Examination of Witnesses (Questions 1186
- 1199)
WEDNESDAY 5 DECEMBER 2007
Mr John Perkins, Mr Jon Godel and Mr Peter Murphy
Q1186 Chairman:
I apologise for keeping you waiting. Welcome and thank you very
much indeed for coming. You know what we are about and I know
that you have been listening to some of the evidence, so you know
roughly the kind of areas that we are going to go into. Tell me
about IRN first of all. Do you describe yourself as a news agency?
Mr Perkins: Yes, news provider. The service
really falls into two parts: it is a news agency in the sense
that we produce live news bulletins 24 hours a day, seven days
a week, but the component part of all those bulletins and various
programme items and other issues are actually sent separately
in advance to individual stations and then they choose and select
which part of our service they want to use and mix with their
own local material. In fact, each of the stations that we service—and
there are 250 currently who are our clients—take a supply
of national and international news from IRN, mix with their own
local news and essentially they make their own editorial judgments
on what material they subsequently broadcast. In terms of day
parts, during the day really from about breakfast-time in the
morning through to about seven o'clock in the evening, we are
effectively a news agency in the sense that the majority of stations
have their own newsreaders locally based, they do not report it,
and they take our material, process it and mix it with their own
material. What tends to happen in the evening from about seven
o'clock onwards is that a lot of stations default to our live
bulletins because they simply do not keep staff for whatever reason
overnight. In a nutshell, that is what we do.
Q1187 Chairman:
I imagine that your budget contrasts a bit with the BBC budget.
Mr Perkins: It is a parallel universe, really!
Mr Godel: What I would give for £41 million!
Mr Perkins: We are dividing everything by 10!
Yes, in terms of a budget, we produce what we produce which is
a very significant amount of material 24/7 for about one tenth
of the figure that you heard previously quoted for their radio
journalism.
Q1188 Chairman:
Would you tell us what that figure is? How much are you spending?
Mr Perkins: Between £4 and £5 million
is the total cost of running IRN.
Q1189 Chairman:
How many journalists do you employ?
Mr Godel: Currently, we employ 38 journalists
in London and that is broken into a news section, a section focusing
on sport, a section focusing on entertainment which you can imagine
is quite important to some of the stations that we are talking
about here, and a section in Westminster and Peter Murphy sitting
at the end is our Political Editor.
Q1190 Chairman:
I think we have all come across Mr Murphy or rather he has come
across us from time to time! This is a lean organisation which
works pretty hard.
Mr Godel: Yes. That is the core radio practitioners.
You will be aware that IRN sits within ITN.
Q1191 Chairman:
Yes.
Mr Godel: So IRN is able to use all content
being gathered by ITN. I am of the firm belief that it is important
for a radio news organisation to be able to turn any content into
fantastic radio. If you like, the BBC were referring to radio
practitioners who are important to them. We have the same view.
It is not a case of, "Let's take a piece of audio from someone
who has gathered something for television". Often, we are
able to speak to correspondents working for ITN who will and do
a radio piece for IRN, so it is true tri-media, if you like. We
do have that ability but we still have a core set of journalists
who are primarily there to put the bells, whizzes and bangs on
to make it into fantastic radio.
Q1192 Chairman:
Are you profitable?
Mr Perkins: We are now. For many years we were
not but, in 1992, we took a quantum decision. We used to be a
wholly owned subsidiary of LBC, London Broadcasting, when it was
first set up. We then floated IRN off and we were actually paid
by cash, so it was a very crude and simple method, but we decided
what the cost of IRN was likely to be for the coming year and
then we used to go out, rather like robber barons, to the various
stations in the provinces and say, "Right, your share of
the audience is X per cent, so your share of the cost of IRN will
be X per cent", but it never actually worked as a commercial
proposition because we always had cash flow problems. People always
seemed to think that the news was the last thing you actually
paid money for, so we were in perpetual crisis. We floated the
company off and shares were taken in it by the various stations
that took the service and then, in 1992, we took a quantum decision
to leave LBC and to actually set up the current IRN which is a
very small company: it consists of me as Managing Director; I
have one Business Development Director and a PA and that is it.
Effectively, what we do is commission others to provide the various
services that we need. For instance, we commission ITN to provide
the news for us. All the journalists who work for us, including
Peter, are actually employed by ITN and what I do is negotiate
a contract with ITN to supply the news. Similarly, we have contracts
for the sale of our air time and contracts for our satellite distribution
and anything else that we need. That is how we do it. From that
point on, which was 1992 to be precise, we were able to make a
profit because commercially the sale of the air time enabled us
to bring in a certain amount of revenue to set against the cost
and, because it was a negotiated contract, it was a fixed cost,
and everybody knew exactly where they stood and, so long as the
advertising market held up and we sold the advertising, we were
able to make a profit which we have done every year since 1992.
If you then ask me what happens to that profit, it is redistributed
back into the industry on the basis that two thirds of it goes
back to the stations that take our services—it is a form
of loyalty bonus which is calculated according to the size of
their audience—and the other one third goes back to the
shareholders in the form of dividends. So, at the end of the year,
I am left with nothing in the cupboard and it starts all over
again.
Q1193 Chairman:
The local stations sound as though they are doing rather well
out of this deal. Explain to us how you do the advertising. They
do not any longer pay you.
Mr Perkins: No, we have actually turned the
whole thing on its head. From a position where they effectively
did pay us for the service, I suppose effectively you could say
that we now pay them. Unlike all the other organisations you have
talked to, we are totally at the mercy of the commercial world.
We do not have subscriptions; we do not have licence payers; we
do not have companies that pay us on a three-year contract. Our
contract is for one year with each of the subscriber groups and,
at the end of that one year, they can give us notice or they can
continue. We work on a pretty fragile base. Their commitment to
us is to provide us with six spots of advertising during the breakfast
period which follows the news bulletins at six, seven, eight,
nine, ten and 11 and our spot immediately follows the news—it
is what they call "solus", ie there are no other adds
in that break, it is unique. That enables us to go to national
advertisers, banks and car manufacturers, and pretty well guarantee
that, if they buy the eight o'clock spot on commercial radio,
it will go out on every commercial radio station throughout the
UK, or the vast majority of them, after whatever time the eight
o'clock news finishes. Stations have different varying lengths
for their news. That is how we make our profit. Clearly, the advertising
market goes up and down and for the last three years it has been
fairly bumping along the bottom a bit. So, we have had to look
at other sources of revenue and the reality of life now is that
30% of our revenue comes from non-advertising sources. So, we
have now diversified into things like directory inquiry services
which we do and that produces a healthy revenue for us. We are
into commercial distribution in the sense of advertising. We do
customised news bulletins for classic—
Q1194 Baroness Thornton:
Do you mean that you run a 118 number?
Mr Perkins: We are 118212. We are called Maureen
which is probably another story. We have actually broken up several
marriages because we text people the number and at the end we
put, "Love Maureen X" and that has caused domestic strife!
It is lucrative.
Chairman: Okay, you have done your commercial!
Q1195 Baroness Thornton:
I promise that that was not planned.
Mr Perkins: I never miss an opportunity for
a commercial!
Q1196 Lord Inglewood:
Following on from that, you obviously depend upon the advertising
associated with the bulletin for your revenue. Do the characteristics
or the aspirations of the advertiser in any way determine what
goes on to the news? I am talking about if you have a car ad coming
up, for example motor racing, you might expect to juxtapose a
bit. Does that have any bearing on it?
Mr Godel: No, absolutely not. I have worked
in commercial radio for 14 years and, before that, in local newspapers
and I think it is fair to say that working as a local journalist
at a newspaper desk, certainly there is that sort of influence,
or the local car man does not want you to write a story about
it. In commercial radio and certainly at IRN, I have never encountered
that. As editor for eight years there, that has never been a consideration.
The only consideration we do have is that when there is a particularly
sensitive story, for example when there has been a plane crash
and the advert happens an advert for easyJet, for example, then
that advert would not be played, but that is on sensitivity grounds
in the case and decency but, in terms of influencing our news,
ITN, which is the news provider for IRN, does not entertain that
at all and we would never entertain that; that is not part of
what we do at all.
Q1197 Lord Inglewood:
I would like to explore that a little further. You get the plane
crash, you have lined up the airline advert, do you just drop
it and substitute it and put on another one with reference to
anybody?
Mr Godel: Absolutely, there would be no reference
there. These are very rare occasions; I think we have probably
done it twice in five years. That would be a decision by the Editor,
which is me, to drop that and the advert would be placed again
at another appropriate time. That is a very rare thing. In terms
of an advert being in a bulletin and then changing our news bulletin
as a result of that, that never happens.
Q1198 Baroness Eccles of Moulton:
Presumably, the commercial radio stations are also dependent on
advertising revenue for probably the major part of their revenue.
Mr Perkins: Advertising and sponsorship, yes.
Q1199 Baroness Eccles of Moulton:
Presumably, you have to do quite a toughly negotiated deal with
them in order that you are not taking up too much of their good
advertising space throughout the broadcasting day.
Mr Perkins: Yes, we could. Yes, we could be
cannibalising them and taking the revenue. When the IRN was set
up, the arrangement we had and the agreement we had with the stations
was that we would wherever possible only use new advertisers to
commercial radio—bear in mind that we are going back some
years now and it was something of a novelty then—and we
also sell at a premium because, if we did not sell at a premium,
ie at a rate about 20% above what the stations sell them at, you
would be able to buy a prime spot on pretty well any commercial
station in the UK through us far more cheaply than going to the
station and they would not be terribly happy with that. We do
have the premium barrier in a way there which we adhere to and,
wherever possible, we try and make it. The history has been that
a lot of people have come into commercial radio to advertise through
the news link spot on the news. They have got in there, it has
been successful and, as a result of that, they have increased
their advertising spend which has then tricked down—
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