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Home > Media and Analysts > Speeches and Presentations > 2006 > Sep > RTS Speech


18|09|06

RTS Speech

Introduction

Thank you very much for inviting me to address you this evening and thank you for that introduction.

When I joined Ofcom as Deputy Chairman, I was told by Stephen Carter, our recently departed Chief Executive that the role I had to fulfil as Chairman of the Content Board was to “be the last governor of Hong Kong”.

Now, whether I am the precise analogue of Chris Patten is moot. But the direction of the analogy and the broad timescale - five to ten years - is spot on. I already oversee a world of content delivered in linear packaged form; and in pulled, on demand form and where the user is their own indie. Regulation is already “One country, two systems”.

Tonight I want to talk about the managed transition of content regulation and what life on the other side of that transition might look like.

I have spent a fair bit of my professional life in and around newspapers (and more recently the Broadband Stakeholders Group) which gives me some perspective on content aggregation and packaging in next door media to television. When I mentioned to colleagues in Ofcom that I was speaking this evening, one bright spark said “Well, as a title what about ‘from hot metal to hot wired’?”. I changed that a bit because otherwise that would have been an unfair and very outdated view of the press which is seeking – indeed having – to modernise at speed against the challenge of the internet. And television in relation to the press is like one of those multiplexed channels on Sky: TV is “press plus one year”.

The Market Context

At one end of the spectrum the net is dis-intermediating the classifieds market (or, in plain Ulster speak, it is eating the newspapers’ lunch). UK Internet advertising revenue, overtook radio revenue in 2004, is overtaking national newspaper revenue this year; and in The States, Google’s and Yahoo’s ad revenues are more than the prime time revenues of all the TV networks put together.

We are at a cusp. One lead medium is giving way to another. As broadcast television overtook radio, then newspapers, so net-delivered video content will overtake broadcast television. TV is still in its 50 year run as the leading medium; and even when overtaken, media co-exist, they do not disappear. But they co-exist within a new ecology that is shaped by whatever happens at that time to be the lead medium.

In broadcast television we have a plethora of intervention and regulation that has built up because of content and context. Over its fifty year run as the lead medium, the box has been central to family life. As Ashley Highfield reminded us recently in 1994 182 TV programmes drew audiences of more than 10 million. Last year that number was down to 12.

Stephen Carter observed when he gave his first address to the RTS three years ago that: “Television is important. But not as important as the people who work in it think it is”. Now one may be surprised at how little offence TV folk took at that remark. But not surprised at its prescience.

Cue for a few techno-geek facts.

The two most popular downloads from YouTube – ‘Lazy Sunday’ and ‘The Easter Bunny hates you’ have drawn audiences of 6½ million and 5 million respectively. And spawned numerous variants and parodies. Compare that with audiences of 5.2 million and 3.9 million for a couple of episodes of EastEnders last month: admittedly August figures are always light and Pauline Fowler had just said she was leaving. Granted too that the EastEnders viewing figures were for a one off showing, UK only. YouTube is globally accessible and streamed over time. Even so it sets a context.

Next fact and observation. In 2004 we had some independent projections done on TV ad revenues out to 2014. They showed a 2.3% compound average growth rate. 2005 was a bit ahead of that. But in 2006 TV advertising overall is likely to be 5% down. Indeed all advertising is down. That is a mixture of cyclical and structural. No one yet knows how much of each. That has a bearing on the direction of future content regulation.

Thirdly, broadband, whose take up is growing faster than digital TV despite the bumper summer that Curry’s have had. And within broadband, LLU has now passed the three quarters of a million mark growing at 30,000 homes a week. Why does that matter? Because LLU is the medium that delivers IPTV and other video-rich content on demand.

Fourthly, audiences, particularly young audiences. Ofcom’s annual bumper book of facts – The 2006 Communications Market Report – has some germane facts on this group. The internet not television plays a central role in their lives. 70% of 16-24 year old net users are on social networking websites. Nearly two in five contribute to the blogosphere. They watch an hour a day less television than the average viewer and that account is continuing to decline.

Now, that age group have always tended to be more flighty and, for the advertisers, hard to reach. TV broadcasters used to rely on the ‘grey curve’: as that cohort settled down and had families they had less disposable income, stayed in more and, so, watched more TV.

But many have become increasingly sceptical about whether the grey curve will kick in. Today’s cohort, with access to LLU and a huge range of non-broadcast content are accelerating the trend.

We are not yet at the tipping point but I predict that by 2012 when (hopefully) digital switch-over has happened successfully and the London Olympics are being staged that cohort will be parents with young children for both of whom broadcast television will have ceased to be the lead medium.

Content Regulation

Against that context, the regulation of content has got to be re-thought. We have a model which, with a bit of sensible updating in the 2003 Act has, in its essentials been around for somewhere between 20 and 40 years. It is looking increasingly dated.

To look at how it should evolve it is worth looking at why our legislators have developed the panoply of intervention and regulation we have today. What are the public policy objectives?

Let me take each in turn.

“Quality television” is a bit like the term “Public Service Broadcasting”. You know it when you see it. But it is hard to define. High production values are usually part of the mix. Breadth, probably. Telling me something I didn’t know but am better for knowing or helping me look at the world around me with new eyes – certainly. Reflecting a society to itself. All these are elements of ‘quality’ that, over the years, broadcast television has delivered.

We traditionally think of ‘quality’ in relation to the broadcast institutions that were the product of the collision of creativity with spectrum scarcity – the BBC, ITV, Channel 4 and latterly five. I’ll come to them in a moment. But, now that there is a television market, quality is increasingly something that the market is delivering.

Take breadth, the range of genres and programming available on the widest platforms give the lie to the old saying “200 channels and nothing to watch”. At least in the UK market.

Taking individual channels – Sky News for example – some easily stand comparison on quality with public service channels, as the number of RTS and BAFTA awards testifies.

And, in drama, there has been not a dumbing down but a braining up in terms of the richness and complexity of plot development compared with the so-called golden age of television. Compare ‘Dragnet’ with ‘The Sopranos’; ‘The Saint’ with ‘Spooks’ ; or ‘The Prisoner’, the acme of intellectually mystifying 1960s drama with ‘Lost’ (where all but the world’s brainiest were cerebrally challenged by the plot-line in Series 2).

So if I talk a bit about the institutions of broadcasting it is not to discount or dismiss the market which is delivering an ever increasing amount of “quality” as a public policy objective.

Indeed in open markets of real scale – America and, possibly, India, market-led television can and does deliver quality. HBO does ‘quality’ just as much as PBS. Hollywood and Bollywood are the prime examples of the market achieving the quality goal of reflecting a society to itself.

But in medium sized markets – among which I include the UK – or smaller markets there has traditionally been intervention, often involving direct or indirect public funding, because the market is too small for market-led companies to deliver sufficient investment in high production value originated content to satisfy the demand for ‘quality’.

In Britain that intervention amounts to about £2.5 billion through the licence fee and through the value of spectrum in the case of BBC television. And £400m indirectly through the value of spectrum access and other privileges available to ITV, Channel 4 and five.

There are corresponding obligations:

Each of these is a proxy for “quality” that can be measured and, to a degree, enforced by a content regulator. The BBC Trust in the case of the BBC; and Ofcom in respect of the commercial broadcasters. So how will what we have today change over the next 5-10 years?

Firstly the BBC. In essence overseen by the BBC Trust. As citizens we all hope the new model works and that what is – for all the brickbats it gets – an outstanding and at times truly wonderful creative institution continues to be ‘on song’. The BBC has a Charter until 2016 and the funding will be what it will be. The BBC itself recognises that it needs “competition for quality” to keep it on its toes. I will come to that in a moment.

Ofcom’s role in relation to the BBC and quality is simply a precautionary one: help the BBC Trust ensure that in entering new areas the BBC is not the elephant in the jungle that inadvertently squashes innovation and quality from the market. We are just starting our first Market Impact Assessment – on the BBC i-player. What I hope this will bring to the process is rigour, independence and transparency.

Secondly, ITV and five. By 2012 ITV and five may no longer be providing much public service content. The old implicit compact derived from monopoly or scarcity rent will have very largely gone.

Meantime we face a messy transition. Especially if addressed with a particular shareholder mindset – one that sees every public service obligation as a cost to be hollowed out not an opportunity to be built on.

Last time I looked, ITV plc was generating £460 million in operating profit and giving £300m back to shareholders. Its licence payments to the Treasury have gone down from over £200m in 2004 to £75m last year and £4m by switchover; because the factual and actual value of ITV1’s analogue licence is a shrinking asset; day by day.

But, given creative verve and nerve under a new CEO, and finding again a distinctive voice that makes audiences want to listen, ITV could become like the better end of the US commercial networks – a significant market-led contributor to quality. Their salvation is largely in their own hands rather than the regulator’s gift. The same is true of five; though – being smaller – it has the disadvantages of lack of shelf-space to overcome; but, being smaller, can be and has proven itself to be opportune when advantage presents itself.

So what about Channel 4? About Channel 4 I will say only two things, both related to our planned work.

Firstly, Ofcom has just started the Financial Review of Channel 4. It is sober, serious and will not be an industry free-for-all. Its purpose is straightforward; to answer this question: is the Channel 4 model sustainable over 5-10 years to deliver its psb remit?

Second point, Channel 4’s remit is to provide a wide variety of high quality and diverse programming that is innovative, creative, educational, distinctive in character, and appeals to culturally diverse audiences. In parallel with the Financial Review Ofcom is assessing Channel 4’s delivery of that remit:. We will need to understand how Channel 4 defines and implements its remit, and identify benchmarks against which to measure it in the future.

Which leaves the public service publisher - the PSP. We have between now and switchover to decide (a) whether we need one; (b) its core creative proposition; (c) how it’s funded; and (d) what sort of media institution. That’s a big agenda. We cannot wait until switchover to address it. The Government’s White Paper on the BBC asked Ofcom to do further work to flesh out the answers.

Some aspects of that debate are clear today. Firstly, absent a positive decision to have a PSP, some £300 million a year today spent on public service content will disappear from the system, as the old, analogue compact with the commercial PSBs winds out. More importantly, the number of institutions delivering public service content, could easily diminish to two - the BBC and C4; or just one - the BBC - if we are unlucky. Monopolies tend to be bad things; as the BBC itself acknowledges. Competition for quality benefits us all.

Secondly, any new institution needs to be rooted in the new media. It needs to capture the imaginations of the 16-24 cohort, who by simple arithmetic will be the 22-30 something cohort by switchover.

Thirdly, the PSP probably needs to be a new institution. For exactly the same reasons Jeremy Isaacs deployed 25 years ago for a separate Channel 4; not, as many then argued, for a new division within ITV. Few here tonight would regret going with Jeremy Isaacs on that one! Existing institutions can renew and develop. What they cannot do is throw off completely their persona and DNA to be something new and radical. In the new media world that is what public service content will need.

Fourthly, funding. There’s the Woody Allen line about Hollywood film-making: ‘I have got an idea. I am looking for some money to turn it into a concept’.

“How much?” is an open question. Less than £300 million a year, probably: new media content costs a lot less to make than traditional broadcast content. But enough to provide ‘quality’ to attract users; to distinguish it from user-generated content and commercially-generated viral marketing. And enough to keep the BBC and Channel 4 on their toes.

Fifth, creative concept. The hardest. In 1980, Jeremy Isaacs didn’t have an opening night schedule for Channel 4. But the idea of doing: ‘innovation’; ‘reaching audiences the others weren’t’; and ‘good things that the other broadcasters didn’t’ – the central creative concept - has, ever since, been Channel 4’s DNA. The PSP needs a creative concept to the same level. We have asked a group of new media creatives to work this up. Anthony Lilley is their spokesman. They have some interesting ideas. These got their first airing at Edinburgh last month.

No, not the television festival but the parallel interactive media festival. Appropriate.
Anthony is here tonight. On Ofcom’s table. If he doesn’t have to rush off, some of you can nobble him after the end of tonight’s formal proceedings.
That, in the trade, I believe, is called ‘A Teaser’.

So much for the first content regulation objective- ‘quality’.

I will move briskly over the second: ‘plurality’. This is an issue about which politicians and legislators get very excited. Most democratic polities have media ownership and news impartiality rules. And the deal is: the regulator advises, the elected politicians decide. At Ofcom, we are comfortable with that. In the UK we have relaxed ownership rules. We also have a strong BBC – a necessary counterbalance. Something I would urge some of the more vociferous critics of the BBC to reflect upon.

Impartiality in news, is the subject for a whole separate debate. Again new media turn the terms of debate. But I do not propose to enter that tonight.

So let me turn to the third public policy objective for content regulation: Standards.
What of the USA model? Oases of standards: the Free-to Air Networks where the Janet Jackson Wardrobe malfunction, that in the UK would cause an on air apology and probably a ‘Case Resolved’ from the regulator; in the USA was FCC melt-down and a half million dollar fine. But outside those ‘oases of standards’ the First Amendment Rules. Any shock-jock can say anything, regardless. And that is before you get to the Internet, which the USA regards as the Wild West.
I am not sure that model is right for us.

Europe has approached the standards debate through the draft AVMS Directive and the concept of platform neutrality: that is, audio-visual content gets regulated in broadly the same way, regardless of delivery platform. This is seductive but simplistic. Standards regulation needs to reflect both content and context. In this case, the degree of control the viewer has about what is watched; and the degree to which the aggregator can control the content that is aggregated. This is not just a matter of principles, it’s also about practicalities. A channel packager is licensed and can, therefore, be regulated. But what about someone who has no known domicile or even name? Many who upload to the Blogosphere or to YouTube fall into this category. To pretend that they can be state regulated raises consumer and citizen expectations that simply cannot- in a free society, at least- hope to be met.

Tonight, I would like to ask what an alternative approach might look like; one which aims to match the extent and the focus of statutory regulation to the risks audiences face and the practical contribution that the regulator can make.

At one end of the spectrum there are open platforms like the internet. As I have just mentioned, statutory regulation could not deliver on a promise of consumer protection in relation to internet-delivered content. The internet is a global medium, and a national regulator cannot manage a global content market, particularly one where there is no institution to be regulated – no channel, and no platform operator in overall control, either of the content or search and navigation tools audiences use to find what they want.

This does not mean that audiences are on their own; there are already many factors contributing to consumer protection online, from the application of general law through to initiatives from individual internet players and collective industry bodies like the Internet Watch Foundation. There are walled gardens of content, content labelling systems, filtering and parental control tools, and protected search engines (like Google’s SafeSearch) There is, true, some Wild West activity on the Internet. But that needs strong general law against whatever individual societies deem utterly unacceptable, where enforcement is ultimately through the police and the Courts, aided by bodies such as the Internet Watch Foundation, and supported by ISPs ready to take down illegal content. It does need media literacy and personal and parental involvement of a high order. But a degree of individual responsibility is an appropriate price to pay for freedom, including the freedom to create and to innovate on the internet.

At the other end of the spectrum there is free-to-air broadcast television. It comes, unbidden, to the box in the corner of the room. Viewer control is limited: we cannot be sure that audiences have access to programme information or to tools like PIN protection which might enable them to manage what is viewed. So, for free-to air broadcast TV an evolution of the current standards model is probably right, for now.

Between these two extremes, the world of digital distribution has created a middle ground: It looks like broadcast telly, delivered differently, But it has a common characteristic: it is delivered on ‘boundaried’ platforms, where a single operator has oversight of the content that is offered and control of the EPG - the means through which audiences access that content. On these platforms, the consumer has actively chosen to subscribe, to take the channel or pay-per-view or video on demand content

Whether it be Home Choice, ntl, Orange, or BT, the platform operator can control the content that is available, and ensure audiences have the tools and information to manage what they watch, Some operators have got ahead of the game and made a consumer virtue of ordering their navigation and PIN-protection to be family-friendly. Ofcom applauds that approach. It is market-led and self-regulatory.

All of those companies are conscious of brand-protection and understand the importance of effective navigation. ATVOD and the IMCB, the bodies which oversee on-demand video providers in the UK, are cited as shining exemplars in the European debates. But the AVMS Directive would, for arcane Brussels legal reasons, saw them off at the knees. Something we must avoid.

We are building a typically British, pragmatic solution. We need to nurture it through the Brussels process. A limited extension to the scope of the existing directive, but only to those things, like video on demand, which look and feel like a development of traditional TV, and have attendant consumer expectations. No extension of top-down regulation to blogs and user-generated content, no attempt to construct the same regulatory compact with teenagers in bedrooms as we have with ITV or Discovery. And a solution which works with the grain of those existing self-regulatory schemes, not against them. That may require some form of accreditation of these schemes. If so, it should be light-touch, and should leave responsibility where it properly lies for developing the rules – with the industry itself, whilst allowing enforcement against cowboys.

This allows the development of a regulatory middle ground: where the basis of standards regulation is the audience, armed with programme information and tools to control access to content, like PIN-protection, along with Media literacy – in the form of the skills required to use these services.

We are already there with VoD services. The prize, long-term, in my view is that this system could become the basis for self- regulation of all the broadcast channels that are not free-to-air.

As a first step, we have to win the debate in Brussels. That started on the wrong footing. But every sign is that HM Government, with Ofcom’s strong support, is on the case. If we can win there, we can open up the domestic debate. And perhaps by the time my Content Board successor comes to speak to you, as the very last Governor of Hong Kong, it is as the champion of a working self-regulatory system and the address is to the ‘Royal Content Society’.

Thank You


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