Television Advertising: Communications Committee Report

Lord Lipsey Excerpts

Thursday 3rd November 2011 Lords Chamber

[Lord Lipsey]

My Lords, I too very much welcome the report, which, besides its recommendations, contains a wealth of information on the system. If I might, not having been a member of the committee, I join the noble Lord, Lord Clement-Jones, in saying that the special advisers to the committee, Professor Barwise and Professor Barnett, really deserve an accolade for the work they have done, whether or not one agrees with them.

This debate has been long delayed. The report came out in February and only now in November are we debating it. However, that is quite desirable in one way because Ofcom is now within a few weeks of making its decisions on these matters. Therefore, I hope that the words uttered in this Chamber may have more effect on it than they would if it had had longer to forget them.

I only want to make two points, in one of which I disagree with the report. Its authors will not worry too much about that, but I also disagree with practically everybody else in the world, a not-unfamiliar position in which to find myself. In the other point, I powerfully agree with the report, and hope that it will bear fruit.

The thing that I think that I disagree with the report about is minutage—COSTA. As an economist, I find the concept that we should limit the number of minutes of advertising extraordinarily curious and hard to justify. It is a strange regulation to have introduced. When it was introduced, there was a powerful case for it, because ITV then had a monopoly; it was, famously, a licence to print money, and you had to do something to restrict the amount of money it was allowed to print. Of course, the situation is completely different today. Barely a minute goes by without my television seizing up with me being asked whether I wish to add additional channels; we are up to something like 1,200 or 1,300. There are more porn channels today than there were channels in total 10 years ago. A monopoly has turned into a properly competitive industry. It is very curious that the Government should seek to limit the output of competitive industries, in this case one output being advertising.

Why do people cling to this? I think, in most people’s heads, the reason is due to America. If you watch American television—like other noble Lords present I have recently spent some time in America—you will know that it really is completely ghastly. Actually, in some senses, the ads are a relief from the bloody programmes, but one ghastliness about it is the amount of advertising. Therefore, there is a respectable fear that our television would become like that. However, this fear is greatly overdone for two principal reasons. The first is the BBC. If we do not like the amount of advertising on the commercial channels, we can turn to the BBC; sometimes the BBC itself is an offender because it contains so many trails for upcoming programmes as to seem almost like a commercial channel itself, but that is beside the point. The BBC’s market share is roughly a third of the market: 33.1 per cent, according to its latest annual report. Compare that with America. There are no exactly comparable figures because PBS—public broadcasting in America—does not publish figures for its share but, thanks to the wonderful work of the Library, I have established that it is roughly 1.3 per cent: a 30th of the BBC’s share. The alternative of turning to public broadcasting if you do not like the amount of advertising is not there; you have to put up with what you get. It is a completely different situation.

The second reason is of course that we have quite a lot of good television. Most of us now have DVRs. On good days I can even work the DVR, thanks to Sky+, which has transformed so many lives. Thanks to a DVR you can, if you want, watch a programme later and accelerate through the adverts, so any channel that puts too many ads in is simply inviting people to postpone their viewing and rush through the ads. There is therefore a powerful competitive force which says, “Do not put too much advertising on, otherwise you will lose your viewers”.

There is a complication, a European directive which limits advertising to 12 minutes per hour. Pro-Europeans will say, “Well, it’s great that we’ve got a limitation”, and anti-Europeans will be surprised that the limit is so much higher than those which we ourselves impose: nine minutes for all channels and seven minutes for the public service broadcasters. The European limitation is so far above our limitation that for practical purposes it does not preclude a sensible liberalisation of our rules.

Why should we keep COSTA? The noble Lord, Lord Clement-Jones, gave the only argument there is: viewers do not want more advertising. It is true that polling evidence contained in this report shows that viewers do not want more advertising. However, I do not think that is a very sensible question to ask in a poll because it does not give the trade-off. If you ask people, “Would you like more taxes?”, they are inclined to say no. If you ask them, “Do you want more taxes to pay for better health services?”, they might be inclined to say yes. Similarly, with television advertising, if you ask the viewers, “Would you be prepared to put up with more advertising if you got more ‘Downton Abbey’?”, they might well say yes. I do not know. Certainly they would if you said more “Strictly” or more of Simon Cowell or whatever they much like to see.

It really is not a valid argument to rely on what the opinion polls show. We have to make our own judgments. In my judgment this is an indefensible piece of overregulation, which leads to all the things that overregulation usually gets. Now we get competitive briefings from various organisations, all talking for their vested interests as to whether they want this to change or to be put down to the same level for every broadcaster. As usual, what should be decided by the market is being decided by competitive political lobbying. That does not seem to me, as an economist, to be very desirable.

That is where I disagree with the report. Where I agree with it very much is that there has to be a relaxation. I quite agree with it on CRR, but I believe that the benefit of the relaxation should go to viewers in the form of more spending on programmes and not to anyone else. To use a fashionable phrase, there is no case for giving the broadcasters “something for nothing”. Having been a director of an ITV company, London Weekend Television, I know how attractive it is to say that you want certain relaxations in order to provide a better service to broadcasters and then hand the money to the shareholders. The shareholders invested in these companies knowing full well the limitations on them. Some of them were no doubt hoping that the authorities would hand them a bonanza by lifting the advertising restrictions, but we should not be falling over backwards to grant them a windfall gain from the removal of restrictions.

I wholly agree with paragraph 47 of the report that any relaxation should be matched for viewers by an enforceable commitment to spend more on programmes. Of course, the detail of that is complicated. It is not an easy thing to do. However, I can think of a symbolic way in which this could be done: ITV could agree to restore “The South Bank Show”—so wonderfully compèred by my noble friend Lord Bragg—which it cruelly and remorselessly butchered in December 2009 to the immense disbenefit of its more sophisticated viewers and indeed of its reputation with the public.

--- Later in debate ---

[Baroness Fookes]

I take the point that my noble friend has made. I was against the apparent wishes of the noble Lord, Lord Lipsey—to increase the amount of advertising, to make it without limit and that there should be no rules. That was what I was concerned about. I entirely take the point of my noble friend Lord Fellowes that it is the advertising revenue that produces good-quality drama and other types of programme.

[Lord Lipsey]

I should correct the misapprehension, which is no doubt my fault. I did not say that we should increase the amount but that we should get rid of the restrictions. It might go up; it might go down. Who can tell? I am not in favour of restrictions on competition in this field.

[Baroness Fookes]

That is exactly what I thought the noble Lord had said, and what worried me was the thought that there might then be an increase in advertising. However, that is an academic point at the moment. All in all, as I persisted in remaining on the committee despite my initial reservations, I thought that we came out with a good, robust report. It is one that I hope the Government will take on board very seriously.