S4C

Written evidence submitted by PACT

Executive summary

1) We welcome this inquiry and ask the Committee to make two recommendations: firstly, that legislation guarantees S4C’s funding and independence; secondly, that S4C acts itself and develops an exports-led strategy to help the Welsh production sector grow.

S4C’s importance

2) S4C has been a cornerstone of public service broadcasting, providing audiences with an independent editorial voice and championing the Welsh language.

3) S4C underpins Wales’ production sector by spending £73m [1] pa on Welsh-language programming, dwarfing BBC and ITV investment in English-language programmes for Welsh audiences. [2]

Ensuring continued funding and independence

4) The announcement by the Government and the BBC only commits to a level of funding for S4C until 2014/2015. Beyond this, we expect the BBC to consider further cuts.

5) We also have serious concerns that the announced joint BBC Trust/S4C Authority governance structure cannot guarantee genuine independence for S4C.

6) We ask the Committee to recommend the strongest possible safeguards for S4C within the legislative and regulatory framework available, particularly the new Communications Act and the Royal Charter and Charter Agreement, including:

· A requirement to allocate a fixed level of funding to the service.

· An undertaking that the S4C service will be independently managed and regulated.

· A requirement that programmes made for S4C come from external suppliers.

Increase S4C’s positive impact on the Welsh economy

7) We welcome the Welsh Assembly Government’s recent report, The Heart of Digital Wales by Ian Hargreaves, which stated that public funding was failing to maximise the growth of Welsh creative companies and proposed a greater focus on exports.

8) We ask the Committee to recommend that S4C develop a strategy to help producers develop businesses on a global level, with a greater focus on exportable genres. This could be underpinned by introducing a stronger economic element to S4C’s remit.

9) This will help Welsh companies replicate the growth of the UK’s independent production sector as a whole, which has grown by 40% since 2003 [3] and helped increase exports of UK television content by 40% (independent and in-house). [4]

Introduction

1) Pact is the trade association that represents the commercial interests of the independent production sector. The sector produces and distributes half of all new UK television programmes, [1] as well as much of the UK’s content in digital media and feature film.

2) The independent television sector contributes £4.3 billion per year to the UK economy (GVA), [2] and employs 20,950 people – more than the television divisions of the BBC, ITV, Channel 4 and Five combined. [3] The sector has helped increase exports of UK television content by 39% since 2003, [4] and uses the resulting revenue to invest £200m per year in the development and production UK content.

Response to questions raised in Terms of Reference

Question 1: The extent to which S4C is fulfilling its remit

1) We propose in this paper several ways in which, in our view, S4C could significantly increase its positive impact on the Welsh creative economy, as well as offer audiences a more engaging range of Welsh-language content across all platforms not just traditional television. However, there is no doubt that S4C is a cornerstone of public service broadcasting in Wales, underpinning the Welsh television production sector as a substantial source of investment in programming, and providing audiences with a distinct editorial voice as well as championing the Welsh language.

2) We think that historically S4C has broadly fulfilled its public service remit, which is defined under the Communications Act 2003 (Schedule 12) as: "the provision of a broad range of high quality and diverse programming" that is primarily in Welsh. [1] However, we believe the challenges involved in continuing to deliver this remit will require a root and branch review of the type of content commissioned by S4C, the way in which it is commissioned and the way in which it is financed.

3) We believe that S4C’s independence has enabled it to achieve significant successes over its 30-year history and believe this continued independence will be essential if it is to grasp the opportunities presented in a digital world in a challenging funding environment.

Question 2: What impact recent and potential future spending cuts will have on S4C and what level of public subsidy for S4C is appropriate and sustainable over the longer term

1) The Welsh production sector is facing a sustained decline in funding from broadcasters for English-language programming specifically for Welsh viewers. Spending on such programming by the BBC and ITV – the only public service broadcasters other than S4C that provide programming specifically for Wales - has fallen by a third since 2003, according to Ofcom. [2] Although Ofcom does not break down spend by broadcaster, the regulator states that delivery by hours of programming has declined at both broadcasters in recent years, the BBC falling 15% since 2004 and ITV 11%. [3]

2) The recently announced cuts to S4C’s budget going forward will greatly exacerbate the pressure now facing the Welsh production sector. While the above noted declines represent a drop of around £17m in funding since 2003, the reductions in S4C’s funding amount to a further fall of £25m over four years.

3) S4C should therefore minimise any reduction in its programme budget resulting from cuts to its overall funding, thereby limiting any drop in the quality of what is on screen for the viewer and the negative impact on the Welsh production sector. S4C should also create a commissioning environment which encourages independent producers to be even more entrepreneurial in the way in which they fund content, ensuring that the decline in S4C’s funding is mitigated by third-party funding from co-production, international sales, digital exploitation and other commercial opportunities.

4) In the medium to long term, we are very concerned that the recent announcement by the Government and the BBC only includes a commitment to the level of funding for S4C until 2014/2015. Beyond this, we expect the BBC to consider further cuts to S4C’s funding, based on the BBC’s recent history of reductions in spending on programmes for Welsh viewers, as mentioned above, and the fact that, prior to the Government’s announcement, the BBC had already announced that it would be cutting the amount it spends on S4C programming by 17%, to £19.5m, next year. [4]

5) We therefore ask the Committee to recommend that the BBC’s Charter Agreement include an undertaking to fund a Welsh-language service as S4C and that this undertaking includes in the Agreement a requirement to allocate a fixed level of funding to the service.

6) We ask the Committee to also recommend that, if appropriate, this should also be reflected in the new Communications Act (Schedule 12 of the 2003 Act covers the public service remit of the Welsh Authority services).

Question 3: The cultural and economic benefit to Wales from the investment of over £100m per annum of public funds into S4C

1) We note the findings of the 2010 report, The Economic Impact of S4C 2007-2010, which indicated that the broadcaster contributed a GVA of £85m to the Welsh economy in 2009. The report goes on to state that S4C supports 1,950 external jobs, the majority of which are in the independent production sector. As the report notes, the broadcaster thereby contributes to the Welsh Assembly’s aim of developing a highly skilled, knowledge economy. [5]

2) We would particularly like to highlight S4C’s role as a publisher broadcaster, commissioning from external, Welsh companies. Investing in content from such independent suppliers, rather than a broadcaster’s own in-house production division, enables these companies to develop the skills and experience to win commissions from other broadcasters, allowing them to further develop their businesses, and therefore has an indirect benefit in terms of nurturing a sustainable production sector that keeping production in-house within a broadcaster cannot.

3) We therefore welcome the Secretary of State for Culture’s recent statement that, as part of the funding arrangements with the BBC going forward, S4C’s "total content commissioning budget will be for independent producers (outside of the BBC’s ongoing statutory commitments)." [6] To reflect this, and to provide the Welsh production sector with clarity going forward, we ask the Committee to recommend that the new Communications Act and the Charter Agreement include a requirement that 100% of programmes made for S4C come from qualifying independents or other external suppliers.

Question 4: Whether S4C is maximising the use of its financial and other resources to achieve value for money, to optimise the quality of its output, and to reach as wide an audience as possible

1) We welcome the findings of the Welsh Assembly Government’s recent report, The Heart of Digital Wales by Ian Hargreaves, [7] which stated that current public funding was failing to take advantage of opportunities to maximise the growth of Welsh creative companies. The Hargreaves report stated that:

"The disappointment has been that so few companies in the Welsh independent television production sector have matured into units capable of operating throughout the UK and beyond.

2) Hargreaves went on to highlight the need for a greater focus on exports and working with companies in the wider UK and abroad, stating: "The challenge today is for the Welsh indies to become still more adept at bidding for UK network commissions, as well as pursuing international co-productions and sales."

3) In order to help deliver this, S4C should in our view help Welsh companies take advantage of global opportunities. Even with reduced funding, its annual budget represents a substantial level of investment in Welsh content – far higher than the combined spending by the BBC and ITV on English-language programmes specifically for Welsh viewers, which was £33m in 2008. [8] However, in our view, S4C often tends to interpret its remit in a way that looks inward at the Welsh production sector, at the expense of encouraging Welsh producers to embrace wider opportunities, both in the UK and the global market. This has meant that many companies are indeed reliant on public funding through S4C, as the Hargreaves report suggested.

4) Such an inward-looking approach is at odds with developments over the last decade in the wider independent production sector across the UK. Since 2003, the UK independent production sector has grown by 40%, [9] with the emergence of substantial companies with a global presence, and a surge of 40% in export revenues from UK TV content (independent and in-house). [10]

5) As a result, independent producers are increasingly raising funding for programme costs outside the amount paid by the commissioning broadcaster – this is known as deficit funding. Last year, the UK independent sector invested more than £200m in UK production in this way, and co-production with other broadcasters is an important part of this, representing around £40m per year. [11] Investment raised by independent producers in this way has enabled them to fill the gap left by declining spending from UK broadcasters. We see this as particularly relevant for S4C in light of the recent announcement by the Government that its funding will be reduced. This will inevitably mean S4C will have to seek to reduce its total programme budget, in turn placing increased pressure on producers to cover the resulting gap through deficit funding. An increased global focus will therefore not only encourage the growth of the Welsh production sector, it will also enable producers to raise more funding for Welsh content, driving quality for the viewer.

6) Does such a focus on UK and global markets necessarily entail a loss of Welsh culture? In our view, no. S4C’s specific statutory duty is to promote the Welsh language, which is clearly not in question as the majority of its programmes will be broadcast in Welsh. [12] In terms of S4C’s broader representation of Welsh culture, independent producers across the UK successfully work in global markets without necessarily watering down the public service or UK cultural elements in their work. ITV’s successful Downton Abbey, for example, is an original British period drama that, through the producer, Carnival, was part funded from overseas sources.

7) An increased focus on exportable, popular genres would in our view refresh S4C’s schedule, not diminish it, potentially helping S4C engage with a broader range of audiences.

8) In our view S4C therefore needs to develop a comprehensive strategy to encourage the Welsh production sector to develop businesses on a UK and global level. This should be underpinned by then inclusion of an economic element in the remit of the S4C Authority and developed in close consultation with industry to ensure it genuinely reflects the needs and aspirations of Welsh creative businesses. As part of this strategy, S4C should through consultation with the industry identify the genres and types of programmes that best lend themselves to generating exports – many core public service genres will need to be fully funded by S4C, but others are able to attract substantial levels of funding from wider UK or global markets. Similarly, the UK has excelled at exporting "formats" – i.e. the right to remake a show for overseas audiences – and is the global leader in this area with a market share of over of 50%. [13] S4C’s strategy to encourage the growth of creative companies in Wales should include a focus on developing formats.

9) In terms of whether the Welsh production sector can deliver such an ambitious plan for growth, independent producers across the UK respond to the needs of broadcasters in order to win commissions from them. To date, there has been little incentive from S4C for Welsh producers to develop exportable programmes. S4C should develop and make public a clear, long-term strategy for developing exportable programmes that would provide the production sector with the clarity and security it needs to invest in the longer term in such programmes, e.g. recruiting the appropriate production talent or investing in project development.

10) We would also welcome a specific commitment in terms of spend and/or hours to home-grown feature films, as is the case for the BBC and Channel 4 under the Charter Agreement and Communications Act respectively. A commitment to film should be aligned to recommendation of the Hargreaves Review for a re-organisation of Wales’ support for the film industry to eliminate duplication and maximise economic impact and efficiency. [14]

11) Additionally, we ask the new management at S4C to review the broadcaster’s digital/new media strategy to ensure that S4C takes full advantage of opportunities to engage with audiences across different platforms. While we note that S4C outlines its digital strategy in its programme policy statement, the widespread anecdotal experience of our members is that the broadcaster is often not as interested in cross-platform proposals as other broadcasters.

Question 5: The potential for further collaboration between S4C, the BBC and independent broadcasters in Wales in order to reduce duplication and to achieve economies of scale

1) The opportunities for further collaboration in order to reduce duplication and to achieve economies of scale should be explored with a wide range of partners, not just the BBC. We believe there is a risk that too close a relationship with the BBC would shut off opportunities to collaborate with other partners in the UK and internationally.

2) There is a particular threat to plurality in children’s content by tying S4C too closely to the BBC. S4C is currently the second largest investor in original UK production for children behind the BBC. For many producers it is the only alternative to the BBC as a commissioner of children’s programmes in the UK. S4C’s independence is vital in ensuring plurality and competition in this important genre of programmes.

3) We deal further with S4C’s relationship with the BBC in response to Question 6, as this falls under regulatory control and finance following the Government’s recent announcement about a link up with the BBC.

Question 6: Whether the finance and accountability of S4C, currently the responsibility of the Department for Culture Media and Sport, should remain in Whitehall or become a devolved matter

1) We have serious concerns over the Government’s proposal that the BBC Trust should take over joint responsibility for S4C along with the S4C Authority from 2013/2014. We see this as a potential risk to S4C’s independence, as well as a move that may lead to further erosion of funding for S4C and cut off opportunities for S4C to collaborate with other commercial partners.

2) As noted above, funding for programming specifically for Welsh viewers from the BBC and ITV – the only other public service broadcasters providing programming specifically for Wales – has fallen by a third in recent years. In terms of network programming - i.e. programming not specifically for Welsh viewers – only the BBC is genuinely active in Wales in our view. Ofcom figures indicate that Welsh-made network programming accounted for less than 1.4% of the output of ITV1, Channel 4 and Five by both hours and value. The BBC was substantially higher, recording 3.7% by value and 3.4% by volume, but it is important to bear in mind that a large share of this will be made in-house and therefore not benefit the independent production sector. [15]

3) We are therefore concerned that S4C should continue to represent an alternative source of funding for programming to the BBC, as well as have a distinct editorial voice. This is not a criticism of the BBC; rather, we are concerned that it should not be the only home of Welsh programmes, either for Welsh audiences or for the UK in general.

4) The Government has outlined a similar structure for S4C post 2013 to that of BBC Alba, i.e. a distinct service licence overseen by the BBC Trust and the S4C Authority. We do not think the BBC Alba model provides genuine independence: we note that the BBC Alba’s joint management board of four includes the BBC Scotland head of operations and BBC Scotland head of programmes, while the BBC Alba head of service is a BBC employee.

5) We therefore ask the Committee to recommend the strongest possible safeguards for S4C’s independence and funding within the legislative and regulatory framework available, particularly the forthcoming Communications Act and the Charter Agreement. These should include:

· A requirement that 100% of programmes made for S4C come from qualifying independents or other external suppliers.

· A requirement to allocate an appropriate level of funding to the service.

· An undertaking the S4C service will be independently managed and regulated.

November 2010