Support for the creative economy

Written evidence submitted by Channel 4 [SCE 071]

1. Channel 4 welcomes the opportunity to respond to the Select Committee’s timely inquiry. The UK’s creative sectors, which range from television and feature film to fashion, design and games development, already have significant cultural and economic importance and have the potential to provide even further growth and employment for the country in the years ahead. But the UK’s great success stories-which include being a global leader in television formats and one of the largest games markets in the world-have not come about by accident. Instead, the health of the UK’s creative industries is a result of the specific policy decisions and regulatory frameworks put in place by successive Governments. As the UK looks for sectors that can drive its growth in the future, Channel 4 welcomes the Committee’s focus on ensuring that Government policy enables the creative industries to reach their full potential.

2. In particular, Channel 4 believes that stimulating investment in UK content should continue to be a key objective of the public policy framework for the creative industries. Channel 4 would urge the Committee to explore as part of its review public policy measures which will enable the UK content industry to thrive, including policies which will help Channel 4 to deliver public service content in line with its remit and sustain its investment in the sector.

Channel 4 and the public service broadcasting ecology

3. Channel 4 is a publicly-owned, commercially-funded public service broadcaster with a statutory remit to be innovative, experimental and distinctive. Unlike the other commercially-funded public service broadcasters, Channel 4 is not shareholder-owned: commercial revenues are the means by which Channel 4 fulfils its public service remit. In addition, Channel 4’s not-for-profit status ensures that the maximum amount of its revenues are reinvested in the delivery of its public service remit, including high levels of investment in content commissioned from around the UK and across a range of genres.

4. Channel 4’s remit to be distinctive means it is responsible for commissioning content that would struggle to find a home elsewhere-as most recently demonstrated through its brave news and current affairs (Channel 4 News, Sri Lanka’s Killing Fields), cutting-edge film and drama (Tyrannosaur, Top Boy) and daring comedy (Black Mirror, 10 O Clock Live). Through our factual programming we seek not just to explore big topical issues, but also challenge contemporary taboos-in recent months bringing large audiences to themes as varied as multiculturalism (Make Bradford British), mental health in the workplace (4 Goes Mad season), disability (The Paralympics, The Undateables) and trans-gender lives (My Transsexual Summer).

5. Reflecting the quality of its commissions, Channel 4 won 10 awards at the 2012 RTS programme awards with content ranging from Mummifying Alan to 24 Hours in A&E and Hugh’s Fish Fight-and also won five awards at the 2012 BAFTAs and two Oscars at the Academy Awards.

6. Channel 4’s establishment as a statutory corporation with a public service remit, and its status as a publisher-broadcaster, is a good example of Government support for the creative industries. It forms part of the public service broadcasting (PSB) system, comprising the licence-feed funded BBC; the publicly-owned but commercially-funded Channel 4; and the commercial PSBs ITV and Channel 5. Together these organisations continue to deliver the most significant levels of investment in UK content-and in particular on content that meets public service purposes. This system has played a major part in the ability of the UK content industries to go on delivering significant cultural and economic value, and Channel 4 would urge the Committee that when considering future forms of support for the creative industries, it seeks to explicitly build on the strength of the UK’s current policy interventions.

Channel 4 as in investor in the creative economy

7. For 30 years, Channel 4 has worked with the independent production sector to provide some of the UK’s most innovative and distinctive television programmes, films and increasingly, online content. In 2011, Channel 4 invested £419 million in UK-produced content across its portfolio of services-and plans for this figure to increase to a historic high of around £450 million in 2012.

8. Channel 4’s unique status as a publisher-broadcaster means it is able to play a special role in supporting the creative economy, creating jobs and providing opportunities for talent from all over the country. A 2010 report from Oxford Economics showed that Channel 4’s activities generate £1.1 billion for the UK economy each year & support 28,000 jobs across the UK.

9. Channel 4’s investment has helped the independent production sector grow into a thriving industry, and the UK to become a leading exporter of TV programmes and formats. For example, Channel 4 commissions such as Undercover Boss and Secret Millionaire have successfully been exported to the United States and its most recent innovative factual format The Audience has been sold to territories including Canada and Denmark.

10. The UK’s vibrant independent production sector continues to rely on Channel 4 for a large part of its success. In 2011, Channel 4 worked with over 400 suppliers across TV and digital media, across all parts of the country. This included large international companies, many of whom are now owned by multi-national corporations, alongside emerging SMEs.

11. Channel 4’s support has benefited companies from across the UK. Channel 4 spends more than £100m in the nations and regions annually-all on independent production companies. Channel 4’s support for the creative economy in the nations and regions of the UK is outlined in more detail below.

12. Channel 4 is building on its TV tradition in the digital world, stimulating investment in the digital economy in the same way that helped to give birth to the independent production sector in the 1980s. In 2011 Channel 4 worked with 150 digital suppliers, 40 of which were new to the broadcaster. 47% of this online spend was on companies based outside London.

13. Recognising that the independent sector has undergone considerable growth over the last decade, Channel 4 has set out to broaden the range of companies it works with, to ensure that it is open to the best creative ideas and that there continues to be a range of different sized independent companies within the sector.

14. In 2011 Channel 4 launched the Alpha Fund to support new start-ups, regionally based companies, projects featuring diverse talent and grassroots innovation, and aims to kick start original ideas that can grow in scale and ambition. Jay Hunt, Channel 4’s Chief Creative Officer, has also established the Independent Producers’ Access Plan, which encourages all of the commissioning team to engage with producers around the UK and meet targets for working with new companies and talent. Channel 4 has already seen positive progress from this strategy-with companies voting it the best broadcaster to work for in the 2012 Broadcast Indie Survey.

15. It is Channel 4’s unique model and commitment to emerging talent that has enabled it to have such a catalytic impact on the creative industries. Channel 4’s status as a publicly-owned entity is central to ensuring it is able to go on playing this major role in the creative economy.

Channel 4 as a showcase for the creative industries

16. As a broadcaster with universal reach, free at the point of use, Channel 4 is able to play a unique role in its support for the creative industries-not only as a direct investor in innovative television, film and digital media-but also as a window on artistic endeavours from all creative disciplines: whether that is theatre, visual art, dance, music or design.

17. The Committee notes the success of the Olympics and Paralympics Opening and Closing Ceremonies as a showcase for UK cultural excellence. Channel 4 was not just the broadcaster of the Paralympics Ceremonies, but has over the years also developed and supported many of the artists featured in all the Ceremonies: from Danny Boyle, whom Channel 4 has nurtured from his directorial debut, Shallow Grave, through to his forthcoming feature, Trance, to amputee dancer David Toole, who starred in a Channel 4 film of theatre company DV8’s performance piece The Cost Of Living, and the British Paraorchestra who featured in the Paralympics Closing Ceremony and whose formation was the subject of a Channel 4 documentary.

18. Channel 4 will continue to develop its distinctive approach to arts coverage, which includes championing cutting edge art that audiences may not otherwise see, such as through its broadcast of the Turner Prize; championing emerging forms of creative disciplines as legitimate forms of art-whether that is graffiti, spoken word poetry or house music; and uncovering new artistic talent. In 2012 Channel 4’s arts output has ranged from Grayson Perry’s acclaimed documentary on class and taste, a behind the scenes preview of Damien Hirst’s Tate Modern exhibition, to Random Acts, a showcase of 360 specially commissioned 3 minute arts films.

Policy issues affecting support for the creative economy

19. While Channel 4 believes that any thinking about creative industries policy should seek to build on the effective framework that is already in place, Channel 4 believes there are incremental, but important, reforms that can make a real difference to the ability of the UK creative industries to grow and prosper.

Incentivising investment in content

20. With specific regard to broadcast media, Channel 4 believes the Government could maintain and incentivise greater investment in UK content, including investment in public service content by the PSBs. The current Communications Review provides a good opportunity for the Government to take action to meet this objective and support the creative economy, for example by:

· Updating the Electronic Programme Guide (EPG) regime to take into account convergence and to secure prominence for public service content in non-linear environments. The Government could encourage Ofcom to conduct a review of the current EPG regime with a specific view to making recommendations / changes likely to maximise investment in high quality, diverse, original UK content in a converged world, and ensure that Ofcom has appropriate backstop powers to ensure prominence in the light of future technological changes.

· Re-opening the debate on advertising minutage rules. Channel 4 believes that the advertising minutage rules could be changed to drive further investment in public service content from all commercially-funded PSBs, and therefore suggests the Government consider amending Ofcom’s statutory duties to ensure that, in any future debate on the harmonisation of the PSB and non-PSB minutage rules, Ofcom specifically has an objective of encouraging investment in UK content from PSBs. The PSBs remain the biggest investors in original UK content, and therefore, in Channel 4’s view, the substantial increase in revenues for PSB’s that harmonisation down of the minutage rules to PSB levels would enable would have a direct positive impact on the ability of all commercially-funded PSBs to invest in UK content and deliver public service obligations, as well as enhancing the viewer experience.

· Ensuring that the carriage regime-ie. the relationship between channels and platforms such as cable and satellite-recognises the huge value that PSBs bring to these platforms. Channel 4 notes a report commissioned by the Government from Mediatique, which considers whether a deregulated model of carriage might deliver additional benefits for UK viewers. Channel 4 welcomes Mediatique’s conclusion that under a new, deregulated model "an outcome whereby payments flow from TV platform operators to PSBs is plausible and that this could lead to an increase in expenditure on original content industry wide" and that this justifies a review of the current regime governing carriage.

· Waiving the planned introduction of Administered Incentive Pricing (AIP)-ie. spectrum charging-from the end of 2014 for PSBs as a means of supporting public service content investment in future. The introduction of AIP for spectrum used for broadcasting would result in the PSBs making millions of pounds of AIP payments to Ofcom-funds which could otherwise be used to deliver public service content obligations.

Intellectual property (IP)

21. Channel 4 welcomes the Committee’s emphasis on intellectual property policy. As a major investor in the creative economy, Channel 4 relies on a sound IP regime to underpin its activities. Unlawful use of copyright material undermines investment in content. Channel 4 believes that a strong IP regime has been a key factor in the strength of the creative industries in the UK, promoting entrepreneurialism, innovation and economic growth in the UK broadcasting sector, and a weakening of the regime could lead to a vicious spiral of declining revenues, investments and audiences.

22. Channel 4 believes that overall the existing UK IP framework works effectively, rewarding content creators and stimulating innovation and economic growth in the creative sector.

23. In relation to online copyright infringement, Channel 4 welcomes the initial obligations set out in the Digital Economy Act 2010 to help address online copyright infringement. Channel 4, alongside others in the content industries, is also seeking to address this issue through the provision of compelling legal offers, such as 4oD, and by helping to educate consumers about the important role played by intellectual property in underpinning content creation.

24. Beyond the measures in the Digital Economy Act 2010, Channel 4 believes that the Government can help reduce online piracy by repealing Section 73 of the Copyright, Designs and Patents Act 1988. Online sites such as TVCatchup.com have used Section 73 as a defence for appropriating Channel 4’s TV channels and streaming them live over the internet on both fixed and mobile networks, without consent.

25. These parasitic services compete both for viewers and revenue, making money from Channel 4’s channels by selling advertising around the content. TVCatchup, for example, sells "in-skin" and/or pre-roll advertising against Channel 4’s broadcast content and that of the BBC services. This commercialisation of Channel 4’s content is in direct competition with Channel 4’s own online services.

26. The negative commercial impact of retaining Section 73 is significant for PSBs, and this impact will continue to increase if no action is taken by the Government to repeal these provisions. It is essential that the Government ensures that the IP regime continues to allow content providers the incentives and protections to enable them to continue to invest in content.

27. Finally, Channel 4 shares the concerns expressed by some rightsholders about proposals which could allow copyright law-in particular exceptions to copyright law-to be made via secondary, rather than primary, legislation. Given the importance of a strong IP regime for the future of the creative industries, Channel 4 believes that any proposed changes to the IP regime need to be debated fully.

Spectrum policy

28. Spectrum is a highly-valuable public resource with a wide variety of competing uses, from television channels in high definition and standard definition, through mobile telephony services, to wireless broadband and beyond. The allocation of spectrum provides an exciting opportunity to deliver new services to consumers and drive growth. However, Channel 4 is concerned that developments in domestic and international policy on the use of spectrum could adversely affect television services enjoyed by viewers across the UK.

29. Channel 4 believes that spectrum allocation for Digital Terrestrial Television (DTT) needs to take into account the significant social and cultural value the platform delivers for consumers. It is vital that a strong signal is sent by the Government that sufficient spectrum should be allocated to DTT in the UK-allowing it to evolve to meet consumer demand and technological developments. Any deterioration in the DTT platform would diminish viewers’ enjoyment of TV services, and directly and negatively affect PSBs’ ability to invest in UK content and make that content universally available, free at the point of use.

30. Channel 4 believes that the Government and Ofcom should commit to a strong DTT platform for the long term that will continue to provide viewers with universal access to public service content and new ideas and information, free at the point of use. Channel 4 is therefore concerned by recent proposals from the House of Lords Select Committee on Communications, which suggested that terrestrial television should be transferred from its DTT spectrum and moved to the internet. Channel 4 believes it is vital to retain universal access to broadcast free at point of reception for the foreseeable future to continue to deliver social and economic benefits-and Channel 4 is pleased to see that the Government has recently confirmed its support for this position.

UK tax relief for creative sectors

31. Channel 4 welcomes the proposals outlined by the Government to introduce tax reliefs for high-end television, animation and games. They are an important recognition of the economic significance of the creative industries and, as part of the existing suite of UK policy initiatives aimed at supporting the creative industries, are likely to provide a further cultural and economic boost to the UK; enhancing the country’s global competitiveness by attracting production that may not otherwise be made in the UK, incentivising new investment, as well as retaining and developing the dynamic creative skills-base that already exists here.

32. The new reliefs build upon the success of the film tax credit. As a major investor in UK feature film through Film4, Channel 4 has extensive experience of the film relief, which has brought significant benefits to the industry, helping to grow the volume of British productions while also attracting substantial inward investment into the UK, thereby creating new employment opportunities for British crew.

33. Channel 4 has provided detailed comments on the proposed tax reliefs as part of the DCMS and Treasury consultation processes. Channel 4 has consistently emphasised the importance of the ensuring the reliefs: incentivise indigenous content investors alongside overseas investment; promote support for training and skills development; and provide sufficient flexibility to enable current and future business models to develop and flourish.

34. With regards to the specific scope of the tax relief, Channel 4 supports the principle of including a wider range of genres within the scope of the high-end television tax relief, rather than just drama and comedy. For example, including documentary programmes within the definition (as long as they qualified over the £1m threshold) could incentivise further investment in high-quality, highly-skilled documentary making.

Skills policy for the creative sectors

35. Channel 4 welcomes the Committee’s focus on establishing a strong skills base to support the creative economy. Supporting the on-going development of skills and talent in the creative industries is a vital objective-for the media sector as well as UK plc more generally. If the sector is to fulfil its potential, the UK must ensure that the creative talent base that exists here is fully equipped to respond to the rapid changes of the digital landscape. Therefore Channel 4 believes that rather than a ‘one-size-fits-all’ skills strategy, emphasis should be on promoting flexibility and industry-led innovation.

36. Channel 4 invests significantly in talent and skills development. This includes its own award-winning internal programmes run through 4Talent, which offers work experience placements, apprenticeships, workshops and master classes to people looking to gain entry into the creative industries, alongside funding and support for external skills bodies such as Creative Skillset and the National Film and Television School.

37. As a broadcaster with a remit to be innovative and experimental, as well as a duty to invest in talent, Channel 4 has launched initiatives aimed at meeting some of the skills challenges presented by emerging technology. Specifically a major challenge is created by convergence, which has brought together disciplines that may previously have sat apart, such as science, technology and the arts-and which may not yet have in-depth understanding of how each other operates. To address this issue, Channel 4’s online team runs the Fuel4 programme, a series of events and paid placements aimed at encouraging collaboration and understanding between TV and digital producers.

38. Since 2011, a strategic focus of Channel 4’s skills programmes has been to broaden access to a wider range of young people-particularly those from less advantaged backgrounds. This is particularly important for the creative industries-where jobs can be centralised in particular locations and which can be dependent on establishing personal relationships with those already in the industry. As a result of this culture, the creative industries as a whole remain under-representative of some social groups-such as ethnic minorities, disabled people, and those from disadvantaged backgrounds.

39. For this reason, Channel 4 is proud to have become a founding signatory to the Government’s Social Mobility Business Compact, in which it has pledged to support communities and schools, recruit fairly and openly, and provide opportunities for all young people to get a foot on the ladder.

40. 4Talent has a strong track record in engaging with young people from across the country, and helping them on to further careers in the industry-with 42% of participants in its work experience programme finding further experience or employment in the industry as a result. In 2011 Channel 4 set out to widen the groups of young people it was reaching through these schemes, and actively sought to attract people from all educational and employment backgrounds by venturing outside of the traditional media ‘hubs’. Over the last year 4Talent open days have visited locations including Derry, Barnsley, Penzance and Dundee. Of the attendees, 61% said neither of their parents went to university, and 18% had received income support growing up.

41. While steps are being taken by individual companies, like Channel 4, to broaden access to the creative industries, improvements could still be made at both an industry and national level. For example, while the public service broadcasters offer extensive opportunities for new talent to gain access to the media, Channel 4 believes more could be done to incentivise a broader range of media companies, including smaller companies, to open up access. Limiting the red-tape involved in setting up and joining apprenticeships and work experience schemes could be a useful way of doing this-so that they are flexible enough to appeal to smaller organisations and do not become an administrative burden.

42. It is also vital to any cohesive skills strategy that there is significant engagement between industry and educational institutions. Channel 4 notes that the success of these partnerships is founded on how easy it is to approach and develop relationships with specific institutions -and where there are clear points of contact for industry to liaise with.

Regional creative clusters  

43. The Committee asks about the importance of "clusters" and "hubs" in facilitating innovation and growth. Channel 4 agrees that it is important to support the creative industries throughout the UK: supporting regional companies has been a key element of Channel 4’s work for the last 30 years. In 2011, it invested £152 million in programmes for the TV channel portfolio from companies in the nations and regions-an increase of 22% on 2010. Channel 4 continued to exceed its licence quotas for the main channel, with 48% of all hours of TV commissions coming from outside the M25, and 4.2% of its investment coming from Scotland, Northern Ireland and Wales. In recent years Channel 4 has sought to build new relationships with companies in the devolved nations; for example, Telesgop of Swansea, who produced one of Channel 4’s stand-out single films of the year with Wallis Simpson: The Secret Letters, their first ever commission for Channel 4. Channel 4 has also expanded the spread of its digital commissions, working with 54 businesses based outside London, including games and apps developers in Dundee, Bristol and Middlesbrough. 47% of Channel 4’s online commissioning budget in 2011 was spent outside London.

44. While Channel 4’s focus has been on attracting creative ideas, regardless of where in the country they come from, Channel 4 has found the existence of ‘creative hubs’ to be a helpful source of expertise and talent. These hubs have often grown historically as a result of the major broadcast centres such as ITV and the BBC-and the success of MediaCity in Salford is a testament to the continued importance of major infrastructure investment from the broadcasters.

45. Beyond this, Channel 4 is engaging increasingly with talent from ‘hubs’ in other parts of the country-that have developed as a result of other factors such as strong local universities or transport links to major cities. This is true particularly for companies in the emerging digital sectors, which are less concerned with physical proximity. For example, in recent years Channel 4 has become a significant investor in innovative online games-and has recognised that Dundee has significant expertise in games development. Talent is attracted to the city by the games courses at the University of Abertay Dundee, and then stay to set up their own, internationally successful, games companies. Channel 4 has commissioned several of these companies, which include TAG Games and Dynamo, to produce innovative projects, and in 2011 announced that its new games commissioner would be based in Scotland in order to harness the wealth of gaming talent that exists there.

46. Channel 4 hopes that this submission is of assistance to the Committee and would be happy to discuss these issues in greater detail.

November 2012

Prepared 21st November 2012