Supplementary written evidence submitted by
Jane Featherstone

The Film and TV industry is a British success story- a growth industry, underpinned by a world-class talent base (in front of and behind the camera), and an outstanding infrastructure, all enabled over the past two decades by a highly effective set of regulatory interventions. Most notably, the Terms of Trade and HETV tax credits have led to huge inward investment, attracted by our talent and our skilled workforce who learned their trade on lower budget PSB shows, and first-class studios and facilities.

Our Public Service Broadcasting structure is the envy of the world, and their remit to reflect British culture and values through British storytelling generates significant social cohesion at home (The Office, Sherwood, Mr Bates v The Post Office, It’s a Sin, Happy Valley) as well as significant soft power abroad (Downton Abbey, Peaky Blinders, Doctor Who, Sherlock, Fleabag). These British-first stories are primarily made by PSBs rather than streamers, who have a commercial remit to focus on stories with more global reach and focus, even if made at high quality in Britain by British producers (The Crown, Sex Education, Black Doves, Fool Me Once, Slow Horses).

Our PSBs also have a remit to promote diversity and regionality on and off screen, which not only further supports true British storytelling but can also create employment in under-served areas of our nation (Peaky Blinders, Doc Martin, Broadchurch, Shetland, Blue Lights, The Fall).

The terms of trade between producers and the PSBs encourage and facilitate the growth of entrepreneurial and profitable British rights-owning businesses. These businesses have the ability to take creative and commercial risk, exploring diverse stories and talent and have, in turn, become attractive to further inward investment.

We would like to stress that we do not think this is a zero sum game - it is not about PSBs versus streamers. Both contribute a huge amount to the industry and to the nation in terms of investment, spend and high quality programming. Rather, this is about ensuring the long-term health of the entire ecosystem from which the whole industry benefits.

The HETV industry now faces two interconnected problems:

1) Funding and producing ‘mid tier’ content (BECTU bands 1 and 2 up to

£3m/episode) that is the lifeblood of the PSBs, a training ground for talent and the home of most culturally specific and relevant British content.

2) The increasing prevalence of ‘all rights’ deals for British producers, meaning they do not share in the success of hits or benefit from a long tail of value from IP ownership, making it harder to build businesses with true equity value and long-term investment plans of their own.

As there is on average a 2-3 year lead-time to get scripted programmes from idea to screen, we need to act now.

Funding and producing ‘mid tier’ content

Budgets have increased disproportionately over the last 5 years because of a post-Covid production bubble, with streamer and big US studio commissions distorting the market by paying talent and crew much higher rates. Much of this

increased inward investment has been attracted by the tax credits combined with the strength of the UK creative sector. The production budget increases are a combination of supply and demand pushing up rates and costs, but also due to the disparity between US and UK rates.

There has also been a general ad-market decline globally, impacting global networks’ abilities and desire to fund non-local content. The wider US market decline means there are fewer US buyers for British content, who are seeking safe bets on irrefutably global or US-focused stories. The BBC’s licence fee income has also declined in real terms since 2010 through a combination of real term freezes and a decline in the number of households paying.

The consequence for the UK PSBs is that, through no fault of their own, the proportion of a show’s total budget that they are able to fund has dramatically declined, alongside a reduced ability or desire for international networks to co-fund projects via pre-sales or co-production. The deficits on shows are too large for distributors to fill, and projects with editorial green lights from PSBs cannot be funded.

The PSB market for scripted programmes is focused on band 1 and 2 projects, with budgets mainly in the £1.5-2.5m per 60’ episode range but sometimes up to £3m and very occasionally beyond that. These are the projects that reflect PSB values of diversity of storytelling, talent and geography. They are the projects where talent grows and develops, where risks are taken. A changing population needs to see itself reflected in culture and we all have an obligation to support the social fabric of the UK or risk a disenfranchised society. Content watched by British consumers on PSB channels is 80% British, on streamers it is estimated to be 10%.

If band 1 and band 2 shows cannot be financed, PSBs will continue to struggle to make scripted programming unless producers go abroad to film where costs are lower and / or tax breaks are higher, or they acquire foreign-made drama at lower cost. Either way, we lose British-made drama. We risk losing everything the UK tax credit and Terms of Trade have built.

Possible Solutions:

A 15% top up to the HETV tax credit, bringing it to 40%, in line with the newly agreed incentive for independent film, to be applied for two primary purposes - the first, targeted at band 1 and 2 shows from £1m per 60’ episode up to £3m/episode, and available to all productions filmed here within that budget level (ie. any financier, whether PSB, streamer or other) as long as they adhere to the framework. The second, to support filming in the Nations and Regions, which will create long-term security and job growth. We understand that more research will need to be done in order to evidence the ROI on this additional investment, but we would argue strongly that this additional tax incentive is intended to address a market failure and will help ensure the health of the PSB system on which we all rely to continue to bring inward investment here. Evidence thus far suggests a further tax incentive would indeed generate an ROI AND support public service broadcasting.

The increasing prevalence of ‘all rights’ deals for British producers

As the PSBs struggle to fund shows and the streamers continue to grow, the balance of deals shifts more towards ‘all rights deals’ or ‘cost-plus’. Streamers don’t offer producers meaningful rights ownership so producers cannot build a library to sustain them in the leaner times and to generate profits to plough back into the UK industry. As a result, we are losing independent production companies, losing employers and losing diversity and investment.

The streamers have made a hugely valuable contribution to the UK creative ecosystem, and are responsible for commissioning a significant amount of

high-quality programming, and will continue to do so, but it is dangerous for the UK industry to become entirely dependent upon them. They commission far fewer programmes than PSBs, do not have the PSB remit to reflect British culture and will lead to consolidation of producers, likely not British owned, as they work with fewer and more established indies with the backing of large groups to support the commercial requirements of streamer working practices.

Possible Solutions:

A healthy PSB market provides a robust commercial alternative to streamer deals, albeit at different budget levels. If producers can get band 1 and 2 programmes financed with PSBs via an enhanced tax credit structure, they will have the choice to go with PSBs because they will retain rights in those programmes and build more sustainable businesses. At the top end of the market in terms of budgets, the streamers will continue to dominate and take the scale of risks that others cannot with commercial deals to reflect that. However, there will be optionality and competition across the market as a whole and therefore commercial leverage for independent producers and more meaningful choice for the audience.

Some further market context

For those of us working in the screen sector, a thriving and growing industry is key to sustainable long-term health. We have a fragile but powerful ecosystem. It benefits everyone involved in the screen industries in HETV to make sure the conditions for future growth and success are nurtured.

I believe this ecosystem thrives, and will continue to thrive, if we can protect British storytelling, creative entrepreneurialism and skills for the future.

Social Cohesion in Storytelling - TV is one of the great drivers of storytelling in our nation. It helps us understand what it means to be British and to live in a complex, changing society. A changing population needs to see itself reflected in culture and we are culturally at risk of losing the very stories which define us, with some types of programming in danger of disappearing altogether. Television production takes time - it takes 3 years for the impact of decisions we make to be seen and felt on screen, so we need to act now.

Commercial and creative health of UK indies – UK independent producers have gone from being manufacturing businesses to service ones. The increasing prevalence of streamers as buyers and their commercial terms can disconnect creators from their successes and fundamentally changes the business model – one built on the entrepreneurialism of rights ownership. Business confidence is reduced and the appetite to take risks on developing projects, particularly those very British stories with less international appeal, is reduced. More competition and rebalancing in the market from inward investment will help with this, but the PSBs need to be in a position to commission properly and producers are very effective at creating sustainable jobs and telling British stories.

Leadership and AI skilling – the BBC and Channel 4 in particular have always been the driving force of training and development in the UK market, with leading global UK talent (on and off screen) having been formally and informally trained over decades at the PSBs. A tiny sample of talent - off screen, Stephen Frears, Russell T Davies, Danny Boyle, Sally Wainwright, Steven Moffat, Sarah Phelps, Ridley Scott, Phoebe Waller Bridge and Richard Curtis all began their careers at the PSBs and on screen, Benedict Cumberbatch, Michaela Cole, Lenny Henry, Daniel Craig, David Tennant, David Oyelowo, Jodie Whittaker and Julie Walters all had formative roles early in their careers at the BBC. We know the Skills Taskforce is making recommendations, as is Screenskills who we know are doing active and important work in this area. We support what they’re doing and we would encourage a particular focus on creative leadership and AI skills alongside other training - essential for the future of the industry and the UK’s global competitiveness. There is an opportunity for the UK to really lead the way in its training for and adoption of AI in production.

Underpinning all this is a need for a healthy, thriving and sustainable PSB system. Strong PSBs provide competition, a vital contribution to skills development and uniquely British content to support the cultural and social fabric of our society. They have also been behind around 80% of the skilled workforce that is currently working in the market today and will continue to provide a pipeline for talent, one of the many reasons inward investment comes to this country. This is not straightforward but at the very least we need to change the narrative around the BBC and treat it like the precious jewel it is. Long-term thinking is also critical when it comes to the BBC - significant and sustainable public funding needs to be baked into the next Charter, with reform for the licence fee to take into account changes in viewing (it’s not all about having a TV anymore).

Jane Featherstone, CCO and Co-Founder of Sister