CHAPTER 3: British television|
137. This chapter considers the issues facing
the production and distribution of UK-originated content for television.
The first part of the chapter outlines a brief history of British
television and current viewing patterns; the importance of television
in economic and cultural terms; and the regulation of the television
industry. The second part of the chapter considers current pressures
on the provision of UK content with a focus on specific programming
genres; and the independent sector's contribution to UK content
A brief history of British television
TELEVISION'S EARLY DAYS
138. The world's first regular television service
was launched by the BBC in November 1936. The Marconi-EMI 405-line
"high definition" service transmitted around four hours
of programmes each day from Alexandra Palace, available only
to owners of sets in the London area.
In May the following year, King George VI's Coronation procession
became television's first outside broadcast, while the Wimbledon
championships became Britain's first televised sporting event.
This was, however, still very much a minority interest: when television
was suspended on 1 September 1939 because of the war, there were
fewer than 20,000 TV sets in operation.
139. BBC television resumed in June 1946, with
a combined £2 radio/television licence fee (separate from
the pre-existing radio licence) introduced in the same month.
Over the next few years, the service was gradually extended outside
London, but the watershed broadcast was the televising of the
Queen's Coronation in June 1953, covered by 21 cameras and watched
live by around 27 million viewers in the UK as well as by viewers
in Germany, Netherlands, France, and Belgium. This proved the
catalyst for the purchase of television sets, and is generally
regarded as the "tipping point" for television in the
THE BBC/ITV DUOPOLY AND THE RISE
140. In 1954, the Government decided that the
second television channel should be operated on commercial lines,
albeit regulated by a public body with a statutory responsibility
to impose public service requirements. Rather than run by a single
network, it was to be organised as a series of separately owned
regional franchises, each with a monopoly of television advertising
in its own geographical area and collectively known as ITV. The
Independent Television Authority (ITA) was inaugurated in July
of the same year as the overarching regulatory body, charged amongst
its other duties with choosing appropriate ITV contractors among
competing bidders. It also decreed that the news should be provided
by a separate organisation, Independent Television News, underwritten
by the successful ITV contractors. ITV launched in the London
area through the contractor Associated-Rediffusion on 22 September
1955. ITV then extended
gradually to the Midlands, North and Central Scotland franchises
in 1957, Wales, the West and Southern franchises in 1958, the
North East and Ulster in 1959. The network was not complete until
141. By the end of 1958, the number of television
households exceeded the number of radio-only households, rising
to over 10 million by the end of the 1950s. During the first years
of the ITV franchises, as the medium took time to work its way
into people's lives and advertisers needed to be wooed away from
the familiar territory of newspapers, commercial television struggled
to make money. By the beginning of the 1960s, however, on the
back of popular shows such as The Adventures of Robin Hood,
Coronation Street, Double Your Money and Take Your Pickas
well as a liberal smattering of American imports such as Bonanza,
Rawhide and I Love Lucythe tide turned and
ITV companies' monopoly of television advertising made them exceptionally
profitable. Roy Thomson, later Lord Thomson of Fleet and owner
of Scottish Television from its inception in 1957, famously described
his franchise as "a licence to print money".
142. In 1962, the Pilkington Committee on Broadcasting
produced its report, which was critical of the quality of ITV
programming, and recommended greater regulatory scrutiny by the
ITA. It also recommended that the third television channel should
go to the BBC; that the technical standard should move from 405
to 625 lines; and that colour transmission should be expedited.
The same year saw the first historic transatlantic satellite transmission,
broadcast live via the Telstar satellite. BBC2 went on air in
April 1964, and started transmission in colour three years later.
A colour television licence was introduced for the first time
in 1968. The following
year saw a colour service inaugurated on both ITV and BBC1.
143. By the end of the 1960s, television licences
had increased from 9 million in 1959 to 16 million and television
was being blamed for plummeting cinema audiences: admissions had
fallen from 600 to 200 million over the same period, while the
number of cinemas had declined from 3,414 to 1,558.
The public service philosophy which had become ingrained within
the BBC seemed to be mirrored by ITV, which during the course
of the 1970s easily matched the BBC's output of original drama,
documentary, arts, current affairs and children's programmes.
144. The radio-only licence was abolished in
1971, and the inexorable rise of the television medium was consolidated
during the 1970s, a period of unusual stability where the only
significant change was a change in the regulator's name as the
ITA was rechristened the Independent Broadcasting Authority (to
accommodate commercial radio) and technology advances saw the
introduction of video cassette recorders in 1974. By the end of
the 1970s, the number of colour television licences outnumbered
CHANNEL 4 AND THE BEGINNINGS OF
CABLE AND SATELLITE
145. There was a further round of ITV franchise
changes in 1982, determined by the IBA on the basis of programme
track record and commitments for the future.
A more profound change to the television ecology took place in
the same year, with the start of Channel 4. The Annan Committee,
set up in the 1970s to examine options for a fourth channel, had
rejected ITV's calls for a second channel and recommended a wholly
new approach to the funding and structure of television. The result
was Channel 4, set up as a non-profitable body under the auspices
of the IBA, with three very distinctive features.
146. First, rather than a vertically integrated
broadcaster which produced programmes in-house, it was created
as a publisher-broadcaster with a team of commissioning editors
who would commission programmes from outside. Second, although
funded commercially through the sale of airtime in the same way
as ITV, its advertising sales were conducted by ITV and the revenue
then returned to Channel 4. It therefore did not compete directly
with ITV for commercial revenue, maintaining ITV's monopoly of
television advertising which was felt to have underpinned the
quantity and quality of its home-grown content. Third, it was
obliged by statute to be innovative and to cater for tastes and
interests not generally found on other channels. Experimentation
and minority programming were therefore written into the DNA of
Channel 4 from its inception, an explicit extension of the public
service ethos which still governed British television.
147. Breakfast television started in 1983 on
both BBC and ITV (TVam winning the breakfast franchise) and Thames
was the first channel to start 24 hour broadcasting in 1987. The
1980s ended with a four-channel all-day schedule on terrestrial
television, run on public service lines, which for the vast majority
of the audience comprised their total viewing experience. The
1980s also saw the first attempts at cable and satellite delivery
systems which were to spawn a plethora of channels over the next
20 years. Europe's first satellite channel, later known as Sky,
was launched in 1982. It could be received via the cable systems
which were gradually emerging in urban areas after franchises
had been awarded by the new Cable Authority (created in 1985).
148. It was, however, advances in direct-to-home
satellite broadcasting which were to have a greater impact. In
1986, the domestic franchise for a three-channel domestic satellite
service was awarded by the IBA to British Satellite Broadcasting
(BSB) which planned to launch its satellite dish-received service
in late 1989. It was, however, pre-empted by the Rupert Murdoch-owned
Sky four-channel system which launched its service in February
1989. In the event, planning issues and technical problems delayed
the launch until April 1990.
THE 1990SA RADICAL SHIFT
149. Two days in November 1990 fundamentally
reshaped British television. On 1 November the Broadcasting Act
1990, which aimed significantly to deregulate British television,
received royal assent. ITV licencesnow to be known as Channel
3 licenceswere to be decided by auction rather than subjective
"beauty parades", subject to passing a quality threshold.
Channel 4 was to be separated from ITV as a stand-alone (though
still non-profit) organisation competing with other commercial
channels for advertising revenue. The IBA was split into an Independent
Television Commission (ITC) and Radio Authority, both with significantly
reduced powers over programme output. And all public service broadcasters
were now obliged by law to commission a minimum 25 per cent of
their non-news programmes from independent producers.
150. The following day, in the wake of substantial
losses by both operations, the two satellite companies which had
been fighting a bitter war of attrition announced a "merger"essentially
a takeover in which the new operation, British Sky Broadcasting
(BSkyB) was controlled and run by Sky. In 1992 BSkyB, despite
still being very much a minority broadcaster, acquired the rights
to exclusive live coverage of football's newly formed Premier
League, a landmark deal which formed the basis of a lucrative
subscription service centred around exclusive sports television
151. Those Channel 3 franchises which had prospered
in the new auction process started broadcasting in January 1993.
This was followed rapidly by the first wave of consolidations
within the ITV system in the wake of relaxations in the 1990 Act
and in anticipation of further deregulation, which came in the
Broadcasting Act 1996. By 1997, the original 15 franchises had
effectively been whittled down to five major companies: Carlton,
Granada, United News and Media (owners of Meridian, Anglia and
HTV), Ulster Television (UTV) and Scottish Media Group (STV and
Grampian). In 2000, Granada took control of the former UNM franchises,
leaving Carlton and Granada as the two "big beasts"
of ITV in advance of further ownership deregulation in 2003.
152. The Broadcasting Act 1996 also laid the
groundwork for digital terrestrial television (DTT), which provided
the possibility of multi-channel and interactive television via
a terrestrial network Digital "multiplexes" for commercial
DTT were awarded by the ITC to the consortium most likely to make
the enterprise succeed. The winning group, British Digital Broadcasting,
was owned primarily by the two major ITV groups Granada and Carlton,
and was renamed ONdigital before launching in 1998. Designed as
a subscription service, which required customers to buy set-top
boxes to convert digital signals for analogue sets, ONdigital
struggled with poor programming, unreliable signals, and a powerful
subscription competitor in BSkyB. Despite giving away set-top
boxes and being relaunched as ITV Digital in 2001, the enterprise
collapsed under the weight of huge debts in 2002.
153. While attempts were being made to kick-start
DTT, the final piece of the analogue puzzle was completed in 1997
with the launch of Channel Five as a for profit company (subsequently
rebranded as Five). It was initially available to around 70 per
cent of television households. Five is now owned by the German
154. All the public service channelsthe
BBC and Channel 3 (ITV), Channel 4 and Fivereceived public
support in return for undertaking certain programming commitments,
including UK origination quota requirements set by the regulator.
For the commercial PSBs, support included free or cheap access
to the limited analogue spectrum which reached the great majority
of UK households. In addition they benefited from free access
to digital capacity as well as prominence on Electronic Programme
THE 2000SAN ERA OF COMPETITION,
PROLIFERATION AND NEW TECHNOLOGY
155. With the DTT franchise now vacated, the
ITC awarded it in 2002 to a new BBC-led consortium committed to
free-to-air broadcasting and subsidised set-top boxes offering
28 channels. Branded as "Freeview", the new service
sought to establish itself without monthly payments rather than
compete with Sky's subscription model.
156. The Communications Act 2003 continued the
deregulatory trend of its predecessor, relaxing content obligations
on commercial PSBs and clearing the way for a further consolidation
of ITV. This was completed in 2004 when Granada and Carlton merged
to become ITV plc, subject to restrictions on the sale of advertising
airtime in light of OFT and Competition Commission concerns about
its dominance of the television advertising market. The remaining
Channel 3 licences, not part of ITV plc are owned by the Scottish
Television Group (central and northern Scotland); Ulster Television
(Northern Ireland); and the Channel Islands Group (Channel Islands).
157. The Communications Act also heralded the
biggest shake-up in broadcasting and telecoms regulation for years
as five separate regulators, including the ITC, were brought together
to create the Office of Communications (Ofcom) in anticipation
of greater technological convergence between screen, print, telephone
and computer. The regulation of commercial television passed to
Ofcom in December 2003.
158. In September 2005, the government announced
a definitive region-by-region rolling programme of switchover
from analogue to digital terrestrial television, beginning in
2008 and culminating in London in 2012. The first analogue signals
were switched off permanently in Whitehaven, Cumbria in October
159. Meanwhile, consolidation of media ownership
continued. In November 2006, BSkyB acquired a 17.9 per cent stake
in ITV to become its largest single shareholder. Following an
investigation and ruling by the Competition Commission, the satellite
company was ordered to reduce its shareholding to 7.5 per cent,
but in 2009 obtained permission from the Court of Appeal to take
the matter to the High Court. Its appeal is still pending. In
February 2007, the cable company NTL rebranded itself as Virgin
Media following Virgin's significant investment in the company.
160. At the same time as ownership trends were
shifting in commercial television, satellite and cable, technology
was transforming the viewing experience. The 2000s saw VCRs become
progressively obsolete as first DVDs and more recently recordable
hard drives allowed easier time shifting and non-linear viewing.
The Sky+, V+ (for Virgin), Freeview+ BT Vision boxes all now permit
consumer-friendly recording as well as, increasingly, catch-up
television on all channels. Accessibility of television via live
streaming and catch-up programmes on the computer have also brought
the convergence of televisions and computers closer, although
the vast majority of television viewing remains television-centred.
THE IMPORTANCE OF THE TELEVISION
161. According to the latest ONS data,
there are around 80,000 jobs in the television industry: in broadcast
television, cable and satellite and the independent production
sector. This amounts to just over a tenth of the entire workforce
in the creative media. The television industry comprises over
1,450 businesses, which are broadly divided up into the following
three sub-sectors (p 266):
- (a) 10 (terrestrial) broadcast television
- (b) Around 250 cable and satellite broadcasters
- (c) Around 1,100 independent production
162. The industry comprises a small number of
large businesses and a large number of small companies. However,
there is an increasing trend for the smaller independent production
companies merging with others or being bought out to form much
163. According to an Ofcom survey,
British viewers appreciate programmes that reflect UK cultures,
values and identities. Over four-fifths of people think it is
important for the main television channels to provide programmes
that are made in the UK and reflect life in the UK. The importance
of locally produced drama was emphasised to us by Peter Grant,
an expert in trade law and international cultural policy, who
people appreciate having their own stories
told and their own experience reflected on the small screen. So
there is a real demand for local programming, whether it is drama
or the other categories" (Q 427).
164. In addition, British television companies
like the BBC, ITV and Channel 4, also make a significant contribution
to our export economy. In 2008, the total revenue from the international
sale of UK television programmes and associated activities was
is a 25 per cent increase on 2007. In that year, BBC Worldwide's
overseas revenues amounted to around £430m and ITV's overseas
revenues around £150m. The industry's main customer abroad
is the US, accounting for over a third of total export revenue
in 2008. Both UK television programmes and programme formats prove
popular with other countries. Examples of popular television programmes
include ITV's Midsomer Murders; Channel 4's Ramsay's
Kitchen Nightmares; and the BBC's Doctor Who.
Examples of popular formats include shows such as the BBC's Strictly
Come Dancing and ITV's Who Wants to be a Millionaire?
REGULATIONS GOVERNING UK CONTENT
165. The BBC was set up by Royal Charter and
Channel 4 by Act of Parliament. UK Legislation applies special
regulatory provisions to each of the 'Public Service Broadcasters'.
The three commercially funded channels are regulated in respect
of these statutory requirements by Ofcom while the BBC is regulated
both by the BBC Trust and, in certain areas, by Ofcom. Non-PSB
television channels broadcast from the UK are also subject to
regulation by Ofcom, but to a much lesser extent than the PSBs.
166. All television channels licensed by Ofcom
are subject to a range of licensing obligations and conditions,
grounded in statute and enforced by Ofcom. Television businesses
in the UK are also subject to UK Competition Law which is administered
by Ofcom and the Competition Commission. In the case of competition
issues with an EU dimension the European Commission can become
167. All channels licensed by Ofcom (like all
other channels licensed by any EU Member State) are subject to
the provisions of the EU Audiovisual Media Services (AVMS) Directive,
which has been transposed into UK Law.
The European Union has developed strict rules relating to the
permissibility of State Aids, which are widely defined and include
support in kind as well as cashfor example, free use of
spectrum. The European Commission can and does intervene if it
identifies what it considers abuse. Television content is also
subject to EU regulations. The AVMS Directive
provides that each channel must, where practicable, show a majority
of European programmes. Ofcom requires broadcasting licensees
to report annually on the proportion of European content included
in their transmissions and, if this is less than a majority, to
explain why it is not practical to achieve this. This information
is then submitted by the Department of Media, Culture and Sport
to the European Commission on a bi-annual basis (p 505).
Quotas and the Communications
168. All television channels licensed by Ofcomand
in some respects BBC channels tooare subject to a range
of regulatory requirements set down by the Communications Act
2003. These are generally recognised as dividing into three levels
or "tiers" of regulation:
- Tier 1 sets standards for matters such as
harm, offence and political impartiality. These standards apply
to all broadcasters including the BBC (although accuracy and impartiality
are a matter for the BBC Trust);
- Tier 2 applies only to licensed public service
broadcasters. As well as implementing the 25 per cent independent
production quota, it requires Ofcom to set quotas for original
UK production for each public service channel. It also requires
Ofcom to set down minimum requirements for news and current affairs
programmes on these channels.
- Tier 3 also applicable only to licensed
public service broadcasters, relates to other areas of public
service programming where Ofcom can offer guidance but not set
169. Original productions are programmes made
in the UK and can come from two sources: either commissioned from
independent producers, or a broadcaster's own in-house production
facilities. The table below shows the quotas currently set by
Ofcom for each channel both in peak-time and for the whole day.
It demonstrates that all channels comfortably exceeded their original
production quotas in 2008. The table covers all UK content, though
not necessarily first-run productions since it includes repeats.
Original production quotas and performance
by public service channel 2008
|Quota all day% hours
||Achieved all day% hours
||Quota peak time% hours||Achieved peak time% hours
Source: Ofcom Communications Market Report 2009
170. Evidence we received suggested the PSB channels
broadcast considerably more UK-originated content at peak time
than they did 30 years ago. Andy Duncan, outgoing Chief Executive
of Channel 4, told us, "One of the rather good things in
the UK is that if you look at eight o'clock or nine o'clock in
the schedules, typically it is British drama and British programming
that dominates the schedules" (Q 2210). This represents
a sea-change in the schedules of the 1970s when American imported
drama featured heavily in the peak-time schedule. Michael Grade,
Executive Director, ITV, said "
if you go back to the
so-called golden age of broadcasting, pre-digital, pre-Sky, the
BBC1 schedules, the ITV1 schedules, were packed with American
material. Hawaii Five-0, Kojak, Starsky and Hutch,
Six Million Dollar Man, Dynasty, Dallas,
You do not see them on the main channels
today, because Doc Martin, Benidorm, The Fixer,
The Billthese are programmes that are more popular
than American material" (Q 1824).
171. While this dominance of prime-time schedules
by UK-produced programmes is to be welcomed, it is the overall
level of new original programming that concerns us and which we
172. Despite two decades of multi-channel broadcasting,
the vast majority of UK originated content, (other than in sport),
is produced or commissioned by the public service broadcasters.
In 2007 (the most recent year for which figures are available),
PSBs represented over 90 per cent of all spend on original UK
television programming, with cable and satellite channels accounting
for the remaining 10 per cent.
Cable and satellite channels'
contribution to UK content
173. The Satellite and Cable Broadcasters' Group
(SCBG), who represent the largest satellite and cable channels
in the UK (Q 1566), told us that the SCBG members contributed
£193m to UK-originated content in 2007 (Q 1581). This
contrasts with PSB channels who contributed £2.6bn in UK-originated
content in the same year. However, this figure does not include
the expenditure of cable and satellite channels on sports programming
or the acquisition of sports rights, and the contribution that
this makes to sport in the UK.
174. BSkyB is one of the largest providers of
satellite television in the UK, with 9.4 million subscribers (Q 1924)
and revenue of over £5bn (Q 1919). David Wheeldon,
Director of Public Affairs, BSkyB, told us that "we are investing
considerably in UK content and that is growing" (Q 1998).
However, this is difficult to check. BSkyB is not willing to provide
us with detailed figures on its investment in UK content. The
Committee is therefore unable to judge BSkyB's claim that their
investment in UK content is increasing significantly. We greatly
regret the refusal of BSkyB to provide this information. Christine
Payne, General Secretary of Equity (the trade union representing
performing artists), said that BSkyB's contribution to UK-originated
drama is "very, very little, and this is of great concern
to us, because as the television landscape is changing, then these
channels seem to be taking all the advantages of the work that
our members have done, but contributing very little back to it"
(Q 254). We note that a recent Culture, Media and Sport Select
also recorded reluctance by the cable and satellite industry to
provide figures: "Although the Satellite and Cable Broadcasters'
Group originally agreed to provide us with its own estimate of
the multi-channel sector's investment in UK-produced children's
programming, we note that it has since declined to do so on grounds
of commercial confidentiality. We find this failure
175. There are several types of programming where
purely commercial players are unlikely to invest significantly
in UK content for television or other platforms, because returns
are too low and the commercial risk is too great. Without the
PSBs, the UK production of certain programme genres would be likely
to decline, which would be a loss for UK audiences, for employment
in the industry and for the economy as a whole. Ofcom has identified
the programme genres most at risk as children's programmes; regional
news; documentaries; drama; and comedy.
The pressures on Public Service
176. Given the important role of PSBs in producing
and commissioning UK-originated content, it is of concern that
the total value of expenditure on UK-originated output by the
five main PSB channels has decreased by £500m in five years,
from £3.1 bn in 2004 to £2.6 bn in 2008,
a fall in real terms of around 15 per cent. The five main PSB
channels broadcast 33,177 hours of first-run UK originated programming
in 2008, down by 3 per cent (1,099 hours) since 2004.
177. Financial pressures on the commercial PSBs,
and uncertainties over the future of channels 3, 4 and 5, mean
that their commitment to PSB content is now at considerable risk.
As outlined in two previous reports by this Committee,
the PSBs are subject to the following changes in the market:
- (a) First, the move from analogue to
digital broadcasting. In the analogue broadcasting market, the
commercial PSBs benefited from access to limited analogue spectruman
implied subsidy in return for which the companies undertook certain
public service obligations.
- (b) Second, falling advertising revenues
and fragmenting audiences. A significant proportion of advertising
revenue is migrating from television to the internetin
the UK, Google's advertising revenues are greater than ITV1's.
The speed and severity of the current economic recession has intensified
the fall in advertising revenues.
In addition, a system of just two commercial channels and little
competition has been transformed into hundreds of competing channels
and fragmenting audiences. These challenges exacerbate the tension
between a commercially owned public service broadcaster's incentives
to maintain a profitable business model and investing in high
quality public service content.
Total TV industry revenue by source
Source: Ofcom Communications Market Report 2009
178. Whilst the BBC has greater security of funding
through the licence fee, they too faced pressures to deliver value
for money for audiences, and meet demands for fresh programmes.
The BBC has devised an efficiency programme, which started in
April 2008, with a target to achieve 3 per cent cumulative savings
of £1.9 bn.
Mark Thompson, Director-General, BBC said, "
are trying to do is to track, to benchmark quality, so you make
sure you are maintaining or increasing the public perception of
quality while delivering these efficiencies. So far across the
piece, that seems to be going well and the public scores we are
getting for quality are slightly up over this period even though
we have already taken 15/20 per cent out of the budgets"
179. Channel 4's funding problems were addressed
in our report on Public Service Broadcasting.
These still have not been resolved. Glyn Isherwood, Group Finance
Controller, Channel 4, told us "The total programme budget
for 2009 is about £530 million, which is £100 million
less than the previous year, so there is substantial pressure
on that programme budget" (Q 2162), and this is the
lowest level since 2002. So, whilst we welcome the wider remit
for Channel 4, especially in relation to UK content, which was
proposed in the Digital Economy Bill
(November 2009), it is still not clear where the funding will
come from, to implement this wider remit.
180. The current difficulties of commercial PSBs
contrast with the subscription based channels, such as BSkyB,
where revenues have risen between 2003 and 2008. These channels
have also seen a fall in advertising revenues but have a solid
base in subscriptions, as shown by BSkyB whose subscriptions make
up almost 80 per cent of their total revenue (Q 1919). These
channels generated revenues of £4.3 billion in 2008, a six
per cent increase on 2007.
181. The pressures faced by the PSBs have an
adverse impact on UK content both from an economic and quality
point of view. Andy Duncan, Chief Executive of Channel 4
said "One of the worries I have for the British system as
a whole is the engine of content investment has historically come
from the licence fee and from the TV advertising income that ITV,
Channel 4 and to a lesser extent Five
have earned, where
the majority of that money has been reinvested back into content,
and in Channel 4's case all of it has been reinvested back into
content. The model that is now growing up is one where if you
are a digital channel business you buy other people's used content
to repeat and/or you acquire from the States ... The level of
content investment in Britain is a worry whether you are looking
at it from a cultural/social public value perspective or from
a creative economy hardnosed business perspective. On both fronts
it is a worry" (Q 2209).
182. An integral part of the public service ethos
in the UK has been a recognition that home-grown content and innovation
are important ingredients of our television culture. In addition,
certain programme genres, which have been identified as being
central to public service purposes, have experienced falls in
spending. Ofcom's figures show that in the five years leading
up to 2008, spending on children's programmes has fallen by 48
per cent; news and current affairs by 14 per cent; factual programmes
by four per cent; comedy by nine per cent; and drama by three
183. The two genreschildren's programming;
and regional news and current affairswhich have seen the
steepest falls in expenditure, are also the areas of UK-generated
content that Ofcom believe need to be safeguarded. This was explained
by Peter Phillips, Partner for Strategy and Market Developments,
Ofcom. He said "What we said in the Public Service Broadcasting
Review was that we felt that news programming should be the highest
priority given the feedback that we had from audiences about what
mattered to them. The next set of priorities that we set out in
addition to that were around children's programming, where we
have seen very significant changes in the amount of UK-originated
children's programming, particularly for older, school age children,
and particularly in the areas of drama and factual programming
for those children" (Q 2249).
184. In the five years leading up to 2008, the
volume of first-run originated children's programming fell from
1,887 hours per annum to 919 hours.
Reasons include re-focused PSB requirements, increased commercial
pressures, greater restrictions on advertising in and around children's
programming and significant changes in children's consumption
185. Ofcom told us that the reduction in the
volume of first-run originated children's programming is particularly
acute for "older, school age children, and particularly in
the areas of drama and factual programming" (Q 2249).
The Digital Economy Bill (clause 21) has placed a requirement
on Channel 4 to make "relevant media content that appeals
to the tastes and interests of older children and young adults".
Andy Duncan, told us that Channel 4 "would be very happy
and willing to take on additional responsibilities towards the
older children's group in particular" (Q 2189)
186. Cuts in funding of children's programming
are also affecting UK-originated programmes for younger children.
Anne Wood, Creative Director, Ragdoll Productions, said the
"Director General of the BBC has cut the children's budgetand
many othersto the bone in the interests of saving money.
If you have no investment, you have no creative risk taking
It comes down to the funding every single time" (Q 688).
Anna Home, Chair, Save Kids' TV argued that "children today
see a huge amount of the world, particularly of the American world,
and relatively little of their own". She pointed to drama
"where children see themselves reflected, their own lives
reflected, in a context which they comprehend", which she
said was "hugely important, both for their education and
for their cultural development as citizens" (Q 1489).
187. The reduction of both output and expenditure
in children's programming could have serious consequences, according
to Ofcom. In December 2009, Colette Bowe, Chair of Ofcom, told
a House of Commons Committee
"we are sleepwalking into a situation where we do not have
UK-generated content of a high quality for our kids. I believe
that would be a very bad outcome".
188. News and current affairs shows the second
steepest fall in PSB expenditure in the five years to 2008.
The BBC is continuing its regional news service, though making
efficiency savings in this area (Q 2055). In contrast, ITV
is withdrawing from regional news. In its written evidence to
us, ITV outlined that it currently invests around £55m per
annum in regional news but earns insufficient return on that investment.
It is aware that a high value is placed on regional news by many
viewers, the Government and Ofcom, and believes that a publicly-funded
model is the best option to guarantee a secure future for regional
news on Channel 3. It supports proposals for an alternative model
of regional news provision in which ITV provides the time slots
while the service itself is provided by third party news organisations
(p 403). The Government agrees and Digital Britain stated
that "An early priority is for independently financed news
consortia providing an independent stream of multi-media and broadcast
news using Channel 3 Licensees' broadcast regional news slots
as one means of distribution". Building on Digital Britain's
proposal, clause 28 of the Digital Economy Bill (November 2009)
includes provision for appointed providers of regional or local
news, enabling third
party organisations to provide news on Channel 3 (ITV).
Documentaries and drama
189. Other programme genres are also under pressure.
Roger Graef, documentary maker and CEO, Films of Record, told
us that new technology has resulted in financial pressures on
makers of factual programmes, "there is the economic reductionist
pressure of very tight budgets: because technology allows you
to shoot and edit quicker, the accountants who look at the budgets
say in that case we must shorten the budget and shorten the schedule.
In my experience with documentaries, especially open-ended ones
which are not scripted in advance, very often the best things
happen on the very last day
investment and the open-ended processhas really eroded
big time" (Q 688).
190. On expenditure on drama, Michael Grade confirmed
that current economic conditions had caused ITV to reduce its
original drama output from eight to seven hours a week (Q 1838).
But there is a more fundamental threat to television drama production
from the United States. American imports such as West Wing
and The Wire offer high quality competition. Because US
producers are able to recoup their costs from their large domestic
market, they can be highly price competitive in overseas markets.
Peter Grant told us that the US is "able to sell [televised
drama] in other countries at prices that make it almost impossible
for other countries to compete in the high value, audiovisual
sector without government support" (Q 424). The UK is
particularly vulnerable to this competition, compared to other
European countries, because of the lack of a language barrier.
THE INDEPENDENT SECTOR'S CONTRIBUTION
TO UK CONTENT
191. The uncertain future of the PSBs means an
uncertain future for another part of the UK television industry:
the independent production sector.
192. According to PACT (p 10), the independent
sector (comprising production companies that are external to broadcasters)
plays an increasingly important role in creating UK content. The
independent sector has an annual turnover of more than £2
billion, creates around half of all UK television programmes each
year across the BBC, ITV1, Channel 4 and Five and provides 21,000
193. Historically, the independent production
sector has delivered high levels of UK content for the PSBs (p 80).
The creation of Channel 4 as a publisher-broadcaster and the formal
introduction, through the Broadcasting Act 1990, of a statutory
25 per cent independent quota were the key drivers in opening
up a market that previously relied on in-house production at the
BBC and ITV.
194. Following an assessment by the Independent
Television Commission (ITC) of the independent production sector
in 2002, the ITC recommended a radical shift in the relationship
between broadcasters (as programme commissioners) and independent
producers. Broadcasters were in a strong negotiating position
because there was little interest in commissioning from the multichannel
sector. The ITC concluded that intervention was required to promote
growth in the independent sector.
195. The ITC, and subsequently Ofcom, developed
Terms of Trade/Codes of Practice to help independent producers
to negotiate a fair deal in the primary rights package, establishing
a balance in the relationship between the parties. These terms
of trade relate to how rights should be sold and priced. Primary
rights are a matter of negotiation between broadcaster and independent
producer, subject to Ofcom's approval. The terms of trade introduced
in the Communications Act 2003 enabled independent TV producers
to retain control of a share of intellectual property rights when
they create programmes for broadcasters. The major broadcasters
told us that the Terms of Trade put them at a commercial disadvantage.
Michael Grade said, "It is a nonsense that there are regulated
terms of trade between two commercial organisations. If you are
an independent producer, you have plenty of places you can sell
your wares to" (Q 1867).
The BBC and the independents
196. As noted, the BBC must commission at least
25 per cent of its qualifying television programme hours from
independent producers. However, as noted by the House of Lords
Select Committee on the BBC Charter Review in 2005, the BBC did
not always succeed in meeting this obligation, and saw it both
as a ceiling as well as a floor. Many witnesses who gave evidence
to the Committee felt that "an increase in independent commissioning
at the BBC would benefit the industry and the quality of programming"
197. Following the 2005 Green Paper,
the BBC, with a view to increasing independent production, put
forward a plan to introduce the Window of Creative Competition
(WOCC), which identified a further 25 per cent of BBC commissions
over and above the 25 per cent minimum quota for which all producers,
both in-house and external, can compete.
198. The WOCC began operating in 2007 and has,
to date, been successful. According to the BBC,
in the financial year 2008/9, independent production companies
won three-quarters and in-house won a quarter of network programme
hours available within it. The BBC Trust reviews the operation
of the WOCC, and other commissioning arrangements as set out in
the BBC Agreement, at least every two years. The BBC Trust said,
in a review conducted on the BBC Trust's behalf by PriceWaterhouseCoopers
in 2008, concluded
that "commissioners had clear incentives to pick the best
ideas and PwC found no obvious bias towards accepting in-house
ideas over independent ones or vice versa".
199. From its inception, British television was
governed by a public service ethos which was applied as much to
the commercially funded sector as to the publicly funded BBC.
For the first 45 years of post-war television, change was incremental
and as recently as the early 1990s a four-channel terrestrial
service provided the vast majority of television consumption.
200. From the beginning of commercial television,
a clear separation of revenue streams (between the licence fee-funded
BBC and advertising-funded ITV and Channel 4) provided stability
of programme funding, and substantial returns for ITV companies
in return for their regional advertising monopolies. However,
the major legislative changes of the 1990 Broadcasting Act coupled
with the arrival of cable and satellite channels and a fifth terrestrial
channel signalled a profound shift in the television market-place
in the 1990s, when the "licence to print money" gave
way to significant competition for viewers and commercial revenue.
The arrival of pay channels, in particular, heralded a new source
of television revenue through subscription.
201. The last ten years have seen two major technologically
driven changes. First, the shift from analogue to digital transmission
in terrestrial, cable and satellite television has spawned a proliferation
of channels, both advertising and subscription based. Revenue
from subscription channels now exceeds that from both public funding
(the licence fee) and advertising. Second, a new generation of
hard drive recorders along with catch-up TV (such as the BBC iPlayer)
and online viewing through computers provide a number of different
approaches to television consumption.
202. The television industry today plays a vital
role in the UK economy, providing around 80,000 jobs and contributing
about £1 billion to the export economy. In addition to a
small number of large terrestrial broadcasters, the industry comprises
a large number of small independent production companies which
have injected considerable creative and economic dynamism.
203. Television also plays an important cultural
role in the life of the nation, and overall levels of TV viewing
have remained remarkably consistent, despite the upheavals of
the last 20 years, at around 25 hours per week. Both opinion research
and viewing figures demonstrate that British audiences place particular
value on UK-originated programmes. In recognition of both the
economic and cultural importance of original UK content, British
legislation has consistently empowered regulatory bodies to set
minimum quotas on the levels of UK programming which the PSBs
are expected to transmit. For the most part, these have been comfortably
204. The exponential growth in the number of
channels and the substantial revenues now being earned through
subscription and pay per view have not been matched by a proportionate
increase in the volume of UK-originated content. Over 90 per cent
of UK-originated content on television is therefore still produced
by the public service broadcastersnotably the BBC, ITV
and Channel 4.
205. Until now, the commercial PSBs have received
financial support from their use of the limited analogue spectrum.
With completion of the digital switchover programme in 2012, this
implied subsidy will disappear. At the same time, an unprecedented
cyclical decline in advertising revenue because of the economic
downturn has been exacerbated both by fragmenting audiences and
by a structural shift of some TV advertising revenue to online.
206. One consequence has been a dramatic fall
in overall spending by the PSBs on UK-originated programming,
down by around 15 per cent in real terms from £3.1 billion
in 2004 to £2.6 billion in 2008. There is a consensus in
the industry that this rapid decline is set to fall further if
remedial action is not taken.
207. There is a particular risk that the commercial
PSBs will be driven towards acquiring more programmes from abroad
(especially from the US), which are generally cheaper than equivalent
hours of UK-originated output. If unchecked, a continuing reduction
in investment in UK television content could have damaging consequences
for the economy, for jobs, and for British culture.
41 For the first 3 months, this system alternated with
the 240-line John Logie Baird system until it was agreed that
the Marconi system afforded better quality reception. Back
The BBC responded with the first example of competitive scheduling
by killing off Grace Archer in its hugely popular radio series
The Archers. Back
The same year saw some significant changes in ITV franchises,
with London Weekend Television replacing ATV for the London weekend
franchise and Thames created by a forced merger of ABC and Rediffusion
London for the weekday franchise. Yorkshire TV was given a new
franchise out of part of the Granada area, Harlech replaced
TWW, ATV took over the all-week Midland franchise and Granada
the all-week North-West franchise. Back
Figures from the British Film Institute Back
Appendix seven lists popular British television programmes by
decade from the 1950s onwards Back
ATV, Southern and Westward were replaced respectively by Central
in the Midlands, TVS in the South and TSW in the South-West. Back
Carlton replaced Thames, Westcountry replaced TSW, Meridian replaced
TVS and TVam lost out to GMTV for the breakfast franchise. Back
ONS Annual Business Inquiry, November 2009 Back
PACT Annual TV exports survey. Associated activities include DVD/Video
sales, formats and licencing. Back
AVMS replaced the Television Without Frontiers (TWF) Directive
on 10 December 2007 and was transposed into UK legislation on
10 November 2009 Back
c) atleast50%ofprogrammingincludedintheirTransmissionTimeinaccordancewith(b)aboveiscreatednolessthanfiveyearsearlierbyproducerswhoareindependentofbroadcasters. Back
Culture, Media and Sport Committee, First Report (2007-08): Public
service content (HC 36) Back
Ofcom Public Service Broadcasting Annual Report 2009, p.33 Back
Ibid p.34 Back
HouseofLordsCommunicationsCommittee-First Report (2007-08):
TheOwnershipoftheNews (HL 122);and
Second Report (2008-09) PublicServiceBroadcasting (HL61) Back
Ofcom PSB annual report 2009, p.145 Back
Joint Culture, Media and Sport; and Business, innovation
and Skills Select Committee evidence on Ofcom's 2009-10 Annual
Plan, 1 December 2009 Back
Review of the BBC's Royal Charter: A strong BBC, independent of