Examination of Witnesses (Questions 2080
- 2093)
WEDNESDAY 27 FEBRUARY 2008
Mr Andrew Harrison, Mr Mark Story and Mr Daniel Bruce
Q2080 Baroness Eccles of Moulton:
You have given us a very convincing description of the reason
for liberalising the commercial radio ownership rules within the
specific industry. The question I want to ask is about the current
rules on cross-media ownership. Why is it that liberalising that
relationship is not met with favour? Surely it would produce about
the same benefits as you have described in liberalisation and
flexibility within the more confined industry itself. Could you
briefly comment on that?
Mr Story: We are in favour of some liberalisation
of cross-media. In the areas that we operate, we publish magazines
where we have taken the brand and the brand has been translated
into radio and television quite successfully. More recently we
did it with a magazine we publish called Heat, which we
relaunched back in September. It is doing particularly well, about
70% year on year. We are fairly happy with the way that works.
We have not come across the cross-media rules in a negative way
so far. I guess when it is a local newspaper and the radio station,
that opens up other areas. Our own process I guess would be that
we think liberalisation is good but ultimately somebody should
sit down and say, "Is this good in this particular case,
rather than having arbitrary rules?"
Q2081 Baroness Eccles of Moulton:
Does that mean that the 50% ban on cross-media ownership should
be relaxed or prevail, or maybe be even tighter?
Mr Story: The radio industry is suffering because
of a one rule every time approach. In some cases there may be
justification for having regulation to stop something happening
but we do not get to that stage. We get to a "No, you cannot
do that" immediately when it would often be in the interests
of the consumer. We had a ridiculous case when we took over our
Scottish station. We provided several services on mutiplexes in
digital radio in Scotland. Because we would be the dominant player,
we had to take those services off the multiplexes but there was
nobody else to pick them up. The listener lost those services.
That is of no interest. Sometimes I think this is a rather arbitrary
way of approaching this particular issue.
Q2082 Baroness Eccles of Moulton:
A bit of flexibility and common sense should be allowed to creep
in, as it were?
Mr Story: Absolutely. We are all concerned that
there should be a diversity or plurality of access to media but
sometimes these rules do not work.
Q2083 Baroness Eccles of Moulton:
Hard and fast, simple rules are inappropriate in this context?
Mr Story: Absolutely.
Q2084 Baroness Howe of Idlicote:
The separate rule for analogue and digital services: we have heard
a great deal about how impoverished the whole situation is under
its current management. Ofcom says something like 40% are unprofitable.
It is clearly indicating that separate analogue and digital rules
are not really sensible. I am just wondering to what extent you
would agree with that. I would have thought totally, but perhaps
you can confirm that. What sort of changes to the current system
would you like to be made, particularly the fact that the calculation
of ownership limits is made on this case by case basis?
Mr Harrison: Our position overall from the radio
perspective is we would agree with Ofcom's analysis but not their
proposed solution. Their analysis that it is somewhat strange
to have separate ownership regulation for analogue and digital
environments is a nonsense and they should be combined into one
system. What Ofcom has proposed as part of the future of radio
is that they would look at a new points system that combines analogue
and digital ownership into a whole new complicated points system
which is really a variation on the theme that we have been discussing
for the last hour; whereas our point of view is that they should
all be looked at as one continuum. They are all radio services
providing services to listeners. The listeners do not care whether
the platform is an analogue or a digital platform. They are just
interested in what comes out of the speaker. Regardless of whether
your service is delivered on an analogue or a digital basis, we
should have the freedom to relax the media ownership laws within
a locality, given that you also have the BBC presence both analogue
and digitally in each of those markets.
Q2085 Baroness Howe of Idlicote:
That is the point of view of you all?
Mr Bruce: Yes.
Q2086 Baroness Scott of Needham Market:
I wanted to ask about the framework within which Ofcom is working.
It has a statutory duty to uphold the public interest but it cannot
do anything unless the Secretary of State initiates the process.
Do you think that is about right or do you think Ofcom should
be able to initiate proceedings by itself?
Mr Harrison: Historically, it has been about
right. However, what we have increasingly come round to in the
last four or five years is that the difficulty we face as an industry
is we are a traditional analogue industry competing for revenues
and listeners in a sector which is now very fast moving. To give
you the most obvious example, the legislation that we are currently
working under is the 2003 Communications Act. The original thinking
for that Act first went through Green and White Papers in about
2000. In 2000 we were in the middle of the dot com crash and there
was no clear expectation and understanding, very understandably
at the time, that online businesses would grow and develop with
the speed that they have grown and developed across the last six
or seven years. In reality, what that means is we face a whole
raft of competitors for revenues and for listeners with business
models that are not regulated, that are not under the remit of
Ofcom and our ability to respond and flex our business to cope
with those challenges is impaired by the logistic environment
in which we work. Our thinking has moved. While it is absolutely
right that Parliament should retain the overall legislative and
statutory role for broadcast, for television and radio, if Ofcom
had far greater freedom to act and more powers devolved down to
it, it would mean the regulator could be much fleeter of foot.
The reason we are getting into the debate around ownership is
because that requires primary legislation. With the best will
in the world—I smile when I say this—we have had three
Secretaries of State in the DCMS in the last 12 month. We are
in the middle of a change of leader. There will be a general election
before the next Communications Act. In reality, the ability of
a small sector like radio, let alone a big sector, to effect legislative
change on an area of policy which is not home affairs, health
or education—we are relatively low down the manifesto commitments
with a limited amount of parliamentary time. A lot of the things
we are talking about now will only get changed with primary legislation
which will only come into effect, one assumes, somewhere in the
window between 2012 and 2014. That is a lifetime for us right
now. In the preceding seven years from 2000 to 2007, we had seen
a whole explosion of companies that did not exist six or seven
years ago with whom we are competing for news and listeners. None
of us knows quite how this will manifest itself. If we are worried
about plurality and local news and the viability of local business
models, my full expectation is there will be a Google local news
service coming to Suffolk within two years, by which time we will
still be debating whether or not to have two plus one ownership
rules and can we tack it on to a Bill somewhere and get it through.
Fundamentally, the pace of change in the sector is so fast that
it would absolutely be in the public interest for Ofcom to have
far greater discretionary powers within the context of a legislative
framework to enable the sector to respond quickly. Clearly there
will need to be a balance there.
Q2087 Chairman:
Who would you give the powers to? Would you give them to Ofcom?
Mr Harrison: I think you would give them to
Ofcom. It would be for parliamentarians and the government to
work out how much power could be devolved, in which sectors and
so on, but the fundamental point I am making is that we require
primary legislation for an awful lot of the business flexibility
and change that we think we need to make.
Q2088 Chairman:
None of this can be changed by regulation or by order?
Mr Harrison: Some of it can but some of it cannot.
Ofcom is naturally cautious in the discretion it chooses to exercise
and a clear steer from Parliament as to the amount of discretion
it is expected or obliged to exercise would help.
Q2089 Chairman:
Mr Story, you do not have any direct responsibility for Heat
magazine, do you?
Mr Story: Not for the magazine, no. I do for
the radio station.
Chairman: That will reduce my questions.
Q2090 Baroness Bonham-Carter of Yarnbury:
We have not asked how your radio stations are doing in the present
climate.
Mr Harrison: Overall revenues for calendar year
2007 will be about 600 million. That is about the same level they
were at in 2000.
Q2091 Baroness McIntosh of Hudnall:
In cash terms?
Mr Harrison: In cash terms. In real terms, it
is about a 20% decline.
Q2092 Chairman:
With your 320 stations, how many areas do they cover?
Mr Harrison: In terms of licensed areas?
Q2093 Chairman:
Yes.
Mr Harrison: Probably 320. They will all be
very slightly different. In practice, there is a fair amount of
overlap.
Chairman: It has been a very interesting and
informative session. You have given your evidence with admirable
clarity. We understand exactly where you are coming from and the
proposals that you are making. In particular, I think we have
all learned a little more about the commercial radio industry
so thank you very much indeed for coming.
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