Access key 0 - Accessibility, Access key 2 - Jump to content, Access key 7 - Jump to navigation
Skip To Content | Skip To Navigation
 

Home > Media and Analysts > Speeches and Presentations > 2008 > Sept > RTS PSB


17|09|08

Public Service Broadcasting - Taking The Next Steps Forward

Speech To The Royal Television Society by Ed Richards, Chief Executive, Ofcom

It's very kind of you to have me back. I am pleased to see so many people here tonight from so many parts of our business - or, should I say, ‘show-business'?

We have had a busy time - Guardian leaks at one end of the summer and McTaggart lectures at the other.

When Steve Hewlett and I met up a couple of weeks ago, I said “Steve, what do you think the most important thing will be for me to talk about at the RTS?”

He said, without a trace of irony and with a completely straight face: “The contents of your PSB review document.”

“That will be the PSB review you shared with the readers of the Guardian will it?” I said.

Luckily that was a very early draft.

This business has a never ending capacity to surprise. I had one such just a few weeks ago.

In common with many others I was enjoying the pouring rain on my summer holiday in Wales. No landline and a very unreliable mobile service meant that I'd been out of all contact for a day or so.

It was a Saturday evening, relaxing with the family in front of the TV.

At that point the mobile unexpectedly vibrated into life. A text alert.

It said something like: ‘No place for popular TV under Ofcom says McTaggart lecturer'.

And another; ‘Ofcom against entertaining and popular TV says ITV chief'.

So my mobile is telling me that Ofcom is somehow banning entertaining, popular tv - and there I am sitting on the sofa watching the X Factor live on Saturday night prime time - on ITV!

‘The world's gone completely mad' I thought to myself.

‘It must be the wet August affecting people's mental stability'.

Now, I am used to Ofcom being criticised by those around broadcasting who believe we can and should turn the clock back twenty years to a mythical golden age.

I am used to Ofcom being harangued by those who insist that the market unaided will meet every reasonable need for every viewer in the land.

I am far less accustomed to being portrayed as somehow philosophically opposed to entertaining and popular tv.

But at least we now understand the root of ITV's current woes. It's not the recession or PSB obligations or CRR at all.

It's that they do in fact have a cupboard full of peak time entertainment hits, but a shadowy figure somewhere in the bowels of Ofcom is secretly controlling the schedule and putting World In Action on instead.

There was a bit of debate about our PSB purposes as well. And of course you can always revert to the safe haven of Lord Reith's ‘inform, educate and entertain' or indeed Greg Dyke's ‘great programmes'.

But the market will do quite a bit of that all by itself. So, in today's circumstances, those definitions of PSB are rather like the country bumpkin's answer to the motorist lost in the back of beyond.

The motorist said;

‘Excuse me my good man, do you know where I am?'

‘Well Zurr, you is in your car' replied the bumpkin.

It's a wholly accurate answer - but also wholly useless for getting you where you need to be. Hence our longer attempt.

Of course, Peter was having a bit of fun and I don't begrudge him that. It was an entertaining speech written with humour and eloquence.

I confess to having the odd chuckle myself when I got round to reading it.

But it was a real missed opportunity. More light entertainment than serious factual.

There are in fact real issues facing our industry; issues that need to be confronted, argued about and addressed.

These are some of the real issues that we face, and it is these questions that I would like to try and address tonight, working around four simple questions:

And finally,

How do we pay for it?

Is the current system broken?

Legend has it that when Caesar crossed the Rubicon there was no going back.

That is not a bad parallel for where our PSB system is today.

After a decade of change, steadily eroding the old system, it is hard to point to a precise moment where it broke and became unsustainable.

Several responses to our Phase One consultation said, in effect: ‘It isn't that different from last year or the year before. A few more efficiencies here and there and it can scrape through for a few more years. So can we stop worrying about alternatives please?”

That is understandable, but wrong. And it is certainly not in keeping with Parliament's instruction to Ofcom to “maintain and strengthen” public service broadcasting.

Since Phase One we have looked again at the analysis and re-run and updated the numbers.

ITV plc's financial position is worse now than six months ago. Partly that is cyclical. Despite programmes that have held or improved their share of commercial impacts, the economic down-turn is hitting nearly all ad-funded businesses hard. It is also structural, as we rapidly approach 90 per cent plus digital take-up and online advertising looks to steal growth from more traditional media.

Now, it is of course in ITV's interests to paint an apocalyptic scenario to the regulator. Indeed it is in their interests to mount a public campaign pleading their case, highlighting the ‘excessive burden' of regulatory obligations and muttering about the allegedly slow pace of regulatory reform.

And no one could possibly accuse them of not having done so.

But our job is not to be swayed by a bit of PR here and there, but to subject the numbers and projections to careful scrutiny and take an independent and objective view.

And that is what we have done.

There are some elements of what can be called ‘regulation' that affect ITV plc's bottom line, but which have no direct connection with the PSB Review. The CRR Remedy is a good example. We will address those separately, transparently, in the way we have set out.

But there are also things which affect the bottom line of the Channel 3 licensees and directly affect the costs and benefits of their PSB licence. We accept that, in aggregate, these are significant. We will set out detailed proposals next week.

Whatever our decision on these specific proposals, overall the costs of holding a PSB licence will outweigh the benefits for most Channel 3 licensees well before switchover is complete and in some cases imminently.

The uncertainties about Channel 4's financial prospects remain as great as when LEK did the numbers for our financial review 18 months ago. But the external situation is now worse. To break even Channel 4 would need to cut their investment in public service content year on year from here to 2012 to the detriment of the public service content that audiences tell us they value.

We have subjected these projections to close scrutiny and we believe that this annual deficit could amount to between £60 and £100m by 2012, excluding the costs of the Next on 4 vision. Channel 4 themselves still believe that we are being too optimistic.

In principle Channel 4 could simply spend its reserves to sustain short-term investment in public service content. But no sane business would run through its savings to fund unsustainable outgoings without some security of future income. So Channel 4 needs clarity about its future role and its funding. This is now a pressing priority.

So, is the system broken?

Well, it's crucial to note that the BBC looks in rude economic and creative health and that is an essential foundation stone.

But as things stand, ITV can credibly contemplate handing its licence back, the businesses in the nations face similar pressure and C4 must examine its cash reserves and make cuts to programme budgets to meet its fiduciary duty.

And this is before we consider the opportunity offered by digital media to meet public purposes in new ways - an opportunity that the current system does not permit, outside of the BBC.

So the answer is, for commercial PSB, yes.

If the system is broken, does it matter?

There are essentially three issues here.

Let me take these in turn.

First, what will disappear? There will be a growing deficit, compared to what viewers enjoy today - a deficit far too large to be written off as statistical rounding.

What viewers would lose out on, at the very least is, original drama that requires significant risk, innovative comedy, current affairs, investigative documentaries, broad ranging factual programmes, nations and regional news, and original UK programming for school-age children.

In other words, all those areas which, in today's schedules, are often already only marginally profitable or already unprofitable.

Would this matter to audiences?

Well, audiences express strong support for the four PSB purposes and for a diverse range of original British content. And audience figures for many programmes in these genres where the pressure is greatest are often many times what the most popular multichannel programme can achieve.

And our detailed research, which we will release next week, shows that audiences value plurality in public service provision and are willing to pay for it. Even allowing for substantial overstatement of ‘willingness to pay' in research, there is certainly a willingness to fund plurality at the relatively modest levels that we believe are needed.

And if the traditional commercial public service broadcasters would no longer produce this content, would the market provide?

The problem is not that these genres and programmes are simply “niche, worthy or dull” as some might depict the caricature. But that they require relatively large and riskier investment, which makes these genres a lot more challenging than others when seen as purely commercial prospects.

Market provision gives viewers access to a wider range of content than ever before. And it makes a significant contribution to content that meets public purposes, particularly in entertainment, sport, acquisitions and archive content and of course, in one outstanding but also exceptional case, news.

But there is little or no evidence, outside these broad areas, of the ‘ever-growing' provision by the market that some of its advocates proclaim.

Outside sport and movies - all of multi-channel produces 10 per cent of the total origination produced by the four free-to-air public service broadcasters; and less still if we exclude the PSB digital channels.

Of course new media also offers new forms of content that meet public purposes too. That is welcome - indeed we in Ofcom have championed the potential of new media to meet public purposes.

But in the near future, new media cannot yet match the reach and impact of television. And the types of public service content now under pressure on television do not suddenly become easier to produce or - crucially - to fund in new media.

So while there is a wonderful opportunity to enhance and to enrich the ways of meeting public service purposes through new media, it must be seen as a complement to the core challenge of funding and achieving reach and impact for PSB more generally.

So, does it matter that the system is broken?

Audiences tell us that the diversity, range and content of PSB matters a lot to them and that they don't want to lose it. Not only that, but they are willing to pay for it.

We can see from analysis of schedule economics that critical genres which provide this diversity and range will be in jeopardy.

And there is little evidence to support the idea that the market will step in to fill the gap.

So, does it matter?

The answer is yes.

How do we fix it?

This is primarily about being clear on the ends we have in sight and then identifying the best means to deliver those ends.

Let me say that it has been argued that Ofcom has elevated plurality from being a means to being an end in itself.

Not so.

Our focus has always been very clearly on public service purposes and the kind of public service content that meets those aims such that people want to watch it, so that it is relevant and engaging to as many as possible.

As a means of delivering this we have emphasised original British content and plurality of provision.

I think the argument for investment in UK content enjoys consensus. The same seems increasingly true of the argument for plurality as well.

But let's be clear why it matters.

Plurality guarantees a wider set of voices and perspectives across PSB and broadcasting more generally.

Plurality creates more competition within PSB, particularly in those areas which lack any significant market provision - the areas we are most concerned about.

And plurality delivers greater impact for PSB because it broadens the range of audiences that can be reached when compared to the alternative of a single organisation.

News, in its widest sense is probably the one area where plurality is unashamedly an end in itself. At the level of national and international news, the market may well deliver it. But the picture is different in the Nations and, to a degree, in the Regions.

Without a strong alternative voice to the BBC and there would be a real loss of plurality and a weakening of our interests as citizens. This is something of enormous concern to people who live outside London and in particular in the nations.

Does plurality inevitably mean a weakened BBC, as some argue?

Not if you protect the core funding and purposes of the BBC. As David Currie said in July, you do not strengthen PSB by weakening the BBC.

A close variant of this is that you maximise reach and global impact by giving any and all intervention going to the BBC.

But by this logic all the current indirect subsidies that commercial PSBs enjoy - ITV, 5 and Channel 4 - would be better employed by the BBC.

It doesn't sound right does it?

Diversity, plurality and competition for quality are likely to produce better results for the viewer than the additional value the BBC could create with say a marginal hundred million pounds on top of an existing £3 billion budget.

Finally, what of the case for the focus of intervention through institutions as opposed to a more open, competitive process?

The BBC offers five good arguments why funding defined institutions has advantages - thinking which very much echoes our own:

Audiences instinctively understand these advantages and recognise the importance of trust and familiarity that institutions bring.

Equally, funding solely through a limited number of institutions, tied by fairly specific primary legislation that takes years to change may be too inflexible for today's needs. We should consider the merits of alternatives as well.

What about competitive funding?

People always infer bureaucracy, second guessing and the legendary, or more accurately, mythical ‘arts council of the air' - imagining a group of well meaning geriatrics picking shows for the Saturday night schedule hunched over a cup of camomile tea.

But that wouldn't by very sensible would it?

We have thought about this and some options do seem entirely credible.

A small number of substantial, ongoing contracts in a limited range of areas, with certainty of funding over a medium to long-term horizon.

Clear objectives set in terms of public service need, reach and impact with target audiences not via pre-specified forms of content or distribution but with scope to innovate and deliver an impact in different ways.

It would probably not be suitable for some genres or types of programming. But for others, where clear objectives can be set in advance - news in the Nations for example - it offers the prospect of an alternative model which may provide a more flexible means to take advantage of new cross-media digital opportunities.

Competitive funding also provides tougher accountability and real discipline - because if you fail to deliver, then you lose the funding.

So, how should we fix the system?

By putting at the centre of our deliberations some simple, convenient truths.

That we start with the ends; clear public purposes delivered through content that is engaging, challenging, innovative, original - indeed entertaining if you prefer that word.

That we value and protect the BBC, but also place plurality of provision at the centre of our concerns as a means to sustain competition for quality, to enhance reach and impact and to promote diversity of voice.

And that we recognise the value of institutions but also the opportunity of competition within PSB as well as beyond it.

How do you pay for it?

If we have some guiding ideas about how to fix it - then how you pay for it is of course the most difficult question of all.

There was a useful Ofcom/LSE debate last week where further interesting ideas emerged. That reinforces our view that we should at this stage keep open options on how best a new system should be paid for - ultimately of course it is a question for Government in any case.

Tonight, I want to simply highlight the credible options:

I will also make two further points.

First, to reiterate that Ofcom would not favour any mechanism that reduced the BBC's core programme and services budget.

But secondly, that our research shows clearly that audiences are very open minded about what should happen to the licence fee switchover surplus from 2012 onwards. More details next week.

And to repeat, we keep an open mind about the strengths and weaknesses of all these various options. I am not giving any coded hints about preferences one way or another. As far as funding options are concerned, I might paraphrase Alan Greenspan; ‘If you have drawn any firm conclusions from what I have just said, then you have clearly misunderstood my remarks'.

The Ofcom Models

Our consultation next week will begin to try and draw all this together.

In Phase One we set out the four models as archetypes to stimulate debate. In the light of your responses and audience research we have refined this to three central options for the longer term that we will consult on from next week.

Perhaps a very brief word on some of the feedback we have received before I explain these three options.

It's fair to say that there was almost no support at all for the ‘BBC only' model.

Save, that is, for two private individuals who wrote in to support the ‘BBC only' option.

One began their letter by saying: “I don't have a television set, but ……”

As always, we have listened to all your views carefully and we see three central options:

A refined Evolution model

In this model the main commercial PSBs would retain obligations. ITV1 could become a network of nations-based licences, or a single UK licence, with obligations at network level for UK origination, UK and international news, but probably nothing else. Additional funding is likely to be required for nations and regions news.

Five's role would focus on UK origination, in particular UK children's programming, and news. Channel 4 would have an extended remit to innovate and provide distinctive public service content across platforms, with additional funding.

A refined BBC/Channel 4 model

If ITV1's and Five's incentives are no longer credibly aligned with public service purposes, and not for profit institutions are chosen as the primary way of securing those purposes, a BBC/Channel 4 model would offer advantages.

In this model the BBC and Channel 4 would be the main recipients of public funding and regulatory assets. Channel 3 and Channel 5's licences would be auctioned or the spectrum rights and other regulatory assets transferred directly to Channel 4 and the BBC to enhance their public service propositions.

Competition for new funding could be introduced for nations, regions and potentially local news too. Channel 3 licensees would have no ongoing public service benefits or obligations, but could compete for funding to provide nations and regions news, alongside others if they wished. Five would also lose public service status but could similarly bid.

A refined competitive funding model

If audiences turn rapidly to new platforms and forms of content, and we value competition for funding as a means of ensuring accountable and efficient use of public resources, a competitive funding model offers advantages that we should keep open.

In this model, additional funding would be opened up to a wider pool of providers. Channel 4 could retain its PSB status along with its existing regulatory assets, but be required to bid for any additional funds alongside other providers. Channel 3 licensees and Five could also bid for funding, but alongside others, if they wished to continue to play a role.

Each of the options has precedents, different strengths and weaknesses and governance implications. These will be set out in greater detail next week.

Conclusions

We are now coming to the time when people will need to begin to say on which side of a number of arguments they stand.

There are real choices to be made and I want to conclude with some clear pointers about where we believe the argument takes us.

First, the BBC should remain the cornerstone of public service content, and its core programme and services budget should be secure.

Second, audiences should have a choice of providers in most areas of public service content, which the market alone will not provide. To achieve this, replacement funding will be necessary by 2012.

Third, Channel 4 should have a significant public service role in the digital age, building on its current contribution as a publicly owned not for profit institution. It needs an economic model and funding mechanism to support this as a pressing priority.

Fourth, the provision of content for the nations - in particular dedicated news - remains an essential requirement for any future model.

Fifth, institutional and competitive funding could both play important, complementary roles in the future model for public service content; we should keep the option open for the latter.

Finally, between now and 2014, ITV1 and Five should retain important PSB roles but focused on UK origination and news and (for ITV1) the nations and regions. These are the audiences' priorities for meeting public service purposes.

But after 2014, in both cases, the arguments for retaining their public service benefits and obligations are more evenly balanced.

What you will see next week is a rigorous analysis of the issues based on your responses, evidence and further research. These will no doubt be too technocratic and detailed for some tastes but I am not going to apologise for that.

This business divides into two tribes.

There are some people who really love all the detail and argument around strategy, the definition of public purposes, market failures and funding mechanisms.

And there are others who just want a big programme budget and the freedom to use it as creatively as they can.

Funnily enough, you need both.

What we need is the creative ambition to create great programmes, but also the creative ambition to develop a system that delivers the budgets to make the great programming in the first place.

You can't want the first and duck the second.

The central elements of this debate are now beginning to crystallise and we face important judgements.

Get those judgements wrong and will there be a terminal cataclysm for our society?

Of course not.

It's just that our lives will be a bit narrower, a bit greyer, a bit duller as a result.

Get it right, and we will enjoy a little more colour, diversity and illumination in our culture, our economy and our society.

And for that, it's worth putting aside individual or corporate interests, and trying to agree what's in the interests of viewers and audiences as a whole.

I hope that our work contributes to that end.

Thank you.


Back to top Back to top


Further information

Help

Keep up-to-date