Press Office

Wednesday 24 Sep 2014

Speeches – 2009

Mark Thompson

Mark Thompson

BBC Director-General

Keynote speech given at Changing Media Summit, Park Plaza Riverbank, London

Check against delivery

Every established content player around the world faces two challenges. First the challenge of confronting the new technologies, the new delivery systems, above all the new consumer behaviours that go with the digital moment. Second the challenge of finding a business model that stands a chance of working in this new environment.

Without a viable business model the danger is that, no matter how bold you are in embracing digital, your ability to invest in content creation itself will be undermined.

You may end up with splendid digital pipes but have little or nothing to pump through them.

These challenges felt daunting during the boom years. Today – with many commercial media companies convinced that the cliff face of revenue decline they're facing right now can only accelerate the adverse structural change in media markets they feared anyway – they can seem insurmountable.

I said that every established content player faces these challenges. Many in commercial media would say that, in the UK at least, there's one big exception: the BBC.

The licence-fee, they argue, gives the BBC the financial security to sail serenely through any downturn. And it allows the BBC to make an each-way bet on the future: to continue to fund its traditional linear services and direct investment in the services of the future – the web, iPlayer, mobile and so on.

Even in a time of plenty, this adds up to a formidable set of advantages. In what is certainly a deep, and could be a prolonged media recession, to commercial rivals who feel they are fighting for their lives, it can seem disproportionate and unfair. Wouldn't it better, some argue, if the BBC's revenues were brought down alongside everyone else's? If the BBC's ability to invest in the digital future were as constrained in this period as everyone else's is?

My initial answer to this line of argument is yes. Yes: the licence fee is a unique privilege. And yes: receiving it confers unique advantages, but also unique responsibilities which both the BBC Trust and the wider industry should hold us to.

But the licence fee is an integral and critical element in this country's investment in the creative industries and specifically in content creation. More than a third of the licence fee goes straight out of the BBC each year in external contracts with independent producers and other suppliers. Most of what remains pays directly for creative talent and creative content from Comic Relief to Newsnight.

The idea that what this country's creative industries need now is a further reduction in investment is not one that makes much sense to me. And yet the broader challenge – is the BBC going to stand by, secure in its own funding, while much of the rest of British media faces the abyss, or is the BBC going to take tangible, measurable steps to partner, to support, to share some of its advantages with other broadcasters and media players? – that broader challenge is a fair one and one that the BBC must answer.

Mending the roof

But first: where does the BBC itself stand at this difficult, perhaps even rather frightening point in the economic cycle? Did we – to borrow a political phrase – mend the roof while the sun was shining?

We started work on the roof more than four-and-a-half years ago. In that time we have been engaged in a massive and wrenching process of change in the BBC. 7,200 jobs have gone so far and there are still 1,200 more to go – a bigger programme of restructuring and redundancy than has been announced by any other broadcaster, public service or otherwise. The BBC is one part of the public sector that has not been, and will not be immune to job losses.

We knew that we could only find the resources to maintain the quality of existing services and pay for developments like iPlayer if we dug deep for productivity gains and other efficiencies.

And we have. Since 2005 we have released a cumulative total of £524m in efficiencies which have been ploughed back into programmes, into new digital services and into the massive task of digital switchover where the BBC is not just meeting its own costs, but having to meet the costs of the Government's targeted help scheme and the industry-wide marketing costs.

But the efficiency story is by no means complete. We can only meet our obligations over the coming years by achieving further very substantial savings. In TV, for instance, we are targeting a 5% net reduction in programme prices each year for the next five years – a cumulative saving of more than 20%. So across the BBC we will be making savings of £1.9bn in this Licence Fee period.

Later this morning I'm discussing the BBC's budget for the next three years with the BBC Trust. Even given those savings, the impact of the likely falling-away of household growth, the collapse of the commercial property market and pressure on our commercial revenues mean that without further significant reduction in our spending plans we would exceed our statutory borrowing limit within two years.

So we will be proposing a budget which includes a further £400m of painful cuts and reductions in expenditure from freezing senior manager pay and withdrawing discretionary bonuses to the amount we pay top talent.

I say this not to claim that BBC faces the same scale of financial challenge as some of our commercial colleagues. We don't. But the picture of a BBC swimming with cash and people and able to make additional savings at the drop of a hat is simply out of date.

We will protect programmes and services over the next few difficult years. As far as we can, we will also protect jobs and our investment in independent production and in the digital future. We can only do those things because we began the difficult process of reform nearly five years ago. And even so the economics are tight.

A counter-cyclical force

But I want to argue that the fact that the BBC can go on investing in content and in new technology during a media recession is a strength rather than a weakness in our system.

It means, as I've said, that we can continue to support the content sector when the ability of other broadcasters to do so is diminished. It also means that we can also continue to develop technologies and services which can and will be used not just by the BBC but by other broadcasters and media players.

Yesterday I was at the BBC's Research and Development laboratories at Kingswood Warren. I met the teams working on Canvas – our plan, together with ITV and BT, to develop a simple, open standard for internet TV to the main sets in the house so that audiences can enjoy services like iPlayer, ITV player and YouTube in their living-rooms as well as in front of the PC. I saw critical work on the new standard for High Definition on DTT and cutting-edge work on 3D and several other new broadcast and IP technologies.

What's interesting is the presumption of all the scientists and engineers I talked to, is that their work would be shared with the rest of the industry in this country and in many cases across Europe. That's not a new idea at Kingswood, by the way – we shared groundbreaking work on PAL, on NICAM stereo, on Freeview and Freesat, on the web.

A few months ago, we announced our willingness to share not just the technology but the brand and the look and feel of the iPlayer. Although the BBC may well be the first user of these new ideas and technologies, we do not do the work at Kingswood and across the BBC to secure significant proprietary advantage. We do it in the interests of the whole industry.

This is particularly important in a recession. It's important to other broadcasters because it gives them a chance to seize the digital initiative at a time when their own ability to invest in technology is constrained. But it's important to UK PLC too.

Recession or not – indeed perhaps, as I've said, actually accelerated by the recession – the process of digital transformation of media will continue and there will be winners and losers, not just within individual industries but at the level of countries.

Stephen Carter's emerging vision for a digital Britain is not just about better connectivity and better services for the British public, but about greater competitiveness for this country and greater global success for our creative industries. But the time to invest in that vision is now – that is certainly the view of several other countries who have identified exactly the same opportunity.

Of course the BBC and the licence fee aren't a complete answer to the challenges laid out in Digital Britain. The overwhelming majority of the licence fee must still go to fund the central mission of delivering excellent content to the British public.

But we can, and I hope will, play our part – and because of the stability and certainty of licence fee funding can go on playing that part even in the depths of a recession.

Market impact – and market failure

You can accept all that, of course, and still worry about the BBC's market impact in relation to the rest of British media. Investment in the sector is all fine and good, but if the aggregate effect is to foreclose markets or to impair the profitability of commercial players, the net effect could still be negative.

That is why the BBC – and especially the BBC Trust – should take the issue of market impact so seriously. You can already see, not least because all of the evidence and decision-making is available to be examined and scrutinised, how the Trust is factoring market impact into its judgement calls about both existing and new BBC services. And you will have noticed how, pretty much for the first time in its history, some of the BBC's proposals for new ventures are being turned down or substantially modified.

That can be pretty frustrating for all of us who work on the operational side of the BBC. We don't propose new services lightly – each of them is intended to meet specific audience needs or opportunities and each of them is developed with creative energy and commitment.

But we have to accept that the Trust, assisted in its market impact assessment by Ofcom, is better placed to be objective and to weigh the merits of any given proposal against the rest of the market.

This role, this determination to identify and take account of market impact in advance of decisions on BBC services is even more important when markets are depressed and when the business models both of incumbents and of potential commercial new entrants are more marginal.

At the same time, market impact is not the only factor which the Trust has to consider.

Any modern justification for the public service BBC and for the licence fee must rest on the idea of market failure, whether broadly or narrowly defined. The belief that the BBC can add choice or quality, or defend range, or set standards in ways which one could not be confident that the commercial market would do itself if the BBC did not exist.

Now from Alan Peacock in the late Eighties onwards, people have argued that the whole case for market failure would vaporise in a digital age. The plethora of choice, the collapse of the barriers to entry to media, would enable every kind of public demand for journalism, culture, entertainment to be satisfied.

Well, it doesn't look like that at the moment.

Digital is a great democratising, liberating force. The public around the world can make and distribute their own content. There has never been a better moment for plurality and the global exchange of opinions than today.

But crucially, when we turn to high quality, professional media we can see market failure either happening or threatening. Local and regional news. International newsgathering. Investment in indigenous television drama, comedy and serious documentary. The business model that for well over a century has supported high-quality newspapers.

People sometimes look at current media market failure in the UK and say – well, it's all the fault of the BBC. If the BBC and the licence fee didn't exist, commercial media markets would flourish. But these are global phenomena, and there's just as visible in countries like the US where there is no powerful public broadcaster as they are in Britain.

And for all the reasons I've mentioned, if it's directed in the right way, the BBC's revenue and its technology and know-how could make a significant difference to the way these new forms of market failure play out.

The challenge is how to address market failure without the kind of adverse market impact that could actually make things worse or leave the BBC in given media markets with an effective monopoly.

The partnership agenda

Our emerging answer to that challenge is the idea of partnership, of redefining the relationship between the BBC and the rest of UK media – which historically has been based on rivalry and competition – so that it focuses much more on collaboration and on the sharing of the benefits which the licence fee confers.

It's not a new idea for the BBC and most of our high-profile projects over the past five years – from Freeview and Freesat to Salford – have been conceived with partnership in mind from day one. But last year, the partnership agenda moved into a new phase.

In December we announced a broad range of ideas for potential partnerships and since then we've made considerable progress. The IPTV JV – Project Canvas – is well under way. We're talking to all the PSBs and others about the practicalities of sharing the iPlayer. We've signed an MOU with ITV after detailed joint work bottoming-out how we can pool regional news resources and rushes to help the sustainability of regional news on ITV. We began talks with Channel 4 on collaboration and partnership with BBC Worldwide last summer. In recent weeks we've have made real progress. Although we are not there yet, the potential for an exciting new partnership between us is there, one that would be beneficial to both parties and which could play a significant part in addressing Channel 4's funding issues.

Are there questions that have to be addressed about the competitive impact of these proposed partnerships? Of course there are. The BBC is a publicly-funded body and any use of its resources must be considered very carefully from a competition perspective. I would not jump to the conclusions, however, that these are questions that cannot be addressed.

Do the partnership proposals go far enough? Well, the fact that we're hearing other players say that they don't emphasises to me that this has become a real conversation. When we launched the initial proposals last December, I said I believed that they could be game-changing. The progress we've made since then has confirmed me in that view. I believe that the partnership idea is now at the centre of the debate about we create a sustainable and plural digital Britain.

But in a converging world, we need to cast the partnership net a lot wider than the broadcasting sector. We are talking to the Press Association and to several newspaper groups about whether there are content partnerships which could be useful in adding value to the newspaper sector and their ambitions in digital media. We have reached new agreements with a number of public bodies and are talking to many more about ways in which the BBC's technology and access to audiences could help them deliver their vision of the future.

There are a few people inside and outside the BBC who worry that the partnership agenda could weaken the BBC, could dilute its delivery of its own public mission. Of course we have to be careful. We have to recognise too that the spirit of partnership means a major cultural shift not just for the BBC but for its traditional rivals. The idea of sharing facilities and content with competitors is a challenging one.

I believe though that a BBC which visibly helps support and strengthen the rest of UK media, a BBC for whom success is not just about its own programmes and services but about the success of the whole sector in the country but also around the world: I believe that such a BBC will not be weaker, but stronger.

Thank you.

 

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