists are reasonable? Do you think the criteria for compiling those lists are reasonable, or would you like to see them change?

  Mr Duncan: DCMS have said they are going to review listing over the next two or three years. Our view is that would be a sensible thing to do. We have not particularly spent a lot of time thinking through what changes, if any, are necessary. Particularly given the recent controversy over the cricket, it would be a good time to dust them off and take a view. The listing of some crown jewels is very important.

  Q1172  Baroness O'Neill of Bengarve: But you do not have a wish list.

  Mr Duncan: No, not that we have formulated at this stage.

  Q1173  Chairman: Do you have criteria? Do you have a sort of definition of the crown jewels?

  Mr Duncan: To be absolutely honest with you, no. Ultimately, it is an issue for Government to work out, but the basic principle of having some listed events is a good thing. A serious piece of work has not been done on it for a number of years and, given how much technology has changed and the whole digital environment has changed, a debate back to first principles would be a very good idea, but we literally have not spent any time on it whatsoever.

  Q1174  Bishop of Manchester: May I take up a point you made earlier this morning when you were enthusing about regional development and you mentioned several places, some of them relatively small. You did also mention Manchester. Forget I am the Bishop of Manchester, because I want to be absolutely fair on this one. When the BBC came to us, on several occasions they emphasised their commitment to the move to Manchester. They have also emphasised how that will depend upon the appropriate licence fee being agreed. At various stages during our meetings, it is fair to say we have all expressed some concern about aspects of the proposed Manchester move, for example, there have been some real worries over the cost, particularly the early figures that we were given and whether or not that is actually an appropriate use of the licence fee and whether we ought to be protecting the interests of the fee payers by saying that is too much. Then there are the fears that if you move departments up to a region, you also move them away from what, rightly or wrongly, could be regarded as some of the corridors of power in London. Then there are all the domestic upheavals of people, with all their fears about what it must be like living near the North Pole and all these sorts of things. It would be interesting first of all to find out from your viewpoint as Channel 4 what you feel about that proposal by the BBC. Just forgetting for the moment how that might fit in with you, as a professional company, what do you think about this move?

  Mr Duncan: I went to university in Manchester, so I am quite proud of Manchester. I was also involved in the Manchester project when I was at the BBC. From a Channel 4 point of view, our perspective is that it is actually a good thing that the BBC are looking to invest significantly outside London and, being party to the debates which took place two or three years ago, I think that having one strong centre does make more sense than trying to spread it too thinly. The broad thrust of the Manchester proposal is a very good thing. I should say that there are two very significant points. One is that it should not be a Manchester-only solution, going back to the earlier WOCC debate. If Manchester is part of a broader strategy to help the BBC really broaden out from its over-London-centric approach, then that would be very good; if it is a Manchester only thing, then it is a big opportunity missed. Given that all licence fee payers across the whole of the UK pay for the BBC, to have a broader spread like that does make sense. In particular, the North of England is a real weak point. The second thing is, being very blunt about it, that the costs are far too high. I think the BBC are involved in some licence fee negotiation tactics. You could be much smarter and much more sensible about how you could really build, creatively and imaginatively, the sort of centre of gravity around Manchester, perhaps in conjunction with the independent sector, perhaps opportunities for cooperation with the likes of ITV who have a centre there. Certainly compared with some of the figures I saw before, they look very high indeed and it is a classic BBC Rolls-Royce, "We'll have a completely spanking brand new office and we'll ship thousands of people up there". From a commercial perspective, if you were Channel 4, you could probably pull off something more creative, more imaginative at a fraction of the price. They should be supported in doing it, but they should be pushed very hard on how much it really costs and they should be encouraged to do it in a way which really tests their commitment to partnership.

  Q1175  Bishop of Manchester: May I now take up something you said in providing that answer. You were referring to "sharing" and of course having this shared hub is meant to be one of the key features of the move. You did say earlier this morning that the BBC are not really very good at cooperating. You said in fact that there are not many good examples of sharing activities. That does not sound hugely hopefully prophetic given their plans. Could you comment on what you feel their ability is, given past evidence, to produce the hub that will really work and would Channel 4 in any way benefit from that?

  Mr Duncan: On the first point, my sense is, particularly given the amount of money that they are requesting against it, that they have had several years of debating and discussing it and very tangible concrete plans should be put on the table now and they should demonstrate very clearly and very vividly how the partnerships would potentially work. It is a very, very good test case to see whether this commitment to partnership is something they really mean or whether it was just fine words during the Charter renewal process. Before any licence fee is set next summer, whenever the time period is, the BBC should get that money subject to putting a very clear plan together illustrating that. As far as Channel 4 are concerned, we are a kind of very lean mean organisation. There are only 900 people; less than the old BBC HR department. We do not have regional bases as such; we source our programmes from all over the country. Our prime interest would be how this could be used to help nurture the independent production sector in the North generally, not just in Manchester. Certainly indirectly we benefit from that: whether there are any direct cooperation benefits is less likely. ITV have just walked into the room, but I can imagine that there are more opportunities for them because they have a physical base there.

  Q1176  Bishop of Manchester: On the whole do you think it is a workable idea?

  Mr Duncan: It is a really good idea. It is one of the most important ideas in the Charter. It is an incredibly important opportunity. To repeat myself, it should be part of a broader strategy to broaden outside London, including the WOCC point from earlier, and it should be done more cost effectively.

  Q1177  Chairman: We need to get the costs right. The costs are changing almost as we speak, but at one stage there was going to be a 25-year payback. How many investments do you do on a 25 year payback?

  Mr Duncan: None.

  Q1178  Baroness Bonham-Carter of Yarnbury: I just want to go back to our WOCC conversation. You were saying you thought the BBC needed mandated targets for sourcing from regional companies, but I did not quite get who you thought would oversee that?

  Mr Duncan: You have a number of options and it depends a bit on the Government's whole debate which is still going on in terms of the Charter. Clearly, it could be something the Trust manages or it could be something that Ofcom manage. I suspect they are the two options.

  Q1179  Baroness Bonham-Carter of Yarnbury: Would you have a preference?

  Mr Duncan: As long as they actually stuck to the target and were given a target, then no, it would not matter.


 
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