Examination of Witnesses (Questions 140-154)
Mr Alex Blowers
25 OCTOBER 2006
Q140 Lord Swinfen: Mr Blowers, what
will be the position of the BBC on product placement, bearing
in mind that they are not supposed to advertise?
Mr Blowers: My understanding of the legal position
would be that the BBC would be required to comply with any restriction
on product placement that would take place. As far as I am aware,
the position today is that the BBC, like other broadcasters, does
unpaid for prop placement. They have a process of where they need
suitable props for a programme they will outsource those props
but there is no payment in either direction. If an absolute ban
remains in force on product placement then that ban would apply
to the BBC as it applies to any other broadcaster.
Q141 Lord Swinfen: Do you think that
the proposed rules adequately address the emerging business models
for content provision over the new platform?
Mr Blowers: That can be answered in two ways.
Going back to scope, it is important that we get scope right so
that many of the new opportunities in new business models are
not mired in overregulation. It is also important that an appropriate
degree of freedom is given to traditional broadcasters to advertise.
Some of the detailed rules that the Commission has proposed to
remove from the Directive in our view it is appropriate to do
so and getting that balance right. There is an issue here about
the relative attractiveness of the traditional what we call the
"spot" advertising market; the adverts that appear interspersed
with programmes and other forms of advertising. If we keep the
rules too stringent on spot advertising, whilst creating a very
open environment for other forms of advertising, then potentially
that could be unfair for broadcasters. There is a need to avoid
overregulation of advertising opportunities in the non-linear
tier and to progressively remove some of the rules that apply
to broadcasters which, frankly, are now probably beyond their
sell-by date.
Q142 Lord Swinfen: I am wondering
whether there are any other restrictions apart from what has been
proposed that you would want to see on marketing and advertising,
particularly with regard to children's programmes?
Mr Blowers: It is important to get the balance
right in this area. Our view is that the rules that apply in particular
to children need to evolve with consumers and citizens' expectations
about protection for children. As the Committee will probably
be aware, there has been a lively discussion about food advertising
for children which is taking place at present. We are in the process
of considering our proposals on that that we will be making shortly.
We therefore recognise that there are particular areas of concern
in relation to advertising to children that this Directive needs
to address. In fairness, I think the Directive does provide a
clear framework for applying stricter rules to advertising directed
at children.
Q143 Lord Roper: Is there one problem
as far as this is concerned and that is so far as Article 11(3)
and Article 11(5) are concerned, which they are going to put together
into Article 11(2) insofar as this will mean that they will all
be subject to the new 35-minute rule, this might have the effect
as far as commercial television stations are concerned to form
some sort of disincentive in putting either children or news programmes
on. What is your view on that?
Mr Blowers: We are sympathetic to the argument
that the 35-minute rule should be removed in its entirety. That
has been a pretty clear UK position since the outset. The 35-minute
rule reappeared mysteriously during the course of the inter-services
consultation within the Commission. I do not even think that the
Commission officials really believe in it. To clarify a point
I was making, it is entirely appropriate to remove those kinds
of artificial restrictions and certainly to look very hard at
an artificial impediment to the creation of children's programming.
Some of the more qualitative restrictions on advertising to children
remain entirely appropriate and we do not have any issue with
the maintenance of a fairly strict base of regulation as far as
that is concerned.
Q144 Lord Haskel: You would be sympathetic
to the view that we have had put to us that the market can take
care of advertising. Those platforms which advertise too much
would lose customers and the ones that advertised modestly will
keep their customers. Would you agree with that?
Mr Blowers: There is some evidence from commercial
radio which does not have these kinds of restrictions that that
is in fact the case. It is also important to note that the removal
of these particular restrictions on things like centre breaks
do not alter the fact that the Directive still has some absolute
maxima for the amount of advertising that can be carried both
per hour and per day. We would not be relying entirely on a self-correcting
mechanism market. There would still be some restrictions in there.
Q145 Chairman: The evidence to us
appears to suggest that given the freedom for product placement
traditional television would anticipate product placement as a
sort of commercial revenue which would gradually start to replace
the diminishing spot commercials and so on. Is that a fair assessment
of where the market is likely to go?
Mr Blowers: We are slightly sceptical about
this particular claim. The reason is that if you look at the US'
experience and look at the relative size, product placement having
been permitted in the US now for a number of years, if you look
at the relative size of the product placement market as compared
with the spot advertising market, the latter still massively outweighs
the former and the evidence advanced to us in our recent consultation
on product placement suggested the product placement market opportunity
is somewhere in the £25 million to £100 million range,
whereas in 2005 the value of the spot advertising market was something
like £3.5 billion. It is important to have that sense of
the relative proportions of these things. Where there is an argument
in favour of relaxing product placement, I do not think we would
accept the argument that it is an inevitable and necessary substitute
for spot advertising revenues.
Q146 Chairman: What about the use
of split screens and so on? Increasingly younger people are certainly
watching the internet on their television screens and so on. The
ability technically to show advertisements while at the same time
having a TV programme on is already rife on the internet and could
clearly easily be replicated on what I would call the real television.
Presumably that would be permitted? The draft Directive seems
to be framed in traditional terms—television breaks, spot
advertisements, placements—but meanwhile all around the
picture can be advertisements. Am I correct?
Mr Blowers: There is an interesting set of challenges
around the use of multi-screen presentation or multi-advert presentation
on the screen. From our perspective there is life in the old dog
yet as far as the spot advertising model is concerned. With one
or two exceptions, most channels are retaining that model. They
could have moved to an overlay model.
Q147 Chairman: Is that kind of commercial
revenue earner regulated?
Mr Blowers: It would be caught by our existing
rules. It would not be permissible to have, for instance, a rolling
banner ad appearing at the bottom of the screen.
Q148 Chairman: In the future internet-based
media which falls under your television-like services would find
that they would be regulated on their use that most internet media
make their money from which is from these kind of adverts.
Mr Blowers: I do not think so is the answer
because the specific rules that we would apply today to broadcasters
in the linear tier would not seek to impose the same rules in
the non-linear tier. It would be possible to produce a service
that did have some of these new types of advertising in a non-linear
service and they would not be restricted in the same way. The
reality is that our existing rules in the linear tier are designed
for that traditional model and that holds good for most of the
services we are currently regulating in the linear tier.
Q149 Chairman: The question of regulating
public interest issues around the theme of promotion of race-hatred
and obviously issues of violence and children and so on, my understanding
is that government feel that what is in the draft Directive at
the moment is unnecessarily wide and that this could be simplified.
Could you explain this? Clearly in the outside world if there
is a difference between the Commission and the Government on what
should be regulated—for example, violence and expressions
of hatred—it is clearly significant. Can you explain this
to us?
Mr Blowers: There are three dimensions to this.
One is that every government must strike a balance as it sees
fit between the freedom of expression and prohibition of certain
forms of expression which may incite hatred against particular
groups. The Government would argue that that balance is something
which is best struck at national level by national governments
reflecting the particular circumstances, the particular history
and the particular considerations of their own country. There
is a top level point of principle here of whether it is really
appropriate to try and strike a common denominator balance between
these things at European level. That is the first point to make.
The second point is really about, in aggregate, the effectiveness
of all the systems of control that are available to us to deal
with these kinds of problems. Incitement to hatred is a criminal
offence in the UK and it is right that it should be dealt with
as a criminal matter. Ofcom apply a much higher standard to the
expression of opinion on broadcasters. That goes back to the point
I made right at the beginning of the session that broadcasters
have a particular duty of care because it is a much more pervasive
medium. The second point to make is that it is not appropriate
to think about a broadcast-type approach to these issues being
rolled out across all forms of service. I do not think that is
the right approach. The third thing is have we got the right structures
in place? It is work-in-progress. A lot of progress has been made
by the Government, by the industry putting together self-regulatory
industries and working with the Government and there is a role
for the regulator. We all need to continue to work to develop
new responses because new issues and new problems are arising.
The broad structure and the broad approach that the UK has adopted
seem to me to be correct. I do not believe that it needs to be
radically redrawn.
Q150 Baroness Eccles of Moulton: Your
answer to the former question happily leads into my question.
We have gained the impression during the course of the inquiry
that we do quite satisfactorily operate a system of self-regulation
and from what we have heard the industry is reasonably comfortable
with the degree of regulation that they have to operate under
now. My question really is about what damage the Directive could
possibly do to the regime under which we operate at present and
what your view is first of all about that? I use the word "damage"
advisedly because it seems that we are all supportive of the way
the industry is regulated at the moment and whether you think
we are heading in the right direction or whether there is more
that could be done; just a general view of the threat that could
possibly be apparent.
Mr Blowers: The Directive mark I, the one which
we are all none of us able to discuss as we know the world has
moved on, I think would have been in our view very damaging because
there would have been no place for the existing self-regulatory
initiatives. We could not have used them or built on them in terms
of implementation of the new requirements. As a kind of psychological
consequence we would have had a lot less willingness and commitment
from the industry to continue to work to develop self-regulatory
systems. Why would you do that? Why would you put the time and
effort in if the expectation is that in due course the Government
or the regulator will step in with their own prescribed model
based on this new Directive? That was why we felt that would be
very damaging. Going back to the point that I made earlier, we
were also very conscious that we could end up regulating not very
much in the sense that a lot of these activities could in reaction
to overregulation simply be taken out of our jurisdiction all
together which would have left us looking particularly foolish
really. The potentially good aspects of this proposal is that
it has supercharged efforts in the industry, and frankly probably
in Ofcom as well, to think through some of these challenges around
how we can develop models of effective co-regulation going forward
that will have the benefit of existing self-regulatory systems
but will also underpin the Directive. You could say that at least
one good aspect of it is that it has made everyone think a lot
harder about how we continue to improve on the system that we
have.
Q151 Baroness Eccles of Moulton: Presumably
what we do not want is to have to have a lot of new legislation
which means that what is now operated on a self-regulatory basis
then becomes enshrined in law.
Mr Blowers: Exactly.
Q152 Lord Walpole: Do you think that
if things go the way you think it is going the regulators throughout
Europe are going to be able to cope? I have no idea how you can
watch 350 stations or whatever we have in England at the moment.
If they are entirely self-regulatory, all right, but you are going
to have to watch them, are you not? All you regulators are going
to have to watch them.
Mr Blowers: We have moved to a system in the
UK, and this is not common across Europe, of essentially having
a complaints-led approach so we do not routinely monitor. It is
actually 750 channels that we licence here in the UK. There are
simply insufficient eyeballs in Ofcom to physically watch them
all, so what we do is we react to complaints and only when we
receive a complaint do we intervene. The short answer to the question
of whether regulators will cope is we probably need more acts
of cooperation between regulators. Ofcom is seen as being probably
at the upper end of the scale in terms of the capabilities in
Europe in this area, and we have to be because we are regulating
more than half of the channels in Europe. What we are looking
to do is to export and disseminate our best practice and co-operate
more with other regulators so that we can try and raise the overall
level of performance.
Q153 Lord Roper: The Government are
very keen that the final document should contain something on
media literacy and want to involve the regulators in developing
programmes of media literacy. Is this something that you are looking
forward to doing and have you done a plan for it?
Mr Blowers: We already have an extensive programme
of activities on media literacy. I am very conscious of the time,
I would be very happy to cover this issue in a supplementary note
if that would be of interest.
Q154 Lord Roper: Thank you very much.
Mr Blowers: We have been strongly encouraging
the inclusion of references to media literacy. If there are three
legs on this particular milking stool, one is the activity of
the regulator, one is the activity of co-regulatory schemes and
the other is media literacy and empowering consumers to understand
the issues and protect themselves in this new environment. It
is a very, very important area. If you want to know more about
what we are doing in that area I am very happy to cover that in
a supplementary note.
Chairman: Mr Blowers, that was a tour
de force. We are deeply indebted to you for your time, for
the clarity of your answers and also for your very generous offer
to take the dog that did not bark, as it were, and listen to what
it would have said and send us some supplementary answers. On
behalf of the sub-committee could I thank you very warmly indeed.
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