Examination of Witnesses (Questions 127-139)
PACT
27 FEBRUARY 2007
Q127 Chairman: We move now to the second
part of this morning's session, where we are focusing particularly
on the production sector, and can I welcome John McVay, the Chief
Executive of Pact, and Mike Watts, co-founder and Director of
Novel Entertainment, who also chairs Pact's Children's and Animation
Committee. Can I start off perhaps, by asking you, as far as the
viewer is concerned, what they care about is what they watch,
the content, and this inquiry is entitled Public Service Media
Content, therefore does it matter where it is made, as long as
the content is fulfilling the public service requirements?
Mr McVay: I think that is exactly
the point. If you want to deliver high-quality public service
broadcasting then also you want to deliver innovation in the type
of public service broadcasting. We believe that the way you do
that is by having a plurality of supply, so you have in-house
production and you have external producers competing to deliver
the best ideas to the buyer, the BBC, ITV, Channel 4, or whatever,
and we think the system we have evolved in the UK between independent
producers and in-house production leads to the most competitive
market for ideas. We believe very firmly, and indeed our discussions
with the BBC under the new WoCC (window of creative competition)
were predicated on an idea that it is the ideas that count and
therefore we want to have a meritocracy of ideas so that the best
ideas are commissioned regardless of who is making them. You are
quite right, at the end of the day, the audience just wants to
see a great programme which is engaging, stimulating and, indeed,
sometimes, even educational. Alex Graham, Chairman of Pact and
also the Chief Executive of Wall to Wall, unfortunately cannot
be here today because he is at a major conference in Australia,
where they are discussing precisely the consequences and benefits
of the Communications Act in terms of enhancing and developing
a meritocratic programme supply market.
Q128 Chairman: Although you accept
that there is a role for both in-house and independent, nevertheless,
what you want to see is UK production. The question is does this
Government need to go on intervening to support the UK production
industry or have we reached a point where probably that kind of
intervention is no longer necessary? I am thinking specifically
about quotas and obligations based on broadcasters.
Mr McVay: The independent production
quota, which has been in place for a good number of years, still
serves a critical purpose, in that it requires broadcasters to
think about the best idea at a very minimum level, 25%, and indeed
most broadcasters, where they have moved towards a more meritocratic
system, are now in excess. Indeed, even the BBC, which had quite
a pitiful record in complying with the law, is now in excess of
25% per annum, on the basis of ideas. We discussed with Ofcom,
in the review of the programme supply market last year, that ideally
we would have liked Ofcom to be a bit more proactive in defining
the terms in the market where at such a point you would not need
an intervention, so you could move to a free and open programme
supply market. They took the view, and we concur with them at
this point, that we are not quite there yet, but I think certainly
we are going the right way. I think if the BBC is true to its
word, and indeed if ITV, under its new regime, wants to get the
best programming, then absolutely they should be commissioning
more independent producers to deliver that.
Q129 Chairman: How do you respond
to the concern expressed by the commercial broadcasters that,
for a variety of reasons, their traditional funding models are
becoming unsustainable and that if they are to continue to deliver
public service content they may need alternative incentives to
do so?
Mr McVay: I think one of the major
consequences over the past years has been the introduction of
the CRR, which seems to have led, and again we do not have all
the figures on this, to a reduction overall, for all broadcasters,
of advertising spend, and hence the money we can put into programming.
I think the future of the CRR is one which we would hope Ofcom
would look at and have a proper discussion about. The last thing
we want, as producers, is less advertising spend coming into the
television market, because that funds programming and that funds
public service programming. We recognise that the broadcasters
have concerns about public service. There are some genres which
we think they should invest in, which are core genres, we think,
in public service. One of the key ones which we think has been
particularly damaged over the past few years has been children's
programming, where we think there is an absolute remit for public
service broadcasters. We are using our spectrum and we will continue
for some time to invest in high-quality, original British children's
programming.
Chairman: We will want to come on to
children in a second.
Q130 Adam Price: In addition to the
independent production quota, we have the quota for "out
of London" production as well. Do you think these quotas
are necessary and have they been successful?
Mr McVay: We worked very hard
in Parliament, during the passage of the Communications Act, to
make sure that there was a duty placed on broadcasters to commission
more programming from out of London; 40% of my member companies
live and work out of London and we feel that the broadcasters
could do a lot more, particularly the BBC. There was quite a lot
of debate about Manchester and should there be a BBC studio in
Manchester. Our view has been always that if you want to see culturally
diverse television in the UK it is not really just about bricks
and mortar, it is about returning work, it is about giving people
series and returning series. We think all the broadcasters can
do an awful lot more to commission more returning series from
out of London, to create stable production bases in Cardiff, Bristol,
Glasgow, Leeds, Manchester, where talent does not have to come
to London, if actually you live and work in an area, or talent
from London can go to live and work there as well. That is an
issue more about the commissioning of the sustainable productions
going forward. The history so far has been very mixed. Channel
4, for instance, tend to commission a lot of singles and short
runs, which is great when you get one, but it is quite hard to
attract a major bit of talent back to Belfast if you have got
only two programmes. They are not going to get their kids out
of school, sell their house in London and move back to Belfast,
even if they really want to, on the basis of that sort of work.
We think that all the broadcasters could do a lot more to have
a more coherent strategy to deliver more sustainable programming
and therefore more clusters of creative industries across the
UK. We have been pushing for some time for the BBC to commission
at least 50% of its network commissions from out of London, in
the same way that ITV is required to. Unfortunately, ITV gives
most of that 50% to its own licensees' production outfits; we
would like to see a far broader spread across the country.
Q131 Adam Price: Five has placed
a self-imposed target of 10%, which it overachieves, I think it
is nearer to 30%. All of that is voluntary. Do you think that
is a successful model? Why should there be compulsory quotas if
voluntary targets can be set?
Mr McVay: Five is an interesting
case in point because it is a publisher-broadcaster, it does not
have any in-house production, unlike BBC and ITV, and it is achieving
beyond 10% because it is getting great ideas from companies based
across the country, so we welcome that. We hope it continues going
that way and certainly we applaud the fact that they have reached
nearly 30%. For the big production broadcasters, like ITV and
BBC, I think unless you require them to spread that benefit across
the country, with some clear minimum position, then absolutely
they will consolidate, because they will argue that it is cheaper
to have everyone in London and have a metropolitan production
base. Indeed, the consolidation of ITV, through their licence,
has been brought up over a number of years and has seen that precise
process happening. We think that, again, if you move in the short
term to have interventions to create a strategic change, to create
some intervention for a purpose, once you get to that purpose
then you should not do it, because, hopefully, the ideas, the
production base, in Manchester, or Glasgow, absolutely will deliver,
and that is the only thing that matters, that you are getting
great ideas.
Q132 Adam Price: If we look beyond
regional programming, we have had a large number, I think 13,
of submissions on local television; there is an enthusiastic community
of support out there, clearly, for local television. Do you think
that will create a new market for your members on a smaller scale
in a local area?
Mr McVay: I will go back to my
personal career, without boring you. I grew up in the 1970s and
1980s, and one of the most significant things in my life was a
thing called The Workshop Movement, which came about when Channel
4 was created, which effectively was local television, it was
local, subsidised production, and that was a great training base
for me and many of my colleagues in the industry. I think local
television has a very important role, partly to identify talent,
to help that talent get trained, to give different voices, to
encourage cultural diversity; we think it is a very important
place for people to understand and engage in broadcasting at a
very local level, and hopefully that is the beginning of a career.
I think one of the other ways in which local television can be
really important is enhancing and increasing the diversity of
our industry as well, which I think, by all accounts, and certainly
from every recent statistic, is still not really as representative
as it should be. I think local television, like local radio has
been traditionally in the past, can be a really good focus for
talent to get together, maybe to make programmes like you would
not see on network television but which actually are good programmes
in terms of helping get a career started.
Q133 Philip Davies: One of the areas
of public service media content which has been under a bit of
pressure is children's programming. To start with, there are some
of us, perhaps a minority of us, who believe that the recent Ofcom
intervention on so-called junk food was a triumph for the nanny
state and will not make any difference to childhood obesity but
could have quite a devastating impact on children's programming.
What would be your view of that?
Mr Watts: We think certainly it
will have a devastating effect. Obviously, Ofcom's restrictions
on food and drink advertising are coming into force very soon,
and Pact accepts that is going ahead so we are not here to argue
about that. It is quite evident that, on the basis of Ofcom's
own findings, some £39 million a year is going to come out
of support for programmes as a consequence. This is significantly
more than is being spent currently by the commercial broadcasters
and public service origination of UK children's programmes. At
a point when also ITV has cut back significantly its whole involvement
in children's television by stopping commissioning, we will be
seeing a double-whammy effect, which is the food ban will reduce
the amount of available funds to go into programming and commission
broadcasters and, at the same time, ITV has pulled out. Yes, we
do think the effect is devastating; we think it is the beginning
of a crisis in children's production. We feel it is something
we are experiencing right now and it is going to become a lot
worse.
Q134 Philip Davies: You mentioned
ITV stopping commissioning children's programming, but Ofcom prevented
them from reducing the amount of children's programming which
they broadcast. Where do you think the focus should be on obligations
between commissioning and broadcasting; is the important thing
the commissioning of the programmes or the broadcasting of them?
Mr McVay: The problem we have
is in the Communications Act, that Ofcom have no powers to impose
a certain amount of original spend in PSB at all. The way it works
is that they can look at the number of hours of broadcast and
require ITV to broadcast eight hours a week; now if ITV have been
canny and have commissioned many, many hours, they have a lot
of stock to broadcast without commissioning one more hour of any
original programming. If their hours were reduced this year by
two, say, which they may be, Ofcom have yet to announce their
new agreement, then ITV have another two hours of stock to play
out over the year, so they can meet the terms of their licence
absolutely but they do not need to commission one more minute
of children's programming to do that.
Q135 Philip Davies: Do you think
they should have to commission this?
Mr McVay: We think, in some core
public service genres, the Communications Act is now being tested;
there is a tension there, clearly, for what we would see as the
soft underbelly of public service broadcasting, children's programming,
when there should be some specific requirements on investment
in original programming. Another way you can do it is, clearly,
you can get the mix between British programming and acquired programming.
Acquired programming will be less, or it is producing such high
volume it is a lot cheaper to acquire or invest in than the original
British children's programming. We think there needs to be some
more specific clarity on this. I think overall the Communications
Act has been a very useful tool. The last Ofcom PSB review we
thought was very intelligent, there was a very good debate around
public service, but it does leave a hole there saying a broadcaster
like ITV basically cannot spend one more pound and still meet
its licence.
Q136 Philip Davies: You mention in
your submission that some children's programming is very successful
in that it generates lots of worldwide sales and I think particularly
the focus was on the under-fives. Why cannot the revenues from
these lucrative and successful programmes subsidise some of the
less successful public service media content for children's programming?
Mr Watts: In certain circumstances,
that revenue does; because some of that revenue, when it is generated
by independent productions which perhaps are being distributed
by distributors like BBC Worldwide, by some mechanism or other,
does come back in. I think what one has to remember about this
is that the area in which largely revenue is generated amongst
children's programmes is in the pre-school area, essentially it
is the programmes for the very young, which represents only about
10% or 12% of the total production in the UK of children's programmes.
When there are toy activities, or licensing activities, or merchandising
revenues, it is centred round only a very, very small percentage
of the total children's programmes. Programmes like drama and
factual and entertainment, and programmes like Art Attack,
programmes which stimulate activity, which are very much UK-centric
programmes, do not generate licensing and merchandising revenues
which then naturally would come back and provide somebody with
the opportunity perhaps to go back into the funding.
Q137 Philip Davies: It does already
subsidise it; the successful ones already do subsidise the less
successful ones?
Mr Watts: Yes; effectively. You
could look at it that way. You could say that, essentially, some
of the genres of programming are supported by the genres of programming
which do generate a lot of international television sales. Clearly,
those pre-school programmes do play in 50 countries or 100 countries,
and they do provide for whoever is distributing that programme,
or whoever invested in that programme, some opportunity to underwrite
other programmes.
Q138 Philip Davies: In your submission,
you were wanting to ask the Secretary of State for an urgent review
of funding for children's programming and there was talk of a
children's production fund of about £23 million. Where did
you get the figure of £23 million from; what does that do?
How would it work and where would you expect the money either
to come from or go to?
Mr McVay: I will come back to
the figure, but I think we would start from a bigger question.
I think Mike is right that we are facing a crisis in children's
production. I think it is a direct effect of a market intervention,
i.e. with food ad restrictions, there is a market failure looming
on the horizon for children's programming. The question is, as
a society and as Parliament, do we want to have children's programming;
if we want to have original, British children's programming available
across our broadcasting networks, what can we do about it. One
idea we have come up with is a fund, because we see a crisis looming,
we think that there needs to be some form of intervention; the
£23 million is the exact replacement, more or less, of ITV's
exit from investing in children's programming. However, we believe
that is probably not enough strategically, going forward, and
we think there would be a far bigger fund needed in order to provide
a diverse range of children's programming, which would be available
on terrestrial, digital, cable and satellite. They would be available
to a number of broadcasters; so that if you switch on a niche
children's cable and satellite channel, instead of seeing only
acquired programming, you will see some original, British children's
programming because there will be a way to fund it to get it on
those channels. Those channels do not invest significant funds,
only about £6 million a year, in original programming, so
if the commercial broadcasters exit there will be a large deficit
of at least £23 million, potentially more than that, but
for us the question is, strategically, how do we tackle that,
how do we take that forward. If we do want British children's
programming, which I do and I know Mike does and maybe some people
sitting behind me do, then how can we tackle that, what is the
way to solve that problem.
Q139 Philip Davies: Is this to come
from the licence fee or where is this money coming from?
Mr McVay: We are always conscious
of not putting the cart before the horse. What we are keen to
do is try to get some sort of debate about whether we want children's
programming; if we do then let us have a discussion about the
best way to fund it. As a society, if we decide that we do not
and we do not care, then fine, but one of our issues during the
debates and the health debates around the food restrictions last
year was that we felt the idea of children and children's programming
got squeezed out. Indeed, we are just about to launch, today,
a YouGov survey on what parents think, because we thought it would
be really interesting to ask the parents what they thought about
British children's programming. Just to share some initial statistics
on that: 70% of all the parents we surveyed believed that UK-produced
programmes contribute to the UK's cultural identity; 73% agreed
that original UK children's programming encouraged children to
read and play imaginatively; and 73% agreed that original UK children's
programming was even more important in an age of multi-channel
television. We think there is a debate to be had. We would be
presumptuous in trying to prescribe to Parliament, or indeed the
Secretary of State, the exact mechanisms or funds which were needed,
but we think there needs to be a debate about it.
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