DMB0060
Written evidence submitted by Warner Bros. Discovery
Response of Warner Bros. Discovery to Call for Evidence by CMS Select Committee: Pre-legislative Scrutiny of the Draft Media Bill
Introduction
Warner Bros. Discovery welcomes the opportunity to respond to the call for evidence by the CMS Select Committee relating to pre-legislative scrutiny of the draft Media Bill.
Warner Bros. Discovery was created last year through the merger of Discovery and WarnerMedia. The completion of this deal brought together a family of iconic brands, including Warner Bros., HBO, DC, CNN, Cartoon Network and Discovery, and we are proud to create and distribute high quality entertainment, news and sports globally across television, film, streaming, games and consumer products. We include an overview of our activities in Annex 1.
As members of both COBA and MPA we have fed into their respective responses to the Call for Evidence, in particular their comments regarding (1) tier 1 VOD services, (2) the introduction of a VOD code, (3) accessibility and (4) audience protection guidance.
In addition, having reviewed the questions raised in the Call for Evidence, we would like to submit our additional observations on two key issues, namely the changes to (1) Channel 4 and (2) the Listed Events regime, with the goal of helping ensure that the draft Media Bill creates a modernized regime that is fit for purpose and ensures the existing mixed ecology continues to thrive and enable all market participants, ultimately to the benefit of UK audiences.
We would welcome the opportunity to engage with the CMS Select Committee further, whether individually or through one of our trade associations.
Channel 4
Channel 4’s publisher-broadcaster restriction has created a distinct role for Channel 4 in the UK audiovisual ecosystem supporting both independent production and increased investment in the nations and regions by non-qualifying independent production companies.
If Channel 4 is to be subject to a new duty of sustainability it is vital Channel 4 has flexibility to meet that duty as it sees fit while also not losing the benefits to the audiovisual sector that have derived from its unique status to date. As such, WBD considers that Channel 4 is first given time to be measured against this duty before any additional changes are introduced.
Consideration should be given to retaining the status quo both in terms of in-house production (as already set out in the Communications Act 2003[1]) and the independent production quota.
Should Government nevertheless consider changes to Channel 4’s ability to produce in-house and the independent production quota are necessary, then WBD submits that an appropriately designed creative window of competition be retained to ensure the benefits of the current regime, including existing well performing content and investment across the UK by non-qualifying independent production companies, are not put at risk to the detriment of Channel 4, its viewers and the wider UK audiovisual ecosystem (including production companies and those employed by them).
In the UK, by way of illustration, WBD’s production group, Warner Bros. International Television Production operates the following businesses:
· Ricochet (with offices in Brighton and Glasgow)
· Twenty Twenty (with offices in Bristol and London)
· Wall To Wall (with offices in Bristol and London)
Each of Ricochet, Twenty Twenty and Wall To Wall began as independent production companies whose first commissions came from Channel 4. These early commissions included Chef for a Night (Ricochet), 20/20 Vision, which was Channel 4’s flagship current affairs series, (Twenty Twenty) and The Media Show (Wall To Wall) which ran from 1987 to 1991. Since then these entities became part of the Shed Media group subsequently acquired by Warner Bros. Discovery in 2014. These entities are now non-qualifying independent production companies but continue to produce a significant amount of content for Channel 4, some of which have proven to be the most commercially successful programming on Channel 4. As such they are a direct result of the unique publisher-broadcaster model operated by Channel 4. Notable content produced includes First Dates, Sun Sea and Selling Houses and Food Unwrapped.
Over the last 3 complete calendar years, for example, Channel 4 commissions typically represent around:
- [confidential] % of the revenue generated by Twenty and Twenty; and
- [confidential] % of the revenue generated by Ricochet.
By way of further illustration, these Channel 4 commissions resulted in approximately [confidential] staff engaged in the nations and regions.
Production companies have invested materially across the nations and regions not least because Channel 4 has a quota of 35% of spend on new content created by production companies ‘established’ in the nations and regions which it aims to exceed. Twenty Twenty, Wall To Wall and Ricochet are perfect examples of those investments with an estimated aggregate investment (in terms of costs incurred in the nations and regions) in the region of [confidential] with approximately [confidential] employed during 2022 alone. Moreover, with returning, scalable productions, this supports not only quality jobs but also investment in training.
As such these businesses have built out operations in the nations and regions, including in reliance on the opportunities to work with Channel 4 and remain heavily dependent on having continuing opportunities to work for Channel 4.
We respectfully submit that if changes to Channel 4’s operating model are to be made consideration be given to ensuring all interests are taken into account (including opportunities to produce for Channel 4) and that existing investments and successful programming already provided to Channel 4 are not put at risk.
Listed Events
As we note in our overview of our activities in the UK in Annex 1, we have worked closely with the BBC regarding delivery of the Olympics. We fully understand the public policy objective of the Government, which it recently restated in relation to its consultation on digital rights relating to Listed Events, namely:
“The government’s overarching objective for the Listed Events Regime is to ensure that key sporting events of national interest are widely available and free-to-air for all audiences, particularly those who cannot afford to watch sport behind a paywall, insofar as is practicable and reasonable. Sports rights holders use commercial broadcast income to the benefit of the wider sporting sector, so it is important that the regime continues to strike the right balance between accessibility, particularly when timezones affect the screening of events domestically, and the ability of sporting organisations to generate revenues to invest in their sports at all levels.”
As we understand, the digital rights review is ongoing making it difficult to comment further on how any changes emerging from such a review may impact the Listed Events regime.
However, from an initial review of the draft Media Bill, it seems clear that the intention is to change the regime so that Listed Events are explicitly the preserve of public service broadcasters. At the same time, the draft Media Bill would appear to remove an important condition in the existing Listed Regime namely that there is a requirement for qualifying services: “that the service is received by at least 95% of the population of the United Kingdom”.
This change in approach would not appear to be consistent with the overarching objective of the regime. For example, on this basis a public service broadcaster could choose to put all of the content to a Listed Event on its digital platform without any requirement to include such content on its existing linear channels. If this happened, it is not clear whether this would be regarded as being widely available to the population nor what OFCOM could do to address any concerns. As a minimum, such broadcasters should be obliged to continue to make such content available on existing linear channels.
If the current condition that the service is received by at least 95% of the population of the United Kingdom is no longer deemed necessary because of the wide availability of the internet, it is not clear why Listed Events should be the specific preserve of public service broadcasters. Commercial operators with on-demand services are equally available over the internet and could similarly be able to make such content available for free.
Moreover, if the intention is to amend the regime in this way, and further public service broadcasters are granted specific digital rights, it is not clear what impact this could have on tenders organised by sports rights holder for rights. If, effectively, only public service broadcasters are able to bid for rights (because of the rights that in essence are reserved to them) this will reduce competition for rights. This could lead to a sports rights holder refusing to license the relevant rights with the effect that UK viewers miss out entirely. It would, of course, harm investment in the relevant sport too. (A recent example of this risk can be seen with FIFA’s comments regarding the rights for the Women’s World Cup, a listed event).
While we fully understand the overarching objective of the Listed Events regime, we also believe there is appropriate scope for commercial operators to provide additional consumer value alongside the offerings of public service broadcasters. For example, we are able to showcase every Olympic event (including those a public service broadcaster may not wish to show even if they had the rights) for a relatively modest monthly fee providing a unique value proposition to consumers. It is important that in balancing the interests of consumers, rightsholders and broadcasters, that any new intervention does not unduly distort competition or restrict existing consumer choice.
Concluding Thoughts
One of the challenges in providing substantive responses to the draft media bill, is that certain key elements of the draft media bill are not yet clear or may be intended to be dealt with via secondary legislation or through OFCOM guidance. For example, potential changes to the independent production quota for Channel 4 or digital rights within the context of the Listed Events regime. It may be helpful for the Committee to request more clarity on these issues so as to fully assess the impact of the draft media bill.
The UK has the opportunity to update its media regulatory regime to be world leading and tailored to the emerging changes and opportunities arising from evolving consumer demand and technological innovation.
In our view, it is important that all changes are considered individually and in the round with the aim of continuing to enable a mixed ecology that has allowed for healthy competition, a wide variety of consumer viewing offerings to develop and led to a thriving production sector.
19 May 2023
Annex 1
About WBD
Warner Bros. Discovery was created last year through the merger of Discovery and WarnerMedia. The completion of this deal brought together a family of iconic brands, including Warner Bros., HBO, DC, CNN, Cartoon Network and Discovery, and we are proud to create and distribute high quality entertainment, news and sports globally across television, film, streaming, games and consumer products.
Warner Bros., which celebrates its 100th anniversary this year, has been present in the UK for more than 90 years. HBO, which just celebrated 50 years of setting the standard for ground-breaking television, regularly partners and collaborates with homegrown organisations on distribution and production (for example HBO co-produced His Dark Materials with the BBC).
Beyond London, we have a strong presence across the country with production companies in Bristol, Brighton and Glasgow producing content including for the BBC, Channel 4 and others as well as licensing a studio tour in Northern Ireland, which showcases the filming of Game of Thrones.
We believe we offer the British public one of the most differentiated and comprehensive portfolios of content. We are the fifth-biggest commercial broadcaster in the country, with 23 linear channels and a newly created joint venture with BT Sport – soon to become TNT Sports – which provides one of the most extensive line-ups of live sports coverage for fans in the United Kingdom alongside our entertainment offering.
We are the home of the Olympic Games in Europe for Paris 2024, presenting every moment in the United Kingdom through Eurosport on discovery+ and with the BBC as a free-to-air sublicence partner to bring the Games to a wide audience. Our coverage will continue across Europe under a new deal for the subsequent four Olympic Games until 2032, where our European Broadcast Union (EBU) partner has provided the BBC with continued free-to-air rights.
We are committed to ensuring that the vibrant creative economy here succeeds and grows. As such, we run a wide variety of skills initiatives to offer opportunities to aspiring professionals, support their progression within the industry and grow the pool of highly skilled talent for future generations. The Warner Bros. Discovery Access programme which we are expanding, as well as partnership schemes with organisations like NFTS, BAFTA and the BFI, have and will continue to provide training, mentoring, placements and industry exposure to hundreds of people in areas where there is a need for skilled professionals and where barriers to entry have traditionally been high.
The UK continues to be a vital place of business for us and we are keen to assist with ensuring it creates the very best environment to allow the audiovisual sector to thrive.
5
[1] We note the draft Media Bill proposes to delete the relevant section from the Communications Act 2003