This is the text of an interesting speech made by Michael Grade, BBC Chairman, to the National Association of Television Program (sic) Executives:

Keynote speech at Natpe 2006 Conference, Las Vegas

Fear and the Future

Wednesday 25 January 2006

I have been coming to Natpe on and off throughout my 30 year career in broadcasting, both in the UK and here in the US, where I worked for Jerry Perenchio and Norman Lear running their television production company in the Eighties.

I used to be a regular attendee at Natpe, both as a buyer and a seller. Those were simple days: have an idea, bring it to the market, sell it, make it, show it to the audience. Then wait to find someone else to blame!

Just three US networks, a vibrant syndication market – all cash, some international sales and, er, that was it! What an uncomplicated world it was. No scope for consumer choice in that very linear of models.

Looking around the convention floor yesterday, Natpe is unrecognisable for this visitor returning after a ten year absence. So many new faces, some old faces, and, as Johnny Carson once memorably remarked, a few new faces on old faces!

I also detected a measure of fear around the convention. This is understandable: the media world is changing out of all recognition.

It's pretty clear we are on the eve of another revolution in our industry and, like Vegas itself, it will produce some big winners and, of course, some big losers – hence the fear.

Most of you here work in the private sector, with share options and bonuses, lavish mortgages and equally lavish alimony.

I work in the public sector and I have been invited here in my capacity as the Chairman of the British Broadcasting Corporation – the BBC, one of Britain's greatest and most recognisable international brands.

We are funded by a compulsory licence fee paid by all 24 million households in the UK. We spend the public's money on radio, television and online content of every kind.

For our domestic services, we take no advertising revenue; we charge no subscription revenues, in fact we don't compete for revenue at all.

But we do compete for excellence. We compete for innovation. And of course we compete for the attention of viewers, listeners and online users.

With no shareholders or advertisers to satisfy the BBC's approach is exclusively to serve audiences: that's why it's called public service broadcasting.

What do our audiences expect? What do they want? What do they need? How can we deliver these things in ways that are simple to access and universally available?

The BBC spotted the digital revolution very early and we have learned a lot about the audience need for simplicity and universality.

I would like to suggest that, for both the public and private sectors, these two words – simplicity and universality – are the two principles on which success in this new media world will need to be founded.

Let me define what I mean by "this new world". I mean, of course "on demand".

The next age of the media will have arrived when on demand has become the main way that people consume television and radio output. I am as sure as I can be that on demand is the future.

A fortnight ago, here in Vegas at CES, we saw the latest rush of announcements. Google selling video downloads. Microsoft hooking up with UK Sky to offer broadband content including movies and sports clips. Sony offering Location-Free TV.

On demand is coming and it will change everything. The on-demand world will be one of infinite global choice, of unlimited access to the archives: whatever you want, whenever and wherever you want it, delivered via broadband to whichever device or platform you choose.

All the technology needed for on-demand already exists, and it is up and running in some parts of the Far East. Distribution capacity is expanding. Compression technology is improving. And storage costs are falling.

It's a perfect virtuous circle where each part of the cycle reinforces the capacity of the rest to deliver. Nothing, nothing is going to stop on-demand.

On the face of it, it looks like an amazing bonus for audiences, as much choice as anyone could ever want, delivered in ever more convenient new ways – so long as your battery lasts, of course!

BUT, this revolution is going to put huge new commercial pressures on traditional broadcasters and content-providers like us.

In the face of that pressure the natural response could be fear. It could be a defensive retreat to familiar and comfortable territory, to steer clear of the new, the edgy and the surprising.

Less risk. Predictable formulae. And of course leading to that fatal antidote to creativity: the fear of innovation.

This increased competitive pressure is going to come at every single point in the production chain.

We are already seeing the start of this with the rapid growth of user-generated content.

Just to take one area: cell phones. They now have cameras built in giving millions the potential to become their own paparazzi. The age of the citizen photo-journalist has arrived.

An example. In July last year there was a serious terrorist attack on the London transport system.

On the day the bombs went off, BBC News received about one thousand images and clips from cell phone cameras emailed in by members of the public. That certainly took the newsroom by surprise.

But in December last year there was a massive fire at an oil-storage depot just outside London – not terrorism this time just an accident, but a truly spectacular one.

The blaze began early in the morning and by lunchtime BBC News had received not one thousand, but five thousand emails, all with multiple images of the fire, and some with substantial video files attached.

From nothing, to one thousand, to five thousand – all in the space of a few months. How many next time?

As the technical and financial barriers to entry fall away we will see a huge flowering of new content-providers, from the mighty corporations to the one-man bands, producing a vast range of content – all of it available anytime, anywhere, delivered via broadband to the platform of your choice.

Some of these will be blockbusters, produced with the highest network or Hollywood production values.

Others will be much more modest: back-yard productions searching out a niche audience, perhaps one sharing a particular passion - fly-fishing, stamp-collecting, or even warm beer enthusiasts for the UK.

One estimate suggests that, in ten years time, ten to 15 per cent of all available new content could come from new providers.

This doesn't mean the end of the blockbuster. Far from it.

As happens now in movies, where the big theatrical releases are still very much the engine that drives sales of DVDs and other merchandise, so the big television networks are likely to retain the key role of the first showcase for marketing NEW programmes – even if that content may eventually be consumed and paid for via other platforms.

So it may be that in the future we end up with several tiers in this new world – with different places and spaces for players of different sizes and ambitions.

But more players will always mean even more competition. Now that is scary – but it doesn't need to be.

The big broadcasters and content-providers will be valued by their audiences so long as they provide something genuinely distinctive.

Yes. Content will continue to be the force that drives the market forward.

But it's about some different things too. The new technology will demand new ways of working.

For example, it may mean rethinking the way material is commissioned and produced.

The old model in broadcasting is the linear model. Content is commissioned, slotted into a linear schedule, broadcast once via a single channel to a single platform and then lost for ever – well that's a cartoon-version of reality, of course, but this audience understands what I mean.

In the new model there is no schedule. Channels become much less important. Search engines guide the viewer to particular kinds of content.

And that content comes in many different versions that work on so many different platforms.

Programmes won't even have to be their traditional length. They will be any length the viewer wants.

An episode of Desperate Housewives originally made to fill a one hour commercial slot can now be made in any number of lengths to suit viewers' availability to watch – and made in a variety of formats appropriate to whatever device the viewers choose: giant plasma screens, laptops, PDAs, mobile phones, iPods, PSPs, or whatever new device turns out to be the next big thing.

You can build an interactive community around the soap, with blogs and online chats, and teasers for upcoming storylines, and votes on which twist the plot should take next.

There are exciting opportunities here to stimulate more intimate engagement with the audience.

A number of things flow from this. The template of what constitutes an effective creative team is likely to change radically.

A successful project will need not just great writers and producers and directors, but great marketing people too.

People, that is, who really understand how to engage with and respond to the changing audience needs as they are revealed by this new world – experts who understand the challenge of marketing not just the blockbusters, but the niche content.

Also, you'll need savvy rights people too. An awful lot of wonderful ideas in this new world will founder on the rocks of intractable rights problems.

The rights issues will have to be grappled with at the very start of the creative process, not some way down the line.

You need only look at problems of the music industry to see how prevarication on rights issues plays into the hands of the pirates.

And let's not forget to include smart software engineers to develop all those interactive elements in the most creative way – and to ensure that the necessary labelling is built in so that your content is easy to find, of course by an efficient search engine.

It will always remain true that it must be creativity that drives content and not technology.

But, in order to ensure our audiences reap maximum value from our content in a multi-platform world, technology has to have a seat at the creative table.

What are the funding implications? How will consumers be asked to pay? Can a viable system of micro-payments be developed? Will it produce enough revenue to support content with the highest production values? Will a bigger slice of revenues have to be put aside for increased marketing costs – just to ensure you get noticed?

Here's an interesting statistic. In 1995 there were 225 shows across British television that delivered audiences of more than 15 million.

By 2004 that figure had dropped from 225 to just ten shows. Last year there were none.

That's the effect of fragmentation. In the coming world of almost limitless choice, only the most original, imaginative, and visible content will have any chance of commercial success on the new digital highways.

To help audiences navigate their way through this new world, content from trusted brands will have a big advantage.

If ever there was a time to put the emphasis on quality, this is it.

We all know that audiences are becoming more demanding. More and more they are rejecting what I call 'commodity content': the predictable, cookie-cut, formulaic programmes.

The BBC's own research confirms that the kind of programming audiences rate as high quality tends to be the expensive kind.

It's one of the main reasons why the BBC is planning to invest an additional 2.8 billion dollars over the next seven years in sustaining and redefining the quality of its output.

The BBC exists to inform, to educate, and to entertain and to ensure that there remains in the UK a rock-solid source of high-quality innovative UK-produced content that creates public value in many different ways.

Come the revolution, those values must remain the same and continue to be translated into truly exceptional programmes whose distinctiveness is beyond question.

Technological change and intensifying competition may tempt some businesses to defend their profits by concentrating on the tried and tested crowd pleasers.

If that's the road to satisfying the shareholders, then it's commercially the right one to take, but only in the short term.

That is certainly NOT the road our licence fee payers want the BBC to take.

And while we're thinking about audiences, isn't it about time the industry put some real effort into agreeing common technical standards?

Too many new devices on the market only work with content from a particular source and are not universal.

Recent history tells us this is madness. It confuses and deters the audience and we mustn't allow it to become a major hurdle in the path of the on demand revolution.

Audiences don't care who makes the device they use to access their media. They do care that whatever device they invest in gives them access to whatever media content they want.

The current situation is a gift for the pirates. If the industry doesn't find a way to allow all devices to access all content then the pirates will do it for them. It will be Napster all over again.

I come back to my two favourite words in this context: simplicity and universality.

Can I take this opportunity to urge our industry to take these two principles to heart and make them the touchstones of its technology.

Well, before you exercise your individual choice and switch me off, if you are still afraid – let me say this to you as a veteran of this business.

The history of the modern media world is filled with chapters headed "Is This The End of….?"

Television was thought to spell the end of cinemas. Wrong. Multi-channel television would mean the end of the networks. Wrong. Video and DVD machines spelt the end of cinema admissions. Wrong again.

The advent of the Web and file sharing would mean the end of the music business. Close, but again wrong!

The new world of on-demand is exactly what it says on the tin, it is simply DEMAND.

It creates new, unprecedented demand – for what? For content, which is what some of us are dedicated to producing.

The more distribution outlets, the better – provided there is a steady flow of exciting content to oil the wheels.

There is certainly enough talent in our industry to fill those pipes and usher in this third age of media.

In the new world we are approaching, the technological revolution will offer astonishing new possibilities and spark undreamed-of creative energies.

What a great time to be in this business.

Change is always unsettling – and change at the current pace seems to be producing two kinds of fear – fear of doing nothing and fear of making the wrong move.

But to overcome that fear hang on tight to the thought that change means opportunities.

Sure, there'll be mistakes. There'll be wrong turnings. Everyone will always be scared of taking the first step in case it leads over the precipice.

But talented people know how to pick themselves up, they learn quickly and will try something new.

The old, cosy world may be turning upside down. But I want to leave you with this final message of comfort.

However big the revolution, one thing will stay the same: the audience will always find great content. It's true for you and it's true for the BBC.

Hang on to that principle and the future will hold no fears.