Culture, Media and Sport CommitteeWritten evidence submitted by the Children’s Media Foundation
Introduction
The Children’s Media Foundation (CMF) is a not-for-profit organisation focused on the media diet of UK children and young people. It is the successor to two previous organisations—the Children’s Film and Television Foundation and the Save Kids’ campaign. It promotes better awareness and understanding of the issues around children and their use of media, in particular the content that is made for them. It partners with the academic and commercial research communities to focus and disseminate research of value in the public discourse. It lobbies for support for children’s content production in the UK. It supports media literacy initiatives amongst children and their parents and acts as a watchdog from the audience perspective on the content provided for children, and on the implications of changes in the way children access media with new platforms and new technology.
The CMF provides secretariat services for the All Party Parliamentary Group on Children’s Media and the Arts.
Context
The CMF welcomes the opportunity to respond to this inquiry, as we believe that the production of media for children in the UK, on a variety of platforms, is a vital component of a vibrant creative economy. There has been a respectable history of export and co-production in the children’s sector, and the value of British IP (Intellectual Property) in the children’s field, is significant. This includes the work of publishers, interactive producers (or Aps, e-books and websites) and games producers, as well as the more traditional film and television projects. Examples from Teletubbies to Moshi Monsters indicate that the industry “hits above its weight” in export and partnerships. In 2008 PACT (Producers Alliance for Cinema and Television) reported that UK Children’s TV Exports were worth 15% of total TV exports. In most countries that ratio is 12%.
But the industry needs support in the face of significant competition from the US giant media corporations (Disney has announced it has bought the Star Wars brand and Lucasfilms Studios for $4.5 billion) and from new threats in emerging markets such as China and India. The use of subsidies, tax incentives and quotas in other territories also puts UK production at a disadvantage, which we will illustrate in some of the examples we provide below.
For the CMF there is a cultural element to this argument. Support for UK creative ventures will ensure that British sensibilities are significant in the development, writing and production of the content being provided—even when that content might be an international co-production. We feel it is vital that UK kids get to see themselves represented, hear their own stories and their own voices, in the content they experience. Clearly the ability to retain greater editorial by the UK producer, through greater contribution to the overall budget, means that more elements of the content being produced will retain their British look and feel.
There is however also an economic argument. The UK children’s content industry has in the past proved itself a world-beater. But this is no longer the case. ITV’s children’s commissioning is around 10% of the level it stood at 10 years ago, and Ofcom statistics indicate that there has been a 17% decrease in spend on first-run originated children’s content between 2006 and 2011. Our submission by Anne Brogan of Kindle Entertainment will bring into sharp relief the pressures on independent producers as broadcasters have withdrawn from fully-funding children’s projects.
The cultural and economic arguments coincide when we consider the power of indigenous media to inspire the younger generation to build a creative career, and to potentially go on to export that creative talent successfully. The CMF is supported by a varied group of individuals who represent that international creative success, who can attest to the importance of UK-produced content in their childhood as an inspiration—eg Nick Park (Wallace and Gromit etc) who cites Blue Peter as a founding influence on his view of the world and his desire to create animation. Or Russell T Davies (Dr Who etc) who quotes his time working in BBC Children’s television as formative in his creative development. We include Anne Wood’s comments on her early career in this submission to support this point.
Response
All of the above represents our broad response to the question of the importance of support for the creative industries, and as we contend, in particular the children’s media sector.
More Specifically
We advocate the extension of tax relief to children’s content other than animation (which is only one element in the overall provision), in particular to children’s drama and factual, subject to certain criteria. Eg a cultural test as used in film and proposed for animation.
Our reasons:
The continuing decline in original UK content for kids, in particular in drama and factual, first noted by Ofcom in 2007 when the now infamous 1% figure was first revealed. (Of all the hours of children’s television broadcast, only 1% was newly produced here in the UK. This figure is likely to be even smaller since the decrease in commissioning at ITV).
The changes in the commissioning and financing of children’s content, leading to fewer commissions and the necessity of seeking overseas tax breaks and top up finance.
The subsequent impact on UK independent producers in terms of retaining their IP and sustaining their business.
The resulting loss of economic benefit and the erosion of a niche skills base.
The long term impact on the audience in terms of the disappearance of wide-ranging, culturally relevant, entertaining and educative content in all genres for all age groups—the kind of content which was rightly celebrated in the Olympic ceremonies.
In addition consideration should be given to:
Film
We welcome the BFI’s stimulus for the animated film sector and would like to see new initiatives in the live-action market as well. UK film production, writing and performances are pre-eminent. The Harry Potter series exemplifies this. But much of the financial benefit was not returned to the UK.
Investment in Indigenous Content
We have for some time lobbied for public funding to be found to create an alternative commissioner to the BBC, with the power to commission drama, comedy and factual content, to be delivered via Video on Demand (VOD) services and in partnership with non-public-service broadcasters on a series by series basis. £30 million of Lottery Cultural Funding would have a profound cultural effect on Britain’s kids, significantly enhancing the range and quality of content they currently experience. It could also generate investment from the national and international commercial broadcasters as they compete to secure quality new UK content on their networks.
Evidence
Below are three statements from distinguished, dedicated and successful producers of children’s content which clearly demonstrate the issues from a number of perspectives, and, we believe, make the case for the extension of tax relief to children’s productions and potentially for further market intervention.
Statement from Anne Brogan, Co-Director Kindle Entertainment
(Kindle is an SME with a wide range of successful projects from TV Movie production—Some Dogs Bite for BBC Three, Dustbin Baby for BBC One, Treasure Island for Sky to pre-school programming Big and Small for CBeebies. Kindle won the BAFTA Award for Independent company of the year in 2010 and 11.)
Kindle’s experience of making a high-end action adventure show with significant international potential reveals a number of issues that have hit the UK production sector:
(1)
(2)
(3)
Taken together, this triple whammy means that it is extremely challenging to stay in business let alone build a business in an area of UK expertise—the creation of kids’ content—that has been a significant part of export sales for many decades.
Distribution companies are taking advantage of the weakened position of UK kids Indies and insisting upon very tough deals for their investment, often demanding to take “executive producer fees” equal to the Independent Producer’s production fee, and a back end position—as well as recouping their advance. This stance is becoming more and more common with the big players. A tax break for the Indie would help put some of the power and hence control of the IP back in their hands. In the example below, as well as giving away our back end, we had to defer some of our fees in order to realise the ambition of the show.
The kids’ business is a global business but to complete on that global stage we need to be in as advantageous a position as other indies elsewhere in the world. Canada has big tax breaks, as does France, Hungary, Belgium, Malta … and many other parts of Europe. Australia and South Africa also attract UK generated business because of their tax break.
A tax break for kids drama made in the UK could have huge benefits for the sector—generating business and building up the profile of companies so that they can establish themselves as world leaders in the creation of kids content, putting the UK on the map and creating more jobs and opportunities for people within the UK.
The Project Example:
The project was funded by the following sources plus a small deferment by Kindle:
Licence Fee.
Distribution Advance.
Tax Credits.
Equity Investment.
Post Production Investment.
The recoupment is complex—as these things tend to be—but you can see from below that the production company comes way down the line—even our deferred fee is recouped well after everyone else.
|
1st Place |
Distributor Advance (reduced commission) |
|
2nd Place |
Equity Investor |
|
3rd Place |
Distributor Advance (commission not taken in 1st place) |
|
4th Place |
Post Production Investors |
|
5th Place |
Kindle’s deferred fees |
We then get to Net Profits. Of which Kindle keep just 52.5% until Equity Investors have recouped an additional £30,000, then this increases to 62.5%
The Breakdown of the Financing
Again this is complex but the simplest figure to quote is the licence fee, which was 78% of the budget. The Indie (Kindle) brought 22% of financing to the table, but in doing so gave away a much bigger share of back-end to be recouped higher up the waterfalls.
|
Financed By: |
£ |
|
|
BBC Licence Fee @ £197,000 per ep |
2,561,000.00 |
78% |
|
BBC Worldwide Investment @ £20,000 per ep |
260,000.00 |
8% |
|
90% of South African Tax Credits @ 15% of SA Qualifying Spend |
272,560.07 |
8% |
|
Ingenious Investment @ 5% of Cash Flow |
157,178.00 |
5% |
|
Post Production company investment |
50,000.00 |
2% |
|
Total Income |
3,300,738.07 |
Statement from Anne Wood, Founder, Ragdoll Productions
Anne Wood is a Founder Patron of the Children’s Media Foundation.
My career probably took a different path to most young people coming into the industry today.
I started as a teacher in 1958, and then when my children were born, I started an innovative magazine for parents about books for children. This in turn led me to be invited into television by ITV, as a complete novice, to advise on content.
This was at a time (1976) when children’s television was supported by all broadcasters and was given comparable status with other sectors so there was healthy competition. This meant that there was room to allow innovative thinkers, such as myself from outside the medium, to learn its ways and we had the right to fail. This is always an important part of the creative process for anything new to emerge. Short runs of programmes were possible which enabled more experimentation. Budgets were secure, and an infrastructure was in place which facilitated the development process.
Now the situation is completely different. Only the BBC commissions children’s programmes of any substance. At best they are only able to offer 25% of the budget. The lack of support of children’s television by other channels means that the infrastructure has been dismantled and it is left to independent producers to survive as well they may with only one real UK customer.
I would argue that had it not been for the support I was given in the 70s and 80s by ITV, Teletubbies would not have happened on the BBC in the 90s, and been the huge global success it became. It remains a landmark programme for the amount of revenue it has generated. In its heyday, Teletubbies generated more than £30 million per annum in revenue for the BBC/Ragdoll and it continues to earn and be shown around the world. For me the most important thing about Teletubbies, is it allowed me to pass on my experience to younger creatives, such as Andrew Davenport with whom I went on to create In The Night Garden. This too has become a landmark programme.
Now I am endeavouring to help another generation of potential programme-makers, but unfortunately because of delays caused by the need to raise additional finance, the infrastructure we had created at Ragdoll has also had to be dismantled.
This matters because creativity in television will only thrive within a proper, professional framework. It is clear that production in the future cannot continue in the way it did in the past. Technology changes and so do production methods, but the origination of innovative content will remain the never-changing, most important factor. We have a proud tradition of this in the UK and there is a serious danger of it simply disappearing because it is no longer nurtured.
Statement from Ad Astra Creative
(Ad Astra is a small SME (small and medium-sized enterprise) working in the Children’s TV/Media IP Production market).
There are fewer and fewer independent production companies specializing in children’s content around as commissioning levels drop and Broadcaster or Distributor corporations find it easier to deal with other suppliers—mainly corporates. Yet a thriving industry of any sort surely needs an energetic balance of start-ups, SMEs and corporates to produce the enterprise and inventiveness required to succeed in a fast moving global industry as well as reflecting culturally the changing UK. We understand even UK corporate suppliers currently struggle to make a profit in the dysfunctional UK Children’s TV market.
Adastra has been in existence for eight years and after development and marketing over two years, achieved a commission from a UK broadcaster. We have now produced two shows with 5 BAFTA nominations and 1 BAFTA award. One of our series has sold to over 104 countries and is one of the top five shows on the UK broadcaster channel, which is in itself the highest rating channel in its genre in the world. The associated digital games are also some of the most popular on the channel’s website. The broadcaster has now ordered another 52 shows to make a total of 118 episodes. Finally we have a toy licence, albeit at an extremely cautious level. So by all conventions the series is a fantastic success.
Our second series is the top show in several European territories and broadcasts across 50 countries through Europe, the Middle East and Africa. Its recent BAFTA nomination shows the quality we produce and the potential for growth.
Yet we struggle to get commissions and to turn this into a profitable company. This is partly due to international Merchandising and Licensing attitudes to non-animated content (our shows are a mix of animation and live-action). But it’s also at UK Broadcaster Commissioner level (both PSB and commercial) where there is a lack of incentive to commercialise a show. Our international distribution is entirely dependent on large corporate foreign distributors who prioritise their own in-house and co-production shows—ie programmes where they make a bigger investment.
We have worked very hard to keep our IP in the UK and keep production here. We have only been able to do this due to a sovereign investment fund (backed by the EU), which has been available in one of the UK regions. We have almost repaid 52 episodes-worth of investment and we shall persevere in our drive to commercialise in order to repay all the investment and move into shared profit.
The sovereign investment fund is now no longer available and it has been extremely difficult to find alternatives. We will probably have to defer Programme Producer and Company Production fees to pay for this—ie not pay ourselves. The alternative will be to give away IP abroad and get involved in an expensive process of using facilities and talent in another country, as those are the complications which come with co-production. It will be more expensive, more complicated and the quality will suffer and it will be the only option if we have to cut our costs any further. If we had an equal tax relief regime to our foreign competitors we could fill the gap.
We continue to see foreign companies through Broadcast or VoD dumping children’s media on the British public well below cost. If the BBC didn’t exist, we would have a miniscule production sector—possibly only BBC in-house. For a UK company (UK IP, UK production and UK value base) to compete in this market, whether through people like Disney, Nickelodeon, or the new platforms such as Netflicks, is almost impossible as they have vast libraries of cheap material from North America.
We need to encourage a UK competitive production and commissioning environment by providing much-needed support. Then we would be able to show the world the brilliance of our Children’s IP media production, which we have excelled at so stunningly in the past.
November 2012