The film and television industries make an important
contribution to the British economy. They contribute to national
income and employment, and make a net contribution to exports,
which has the capacity to grow. Despite the competition from abroad,
particularly the US, UK-produced content on film and television
has a strong international reputation and makes a major contribution
to the entertainment and education of British audiences. This
report looks at how these industries have developed, the challenges
they are currently facing and what practical help might be provided
to enable them to develop further.
Since its inception, the British film industry has
experienced periods of boom and bust. From the early years, the
Government has recognised its importance and sought to support
and protect it, using a variety of tools, including quotas, levies
and tax incentives. The industry has been profoundly influenced
by the American film industry, built around the major Hollywood
studios, which has been at different times an overwhelming competitor
and a major investor in filmmaking in the UK. The policy of encouraging
American investment has been successful to the point where some
two thirds of spending on film production in the UK is on American
funded and produced films.
The production arm of the British film industry is
its strength. Unfortunately, American companies have always dominated
the distribution sector, where much of the profit is to be made.
Despite several attempts, no British company has been able to
emulate the American model of vertically-integrated companies,
which can finance the production of their own films and distribute
their own and other companies' productions worldwide. We found
this still to be the case, though the coming of digital distribution
could offer opportunities for a different distribution model.
Since 2007, the Government has supported the film
industry principally through tax relief on film production expenditure.
Witnesses from the film industry said the new system had been
successful, particularly in attracting big budget films. We recommend
some adjustments to the system with the aim of giving more support
to smaller films and allowing British films to be partly shot
abroad without suffering a financial penalty. Independent filmmakers
still face difficulties in financing their films. We recommend
that the Government consider ways of encouraging private investment
in film production.
The UK Film Council is the UK's strategic agency
for film. We found widespread support for its work, but concern
that part of its limited budget is being transferred to Olympics
funding. We share this concern and question whether the Film Council
should be substantially financed through the Lottery. We also
question the case for a merger between the Film Council and the
British Film Institute, which is currently under discussion.
A number of witnesses saw audiovisual piracy as the
main threat to the film industry. We support the Government's
decision to introduce measures to combat unlawful file sharing,
and welcome the decision of some companies to develop new business
models to meet the legitimate demands of their customers. We also
recommend new legislation specifically targeted at making the
recording of a film in a cinema by camcorder a criminal offence.
The funding of UK-originated content on television
is also affected by recent technological and regulatory changes.
The last ten years have seen greater competition in the industry,
with a proliferation of channels, both subscription and advertising
based. Revenue from subscription now exceeds advertising revenue
and the competition for the latter now also comes from online.
Despite the increase in the number of channels, the
vast majority of UK originated content is produced by the public
service broadcasters (PSBs). The spending of the PSBs on UK-originated
output fell by 15 per cent in real terms in the five years to
2008. The commercial PSBs are facing serious financial pressures,
largely as a result of falling advertising revenue, and this is
impacting on their programme budgets, particularly for certain
We looked at ways in which this decline in investment
could be reversed. We believe the role played by BBC Worldwide
in distributing UK content overseas could be expanded, generating
more revenue for investment. To this end, we recommend the sale
of a part of BBC Worldwide, to create a public private company.
Other ways of encouraging greater production of UK
content include a tax credit similar to the film tax credit. We
recommend a trial of such a scheme in support of children's programming,
which is one of the genres under threat. Other possibilities include
the use of the proceeds of spectrum sale and sharing part of the
BBC licence fee.
Expansion of online video on demand may provide opportunities
for more profit to be made from UK content. One joint venture
that would have enabled the PSBs to recoup the online value of
their content was Project Kangaroo. This was blocked by the Competition
Commission. As a result, American companies may soon take the
lion's share of this value. We recommend government intervention
in any similar cases in the future, to ensure that the full implications
for the television industry are taken into account.
Finally, we looked at training provision across both
industries. One of the strengths of the British film and television
industries is the highly skilled workforce, both in front of and
behind the camera. However, the provision of training is patchy
and that there are some specific skills shortages. University
courses are not delivering the skills required by the industry.
Apprenticeships and internships would improve training in practical
skills but are underused. There is also widespread use of unpaid
work experience and informal entry routes into the industries,
which discriminate against those without connections, while making
it unlikely that those recruited are the most able.
The current economic conditions have caused companies
in the industry to reduce their in-house training budgets and
their contributions to Skillset, the industry training body. We
particularly urge the Government to encourage the PSBs to revive
their investment in training.