Mark Thompson's MacTaggart lecture: a response

Mark Thompson's MacTaggart lecture was a blinkered attempt to skewer Sky while ignoring the BBC's own culpability in the crisis of investment in public service broadcasting, argues David Elstein.
David Elstein
1 September 2010

Mark Thompson is one of the few people to have been allowed two bites at the most prestigious public address that the television industry offers: the annual MacTaggart Lecture at the Media Guardian Edinburgh International Television Festival, held over the August Bank Holiday weekend. In 2002, when he first spoke, he had just taken over as Channel 4’s Chief Executive. By the time of his reprise last weekend, he had completed six years as the BBC’s Director-General. The difference in tone is remarkable.

In 2002, Thompson had no difficulty in acknowledging that much of British television was “dull and mechanical and samey”, suffering from a creative deficit, culturally conformist, risk-averse in its scheduling, and lagging behind the US in key genres: “it’s odd how often when you’re looking for ambitious, complex and above all modern TV, you find yourself watching not British but American pieces: Six Feet Under, say, or 24.”

It’s no secret that, since 2002, US drama has drawn further and further ahead of ours, with UK comedy similarly lagging. Whilst spending on content has continued to expand in American television, our system has contracted sharply, as Ofcom reported only last month. We suffer now not only from rigid scheduling, but also from a surfeit of cheap output: soap, heavily constructed reality, cookery, property, elimination contests and quiz formats, all in the heart of peak-time – something that US broadcasters observe in disbelief. It was a telling comment on the conservatism of which the 2002 speech complained that, eight years later, the Channel 4 schedule Thompson had promised to radicalize had only just got around to cancelling Big Brother.

The 2010 speech was strong in its attacks on Sky and the Murdochs – no surprise there: James Murdoch, in last year’s MacTaggart, had lambasted the BBC’s seemingly unconstrained expansion (a critique partly echoed this year by former BBC chairman, Michael Grade). Thompson also – again unsurprisingly – defended the licence fee as one of the key pillars of the BBC, along with editorial independence, a culture of public service and the strong support of the public. Yet some of the themes he chose for his speech look – in the cold light of day, after the applause from a packed audience of delegates had faded – not just odd but also misconceived.

Other than in his peroration, Thompson avoided using that tired old phrase “the best television in the world” to describe the UK’s output. Elsewhere, he acknowledged that the US was well ahead, and relied instead to the “straw man” argument: that at least our television was not the worst in the world. The evidence he chose to support his argument was somewhat bizarre: a survey of “several hundred Brits” who had recently travelled abroad, and were asked – amongst other things – to compare the quality of television where they had travelled with that at home. To no-one’s amazement, 62% preferred the home offering, and only 8% that from abroad. Given that most of those surveyed would have spent little time watching television on their travels, and that much of what they saw would have been in a foreign language, or comprising continuing storylines and themes with which they had no familiarity, it is not surprising that they plumped for what they knew. I would wager that if you asked the same question of returning Austrians, or Thais, or Belgians, a similarly high percentage would favour the familiar. This is as weak as evidence gets.

Thompson also claimed that British programmes were increasingly well received abroad, including in the US. The evidence he cited for this was not the presence of British shows in US schedules, but the BBC’s status as a top ten provider in the iTunes TV section, by dint of loading up hundreds of hours of its content. This is a very modest achievement, partly because the download market is small, but also because the US distribution market is very fragmented. Of course, some of our formats have made headway in the US, from Millionaire to Strictly Come Dancing. The Office is perhaps the most notable success, where a massively improved version of the UK original has struck gold. But the re-make of Life on Mars failed dismally, and there are virtually no UK dramas in the schedules of the top twenty channels in the US. Yet this week, in the schedules of the top twenty channels in the UK, you can find 67 different US drama series, half of them in peak time. By contrast, this week there are just six hours of non-soap original UK series drama in the peak-time schedules of the five UK public service channels. As Thompson eventually conceded, the UK TV industry is “a minnow” even if we out-perform the likes of France and Germany in terms of spend on content per head.

The core of Thompson’s argument was that the UK’s public service broadcasters have a collective interest in building up their production capabilities, and that cutting the licence fee would be a betrayal of the creative industries: “a pound out of the commissioning budget of the BBC is a pound out of the UK creative economy – once gone, it will be gone forever”. To make sense of this position, he had to argue that a decline in quality was not inevitable, but that there was a “looming short-fall in the amount of money available to invest in original British production”.

Explicitly, he stated that “the total pot of money available to invest in original TV production is shrinking and, unless something changes, may shrink further”. It is happening, he said, because the pool of advertising that supports public service content beyond the BBC is declining. It is certainly true that – according to detailed reports from the media regulator, Ofcom – Channel 4 and ITV1 reduced their total spend on network programming from £1.48bn in 2005 to £1.277bn in 2009, in 2009 prices: a 14% decline.  This included a 17% decline in their spending on first-run origination, from £1.26bn in 2005 to £1.037bn.  But in the same four year period, BBC spending on its television channels also fell, by 13%, according to both measures – network programming and first-run origination. £198m was removed from network spending, and £188m from first-run origination – almost as much as was cut by the two key commercial channels, who were being devastated by a huge slump in their advertising revenues.

The BBC, with its inflation-proofed licence fee income, had no such excuse. It just chose to move large amounts of money out of content production and into infrastructure projects, such as Broadcasting House in London and Salford Quays. Yet Mark Thompson made absolutely no reference to the fact that the crisis in content investment was not “looming”, but had already happened, with the BBC leading the way. Nor did he refer to Ofcom’s calculation that last year the BBC spent just 56% of its TV-related licence fee income on first-run origination. The average for the last four years has been 57%, compared with an average of 64% for the previous decade.

When I confronted the boss of BBC TV, Jana Bennett, with these figures during another Edinburgh session, she did not challenge them, but simply expressed the hope that content spend would recover once the major building projects were complete. But for Thompson, it is as if the damning Ofcom reports had never been published – which is consistent with the undisguised contempt in which the BBC holds Ofcom. The pretence that BBC Television had not cut its budgets by almost as much as the beleaguered ITV and Channel 4 was simply breathtaking. Indeed, Thompson appeared to be in full denial: “at a time when other broadcasters are struggling to maintain their origination budgets, it’s critical that the BBC spends as much of the licence fee as possible on high quality content”. Given this refusal to acknowledge the reality, it was not surprising that his proposed remedies for the content crisis ranged from the spurious to the misconceived.

First, he announced that thousands of jobs had been removed from the BBC in the last six years: but the bulk of that has come from outsourcing – last year, the reduction was 56 jobs, from just over 24,000 to just under. He continued with the theme announced in his strategy review, Putting Quality First, that the BBC should be “as small as its mission allows”: but how small that is has never been revealed. All that we have heard so far is that the BBC’s multitude of web pages will be reduced by 25% (leaving its online spending at £150m per annum, dwarfing every other UK web provider); that an Asian radio service will close; that Radio 6Music will not close; and that a little less will be spent on sport and acquisitions – yet no money will actually be saved, as it will all be spent on making the BBC more distinctive.

Thompson chose to attack another set of straw men – “the hardliners” and “the enemies of public service broadcasting” – for trying to distinguish between readily available entertainment programmes and more serious content that the market fails to deliver (Thompson argued early in the lecture that the BBC needed to provide both, as part of “whole cloth”). Yet at the end of this section, he concluded by saying “the BBC needs to make a further significant shift towards distinctiveness, spending more of the licence fee on output you can’t see or hear anywhere else and which, without the BBC, wouldn’t get made at all”. So he is a “hardliner” too.

He did not cite the evidence that led him to claim that there is stronger support for the licence fee than when Alan Peacock recommended, 24 years ago, its eventual replacement by subscription funding. He seems not to have read his own annual report, which quotes research from The Guardian that just 58% of licence fee payers currently think the fee is good value for money.

Meanwhile, he urges the competition authorities to “look hard at the structure of the advertising market and the effect of the present main competition remedy, the (sic) CRR”, in the apparent belief that abolishing Contract Rights Renewal will allow the commercial sector to invest more in content. In fact, CRR was the remedy dreamed up by ITV to offset the likely negative impact on advertisers and other commercial broadcasters if Carlton TV and Granada TV were allowed to merge. Mark Thompson, as Channel 4 CEO at the time, will undoubtedly have welcomed it. As it happens, CRR only briefly benefited Channel 4, and then became a contributory factor, along with the progressive over-supply of commercial airtime, in the rapid erosion of the cost of TV advertising across the industry. The competition authorities are indeed keen to “look hard” at the whole airtime market, which is highly complex and unpredictably sensitive to a variety of potential changes. However, they have firmly decided that abolition of CRR is not the answer, and it is mischievous of Thompson to introduce it as a potential solution for a problem – declining programme spend – for which his own culpability is so clear. That Jeremy Hunt, the Culture Secretary, foolishly believes that he knows better than the Competition Commission what market they should be analysing, and advocates straightforward abolition of CRR with no other change, is no excuse for Thompson’s intervention.

Another puzzling theme was the call for revision of the codified terms of trade with broadcasters that have allowed independent producers to become a significant part of the UK content scene. Thompson, for justification of his call for “flexibility”, referred to the emergence of powerful independent production companies: but they, of course, have no need of standard terms. It is the weaker producers who might be pressured to give up rights and fees if the terms of trade did not protect them: the BBC’s apparent desire to exploit their vulnerability, when it chooses not to spend its own munificent revenues on fully-funding new content, is unpleasant to behold.

Then Thompson offers his final non-sequitur of a distraction from the BBC’s failings on content creation: the suggestion that BSkyB should invest more in original UK production, because its total income exceeds the BBC’s. As is usual in these discussions, he dismissed the massive amount Sky spends on sports programmes, as well as the significant amounts spent on news and arts output, as if the thousands of people working on them have no significance. Instead, he urges Sky to spend “hundreds of millions of pounds” (when he delivered the speech, this came out as “scores of millions” – the draft text four hours before delivery spoke of “half a billion pounds”!) on the kind of content that terrestrial broadcasters are supposed to deliver, thanks to their dedicated funding and spectrum privileges – drama, comedy, documentaries, entertainment.

He argues that Sky’s “income” makes it the dominant commercial broadcaster, and it should act accordingly. Of course, Sky’s income derives from a mixture of selling (mostly third-party) basic tier channels, its own premium movie and sports services, plus broadband, telephony and fancy technology. It is – as Thompson well knows – primarily a platform.  More importantly, whereas the BBC’s income is levied from all TV households under threat of prosecution, Sky’s is derived from voluntary customers who have already been required to pay their licence fee. It is not just brazen of Thompson to try and instruct Sky on how to satisfy its customers (an obligation he is extremely keen for the BBC never to have to face), but bare-faced cheek to propose that it should “single-handedly” fill the content funding gap, for which he refuses to accept any responsibility, despite the overwhelming evidence of the BBC’s behaviour.

The spuriousness of his argument is perhaps easier to see if you try to apply it to Virgin Media. Since the sale of its channel business to Sky, Virgin Media spends not one penny of its £3.6bn annual income on content creation, though it pays hundreds of millions of pounds to content suppliers. Its revenue is less than Sky’s, but not much different from that of the BBC: yet it earned not a single mention in Thompson’s speech, which was designed much more as payback time for last year’s attack on the BBC by James Murdoch than as a serious contribution to the urgent debate on how to save public service broadcasting from its failing suppliers.   

To round off his attack on Sky, Thompson quoted Rupert Murdoch’s argument as to why US cable companies should pay re-transmission fees to networks like Fox, gleefully urging that Sky (yet again, Virgin Media failed to secure a mention) should do the same for ITV, Channel 4 and Five. Thompson may not be aware that Murdoch has run the re-transmission argument both ways, having paid cable operators handsome carriage fees in order to widen distribution of Fox News in its early days. But he is surely aware that the “must carry” and “due prominence” rules which govern the cable and satellite platforms in the UK would need to be amended to conform with the re-transmission option available to US broadcasters.

ITV, Channel 4 and Five are guaranteed slots 3, 4 and 5 on electronic programme guides, as part of a regulatory deal that ensures their carriage on all platforms. They are free to negotiate carriage terms for their spin-off channels, even those which are free-to-air, and recently ITV secured some Sky funding to support satellite transmission of high definition versions of ITV2, ITV3 and ITV4. However, it is highly unlikely that ITV, Channel 4 or Five would be willing to risk their EPG prominence, let alone threaten to remove their service entirely, in order to secure some form of re-transmission fee. Conversely, Sky might well consider it a bargain to pay some form of fee to dislodge those channels from the front page of the EPG, which would significantly improve the visibility of their own channels. And if Sky just dug in its heels in response to a threat to pull ITV1 from its platform, one wonders how long ITV would withhold its main channel, suffering huge short-term revenue losses, and long-term loss of visibility. All in all, it is a safe bet that re-transmission fees will not be a significant source of revenue for content creation.

Thompson could not leave the subject of Sky without referring to the recent proposal from Rupert Murdoch to buy the 60% of BSkyB his companies do not already own, wondering why the cross-media ownership rules have not caught up with Sky’s growth and ITV’s decline. Needless to say, he did not mention that owning a regulated platform gave a company no editorial influence, nor that the many channels actually owned by Sky delivered an audience share less than Five’s, nor that Sky News is subject to regulatory requirements for impartiality which are scrupulously observed. If he had waited a day, he would have seen how potential embarrassment for Sky Sports (the major funder of English cricket) clearly failed to inhibit the News of the World in its exposure of the Pakistan betting scandal. It is the potential co-ordination of news agendas between different media that provides the most obvious basis for a “public interest” intervention by the government in the proposed takeover: given the available evidence, this seems rather modest a concern in the current context, compared with the market distortion risk that led to Sky losing two recent regulatory battles, over the wholesale pricing of its sports channels and its attempt to buy 17.9% of ITV.

Mark Thompson is a highly intelligent man, and in mounting his attacks on Sky he successfully – if temporarily – diverted attention from the BBC’s own problems and failings. Perhaps he should take a leaf out of Rupert Murdoch’s book, and look to his creative record. One of the least known aspects of Murdoch’s investment history was to build from scratch a highly successful television production studio, Twentieth Television, which has delivered not just the “ambitious, complex and modern” show 24 that Thompson praised in his 2002 speech, but also the likes of The Simpsons and Glee. If, in his remaining years as Director General, the BBC produces a series as inventive, ground-breaking and exhilarating as Glee, Mark Thompson will have delivered the licence fee payers much better reason to praise him than his latest MacTaggart effort.

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