With the BBC's charter due for review in 2006, a lobbying force is gathering around its media rivals, who argue that licence funding allows it to dominate markets way beyond its public-service remit. But will it change anything? Adam Leyland reports.
Like warm beer, the Spitfire, Elgar and Yorkshire pudding, the BBC is as quintessentially British as mom's apple pie or Disney or Coke are American, reflecting in a microcosm the virtues we like to call our own. Founded on the hallowed ideal of broadcasting as a public service, the BBC was draped in the altruistic principle laid down by Lord Reith, its first director general, that it would do 'what's right' and hang the commercial imperatives. Indeed, the veteran Tory journalist Peregrine Worsthorne recently declared the BBC 'the only great institution created in Britain in the 20th century'.
Despite this bright start, the Beeb has never been short of detractors. Today's critics say our benevolent 'Auntie' has turned into an interfering and overbearing mother-in-law with eyes in the back of her many heads, a sharp tongue and teeth to match. As her power and influence grow, so does the carping from competitors, politicians, commentators and others, who say the BBC is anti-competition, a cultural tyrant and that the licence fee is an unjustifiable handout to an increasingly commercial operation. Such criticisms will only get louder if, as predicted, this month's publication of the corporation's annual accounts shows that all the Beeb's five commercial divisions turned a profit for the first time in a decade. When savings as well as earnings are taken into account, this means an annual surplus of pounds 331 million.
Now, in the midst of this increasingly public unrest, the BBC is gearing up for its next once-every-10-years charter oversight, due in 2006, on the outcome of which rests the future shape and remit of the corporation. This was expected to be a rubber-stamp job, since New Labour has always been pro-BBC and vice versa: both its director general (Greg Dyke) and its chairman (Gavyn Davies) are close friends of Tony and Gordon. But it is shaping up to be much harder work. Tessa Jowell, minister at the Department of Culture, Media and Sport, has promised a searching review, and even the cosy-sounding 'Charter renewal' of old has been given the more rigorous tag 'Charter review'.
Despite having declared that the procedure would not be 'the most important thing in the world', Dyke is taking no chances. He opened a 'Big Conversation' with his 23,000 staff in May to get everyone on-message about the corporation's core values, and put a team of top executives - including Charles Constable, head of business affairs, and Roly Keating, controller of the new arts and culture digital channel BBC4 - in charge of preparing the case for the Beeb. A white paper is expected from Keating's team later this year or early in 2004.
Meantime, everything seems up for grabs. There's talk of scrapping the licence fee (pounds 116 for a colour telly) - which would leave a pounds 2.5 billion hole in the corporation's annual finances - amid claims that the BBC is increasingly commercial and no longer deserves such a huge public subsidy.
Over the years, various aspects of the corporation have come under scrutiny. Arguments about political bias, value-for-money and dumbing down have come in and gone out of fashion, but always underlying any debate has been the vexed issue of public service broadcasting. The BBC's original Reithian brief - to inform, entertain and educate - has been widened more times than the M25, superseded by a less patronising, more consumer-led interpretation, with a mix of programming to suit varied tastes.
The trouble is, the more populist the mix, the more it undermines the principles on which the licence fee was founded. And the BBC has become very populist indeed. Since Dyke's arrival as director general three years ago, BBC1 and, to a lesser extent, BBC2 have made a grab for viewer ratings, leaving education and information marginalised as entertainment came to the fore.
Thus the 9 o'clock news was shunted back to 10, current affairs programmes like Panorama were dumped in Sunday night graveyard slots, arts programmes were conveniently moved to BBC4. Meanwhile, extra episodes of EastEnders, Holby City and Merseybeat, along with makeover programmes and reality shows (such as Fame Academy) vied with the peak-time fare on ITV1.
In a declining viewer market, resulting from the growth of multi-channel television, ITV1 watched its audience share continue a disastrous fall from 31.2% to 24.1% between 1999 and 2002, when the ratings at BBC1 slid only from 28.4% to 26.2% and BBC2's ratings actually went up, from 10.8% to 11.4%.
To say that the BBC is competitive does not break new ground. Will Wyatt, former chief executive of BBC Broadcast, recalls the time when ITV launched TV-AM and the BBC 'knocked it out of sight' with its competitive response. No doubt there would be less clamour about the Beeb from commercial TV today if the share prices of media companies had not fallen through the floor along with their advertising revenue. But there is a feeling that the BBC has gone too far and is abusing its public service position. Says Mick Desmond, chief executive of Granada: 'I don't sense much that's Reithian about the current BBC. We would like to see more diversity on the mainstream channels. Public service broadcasting needs to be more tightly defined.'
There have been signs the BBC is pulling its punches. Plans to slot its Daniel Deronda drama head-to-head against ITV's Doctor Zhivago were quietly dropped. And the competitive crowing has all but stopped. Today under Jana Bennett, director of BBC Television, the BBC1 schedule shows better balance, there is more arts coverage on BBC2, and Panorama has a bigger budget (although it still airs on Sunday night). 'We want to get back to those first principles,' says Bennett. 'And the sooner we get down to that debate - what the licence fee does for Britain - the better.'
All of which fails to impress the private sector. Bennett's predecessor, Mark Thompson, now chief executive at Channel 4, observes: 'Once every 10 years, as it enters the run-up to charter renewal, the BBC has a tendency to rediscover old-time religion.'
It's not just the traditional commercial broadcast rivals that are facing the predatory side of the BBC either. Take multi-channel digital TV. The UK market has absorbed a number of new, innovative players in recent years, including The Cartoon Network, E4, MTV, the History Channel, Discovery and Sky's award-winning rolling news station. There is even a strong case for suggesting these channels serve a public good. But armed with an unexpectedly generous pounds 1 billion of extra licence fee funding in 1999 (sanc- tioned by the Government to ensure a BBC presence in the digital world), the corporation has hunted down rivals with the ruthlessness of Microsoft. There's the rolling BBC News 24, two new child- ren's channels, Cbeebies and CBBC, UK History and now BBC3.
'The 800-pound BBC gorilla has been given steroids and allowed to wreak havoc in the 'Blue Peter garden' of broadcasting,' says Andy Turner, co-president of Turner Broadcasting. 'This has impacted all other multi-channel providers and should be kept in check. The BBC uses its immense muscle, being able to offer analogue and digital platforms to producers, as a way of either excluding or pricing out commercial competitors.'
With the introduction of Freeview, the digital service set up by the BBC along with Sky and Crown Castle after the demise of ITV Digital, the BBC can even undermine the emerging subscription TV market. Just as networks began to spot an alternative revenue stream to advertising, the BBC might be seen as strangling that market at birth with its 30 channels at a one-off cost of pounds 100.
Now with the creation of Ofcom, the super-regulator of the commercial TV and telecom industries, the private TV bosses are lobbying for the BBC to be brought under its jurisdiction. 'We want to ensure that funding is fully assessed in relation to the ecology of the advertising market,' says Desmond. 'Ofcom's ability to regulate will be undermined by its inability to control the biggest broadcaster. At the moment it's left to regulate ITV, Channel 4 and Five, and these are small potatoes compared with BBC and Sky.'
The Labour Party has traditionally been pro-BBC, with both Dyke and Gavyn Davies, chairman of the board of governors, among New Labour's higher-profile acolytes. But the strength of this relationship will have been tested by the corporation's coverage of Gulf War 2. There were times during the conflict when Tony Blair may have tuned in and thought he was watching French television.
The Government will also have to get its head round a number of technological changes. At the time of the last charter renewal process, the 'Extending Choice' white paper in which the Beeb set out its stall didn't even mention online. Today, the Corporation spends pounds 100 million a year on its web sites, and there are digital terrestrial, satellite, cable and broadband options to consider. And with the available wider spectrum, the Department of Culture, Media and Sport will also need to consider realistically its oft-stated desire to switch off old-style analogue television by 2010.
Charles Constable, who as head of BBC business management and implementation is jointly leading the charter renewal team, concedes: 'We are in a very different environment from the campaign of the early 1990s, which will make this process incredibly challenging.' Among the most important changes since then is the emergence of pay-TV. Barry Cox, deputy chairman of Channel 4 and a Cabinet adviser, argued early this year that, with the public becoming accustomed to subscription TV and with the availability of micro-billing technology, the BBC will need to move to a subscription-based funding model once analogue is no more.
So are we about to see the end of the licence fee? Jowell suggested in an interview last year that this was off-limits for the current charter renewal campaign. Since then, however, the minister has rowed back from that position, and recent statements from the DCMS have been far tougher and no-nonsense. Her apparent change of heart has surely been influenced by BBC arrogance. Jowell was clearly infuriated by the corporation's slow response to Government concerns about BBC3, the digital TV youth channel launched this year whose pounds 100 million budget and competitive positioning raised hackles in Westminster.
Mathew Horsman, director of Mediatique, lays the blame at the door of Dyke. He says: 'Greg likes to win. This sends signals down through the corporation, and corporate behaviour changes. He's made the BBC more creative, more fun, but also more brash.'
As Horsman suggests, it has been Dyke's real achievement to inject fun and confidence into the BBC, which had become demoralised under Lord Birt and his army of management consultants. The flipside was Dyke's early triumphalism, and his less-than-diplomatic response when it emerged that the BBC had failed to meet the Independent Television Committee's 25% quota of independently produced programming. Dyke said the BBC was 'not in the business of making money for independent producers'.
Having now taken a back seat in the charter renewal campaign, Dyke is seen as being cavalier by many. 'Greg has a lot of terrific qualities, but thinking a long time ahead is not one,' says a former BBC executive. 'He's not a great strategist. John (Birt) and Mike (Checkland) dictated the debate. Greg is on the back foot.'
Cox believes Dyke is simply a different kind of lobbyist. 'He's a prisoner of his own mythology - the East End lad made good. He is a quality TV-maker but he's not comfortable talking about public service. It doesn't suit his style.'
The BBC is feeling pressure from unexpected sources, too. Along with the Tory media, several Labour peers have publicly denounced its behaviour, including David Lipsey and Lord Puttnam. And Cox, of course, is a close friend of Tony Blair. Cox's most controversial contention - that the licence fee should be scrapped - is not yet practicable. But given the speed of change in broadcasting, he believes that 'the next charter might be for only five years'.
Another idea mooted by Cox - that a portion of the licence fee should be reserved for commercial channels to help them meet their own public service obligations - is also gaining ground.
Horsman predicts that the BBC will have to make several 'throwaways', as it did during the privatisation of its transmission arm, Crown Castle, in the previous charter. 'The studio facilities and outside broadcast facilities aren't worth the trouble,' he says. 'I don't see why they can't pay for these facilities like everyone else.'
It has also been suggested that BBC Worldwide, the commercial division of the BBC, might be sold off. Desmond believes it would help level the playing field. 'The current set-up allows them to fund programmes and distribution deals in a completely different way. The deals they do with independents (where they own the foreign rights) amounts to exploitation.'
Horsman thinks the BBC is unlikely to float off Worldwide altogether ('It's not its fault if the BBC is told to make money by the Government and it reduces the licence fee'), but he points to its foreign rights distribution arm as another possible throwaway.
Nonetheless, opponents are cynical about possible reforms. As it has proved with Freeview and the digital curriculum (see panel), the BBC is a useful partner for the Government. It toes the New Labour line on a number of issues, including the thorny topic of devolution. Witness the corporation's earnest efforts to persuade a largely uninterested Welsh population that the recent elections for its national assembly were really worth the candle. Tait points out: 'The Government clearly doesn't want to lose its relationship with the biggest news provider.'
Observes an ITV executive: 'The traffic between the Department of Culture, Media and Sport and the BBC is phenomenal.'
Another consideration is the growing power of BskyB, leaving the BBC as perhaps the only effective antidote to the potential influence of media mogul Rupert Murdoch. That might be an unhealthy position but it is a safety valve over and above Ofcom.
There another reason for suggesting the status quo will be maintained. As one ITV executive puts it: 'The BBC is a major lobbying power in its own right. The Government wouldn't want to upset Auntie. It will meddle at its peril. It's like changing the formula for Coke - you just don't do it.'
A STALKER ON THE WEB
Remember when broadcasting was the BBC's middle name? Well look again. Just as its 'public service' remit has been loosened, so it is with its former core activity. The Beeb now has its fingers in numerous other pies, with well-funded, highly aggressive divisions that churn out magazines, books, videotapes, CDs and DVDs. Not to mention its educational and online arms. There is even a putative venture capital division - BBC Vecta - created to investigate the commercial potential of technological innovations from the Beeb's R&D teams.
Much of this activity has pitched the corporation right in among private-sector rivals, and many of them feel that 'Auntie' might be taking liberties in the field of competition. Most vocal of these in recent months has been the online community, and not without reason. The annual online spend of pounds 111 million at bbc.co.uk exceeds by more than five times the corporation's initial projections (pounds 21 million a year).
And, after the Government had been assured by the BBC that its web sites would be educational and public-service based, rivals were infuriated by the corporation's subsequent predatory pursuit of its commercial competitors. 'In sport, travel, gardening and entertainment,' says Angela Mills Wade, director of the British Internet Publishers Alliance, 'the BBC is going after established commercial rivals that already do a good job. I just don't think its public service position is tenable.'
With the Government promising a review of the BBC's web activities, the broadcaster's online supremo Ashley Highfield appears to have tempered her expansionism, with a layoff of 100 people in the spring (a token number), and plans to cut spending by pounds 6 million and to streamline activity. This will be a major undertaking in view of bbc.co.uk's estimated 25,000 separate web sites. But will it ditch the ones that are most popular, or the sites with the greatest public service justification?
The BBC hopes that, through such self-regulatory measures, it can limit the interference by the Government. But Mills Wade speaks for many others when she argues that the Department of Culture, Media and Sport is already a soft touch. 'The Government has allowed the BBC the most lengthy lead, and they never rein it in. Every time the Government tries to do something, the BBC gets its way, even with the digital channels, like BBC3. There has to be a better, more transparent way of monitoring, scrutinising and enforcing its activities.'
The board of governors that regulates BBC activities has always been a controversial body, with its independence open to question and very little known about its part-time members. 'No-one knows who they are or what they do,' says one senior executive at Carlton.
Gavyn Davies, the current chairman of the board, has opened up the appointment process to greater scrutiny. But it is still viewed as a deeply flawed system. Says one lobbyist: 'The BBC is notorious for riding a horse and cart through its own proposals, because it's monitored and appraised through its own board of governors. Turkeys don't vote for Christmas, do they?'
With the BBC having recently been awarded the lucrative digital curriculum (a Government initiative to provide online learning materials and facilities to schools, colleges and individual students), educational publishers are the latest to express concern at the corporation's lack of independent governance. The Digital Software Alliance, a group acting on their behalf, hopes that it has taken a lesson from others in the online world and successfully lobbied the Government for constraints on the BBC's extra-curricular activities. A record-breaking 18 such conditions have been placed on the deal, including a performance review after two years.
The alliance's director, Graham Taylor, is banking on their effectiveness, but is encouraged even more by a letter sent to Gavyn Davies by Tessa Jowell, the culture, media and sport secretary, instructing the BBC to 'stick to the spirit as well as the letter of the law'. Adds Taylor: 'We're now seeking clarification from the DCMS about how the constraints will be policed.'
THE RISE AND RISE OF THE BBC ... BY EMMA DE VITA
BBC LICENCE FEE: pounds 0.50
1922: The British Broadcasting Company formed, 18 October, by six radio manufacturers. John Reith is general manager. His vision: a broadcaster able to 'inform, entertain and educate', free from political or market pressures. Staff: 4
1927: The company is granted its first Royal Charter, which defines its objectives and obligations. Renamed the British Broadcasting Corporation, the BBC is accountable to an appointed Board of Governors - trustees for the public interest. Sir John Reith becomes the first DG.
1932: The forerunner of The World Service, The Empire Service, begins. The first TV transmissions are made. Reith dubs TV 'an awful snare'. Staff: 1,512
1938: The first BBC TV news bulletin. Reith resigns as DG and Frederick Ogilvie takes over. A year later, the television service is closed for the duration of WW2.
1945: Now broadcasting in 40 languages (Goebbels conceded the BBC had won the 'intellectual invasion' of Europe). William Haley takes over as DG in 1944. In 1946, the Third Programme is launched, hugely expanding the service. Staff: 10,727
BBC LICENCE FEE: pounds 2
1953: Queen Elizabeth II crowned. 20 million TV viewers watch - the first time a TV audience exceeds that of radio. Nine million Radio Times sold. Ian Jacob marks his first year as DG. Panorama is first broadcast.
1955: ITV launches in September. Competition has an instant impact on BBC TV and its share of the audience falls as low as 28% in 1957. The Queen broadcasts her Christmas message on television for the first time. TV is now available to 95% of the population.
1960: Hugh Greene becomes DG, and BBC Television Centre opens. Over the next decade, classic programmes are broadcast for the first time: Dr Who ('63), Match of the Day ('64), Tomorrow's World ('65) and Dad's Army ('68). Staff: 16,889
1964: BBC 2 launches. Its remit is to offer an alternative and more experimental style of TV broadcasting. Three years later Radio 1 launches. The Light, Third and Home services are renamed Radios 2, 3 and 4. Colour television broadcasts begin on BBC2.
BBC LICENCE FEE: pounds 11
1970: A new pattern of generic radio broadcasting begins. Radio 3 focuses on serious music, and Radio 4 on news and talks. The BBC Complaints Commission is established. Sir Charles Curran, appointed DG the previous year, is replaced by Sir Ian Trethowan in 1977.
BBC LICENCE FEE: pounds 46
1982: Channel 4 goes on air and satellite TV services begin. Alasdair Milne becomes DG. Breakfast TV launches on the BBC the following year, with Selina Scott and Frank Bough.
BBC LICENCE FEE: pounds 58
1985: Thatcher's Peacock Committee recommends against the BBC carrying advertising, arguing that this would reduce rather than increase market competition. EastEnders is launched against Granada's Coronation Street. It becomes the most watched programme on TV.
1987: Michael Checkland becomes DG and introduces radical measures to increase efficiency, reduce staff and operating costs, thereby making the BBC more competitive. The BBC agrees to a Government proposal for a 25% quota of independent programming.
BBC LICENCE FEE: pounds 62.50 1988: Licence fee increase pegged to retail price index. BBC External Services renamed The World Service. By 1990, all BBC commercial activities are brought together under a single organisation, BBC Enterprises.
BBC LICENCE FEE: pounds 71
1990: Radio 5 launches, designed to broadcast education, youth and sports programmes. BBC Subscription Television created as a separate company with BBC Enterprises. Have I Got News for You? is broadcast for the first time.
BBC LICENCE FEE: pounds 77
1991: BBC World is launched. Start of BBC TV Nicam stereo sound services. Licence fee increase pegged below retail price index for one year. An era ends with the publication of the last issue of The Listener.
BBC LICENCE FEE: pounds 83
1993: John Birt takes over as DG. In 1996, he splits the BBC into two divisions: BBC Broadcast, which controls commissioning of programmes, and BBC Production, which makes them. Radio 1 is repositioned, which leads to a decline in audiences.
BBC LICENCE FEE: pounds 84.50
1994: BBC Enterprises is relaunched as BBC Worldwide. It sells programmes overseas, publishes magazines and books, and operates channels such as BBC America. Radio 5 is renamed Radio 5 Live, devoted to news and sport.
BBC LICENCE FEE: pounds 86.50
1995: BBC Radio pioneers the world's first national digital radio service in preparation for the arrival of domestic digital radio receivers. Radios 1 to 5 Live are now available in digital format, and other experimental services, such as BBC Parliament, are piloted.
BBC LICENCE FEE: pounds 89.50
1996: The Royal Charter is renewed for the sixth time and the Government announces a new licence fee settlement to last until 2002. This gives the BBC its first increase in real terms for more than a decade.
BBC LICENCE FEE: pounds 91.50
1997: BBC Worldwide joins with Flextech to launch the UK Gold family of channels. It also partners with Discovery to develop new channels. The BBC sells its home transmission outfit to Castle Transmission Services for pounds 244 million. BBC News 24 and the first BBC web site are launched.
BBC LICENCE FEE: pounds 97.50
1998: Digital audio broadcasting and digital television go on air. BBC Choice launches with programmes that complement and extend those seen on BBC1 and BBC2. BBC News 24 and BBC Parliament are also available. The Government announces that the licence fee will rise according to a five-year formula. Its price increases to pounds 101 (colour) and pounds 33.50 (black-and-white). Radio 4's schedule changes attract mixed reactions, but audience levels reach nine million by 2000. Governors approve plans for BBC Resources. Staff: 21,000
BBC LICENCE FEE: pounds 101
1999: Greg Dyke joins the BBC as DG designate. The Government sanctions an extra pounds 1bn on licence fees to fund digital services. BBC Knowledge is launched and BBC News announces a deal to supply news to Vodafone Airtouch mobile phones via new WAP technology. Tweenies is the most successful pre-school programme on TV. Only Fools and Horses gets 24 million viewers at Christmas. Beeb.com is set up as a commercial web site and ISP but fails to take off.
BBC LICENCE FEE: pounds 104
2000: Dyke replaces Birt as DG. He dismantles management bureaucracy and invests the proceeds in better programming. He attacks the BBC's coverage of business, and puts the editor of Sunday Business, Jeff Randall, in charge.
BBC LICENCE FEE: pounds 109
2001: The Government approves three digital TV channels and five digital radio networks. The content of BBC3 (the proposed replacement for BBC Choice) is deemed frivolous by culture secretary Tessa Jowell. It is approved only after changes. New media services are renamed BBCi.
BBC LICENCE FEE: pounds 112
2002: BBC Four replaces BBC Knowledge, and Cbeebies and CBBC launch. Freeview, the digital service set up with BSkyB and Crown Castle after the demise of ITV Digital, is introduced, offering 24 channels for pounds 100. Jowell invites views on the BBC's application for the digital curriculum, which will absorb pounds 150 million of licence money over the next five years. Media and software companies demand a judicial review, saying their industry will be 'decimated' if the plans are approved. BBC Worldwide returns over pounds 100 million, achieving international sales of pounds 660 million. It is now the largest UK-based provider of international TV. BBC1 becomes the most watched channel in the UK and it beats ITV1 in the Christmas ratings war. Former FT editor Richard Lambert delivers a Government report on BBC News 24, which attacks BBC governors for failing to control its management and strategy. Chairman Gavyn Davies disagrees. BBC Ventures Group formed to provide media management and distribution services to the BBC and outside clients. Staff: 25,568
BBC LICENCE FEE: pounds 116
2003: Jowell announces a 'comprehensive review' of the BBC's role and funding before charter renewal in 2006. The BBC restructures its charter responsibilities to allocate more time to prepare its case. BBC3 finally launches with a pounds 100m budget. Dyke opens a 'Big Conversation' with his entire staff, outlining a blueprint for change, including a leadership programme at Ashridge. Critics dub the scheme Birtian. The Government announces a review of the BBC's online services. The Digital Curriculum is approved. BBC Vecta, the BBC's venture capital arm, launches, sparking fears that it is overstepping its remit. A BBC record label is launched, also attracting criticism. The first phase of the White City development due to open in the autumn.
2004: White paper by Roly Keating, controller of BBC4, and Charles Constable, head of business affairs, is due, giving the BBC's case for charter renewal. Central Office Building in White City will be ready for occupation by the summer.
2006: The BBC's charter expires in December. By 2008, BBC News, the World Service and BBC Radio and Music will have moved into Broadcasting House, following a pounds 400 million redevelopment of the site.