BRITISH BOLD CREATIVE The BBC’s submission to the Department for Culture, Media and Sport’s Charter Review public consultation. — October 2015 Contents 1 Introduction 2 Executive Summary 2.1 An open BBC 2.2 A world-class media sector 2.3 Purpose and Remit 2.4 Scale and Scope 2.5 Funding 2.6 Efficiency and Value for Money 2.5 Independence 2.8 Governance and Regulation 3 Answers to Consultation Questions 3.1 How can the BBC’s public purposes be improved so there is more clarity about what the BBC should achieve? 3.2 Which elements of universality are most important for the BBC? 3.3 Should Charter Review formally establish a set of values for the BBC? 3.4 Is the expansion of the BBC’s services justified in the context of the increased choice for audiences? Is the BBC crowding out commercial competition and, if so, is this justified? 3.5 Where does the evidence suggest that the BBC has a positive or negative wider impact on the market? 3.6 What role should the BBC have in influencing the future technological landscape including in future radio switchover? 3.7 How well is the BBC serving its national and international audiences? 3.8 Does the BBC have the right genre mix across its services? 3.9 Is the BBC’s content sufficiently high quality and distinctive from that of other broadcasters? What reforms could improve it? 3.10 How should the system of content production be improved through the reform of quotas or more radical options? 3.11 How should we pay for the BBC and how should the licence fee be modernised? 3.12 Should the level of funding for certain services or programmes be protected? Should some funding be made available to other providers to deliver public service content? 3.13 Has the BBC been doing enough to deliver value for money? How could it go further? 3.14 How should the BBC’s commercial operations, including BBC Worldwide, be reformed? 3.15 How should the current model of governance and regulation for the BBC be reformed? 3.16 How should Public Value Tests and service licences be reformed and who should have the responsibility for making these decisions? 3.17 How could the BBC improve engagement with licence fee payers and industry, including through research, transparency and complaints handling? 3.18 How should the relationship between Parliament, Government, Ofcom, the National Audit Office and the BBC work? What accountability structure and expectations, including financial transparency and spending controls, should apply? 3.19 Should the existing approach of a 10-year Royal Charter and Framework Agreement continue? 2 1 INTRODUCTION This document is the third in a series setting out the BBC’s position for Charter Review. It responds to each of the nineteen questions raised in the Government’s consultation paper. It should be read alongside the BBC’s proposals for programmes and services in the next Charter, ‘British, Bold, Creative’ that was published on 7 September 2015 (referred to here as the BBC Strategy Paper), and the paper on the BBC Studios proposal, published on 17 September. These provide an evidence base for answering some of the questions raised by the Government’s consultation paper. This document cross-refers to that evidence rather than repeating it wholesale. It draws on a wide range of other evidence and analysis, some of which we have published as annexes alongside this document. They are: • A report by PwC on the impact of a change in the BBC’s licence fee revenue; • A report by Frontier Economics on the BBC’s contribution to the UK Creative Industries; • A report by Mediatique on value for money; • A summary of the BBC’s latest audience research. 4 2 EXECUTIVE SUMMARY 2.1 An open BBC Charter Review is an important opportunity to set At the same time, where things demonstrably work, the future direction of the BBC. Having agreed the we will argue for continuity and only for changes that BBC’s funding framework for the next Charter period, strengthen, not weaken, the current model. Stability we look forward to the debate. The Government’s starts with the BBC’s funding settlement. The Budget consultation paper raises important questions about agreement should deliver a sustainable income for the the mission, scale and scope, funding, and governance long-term though it will not be without its challenges of the BBC. and difficult choices. We will not be seeking to re-open the Budget agreement. Our proposals to Our response shows that the BBC is working modernise the BBC depend on this funding envelope. well today and helping to grow the UK’s creative The funding agreement means the BBC will continue industries, but will need to modernise to preserve to shrink in financial terms—but that will not stop us public service broadcasting. To that end, we are delivering a better, more open BBC. putting forward a radical programme of reform to create an open BBC that: Delivering the funding agreement also means not fragmenting the licence fee through new top-slicing • Becomes Britain’s creative partner and a platform or contestable funding. This policy would risk for this country’s incredible talent and the work substituting public money for private, and it would be done by its great public institutions; allocated by committees rather than commissioners. • Transforms our services to be internet-fit, while It would be subject to lobbying rather than audiences, maintaining much-loved linear services; and it would weaken accountability for public money and erode the BBC’s independence. We welcome the • Leads digital innovation with new investments Government’s commitment to end the broadband such as the Ideas Service and iPlay for children, ring-fence. We would regard any new proposal and widening choice for audiences by making our for top-slicing, or a reduction in our ability to make services more distinctive; commercial returns to supplement licence fee income, • Increases competition from two thirds of our cost as reopening the funding agreement. base to around 80%; Our strategy for an open BBC needs to be • Saves close to 20% of our costs or an average underpinned by a policy framework that supports the savings target of around 3.5% a year over the next BBC’s creativity, innovation and independence. The five years, having already saved over 40% of our answers in this document are our suggestions for how cost base in this Charter period; that framework should evolve in the next Charter. We • Is a leaner, simpler organisation and gets our look forward to discussing them with Government, overheads to less than 7%, inside the top 25% audiences and stakeholders, and working towards a of private regulated companies, having already got White Paper that will make the BBC stronger in 2025. to less than 8% this year; • Grows cumulative commercial returns to around £1.2 billion over the next five years, with BBC Worldwide maintained as an integral part of the BBC; and • Removes key guarantees and quotas for BBC programmes, but setting up BBC Studios to maintain the BBC as one of the best programme- makers in the world. 6 2.2 A world-class media sector It is hard to think of a country in better creative shape independent BBC in ten years’ time that serves than the UK. The success of our media ecology has audiences even better and is a creative powerhouse made our culture and our democracy stronger. for the UK at home and abroad. A BBC that can The creative industries are also one of the most play a unique, vital role in securing the conditions for productive parts of the UK economy in terms of future success, namely: growth, jobs and exports. The UK has always had the • A high level of investment in a wide range of high best of both worlds—a thriving domestic sector and quality programmes and new digital content— significant inward investment. There are not many home-grown for British audiences and exploited industries where the UK goes toe-to-toe with the around the world; US—but the creative industries still do. British values and British identity have a special place in the world— • Programmes and services that make Britain a and the BBC, alongside others in our creative better place—by connecting audiences with their industries, has a vital role in building the UK’s global cultures and heritage, and enabling an informed brand and influence. conversation across the country; • A growing and diverse production sector Britain’s competitive position has not come about with strong skills and talent base across the UK, by accident. We have created a media system in this exporting even more than today; country that works—it has been achieved through the careful regulation of broadcasting, combining • The widespread availability of public service the investment of the licence fee, the public content and prominence across platforms and service content of the commercial PSBs and the devices to secure its cultural and democratic complementary spending of a large number of impact; multi-channel services on pay-TV. Public funding— and now at only around a fifth of total TV revenues— has supported rather than crowded out a vibrant • Thriving competition between networks and UK media sector. between free-to-view and pay platforms, with low barriers to entry for innovative services and low Britain can have a media ecology in the next decade switching costs for consumers. that is even better than it is today. The Government’s consultation paper raises many detailed questions about the BBC, which we respond to in this document.