BBC Annual Report 2012/13 BBC Executive’s responses to follow‐up questions to 22 October 2013 oral evidence session Lord Hall’s vision for the BBC 1. Given Lord Hall’s vision for iPlayer and the ability for users to become their own schedulers, assembling the content they like when they like from the BBC, will the BBC need as broad a portfolio of channels in future as it does today? Answer: Lord Hall’s speech on 8th October 2013 was explicit about the continued popularity of television channels, which serve a different need from services like iPlayer. Channels are social media, bringing people together in an environment where a channel scheduler has done the work of collecting together a set of programmes that they think viewers will want to watch. iPlayer still only accounts for around 3% of all BBC television viewing – the vast majority of what people watch today has been delivered via a television channel. But we also think channels will be different in the future – not just the traditional stream of linear programming. Users will be able to go back in time – through the backwards programme guide on YouView, for example. They will be able to go into the future or create their own schedule from programmes released early. Channels will know what users like to watch and suggest what they might want to watch next. Through services like the Connected Red Button, viewers of channels will be able to access extra coverage, alternative programmes, radio stations or content the BBC has made especially for online. 2. Viewers who only watch on‐demand and catch‐up services such as the iPlayer or 4oD don’t require a TV licence. Does the BBC’s plans for the iPlayer, with more content available for far longer on catch‐up— including programmes premiering online before broadcast—potentially undermine future licence fee revenue? Answer: At present a TV licence is needed if anyone in the household watches or records TV programmes in the year on any device at the same time as they are shown on TV. This requirement is commonly understood by people. Whilst a small number of homes watch only catch‐up TV and therefore do not need a licence, our analysis suggests they account for only 1‐2% of households overall (most households also watch some broadcast or live‐online TV and therefore need a TV licence). In our view, the introduction of content premiered on iPlayer will not change this. We anticipate that the vast majority of households who watch content premiered on iPlayer will continue to also watch live TV, by broadcast means or online, and so will still need a TV licence. Premiering will enrich iPlayer as well as complement the BBC's broadcast services. However, the licence fee definition could start to create perverse incentives, with a fee payable for some ways of consuming BBC TV but not others. We would welcome discussing this issue with the Committee to consider whether and when the licence fee should be modernised again. 1 It is worth noting that the licence fee has always adapted flexibility to technology change over time, including through a relatively simple change to the regulations in 2004 to capture households watching linear TV over the internet – a change which is now well understood1. 3. Should TV licensing be required in future not only for those who watch programmes “as they are broadcast” but any use of iPlayer on any device? Answer: The licence fee definition remains robust, with only 1‐2% of households consuming exclusively on‐ demand content and so not requiring a licence fee. However, the definition could start to create perverse incentives, with a fee payable for some ways of consuming BBC TV but not others. We would welcome discussing this issue with the Committee to consider whether and when the licence fee should be modernised again. 4. How does the BBC currently enforce TV licensing for those who watch TV programmes as they are being broadcast on devices other than a television but claim only to watch catch‐up TV? Does the BBC seek, and do ISPs and mobile operators, provide usage information? Has the BBC successfully prosecuted anyone in this situation? Answer: We can and have prosecuted people watching TV illegally using equipment other than TV sets. There is no separate enforcement strategy as our existing approach enables us to catch people watching on any device. We don't have access to data from ISPs on people's web usage, and we are not seeking to obtain it. Fewer than 2 per cent of households watch only catch‐up TV and therefore do not need a licence2. Headcount 5. What is the current size of the BBC workforce and what is the headcount expected to be in 2015 when the Delivering Quality First saving target is to be achieved? Answer: The total BBC workforce (excluding commercial subsidiaries) comprised of 20,156 staff (18,644 full time equivalents) as at 31 October 2013. The DQF programme extends through to the 2016‐17 financial year and we anticipate that there will be further staff reductions through that period. Executive and talent pay 6. When negotiations were undertaken with existing senior managers over the introduction of the £150k cap on redundancy, was any attempt made to end the legacy of free private medical cover and car allowances that many still receive? What is the current cost to licence fee payers of these benefits? Answer: Car allowance and PMI are contractual, taxable benefits. Removing either benefit from current employees without consent constitutes a change in contractual terms which exposes the BBC to significant legal risks such as claims for unlawful deduction of wages, breach of contract and unfair 1 77% of those watching linear TV content on a PC or laptop at least weekly report that they know it requires a TV licence. 2 BARB Establishment Survey, Q2 2013. 2 dismissal. The BBC considers the legal risks when determining whether to remove contractual entitlements without consent. For changes to redundancy severance terms, while there is some legal risk, it is reduced because the majority of individuals will not be made redundant and there is no immediate impact on their terms and conditions. Removal of health care and car allowance would have an immediate and significant impact on the individual’s pay and benefits. PMI and car allowance have ceased being offered to new senior manager appointments since August 2011 and April 2012 respectively. The total annual spend on car allowance is £2.2m (in 2009, the annual spend on car allowance was c£3.6m). We do not offer the benefit to new SM appointments and the allowance is frozen so the annual cost will continue to reduce each year. The total annual spend on PMI, including insurance premium tax (IPT) was c£750k on renewal in January 2013. 7. It has been reported that last year BBC Worldwide bought Jeremy Clarkson out of Bedder 6, a company set up to bolster his pay, at a cost of £10 million to £15 million. What was the business case for buying Mr Clarkson out of this arrangement? Did this reduce the dividend that would otherwise have been returned for BBC public service operations in the year? Answer: Bedder 6 was a joint venture between BBC Worldwide (BBCW) and Jeremy Clarkson (JC)/Andy Wilman (AW) (Top Gear presenter and Executive Producer respectively), established in November 2007. BBCW owned 50% of the shares in Bedder 6 and JC/AW 50%. The joint venture was set up to maximise the commercial value of Top Gear. It was successful in doing so with £149million of Top Gear revenues generated in the first five years. The joint venture ensured that the key talent was retained by the BBC. Under the terms of the original agreement between BBCW and JC/AW, JC/AW had an option to put their shares and require BBCW to acquire their stake at market value, within five years. In April 2012 JC/AW exercised their put option. As a result BBCW reached a negotiated settlement with JC/AW to acquire their shares in a way that ensures JC/AW’s ongoing commitment to Top Gear. This settlement is structured to help safeguard the show’s long term future by incentivising JC/AW to participate in the development of the UK production and format and is forecast to deliver net incremental cash to BBCW over the next 10 years, and has a positive net present value to BBCW on conservative assumptions. In total in 2012/13 BBCW returned £156million to the BBC in dividends and investment in content. The Bedder 6 deal did not reduce the level of dividend, which was paid in accordance with a pre‐determined target. Does the overall figure in the annual report for pay on talent represent the total remuneration paid or are there any other deals with production companies via the BBC’s PSB or commercial operations in existence that may give a less full picture? Answer: The disclosures on talent spend in the BBC Annual Report and Accounts (for example, page 76 of the 2012/13 Annual Report and Accounts) represent the amounts paid directly to artists and 3 contributors by the BBC in respect of their work on programmes for broadcast on the BBC’s public services. It excludes amounts paid to artists and contributors via independent production companies since the BBC does not have full visibility of, or manage, such payments, and amounts paid to artists and contributors by BBCW. Bullying and harassment issues 8.