Public Service Broadcasting – Taking The Next Steps Forward

Speech to The Royal Television Society by Ed Richards, chief executive, Ofcom:

It’s very kind of you to have me back. I am pleased to see so many people here tonight from so many parts of our business – or, should I say, ‘show-business’?

We have had a busy time – Guardian leaks at one end of the summer and McTaggart lectures at the other.

When Steve Hewlett and I met up a couple of weeks ago, I said “Steve, what do you think the most important thing will be for me to talk about at the RTS?”

He said, without a trace of irony and with a completely straight face: “The contents of your PSB review document.”

“That will be the PSB review you shared with the readers of the Guardian will it?” I said.

Luckily that was a very early draft.

This business has a never ending capacity to surprise. I had one such just a few weeks ago.

In common with many others I was enjoying the pouring rain on my summer holiday in Wales.

No landline and a very unreliable mobile service meant that I’d been out of all contact for a day or so.

It was a Saturday evening, relaxing with the family in front of the TV.

At that point, the mobile unexpectedly vibrated into life. A text alert.

It said something like: “No place for popular TV under Ofcom, says McTaggart lecturer.”

And another: “Ofcom against entertaining and popular TV says ITV chief.”

So my mobile is telling me that Ofcom is somehow banning entertaining, popular TV – and there I am sitting on the sofa watching the X Factor live on Saturday night prime time – on ITV!

“The world’s gone completely mad”, I thought to myself. “It must be the wet August affecting people’s mental stability.”

Now, I am used to Ofcom being criticised by those around broadcasting who believe we can and should turn the clock back twenty years to a ‘mythical golden age’.

I am used to Ofcom being harangued by those who insist that the market unaided will meet every reasonable need for every viewer in the land.

I am far less accustomed to being portrayed as somehow philosophically opposed to entertaining and popular TV.

But at least we now understand the root of ITV’s current woes. It’s not the recession or PSB obligations or CRR at all.

It’s that they do in fact have a cupboard full of peak time entertainment hits, but a shadowy figure somewhere in the bowels of Ofcom is secretly controlling the schedule and putting World In Action on instead.

There was a bit of debate about our PSB purposes as well. And of course you can always revert to the safe haven of Lord Reith’s ‘inform, educate and entertain’ or indeed Greg Dyke’s ‘great programmes’.

But the market will do quite a bit of that all by itself. So, in today’s circumstances, those definitions of PSB are rather like the country bumpkin’s answer to the motorist lost in the back of beyond.

The motorist said: “Excuse me my good man, do you know where I am?”

“Well Zurr, you is in your car,” replied the bumpkin.

It’s a wholly accurate answer – but also wholly useless for getting you where you need to be.

Hence our longer attempt.

Of course, Peter [Fincham] was having a bit of fun and I don’t begrudge him that. It was an entertaining speech written with humour and eloquence.

I confess to having the odd chuckle myself when I got round to reading it.

But it was a real missed opportunity. More light entertainment than serious factual.

There are in fact real issues facing our industry; issues that need to be confronted, argued about and addressed.

How do we strike a fair balance of public service obligations alongside the enduring value of ITVs licence?

How do we ensure Channel 4 has a sustainable economic model and clear purpose in the future?

How, if at all, can we secure a range of public service content including news in our nations and regions in the future?

These are some of the real issues that we face, and it is these questions that I would like to try and address tonight, working around four simple questions:

Is the current PSB system broken?

Does it matter if it is?

If it does matter then, how do we fix it?

And finally: How do we pay for it?

Is the current system broken? Legend has it that when Caesar crossed the Rubicon, there was no going back.

That is not a bad parallel for where our PSB system is today.

After a decade of change, steadily eroding the old system, it is hard to point to a precise moment where it broke and became unsustainable.

Several responses to our Phase One consultation said, in effect: “It isn’t that different from last year or the year before. A few more efficiencies here and there and it can scrape through for a few more years. So can we stop worrying about alternatives please?”

That is understandable, but wrong. And it is certainly not in keeping with Parliament’s instruction to Ofcom to “maintain and strengthen” public service broadcasting.

Since Phase One, we have looked again at the analysis and re-run and updated the numbers.

ITV plc’s financial position is worse now than six months ago. Partly that is cyclical. Despite programmes that have held or improved their share of commercial impacts, the economic down-turn is hitting nearly all ad-funded businesses hard. It is also structural, as we rapidly approach 90 per cent-plus digital take-up and online advertising looks to steal growth from more traditional media.

Now, it is of course in ITV’s interests to paint an apocalyptic scenario to the regulator. Indeed, it is in their interests to mount a public campaign pleading their case, highlighting the ‘excessive burden’ of regulatory obligations and muttering about the allegedly slow pace of regulatory reform.

And no one could possibly accuse them of not having done so.

But our job is not to be swayed by a bit of PR here and there, but to subject the numbers and projections to careful scrutiny and take an independent and objective view.

And that is what we have done.

There are some elements of what can be called ‘regulation’ that affect ITV plc’s bottom line, but which have no direct connection with the PSB Review. The CRR Remedy is a good example. We will address those separately, transparently, in the way we have set out.

But there are also things which affect the bottom line of the Channel 3 licensees and directly affect the costs and benefits of their PSB licence. We accept that, in aggregate, these are significant. We will set out detailed proposals next week.

Whatever our decision on these specific proposals, overall the costs of holding a PSB licence will outweigh the benefits for most Channel 3 licensees well before switchover is complete and in some cases imminently.

The uncertainties about Channel 4’s financial prospects remain as great as when LEK did the numbers for our financial review 18 months ago.

But the external situation is now worse. To break even, Channel 4 would need to cut their investment in public service content year-on-year from here to 2012 to the detriment of the public service content that audiences tell us they value.

We have subjected these projections to close scrutiny and we believe that this annual deficit could amount to between