Select Committee on Communications Minutes of Evidence


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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