House of Lords Communications and Digital Select Committee inquiry “A creative future”
About the BFI
The BFI was founded in 1933 and is governed by our Royal Charter. Over the past 90 years we have grown in our role as a cultural charity, a distributor of National Lottery funds and as the UK Government's lead body for film and the moving image.
We are a community of over 700 people who are passionate and knowledgeable about film, television and the moving image. And we are committed to ensuring a positive and accessible screen culture for all.
Our mission
We want to create the conditions in which screen culture and the UK's screen industries can thrive - across the UK and around the world.
We will do this by:
through our online and in-venue programmes and festivals
Our creative industries are a success story for the whole of the United Kingdom, and the screen industries are a notable example of this. We make high quality film, television and screen content that is enjoyed by audiences at home and around the world, demonstrating our talent and innovation in creative storytelling, and the skills and expertise of our world-class crew, cast, video games developers and production businesses. The BFl's Screen Business report (2021) highlights that since the pandemic we have seen a bounce-back in activity, with £1.24 billion of film and high-end television spend during the last quarter of 2020. This only accelerated during 2021 and we are now on a trajectory to surpass pre-pandemic business levels.
Despite these encouraging signs, BFI recognises that the creative industries, like many other sectors, are also experiencing changes and disruptions that challenge business-as-usual operation, with the potential for further such challenges in future. These include, but are not limited to, emerging or widening skills gaps, reduced access-to-finance, the climate emergency, lack of business support, limited diversity and size of talent pools, changing education, migration, culture and labour market priorities of governments around the world, the COVID-19 pandemic, changing consumer behaviors, ageing populations, increased market competition, supply chain adaptations, IP protection and exploitation challenges, and the cost of living crisis.
One of the major factors at play in many of these issues is the increasing pace of technological change. We believe that this technological change, alongside market and audience fragmentation has the potential, if addressed correctly, to offer huge opportunities which could result in innovation and be to the long-term benefit of art forms such as film and high-end TV HETV. In the last decade for example, the rise of streaming has offered many consumers greater access, choice, and flexibility when engaging with creative content such as film, high end TV, music, and other audiovisual artforms.
Economic Review of Independent Film
We commissioned Alma Economics to undertake an Economic Review of UK Independent Film (published July 2022) in order to better understand the sustainability of this vital art form at a time of great change. Their analysis identifies that, when adjusted for inflation, revenues for the independent film sector in the UK have consistently declined over the course of the last ten years, and that this decline is chiefly driven by stagnating box office sales and a significant decline in physical home entertainment sales such as DVD and Blu-Ray (also known as packaged media).
Given the aforementioned rise in streaming products and services entering the market, this could be considered an expected finding. However, the emergence of such digital media, and acceleration in take-up caused by COVID-19, has not contributed enough to reverse what amounts to an overall trend of decline in revenue caused, in part, by the transition from the highly profitable medium of DVD to other media which tend to generate far less revenue for rights holders.
The review also identifies that "in some years the downward trend has been masked by a small number of very successful commercial "hits", highlighting the inherent risk of investing in UK independent film and the benefits of diversifying across a slate of films consisting of potential winners and losers from a commercial perspective." These commercially successful films outperform most other independent films to the extent that they significantly raise average box office receipts, creating a false impression of the independent sector's performance.
Secondly, evolving distribution models have yet to support greater profitability to the overall benefit of UK independent film. Most such films are made available through the traditional model where a film is first released in cinemas before being commercially exploited through physical and digital sales. Though release models have adapted (including experimentation with release windows, sequencing, and pricing), this has not provided a route towards stronger commercial outcomes, and it remains the case that "there are a small number of commercially successful UK independent films which generally fail to cross-subsidise a large body of films which are unable to recoup". Moreover, cinema attendances have not yet fully recovered to pre-pandemic levels, putting further pressure on revenues.
Finally, the review identifies the significant cost pressures facing production of independent film - including the increasing cost of cast, crew, and studio space - as having a significant impact on production budgets. The review attributes this cost inflation to the "significant recent increases in inward investment in UK screen content (including film and HETV) which has reportedly accelerated demand for skills and filmmaking infrastructure, in turn leading to a deficit in key inputs required to produce independent films." It also identifies new costs associated with production through the Covid-19 pandemic as an exacerbating inflationary pressure (with some producers reporting a resulting increase of 10-20% to budgets), noting that it is not yet clear if, or to what extent, these added costs will subside. It is likely that the cost of living crisis, with UK inflation predicted to rise as high as 18-22% by some institutions, will exacerbate these challenges.
There has always been an inherent risk associated with producing independent films, and over the years this has sometimes been added to challenging commercial and market conditions.
Our published response to the report acknowledges this reality, but, as it points out, "what is changing is that the 'upsides' generated when independent films succeed are now reduced, while at the same time costs are escalating. [... ]the imbalance of the independent film model, with flatlining of budgets and decline in revenues, points to a future where the full diversity, range and success of independent film will not endure."
Film4
To help address these challenges, the BFI also wishes to stress the critical importance of maintaining, and continuing to strengthen, the role of Channel 4 as a key investor in British independent film under any new ownership structure following the passage of the forthcoming Media Bill.
Film4 has played a vital role as a catalyst for investment in, and creative support for, new talent and new voices which reflect British culture across the UK in all its diversity to the benefit of audiences. This is particularly true at a time when raising finance for independent British films is harder than ever, due to a variety of factors which we describe above.
Film4 has been one of three cornerstones of discretionary funding from public entities, for British film, alongside the BFl's Lottery support and investment from BBC Film.
From My Beautiful Laundrette and Letter To Brezhnev to Trainspotting, Four Weddings and a Funeral, Slumdog Millionaire and The Favourite, and more recently The Father, Film4 has invested in scores of commercially and critically successful British films.
The presence of Film4 acts as a vital complement to National Lottery funding because Film4 can commission films, something which is not permitted by National Lottery legislation. This ability empowers it to help ensure diversity of content and a multiplicity of voices and decision makers in the market, which is of increasing importance at a time where the total number of independent commissioners is decreasing. With a budget of £25m p.a., Film4's role as an active and highly experienced commissioner of British films, with creative and editorial input, is also highly valued by the independent British film sector. It is therefore vital that this support for British film is maintained in any new future ownership structure for Channel 4.
European Works
Investment in original production in the UK is also sustained by UK works continuing to qualify as European works for the quotas set out in the European Union's Audiovisual Media Services Directive (AVMSD). This is because the AVMSD rules concerning the definition of European works state that a work can qualify if the work originates in a European third state party to the European Convention on Transfrontier Television (ECTT) of the Council of Europe. The UK remains party to the ECTT. Maintaining this status under AVMSD must remain a key objective for the UK over the coming years.
Talent is everywhere, but opportunity is not
Historically our screen sectors have not been as diverse as, or truly representative of, the United Kingdom. Addressing this is a key priority for the BFI. We believe that off-screen inclusion will drive on-screen representation and that will bring broader audiences to the industry including the BFI; there are clear cultural and commercial opportunities and benefits created by embedding inclusivity within our industry; and that inclusion is not our biggest challenge, but our greatest untapped opportunity. We already support our industry by sharing knowledge; providing resources; encouraging take-up of the BFI Diversity Standards; and through our guidance and principles tackling bullying and harassment. However, in order to ensure the screen sectors and the wider creative industries are truly representative, further action is required from all of those comprising them.
Climate Emergency
It is also clear that that the climate emergency presents a challenge that all sectors must respond to. The screen and wider creative industries have a huge role to play and this includes the opportunity to lead a collective response. We believe that changes across all areas of activity are required - from developing and producing new works, to exhibition, to collection and preservation. This will help reduce the environmental impact of the screen sector and support wider societal efforts to reduce carbon emissions and biodiversity loss. This includes the target of reaching net zero by 2050 that has been set by UK Government as we enter our new ten year strategy period.
Screen culture can shift hearts and minds on environmental sustainability. It can communicate the importance of reducing humanity's impact on the planet, and show how we can do so.
Storytelling can play a powerful role in uniting people from all backgrounds around this common cause.
Cost of Living Crisis
The long term impacts that the emerging cost of living crisis will have on the creative industries remain to be seen, however we can anticipate in the short to medium term that a reduction in consumer disposable income will reduce footfall, attendances, and overall income for many in the sector. Additionally, rising energy prices - where costs are uncapped for businesses - will severely test the financial resilience of individuals and creative businesses at a time when this for many remains lower than it was pre-pandemic. We can also expect the diversity of audiences and practitioners to reduce, as those less financially able to attend or perform may feel unable to participate.
As highlighted above, the screen sectors are rapidly and ever evolving. The UK requires a technically skilled workforce that can use new technologies to tell stories, and keep pace with international competitors.
In June, we published the BFI Skills Review 2022.[1] The review highlighted how rapid growth in the sector and retention issues have created a shortage of skilled labour within film and TV production. These shortages are widespread across different roles and levels. Crew shortages are negatively impacting productions, which includes crew being promoted without the necessary skills and support, leading to increasing levels of stress on set.
The resulting pressure is felt most acutely by the UK's independent sector. As the independent sector typically operates on a less profitable business model, they can struggle to compete to attract and retain crew against multinational subscription-video-on-demand (SVoD) services operating in the UK. The UK's independent production sector is of key cultural importance and serves as a developing ground for new and exciting world-class UK talent.
While the growth of the UK production sector as a whole brings with it opportunities in terms of creating jobs and growing the economy, this should not be at the expense of cannibalising the UK independent production sector.
In terms of skills needed to fill new and emerging roles, the UK needs to continue to develop skills to embrace virtual production. Research has been undertaken in recent years to better understand the skills needs of virtual production, including by StoryFutures in their Academy Virtual Production Skills Report (2021).[2] StoryFutures' research highlights how virtual production changes the way departments operate and interact, and the technical skills (for example coding and engineering skills) and creative and communicative skills required to unlock the economic benefits virtual production can bring.
As with other sectors, those working in the screen sectors need skills to better understand and tackle the environmental impact of the sector. BAFTA Albert[3] and its Sustainable Production Certification, are increasingly being adopted by productions, as is the role of Sustainability Officer on larger productions.
Another key skills gap within the screen sector needed to tackle emerging opportunities and challenges are business leadership skills. A lack of management and leadership training experience among senior staff and Heads of Department was frequently mentioned during consultations for the BFI Skills Review and ScreenSkills research notes interpersonal skills, mentoring, and the ability to manage and support teams as key skills gaps.[4] Applications to the Culture Recovery Fund, provided to give support to exhibitors adversely affected by the pandemic, highlighted that many exhibition professionals lack a number of business skills (e.g. competent financial forecasting) which would enable them to build more sustainable, effective and efficient cultural businesses.
There are skills challenges facing the UK's screen heritage sector, both in terms of retaining skills for handling legacy formats and skills needed to embrace cutting edge technologies.
Firstly, in the general workforce a lack of succession planning combined with limited routes of entry (and a relative lack of training in heritage related skills) is placing increasing pressure on the sector. The increasing need for a more digitally skilled workforce will only increase this pressure. Secondly there is a risk that a lack of capacity, resources and skillsets for collecting today's moving image means that the screen heritage collections of the future will have a gap in the record of today. The relationships management capacity for collecting from communities, creatives and organisations is a key development area, alongside digital preservation, cataloguing and public access needs. These challenges will require a coordinated response from industry in order to ensure that the UK's film heritage better reflects the diversity of its people, is more easily accessible to those people, and remains properly protected.
a. How can this be sufficiently flexible to take account of the pace of change in the sector?
a. What actions are needed from organisations in the creative industries to prepare for and accommodate the requirements of the future workforce?
Questions 3 and 4 answered collectively:
The Skills Review identified five key recommendations, for industry, the BFI and other screen organisations, and Government, to ensure the film and TV production sector has the appropriate skills and talent pipeline:
1. An industry-led and localised approach to investment in training
2. A more formalised approach to hiring, workplace management and professional development
3. Stronger bridges into industry from education and other sectors
4. More comprehensive careers information, profiles and pathways
5. Better data to support policy and action
Estimates indicate that an overall training investment of between £95.1 and £104.3 million a year is needed by 2025 to provide the skilled workforce necessary to match demand. £104.3 million represents around 1.4% of the forecast level of film and HETV production spending in 2025. The majority of this spend will need to come from industry and we are asking production to ensure at least 1% of production spend is being invested into training and workforce development.
The Department for Digital, Culture, Media and Sport (DCMS) asked the BFI to undertake the Skills Review and have committed to work with the BFI to bring together key stakeholders to develop an on-going industry-led response to the recommendations above, including an agreed approach for co-ordinating, supporting and monitoring skills and training investment going forward. Should the production sector's investment in skills and training not sufficiently increase to meet the challenges we are currently facing, it is recommended that UK Government explore requirements to mandate investment in skills development and training that are linked to production spend.
The Skills Review includes additional recommended actions for UK Government to improve the production talent pipeline, and bridges into the industry from education. One key recommendation is for UK Government to work with employers to access and deploy the Apprenticeship Levy in order to fund training. Historically, the sector has struggled to access funding for training via the Apprenticeship Levy, particularly in England. In 2019, ScreenSkills estimated that the screen industry pays £20 million a year into the Apprenticeship Levy, but only 25% of this funding is used by screen companies. One key barrier has been the requirement for an apprenticeship to last a minimum of 12 months, which can be a logistical challenge given the production of a film generally occurs over a period of only several months.
Recently, pilot schemes have been run to try and increase the uptake of apprenticeships on productions. Last year ScreenSkills, Netflix and WarnerMedia launched a pilot scheme for 20 production accountants and production assistants in England, with £100,000 funding from DCMS. Building on this pilot, earlier this year ScreenSkills and the BBC were announced as a recipient of Department for Education grant funding to run a flexi-job apprenticeship programme.
We encourage Government to continue to work with employers to help access and deploy the Apprenticeship Levy to fund training, including building upon the findings of flexi-job apprenticeship pilots. Greater flexibility over what the Levy can be used to pay for could help fund training to give those later in their careers the skills needed to meet new and emerging challenges.
Moreover, to ensure that similar incompatibilities do not arise, it is important that the creative sectors, including screen, are involved in the design of future skills and education reforms, for example in setting technical and apprenticeship standards and the development of T-Levels. Media, broadcast and production T-Levels will be available from September 2023 and must include an industry placement of at least 315 hours over two years across no more than two employers focused on developing practical and technical skills - creating an even greater demand for work placement opportunities.
Significant challenges face productions in terms of providing placements for T-Level qualifications, including confidentiality issues with under-18 year olds, and logistical challenges in providing placement opportunities on short productions, that may have a short window between being greenlit and production starting, or be shooting in remote locations that are hard for someone without a car to get to. Working hours can be long and take place outside of a traditional working hours.
Finally, it is important that the awareness of possible careers within the film and TV industry is improved. We have called on the UK Government to support schools to provide adequate access to information, advice and guidance about careers in the sector including through funding the Creative Careers Programme. This work should include improving awareness of and access to local and/or regional opportunities. In order for the booming creative sectors to continue to prosper, it is important that the Government raises the profile of creative subjects and their prominence within the curriculum in England through the Cultural Education Plan.
These subjects cannot be taught in isolation; for example the next generation of video game coders benefit from an education in both STEM and creative subjects. We were pleased to see that Baroness Bull, a member of the Lords Communications Committee, was recently appointed as Chair of the Expert Advisory Panel for the Cultural Education Plan and we look forward to working with her and the Panel on this key initiative.
While outside of the scope of BFI Skills Review 2022, we recognise that the UK's VFX, animation, and video games sectors continue to grow and face skills challenges. To explore these further, the BFI will be undertaking a review of the skills and workforce needs of the video games, VFX, post-production, and animation sectors, including new and emerging forms of screen content such as immersive and interactive. Given the overlapping skills and needs in these subsectors, it is appropriate to consider them together.
Meeting the challenges facing the creative industries will involve work across a wide range of areas - in the screen industries alone this ranges from education and skills, through to audience and talent development as well as heritage, research and international work.
Research and Development in areas such as these, alongside engaging with organisations that are highly specialised in these fields, will be hugely important in ensuring that individuals, businesses, and organisations in the creative industries can continue to thrive. The need to develop expertise and evidence, and test new and experimental solutions across the sectors will only increase when confronting the challenges and disruptions outlined in the answer to question 1.
We believe that innovation is key to the continuing success of the creative and screen sectors and strongly support this focus on enhancing investment in innovative business activities. We recognize that existing R&D tax reliefs are already making a valuable contribution to parts of the screen sectors in the UK, notably the VFX sector. Additionally, though the BFI does not itself claim R&D tax relief, we undertake - and commission - extensive research into the film and broader audiovisual sector, including the animation and games sectors.
We welcome Innovate UK's role as a key funder of R&D. Their new £2.5m scheme for the creative industries, recognises that R&D does not just take place in traditional areas. In a similar vein, we also believe the Government's plans to launch the Advanced Research and Invention Agency (ARIA) could have the potential to make a valuable contribution to R&D activity in the creative sphere.
As a matter of principle, we would echo the observations made in OMB's study for DCMS, in respect of challenges for the creative industries
"However, while the creative industries are highly innovative, they face several challenges in conducting R&D, including that:
To realise the potential R&D has for the creative industries, we believe that the challenges outlined above need to be addressed. Furthermore, we would welcome any measures that incentivise R&D to achieve sustainable practices that support wellbeing, environmental restoration and economic prosperity in the screen sectors.
The creative industries are a success story for the UK, growing faster than the national economy. Their success is in part due to the policies and interventions pursued by the Government, including tax reliefs, the Culture Recovery Fund, and support provided by DCMS for its culture and creative industries-facing Arms-Length Bodies. This includes the BFI, which uses Government Grant-in-Aid to carry out essential functions such as policy and advocacy that supports the growth of the UK's screen industries; safeguarding the nation's moving image heritage through the BFI National Archive; and developing and delivering the Global Screen Fund to support international opportunities for the UK's independent screen sector.
To ensure that the challenges of the future are met, and opportunities seized, the Government and the creative industries should remain agile and proactive in response to a landscape that is changing quickly. In our response to the Economic Review of Independent Film, we outlined the need to consider the following recommendations for policy intervention:
Increasing support directly for independent film producers
The Economic Review proposes that an increase in Film Tax Relief, specifically for independent film, would have significant positive impact and would be likely to generate positive returns, due to the incubator effect. In addition, it is proposed that public funders consider how existing funding mechanisms can be better structured to support independent film producers.
Increasing support for independent film distribution
The review proposes that increased tax relief for distribution is an option with favourable economic outcomes, while cautioning that support for distribution might not be as effective as other measures.
Increasing support for the exhibition of independent films
The review also indicates a clear and important role for exhibition in reaching audiences and overcoming the disadvantage of relatively low marketing budgets.
Increasing the contribution to independent film from large streaming services
The review notes that streaming is an area of potential benefit to independent film, but that currently the positive contribution of streaming is ambiguous. The review associated streaming with new financial models which can ensure valuable 'cost-plus' financing upfront, but also notes that 'cost-plus' deals can also exclude film producers from exploiting the commercial upside.
Finding the right formula for success in this fast-growing and impactful area is a complex task that will evolve over time. The BFI will continue to take a proactive role, working with stakeholders to ensure independent production is given appropriate support and consideration in the UK.
September 2022
12
[1] https://www.bfi.org.uk/industry-data-insights/reports/bfi-skills-review-2022
[2] https://www.storyfutures.com/resources/storyfutures-academy-virtual-production-skills-report
[3] https://wearealbert.org/about/
[4] ScreenSkills Assessment 2021. ScreenSkills, June 2021. Available at: https://www.screenskills.com/information-and-resources/information/research/