Submission to Select Committee January 2011/12

submission to select committee january 2011/12

submission to select committee january 2 0 1 3 P a g e | 2

index

page

1. executive summary 3

2. section 1 - the scope of public service broadcasting on the island 4

3. section 2 – the cost of public service broadcasting in the island 10

4. section 3 – the delivery of public service broadcasting 21

5. section 4 – government policy towards its national public service broadcaster 25

6. section 5 – conclusions 30

Appendices (separate submission)

appendix I public service broadcasting – model law appendix II 2012/13 promise of performance appendix III manx radio programming output considerations appendix IV capital schemes appendix V value for money (VFM) report june 2006 appendix VI manx radio subvention payments appendix VII new fm network costing appendix VIII recommendation of the committee of ministers to member states on public service media governance appendix IX principal objects and associated powers of rté appendix X s4c – memorandum of understanding draft operating agreement* appendix XI strategic partnership deed of agreement between the bbc and s4c appendix XII manx radio analysis of berry proposal

submission to select committee january 2 0 1 3 P a g e | 3 executive summary

0.1 In December 2012 Tynwald reaffirmed its commitment to public service broadcasting and recognised Manx Radio as the Isle of Man’s national broadcaster. Manx Radio, in this role, has put the interest of its listeners and its community at the heart of its activities and by doing so, ensured the community has had its own voice and a national identity.

0.2 Independent research confirms that Manx Radio’s listening figures are the highest of any broadcaster, by far, in the Isle of Man – including BBC radio. As of October 2012:

. Each week Manx Radio is listened to by 51% of the Isle of Man population over the age of 15 for, on average, 12 hours per week . Each week Manx Radio is listened to by 70.8% of the Isle of Man population over the age of 45 for, on average, 13.4 hours per week

During the same period, 96% of the Manx population (aged 15+) listened to radio on the Island showing the importance of radio listening to Isle of Man residents,

0.3 The directors of Manx Radio consider public service broadcasting to be an essential service, not only for the Island, but in promoting the Isle of Man worldwide as a mature democracy. However, following significant reductions to its subvention funding since 2008/09 and reductions to its commercial revenues the company has had to make considerable changes to its output. As a consequence, there is concern as to whether the station can continue to meet the terms of its licence as a public service broadcaster.

The situation in which the station finds itself in is not new and over the last 20 years a number of reports have been written that have all drawn largely the same conclusions.

0.4 Within Section 1 of the submission we examine the definitions of Public Service Broadcasting as determined by the Council of Europe and investigate Manx Radio’s interpretation of its licence in an attempt to throw some light on whether there is a more suitable option for the country and whether there is scope for a new definition to suit the Island’s current needs.

0.5 The cost of the service, explored in detail in the Internal Audit report of June 2012, is further examined in Section 2 and a detailed breakdown of the station’s situation across all expenditure is provided. We also investigate alternative funding options for the station.

0.6 Section 3 explores the various transmission solutions, both analogue and digital, and their shortcomings and offers potential solutions for the future and their cost.

0.7 The Isle of Man Government’s policy towards its national public service broadcaster is analysed in Section 4 and the four possible scenarios under which Manx Radio could be licensed, is discussed. Furthermore, we look further afield to suggest possible new structures that could provide the national broadcaster with self-determination as proposed by the Council of Europe.

0.8 Finally, Manx Radio draws conclusions on how the station could be structured for the future. It suggests a funding model that leaves it able to determine the most appropriate public service programming for its listeners, decide on and fund its transmission platforms and determine and fund capital projects in the very way public service broadcasters elsewhere operate to provide a voice and identity for the public they serve.

submission to select committee january 2 0 1 3 P a g e | 4 section 1 – the scope of public service broadcasting in the island the Scope of public service broadcasting (PSB) and its importance to the isle of man

1.1 In December 2012 Tynwald reaffirmed its commitment to public service broadcasting and recognised Manx Radio as the Isle of Man’s national broadcaster.

In this section we look to define what PSB really is, determine the extent to which Manx Radio’s public services are listened to in our community and find out who listens to them. We examine the requirements that inform the station’s output and explore how the station, together with the Radio Manx Trust, determines the station’s output.

1.2 international interpretations of PSB

A significant body of work has been carried out by a number of established international organisations to determine the nature of PSB. A paper, ‘Public Service Broadcasting – Model Law’ (See Appendix I) published in 2007 and distributed via the European Broadcasting Union, is one of the most useful. That document:

Sets out to explain the nature of public service broadcasting, its leading role in a democratic society, public service broadcasting as a factor of social cohesion and of national identity, and as the country’s prime promoter and reflector of culture. In the digital world, with virtually unlimited possibilities of distributing sound and audiovisual programmes via a multitude of channels, public service broadcasting is even more important, so as to continue to serve the interests of the public in the best manner possible.

Once the concept of public service broadcasting is embraced, it needs to be implemented in practice, and in the first place through legislation.

The document details how the PSB remit varies from country to country but how it is based on a core of common features that are universally valid.

Generally speaking, public service broadcasting must provide programming in the fields of information, entertainment and education/advice for people of all ages and social groups and in any format (such as generalised channels, thematic channels, multimedia services, teletext or other content services, with or without interactivity). It plays an active role in presenting and promoting national culture, whilst also increasing the population's knowledge and understanding of foreign cultures.

Programming includes both mass appeal programmes, such as popular entertainment and coverage of events of major interest to large sections of the population, and a fair share of programmes catering for special/minority interests. It meets high professional standards in terms of content, quality of production and manner of presentation. It serves as a reference point for all members of the public and is a factor for social cohesion and integration of all individuals, groups and communities. Avoiding cultural, sexual, religious, social and racial discrimination and refraining from sensationalism, it applies high ethical standards and fosters civic values and a sense of individual responsibility within society.

Public service broadcasting is expected to put the ever-increasing number of individual items of information which are available to the public into a meaningful context, to concentrate on their relevance for the citizen and for society, to explain the world in all its variety, richness and diversity, and to assist the population in understanding the new environment. Representing an oasis of credibility, public submission to select committee january 2 0 1 3 P a g e | 5

service broadcasting makes a major contribution to ensuring a truly informed citizenship, which is a precondition for a healthy democracy.

The document also notes that the Council of Europe in 1994 and the European Parliament in 1996 identified the nucleus of common features involved in PSB and goes on to show how States participating in these conferences undertook:

to provide the legal, political, financial, technical and other means necessary to ensure genuine editorial independence and institutional autonomy of public service broadcasting organisations, so as to remove any risk of political or economic interference.

1.3 Whilst there are a great many definitions for Public Service Broadcasting, there are some key, common threads that can be found in any public service broadcaster providing a service within a democratic country, in that:

 It puts the listener at the heart of every decision it makes  It serves minorities and special interest groups as well as the majority  It ploughs profit back in to programme making  The programme output is driven on editorial merit and not by purely commercial concerns  As well as entertaining the listener, it seeks to inform and educate them, also serving to enhance their knowledge of, and sense of belonging to, a country or area. As part of this it seeks to celebrate and champion that area  In a democracy, it should provide scrutiny of our decision makers as such scrutiny is an essential part of the democratic process. It should always remain balanced. Therefore, PSB must be properly structured to ensure it has credibility and earns the trust of the listeners with a demonstrable independence from any national, regional or local governance  It means all groups and sections of society must be served even though it is impossible to please everybody all the time  It is not made for the government, parliament, or president, for a political party or a church or for any other interest group or for shareholders. It must be independent of all these, serving “only” the interests of the population  All households in the service area should be in a position to receive the programme service

This can probably be more simply stated as a radio station that puts the interest of its listeners and its community at the heart of its activities and by so doing, ensures the community has its own voice and a national identity.

1.4 Regarding Manx Radio’s current level of PSB activity, the Treasury Internal Audit Report of June 2012 (paragraph 2.15) drew this conclusion:

“There is no doubt that Manx Radio provides a high quality public broadcasting service and is able to demonstrate this through numerous awards and accolades and very impressive reach figures. The two key elements which differentiate Manx Radio, and public service broadcasting, from the Island’s commercial stations is its news production and speech based programming. These in turn represent the most expensive forms of production with purely music based and pre-recorded programming being far cheaper to produce.”

1.5 Manx Radio’s winning entry for the 2011 Nations and Regions Awards elicited the following comments from its industry peers: submission to select committee january 2 0 1 3 P a g e | 6

“An excellent and professionally crafted entry which truly reflected and encapsulated the lives of its listeners.

Ambitious in its range of stories and how those stories were told, this station has the sound and production values of a high quality national radio station. Its content was both engaging and relevant, tugged at the emotions and surprised the judges with unpredictability, humour and pathos.

The station’s grown up presentation and ability to cross generational boundaries in an effortless way leaves the listener feeling both informed and represented.”

This is the third time that Manx Radio has won the award in recent years showing that Manx Radio’s output is consistently good. This is what defines Manx Radio's public service broadcasting on the Isle of Man.

1.6 who listens to PSB in the isle of man?

Independent Research conducted quarterly by RAJAR (Radio Joint Audience Research) assesses the average weekly reach of all radio stations listened to by a sample of Isle of Man residents. The October 2012 report concluded:

 Manx Radio is listened to by 51% of the total Isle of Man population over the age of 15 each week for, on average, 12 hours each week

 Manx Radio is listened to by 70.8% of the Isle of Man population over the age of 45 each week for, on average, 13.4 hours each week

 At eight o’clock each weekday morning, radio coverage of Mandate AM alone reaches over 10,000 people at once.

In addition, this reach significantly increases in times of crisis such as power outages and adverse weather when Manx Radio is the station of choice.

Manx Radio, as per its licence, reaches out to the whole community as shown below:

Manx Radio weekly reach Source Rajar

10 8 6 Manx Radio Q3 12 4 2

1000's 1000's listenersof 0 Adults 15 Adults 25 Adults 35 Adults 45 Adults 55 Adults 65 Adults -24 - 34 - 44 - 54 - 64 - 74 75+

The fact that Manx Radio’s current programme schedule attracts over half of the Island’s population (over the age of 15) each week means that it is at the very top end of any listening figures for any station in Great Britain and exceeds, by a significant margin, the listening figures of any other station on the Island – including the BBC: submission to select committee january 2 0 1 3 P a g e | 7

NB. Energy FM does not subscribe to Rajar (Radio Joint Audience Research)

Total radio listenership on the Isle of Man is 96% of the population showing what an important medium radio still is.

The Isle of Man’s population has considerable listening choice and does not listen to what it dislikes. The chart above shows how more of the population of the Island choose Manx Radio’s credible, live and local services than its competitors. This is because it provides the daily source of Manx news and information, companionship and up to date information about our community that is impossible to get elsewhere.

Listening figures remain high in spite of the availability of Manx Radio news and other services on-line and on hand-held devices, largely because well produced broadcast news remains the most flexible and easy way to source in-depth news. Radio retains its position as a vital delivery platform – in and around the house, in the car and over mobile networks. However, Manx Radio is dedicated to embracing new, relevant, transmission platforms as they become important for our audience. Its web statistics highlight that its website attracts, on average, around 250,000 visits every month – this figure significantly increases over TT.

1.7 what determines the PSB remit of manx radio?

1.7.1 the darwin report vision for PSB

In 2001 the Directors of Manx Radio requested Tynwald approve funding “to enable Radio Manx Limited to undertake a review of the threats and opportunities facing Radio Manx Limited …. in order to determine recommendations for the future operation and structure of the company”. The resultant “Darwin Report” made recommendations with regard to the constitution, funding framework and vision for the station focussed on public service broadcasting.

Manx Radio is run by the Directors within the vision proposed by Darwin and unanimously approved by Tynwald in December 2002. This report also laid out the structure under which Manx Radio should be governed and regulated as a Public Service Broadcaster.

1.7.2 the broadcast licence issued by the isle of man communications commission under the broadcasting act 1993

Radio Manx Limited was granted its licence to provide a sound broadcasting service under part 1 of the Broadcasting Act 1993, on 3 March 2005 for a period of 10 years. The Licence defines the Character of Service of Manx Radio as the National Public Service Radio Station of the Isle of Man as follows: submission to select committee january 2 0 1 3 P a g e | 8

“Manx Radio is the voice of the Isle of Man. It is a sound broadcasting service which is provided as a public service for disseminating information, education and entertainment:

 which is responsive to the tastes, interests and concerns of the whole community;  where the programmes reflect the varied elements which make up the culture of the people of the Island and has especial regard for the elements which distinguish that culture;  where the programmes have a wide range in their subject matter, having regard both to the programmes as a whole and also to the days of the week on which, and the times of the day at which, programmes are broadcast; and  where a sufficient amount of time in the programmes is given to news programmes and to current affairs programmes which are of high quality.

Local news will run hourly during daytime. UK and international news will feature at other times. Manx Radio will promote the Isle of Man and doing business in the Isle of Man. Locally produced and presented speech will normally form a significant part of daytime output.”

This Character of Service is the reason why Manx Radio delivers 17 news bulletins each weekday and 13 on a Saturday and Sunday, and provides Current Affairs programmes to discuss and to analyse issues facing the country. It is why the station provides specialist programmes for small sections of the community, be they targeted at special interest groups or at Manx language speakers. It is also why so many hours of both its specialist and general programming feature speech output that is specifically targeted at members of the Isle of Man community.

1.7.3 the promise of performance

The Promise of Performance is a document, agreed with the Radio Manx Trust on an annual basis.

The Trust comprises five trustees who are members of the public from a range of backgrounds. It sits between the company and Government to ensure the Public Service Broadcaster remains editorially independent from Government and its primary role is to ensure that Manx Radio follows the terms of the Purpose, as agreed by Tynwald. This “Purpose” is the Character of Service as detailed above.

The 2012/13 Promise of Performance (See Appendix II) indicates the number of hours in each programming category Manx Radio delivers in order to meet the terms of its licence. From time to time, the station will amend its programming to ensure the public receive the information they require such as during TT, in times of exceptional weather, at election time, at times of breaking news etc. However, at all other times, the core output, as detailed in the Promise of Performance, is what underpins our output and remains popular with our listeners.

It is dangerous to be too prescriptive with a PSB broadcaster as our programming always needs to reflect current events. Indeed, it would make a mockery of the concept of public service broadcasting if any public service broadcaster needed to return to Government to amend its Promise of Performance at any time.

1.7.4 on-going listening habits which reflect the voice of the public of the isle of man

It remains fundamental that PSB should fulfil the needs of the public. This will not always sit easily with the needs of those currently in power, but that is its very essence.

The Directors also monitor the independent Research conducted quarterly by RAJAR.

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1.8 A summary of the PSB currently provided by Manx Radio

Taking into account all of the factors detailed in 1.7, the Board and Management of Manx Radio carefully and regularly consider the PSB which best achieves all of the above objectives and this is summarised in Appendix III which details:

 Each distinct public service broadcasting programming genre that Manx Radio and the Radio Manx Trust has deemed is required to fulfil the terms of our licence  A summary of how Manx Radio has interpreted its licence and “Character of Service” in each of these areas, and what other factors the station taken into account in determining the output submission to select committee january 2 0 1 3 P a g e | 10 section 2 – the cost of public service broadcasting in the island

2.1 Once the scope of the PSB output has been clarified (section 1), it becomes practical to determine the amount of funding required to deliver that PSB. This section analyses the cost of delivering PSB and investigates the impact of reducing subvention and commercial incomes on the service. It also explores various funding options and suggests (in 2.9) an effective solution as to how the public service broadcaster’s funding could be determined for the future.

Further detailed financial information can be found in the Internal Audit Report of June 2012.

2.2 the cost of the current level of public service broadcasting

2.2.1 operating costs

Treasury Internal Audit Report of June 2012 (paragraph 2.15) drew the following conclusion:

Manx Radio costs the public 19p per week per head of population and provides the PSB detailed in Appendix III. It is difficult to separate the specific costs of PSB as Manx Radio will not simply deliver a news story but then utilise the material generated in a number of other areas of PSB programming. However, a rough indication of annual cost to the taxpayer per head of population per strand ranges from 10p for our coverage of Tynwald and the House of Keys, 31p for Sport, £3.36 for News and Current Affairs and £4.08 for the remaining general programming which represents 58% of our output and is not simply music but includes a myriad of PSB information relevant to our community.

In total, the programming expenditure in 2011/12 was £1,419,894 - a massive £569,894 more than the 2012/13 current subvention provides. This additional revenue is derived from commercial activities – advertising, sponsorship and technology services.

Manx Radio has, where figures are available, compared its cost per broadcast hour against those of other similar broadcasters such as BBC Local Radio and RTÉ. Each comparison has showed that Manx Radio’s costs are significantly lower. When considering the cost of operation it should be noted that the Treasury Internal Audit Report (paragraph 1.5) identifies that:

This review has found no evidence that would go against the view that Manx Radio is operating efficiently and at a low cost given its output, as communicated by Manx Radio’s Directors.

2.2.2 capital costs

Manx Radio’s Broadcasting House was identified by Treasury’s Capital Projects team as the worst building in government ownership. It had a number of fundamental Health and Safety issues which, due to a lack of investment in the past, had the potential to cost the company dearly. In addition, the station needs to have a disaster recovery system capable of addressing the Government disaster policy. As a consequence, a series of capital projects has been instigated at the station. (See Appendix IV).

To March 2013, the station has received £700,000 as capital grants (plus £50,000 for professional fees) - £250,000 in each of the financial years commencing 2011/12 and submission to select committee january 2 0 1 3 P a g e | 11

planned for a five year period. Whilst these are received as capital sums, all of the items are depreciated through the Company’s Profit and Loss Account and thus are also offset against the subvention.

2.2.3 transmission costs

Tynwald have decided that Manx Radio’s transmission services should be provided by the Department of Home Affairs (DHA). These currently consist of a single FM network with three transmitters at Snaefell, Carnane and Jurby and a single AM network from a single transmitter at Foxdale.

The true cost of transmission, to include transmitter hall rental, rates where applicable, Wireless Telegraphy Licence, electricity, communications circuits, maintenance budgets and engineering services for 2012/13, is estimated to be circa £86,000 for our AM and FM transmissions.

When Manx Radio was purely a Commercial radio station and did not receive government support for its public service broadcasting output, Tynwald may have needed to operate these valuable frequencies. However, as the nation’s public service broadcaster, owned by Treasury, the time may have come for Manx Radio to take over the control of its own transmission network. The funding would also, obviously, need to be transferred from the DHA to Manx Radio and an agreement sought that Manx Radio would not be charged for antenna space on the DHA masts nor for accommodation in transmitter halls, as this would simply raise the transmission costs.

Section 3, ‘Transmission’ investigates the relevance of the existing transmission platforms.

2.2.4 total transmission costs

The total PSB cost to Government in 2013/14 is expected to be:

Subvention £ 850,000 Transmission £ 86,000 Capital Grant £ 250,000 £1,186,000

2.3 funding required to provide the agreed level of PSB originally determined

Manx Radio has been the subject of numerous reports over recent years. The Cole Report of December 1993, The Darwin Report of 2002, and The Value for Money (VFM) Committee in June 2006 which provided a review on ‘The Future Role, Structure, and Funding of Manx Radio’. The latter report (Government Report 040/06) (see Appendix V), included a summary of the pertinent aspects of each of these reports as well as a summary of the VFM Committee’s own work and makes relevant reading as it shows that Manx Radio has faced the same recurring problems every 10 or so years.

The Report which formed the basis for the last subvention mechanism agreed by Tynwald was the Value for Money (VFM) report of 2006. It looked to redress the funding issues highlighted in the Darwin report and highlighted the company’s inability to carry out essential capital schemes through its existing funding model. The report also noted:

In order to provide the best level of service to the people of the Isle of Man, Manx Radio could be expected to spend up to its budgetary limit and failure to do so may result in the station producing a less diverse range of programming and thus failure to meet with the public service broadcasting requirements. On the other hand this pattern of spending is likely to give rise to inadequate working capital. Future levels of subvention need to be sufficient to provide Manx Radio with stability and independence whilst enabling a capital expenditure programme to be financed.

The report also concluded that the: submission to select committee january 2 0 1 3 P a g e | 12

Communications Commission policy to pursue an "open airwaves" policy and allowing new radio stations to become established has undoubtedly led to higher competition for the finite amount of local advertising that is available to the various media on the Isle of Man.

Manx Radio is 365 day, 24 hours per day service and in terms of value for money provides a cost effective service to the Island's residents.

and recommended:

There is little prospect of the Station reaching a point of self-financing or commercial break even. The more comparable examples of radio stations akin to the Manx Radio model show a more expensive cost base to produce a similar broadcasting output. The future of the public broadcasting model will continue to be dependent on substantial Government subvention to ensure its sustainability.

The level of funding which should be subject to Tynwald approval for 2007/08 is £933,650 thereafter subject to RPI review using the rate of inflation (The General Index of Retail prices for All ltems) from 01 April to 31 March averaged for each year.

As indicated above, Tynwald accepted this subvention formula and it was implemented until, and including, 2008/09, since when the formula has ceased to be adhered to.

2.4 current funding position

All of the Company’s income is invested in Public Service Broadcasting. The rationale for the structure and spending in each area is considered carefully by Management and the Board.

Contrary to the recommendations of the 2006 VFM Report, continual reductions in subvention have been made over the last four years. When this is combined with commercial pressures, this has resulted in significant cost cuts being undertaken, including significant staff cuts. Due to the nature of the Company’s business, further reductions in income can only be found by cutting costs which directly affect public service output simply because there is nothing else left to cut.

The Board sought a review by Treasury Internal Audit and a debate upon the resultant report because it believes consideration should be given to the effect of Isle of Man Budget decisions upon PSB, that members of Tynwald should actively consider and formally approve whether this is indeed the correct way to proceed for the public of the Isle of Man, rather than allow the loss of a large proportion of PSB to occur by default. Whilst the Board understands the financial pressures placed upon the Government purse, the impact of even 3% per annum has a massive impact upon PSB, despite the resultant figure of £25,500 being a small amount in the overall Isle of Man Budget.

2.5 current ‘funding gap’ and the reasons that this gap has arisen

2.5.1 reductions in the subvention provided by government

Appendix VI details the level of subvention, year on year, had the Tynwald approved subvention formula been adhered to. In four years the subvention has reduced from £978,672 to £850,000 - a real terms income reduction of £294,168.

If the Company’s subvention remains frozen for a forthcoming three year term at £850,000, this would mean a further drop in real term income. Assuming inflation remains around 3% over the next three years, the annual subvention would be £400,000, or 32%, below the Tynwald approved funding formula amount of £1,250,000. The Company simply cannot absorb this massive subvention reduction in addition to the reduction in commercial income and retain its vital broadcast services.

The Darwin report echoed the observations of the Cole report in that they both envisaged a new ‘Charter’ for Manx Radio. Whilst many of the aspirations of that report were implemented, the funding recommendations were not. Despite the Broadcasting submission to select committee january 2 0 1 3 P a g e | 13

(Amendment) Act 2007 going some way towards achieving the Darwin report’s recommendations of the full ‘Charter’, the Act falls a long way short of meeting the Council of Europe requirements to guarantee the independence of public service broadcasting, by providing:

‘the legal, political, financial, technical and other means necessary to ensure genuine editorial independence and institutional autonomy of public service broadcasting organisations, so as to remove any risk of political or economic interference’.

However, no funding mechanism was introduced that allowed the Council of Europe’s requirements for independence to be met. Instead the Budget for Public Service Broadcasting has been effected without proper consideration of the way this might undermine the very fundamentals of Public Service Broadcasting agreed in every one of the various reports.

Furthermore, whilst Tynwald had wanted to differentiate the Public Service Broadcaster through the issue of a licence of up to 30 years, the new Act did not include a clause that allowed for the renewal of any broadcast licence. Consequently, this extended licence could never be implemented. Furthermore, there is a pressing urgency to amend the Act so that licences of all the broadcasters can be extended.

There has also been no ongoing provision made for capital expenditure to include the replacement of old and obsolete broadcast equipment.

It is Manx Radio’s view that these omissions lie at the heart of the station’s current problems.

2.5.2 further unexpected cost increases

i. Following a review of the pension scheme, the contributions paid by the employer increased in respect of Manx radio staff by £87,000 p.a. This represented nearly 10% of the subvention newly agreed by Tynwald following the 2006 VFM report

ii. Whilst the capital injection on the company’s overdue infrastructure improvement scheme has been fundamental, the on-going depreciation charges of £27,500 p.a. appear on the profit and loss account and thus offset the subvention

2.5.3 external factors affecting the company’s ability to grow commercial income

The Darwin Review considered the various options for Broadcasting in the Isle of Man and concluded that the most appropriate way forward was for the Company to generate commercial revenues to reduce the amount of funding sought from Government. Commercial revenues are never easy to secure. It is not only the on-air offering that is important for clients, but it is the quality of service that determines what they spend. Over the last 8 years Manx Radio has put considerable effort into improving its sales service and this has paid dividends. However, in the current financial climate the company has also seen its commercial revenues reduce.

Manx Radio’s MAT (Moving Annual Total) is analysed graphically below and shows how the station has performed on an annual basis, where:

 The blue line shows Manx Radio’s MAT from April 2001 to November 2012  The orange line shows annual income at April 2001 inflated over the same period  The columns on the right hand side show income in 2011/12 o Purple line represents Manx Radio’s income o Green line represents Energy FM’s income o Red line represents 3FM’s income

The following points are clearly shown from the graph: Manx Radio Commercial Income Moving AnnualTotal - Long

1.70 1.65 1.60 1.55

Millions 1.50 1.45 Inflation applied to April 2001 MAT 1.40 1.35 1.30 1.25 3FM Income in £ 1.20 a. TT Cancellation 1.15 1.10 1.05 1.00 Energy Income in £ 0.95 b. Energy Launch d. 3FM Debate 0.90 0.85 0.80 0.75 0.70 0.65 c. Darwin Report 0.60 e. 3FM Launch 0.55 Value of Manx Radio 0.50 0.45 Income in £ at Q3 2012 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05

0.00

Jul-01 Jul-02 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-10 Jul-11 Jul-12

Apr-01 Oct-01 Apr-02 Oct-02 Apr-03 Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12

Jan-02 Jan-03 Jan-03 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Julu-03 Ju;ly -09

submission to select committee january 2 0 1 3 P a g e | 15

 TT cancellation (point a): Manx Radio had allowed itself to become over reliant on incomes from the TT and its cancellation in 2001 due to foot and mouth was a turning point that placed the station’s very existence in jeopardy. The resulting financial position was the catalyst for the Darwin report that focused on how broadcasting could be sustained for the longer term on the Isle of Man.

 Uncertainly over the Company’s future has a direct impact upon its customers, resulting in a reluctance by them to commit to advertising expenditure with the station. The graph shows how vulnerable Manx Radio’s commercial income is to external forces:

o Energy FM was launched in 2001 in the Douglas area and the MAT at (b) shows how, inevitably, some advertisers moved to the new station o Tynwald’s unanimous acceptance of the Darwin report in December 2002, together with the station’s promised increase in funding, is also reflected in the MAT – our commercial clients are reassured about the station’s future and begin to re-invest in radio advertising (c) o In early 2004 (d) Tynwald debate the proposed launch of Athol Radio. This de-stabilised the commercial market as clients were now unsure where to spend their advertising income and Manx Radio lost £175,000 in sales. As soon as 3FM is launched in November 2004 (e) clients have clarity and understanding of the marketplace in which three commercial stations are operating and, slowly, they begin to spend again with Manx Radio

 Following a steady upward trend in revenues to April 2009, worldwide turmoil in the financial markets leave clients uncertain as to whether to spend on advertising and revenues begin to decline again.

 The impact of competition from two further island based radio stations:

o During the period April 2001 to November 2012, the Isle of Man Retail Prices Index All Items shows an increase of 52.5% o The recent Berry plan states that the revenue achieved by 3FM in 2011/12 was £467,042 and that Energy FM brought in circa £100,000. Over the same period, Manx Radio’s advertising and sponsorship revenues were £881,000 showing the total advertising and sponsorship revenues realised by all Island radio stations to be £1,448,042 in 2011/12 o When this sum is compared to the £1,050,000 raised in commercial revenues solely by Manx Radio in April 2001 inflated by 52.5% (the Isle of Man Retail Prices Index All Items), the expected advertising income would be £1,601,250

The launch of two new radio stations has failed to stimulate radio advertising revenues in the Isle of Man. Indeed, total revenues for this sector are £150,000 below inflation, but have been spread around all three radio stations in the following proportions:

Energy FM 6% 3FM 33% Manx Radio 61%

and replicates exactly what many Tynwald members predicted during the 3FM Tynwald debate in 2004.

Additionally, the Berry plan shows that the 3FM traded at a loss in 2011/12 and it is Manx Radio’s view that Energy FM’s survival must be in doubt if it’s only bringing in £100,000 in commercial revenue.

submission to select committee january 2 0 1 3 P a g e | 16

2.6 manx radio funding from 2013/14 onwards

The station’s current business plan (January 2013), budgets the following costs for running the station for the three year period 2013/16:

2013/14 £1,687,290 2014/15 £1,733,193 2015/16 £1,761,042

These allow for the current PSB to be retained, however, there are a number of important issues that should be noted:

1. The RadioCentre (the commercial radio industry’s trade body) has been in negotiations for around 12 months with the Performing Rights Society and Phonographic Performance Limited concerning the rate of royalties radio stations must pay for the transmission of recorded music. The organisations are currently demanding a 40% increase 2. Manx Radio has already reduced its full time staff from 35 to 19 to meet recent reductions in subvention and advertising revenues over recent years. Our Newsroom is inadequately resourced and we no longer have the ability to man court hearings, public hearings, Select Committees etc and feel this does not enable us to provide a full public service for the Island. Furthermore, we do not have cover for illness within the news team 3. The station requires 2 new producers to enable us to develop our Breakfast Show offering, deliver Mandate AM in the necessary manner and to best utilise our suite of digital offerings via the web, mobile telephony and facebook 4. The station is not resourced to cover the major sporting events such as the Island Games and Commonwealth Games where significant numbers of Manx athletes will be participating 5. The station is also not resourced to cover another general election on the Island

In order to meet these costs under the current subvention proposals, the Company would be reliant upon the TT contract to be renewed upon a reasonable basis and a challenging and significant rise in commercial revenues despite the current difficult economic climate.

In addition, the station needs to replace its digital news production system at a cost of circa £47,000. This has been budgeted for in our plans for 2013/14, but if we are unable to meet our ambitious income targets, this will not be progressed. We also need to replace our website (uncosted) to take advantage of new technological developments introduced at the station that will streamline website content delivery.

This shows that the station is underfinanced to continue to meet, what the directors consider to be the core PSB detailed within Appendix III and the station is under resourced to provide some basic operational functionality.

Manx Radio has now been advised of the likely subvention settlement from 2013 which show that the subvention will be frozen at £850,000, pending Tynwald approval.

2.7 implementation plans

The board are of the view that there are two options available to the company:

 Reduce core services further  Take on extra sales staff to aggressively attempt to grow revenues

In order to attempt to avoid reducing core services the Company has little choice but to follow this second strategy. The Committee should understand that this course of action, is unlikely to grow the overall spend of radio advertising in the Isle of Man and is likely to take revenue away from competitor stations.

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The sensitivity analysis undertaken within the 2012 Internal Audit report (Section 5) clearly reinforces the precarious funding position in which the company finds itself in. The report also studied the company’s overdraft position in section 4.79. This has been of major concern to the company and, unless we curtail our activities by around £150,000 over the coming years, the situation will remain. It is only the fact that government provides a letter of support to the station each year which prevents the Auditors from deeming that the Company is not a going concern.

The company has approached Treasury with two solutions to address this position:

 The issue of further preference shares  The payment to the company of the BBC Digital refund contribution in 2013/14 and again for 2014/15 to partly allay the problem

but Treasury has not supported either proposal.

Manx Radio has now reached a crossroads and needs agreement on the scope and funding of the public service broadcaster to secure the Station’s future. Indeed, the Internal Audit report noted, as had the Darwin report of 10 years ago, that the station is now becoming overly reliant on its commercial income and losing its focus on its PSB output – as was the case when it was short of funds in 2001/02.

2.8 alternative funding scenarios for manx radio

Manx Radio is unaware of a public service broadcaster anywhere in the world able to fund its activities solely through advertising. As a consequence, a number of funding models has evolved which are considered suitable in various territories. Manx Radio believes there are five possible funding scenarios that could be implemented on the Isle of Man if the preferred solution, detailed later in 5.3, was not attainable. The first proposal is the most expensive:

2.8.1 fully funded, non-commercial, PSB broadcaster

 A fully funded broadcaster would benefit from knowing exactly what income was available to it at the commencement of each year and would ensure that its programme schedule was defined to enable it to operate within the budget available. This solution would take Manx Radio out of the limited advertising marketplace, thereby enabling other, fully commercial broadcasters, publishers and on-line operators to share a larger advertising pot on the Island  The downside to this proposal is its higher cost to the taxpayer and a barrier to the Island’s largest radio audience to the businesses that currently use the station to promote their activities and services  To retain Manx Radio’s current services a subvention would be required of circa £1.5m per annum, however, the issues surrounding the overdraft, capital expenditure, transmission and future funding model would still need to be addressed

2.8.2 transfer of manx radio to the bbc

 Tynwald could ask the BBC to provide a full BBC Local Radio Service for the Isle of Man. This would mean the closure of Manx Radio and there would be no requirement for the Isle of Man government to provide any subvention. In addition, the Treasury could possibly let, or sell, Broadcasting House to the BBC  The greatest disadvantage to this proposal is that the Isle of Man becomes one of the few nations to lose its own national broadcaster

2.8.3 subvention withdrawal

 Manx Radio could be re-configured purely as another commercial music radio station, providing news and weather on the hour and entertainment via competitions and music programming

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 There would be no subvention requirement and the Isle of Man would no longer have a Public Service Broadcaster

2.8.4 the berry proposal

The Directors of Manx Radio have been shown the Berry plan to integrate Manx Radio into a new Manx Broadcasting Corporation (MBC) and to be run by the management of Energy and 3FM.

The Board considered what savings would be available to the Manx Taxpayer should the proposal be adopted and what the effect would be on the radio service provided to that same Manx Taxpayer. The full analysis is available in Appendix XII.

 The plan anticipates that the three loss making stations will become a single Manx Broadcasting Corporation achieving a profit, payable to its Shareholders, of £250,000 even though the new shareholders make no financial contribution to the new organisation  The programming of Energy and 3FM are proposed to be unaltered but the output of Manx Radio is to be changed into a tabloid, rolling-news service resulting in 15 redundancies at the station. Three radio stations will remain despite previous reports and current evidence suggesting the Island can only sustain a maximum of two  A conflict of interest between driving higher profits and investing money in costly public service broadcasting would be a continuing feature of this proposed arrangement. As the annual Government monies under the proposal will be expended only on certain fixed costs, the number of staff employed by MBC will be dependent upon the commercial revenues achieved and the amount of profit required. In times of reduced commercial income, this puts quality and quantity of public service output in direct competition with Shareholder return. However, this will be outside of the control of the Government as no public spending is allocated in respect of output costs  There would be a considerable reduction in live broadcasting by Manx Radio taking away the station’s ability to react to national and local incidents, including flooding, storms, power cuts etc  The role of the Manx Radio board as ‘protector’ of our shareholder’s interests disappear as the new structure envisages the Directors of Energy FM and 3FM operating Manx Radio under licence for a period of 10 years. This offers no safeguards for public service output as profitability concerns will always be of paramount importance or safeguards for public funds

Manx Radio is of the view that one, fully commercial station providing a music service targeting 35 year olds, could survive on the Island whose population is less than 85,000.

Alternatively, the national broadcaster, could at marginal cost, operate a similar service. The existing third radio station, which the Berry proposal suggests should target a population of less than 10,000, should be closed and its frequencies utilised for the broadcasting currently provided to the public on Manx Radio’s AM transmitter (Tynwald, TT, S100, MGP etc).

However, there is also another option for the Isle of Man.

2.9 european funding recommendations for PSB’s

What is clear is that the funding of the Isle of Man’s public service broadcaster is not subject to a formula under which the station can plan its future operations.

The paper ‘Public Service Broadcasting – Model Law’ (See Appendix I), which has already been referred to within this document, makes itself clear on the funding of PSB’s.

It is acknowledged within Europe that the basic form of funding at least the major portion of a public broadcaster's financial needs is the receiving licence fee system,

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firmly established in Western Europe and with a growing tendency also towards the East of the continent. Under this system, a monthly fee must be paid for every radio and/or television set which is technically in a position to receive broadcast programmes.

In some countries in Central Europe, and still more so in Eastern Europe, but also in a few Western European countries, public funding comes in the form of an annual allocation from the state budget. However, a closer look will reveal that, especially when it comes to managerial and, above all, editorial independence, more often than not the broadcaster may more or less resemble a state broadcaster, rather than being a truly independent public service broadcaster.

Licence fee funding, as opposed to funding from the state budget, has several decisive advantages:

Firstly, it means that the broadcaster is independent of the political good-will of those who decide the amount of the state budget allocation. Programming, and particularly political coverage, does not have to please those in power as a (tacit) pre-condition for actually being granted the requested sum. However, since the amount of the licence fee, and in particular its periodic adjustment (increase), also needs to be decided upon by some official body (normally the Parliament or the Government), great care must be taken to ensure through appropriate legal means that, as far as humanly possible, the decision is taken in a neutral manner, solely on the basis of the objective needs of the public broadcasting organization to fulfil its public remit.

Secondly, licence fee funding, and the income to be expected therefrom over a given number of years, is considerably more predictable than an annual allocation from the state budget. This is vital for medium and, even, long-term strategic planning and investment.

Thirdly, as long as there is funding from the state budget, the broadcasting organisation is likely to be a state company, with all the constraints that that implies. In particular, the broadcasting organisation is probably bound by a state salary structure, which is a critical handicap in a system where there is direct competition with commercial broadcasters. Where there is licence fee funding, it may be assumed that the broadcasting organization also has the right of self- administration (whilst naturally being subject to public control).

Another major advantage of licence fee funding is that an important psychological link is established between the licence fee payer, the citizen, and the public service broadcaster as the recipient of the payment. The citizen knows what he or she is paying for and appreciates its value. The broadcaster is continually aware of whom the programming is made for, and who ultimately has to be satisfied and pleased.

The document goes on to recognise that, today, the possession of a TV set may not be the most appropriate criteria for the payment of a TV licence, however, the document concludes:

Every citizen should be obliged to contribute to the funding of public service broadcasting, on the grounds that the very existence of public service broadcasting is a merit good which deserves this unique form of solidarity funding by all.

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However, in the Isle of Man the population already pay a Licence Fee to the BBC. In Section 4 of this document we explore how Manx Radio could possibly benefit from a new funding model and derive some of its revenue from the existing BBC licence fee.

submission to select committee january 2 0 1 3 P a g e | 21 section 3 – the delivery of public service broadcasting

In this section we detail the transmission options available to Manx Radio, reveal the shortcomings of our AM service and offer solutions to improve the listener experience. We also discuss the developments Manx Radio has introduced to its digital transmission platforms that allow listeners, at home and abroad, to consume the station’s output in new and interactive ways.

3.1 broadcast technology

Manx Radio is a provider of content – news, information, education & entertainment. Alongside conventional broadcast radio new digital opportunities are everywhere. However, these new technologies also introduce additional costs to the broadcaster and to the user.

Use of Internet related platforms will continue to grow and Manx Radio has been in the vanguard of developing these new services for its listeners. These internet based ‘pull’ technologies are well suited to lower demand services but they do not scale well for larger numbers of users. With Internet delivered services, there must be sufficient numbers of back- office servers and infrastructure bandwidth to meet anticipated peak demand and, consequently, costs increase with the number of users. Currently, it would not be cost effective for broadcasters or telecom providers to scale their infrastructure to meet the peak demand that would occur during times of civil emergency – or even a major sporting event!

However, traditional free-to-air radio broadcasting (‘push’ technologies) will continue to dominate for many years as the primary medium for mass audience delivery as there is no limit to the number of users or listeners that can be supported with broadcast transmissions. This is an essential consideration for a national broadcast network, especially as 96% of the Island’s population aged over 15 years currently listen to the radio.

The radio landscape in the Isle of Man and across the UK is dominated by three radio technologies: FM, DAB and AM.

3.2 amplitude modulation

AM is considered by many to be an obsolete technology, although still well used for its large geographic coverage is some parts of the world. In the UK, fewer new consumer radios are now available to purchase and organisations such as the BBC are actively beginning to shut down their AM services. Many services that do remain on AM are simulcasts of services also transmitted on FM or DAB. However, with limited alternative use for this block of radio spectrum, there has been limited governmental pressure to cease AM broadcasts and there are still some 250 AM transmitters operating across the British Isles.

Manx Radio’s AM service operates from Foxdale at 20kW radiated power (ERP). To minimise off-Island penetration into the UK, it is licence restricted to a directional signal, strongest in the NE-SW. This does provide reasonably good all-Island coverage but areas such as Ramsey town still suffer from shielding from Snaefell and Douglas itself falls in a weaker area of signal.

3.3 frequency modulation

FM, although around since the 1960’s and is itself an aging technology, remains the dominant broadcast platform across the British Isles. With new technologies, such as DAB now available, there has been discussion in the UK about closing the FM bands and moving to newer technologies – as has now been done with TV’s digital switchover. If this transition is agreed, it may begin with a withdrawal of the existing BBC FM services (Radios 1, 2, 3 and 4). Currently, the UK government has stated that a date will not be confirmed until DAB networks provide equivalent coverage to existing FM networks and DAB listening reaches 50%. It is also possible that local services (as opposed to national) may remain on FM for the foreseeable future.

Manx Radio’s FM coverage is provided by three high-power transmitters at Carnane, Snaefell, Jurby and a supplementary relay in Ramsey. Energy FM use seven FM transmitters at Carnane,

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Snaefell, Beary, Port St Mary (Howe), Jurby, Ramsey and Ballasaig. 3FM use five FM transmitters at Carnane, Snaefell, Beary, Port St Mary and Ramsey.

3.4 dab

Digital Audio Broadcasting (DAB) is an advanced digital radio technology standard, developed as the European Eureka 147 project, under the European Telecommunications Institute. It has been adopted by the UK as the replacement for AM and FM and continues to be rolled out extensively by the BBC and UK national and regional networks.

The DAB system operates just above FM in frequency Band-3 (217MHz to 230MHz). Although setup costs for DAB are higher than FM, the ability to carry multiple services on a single network can offer savings and might, therefore, be an attractive solution for the Isle of Man.

None of the Isle of Man broadcasters transmit on DAB. However, there is a BBC national network transmitter at Carnane that provides coverage in the Douglas area and over part of the south of the Island. Coastal or elevated areas of the Island may also receive BBC and UK commercial stations via DAB transmissions from off-Island transmitters, so increasing the coverage of DAB services on-Island.

3.5 issues facing manx radio

Manx Radio currently uses both AM and FM bands. Although AM has been described as an obsolete technology, as a second network, it remains essential for Manx Radio in enabling us to provide diversity of programming and special event services (TT, Tynwald and House of Keys coverage etc) while maintaining core programming on our other frequency.

Manx Radio’s existing FM network provides reasonable Island-wide coverage but there are areas of poor reception. In these areas the AM service, when transmitting the same programme content, is used by Island listeners as a lower-quality but receivable alternative. As AM listening and choice of new radio receivers is in decline, poor FM coverage, in areas such as Peel, is becoming a greater issue and Manx Radio is failing to provide universal coverage expected of a National broadcaster. To address this, Manx Radio, if it receives DHA concurrence, is likely to be able to rectify this issue during 2013/14 with the implementation of a new FM transmitter.

Much of Manx Radio’s AM transmitter platform is old and in need of considerable expenditure in the near future. The two transmitters (main and backup) are 22 and 32 years old respectively and the backup generator is 47 years old. The two, sixty metre tall masts are also in need of repainting and guy maintenance. The collective cost of replacing one transmitter, the generator and undertaking the mast maintenance is likely to be in the excess of £200,000.

Additionally, a cursory inspection of radio set dealers in the Isle of Man shows that only around 15% of radios for sale are capable of receiving AM transmissions showing that the public will find, over time, that they will not have the means to receive AM transmissions.

While stressing the importance of the AM network to Manx Radio’s services, the dilemma faced is whether it is appropriate to spend significant funds maintaining old AM technology, or would funds be better spent contributing to a second FM network, or towards a national DAB network which could carry all the services provided by Isle of Man broadcasters and provide spare capacity for the future.

While there would undoubtedly be many frequency planning hurdles to surmount, indicative costings suggest an additional FM network could be established for less than £220k as shown in Appendix VII.

Around five years ago Manx Radio carried out considerable research to determine the most cost effective way of bringing DAB to the Island. Due to the Island’s topography, it was considered that seven transmitters would be required and the estimated costing was circa £1.5m, together with an annual cost of circa £200,000 for maintaining the multiplex.

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Prices have reduced considerably since then and, without carrying out any detailed work on DAB transmission planning, or pricing the necessary infrastructure at this time, it is considered that a network, capable of transmitting all the Island’s broadcasters, could be put in place for £600,000. Direct annual running costs would be expected to be in the region of £112,000.

3.6 digital platforms

Manx Radio is committed to reviewing all new technological developments in this arena so that its content is easily available to existing and to potential new users and listeners.

The improvements to our website are at the heart of these developments and over the last 10 years manxradio.com has been re-developed on three occasions to allow us to deliver users with new and desirable features. Usage of manxradio.com over recent years has continued to grow and we now average around 55,000 unique visitors per month to our services:

Unique Visitors Unique visitors 160,000 09/10 140,000 120,000 Unique visitors 100,000 10/11 80,000 Unique visitors 60,000 11/12 40,000 Unique visitors 20,000 12/13 0 Apr Jun Aug Oct Dec Feb

NB. The drop in visitors to TT in 12/13 is because Manx Radio actively sent visitors to our dedicated TT site – www.manxradiott365.com

Actual visits to the site continue to grow and now averages over 250,000 per month:

Site Visits 500,000 Number of visits 09/10 400,000 Number of visits 300,000 10/11 Number of visits 200,000 11/12 100,000 Number of visits 12/13 0 Apr Jun Aug Oct Dec Feb

Today, listeners can access around 85 news stories per week via our website and, if they choose, can sign up to an RSS feed ensuring they are kept up to date with breaking stories and current weather forecasts. Our Listen Again service allows listeners to hear all key Manx Radio programmes at a time to suit themselves for a week following broadcast. Our webcams continue to be a heavily populated section of our website and Manx Radio is disappointed that further development of webcam feeds from around the Island has been put on hold because of financial restraints.

Manx Radio was in the first tranche of radio stations to provide its services via the industry standard RadioPlayer web listening device. The RadioPlayer allows listener’s easy access to our conventional AM and FM services in high quality as well as to our Listen Again broadcasts,

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Facebook and Twitter feeds. Substantial investment has also been made in one of the most comprehensive iPhone, iPad and Android applications that is offered by any radio station. These services are all powered by an electronic programme guide that provides content metadata making Manx Radio services easily searchable. Additionally, there are ways to interact effectively with the station via Facebook and Twitter and also a direct contact route into our broadcast studios. There have been over 20,000 downloads of the various Manx Radio apps showing that this means of consuming Manx Radio is important to our listeners.

We are one of the few radio stations anywhere to operate a suite of Facebook pages. This provides bespoke connectivity and engagement with a diverse range of programming and news content and ensures followers of one type of programme are not bombarded by content and messages referring to topics they are not interested in.

Our Twitter feeds are automatically derived from our RSS news feeds and top level Manx Radio content. In times of adverse weather and national emergency, these feeds are manually updated. The uptake of both our Facebook and Twitter services has been outstanding with 20,800 Facebook Likes and over 8,500 Twitter followers by the end of 2012.

Manx Radio has also been successful in syndicating our news output to other news agencies and we recently signed an agreement with Cable and Wireless to provide feeds of Manx Radio AM and FM to the new Sure TV offering.

Our commitment to improving reception for TT visitors has also been considerable. Not only is the service available Island wide via our AM transmitter but the race course from Ballaugh around to Union Mills is now covered by low power temporary FM transmitters. In 2011 we negotiated with UK and Eire DAB providers to get our coverage included on their transmitters, however, when they required £10,000 for the continuation of the service in 2012 we had to withdraw as there was no support available from the Department of Economic Development.

In May 2012 Manx Radio launched its TT 365 service. At the time of writing, in excess of 400,000 users have embraced the service which is fed via a dedicated website that also provides a dedicated iPhone, iPad and Android service. The entire service is run by one individual at Manx Radio and was planned to become a new, off-Island, revenue stream for the company as well as to keep the TT name alive internationally through the year. However, a change of heart from DED puts the future of this service in jeopardy,

There are, as you would expect, some areas of the digital revolution that Manx Radio is frustrated in, and we have been unable to pursue for various reasons:

 Video. The use of widespread video on our website has always been an aspiration, but as commercial revenues and subvention payments have fallen forcing us to reduce our newsroom, it has not been an achievable option for us. We are strongly of the opinion that Manx Radio is the most appropriate organisation placed to deliver these services for the Island. With an existing newsroom, a news editor and some staff already familiar with working to camera, a TV service from Manx Radio would be the cheapest possible option for the Island  Podcasts. Although Manx Radio’s website and applications allows for the transmission of Podcasts the station management have decided that our resources should be targeted to Manx Radio’s output as opposed to creating new services for what are likely to be minority audiences  Website. The Manx Radio website is in need of updating so that a new content management system can be utilised that will deliver the benefits offered by our electronic programme guide that drives all our other digital offerings.

With the exception of the areas highlighted above, Manx Radio is of the view that, not only has it embraced affordable new delivery platforms which provide the station’s services to all via the most appropriate delivery systems, its compelling and relevant content is now more readily available to both the Manx population and to listeners further afield. We believe the station’s digital offering compares favourably with all but the most well financed broadcaster.

submission to select committee january 2 0 1 3 P a g e | 25 section 4 – government policy towards its national public service broadcaster

We believe that there are four main ways in which the Isle of Man’s national broadcaster could be structured – State Broadcaster, Public Service Broadcaster, Commercial Broadcaster and Community Broadcaster. Section 4 details the core differences and looks at the structure of other broadcasters that suggest alternative ways the National Public Service Broadcaster of the Isle of Man could be structured and financed for the future. broadcasting structure options for the isle of man’s national broadcaster

4.1 state broadcasting

State Broadcasting is synonymous with non-democratic regimes where the State financially supports the State or National Broadcaster to provide political information (propaganda) which is closely controlled by the State. State Broadcasters have traditionally been the sole broadcasters in a given territory and were instigated by the state so that governments could control the information provided to the country’s citizens.

In the Isle of Man Manx Radio is frequently referred to as ‘the mouth-piece of Government’ by those who feel the views of the Council of Ministers dominates the airwaves. In reality, this is clearly not the case as considerable time and effort is placed in ensuring balance within our output and by securing speakers with alternate views. However, in a small Island community, it is not always possible to find contributors willing to publically voice their opposition to the government. What is clear from this simplistic example is that unless there is a clear delineation between State and Broadcaster, it becomes easy for those, whose interests are best served by perpetuating the ‘state-broadcaster myth’, to continue to question the independence of Manx Radio. This is why Treasury’s current dual role as Shareholder and, essentially, the body primarily responsible for setting the broadcaster’s annual budget, ensures that the broadcaster’s independence continues to be questioned.

If for no other reason, it is imperative in democratic countries for the overview of the Council of Europe to prevail. In a declaration on the guarantee of the independence of public service broadcasting, the Council specifically called on States:

‘to provide the legal, political, financial, technical and other means necessary to ensure genuine editorial independence and institutional autonomy of public service broadcasting organisations, so as to remove any risk of political or economic interference’.

The Council of Europe’s recommendation CM/Rec(2012)1 of the Committee of Ministers to member States on public service media governance (See Appendix VIII) had the following to say:

Independence is the core requirement for every public service media organisation. Without demonstrable independence of action and initiative, from government as well as from any other vested interest or institution, public service media organisations cannot sustain their credibility and will lose (or never gain) popular support as a forum for carrying forward the national debate and holding power to account.

Securing and safeguarding independence is therefore a primary role of any framework of public service media governance, and this is why independence has been at the heart of all of the relevant Council of Europe standards.

The fundamental requirement is that the editorial autonomy of the public service media should be guaranteed, and the structures necessary to ensure independence of editorial action clearly and unambiguously set out.

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4.2 public service broadcasting

As the name intimates, public service broadcasting is broadcasting:

 Made for the public  Financed by the public  Controlled by the public.

Firstly, in terms of technical coverage, it means that ideally every household should be in a position to receive the programme service.

Secondly, it means that all groups and sections of society should be catered for by the service. The entire population, in this sense, must be served by public service programming even though it is impossible to please everybody all of the time.

If positively expressed, PSB is made for the public, for the entire population. If expressed negatively - it is not made for the government, for a political party or a church or for any other interest group or for shareholders. It must be independent, of all of these, serving only the interests of the population, of people as citizens rather than as consumers.

Freedom of expression and the right to seek and receive information are fundamental for the functioning of a genuine democracy and the media are the most important tool for freedom of expression in the public sphere, enabling people to exercise the right to seek and receive information.

Public service media need to operate and evolve within a sustainable governance framework which secures both the necessary editorial independence and public accountability. However, it is also important to secure a pluralistic voice, which in our community, is provided through the existence of commercial radio services, the Press and by news internet services.

The Council of Europe, recommends that member States further strengthen and, where necessary, enhance the appropriate legal and financial environment, including the external governance arrangements for public service media organisations, by drawing inspiration from their guiding principles, thereby guaranteeing the independence and sustainable development of public service media and empowering them to take up the challenges of technological progress and editorial competition, in particular by:

 Including, where they have not already done so, provisions in their legislation/regulations for the remit of public service media, particularly with regard to the new communication services, thereby enabling these media to make full use of their potential and, especially, promote broader democratic, social and cultural participation, inter alia, with the help of new interactive technologies  Encouraging public service media and providing them with the necessary resources and tools to review and develop their internal governance arrangements, regardless of where they stand in the transformation into fully- fledged public service media  Ensuring wide distribution of the specifically designed guiding principles to the public authorities in order to allow public service media to reinforce their essential position in the media system and improve their functioning in the digital environment to fulfil their democratic mission  Encouraging the public authorities to support and promote the implementation of these guiding principles

4.3 commercial broadcasting

Commercial broadcasting services are broadcasting services:

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 That are operated for profit or as part of a profit-making enterprise  Their key role is to attract the largest possible audience for their licensed service in order to provide the best platform for their advertisers  Whilst regular news bulletins and sports results are an important facet for building and retaining audience it is traditionally sourced from syndicated feeds with the minimum amount of local resource committed to delivering local news output. This ensures that profitability remains high  There is no requirement to provide programming services for minorities, special interest groups or to provide debate and political interrogation and normally these are not provided as they do not contribute to the profitability of the organisation  There is every incentive to introduce automated programming to increase profitability

It is virtually unheard of that governments support commercial broadcasters. They are normally present to offer listener choice and plurality of view to that offered by the national public service broadcaster.

4.4 community broadcasting

These services are normally provided by enthusiastic amateurs or retired professionals to meet the niche requirements of particular audiences. The organisations are often voluntary and run on a charitable basis. They are often subject to restrictions by the licensing authorities as to how much advertising they can generate and there are often restrictions ensuring they do not compete with licensed services for particular types of advertiser.

In the Isle of Man, it may be appropriate, for example, to run a Community Station within Nobles Hospital. However, it is unlikely that this form of broadcasting will be within the remit of this Select Committee.

broadcasting models of interest to the isle of man

4.5 the bbc

The Royal Charter is the constitutional basis for the BBC. It sets out the public purposes of the BBC, guarantees its independence, and outlines the duties of the Trust and the Executive Board – a far more simplified structure than that within which Manx Radio operates.

The Agreement with the Secretary of State sits alongside the Charter. It provides detail on many of the topics outlined in the Charter and also covers the BBC's funding and its regulatory duties. The Agreement is an important constitutional document because together with the Charter, it establishes the BBC's independence from the Government.

The BBC collects a licence fee from every Manx household in possession of a TV receiver and it is estimated that this equates to around £5m per annum. The Manx Government paid the BBC directly in 2008/09 £616,500 pa to provide free licences to the over 75’s of the Island.

It is Manx Radio’s understanding that, as a Crown Dependency, the Isle of Man cannot set up organisations under a Royal Charter.

4.6 rté

RTÉ is a Public Service Broadcaster, a non profit making organisation owned by the Irish People. RTÉ is Ireland’s cross-media leader, providing comprehensive and cost-effective free to air television, radio and online services, which are of the highest quality and are impartial, in accordance with RTÉ’s statutory obligations.

The RTÉ Authority is charged by the Irish Government with overseeing the activities of the RTÉ Group. The Director General reports directly to the RTÉ authority.

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The Principles and Objectives of RTÉ, as determined in the Broadcasting Act 2009 are copied in Appendix VIX and could form a basis for a new Isle of Man Act for its national public service broadcaster.

4.7 channel four

Channel 4 is a publicly-owned, commercially-funded public service broadcaster that does not receive any public funding and has a remit to be innovative, experimental and distinctive. Channel 4 works across television, film and digital media to deliver their public service remit, as outlined in the 2003 Communications Act and most recently the 2010 Digital Economy Act.

Channel 4's primary purpose is the fulfilment of its public service remit, which is defined in the 2003 Communications Act. Channel 4's licence from Ofcom, in addition to stipulating the need to meet the remit, places certain specific programme obligations on Channel 4. These establish quotas for programming such as news and current affairs, as well as quotas for original production, independent production, access services provision, and production in the Nations and Regions.

4.8 s4c (channel 4 for wales)

The S4C model provides unique parallels with Manx Radio’s situation as it is currently undergoing a complete change in its funding mechanism, with 90% of its income from 2013/14 being derived from the BBC in a new partnership.

This extended partnership will contribute to ensuring that both organisations can meet their individual statutory commitments to providing services whilst also providing for the development of broadcast media to provide services which truly meet the changing needs and expectations of the Welsh audience.

Under this agreement the BBC will provide funding as well as continuing to provide programmes to S4C in order to sustain a rich, freely available Welsh language television service, fit for the 21st century.

Funding for S4C in the future will be from three sources:

 The BBC licence fee  Her Majesty’s Government grant-in-aid  Commercial income.

The Agreement is underpinned by two balancing obligations:

1. On the BBC to recognise that S4C is solely responsible for delivering its remit, its statutory duties (including duties in respect of expenditure of grant in aid) and its additional activities and objectives as set out in its Corporate Plan, Content Strategy and Statement of Programme Policy. The BBC both in its consultation and in its proposals, will respond positively and practically to S4C’s overall content strategy, and so seek to maximise the value delivered to the S4C services and audiences.

2. On S4C to recognise that the BBC’s contribution to S4C’s services pursuant to section 58 of the Broadcasting Act 1990 is an important element of the BBC’s remit and overall delivery to Welsh language audiences of its public purposes and the public service characteristics enshrined in its Charter and Agreement. Further, S4C recognises that the BBC and its Trust are solely responsible both for how they do this and for the value for money of the BBC’s expenditure, subject always to Section 58 of the Broadcasting Act 1990.

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The benefit of this type of agreement is that S4C retains its corporate identity although it is to be primarily funded by the BBC through the BBC licence.

This type of arrangement could work exceptionally well in the Isle of Man. The BBC could provide considerable funding but, as is the case in the S4C agreement, allow Manx Radio and, indeed, the Isle of Man, to retain its independence with its own National Public Service Broadcaster, legally bound to deliver the programme output for which it is licensed.

Appendix X is the Memorandum of Understanding, Draft Operating Agreement. (NB. I have been informed that a final Agreement will be available shortly and it has been requested that the ‘Draft Agreement’ is not included within the Select Committee papers). Appendix XI is the Strategic Partnership Agreement.

submission to select committee january 2 0 1 3 P a g e | 30 section 5 – conclusions

5.1 The Isle of Man is a mature, democratic society. Tynwald has already agreed that it reaffirms its commitment to public service broadcasting and that it recognises Manx Radio as the Isle of Man’s national broadcaster. However, with an inability to determine its future because of its numerous ties to government and no transparent funding formula, it continually finds itself unable to determine and fund its core activities.

The internationally agreed definitions of PSB are clear and suggest that a definition that restricts the spheres of Manx Radio’s output is inappropriate.

Manx Radio, the National Public Service Broadcaster, has never had its status and objectives as the Island’s public service broadcaster confirmed in primary legislation. Manx Radio suggests it would be the natural step to secure public service broadcasting for the future in the Isle of Man. The existing national broadcasting organisation (Radio Manx Ltd) could be transformed into an independent, non-profit public service broadcasting organisation with the right to self-administration. It would adopt internal Statutes and Bye- Laws in accordance with the provisions of this Law and be set up with the appropriate structures and governance to deliver the services in the most cost-effective way possible.

5.2 There are models available from existing national broadcasters that provide a blueprint for setting up the National Public Service Broadcaster in the Isle of Man. Each of these models contains the recommendations of the Council of Europe for public service broadcasters:

‘ to provide the legal, political, financial, technical and other means necessary to ensure genuine editorial independence and institutional autonomy of public service broadcasting organizations, so as to remove any risk of political or economic interference’.

A new Act should be introduced as soon as practical.

5.3 a possible future funding scenario for manx radio

S4C’s situation demonstrates a funding model that could well be suited to the Isle of Man in that it provides for:

1. A reduction in Isle of Man Government support 2. BBC funding to provide the programming remit of the broadcaster as stipulated in its statutory commitments 3. Provides for Manx Radio to support its income with advertising and sponsorship of programming paid for, but not generated, by the BBC

If this is implemented, it is Manx Radio’s view that, following the completion of the current capital programme, the future funding of the broadcaster (at today’s prices), to include the broadcaster running its own transmission platforms, providing its own capital funding and trading without the need of any significant overdraft, could be secured as follows:

1. Government subvention support of £550,000 pa plus RPI or GDP (down £300,000 from the current £850,000 pa) 2. BBC support of £650,000 pa plus RPI 3. Transmission support of £86,000 pa (as currently paid by the DHA) 4. Advertising and sponsorship revenues of circa £950,000

This would provide the broadcaster with an annual income of circa £2,236,000 and allow it to function independently, across all its operations, as prescribed by the Council of Europe.