Speech by Sir David Clementi, Chairman of the BBC at the Oxford Media Convention on Monday 18 March 2019.
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Ladies and Gentleman, it is a pleasure to be in Oxford. It is exactly three years since I last spoke at this conference, and it’s a sign of how much has changed in that time that it is not only three years, but four Culture Secretaries.
Back then, March 2016, it was John Whittingdale who had asked me to carry out an independent review of the BBC’s governance and regulatory arrangements, as part of the preparatory work for the new Charter.
I had published my Review a couple of days before the Conference, and was able to set out in my speech the main headline recommendations:
The BBC Trust should go; and in its place the BBC should have a unitary board, with a majority of Non-Executive Directors
Regulatory oversight of the BBC, including step-in rights, should pass wholly to Ofcom
These two main proposals, subject to a raft of detailed points, did find their way into the new Charter and Agreement, which took effect from April 2017.
We have worked inside this new framework for nearly two years, so it is reasonable to look back and ask how well it is doing.
We also have to bear in mind that the Charter calls for a mid-term review which is likely to start formally in 2022.
The Charter makes clear that the mission of the BBC, its five public purposes, and the licence fee model that underlies it, will not be in scope. But BBC governance and regulatory arrangements will be looked at in the light of recent experience.
Of course, compared to my appearance here in 2016, I now wear a different hat, as Chair of the BBC.
So I can no longer claim the label of independence. But I hope you will find my remarks today are still set in the context of what may be judged to be the public interest.
One thing that almost everyone is agreed upon is that, taken as a whole, the new governance and regulatory arrangements work substantially better than the old model.
But arguing that the new system is an improvement is far from claiming that it cannot be improved upon.
So this morning I want to consider some aspects of the current arrangements, particularly those which might arise in the mid-term review.
It may be a couple of years away, but some of the issues are complex. And I don’t need to relate how quickly time passes.
So I plan to cover three areas:
Some comments on how well the new unitary BBC Board has bedded in
Some thoughts on how the Board is discharging its responsibilities to make sure the BBC delivers outstanding public service content and value for licence fee payers
Some issues concerning the future of our regulatory arrangements in a fast-moving digital world
How the new unitary board has bedded in
First, how have the BBC’s revised systems bedded in?
In the old model, the relationship between the BBC Executive Board and the BBC Trust was mired in a serious confusion around the responsibilities of each in the areas of governance and regulation.
And the regulatory responsibility of the Trust was subject to a complicated set of arrangements with Ofcom about the extent to which the latter would involve itself in regulatory competition issues.
I wrote towards the beginning of my review that governance and regulation needed to be thought of as separate activities. And that a regulator needed to be independent of those it regulates.
The old system ignored this key principle.
The BBC Trust was part governance Board and part regulator of the BBC. It was never clear whether its job was to champion the BBC, or stand apart and hold the BBC accountable for its licence obligations.
Today it is safe to say that the Trust is not mourned by anyone, certainly not the Chancellor of this great University, Lord Patten, who recently described being Chairman of the BBC Trust as “a terrible position to be in”.
The revised system under the new Charter has one unitary Board, clearly accountable for the governance of the BBC.
It has a single regulator responsible for regulation of the BBC, as well as the other public service broadcasters.
The new arrangements, for the BBC and Ofcom, are easy to understand, both inside and out. And they make entirely clear where responsibility lies.
For the BBC, I am particularly pleased with the way the Board has come together and is going about its work.
Non Execs have been critically involved in key decision making - engaging early with important issues, considering them regularly, and interrogating them closely, over time.
The result is a Board and Executive fully aligned behind the BBC’s strategic agenda.
BBC Studios is a good example.
The Board recognised how vital it was, in an increasingly competitive global market, to bring together programme production, sales and distribution into a single entity.
I’m delighted that Studios has made such a bold and confident start.
Another crucial issue on which the Board has spent a significant amount of time is the initiative to reinvent public service broadcasting for a new generation - making sure the BBC can reach and remain relevant to younger audiences.
The move in viewing hours from linear to non-linear is apparent to all.
It is why we have been so engaged in the modernisation of iPlayer; and in the development of BBC Sounds as a single personalised destination for all of our music, radio and podcasts.
Most recently, we have announced that - with ITV - we’re in the final phase of talks to launch BritBox in the UK.
This will be the first time British PSBs have come together to create a subscription VOD service in this country.
But, of course, at the moment there is no Board decision more important than the one we must make this year regarding the future of free TV licences for the over-75s.
As you know, under the Digital Economy Act of 2017, Government funding for the current TV licence concession is set to come to an end in 2020, and it is the responsibility of the BBC to consult and decide what - if anything - should replace it.
We are of course aware that some pensioners are still in poverty and that TV is an important source of companionship for this group. We must also be mindful of the implications for the BBC of continuing to provide a concession in the years to come.
If we continued the current concession it would cost the BBC around £745m, equivalent to almost a fifth of our budget.
It is clear that the scale of service cuts we would need to make would fundamentally change the BBC for everyone - for all licence fee payers and for the industry as a whole.
Recently we concluded our broad, three-month public consultation on the future of the over 75s concession.
Over the next few months we will study the responses we have received from the public and stakeholders very closely.
We are determined to consider all the options and arguments. And we have been clear right from the start about the three criteria we will be using to help us come to a decision:
First, fairness - the impact on older age groups and the impact on all licence fee payers;
Second, financial impact - the cost of any concession to the BBC and the possible impact this might have on programming and services.
Third, feasibility - the need to be able to implement any concession effectively, clearly and simply.
The consultation process has proven that there are strong views on all sides. Any choice will have its merits and its drawbacks, its critics and its backers.
Ultimately, it is for the Board to decide. And I can assure you that none of us underestimates the significance of the decision.
At this stage we are still gathering the threads together from the consultation period. We will need to make the best and fairest decision for everyone, and we hope to do so before the summer.
How we are delivering outstanding content and ensuring value
Of course, good governance is not an end in itself. The biggest benefits of a well-run BBC come to those who pay for it.
Not surprisingly, when I go out around the country engaging with audiences, people don’t talk to me about the BBC’s improved governance arrangements. They want to talk about content and its availability.
They talk about the Bodyguard, the final episode of which was watched by an extraordinary 17 million people. Or Killing Eve, that had over 45 million iPlayer requests. Or Fleabag or Strictly, Springwatch or A Very English Scandal.
So this is the second area I want to touch on today: the Board’s responsibility to make sure the BBC delivers outstanding public service content and maximum value for licence fee payers.
And in particular, I want to cover how we are listening and responding to what our audiences tell us they want, and what constitutes value in the digital age.
It’s great that around 20 million people are now using their BBC accounts each month. That data is helping us better to understand their needs and transform how we personalise their service.
But ultimately you cannot have a conversation with data, and for the Board there can be no substitute for face-to-face discussion.
This is what we have been doing with our regular “meet the audience” events, all around the country. I have personally attended sessions from Coventry to Margate, Antrim to Dundee. And next week I will be in Aberdeen.
The focus has been on hearing from younger audiences, diverse audiences, and those the BBC finds harder to reach.
There is general agreement on what we are felt to be doing well.
In today’s world of fake news audiences recognise the value of a truly independent national broadcaster, free from political influence and interference.
We are seen as one of the ‘go to’ destinations, not just for news and drama but also for documentaries, such as David Attenborough’s Dynasties and Blue Planet II.
And we are felt to cater well for younger children, with CBeebies in particular.
We feel that the BBC can point to a strong track record of outstanding and distinctive content over the past year. And it’s encouraging that audiences in general agree.
But there is also broad consensus on where we are seen to be falling short.
In particular, these face-to-face sessions have underlined the extent to which distribution and availability are important: binge watching highly-recommended TV series is increasingly the norm.
The BBC is not felt to be meeting this desire well, especially because of the perceived limitations in the viewing window for BBC iPlayer.
The lack of ability to watch series all in one go, the wait for episodes to be uploaded, and the relative speed at which episodes and series expire and are no longer available on iPlayer, all are felt to be particularly frustrating.
As one person said at a session in Salford: “If I have to wait until tomorrow to watch it then I won’t watch it, I’ll go somewhere else”.
If these trends are marked across all audiences, they are particularly so with younger audiences.
The pace of change among this age group is remarkable. 16-34 year olds now spend more than half of their screen time each day watching non-broadcast TV. And the time they spend music streaming has grown by 40% in just a year.
For the BBC Board, these are extremely important insights. The principle of universality is fundamental to the BBC’s public service remit, and always at the forefront of our thinking.
We are acutely aware of our responsibility to ensure that the BBC not only continues to reach everyone with its public service mission, but also offers value to everyone.
And it is obvious that, increasingly, it’s through our online services that audiences will expect to receive more value for their licence fee.
More and more, they will see BBC iPlayer as the front door to our content offer. And, in the on demand world, it is clear that the 30-day viewing window, for example, offers less and less public value.
Where once it was a catch-up service, iPlayer now needs to become a destination in its own right - one that brings together our very best creativity and tailors it uniquely to each user.
That’s why we have set out our plans to reinvent iPlayer, and those changes include:
Programmes available on iPlayer for at least 12 months after they are first shown
Complete series box sets for selected titles made up of returning series and their back catalogues
More live programming and more content from the BBC archive
Our research shows that audiences believe these changes will make iPlayer a better place to watch TV, and in the on-demand age will offer better value to licence fee payers.
Our regulatory arrangements in a fast-moving digital world
This brings me to the third topic I want to focus on today: the future of our regulatory arrangements in a fast-moving digital world.
I am not alone in pondering what the best regulatory system is for an increasingly digital and global broadcasting market. It is something that is increasingly at the forefront of Government and Ofcom thinking too.
Frances Cairncross recently published her report on the future of high quality journalism. She recommended new regulatory arrangements to redress the balance between platforms and publishers.
Last week, Jason Furman - a former advisor to President Obama - produced his report for the Treasury on competition in the UK digital markets. It highlighted that, where there is such dominance by tech giants in so many markets, it leads to less choice, less quality, and less innovation for consumers.
And very shortly we expect the Government’s White Paper on the future of online regulation - designed to address some of the harms and excesses of the internet.
None of this is easy.
But it is vital that we do have regulation that is fit for purpose. That protects citizens and consumers, and creates a level playing field for the industry.
I want to argue that effective regulation for the digital age is just as important for the future of the broadcast sector as it is for the social media sector. Not least because of the developing overlap between the two.
On the whole, I believe the BBC can be pleased with the relationship that has grown up between us and our new regulator, Ofcom.
We can point to some important milestones:
The merger of BBC Worldwide and BBC Studios last April, including the series of commitments to Ofcom made by the BBC for preserving transparency about the new arrangements
Ofcom’s decision last June to approve a new BBC television channel for audiences in Scotland - launched successfully last month
The first phase of BBC Sounds, launched in November as an ambitious reinvention of our radio app for the podcast age. It is a crucial part of how we are responding to Ofcom’s call for us to attract young audiences
But I want to return to the BBC’s strategy for iPlayer, and use it to consider, as a case in point, how our current regulatory arrangements are standing up to the pace of change.
It is hard to overstate how rapidly the giant global players are moving within the market around us.
In the last quarter of 2018, Netflix added a record 8.8 million of worldwide subscribers. In total it has nearly 140 million subscribers in over 190 countries worldwide. In the UK it is in over a third of all households.
Amazon is investing heavily in TV content across Children’s, Drama, Factual, Comedy, Films and Sport. Google has invested strongly in YouTube, including in new long-form TV programmes.
Apple will be launching a new video streaming service this year. We can expect new services from Disney, Comcast and WarnerMedia too - all well-positioned to make a major impact.
It’s a market in which to stand still is to go rapidly backwards.
This is why our plans for iPlayer are so critically important.
Our aim is to make some important but straightforward changes to bring it more into line with what the rest of the market is already doing.
More box sets, and more content, available for longer.
The Board determined that the BBC’s planned iPlayer changes for 2018/19 did not amount to a material change, and therefore should not be subject to the delay of a Public Interest Test.
Ofcom disagreed. That is their right. And we are now conducting a PIT process which we will publish shortly.
But every month is precious, and comes with the risk of lagging even further behind audience needs and expectations.
We have to put this in context of what is now the norm for the market - and for our audiences.
Netflix, for example, currently update their app over 50 times a year - around once a week - with no hold up, and no need for regulatory approval.
They can commission or acquire content and stream it for as long as they have negotiated with rights holders.
So in the current global digital marketplace I think there are important issues for us all to consider - Government, Ofcom and the BBC, as well as all UK media organisations.
We need to look again at whether regulation, born in a UK-centric linear era, remains fit for the global, digital age.
The current regulatory system has its origins in an era where the BBC was seen as the big beast in the jungle, the big beast against whom all others needed protection.
But that view of the world has now passed. Increasingly, our major competitors are well funded, international giants - Netflix, Spotify, Facebook, YouTube - whose financial resources dwarf our own.
Of course we recognise that, given our unique funding model, there must be constraints on how the BBC operates.
But we need to find a way forward that does not just play into the hands of global competitors at the expense in particular of UK PSBs.
The explosion of choice from the new online players has undoubtedly been a good thing for UK consumers. But in embracing the new we should also celebrate, and protect, what is good about our existing broadcast ecology.
I believe we need a system of regulation that promotes and protects public service broadcasting.
That means that, whilst genuinely promoting competition, we ensure that the UK PSBs are not disadvantaged against large global competitors.
And, in our efforts to be fair, we need to be mindful of the kind of approach that famously and demonstrably failed UK audiences when the Office of Fair Trading and Competition Commission blocked Project Kangaroo almost exactly a decade ago.
All this needs to be addressed with urgency, and will certainly need to be dealt with in the mid-term review of governance and regulation.
So I would like to start the debate here with what I believe are four critical questions:
1. How should we define the presence of the BBC in the market place?
We are concerned that Ofcom take a narrow view of the market place, and in the area of iPlayer have looked just at our position against other PSB players and Sky’s Now TV.
In this context, iPlayer has done well and can be seen as a leader among UK players. But that hides the much bigger picture of what is happening in the UK video on demand market as a whole.
Over the last four years, Netflix and Amazon together have moved their joint market share to around 55%. At the same time, iPlayer’s share of the total VOD market has fallen from over 40% to around 18%.
Judged in the context of the whole market and not just PSBs, the challenge from the Board to the BBC has been to move faster.
Meanwhile, the response of the regulatory authorities has been to slow the BBC down.
So, there is a key question for policy makers about how we define the market context in which regulatory decisions need to be made.
2. At what point should the regulator exercise step in powers?
The BBC Board accepts that step in powers should be part of any good regulatory process.
I proposed such powers for Ofcom when I wrote my report three years ago, and nobody - then or now - argues against them.
In the past, the balance of opinion has favoured a system where regulators may step in and call “time out” where there is a hypothetical possibility that a BBC action might cause problems.
Increasingly, our view in a dynamic market place is that step in powers should be used when there is actual evidence of a harm, rather than based on analysis of hypothetical competition risk.
We regard this as a second area where further analysis needs to be undertaken to determine how best to maximise public value.
3. What can we do to increase the speed of the regulatory process?
Even in circumstances where regulatory powers might be legitimately exercised, there is an important question about timing.
The Charter and Agreement set time limits for Ofcom. Currently they are allowed nearly eight months to consider changes.
I think these limits need to be looked at again in the light of the pace that our competitors are able to move in a global digital market.
4. Finally, are the Government and Ofcom doing enough to strengthen the PSB ecology for consumers?
We have a unique and extraordinarily successful media ecology in this country. It has grown up over nearly 100 years, and is critical to the UK’s cultural, democratic and economic wellbeing.
Do we do enough to support it or, dare I say, even celebrate it?
Or are we running the risk of tying ourselves up in red tape and regulation at a time when all media organisations need to be fast and agile to succeed?
If we value Public Service Broadcasting, and the BBC in particular, we need a regulatory system which encourages PSBs to adapt and prosper.
I strongly support our campaign, working closely with the other UK PSBs, to ensure that, in the area of prominence, all our services should be as easy for people to find in the digital world as they have always been in the analogue world.
I urge the Government to take legislative action, and to take action to strengthen the PSBs as and when they get the chance.
Let me conclude at this point.
I put these four questions forward as the start of an important debate. Some of them need addressing now; some will form a crucial part of the mid-term review. . And, of course, at that time there will be many more questions to consider.
I urge Government and regulators to engage with them, seeking to determine where the public interest best lies.
The hypothesis I will leave you with is that the BBC is a critical part of the UK media sector.
A strong, dynamic BBC allows our media industry to punch well above its weight in the world.
It means a domestic player committed to serving all Nations and Regions in the UK.
It means a Corporation committed in its news output to impartiality and accuracy, a bulwark against fake news.
And it means a BBC iPlayer committed to showcasing the best of British writers, directors and actors, delivering great value for licence fee payers.
We must be able to adapt and innovate in the digital world. We must be able to make the changes our audiences demand, in real time. Not by revolution, every few years, but by rapid, ongoing evolution.
I know that Ofcom recognise the challenge, just as we do. At the end of last year, they pledged to be “a forward-looking regulator that supports the future success of UK TV, firmly rooted in the online world.”
Working well together, in the public interest, we need to ensure we pave the way for the effective modernisation of BBC online services on which our audiences increasingly depend, and by which they will increasingly gauge our value.