Examination of Witnesses (Questions 1894-2025)|
Ms Sophie Turner Laing and Mr David Wheeldon
21 OCTOBER 2009
Q1894 Chairman: Welcome
and thank you very much for coming; we are very grateful. I want
to begin with an issue which has come up a great deal in the evidence
that has been given to this Committee and that is the issue of
piracy. A whole range of people have expressed their concerns
about it and a whole number of film-related organisations have
expressed concern about enforcing protection of copyright and
the growing threat from illegal file sharing and other forms of
online piracy. What is the view of BSkyB on this?
Mr Wheeldon: As you know, we are both a significant
investor and owner of content, as well as an internet service
provider, so we look at this from both sides. There is no doubt
that illegal file sharing, peer-to-peer file sharing, is a very
significant problem for the content industries and, if nothing
is done about it, it will impact the ability for the content industries
to continue to invest and, in the end, content needs to be paid
for. We take it very seriously. We are broadly supportive of the
direction of travel that the Government are proposing to go in
with their legislative consultation, Obviously, we are looking
forward to seeing the precise detail in the Bill, but certainly
we believe that matching obligations on ISPs to send letters,
to collect data
Q1895 Chairman: Before you go on
to the detail, which we obviously will, how has it affected you
Mr Wheeldon: It is difficult to put an absolute
number on it but, if you look for instance at the report that
came out in the summer by BigChampagne, a media research company,
four out of the top five illegally downloaded television shows
are exclusive to Sky in the UK. These are shows that we invest
in very heavily, that we want our customers to experience on the
Sky platform because that is what they have paid for and, if it
is being illegally downloaded, then that can affect our entire
business model. If you then look at the way the movie studios
are being impacted and the kind of piracy that is now beginning
to move from digital music to digital audiovisual and movies,
their ability to monetise and invest in film impacts us in the
sense this is content that we want to acquire.
Q1896 Chairman: But you cannot put
a figure on loss?
Mr Wheeldon: I think it is very difficult. There
have been attempts to put a figure on loss and the BPI estimated
£180 million for the music industry and I have seen figures
of £150 million for movies and TV but, to be frank, I think
it is very, very difficult and of course, knowing what is the
net loss, because not every bit of piracy would have resulted
in a financial transaction to buy the content, it is quite difficult.
Q1897 Chairman: Your general attitude
was expressed quite forcefully by James Murdoch in his MacTaggart
lecture and perhaps, as he said so many other things, this part
of it did not quite get the attention that it perhaps deserved.
He said, "We don't even have the basics in place to protect
creative work. Whether it is shoplifting at HMV or pirating the
same movie online, theft is theft. They are both crimes and should
be treated accordingly. The Government dithers, dimly aware of
what it has to do but afraid to do it". Is that a fair summing-up
of the BSkyB position?
Mr Wheeldon: It has certainly taken quite a
long time to get to where we have got to in respect of the Government
proposing a legislative solution. I was involved in all of those
MOU voluntary agreement discussions going back almost two years
now and we do seem to have taken an awful long time to get to
the point at which we have realised there is not going to be a
solution here unless there is some kind of legal obligation on
all parties to take action.
Q1898 Chairman: Why does Mr Murdoch
say the Government "is dimly away of what it has to do",
okay, "but afraid to do it"? Why "afraid to do
Mr Wheeldon: I am not going to comment on whether
the Government are afraid or not, but I certainly think there
is a sense that there could be a consumer backlash from those
who have enjoyed that access to content for free. There is certainly
a strong campaign by certain groups out there that believe that
somehow it is a human right to have access to all this content
without paying for it and that the internet somehow changes the
rules of the game. I have to say that I find that a slightly bizarre
and illogical position to take.
Q1899 Chairman: What would be your
solution? What would be your proposal? What would you do to counter
Mr Wheeldon: As an ISP, we want to take action
but we also recognise, as an ISP, that it is very difficult for
us to take action unilaterally. If one internet service provider
does it, that does not solve the problem. We have a competitive
market; it will just go to others.
Q1900 Chairman: And you might lose
Mr Wheeldon: And you would lose custom, absolutely.
We recognised that fact some time ago. We have always said that,
if there is going to be a solution, it has to be a whole industry
solution. If that cannot be achieved voluntarily, then there have
to be obligations on ISPs to take action and obligations on rights
owners to follow that action up.
Q1901 Chairman: Can it be achieved
Mr Wheeldon: No. I think we have come to that
conclusion. We attempted to reach a voluntary agreement last summer
and it was very clear that the ISPs and the content industry had
very different motives and incentives behind this and that it
was going to be pretty much impossible to achieve that.
Ms Turner Laing: I think it is fair to say we
are one of the only ISPs who are fully involved in the content
provision business as well. We have a slightly different view
on it than, say, Charlie Dunstone at TalkTalk.
Q1902 Chairman: As a generalisation,
it would be the ISPs who would be opposed to action in this area.
Mr Wheeldon: As a generalisation, that is probably
Q1903 Chairman: The only people who
can actually cut through this would be the Government.
Mr Wheeldon: Yes.
Q1904 Chairman: I mean legislation
of some kind.
Mr Wheeldon: Yes.
Q1905 Lord Inglewood: One small point.
You use the phrase "take action". Is that a euphemism
for "cut off", as in cutting off the gas or cutting
off the electricity? What exactly do you mean?
Mr Wheeldon: We certainly believe that, if all
ISPs have an obligation to send letters to those they have identified
as being potential infringers, that is identified by rights owners,
that would have a significant effect. The fact that letters are
being sent out to the account owner, not necessarily to the user,
will draw attention within households to what is going on. If
you can combine that with an effective sanctions regime with a
threat of a consequence if this continues, which I think does
Q1906 Lord Inglewood: What consequence?
Mr Wheeldon: I think that does require, in the
first instance, rights owners being prepared to take the very
worst offenders to court because, in the end, we do believe this
is an illegal action and it should be prosecuted. If that does
not work, then there are a range of technical measures which the
Government have set out in their consultation which could be applied.
The latest iteration certainly includes account suspension. We
do not believe it is right to rule any of those in and any of
those out right now. What you should do is go through a proper
test to decide which are likely to work and which are going to
be most proportionate. If you have done that test and if you have
assessed whether the letter writing has worked or not, then it
seems to be fair enough to decide that it may well be that one
or two of these are the right sanctions to apply in certain circumstances.
But there needs to be that provision and there also needsand
let us be clear about thisthe right of appeal to customers.
You cannot do this without that.
Q1907 Chairman: The Motion Picture
Association take the view that the initial first and essential
first stage in tackling this problem is an obligation for ISPs
to notify customers whose internet accounts have been used to
download or upload copyright content and you would agree with
Mr Wheeldon: We would.
Q1908 Lord Maxton: Where do you draw
lines in this, which is the real problem? If I download a film
from Sky films, copy it on to a CD or DVD, give it to my son and
he then gives it to somebody else, where do you start prosecuting
because no money is actually changing hands, almost certainly?
That is a free operation from all of us.
Mr Wheeldon: What you are describing there is
format shifting which, in the UK, is not strictly legal but people
tend to turn a blind eye to itit is legal in many other
countriesthe principle being that the content has been
paid for and then, once the owner has that, they should be allowed
to transfer it to whatever device they choose. I am not going
to comment on whether that should be made legal or not, but what
we are talking about in respect of file sharing is actually accessing
that content in the first instance without paying anything and
that is a big difference.
Q1909 Lord Maxton: Somebody is paying
for you to provide the ISP service. You do not give your Sky Broadband
for nothing and neither do any other providers.
Mr Wheeldon: You are paying for access to the
internet but you are not paying for the content if you are accessing
it via a peer-to-peer file sharing site. That content has got
on to that site often illegally itself.
Q1910 Lord Maxton: That is the file
sharing site. I can access Sky because I am a Sky subscriber and
I can access your Sky site online. There are hundreds of films
there and I can download one of those on to my hard disk and then
copy it on to a DVD and give it away. That is not file sharing
in the strict sense of the word, but I presume that I can do that
and I can do it with a whole range of other files too.
Mr Wheeldon: I certainly think through the television
you would probably struggle to be able to physically do that because,
through the television box, there is no mechanism to record that.
Q1911 Lord Maxton: I am not talking
about the television box, I am talking about the internet.
Mr Wheeldon: If you were to break the encryptions
and you knew what you were doing, then you could do that. I am
afraid I would regard that as piracy.
Ms Turner Laing: I think it is fair to say the
films that are available on Sky Movies via Sky Player are encrypted.
First of all, there is a conditional access there that shows that
you have to be a Sky Movies subscriber and equally, you cannot
take it off the system and transfer it because that is our
Q1912 Lord Maxton: It is quite interesting
that Apple, however, with their iPlayer have got into some public
difficulty because they have not allowed people to use and play
their content on other devices and, as a result, they have had
to change the rules on that.
Ms Turner Laing: But that is under the contracts
we are under with the MPAA Studios who do not prohibit because
obviously they are in the business of protecting their other revenue
streams in the form of DVD, et cetera.
Q1913 Lord Maxton: Is this not an
international problem? To be honest, we could do all we want but,
if the content is coming on the internet from somewhere else in
the world, which may have different copyright laws, how do you
deal with that?
Mr Wheeldon: With the system as proposed, the
onus would be on the owner of the content, the rights owner, to
identify what content is being accessed illegally and they can
do that. They have ways of looking at particularly the illegal
file sharing sites, they will identify the content which is not
distributed freesome content is but a lot of it is notand
they will then take action to notify the ISPs that that content
has been accessed illegally. There have to be obligations on rights
owners to want to enforce their own rights, absolutely. You cannot
say whatever you download is potentially illegal.
Q1914 Chairman: Is it not also the
case that a warning would actually have quite a big effect on
many, many people? The pure issue of a warning would have that
impact. I am not saying it is going to have that impact upon serial
offenders, if I may put it that way, but it would have an impact
upon many, many people.
Mr Wheeldon: I think you are absolutely right.
I do think that the sending of a notification that this is going
on to an account owner, who may not know it is going on, will
have a significant effect, yes.
Q1915 Chairman: There is no rule
written down where the public have a right to free access/free
downloading of anyone's films, I would have thought.
Mr Wheeldon: Absolutely not.
Q1916 Lord Inglewood: That is fine,
but I go to you and I get this warning and I then immediately
change to somebody else. There are a number of internet service
providers out there.
Mr Wheeldon: That is why the obligations have
to be on all internet service providers. That is why, in the end,
a voluntary agreement was never going to work because you cannot
have just two or three signing up and then the rest of them not.
Everybody has to be party to this. So, you must know that, if
you go to another internet service provider, not only will the
same thing happen again, but actually the likelihood is that the
data will be collected by the rights owners that will know you
have already done it once, so the consequences that you might
suffer are ...
Q1917 Chairman: One last question
on this. You have a disagreement with Virgin Media; what is that
on? It is not on this, I think.
Mr Wheeldon: They can speak for themselves on
illegal file sharing.
Q1918 Chairman: But it is not on
Mr Wheeldon: No.
Lord Maxton: It is on price, is it not, or it
was on price?
Chairman: We can follow that up. Let us move
on. Let us go back and start with the performance of BSkyB and
Q1919 Lord King of Bridgwater: We
now start turning to people who actually pay and how that is affecting
your business. I have some very quick questions just to set the
scene. Turnover and then the breakdown of that turnover, that
is the breakdown between subscription revenues, advertising sponsorship
and whatever you get from charging those using the BSkyB platform.
Ms Turner Laing: Our annual revenue now exceeds
£5 billion. Almost 80 per cent of the group revenue was from
subscription, with the remaining revenues being apportioned to
wholesale subscription revenue, installation and service revenue;
and our advertising revenue makes up approximately six per cent
of overall revenue. It is a relatively small part of our business.
I think what is important to understand is that we are, having
just had the conversation on ISPs, in the triple-play business,
so we are not strictly a broadcaster-based only business anymore.
Q1920 Lord King of Bridgwater: Dealing
with the smaller before the larger, Michael Grade said some pretty
horrific things about what has happened to advertising revenue
in the last year. Has that been reflected in your figures?
Ms Turner Laing: Absolutely. We are definitely
not immune to the advertising downturn and we have seen a significant
loss. However, there are some optimistic small green shoots coming
back into the marketplace, but we are not complacent on that because
one cannot foresee what unemployment numbers will do in the early
part of next year.
Q1921 Lord King of Bridgwater: Can
you give a figure for how much it has dropped?
Ms Turner Laing: The market itself is down 15
Q1922 Lord King of Bridgwater: Fifteen
Ms Turner Laing: Fifteen points, yes.
Q1923 Lord King of Bridgwater: What,
the advertising revenue?
Ms Turner Laing: Yes. What has been significant
is the total exit of significant genres from the advertising industry,
like the alcohol trade, car trade et cetera which have literally
disappeared overnight and moved to a more in-store promotion with
Q1924 Lord King of Bridgwater: What
about your direct customers, in other words the subscriptions?
What has happened there?
Ms Turner Laing: We have our quarterly results
on Friday, so I can give you our last quoted numbers, which are
9.4 million subscribers. At the moment that is holding strong,
although we have to obviously keep a keen eye on churn which is
the amount of people who come out of subscription.
Q1925 Lord King of Bridgwater: You
have 462,000 additional customers. If you say that it is holding
strong, do you mean that you have lost 462,000 somewhere else?
Mr Wheeldon: Last fiscal year, we gained 462,000
net customers, so that is taking into account those who leave.
Ms Turner Laing: So, we grew.
Q1926 Lord King of Bridgwater: You
are still growing in the recession.
Mr Wheeldon: That is correct.
Ms Turner Laing: So far.
Q1927 Lord King of Bridgwater: How
about profitability? Have you had to spend more to get it?
Ms Turner Laing: Yes, because obviously the
subscriber acquisition costs, or SAC as they are known, are very
extensive. The amount of money that we have actually put into
our marketing budgets to remain customers, bundled offers, et
cetera, has increased.
Q1928 Lord King of Bridgwater: What
effect has that had on profitability?
Ms Turner Laing: What emphasis?
Q1929 Lord King of Bridgwater: On
Ms Turner Laing: Profitability has held strong,
but what we have done is had a severe review of costs. We have
reduced our overheads significantly and thus we continue with
our marketing costs.
Mr Wheeldon: I think it is important to understand
that profitability is obviously not just about the subscriber
numbers and the increase in subscriber numbers. For instance,
looking at advertising, approximately six per cent of revenue
is generated by advertising, but that is disproportionate in the
contribution to direct profit because it falls straight to the
bottom line. We have had to deal with that headwind and have managed
to continue to grow profit despite that.
Q1930 Lord King of Bridgwater: How
much churn do you get in your subscribers?
Ms Turner Laing: We average about 10.4 at the
moment; 10.4 per cent of our customers churn.
Q1931 Lord King of Bridgwater: Turnover?
Ms Turner Laing: Yes. So, the number to focus
strongly on is our net adds number.
Q1932 Lord King of Bridgwater: Some
of the figures and the change in your share of viewers are pretty
dramatically down, are they not? The entertainment channels contracted
by 50 per cent over five years.
Ms Turner Laing: That is true, there is a trend
down in overall share of viewing anyway, but you also have to
look on the amount of channels that now exist in the marketplace
compared with five years ago.
Q1933 Lord King of Bridgwater: You
are a major player and a number of these channels are watched
by a man and a dog, are they not?
Ms Turner Laing: I think that you have to debate
whether the man or the dog would be very happy watching a small
channel. For example, Sky Arts, those who watched our live opera
from Glyndebourne was about 30,000 people. That is tiny in respect
of a BBC 1 audience, but that is 30,000 very satisfied subscribers
that it is actually on air. Share viewing is a very small metric
for us. Also, I am not sure which of you have Sky Anytime at home
in your Sky boxes, which is where we push the highlights of the
week, which is not measured by BARB, so we have a totally different
form of driving satisfaction from audiences.
Q1934 Lord King of Bridgwater: When
you said that it is over a number of more channels and that is
why your shares have gone down, do you have an idea of what share
of the viewing has been taken by all the additional channels?
Is that an adequate explanation for your fall?
Ms Turner Laing: No, it is not. We are in a
very competitive market. As Freeview has grown, the growth of
the diginets from the terrestrial channels in the form of ITV2,
3 and 4 have grown enormously. If you look at the audience that
comes off X Factor and goes straight on to ITV2, that is
enormous, but also they do have the centre break in the middle
of Coronation Street to promote movies or content, whereas
we do not. Regarding share overall, Sky1 probably will do about
3.46 per cent share overall. That is not a huge drop from the
late threes and fours that it was doing five years ago, and Sky
Sports continues to deliver and we are breaking audiences in a
lot of areas.
Q1935 Lord King of Bridgwater: I
thought Sky Sports was marching on, but it seems to have fallen
about 50 per cent or nearly 50 per cent. I have a figure here
that it was 3.7 per cent and you are down to 2.6 per cent.
Ms Turner Laing: I think it depends on when
that data has been done.
Q1936 Lord King of Bridgwater: It
is 2003 to 2008.
Ms Turner Laing: The question is whether that
takes into account the restart of the Premier League seasons because
obviously the audience flexes up and down depending on whether
football is available.
Q1937 Lord King of Bridgwater: What
effect has Setanta and its activities had on that figure?
Ms Turner Laing: Setanta obviously had a pack
which has now gone to ESPN and, whilst they had some extremely
strong matches, it was not an overall factor in the decline in
Q1938 Lord King of Bridgwater: It
was not a factor in the decline?
Ms Turner Laing: It is a small element because,
at the end of the day, the amount of matches they actually broadcast
was relatively small, but obviously they had other things, like
golf and boxing as well.
Q1939 Lord King of Bridgwater: So,
less people are watching sport?
Ms Turner Laing: Yes.
Q1940 Lord King of Bridgwater: Really!
Yet you have added cricket which you did not have in the earlier
part of that period. Is that right?
Ms Turner Laing: Yes.
Q1941 Lord King of Bridgwater: You
still end up with a lower share?
Ms Turner Laing: Share is not the only driver
for us. I think that is a metric which has been used for terrestrial
television and is not really a valuable marker for us in subscription
television. What we do we deliver extremely well. We put an awful
lot of investment into our sport, all our programming, and what
we are trying to deliver is the best of it. I am not sure this
metric that it has to be seen by millions of people is a true
arbiter of quality.
Q1942 Lord King of Bridgwater: I
understand that. We are dealing in percentages, but do the percentages
reflect the actual numbers or is there a change in the overall
total by which the percentages look rather different? In other
words, what is 2.6?
Ms Turner Laing: In real terms?
Q1943 Lord King of Bridgwater: What
is the number that 2.6 represents?
Ms Turner Laing: It is very hard to say exactly
because you may get a viewing share of two million for a big football
game and then you may get a share of 20,000 for women's netball.
What you are doing is aggregating all those different events up
Q1944 Lord King of Bridgwater: Someone
has managed to produce these figures saying 3.7 down to 2.6. We
can bandy around percentages, but what I am trying to get at is,
what that actually adds up to?
Mr Wheeldon: What, in terms of total numbers
Q1945 Lord King of Bridgwater: Well,
2.6 of what?
Ms Turner Laing: Overall share that is distributed
Q1946 Lord King of Bridgwater: It
is 2.6 of a global figure?
Ms Turner Laing: Of all television share in
Q1947 Lord King of Bridgwater: What
is that figure? Do you understand the point I am making?
Mr Wheeldon: You are talking about the numbers
of people watching for the numbers of hours?
Q1948 Lord King of Bridgwater: Yes.
Mr Wheeldon: I think you can broadly say that
has not significantly changed over time. People still watch lots
Q1949 Lord King of Bridgwater: Someone
has produced this precise 2.6 per cent figure and, when you actually
ask what that means, what it is, 2.6 per cent of what ... It may
be that is an impossible question to answer.
Ms Turner Laing: I think that we can get you
the numbers very easily from BARB. I would not have the correct
figures with me.
Lord King of Bridgwater: Perhaps you could.
Lord Gordon of Strathblane: I think the point
obviously is if the universe has increased hugely, then 2.6 might
be as big as 3.7 of a previously smaller universe.
Q1950 Lord King of Bridgwater: Thank
you very much.
Mr Wheeldon: Your question is, are more people
watching more television?
Lord King of Bridgwater: I am trying to see
whether 2.6 and 3.7 are actually indicative of less people watching
Q1951 Chairman: I think in essence
it is 2.6 of what and 3.7 of what. It is the "what"
we want to know.
Mr Wheeldon: BARB are the people who can give
the definitive answer on that one in respect of the numbers.
Lord King of Bridgwater: Through My Lord Chairman,
if you would like to give us the figure, that would be helpful.
Chairman: Thank you very much. Let us go on
to investment and original content.
Q1952 Lord Inglewood: You may disagree
with the distinction but, of the total UK content that you produce,
how much of that is news and sport and how much is other?
Ms Turner Laing: Of our £1.75 billion that
we invest in content every year, we spend £1 billion of that
in the UK. We spend approximately £944 million on sport,
just under £300 million on movies, just over £200 million
on entertainment and, our third party channels, we spend just
over £300 million. Of the news part of that, we spend about
Q1953 Lord Inglewood: Sometimes you
are criticised that you say you are producing an awful lot of
material in this country and yet, particularly in the case of
sport, an awful lot of it is not created by you. It may be enhanced
by your cash. Is it right, from a public policy perspective, to
see that as being UK originated content?
Mr Wheeldon: It depends whether you see sport
as a creative industry or not.
Q1954 Lord Inglewood: I am asking
the question. I am not saying you are wrong.
Mr Wheeldon: The people who do that will tend
to say Sky does not spend very much money on content if you exclude
all the content that it does spend money on! I find that slightly
Q1955 Lord Inglewood: It is a question
really of the definition of content. It is whether it is material
or whether it is something new.
Ms Turner Laing: I think it is quite important
to look at our investment in content in the whole. Obviously,
there are hours and hours and hours of sport that we actually
create and put on air. Equally, the investment that we put into
whatever sporting body where we are acquiring the rights, a large
element of that investment is going into grass roots. For example,
in cricket, a huge amount of money is going into the ECB, county
cricket, getting more children into cricket, girls into cricket
and whatever, and the same for football. I think it is also important
to look at our investment in arts, because although our overall
programming investment in arts is relatively small compared with
that of the BBC, what we actually invest in other art's content
as far as ... For example, Antony Gormley's One Another
which we did with them on the fourth plinth in Trafalgar Square
or the fact that we are going to Durham to do Lumiere with
Artichoke, which is about light installations with artists and
things like that. I think that it is not always quantifiable investment
in content that necessarily ends up as a programme.
Q1956 Lord Inglewood: In a sense,
what you are saying is the virtue of what you are doing is creating
a lot of stuff which does not appear on television that is done
by people in the outside world more widely.
Ms Turner Laing: That is correct.
Mr Wheeldon: If you look at the model of Sky
News for instance, which is essentially about disintermediating
the people who try to filter news, Sky News is about presenting
it as it happens, when it happens and without creating too much
of a filter. In many ways, Sky Arts is the same. It is about offering
an opportunity for events that are happening, where there are
high production values, to have access to a wider audience. I
would argue that is of huge value to the customer and to the public.
Q1957 Lord Inglewood: You can also
argue it I think from a commercial perspective, that a lot of
these relatively niche programmes are a form of loss-leader, in
the same way as supermarkets sell milk cheap because it draws
them in and, given the bundling portfolio, the way you bundle
your programmes, you are actually sucking people into all the
Ms Turner Laing: I am not sure that sucking
in is what we are hoping to do. What we absolutely believe in
is choice in content and, therefore, we offer hundreds of different
channels. I think it is quite important to remember we are putting
£300 million into other people's channels, whether that is
National Geographic, the History Channel or whatever. National
Geographic spend over £12 million a year with UK producers.
Q1958 Lord Inglewood: I accept all
that and I am not trying to deny the good that is done, but the
Sky brand is not necessarily known for its pure philanthropy;
there are other motives behind it.
Ms Turner Laing: What we are doing is enhancing
that content because content can be consumed in so many different
ways now, whether it is online, on your phone or on air. We want
to obviously provide satisfaction and value to our subscribers,
so we use that content in a million different ways in reaching
them. For example, with the Glyndebourne opera, we actually ran
a satellite feed to Chester and ran it live, a concert-in-a-field,
to give value to those subscribers who could not go to Chester,
a bit like what the National Theatre is doing.
Q1959 Lord Inglewood: What you are
really saying is, in the digital world, the old-fashioned idea
of creating content as if, as it were, you were putting on a theatre
production is old hat, out of date, irrelevant and it is not the
way you should look at it.
Ms Turner Laing: Correct.
Q1960 Lord Inglewood: I am not saying
this is a proposition which is absurd.
Ms Turner Laing: It is how we look at it.
Q1961 Chairman: This is an inquiry
into the film and television industry. It is not an inquiry into
the merits of Sky's coverage of sport, news and other things.
That is the key question. It is, in some way, in what ways you
are going to be able to do more, or ways in which the creative
content in film and television, the UK industry, can be enhanced
by Sky's activities.
Ms Turner Laing: For example, we produce sport
and news within Sky, but all our entertainment channels have no
production teams or a very small amount. All our productions are
commissioned by independent production companies, as is Channel
4's. We are a publisher/broadcaster in that respect. Our intention
is obviously to increase our investment in entertainment. You
may have noticed that we have recently started off on a drama
strategy, where we are taking well-known books or novels within
the UK and turning that into drama. This is a relatively new move;
it started off by our dramatisation of The Pratchetts and
that is the start of a long journey. We have recently hired Stuart
Murphy, who ran BBC 3, and also Lucy Lumsden, who ran BBC Comedy,
and we will be investing tens of millions into the comedy genre
as she arrives next November.
Q1962 Baroness Eccles of Moulton:
We are straying into my area, as it were. Has investment in Sky
Arts changed very much over the last few years?
Ms Turner Laing: Absolutely. We were the joint
venture holder of it originally and we have increased the pure
content investment by 50 per cent. Obviously, that is a relatively
small amount of hours. We look on arts as not purely just television
programming; it is one of our CSR strands.
Q1963 Baroness Eccles of Moulton:
You have given us some examples of plans for the future. Do you
have any other plans for generating UK originated content?
Ms Turner Laing: Absolutely. For example, with
arts, as we are on that now, we have just finished doing a run
of what we called Theatre Live, which was working with
six authors who had never written for television before and then
actually shooting those and performing those live in our studios
in Osterley. We are about to start a new season of that. We are
doing short films with Hilary Bevan Jones, who is Richard Curtis's
producer, for Sky 1. We are looking at investing in specialist
factual for the first time and have some very interesting conversations
that are ongoing, which link into our rainforest campaign which
we announced today, where we have teamed up with the WWF to raise
a large amount of money to save three billion hectares. That is
following on from the success that we had with Ross Kemp going
to Afghanistan. Ross will be going to the Amazon for us. There
is very much a will and an interest to continue to increase our
investment in the entertainment genres because I think it goes
without saying that we have put a lot of money into news and sport
Q1964 Baroness Eccles of Moulton:
Things like the Ross Kemp project and the rainforest --
Ms Turner Laing: They will continue.
Q1965 Baroness Eccles of Moulton:
You classify them as entertainment, but it is a little more than
that, is it not?
Ms Turner Laing: It is factual entertainment,
if you want. It is mainly because Sky1 is known as an entertainment
channel, but obviously we like to deliver challenging documentaries
as well as light entertainment or comedy.
Q1966 Baroness Eccles of Moulton:
Would you think of putting a greater emphasis on the more serious
side of entertainment?
Ms Turner Laing: No, because we hope to offer
a balanced diet and we are an entertainment channel. The platform
itself carries a larger number of factual channels that do it
extremely well, whether that is Discovery or National Geographic.
There are a myriad of different routes which can deliver that
kind of programming to the channel, but we are part-funding that
Q1967 Baroness Eccles of Moulton:
They, Discovery et cetera, would also come under the category
of UK originated content.
Ms Turner Laing: That is correct.
Q1968 Baroness Eccles of Moulton:
What plans for the future do you have for them?
Ms Turner Laing: We are in joint ventures with
some of those channels. Obviously not in something like Discovery,
but they tend to operate their programming budget on a global
basis. The UK is a very significant part of that because it is
obviously one of the most mature markets outside of the US. There
is no doubt that the money that is put in from the UK elements
of those channels is quite significant in making it happen.
Q1969 Baroness Eccles of Moulton:
You would have an influence over that?
Ms Turner Laing: On some of the channels that
we are in joint ventures with, not necessarily Discovery.
Q1970 Baroness Eccles of Moulton:
Maybe it would be interesting to know a little more about that,
not now but generally.
Ms Turner Laing: Absolutely. We can get their
Q1971 Chairman: Thank you very much.
We are in slight danger of figures tripping us all up at the moment,
but I just wonder if you are aware of these figures. Ofcom figures
show that the main PSB channels spent £2.5 billion in UK
originated programmes in 2007that is £2.5 billionand,
in the same year, according to figures given in evidence by the
Cable and Satellite Broadcasters Group, investment for all non-PSB
channels was just £120 million. Are you aware of those figures?
Mr Wheeldon: Yes, I am certainly aware of the
Ofcom figures. That includes BBC spend, the terrestrial channel
spend, and Ofcom, in their public service broadcasting review,
went into those in some detail. I have to say that, again, they
obviously exclude the spending that Sky makes on genres which
do not fit into Ofcom's view of what is public service broadcasting,
although interestingly include the BBC's spending on sport, which
is slightly odd.
Q1972 Lord Maxton: The BBC spend
on news or not?
Mr Wheeldon: It will include the BBC spend on
Q1973 Chairman: As a generalisation,
why is BSkyB's investment in original content so low as these
figures appear to indicate?
Ms Turner Laing: I think it is fair to point
out those are 2007 figures and we have increased our budgets quite
enormously since then. Sky was very, very focused on sport and
movies as being the major drivers of its subscription business.
As the businesses matured and also as we found relative success
in delivering admittedly small audiences to niche channels, but
they are highly valued by our subscribers, the continuation is
to carry on putting what is seen as relatively small numbers against
those, so that you can deliver specialist programming.
Q1974 Chairman: On the face of it,
UK originated programmes for UK audience must make a great deal
of sense because people probably most naturally go to them. Would
tax breaks or any other kinds of incentives be of help to an organisation
Mr Wheeldon: You do have to ask the question
whether this is a market that needs more intervention. It already
has £3.6 billion a year, which is essentially state intervention
in the market to produce content and it is called the BBC. We
would question whether there is a need for any further intervention.
In fact, we would argue there is already far too much. If you
look at investment in content and you look at where we came from,
what we saw were areas of the market that were underservedmovies,
sport and news were underserved. We went into them to provide
for customers who did not have that. The opportunity to invest
from an organisation like us is always going to be most obvious
where the market is underserved by others. If the state is already
there, it is very hard to make a return.
Q1975 Chairman: I notice a very interesting
change in the way you talk about public service broadcasting.
You are now talking about the state as if it is some sort of East
Mr Wheeldon: I am sorry, this is simply shorthand
reference to the BBC.
Q1976 Chairman: I did notice Mr Murdoch,
referring to the BBC, referred to and I quote "state-funded
intervention" and "state-sponsored journalism".
Do we take this as being a new house style as far as BSkyB is
Mr Wheeldon: It is indisputably funded via a
compulsory levy which is raised by the state. I think the description
is entirely accurate. What connotations you choose to put on depends
on your perspective.
Q1977 Chairman: Do you believe in
public service broadcasting?
Mr Wheeldon: I believe that public service broadcasting
as a concept exists. I would question whether the definitions
of what is public service broadcasting are particularly helpful.
Q1978 Chairman: Would you like to
see public service broadcasting reduced?
Mr Wheeldon: We believe that the market can
produce an awful lot more of the kind of content that has previously
been produced as a result of interventions in the market.
Q1979 Chairman: Let me put it another
way. Do you think the BBC has too much power, too must finance
and too much muscle in this area?
Mr Wheeldon: If I were to say "yes,",
I would simply be echoing what a vast swathe of the industry is
Q1980 Chairman: Are you saying "yes"?
Mr Wheeldon: I broadly would agree with that
proposition in that at the moment, in terms of the ability for
others to invest in the kind of content that you are all talking
about today, the BBC is disproportionate and that is affecting
other people's ability to invest in that content.
Q1981 Chairman: Therefore, what would
by your role for the BBC? Would you like to see it doing programmes
that others could not do?
Mr Wheeldon: I certainly think the BBC needs
to think about what is distinctive and what is not, as too often
what the BBC does is not distinctive.
Q1982 Chairman: It would obviously
be to your commercial advantage if the BBC came out of particular
areas, would it not?
Mr Wheeldon: Not just to our commercial advantage,
but I suspect you will find to the commercial advantage of virtually
every other commercial broadcaster.
Q1983 Chairman: Although not necessarily
Mr Wheeldon: It depends on whether you want
to have an alternative to the BBC that is not funded via by some
form of government intervention.
Q1984 Chairman: Sophie, you actually
worked for the BBC.
Ms Turner Laing: I did.
Q1985 Chairman: For how long did
you work for the BBC?
Ms Turner Laing: Six years.
Q1986 Chairman: Did you feel at the
time you were working for a state-funded organisation?
Ms Turner Laing: Yes.
Q1987 Chairman: In what way did you
Ms Turner Laing: Because the way that the funding
is received means there is very little reality in delivering and
operating under a PNL. You do not have to deliver shareholder
value necessarilythe aim is obviously to do thatand
your funding is secure over a set period of time. No commercial
business has that security. I fundamentally believe that the BBC
is capable of great creative innovation. I feel it has become
very distracted in what it has been doing and, if it continued
to make great content, it would be worth paying for but it has
strayed very much into all sorts of other areas which commercial
Q1988 Chairman: Compete with you?
Ms Turner Laing: No, commercial businesses,
whether it is on the online world, whether it is the Lonely
Planet example, which is always trotted out, or whatever.
There are businesses that we are definitely not in but the BBC
Q1989 Chairman: Did you feel, when
you were working there, that the Government were breathing down
your neck, which is a normal feeling about state-run organisations?
Ms Turner Laing: You have to remember, I was
working for Greg Dyke, so I think the answer would be "yes"
Q1990 Chairman: I am not quite sure
I totally understand that. Was Greg Dyke breathing down your neck
or was it the Government?
Ms Turner Laing: It was at the stage of Hutton,
et cetera, and there were obviously quite a lot of problems.
Q1991 Chairman: Did you leave at
the time of Hutton, in fact?
Ms Turner Laing: I left just before the inquiry
Q1992 Chairman: On that occasion,
you did actually feel at the time of Hutton that the Government
were actually breathing down your neck?
Ms Turner Laing: Very definitely.
Chairman: There may be some sympathy with that
Q1993 Lord Gordon of Strathblane:
Obviously, the term `public service broadcasting' covers a multitude
of virtues, but do you think that original UK originated children's
programming is an important ingredient in it, for example?
Ms Turner Laing: Nobody has been able to truly
define what public service broadcasting has been for the last
20 or 30 years.
Q1994 Chairman: I thought we did
rather well in our report on it!
Ms Turner Laing: Apologies! I think children's
programming is a very important part. The BBC, obviously with
two channels dedicated to children's programming, provide a large
swathe of that. We are a joint venture holder with Nickelodeon
in their children's channel. Children's programming has had a
great tradition in the UK, mainly because we have a very vibrant
literature basis. My background is in children's programming,
so I very much feel that should be part of it.
Q1995 Lord Gordon of Strathblane:
If we leave the BBC to one side, would you also accept that the
terrestrial public service broadcasters, who are advertising dependent,
have less money than they used to have and are certainly cutting
their investment in, for example, children's programming?
Ms Turner Laing: Then I think it does goes back
to the argument that, if the BBC are funded in the way that they
are, does one need a great plurality of voices in children's programming
or is it sufficient, given that linear content is one way children
consume and, quite frankly, a whole generation now have moved
on to video games or online or whatever, so is the direct investment
in linear content really viable for all the terrestrial broadcasters
to be in as a market?
Q1996 Lord Gordon of Strathblane:
I am surprised that you think it is acceptable that the BBC should
have a monopoly of UK production of, for example, children's programming.
Ms Turner Laing: They do not. We have a number
of commercial children's channels, Disney being an example, Cartoon
Network, Nickelodeon, et cetera, who all produce here in the UK,
so there is a vibrant market there. They just cannot compete on
the investment in hours of drama, or whatever it is, like that
because that is very expensive programming.
Q1997 Lord Gordon of Strathblane:
Can you give us any figure for, for example, Nickelodeon spend
in the UK?
Ms Turner Laing: I will have to come back to
you on that; I do not have that with me.
Q1998 Lord Gordon of Strathblane:
I think it would be helpful to have that. Granted that some people
feel it is desirable that there should be more UK origination
from other than the BBC, people have been offering evidence to
us on methods of funding it because they recognise the market
itself might not generate it. Somebody suggested retransmission
fees. You are broadcasting terrestrial channels and you should
pay a small levy for that privilege. Your reaction I think I can
predict, but I would like to have it.
Mr Wheeldon: As we have already described, we
are investing considerably in UK content and that is growing.
You would be robbing Peter to pay Paul. If you restrict our ability
to invest in programming, we will do less of it and that is the
effect that a levy would have. The other point I would make is
the terrestrial PSBs get very significant advantages from being
carried on platforms such as ours and, indeed, they also have
regulatory advantages which are valuable to them, such as due
prominence on the electronic programme guide. That is pretty significant
for the likes of ITV. Frankly, I think retransmission levies are
just a way of taking from an organisation which actually already
has an incentive to invest in content. I am not sure why you would
want to do that.
Q1999 Lord Gordon of Strathblane:
Would your reaction be the same if somebody suggested a levy on
the equivalent of Sky + digital recorders, because of the reuse?
Mr Wheeldon: Again, this is a market that has
a £3.6 billion a year intervention and you want to increase
it. I just cannot conceive
Q2000 Lord Gordon of Strathblane:
What people are looking at are ways of perhaps increasing it,
not giving it to the BBC but giving it to other people.
Mr Wheeldon: What I do not understand is why
the assumption is always that the only way to get more people
to do more investment in content is to fund it via some form of
intervention. Actually, if perhaps there was less intervention
there in the first place, more people would invest because they
could make a return. Unfortunately, that starting point never
seems to be arrived at, which is slightly odd.
Q2001 Lord Gordon of Strathblane:
I would like to come back to a point you made, Sophie, on film.
Was there not way back a Sky Film channel?
Ms Turner Laing: No. We had a production company
called Sky Films that existed pre me, so about six or seven years
ago, which lost a considerable amount of money. It was a good
investment, they put a healthy investment in, but it had no real
return for it. It was felt better that we went into long-form
programming, such as dramas, factual and pieces like that. I think
it is important to understand how our movie deals work with the
studios because obviously we take a set amount of films from each
studio each year and not a high percentage but a percentage is
British films. For example, Universal's films, which owns Working
Title in the UK, flow through us and our licence fees that we
pay to the studios are integral in them green lighting films.
Without that comfort of our output deals, they would not green
light that. We have been working closely with John Woodward to
see what more we can do to enhance studio investment in film because,
that way it is a natural progression of investment rather than
forcing one down a route of producing relatively small films that
in the end get small audiences because, at the end of the day,
we are a mass market movie service, not Film 4.
Q2002 Lord Gordon of Strathblane:
You do not have any plans to go back into the film business?
Ms Turner Laing: No. I would thoroughly prefer
to put whatever investment I am lucky enough to get from my Chief
Executive into drama.
Q2003 Baroness Howe of Idlicote:
There is clear audience evidence that they are very concerned
to have a high proportion of UK originated content. Before I go
on to a slightly broader question, I am not certain whether we
have got what proportion of programming on your entertainment
and arts channels is, in fact, UK content.
Ms Turner Laing: All of our originated content
is UK produced.
Q2004 Baroness Howe of Idlicote:
All of it?
Ms Turner Laing: All of it. The percentage of
original spend is all spent with UK companies.
Q2005 Baroness Howe of Idlicote:
Let us look at the effect of the AVMS directive, which actually
requires 50 per cent of the output of European broadcasters, that
is excluding sport obviously, to be EU content. What effect would
that have on your work if it was enforced rigorously because,
in fact, we had evidence from Carole Tongue that it was not being
enforced as fully as it should be?
Ms Turner Laing: Is that spend or hours?
Q2006 Baroness Howe of Idlicote:
Ms Turner Laing: It does not define it. Therefore,
what we prefer to do is smaller, bigger, better, so that we make
sure what we invest in we do extremely well. As far as hours,
we probably would not qualify for that but, as far as investment
in actual spend, there is definitely the intention that we should
be reaching those types of figures.
Q2007 Baroness Howe of Idlicote:
It would have an adverse effect?
Ms Turner Laing: I think we should be able to
do it, yes.
Q2008 Lord Inglewood: A week ago
when Michael Grade was sitting where you are both sitting now,
he was, in his usual trenchant way, extremely critical of the
Competition Commission's rulings about Kangaroo and arguing that,
by effectively making it impossible to have a single portal for
video on demand with the television channels involved, we were
condemning this country to an American dominance in that part
of the business. Do you agree and do you think it is important
that there is a kind of UK single portal for watching British
TV on a video-on-demand basis? I am using layman's words.
Mr Wheeldon: We would argue that the market
should be allowed to find the right means of delivery.
Q2009 Lord Inglewood: The market
had found a means of delivery and it was the Competition Commission
that stopped it.
Mr Wheeldon: The problem is that the market
had not entirely. The big problem with all of this was the involvement
of the BBC. When you have such a dominant player in terms of content
involved in such a deal, it was always going to cause a problem.
Q2010 Lord Inglewood: What you are
really saying is the domestic TV market in Britain is completely
dominated by one player that is abusing an economic dominant position
in respect of the whole marketplace, full stop.
Mr Wheeldon: I am not saying it is abusing its
position, I am simply saying that it is self-evident that it is
a dominant player.
Q2011 Lord Inglewood: Yes, but it
is where you get abuse of the dominant position that is the problem,
is it not, not the fact that you may have somebody who is in a
Ms Turner Laing: Surely the debate on Kangaroo
was that, if you are an aggregator of content and this was a platform
that was being set up, you usually would take content from everywhere.
For example, our platform is an aggregator of content. We do not
decide on taste and decency terms who comes on the platform, Ofcom
do. The issue with Kangaroo was a closed wall environment, so
that it would only be public service broadcasting there. It is
debatable whether the true full force of UK content could actually
end up on Kangaroo.
Q2012 Lord Inglewood: Would you want
to be on Kangaroo if Kangaroo existed?
Ms Turner Laing: We are involved in the consultation
on Canvas. Last week, we did a deal with an IP TV company called
Fetch. Our feeling is that, for IP TV delivery, we are looking
to be on all sorts of platforms.
Mr Wheeldon: It is in our economic interest
to distribute our content as widely as we possibly can.
Q2013 Lord Inglewood: Do you think
that it is in the UK's interest to have what I call a UK portal
rather than have somebody like Hulu dominating the marketplace
Ms Turner Laing: I am not sure whether a UK
platform is really who owns the platform. I think it is what content
is accessed there and how independent producers can get their
content on the platform and available. Channel 4 have recently
done their deal with YouTube, so all their content is going to
be available on an existing platform. I do not think that probability
precludes them from doing a deal with Fetch or with anybody else
who might come up. You want to get your content as widely distributed
as possible. The consensus of needing to have a British Hulu I
think is debatable.
Q2014 Lord Inglewood: I am not trying
to put critical words at you, but the argument is that nationality
does not really matter in all this.
Mr Wheeldon: Is it not more important where
the revenue is going? If Channel 4 can get revenue streams from
Q2015 Lord Inglewood: That also may
be important. I am trying to tease out what your thinking on that
Mr Wheeldon: There are not many industries anymore
where we deliberately try to create national champions. That was
seen to be a failure of industrial planning.
Q2016 Lord Inglewood: There is in
the widest possible sense a feeling that it is part of British
cultureI think you almost touched on it yourselves earlierthat
it belongs to this country rather than the world as a whole and
we want to encourage it. For exampleand you may disagree
with itif you look at the European legislation, there is
clearly a concept of the value of the distinctiveness of a European
component in this wider world market.
Mr Wheeldon: I am not sure how a platform aggregator
makes a big difference to any of that.
Ms Turner Laing: I think it would be fabulous
to have one if it provided universality of access.
Chairman: We have run out of time but can we
get in a question on training.
Q2017 Baroness Howe of Idlicote:
Do you run any in-house training schemes and, if so, for what
sort of programmes?
Ms Turner Laing: We have a variety of apprenticeships
in our various content divisions. We have also just started up
a school leavers' scheme where we take 18-year olds into the business
because, if we are looking for people to produce promos or be
cameramen, they do not necessarily need to go to university and
we would rather give them the training on the spot. One of the
areas obviously that we lead the light in is in HD. We are the
leading carrier of HD channels and we provide a lot of help and
input to the industry generally. When we introduced HD, we worked
with tons of small independent companies to get them up to speed
on what they needed to do, provided access to our HD suites, bedded
suites, et cetera, and we are just about to startyou probably
saw our announcementin 3D. We are working with the Film
Council at the moment to work out how we could help get professionals
in the industry around the 3D idea because, quite frankly, there
is nobody in the UK who knows very much about it.
Q2018 Baroness Howe of Idlicote:
You are working in partnership, as you have said, with another
organisation, but what about contributions like Skillset?
Ms Turner Laing: We are not part of Skillset
for a myriad of reasons but we prefer to be very proactive in
our own apprenticeship scheme. I think it is important to add
that we are a large corporate sponsor of the National Film and
Television SchoolI am a governor therewhere we support
on an annual basis and have done for many years and will continue
to do so.
Q2019 Baroness Howe of Idlicote:
Are you happy with the amount of training that goes on in those
places? Is it, in fact, sufficient? Are there particular areas
in which current skills are inadequate and what would you propose
should be done about them?
Ms Turner Laing: I think it would be helpful
if we were not sending hundreds of children to media studies courses
at university where they are not particularly brilliantly taught
and then we have to retrain them as soon as they come out.
Q2020 Baroness Howe of Idlicote:
Higher education is not one of the areas you
Ms Turner Laing: Some more vocational work would
be much appreciated.
Q2021 Chairman: That is a complaint
which has come out from a number of people in the industry. What
can one do about it?
Ms Turner Laing: I think the issue is that it
goes back to the whole way the education system is run about how
many grades you can get through your students and media studies
is seen as a very soft option, so you either have to cut that
down or ... The problem is that we are in an industry where the
technology changes minute by minute, not year on year even, so
it is quite hard. I think having a greater degree of practical
experience, whether it is internships, as they do in America,
or even engineering courses, would be much more helpful than what
we have at the moment.
Q2022 Baroness Howe of Idlicote:
You have mentioned apprenticeships. Do you think this is one of
the areas where you could advocate rather more towards women in
this respect because there are very few women who take up apprenticeships
and I would have thought this was an area which would be quite
interesting for them?
Ms Turner Laing: We have quite a well thought
through diversity plan which covers both gender and ethnicity
because, as you may know, I was Chair of the CDN for the last
couple of years. For me, it is both gender and ethnicity, because
television as a whole is pretty white and middleclass, hence providing
our school leavers' schemes. We only take pupils from our local
schools in Hounslow, so we draw them from our local community.
I think gender is an issue with technology.
Q2023 Baroness Howe of Idlicote:
Given the emphasis that the Government are placing on apprenticeships,
surely there is an area here where you could encourage them to
do rather more.
Ms Turner Laing: We have a very open policy
on work experience. We take part in the 11 million takeover day,
which was a government-run initiative where we get everybody from
primary schools into Sky to come and see what it is about. Our
volunteering work that we do, whether it is planting trees or
whatever, is done in co-operation with local schools, so that
they have an understanding of the jobs which are available in
television. School children predominantly see it as either you
are a presenter or a cameraman and there are obviously a million
other roles there to play.
Q2024 Chairman: We must be careful
not to offend our Specialist Adviser on media courses"too
late" he says and he is probably rightand, even if
we do, we probably do not mind! Would it be fair to sayand
I am trying to shorthand itthat you would like to see a
bigger element of vocational training in some of the media courses?
This point that you and others have made that people are coming
out of such courses, even when there are vocational parts in it,
and simply need to be retrained right from the beginning. It seems
a terrible negation of everything that has happened before.
Ms Turner Laing: I think that it is also supply
and demand. As an industry, there is a certain percentage of people
who work in the industry and the amount of students who are going
into media studies far outstrips any of the intake that one would
take on a natural turnover and, in a recession, people are not
moving as frequently as they were before. You are pushing everybody
down a very, very narrow funnel and basically you start really
at the bottom. I started as a secretary, people start as a runner,
and that is how you learn the business because it is very much
by experience. If there was a greater degree of practical experience
on the job where people literally went for six months or a year,
just like when you are learning languages, you go and live in
whatever country you are learning the language of, it would be
much, much more useful because we would be able to put people
quicker into positions of responsibility rather than needing to
baby-sit for a year.
Q2025 Chairman: Would the media industry,
particularly the television industry, I suppose, co-operate in
that sort of scheme?
Ms Turner Laing: I do not see why they should
not, because there is a very large freelance part of the creative
industries. Who is to say you could not make up some of that freelance
basis with internships.
Chairman: That is very interesting. Thank you
very much indeed for the evidence. I think there are some issues
we might like to clarify, if we might, in post so that everyone
knows what figures we are talking about, because this area does
very easily become confused. Thank you very much for the way in
which you have given your evidence and we are very grateful for