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Review of the Television Production Sector Consultation Document

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Review of the Television Production Sector Consultation Document Review of the television production sector Consultation document Consultation Publication date: 10 January 2006 Closing Date for Responses: 21 March 2006 Review of the television production sector Contents Section Page 1 Executive summary 1 2 The objectives of television production 17 3 Intervention in the television production sector 27 4 Current position of the television production sector 44 5 Future developments and implications for intervention 64 6 The Codes of Practice 80 7 Other key policy issues 97 Annex Page 1 Responding to this consultation 111 2 Ofcom’s consultation principles 113 3 Consultation response cover sheet 114 4 Consultation questions 116 5 Industry interview programme 118 6 Consultation events around the UK 122 7 Creativity and innovation 131 8 Operation of the Codes of Practice 137 Review of the television production sector Section 1 1 Executive summary 1.1 The UK television industry generates annual revenues in excess of £9bn, and spends almost £5bn on programming – of this, around £2.6bn represents spending on original programming. This means that UK television viewers enjoy one of the highest levels of domestically originated content in the world. 1.2 The £2.6bn spent by major UK channels on original programming in 2004 comprised over 27,000 hours of new programming, made by a television production sector with over 800 firms around the UK. The amount of original television production has grown at an average rate of 4% per year over the past five years, with production companies also benefiting from new opportunities overseas and on alternative distribution platforms.1 1.3 Ofcom has been conducting a review of the television production sector2, which has followed on from Ofcom’s review of public service television broadcasting (the PSB Review) carried out in 2004/5. 1.4 This document summarises Ofcom’s findings from the current review. We have set out the results of our analysis in full, with a view to developing the evidence base and informing debates in the industry. Whilst we find that there is no requirement for major revisions to intervention in the television production sector, we have set out options for change in some important areas. Alongside our proposed options for change, this document sets out a number of questions for consultation. 1.5 We now enter a period of formal consultation, which concludes on 21 March 2006. During this period, we welcome stakeholders’ views on the issues and options discussed in this consultation document. Following this deadline, we expect to issue a final policy statement in the spring of 2006. Further implementation work may need to follow this review – for instance in relation to the Codes of Practice governing the relationships between the main terrestrial broadcasters and independent producers. Any potential changes to the Codes could require a further consultation exercise with stakeholders, relating specifically to updating Ofcom’s guidance on the Codes of Practice. Moreover, if Ofcom recommends a change to the definition of a qualifying independent producer, this issue would be taken forward by Government. The purpose of this review 1.6 This review concerns the key aspects of the television production sector, which comprises programme-making activity both within the main broadcasters (in-house production) and outside (external production – qualifying and non-qualifying independent producers3). We seek to explore the key developments in the sector, 1 The data in paragraphs 1.1 and 1.2 is drawn from Ofcom research conducted as part of the review of public service television broadcasting, for the Communications Market 2005 report, and for the current review. 2 It should be noted that film production is outside the scope of this review. As noted in the terms of reference for this review, published on 11 May 2005, Ofcom does not have powers to intervene in relation to film production. 3 In this document, we use the terms “external producer” and “external production” to refer to all production that is not in-house – and so the terms refer to both qualifying independent producers, and other external producers. We use the terms “independent producer” and “independent production” where we need to make reference solely to qualifying independent producers. 1 Review of the television production sector and how the interests of television viewers – as both consumers and UK citizens – are met by the industry. Our particular focus is on the key production quotas, the operation of the commissioning system between producers and broadcasters, and the Codes of Practice. 1.7 The last major review of the sector was the Programme Supply Review, conducted by the Independent Television Commission (ITC) in 2002. As well as reviewing existing quotas, the ITC’s review recommended that Codes of Practice should be put in place between independent producers and the main terrestrial channels – who are licensed public service channels under the terms of the Communications Act 2003 (“The Act”). These recommendations were subsequently incorporated into the Act, and the Codes have since been implemented by the broadcasters based on guidance from Ofcom. 1.8 The timing of the current review is therefore driven in part by a need to conduct an initial assessment of the operation of the new Codes. However, Ofcom is also using this opportunity to carry out a more comprehensive review of the overall set of interventions in the production sector. 1.9 Ofcom’s general duties are set out in Section 3 of the Act, and these provide us with overall guidance in carrying out this review. However, we also have important duties relating specifically to the television production sector, as set out in Chapter 4 of the Act: • Section 285 Code for programme commissioning by the main terrestrial broadcasters. This relates to the commissioning by licensed public service channels from independent producers, and focuses on the principles under which commissions are agreed upon • Section 277 Programming quotas for independent production requires Ofcom to set quotas for the proportion of independent television production commissioned by licensed public service channels, and Section 309 Quotas for independent programmes applies in a similar way to digital television programme services which are not comprised in a licensed public service channel • Section 295 Involvement of C4 Corporation in programme-making relates to Channel 4’s model as a publisher-broadcaster • Section 286 Regional programme-making for Channel 34 and 5 and Section 288 Regional programme-making for Channel 4 relate among other things to the proportion of programmes commissioned by these channels made outside of the M25 area. 1.10 Therefore, whilst we seek to take a broad perspective in carrying out this review, we are necessarily focused on carrying out our duties under the Act – as they apply in general and specific terms to the television production sector. 1.11 Figure 1.1 below summarises the framework that we have adopted for this review. 4 The term “Channel 3” refers to the licences currently held by ITV plc, SMG plc and Ulster Television plc. We also use the term “ITV1” to refer to the services broadcast under the terms of the Channel 3 licences. 2 Review of the television production sector Figure 1.1: Ofcom’s approach to the television production sector review What is the right intervention in the UK television production sector? 1. What are 2. Why won’t 3. What are 4. What are 5. What do the overall the market the current the key we propose objectives for deliver on remedies? market for the the sector? these? trends? future? 1.12 Our overarching goal is therefore to define the appropriate extent and nature of intervention in the television production sector, taking into account our duties under the Act. This requires us to give consideration to a number of specific issues: • The objectives that, if met, would enable us to conclude that the production sector is operating effectively • The rationale for intervention in the sector – i.e. the factors that could mean that the objectives are left unfulfilled – and the specific interventions that have arisen in response • The key developments in the market – both over the recent past, and in looking to the future • The implications for intervention going forward – both for the overall rationale, and for the specific policy areas. 1.13 The rest of this section considers each of these issues in turn. The objectives of television production 1.14 Ofcom’s starting point in this review is the interest of viewers. However, it is important to be clear what we mean by viewers. We see two perspectives: • Viewers as consumers, who enjoy television as an entertainment medium • Viewers as UK citizens, who are affected by television at a social level – relating to the viewing habits of all UK citizens, as well as their own. 1.15 Our objective is to ensure that viewers as consumers and UK citizens receive the types of television content that meet their underlying interests. Importantly, we believe that intervention should only take place if it is intended to secure benefits for viewers. 1.16 In our view, if the interests of viewers as both consumers and UK citizens are met by the programming output they see on their television screens, then we can conclude that the television production sector is fulfilling its purpose. 1.17 This approach requires us to define what types of content viewers expect: • Ofcom’s audience research has firmly established that viewers as consumers see entertainment as a key purpose
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