Ofcom review of television production sector: BECTU response to consultation

20 February 2006

BECTU believes that the Ofcom Review is timely - especially in relation to the independent production sector. The growth of independent production for television, advantageous changes in the terms of trade with broadcasters and the rise of the 'super-indies' have contributed to a significant redistribution of power and resources within the broadcasting industry as a whole. We therefore welcome the information provided in the Consultation document and Ofcom's new focus on the sector. We set out below our response to the questions posed - although this is in many cases abbreviated by the focus on corporate issues which are only indirectly relevant to our own function as the trade union representing 'behind the camera' workers in the sector.
We believe, however, that there is a significant omission from the scope of the Review - which is the working conditions of the thousands of freelance workers who provide the skilled labour force for the independent production sector. Given the numbers involved, the labour intensity of the sector, the significance of individual creative contributions and Ofcom's own role (through the terms of trade) in promoting the growth of the sector, we believe this is inappropriate. We accept that Ofcom's terms of reference exclude the issues of training and individual creators' rights and that Ofcom has no statutory role in relation to terms and conditions of employment. Nonetheless, we believe these issues are very significant and relevant to the future of the sector especially when Ofcom has developed a role in promoting and overseeing its future growth.
On freelance Pay and Working Hours in independent production, Ofcom will be well aware of the very significant recent publicity given to these issues, including numerous articles in the trade press referring to the concerns of industry trade unions, of the 'TV Wrap' campaign and of individual freelances. BECTU has written directly to Ofcom on these matters, which have also been raised at the regular Ofcom/FEU meetings.
In late 2005 BECTU undertook a Television Freelance Survey of members working in independent production for TV as well as directly for BBC and ITV. The survey focussed on pay and hours of work. The response from 900 members makes it the most comprehensive recent survey of its kind and gives authority to its findings.
On pay for freelances, the results were as follows:
- The independent sector is markedly more likely than BBC or ITV to pay freelances below the recommended minimum rate (set by the independents' own trade association PACT in its joint rate card agreed with BECTU).
- 34% of all freelance contracts with independents were below the recommended minimum (compared to 28% for BBC contracts and 24% for ITV contracts).
- It should also be noted that below-minimum rates were more likely on daily contracts for long hours (ie over 12 hours), with 53% of such contracts paying below the rate compared to only 18% of daily contracts for 10-12 hours. This is significant in relation to independents when set against the findings on hours.
On hours for freelances, the results for daily contracts were as follows:
- The independent sector is significantly more likely than BBC or ITV to operate daily contracts in excess of 12 hours for freelances.
- 25% of all freelance daily contracts with independents were for over-12 hours (compared to 20% for ITV and 17% for BBC).
We are not suggesting that independents are worse employers than broadcasters on all counts. For instance, in some areas of production our survey found independents both at the bottom of the freelance pay scale and at the top, with broadcasters in the middle. In these cases, it would be more accurate to characterise the independent sector's performance as volatile rather than unambiguously poor.
There is still a widespread delusion that independents are small and nimble, operating on a shoestring, squeezed by powerful broadcasters, offering creative opportunities to freelances but unable to provide terms and conditions of employment equivalent to those offered by the broadcasters. If this were ever true, it is certainly not true today. The independent sector today is dominated by a small number of "super-indies", often multinational businesses equivalent in size to the broadcasters that commission their work. They have defeated the broadcasters over terms of trade. They have rights in their work for exploitation in secondary markets. And they stand to make further inroads from the BBC's WOCC. Collectively - and in the case of the "super-indies" individually - the independents exercise enormous power and with that power come responsibilities to the people they employ.
We therefore urge Ofcom to reconsider its hands-off approach in this area; to engage in meaningful discussions with industry trade unions and the independents in order to develop a clear and mutually-understood set of acceptable employment standards on pay and hours; and to ask broadcasters to adopt a contract compliance approach to independents requiring them to observe these standards.
The absence of specific statutory powers for Ofcom in this area is no reason why this should not be undertaken on a voluntary basis. Ofcom's inactivity in this area contrasts sharply with its proactive and assiduous attention to the demands and concerns of the independents. Since skilled and creative labour is the primary asset of the UK television production sector, the time to redress this balance is now long overdue
On Training - which is excluded from Ofcom's terms of reference - we should at least note that the broadcasters (principally the BBC) -continue to provide the overwhelming majority of vocational training for the media, including many individuals who subsequently take their skills to the independent sector. The BBC itself estimates that up to 40% of people working in the UK media have received some training from the BBC, whose expenditure on formal training for programme-making staff alone was £40m in 2003-2004. While recognising that independents have made an investment on training over a number of years through the Freelance Training Fund, this can still not hope to replicate the opportunities for training provided by a stable structure of in-house employment.
On Equal Opportunities for staff and freelances working in the media, we have continuing concerns about the performance of the independent sector in relation to cultural/ethnic diversity in particular as well as about Ofcom's role in this area. Ofcom rightly identifies 'diversity of ...ethnicity' (2.33) as an important aspect of programme production. This applies both to in-house and external production and we accept that significant improvement is required in both areas. However, in-house production at least provides the stable structures in which equal opportunity policies have the possibility of making an impact - and at the most basic level broadcasters can and do provide to Ofcom the employment data by which progress can be assessed.
We believe Ofcom should become more proactive in promoting cultural/ethnic diversity in the independents' workforce - where the predominance of freelance over permanent employment makes it more difficult to put equal opportunities policies aimed at changing the ethnic balance of the workforce into effect. As a minimum step we believe Ofcom should place requirements on independents to provide employment data (including an ethnic breakdown) similar to that provided by broadcasters. If Ofcom claims to have no remit to do this then those requirements could in the first instance be voluntary.
Moving beyond this, we believe Ofcom should give consideration to seeking more statutory powers in this area - including the power to require broadcasters to adopt contract compliance methods of monitoring and enforcing good practice on independents. Hiding behind the absence of such a remit while at the same time actively promoting the independent sector is not, in our view, an acceptable position for Ofcom to take.

Q1 Do you share the view that Ofcom's focus in the TV production sector should be on furthering the interests of viewers as consumers and UK citizens?
Q2 Do you agree that Ofcom's assessment of the role of diversity in its different forms is an appropriate framework within which to think about the link between viewer interests and diversity of production?

We accept that Ofcom's underlying focus in the sector should on furthering the interests of viewers as consumers and as citizens. We can therefore agree that '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'. We believe, however, that the respective interests of consumers and citizens may not always coincide. For example, the consumer interest in mass audience programming, popular imports and repeats may cut across the citizen's interest in having a broadcast system which educates and informs as well as entertains. If choices have to be made, we believe Ofcom should be prepared to lean in the direction of the continuing citizen interest in a strong and broad public service broadcasting ethos rather than a purely consumer and audience-led approach.
We do not accept that this underlying focus (the interests of viewers) provides a justification for Ofcom to support any particular strategy of promoting diversity of corporate scale and structure (ie in-house or external) or diversity through having a large number of businesses in the market. The link between viewer interest and any such specific approach to diversity is, our view, not demonstrated or justified in the Document.
We can agree that 'too much emphasis on promoting diversity in the production sector could ultimately act against viewer interests' (1.21); and that 'diversity-whether of sources of supply, or of content on screen - is only important if it helps to meet viewers' interests' (2.42).
However, the link between viewers' interests and diversity of sources of supply (ie encouraging independent as well as in-house production) is simply not proved. The argument, in 2.15, that since people feel they should continue to be provided with 'a good variety of programme types', then 'by extension, they also see value in a plurality of supply' simply does not hold. 'By extension', they do not necessarily see anything of the kind. No evidence is put forward for this assertion and we believe it is positively misleading. It seems as if Ofcom is assuming the case which it is purporting to prove ie that viewer interest justifies a policy of encouraging diversity in programme supply. On the contrary, we believe there is a strong viewer interest in sustaining a critical mass of in-house production in the broadcasting sector, as a guarantee of the range, quality and diversity of output that viewers have come to expect from terrestrial TV in the UK.

Q3 Do you agree with Ofcom's understanding of the reasons why intervention has been warranted - namely negotiating strength, vertical integration and geographic concentration?

We note the reasons for intervention in the television production sector ie negotiating strength, vertical integration and geographic concentration. We defer our discussion of geographic concentration to the section on 'out of London production' later in the Document.
We note, in respect of negotiating strength, that the new Code of Practice and terms of trade between broadcasters and independents already represent a very significant shift in favour of the latter. Ofcom's underlying preference seems to be for a continuing shift in this direction. We continue to be concerned about the balance of the argument in this area, since there seems little detailed examination, on the part of Ofcom, of the implications and dangers of restricting broadcasters' in-house production below the critical mass necessary to sustain an adequate range and quality of output. A more even-handed consideration of these issues would be desirable.
On vertical integration, Ofcom again seems to assume the case which it wishes to prove is in favour of encouraging further diversity of supply by means of independent production. The Document states that 'Intervention in this area [ie encouraging external production] may therefore be considered necessary because of a potential failure by broadcasters to commission the programmes that satisfy the interests of viewers as consumers. '(3.41) But equally, it may not be necessary. The evidence justifying intervention is simply not provided.
The Document does provide a summary of the efficiencies and benefits of in-house production in paragraph 3.44 and 3.45. However, this is immediately followed by the statement that 'this natural tendency towards in-house may lead to a reduction in the diversity of supply of programming. From a social perspective regulatory intervention may be justified to help ensure that there is diversity and plurality in the supply of programming - which is in the interests of viewers as UK citizens'. (3.48). We are back to the unproven link, already referred to above, between viewer interest and diversity of supply.
The Document goes on to compound this problem by justifying intervention in favour of external production simply on the basis that previous policy interventions have leaned in the same direction (paragraph 3.50 and 3.51). The Document then states that 'Given the direction of policy in this area, it could seem a backward step for viewers if in-house production were to increase in the future even if this were the outcome of rational commercial decisions being made in a competitive market.'(3.52) The fact that 'it could seem a backward step' is no justification at all. This section simply seems to parade Ofcom's prejudices rather than present evidence on the issue of in-house compared to external production. We simply do not believe that the Document makes any adequate case justifying further intervention against vertical integration in the sector.

Q4 Does our representation of the current position of the television production sector accord with your experience and understanding of the sector?

The Document provides useful information on the general market overview, the external production sector and out of London production. We note the impressive value of original UK production overall - £2.6B - which underlines the UK's continuing leading international role as a producer rather than importer of TV programmes.
We note that the external production sector already accounts for 44% (£1.1B) of total production. The existing weight and size of the independent sector as a whole - together with the evidence that a small number of companies are responsible for the bulk of the turnover - underlines the point that the days of small and powerless independents pitted against large and powerful broadcasters are long gone.

Q5 Do you agree with Ofcom's understanding of the likely future developments in the sector? Are there other relevant developments Ofcom has not considered?
Q6 Do you agree that the rationale for intervention - in terms of negotiating strength, vertical integration and geographic concentration - remains valid? Do you have a view about the circumstances that would lead to the withdrawal of intervention?

The Document correctly identifies a number of evolving trends in the production sector, including:
- a growth in the sources of demand for independent or external productions eg from digital channels and from international markets.
- the consolidation of the independent sector through mergers and acquisitions, access to external finance from private equity houses and stock market floats.
- the growth of the 'super-indies' which can benefit from economies of scale and scope thereby leading to further consolidation - as also predicted by Mediatique and others.
- 'the emergence of a greater number of larger companies - who may be able to counter the competitive advantage of vertically-integrated broadcaster-producers.' (5.55)
- 'in more commercial genres - like Drama, Entertainment and Factual - it [the external production sector] will be in a strong position when competing with in-house production companies.'(5.57)
Two additional trends worthy of more attention in our view are:
- The potential for large independents, especially those with new responsibilities to shareholders, to develop a bias towards 'safe' programmes in low-risk re-sellable formats (as argued in 'The Tipping Point' report from the Work Foundation). If true, this undermines the case for independents as a force for diversity and creativity in programming.
- The very large amounts of money being awarded by some independent producers to themselves (notoriously including Peter Bazalgette's £4.6m in 2004). High salaries and lucrative incentive schemes in the larger independents puts them in a position to 'poach' creative talent from the broadcasters. There is evidence that this has already been happening at the BBC. To the extent that this is true, it undermines the case that independents have weaker negotiating strength than the broadcasters.
The great omission, in our view, is any analysis whatsoever of the labour market in the external production sector - other than the passing reference to the fact that 'The production sector is predominantly a freelance-based industry, which relies on outsourcing at almost every stage of production'. (5.44)
Again, we take issue with the assumption which seems to underlie the arguments on negotiating strength and vertical integration ie the unproven link between viewer interests and the need for intervention to promote the independent sector. However, we can certainly accept that the existing independent production quota should remain in place rather than removing such intervention altogether.
On out of London production, we accept that market forces will not of themselves encourage production activity to disperse from London and that therefore 'intervention to secure out of London production will continue to be required'. (5.88)
The Codes of Practice

Q7 Do you agree with Ofcom's assessment of the operation of the framework created by the new Codes of Practice - both in general terms, and particularly in relation to prices and new media rights?
Q8 What are your views on the objectives and range of options which Ofcom has set out to assist it in developing proposals in relation to new media rights?
Q9 To what extent could new media rights issues be addressed through negotiation within a reasonable timeframe, without the need for intervention by Ofcom?
Q10 What are your views on the principles of moving to a system based on a windowing concept - ie a system involving primary and holdback windows?
Q11 Do you agree with Ofcom's assessment of the main issues that are likely to be raised in relation to the implementation of such a framework? Specifically:
- Should there be an interplay between the duration of the primary and holdback windows? If so, what factors would determine this interplay?
- How could repeats be treated within a windowing framework?
- There are potentially a spectrum of Video on Demand (VoD) rights from free to air through to pay per view. The potential of VoD rights to affect existing viewing patterns (and therefore existing advertising-based funding models) differs across this spectrum. At the same time VoD rights represent a new potential source of revenue for both broadcaster and producer. How might this threat/opportunity trade-off best be managed within a windowing framework?
- What options might be developed for allowing the early exploitation of re-purposed content while taking account of the legitimate concerns of broadcasters?
- How might returning series be treated within this framework?
Q12 To what extent could the principles of a "when, not where" approach be accommodated into the existing Codes of Practice/terms of trade framework?
Q13 Are there any other aspects of the Codes of Practice that require further consideration by Ofcom?

Section 6 of the Document analyses a whole range of new issues concerning the distribution of rights as between broadcasters and independent producers including programme prices, new media rights, primary and holdback rights windows and the treatment of repeats/VoD rights/re-purposed content/returning series.
We note that Ofcom believes the current Codes of Practice have worked well; that further thought is now needed to developing arrangements to deal with some or all of the above issues; that these may best be dealt with through negotiation between broadcasters and independents; that failing this Ofcom will intervene by recommending changes to the Codes of Practice; and that this would be subject to further negotiation.
We have no specific view on the questions raised at the end of Section 6 since the entire debate is restricted to the corporate control of rights and their relative distribution between broadcasters and independents. Our general reaction to the prospect of yet a further allocation of new media rights to independents is that Ofcom, in curtailing the broadcasters' revenue streams in this way, may ironically present them with a strong incentive to boost in-house production (where rights are retained) at the expense of independent production. We would welcome this although we anticipate that Ofcom, as a major promoter of the independent sector, would not.
A glaring omission, in our view, is any discussion of or even reference to individual creators' rights. Ofcom has indicated that this falls outside the Review's terms of reference. We see no justification for this.
Ofcom has made and continues to make significant efforts to improve the rights position of independents vis-�-vis broadcasters. This seems to be taken as self-evidently desirable. It seems irresponsible and unbalanced to take no account of the additional responsibilities which, in our view, ought to accompany these rights. Complaints by independents about their exploitation by broadcasters are sometimes matched, hypocritically, by their own exploitative practices towards individual creators. We believe that Ofcom should take note of this and should require fair dealing on the part of independents towards the individual creators who contribute to their corporate success.

Q14 What do you see as the key issues in relation to the operation of the BBC's proposed Window of Creative Competition (the WOCC)?

We note that the Section on 'Other key policy issues' encompasses discussion on the BBC's planned WOCC (Window of Creative Contribution), the independent production quota, out of London production and relevant definitions.
Specifically on the WOCC, we note that this proposal represents a significant opportunity for external producers to complete for around £500m of BBC commissions, which is approximately £200m over and above the BBC's current external commissioning spend.
As indicated above, we do not think that the Document has presented any adequate or fundamental justification for policies which promote diversity of supply ie external production rather than in-house production. This is asserted but not proved to be in viewers' interests. We are therefore strongly at variance with the statement that 'Ofcom welcomes the principle of the WOCC - we support the BBC's intention to enhance creative competition and create a more level playing field for external producers.' (7.10). Why is it judged self-evidently desirable for there to be 'a more level playing field for external producers' and why should Ofcom presume to take on a role in promoting this?
On the contrary we believe, as stated in our response to the Green Paper on BBC Charter Review, 'that the WOCC will be harmful rather than helpful to the future of the BBC'. We believe the Document comprehensively underestimates the value of in-house production. As primarily a programme producer rather than a mere commissioner, the BBC commands a broad range and critical mass of creative and technical skills in its labour force. This, we believe, is a guarantor of high quality programming across all genres and provides the necessary space to develop talent and innovation.
By undermining this through yet further provision of external production, we believe the BBC's position as a world class centre of excellence in television programme production across the board is put at risk - to the detriment not only of its skilled labour force (a significant proportion of whom stand to lose their jobs) but ultimately of the viewers, (who, as audience research indicates, value the high quality output of public service broadcasting).
In this respect, we find the analysis put forward by the Work Foundation in its report 'The Tipping Point' persuasive. We note their view that 'in the long-term the BBC risks a serious hollowing-out as a creative organisation by a rapidly growing and newly empowered independent sector who will be obliged to poach its talent because of the paucity of its own training, while driving a hard bargain over both programme provision and re-use of content in service provision'. Evidence is already emerging of a trend for senior BBC staff to be lost to the independent sector eg Stuart Murphy to RDF, Lorraine Heggessey to Talkback, Peter Salmon to Television Corporation, Jane Lush to Splash, Elaine Sperber to Television Corporation, Rupert Gavin to Contender Entertainment. In this context we believe the 'playing field' is tilted not in favour of the BBC but against it.
Despite this, the Document argues for the opening up of yet further complicating issues in the operation of the WOCC eg areas of integrated commissioning and programming, returning series (7.10). Ironically, the Document then cautions against complexity in the operation of the WOCC (7.13). In our view, the WOCC itself brings an unnecessary level of complexity to the BBC's operations - opening up the prospect of wasteful and excessive transaction costs and bureaucracy which are reminiscent of the BBC's earlier and discredited policy of Producer Choice, which sought to introduce an internal market into the BBC.
Finally, the Document proposes that Ofcom should be involved, jointly with the BBC Trust, in reviewing the operation of the WOCC. In the light of Ofcom's analysis and its role in promoting external production we believe this would be undesirable and inappropriate, as well as introducing an unnecessary level of complication to the BBC's future operations.
In summary, our views on the proposed WOCC are as follows:
- We believe the WOCC will be harmful rather than helpful to the future of the BBC as a producer broadcaster.
- We contend that the Ofcom Document comprehensively underestimates the value of in-house production.
- We anticipate that the WOCC will introduce unnecessary transaction costs and complications into the BBC's operations.
- We oppose a joint role for Ofcom in reviewing the operation of the WOCC.

Q15 What are your views on the options for the future of the independent production quota?

We note that the Document presents 4 options for the 25% independent production quota. (1) reduce/remove it; (2) maintain at the current level; (3) increase it for some or all public service broadcasters; (4) increase it but with a view to removal when it becomes self-sustaining.
We agree with the Document's analysis of options 1 and 4, which is to reject them.
In respect of option 3, we note that the Document holds out the possibility of increasing the BBC's quota - but only if the WOCC does not achieve its aims. For the reasons set out in response to Q14, we disagree with the basis premise behind the WOCC and by extension see no case for increasing the BBC's independent quota under any circumstances because of the inevitable and undesirable damage to in-house production and consequently to viewers' interests.
Given the above, we agree with the Document's support for option 2 ie maintaining the quota at its current level. We see no additional use for any separate or subsidiary quota for small independents.

Q16 What are your views on the options for the future of intervention to secure production outside London?
Q17 Would the move of a channel or significant commissioning power outside London be desirable and practical, and would it create the circumstances to allow a withdrawal from intervention in out of London production?

We note that Ofcom identifies and considers a range of measures (Box 7.1) to secure production outside London and expresses a preference for a further strategy to 'increase the degree of intervention, or supplement current measures with further policy tools' (7.27 and following).
We note that the Document specifically favours increasing the levels of out of London spend for C4, Five and the BBC towards Channel 3 levels and recommends a BBC out-of-London target of 50% of network production by volume and value to be achieved over time.
BECTU's initial view on these issues is as follows:
- We support in principle the shifting of production out of London by the BBC and other broadcasters. We believe that any such shift of production should always and only be undertaken in accordance with good employment practice ie full consultation with the workers involved and no compulsory redundancies or relocations.
- While accepting that 'too much emphasis on [geographical] diversity could actually act to the detriment of views', we nonetheless believe that any out-of-London shift of production should aim to achieve a degree of genuine geographic dispersal around the UK rather than a sole focus on 1 or 2 additional links outside London; and should avoid any purely artificial dispersal to comply with the letter but not the spirit of such an exercise (eg relocation just beyond the M25).
- Set against any rigid, quota-filling approach, we believe it will continue to be necessary to pay due regard to preserving a critical mass of in-house production, particularly in the BBC, in London; and to the fact that the majority of the freelance workforce remain based in the South East.
- We believe that Ofcom should pay due attention to the responsibilities of the independent sector on this issue. Independents - especially the super-indies - remain overwhelmingly based in London and the South East. Targets - if not statutory quotas - for a fairer geographic dispersal of independent production should now be considered, with a focus on the genuine use of out-of-London staff, freelances and facilities rather than cosmetically regional productions which are still predominantly London-based.
- While open in principle to the consideration of moving a mainstream BBC channel out of London, we do not see any case for this in addition to the BBC's current (and in our view flawed and piecemeal) approach involving the shift of sports and children's programming to Manchester.
- As indicated in a previous submission to Ofcom, we are opposed to the proposal for the establishment of a Public Service Publisher (whether out of London or not).
While supporting Ofcom's general concern with the out-of-London issue, we believe this contradicts Ofcom's previous decisions allowing the rundown of ITV regional production - a strategy to which we were and remain strongly opposed.

Q18 Do you think it would be desirable to propose a change to the definition of a qualifying independent producer, and do you believe that change in this area could help to further the interests of viewers?
Q19 If so, do you support any of the Options for change to the definition of a qualifying independent producer presented in this document? Are there any other options that Ofcom should consider? Please explain the basis for your views, taking account of the points made by Ofcom, and provide any supporting evidence.
Q20 Do you agree with our proposals for no change to the definitions to qualifying programmes and out of London productions?

We note that the Document raises the issue of definitions in three areas: qualifying independent producers; qualifying programmes; out of London productions.
In respect of independent producers, we note that the current definition excludes independents which share common ownership (in excess of 25%) with a UK broadcaster or which are more than 50% owned by two or more UK broadcasters.
We further note the arguments for effectively relaxing this definition eg exclusion would only apply if the independent or broadcaster concerned exceeded a defined size threshold. We reject such arguments - not only on grounds of practicality but because the growing weight of the independent production sector removes any justification for more favourable, permissive treatments. The independent sector now plays a very significant economic role in UK broadcasting and many super-indies are already considerably larger than the smaller broadcasting franchises. We therefore see no case for a relaxation of the ownership restrictions.
In the light of this, we support the Document's recommendation of no change in the current definition, which we agree is 'a clear practical rule which has to a great extent withstood the test of time' (7.51).
We similarly favour the retention of the current definition of qualifying programmes (7.58 - 7.59) and out of London production (7.62) and would oppose any relaxation of these. We accept that both definitions have been working well.

Last updated 23 March 2006

Ofcom review of television production sector: BECTU response to consultation

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