Greg Dyke Address Broadcasting Conference

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A New Future for Public Broadcasting

( 21 November 2003 )

Good evening or good morning as it is this end and thank you for inviting me to address

your conference.

Im conscious that the time difference means youve just enjoyed dinner while Ive just had

breakfast. I must confess this is my first after-dinner speech with nothing stronger than a cup

of coffee to sustain me.

It would have been preferable if I could have been with you in person especially as I could

have flown on to Australia to see England in the Rugby World Cup final. Of course here in

England we all expected to be playing New Zealand in the final but I dont want to intrude on

private grief.

[pause]

This morning I plan to talk about three things in particular and in the process hope to touch on

all the subjects I was asked to address by you. The three areas are:

Firstly, how public service broadcasting serves the public interest in the digital age

Secondly on distribution issues how the BBC got involved in free to air digital and our

interesting relationship with Sky

And finally a few details on the financial reforms we have carried out which have allowed

us to pay for much of what weve achieved in the digital world

So first, the purpose of public service broadcasting.

At the outset, we have to remember that although New Zealand broadcasting was originally

modelled on the BBC and the British system, today there are significant differences between

our two systems. The BBC still doesnt carry advertising anywhere on our output - the vast

majority of our funding still comes direct from every household via the annual licence fee

which is currently 116 and will soon increase to 121.

Even so, there are still some fundamental similarities particularly thanks to your current

Governments determination to rebuild the role of public service broadcasting in New

Zealand. As I understand it after some years in the wilderness, public service broadcasting is

back at the heart of your system. In doing this, youve clearly recognised the needs of yourpopulation as citizens as well as consumers.

When I met Martin Matthews when he visited the UK I was impressed by the new TV New

Zealand Charter not just for its laudable aims but also for the simplicity with which they

were expressed. Its a brilliant piece of work. While youve managed to express your

objectives on two sides of paper, the BBC charter and related agreement runs to something

like 40. Its hardly user friendly. As our charter is up for review in 2006, maybe well be able

to do something about that. (We are also preparing for this charter review process by thinking

about what the BBC should be for in the 21st Century).

Our work on this is still in its early stages but I am sure that the provision of high quality UK-

made programmes which reflect our culture and our society will be the defining feature of thefuture BBC.

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The globalised nature of todays markets have never made it easier or more tempting for

broadcasters to buy more and make fewer programmes. In this environment, its the BBCs

ability to invest in indigenous programming that will increasingly set us apart from our

advertiser funded commercial counterparts who, I suspect, will be forced to reduce the

amount they spend on original production as the market continues to fragment and more andmore people get multi-channel television.

I know youve carried out research in this area and the vast majority (77%) of people said

they supported the kind of programmes provided by NZ on Air. I believe this is further proof

of something we all instinctively know that audiences want programmes which reflect their

own culture and values.

The BBCs role as an investor in British programming and talent has always been central to

our remit. Whats becoming more apparent today is the increased importance this will have in

the future.

We recently published some independent research which highlighted the inevitable

consequences which current trends will have. Whether its the increasing reach of thematic

channels or the launch of new networks, content spend in the commercial sector will come

under pressure.

All the evidence suggests that TV markets operated on a purely commercial basis, behave like

any other market; they focus purely on the bottom line, import many of their programmes and

fail to provide audiences with the rich range of content we know they want.

Put a well funded public broadcaster at the heart of this system and you change the rules. In

this country, the BBC is responsible for nearly a third of all audio visual content spending and

40% of TV production spend.

Is this market distortion? Of course it is, but so too are our public hospitals, state education

and social services. As a society these are all things governments make a conscious decision

to provide in the best interests of our citizens. For instance last year the BBC launched two

new childrens channels one called C Beebies for toddlers and the other called CBBC for 6-

12 year olds. When we announced we were doing this we came under attack from the likes of

Disney, Viacom and Fox all of whom had already launched childrens channels in the UK.

They claimed it was unfair that we were using public money to compete with them. Butsurely in a democratic society we, the public, have the right to decide we want childrens

channels which dont carry advertisements, are essentially British and whose content reflect

our culture. Why should the BBC be dictated to by American media companies who are

effectively dumping American programmes in our market, simply to make an extra buck.

In todays market driven world I know its unfashionable to say these sort of things and attack

the free market concept but in the world of television we should always remember that

globalisation actually means Americanisation.

Historically, the BBCs presence in the UK market has meant that the principal commercial

channels have had to follow our lead if they are to compete. It ceases to be about who canmake or acquire the cheapest programmes and becomes a question of who can make the best

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programmes. Youll be pleased to know our channels are now number one and three in the

childrens market in the UK. Why? Because parents trust the BBC and want childrens

channels which are fundamentally British not American.

The financial strength of the BBC historically also explains why ITV, our main independent

channel is the biggest commercial spender in Europe and shows 20% more home grownprogramming than is required by regulators. They have to compete against us. Market

distortion? Of course but its for the benefit of Britain.

So public funding of broadcasting is not about creating an oasis of quality in a desert of

reality TV and soap operas. What it does is raise the bar for the big commercial channels too

and of course in the process creates huge spin off benefits in the creative industries more

generally.

Whether this effect will eventually extend to the pay TV sector is far from certain. The UK

pay TV sector, dominated by Sky, is now earning annual revenues of 3.4 billion. Its

estimated that just 100 million of that revenue goes back into making new programmes inthe UK. Thats a pretty pathetic recycle rate of just 3%. This compares with an average rate

of 55% among the UKs main broadcasters, including the BBC.

This is one of the reasons we see a clear place for a new breed of high quality free to air BBC

television services. Weve recently launched our own portfolio of digital TV channels into

this highly competitive market.

Now in addition to our two main analogue TV channels, BBC One and BBC Two, we have

six additional digital services, providing childrens programmes, arts, news and culture.

Like our childrens channels this new breed of BBC services are radically different from the

vast majority of whats on offer to digital viewers. The channels are advertising-free, and the

programmes are overwhelmingly British and commissioned for the channels on which they

are seen.

These and our other services are changing peoples minds about digital. In the past, premium

sports or movies were the main reasons for getting digital. Today the BBC brand is bringing

more diverse groups of licence fee payers to digital television.

==

We are also beginning to realise the potential power of the BBC brand outside the sphere ofbroadcasting, particularly in partnership with other people. Weve been discovering the value

of reaching out to communities in ways other than television and radio.

In the north of England weve been converting some of our radio stations into what we call

open centres where, as well as being broadcasters, they also deliver services so that people

can get internet access and IT training. Weve also been working in partnership with local

councils to take these resources on the road in special buses often connecting with people

who are neglected by or alienated from more traditional institutions. What weve discovered

is that the BBC name is something which has an association with glamour and is also a brand

which people trust. They dont associate us with the often rather austere institutions of the

state which traditionally provide education and advice. In the future, we see enormous scope

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The fundamental reason Freeview has proved a hit with consumers is because there are

millions of people in the UK who are not interested in digital TV if it means paying a monthly

subscription.

Freeview has removed that obstacle. By marketing it effectively to the very people who were

resistant to pay TV it has created demand for digital in areas of the market where previously itdidnt exist.

This is good news for us in terms of getting our new digital services to the widest possible

audience who after all have paid for them through the licence fee. Its also good news for

the industry and for the British government which has set a target date of 2010 to switch the

whole country over to digital. Thanks to Freeview, this is now a realistic prospect.

DTT does have some drawbacks though. As well as limited channel capacity, universal

coverage is difficult to achieve without interfering with analogue transmission.

DTT Coverage in the UK is currently about 75%. By comparison, digital satellite has 98%

coverage. So for people living in some parts of the UK, Sky has been the only digital option -even if you only wanted free to air digital services, including those from the BBC.

Skys strength in the market has traditionally given it power over broadcasters who had to pay

to use its conditional access system and encryption if they wanted to be on the platform

All this changed however when a new satellite was launched earlier this year. It offered a

tighter footprint which would not spill over in to much of Europe thereby doing away with the

need for encryption.

So when our contract with Sky came up for renewal earlier this year and they attempted to

hike our fees from 7m a year to a total of 85m over five years, we had both the opportunity

and incentive to switch to broadcasting in the clear, thereby by-passing Sky.

There were two main advantages in doing this. First, we saved huge amounts in encryption

fees yet could still have our services on Skys EPG. And second, we could spend this money

far more fruitfully on improved BBC regional services for satellite audiences.

One of the questions I was asked to address today was what effect this decision had on our

relationship with Sky. Well I cant pretend they were happy but then keeping Sky happy isnt

my job.

What I can tell you today is that since then, weve continued to work successfully with Sky in

some areas while competing with them in others. But then thats the world we live in today

Im sure Sky would rather have had the 85 million. But then who wouldnt? Their

interests lie with serving their shareholders. Ours lie with serving the interests of the public

who pay their licence fees.

Even so, weve collaborated with Sky on Freeview where they have three free to air channels,

on improving the range of BBC regional services available on satellite and more recently on

developing a standard EPG for the DTT platform.

What you cant afford in todays market is to have a one-dimensional relationship with the big

players like Sky. Competition is good for the consumer but so too is the ability to co-operatewhen its in our mutual interests to do so.

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===

So Ive talked about public service programming and some of the steps weve taken to ensure

they are widely available. Finally, let me turn to the subject of money without which none

of this is possible.

In one of my first big speeches as Director General I made the simple observation that

money matters when youre trying to make outstanding programmes. I also pointed out that

money on its own is not enough its easy to spend a lot of money making some very average

programmes.

Its our job to deliver maximum value to audiences. This means producing wonderful,

enriching programmes for the widest range of audiences. It also means recognising that

public funding is a privilege, not a right.

We have to spend the publics money in ways they would approve of. In our case, I said that

meant spending less on what I called the Three Cs cabs, croissants and consultants and

more on what goes on screen. At the same time I set tough targets for our commercial

subsidiaries in terms of the amount they contribute to programme-making budgets. These

subsidiaries last year handed back nearly 130 million for programme-making and saved us

23 million in reduced costs.

Today, The BBC is spending more money on the things that people want. Instead of spending

24% of our income on our overhead, on running the organisation, we have cut that by 50%

down to 13% and our aim is to get that figure even lower. At the same time, Weve increased

our programme spend by more than one-third (35%).

But most people in the BBC are not turned on by talk of efficiency savings. What gets them

out of bed in the morning is the prospect of having the opportunity to pursue creative ideas.

So the process of financial reform is just one part of a wider programme of cultural change at

the BBC called Making it Happen.

The overarching aim of Making it Happen is to make the BBC the worlds most creative

organisation. We know we will only do this if we change as an organisation. The BBC like

many public bodies has historically been averse to taking risks and prone to playing it safe.

Learning to take risks and to try new things is essential to the success of Making it Happen.

This applies as much to how we run the organisation as to what we put on air.

If we hadnt been willing to take a risk with untried talent in the form of Ricky Gervais and

Stephen Merchant, wed never have had The Office which has become the comedy hit of the

decade. And if wed listened too much to market research or to audience focus groups wed

never have made our recent drama documentary about Pompei or our modern take on

Chaucers Canterbury Tales. Both these programmes

went out in peak time on BBC One and attracted big audiences (10 and 8m (peak)

respectively)

This may explain why, as many of our main commercial broadcasters are struggling, the BBChas been enjoying the kind of success we havent seen for many years. Weve seen record

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levels of audience approval, BBC One has overtaken ITV for the first time as the most

watched TV channel and weve vastly increased the choice we offer viewers and listeners.

This isnt meant to sound boastful. Its evidence of the potential of public service

broadcasting even in the most competitive environment.

Finally, what we cannot afford is to allow ourselves to be pushed to the margins as some

would like. To do that is to follow the American and even the Australian model of public

service broadcasting and leave market forces alone to determine the kind of programmes

people get. Looking at the state of much of American TV and radio today, Im not sure what

that has to commend it.

We cant afford to be monkeys in a market of 800lb gorillas like Sky. The long term survival

of public service broadcasting depends on our ability to be 800lb gorillas too.

Governments have a role to play in creating the right conditions for public service

broadcasting to flourish. Secure funding is key to this. But so too is a recognition thatbroadcasting is a creative process which can be crushed by the weight of too many targets,

rules and restrictions. Governments have a terrible tendency to talk about light touch

regulation while binding the broadcasters in endless red tape and performance indicators.

Its also up to us as a public broadcaster to help ourselves. We must be willing to capitalise on

our assets and exploit our unique position to deliver the kind of home-grown programmes

which take time, money and talent to make. Ultimately, this and this alone is how we will

ensure our place in the broadcasting landscape of the 21st century.

As the BBC goes into the charter renewal process this country faces a choice. If it wants a

broadcast system which reflects our culture and our society it will need a well funded BBC.

If Britain doesnt want that I have no doubt the BBC will become like public service

broadcasting in the United States and Britain will lose its own distinctive broadcasting

system.

Thank you for listening Ill be happy to take any questions you may have.

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Greg Dyke Address Broadcasting Conference

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