Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 505 - 519)



  Chairman: Gentlemen, we are most grateful to you for accepting our invitation to come here. We have heard from your organisation in the past as these issues have developed and we thought it would be useful to get your perspective on the latest developing situation in this inquiry.

Mr Fearn

  505. Have the current rules on cross-media ownership led you to invest abroad when you might otherwise have invested in this country?
  (Mr Sinclair) Undoubtedly so, most obviously in radio. As you know, we are significantly limited in our ability to invest in radio, and that led us to build up really quite a significant radio business in Australia which we still largely own. We would not have had an opportunity to invest that volume of capital in the UK, largely because of the process you have to go through, if you are a newspaper owner, every time you want to acquire a radio licence.

  506. What is that process?
  (Mr Sinclair) There are a number of tests, which include examining the overlap between newspaper circulations and a broadcasting area; there are public interest tests; and even the impact of other types of media ownership—for instance, in television within a multiple media group.

  507. Could I switch to the BBC now. You argue, and I quote from your paper, that the BBC's privileged position "will inhibit development of a dynamic market". What privileges would you wish to see withdrawn from the BBC?
  (Mr Stewart) I think the fact that the BBC is a public financed organisation means that it is exposed less to commercial risk than commercial enterprise; and it is able to move into areas where there is a commercial opportunity, and the effect of that is to diminish that opportunity. There are a number of instances we have just been discussing, and hearing about some of them in the previous session, in new media, where the activities of the BBC have affected the dynamics of the marketplace: provision of content free of charge to Internet portals; the development of programme propositions which have affected opportunities for commercial broadcasters. It is that balance of the reduced risk that the BBC faces compared to other commercial broadcasters and the facility they have to make content available free of charge which I think does have a bearing on the development of a dynamic and competitive market.

  508. If some of those privileges were to be removed, which should be removed?
  (Mr Stewart) As Patricia Hodgson was saying earlier, it is a question of revisiting the terms of reference of the BBC and looking again at what its purpose is. The White Paper says that among its key objectives is the development of a competitive and dynamic marketplace. Essentially what I am saying is that some of the activities of the BBC act against that objective.

Derek Wyatt

  509. Let us try and deal with it hypothetically. Let us say that in the near future, to resolve the dichotomy and the schizophrenia which exists in the BBC, that BBC Worldwide is privatised. Would you be allowed to buy into that under current regulations?
  (Mr Sinclair) I have to say that is sufficiently hypothetical that we have not considered the possibility.

  510. Let us be realistic. That would be a very attractive thing for you, as it would no doubt be for Granada, Carlton or Time Warner or whoever. Once that decision was made that would be a very sexy investment for media players?
  (Mr Sinclair) Possibly.

  Chairman: Provided it was allowed to carry on commercially?

Derek Wyatt

  511. If it was commercial it would be commercial. How it was commercial would be defined by OFCOM, we hope. Do you think it is a weakness of OFCOM that the BBC has basically got away scot-free?
  (Mr Sinclair) We certainly think that the approach to media regulation in this country should treat all the media players equally. The fact, and we do agree with you, that the BBC is treated as a special case means that there is no level playing field between all the media players in the UK. We do agree: scot-free maybe, but certainly not treated equally and we do not think that is right.

  512. Sir David English used to come in front of us and try and explain how cross-media ownership could work, and as we are pretty dim we never really understood it. Basically what you are saying is that there should be no upper or lower limit to ownership of media any more?
  (Mr Sinclair) Not quite, no. We do think that, consistent with public policy objectives through the activities of fair trading regulators, where there is the possibility for unfair trading then a competition authority should do its work and, where it thinks appropriate, put in upper limits, but that should be the extent of the regulation.


  513. Mr Wyatt always stimulates me to think of questions. Taking into account the amoeba-like multiplication and reform of cross-media ownership—and at the end of this morning we are going to have SMG—is there any point any longer in any rules for cross-media ownership when there are so many different combinations of area?
  (Mr Sinclair) I think there is now an emerging case that the historic approach to regulating cross-ownership is outdated and irrelevant, and may even be counterproductive. We can only repeat what we have said in our paper to you, which is that we believe there should be minimal prohibitions on cross-media ownership; and that the competition authorities should be allowed to do their work freely. We think there should be included in the work of the competition authorities this very important concept of plurality. We have no problem with that at all; indeed, we think competitive activity in most media markets is a stimulant to quality, and that is what attracts people to use media; and it stimulates the providers of media to be better. We see that time and time again. Cross-media restriction helps none of these things.

  514. There was a controversy two or three years ago in which News International were accused of predatory pricing policies. I can get News International newspapers free on the Internet, just as I can get lots of newspapers free on the Internet every morning, including British ones and foreign ones. I think you are absolutely right in your paper to warn against any danger of Internet regulation meaning interference with newspapers, which is absolutely intolerable. When we move into a position like that where anybody for the price of a telephone call can sit down and read a whole array of newspapers throughout the world, the whole concept of cross-media ownership has changed, has it not?
  (Mr Sinclair) It has dramatically, although I would say, looking at the content of a newspaper on the web is a very, very different experience from looking at the newspaper itself. The medium in this case moulds the message, and the web tends to make the reports rather shorter. You do not get the chance to dwell on the niceties of a beautifully crafted article. Certainly the screen delivery is not really conducive to the luxurious read we all enjoy in a good newspaper. I can only agree with your point, that once again cross-media regulation does not seem to contribute to the end product, which is a quality offering in front of our customers. Ultimately it is our customers who decide which media products are going to survive.

  515. I personally would agree with you, in the sense that I like picking up a pile of newspapers and I like the aesthetic feel of picking up, say, a chunky copy of the Daily Mail, a copy of The Times or the Daily Telegraph, whatever it might be. I heard on the radio this morning that a third of households now have access to the Internet and are using that access. There must be a very large number of people to whom reading a newspaper on the Internet is increasingly becoming the way in which they read newspapers?
  (Mr Sinclair) I can only say for one of our many products, the Daily Mail, that coincident with the rise in usage of the web, our sale has gone up.

  Chairman: There you are: quod erat demonstrandum.

Derek Wyatt

  516. You have a very sexy share price in both of your shares. Is it a factor that you cannot really grow much more investment unless you invest outside the UK; so really you do want a change because you cannot actually grow a bigger company and you cannot be a bigger player in the global media?
  (Mr Sinclair) No, I can emphatically say that is not the case. Our share price is whatever our investors say it should be. That is strictly a function of supply and demand in this very efficient London financial securities market. We are unusual in that we are largely cash investors in the media. We do not issue equity. In fact, if we thought our equity was fully valued we might use it, but we do not. We use cash and we create cash resources by working our business as well as we can to improve our debt capacity. Of course, the disciplines of cash investment are quite foreign to those who use paper currency all the time. It does bring real disciplines to our business. The fact of the matter is that we are more restricted by the availability of really good opportunities to invest than we are by our capital base.

  517. As Vivendi did for a short time when trying to sell, and has sold, its share in Sky, you could have been a major investor in BSkyB. There are ways you could have invested. You have a 25 per cent share of ITN?
  (Mr Sinclair) 20 per cent. We are limited to 20 per cent.

  518. You would probably like to buy it if it was relaxed, but would have one or two people after you, I suspect. Is it your wish that, in a sense, OFCOM should leave the regulation to the market? There are Bills in place already and that should be how it is; it should be a very, very light touch?
  (Mr Sinclair) Broadly, we agree with that.

Mr Maxton

  519. Following on the Chairman's question about the newspaper on the Internet, in 1998 when I asked Sir David English about this he informed me that the Daily Mail was not yet on the Internet. I think I looked for something recently on the Internet—are you there yet?
  (Mr Sinclair) If I can break your question down into two parts. There are newspapers on the Internet; and there are Internet activities. On the first, we have never believed deeply that newspapers would naturally transfer themselves on to the Net; hence my earlier remarks about the different experience of reading a paper on the Net and on newsprint. In fact, possibly of all the UK newspapers we have been the least forward in putting our national newspaper titles on the Net, because we think the Net does other things better. That is why, out of our national newspaper stable, we have concentrated on niche subjects where use of text, which is what the Net is so good at, come together, and they include web sites like This is Money, which is derived from our base in Money Mail during the week and the Financial Mail on Sunday at the weekend. We are a natural publisher of financial information for our public. We have recently gone to the top of the web site league table in this area. An interesting use of talent crossed over from print to the web. We think that is a much more productive way of using the web than simply taking, as I think the Telegraph did in the early days, the paper and largely trying to reproduce it on the Net. We do not think that works.

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