Examination of Witnesses (Questions 300-315)
Mr Jonathan Simon, Mr Martin Stott and Mr Magnus
Brooke
30 OCTOBER 2006
Q300 Lord Walpole: When we get to
product placements, do you not think the public will find it irritating?
I know I would.
Mr Brooke: I am not sure you would necessarily
notice it.
Q301 Lord Walpole: This is the danger
and what worries me. I suppose you will tell me that the best
product placement is subliminal?
Mr Brooke: Subliminal is something you cannot
even see, it is invisible to the naked eye. Of course you can
see the particular product or particular brand in the programme
and, indeed, we would certainly be in favour of transparency so
that you should be able to know through appropriate identification
that that programme contains product placement. I think the reality
is at the moment when you go to the cinema, or when you watch
some American programming, there is already product placement
there. Indeed, at the moment on all channels, including the BBC,
as I understand it, there is prop placement which is essentially
the provision of props for free. We are talking about an extension
of a practice which is already commonly accepted and, indeed,
totally legitimate under the Ofcom Broadcasting Code. I accept
that, and you are absolutely right to be concerned about that.
It is our responsibility to make sure that any rules are appropriate
and there is appropriate regulatory controls and that we abide
by those. Ofcom commissioned some deliberative research from viewers
which went through a number of different ways of continuing to
pay for public service broadcasting, one of which was product
placement, and there was a feeling that product placement was
preferable to other potential mechanisms, like subscription, of
maintaining revenue for commercial public service broadcasters
in preference to other means of doing that. Viewers like realism,
frankly, and not having fake beers on Coronation Street
and things like that, and having a sense that this is the real
world we all inhabit and the reality is brands are everywhere
and it is part of the world we live in.
Chairman: We have seven minutes left
so it would be helpful if you could keep the answers a bit briefer,
not because they are not enormously interesting and helpful but
because of the time. There is another question in the area of
content with Lord St John of Bletso and then we are going to go
on and look at issues of self-regulation and impact assessments.
Q302 Lord St John of Bletso: Thank
you, my Lord Chairman. Unfortunately I have to slip away in about
five minutes so I will ask all three questions at the same time.
First of all, considering illegal, harmful content, do effective
mechanisms exist in the Directive to control these types of illegal
content? Is the proposal in the Directive likely to substantially
enhance restrictions on freedom of expression? That is my first
question. If I can slide my other one in as we have the seven
minute rule! With the increasing convergence of traditional television
and internet-based content, which you mentioned in your submissions
to us, does the imposition of quotas for European works and independent
productions continue to make sense in the emerging environment?
Mr Simon: If I can answer the first of those
questions. Rules on illegal content are by definition already
covered by general law and also as broadcasters in the UK we adhere
to the Ofcom Broadcasting Code which goes a lot further than the
TV Without Frontiers Directive in terms of harm and offence, but
it does it in a far more subtle and nuanced way which makes reference
to context and that links into your freedom of expression point.
It is very important to us that one strength of the UK media is
that it has a long tradition of challenging taboos and prejudices
and addressing difficult contemporary issues and Channel 4 does
this as much as any broadcaster. You can do it by a variety of
means: you could have a documentary which could portray people
with very extreme and prejudiced views and the point of the documentary
is to expose them; you could have a political satire which presents
but actually ridicules very extreme views; or you could have a
discussion programme which portrays a range of views, some of
which might be very offensive. I think it is important as broadcasters
that we can preserve this level of freedom of expression. We need
to make sure nothing creeps into the Directive which prevents
us from doing so, but from doing so in a responsible manner to
as we always have done.
Mr Brooke: Staying with European quotas, from
our point of view we produce European content for two reasons:
firstly because viewers like it and that is what they expect and,
secondly, because we have got the revenue to pay for it, and I
do not think that is a function of the quota, to be honest. We
broadcast 86 per cent of European content across our schedule,
so we are a long way ahead of the quota. The key thing is there
is no point having a quota unless you have the revenue to fulfil
the quota. On independent production, again, we commission the
best programmes and the network centre is responsible for commissioning
the best programmes. We make more money out of broadcasting successful
programmes than we ever would on producing a programme which is
not very good, so there are massive incentives, from our point
of view, to commission the best programmes. Provided independents
continue to produce good programmes then we will continue to commission
them. Again, I do not think it is a function of the quota.
Q303 Lord St John of Bletso: Time
has run out but I was interested in your comment from your evidence
where you mentioned that over 90 per cent of your funding comes
from advertising revenue, and I would be interested to expand
your answer from earlier on when you were talking about the different
frameworks, the way that revenue can be generated by other sources
other than advertising. It would be interesting to know how you
see the revenue split between advertising and other sources of
revenue in the next five or 10 years with the convergence of the
on-line services in respect of what companies are offering.
Mr Simon: I can give you a very brief answer
which is we do not really know. As we were discussing before,
we are going to be experimenting with a whole range of different
new business models for new services and they would probably include
types of pay as well as new types of free services. It is too
early to predict with any degree of certainty what kind of models
will work and what the impact in terms of what percentage advertisements
will be.
Q304 Chairman: I was not clear from
your answer to Lord St John of Bletso whether you feel that the
Directive as currently drafted restricts the freedom of expression
which was referred to. When the Minister was before us last week
he gave us the distinct impression he was concerned that the Directive
as originally drafted did raise some issues of restriction which
he would not want to see going beyond the current UK position.
Mr Simon: It does, and we know that the wording
in the proposal in Article 3e talks about not allowing incitement
to hatred based on: "sex, racial or ethnic origin, religion
or belief, (without stating what belief means) disability, age
or sexual orientation". Again, there is no reference there
in the way Ofcom is careful to put it into context in its own
Broadcasting Code. I think there is a potential worry.
Q305 Lord Haskel: Has the Commission
adequately considered the impact that this proposal is likely
to have on the sector? Is it even possible to predict the likely
costs and benefits of this proposal with sufficient reliability
to support the proposed changes in the Directive? Would a precautionary
approach to regulation suggest different proposals for change?
Mr Brooke: The big issue is the extension of
scope, and as you probably heard from our evidence in terms of
the extension of the scope to on-line, from our point of view
that is not an absolute core issue. We already have compliance
systems in place to deal with that extension to the extent that
we develop those sorts of businesses. I would not say that was
necessarily an area where we could go into huge detail about what
the impact would be, but clearly there would be a significant
extension of regulatory compliance obligations on those providers.
I think an area we do know about is the 35-minute rule where clearly
there will be a significant economic impact for us. It is not
obvious to us that the Commission have carried out an impact assessment,
and manifestly it is fairly straightforward to quantify what that
impact would be. You can take the number of centre breaks or the
number of additional breaks that you might be allowed in films
and, to some extent, quantify what those would be. If the extension
of scope was an area where it was hard to say exactly what the
overall figure would be, I think there are areas where we are
involved where it would be slightly easier, to be honest, partly
because you are talking about changing existing practice. Effectively
you are talking about an enhanced restriction from the position
we are in at the moment, so you are taking the existing situation
and tightening regulations and saying what will the impact of
that be.
Q306 Lord Haskel: If a person could
choose, would they go for something like you mentioned, Coronation
Street, the X Factor or something like that?
Mr Brooke: In what sense?
Q307 Lord Haskel: For advertising
there are more people watching these programmes.
Mr Brooke: Yes. It depends on what you are trying
to achieve through the advertisement. If you are trying to reach
a particular sector or a particular sort of person or reach a
mass audience, it depends on what your objective is and therefore
how much money you want to spend to reach that particular segment
of the audience, or whether you want to reach as many people as
you possibly can at the same time. In broad terms, the more people
watching the more valuable potentially the airtime is.
Q308 Chairman: On impact assessment,
did the Commission look as rigorously as you would have liked
at the very liberal option which you clearly would prefer, very
much lighter touch, little or no regulation of advertising and
so on, given the complete change in the competitive framework
and so on? Was that looked at thoroughly?
Mr Stott: I do not think it was looked at thoroughly
enough is the short answer.
Q309 Chairman: The question at the
end of all this is given that the draft Directive is produced
in an area which is probably as important as anything to the average
citizen, young and old, and given this potential extension, why
do you think the Commission came forward with the draft Directive
having had an impact assessment done, because you have had a consultation,
and you have got a number of areas which clearly you are unhappy
about and other areas where you feel they did not go as far as
they might have done or at least discussed them as an option?
What does this say about the impact assessment process?
Mr Stott: I think you are asking us to look
into the minds of the Commission.
Q310 Chairman: No, it is affecting
you and your viewers.
Mr Stott: I accept that, indeed. Each one of
us has spent a lot of our time trying to put that right as best
we are able. We feel that the proposal is far from satisfactory
in that it lacks clear coherence and is not based on a clear assessment
of what the impact of it would be.
Q311 Chairman: Are they listening
to you now?
Mr Stott: We would like to think so.
Mr Brooke: To be fair to the Commission, not
everybody in Europe shares our views sadly. The Germans appear
to be very much in favour of liberalisation of the advertising
rules, but our experience is not necessarily that every other
European country sees the logic of our arguments. I suspect to
some extent that may have coloured where the Commission ended
up as opposed to it necessarily being the result of a linear process
of impact assessment and modification.
Chairman: We are in Brussels next week
so we will hear a number of other views. We entirely understand
that point.
Q312 Baroness Eccles of Moulton:
Earlier on you referred to principles that should be regulated
for and also that micro-regulation is inappropriate and light
touch is important. Obviously with such things as self-regulation
and co-regulation, which would be done by the Member States, presumably
there will remain some principles which will need to be regulated
for at Commission level, at the European level. I am talking hypothetically
in a perfect world. What would you consider those regulations
to be bearing in mind that you want to try and preserve as far
as you can some sort of equality between the linear and non-linear,
however they are defined?
Mr Simon: I think it is perfectly appropriate
for the Commission to have as an objective the promotion of the
circulation of European works and the Country of Origin principle
is completely key to that. What it needs to recognise, which it
does not always do, and this comes back to the micro-management
point, is where there are cultural differences across the EU they
should not be flattened out, they should be celebrated and each
Member State should be free to continue to promote the things
which it wishes to. That is where conflict can arise in this.
There is a risk where every country has got its own little pet
obsession and they try and force that into the Directive. We are
saying it should be the lowest common denominator approach where
you only regulate what you need to at the European level. The
opposite often seems to be happening where every little bit of
national regulation gets thrown into the European agenda and you
get rules which make sense in one Member State and suddenly the
risk is they are going to be applied across the whole of Europe.
Q313 Baroness Eccles of Moulton:
Can you say what should be regulated?
Mr Stott: Just talking about advertising, which
we have been spending quite a lot of the last hour doing, if one
had a directive which prescribed a maximum amount of advertising
per hour and also said that commercial breaks could only be taken
at a natural point which is consistent with the editorial integrity
of the programme and also there were to be some qualitative rules
about the type of programming you could have, such as those that
are contained in the basic tier, I think that would be a perfectly
reasonable set of rules to be applied at the European level. It
is when you get into saying how many minutes you can wait before
you have a break, whether or not you could have an isolated spot
or whether that can only be an exception, those sorts of far more
detailed rules are the ones we want to see. We would be more than
happy to agree with broad principles.
Q314 Baroness Eccles of Moulton:
You can see that the viewer must be afforded some sort of protection
against unacceptable content, but I am quite surprised that you
would not be prepared to let the market decide on whether advertising
is being correctly applied or not. Why do you have to have regulation
for advertising?
Mr Simon: We come from an environment where
we are extremely regulated at the national level as much as at
the European level and there is a degree of media literacy as
well that is needed alongside a more liberalised approach.
Q315 Baroness Eccles of Moulton:
That is the first time we have heard media literacy mentioned.
Mr Simon: It is something we are all involved
in. It is unrealistic to say that we should completely wipe away
every regulation which exists. As Martin was saying, there should
be an absolute minimum set of regulations at the European level,
have a national debate based on the national context of what concerns
people the most in each Member State and apply a relevant set
of regulations, which may themselves become relaxed over time
and realistically they probably would. The long-term game is there
probably will be less and less need for any kind of restrictions
at all because there will be more self and co-regulatory models,
as we were just mentioning, and people will be more used to these
models and that should be the long-term game.
Mr Brooke: What this boils down to is how each
country chooses to find its own national broadcasting. In a sense,
if you take public service broadcasting, there are very clear
rules in the state aid rules that each Member State ought to decide
within a very, very broad European framework its own public service
broadcasting system and then fund it. There is very little European
interference in that. This is the kind of commercial side of that
and yet we are in a situation where there are incredibly detailed
rules in Europe about how commercial investment in a particular
country's content is arrived at, which seems a very odd anomaly;
I have never quite understood it.
Chairman: That is a very good last note
on which to end. Mr Stott, Mr Simon and Mr Brooke, thank you.You
have gone beyond the call of duty. I have to say, you have been
excellent witnesses and have been very helpful.
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