Speeches
Guardian Media Summit
31/10/2007
ITV has been part of the British broadcasting landscape for over fifty years. It’s sometimes hard to imagine, but for most of that time the vast majority of viewers had the luxury of four or less channels to choose from. Even more sobering is the fact that for well over two thirds of ITV’s existence it had an effective monopoly of the sale of television commercial airtime in the UK. How things have changed! Satellite, First digital television and now broadband internet have revolutionised the landscape, and consigned the constraints of spectrum scarcity to history.
So is that the end of the world for us? Certainly not. Yes, there will be a continuing, but not precipitate fragmentation of audiences until switch over is completed. Yes, there will be increased competition for public attention. Yes, there will be some new revenue models. And yes, there will be whole rafts of new cheap and cheerful ways for individuals as well as companies to share audio-visual material with the rest of the world – not all of it loser, sorry, user generated content.
But there are new opportunities for the existing players, too. ITV certainly does not live by one technology alone, nor will it wither and die with the passing of spectrum scarcity. ITV is not a technology, nor a platform, nor an artificial creation suited only to a particular era in the history of electronic distribution.
ITV’s core purposes, skills and assets revolve around ideas, not technology. It is about creativity, about the ability to provide the entertainment and the narrative dramas and news that British audiences have valued for the past 50 years and will continue to seek and value well into the digital future.
It is also about having and sustaining the necessary scale of resources continually to turn new ideas into high-quality attractive programming. And it is about having a highly visible brand, which viewers instantly recognise, and know exactly what to expect and how to find. As the market fragmentation reaches saturation, few if any commercial competitors will have anything like that combination of skills and resources to meet these high audience expectations.
We often seem blinded to the fact that the digital revolution in broadcasting is primarily about an explosion in the channels/platforms of distribution. There is no parallel increase in talent, resources and production skills. Indeed, newcomers are in a very tough position: where is the material? where is the brand recognition? How much additional money needs to be spent on marketing?
In ITV1, and increasingly in ITV’s 2, 3 and 4, we have channel brands that really do cut-through. Channels where viewers know that they can expect high quality entertainment, and where they like what they find. They are all channels where a virtuous circle of high levels of investment in quality content attracting the large audiences that advertisers want to reach and are prepared to pay for. That revenue is recycled to fund further reinvestment. This is a model that fragmentation makes it harder, not easier, for others to replicate.
On ITV1, the £1bn annual investment in content delivers a range of high-quality programming including original, domestic dramas like Doc Martin which consistently gets more than 8m viewers, entertainment shows such as Britain’s Got Talent and I’m a Celebrity which secure double digit million audiences, and high quality sport including Champions League football, the Rugby World Cup, and Formula 1. Not the sort of line-up too many established competitors can provide, let alone the digital start-ups. And, remember this, it is all free at the point of consumption.
On ITV2, where we will invest an additional £20m in programming from next year, the success of shows like Secret Diary of a Call Girl, which opened with an audience of 1.8m, has shown that our considerable strengths in commissioning and bringing to screen attractive, original, British content can continue to deliver mass audiences even on digital channels despite all the distractions.
This virtuous circle is also what our advertisers need and want. Even if increasing competition has reduced the absolute size of our biggest audiences, they are still by some distance the biggest audiences available to advertisers. And for advertisers, television delivers two unique things as medium: (1) fast cover build – the ability to reach a large portion of the population with a consistent message in a short space of time; and (2) brand engagement – high levels of audience engagement with great content and the richness of the medium itself (sound, moving image, a shared, often social, experience) which provide a unique environment for advertisers to get audiences to connect with their brands.
It is against these two key criteria that our channels must and will continue to deliver for our audiences and of course for our advertisers – large and engaged audiences. Continued success delivering this will differentiate the value of the advertising that our channels deliver from that of the myriad channels in the long tail of multi-channel television.
Within television, ITV1 and ITV’s family of digital channels, will therefore remain focused on serving mass audiences and advertisers needs. But we are also going beyond television. As I said, the digital revolution opens up interesting new opportunities, and ITV will travel with its audiences and advertisers wherever they want to go – internet, mobile phones, whatever. And we will grow our production and licensing businesses internationally. Our content is both the driver and the attracter, as we have already found. On the back of Britain’s Got Talent on ITV1 and ITV2, clips of the winner, Paul Potts, were viewed no fewer than 30 million times on You Tube.
In this context, the free-to-air model is another huge asset. Unlike the music industry, there’s no threat of competitors or pirates attacking our revenue. How do you undercut something that is already free? Provided we present our content in ways that people can find and enjoy easily, they will come to watch a free, ad-funded, and wholly legal service with ITV. We are already doing this with our relaunched itv.com site. More than 5 million people came to itv.com in the month of September, between them watching almost two million streamed videos.
I’m constantly astonished by the suggestion that the expansion of online opportunities is going sound the death knell for us. I see the future as 180 degree opposite to that proposition.
This is not an argument for complacency regarding online competition. There are some very big beasts in the jungle out there. This week it was reported that in the course of 2008 Google’s ad revenues will exceed those of all ITV’s channels combined (and most of that is search). So it is absolutely vital for us to keep up the high level of investment in original British produced programmes which ensure we have the content that both drives and attracts audiences, whatever the platform. We will continuously develop itv.com to ensure that it keeps pace with consumers’ rapidly changing expectations in online. And, we will constantly evaluate the best models of partnership and collaboration with the online aggregating giants to ensure we extract the fullest value for our investment in content.
But there is other work to be done. This huge transition also calls for a new regulatory settlement. Under spectrum scarcity it was a very simple bargain: you have the monopoly licence to make money from broadcasting, so long as you accept conditions about what you broadcast. Hence: genre quotas etc. That deal is now unworkable and unsustainable. ITV’s public service broadcasting costs will run to over £200m in 2007, and that’s before adding in the opportunity cost of not being able to play out commercial content in those PSB slots.
At the same time, we and the other commercial PSBs are rewarded for our contribution with less control over our advertising minutage than our digital channel competitors. It’s another example of legacy regulation in a world that has utterly changed. Competition is coming these days not just from other ad supported broadcasters, but from Google and other online giants who are out to eat our lunch. They invest nothing in the UK’s content sector and they are so apparently unconstrained by regulation that when they acquire one of the world’s biggest online advertising networks (DoubleClick) nobody blinks and nobody questions it. I am not arguing for regulation of Google etc – just the freedom to compete on equal terms, and to have the freedom to manage our inventory of our airtime like any other business.
What is urgently needed is a new understanding about the value of commercial public service broadcasting. Clearly, the model is no longer able to sustain that range of mandatory output that was provided in the monopoly days when cross-subsidy between genres was a simple business. In the commercial digital world, only what is commercially viable will survive securely. Wishing it were otherwise will not change that fact. But I am confident that regulators understand and accept this urgent need for change. We are relieved that Ofcom has started its PSB review ahead of schedule, and we are encouraged by their public pronouncements to date. Ofcom understands the importance of giving ITV the commercial freedom it needs in return for sustained investment in original UK production – I only hope they really understand how urgent the need actually is.
If this new deal on private sector PSB can be secured out to digital switchover and beyond, then this will be seen, in my view, historically as an outstanding achievement on behalf of the British public in the difficult transition to digital. Sustaining high levels of investment in indigenous UK production, and in a high quality national and regional news service, must be the focus of future regulation.
That is the only way in which the public interest and the shareholder interest can be aligned. And so long as these interests are closely aligned, then a new and enduring public service settlement can be created for the private sector for the new age. If not, market forces will call a different tune.
One of the key parts of a new settlement must be a realistic approach to the regional news service. As I have said on other occasions, I am committed to regional news remaining at the heart of ITV1’s schedule. It is part of what distinguishes ITV, and it is valued by our audiences. However, the investment we currently make in regional news – at around £120 million – is out of proportion both to the commercial value it delivers and to the public benefit it brings.
ITV has therefore set out publicly a detailed plan to provide a future for regional news that we believe is in the interests of both viewers and shareholders. We are proposing to maintain a critical mass of high quality, well resourced regional news services, but to reduce the number of flagship services from 17 to nine. This will enable us to focus resources in newsgathering and journalistic excellence on the ground. The areas where we are proposing to bring services together are the smaller of our services, where the cost per viewer is disproportionately high. However, right across the UK – and even in those regions which are being streamlined – we will maintain a newsgathering infrastructure, including journalists, camera crews and the latest lightweight digital technology to ensure that all the stories of interest to all viewers can be covered. This is surely a better and more rational route than our only alternative - to make debilitating cuts across the existing and antiquated map of regional services.
I am personally committed to the importance of news, and fully and willingly accept the responsibility as a broadcaster to maintain a well-informed democracy. I have always been clear that ITV must provide high quality competition to the BBC’s news services. I applaud Simon Shaps’ announcement this morning of his decision to restore News at Ten.
Overall, I want to achieve a new public service broadcasting settlement that leaves ITV free to invest in UK production on the basis of its own creative and commercial judgement. Ofcom's PSB review part 2 will need to move us swiftly to that position, where the private and the public interest coincide. Only such a settlement would underpin the continuing investment of over £1bn per annum in UK television original production.
That is a goal worth working for. It is a redefinition of private sector PSB, but it is fit for the modern market driven age.
The need for a new regulatory understanding also extends to commercial issues. Advertising is one of the largest and most successful of the UK’s creative industries. Of course it sustains commercial television: but it has a much bigger role in the wider national economy. Each year it contributes over £5bn to the UK economy, and accounts for nearly 1.5% of GDP. It is bigger that the UK film and television industries combined. We need the Government and regulators to resist the constant temptation to undermine the advertising industry by using it as a surrogate for policy-making. It’s become a little too easy for politicians to take a swipe at advertising as evidence that they are “doing something” about a particularly intractable issue.
There are suggestions this week that the Government is about to propose new restrictions on the advertising of food products, to promote better health. Yes, it’s an eye-catching way of grabbing headlines, but I fear it’s just a simplistic – and misguided - substitute for the harder decisions that need to be made to have real and lasting effect. Banning advertising is not a substitute for good policy-making. The potency of advertising lies in building brands, and encouraging people to switch between them and to make their own choices. I know that it has a positive role to play in improving the nation’s health – for instance in the positive support it is giving to the 2012 Olympics. But public purposes like good health cannot be magically delivered simply by restricting information about legally available products.
A word here, if I may slightly overstep my time, about trust in broadcasting. The industry is presently emerging slowly from one of the most shameful and inexcusable chapters in its history. ITV of course has shared that pain. It has on a personal level been perhaps the most difficult and unexpected issue I have had to manage in my 30 year career in broadcasting and I have managed some pretty hairy moments.
When the press reported the first story of PRS problems at ITV – just a few weeks after my arrival – it was clear to me that I had to get to the bottom of the issues. It would have been easy to take a couple of examples, to fire a couple of producers, and to brush the rest under the carpet. I thought it was potentially much more serious than that, so took the decision to take all our PRS services off air immediately, and brought in Deloitte to do a review of all our PRS activity over the preceding two years. Two weeks ago, it wasn’t investigative journalism that “revealed” the extent of the shocking problems at ITV. It was a report we had commissioned ourselves, and whose findings we published.
To get full disclosure we encouraged whistleblowers to come forward, which I am pleased to say they did. There was no formal amnesty as such, because full disclosure always involved the possibility that it would reveal criminal wrongdoing. But to conduct this inquiry as a witch-hunt would have been counter-productive in getting to the truth. To advise on the possibility of criminal activity, we appointed lawyers to examine every piece of the evidence. Deloitte reviewed their conclusions, and stated, and I quote: “ITV has taken specialist legal advice in respect of each of the specific issues set out in this document and is advised that the evidence does not support any allegation of criminal behaviour." Of course we are not the judge and jury in this, and the report and legal opinions are available to Ofcom and any other relevant authority, should they ask for it.
What the report did show very clearly was a lamentable lack of ethics in parts of the editorial decision making processes. In some programmes viewers were invited to make phone calls to participate through voting, and their votes were then ignored, simply because the production staff couldn’t let go of their editorial control, and didn’t understand that the contract with the viewers had changed fundamentally. But, I repeat, not one of the findings showed any criminality, or premeditated intent to fix things so as to increase phone revenues.
In July I spoke of my policy of ‘zero tolerance’ toward deliberate deceit. I have not – as some have suggested - gone soft on that. My responsibility in dealing with this issue I found on my desk was to the public, to get the facts out, to find out what had gone wrong, and to put it right. The review revealed shocking instances of casual contempt for the interests of viewers who had been invited to participate. It has not, however, led to any example of fraud or criminality. But let me be very clear here: if anyone – inside or outside ITV - has concealed any material evidence from Deloitte, or knowingly ignores the contract we make with viewers, then it will be no defence now to claim ignorance of the issues, or to offer excuses about making ‘better’ programmes – that won’t was from here on in.
Throughout the damaging revelations of the last months, I have never doubted that the prompt action I took to flush out publicly and painfully the size of the problem was right the decision, indeed the ONLY proper decision. British broadcasting WILL recover trust, but only by confronting the problem and doing everything in our power to ensure that the bad cases that have come to light remain historical examples – and NOT current lapses.
One of the founders of ITV, my Uncle Lew, Lord Grade, certainly believed, as has been extensively quoted recently, that “The show must go on”. However, what has not been recorded is that what drove him throughout his life was a much deeper and more meaningful conviction that you must never ever break your word. The best protection for the public is that no one, commissioning executive, producer, director, researcher – whoever, can be in any doubt now that the show doesn’t have to go on if it means breaking your word to the audience. Everyone is on notice from here on in. The public knows that, and knows that we have come clean about everything we have discovered, and that we have offered full reimbursement.
It has been a horrible experience, but ultimately we will be judged on how effective our actions have been, not by the headlines they understandably generated at the time. It remains my task to continue to rebuild confidence about ITV, and within ITV. A strong, popular ITV has been part of the UK television landscape for over 50 years. I have every intention of keeping it that way.
As we move into a fully digital world my vision for ITV is to remain the nations’ favourite source of entertainment, free wherever the audience wants it, travelling with viewers and advertisers onto whatever platforms they choose. Only ITV can compete with the BBC’s investment in excellence and quality in British production for British viewers. So long as we can go on creating compelling television, whether it is drama, sports or formatted entertainment, fact and fiction, news and so on and so long as we are freed from the antiques road show of regulatory prescriptions, we will be able to offer viewers and shareholders alike a great return on their investments of time and money.