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Ed Vaizey: BBC must not drive up stars' salaries

"There are a huge range of issues I could talk about today - our clear proposals for near-universal broadband within five years; our plans for local television; our approach to the internet.  But given the time available, yesterday's publication of Ofcom's PSB report, and the imminent publication of Lord Carter's Digital Britain report, I want to focus on the debate on public service broadcasting, which seems to be nearing its conclusion.

Let me begin with a ritual, but sincere, genuflection to my audience.  We have, given our size, probably the most successful television industry in the world.  As a result of important reforms made in the 1980s and 1990s, we have a thriving independent production sector, as well as innovative broadcasters from the BBC, to ITV, from Channel 4 to Five and Sky.  We are the second largest exporter of programming in the world.  The British television industry is worth an estimated £60 billion, and is responsible for 2 million jobs in the British economy - at least at the moment.  We can be proud of the success of British television, as well as recognising its huge economic and social contribution to our country.

As every one knows the world is changing incredibly fast.  Last year, 1/3 of all internet users watched video clips and web casts, with YouTube reporting 9 million UK users in April.  The BBC reported 41 million requests to view BBC programmes via iPlayer in December and 271 million requests since its launch in Christmas 2007.   The internet will become the dominant content medium.  Most of us will read our newspapers on it, get our music and films from it, and watch television programmes on it.

<h2>What do we mean by Public Service Broadcasting?</h2>

So the long-running debate about the future of public service broadcasting is about one question only - how do we preserve quality public service content in this new media age?  Or to put it more accurately, how do we pay for it?

To answer that question, we first have to be clear about what we mean when we use the phrase "public service content".  Public service content is almost impossible to define.  One could use Woody Allen's definition - "I know when my film has lost money, I have made a good film".   Broadly speaking it is about the kind of content the market provides, but not in abundance - documentaries, children's television, quality films, religious programming, news

Public service content is not, of course, confined to public service broadcasters.  Sky provides public service content, not least with Sky News, which has driven so much news innovation in the last decade and more.  And of course we all benefit from hugely successful American television programmes made by their commercial broadcasters.

Further, the internet will not see the end of public service broadcasting.  Far from it.  It will probably increase it.   As Peter Bazalgette pointed out on Monday, with sites like Tate Media, many of our cultural organisations are becoming broadcasters, and that presents huge opportunities. Many of our newspapers will also become in effect broadcasters in the next few years.

So when we talk about public service content, what we are actually talking about is the future of quality content for large audiences.  In effect, the future of our main terrestrial broadcasters, the BBC ITV, Channel 4 and Five.

That future remains uncertain because of an extraordinary amount of dithering by the Government.  The debate over the last few years, led by Ofcom, has gone in almost every direction.  We were briefly diverted by the idea of an Arts Council of the Airwaves, a publicly-funded commissioner of programmes, and even a public service publisher, putting stuff on the web.  Of course, because the potential client group for such a fund was so vast - from local newspapers, every television channel, cultural organisations, and innumerable websites - the idea was never a runner, apart from the fact that it was a deeply unattractive, dirigiste proposal in any event.

While Ofcom was busy putting forward its proposals, the Government suddenly announced its own enquiry, the Convergence Task Force, launched here last year by James Purnell with great fanfare.  After burning through £300,000 worth of public money and holding flashy events at Arsenal football stadium, the group has yet to deliver its breathlessly awaited report, either interim or final.  I am just sorry that so many of you had so much of your time taken up by it along the way.

Now alongside Ofcom and after the Convergence Task Force, we suddenly have a new participant - Lord Carter and his Digital Report, published next week.  It turns out that after years of debate and consultation, the whole issue will be decided by Carter in just a few months.  Suddenly new options are on the table, including the merger of Channel 4 and Five, and the sale of GMTV to ITV.

So we have had the Ofcom review, the Purnell review and now the Carter review, three reviews all going in different directions, wasting time and money.  The only clear outcome so far is that Andy Burnham has been comprehensively sidelined, and broadcasting policy has been taken over by Stephen Carter and Peter Mandelson.

<h2>BBC</h2>

Given this fast moving policy landscape, you will understand why my Party is reluctant to make firm commitments until the smoke clears from Lord Carter's office in Victoria Street.  But let me at least set out some principles and approaches which I hope you will find useful.

Let me begin by outlining the approach we will take towards the BBC.  We are fans of the BBC.  In an uncertain world, the BBC provides a great resource for publicly-funded high-quality content.  When looking for a solution to the future of public service broadcasting, we want one that is the least damaging to the BBC's integrity. 

Although we believe in plurality in public service broadcasting, we do not believe the solution to the challenges presented by the internet age is necessarily to try and create another BBC.  Having said that, it is equally important that the BBC stop acting like a friendly monopolist, making noises about partnerships, and engages seriously in discussions about how to ensure plurality in public service broadcasting.

On other matters: while we support the licence fee, and believe it is the best way to fund the BBC for the foreseeable future, we believe the level of the licence fee is at the top end of what is acceptable to the public.

The current settlement - which began in 2006 and lasts to 2012 - built in increases of 13 - 15% over that period.  That was a generous settlement when times were good.  It may start to look prohibitive as times get increasingly bad.   The BBC will have to think very hard about whether substantial licence fee increases can be justified in the coming years.

The BBC Trust, under Sir Michael Lyons, has done a good job, and I would like to congratulate him.  So what follows is not personal, it is, as they say, business.  We think that there needs to be a clearer divide between the regulation and management of the BBC.  The BBC and the BBC Trust should be clearly separate.  The BBC should have its own chairman, who can cheer lead for the Corporation, while the head of the regulator gets on with regulating. A truly independent regulator would provide a genuine voice for the licence fee payer.

Moving on from that, the expansion of the BBC into areas where the private sector is already working needs to be carefully watched.  Our watchword will be simple - if the private sector is already doing a good job in the area, or is developing a market in an area, the BBC should be prevented from going in with all guns blazing. 

Finally, there is the issue of costs.  The Ross/Brand row was not just about bad taste, though of course that was important.  It was also about the huge amount of money the BBC is paying Jonathan Ross and other stars.  A public service broadcaster with guaranteed revenue shouldn't compete with the private sector on top talent salaries.  In fact, I would go further and say the BBC actually pushes up the price of talent with its interventions.  So we will ensure that the BBC publishes fully audited accounts which will include details of the salaries of all its top talent.  The BBC should be prepared to defend salary and indeed all expenditure decisions it makes.

<h2>Other network channels</h2>

Let me now turn to the commercially-funded public broadcasters.  The current regulatory system guards against threats which are fading away - namely monopolies of both supply (content) and demand (advertising).   The new world brings the challenges of fragmenting audiences and multiplying means of content delivery, which will require agile businesses with multiple revenue streams.

<h2>ITV</h2>

There can be no doubt that ITV faces a very tough commercial environment, and Government should be doing what it can to help.  If we can safely remove or relax much of its regulation, we should.  Let me take one or two specific examples.

Product placement is not a panacea by any means.  Ofcom's analysis suggests that this market could be worth £25-£35 million a year within five years, although there is the potential if up to £120 - £125 million.  The important point is that which side of the debate you are on shows whether you understand the changing landscape or not.  Are you going to simply say no to any change, as Andy Burnham has, or are you going to recognise that the world has changed and that you are prepared to change with it?   The position you take in this debate also shows whether you trust the broadcasters or not.  By and large, we do.  You know your audiences and you know what they would find acceptable in terms of product placement. 

We also broadly supported the OFT's findings on Contract Rights Renewal.  Their preliminary view to recommend that ITV's Contract Rights Renewal (CRR) Undertakings are relaxed is a positive step but one that must be considered as part of a wider strategy that restores health to commercial public service broadcasters. We know that there is debate within the industry about whether this is the right thing to do, given that ITV's market share still remains at 45 per cent, but we believe it is important to relax these regulations before it is too late.

<h2>Channel 4</h2>

Finally, Channel 4 and Five, the heart of the problem we are debating. 

First, let me say that we are fans of Channel 4 as well.  In a month when Film 4 swept the board at the Golden Globes, it is worth remembering that it does many things very well.  And, realistically, it is the only full-time national PSB competitor to the BBC that we have.  So we want it to survive and thrive. An organisation providing public service competition to the BBC is the one outcome that we believe we must get from this process. And we are convinced that in some form Channel 4 should be part of this.

A huge range of solutions to the Channel 4 conundrum have been put forward.  There are the solutions that involve the BBC - straightforward top-slicing of the licence fee; partnerships with the BBC and BBC Worldwide, or by using money ring-fenced for digital switchover; or the sharing of resources such as studios and technology. 

Then there are the market solutions - a merger with Five, with BBC Worldwide, changing the terms of trade, or a combination of these.

We have been careful not to rule out any solution.  But as I have indicated, we are less convinced about a solution that involves top slicing of the licence fee. 

Crucially we see some opportunity in allowing Channel 4 to make more of the assets that it has. This need not involve looking at the terms of trade but ensuring Channel 4 better exploits the rights it already has.

We certainly would not rule out a merger either between Channel 4 and Five or Channel 4 and BBC Worldwide. Of course, the world is very different from 2003.  Any merger would have to ensure that the public service aspect of the merged channel was dominant and driving the channel's values.  But a merger would create a public service broadcaster of significant size, from two sub-scale businesses, able to compete with both the BBC and ITV.

<h2>Conclusion</h2>

Let me return to the basis of our approach.  We have some of the best television in the world - or more accurately, content.  We want that success to continue, and we believe that public service content will continue to play a vital role.  That means a strong and successful BBC.  But it also means a strong and successful competitor to the BBC.  It means realistic freedom for broadcasters to compete in a multi-channel, multi-platform digital world.  But above all, it means the right solution for viewers."

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