The David Elstein Interview: Part 5 - Switchoff
Elstein, 60, is currently chairman of Sparrowhawk Media, owners of the Hallmark channel. Previously he launched Channel 5, worked for Sky as head of programming and held position as a senior editor at the BBC.
In the final part of the interview, Elstein looks ahead to the future of broadcasting after analogue switchoff.
Alan Jay: We were talking about the difficulties of diversifying in the digital platforms. Do you think that ITV and Channel 4 have done it right or are going too fast or too slowly with the number of channels that they're launching at the moment?
David Elstein: I don't think they've got a lot of choice. I think it was interesting to watch them both move into pay TV thinking they had to diversify their revenues as well as their consumer proposition. ITV has almost completely withdrawn from pay TV now and Channel 4 has almost completely withdrawn. They still have Film 4, but one wonders how long that will last as a pay service. I think they've used their branding very intelligently. I think the look of ITV 2, 3 and 4 has proved to be very powerful and they've very sensibly used programme overlaps and brand extensions to carry audiences across from their main channel to their subsidiary channels. For all kinds of channels who only have multi channel presence, like Sky 1, that has been a huge competitive disadvantage.
Now, nobody has come along and said this is unfair. Nobody has come along and said 'why should terrestrial channels who are granted scarce terrestrial spectrum in order to run a terrestrial service be allowed to exploit that in order to make money in a marketplace against competitors who have no such privileges and advantages?' If you look at the vast amount of promotional ad time that ITV and the BBC and Channel 4 use to build audiences in their multichannel offerings, if you're only multichannel you think 'well hang on a minute, what's going on here?' And they're meant to use their terrestrial channels to serve their terrestrial viewers. Running promotions for something that's not available to purely terrestrial viewers is an abuse of their privileged position. And as long as the government and the competition authorities turn a blind eye to it you'd be nuts not to do it if you're in that position, and they do it. And so the BBC, ITV and Channel 4 and no doubt in the future Channel 5 will carry on using that leverage for as long as they can in order to build a position in one market out of their unique position in another market. Now if it was Sky, the world and his wife would be banging on..., asking 'how can they be allowed to do this?' Surely this is wrong. This is a dominant position. At least with Sky they've earned their dominant position by hard work and good commercial judgment. The terrestrial broadcasters... have been granted by government fiat their special privilege positions. But that's the world we live in.
Alan Jay: How do you see the future of the terrestrial channels with supposed switchoff of analogue broadcasting in 2012?
David Elstein: I’ll believe it when we see it. Look, they're all planning for that transition. They can already see the future. Of course they've already got 63% of homes that are digitally enabled. Now, that's not the same thing as every single television set being digital, but it's a very good indicator. You look at something like Channel 4 which has a 14% share in five channel homes, a 7% share in 400 channel homes, and 11% share in Freeview, so you can see why they're all piling into Freeview because it's a very good way of recreating spectrum scarcity in the digital age. There's only 30 or 40 channels' worth of capacity and the terrestrial guys can dominate that capacity with more than half of it and generate nearly 90% of the viewership on a platform. You may have had to kind of spread yourself out across a number of channels to deliver the same type of viewing you had before, but between you, you can be pretty dominant and that's why DTT has been the favourite child of terrestrial broadcasters for a very long time - because they can see a better future for themselves and DTT than in any other form of digital delivery. Now, will freeview be a dominant player in the digital marketplace? Will that many consumers say that 30 channels is fine? Lack of interactivity is fine? Lack of HD is fine? Lack of transactions is fine? Lack of pay choice is fine? To some extent the terrestrial channels are playing for a generation of technological illiteracy. They hope that there will be a sufficiently passive population suffering from technological inertia who will reluctantly transition to Freeview rather than take the full plunge into unlimited multichannel television. And if that works, they'll survive pretty well. And if they're wrong, they'll have problems.
Alan Jay: Do you think that the government or the BBC or someone else should be the key driver to the analogue switch off?
David Elstein: Well, as you know, I don't think anyone should be driving the analogue switchoff. I think it's premature. Extremely wasteful. Very high risk. And ill thought through. That any of it should be funded out of the license fee is either illegal or quite wrong - it's inconceivable to me that anyone should recommend that. And I think the BBC's defence of that is so pathetic, it bearly bears repetition. I think Michael Grade said 'we support universality, the government believes this is an issue of universality.' For God's sake, BBC, it's universally available on satellite now. You know, making itself universally available on DTT, it doesn't have to do with government policy or principle. It's self-preservation. The BBC sees an advantage in getting somebody else to fund the transition to DTT quickly. We've all been sold that the pup of DTT is the key to analogue switchoff. It's nothing of the sort. It's vastly cheaper to give everyone a satellite dish than to role out DTT to 1,154 transmitters. I mean, insane. Why the NAO hasn't had a go at them I've no idea. I know the CMS committee is going to start hearing next week on this and I'll be there on the first day to give evidence. But, it's just part of this faustian pact between the BBC and the government. The government doesn't want to take responsibility or risk the unpopularity, the BBC says 'well, if you give us the money we'll do it. But give us all the other money as well.' Yeah, the general public ends up paying for this political deal. It's not the first time.
Alan Jay: If it does get switched off, what do you think they should do with the spectrum?
David Elstein: Well, we know what we're going to do with it. We're just going to use it for digital television. We're not going to give much of it back, and you know for the most part it's not very valuable. I know people have put this figure of £500 million to £1 billion on it, but mobile telephone companies have no interest at all. It's not national. It's not international. It's little bits of spectrum dotted around - what are you going to do with it? So, it's highly likely to be reallocated to local television, more DTT, multiplex content, who knows? I think Mike Hughes was saying at the last Westminster Media Forum that if Ofcom didn't look out, the French, the Belgians, the Irish and the Germans would nick all the frequencies.
Alan Jay: Which has happened before as well.
David Elstein: Exactly. So, you know even the remote prospect of some cash from spectrum sales looks to me pretty unlikely. The broadcasters will make sure of that. They've won every bit of this argument so far. We are spending billions and billions and billions of pounds doing something that's only in the interest of the terrestrial broadcasters. Nobody else in the world. The chances of them not getting this last concession as well must be well minimal.
Alan Jay: Finally, does Ofcom do a good job? Should have a heavier hand actually regulate?
David Elstein: No, I think Ofcom for the most part has done a pretty reasonable job for the last two years. You know, they've been quite bold in taking on the BBC over at charter renewal and has been absolutely, you know, crapped all over by the BBC in return. There's a surprise. I guess most people would say it's been patchier in telecoms than it's been in TV and that it hasn't quite got its act together on radio yet. But you're dealing with a regulator that's still sorting out its own structure, let alone dealing with the multiplicity of demands on it. And although there are those who say it's an unduly expensive regulator in terms of the number of people on high salaries, frankly if you're going to have a regulator I'd rather have very good quality people there and pay them competitive salaries then say 'oh well it's just a regulator. Let them all eat dirt and chew crumbs.' You just get worse regulation. So if you're going to have a regulator, let it be a single regulator. If you're going to have a regulator, let it be solved by quality people. If you're going to have a regulator, let it be driven by research and verifiable data as much as it can be. Of all the things Ofcom has done I think probably the most disappointing has been the public service review and the use of kind of febile notions about the definitions and concepts and insignia of public service - it's what I called motherhood and apple pie virtues. There's scarcely a programme thats ever been produced that doesn't meet one or more of the tasks of public service broadcasting as defined by Ofcom. I remember writing to Ofcom two years ago saying 'please name a single BBC programme that does not qualify under these new definitions. And now tell me what good these new definitions will do.' The answer? None.
Alan Jay: Okay. Thank you very much for your time!