A speech by Sir David Clementi, Chairman of the BBC, at the Voice of the Listener and Viewer on Wednesday 20 November 2019.
Good morning, everyone. I’m very pleased to be back here at the VLV.
As Chairman, it is always a pleasure to have the chance to talk directly to the people who, in the long run, shape the BBC’s future: our audiences.
I’m often asked how I feel about the constant scrutiny that the BBC comes under, and the daily criticism we receive from all political sides.
The answer is that I am always glad to hear when people hold strong views. Everyone owns the BBC, everyone should have an opinion. That is as it should be.
I would be much more concerned if what I encountered most often was apathy.
In reality, surveys consistently show that the BBC remains one of the things that make us feel most proud to be British.
You know you occupy a special place in the nation’s heart when you’re right up there with Shakespeare and fish and chips…
“Worth the licence fee alone”
Fortunately, in amongst the criticism, I also hear plenty of praise.
I’m always pleased in particular to hear that special phrase: “Worth the licence fee alone”
A quick look at social media shows that it has been used recently about everything from Strictly to CBeebies, Top Gear to Test Match Special, The Repair Shop to Peaky Blinders, the Proms to BBC Parliament, People Just Do Nothing to Andrew Neil’s new political programme.
My own contribution to “worth the licence fee alone” is the BBC’s News app - a brilliant way to find out in 60 seconds what is going on in the world.
There’s something about how this phrase is used that means something quite different from simply “good value for money” - though of course that’s what we provide.
It speaks to the audience’s recognition that the BBC exists to deliver more. It’s used to suggest that – with this programme at least - we are fulfilling our wider public service mission - to inform, educate and entertain.
The principle of universality has always underpinned the BBC. It is a service, including local radio, for the whole nation.
Everyone pays, everyone gets something they value in return.
This is the starting point for what I want to talk about today.
It gets to the heart of what the BBC represents for the UK more widely: a universal service designed to bring broad benefits to the whole country.
And with the licence fee privilege comes a range of responsibilities that have been reflected, quite rightly, in the way we are regulated.
This morning I want to look to the future. I want to consider the challenge of how best to regulate the BBC as a universal public service in the global, digital age. I then plan to say something about the licence fee, and our decision relating to the concession for those over 75.
The BBC’s regulatory framework
Today’s broadcasting industry does not fit into any economic or regulatory model that can be easily categorised. Indeed it is now a sub-set of a much wider media sector.
Part of the industry - including the BBC - is highly regulated, while part is regulated very lightly.
Meanwhile, the most recent entrants into the market - such as Amazon and Netflix - are scarcely regulated at all.
The regulatory environment around the BBC is to a large extent left over from a linear era.
Times have changed. The market around us has evolved beyond all recognition.
Many of the harms our regulatory framework grew up to guard against are no longer relevant. The issues it seeks to remedy do not reflect the realities of the global, digital age.
In the past, many argued that the BBC occupied too big a place in the market; that regulation was necessary to promote proper competition.
They saw the BBC as “the big beast in the jungle”, from whom all others needed protection.
The rights and wrongs of that view might be a matter for interesting historical debate.
But today there can be no question that the BBC faces increasing competition from all sides, across all our content and services.
Our licence fee enables the BBC to deliver public and wider economic value to the UK.
The aim of regulating the BBC is to strike the right balance between protecting the BBC’s ability to deliver this value and fulfil our PSB mission, while ensuring that the licence fee does not mean we are insulated from competition.
But today the environment in which we operate is no longer limited to the traditional broadcast competitors at home. Increasingly it is dominated by giant tech players from around the world.
Over the last four years, Netflix and Amazon together have moved their joint market share in the fastest-growing part of the market - Video On Demand - to around 55%. At the same time, iPlayer’s share of the total VOD market has fallen from over 40% to around 18%.
The reality is that, over the past decade, the nature and intensity of competition faced by the BBC has grown exponentially. And the case for regulating the BBC on pure competition grounds has diminished accordingly.
The fact that we have seen newer players succeed so spectacularly in video - not to mention Spotify in music and Apple in podcasts - demonstrates that the BBC is not putting up barriers to entry or expansion.
To those who argue that the BBC is still in a position to deter competition, I would simply say that we can’t be very good at it!
The BBC as a spur to competition
Where the BBC was once seen as a bar to competition, I believe we should instead be viewed as an essential stimulus to competition, core to the success of the UK’s creative industries.
Notwithstanding the level of competition, the BBC remains a remarkably powerful creative force for the UK, even against the advancing tide of global competition.
In terms of content, it is evident across all our services, in practically every genre.
Look at programmes like Bodyguard - a must-watch TV event which attracted 17 million people to the finale in an age when we’re told those kinds of audiences are a thing of the past.
Or the incredible success of Killing Eve, which has now had around 100 million requests to view on iPlayer.
Or the remarkable impact that programmes like Blue Planet II have had on how we view the use of plastic in our day-to-day lives.
Look at the audiences the BBC drew to the Women’s World Cup this summer, and the live, simultaneous streaming options we offered audiences from both Wimbledon and Glastonbury.
Look at the job that programmes like Newsnight and Brexitcast are doing to help audiences navigate our political landscape.
Or BBC Parliament, which over the last few months has attracted the kinds of audiences we more associate with soap opera - and arguably offered even more nail-biting drama!
The fact that the BBC won 16 out of 26 BAFTAs earlier this year - not to mention 5 Golden Globes and, most recently, 8 Emmys - speaks for the BBC’s creativity in practically every area. As does the fact we swept the board at the most recent Audio and Radio Industry Awards. Not to mention the RTS Channel of the Year award for CBeebies, and most recently the Creative Diversity Network’s UK Television Diversity Award for 2019 Broadcaster of the Year.
This success is a tribute to the BBC’s commitment to innovation and investment in home-grown, British content, as well as our commitment to making the BBC a great place to work.
Overall, the BBC’s presence in radio and on television, in news, drama, documentaries and elsewhere has acted as a spur to competition, raising the bar, forcing competitors to raise their own standards.
Of course, beyond the direct and indirect commercial value we help generate, there is also the broader economic impact.
The knock-on effects of our major investment in MediaCity in Salford are a good example.
Employment in Manchester’s media sector tripled in the decade to 2016, significantly ahead of the national average. The number of media businesses in the city tripled too.
We are seeing another example of this kind of impact right now with the new investment we are making in Cardiff.
And look at how the commercial sector has responded to astonishing worldwide success of the BBC’s Natural History Unit in Bristol, and its landmark programmes.
It cannot be coincidence that Netflix has chosen Bristol and Bristol-based talent as the home for its own natural history drive.
Our mission and public purposes exist to maximise these broader benefits.
Our responsibility to reflect and represent the whole of the country in our output, for example, has led most recently to the phenomenon of the “Peaky effect”.
The programme Peaky Blinders is credited with attracting a record number of tourists to Birmingham, keen to explore the places and stories associated with the show.
Poldark is credited with a similar impact on tourist numbers to Cornwall, while visitor numbers at Shibden Hall near Halifax have trebled since Gentleman Jack was broadcast on BBC One.
In short, all the evidence today is that the BBC acts as a positive competitive force for the UK’s television sector, and makes a far-reaching economic contribution.
A shift in mind-set
Against this background, I believe that the tremendous shifts in the marketplace need to be accompanied by a significant shift in the way in which we think about the role of broadcast regulation.
A few weeks ago, the former Director-General of the BBC, Mark Thompson, gave a speech in which he talked about “an officious governmental and regulatory environment which has sought to stymie or limit digital transformation and innovation by the BBC as much as possible”.
These are strong words, but they raise an important issue about the role of policy makers.
Mark Thompson reminded his audience of how the authorities blocked the original plan for a streaming service developed by UK PSBs over a decade ago - Project Kangaroo.
Of course, the net effect of that decision by the authorities was to hand a giant lead to the American streamers.
No wonder Reed Hastings, the CEO of Netflix, said at a European broadcasting conference earlier this year that the regulatory authorities had been “the best protector of Netflix in the world! Because the British regulator said that the BBC and some of their peers could not get together to form a joint venture to do internet.”
The changes that the BBC is now introducing to iPlayer offer a more recent example of involvement by the regulators.
Our iPlayer plans represented some important but straightforward updates to bring our service more into line with what the rest of the market was already doing.
More box sets, and more content, available for longer; all things that our audiences had been telling us consistently that they wanted.
Ofcom decided that these changes, intended to make our offering more competitive, might have an adverse effect on the market.
The resulting process delayed our reforms by 12 months - a period during which the market share of the big American players continued to soar.
And it’s a sign of how quickly you can fall behind in this market that, in that 12-month period, the big tech companies were able to update their own platforms, without regulation, on a weekly basis.
But I’m pleased that we can now point to an iPlayer strategy that is starting to deliver: in the space of the last year, iPlayer’s reach to young audiences is up by around 20%.
Making programmes available for 12 months is what today’s audiences want and expect.
A change in regulatory emphasis
In my view, and I believe it is Ofcom’s view too, the real issue here is that we currently have linear regulation, set by the Charter, in a digital age.
The shift in mind-set that I am calling for is one that will better reflect the new realities and allow us to keep pace with the online world.
It should move us away from a presumption that BBC intervention will come with negative consequences, and towards a presumption that it will act as a public good.
And I am calling for a change in regulatory emphasis to recognise that.
When I spoke earlier this year, in a speech to the Oxford Media Convention, I raised four central questions concerning the future of the BBC’s regulatory arrangements in a fast-moving digital world.
Allow me to return to each of them in turn.
First, how should we define the presence of the BBC in the market place?
We are concerned that the regulatory authorities do not place enough emphasis on the context in which the BBC, together with other PSBs and smaller players, compete.
In regulating the BBC, it is absolutely right to worry about our effect on smaller players. But it is equally important that regulators do not take too narrow a view of competition.
It will not serve Britain well to protect competition between the BBC and other UK players while ignoring the wider effect that competition from global players is having.
I should say that I very much enjoyed hearing what Carolyn had to say earlier. And I’m delighted that we’re now working together so closely on BritBox.
We know that the only way for UK PSBs to deliver distinctive, British content that supports the British economy is to compete and respond to the competition we face from the global giants.
Regulation must set the right incentives to foster investment and innovation. We are not convinced that the current regulatory framework always allows the right balance to be struck.
The risk in getting the balance wrong is that high-quality British content will inevitably suffer; and that the UK market will become dominated by global players who will then no longer need to invest in local content to compete.
Second, 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.
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 simply on the basis of a 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.
Third, 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 8 months to consider changes.
These timing issues were put starkly in the House of Lords Select Committee Report, published on 5 November, where it stated that “the BBC needs to have the power to innovate at speed without undue regulatory burdens, or it risks becoming a minor player in the face of dynamic, well-resourced global players.”
So the current timing limits need to be looked at again in the light of the pace that our competitors are able to move.
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?
The BBC’s first operating licence, under the new Charter, contains nearly two hundred broadcasting conditions, which are carefully adhered to by the BBC and closely policed by Ofcom. BBC One alone has quotas on the levels of BBC commissioned programmes and repeats, hours of arts, music, religion, current affairs, comedy, regional programmes, network and local news. Our commissioners are always having to think about regulatory quotas before they can start trying to commission great programmes that audiences will love.
Of course, obligations come with the privilege of our licence fee model. But the BBC, alongside Ofcom, still need to ask whether the prescriptive nature of the operating licence is helping and not hindering the way we serve audiences.
That is why we welcome Ofcom’s recent consultation on changes to the conditions for our children’s programmes; and we also welcome Ofcom’s openness to evaluating the effectiveness of the other parts of the Licence in holding the BBC to account, while allowing it enough flexibility to innovate.
Turning from issues around our licence to the issue of prominence, I strongly support our campaign, working closely with the other UK PSBs, to ensure that all our services should be as easy for people to find in the digital world as they have always been in the linear world.
For this reason, we strongly support Ofcom’s recommendations to the Government which would give British public service content due prominence in the era of on-demand and internet TV viewing.
I urge the Government to take legislative action to ensure that viewers can still easily find PSB content across the full range of devices from smart TVs to streaming sticks to set-top boxes.
And I urge them to take further action to strengthen the PSB ecology, as and when they get the chance.
Against this background we welcome the fact that Ofcom is beginning the work required for a full review of the UK’s PSBs, and we will of course work closely with them.
The right regulation for the BBC
Let me make some concluding remarks on these regulatory issues.
It was interesting to note that, in her comments at the RTS Conference in September, Sharon White said that the BBC “has not quite come to terms with being regulated by Ofcom”.
I am not sure I would agree.
When the history of the BBC’s regulatory framework comes to be written, it will show that in September 2015, some 18 months before I became Chairman of the BBC, I was asked by the Secretary of State, John Whittingdale, to write an independent report on the regulatory framework for the BBC.
I fairly quickly reached the view that the BBC should be regulated by Ofcom. And it took a lot longer to convince the leadership of Ofcom that this was the best outcome than it did to convince the leadership of the BBC.
I believe that Ofcom is the right regulator of the BBC.
I do not know anyone on the BBC Board, or in Tony Hall’s senior management team, who does not share this view.
It is a far better system than regulation by the BBC Governors or by the BBC Trust which went before.
And the current system fully recognises that the BBC is an integral part of the UK’s communications industry - which is why it is surprising that Ofcom had such initial reservations.
The reality is that we fully accept regulation by Ofcom.
But that does not mean that we have deferentially to agree to Ofcom’s every decision.
We think that in large part they have been a good regulator.
As I have commented, we fully support the stand they have taken on the issue of prominence; and we welcome their willingness to look at some of our licence conditions. But we do not think that the overall framework within which they are required to exercise their regulatory responsibilities sufficiently recognises the dynamic of today’s media market place.
We think the regulatory system remains a linear construct in a digital age, and we believe that Ofcom, and indeed all policy-makers, need to think carefully about the international context in which the BBC competes, rather than concentrate so heavily on the domestic context.
As things currently stand, I think I can say - as Sharon moves to her new responsibilities in the retail sector - that “the BBC has never been knowingly under-regulated.”
TV licences for over 75s
Let me now turn to the other issue I want to cover this morning: our decision in respect of the licence fee for those over the age of 75.
Under the settlement between the Government and the BBC in 2015, it was agreed that the Corporation would take over the responsibility for determining the policy for over-75s, and for funding that policy.
That agreement gave the BBC a number of important things: a new 11-year Charter and some financial benefits.
There was no agreement, nor any expectation, that the BBC would simply copy HMG’s concession. Indeed, the financial benefits to the BBC from the 2015 Agreement, amounting to some £200 million per annum, came nowhere close to paying for the full cost of the concession for all over 75s, estimated at £750m, rising to over £1 billion over the next decade.
John Whittingdale, the then Secretary of State, said at the time that “reform of the over-75s concession would be very much on the table”; and this was confirmed by Ed Vaizey, a Minister in the Department at the time.
Part of the agreement was that - quite rightly - the BBC would have to carry out a full public consultation.
This took place between November 2018 and February of this year. It was a major exercise, and the BBC received over 190,000 responses from members of the public and from stakeholders, including of course the VLV.
We announced our decision in June of this year. Any household with someone over 75 in receipt of Pension Credit would be eligible for a free TV Licence funded by the BBC, at a cost we estimate of around £250 million.
We think the decision is fair to those over 75 who most need our help, and fair to all our audiences, amongst whom there was no support for the very significant cut in the BBC services, including BBC Two, BBC Four, Radio 5 Live, the Scotland Channel, the News Channel and some local radio stations, cuts that would have been required if the concession had been extended to all.
We believe that the decision we made was the best way to balance help for those most in need, whilst ensuring that the BBC could continue to provide a range of services that served all audiences. And, importantly, we have carried out the terms of the 2015 Agreement with the Government to the letter.
It is interesting to see that the recent report from the DCMS Select Committee commented that it would be unsustainable for the BBC to carry the full cost of the concession, amounting to some 20% of our revenue.
What most observers are agreed upon is that the system used in 2015 for setting the Licence Fee was most unsatisfactory.
The negotiation was done over a few days by a Government in a hurry, with little input from the BBC and none from the public.
The VLV and others have suggested ways in which the future Licence Fee should be set. In the end, we need a much more transparent process, and we have made clear our view that it must involve public consultation. As I said earlier, we are here to serve audiences.
Some have taken the opportunity of the inadequate historic process for setting the Licence Fee to attack the principle of the Licence Fee itself, and to propose instead a subscription model.
Any discussion needs to bear in mind that the current Licence Fee system is fixed under the Royal Charter until 2027.
More fundamentally, there are issues with any subscription model; and the most basic of these is that any subscription service model seeks to serve the needs of its subscribers, and they tend to be the better off.
The whole point of the BBC, as I commented in my opening remarks, is that it is underpinned by the principle of universality, that it should be available to everyone.
I have no doubt that the BBC would do well under a subscription model, given the quality of much of our output. But it would no longer be the BBC you and I know. And it would no longer serve everyone.
Those who advocate such a model must be realistic and recognise that the Public Service Broadcaster principle of universality would be lost.
Thank you for listening: and I look forward to hearing some of your views in the Q&A session.