Digital Dilemmas | Brunswick Group
Brunswick Review Issue 2

Digital Dilemmas

Industry leaders, media commentators and Brunswick analysts consider some of the challenges of a fast changing online communications landscape.

Businesses around the world are grappling with the latest developments in online media. In this special section, Digital Dilemmas, we explore the threats and opportunities.

Mark Thompson
Director-General, BBC

In this opening Q&A he talks to Brunswick Partner Tim Burt about the role of public service broadcasting, and how the BBC is preparing for the digital age.

What’s your response to those competitors who say the BBC has an artificial springboard – in terms of (public) funding – to prepare for the digital era?

We’re on a long-range path towards redefining what the BBC is and how it reaches its audiences here and around the world. Our proactive engagement and innovation around web and mobile and other digital technologies is one of the reasons why we have been resilient. There is also quite a bit of evidence that it’s been useful to the wider industry. The BBC’s commitment to Freeview has made the digital switchover possible. Our iPlayer service is beginning to help strengthen on-demand usage. 

We have put a significant investment into new digital services, and the public has responded by using those services to their great satisfaction. 

There isn’t really going to be an analogue BBC left in a few years time, it will all be a multi-media, multi-platform operation. We are going through the biggest re-tooling in our history. We are completely reinventing the infrastructure because you don’t need an analogue television or radio infrastructure in a multi-media digital age.

There is nevertheless a sense of the BBC under siege – is that right?

Well, who’s under siege? There is a kind of siege around traditional commercial media. A lot of the rest of traditional media feels under existential threat. Newspaper owners or commercial broadcasters see the BBC and its prominence as part of the problem, or at least feel that if we went away or were smaller that would be one less problem to deal with. 

The siege metaphor really does work for the United States newspaper industry. United Kingdom newspapers in many cases have healthier models than many of their US equivalents. There are sieges going on, and it may appear as if we’re the besieged city. But I wonder whether what you’re seeing are secondary effects of what’s going on elsewhere in the media.

So is it the mirror effect: that whenever the commercial sector is weak the BBC looks artificially strong?

I think there is a magnifying effect. Nobody believes that the end of the economic cycle is going to bring good news for traditional media. Those players who use this moment to reinvent their business models and to develop new revenue streams to support content development and distribution may well thrive in a post-downturn moment. Those who can’t will have a downturn which doesn’t end.

Does the BBC suffer from a perception gap, being widely admired overseas and pilloried at home?

First, there’s a lot of evidence that public support for the BBC in the UK is strengthening. So I think the perception gap is wrong to the extent that the BBC is an extremely popular and trusted institution at home as well.

The international picture is an interesting one. The BBC is probably the most trusted news provider in the world and has very substantial audiences of hundreds of millions of people a week who turn to it for news. One of the challenges for the BBC is whether it can broaden its global reputation in ways that get British talent to people in other countries and that build attractive revenues to support our operations.

That raises the issue of BBC Worldwide, your commercial arm. There seems to be a conflict here between the public service purpose and commercial exploitation over rights and program formats around the world. 

It’s not uncommon in global media. You think about Al Jazeera, you think of the Xinhua News Agency. Sometimes when I listen to Rupert or James Murdoch you get a sense that other than this one strange anomaly in the UK, the whole world is a simple free market in media. In reality, there is a vast amount of blending of public and private money in global media, in the provision of news and beyond. When I talk to the competition authorities in Brussels, the BBC is regarded as one of the public broadcasters around the world that has done the most to separate out publicly funded, advertising-free, fully license fee1-funded services from its commercial activities.

If you’re someone who doesn’t believe there should be any public intervention in media at all, no level of transparency is going to satisfy you that this isn’t some dark plot.

Does what you see around the world – PBS in the US and the German and Japanese license fees, for example – reinforce your view that the BBC structure is correct? 

The debate about public service broadcasting has echoes around the world. Powerful Japanese newspaper groups managed to get a law passed in the 1990s which stopped NHK from launching a website, so NHK has a very small corporate website. The German public broadcasters are again very limited with what they can do on the web and that was because of very strong arguments made by the German newspaper groups.

Haven’t you had similar opposition to local BBC websites?

Well, indeed. Remember, Britain’s local and regional newspapers lobbied successfully in the 1920s against the BBC broadcasting news before 7:00pm because of the potential impact on newspaper sales. Newspapers have run pretty effective lobbies against the BBC for over 80 years.

Newspapers were worried about substitution of newspaper sales by radio and then by television and now it’s more profound because all roads lead to the internet and it feels to them like direct head-to-head competition. Whether it is or not is absolutely unproven. I know this will be greeted by some with skepticism, but the BBC is an organization which in the UK and around the world, morning, noon and night, is doing newspaper reviews, is taking star columnists and presenters from newspapers and putting them on the air, is encouraging an appetite for news and debate which is stronger than in other countries. 

I think one reason the newspaper industry remains more buoyant in the UK than it does in other countries is because we shine our light on it all the time – the BBC drives hundreds of thousands of internet users from our site to the newspaper sites.

Are you trying to say: We’re not a commercial menace, we are your “frenemy”, (to use the words of WPP Chief Executive Sir Martin Sorrell)?

So they will eventually burst into tears and say “I love big brother”? I don’t think so. But the idea that the BBC could be quite useful is not new. Developing PAL color television or NICAM Stereo or the standard for Freeview, for instance. Other broadcasters are used to the idea that not only will the BBC be prepared to develop this stuff but they will open source it. 

We’ve never had that relationship with newspapers, not least because we haven’t been in these technical kinds of conversations before. Without being too sharp-tongued about it, the tradition of different newspapers is a bit like the natural history of the Great Plains of Africa – the word predation springs to mind. That said, we’ve signed syndication deals with the GuardianGroup, IndependentTelegraph and Associated so they can use parts of our video from our news website on their websites.

But the people you are trying to assist with this structural upheaval are also your worst critics, aren’t they?

The fact that they’re our critics doesn’t mean they’re not signing up for the syndication arrangements, and I think quite sensibly so. I’m not suggesting that we’re trying to adjust their corporate view of the BBC, but what I would say is that over time I hope we can convince the wider world that a lot of what we do is genuinely of value.

Britain has moved its digital television and radio further and faster than it would have done otherwise, because there was a BBC. The BBC wasn’t a blanket stopping innovation, it wasn’t hanging on to the analogue past. 

One of our biggest partners in digital has been BSkyB. We launched high definition on Sky first because that was the first platform where we could do it. We launched interactive services more extensively on Sky than anywhere else, and often we find ourselves collaborating incredibly closely with Sky on digital innovation. Now the question is whether the BBC could end up being a net benefit rather than assuming we’re a net drag on the industry.

Nevertheless, there is a widely-held view in other parts of the world that public service broadcasting is marginal.

There are many countries, and Japan and Germany are both good examples, where it’s still very salient and important to audiences. They think the BBC has moved further to migrate to digital than any other major public service broadcaster. 

In Korea and Japan the technical infrastructure for digital is more advanced; they are places where 80 MB per second of broadband access is routine rather than being heroic. I go there to learn. 

But in aggregate, they applaud some of our bigger gestures, such as the way we built up bbc.co.uk as a rich content site, with years of concentration and development, and the launch of the iPlayer.

The challenge around the world is that you bump into Google, Yahoo, and Apple. Our relationships and our conversations with those companies are absolutely as important in some ways now, globally more important, than our conversations with traditional broadcasters.

So are they the new competitive set?

There are some areas where they are very powerful enablers. The barriers to entry to our content, in some ways, are lower in these new environments. But while it’s easy enough to get on to iTunes your stuff has to punch through because it’s in a very crowded space.

Could you offer partnerships to commercial operators like NBC or Paramount that would help them better compete with Google and Yahoo and Apple?

Well, our tradition and culture is not to try and seek proprietary advantage by hiding stuff, so we tend to be fairly open with almost everyone about what we’re finding. We are very, very eager to help others figure out effective ways of monetizing high quality content and to that extent we are absolutely open to all those conversations and are having them.

So the partnerships model is likely to be accelerated and extended internationally?

In the last few years BBC Worldwide has launched over 40 TV channels, every single one of which is essentially one or other form of partnership. And we do this rather brilliantly in the World Service, which is one of our public service crown jewels. We cannot rely on shortwave radio to get to our audience in Africa, for example, which is why we’ve got over 240 FM re-broadcast partners.

Should the BBC license fee be renamed the Digital License Fee and should you have a monopoly of it?

In a funny way we’ve got this rather interesting global position now. The BBC is one of the very few media brands which is known around the world. Now if you move back to the UK, there’s a debate about should the BBC get all the license fee. Obviously there is a fundamental issue here: the roots of the BBC in the UK need to be watered and if somebody chops the roots down the whole plant will die so it is important but it’s a much narrower debate.

One of the problems with European media is much of it has been very, very parochial and inward-looking and monetization models have been largely based on trying to find out what local audiences want and then giving it to them. The danger is that you end up with a model where unfortunately the amount you can monetize from a local audience won’t cover your costs and you end in a spin down. By contrast, we are the only net exporter as a broadcaster. Outside of the US majors, we are also by far the biggest seller of audio viewing content in the world. 

So is the license fee the right funding model to support that sort of global franchise?

I don’t think it’s the only funding model. The US has got very large companies, and News Corporation is a good example, that have taken a global view of media and built vast businesses. So I don’t think the license fee should be the only model.

But it turns out that the license fee has been quite an effective anchor in terms of building a global position for UK content around the world. There is plenty of room for others to get involved without damaging the license fee. That said, I think it would be wrong if we were to argue that the BBC should be somehow completely outside the debate about the level of public expenditure.

People say that you have a greater survival rate than your predecessors and that you would like to see it through to the London Olympics in 2012. What shape would you like the BBC to be in by then? 

Well this liner carries on. There’s a day when you arrive on the liner and there’s a day when you leave and I’m not by the way implicitly suggesting that 2012 is the right moment, who knows? And you know what, some things will be done when I leave and some things won’t be done. 

My job, in a strange way, is as much about making sure that the store of future ideas, future strategy and future leadership talent is rich in the organization and that the momentum of the organization is there.

Within a few years time we’ll have switched off analogue television, the biggest engineering project we’ve ever undertaken. We will be, I hope, getting millions of people to access internet and television services like iPlayer and YouTube on their main television sets. 

People thought that the BBC was not quite going to shrivel, but just gently be edged to the sidelines as the market expanded. The BBC’s ability to reinvent itself has proven to be rather deeper and more imaginative than people thought. 

There is a prospect of the BBC getting to its 100th birthday in 2027 as a really big important cultural institution and a big everyday part of people’s lives, and possibly even, who knows, funded by a license fee with most of its services still free at the point of use for households up and down the country. That is not a completely ridiculous idea.

1 The BBC, the largest broadcaster in the world, is funded by a license fee paid by UK households. 

Mark Thompson is Director-General of the BBC. He was appointed Director-General on May 21, 2004, after being Chief Executive of Channel 4 since December 2001. He had previously worked at the BBC for more than 20 years, becoming Director of Television in April 2000, responsible for the management and running of all BBC network television channels.

Tim Burt is a Partner in Brunswick's London office. He worked previously at the Financial Times where he held several senior editorial roles, including Media Editor, Motor Industry Editor and Nordic Bureau Chief.