Memorandum submitted by PACT (Producers
Alliance for Cinema and Television)
The draft Communications Bill fails to answer
the most critical question that occupies the minds of ordinary
viewers and consumers``is there anything good on the TV
that I want to watch?"
The draft bill is almost wholly concerned with
the interests of broadcasters, channels and platform owners and
has little to say about the need to create a competitive market
producing high quality content which can appeal domestically and
internationally. PACT has specific proposals and amendments to
address this gap.
Recent consultation on digital switchover found
that consumers have resisted moving to multichannel television
because of the lack of compelling programme propositions. A more
competitive market in rights and content would allow channels
to compete for the best programming, leading to better quality
services. The lack of distinctive, compelling programming was
certainly one of the factors leading to ITV Digital's demise.
The problem is that the production industry
is dominated by vertically integrated, risk-averse broadcasting
organisations. Presently the BBC and ITV have huge scale monopolies
in the markets for production, broadcasting and secondary distribution.
Over 75 per cent of all production is done in-house by the broadcasters.
The BBC in particular has been able to use its position as the
dominant broadcaster, the dominant production house, and the dominant
distributor, to dictate terms of trade that are considerably worse
than their commercial competitors. According to recent Merrill
Lynch research, the BBC accounts for 49 per cent of the money
spent on free-to-air programminga clear sign of their dominance
and market power.
To address this problem, PACT is arguing that
the bill should enshrine a Code of Practice to be enforced by
OFCOM. This code would help to createfor the first time
in the UKa fair, transparent and equitable market for suppliers
and purchasers of content.
What we propose is not just intended to benefit
independent producers, but all content providers. At present,
without effective regulation, there is a danger that broadcastersthrough
their control of content rightswill be able to spread across
all delivery platforms making it harder for new entrants to enter
the market, and harder for others to compete. Effective competition
requires that we not only have a wide range of content providers,
but also a wide range of intellectual property holders.
The Code of Practice would provide a modern
and flexible regulatory tool that would assist in the promotion
of competition. It would provide for a more transparent market
and is sufficiently light-touch and self-regulatory to fit with
the government's "better regulation" aims. It would
not impose undue administrative burdens on broadcasters, but will
provide for a better balance between the interests of broadcasters
and their content suppliers.
PACT recently commissioned independent economists
to analyse competition in the television industry. They have concluded
that while there is competition in the television channel market
for advertising and subscription revenue, and competition in channel
distribution (between Sky and the cable operators, for instance),
in the case of programme production there is only limited competition.
The in-house production teams of the vertically integrated broadcasters
make the bulk of the main broadcasters' programmes.
The economists concluded that lack of real competition
reduces broadcasters' incentives to invest, innovate or increase
efficiency. These factors ultimately result in a loss of value
to UK television consumers.
Independent producers only continue to exist
at all by virtue of two acts of parliament from the 1980s: those
that established Channel 4 and introduced the 25 per cent independent
production quota. But the quota has become a ceiling, rather than
the floor that was intended. Without the welcome commitment in
the bill to retain the quota, one of the UK's most creative and
dynamic sectors would disappear overnight. But by itself, the
quota cannot create a competitive content market. Without the
ability to retain some intellectual property rights, or share
in the real value of content, the independent production sector
will never fulfil its potential as a real industry, and will remain
an army of freelancers.
If we are to achieve the governments ambition
to have a competitive and dynamic media and communications market
then we need a well-capitalised content production sector, able
to invest in its own research and development of new ideas.
There are those who reacted to the Bill with
dire warnings about foreign ownership of our media. We regard
the establishment of a competitive and plural creative economy
as a much more important issue. That said, if we are to allow
even greater vertical integration, and invite investment from
overseas, then the responsibility to protect and strengthen the
UK's creativity becomes even more important.
Peter Bazalgette, the Chairman of Endemol Entertainment
UK, recently wrote in the Financial Times: "An impartial
alien on the Clapham omnibus would conclude that we are, curiously,
far more concerned about the distribution of programming than
we are about the programmes themselves". Consumers may want
innovative technology platforms, but mostly they want compelling
content that entertains, enriches and engages them.
PACT believes we have an answer to this critical
question and ask that we have the opportunity to meet with the
Joint Committee to expand on our ideas and explore the benefits
they would bring.
Please find attached our submission providing
further details on our proposed Code of Practice.
The Producers Alliance for Cinema and Television
(PACT) is the UK trade association that represents the commercial
interests of independent feature film, television, animation and
new media production companies. PACT has over 1,000 members, making
it the largest representative group of screen-based content producers
in the UK and the largest trade association in the film and television
1. OFCOM is being established to promote
competition in broadcasting and telecommunications for the benefit
2. Ensuring ``effective'' competition in
the production, distribution and supply of content is a key priority
for PACT. What we propose is not just intended to benefit independent
producers, but all content providers, including broadcasters like
Carlton and Granada who supply programmes to the BBC.
3. We propose that OFCOM is active in using
in it's powers to ``promote'' competition. It would not be sufficient
for it to look for specific abuses and remedy themit needs
to be able to make the markets more open and competitive.
4. In addition to the general powers to
promote competition, we consider it essential that public service
broadcasters should be subject to a Code of Practice on the commissioning
5. The terms offered by broadcasters have
frustrated the development of the independent production sector
and left it heavily under-capitalised. If we are to have a competitive
and dynamic media and communications market then we need a well-capitalised
independent sector that invest in its own research and development
for new programme ideas.
6. Presently the BBC and ITV have huge scale
monopolies in the markets for production, broadcasting and secondary
distribution. The BBC have been able to use their position as
the dominant broadcaster, the dominant production house, and the
dominant distributor, to dictate terms of trade that disadvantage
its suppliers. Even where producers have been willing to contribute
to budgets in exchange for retaining some rights, they have been
frustrated by the BBC's refusal to entertain such terms.
7. ITV however, is in a different position
because its Networking Arrangements are regulated by the ITC in
consultation with the OFT under the provisions of section 39 of
the 1990 Act and Schedule 4. As a result independent producers
benefit from much more favourable terms of trade and have access
to the Network Centre on the same basis as licensees own production
8. If ITV becomes a single entity then there
is a danger that independents will lose the benefits of the regulated
Networking Arrangements. We therefore propose a Code of Practice
that would apply to all public service broadcasters, not just
9. PACT proposes that a Code of Practice
to be introduced to provide a check against the dominance of public
service broadcasters in commissioning content and bring some balance
to the tensions that exist between those broadcasters and their
10. The Code of Practice is intended as
a modern and light touch form of co-regulation that would assist
in promoting competition. It need only apply to public service
broadcasters because of their privileged position in the market.
Market forces should then ensure a more fair equitable system
of programme commissioning and terms of trade across the board.
11. PACT believes the Bill should include
provision for a Code, but the actual legislative provisions should
be kept simple, to allow OFCOM full flexibility to review and
amend the Code as necessary, to reflect changing market circumstances.
12. The proposed Code should cover commissioning
structures as well as terms of trade. It might echo some elements
in the ITV Networking Arrangements as well as some of the elements
in Good Behaviour Code for Supermarkets and Suppliers.
13. It might simply provide that a broadcaster
(or a broadcaster having a certain market share) should send its
proposals for commissioning content to OFCOM for approval. Before
approving such arrangements OFCOM should have regard to its general
duties to protect and promote the interests of consumers, including
the promotion of competition.
14. OFCOM might publish general guidance
to broadcasters on what issues their proposals for commissioning
content should address.
15. Ensure equal access to programme-making
In-house producers, independent producers and
others, should all have equal access to programme commissioners,
and the structures broadcasters' have in place should provide
for this. The Independent Production Order provides independent
producers with a share of the market, however, with broadcasters
like the BBC treating the quota as a ceiling and not a floor,
it does not guarantee equal access.
16. Ensure publication and monitoring of
terms of trade.
As with the Supermarket Code, the proposed Code
of Practice should provide that terms of business are available
in writing. The operation of those terms should be subject to
monitoring by OFCOM in the same way as the ITV Networking Arrangements
17. Ensure fair dealing.
Broadcasters should not be able to exploit the
fact that a producer has started production to enhance their negotiating
position. Nor should they be able to operate any other arrangements,
such as the terms on which they will enter into licensing deals
that have the effect of being anti-competitive.
18. Ensure no undue delay in payments.
Broadcasters should be required to pay producers
promptly, both for commissions and any profit shares from secondary
19. Regulate third party dealings.
In commissioning content, broadcasters should
not be able to insist that the producer uses certain suppliers
or distributors. In particular, it should not be a condition of
a contract that a producer must use the broadcasters' own distribution
arm, and producers should be able to freely enter into any negotiations
with any distributor.
20. Provide for a disputes resolution procedure.
The Code should provide for a disputes resolution
procedure. This might involve a senior person within the relevant
broadcaster, followed by a mediator, with OFCOM as the ultimate
body to whom an aggrieved party could complain.
21. Provide a right of appeal to Competition
Interested parties might be entitled to appeal
to the Competition Commission if it believes the Code of Practice
is being applied in a way that does not satisfy the competition
test. This would echo the provisions in Schedule 4 to the 1990
22. PACT has drafted clauses for a Code
of Practice which will form part of its fuller response on the