Examination of Witnesses (Questions 505
TUESDAY 13 FEBRUARY 2001
J F SINCLAIR, MR
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.
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
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 ownershipfor 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privileges would you wish to see withdrawn from the BBC?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
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.
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
(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?
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
(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 ownershipand at the end of this
morning we are going to have SMGis 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
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
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.
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 Internetare 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.