APPENDIX 13
Supplementary Memorandum submitted by
the Producers Alliance for Cinema and Television
ABOUT PACT
1. The Producers Alliance for Cinema and
Television (PACT) is the UK trade association that represents
the commercial interests of independent feature film, television,
animation and new media production companies. PACT has over 1,000
members, making it the largest representative group of screen-based
content producers in the UK and the largest trade association
in the film and television sectors.
2. PACT is also currently responsible for
the Chairmanship and administration of the DTI sponsored "Digital
Content Forum" (DCF) which is the representative body that
bridges the gap between traditional publishing, graphic design,
film and TV production, high-tech computer engineering and e-commerce
entrepreneurs. The DCF has worked with Government on a range of
initiatives and was responsible for Broadband Summit held in November
last year.
PACT'S NEW
EVIDENCE
3. PACT welcomes the opportunity to submit
further evidence to the Select Committee. Our evidence is concerned
with content production and how this sector of the market can
be made more successful and competitive and can contribute towards
the Government's aim to "make the UK home to the most competitive
and dynamic media and communications market in the world".
4. PACT has submitted evidence on a regular
basis to the Select Committee's inquiries concerned with television
matters. We provided the Committee with a copy of "It's the
Content Stupid", our formal response to the White Paper on
communications reform. This evidence sought to emphasise the continuing
importance of independent producers in the television market,
and the need to ensure that communications markets develop in
open and competitive ways.
5. PACT is particularly concerned about
the advantages enjoyed by the main terrestrial broadcasters in
the current market, which allows them easily to acquire and control
programme rights. Control of programme rights gives broadcasters
considerable market influence and market power and provides them
with leverage in the emerging markets. We describe in detail how
the market currently operates against the interests of independent
producers later in this paper.
6. The Government is keen to promote uptake
of digital television and broadband services and we fully support
these moves. However, to be successful these new services will
require high quality and appealing content that satisfies the
interests of consumers. This means the UK needs a well-capitalised,
competitive and dynamic content production sector. There must
be sufficient incentives for content creators and adequate protection
for their intellectual property. Without sufficient attention
being given to the needs of content producers there is real concern
that it could lead to a market that is less, rather than more
competitive.
7. While the Government proposes to give
OFCOM concurrent powers to regulate competition in the communications
markets, it appears that current thinking is that these powers
would be focused on issues such as conditional access systems,
interoperability, electronic programme guides and telecoms issues.
OFCOM will, of course, have wide discretion as to how to use its
competition powers. PACT believes that it is important that forthcoming
legislation should include:
— a specific duty for OFCOM to "promote"
fair and effective competition in the production and distribution
of content, including control of rights; and
— provision for OFCOM to oversee the
operation of a "Code of Practice on Broadcasters' Commissioning
of Content". This would be similar to the current regulation
of the ITV Networking Arrangements by the ITC and the OFT. This
arrangement would also be parallel to the arrangements introduced
to protect the interests of suppliers to supermarkets, following
the recent Competition Commission Inquiry.
REGULATION OF
COMPETITION BY
OFCOM
8. PACT's previous written evidence to the
Select Committee made clear our support of the Government's aim
to "make the UK home to the most competitive and dynamic
media and communications market in the world". PACT supports
the creation of OFCOM and the proposal to give it concurrent powers
to regulate competition. The delay in the Government bringing
forward legislation has given us an opportunity to give further
consideration to the kind of powers that OFCOM will need, if the
Government's ambition is to be achieved.
OFCOM'S COMPETITION
POWERS
9. The Government has already stated that
it proposes to give OFCOM concurrent powers with the OFT to regulate
competition in the communications industries. PACT welcomes this,
and believes that the sector will benefit from having a dedicated
regulator that can readily get to grips with some of the complex
competition issues that are likely to arise. However, we consider
that OFCOM will need more than just the concurrent powers provided
for in the Competition Act 2000 and Fair Trading Act 1973. We
note with approval the comments made by Oftel in its response
to "Regulating Communications in 1999". Oftel said:
"Some rules in addition to competition law
are expedient to prevent the residual advantages of incumbents
being exploited in a way which frustrates the development of competition
or unfairly exploits the consumer. Competition law, with its emphasis
on waiting until an abuse has occurred and focussing remedies
on individual abuses, is inappropriate to deal with the long term
and widespread advantages enjoyed by historically incumbent firms".
10. PACT considers that OFCOM should be
provided with powers to regulate competition similar to those
in the Telecommunications Act 1984 and the Utilities Act 2000.
Taking OFTEL's powers as an example, these have enabled the telecommunications
industry to move from being a state monopoly into one of the most
competitive telecoms industries in the world. There are some specific
duties set out in the 1984 Act. For example, Oftel was required
to "promote" competition in the supply of telecommunications
equipment.
11. PACT therefore proposes that:
— OFCOM should be provided with powers
to actively "promote" competition, which should be similar
to those contained in the Telecommunications Act 1984 and the
Utilities Act 2000.
— The legislation should include a
specific duty for OFCOM to "promote" effective competition
in the supply and distribution of content for communications networks.
— The powers should be forward looking,
allowing OFCOM to take a view on how the market can be made more
competitive and dynamic, rather than them having to look for specific
abuse afer the fact.
PACT has instructed its lawyers to propose a
suitable clause.
CODE OF
PRACTICE FOR
BROADCASTERS
12. It is always likely that there will
be some tension between the producers and broadcasters of content
on intellectual property matters and we consider that such tensions
could be held in check by the operation of a Code of Practice.
13. PACT believes that as the BBC, Channel
4 and some ITV companies are significant aggregators of the intellectual
property rights to programmes, there should be some direct measures
that prevent them from using such rights to restrict or distort
competition in both television and other audio-visual markets.
Control of rights has been a significant factor in allowing broadcasters
to develop additional programme channels and move across into
other delivery platforms such as the Internet.
14. In considering this matter we have looked
at the existing arrangements for regulating the ITV Networking
Arrangements. Our attention was drawn to the Competition Commission's
deliberations on supermarkets and their suppliers. The Commission
noted that some supermarkets had a significant market share, and
where able to use their buying power to the disadvantage of their
suppliers. The Commission concluded that a Code of Practice regulated
by the OFT would provide a suitable remedy.
15. There are certain parallels between
the positions of supermarkets and their suppliers, and the position
of content producers and broadcasters. PACT therefore considers
that the forthcoming Bill should include clauses allowing OFCOM
to regulate a Code of Practice covering broadcasters' commissioning
of content. As with the supermarkets case, this Code would not
need to apply to all broadcasters, but should apply to those above
a certain threshold. We think it would be appropriate for it to
apply to all broadcasters whose combined audience share amounts
to 5 per cent or more of the total television audience.
16. We consider that such a Code would provide
a modern and flexible regulatory tool that would assist in the
promotion of competition. It would provide for a more transparent
market and is sufficiently light-touch and self-regulatory to
fit with the Government's aims. It would not impose undue administrative
burdens on broadcasters, but would provide for a better balance
between the interests of broadcasters and its content suppliers.
17. Our view is that the Bill should make
provision for such a Code, but that the actual provisions should
be kept simple, to allow OFCOM full flexibility to review and
amend the Code as necessary, to reflect changing market circumstances.
The Code might simply provide that a broadcaster having more than
a certain market share should send its proposals for commissioning
content to OFCOM for approval. Before approving such arrangements
OFCOM should have regard to its general duties to protect and
promote the interests of consumers, including the promotion of
competition. OFCOM might publish general guidance to broadcasters
on what issues their proposals for commissioning content should
address.
18. The intention of the Code should be
to:
— Ensure equal access to programme-making
opportunities
In-house producers,
independent producers and others, should all have equal access
to programme commissioners, and the structures broadcasters' have
in place should provide for this. The Independent Production Order
provides independent producers with a share of the market, however,
with broadcasters like the BBC treating the quota as a ceiling
and not a floor, it does not guarantee equal access.
— Ensure publication and monitoring
of terms of trade
As with the
Supermarket Code, the proposed Code of Practice should provide
that terms of business are available in writing. The operation
of those terms should be subject to monitoring by OFCOM in the
same way as the ITV Networking Arrangements are monitored
Broadcasters
should not be able to exploit the fact that a producer has started
production to enhance their negotiating position. Nor should they
be able to operate any other arrangements, such as the terms on
which they will enter into licensing deals that have the effect
of being anti-competitive
— Ensure no undue delay in payments
Broadcasters
should be required to pay producers promptly, both for commissions
and any profit shares from secondary sales
— Regulate third party dealings
In commissioning
content, broadcasters should not be able to insist that the producer
use certain suppliers or distributors. In particular, it should
not be a condition of a contract that a producer must use the
broadcasters' own distribution arm, and producers should be able
to freely enter into any negotiations with any distributor
— Provide for a disputes resolution
procedure
The Code should
provide for a disputes resolution procedure. This might involve
a senior person within the relevant broadcaster, followed by a
mediator, with OFCOM as the ultimate body to whom an aggrieved
party could complain
— Provide a right of appeal to Competition
Commission
Interested parties
might be entitled to appeal to the Competition Commission if it
believes the Code of Practice is being applied in a way that does
not satisfy the competition test. This would echo the provisions
in Schedule 4 to the 1990 Act.
THE INDEPENDENT
PRODUCTION SECTOR
19. In order to illustrate our case and
give some context to our arguments, we provide some background
on the independent production sector for television. However,
we believe that some of what we are proposing would also benefit
a range of content suppliers across much of the audio-visual sector.
20. The creation of the independent production
sector is one of our great British success stories. The sector
has a reputation for creativity and innovation and is responsible
for some of the best, most popular, and most challenging programmes
on British screens. Independents have provided price and creative
competition in the production market, which has helped to improve
both efficiency and quality across the whole of television, to
the benefit of consumers.
21. As a measure of the sector's success,
the Committee may wish to note that:
— independents took more than 60 per
cent of the BAFTA programme awards in 2001;
— UK independent productions won both
the Golden and a Silver Rose at the renowned international television
festival in Montreaux; and
— UK independent producers have also
consistently won more of the USA's International Emmys than UK
broadcasters.
CHANNEL 4
22. The independent sector came into being
with the creation of Channel 4, which unlike most channels is
as a publisher/broadcaster and therefore does not make its own
programmes. At the outset it was expected that Channel 4 would
source its programmes from ITV production arms and independent
producers. However, within a few short years independent producers
had proved their worth and Channel 4 reduced its reliance on ITV
companies as programme suppliers, because they judged that independents
could deliver better and more innovative programmes at lower cost.
Independents remain the major source of programme supply to Channel
4, accounting for some 80 per cent of Channel 4's originated output.
INDEPENDENT PRODUCTION
QUOTAS
23. The sector received a boost following
the 1986 Peacock Report into the Future Financing of the BBC.
This observed that UK television production costs were high by
international standards and noted the success of independent producers
in supplying Channel 4.
24. Peacock recommended that the Government
introduce independent production quotas for the BBC and ITV to
increase competition and efficiency. In order to achieve long
term structural changes in production, Peacock recommended that
the quota should be set at 40 per cent but following heavy lobbying
from broadcasters the Government decided on a quota of 25 per
cent of "qualifying programmes".
25. Quotas were first introduced for the
BBC and ITV on a voluntary basis in 1988. Statutory independent
production quotas for all public service broadcasters succeeded
these on 1 January 1993.
26. The 1989 "Television Without Frontiers
Directive" also provided that all other broadcasters must,
"where reasonably practicable" commission 10 per cent
of "qualifying programmes" from independent producers.
27. There are now some 600 or so fully-fledged
UK independent production companies making a range of programmes
across all genres for UK and international channels.
IMPACT ON
THE MARKET
28. Broadcasters have acknowledged the impact
that independent producers have had on the market. When giving
evidence to the Select Committee in 1998, the former BBC Director-General,
John Birt (now Lord Birt) commented:
"It is undoubtedly creative competition
that has kept us on our toes; it has kept BBC Production on its
toes and price competition has undoubtedly placed pressure on
us to become more efficient . . . the independent production sector
has certainly been a vital stimulus to greater efficiency"
29. Commercial broadcasters have also learned
from the sector. Broadcasters like Carlton and Granada have structured
their production arms so there is internal competition between
different units, in an effort to emulate the "magic"
brought about by small independent production companies.
30. Overall, production costs have fallen
and channels like BBC1 and ITV1, which during the 70s and 80s
used to rely on imported programmes in their peak time schedules,
are much more focused on commissioning original UK programmes.
THE CURRENT
MARKET
31. Despite the enormous creative success
of the sector over its 20-year history, the sector has so far
been unable to reach its full potential. The absence of well-capitalised
independent production companies that can operate on a secure
footing is a direct result of the way the current broadcasting
market operates. Some of the most important factors that have
prevented the sector developing include:
— The BBC interpreting the quota as
a ceiling and not a floor, in order to protect its in-house production
arms. Despite independent production quotas, the BBC, which accounts
for some 40 per cent of the total television market, can still
obtain more than 75 per cent of its originated programmes from
its in-house production arms.
— ITV Network Centre still obtains
the majority of its programmes from licensees' production arms,
with Granada accounting for some 50 per cent of its original programming.
— Independents face competition from
strong and well-capitalised in-house production units and intense
competition from other independent producers.
— The small number of broadcasters
who commission programmes, coupled with the existence of large
in-house production arms and a large number of independent producers,
has enabled broadcasters to dictate terms of trade that are favourable
to them but to the disadvantage of independent producers.
32. This position has not only harmed the
independent production sector, it also works against the consumer
interest. It has prevented the structural changes that Peacock
envisaged from taking place and means that the full effects of
price and creative competition have not been realised. Consumers
would be better served if broadcasters always bought the best
programme ideas at the best prices, regardless of who the supplier
is.
33. As a consequence the sector remains
heavily under-capitalised. To date, with the exception of two
animation companies, no independent producers have been in a position
to seek a Stock Exchange listing in their own right. This has
further consequences for the market:
— Few independents have the assets
and capital resources that would allow them to invest in the research
and development of new programme ideas.
— Even some of the largest and most
successful independents largely depend on "cash flow"
and need a constant stream of programme commissions with broadcasters
funding programme development in order to survive.
— This "dependency" inhibits
the ability of independent producers to properly compete in the
production market. It also restricts the full benefits that could
be gained through effective price and creative competition in
the market.
"COST PLUS"
COMMISSIONING
34. The standard terms of trade offered
by most broadcasters are commonly referred to as the "fully
funded model", but which PACT prefers to call the "cost
plus model" for reasons that will become clear later. The
"cost plus model" was invented by Channel 4 in 1982
when the broadcasting market was very different, with just four
programme channels and limited opportunities to exploit programmes
overseas and through other media. It had the advantage of allowing
small businesses to start with few capital resources, and at that
time was well be suited for certain types of projects have a limited
shelf-life and secondary market potential.
— Cost Plus terms result in the broadcaster
acquiring most, if not all of the intellectual property rights
(IPR) to a programme.
— Typically the broadcaster will agree
to meet the agreed budgeted costs of the production of a programme
and pay a production fee on top, to represent the producer's margin.
— The broadcaster will exploit the
full rights to the programme, including the distribution of the
programme to other UK channels and overseas broadcasters.
— In many cases producers will not
receive any additional fees from such additional use or exploitation
of IPR. Although arrangements exist for them to benefit from a
minority share of net profits from any programme sales.
— Where programmes do produce net profits,
income streams for producers still tend to be very limited.
35. The "cost-plus model" works
against many producers because:
— it leaves independent producers without
intellectual property rights, which they could use as an asset
to attract investment and grow their businesses;
— it limits the ability of independents
to earn additional income from the further exploitation of their
programmes; and
— it makes the sector unattractive
to investors such as venture capital firms.
36. PACT believes that the "cost-plus"
is intrinsically unfair, and is one of the major reasons why the
independent production sector remains under-capitalised. In order
to rectify this situation PACT proposes that:
— Independent producers and others
producing content, need a system that recognises that they have
created valuable intellectual property and rewards them for each
exploitation.
— Actors and Directors receive ongoing
revenue from secondary exploitation of a programme so it is unfair
that production companies receive nothing.
ITV NETWORKING ARRANGEMENTS
37. There is an alternative to "cost-plus"
known as "licensed commissioning" which is best illustrated
by the arrangements operated by the ITV Network Centre. This is
as follows:
— The Network Centre pays for a licence
to show a programme with two repeats within a five-year window.
— Licence fees usually amount to about
80-100 per cent of the costs of production, but do not cover costs
associated with programme development.
— An additional fee is paid for each
of the two repeat transmissions.
— All other secondary rights stay with
the independent producer, which provides an asset and allows producer
to make their own arrangements to distribute programmes in overseas
markets, with better returns.
38. These arrangements are not perfect but
those independent producers who have been able to meet their own
programme development costs and take advantage of the ITV Network
Centre deal have found it very advantageous. It has allowed them
to grow their businesses more rapidly than those who are forced
to rely on the "cost plus model" operated by the BBC,
Channel 4 and some other broadcasters.
39. The terms offered by the ITV Network
Centre result from a direct intervention by the OFT and the then
Monopolies and Mergers Commission, following the award of ITV
franchises after the Broadcasting Act 1990. Section 39 of the
1990 Act required ITV companies to co-operate in the provision
of the ITV and for the Networking Arrangements to be regulated
by the ITC after consultation with the OFT. The Act provided a
competition test at Schedule 4 which the OFT must apply in considering
the Networking Arrangements. The provisions were intended to protect
smaller ITV companies, but also benefited independent producers.
Independents were able to demonstrate to the competition authorities
that the terms they were being offered by ITV were less favourable
than those on offer to the production arms of ITV Licensees. The
OFT determined that the Network Centre only required the primary
right to broadcast a programme, and that therefore, independents
should be able to retain the secondary rights.
40. The BBC and Channel 4 can use "licensed
commissioning" but in practice such deals are rare. The BBC
does all it can to discourage such deals by offering licenses
that will typically cover only 40 per cent of the direct budgeted
costs of production. That would mean the producer would have to
make up the balance of the costs and earn a margin from secondary
sales, which as the BBC knows, is unlikely to provide an income
to match a 60 per cent production deficit. It is clear that the
emphasis of the BBC, and to a lesser extent Channel 4, is to acquire
the programme rights, rather than share a reasonable proportion
of costs with the production company. Production companies would,
of course, have to shoulder more risk, but would benefit from
much greater rewards.
RIGHTS AND
COMPETITION
41. The retention of programme rights particularly
by the BBC and Channel 4 gives them a huge competitive advantage
over other channels. As a result of their audience shares, the
main terrestrial channels can invest substantially in original
production and commission programmes of better quality than other
cable and satellite channels. By retaining the rights to such
programmes, they can take full advantage of the opportunities
offered by the developing multi-channel and multi-platform environment
to launch their own services in competition with newer operators
using those better quality programmes. This therefore makes it
more difficult for new operators to compete effectively and raises
the entry barriers to the market. This situation would be rectified
if the market supported a wider range of content controllers who
could sell their rights in an open and competitive market.
THE BBC
42. Control of programme rights has assisted
the BBC in being able to launch its new digital public service
channels, and its joint-venture commercial channels under the
UK TV brand (such as UK Gold, UK Play etc). Typically a programme
will progress from, for example, BBC1 to BBC Choice and then to
a channel like UK Gold. Other channels that may be interested
in buying BBC programmes are usually excluded from competing with
channels like UK Gold. This prevents the development of a competitive
market and restricts the availability of UK-produced programmes.
This lack of competition means that programmes are unable to achieve
a "market value" from secondary exploitation in the
UK. It also means that other channels, which cannot access programmes
through the UK secondary market, must rely on imported programmes.
43. The BBC used to sell some programmes
to a range of UK commercial channels. For example, it used to
sell children's programmes to Nickelodeon. This provided the BBC
with additional income, and allowed an independent producer a
share of net profits. Now, however, the BBC refuses to sell programmes
to Nickelodeon in case it wants to use them on its new public
service children's channels. Nevertheless, it does not propose
to make any payments to independent producers for this further
exploitation and so those producers who used to receive a small
income from sales to Nickelodeon will now receive nothing.
44. Programmes that are retransmitted by
the BBC on its digital channels or joint-venture commercial channels
clearly have a value. However, the BBC refuses to recognise that
value and provide producers with an additional payment. This inhibits
their ability to develop new programme ideas, and means effectively
that producers are subsidising the provision of the BBC's digital
channels, and its joint venture channels.
45. Within the Digital Content Forum that
there is widespread and deep concern about the BBC's position
in the market. Aside from its dominant position in broadcasting,
where it enjoys 40 per cent of the total television audience and
just over 50 per cent of the total radio audience, its publicly
funded and commercial websites receive far more traffic than any
other UK-produced websites. It is the third largest publisher
of consumer magazines in the UK and a major distributor of books,
videos, DVDs, CDs, cassettes and other merchandise. It has become
a major Internet Service Provider and has stated that it wants
its commercial Internet site to become the major e-commerce site
in the UK. The BBC takes an aggressive stance on intellectual
property rights, and must be by far the largest single holder
of UK rights in the audio-visual industries. It is by far the
largest distributor of UK television programming for both the
UK and overseas secondary markets, with BBC Worldwide boasting
that it alone accounts for more than 50 per cent of the UK exports
revenues for television. The BBC's tentacles spread far and wide
and affect the competitiveness of many commercial organisations
in the audio-visual field.
46. The Government did commission Professor
Whish to conduct an audit of the BBC's fair trading policies and
procedures,Whish reported that he found the BBC's policies and
procedures to be sufficient to ensure that the BBC traded fairly.
However, he also observed that the critical issue was how those
policies and procedures were implemented, which was outside the
scope of his remit. We believe that had Whish been able to inquire
into implementation and take evidence from others, he would have
found cause for serious concern.
It is clear to most throughout the communications
industries, that the BBC Board of Governors cannot reconcile their
roles of guiding BBC policy with effective regulation, particularly
as regards competition issues. PACT therefore believes that the
case for OFCOM regulating the BBC is overwhelming.
OTHER CHANNELS
47. Other channels, including E4 and ITV2
have to buy their programmes There are many other channels in
the UK market that would jump at the chance to use programmes
that had first been made for the major terrestrial channels. The
Paramount Comedy Channel, for example, has bought comedies from
Channel 4. However, they may find it harder to do so in future
because Channel 4 may restrict the availability of its programmes
because of E4.
48. The hoarding of programme rights by
established broadcasters also has another effect on the market.
The ITC/OFTEL/OFT joint consultation exercise on measures to promote
digital television noted that "the lack of compelling programme
propositions" was a major reason for consumer resistance
to digital television. As each of those broadcasters seeks to
exploit its own programme rights for their own ends, it means
that the market supports programme channels of indifferent quality.
To take an example, the programme propositions of UK Gold and
Granada Plus are more or less the same—to give viewers a
further opportunity to see successful UK programmes from the past.
And yet UK Gold relies mainly on the BBC's back catalogue while
Granada Plus naturally exploits the back catalogue of Granada
and the other ITV companies which it has acquired. A more competitive
market might support a channel that sources the best of our domestic
programmes from the past regardless of which channels they were
first shown on. Such a channel might be more appealing than either
UK Gold or Granada Plus are at present. Similarly the Paramount
Comedy Channel, which has some UK programming, has to rely mainly
on American product. It would gladly buy more UK comedy series
if it could access such programmes in the market. A more open
and competitive market for secondary programme rights would enable
it to do so.
49. If there was a more open and competitive
market for programme rights it would have a number of benefits
for the broadcasting industry and, more importantly, for the consumer.
Such a market can only be brought about if there are more controllers
of programme rights, who can sell into the market. Such an outcome
could be achieved if more content producers were allowed to retain
control over their programme rights. This would allow them the
opportunity to sell such rights openly to the highest bidder.
This would lower entry barriers to the broadcasting market, allowing
new entrants to compete more effectively with existing incumbents
for UK-produced content. This might also provide for more innovation
in the types of programme services offered to consumers and lead
to better quality channels. It would allow for the greater exploitation
of domestically produced programmes reducing the reliance of some
channels on imported programmes. It might also help to reduce
the UK's trade deficit in television programming. It would also
allow successful programmes to find their value in the market,
providing greater revenues to producers that could be ploughed
back into the research and development of new programme ideas.
This in turn might provide more incentives for content creators
allowing the development of a more competitive and dynamic content
production sector and drive quality and innovation in the production
of appealing content.
OTHER DELIVERY
PLATFORMS
50. Thus far, we have concentrated on the
position of independent producers in the television market. However,
we know from our discussions within the Digital Content Forum
that there is widespread concern about competition issues for
other delivery platforms.
51. The BBC is a content provider in its
own right with huge resources that no other UK content providers
could hope to match. Its substantial presence on the Internet
has the effect of limiting opportunities for others to provide
services on a commercial basis. For example, local radio stations
and local newspapers wanting to provide local information resources
face stiff competition from the publicly funded web pages provided
by BBC's local radio stations. Educational publishers now face
competition from the BBC in providing online and other information
resources for schools and colleges. Similarly, many face competition
in providing text-based information services over mobile communications
networks.
52. The BBC's control of rights also affects
the potential of other content delivery platforms. "Home
Choice", the video-on-demand service provided by Video Networks
is largely dependent on the BBC as its major supplier of UK content
because of its dominant position as rights holder of UK television
programmes.
53. There is also a risk that other content
delivery platforms with dominant operators could limit competition
in the market. Sir Christopher Bland the BT Chairman has expressed
a desire for the company to deliver television services over its
existing telephone network in competition with cable operators.
Given the size of its network and the slow progress towards local
loop unbundling, BT could enjoy huge competitive advantages as
a supplier and aggregator of content. Sir Christopher Gent is
also on record as saying that when Vodafone launches its third
generation mobile network, it will want to ensure that revenues
go to Vodafone and not to the likes of Yahoo.
CONCLUSION
54. In this submission we have tried to
illustrate how broadcasters have been able to use their control
of rights as a significant lever to launch new television channels
and other audio-visual services. Broadcasters have taken an aggressive
stance on intellectual property rights with independent producers,
which has resulted in the sector remaining heavily under-capitalised
and unable to compete effectively. Control of rights also prevents
new operators from gaining access to content through the UK secondary
market, raising entry barriers and making it more difficult for
them to compete. If this situation continues then the Government
cannot achieve its stated aim of "making the UK home to the
most competitive and dynamic media and communications in the world".
Furthermore, the market as it stands is against the consumer interest,
as it restricts access to UK-produced programmes and limits the
ability of content producers to innovate and provide quality content.
55. We believe that giving OFCOM active
powers to promote competition, with a specific duty to ensure
that such competition develops in the production and distribution
of content, will go some way to remedying this situation and provide
for a more competitive market. Furthermore, we consider the Code
of Practice for broadcasters, regulated by OFCOM. This would provide
some balance to negotiations between broadcasters and their suppliers,
allowing suppliers to retain more rights, gain further revenues
and compete more effectively
January 2002
| 
