BBC Strategy Review Supporting analysis December 2010
Getting the best out of the BBC for licence fee payers
BBC Strategy Review / Supporting analysis
Introduction
In summer 2009, the BBC began a wide-ranging review of all aspects of its future strategy. In March 2010, the BBC Executive then published the strategy proposals that it put forward to the Trust, titled Putting Quality First. The BBC Trust put these out to public consultation. A summary can be found at Annex A. In July, the Trust published its initial conclusions in response. These focused in particular on two areas. First, the shape of the BBC’s broadcast and online services and the content within them. Second, the way in which the BBC controls its costs and how much it tells people about where the money is spent. In both areas, the Trust concluded that there was more to be done to set even higher standards. We set the Executive a number of challenges, and committed the Trust to further work on areas including in particular:
• Value for money • Performance objectives and reporting • Distribution • Boundaries with the commercial market
We have now completed that work and published the final strategy for the BBC, available online at http://www.bbc.co.uk/bbctrust/our_work/strategy_review/index.shtml. The strategy itself has been designed to be as concise as possible since it will, to some degree, be a working document for BBC management. This document therefore sets out the supporting analysis in longer form.
A new licence fee settlement The Trust recognises that the BBC’s new licence fee settlement changes the picture somewhat. It is not realistic to expect that a 16% budget reduction can be made in the space of four years without some changes to the range of services and activities being required. In the course of the next year or so, the BBC Trust and Executive will therefore need to agree between them what a realistic target is for productive efficiencies in the period from 2013/14 to 2016/17, and how any remaining gap in funding is best met. That is likely to require a more fundamental review of the cost base and the shape of BBC services than was done in the course of the Strategy Review. It is likely that it will also need to incorporate the reassessment of the television portfolio that we had imagined would take place around switchover in 2012/13. The guidebook for this process will be the strategy that is set out here and the key principles will be the four objectives we have set for the future BBC: increase quality and distinctiveness; improve value for money; set new standards of openness and transparency; do more to serve all audiences. Therefore, while this supporting document necessarily looks back to the review process we have been through, the final strategy itself looks forward to the changes that are to come.
December 2010 1
BBC Strategy Review / Supporting analysis
Summary of initial conclusions
The Trust supported the core vision and principles behind the Director-General’s proposals in Putting Quality First and will pursue a strategy that focuses on the BBC’s core role as a provider of distinctive public service content, since:
• it is a strategy that addresses current audience demand for more fresh and new ideas • it reflects the BBC’s obligations as a recipient of public money and its role in fostering a creative public space • in the longer term, technological change could well make the BBC’s role as a funder and provider of UK content more important and its role in funding the supporting infrastructure for the distribution of that content somewhat less important.
The Trust agreed that the principles set out by the BBC Executive to ‘put quality first’ and ‘do fewer things better’ point the BBC in the right direction. We also agreed with the Director-General that the BBC should to go further in concentrating a greater proportion of its funds on content and creativity.
The Trust concluded that to deliver this strategy would require changes in BBC culture and behaviour in three areas: Value for money – how to be as transparent as possible and how to show licence fee payers that all their money is being spent wisely. Distinctive content – how to apply a new filter to commissioning and scheduling decisions that always puts quality first and concentrates on innovative public service content. How to turn the five new editorial priorities (journalism; knowledge, music and culture; UK drama and comedy; children’s content; events that bring communities and the nation together) into gold standards of BBC excellence. Openness – how the BBC could be more straightforward and open about its plans and strategy and how it could work better with the rest of the industry, in particular by explaining where it will set the boundary of its activity. We considered that to address concerns in the marketplace that the BBC seems too big, and disquiet among the public about whether the licence fee is always being spent as efficiently as possible, the first priority should be to tackle these questions about behaviour and prove that no resources are being wasted.
December 2010 2
BBC Strategy Review / Supporting analysis
In particular, the Trust stated that a new approach to value for money was fundamental to public trust in the BBC We said we wanted to accelerate the changes we were already making to increase transparency and value for money and that the BBC’s obligations to licence fee payers should include: Financial responsibility and efficiency – the BBC must not take any more public money than it needs. At that point, the BBC was already conducting a long-term efficiency review with a view to finding further savings through more radical changes to the cost base from 2013 onwards and the Trust stated it would appoint its own external advisers to interrogate the assumptions and conclusions of that review and would ask the National Audit Office to consider taking on this work for us. In the meantime, we thought the BBC needed to scrutinise its budgets with as much rigour as the rest of the public sector to see what scope there may be for saving money. The Trust therefore asked the Director-General to conduct a rapid exercise of this sort and to report back immediately after the summer, to assure ourselves that we were doing everything possible to remove slack in the organisation. Setting an example on pay – it is important that the top management of the BBC responds to public concern and shows leadership to the rest of the BBC in tough times. We therefore asked the Director-General to accelerate existing work to reduce the senior pay bill by 25% – so that it would be completed within eighteen months, by which time we expect there to be a different, simpler management and pay structure in place. In the meantime the Director-General and all members of the BBC Executive Board each volunteered that for this year and next they will forego a month’s salary. In parallel, Trustees volunteered to take an equivalent 8.3% pay cut for those two years. Transparency – licence fee payers have a right to know more about how their money is spent on management salaries and talent costs. We asked the BBC to disclose more detail about how these costs are structured and challenged them to provide greater transparency about who is at the top end of the talent pay scale, if this could be done without divulging individual salaries.
The Trust identified the next five years as a transitional period, requiring careful long- term planning to allow the BBC to manage the transition to a fully digital, on-demand world, and to restructure its services to do fewer things better in the longer term. Online – to prepare for a future where the BBC will have two distinct online functions – providing on-demand access to BBC TV and radio programmes while also remaining a publisher of distinctive, original public service material for the web. We agreed the first step should be to simplify the existing content on BBC Online and to strengthen editorial control of its future development. In television – to identify the future tipping points where reassessment will be needed of the range and structure of services. We stated that the first such point should be around the conclusion of switchover in 2012/13, by which point trends in on-demand viewing should also be clearer. For radio – to assess the likely shape of digital change and the BBC’s role in promoting that change on behalf of licence fee payers, both the services it provides and the contribution it makes to the transmission infrastructure.
December 2010 3
BBC Strategy Review / Supporting analysis
In each case the Trust was clear that the BBC had already begun to do its thinking, but concluded that it needed to move more quickly.
The Trust conclusions about the immediate implications for existing services were: Television – the immediate focus should be on increasing the distinctiveness of existing services, with a particular focus on greater variety and ambition on BBC One in peak time, and making BBC Two stand out as a clearer alternative through greater depth and ambition in its factual programming, comedy and drama. Further action is needed to improve the quality and originality of the daytime schedules. Network Radio – for the time being, the central focus for radio strategy ought to be: to deliver greater distinctiveness on Radio 1 and Radio 2; and to put together a full strategy for the BBC’s contribution to future digital development, based on Government policy, detailed discussion with the commercial radio industry and an appraisal of the potential of DAB against alternatives, including Internet Protocol radio. The Trust endorsed the BBC Executive’s underlying ambition to do fewer things better and thereby focusing the BBC more effectively on its core mission, ensuring that it plays its full part in promoting the move from analogue to digital and making sure it has due regard for the BBC’s competitive impact. However, we did not think a convincing case had been made, as presented, for the closure of 6 Music. The Trust did not agree that there is a consistent strategic rationale for closure on grounds either of promoting digital development or market impact. Nonetheless, we stated that the proposal had been helpful in highlighting the need for a further review of the BBC’s digital strategy. The Trust said that if, as part of that review, the Executive wanted to put together a different proposal for the overall shape of its music radio stations that it thought could further increase the distinctiveness of the output, we would consider it. However, we would not expect to see a further proposal to make changes to 6 Music unless the Executive could provide:
• a clear link between a new future strategy for music radio and the strategy for digital development • evidence that the changes we have already requested to Radio 1 and Radio 2 are under way • an explanation of how the distinctiveness of those stations could be further increased as part of a new music radio strategy • reassurance that there would be long-term protection for the type of distinctive content currently available uniquely on 6 Music
We acknowledged that the Asian Network was performing poorly and that the case for closure could be consistent with the strategy we were setting; we therefore said we would consider a formal proposal from the BBC to close it but would need to be convinced that any alternative proposed would be a clear improvement in terms of overall public value for British Asian audiences.
December 2010 4
BBC Strategy Review / Supporting analysis
Local radio – we welcomed the commitment to a more distinctive role and mission for local radio and said we expected a proposal from the BBC Executive to trial the concept of sharing regional content in non-peak hours to fund improvements including higher quality speech programming in peak hours and a renewed focus on local political coverage. We said we would use the outcome of that trial as the starting point for further regulatory testing. We decided to postpone our service review of English local radio, which was originally scheduled to commence in autumn 2010, until we are able to assess any changes that may be made. We confirmed that our review of national radio stations in the devolved Nations (Radio Scotland, Radio Wales, Radio Ulster/Foyle, Radio Cymru and Radio nan Gàidheal) would continue as planned this autumn. Online – we endorsed the concept of a 25% reduction in the BBC Online budget although we said we would want to understand and approve the editorial changes involved. We said we would welcome a simpler and clearer focus, including core online publishing services such as news, sport and weather alongside iPlayer. We also acknowledged the continued potential of BBC Online to add editorial value in other priority areas (in educational content for school students, for example) and said it must not be reduced to the provision of background material in support of other services. That reinforces our desire to see more effective editorial controls and leadership across the board, with effort and funding concentrated where the BBC has a clear and distinctive role and to remove BBC content where it does not have a clear public service rationale behind it. We said we would also want to see greater clarity as to the correct balance between audio-visual and text-based content.
The Trust also requested more detailed work from the BBC Executive in some areas: Those areas were:
• The Executive’s proposed strategy for the future development of digital radio • Its final proposals for re-shaping BBC Online
Areas of further work for the Trust were confirmed as: Measurement and reporting – to help set performance objectives and explain how we will assess whether the strategy is being delivered Distribution – what it should mean for BBC services to be universally available as technology changes. What the implications are for the different platforms the BBC is involved with, the way it shares its content with other platforms and the future deployment of archive and other material online Boundaries – the BBC must not retreat from serving any particular audience groups. But we think that boundaries need to be clearer and better expressed for the outside world and will want to consider further how to achieve that Value for money – we said we would accelerate our examination of how the BBC uses its own resources, to reassure the public it is not taking any more money than it needs The BBC’s global strategy – where the BBC Executive was, in July, still developing its proposals
December 2010 5
BBC Strategy Review / Supporting analysis
Finally, the Trust reiterated its continuing commitment to serve all audiences across the UK – both continuing to reach the vast majority in any given week, and improving the way it represents the UK’s Nations, regions and communities.
December 2010 6
BBC Strategy Review / Supporting analysis
Where initial conclusions have been firmed up
The Trust’s initial conclusions stand on their own terms. The final strategy represents an expansion and firming up of those conclusions and not a reassessment of them. It is nevertheless worth reinforcing two points in particular:
• While audio-visual media continue to move towards a digital, more on-demand future, the pace of change is not yet fast enough to demand significant structural change to the BBC or the general shape of its services. • Our position on the immediate future of individual services remains unchanged, but it has now been further informed by more detailed work by the BBC Executive on digital radio and BBC Online.
This section expands and updates our position on these two points, based on work that has been carried out since July. It concludes with a short assessment of the future impact of the BBC’s new licence fee settlement, agreed in October 2010. The sections that follow provide further detail on:
• Those areas where we asked the Executive to do more work in July • Those areas where we committed the Trust to do more work of its own
Market/technological context We observed in our initial conclusions that the future technological development of television-type services was likely to be through internet, mobile and hybrid platforms. It is clear that over time this could change the way the BBC works, and allow a very different approach to the packaging and branding of programmes, if traditional 24-hour live broadcast channels become less necessary or are put together in different ways. We accepted that widespread change of this sort remains some way off. But our conclusion about the implications was twofold. First, that it confirmed the BBC is right to re-focus on its central public service role as a creator of the highest-quality content above all else. In the longer term, the BBC’s ambition to ‘do fewer things better’ is likely to involve adapting to new patterns of audience behaviour by focusing investment on a smaller total amount of BBC output. Second, that the BBC needed to start anticipating and modelling future changes now and, for its television services, ought to fix some key tipping points at which the amount and structure of output ought to be reviewed again. Since we published initial conclusions, we have commissioned a more detailed assessment of market trends and developments from consultants Mediatique to inform our work on distribution strategy. The full report is available at http://www.bbc.co.uk/bbctrust/our_work/strategy_review/supporting_evidence.shtml. It confirms a trend of evolutionary rather than revolutionary change in audience behaviour in the next five years, as shown in the projections below, with the majority of viewing remaining via linear channels, with viewers gravitating towards the same programmes in
December 2010 7
BBC Strategy Review / Supporting analysis
both linear and non-linear windows, and with the great majority of video-on-demand (VOD) content viewed on traditional TV sets.
Figure 1: VOD consumption1
Figure 2: TV viewing hours2
1 Mediatique Market Report, p.38 2 Mediatique Market Report, p.40 December 2010 8
BBC Strategy Review / Supporting analysis
The immediate future for individual services The key priorities set out in our initial conclusions were:
• In television, to improve the distinctiveness of BBC One and BBC Two, particularly in daytime and in peak time • In radio, to increase the distinctiveness of Radio 1 and Radio 2 and develop a strategy for promoting digital radio • For BBC Online, to clarify and simplify the service, to concentrate more on areas where it plays a distinctive role and has a public service rationale, and to create more effective editorial controls and leadership
Since those conclusions were published, the Trust has concluded its service reviews of BBC One, BBC Two and BBC Four. The Trust's review found that BBC One and BBC Two are performing well in many respects. BBC One is the most watched channel in the UK while BBC Two's reach is also substantial. Audiences recognise that both channels provide a high-quality offering across all genres, and make strong contributions to delivering each of the BBC's public purposes. However, the review found some areas where both channels can improve, in particular to provide the distinctive offering that audiences expect from the BBC.
• BBC One needs to harness its scale and size by being more ambitious and taking more creative risks in peak time. In particular, it should actively seek to increase the level of range, variety and surprise in pre-watershed peak time, and show greater creative ambition at 9pm. We would expect to see signs of improvement in audience perceptions by the end of 2011 and will consider at that point whether we need to ask for further action from the Executive to address audience concerns • BBC Two should continue to implement its plans to make its factual, drama and comedy output more distinctive. Its aim should be to re-establish its position as a channel which audiences recognise as being manifestly different to BBC One • Daytime output on BBC One and BBC Two needs to make a greater contribution to the BBC's reputation for quality and distinctiveness. The Executive should therefore implement the proposals it has put forward in response to the Trust's interim findings to increase the quality and distinctiveness of daytime output.
The review also concluded that the Executive should aim to increase the impact of its current affairs programming on BBC One and BBC Two and implement its plans to improve the quality of opt-out programming in the Nations of the UK.
December 2010 9
BBC Strategy Review / Supporting analysis
Much of BBC Four's programming is seen as high quality and distinctive by its audience. Over 80% of its programmes were rated original and different, the highest by some margin for any channel. The review found that BBC Four does not, however, significantly influence wider audience perceptions of the BBC. BBC Four's challenge is to increase its impact, particularly in its core areas of specialism, and secure a greater reputational dividend for the BBC, while also retaining its distinctive nature. To help the channel realise this, the Trust expects the Executive to signpost and promote BBC Four content more effectively on other BBC output and channels, as well as continuing its ongoing commissioning and scheduling collaboration with BBC Two. The Trust will also amend BBC Four's service licence to reflect more clearly its editorial direction and focus.
In our initial conclusions, given that fundamental shifts in audience behaviour are still some way off, we did not see any immediate requirement for a radical reduction in the number of BBC services. However, we said we would consider any proposals for closing or changing particular services if they could be made on their own merits – in terms of serving audiences better in different ways – and fitted with the direction of an overall strategy that is about prioritising investment in high-quality, distinctive content. We asked the Executive to pursue particular pieces of work in two areas – to develop a more detailed strategy for promoting digital radio and to present final proposals for the reshaping of BBC Online through a 25% budget cut. Much of the digital radio strategy is about distribution and the funding of distribution, issues that are dealt with below. On the content side, the strategy is threefold:
• To present the BBC’s portfolio of digital services simply and clearly, and as ‘sub- brands’ of analogue stations wherever appropriate for listeners. However, 6 Music will not be re-branded because its current positioning is so clearly distinct from Radio 1 or 2. • To offer distinctive programmes on our digital services that are familiar alternatives to the BBC radio programmes that our listeners already enjoy • To place programmes currently available on analogue solely on a digital platform only where this is clearly editorially justified
The Trust sees merit in the Executive’s principle of developing its digital-only services, particularly 1Xtra and Radio 7, as closer extensions of its core analogue networks both in terms of their content and their branding and promotion – although we will want to consider the proposal to transform Radio 7 into Radio 4 Extra as part of the current service review. We do not now expect to receive any proposal from the Executive to change or close 6 Music. However, we will consider any formal proposal for the closure of the Asian Network if the Executive wishes to put it forward. We endorse the Executive’s plans to increase the volume of internal marketing of digital radio.
December 2010 10
BBC Strategy Review / Supporting analysis
We now expect the BBC Executive to publish its new digital radio strategy in full once the service review of Radio 3, Radio 4 and Radio 7 has been completed and the implications for the 4 Extra proposal are clear.
We have received a formal submission from the BBC Executive setting out the shape of the proposed reduction to the BBC Online budget and service, and we are currently analysing it. We accept the central argument that the scale and scope of BBC Online has become too broad and unfocused and needs a new, clearer, more coherent boundary but need to test the specific proposals put forward: first to assess whether or not they represent a significant change to the BBC Online service and require a Public Value Test; second to assess whether or not they deliver the sort of service that we believe is in the best interests of audiences and takes proper account of market impact. We expect to make a public announcement of our conclusions very soon, alongside the findings from our recent review of the arrangements for independent supply to BBC Online. We have noted a pilot of content-sharing proposals for English local radio, the results of which will inform our analysis of any formal proposal that the Executive may wish to put forward at a later stage for a permanent change in this area.
The impact of the licence fee settlement We knew when we published our initial conclusions that the next licence fee settlement was going to be very tough. In part, that was why we asked the Director-General to look again at the scope for immediate cost savings (an exercise discussed in more detail below). In advance of any settlement, and conscious that it was likely to impose some tight constraints, we emphasised the need for faster progress on behavioural and cultural change within the BBC, which we felt needed to prove it was as efficient as possible, as transparent as possible and as distinctive as possible from the rest of the market. Given extremely high and consistent levels of public support for the BBC and its output, we did not seek a radical reduction in or restructuring of BBC services. But audiences still want to see better, more innovative content and they want to be sure none of their money is wasted. Our final strategy aims to deliver a different sort of BBC in 2016. The immediate, specific changes we are making will go a long way to delivering that. The BBC’s new licence fee settlement changes the context and will require some tough choices. We want to make sure that spending decisions are consistent with the strategy we have set. It is not realistic to expect that a 16% budget reduction can be made in the space of four years without some changes to the scope of services and activities being required. In the course of the next year or so, the BBC Trust and Executive will therefore need to agree between them what a realistic target is for productive efficiencies in the period from 2013/14 to 2016/17, and how any remaining gap in funding is best met. That is likely to require a more fundamental review of the cost base and the shape of BBC services than was done in the course of the Strategy Review. It is likely that it will also need to incorporate the reassessment of the television portfolio that we had imagined would take place around switchover in 2012/13.
December 2010 11
BBC Strategy Review / Supporting analysis
The guidebook for this process will be the new strategy the Trust agreed and the key principles will be the four objectives we have set for the future BBC: increase quality and distinctiveness; improve value for money; set new standards of openness and transparency; do more to serve all audiences. By increasing the pace of those changes to its culture and behaviour the BBC can ensure it sets the right boundaries as it goes through what will be a difficult period of change.
December 2010 12
BBC Strategy Review / Supporting analysis
Outstanding challenges: value for money and transparency
Where initial conclusions on content and services asked for an expansion or further development of Executive proposals, our conclusions on value for money and transparency set the Director-General two new challenges. First, we asked him to scrutinise budgets immediately to see what scope there was for saving money in the current licence fee period. Second, we asked for increased transparency around both senior executive pay and talent pay. On the former, we asked the BBC to develop a system for the regular publication of full and formal records of all public service senior managers’ pay, anonymised in bands, together with a clear, costed summary of the overall pay/grade structure and in a form that would allow annual tracking of progress. On talent pay, we asked for aggregate costs of presenters’ and other talent salaries in the narrower bands recommended by the Commons Culture, Media and Sport Select Committee. In addition we concluded that there was an over-riding public interest justification for greater transparency about who is at the top end of the talent pay scale, although this should not go to the level of disclosing individual salaries. We asked the Director-General for a plan to deliver this.
Immediate financial review The BBC Agreement requires the Trust to keep the financial needs of the BBC under review to ensure that the Executive Board is not authorised to spend more public money than is needed to appropriately fulfil the BBC's responsibilities. The Trust remains committed to the principle of ring-fenced multi-year licence fee settlements. It is a key part of the BBC's independence that the Government grants such settlements and does not re-open them before they come to an end. However, we also recognise that the British public is facing an exceptionally tough financial climate. In June, we therefore asked the Executive to scrutinise its budgets and see if it could make further short-term savings on top of the existing three per cent year- on-year efficiency target. The aim was to work out whether the BBC would be able to forego any increase in the licence fee for the next two years, while also planning prudently to meet its commitment to return to a zero borrowing position by the end of the current licence fee period and to maintain the broad pattern of current services. The Executive presented its findings to the Trust at the start of September. They made clear that a two-year licence fee freeze would cost the BBC around £144 million in foregone income and would require some on-air changes, particularly at a time of continuing capital spend on infrastructure projects and digital switchover. Nevertheless, the Trust concluded that there were ways of making the necessary savings while keeping any on-air impact within acceptable limits. Detailed work continues on how to implement those savings, as the Trust and Executive agree a budget for the financial years 2011/12 and 2012/13.
December 2010 13
BBC Strategy Review / Supporting analysis
The proposal to freeze the licence fee was put to the Secretary of State in mid-September. He immediately accepted and implemented the first year of the freeze, while reserving his position about whether or not to implement the second year. Since then, we have agreed a new licence fee settlement with the Government that extends the licence fee freeze to cover the whole six-year period between now and the end of the Charter in 2016/17, with the fee remaining at £145.50. The settlement also added new funding responsibilities, taking an estimated £340 million of funding annually out of Government departmental budgets by the end of the new spending period. The impact of this settlement will require a further round of financial planning to assess how to implement what amounts to a 16% cut to existing BBC budgets. A good part of that work will focus on a future efficiency programme, to be implemented from 2013/14 onwards, although there are also likely to be tough choices about how to reduce spending in some content areas, and the Trust will seek the views of audiences as we go through that process. Meanwhile, the immediate job of making the books balance for 2011/12 and 2012/13 still needs pursuing as part of the forthcoming budget round.
Transparency on staff and talent pay Licence fee payers need to be assured that money is being spent wisely. It is the Trust's responsibility to make sure of this on their behalf, and the Trust therefore publishes performance and financial information to explain the overall progress that is being made. But that is not enough. From our research, we know that licence fee payers understand that the BBC operates in a commercial market for talent, and they expect the BBC to put the best possible presenters on air. But research conducted over spring/summer 2010 showed they were also sufficiently concerned about pay and expenses within the BBC that they wanted to see the amounts involved – to reassure themselves directly that they could trust the management not to spend too much money on salaries. The BBC, led by the Trust, has been right at the leading edge of the trend towards greater public disclosure of this sort of information. But we decided to think again about what the most appropriate, open and transparent package of information would look like. To guide our thinking, the Trust commissioned Deloitte to produce an independent report reviewing the approaches taken to transparency and accountability across the private and public sectors, and how the changes we have made to the BBC’s policies compare with examples set elsewhere. Assessed against the framework provided by Deloitte, the BBC is already among the most open and transparent organisations in the UK. However, standards of transparency are increasing across the public sector, and our goal was not simply to stay ahead of others, but to provide the level of transparency that we think licence fee payers want and need in order to build their trust in how the organisation is being run. This was the backdrop for the challenges we set the Executive in July to increase transparency around both senior executive pay and talent costs. Where senior managers are concerned, the Executive has accepted the Trust’s recommendations. From next year, it will produce an annual report on all public service senior manager pay, with salaries anonymised but published in bands no greater than
December 2010 14
BBC Strategy Review / Supporting analysis
£5,000-wide and fitted into an organisational plan. On top of that, the BBC will also produce quarterly reports on expenses, gifts and hospitality for all named senior managers paid more than £150,000. The Trust is satisfied that this is an appropriate and proportionate response. It forms part of a new cycle of planning, reporting and disclosure, outlined in more detail below in the section on openness and transparency. We will break talent costs down into figures for aggregate spend in the bands suggested by the Culture, Media and Sport Select Committee. The BBC currently publishes its spend on talent in four bands (<£50k, £50k-£100k, £100k- £150k and £150k+). As recommended by the Select Committee, it will now publish talent spend in up to nine bands (<£50k, £50k-£100k, £100k-£150k, £150k-£250k, £250k- £500k, £500k-£750k, £750k-£1m, £1m-£5m, £5m+). We also now intend to indicate the numbers of individuals falling into different bands – again, following the recommendation of the Select Committee. Our initial conclusions on the Strategy Review stated that ‘given the BBC’s reliance on public funding, there is an over-riding public interest justification for greater transparency about who is at the top end of the talent pay scale, although this should not go to the level of disclosing individual salaries. We are therefore challenging the Director-General to work urgently on a plan to deliver this level of transparency.’ At the Trust’s request, the Executive continues to examine the legal and commercial issues around this concept of naming the individuals in the very highest bands.
December 2010 15
BBC Strategy Review / Supporting analysis
Where the Trust has done new work Strategic Objectives The Trust wanted to deliver a clear, concise final strategy focused around a set of objectives that were consistent with all the work done over the past year by both Executive and Trust and would be meaningful and motivational to staff. We have set four over-arching objectives that summarise the changes we want to see in the BBC between now and 2016. Below we explain the thinking behind each individual objective, but the philosophy can be summarised in the following terms. The BBC is a public service. It needs to distinguish itself from the rest of the market and hold the trust of the people who pay for it. This is a strategy for accelerating the pace of changes in BBC culture and behaviour that are already under way. The BBC should:
• Increase the distinctiveness and quality of its output • Improve the value for money it provides to licence fee payers • Set new standards of openness and transparency • Do more to serve all audiences
The first three objectives repeat the three core themes of our initial conclusions. The last brings together the new work we have done on universality and distribution with our existing ambitions to better reflect the whole of the UK in BBC output and to maintain the very high overall reach of BBC services. These objectives are not an attempt to summarise everything that the public expect from the BBC or to re-define its reason for existing. The Royal Charter, with its six public purposes and over-arching mission – ‘inform, educate and entertain’ – remains constant. Instead our objectives are about how the Trust wants the BBC to go about fulfilling its public purposes. They clarify the Trust’s focus on those aspects of the BBC that we want to change in the second part of this Charter period. For each objective, our strategy document sets out: why this is an objective; what it means; what the BBC will now do to fulfil it; how the Trust will measure progress. These are not straightforward objectives – they are multi-faceted and they involve a challenging programme of cultural and behavioural change. In assessing progress, therefore, we will use a range of different measures, including audience research, financial measurement, external audit and viewing and listening figures as well as the Trust’s own qualitative assessments of performance. The sections that follow provide further detail about the work and the thinking that went into each objective. The final strategy document http://www.bbc.co.uk/bbctrust/our_work/strategy_review/index.shtml provides the best
December 2010 16
BBC Strategy Review / Supporting analysis
summary of the steps we will take to pursue them and the ways in which we will measure success or failure.
Increasing the distinctiveness and quality of output The Trust believes that the BBC, as a publicly funded broadcaster, has an important duty to provide output that is seen as distinctive by audiences. Public funding also bestows a responsibility on the BBC to take its role in promoting UK culture and creativity seriously and to demonstrate that it has a role as patron of British creative talent. These responsibilities are enshrined in the BBC’s public purposes. The Trust assesses the BBC’s performance in promoting its public purposes each year and has found that the BBC is not meeting audience expectations for distinctive programming, with our recent service review identifying notable performance gaps on BBC One and Two. We have set out our expectation that each channel should aim to be more distinctive, particularly in peak time on BBC One and in daytime output on both channels. This finding is partly a reflection of wider audience dissatisfaction with the amount of distinctive programming on television generally, and it is worth noting that this is not a problem unique to the BBC, and indeed the BBC’s channels are generally seen as performing better than commercial channels in this regard. But audience research shows that audiences have higher expectations of the BBC, and particularly BBC One, than commercial broadcasters in this regard. We think this reflects audience understanding that the nature of BBC funding should allow it to take greater risks. We explained in our initial conclusions the ways in which we expected the BBC to do more to pursue distinctiveness, which have been translated into the final strategy. Putting Quality First is also a strategy that emphasises the importance of increasing quality. Our assessment, on the basis of a range of audience data, is that quality standards are already very high across most BBC services. Nevertheless, we endorse the Executive’s aim to maintain and, where possible, increase quality of BBC output, particularly in the five genre areas they have identified as priorities:
• journalism • knowledge, music and culture • UK drama and comedy • children’s • events that bring communities and the nation together.
To measure progress, we will continue to track audience perceptions both in terms of immediate responses to programmes (particularly Appreciation Index or AI scores) and more general perceptions of BBC performance. We have agreed with the BBC Executive that measures of quality should be given new precedence within the BBC’s established performance assessment framework – Quality, Reach, Impact and Value for Money (QRIV). We have also agreed that the BBC will in future publish quarterly reports on the performance of each service in terms of quality and distinctiveness measures. We hope this will balance the emphasis otherwise placed
December 2010 17
BBC Strategy Review / Supporting analysis
on audience figures and create additional incentives for programme-makers to put quality first.
Improving the value for money provided to licence fee payers We made clear in our initial conclusions that improving value for money remains a fundamental objective for the BBC. We must continuously scrutinise BBC activities to ensure that any scope for saving money is identified. But we believe there is more to value for money than looking for savings and new efficiencies, though this is undoubtedly very important. It is also about being transparent in how we spend money so that we can demonstrate to licence fee payers that their money is being wisely spent. For this particular key objective we will be looking to the BBC Executive to deliver:
• increased efficiencies • public responsibility in specific areas of expenditure such as senior pay • an increase in the proportion of expenditure that is spent on content and a reduction in the proportion spent on central overheads
Earlier in this document, we set out progress on the work the Trust asked the Director- General to conduct on immediate savings and to increase transparency on pay. In our final conclusions, we further confirm that:
• Delivery against the current 3% year-on-year efficiency target will be verified by the BBC’s external auditors, KPMG, and considered by the NAO in a value for money study in 2011 • Work to reduce the senior management pay bill by 25% will be accelerated so that this is completed by December 2011, from a baseline at 1 August 2009. In order that the BBC can demonstrate its progress we have asked that the external auditors confirm the baseline position.
Together with the BBC Executive, we have also now worked up plans for greater disclosure of BBC spending plans. The BBC currently publishes its incurred expenditure in its annual report split out by individual service. Although there are baseline budgets stipulated for the individual services we note that the BBC has not to date published its spending plans in entirety in advance of any financial year. We believe that this is an area where there is room to be more transparent. Accordingly we intend to publish a summary BBC budget, approved by the Trust, for each year to enable licence fee payers to see where the BBC is intending to spend its money. This should include supporting information from the Chief Financial Officer about spend in particular areas of public interest, such as property or talent costs. The budget commentary will also explain how the Director-General's five editorial priorities have been used to determine spending priorities and service licence budgets.
December 2010 18
BBC Strategy Review / Supporting analysis
One particular area of budgetary detail that we undertook to investigate further was the Executive’s proposed commitment to spend 80% or more of the licence fee on content and no more than 10% on delivery costs and 9% on overheads. We noted in our initial findings that although we supported the principle of a minimum commitment to content spend we did want to be assured that the methodology behind that commitment was sound and consistent with the way that costs are allocated and measured within the Trust’s existing system of service-specific budgets. We therefore commissioned an independent adviser, BDO, to examine the Executive’s proposals. The full report can be found here: http://www.bbc.co.uk/bbctrust/our_work/strategy_review/supporting_evidence.shtml. We note that while a commitment to direct a higher proportion of the BBC’s expenditure into content seems desirable, this does not of itself mean that greater value for money has been achieved. So such a target can only be one part of the story and we also need to consider the overall level of spend – benchmarked where appropriate – and the level and quality of services delivered against that spend. In other words such an aim – or target – could only ever be one tool within our wider value for money strategy. At this stage, so soon after a new licence fee settlement that has brought significant additional funding responsibilities, we do not have sufficient confidence to back a specific numerical target for a minimum content spend. We believe that more work will be required to get the right definitions for all possible costs and to define the current baseline. We also believe that it is right that any such target is consistent with, and complements, the reporting regime associated with service licence budgets. In taking this forward we will also consider the recommendations made by BDO regarding how we might seek to enhance the current service licence budgetary regime. We are, however, setting a clear direction for the BBC to increase relative investment in content overall and to reduce the proportion of costs that it spends on its central overheads and to bring this below 10% of spending on the BBC’s UK public services (from a current level of around 11.5%).
The BBC Executive also suggested setting a target for the positive economic impact of the BBC’s activities on the wider UK economy. This is called the ‘Gross Value Added’ of the BBC. The Executive employed Deloitte to assess the current Gross Value Added (GVA). Adopting a methodology developed by PwC for the BBC Trust, Deloitte estimated that for the financial year 2008/9, the GVA of the BBC was £7.739 million. In addition, using an approach developed by the BBC Trust, Deloitte estimated the net impact of the BBC on the UK economy. This approach adopts a counterfactual to estimate the impact of the BBC’s activities net of a hypothetical alternative market structure, called the counterfactual. The counterfactual used assumes that the BBC is replaced by an advertising funded PSB. Using this approach Deloitte estimates that the net impact of a licence fee funded BBC is £2.551 million. The BBC Trust agrees with the estimates made. It is exploring whether the work to date could take further account of the impact of the BBC’s R&D activity. We also see merit in re-running the GVA analysis at regular intervals – though not as a day-by-day or year-by- year management tool.
December 2010 19
BBC Strategy Review / Supporting analysis
While we have focused on a number of specific areas of value for money through this Strategy Review, the Trust’s focus on the financial management of the BBC and its stewardship of the licence fee runs much broader. A summary of the way we pursue these tasks is included here at Annex B.
Setting new standards of openness and transparency Openness and transparency were two slightly different themes in our initial conclusions – openness was focused more on the relationships between the BBC and the wider media industries, whereas transparency was focused more on issues of value for money (and particularly pay, where we found a good deal of audience concern). In our final strategy, we have brought them together as a coherent statement of what we think should be expected of the BBC as a public institution that spends all of our money. In doing so, we have been mindful of two particular risks. First, that of increasing the bureaucratic burden on the BBC at a time when we are simultaneously seeking to reduce management costs. Second, that of reducing the BBC’s ability to achieve the best possible value for money in commercial deals if too much sensitive information is in the public domain. In the Trust’s view, notwithstanding these risks there are four aspects of openness and transparency worth pursuing:
• A more transparent organisation, explaining publicly how and where money is spent, what progress is being made against this strategy and what future plans exist for new investment and activity. • A BBC that works more openly with the market, trailing new investments, communicating directly with competitors, identifying and setting clear boundaries around ‘no-go’ areas where there are particular sensitivities, building a range of partnerships with a bias towards non-exclusive arrangements. • A BBC Trust that involves the wider media industry directly in the process of scrutinising and reporting on BBC performance • A wider range of performance information in the public domain on a regular basis – including audience assessments of quality as well as the day-to-day figures for reach and share.
To pursue the first aspect, the Trust has decided to begin publishing annual business plans and a summary budget for the BBC at the start of the year, as well as providing an Annual Report at the end of the year. As part of that process, we have asked the Executive to include more information in future through some combination of business plans and Statements of Programme Policy about new initiatives and investments – so that the market understands what the BBC is planning. Where relevant that information needs to be updated at the half-year point also. In the area of most regular tension with commercial companies – BBC Online – more
December 2010 20
BBC Strategy Review / Supporting analysis
formal industry engagement will now be mandated in the form of at least two official industry briefing events each year. The section above on quality and distinctiveness explained how the Trust now intends to make more information public about overall performance against those sorts of measures to balance the current focus on reach/share/viewing numbers. The Trust also intends to provide more formal opportunities for the rest of the industry to comment on BBC performance each year. Finally, we will extend and simplify the existing arrangements for the publication of pay and expenses of senior BBC managers. All named senior managers earning more than £150,000 will now have quarterly reports published on their pay and expenses. All senior managers across the BBC will have their salaries published in bands no greater than £5,000 apart. They will also be fitted into a published organisational plan.As a result of this set of changes, we will have a new and slightly different annual calendar of disclosures/reports/publications. A summary of the new calendar is at Annex C.
Doing more to serve all audiences This is an objective in three parts:
• Distribution, and the ambition to provide a universal service to all licence fee payers • Reach, and the Trust requirement that the BBC maintains a sufficiently high average weekly reach across the population to justify a flat fee licence fee • Representing the UK, its Nations, regions and communities – one of the BBC’s public purposes, and one of the areas where performance is consistently short of what the Trust would ideally want to see
This section looks at each of these three areas in turn.
Distribution and universality The BBC enjoys stable and secure funding in the form of the licence fee that provides it with a unique ability to invest in the UK’s media and broadcast industries for the long term. The Trust views the relationship between licence fee payers and the BBC as fundamental to the way in which we hold the management of the BBC to account in delivering the high-quality programmes and services you expect, providing something for everyone, whilst always respecting the need to ensure value for money when investing in existing and future technologies. YouView is the latest example of the BBC investing in new technology to keep pace with audience expectations and to maintain the principles of open, easy access to BBC services. The Trust recognises the BBC’s long history of research and development in new broadcast technologies, from colour television to DAB to High Definition on terrestrial TV. The Trust commissioned new audience research, in the final phase of the Strategy Review, to test the public’s attitude towards the distribution of (or access to) BBC
December 2010 21
BBC Strategy Review / Supporting analysis
services. That research shows that licence fee payers expect the BBC to create and deliver television and radio programmes that are relevant to them across the Nations and regions of the UK, and easy to access on the platforms that offer them the greatest convenience. For example, radio listeners in Wales expect to be able to pick up BBC Radio Wales at home, or on the move in a car, on FM, AM and DAB. But listeners can also access Radio Wales online, on Sky, Freeview, Freesat, Virgin and even BBC iPlayer on some mobile phones. The way in which the BBC distributes its programmes and services is becoming increasingly complex. This is partly in response to audiences consuming content in new ways on a variety of new platforms and devices (e.g. BBC iPlayer on mobile phones), but also as a result of new developments in technologies and the media industry (e.g. digital radio on DAB, or broadband internet access bundled with TV and telephone services). With digital switchover around the corner in 2012, older analogue broadcasting infrastructure is becoming increasingly expensive to maintain and upgrade. Against this backdrop, spectrum – the airwaves over which most BBC services are carried – will become a commodity that the BBC must pay for and utilise with greater efficiency if Administered Incentive Pricing (or spectrum charging) is introduced from 2014. How the BBC positions itself to take advantage of these changes is critically important, not only in terms of delivering high-quality services but also in terms of its ability to do more with less. As the media and technology landscape becomes increasingly complex, we think it is important to set clear and simple expectations for licence fee payers about how the BBC will deliver the programmes and services they cherish in ways that are efficient, convenient and easy to access.
A principle of universal access to BBC services The Trust supports a strong and long-term BBC commitment to universality. In return for the licence fee, everyone rightly expects to be able to consume BBC programmes and services in a way that is convenient for them, free at the point of use. Our principle is that the BBC should seek to ensure that every household should have convenient access to each relevant BBC service, free at the point of use. We recognise that this is not straightforward to achieve. Geography has historically made genuine 100% coverage prohibitively expensive, and the industry norm definition of ‘every household’ has settled at around 98.5% coverage for terrestrial TV. New platforms and devices are proliferating and most pay platforms offer no completely ‘free’ option. Expectations of mobile services are now beginning to grow beyond the traditional mobile medium – radio. It is also worth noting that through the BBC’s history there have been only two periods where all BBC platforms have been close to ‘universal’ – around 1939-51 (AM radio) and around 1970-96 (colour terrestrial TV, black and white terrestrial TV, AM and FM radio). Since then, the introduction of online and digital services by the BBC has been partly aimed at driving up take-up of new platforms, and so these services have not been available to all. We think, nonetheless, that the BBC’s ambition needs to be to ensure universal access to relevant national and local services.
December 2010 22
BBC Strategy Review / Supporting analysis
But we also think the BBC needs to have some guiding principles that help it take decisions about how to pursue that ambition. Those principles are:
• Safeguarding safe, accessible open routes to BBC content • Sustaining quality free-to-air platforms • Providing value for money to licence fee payers • Securing baseline quality standards, brand attribution and due prominence • Meeting legal obligations and being technically feasible
Now is the right time to review distribution strategy. First because there are still substantial gaps in universal coverage (for instance around DAB, FM transmission in some areas or the absence of BBC Alba on Freeview). Second because, conversely, some services are distributed in a very wide variety of different ways (as shown in the chart below) and it is worth asking whether that duplication provides value for money. Third because of cost pressures on the horizon – for instance linked to any investment in DAB build-out, the possible arrival of spectrum charging, upward pressure on internet costs and a proliferation of different devices and systems.
Figure 3: Availability of BBC services by platform
December 2010 23
BBC Strategy Review / Supporting analysis
Audience research reinforced this message. The public told us that alongside the BBC’s broad commitment to universality, they also respect the need for the BBC to make choices in how programmes are delivered in a distribution environment of increasing complexity and cost, and a tough financial climate. The Trust examined each particular area of distribution – television, radio and online/mobile – on its own terms.
Access to television services The current strategy for the distribution of BBC television services delivers near-universal access by combining its own investment in free-to-air platforms with negotiated carriage deals on other satellite and cable platforms. Digital Terrestrial Television (‘DTT’ or Freeview) is the main distribution technology by which the BBC guarantees universal, free and open access to almost all BBC television services to at least 98.5% of UK households. However, DTT coverage can be patchy in heavily built up areas or where local terrain interferes with signals from the transmitter to the rooftop aerial. In these areas, the availability of Freesat, in addition to the BBC’s carriage on pay platforms, fills the gap. On behalf of licence fee payers, the Trust will monitor closely the audience take up of YouView services, HD and 3D TV which help to inform any future significant developments that need to be addressed as part of the BBC’s commitments to universal access to television services. The BBC should continue to develop and invest in new television technologies itself, where there is public value in doing so.
Access to radio services Radio is more complex, because some radio services remain a good way off universal coverage – in particular digital-only services via DAB, with current coverage around 90%, and some Nations radio services, which do not have consistently good coverage either. The Trust’s conclusions on radio distribution are informed by the additional work we asked the Executive to do over the summer on digital radio strategy. Our proposal is to:
• Enhance its national DAB coverage now – so that it approaches FM equivalence for all the BBC’s UK-wide digital services as soon as feasible – and evaluate options for improving the DAB coverage of BBC Nations radio services • Prepare for any potential radio switchover in two ways: - Draw up a plan for a further build-out of national DAB to match the BBC’s national FM coverage as a switchover date draws near - Continue working with Government and industry to assess the level of investment needed to extend coverage of the local tier of DAB in time for any switchover, recognising that this is not currently funded within the new
December 2010 24
BBC Strategy Review / Supporting analysis
licence fee settlement. We will also want to assess any switchover plans against further audience feedback and research • Review the value for money case for the duplicate distribution of the BBC radio through digital television platforms by the point where DAB coverage approaches FM equivalence
This is a strategy based on an ambition to achieve universality for each of the BBC’s radio services. It is not about ensuring there is a radio switchover. DAB is worth investing in, as the only fit for purpose mobile digital radio medium for the next ten-year period. However, as coverage increases, costs rise significantly and further investment to reach FM equivalence would need to be linked to a clear plan for switchover. However, we also recognise the difficult position that the commercial radio companies face during an interim period, continuing to fund DAB and putting any money into improving coverage for the local multiplexes that they run ahead of further clarity around switchover. We would also ideally want to find ways of reducing, over time, the amount of duplication in the simultaneous transmission of some radio services across a range of different platforms and have highlighted this as an issue to return to once DAB reaches levels approaching FM equivalence.
Online and mobile access Online now fulfils a vital role in extending the range and value of the BBC’s radio and television programmes. In the future, if the BBC is to expand the range of archive content that it puts online, that role could be increasingly important. However, it is also important to emphasise that the BBC is not responsible for broadband networks and devices at the consumer level – these being the responsibility of Internet Service Providers (‘ISPs’) or Mobile Network Operators (‘MNOs’). This means that although the BBC cannot on its own deliver universality, the Trust believes that the key universality and distribution principles of free, open and easy access apply in equal measure to the BBC’s online services. For basic text-based services, universal access to the internet is already a prospect within reach, although issues remain around take-up and a continuing digital divide in UK society. For iPlayer, however, in common with other long-form video offers, universal access would ultimately require universal broadband. We therefore support the Government’s ambition of extending access to broadband (including super-fast broadband) across the UK in the next five years. We will use the £150 million ring fence within the new licence fee settlement to help fund that Government programme, on top of the money that is already available to the Government from the existing underspend on the Digital Switchover Help Scheme. We will look to explore with the Government what the appropriate balance is between spending that money on infrastructure development and spending it on initiatives to boost take-up of superfast broadband, and what contribution the BBC could make.
The Trust has meanwhile been reviewing its policy on the syndication to other platform operators of the BBC’s long-form AV content for catch up services. Following public
December 2010 25
BBC Strategy Review / Supporting analysis
consultation which finished in July the Trust is now close to completing its review of its on-demand syndication policy. In the light of strong stakeholder interest we intend to consult again on provisional conclusions at the beginning of 2011. We will set out our reasoning fully when we publish our provisional conclusions, but the main emerging findings are likely to be that:
• the Trust's existing view (from its 2007 policy), that there is clear public value in the syndication of BBC PSB content on-demand, remains valid • the public value of the BBC is not limited to its content production but derives from its role as a broadcaster and its ability to aggregate content as it does in linear form through its channels. The same principle holds true for on-demand content, so full length PSB TV content should only be made available in aggregated form through a BBC product (for example, iPlayer). Specifically, it should not be made available in disaggregated form • BBC aggregation products (for example, iPlayer) need to be widely available on platforms and devices that are convenient to licence fee payers, but this needs to be balanced carefully against the need to ensure value for money and operational viability and achieved in a way which takes proper account of the effects on the market
Finally, we have considered the role of mobile services and their place in any policy on universal access to services. We have concluded that, although mobile and online are beginning to merge together as interchangeable means of distribution to some devices, including for instance the new generation of tablets, for the time being it is not realistic or appropriate to demand the BBC provide universal access to all its services via mobile networks. Our audience research suggests that the public do not, today, expect that sort of universal access. Instead, we will continue to hold the BBC Executive to the findings from our review earlier this year of the BBC’s specific investment in new mobile apps. The Trust will expect apps to be developed only where they provide access to existing BBC Online content and are available on a free, reasonable and non-discriminatory basis to different mobile operating systems.
Reach It is the BBC’s responsibility to provide something of high quality that is valued by every community within the UK and everyone who pays the licence fee. Our audience research reveals considerable opposition to any suggestion that some parts of the community might be less important to the BBC than others. Although we think the BBC should be willing to see the reach of individual programmes and services fall in favour of high quality and distinctiveness, it continues to be important that the BBC reaches the great majority of the population across all its platforms and services with something that can be meaningful and valuable to each of them.
December 2010 26
BBC Strategy Review / Supporting analysis
The BBC uses ‘Reach’ as part of its QRIV3 performance measurement framework as it is unable to promote its public purposes and deliver its mission to inform, educate and entertain if it does not reach a broad audience. However, we have been clear in our reviews of the BBC’s most popular mainstream services – such as BBC One, Radio 1 and Radio 2 – that reach and share should not be ends in themselves, but that popular services must demonstrate that they can harness their popularity to make a major contribution to the BBC’s public purposes. For example, BBC One maintains a major responsibility to maintain reach to the BBC’s high-quality news and current affairs, and Radio 1 has this responsibility with regard to news and young listeners. We will measure pan-BBC reach using the BBC’s own Cross Media Insight survey, while maintaining use of industry standard measurements BARB and RAJAR to measure consumption of BBC television and radio respectively.
Representing the UK, its Nations, regions and communities The Trust takes very seriously its role to ensure that the BBC serves all the audiences of the United Kingdom. The BBC provides a range of services for licence fee payers – some at a UK-wide level and others at a national or local level. In local radio across England, in national radio stations in each of the devolved Nations, and in non-network television all over the UK, the BBC aims to provide high-quality and distinctive output that is relevant to audiences in their area. The Trust strongly believes that the objectives and priorities set out in Putting Quality First are universal and need to be part of all the BBC’s output. The BBC must resonate better with local communities and be better at reflecting local communities back to the UK as a whole. The challenge of reflecting the whole of the United Kingdom through the BBC’s output is a difficult but necessary task. In recent years the BBC has made some significant progress in this area:
• In ensuring that the BBC appropriately reflects an increasingly devolved UK, the BBC has changed the way it reports on news from the devolved Nations • In ensuring that the BBC appropriately reflects, and engages, with the whole of the UK, the BBC is moving significant parts of its business outside London • In understanding that the best quality programmes do not all get made in London, the BBC will increasingly take its programmes from all parts of the UK
The Executive’s original strategy proposals endorsed the BBC’s current strategy for the Nations and regions, confirming:
• 50% of network television programmes will be made outside London by 2016
3 Quality, Reach, Impact and Value for Money December 2010 27
BBC Strategy Review / Supporting analysis
• 17% will be made in Scotland, Wales and Northern Ireland • A target for 40% of radio spend to be outside London by 2016 • A strategy for new creative centres of excellence across the UK • An ambition to showcase the best of local programming on the BBC’s UK networks • Continued support for the UK’s indigenous minority languages.
However, the Trust’s public consultation highlighted concerns from stakeholders, particularly in the devolved Nations, that there was a perceived lack of focus on Scotland, Wales and Northern Ireland within the BBC Executive’s strategy proposals. We understand that licence fee payers, and industry, would like to see a clearer statement from the BBC about the offer to audiences in each of the Nations of the UK. The Trust is now therefore challenging management to provide further information on what Putting Quality First will mean for each of the four Nations that make up the UK. In spring 2011, the Executive will present its response to this challenge, building on work already underway in each Nation. This response will cover:
• An articulation of the value the whole BBC brings to each Nation, i.e. not just the value provided by services broadcast in those Nations alone • An assessment of current performance in each nation which will serve to identify the most important performance gaps that the Nations’ strategies should address • Proposals to address representation and portrayal • A re-articulation of our commitments to indigenous languages in each Nation.
In setting this strategy for the BBC, the Trust does not see a need to radically change the mix of programming provided through UK-wide network services or the quantity provided through non-network, or local, production. Our research shows that quality and distinctive programming is the most important thing the BBC can deliver for its audiences. We believe that this should be done through a mix of locally produced and UK-wide programming and we have concluded that the relative balance between these is broadly right. As part of this strategy’s commitment to quality – and, where necessary, doing fewer things better – the Trust is clear that all of the BBC’s programming, including that commissioned for the Nations, needs to meet the quality standards audiences expect from the BBC.
December 2010 28
BBC Strategy Review / Supporting analysis
Implementation
Now that the Strategy Review is complete, and the BBC has a new licence fee settlement to run until the end of 2016/17, the Trust’s focus is going to be on the implementation of both, and in particular on:
• Pushing through the specific policy changes required by the new strategy • Setting up the new processes for reporting and disclosure that go along with it • Identifying the precise measures and targets that will be used to track and assess progress • Completing regulatory processes already in train (e.g. BBC Online budget reduction, on-demand syndication policy review) • Overseeing the regulatory process for any further, formal proposals that the Executive would like to submit (e.g. Asian Network) • Scrutinising the Executive submissions on how the strategy will be implemented in each of the UK’s Nations • Finalising a new Agreement between the BBC and the Government, working through some of the detail about how new funding responsibilities will work • Beginning work on the review of efficiency and scope that will be required to remove 16% from existing budgets by 2016
December 2010 29
BBC Strategy Review / Supporting analysis
Annex A BBC Executive Proposals, March 2010 Putting Quality First The BBC’s mission is to inform, educate and entertain audiences with programmes and services of high quality, originality and value. Its constitutional and financial independence, its heritage and its relationship with audiences give it a unique opportunity to enrich and sustain public space here and around the world. The public expect the BBC to be a wholly reliable source of accurate and impartial news; a tireless supporter of originality and excellence; a guaranteed investor in British talent; and an upholder of the highest values and standards. In uncertain times, they want it to remain central to their own lives and to the life of the UK—a constant companion in moments of crisis and celebration. But media is changing profoundly, and the BBC must change too. It must articulate its public service mission more clearly than ever before. It must explore new ways of delivering that mission—and of ensuring that the benefits of digital can be enjoyed by all. But it must also recognise the challenges facing other media, and address legitimate concerns about its scope and ambitions. This strategy directs the BBC to put quality first; do fewer things better; guarantee access to all; make the licence fee work harder; and set new boundaries for itself.
• The best journalism in the world • Inspiring knowledge, music and culture • Ambitious UK drama and comedy • Outstanding children’s content • Events that bring communities and the nation together
Putting quality first means, on this strategy, delivering these five clear content priorities at higher quality across all of the BBC’s services—including by:
• Reprioritising nearly £600m a year, around a fifth of the BBC’s cost base, to higher quality content by 2013 and, on a continuing programme, across everything the BBC does • Investing £50m a year from within this total to raise quality and originality including across BBC Two, children’s output and journalism • Committing from 2013 not to spend less than 90p in every licence fee pound on high-quality content and getting it to audiences
December 2010 30
BBC Strategy Review / Supporting analysis
DOING FEWER THINGS BETTER—making tough choices to improve our services Doing fewer things better means, on this strategy, significant changes to the BBC’s service portfolio:
• Focusing the BBC’s website on the five content priorities - Halving the number of sections on the site and improving its quality by closing lower performing sites and consolidating the rest - Spending 25% less on the site per year by 2013 - Turning the site into a window on the web by providing at least one external link on every page and doubling monthly ‘click-throughs’ to external sites • Increasing the quality of local radio: boosting investment in local news at breakfast, mid-morning and drivetime using resources released by sharing content at other times • Recommending the closure of Radio 6 Music: focusing popular music output on Radio 1 and an increasingly distinctive Radio 2, using the resources released to drive digital radio in other ways • Recommending the closure of Asian Network as a national service, and using the resources released to serve Asian audiences better in other ways • Recommending the closure of teen offerings BBC Switch and Blast!
GUARANTEEING ACCESS Working to ensure that UK audiences can always:
• Get BBC services free at the point of use, in ways and on devices that suit them • Catch up on programmes for free on the BBC’s website, at home and on the move • Access the best of the BBC’s current and future library of programmes
Guaranteeing access means, on this strategy:
• Making internet-connected television a reality and a success, and continuing to support other partnerships for free-to-air platforms • Guaranteeing free access to independent, impartial news including online
December 2010 31
BBC Strategy Review / Supporting analysis
• Opening the BBC’s current and future programme library, as well as working with partners like the British Library, BFI and Arts Council England to bring other public archives to wider audiences.
MAKING THE LICENCE FEE WORK HARDER—reducing the cost of running the BBC Making the licence fee work harder means, on this strategy, focusing the BBC’s spending on what matters most to the public by:
• Reducing the cost of running the BBC by a quarter: from 12p in a licence fee pound today to under 9p by the end of the Charter in 2016 • Reducing senior management numbers, freezing pay and suspending bonuses • Reinvesting savings in new UK programmes serving the five content priorities • Striving to make every licence fee pound benefit the wider UK economy by at least £2, and spreading that value across the UK.
SETTING NEW BOUNDARIES—accepting clearer limits and new behaviours for the BBC Setting new boundaries means, on this strategy: • Reducing spending on imported programmes and films by 20%, capping it thereafter at no more than 2.5p in every licence fee pound • Capping sports rights spending at 9p in every licence fee pound • Recognising the lead role commercial radio plays in serving popular music to 30- 50 year-olds • Recognising the lead role other broadcasters play in serving younger teenagers on TV • Never more local: undertaking not to launch services more local than at present in England • Defining publicly which areas of activity BBC Online will not undertake.
Clearer BBC behaviour means, on this strategy:
• Prioritising quality over quantity whenever a choice is required • Making the BBC the most open and responsive public institution in the UK • Making explicit the BBC’s commitment to consider the market impact of major decisions • Making partnership the BBC’s ‘default setting’ for most new activities
December 2010 32
BBC Strategy Review / Supporting analysis
• Ensuring the tough limits set by the BBC Trust’s recent review of BBC Worldwide are fully implemented, with new limits on acquisitions and a drive towards non- UK activities.
December 2010 33
BBC Strategy Review / Supporting analysis
Annex B
How the Trust discharges its responsibilities for stewardship of the licence fee The Trust is the guardian of the licence fee revenue and it has ultimate responsibility for the BBC’s stewardship of this and other resources. Specifically, the Trust must keep the financial needs of the BBC under review to ensure that the Executive Board is not authorised to spend more public money than is needed to appropriately fulfil the BBC’s responsibilities. In doing so the Trust will examine the value for money achieved by the BBC in how it uses its licence fee revenue.
Stewardship tools The Trust draws on a number of investigative and monitoring tools to discharge its stewardship duties:
In undertaking its value for money (VFM) activities the Trust ensures its VFM strategy:
• Covers all BBC UK PSB spend • Embeds VFM considerations in all areas of Trust activity • Makes use of external benchmarking where appropriate • Recognises that VFM assessment balances cost considerations with non-financial outcomes • Provides an effective challenge to Executive assumptions and assertions • Delivers findings which feed into financial strategy decisions • Holds management to account for delivery of targets and agreed actions • Is transparent
December 2010 34
BBC Strategy Review / Supporting analysis
Annex C
Trust and Executive future reporting cycle
Date Publication description Notes April / Annual business plan • Budget detail as outlined above May • Pan-BBC objectives • SoPPs to cover service remit, vision, key • High-level budget challenges and any other major proposals • Statements of • Also to include information around proposals Programme Policy requiring Trust approval or of particular (SoPPs) sensitivity • Notable investments / proposals May Quarterly disclosure • Expenses, gifts and hospitality (October – December) for named senior managers paid over £150k • Pan-BBC, platform and channel data covering reach, time spent, AIs, quality and distinctiveness for January – March July Annual report and accounts August Quarterly disclosure • SM group expenses, gifts, hospitality (January – March) • April – June performance data November Half-year report • BBC Executive half-year performance review • Executive commentary and self-assessment • Update on performance against pan-BBC objectives • Update on any major proposals developed since the publication of the business plan
Quarterly disclosure • SM group expenses, gifts, hospitality (April – June) • SM group Declaration of Personal Interest forms • Anonymised salaries in £5k bands for all SMs • July – September performance data February Quarterly disclosure • SM group expenses, gifts, hospitality (July – September) • October – December performance data
December 2010 35