Examination of Witnesses (Questions 1080
- 1099)
WEDNESDAY 28 NOVEMBER 2007
Mr Malcolm Wall, Mr Paul Richmond, Mr Jon James and
Mr Scott Dresser
Q1080 Lord Inglewood:
Ownership is therefore the crucial component in determining the
tone and general ambience of the news that is provided by that
particular outfit.
Mr Wall: Absolutely, and plurality of ownership
is the best guarantee of plurality of voice, and that as a concept
is generally, we believe, the view of competition authorities
who are normally reluctant to impose behavioural remedies and
therefore seek out structural remedies for these very reasons,
whether it be in this market or others.
Q1081 Baroness McIntosh of Hudnall:
I just wanted to ask, arising from the last bit of the discussion,
do you think that anybody looking at what Virgin Media offers
to its customers would be able to discern any as it were editorial
influence at work there?
Mr Wall: No, but there is a distinction there.
We are an aggregator; we are an ownership of a service.
Q1082 Baroness McIntosh of Hudnall:
Forgive my interrupting, but you have some choice about what you
choose to carry, do you not?
Mr Wall: We do.
Q1083 Baroness McIntosh of Hudnall:
In what way is that influenced by anybody or anything?
Mr Wall: It is influenced by a need to keep
the two crucial stakeholders happy, that is to say our consumers,
our end users, and our shareholders. What we try to do is provide
content that is the most popular mix of content—it is mixed,
it is not all about providing the most viewed material, it is
about providing a range of material on a commercial basis and
on which we can make a return.
Q1084 Baroness McIntosh of Hudnall:
Can you tell us briefly—or perhaps you could write to us
about this—how you find out what it is that your viewers
want to view?
Mr Wall: Briefly we look at the historical evidence
and indeed the channels that are not much viewed get dropped.
Q1085 Baroness McIntosh of Hudnall:
Do you talk to them? Do you talk to your customers?
Mr Wall: We do indeed talk to our customers,
we conduct quite a lot of research in terms of finding that out
and also we have an open dialogue with the channel providers if
they are not performing. They know the possible consequences,
and indeed most of our channels have two forms of funding, they
have funding in which we would pay them to sit on our service
but a good deal of them also receive advertising funding, and
if they are not engaging the viewer they do not have value as
an advertising medium, so there are some commercial imperatives
for them to have to be successful and to engage the viewers.
Q1086 Chairman:
When it comes to a channel like Al Jazeera you do not in fact
carry that, do you? On what grounds is that, because there is
not enough interest in it?
Mr Wall: In our view at this stage there is
not enough demand for Al Jazeera. We will continue to watch that,
it is on other platforms. We look at Sky's viewing a great deal
because they are able to carry more channels; those channels we
are not carrying that they are carrying we monitor very closely
to see what the viewer response is, and there is a commercial
imperative if there is a high demand for a channel like Al Jazeera
or indeed an entertainment channel for us to include it in the
package.
Q1087 Chairman:
So it is not a political decision.
Mr Wall: There are no political decisions taken
regarding channel carriage.
Q1088 Chairman:
What about Sir Richard Branson?
Mr Wall: Richard Branson's organisation is a
10.5% shareholder in Virgin Media but Richard does not sit on
the board.
Q1089 Chairman:
So the name is given to Virgin Media, he does not sit on the board
and he is only an 11% shareholder.
Mr Wall: He is the biggest single shareholder.
We also have a commercial relationship with him where we pay a
royalty to use the Virgin name which we believe as a brand enhances
our consumer proposition.
Q1090 Baroness McIntosh of Hudnall:
This arises directly out of what we have just been discussing,
which is given that you clearly have quite a strong agenda, shall
we say, about the question of editorial influence, what safeguards
do you think should be in place to try and protect news programming
against that kind of influence? Is it available already and under-used
in your view, or is it deficient?
Mr Wall: We believe that the structure of both
the law and the regulatory authorities is appropriate for control
of this area. We do, however, have some concerns about the interpretation
of the Competition Commission regarding the public interest test,
which I will ask my colleague to expand on. Our general belief
is, as I stated before, this is an area of such importance—that
is to say plurality and impartiality—that it can only really
be enforced or controlled through structural remedies and we believe
that behavioural remedies such as not allowing certain people
to sit on boards are not strong enough in this area when there
are other ways to influence the way people behave. Perhaps I could
ask my colleague to expand.
Mr Dresser: Just adding to what Malcolm said,
we do feel that the existing regime is adequate at this point.
Plurality rules in particular are very important, working in a
complementary way with the impartiality rules in the broadcasting
code. That is of course being tested right now by the Competition
Commission. We very much agree with the findings of the Competition
Commission with respect to substantial lessening of competition
and we did take issue in a follow up submission with them on their
findings on plurality, primarily around a matter of law. There
is a provision in our view which requires, once there is a merger,
for there to be deemed a reduction in plurality and in our view
that should have shaped their decision on plurality and we have
followed up with them on that. In summary, we think the existing
regime is adequate and we did take issue with the Competition
Commission on that plurality point.
Q1091 Chairman:
Should we explain, Mr Dresser, that you are the Assistant General
Counsel of Virgin Media.
Mr Dresser: Yes.
Q1092 Chairman:
What does that mean?
Mr Dresser: It means I work very closely with
senior management.
Q1093 Chairman:
No, I meant in terms of qualification; you are a lawyer I assume.
Mr Dresser: Yes, correct.
Mr Wall: I would have thought it was obvious
by the nature of his answers.
Q1094 Baroness Thornton:
I want to ask some further questions about plurality but can I
first of all say I congratulate you on your library. I was in
shock not being able to get Star Trek and Bones
but I am now recovering from that as a result of your efforts.
In your evidence to us you have said that diversity and plurality
of opinion can only be safeguarded through diversity of ownership,
and we have already discussed some of that, but I would like to
ask you do you see a role for regulation, such as Ofcom's Broadcasting
Code, to protect news organisations from undue influence by their
owners? Also, could you comment on the hint that Ofcom has given
us that requirements for impartiality on some non-mainstream channels
might be relaxed to facilitate the range and diversity of opinions
available for broadcast; what are your views on that?
Mr Wall: If we deal with the first question,
we have been consistent both in terms of our submission to the
Competition Commission, to this Committee and indeed my answers
today in that we believe there is a role for behavioural disciplines
but it is in itself not a great enough safeguard and therefore
in this very important area we have to have structural regulation
to ensure that plurality is protected.
Mr Richmond: That is right, and we do not see
how a behavioural remedy can actually ensure the future plurality
of news. On the issue about the Broadcasting Code, we see the
Broadcasting Code and the plurality regime as complementary but
actually fundamentally different. One, I think, is seeking to
maintain a certain quality of output whereas the other is concerned
with the diversity of views, and if you actually look at Ofcom's
words themselves, it makes it very clear that the code is not
designed to remove the ability of broadcasters to set the agenda
of their news, so we see the focus of those as subtly but importantly
different.
Q1095 Lord Maxton:
Sky bought their share in ITV because you wanted—I am not
sure whether it was to merge with ITV or to purchase ITV. That
would have reduced the plurality, would it not, because you would
have become a 40% owner, if you merged with ITV, of ITN, which
is one of the major news providers. I am not quite sure what you
were proposing in terms of your merger with ITV.
Mr Wall: I will respond to that if I might and
I will return to the impartiality if I could. We were preparing
a bid for ITV but had not made a formal offer when Sky bought
a 17.9% stake in ITV. They have stated their reasons for doing
so in so much as they regarded it "as a good investment".
It is not for me to establish whether there was any other reason
for them to do so. If we had gone on to bid for and had successfully
acquired ITV there is a distinct difference between that consolidation
and the ownership that Sky has of 17.9% of ITV and in our minds
the material influence they have over ITV through that 17.9%.
We are a platform, an aggregator, we own a number of entertainment
channels; we do not own a news service, so the consolidation of
Virgin Media and ITV, if it had ever happened, did not affect
the plurality issue one iota. We believed, as we have explained,
that there could have been some sense at the right price in bringing
those two businesses together, but we are essentially an access
business providing pay television, largely other people's channels—broadband
access and telephony, whereas ITV are a content business. There
is therefore that very distinct difference, whereas Sky is both
an access provider, providing pay television to the UK and more
latterly broadband, but they own a number of channels and, furthermore,
Sky's largest shareholder and controlling shareholder is News
Corp which owns 34% of all newspapers by circulation in this country,
so we believe there is a quantum difference between the consolidation
or potential consolidation of Virgin Media and ITV, a marriage
of access and content with no plurality impact, and the 17.9%
acquisition by Sky of ITV.
Q1096 Chairman:
To be blunt you regarded it as a blocking measure.
Mr Wall: We did say that at the time.
Q1097 Chairman:
Can you remind us what price was paid for the shares?
Mr Wall: Sky paid 135p.
Q1098 Chairman:
What is the price today?
Mr Wall: I believe it is 86p.
Q1099 Chairman:
As an investment it does not sound to me on the face of it to
be one of the greatest.
Mr Wall: Maybe not over the time period that
we are reviewing.
Lord Maxton: I want to move marginally,
although I think it is linked, to the fact that you are a quadruple
provider—
Chairman: Could we just leave that and
go back to impartiality.
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