Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 40-59)



  40. Is that the young audience? The sports audience is certainly the young audience.
  (Mr Dyke) The football is certainly a young audience. Although it is not in the year that we are talking about but in the year since, our audiences for the World Cup are remarkable. Then we may talk about the audience on radio.
  (Ms Abramsky) If you take Radio 1 in the last year, we have actually increased our reach amongst 15 to 24s by just under half a million—just for Radio 1. We have slightly lost share. We have more people listening, but they are listening for a slightly shorter length of time. We have also increased the reach on Radio Five Live, which again is the sport factor. Overall on radio we have therefore increased the reach amongst young people. But they are now listening, and one of the interesting things about young people is that they listen to more radio stations. The length of time they spend listening to a radio station may be shorter, because they are listening to others, but more of them are listening than were listening a year ago.
  (Mr Davies) This is an objective which we have also set for next year. We have set the objective of bringing younger audiences to BBC services by developing bold and innovative programmes. We are therefore well aware of both of the areas that you have raised.

Derek Wyatt

  41. I am on page 68, which is about salaries and pensions. I note that there are 19 Executive members who earn more than the Prime Minister. In fact, there are 19 who earn more than any chief executive of any National Health trust, which is also a public service. Can I talk you through the bonuses for a moment? I see that six bonuses are more than the total of an MP's salary. I can understand Mark Byford getting £69,000 as an additional bonus, because he has done such a phenomenal job after September 11. He and his staff—and I hope that it is his staff—should absolutely get that. I cannot quite understand, say, £58,000 for Mr Yentob. I do not recall that he is a director of either BBC1 or 2. How do you decide that, for someone who is already getting £221,000, they get £58,000? Because of the commercial deals that he has done? Because of his success? How do the audit committee evaluate the difference?
  (Mr Davies) The first thing I would like to say is I think it is unfair to comment on individual people but I am very happy to give you an answer about the compensation policy for the BBC's executives as a whole. I do not think it is customary or right to pick out individual people. We have adopted this year precisely the same policy that we have had for as long as I could find, at least ten years and probably much longer, which is to pay the executives of the BBC on average the median that applies to a group of comparator bodies, including many in the private sector and many in the public. This year we have not been able to achieve that. These levels of compensation are below the median for this outside group of bodies that we compare with, and this year we have paid around 89 per cent of that median. Last year we paid I think 95 per cent of the median so interestingly, although some other media companies seem to have had a hard time in terms of revenues, they have not had that hard a time in terms of what they paid their executives. We have not increased our executive compensation, even this year, in line with what has happened outside. Now could I comment on the difference between the public sector and the public service and what we are doing at the BBC? The BBC is a public service entity but it operates in the private market place. The people who run the BBC are outstanding people and they have very ready access to jobs in the media industry. If we were simply to compare BBC salaries and compensation with public sector bodies we would lose most of the outstanding people who are running the BBC, so we have always had this view that we should pay median amounts of money to what are outstanding people, and I can tell you these people, from my experience of the private sector, would be enormously better paid if they moved into the private sector. They would also have access to share option schemes which would potentially make them very rich which do not apply in the BBC so, although we try and get this group towards the median for the comparative group, the people concerned could do a heck of a lot better if they moved into the private sector.

  42. On the pensions side, could you explain column three where you have against Jenny Abramsky £109,000, against Richard Sambrook £321,000 and against Alan Yentob £211,000. That is the amount paid into their pension fund currently, is it?
  (Mr Smith) No, it is not. The best way of looking at it is, first of all, just at column one which is the increase in the amount of pension the person is entitled to as a result of the expiring—in other words, another year's entitlement. Column three is what the net present cost of that increase would be to the pension fund if the person left and took it with them in one go. So it is the cost of fund net present value of the annual increase that is in column one, and it is not paid in cash.
  (Mr Dyke) For instance, taking the case of Richard Sambrook, he was promoted during the year from deputy head of news to the head of news and therefore he gets quite a significant increase, and the implications of that in the pension fund are quite high. The other thing is, and I would hate to tell you the age of everybody here but the age of people also changes that figure. In some ways, therefore, that figure is an actuarial calculation and nothing else.
  (Mr Davies) We do also take into account the pension benefits when we make the decisions in the Remuneration Committee on compensation.

  43. I have the BARB figures here for April to June of this year and, just to try and help the Chairman a little bit, BBC4 is 0.05 per cent for three minutes in that period and the reach is two per cent in that period, so whilst we have some differences about the 15 and the three I think what would really help me is you writing to me, if not to Chairman, to give me the cost per hour of the digital channels when they are on air and then, if it is possible, the cost per viewer because it seems to me that while, on the one hand, the chief executive is saying that he is driving ratings on BBC1, you cannot have the same philosophy for digital channels, so my question is at what stage do you decide as the Governors that BBC4 will never get beyond what it is, and at X amount per hour or viewer this is not sustainable? What sets of objectives, and can they be put in the public domain, have you set for each digital channel?
  (Mr Davies) I think it is hard to do this on a formula. I would love to have one because it would make life easier but there will be some services that we should have and should feel enormously proud of that will have permanently a high cost per listener hour or cost per viewer hour, for example, Radio 3. I do not know if Jenny has the figures but Radio 3 will typically have quite a high cost per listener per hour but it is something we are proud of and it is something the BBC should do, and it is something no other broadcaster is likely to replicate. The key for me is whether across all of our services we are giving value to all of our licence fee payers; it is not so much to compartmentalise the services one by one and think whether all of them are giving equal value in terms of cost per hour. As Greg never ceases to remind me, if we wanted to reduce the cost per viewer per hour we would have EastEnders on seven nights a week four hours a night. There is a balance here and we have to do it subjectively; I do not think we can do this through a formula.

  44. What you are suggesting is that, irrespective almost of the cost, you would not take the arts off because it is low, because you feel that fits the public service because it fits you currently, but surely the Governors as a whole would be concerned about the money, as Chris has said—10 per cent at some stage. You have more DTT coming at more expense, so at what stage do you say we are not hitting the targets?
  (Mr Davies) I think there would be a time we would become concerned about that and I do not deny it. It also makes plain why the relative budgets of BBC4 and BBC3, if we get permission to do BBC3, are as they are because essentially we think we might get more viewers on BBC3—at least initially. So these things are taken into account. But I think you need to give it time and make the judgments as best you can taking all the evidence into account as opposed to trying to do it through a formulaic approach.
  (Mr Dyke) For instance, rugby cost per viewer hour is one of the most expensive things we do. Should we not do it? Those decisions have to be made as judgments. BBC4 I think costs us £32 million a year.

  Mr Wyatt: I was going to ask you about that because I was going to come on to sport.


  45. I am sorry, Derek. If there is time later on I will come back to that but I would just like to ask two questions concerning what Mr Wyatt has been asking you about. Mr Davies and Mr Dyke have explained that when you have got very few viewers you are proud of it because of the quality of the programmes, but when you outdistance ITV because ITV's audience has shrunk then you boast about the fact you have more viewers than ITV. You are having it both ways, are you not?
  (Mr Davies) I think the BBC is a selection of different services and they are not all going to give equal value for money in terms of cost per viewer per hour or listener per hour, and I think that is inevitable if you run a series of different channels aimed at different objectives. In my mind, it is a strength not a weakness that we have this selection of different services. However, overall, the BBC has to serve the entire public and certainly in some parts of its services it needs to attain reach and audience approval from nearly everybody, so I agree—it is a difficult circle to square but I think it has to be squared in the BBC.
  (Mr Dyke) Also, if you come into some of the questions that Rosemary McKenna was raising, for instance we are expanding the Asian network to try to take it digitally to as many places as we can, which includes probably creating an Asian soap, and if you start looking at that just in terms of cost per listener hour you would not do it in a million years but that is a part of our audience that we do not think is being properly served.

  46. Mr Wyatt asked you about the remuneration of members of the Executive Committee. There is no member of the Executive Committee whose total remuneration over a whole year falls below a quarter of a million pounds, yet on page 67 under Benefits you say, ". . . new appointees to the Executive Committee are only eligible for a company car and fuel for private use". On the basis of those gross remunerations, ought they not to pay for their own car and petrol?
  (Mr Davies) The current custom and practice in terms of executive compensation is often still to include car benefit. It is becoming rarer and at the BBC the old practice used to be to include both a chauffeur driven car and a car for personal use, and the former of those two has by and large gone now. I think the trend, Chairman, is moving in the direction you say across the whole of British industry and we are changing in line with that, but these numbers relate to the year that has just ended.
  (Mr Dyke) We are changing our policy right across the BBC away from cars to giving people choice in-car allowances. It is much more environmentally friendly, and that will happen over the next six to nine months right across the BBC. It is not always the most popular decision, let me tell you!

Alan Keen

  47. One of the successes of this Committee was when we discovered the way the Chairman of the Board controlled the Director General by taking his specs off, and it must be true because he mentioned it on Desert Island Discs and now we have this wonderful photograph on page 7 of the Director General welcoming the new Chairman and formally handing over his specs! It is good to see the confidence that the Chairman has because he has got them back again now.
  (Mr Davies) I find it improves his mood to leave him with his specs, so I am making that exception today.

  48. Can I come back to BBC News 24 on page 82? I did not quite follow the answers that were given earlier. Originally when we first queried this a year or more ago we were told that the cost of BBC News 24 was £50 million. I was a great supporter, and still am, of News 24 until my colleagues were being critical by saying that the cost must be very high. We were told at that time that that included a fair proportion of the cost of collecting news. I have noticed that BBC News 24, from early mornings when it is the main news through to the night, fits smoothly into becoming the morning news programme in a way. Presumably that was partly common sense in that it saves money, but these figures do not show the cost of news anywhere else. Is that £50 million the cost of collecting the news worldwide for all the news programmes?
  (Mr Smith) There is a figure on page 10 which breaks down total spend by genre, of which one is news, and the figure is £395 million.
  (Mr Dyke) But that includes current affairs as well. That is the whole news division.

  49. And obviously the news programme on BBC1—
  (Mr Dyke) I am sorry, I am told it does not. I have misled you.
  (Mr Smith) It is just the news.

  50. So that £50 million is an allocation, I think we discovered before, of the news gathering around the world?
  (Mr Smith) Within the £395 million there is a figure of about £80 million odd for news gathering.

  51. And is part of that allocated to News 24 in this £50 million figure, or is that just the production costs in the studio?
  (Mr Smith) From memory the costs of News 24 are largely the marginal costs of having the channel over and above those which we would have anyway. I can set out the exact picture for you in a note.

  52. It is an important question because my colleagues were critical of the costs of News 24 against its value. As I say, I did not agree with them but if that is just the cost, I believe in questioning a year or more ago it was said that if 24 hour news was shelved, ditched—and I am not advocating that—not all the £50 million would be saved because there was news gathering in that figure, but from what you are saying now that is not really true.
  (Mr Smith) Let us give you the precise answer in a written note.
  (Mr Davies) I think, Mr Keen, you are right: not all the £50 million would be saved.
  (Mr Dyke) Also, if ever we have seen a year of the value for News 24 it was this year on a number of occasions because where, on other occasions, we would have gone across to a news flash on BBC1 for September 11, the period of the Afghanistan war, the Prime Minister's announcement of war—all those sorts of things—this year we cut straight to News 24 and put it on to our main channels. It has been brilliant for that reason.
  (Mr Davies) We think for a couple of months it has overtaken Sky News in terms of audience reach. The Chairman wrote a piece in The Independent last week saying that we were counting the overnight BBC1 figures in our News 24 figures but that is not true. News 24 for the last two months has overtaken Sky in digital homes, not counting the overnight show on BBC1.
  (Mr Dyke) To be fair, Sky News still is not in digital terrestrial homes, which it will be from later this year.
  (Mr Davies) Yes, which will make a difference.

  53. BBC 24 is under digital services and not under analogue. I have not got digital but I have been watching 24 hour news for a long time.
  (Mr Dyke) Then you have a trick that the rest of us have not, Mr Keen!
  (Mr Davies) I think you have been watching it overnight on BBC1.
  (Mr Dyke) On analogue cable?

  54. Yes. That is why it is digital—I see what you mean. Can I come back briefly to the balance sheet and the valuation of films? On the archives, for instance, presumably there is no market value of the vast archives. I agree with John Thurso's inference when he said that, if you do not put a value somewhere in the accounts, it does give a false picture. I was brought up in accounting in the old days—not as Andersen and others have been operating in the States recently—and I guess in this country as well in some cases where as long as you valued the balance sheet as low as possible that was what was needed, but it does give a false position really and I do not agree with what John was saying about the possible reasons for doing that, but we are trying to show the public the value of the BBC and what assets it has. You could not guess really at the value of the archives, could you? You do sell the use of the archives, am I right?
  (Mr Dyke) You could put a value on it because you could value it according to what you sell it for and multiply it up, but I would caution against that. Having run a media company in the United States let me tell you that if ever there was an area of suspect accounting it is the value of libraries on American media companies.

  55. I am not advocating putting it into the balance sheet.
  (Mr Dyke) You could certainly do a valuation of it based upon its potential income, because we know what that is.

  56. Can I suggest that we look at the possibility of putting it as a note but definitely not in the balance sheet?
  (Dame Pauline Neville-Jones) On the value of the archive, undoubtedly you could value the archive and there is a value there, clearly, but it is also a cost because it is only a value if you can use it. A great deal of the material there has to be got into a useable form and there is a big backlog of work to be done on the subject of cataloguing. You can imagine that previously, when people did not think of using archives in this way, both contracts governing the material and also the quality of the material itself had to be sorted out. It was not ab initio put into a form where it could readily be used so we have a big job in sorting out rights and also putting that kind of film material very often into good physical order, as well as locating it. What I would say, therefore, is I absolutely take your point: it is quite a big task and you cannot simply say, "We have this lovely lot of material and it is valued at X".

  57. When you carry out the work to bring it into useable form, is that just charged as a cost? You do not put it into the balance sheet?
  (Mr Smith) We just charge it as a cost. Also, the most valuable output tends to be the most current and BBC Worldwide you know exists to invest in BBC programmes that are currently being made in order to exploit them around the world. Insofar as Worldwide do invest in programmes, the value in Worldwide's balance sheet is also on the BBC's balance sheet at £111.8 million, so where we are actively planning to exploit current output by selling it around the world and therefore Worldwide have actively invested in it that figure is put on the balance sheet because that is the thing we are planning to export commercially. Most of the back catalogue is used for BBC public services rather than commercial exploitation. There is a bit of commercial exploitation but it is not massive.

Michael Fabricant

  58. Firstly, can I be nice and congratulate the BBC on winning the DDTV franchise from the Independent Television Commission? I think the BBC was absolutely right to say that the only way DDTV is going to survive is if free-to-air channels are provided and they are exclusively free-to-air and that is absolutely right, so well done. Now I am going to obey the injunction of our Chairman—
  (Mr Dyke) I thought we could end there!

  59.—and refer you to page 17, particularly the section which says, "Connecting with all audiences", I am sure you are going to guess what I am going to say. Gavyn Davies said just now, talking about Radio 3 and his pride in Radio 3 and I agree with what he said, "This is something the BBC ought to do which no other broadcaster is likely to replicate". Now, in "Connecting with all audiences" it talks about having "a particular focus on making the BBC's news and current affairs more relevant and engaging for this group"—this is talking about young people—"without diminishing the BBC's commitment to parliamentary reporting". Now, you will have read the newspapers recently and I quote The Guardian from July 15 with an unkind headline because I do have very high regard for Greg Dyke not just currently in the BBC but also his previous career in broadcasting, but the article was called "Dyke's dumb idea, BBC must defend political programming" relating to this very item, and it goes on to talk about the future of programmes like On The Record and Despatch Box and others, and changing the whole style of political reporting so that it will appeal more to young people. Apparently you have a board meeting this afternoon and you are going to come up with some sort of compromise. Can you let us into the secret?
  (Mr Davies) Firstly, we do not have a board meeting this afternoon. There is one tomorrow—

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