Memorandum submitted by the Publishers Association

 

1. The publishing sector as a whole is the largest cultural industry in the UK. The Publishers Association (PA) is the trade association which represents consumer trade, academic and educational publishers in the UK. The PA's members represent approximately £4bn of the £5bn turnover within these parts of the overall publishing sector.

 

2. This submission concerns the transparency and appropriateness of certain of the BBC's activities, both in the context of the BBC's pursuit of its public purpose, namely its offerings in educational markets and its purchase of Lonely Planet through BBC Worldwide.

 

3. The PA fully supports the vast majority of the BBC's commercial operations as well as the technological innovations by which, among other means, the BBC historically has made a substantial contribution to public life. At the same time we welcome this opportunity to comment on a number of issues relevant to this inquiry which, although isolated, are of significant concern to certain of our members.

 

The BBC's offerings in educational markets

 

4. The PA takes the view that the BBC in pursuing its public purpose should not be seeking to intervene in established educational markets that can be supplied comprehensively by sustainable commercial models and where there is no evidence of market failure. We are particularly concerned about educational services delivered through the BBC website which seem hitherto to have evaded any scrutiny through Public Value Tests or Market Impact Assessments, yet quite clearly are encroaching directly on commercial markets funded by private sector investment.

 

5. This applies especially to the delivery of free material, developed using the licence fee, into sectors with an established commercial offer (such as Bitesize in the GCSE revision aids market). Nor should the BBC be leveraging a trusted brand established as a broadcaster in order to introduce a free offer into markets which have hitherto been supplied by private sector investment (such as the Learning Zone Broadband service).

 

6. Bitesize appears to have expanded significantly in terms of coverage, functionality and technical sophistication to the point where a service designed to complement TV programmes and for use at home is now principally an online service accessed widely during school hours and supported by teacher mediation. There is no visibility of the usage data, development plans or budget envisaged for this service, nor how it is intended to relate to the commercial offers already in this market, yet there is a clear requirement from BBC Trust that educational services delivered via bbc.co.uk should be distinctive. We are however unable easily to understand by what process distinctiveness and complementarity are to be determined, and this impacts negatively on potential investment decisions.

 

7. This kind of service expansion is of significant concern to the commercial players operating in this market, some of whom are focussed exclusively on this niche market and thus lack the capability to diversify readily in the face of unfair competition from the BBC. We are also uncomfortably aware of the capacity within the BBC to promote its own services across its multiple channels, which of course a private operator cannot match.

 

8. The PA also harbours concerns regarding the new Learning Zone Broadband service that delivers video clips tagged to relate directly to national curriculum learning outcomes as a free service for schools. Several companies already deliver commercial services of this nature, which will be undermined by a free service from the BBC, yet again there appears to have been no Public Value Test or impact assessment prior to launch, something which we feel to be further evidence of service expansion. The BBC describes this service as a 'facility' when in fact it is a 'utility'.

 

9. Taken together, these two clear examples of significant service expansion leave us unable to comprehend what triggers a public value test within the service licence regime.

 

10. We have participated actively in the long debates around initiatives to deliver BBC-branded curriculum material online and free at the point of use into what had hitherto been markets fully and adequately supplied with commercial material designed for the same purpose. These debates eventually led to the suspension of BBC Jam in March 2007, but the arguments would still apply other than in the special case of the indigenous language sector.

 

11. We accept that there is value in releasing legacy BBC Jam material developed for pupils learning through the medium of Welsh, Irish and Gaelic, for whom it is acknowledged that only limited online learning material is available commercially. Whilst it is not true to say that there is no commercial investment in this area, and there remains the potential for a negative impact on the commercial market for indigenous language material overall, given the very significant investment of public funds that has been made in these materials, the new incremental costs involved in the recent BBC management proposal to BBC Trust would appear justified in relation to the volume of material that could become available in a sector that probably cannot be supplied comprehensively by sustainable commercial models. We assume however that any BBC branding would be removed, and we further assume that there will be no fresh investment by the BBC in new material beyond the legacy BBC Jam content.

 

12. By not raising an objection to the release of indigenous language material, it should not be assumed that we would take the same view over proposals to release other legacy BBC Jam material through the same or a similar strategy. We have yet to hear how plans are progressing to release the Special Needs material, where the impact on commercially available material is potentially much greater, or the BBC Jam material developed for the core curriculum. We would hope that BBC management thinking inclines towards realising and recovering their investment in these materials through a licensing or partnership route rather than releasing them through a BBC platform, which would only revive the debates about the impact on a functioning commercial market. We remain open and willing to discuss such proposals should the opportunity arise.

 

Lonely Planet

 

13. BBC Worldwide bought a controlling stake in the travel guide publisher Lonely Planet in October 2007 for an undisclosed sum. This acquisition is of concern to the PA for a number of reasons.

 

14. There are four commercial criteria under which BBC Worldwide operates, and in accordance with which the purchase of Lonely Planet should have, in theory, been undertaken. Although BBC Worldwide is accountable to the BBC Trust, the process of governance by which BBC Worldwide's commercial decisions are scrutinised are unclear, and in the opinion of the PA this perceived lack of transparency in the governance process undermines the value of the existence of the commercial criteria.

 

15. The idea that BBC Worldwide's actions in purchasing Lonely Planet 'do not distort the market', to quote one of the commercial criteria to which BBC Worldwide is held accountable, is of particular concern to the PA as it establishes a potentially dangerous precedent. Lonely Planet's main competitors, including the Rough Guides which are published by Penguin, will undoubtedly struggle to compete against a distributor which is able to market its products across an enormous variety of platforms and outlets, assisted by the considerable weight of the BBC brand.

 

16. Whilst BBC Worldwide is self-funding and exists to provide supplementary funding for the BBC's public services, that the BBC's brand identity should be exploited to commercial advantage when breaking into such a competitive sector appears to be unfair when it results in such a competitive imbalance.

 

17. It also raises the question of whether this acquisition is consistent with another of the four commercial criteria, that BBC Worldwide's activities should 'fit with the BBC's public purposes'. The purchase of Lonely Planet distorts the position which the BBC occupies in public life and casts a shadow over the valuable role it fulfils as a public broadcaster. As the Chair of the Culture, Media and Sport Select Committee has already noted "Why should the BBC effectively nationalise a publisher? Where do its commercial activities stop?" (quoted in the Guardian, 10 March 2008).

 

18. This imbalance is further exacerbated by the BBC's frequent tendency not to acknowledge its commercial relationship with Lonely Planet. This is evident in its promotion of Lonely Planet titles in some of its travel programmes as well as the use of opinions and commentary from Lonely Planet experts, many of whom appear on these programmes and indirectly promote the titles without acknowledging that the brand is owned by BBC Worldwide.

 

19. For these reasons the PA feels that it would be valuable for BBC Worldwide to clarify the application of its commercial criteria and explain why its purchase of Lonely Planet does not contravene the criterion regarding market distortion for the reasons we have set out. We also believe it would be in the public interest for the BBC to be both transparent and explicit about its relationship with any products in which BBC Worldwide has a commercial stake.

 

20. We would also welcome more public reporting by the BBC Trust on BBC Worldwide activities, especially those instances where BBC Worldwide makes acquisitions in commercially competitive sectors.

 

BBC iPlayer / radio reading licence

 

21. In the past year the BBC has suggested that it is considering extending its radio reading licence to make all radio readings available without restriction on iPlayer and also commercially available by marketing radio readings as audio books. The publishing industry's concern with such a move is that it would represent a substantial departure on the part of the BBC away from the transient medium of broadcasting (currently most programmes which can be obtained through iPlayer are only available for a limited period, even if downloaded) into the domain of publishing.

 

22. While the BBC appears to view the prospect of these additional rights as another means of fulfilling its commitment to public broadcasting, the capacity to make any programme produced by the BBC available on a commercial basis would have severe ramifications for the publishing industry as this output would compete directly with the audio books and similar offerings which are put out by publishers in an already commercially competitive and crowded marketplace. In doing so the BBC would be again assisted unfairly by the weight of its own brand.

 

23. Whilst the publishing industry has already expressed its concern at the revised radio reading contract as it was initially drafted, this issue has yet to be resolved. One notable corollary of the BBC's actions if this were to go ahead would be that of ultimately restricting the range of audio material available to consumers, as the BBC may drive publishers out of a marketplace in which they currently offer a far more diverse range of audio material than the BBC could ever achieve by making its own programming commercially available.

 

October 2008