Joint Committee on The Draft Communications Bill Minutes of Evidence

Examination of Witnesses (Questions 640-659)



  640. You say "by and large": can you give us a more detailed breakdown in writing so that we have some clear evidence on that?
  (Mr Gallagher) We would be happy to do that. In areas such as news and sports, even with the handicap of many programmes being excluded, Sky has a majority of European content under the official definitions. Take the channel Sky One: that does not have an absolute majority of European content on it, but last year we provided 50 per cent of that channel's budget for original first-run UK content. That is a very respectable figure for a channel that has less than 2 per cent of all UK viewing.[6]

  (Mr Ball) The exclusion of sport and news is a bit of a nonsense. We probably make about 33,000 hours of sports programming per year. Twelve years ago, I doubt there was 500 hours. There is lots of work for various production companies that employ people and so on and so forth, yet none of that counts towards the quotas, whereas you can put up a pretty cheap soap opera for the afternoon and that would count.

Lord McNally

  641. In your memorandum you say, "a clear analysis and understanding of the role, purpose and scope of public service broadcasting in the wider communications landscape is still needed". Quite a lot of people think that this Bill gives that definition. What more do you want to know about public service broadcasting?
  (Mr Ball) I do not even know what it is.

  642. Not at all?
  (Mr Ball) Well, I have some idea. I think public service broadcasting is related to the BBC; it is there to address a failure in the market, where certain programmes may not get made. If you look at the BBC's television schedules, whether the content they produce—or, more importantly, the content they buy in—is really serving the public, I think is pretty hard to argue. Whether the BBC is bidding several million dollars to buy a heavyweight fight coming in the middle of the night is a public service; or bidding up content that would otherwise find its way on to other free-to-air outlets, like a Friday night movie—it is not a question about content going to pay television, because it would possibly still go to other free-to-airs—so that is not really public service. I think there is some confusion about that.

  643. Do you think if we left it to the laws of competition and the market, we would have, to use the "in" term, a broadcasting ecology that would satisfy our needs?
  (Mr Ball) I do not know if you would. What needs to be done—and nobody is going to be brave enough to do it—is a bottom-up review of what we are getting for our money in public service broadcasting. The BBC has £2.4 billion a year coming in and they spend a lot of it very well and there is some terrific content, but is that really a good use of those funds, and do you need to collect that tax? There should be a bottom-up review. I have not seen anyone with the courage to put their head above the parapet and say let's do that. It is probably very difficult to do, unless you have a pretty strong lobby next to the BBC before ever beginning to approach it. In fact, the BBC is very deft at keeping itself out of the firing line.

  644. Part of the exercise is to retain for this country certain cultural, democratic values, as well as a certain quality of our television. Do you think that Sky has contributed to that?
  (Mr Ball) I am not putting Sky up as a substitute to public service broadcasting at all—and that was not the question. I agree that there are a number of things that one would expect public service broadcasting to bring. My point is, is it funded in a way that is correct? I think we should re-examine if we are getting enough bang for our pound. Are they doing more than they need to do?

  645. You almost said somewhere, but nobody can find it for me, that Mr Rupert Murdoch defined public service broadcasting as a euphemism for market failure. That is a pretty narrow definition, even if it was not his. Have you used that term?
  (Mr Ball) No, I have not seen that. I was thinking in terms of, for example, of channels, before a secretary of state agrees to the BBC launching a new channel in a new area—what is the market failure? Is it necessary from the public service point of view to create a channel in an area that is already being served by the free market?

  646. You objected pretty fiercely to BBC 24-hour news. Would you not see it as logical, in terms of choice, that the BBC should have a 24-hour news channel?
  (Mr Ball) I think it is very difficult on the news. Firstly, the ship has sailed now and that channel is well established. The BBC have huge news-covering resources. Whether it was right for them to move into that—the issue as a commercial broadcaster was that they distorted the market, and it cost the company I run several million pounds because we could no longer compete against a channel that was just given away. I think that news is a bit of a special case. As I say, it is two or three years old. The arts, going to certain segments of drama, sport—are these things already served by the market—there, the BBC has a more difficult argument to make.

  647. Have you any fear that when OFCOM is established we will have a kind of "whinge of the week" against the BBC from yourselves or other commercials, that the whole purpose will be to chip away, chip away, chip away? You mentioned drama and the arts. When you ask what bangs people get for their buck, that is exactly why the BBC has immense support in this country: people do think that those are the very areas—news, current affairs, arts, indeed sport—where they are getting value for their money.
  (Mr Ball) I do not know if everybody thinks that, if you were to put it[7] to the vote. I am not sure you would necessarily get a majority in favour of that.

Lord Crickhowell

  648. I have a good deal of sympathy, as a former chairman of HTV and a public service broadcaster, and I understand what you are saying. Incidentally, there is one channel that I can now receive in the remote valley in Wales in which I live because I do it over your Sky digital system, which I could not do before, and I am grateful. You talk about wanting a clear analysis and understanding of the role and so on, but what we are concerned with is an actual Bill. An attempt has now been made in Clause 181 to define pretty tightly what is meant by "public service broadcasting". I said I have a certain sympathy with you because I questioned the Chairman of the BBC the other night on this subject, and I tried to get him to tell me what percentage of his output he thought was public service broadcasting. I think he tried to tell me that really everything they produced was public service broadcasting, including all their entertainment. As a former Channel 3 producer, I am not sure that I agree with that. However, I come back to the Bill, and in particular the definition in Clause 181(5) which tries to pin it down, because we as a committee are concerned with the Bill and not a general commentary. Are you, on the whole, happy with the definition in the Bill, or are you looking for changes in the Bill that will benefit the public as a whole and tighten up what is meant by "public service broadcasting"?
  (Mr Ball) We have made our choice with the BBC and we have a somewhat unique television market here in Britain. If you look at other public service broadcasters, for example the ABC in Australia or PBS in the US, they are really about market failure, and they are very niche. They each have very good news services and people turn to them and trust them for that sort of content, but they do not go out and make huge costume dramas or acquire expensive sports rights. The area where I am concerned about public service broadcasting and the BBC is deciding how the BBC expands, going forward. Let us say that nothing is going to change with the BBC now and that terrestrial channels will remain, requiring the kind of content that they currently schedule; but going forward, putting new channels out—and there is the BBC news example—and moving into new areas is something that OFCOM should have a say on. They should look at that as it relates to the rest of the television market—and that is missing.

  649. Are you making the point that it is because of the competitive nature of its offering as far as other broadcasters are concerned?
  (Mr Ball) It is, yes. For example, BBC4, the arts-based television channel, is a market that is already served, and one will have to see how the commercial channels in that area are able to compete against something that is effectively a free-to-air channel with similar content. My point is that instead of leaving it is up to the Secretary of State, it should be part of what OFCOM considers in terms of the whole competitive landscape, where the BBC should go next. I accept where it has got to now, and I am not arguing that we should go back and change things; but it is how the market develops.

  650. Would you be concerned if the BBC, as it seems to be doing at present, was to put all its arts programmes into BBC 4 and there was a dumbing-down on other channels in competition; or are there other aspects?
  (Mr Ball) It goes back to your point and the question you asked the Chairman of the BBC: "What is public service broadcasting, and how much of your schedule is it?" I have looked at the notes on that, and I do not think you got an answer.

  651. Will you come back? I have finished with that, because I keep having to remind witnesses and ourselves that we are dealing with not general views, but a Bill. If you have a view that the Bill in any way needs tightening or amendment, that is what we would like to hear.

Lord McNally

  652. One of the tasks charged to the BBC as the premier public service broadcaster, is to benchmark and set standards. Therefore, it is likely to go into new areas. It seems to me that in some ways you are trying to tie down Gulliver; that you want to fossilise the BBC; and that is the death knell for any organisation. I just do not understand why such a successful organisation as Sky does not get on with being competitive in the part of the competitive market that is set out for it.
  (Mr Ball) I think we do get on with being competitive and trying to turn as much value as we can for our shareholders; but the BBC does not distort the market.

  Lord McNally: That is the will of Parliament. You quoted Australia and Canada: those are roads that have been considered many times over the last fifty years, and Parliament has decided that we do not want a ghettoised public service broadcaster; we want one that is contemporary and innovative, which sets benchmarks. That will distort the market.


  653. Perhaps I can ask the question in another way.
  (Mr Ball) I would like to respond to that.

  654. Let me ask this, because I think this is what you are saying. We have got what we have got. I do not think you are suggesting that if the BBC's funding was significantly reduced, either we would have a better ecology of broadcasting in terms of the individual viewer, or a better service for citizens in terms of the information they receive. Therefore, I am suggesting that the market, in its own odd way—and you are quite right to say it is not a free market—has resulted in something that is highly defensible and relatively successful.
  (Mr Ball) The BBC is uniquely British, yes, and we have a unique television market because of it. There are several points. Firstly, I do not agree that the ABC in Australia is ghettoised. It does what it says on the tin; it is a public service broadcaster and provides news and arts programming that would not get made by the market. We have chosen to have something different here, but it is very different and let us not kid ourselves. It is a ferociously competitive organisation. It does not affect what Sky does hugely, but certainly it supports the free-to-air television market in this country and it is crazy to say it does not. Is that a good use of a tax being raised? I do not know. My earlier point was that if you went back from ground up, to work out what kind of public service broadcaster we should have in this country, I do not think you would have the BBC the way it is now. You would have something that would cost a lot less.

Lord Pilkington of Oxenford

  655. I have some sympathy with your view, but I am a little puzzled that every time I open the papers, that you and the BBC are going to enter into an alliance to take ITV with you both. Is this not a monopoly? You are talking about free competition and taxpayers' money, and the two big men in the market are tying it up. Is that not a contradiction of every word you have just uttered to us?
  (Mr Ball) I do not think so. I was asked that earlier this morning. We have a small part to play in a bid that the BBC and Crown Castle are making—I am trying to think of a term that a starlet would use, but we are not necessarily in an exclusive relationship.

  656. An ongoing partnership, dare I say?

Nick Harvey

  657. You have argued that all controls on media ownership should be lifted and that Competition Act powers would suffice to ensure plurality. Others have argued that a loosening of media ownership controls increases potential for anti-competitive practices, for example perhaps shared buying between pay channels and free-to-air channels, and that those would require specific controls. Do you accept that consolidation of ownership within television has the potential to make the market for advertising, programming and rights less competitive rather than more competitive?
  (Mr Ball) I think on the advertising side that would be decided by the competition authorities, if there was too much market power, if for example ITV consolidated and there was too much power in advertising. On the buying of rights, I read with interest the comments that were made about that. The market for free and pay rights, which is what we are talking about, if Sky owned the terrestrial broadcaster—would we have some special market power because we could buy those rights for both windows? Anyone who knows anything about buying rights knows that they always get full value, whether they sell them individually, pay and free, or sell them collectively. If you look at the way the market works now, I can give you several examples. ITV has a deal with MGM for the Bond movies. They have all rights—they have pay and they have free TV, but they choose to keep them for free only. Similarly with Champions' League—they bought pay and free rights. Channel 4 has based its pay channel, E4, on the idea that they can buy both windows, and they do that at the moment; they buy windows for Hollywood product both for pay and free. Should the two things be separated? I do not think it is a show-stopper. If we owned distribution free-to-air and, as we do now, pay, would that be a big problem for us? No. I think the market decides. The right seller will always get full value whether he separates those rights or not. Currently, the market is such that you can buy them, and ITV and Channel 4 buy rights like that now.
  (Ms Cassells) Can I add: the Competition Commission looked at the Vivendi investment in Sky, and the European Commission looked at Sky's investment in Kirsch, looking at this particular issue, and concluded that there was no problem for joint bidding for particular rights.

Brian White

  658. One of the things that concerns me about the way that OFCOM will operate is that there are at the moment about a million people in this country who are deaf, and BT are just withdrawing special services for the deaf. Oftel have said they are not prepared to look at the issue because they are preparing for OFCOM and it is a minor issue. You promised about 18 months ago that within a year or so, 80 per cent of Sky News would be sub-titled, and you targeted 50 per cent by the end of this year. Will there not be a danger with OFCOM that you will be talking about the big issues about competition with the BBC, and that the issues that affect a minority group will either get ignored by OFCOM, or you will be able to play OFCOM off against it and not provide those kind of public service broadcasting standards?
  (Mr Ball) I do not agree. On sub-titling, there is no requirement for us to do that on Sky News, but we do volunteer to do just that. We are on what we said we would do, and in the time we said we would do it.

  659. I thought you said you would do it within a year or so.
  (Mr Ball) I think we said in 18 months we would have 75 per cent.
  (Mr Gallagher) It is 50 per cent this year and 80 per cent next year. In total, Sky is sub-titling 45,000 hours a year in programming on an entirely voluntary basis. We started this several years ago. Sky One, for instance, has 60 per cent of the channel sub-titled. Again, that is a channel that has only 1.7 per cent of total UK audience.

6   Note by witness: And none of the privileges or subsidies of other broadcasters. Back

7   Note by witness: ie the licence fee. Back

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