This is the full transcript of Ian Hargreaves' interview with Greg Dyke

Ian Hargreaves: If you had a choice, now, between running a combined ITV and being director general of the BBC, which would be the better job?

Greg Dyke: Running the BBC.

IH: Why?

GD: Well, have you read the press this week about ITV? Because it's more interesting, more challenging. There's at the moment, more money - not for me! - but to spend. It's a very interesting time in the history of broadcasting. I basically believe that the role of the BBC will get more and not less important.

IH: When you went in to the BBC, you obviously knew a lot about it, having been in the industry all those years. But has anything about it surprised you?

GD: If you spend your life in profit and loss organisations, you know what you're for. In the end, how do you judge what you do? You judge it by whether your profits are going up or not. It's not very difficult. That's not the role of the BBC at all. So you sit there on Day One and say, "how do I judge this? How do I work out whether we're succeeding?"

IH: So how do you judge it?

GD: Well, what do we do? We collect £2.4bn a year and we spend it. It's not a complicated job, as such. How do you therefore best spend £2.4bn a year. And one of the first things I did was say, well, how do we make sure that the maximum amount possible goes into the services, because that's all you're there for. So early on, we had an audit done, and found that 24 per cent of the money - well, 76 per cent of the money was being spent on the services, and 24 per cent was being spend on the overhead. And to me that seemed too high. And therefore we set about cutting the overhead and spending more on the services. And that's what we've done for two years. And I think this year we'll be down to 15 per cent.

IH: But you began with an appropriately big question - how do judge whether you're doing a good job or not. You can't judge it by that, can you?

GD: Well, there is a relationship between good television, good radio, good online services and money. Everybody can tell you great programmes made cheaply, and they can tell you about three, and then they stop. So actually, money is important. Therefore you've got to try to release as much money as you can on the services. Then you've got to look at who you're trying to service. Our job is to serve everybody. If you start from the basis that everybody pays, then the job is to serve everybody. And therefore if there's certain groups that are not using your services, you should be looking at how can you get them to use them? One of the tasks is that there are particularly groups who are not using the BBC services. You would say, I think, minorities, but if you broke it down, you'd find that it's the Pakistani community and things like that that don't use the BBC much. We have a particular problem, as do all media organisations, in the 15-25s, or 15-35s. We are disproportionately 'south-of-England', and the BBC always has been.

IH: Do you agree with Gavin Davies that the BBC is too easily knocked about by this white southern middle class?

GD: No, I wouldn't use the terms "white, southern, middle class" at all, because I'd be in the same trouble he was in. But I would say that if you start from the concept that everybody pays, you've got to try and say, are there people that are using less of our services, who we think we're not trying hard enough for. Which is part of the reason why we've been developing new digital services in television.

IH: So the vision is, don't waste money on things that you don't need to spend it on, get it into programmes; and make sure the BBC remains universal. If you achieve those two things, is that it. Is that your statement of vision?

GD: It's not enough. At it's crudest, you're trying to make wonderful things. We just changed the mission statement of the BBC, really, and we've said, our aim is to be the most creative organisation in the world. And therefore you have to look at the BBC as in any other creative organisation and say, what is the best way of organising it, managing it, to inspire people to make great things.

IH: Michael Grade said the other day that you found a BBC that in Michael's judgement was creatively on its knees. Do you think that's a fair judgement?

GD: No. But I think it was a BBC where too much emphasis had been placed on management. You've got to do those things, but you've got to work out, how do you do that and inspire people?

IH: So how do you do it?

GD: I believe you have to do it by having a common purpose in the organisation. I think you have to have a set of values across the organisation. I think you all have to articulate, know what those values are. But I think most of all, you have to inspire the people who work there. You want people to feel free to take risks, to do things.

I actually think you want them to enjoy their lives. If they enjoy their lives, they'll make better things. I think most things are about leadership. IH: Have you ever felt any tension between "being you" and being director general of the BBC? Doe the shoe fit at all times?

GD: It's fine for me. I'm not so sure it's always fine for people who write about me. One of the things I wrote in the application was that I thought it would be quite a good idea to change the name from director general, because I thought that sounded like I was running the AA or something. That's the Automobile Association, not Alcoholics Anonymous. The real challenge therefore to the BBC is, how do you make it feel snappier, faster, quicker, more fun, where it's at - as opposed to stuck in another era.

IH: Less southern, white middle aged and …

GD: Well, no, it's not only that. If you're based in London I think the thing about ethnic minorities is quite important. But no, how do you make people have more fun? How do you give out a vibe that this is a good place, a great place to be, because people enjoy it? Because a lot of them hadn't enjoyed the previous years.

IH: Do you think that the staff had stopped delivering creatively because they were at odds with John Birt?

GD: I don't think you can say that they stopped delivering creatively, If you actually look through that period, there's some wonderful pieces made. All I learned about management I learned out of programme teams, which always seemed to me to be really great models, if they worked. You know, you'd have a great editor, four or five producers, a pile of researchers, other people working in other jobs, never more than 30 or 40. You could bring them all together, you could all celebrate success, you could all mourn failure, you could all laugh together, you could all joke together, you could know each other. If you could replicate that at all sorts of levels, you're away.

Just before I took this job I went back to the Harvard Business School for a couple of days, just to do a course that I wanted to go on. What they basically said was, the only organisations that are going to succeed in the first part of the 21st century are those where the rules get broken. Where people take all sorts of risks. The sorts of examples they used - the Sony Playstation. The Sony Playstation was developed inside Sony without anyone ever telling the board of Sony. And why? Because the board of Sony, as you know, would have said, we don't do games. Stop. It's about how do you free up people so they can steal bits of budgets here and there, so they can develop other things, they can do other things. But there's no way that the central leadership is going to decide and make it happen.

IH: Let's talk about public service broadcasting. Michael Jackson in the last thing that he had to say in public before he went off to the States said that public service broadcasting was done for as a concept, it was a piece of voodoo that meant nothing, especially to younger audiences and to modern consumers. Was he right?

GD: No. No. No. I don't think the definition thinks that he means that he thinks that the BBC was dead.

IH: No, he didn't say that. He said the idea at the root of the BBC's creation was dead.

GD: I think the idea of publicly funded public service broadcasting is far from dead. I did the McTaggart lecture at the Edinburgh Television Festival a couple of years ago, and I said then the problem the commercial sector in Britain is going to face, as it was already facing in the States, was that if you lose share in a fragmented television market, particularly - if you lose share year in year out, in the end, unless you change your cost base, you fall off the cliff. That's precisely what's happening to ITV.

They've got to change their cost base and they know that. In the changing of that cost base, many of the things that commercial television has historically done in this country, it will not be able to do. ITV's revenue was down 15 per cent, that's virtually your whole profit in one year, gone - and the response to the ITV companies is inevitably, you've got to save costs. And therefore what do you do? You cut the amount of money you spend on local programming, you cut the maount of money you spend on minority programming. You mess around with the news to such an extent that no-one can find it any more. I'm not criticising that. I'm saying that that's an inevitable thing that happens through a fragmenting market place. But what it means is that the BBC's role becomes more important, not less.

IH: So it's not cyclical in your view, it's structural and it's here to stay?

GD: There's a bit of cyclical in it, because they all went up because of the massive amount of money spent on the dotcoms. But if you lose share, in the end the advertisers won't pay what they used to pay. It's as simple as that. You've seen it happen in American networks.

IH: So public service broadcasting becomes something which happens only where it is directly paid for from the public purse in some form or another?

GD: Not only that. But the minority broadcasting side of public service broadcasting - because there's a populist side to public service broadcasting as well, which is about making British programming that people like and enjoy - that will be what ITV will have to depend on and fight for, to retain.

IH: How close do you think we are in television to what we currently have in radio, where the BBC has half of the market, and the commercial sector has the other half, and the BBC does nearly all of what you would call public service radio. Is that what you see happening in television? And are you comfortable with that?

GD: Slowly, yes. Not totally, but slowly. If you looked over a decade, probably so,. What's interesting now is, you saw Sky go into making really good business. Well run, very effective, radically changed the coverage of sport in this country and the rest of it. But it started going into other British production about three years ago, and it's pulled out, because it couldn't make financial sense of it at all. So Harry Enfield and people like that went over to Sky to make programmes and they're watched by 30,000 to 40,000 people. It makes no financial sense at all.

What you're now seeing in the fragmenting media market place is that the fragmenters are themselves being fragmented. So actually, Sky One's audiences are going down as there's more and more channels. Everybody's audiences are going down. Now, who's got enough money to make the original product? Who's got enough money to make the big dramas? Who's got enough money to make the serious factual programmes? Well, increasingly, over a decade, the BBC.

IH: Does it follow, though, from that that the people who are drafting the forthcoming Communications Bill should stop worrying about whether or not they can regulate ITV and commercial radio into some sort of public service outcomes? There may be some in terms of British production where the market wants that, but that the market should not be pressurised to deliver …

GD: I think that's what it says, the Communications Bill, to some extent. Yes, that's an inevitability. The strength of regulation on commercial organisations only works if the commercial organisations are making a decent return on money. If they're not making a decent return, you can't do it.

IH: Do you see any problem for the BBC in it becoming, on that account of the future, the only home for a very wide range of different kinds of radio and television, and indeed you could take that further into new media as well. Does the BBC not need a competitor?

GD: Yes. We don't like living through the period we're living through at the moment, where the ITV system is in some financial difficulty.

IH: It's going to get worse, from what you're saying.

GD: It doesn't necessarily have to get worse. It's just got to look at its cost base and say, what are we going to do in the future? And we can't do all we did in the past. Now, I think while the BBC is there and making programming both in minority areas and majority areas, ITV will have to compete in the majority areas. Right through the 1980s ITV spent vast sums of money on drama to try to steal the BBC's audience. And they did it, quite successfully. That's the last bit that the ITV will be able to abandon.

IH: What about news?

GD: For the foreseeable future, there'll still be other people being able to afford to do it. I had lunch fairly recently with the guy who runs ABC News in the States, and he said, "if there's a future for ABC news.." Now, that was inconceivable a decade ago, that the head of a network news would say "if there's a future for ABC News." But actually what all the American networks have discovered is that their news no longer makes them money. That reality, that commercial reality, will hit in Britain. Well, it has hit in Britain.

IH: And are the politicians wrong to resist that?

GD: I personally think playing the news in the pattern they do it is a bit daft, because I just don't think it gives credibility to your news at all. There's nowhere in the world that I know which has news at different times on different nights. But the politicians were not wrong to resist it, but it's happened.

IH: They're fighting a losing battle?

GD: They're fighting a difficult battle, because I can't see how you get ITV now to go back to playing the news at a regular time..

IH: What do you say to the organisations which accuse the BBC under its digital expansion of crushing promising young businesses like Artsworld and other digital channels or indeed people trying to compete in the new media space. From this perspective, doesn't the BBC look too big?

GD: Look at some of the organisations. Artsworld is a particular one. But let's look at the onces that gave us the most flack. Nickelodeon …

IH: Well, deal with both.

GD: It's up to Britain to decide whether or not it wishes to have BBC Children's Channels without ads, that are 70, 80, 90 per cent British material. Now the government decided that they did want to do that. And I happen to think that's to the benefit of our society and I don't necessarily think we should all sit back and say, oh, it's just conceivable Disney might lose £1m. Well, without being rude - bad luck! I think the BBC has a higher purpose than that.

IH: No one will shed tears for Disney. But should they shed tears for Artsworld, or indeed for Channel 4, which says that it will be severely damaged if you get permission to do BBC 3.

GD: Yeah, that's funny, isn't it, because it's not what Channel 4 said three months earlier. It's the same Channel 4 that said that, that has just paid £1m an episode for The Simpsons. My understanding of the commercial marketplace is that if the BBC takes share what it does is reduces the supply of airtime available for advertisers and that normally pushes the price up, so it doesn't necessarily have an impact at all.

But the Channel 4 position was panic, because Channel 4 suddenly realised that they were having a bad year and were likely to have another bad year this year because of the downturn in advertising. But if you actually look, Channel 4's revenue had grown in the previous ten years on average by 13 per cent a year. Channel 4 is awash with money. It just happens to have put it into E4 and into Film Four where it could easily have spent it on Channel 4. So a) I don't think the impact of BBC 3 on Channel 4 will be great anyway, financially, because we don't take ads, and b) it will be so small, and its impact on Channel 4, given Channel 4's enormous revenue, will be quite small.

IH: But there is a philosophical argument that Channel 4 is a differently funded kind of public service broadcaster.

GD: Yes. It does some very good programmes, I'm a big fan.

IH: And the model that you see emerging in television following the radio model is of a commercial sector which is not doing that range and diversity of things, and you're happy with that, that the BBC should take it all. Isn't there a problem of diversity there, a problem of institutional narrowness?

GD: No. We live in a world where it's very hard to programme one channel to appeal to all audiences. I'll give you an example. A piece of research we did asked people, do you think there's too much sex and violence on television today? 70 per cent of the people over 50 said yes, and 70 per cent of the people under 30 said no. Now how, in those circumstances, should you schedule a channel for both? And increasingly therefore, what we decided to do - and we'd been given the spectrum to do it, the government had given us the digital-terrestrial spectrum to do additional channels - we decided to go two ways. We decided to do one channel aimed particularly at the young, which we still haven't got permission to do, but we're waiting for. And one channel that was clearly, unashamedly intellectual. We then decided to use that spectrum during the daytime for two children's channels; one for up to six and one for 6 to 13, because we think there is real value in what the BBC can produce in all those areas.

What we want to do with BBC3, we would do a news aimed at a certain age group - 25 to 35 year olds. We would do current affairs aimed at that sort of age group, and it's not the same news and current affairs that you would do on BBC1.

IH: What will you do if you don't get BBC 3, if the government says no, no and no for a third time.

GD: They've only said no once.

IH: They've said it twice, haven't they?

GD: No. They said no once, and they said, we want some more information, the second time.

IH: That doesn't sound like yes.

GD: No. Well, what will we do? We will continue planning BBC Choice. But in the end it's a very strange portfolio of channels to offer, BBC 1, 2 Choice and 4. We could change the name to BBC 3 anyway, but we wouldn't do that, at this stage, because it would be all sorts of …

IH: That's what you would do? If you didn't get it, 4 would become 3? A place to think?

GD: I don't know what we'd do. We still think it'll get approval.

IH: Let's talk about sports rights. What is the right place in that market for the BBC? Your predecessor said that the BBC would never again be able to play in that league of top dollar sports rights. You seem to disagree.

GD: I know exactly why he took the position he did. He took a position that said, we, with public money, add more value in drama, factual programmes and entertainment than we do in sport. That was the position, ie, this money is better used. Which in many ways is right. However, it ignored one thing. It ignored what our audiences wanted of the BBC. And all the research we do suggests that people were deeply unhappy at what happened to sport and the BBC. There is no way that the BBC could ever get back all the things it had, and there is no way it could ever compete in every market. But by a combination of saving a lot of money within the organisation and getting an increase in the licence fee, we took a decision of what to do with that money, and some of that money we decided to spend on competing in sports and for sports rights in certain areas.

Now we lost. I mean it's very funny, isn't it, you look back. There's a wonderful article to be written about one week, about 18 months ago, when the world went mad really, and the rights for the Premier League and the FA and the FA Cup and the FA International were all sold in one week. And you're seeing the consequences at the moment. People vastly overpaid. The result was that NTL is virtually bust, or in deep financial problems. ITV is now spending 10 per cent of its total network budget on one show, called The Premiership, which now plays at 10.30 at night. They paid £60m for something we used to pay £20m for.

Now, the day after I went on the Today programme and basically said they've paid too much - for which I was widely criticised and attacked, and said it just sounded like sour grapes, which it probably was - the truth is, they'll all now tell you they paid too much. Everybody will tell you they've paid too much. Sky are paying £6m a game. They'll never pay that again.

IH: But if the BBC had got those rights at the slightly lower prices that you were in the market at for those particular rights-

GD: We were bidding too much. We had been paying £20m a year.

IH: But you'd have got away with it, wouldn't you?

GD: Um, well … we would not have paid £60m for the Match of the Day rights. We put in our maxim,um bid at £40m and that was too high. But if we'd spent the money, yes, we would have got away with it, because we'd have not spent it on something else. But that's the judgement you make whether you're in ITV or the BBC. If you had David Liddiment here, who is the controller of programmes at ITV, if he was being honest today, he would tell you that too much of his money is now going on the Premiership.

IH: If you don't get BBC3, why don't you set up a sports channel?

GD: We certainly wouldn't get government permission to set up a sports channel.

IH: Why?

GD: You'd better ask them that, not me.

IH: Have you asked them?

GD: No. We didn't. But it was made very clear, don't bother!

IH: They must have thought you fancied the idea.

GD: What would you do if we set up a sports channel? If it was a commercial channel, yeah, fine. But what's the point of us doing that? There's other people doing that. If it's a free to air channel, we couldn't buy enough rights for a free to air channel to make it worthwhile.

IH: What will you bid for in the next round of the football options?

GD: I will bid for everything. It's what you get that's the more interesting question.

IH: You'll bid for live premiership?

GD: No. There'll only be Sky bidding for live premiership. Which is why the Premier League might not get the same amount of money again.

IH: Your critics if they have a theme, it is that you don't know where to stop in terms of commercialising the BBC and developing and purchasing properties which are nakedly commercial in their intent or nakedly ratings-chasing in their intend. Do you think that that is something that you have to restrain in yourself?

GD: Well, everybody likes winning. So yes, you do have to sometimes restrain it. In my view, there's no point being at the BBC if all you make, if all you try and do, is high ratings shows. If you actually look at BBC2 on a Sunday night at the moment there's a wonderful programme called The Century of Self which is about Freud and his effect on the 20th century, and it's magnificent. But you wouldn't commission programmes like that if you're after ratings.

IH: Is there anything currently on ITV that you think as a matter of principle you wouldn't have on BBC1.

GD: Oh yeah, but I wouldn't tell you that…

IH: Go on.

GD: …'cos there's enough journalists in the room and that would be all over the papers. I wouldn't tell you that. But yes, there are things we wouldn't do. There are things that I've liked. I'd have liked - which I've said publicly before - I thought their programme on Bloody Sunday was wonderful. And it's a shame we didn't do it. We did some good pieces around that time ourselves, but I really thought that was very good.

IH: Doesn't the Bloody Sunday thing indicate that you think you have lost the ability to set the agenda through current affairs or news-related specials of one kind or another? Panorama is marooned on a Sunday evening.

GD: 10.15pm on a Sunday night is a very good slot, actually, for Panorama. Audiences have gone down a bit, but they've been going down a bit for several years. Actually, I think Panorama's having a very good run. I would like us to do more investigations. And I think that's about money, and we'll try and find some more money in the coming year to do that. I think again, that's about risk. In serious investigations, you have to put aside quite large sums of money and you get no return.

IH: So you'd put the money into Panorama so it can do investigations, or more investigations?

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IH: Patricia Hodgson the other day in her Fleming lecture said it was great for you to triumph with Blue Planet but a tragedy if you triumph with Celebrity Sleepover.

GD: Well the really interesting thing about Patricia Hodgson is that she obviously didn't read the ratings, 'cos we didn't triumph with Celebrity Sleepover. It was a ratings failure. And that's one of the funny things. If it hadn't been called Celebrity Sleepover, nobody would have noticed it. I don't know who called it that, but I wish they hadn't.

But the truth about it is that it didn't succeed. It wasn't a successful programme. There's always been a bit in Britain about this idea that actually you can always just go and do a piece of garbage and stick it out and it'll get ratings. That's a sort of belief. It's just not true. To make popular programming work today is incredibly difficult. In a fragmented media marketplace it does get harder.

IH: Let me ask you about one or two of your competitors. What do you think BskyB's game plan is? Where are they going to be in five years?

GD: I don't know how profitable they'll be. They'll certainly be there, they'll certainly be a powerful operator. I suspect they won't go into British production. They've dabbled that way and pulled back. They will continue to do sport brilliantly as they do.

IH: Will Murdoch, their majority shareholder, own Channel 3, Channel 5, some parts of the above?

GD: That's one of the things it seems to me the government is deciding now.

IH: What's your opinion? Should Murdoch be allowed to own the newspapers he owns and a piece of television.

GD: One of the interesting questions in this country is why has there never been a British multimedia international player? And the reason there hasn't been is straightforward: we had regulation that prevented it. Does it matter that therefore we didn't allow the newspaper companies and radio companies, the television companies to merge, to be owned, to become one big organisation? It depends. Do you believe Messier brings credit to France?

IH: What do you think, though? Do you think that we should now try to go down that route?

GD: I think I'd rather have the World Service, actually. If you look at what the World Service represents, I think it represents the best things about Britain - freedom, tolerance, understanding, thought. I think Britain has done well out of that.

IH: But it also represents resistance to the market and a more commercialised broadcasting system.

GD: Yeah, but what makes you … haven't we been through the period when we believe the market delivered all?

IH: I'm not expressing a belief. I'm asking.

GD: The market doesn't deliver all. There is a place for the market. I came from it. I did very well out of it. But one shouldn't necessarily believe … the reason I joined the BBC is that I just don't believe we should be slaves to the market and let the market deliver all. Because it won't.

IH: When we get digital television everywhere, assuming we get there, do you think it will be the right thing to do to have the BBC paid for by subscription rather than a licence fee?

GD: No.

IH: Why.

GD: I've been through that, myself, over the years. One time I did.

IH: Why did you change your mind?

IH: I changed my mind because I suddenly realised the importance of universality. The great thing about the BBC is that it's available to everybody. It's available to the rich, poor, no matter what background you