Kate Bulkley, Media Analyst.

Television. STV needs devolution

By Kate Bulkley

Royal Television Society

November 2008

Rob Woodward

In the increasingly urgent debate over the future of public service broadcasting, it is sometimes overlooked that as the head of STV, Rob Woodward, is right on the frontline. His profile might not be as high in the London-centric media village as Michael Grade’s or Andy Duncan’s but the pressures he faces are equally intense.

Of the issues confronting Wales, Northern Ireland and Scotland in relation to PSB provision, the most acute situation exists in Scotland, says Ofcom’s Stewart Purvis. STV’s licence could be in deficit by as soon as next year. Purvis describes the fate of the Channel 3 broadcasters in the UK nations as “one of the most complex issues” the regulator needs to disentangle.

Woodward, who took over as CEO of STV 18 months ago, could be forgiven if he looked like someone under pressure, but during our interview early one morning in London he comes across as a man who is focused and more than able to fight his corner.

Woodward and his senior team have been spending a substantial amount of time talking to Ofcom, to government and to MPs about STV’s plan to beef up Scottish content. This, inevitably, includes the provision of high-quality Scottish news and current affairs programming.

“The PSB Review has in its power to set a new direction for Scottish broadcasting,” he insists. “It is our top priority because it is about safeguarding our vision of the future.”

Unlike ITV, which is cutting regional news, Woodward regards national news as part of the DNA of STV.

“We reach 4 million adults each week with our news and that puts us about neck-and-neck with the BBC and for the past few months we have been gaining [on the BBC],” he claims. “I think this is because of the heightened focus on things Scottish and the growth in the nationalist government and growing tension between Westminster and Holyrood. Everything indicates to us that our audience wants more localised content, so the last thing we want to do is cut back on local news provision.”

ITV in Scotland isn’t Scottish enough

More Scottish content is also clearly on the Scottish Government’s agenda. In September the Scottish Broadcasting Commission recommended establishing a new, publicly funded digital channel at a cost of about £75m. The commission prefers this to a public-service solution based around Channel 3.

Woodward embraces the idea of a Scottish digital channel, but says a new channel should not be “at the expense of existing broadcasters, in particular STV” which is working hard to “safeguard” its valued PSB services.

But he positively bristles when asked for his thoughts on ITV executive chairman Michael Grade’s idea of making ITV a UK-wide brand. “Where’s the substantiation to say that the Scottish, Irish and Channel Islands’ audiences would prefer to be served by a single broadcaster?”

“Why has STV’s online service been so successful when people could just as easily go to ITV.com? The direction of travel is very clear: the audiences in Scotland want a strongly Scottish-branded third channel, which provides the best of ITV programmes as well u14 13 u as local, home-grown programmes. We absolutely embrace the power of being local. It’s who we are and it defines STV.”

Ofcom itself calculates that the cost of producing Scottish news and current affairs will be greater than the value of STV’s PSB licence by 2010 at the latest. Woodward says the STV PSB licence will actually “go negative” next year so he is keen find a way to make up the shortfall.

It costs STV £7m a year to produce its news output, but Woodward points out that STV only brings in £1m a year in related advertising so he is asking for £5m a year of public money to fill the funding gap.

“Our ask is very different from that of any other broadcaster because we want the money for the specific purpose of local news,” says Woodward,

The fact that the money would fund a specific and highly identifiable public service should, he argues, enable STV to escape any of the EU state aid issues that Channel 4 is facing in its campaign for public funding.

A former banker and Channel 4 commercial director, Woodward regards Scotland as a distinct and proud nation. He was born in England but grew up from the age of seven in Scotland and earned an MBA from Edinburgh University.

“We believe in a future that is an evolved version of what we have now with ITV, both with continued access to network programming but with the continued freedom to opt out,” he explains.

“Our research says that when Scots are offered only one channel, 60% choose STV over Channel 4, Five, the BBC or any other channel,” Woodward adds.

Under his leadership STV has sold Virgin Radio and is selling its cinema advertising business. The name change from Scottish Media Group to STV, finalised in June, is a reflection of Woodward’s three-pronged strategy to focus on Scottish TV broadcasting, digital services for Scottish audiences and production. STV has plans to reduce its dependence on ITV-generated advertising revenue from 70% in 2007 to just 50% by 2010.

Woodward also wants the relationship with ITV to be “simplified”. On the highly contentious subject of how much STV pays for ITV network shows, he is furious with Grade for suggesting that he gets these on the cheap.

Grade told an RTS patron breakfast in October that it is giving STV and UTV a 30% discount, which the ITV executive chairman said was equivalent to a £25m annual subsidy.

Woodward, nearly gritting his teeth, takes a deep breath before he says: “When ITV plc complains that it is subsidising us, we not only strongly refute that but we have numerous examples where our assets are being used solely for the benefit of ITV plc.”

The “best” example of this, according to Woodward, is the “nominal cost” that ITV plc pays for full access to ITV network programming for its subsidiary channels ITV2, 3 and 4.

“We invest about £50m a year in programmes on ITV1 and we even promote ITV 2, 3 and 4 on behalf of ITV plc,” says Woodward. He insists STV has no economic interest – or benefit – from the success of these other ITV channels. Woodward contends that the value to ITV plc of using network programming on its other ITV-branded channels is worth “in excess of £75m”.

National identities conflict online

There are several other “line items” that he thinks need to be discussed with ITV, all of which will be part of a third-party-authored report that Woodward says will be published later this month to “substantiate and explain” the position of Scottish and UTV in relation to ITV.

One bone of contention is ITV’s desire that STV and UTV should promote ITV.com on air. “This runs counter to one of the conditions of the merger undertaking [between Carlton and Granada], which was that ITV is to provide a clean feed of ITV programming,” says Woodward.

It is a particular problem because one of the three “legs” of STV going forward is developing its digital businesses, including the STV.com site.

Woodward plans to launch online classified ad sales in the first quarter of next year and he also plans to add a “suite” of online services, including localised news sites for the four biggest Scottish cities. “This is not a sideshow for us. Digital is absolutely central to our business,” he insists.

Woodward is also keen to develop STV’s programme production business, headed by the recently arrived Alan Clements. STV already has three global brands in Taggart, Rebus and Jack Osbourne: Adrenaline Junkie. He believes STV should be granted independent producer status when selling to English broadcasters and has made the case to the DCMS.

“We don’t have commissioning power over ITV network programming even though we provide funding,” says Woodward. He calculates that getting indie status outside Scotland could be worth a 30% uplift in the size of STV’s production business over three years.

STV has not been immune to the plunging value of the stockmarket, but Woodward says it is on track with its core broadcast business and has increased its operating margins this year.

The company announced 14% year-on-year growth in Scottish ad sales at its half-year results in August; Woodward says that despite the slowdown the company will deliver double-digit ad revenues for the second half of 2008. But he admits that the majority of STV’s current income comes from its share of advertising from ITV.

“Of course, we are ultimately joined at the hip with the direction of travel at ITV, but we have a window of opportunity to do two things,” says Woodward. “First, to grow the Scottish content business, which currently represents 20% of our income… The second area is all around our plans for digital,” where STV has a target of attracting £1.5m in online ads by 2010, up from the £600,000 expected in 2008.

He repeats that making STV stronger is about making it more focused on its home market. Therefore he plans to “aggressively” opt out of ITV network programming that doesn’t resonate in Scotland starting next year. A likely early casualty will be the FA Cup.

“We want there to be a closer resonance between us and our audience,” says Woodward. “We want to own particular parts of the schedule.” To that end, STV has been campaigning for greater flexibility in its on-air obligations and quotas. “We want to have the flexibility to be able to make commercial decisions,” says Woodward. “That is one area where I do completely agree with ITV.”


PSB in Wales… Ofcom’s view

The regulator’s Communications Market Reports for Wales show a heavy reliance by the public on television to receive news and information about Wales.

In a speech to the RTS in Cardiff in September, Stewart Purvis, Ofcom’s partner, content and standards, said there is vigorous competition between ITV Wales and BBC Wales in the provision of English-language news and current affairs.

Research shows that 91% of respondents think it is important for ITV Wales, as well as BBC Wales, to provide national programming.

In the Welsh language, although the BBC provides the news service for S4C, there is plurality in the supply of current affairs programming, sourced from ITV Wales and BBC Wales.

Purvis said: ‘In the short-term, we firmly believe that it is strongly in the interests of viewers in Wales to retain public-service delivery from ITV plc at a realistic level rather than risk losing such delivery altogether.’

In terms of media distribution, Wales’s geography provides unique and difficult broadcasting challenges. Currently, digital terrestrial television services reach only 57% of households compared with 73% in the rest of the UK.

Broadband penetration in Wales is only 45% and there are access and speed issues, particularly in rural areas. As a result, in the short to medium term television will remain the key way that public-service content is delivered to mass audiences in Wales.

In each of the four models set out by Ofcom for the future, S4C’s services would continue. ‘In fact, we are interested to see if S4C can play a greater role in providing quality UK television for older children in English,’ said Purvis.

He added: ‘But the Institute of Welsh Affairs and Ofcom’s Advisory Committee for Wales think S4C is not a substitute for the need for plurality in the English language in other programming.’

[To read Stewart Purvis’s speech and hear the debate: www.rts.org.uk/wales and click on Recent Events]


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