Select Committee on BBC Charter Review Minutes of Evidence


Memorandum by the Commercial Radio Companies Association

CRCA

  1.  The Commercial Radio Companies Association (CRCA) is the trade body for UK commercial radio. CRCA members include national commercial radio stations, as well as most commercial local and regional stations. These account for almost half of all the radio listening in the UK and around three quarters of local listening. CRCA promotes the importance of commercial radio and plays an active role in encouraging conditions that will enable it to thrive into the future.

INTRODUCTION

  2.  The BBC provides many programmes and services that are enormously valued by listeners, viewers and on-line users. It is recognised the world over for its quality, creativity and authority. But it is also an enormous, state-funded intervention in the market which impacts on the health and wealth of other broadcasters. Commercial radio believes that, at present, the BBC is too large, too powerful, too competitive, and inappropriately regulated. This paper sets out why commercial radio is valuable, and therefore worthy of consideration when framing the BBC's future, and why we seek changes to the BBC's size, shape and scope.

THE ROLE OF THE PUBLIC SERVICE BROADCASTERS AND THE BBC

Commercial radio's value

  3.  Commercial radio is the only terrestrial broadcaster not given Public Service Broadcaster status by the Green Paper. However, acknowledgement is made of the industry's considerable public service output, [1] as set out in a recent audit of over 200 stations' output conducted by CRCA. [2] The audit found that:

    —  The news broadcast by commercial radio equates to the output of more than thirteen 24-hour news services.

    —  Around half of all news provided by commercial radio is local news.

    —  Commercial radio's information services include over two million weather forecasts a year and almost 1.4 million minutes of travel news.

    —  The amount of news, weather and travel information broadcast by commercial radio has risen by more than 60 per cent in the past four years.

    —  Commercial radio promotes almost half a million local events on air every year, and a further 300,000 on station websites.

    —  Stations attend over 44,000 community events every year.

    —  In 2004, commercial radio raised £8.5 million for charity. UK Radio Aid, a unique industry-wide initiative (listened to by over 27 million people and organised in just 10 days) raised a further £3.5 million for Tsunami victims in January 2005.

  4.  This contribution to communities across the UK, and at a national level, is of significant social and economic value. Commercial radio's welfare and provision therefore merit careful consideration when establishing the remit, funding, size and framework for publicly funded radio.

The BBC's new purposes and characteristics

  5.  The Green Paper sets out six new purposes for the BBC. [3] Whilst these are admirable purposes which the BBC should "strive to fulfil", the Green Paper proposes insufficient means to require the BBC to meet them. We do not believe, for example, that programmes should be permitted to avoid meeting any single one of the listed purposes so long as they are able "to justify themselves in terms of their excellence or distinctiveness".[4]

  6.  If all of the BBC deserves public funding, then all of it should be required to fulfil public purposes. To permit otherwise would allow the BBC to continue to compete vigorously for ratings and audience share to the detriment of commercial broadcasters (we explore this theme later in this paper).

Digital Britain

  7.  The committee asks whether the BBC should play a primary role in leading the process of switching Britain over from analogue to digital television. We therefore hope it is helpful if we provide some thoughts on the BBC's role in developing and promoting digital radio, and also set out commercial radio's contribution.

  8.  The BBC started trialling DAB digital radio in 1995. It argued that, in the Charter period now ending, it should be awarded increased public funding for digital television, radio and web activity. Arrangements were made in the 1996 Broadcasting Act that allowed the Radio Authority to advertise a single national and a number of local DAB multiplexes. The national commercial radio multiplex (Digital One) was advertised in 1999. It became clear to commercial digital operators that digital radio might enable them to compete with the BBC's national analogue dominance whereby 4FM and 1AM national stations compete with 1FM and 2AM INRs. Commercial radio resolved that its digital services needed to increase audience choice if receivers were to be sold in mass market numbers. This it achieved by launching five digital-only national services and a host of digital-only local services. The BBC swiftly followed suit with five new national services and moved to match commercial radio's 85 per cent UK coverage. Both the BBC and commercial radio came together within the Digital Radio Development Bureau in recognition that, if DAB were to be a success, both sides of the industry had their important parts to play. The BBC has been able to invest significant public funds into digital-only content while extending its brands via the internet. Commercial radio's pioneering role has been supported by significant shareholder investment of £35 million worth of analogue radio profits, mainly on multiplexing infrastructure. Development of digital radio is thus a joint rather than a BBC-led venture.

THE BBC'S CONSTITUTION

  9.  CRCA sees no obvious reason why the BBC should not be established by statute rather than Royal Charter. It is difficult to see, for example, in what way BBC Radio 3 is more independent than Classic FM thanks to the Charter. Radio 3's deep resources are the result of generous public funding rather than its chartered status. Statute has satisfactorily developed a truly independent regulator and licensor in the form of Ofcom. Why should it not create something along the lines of the proposed Trust with powers to license BBC services for suitable periods?

  10.  Irrespective of Charter duration, it is, as the Green Paper has recognised, necessary to re-examine the licence fee mechanism with a view to possible change in five years' time. The funding of broadcasting is undergoing significant change following the power afforded to consumers by media digitalisation. We are entering the age of "pull" rather than "push" media. Subscription will play an increasingly important part in this. If the State continues to provide guaranteed subscription to the BBC, it will grow while its competitors falter.

GOVERNANCE, MANAGEMENT AND REGULATION OF THE BBC

The BBC Trust

  11.  Commercial radio has consistently argued that securing a more appropriate model for governance, management and regulation of the BBC is crucial to the health of the entire UK broadcasting ecology.

  12.  To inform our thinking in this area, CRCA commissioned international corporate governance expert, Stilpon Nestor, to propose such a model. His contribution is acknowledged in the Green Paper. [5] We are therefore pleased that the Green Paper proposes a model which achieves greater separation of governance, management and regulation, but believe the proposals for the BBC Trust do not go far enough.

  13.  CRCA believes there is insufficient separation between the executive board and the BBC Trust. A board comprising senior executives and non-executive directors should run the BBC. This BBC Board should have a non-executive chairman who is the champion of the management, and a supporter, advisor and confidant for the Director General.

  14.  The chairman of the BBC Trust should be just that. S/he should not be the chairman of the BBC. In his evidence to the Select Committee, Michael Grade said "you cannot have two people [. . .] speaking for the BBC. You have to have a single chairman. It has to be very clear who is looking after the money". We agree that there should not be two people speaking for the BBC; there should be one speaking for the management (the chairman of the BBC Board), and one for the licence fee payer (the chairman of the BBC Trust). They may not always agree. The chairman of the Trust should look after the money and the needs and interests of licence payers. The chairman of the BBC Board should look after the running of the BBC.

  15.  CRCA has commissioned Stilpon Nestor to examine the BBC Trust proposals against the backdrop of international best practice. He will report in June 2005.

Ofcom

  16.  We believe Ofcom should have an increased role in regulating the BBC, focusing on the "negative public interest", ie those things that the BBC should not do, rather than those which it should (which should fall under the remit of the BBC Trust). Therefore, Ofcom should apply any type of regulation which commonly applies to all broadcasters, including that relating to impartiality and fairness. External regulation of such matters will bring increased scrutiny, improve public confidence and deliver important cross-industry consistency in adjudications.

The National Audit Office

  17.  CRCA believes that there should be greater transparency in BBC accounting, with increased involvement from the National Audit Office (NAO). The involvement of the NAO need not threaten the BBC's editorial independence from Parliament, so long as its remit is appropriately drawn.

  18.  It is currently difficult to extract meaningful financial information from the BBC Annual Report. A body in receipt of generous public funding should be fully financially accountable to its licence fee payers, and its accounts should be presented in a wholly transparent and consistent manner.

THE BBC'S IMPACT ON COMPETITION

Ofcom's powers

  19.  In establishing Ofcom, Parliament invested power in, and the industry has since invested money in, a regulator with substantial broadcasting and competition expertise. This competition expertise should be applied to the BBC as it is applied to all commercial broadcasters.

  20.  We support the view that Ofcom should be given ex ante, not just ex post, powers over the BBC. In addition we recommend that:

    —  Ofcom should run industry-wide consultations as part of the process of carrying out market impact assessments.

    —  Ofcom should be asked to make recommendations to the BBC Trust following any relevant market impact analysis it undertakes.

  21.  Market impact analyses should be carried out for any substantial/material change to existing services as well as for the launch of new services.

The BBC's impact on competition for commercial revenue and broadcasting rights

  22.  We are concerned by the increasingly prevalent practice of BBC broadcasts giving on-air commercial value to sponsors of events. Recent high profile examples of this include "The RBS Six Nations" on radio and television, "Crufts sponsored by Pedigree" on BBC2 and "The British Academy Television Awards sponsored by Pioneer" on BBC1.

  23.  Sponsors like to have their events aired on the BBC because it is less cluttered with other commercial mentions than commercial channels. Event owners like being on the BBC because the sponsored presence will attract more sponsorship money to them. But this practice is taking money away from commercial broadcasters and giving it either to the event owner, or to the BBC in the form of artificially deflated rights prices (artificially deflated because the BBC is using licence fee payers money to provide advertising opportunities for commercial companies).

  24.  Such activity reduces the already diminishing pot of money available from advertisers for commercial broadcasters and also gives the BBC an unfair advantage when negotiating coverage rights. It constitutes advertising on the BBC by the backdoor and should be prohibited.

  25.  We note that in his recent review of the BBC's digital radio services, Tim Gardam stated that "One would expect the BBC to be especially rigorous in not mentioning sponsors names, or giving other potentially valuable commercial exposure, in its coverage". Such rigour is not currently evident and should be imposed by the Licence and Agreement.

Bi-media talent deals

  26.  The BBC has, in the past, locked performers into bi-media deals which prevent them from appearing on commercial radio even if they are not appearing on BBC radio. We welcome Mark Thompson's recent statement that the BBC no longer approves of the activity. However, current behavioural change is insufficient guarantee of future compliance and therefore the Licence and Agreement in the new Charter period should prevent such arrangements.

THE FUTURE OF PUBLIC SERVICE BROADCASTING

  27.  In 2004, Tim Gardam wrote, "It is impossible not to conclude that the DCMS, in framing BBC 7's conditions, was surprisingly indifferent to a commercial service already in the marketplace, pioneering a technology that it was government policy to encourage . . . In public policy terms, it might have been better if the opportunity to engender public service competition had taken priority over the BBC's institutional interests in expanding its own services." [6]

  28.  In the following paragraphs we set out why achieving the right balance between the BBC's interests and those of the wider radio market is so important.

Radio Overview

  29.  BBC radio enjoys many structural advantages over commercial radio including an advert-free environment, better spectrum access, the obvious funding privileges, cross-media cross promotional might and an ability to invest in digital radio without risk. Given this "head start", it is therefore particularly important that licence fee resources are used to fund output that could not be provided commercially.

  30.  The BBC argues that, if it is asked to meet market failure, it will be confined to providing unpopular and dull programming. We do not agree. There is a good deal of popular programming which cannot be funded commercially, and we believe that this should be the focus of the BBC's activities. Examples of this include Radio 4's speech output, the live music on Radio 1, and programmes which appeal to the large percentage of the population that advertisers are less interested in reaching.

  31.  The Green Paper states that commercial radio stations "tend to cluster towards the middle ground of taste, in order to reach the widest possible audience"[7], but we are concerned that a similar type of central-ground clustering has characterised changes to BBC radio output over recent years. It is our clear impression that BBC radio is intent on building audience share through popular and contemporary programming targeted at an increasingly young audience. For example:

    —  Radio 2's refocus has dramatically increased its appeal to younger listeners. [8]

    —  BBC local radio appears to be reformatting its output to appeal to younger listeners (see later in report for more detail).

    —  BBC 6 Music, having been primarily charged with playing music from the 1970's to the 1990's, now plays 45 per cent of its music from the last four years.

    —  95 per cent of Radio 1's daytime music is from the past four years.

    —  "New" music alone accounts for 70 per cent of 1Xtra's tracks.

  32.  There is no lack of audience choice in the 15-44 demographic which advertisers want to reach. Nevertheless, commercial radio has invested in new formats (such as Capital Disney, Saga Radio, AbracaDABra and oneword) all designed to widen the industry's demographic appeal. But such investment requires financial risk and, if at the same time, the BBC is using its inherent structural advantages to compete aggressively for audience share amongst commercially-attractive younger demographics, considerable damage will be done. As Tim Gardam noted in his review of the BBC's digital radio services, "The Radio 2 experience shows how effective the BBC can be when it focuses its mind—and its unparalleled resources—on increasing audience share."

  33.  At the BBC Charter Review Seminar on Radio in October 2004, BBC radio controllers continually justified competitive, populist output because it allowed listeners subsequently to hear elements of public service broadcasting. However, this analysis ignores three vital points:

    —  It gives the BBC licence to do just about anything most of the time, so long as it provides specific points of claimed uniqueness from time to time.

    —  It wrongly implies that valuable content (such as news) is not being provided on the station(s) from which the BBC has attracted its increased audience.

    —  By using its cross-promotional, marketing, budgetary and spectrum power to attract those listeners from commercial stations, the BBC is undermining the commercial sector's ability to invest in quality content. A strong commercial broadcasting industry is vital to plurality, competition and quality. If the BBC is allowed to continue to expand and compete without restraint, the wider communications ecology will be damaged.

  34.  Unless the future regulation of the BBC pays better attention to the wider market impact of the BBC's activities both in terms of new services and the character of existing services, it is hard to see how the situation which Tim Gardam observed in relation to BBC7 will be avoided in the future.

BBC Radios 1 and 2

  35.  The BBC has argued that, because Radios 1 and 2 provide a unique mix of speech and music (which, by definition, every different station does), they are worthy of public funding. There is no doubt that these stations are popular, but we question the extent to which they deliver the maximum public value to the maximum number of listeners.

  36.  For example, although the stations play more live music than their commercial competitors, this is concentrated in off-peak. Similarly, their specialist music schedules are consigned to the evenings with lower potential audiences.

  37.  Instead, some shows programmed at peaktime, such as "Steve Wright In the Afternoon", rely heavily on populist programming techniques. For example, over five randomly chosen days, more than 50 per cent of the songs played on Wright's show were top 10 hits, [9] and the speech content of the programme is based on trivia and celebrity guests.

  38.  The public value of Radios 1 and 2 should be measured primarily in daytime output, when most radio listening takes place. These well-funded services should not simply be benchmarked against commercial radio (a predominantly local medium) but should be benchmarked against the delivery of core objectives with public purposes at their heart. Crucial to this is the extent to which their output could not be commercially funded and therefore deserves public funding.

BBC Local Radio

  39.  ITV's de-regionalisation, and any resulting need for increased BBC regionalisation, is not echoed in radio. CRCA's audit of public service broadcasting showed a significant increase in local informational content on commercial radio.

  40.  Plurality in the provision of local public service broadcasting, including the new third tier of Community Radio, will be threatened by an increasingly aggressive, and even better resourced BBC local radio unless restrictions are imposed.

  41.  We are therefore concerned by plans which BBC English Regions are developing for five new local radio stations in Somerset, Dorset, Cheshire, Bradford and the Black Country. They are listed in the Corporation's Statements on Programme Policy for 2005-06.

  42.  It has also become apparent to us that BBC local radio is seeking to refocus its local radio music output towards a younger 45-54 age group. This move has already started pre-Charter renewal.

  43.  For example, Mia Costello of BBC Radio Solent was recently quoted in Xtrax magazine as having overseen "a lighter, brighter, younger and more relevant station, with a new jingle package." She also says "we're now trying to attract people aged 45+" rather than the over-60 age group to which the station's appeal apparently used to be confined and the over-50 target referred to at Lord Burns' radio day in October 2004.

  44.  BBC Radio Bristol is playing more new and current songs than in the past. It has even started to broadcast music sweepers containing refrains from artists such as Keane and Madonna with the strap line "we pick the best of the songs from across the eras to suit any ears". This sounds rather like the post 1999 BBC Radio 2 concept to commercial radio ears.

  45.  At other stations, commercial radio programmers are noticing increased music content at key listening times, features to attract at-work listening and more music from current artists such as Joss Stone, Daniel Bedingfield and the Scissor Sisters. All of this seems to point to an attempt to attract a younger audience to BBC local radio.

  46.  Using such commercial programming techniques to make BBC local radio appeal to younger listeners will not only disenfranchise those older listeners whose loyalty to Radio 2 has waned with the programming changes, but, by making further audience inroads, will undermine commercial radio's ability to provide quality local services.

April 2005


1   Para 8.9, pg 91. Back

2   Copies of "Commercial Radio: In the Public Service" have been forwarded to the committee. Back

3   On pg 8. Back

4   Our Policy, pg 20. Back

5   Para 5.52, pg 78. Back

6   Review of BBC Digital Radio Services. Back

7   Para 1.4, pg 21. Back

8   Since 1999, Radio 2's share of 65+ listening has dropped, its share of 55-64 listening has dropped, share amongst 45-54 year olds has grown by 25 per cent, share amongst 35-44 year old has grown by 60 per cent and share amongst 25-34 year olds has more than doubled. Back

9   Source: Intelligent Media (18-25 April 2005). Back


 
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