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It's a timely debate, as the media industry braces itself for the full force of the second wave of the digital revolution.

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Just as we've adapted to the challenge of greatly expanded audience choice, along comes the explosion in on-demand, infinitely searchable content, where the audience wants it and when and how they want it.

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Getting the economics right will be absolutely crucial, to keep up the flow of quality content that audiences will expect and search for.

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You won't be surprised that economics are on the agenda at the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú at the moment, since we're working our way towards a licence fee settlement for the next Charter period.

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And economics is very much at the forefront of other UK broadcasters' minds too, with some commercial broadcasters facing an advertising downturn. The digital age poses real challenges for all of us.

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So this morning I'm going to talk about why it's vital the UK invests in content for tomorrow's digital world - invest for creative risk, invest for multi-media and new platforms and invest for quality and impact.

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The UK's creative impact

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Let's start by taking a vantage point beyond these shores.

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Last month I was in Los Angeles, along, it seemed, with most of the world's television buyers, to take a first look at next season's primetime US network shows.

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What struck me most in LA this year was the number of leading writers and producers who came up and told me how influential British innovation and ideas are on American TV right now, especially when it comes to drama and comedy. NBC's experience with the American version of The Office came up a lot.

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The first series got off to a somewhat shaky start but NBC stuck with it, which is quite unusual for American networks – and it paid off. The audience for the second series nearly doubled and now a third series has been commissioned.

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Perseverance is very important in comedy. It's a genre that requires you to grow shows and talent, through sometimes less successful early stages, and to bear the inevitable failures with equanimity.

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Comedy makes an emotional connection with audiences like no other genre.

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And comedy, particularly the British variety, has a unique ability to be subversive, to reflect the state of the nation and bring people together all at once. People identify and define themselves by their comedy.

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Imagine how dull everything would be without the likes of David Brent, Vicky Pollard and foul-mouthed Gran.

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But – here's the snag – comedy is the riskiest genre to make, with a high failure rate (something like one in eight) that few media organisations can afford to contemplate, and in fact many no longer do invest on any scale.

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The Â鶹¹ÙÍøÊ×Ò³Èë¿Ú spends around £85 million commissioning original comedy across all platforms each year. In effect, we risk investment on comedy in order to find the winning formula that really clicks with the audience, as Little Britain and Catherine Tate have done most recently.

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NBC are to be congratulated for sticking to their guns with The Office.

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Just think - when Â鶹¹ÙÍøÊ×Ò³Èë¿Ú TWO commissioned a mock docusoap about a Slough paper firm from Ricky Gervais and Stephen Merchant, they were almost unknown. There's creative risk.

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So when the UK public voted for its favourite sitcoms of all time, 27 of the top 30 were from the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú.

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Comedy is a major driver of the digital market. It is already common currency on mobile, web and email.

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The Â鶹¹ÙÍøÊ×Ò³Èë¿Ú's TV Plus trial is looking at new ways of connecting with audiences, for instance piloting preview clips on mobile phones and offering Â鶹¹ÙÍøÊ×Ò³Èë¿Ú TWO and THREE programmes on broadband, and we're finding that demand is already at impressive levels.

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People want to watch their favourite comedy again and again. Little Britain has topped the video-on-demand charts on cable. And Â鶹¹ÙÍøÊ×Ò³Èë¿Ú THREE's The Mighty Boosh received 670,000 streaming requests when offered via broadband.

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It's not just comedy. When we made The Apprentice available on broadband we received 1.7 million requests for full episodes and 2.1 million for clips including the audition interviews.

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Altogether the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú TWO website received 37 million page impressions. That's not just because they wanted to try out the technology. If The Apprentice hadn't been such a great show, no one would have bothered.

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We're finding ways to allow viewers to access factual programming in flexible ways that are useful to them.

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For instance, in our six month Parenting Video On Demand trial. Clips from shows like Child Of Our Time and Little Angels are available and searchable by topic on broadband, and they've been getting 20,000 users a week, at whatever time the parents really need parenting tips.

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At the start of this month the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú finalised its new media rights agreement with Pact.

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Our audiences will now be able to view all our programming on non linear platforms within a "seven day window" from the linear transmission. For any programme series, that opportunity will increase to seven days after the entire series has ended, known as "series stacking".

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Separately, our audiences will also be able to download missed episodes, park them on their hard drive and view them later at their convenience. This is known as the "floating seven day window".

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Although there will be time limitations on these propositions, this is another great offering to support the convenience that audiences are seeking.

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Subject to the necessary approvals it means audiences should be able to catch up with more of their favourite shows when it suits them. That's great news for viewer choice and flexibility.

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And in my view, downloading will naturally be joined by streaming video delivery on mobiles and richer broadband content in whichever way audiences can find good content.

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Investing for quality and impact

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But digital media, from downloads to high definition television, are no different from old fashioned linear broadcasting in one crucial respect.

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Just as great story telling never disappeared from the movies, every platform and every digital technology will continue to depend on one element above all others – and that's great creative content.

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I recently visited Japan to learn from their experience in converting to HD and to prepare for our launch of HD in time for the World Cup.

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I was reminded (and it wasn't just Japanese courtesy) how the UK is acclaimed there, as in so many parts of the world, as setting the benchmark for natural history and science programming.

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David Attenborough is as iconic to Japanese viewers as he is here.

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Most recently, Planet Earth has demonstrated the pre-eminence of the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú in distinctive, inspiring, ambitious natural history.

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Planning for a landmark series like Planet Earth is a major long-term investment. That is where security of funding is so important.

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It's no coincidence that the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú is one of only a very few organisations capable of committing long-term planning on landmark natural history series of that scale and ambition, the kind that can be five years in the making.

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Incidentally, Planet Earth was our first major natural history series to be shot in high definition, thanks in part to co-production money from NHK and Discovery. The new cameras captured our planet in ways that had never been seen before.

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Spectacular in standard definition, Planet Earth viewed in high definition is a revelation. You only have to see some of the footage of the Himalayas or the Angel Falls in our current Â鶹¹ÙÍøÊ×Ò³Èë¿Ú HD trial to become a convert.

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To cut through in a global media environment populated by juggernauts like Lost and Desperate Housewives, you need content which looks and feels big. That doesn't always mean matching US-style big bucks on screen. It does mean ambition, breadth and creativity. Long runs and strong writing must underpin those dramas which cut through.

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A few years ago Â鶹¹ÙÍøÊ×Ò³Èë¿Ú ONE drama was underfunded and underdeveloped, and the audience felt it. Approval and ratings were down.

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In recent years Â鶹¹ÙÍøÊ×Ò³Èë¿Ú ONE has been reinvigorated by creative investment in big, bold drama pieces with strong production values, such as Bleak House, Doctor Who, Spooks and the reinterpretations of Shakespeare plays. Regional voices have come to the fore with acclaimed series such as Life on Mars and The Street.

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We're delighted that this emphasis on creativity has won growing recognition. Â鶹¹ÙÍøÊ×Ò³Èë¿Ú ONE was named as the most creative channel last month in Broadcast's first Creative Report, which set out to measure creativity in today's television industry. Overall, nine out of the top 10 most creative new shows of 2005 were from the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú.

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Creative Future

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In Creative Future announced recently by Mark Thompson, the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú unveiled our plans to build on this creative momentum.

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It's the blueprint for delivering public service content to audiences at home and on the move, regardless of the technology they're using. That means thinking in a 360 degree way about how we commission programmes instead of taking a fixed viewpoint about different platforms or channels.

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People will still want to come home, put their feet up in front of the telly and say 'entertain me'. But they'll also want to access content on all the latest digital platforms when and where it suits them, and they will expect Â鶹¹ÙÍøÊ×Ò³Èë¿Ú content to be there too.

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Creative Future means nurturing creative talent in key areas such as entertainment, comedy, music and drama as well as journalism and knowledge building.

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And it means finding ways to extend our well-loved, well differentiated channel brands into these new digital spaces to act as gathering points for audiences around the content they love.

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Â鶹¹ÙÍøÊ×Ò³Èë¿Ú ONE will remain the natural home of the big, inclusive events in drama, entertainment and sport, and I would like it to be the first home of high definition.

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We're going to be building more intense emotional engagement for audiences, with entertainment shows and bigger dramas with longer runs, which might have their homes on Â鶹¹ÙÍøÊ×Ò³Èë¿Ú ONE but will also live on other platforms. This won't squeeze out single dramas or shorter series on all our channels.

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We're going to invest in writing, in training writers and in new models like writer producer and team writing.

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Just look at what we've already done with Doctor Who, with 'Tardisodes' delivered to mobile phones, online games and mock blogs, and how we're sowing the seeds of excitement around the sister drama Torchwood, which will come in to land on Â鶹¹ÙÍøÊ×Ò³Èë¿Ú THREE later this year, but has a presence on the web during the summer to let audiences find the mysterious origins of Torchwood before it airs.

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We're also looking forward to introducing more family dramas such as Robin Hood, filmed in HD, in the autumn.

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The far-ranging Creative Future comedy strategy, which I've been leading, also aims to boost creative confidence in the new 'modern mainstream' sitcom, with high production values and greater emphasis on development.

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True to our insight about backing new comedy, we will triple the number of comedy pilots on Â鶹¹ÙÍøÊ×Ò³Èë¿Ú ONE each year, as well as continuing to support more new comedy on TWO and THREE, and the occasional brilliant comedy on FOUR.

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If ONE is about the big event, Â鶹¹ÙÍøÊ×Ò³Èë¿Ú TWO and FOUR are our focus for a broad factual offering which reflect the audience's personal passions and interests, arts, culture, science and, well, the way we live and have lived.

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Those brands are going to be invaluable for bringing viewers surprising and engrossing factual content, in the linear and broadband space.

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On-demand will extend the lifespan of this factual programming and online will mean it can build connections and communities of interest, and enable knowledge journeys into the living archive, as we have with Parenting Video On Demand.

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That's why it's important that Â鶹¹ÙÍøÊ×Ò³Èë¿Ú Television moves to 360° commissioning cross platform as rapidly as possible – as recommended by Creative Future too.

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On Â鶹¹ÙÍøÊ×Ò³Èë¿Ú TWO we're drawing new and younger audiences to challenging subjects like business and religion with fresh approaches such as The Apprentice and Dragon's Den, or The Monastery and now The Convent. Expect more of those.

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Â鶹¹ÙÍøÊ×Ò³Èë¿Ú FOUR will be a beacon of intelligent factual, and will mine the rich seams of our culture with a special connection to our archive.

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Â鶹¹ÙÍøÊ×Ò³Èë¿Ú THREE will be the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú destination for younger adult audiences looking for entertainment and entertaining factual, fresh faces and ideas. Young audiences want to participate, to express themselves and to create. I can see a great role here for user-generated content and communities.

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Andy's work will range from user-generated content on mobile to the traditional linear television series, covering comedy, music, factual, drama and of course their own content and ideas.

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Younger audiences have always been part of the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú's audience – it's just that we need to focus more clearly on their lives and interests, and build a strong connection between them and the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú.

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Andy has shown he can bring that single-mindedness and imagination to the task.

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Investment in public service television

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So, finally, let's return to economics.

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I am very conscious that for some channels, notably itv1, the commercial environment is pretty challenging just now.

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But I don't subscribe to the view that Â鶹¹ÙÍøÊ×Ò³Èë¿Ú funding needs to be trimmed in line with prevailing commercial revenues.

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The Licence Fee has a stabilising effect to offset the ups and downs of the audio-visual economy as a whole.

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Contrary to some opinions, we haven't asked for the notorious jacuzzi of cash. Under our bid, Â鶹¹ÙÍøÊ×Ò³Èë¿Ú spend will be proportionately less of the UK broadcasting industry total than it has been before.

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Â鶹¹ÙÍøÊ×Ò³Èë¿Ú content spend

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I know there's concern about the impact of the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú's Licence Fee proposals on the wider sector. But let me address this point in two ways:

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First, it's worth remembering that 70% of the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú's proposed additional funding (the RPI + 1.8% for the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú as opposed to the additional 0.5% for industry costs) for the seven years to 2013-2014 will be met through efficiencies and self help.

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Most of this additional funding relates to our role in fulfilling the new tasks set for us in the Green and White Papers, building out digital infrastructure (DTT, DAB etc), digital services (on demand and interactivity), and new local investment rather than quality content.

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After allowing for reinvestment of efficiency savings in our existing services, the investment into all our existing TV services will be nearly flat - with an increase of only 0.6% pa, while investment in Â鶹¹ÙÍøÊ×Ò³Èë¿Ú ONE and TWO will fall slightly in real terms.

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So we will be making our existing money work harder, by reinvesting efficiency savings, but we won't be raising our overall TV spend significantly. So quality content investments will be largely funded from efficiencies.

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Second, we need to think about the wider production sector. I take the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú's responsibility to the wider creative programme-making community seriously.

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What would be the impact of real cuts in Â鶹¹ÙÍøÊ×Ò³Èë¿Ú spending on that community at a time when others are cutting their spending too? Surely, one of the benefits of the Licence Fee, is to provide that "venture capital for the creative industries" that the Secretary of State has referred to, in bad times as well as in the good?

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The first fact is that over the last decade the Licence Fee has grown much more slowly than broadcast and online industry revenues.

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As a result, Â鶹¹ÙÍøÊ×Ò³Èë¿Ú revenue as a proportion of total industry revenue has steadily declined. In the early Nineties, Â鶹¹ÙÍøÊ×Ò³Èë¿Ú revenue accounted for around 46% of total revenues. Today it stands around at 23%. It has halved, in other words, over the past decade or so.

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What about the future? What happens if the Government accepts the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú's own estimate of its future funding needs and gives it a licence fee that rises at 2.3% above inflation?

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Again, reasonable mid-case assumptions about the growth of advertising and subscription suggest that the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú's share of industry revenues will not grow but decline further to around 20% or less.

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Investment in Â鶹¹ÙÍøÊ×Ò³Èë¿Ú TV is set to remain flat in real terms, as the major part of the proposed Licence Fee uplift will be spent on digital distribution and navigation.

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But prioritising more resources to make innovative content of the right quality underpins the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú's strategy. (A view backed by Professor Barwise of the London Business School, who reviewed the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú's new digital channels for DCMS).

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And investment through the Licence Fee helps to grow the market for new digital services and has a positive impact on the wider creative economy.

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In good times and bad, the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú should set the benchmark for creativity, innovation and risk taking in the UK. Take away that fuel for creativity and it doesn't automatically appear elsewhere.

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In the lean times, it's more important than ever for the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú to keep the benchmark high and underpin innovation and creativity.

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Because we are very conscious that the Â鶹¹ÙÍøÊ×Ò³Èë¿Ú's mission is not just to service licence-payers with our own services but also to contribute towards a healthy broadcasting ecology in the UK.

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It's hard to see how ITV's announced cost-cutting can happen without harming their programming offer. Cutting the Licence Fee isn't going to remedy that or increase the quality available to the audience.

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Given a choice between all boats sink and some boats rise, I have no doubt whatsoever that the audience would choose some boats to rise.

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I fervently hope that ITV's boat stays high in the water – because creative competition benefits the audience. So does a successful and innovative Channel 4 – as long as that success is based on quality and creative innovation.

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Thanks very much.

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