Examination of Witnesses (Questions 1020
- 1039)
WEDNESDAY 28 NOVEMBER 2007
Mr Michael Grade CBE, Mr John Cresswell and Mr Michael
Jermey
Q1020 Bishop of Manchester:
But the chances are that, in a 10-minute slot, there will be a
discrimination against the more sparsely populated rural areas.
Mr Grade: No more and no less than today on
the basis of news values. Programmes are put together on the basis
of the news judgements made on the day on the stories available.
Perhaps I can ask Michael just to describe in a little bit more
detail the resources that we will have on the ground.
Mr Jermey: I think there is some misunderstanding
about what is happening in Border and Tyne Tees and perhaps a
picture has been painted by some people as though we are abandoning
Border and everything is coming from Gateshead and it is really
a Tyne Tees takeover and a Tyne Tees service. That is not what
we are doing. We are creating a new service that will cover the
whole of the Tyne Tees and Border region together which, combined,
will still be one of the two smallest regions in England. The
average audience for Look Around, which is a very good
programme and, as you correctly state, gets a high share but in
absolute numbers the average audience is around 60,000 people
compared with many hundreds of thousands, say, for the service
in Granada. The Border region has traditionally been super-served.
What we are going to ensure in the new service is that each of
the services around England and Wales are more equal; that population
size, with a clear nod to geography as well, is rather more even.
Within the existing Border region you will have a good number
of journalists and camera crews based in Carlisle, and we will
probably put some further news-gathering in some parts of the
region where people are not currently permanently based. That
footage and that news coverage will go into the whole programme.
Then, in addition to that, there would be a zone, which I think
is more likely to be an average of 12 minutes than 10 a night,
within the half-hour programme, that is purely about the current
Border region, about Cumbria, about the Scottish Borders. So I
think if you are a viewer watching in Kelso or Carlisle, you will
get a rich diet of news of the day of your particular part of
the region and also features and news coverage about the wider
region that will also have relevance. What we are essentially
doing is creating more services with a similar critical mass to
the service in Granada, which within the last year has won the
national BAFTA for best news coverage.
Q1021 Lord Inglewood:
I declare an interest as an English listener and viewer of Border.
If I were a Scottish listener or viewer, I am not sure, in the
current world, I would not think it was rather more appropriate
to have Scotland as the core of my local regional news and not
England.
Mr Grade: We are in discussion with our colleagues,
who are independent of us, at the Scottish Media Group, who run
the centre of Scotland licence, as to how we can ensure that there
is a minimum of confusion between Border coverage of the border
region and Scottish coverage of the border region. It is somewhat
problematic because of the configuration of the transmitters but
we are doing our best, with very great co-operation from SMG,
and we are co-operating with them to see if we can alleviate the
problem.
Q1022 Baroness Scott of Needham Market:
What I really want to ask you is whether you think there is a
future for regional news. I live in the Anglia region, which over
the years has become larger and larger. I remember my father getting
enraged, living in Suffolk and watching stories about Milton Keynes.
I am sure he had nothing against Milton Keynes but he did not
see it as relevant. So the danger actually is that the stories
become so much less locally relevant that people simply stop watching
them, and they either watch the national news or they read a local
newspaper. From that perspective, are you not really just driving
further down the road where you cannot provide it any more?
Mr Grade: I think you are right. I think your
forecast as to the point at which people become disenchanted with
the regional news provision, for the reasons you have very accurately
described, is some way off. I think it is inevitable. What we
are working on, which I think will cut through that problem for
all time, is a broadband delivery of ITV local, which we have
now, through our website, ITV.com , rolled out which is very locale-specific
targeted, using our newsrooms, using ITN, using our regional newsrooms
and so on to provide information, entertainment and news that
is very specifically targeted, not quite to postcode but almost,
and that great sense of dissatisfaction that people have always
felt, which is a relic of the transmitters ... If you look at
London as a region, the people of Croydon have very little in
common with the people of Watford but they are served by this
same programme. I do not know how many miles it is from Croydon
to Watford but it is entirely unsatisfactory. Ipswich and Norwich,
Peterborough and Cambridge. This has been a perennial problem.
It is going to be solved over time by broadband delivery of very
specific local news and information, which I think will be an
exciting commercial proposition—that is why I am excited
about it being sustainable—for local advertisers, right
down to the local hairdresser or whatever. It is quite an exciting
proposition and I think that will solve the problem.
Q1023 Baroness Bonham-Carter of Yarnbury:
Your predecessor, Mr Grade, wanted to own at ITN outright. Do
you share those aspirations and, if so, what advantage would it
bring you?
Mr Grade: I do not have a view, to be honest.
The business works very well. The shareholding works extremely
well. We are content with the value we get as a customer of ITN.
We are happy with the position as it is. If other shareholders
wanted to sell, we would look at it but I see no reason. It does
not affect our relationship with ITN. It is not an issue for us.
Q1024 Baroness Bonham-Carter of Yarnbury:
The Chairman asked you this right at the beginning, I think, but
to what extent do you, as ITV, seek to affect the news output?
Mr Grade: We are responsible for the compliance
of ITN as the broadcaster so we take an interest to the extent
that, if we have tremendous confidence in the editorial responsibility
and skills of the editor of ITN, Dave Mannion, and his people,
but he is under no illusions that he has to refer up to us if
he is in any doubt or if he is about to take some kind of editorial
risk—a legal risk or whatever—with the story. He refers
up to us on the issue of compliance. Otherwise, we have regular
meetings with ITN to review their performance, how we think the
programme is going, but on a day-to-day news basis we delegate
entirely to the very talented team of editorial experts of ITN.
Q1025 Baroness Bonham-Carter of Yarnbury:
So you would never say "We think that this story is one that
should be either leading the news or in the news"?
Mr Grade: I think the commissioning editor at
the network centre, Mark Sharman, who is in charge of news and
sport, might well, on a very big news day, an important, difficult,
Newsday, have a conversation with the editor and say "What
are you doing with this story?" and have a general conversation
but there would be no instruction.
Q1026 Baroness McIntosh of Hudnall:
I just wanted to go back to something that the Chairman raised
earlier on briefly, which is about the going out to tender in
respect of national news in 2001. You went out to tender. I know
this was before your day, Mr Grade, so I will address this question
to your colleague. You went out to tender and there was a significant
shift in the way that ITN subsequently presented the news to you
because there was an under-bid from Sky—and that is my reading
of it—which resulted in the price going down quite significantly.
This time you have a contract, I understand, which is due to come
to an end next year, 2008, which has been extended—that
is how it appears—until 2012 without going out to tender
again. Can you just explain that decision not to go to tender
in relation to the previous experience?
Mr Cresswell: By all means. I was not actually
in post in 2001. I was doing something slightly different within
the organisation, so I was not aware of the actual negotiations
that went on at this time. I think the simple thing this time
around was that we had a very good relationship with ITN, we are
very pleased with the quality of their news service and we had
this discussion with them about upgrading their technology around
the regions. In ITV we have invested circa £50 million over
the last few years since the merger, upgrading and digitising
all the newsrooms, and we wanted a conversation with ITN about
how they could get those efficiencies and upgrade their technology.
In order to do that, we needed to extend the term of the contract
to make the investment work, so it was a fairly rational discussion
with them and we are very happy with the quality of the news service.
Are there further efficiencies they can get? Yes, they can get
them with investment but we need to fund that investment and,
in order to make it pay we would need to extend the contract.
So it was, as I say, a very rational, commercial negotiation for
us to get the high quality news service at an ongoing price and
them to be able to upgrade the technology to move them forward
into the 21st century.
Q1027 Lord Maxton:
I assumed 2012 is a short-term contract basically because the
whole world changes when everybody is digital, and everybody will
have availability of 24-hour news services in particular, which
you no longer have. Were you involved in the decision not to have
a 24-hour news service any longer?
Mr Grade: No, I was not, Chairman.
Q1028 Lord Maxton:
Are you likely to restore it?
Mr Grade: No. I cannot see a business case in
a crowded market for us taking a risk and taking money out of
the network programme budget, the ITV network programme budget,
on a highly speculative venture which has failed once to provide
yet another 24-hour news channel.
Q1029 Lord Maxton:
That slightly defeats the argument you were putting on the move
back to 10 o'clock, where you said "breaking story",
"ongoing story". To be honest, once you have 24-hour
news services, why would you wait till 10 o'clock to get the latest
news on it?
Mr Grade: If the story is big enough, we will
just roll ITN through the day, through the night.
Q1030 Lord Maxton:
That would have to be a very big story, the death of Princess
Diana or something, has it not? It is not going to be the ongoing
saga, as at the moment, about expenses and things.
Mr Cresswell: As a free-to-air broadcaster,
funded by advertising, the costs of a news channel are substantially
about carriage. That would today mean free-view carriage. The
cost of a stream is £8, £9, £10 million per year
plus carriage on Sky. So the economics of funding that by advertising
just did not work. I think in the future however, with broadband,
there is an opportunity. If you go onto ITV.com it already has
an ITN site with ITV news where you can catch up on the bulletins
with a refresh during the day.
Mr Grade: With stream pictures.
Mr Cresswell: With stream pictures. We were
too early before in terms of what we are trying to do in terms
of the economics, particularly with the advertising downturn,
but I think technology in the future will enable us to give a
very high-quality broadband service.
Q1031 Chairman:
Thank you very much. Can I just go back to one question Lady Bonham-Carter
asked you about editorial influence? If there was a story which
reflected not particularly well on ITV itself being run by ITN,
would you wish to intervene in that?
Mr Grade: I think we have had plenty of examples
this year, Chairman, of getting a good kicking from our own news
organisation, which is quite right.
Q1032 Chairman:
You do not think you got any preferential treatment?
Mr Grade: It did not feel like it on the day,
I can assure you, Chairman, which is exactly how it should be.
Q1033 Lord Inglewood:
In the event of some iconoclastic new owner, perhaps less steeped
in and committed to the United Kingdom's public service traditions,
acquired ITV, do you think it would be possible for them to completely
degrade and change the news agenda that Channel 3 sent out, or
do you think there are probably sufficient regulatory safeguards
that, to really do anything dramatically and dumbing down would
be impossible?
Mr Grade: First of all, there are statutes in
place and there is a whole set of rules and regulations covering
this area. Should some less scrupulous owner of ITV decide that
they wish to turn the news to their own commercial advantage or
whatever, they would first have to find some decent journalists
who were prepared to do that. That would be the first thing. Let
us assume they could, then they would run foul immediately of
the regulatory and statutory rules, and I think they would have
the devil's own job to do it. First of all, the journalists themselves
would blow the whistle, so it could not be done clandestinely.
Q1034 Chairman:
In short, you are saying you do not believe it is a real possibility?
Mr Grade: I genuinely do not, no.
Q1035 Baroness Howe of Idlicote:
Sticking to the same business of shareholding and its influence,
it was interesting that, when talking about Sky's purchase of
a stake in ITV, the comment was made very much that a new owner
could make a difference to the news output and yet you went on
to argue that in this case the amount, which was, I think, 17.9%,
was not even remotely a full enough share. I think it would be
interesting to know what percentage you think would be sufficiently
worrying.
Mr Grade: I think the evidence that you may
be referring to, through the Chair, was Ofcom's asking the Competition
Commission to consider whether Sky's shareholding was prejudicial
to the supply of news. I am not using the exact, correct terminology.
The Competition Commission's finding, with which we concur wholeheartedly,
that Sky's shareholdings in ITV may throw up other problems but
the issue in relation to news was not an issue, and the Competition
Commission agreed with us that they did not think it was an issue
in respect of news. The shareholding was not an issue in respect
of news.
Q1036 Baroness Howe of Idlicote:
This is because of your arguing the impartiality and other requirements.
Mr Grade: Yes.
Q1037 Baroness Howe of Idlicote:
So you are really saying that, say, 100% ownership would not be
worrying to you?
Mr Grade: Oh, that would be worrying in respect
of news, yes. I would rather not get into hypotheticals, if I
may. At 17.9%, it is clear that Sky has no influence operationally
on ITV. An issue of where we get our news from and what is in
our news bulletins and how we manage the editorial decisions of
the news is not a matter for the shareholders of ITV. It is a
matter for the executive and, in extremis, a matter for
the full board. It is not a matter for the shareholders and would
never come to shareholders so it was not an issue. Obviously,
if they owned a controlling interest, which they are not allowed
to do by statute, they would make their own decisions about how
they wanted to manage the news at that point but, since they cannot
own a controlling interest in a terrestrial PSB, it is not an
issue for us.
Q1038 Chairman:
You do not mind having a 17.9% shareholder on your board—or
perhaps not on your board—a 17.9% shareholding of a competitor
actually on ITV?
Mr Grade: We are on the record with our evidence
to the Competition Commission, whose recommendation is imminent.
We have argued, I think successfully, that at 17.9%, Sky's shareholding
would give them a blocking stake on special resolutions that require
75% of the votes cast, et cetera, and that would give them
a material influence over future strategic direction and that
their interests would not necessarily, as a trade competitor,
be aligned with the overwhelming majority of our retail and institutional
shareholders. That argument I think has been accepted by the Competition
Commission. The issue now is to what extent Sky will be required
to sell down and what the manner of that sell-down will be. We
have taken the purist and intellectually pure argument, saying
it should be zero; we feel it should be zero but, so long as the
Competition Commission's recommendation, assuming the Secretary
of State accepts it ... so long as they no longer have a blocking
stake, obviously, that would be a very good result for us.
Q1039 Chairman:
I would interpret that as meaning that, if they had a 5% stake
or a 10% stake, you would find that acceptable.
Mr Grade: I would be nervous about a 10% stake
because at that point there is the issue of what is known colloquially
in the City as the "squeeze-out". Somebody might be
deterred from delivering an acceptable bid, a bid that was acceptable
to our shareholders for ITV, contingent upon them getting to the
squeeze-out, which they need 90% of the votes to enable to enforce
the sale of the final 10% and that could be problematic. That
would leave Sky at 10% with a residual material influence over
the outcome, so we would like to see it well below 10%.
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