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Memorandum submitted by Equity
1. Equity is the trade union representing 37,000
actors, performers and other creative professionals working in the
2. The BBC is the most significant employer of
Equity members and it plays an integral role in both the audio and audio-visual
industries, as a producer and commissioner of original
3. Consequently, Equity believes that successful
commercial operations, which maximise the value of
The benefits and
opportunities offered by the BBC undertaking a range of commercial activities
in the
4. There are significant benefits for a range of stakeholders in the BBC operating successful commercial activities, which were acknowledged by the Government as part of the BBC Charter Review process in 2006. in particular, the Government accepted that the BBC should continue to relieve pressure on the licence fee by generating commercial income. However, these operations must fit with the BBC's public purposes, be commercially efficient, support BBC brand protection and avoid market distortion.
5. The subsequent improvements in the governance structure of the main commercial operation, BBC Worldwide (BBCW), and its success in increasing its profits to £118m in 2007/8 (and returning over £150m back to the BBC by way of dividends and programme investment), must therefore be seen in the context of an organisation delivering on this remit.
6. Moreover, the availability of this source of funding in additional to the licence fee plays an important role in securing the BBC's ability to continue as the cornerstone of public service broadcasting, enabling it to protect its core funding and deliver on its own obligations under the Royal Charter.
7. The success of BBCW has also enabled it to
deliver real value for audiences. Not
only does it generate £9 a year off each licence fee, but its improvements in
profitability over the past four years have also led to £921m being generated
and invested back into the
8. This means that programmes can better
resourced with higher production values and feature the best in
9. It is also important to stress the role of
BBCW in supporting the international activities of other broadcasters and
producers. A significant proportion of
the current BBCW catalogue is non-BBC intellectual property, which may well
have been commissioned originally for other major broadcasters such as ITV or
Channel 4. This demonstrates the
benefits of BBCW being able to act in the interests of UK plc and take the best
of British programming to a global market.
Consequently the exports generated by BBCW account for around 30 per
cent of the £400m of
10. From Equity's point of view the role that BBCW plays in enabling international television and DVD sales not only raises the profile of British programmes and British talent, but also provides significant financial benefits for actors and performers. As a result, in the last two financial years Equity members received payments worth £22m (2007) and £24m (2008). The nature of Equity's collective agreements with the BBC and other programme makers also mean that the benefit of these sales are shared proportionately amongst the cast, so all featured performers are able to share in the success of a production.
11. Equity does not believe that any other
organisation could be better placed or more experienced in maximising the
opportunities presented by the sale of
The potential risks to the BBC, licence fee payers and other stakeholders
12. Equity believes that there are inherent difficulties faced by the BBC in engaging in commercial activities that mean that it is often in a no-win situation. In particular, if BBCW is tentative in its approach and does not maximise the value of its assets successfully it will be criticised for being inefficient and failing in its duties. Conversely, if it is successful in expanding its sales and activities and in growing its profits, it will be condemned by its competitors as an unwelcome presence in the market place. As noted above this ignores the fact that a successful BBCW is in fact in the interests of audiences, the creative economy and in line with the remit set out by successive governments.
13. Nevertheless the success of BBCW presents particular risks and challenges at a time when broadcasting is changing so quickly and fundamentally. The expansion of digital television and new technology has led to audiences fragmenting and reduced advertising revenue. Consequently other public service broadcasters, regulators and politicians charged with finding sources of additional funding are understandably examining all of the options available. Most recently this has included the suggestion of transferring the ownership or profits of BBCW to Channel 4, as outlined in the recent Ofcom review of public service broadcasting.
14. Equity believes that such a measure presents a significant risk for the BBC and licence fee payers, as well as the range of creative organisations and individuals who depend on its success. Quite aside from the significant legal and technical difficulties of arranging a transfer of ownership, Equity would be concerned that such a proposal would undermine the important contribution BBCW makes in funding original programming by the BBC.
15. It is infinitely preferable for BBCW to continue to support the activities of the BBC, licence fee payers and the creative industries by operating in partnership with a range of broadcasters and producers, whilst being subject to the scrutiny and governance of the BBC Trust.
The future of BBC Worldwide and other BBC commercial subsidiaries
16. As noted above, the future of BBCW has been the subject of a significant amount of speculation. Most recently this has led to the Ofcom proposals, which are currently under consideration as part of phase two of its consultation on the future of public service broadcasting.
17. However, Equity would argue that the future of BBCW and other commercial operations should not be dominated by further debate over their organisational structure and governance arrangements. These considerations are time-consuming and often fruitless, unless they are able to deliver real value to the operations of the business.
18. At this challenging time for the future of
broadcasting Equity would instead emphasise the need to make progress on BBCW
ensuring that it can continue to deliver real value to the BBC, licence fee
payer and creators. For this reason it
must not be diverted by arguments over ownership, but be able to concentrate on
enabling
19. As a representative organisation for key rights holders Equity is a crucial partner in making high quality content available legally online - and capable of ensuring payment to these rights holders. This has been achieved successfully in a range of new areas through BBCW in recent partnerships with YouTube, MySpace and iTunes.
20. While new business models are still in relatively early stages of development, it is clear that these will eventually become replacement technologies for the viewing of audiovisual material. Video-on-demand and catch-up television services are currently an addition to linear broadcasts, but are increasingly likely to become the alternative to these broadcasts for many viewers. This means that successful partnerships and flexible approaches to licensing and payment are even more important.
21. The way in which Equity has been able to exercise exclusive rights for the secondary use of performers work is a good example of this approach. This is currently enabling a genuine choice of new media for consumers, while also providing payments to performers. These payments are then distributed by British Equity Collecting Society (BECS), acting as the appointed distribution agent for Equity.
How the money returned to the BBC by its commercial operations is invested
22. As noted above, the money returned to the BBC by its commercial operations is a vital addition to licence fee income, particularly at a time when the BBC is expected to engage in a broader range of activities under its Royal Charter and operating under the constraints of a lower than expected licence fee settlement.
23. Against this background, the fact that these activities are able to depress the cost of a licence fee by £9 is a helpful and impressive contribution. More impressive still is the significant investment that has been made directly into BBC programming due to success of BBCW.
24. It should also be noted that the money returned from the BBC's commercial operations does not go to the BBC alone, with large numbers of the new television programmes sold by BBCW being from independent producers.
Conclusion
25. Equity is pleased to have the opportunity to contribute this inquiry and hopes that the Committee will consider the points made - particularly in relation to the contribution of the BBC's commercial activities to programme making; meeting its remit; promoting and rewarding UK talent; the risk of transferring ownership; focussing on future activities; and the importance of this additional investment.
26. The BBC's public service broadcasting activities provide the bulk of employment for our members. However, commercial ventures such as BBCW are vital, both for the added financial security that it gives the BBC and for its investment in the creative economy in its own right. It is essential that BBCW is allowed to be as successful a business as possible so that the maximum amount of profit goes back into quality BBC programme making and investment in talent.
27. We would welcome the opportunity to provide oral evidence to the Select Committee on this issue. As the representative organisation of actors, singers, comedians, and other creative contributors who feature in many of the productions sold and distributed by BBCW, we believe that we could provide a valuable perspective on the inquiry.
October 2008
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