Eric Schmidt at Edinburgh

 I  was fortunate to hear Eric Schmidt, Chairman of Google, speak at the Edinburgh Television Festival and to attend the Question and Answer session the following morning.

Schmidt posed one big question -- in my view a massively important one: why hasn’t a country like the UK built large technology companies? (He reminded us that the first commercial use of a computer was at the headquarters of J.  Lyons, once famous for its tea shops, in West London).

For the audience of British TV Executives the question took a more specific form: why doesn’t British broadcasting do better globally, lead in Europe? After all, the British speak a global language -- and other Europeans, like many nationalities, are used to watching dubbed or subtitled content.

His answer was: first, we don’t teach computer science enough in schools or encourage it enough at universities; second, we are over-regulated.

In his brief tribute to Steve Jobs, who had announced that he was stepping down the day before, Eric Schmidt reminded us that Apple makes sure its technology is beautiful.

It’s hard not to agree that our education system could give a much more positive message about science, innovation and entrepreneurship. (What is the point of media departments teaching Marxist or post-modernist theory to people who want to work in advertising or TV?)

But his regulation argument aroused little comment. Why?

To be blunt, British broadcasters and producers are deeply attached to their regulations. I expect they would fight like cats and dogs to keep them.

The BBC is regulated from top to bottom, and funded by a mandatory levy. It totally resists any change.

The public services broadcasters (PSBs), BBC, ITV, C4 and Five, get mandatory “prominence” on all guides. They would hate to lose that.

British producers are entitled to keep rights in programmes even if they have been funded largely by public broadcasters.

Yet Schmidt is right. Regulation does hold back innovation and entrepreneurship. Regulation, as he delicately put it, usually favours the regulated. It deters innovation and entrepreneurship by newcomers, putting the emphasis on continuity and risk avoidance by the current players.

Schmidt proclaims himself a Capitalist and a Technologist. California invents the future in a cultural and political landscape utterly different from Europe, with its high public spending and tax rates and extensive social policies.

But that’s why Europe needs to be very smart about the impact of regulation and the danger of decline. If it cannot support entrepreneurs and build large companies in key emerging sectors, we have a big, big problem.

I have two recommendations which I think are worth exploring by people who are ready  to be fearlessly objective.

One, national regulators should switch their thinking to a European rather than a national scale: Schmidt’s critique of the suppression of the Kangaroo project by British competition authorities got a round of applause.  (I am not an expert in competition law so I am going to return to this when I have taken advice.)

Two, the UK should ask tough questions about the costs and benefits of every piece of regulation, with a strong bias towards abolition.

The UK could start with some like these:

Quotas for original production: the PSB’s have detailed commitments to original production, even though there is a 50% EU rule for European content. Nearly all major channels in Europe exceed the 50% quota of European content, the vast majority of which is domestic. This is because there is a very strong preference for domestic content in every Member State. Are these UK rules really  serving a useful purpose? (If Governments want to be very specific, say about Children’s’ content, they should contract for that directly.)

Guide prominence: it’s actually getting a bit silly. The public broadcasters want to keep their prominence at the top of the guides but now want to charge Sky, for example,  retransmission fees. Sky, I guess, would like to get the revenue for its top slots. Why not take out the regulation and let them sort it out?

A proper assessment might keep some rules but modify them in the interests of a more open market and more competition. For instance, the independent terms of trade have helped to build the UK’s format industry worldwide, but they also act to keep large independents and public broadcasters in an exclusive ritual dance.

Eric Schmidt himself mentioned Contract Rights Renewal (CRR) by which, following the mergers that created what is now ITV, the price of advertising is held at a given level.

There is a job to be done here. Perhaps Eric Schmidt has provided the driver. Anyone agree?

Starting a Media Strategy: Culture and Basic Instinct

What is Culture?

My first blogs of 2011 will be about how to create a successful national media strategy. You will be able to apply them anywhere.

A national media strategy is about how a government can help its media industries to flourish, that is perform somewhere near their potential.

I put most emphasis on the global or international dimension, and start with the core elements of a media strategy, that is, the elements of human behaviour which media content addresses.

Nearly everyone else discussing media strategy simply skips this phase and concentrates in incentives or financial tools. We may well end up there, but this first stage is essential. You can't have a media strategy without a framing theory of culture and and the human need for culture.

This series of postings will end with diagnostic questions, designed to identify the position you start from and what strategic options are open to your particular media industry.  You will then be able to assess where you think your industry can best add value.

If you were a food manufacturer or a nation that relied heavily on food exports, you would accept the need to be up to speed with the best knowledge: new scientific research on cultivation, new technology, the nutritional value of your foods, changing demand around the world. You might also want to define and promote a brand – like Belgium is famous for chocolates.

Ultimately, as a food exporting nation, you are addressing a universal need: humans have to eat. Hunger – and the pleasure we get from food – are two of the ways nature has found to make us pay attention to that need.

The Cultural Paradigm

A media strategy addresses the human need to be part of a culture. Humans need culture like they need food. A given culture is the sum total of the ways in which people interact in a given group. (The  chart, originally developed by Gerry Johnson and Kevin Scholes to examine corporate cultures, covers the many dimensions well).


"Culture" is often misused to mean "Arts". 


A few weeks back, I gave you a current view from the two scientists on the root instinct that drives human culture: an instinct to copy others. (The authors of this work explain it as “fast and frugal learning”: the way you pick up the basic rules of life).

UK Media Policy.What Next?

Those in or near to Government who read this blog have hinted that the department responsible for broadcasting is now ready to move on to thinking about how to grow the UK content industries. After all, we are told– frequently – that one of our national assets is “creativity”. 

That is certainly the mantra of the person reported to be the Government’s economics guru, Richard Florida.

A Conservative is not going to be dirigiste, of course. Anyway, the Florida message is work with what you have got. He pushes three T’s: talent, technology and tolerance and his definition of creative extends to anyone with new ideas.

While the Prime Minister was in China recently, promoting British trade, commentators like the Economist noted we are not the country that mainly has the kinds of traditional exports that China wants to buy right now. Germany sells China $55.8bn worth of goods, against our $9.5bn, which is exceeded by both France and Italy.

While anyone would want to boost traditional trade (a $1.2bn deal for Rolls Royce engines emerged from the trip), we will have to recognise and boost our softer assets, like our universities and private schools, which attract large numbers from India and China.

There is, of course, another way to raise money to pay off its deficit: that is by privatising of Government-owned assets. And many Conservatives would regard privatisation as a way energising an industry and freeing it to raise capital for investment.

So one of my guesses is that the privatisation of BBC Worldwide will shortly go on to the sort of informal agenda that follows when a Government wants to prepare opinion -- rather than move quickly as it did with the recent BBC Licence fee negotiation.

A recent paper by Nigel Hawkins for the Adam Smith Institute suggests that a sale of BBC Worldwide could raise £2.0 bn.

And how would the BBC respond to this? My guess, again only a guess, is that the BBC management would not be strongly opposed. However it would probably push for something intermediate like a part-privatisation.

And what of Channel 4? That’s a trickier issue – and the estimated benefits, perhaps £500m, not so great. I guess that there would be opposition to BSkyB or ITV buying C4. If the Government pushed for privatisation, Chief Executive, David Abraham, free from conventional shareholder pressure, would probably go for the stock market and a sale to private shareholders.

South African TV: In Need of an Adrenalin Rush

I am in Cape Town, South Africa, talking and listening to producers and people who work in the media industry there. (I am taking part in the Entertainment Masterclass Project. It is supported by SETA, the South African Sector Training Authority).

South Africa seems, on the face of it, to have heaps of potential, a natural hub for pan-African production. After all, it is the most advanced economy in Africa.

But then again, it has some familiar problems. A media industry dominated by a public broadcaster. A deficit of other players ready to commission or invest in new content. Old fashioned terms of trade under which producers get fees but zero rights in their content.

The key to a successful creative industry is innovation. But successful innovation needs development time, and development time is risky. So there need to be good incentives.

At least the problem is recognised. A 2008 report commissioned by SABC, the public broadcaster, from a local law firm  reaches these conclusions about the way Intellectual Property is handled here.

“Problems with the current commissioning environment


1. economic value and financial benefits attaching to IP are unable to be unlocked


2. commissioning and oversight processes not efficient, cost-effective, or user friendly


3. difficult to access outside funding when working with broadcaster


4. creates adversarial relationship between producer and broadcaster


5. other creative talent in independent sector disadvantaged due to IP issues and bad oversight”

SABC’s four channels are by far the main buyers of new content.

Formats seem a natural option for South Africa. I bet there are potential formats for reality or entertainment shows which might resonate with the lives of many Africans, and which could be re-versioned throughout the continent. Formats are not as expensive to develop or make as drama.

Formats are culturally specific. Come Dine with Me is about dinner parties, but they do not do dinner parties everywhere. Successful formats, as one speaker said to me, need to connect with the lives of the people who watch them, need to be distinctive and arouse emotions, to be simple and make people feel good.

In the UK we are fortunate. As a recognised form of Intellectual Property, formats can reap the rewards of success. When a producer pitches an idea, he or she knows that, in most instances, the broadcasters take only limited rights and leave the rest to the producer. The result has been a boom in the licensing of formats which started running with Who Wants to be a Millionaire and went into a sprint in Britain with support from the Independent Terms of Trade. Many British companies today not only licence but also produce their formats' overseas versions.

My guess is that a dry legal report – like the one I have quoted – is probably not going to move things forward. A broadcaster like SABC can talk it down and politicians in a country with a large and dominant public broadcaster are often reluctant to disturb the status quo. SABC broadcasts in many languages and is the voice of nation to its people.

Those who care about this issue are going to need to find a new way of reaching the people that count. They will need to portray in bright lights and strong colours, and in simple language, what the benefits of change might look like. South Africa has a very serious unemployment problem. OK, the media industry is not going to put millions more people to work but it could work uch harder for South Africa's economy. I feel the energy is there. It is waiting to be released.

Will the Sun Set on the Terms of Trade?

Last week’s The Royal Television Society’s conference (28.9.10) had a number of themes. One is getting more insistent. The UK commercial broadcasters do not like the Terms of Trade for independent producers and want to make more content in-house, thus controlling its exploitation.

Public interest set the Terms in the first place. (OK, effective lobbying should get some credit, too.) A public policy perspective can often yield perceptions and insights that do not come up when you look, as most of us do, to the immediate interests of your firm or industry. That is why, back in the 90’s, broadcasters vigorously opposed them.

For those who are unfamiliar with the Terms, Ofcom eventually introduced them in 2002 because, in Britain, the public service broadcasters, collectively, dominated the commissioning of new content. Producers and others also accused them of “warehousing” content, -- that is, starving satellite and cable channels of available content. The result? Producers got ownership of the secondary rights to the content they made for broadcasters (where previously they had ceded rights) and could license it to domestic and overseas players. This made some producers extremely rich and helped to build some very large companies – like Shine, All3Media, and Tinopolis.

The Courage to Compete, PACT, 1997

 Our company, Attentional (then called DGA) strongly supported this initiative and helped to make the terms happen. With support from producers’ trade body, PACT, and a hugely talented steering group, we wrote The Courage to Compete, a key document in the campaign, published by PACT in 1997. The document promised – and the reforms delivered – a boost to exports from the UK creative industries, a much more dynamic production sector, and a new global media profile for the UK.

However, things move on.

Now many of those producers have created very large companies, some larger than the broadcasters subject to the Terms.

Moreover, some might argue that the Terms have, in their way, frozen the very situation they were intended to free up. First, they made the traditional public broadcasters the preferred destination for larger producers. Second, they drove a wave of energy and innovation among independents, helping the traditional channels to get access to the best content available and keep their dominant shares.

Now some of the larger independent companies are being bought out by even bigger firms – such as Hollywood studios – controlled from overseas.

If over time these Terms are “sunsetted”, as similar rules were in the US many years ago, it should not happen quickly. There will be many arguments, many questions to think about. What, for instance, of the smaller producers, whose gains from the Terms have been modest? Would it mean revisiting the quotas for independent production? What are the appropriate rules for a new era? What new models will emerge for the production of expensive content? Should broadcast policy now aim to encourage a new level of diversification in the commissioning of content? Or is that best achieved by simple deregulation?