Submissions
MARCH 2006
EQUITY SUBMISSION TO THE OFCOM CONSULTATION DOCUMENT
"REVIEW OF THE TELEVISION PRODUCTION SECTOR"
INTRODUCTION
1. Equity is the trade union for people working in the entertainment industry and represents 37,000 performers and creative personnel. According to a recent survey conducted with Skillset, the Sector Skills Council for the audio-visual industries, a third of Equity members who had worked in the UK performance industry in the past year had spent some time working in television.[1]
2. The nature of the work of Equity members - principally in drama, comedy or entertainment programmes - means that they regularly work on both in-house productions and external productions. Therefore the future health and sustainability the television production sector is clearly a core issue for Equity. The decisions made by Ofcom and negotiated between the broadcasters and producers will have a direct impact on the amount of work available, the types of production and the terms on which artists are engaged.
THE OBJECTIVES OF TELEVISION PRODUCTION
3. As outlined in the consultation document (para 3.13 - 3.23) Ofcom is duty bound by the Communications Act 2003 to use this review to further the interests of viewers as consumers and UK citizens. It also has specific responsibilities relating to the television production sector, as set out in Chapter 4 of the Act. Therefore its focus on defining these interests within the review is inevitable.
4. However, it is interesting to see Ofcom devote so much of its analysis to the "inputs" required in television production, rather than focussing principally on "outputs" as it has done in the past. This uncharacteristic approach is in direct contradiction to the way in which Ofcom has dealt with previous reviews of the broadcasting industry[2]. These reviews explicitly ruled out the regulation of inputs, regardless of the justification put forward by stakeholders in favour of greater regulatory scrutiny of the internal operations and activities of broadcasters.
5. Ofcom is right to seek to further the interests of viewers through the provision of creativity and innovation in broadcasting. These are vital objectives for television productions, whether it is in-house or external. Since the introduction of the independent quota and the growth in "publisher-only" broadcasters there has undoubtedly been a significant expansion of independent production. While it would be wrong to suggest that this growth in independent production has been the only driver of innovation, clearly it has provided a wider range of programming.
6. Both in-house and external producers are capable of making programmes of extremely high standard that deliver quality for viewers and consumers, and in the case of the BBC, assists in building broader public value for UK citizens. Ofcom appears to recognise this when it states, "there is no one model that delivers creativity and innovations, and that both broadcasters and producers have an important role to play" (para 1.17).
7. While acknowledging the points made regarding the aspects of diversity in production and commissioning, Equity would also remind Ofcom of its obligation under s264(6b) of the Communications Act to ensure that in the fulfilment of public service broadcasting (PSB) obligations:
"that cultural activity in the United Kingdom, and its diversity, are reflected, supported and stimulated by the representation in those services (taken together) of drama, comedy and music, by the inclusion of feature films in those services and by the treatment of other visual and performing arts".
8. Equity believes that this statutory duty is crucial in ensuring the range and variety of programme types that deliver a positive outcome for viewers, as consumers and UK citizens. Moreover, this type of diversity should not be obscured by Ofcom's apparent assumption that maximising diversity in programme supply is self-evidently desirable.
INTERVENTION IN THE TELEVISION PRODUCTION SECTOR
9. Ofcom has provided a detailed analysis of the television production sector and the three "key issues behind intervention". For example, the negotiating strength of small external producers, when faced with a small number of very large buyers of originated programming, is quite rightly a matter that should be kept under review. However, it should be noted that the terms of trade have altered the picture significantly and have facilitated the rise of large and influential independent producers (sometimes referred to as "super-indies"). This is an issue which is addressed in further detail in the subsequent sections.
10. Similarly, there is evidence that the potential synergies and efficiencies of producing in-house may lead to a natural tendency for vertical integration of broadcasters who produce their own programmes. The establishment of the publisher-broadcaster model and the statutory independent production quota have therefore been used to address concerns over the abuse of market power. Nevertheless, the extent of vertical integration is an issue that has been directly dealt with by the imposition of the 25% quota for broadcasters, and in the case of the BBC the window of creative competition (WOCC). However, as Ofcom noted in its Review of Public Service TV Broadcasting, there is no case for a change in the independent production quota at this time.
11. Equity recognises the extent of geographic concentration in television production and has consistently supported moves for greater production outside London. However, we understand Ofcom's concern that intervention should not disrupt the positive effect of television production in London, which "acts as a magnet for talent, drawing ambitious and talented individuals to the capital" (para 3.65) and generates competition, innovation and success in proximity to the London cluster. That said, a healthy and diverse production base does require intervention to ensure that viewers are served a range of programming that reflects the whole of the UK. In addition, a growth in production in other parts of the UK increases the opportunities to tap into the talent base outside of London and create similar clusters elsewhere.
CURRENT POSITION OF THE TELEVISION PRODUCTION SECTOR
12. Ofcom has produced a thorough and well-researched analysis of the television production sector in the UK. It is acknowledged that this is in fact the "first comprehensive statistical assessment of the sector ever assembled" (para 4.2). In particular, it is interesting to consider the evidence regarding the importance of vertical integration, relative negotiating strengths and production outside London.
13. In relation to the current position of the television production sector, Equity has accepted the case for some form of intervention to mitigate the market impact of vertical integration. To date that has involved the operation of a 25% quota, which has been one of the factors ensuring that the independent production sector has continued to prosper.
14. However, the combination of concentrated financial power and successful commissioning within a small group of "super-indies", calls into question some of the assumptions that Ofcom makes about the continuing imbalance in negotiating strength. Particularly when this is allied to the lobbying power of PACT and the improved financial prospects for independent producers due to the terms of trade.
15. As the Ofcom/ PACT Producer Census illustrates there is already a relatively high level of concentration in terms of the small number of production companies receiving the lion-share of commissions and the turnover associated with this success. Only 25 of the 200 respondents to the survey stated they had turnover of more than £12m. These companies accounted for 50% of external commissions at the BBC and 63% at ITV1.
16. This research should be welcomed, as it also highlights a concern that Equity has had for some time regarding the role of PACT as an effective trade association. Clearly PACT is an effective lobbying voice for independent producers, as it has demonstrated with its success in securing the advent of favourable codes of practice through primary legislation in the Communications Act, as well as the terms of trade that followed. However, Equity believes that it should also be required to retain comprehensive data on its sector and collate information on the activities of its members.
17. The failure of PACT and its members to keep detailed records and monitor market developments is not a purely academic point of interest. As Ofcom may have discovered it has meant that there is little reliable baseline information against which to benchmark its findings on the current position of the sector, which are essential in ensuring the policy proposals are robust and relevant.
18. Moreover, this dearth of information and inconsistent record keeping can have a direct detrimental impact on the enforcement of collective agreements and the tracking of royalty and residual payments to artists. As a result, Equity believes that it would be helpful to the industry if Ofcom made a clear recommendation in the next stage of this review that PACT should seek to improve its record keeping and the information it holds on the activities of its members.
FUTURE DEVELOPMENTS AND IMPLICATIONS FOR INTERVENTION
19. Equity agrees with Ofcom's analysis regarding the demand for external productions and the potential for these sources of demand to change and evolve, as new content-hungry channels and platforms develop. The most obvious growth in demand will come from digital channels, specific content for new media platforms and from international markets.
20. While broadcasters are likely to remain the dominant source of demand for external production, these new sources of demand and the subsequent growth in size of indies has clear implications for negotiating strength. As a result, Ofcom is correct to conclude that less intervention may be appropriate in the longer term (para 5.60), although detailed information gathering and monitoring should continue.
21. It should also be made clear that the greater power and influence that many of the large indies already enjoy, must be accompanied by greater responsibility for the people they employ. This partly relates to the widely reported and acknowledged exploitation of freelance workers, which was highlighted in 2005 by the successful campaigning of TV Wrap and reported widely in the trade press (particularly Media Guardian and Broadcast magazine). However, concerns of this nature also extend to the treatment of actors and performers, as well as the contractual conditions offered to these individuals. In particular, producers must respect payments to artists and appropriate use fees, as well as the engagement of specialist performers such as stunt artists, voice over artists, singers and walk-on and supporting artists. Moreover, independent production companies cannot continue to depend upon the terrestrial broadcasters (and especially the BBC) to provide the only structured training for much of the television industry.
22. The influence of large independent production companies is also supplemented by the success of PACT, which appears to have an extremely close relationship with Ofcom and sections of the Government. This has undoubtedly enhanced its ability to achieve favourable policy outcomes, which has begun to make an impact on the relationship between producers and broadcasters. This is another factor which must be taken into account when assessing the relative influence and negotiating strength of producers and the rationale for continued intervention.
23. The heavy-handed application of quotas may also need to be reassessed in future. By its very nature, the use of such a mechanism distorts the market and is inconsistent with Ofcom's light-touch approach to regulation. This issue is dealt with in further detail below, when referring to the BBC's window of creative competition (WOCC).
24. As noted above, Equity also agrees that intervention to enable out of London production will continue to be required, certainly in the medium term. Equity has consistently argued for an increase in production in other nations and regions of the UK. However, it is unfortunate that Ofcom's earlier decision as part of its review of public service TV broadcasting reduced the regional non-news obligations of ITV1 - a decision which exacerbated the problem of low levels of regional production.
CODES OF PRACTICE
25. While Equity has accepted some of the arguments for intervention in the TV production sector, this case is weakening due to the impact of the existing mechanisms (including quotas and terms of trade). This has altered the balance in the relationship between broadcasters and producers, so that large and powerful external producers have been able to emerge. Moreover, the uncharacteristic focus of inputs in this sector could also be extended in other areas of Ofcom's responsibility, if it was considered appropriate and was done in order to further the statutory duties outlined in the Communications Act.
26. The specific details of the prices paid by broadcasters for programming, and the distribution of programmes on alternative platforms, are commercial arrangements. As a result these arrangements are rightly subject to negotiation between the broadcasters and producers. However, Equity would ask Ofcom to note the concerns of the creative artists who are engaged to appear in these programmes. These artists also have rights to the exploitation of certain audiovisual work, which are negotiated collectively on their behalf by talent unions (Equity, the Musicians' Union and Writers' Guild of Great Britain) and incorporated in collective agreements.
27. Due to the tight margins and strict schedules within which television production companies are required to operate, any squeeze on the prices paid for programmes can be expected to have a direct impact on a production, as well as those engaged to work on it. While Ofcom found no prima facie evidence that broadcasters were systematically reducing prices, it is an unfortunate fact that when such prices are cut it is often the fees to the artists that are considered a soft option, which are cut in order to reduce costs.
28. Ofcom's principles of a new definition of rights windows based on time rather than the specific platform appear to offer a logical framework, at least for the initial exploitation of programmes. A relatively limited primary window, followed by a possibility of a "holdback" period, where the broadcaster can restrict the exploitation by the producer, should be examined in further detail. It may be that an initial approach of "when, not where" is the most sensible framework. However, Equity believes that it may still be possible to combine this approach with an acknowledgement of type of secondary use and the value of this exploitation across particular platforms.
29. Ofcom should be aware that the decisions that are made on new media rights will have implications for the whole of the television industry. In particular it is likely that broadcasters and producers will seek to reach agreements with artists that mirror the industry practice in other areas. Equity has been in detailed discussions with broadcasters and producers since early 2005, regarding a range of similar issues as they relate to the use (and re-use) of material which involves the performances of Equity members. Inevitably the debate over definitions of primary and secondary use of programmes has been at the heart of these discussions.
30. Therefore, we hope that a clear and transparent agreement can be reached on new media rights before the end of this consultation process. This will assist in clarifying the broader rights framework for the use of audiovisual material on these new and exciting platforms. As such we would recommend that Ofcom considers the approaches being examined by Equity in its discussions on these issues[3] - enclosed with this document.
KEY POLICY PROPOSALS AND PROPOSITIONS
Independent Production Quota
31. Equity believes that the BBC's plans for the WOCC are unnecessary and ill-defined. They also present a real danger to the capacity and critical mass of in-house production, which will be reduced dramatically as a result of the changes and the inevitable increase in external production to more than 40% of hours. Ofcom is correct that "the nature and scope of the review of the operation of the WOCC should be finalised and made public, along with the criteria that would define success for the WOCC" (para 1.59). In the meantime, Equity would argue for no change to the current quota arrangements due to the lack of clarity.
32. However, we do not believe that Ofcom should extend its remit to define the terms of review of operation of the WOCC, or be asked to conduct a review jointly with the BBC Trust. This should remain a matter for the BBC in consultation with the Government and all stakeholders, including independent producers and those employed and engaged within the productions commissioned in this new way.
Production Outside London
33. Equity has made it clear in this submission that it agrees with Ofcom's view regarding the need for continued intervention to ensure that television production is able to prosper outside London. In order to be effective, this intervention must be focussed on the broadcasters, but it may come in a number of different forms depending on the circumstances facing the broadcaster in each case.
34. For example, we believe that the 50% target of network production by volume and value is appropriate for ITV1 and may be a suitable long-term target for the BBC. However, the encouragement of individual genre commissioners being incentivised to deliver out of London production may be more appropriate in the case of Channel 4.
35. These approaches should continue to be part of a regulatory, institutional and financial mix of options capable of securing production outside of London. Equity members have also considered the issue raised by Ofcom, regarding the geographical location of commissioning power and decision making. This approach would be somewhat different to the BBC's prospective move to Manchester for particular elements of its programming and would involve a whole channel being located in a different part of the UK. Specifically, it is Equity policy to call for the BBC to examine the possibility of basing one of its numerous channels in Scotland. However, we would also argue that broadcasters could do more to access the talent base of performers in other parts of the country, by exploring opportunities for production in the Midlands, the South and the North of England, as well as in Wales and in Northern Ireland (where Equity has specifically requested that the Government seek to bring together key stakeholders to kick-start such a process).
36. Therefore all channels should encourage a greater spread of commissioning and explore long-term methods of developing and sustaining regional production bases. Indeed, it is acknowledged that one of the best ways in which this can be achieved is by the establishment of returning drama serials. The fact that this genre of production has a distinct long-term benefit for the regional production base means that it should be subject to particular encouragement.
Definitions
37. Equity has seen no evidence to suggest that consumers, citizens or the television production sector would benefit from the change in definitions of qualifying independent producer. Therefore, barring the presentation of compelling evidence to the contrary, we are happy to support Ofcom's proposal to recommend no change in the definition at this time.
CONCLUSION
38. Equity welcomes this detailed review of the television production sector. Ofcom's work has provided the industry with much more detailed information and given stakeholders a better understanding of the key issues at this time. Equity would like to see this research and evaluation repeated on a relatively regular basis as the industry evolves during a period of unprecedented change. It is clear from the consultation that regulatory intervention in the television production sector will continue to be an important and evolving fact of life for those involved in the industry.
39. Technology is changing the way in which television is accessed and produced. This has huge implications for broadcasters and producers - but it will also have a direct impact on the working lives of actors, designers, creators and performers, without whom the key content element of television production would be absent.
40. Ofcom's framework for dealing with this new environment is helpful in developing a sensible industry approach to the challenges ahead. Equity will now attempt to feed these findings into its own discussions on the future of television which are of such vital importance to Equity members. This separate but related process is already underway and we would urge Ofcom to consider Equity's own analysis (referred to above) regarding the impact of these changes on the collective agreements for the engagement of artists.
17 March 2006
For further information contact:
Matthew Payton
Research & Parliamentary Officer
Equity
Guild House
Upper St Martin's Lane
London WC2H 9EG
020 76700260
[1] Skillset/ Equity Performing Arts Industry Survey 2005
[2] Ofcom Review of Public Service TV Broadcasting 2004-2005
Ofcom Radio Review - Preparing for the Future 2004-2006
[3] Equity: Future of Television Agreements (Feb 2006) - enclosed with this submission.
Site Navigation: