STANDING beside a suit of armour in a hotel lobby, a guest reporter on BBC Staffordshire TV explains how the Grail Court Hotel in Burton-on-Trent has eight ghosts, including “the little girl in Room 21” and “John the barrel man”.
Over at BBC Black Country TV, a news report reveals how traffic wardens have infuriated locals by slapping a £30 parking ticket on a bus that had brought Boy Scouts from Walsall to a parade in Alcester.
Improbable as it may seem, this type of bread-and-butter local television reporting has become the frontline in a battle between the BBC and its private-sector rivals.
Commercial companies — from giant ITV, Emap and Yahoo down to minnows such as Island FM on Guernsey — complain that relentless BBC expansion is hurting private- sector enterprise in areas from parish-pump television to magazines, the internet and classical-music publishing.
Lobby groups representing the radio and local-newspaper industries have sent letters to Tessa Jowell, the culture secretary, in the past few days, setting out their concerns about the BBC’s ambitions and about the way it uses its licence-fee revenue.
They plan to increase pressure in the run-up to the government’s decision later this year on the next licence-fee settlement.
Tom Moloney, chief executive of Emap, the magazine publisher and radio-station operator, complained last week: “The reason this situation has occurred is that the BBC is overfunded and is therefore looking for things to do.”
Martin Cave, a professor at Warwick business school, said: “The BBC’s motivation is that if they expand, they may be able to get a higher licence fee. There is also a defensive motive — not to get left behind if the public moves into non-traditional services, with the risk that the licence fee could be undermined.”
This is denied by the BBC. It asserts that it needs to innovate as audiences change, and that the new regulatory regime, launched in a government white paper in March will ensure that new services can go ahead only if “the consumer benefit outweighs the market impact”.
It may not be easy to persuade the BBC’s rivals that the new regulatory regime will be effective. There is a wide perception that in recent years, the corporation has been too aggressive in extending its tentacles.
The flashpoints include:
Ultra-local TV stations
This concept is being piloted for nine months in six areas of the west Midlands, including BBC Black Country TV and BBC Staffordshire. Each produces one 10-minute news bulletin per day for its local population of about 1m.
Five reporters are based in each local radio station, and a producer works with local community groups. Reports are based on “video journalism with lightweight cameras”.
If these services attract sufficient audiences and get the regulatory thumbs-up at the end of this year, the BBC will consider expanding them to 60 areas across Britain.
Kevin Stewart, chief executive of Tindle Radio, which owns small local stations in Essex, Norfolk, Suffolk and the Channel Islands, is dismayed.
He said: “If the BBC goes ahead with a national roll-out of its ultra-local TV stations, it will distort the market and we will see some local commercial radio stations handing in their licences. It would be a bit like Tesco opening up next to the village store.”
Local newspapers feel equally threatened. The Newspaper Society explained: “Our members are concerned because a large-scale roll-out of the BBC’s ultra-local services, funded by the licence payer, could undermine the commercial position of local newspapers. It could precipitate market failure rather than lead the way to innovation.”
Tim Bowdler, chief executive of Johnston Press, owner of a large number of local papers and websites from Stornoway to Eastbourne, said: “We are investing heavily in developing local digital services — for instance, with a project in Preston for a newsroom of the future. Our ability to do that depends on advertisers using our channels.
“That could be in doubt if the BBC goes into this space like a big gorilla, armed with a large amount of money and immune to commercial pressures.”
Zarin Patel, group finance director for the BBC, explained the reason behind the ultra-local experiment: “Audiences for traditional, regional TV news have been falling, but the evidence is that people do want news about their smaller local area and neighbourhood.”
The BBC also said, however, that the local TV pilots will be subjected to a rigorous public-value test later this year.
The internet
This is perhaps the most important flashpoint between the BBC and its commercial rivals. The BBC has agreed to stop publishing some online content, such as celebrity gossip, as recommended in the Graf report last year; but it has recently floated plans to expand its popular and well-resourced website, bbc.co.uk, into areas such as user-defined content. It also proposes to offer downloads of television footage from the BBC archive.
Jon Gisby, media vice-president for Yahoo Europe, said it was flattering that the BBC wanted to emulate products such as his firm’s Flickr service for sharing photos on the web. “But it also raises an obvious question: why is the BBC proposing to invest public money in areas that the market already successfully provides? “If implemented, the BBC’s proposals could have a big impact on products that are already commercially available and could stifle innovation and prevent new business models and partnerships emerging in an increasingly global market.”
Mike Darcey is group commercial and strategy director at BSkyB, the satellite broadcaster in which News Corporation, parent company of The Sunday Times, has a 37.7% stake. He said: “The biggest area for nervousness is the extent to which BBC content will be given out free on the internet. Just when people are getting used to the idea that they should pay for useful internet services, the BBC weighs in with a large free proposition.”
In Darcey’s opinion, if the whole BBC archive were to be free online, “it would be extremely difficult for any other video-content business models to survive, apart from possibly Sky with sport and movies”.
Patel of the BBC sounded a conciliatory note: “We believe core public-service content, such as news, would be in a free online archive. Other content, such as Planet Earth, would be available on commercial terms, but there is a question whether, after a period of time has elapsed, it should be brought back into the free archive. I have no doubt that we will agree the way forward on archived content with the rest of the industry.”
Magazines
The BBC has trimmed back its magazine business and stopped promoting its titles on television in recent years, but it still sells 100m copies of titles such as Radio Times, Gardeners’ World and Top Gear.
Stephen Quinn, senior publishing director at Conde Nast, wants the regulator to ask it to trim back further. “The BBC’s subsidy from the licence fee gives it a huge advantage as a magazine publisher,” he said.
Moloney agreed: “The BBC should not be in magazine publishing. It is clearly an encroachment into the commercial area, and the BBC could easily license out these brands.”
Patel responded that content for the BBC’s magazines was commissioned at normal commercial rates, and was audited by its “fair-trading auditor”, Price Waterhouse Coopers.
Radio
Critics argue that the BBC’s generous resources have enabled it to increase its radio market share in Britain to 55%, and to pay huge salaries to big-name presenters such as Terry Wogan (£800,000) and Jonathan Ross (£530,000). The BBC itself recently described spiralling pay for its stars as “super-inflation”.
A spokeswoman for GCap Media, owner of Capital Radio, said: “It is not the commercial sector that is driving up salaries. When we lose presenters, generally we know they are going to the BBC for more money.”
Lisa Kerr, at the Commercial Radio Companies Association, said: “The BBC’s expansionism is endemic. No matter how many times an executive says that the corporation is not trying to compete for ratings, it still does so.
“Radios 1 and 2 are targeting commercial radio’s heartland audience with entertainment-based programming during the daytime. Having news bulletins for a couple of minutes an hour, with the occasional longer one, is not enough to make them public-service broadcasting.”
The BBC responded that more of the licence-fee money goes to Radios 4 and 5 than to Radios 1 and 2. It said the budget for Radio 1, at £18m, has been increasing during the current funding period at below the rate of inflation.
It also argued that Radios 1 and 2 offer a much greater choice of music (new, live and in special-interest areas such as folk and jazz) than their commercial rivals do.
Free music downloads
Last year the BBC upset publishers of classical music by allowing people to download Beethoven’s symphonies free from its website after a Radio 3 season on the composer. Hundreds of thousands of people took up the offer. In all, 1m downloads were made — which would have cost the public a whopping £8m if it had bought the music at an average CD price of £8.
Anthony Anderson, managing director of Naxos UK, one of the biggest publishers of classical-music CDs, complained: “By offering downloads for nothing, the BBC was distorting the marketplace. Is this what a public-sector broadcaster, largely funded by the licence fee, should be doing?” Patel said the Beethoven downloads were an experiment and the BBC was “surprised” by the level of the response. It would “think very hard” before doing the same thing again. “We would probably do it in partnership with the classical-music publishing industry,” she said.
Patel suggested that the BBC could be good for the private sector: “We had a Bach season later in the year and anecdotal evidence is that record sales for Beethoven and Bach went through the roof. We may have stimulated interest.”
Overseas television stations
A sixth question mark concerns the BBC’s overseas television stations, such as the news channel BBC World, which takes advertising and is available in continental Europe, competing with CNN and Euro News. It lost £11.2m in 2004-5.
Richard Collins, professor of media studies at the Open University, said: “The investment in BBC World has a payback period that is longer than a rational private-sector operator would countenance.”
Philippe Cayla, chairman of Euro News, said: “Our view is that the BBC would do better for its licence-fee payers if it went into partnership with Euro News rather than tried to develop BBC World any further, especially in Europe. It would be far cheaper, and would avoid unnecessary competition. And remember that BBC licence payers get no value from channels they can’t see.”
The BBC’s Patel said: “In pan-regional TV, in addition to programme costs there is a substantial distribution cost on the signal going round the globe. The thing that really makes the difference to revenue potential is distribution in America. It is fair to say that it has taken BBC World much longer than expected to break into America, but we are making progress.”
THE big question for both sides in this debate is whether the corporation’s new regulatory regime has sharper teeth than the old one.
Reforms proposed in the recent white paper will make new ventures by the BBC subject to a “public-value test” by the BBC Trust (the new supervisory body that will soon replace its board of governors) and a “market-impact assessment” by the regulator Ofcom.
Ed Shedd, media partner at Deloitte, said that with the advent of the trust and new public-interest and market-testing rules, “there is a realisation within the BBC that it needs to think very hard about what services to launch and not to launch”.
Michael Grade, who will move from being the chairman of the governors to being chairman of the trust, is conciliatory.
He told Lord Burns’s seminar on the future of the BBC earlier this month: “I can understand why there is suspicion, why there is cynicism about the BBC, because of its past behaviour.” He pledged that the trust would make its own independent judgments on BBC strategy based on evidence provided by its own people. “We have a couple of years to win the confidence and trust of the private sector,” he said.
'Don't let it get £4bn a year'
IN the year to March 2005, the BBC received licence-fee income of £2.9 billion.
The fee for a colour-television licence rose by inflation plus 1.5% at the beginning of April, to £131.50.
The Department for Culture, Media and Sport will announce in the coming months the new licence-fee formula for the seven years from April 2007.
Mark Thompson, BBC director-general, has put in a bid for the fee to go up at a faster rate, of inflation plus 2.3%, to help fund the switch to digital television and BBC on-demand services.
Rivals and analysts are unconvinced. Charles Allen, chief executive of ITV, said: ‘The licence fee is already worth £3billion per annum and the BBC’s pitch would lift this to £4billion a year by the end of the settlement.
‘We believe that a settlement on these lines would distort the market to such an extent that it will be impossible for commercial broadcasters to compete on a level playing field.’
Allen put it colourfully at the May 5 public seminar chaired by Lord Burns on the future of the licence fee. Mixing metaphors about elephants and monkeys, he pointed at Thompson sitting beside him and said: ‘This elephant here is asking for a mountain of nuts.’
Richard Collins, professor of media studies at the Open University, said: ‘I think there is a case for giving the BBC a tighter remit and less money.’
David Elstein, a former chief executive of Five and current chairman of the Commercial Radio Companies Association, said: ‘The BBC will be lucky to get a bare inflationary increase, plus a bunch of stuff to help pay for the switchover to digital. If that’s what they get, it will be more than they need.’
