Written evidence submitted by ITV Cymru Wales (BIW 15)

1. Introduction

1.1 ITV Cymru Wales is pleased to provide evidence to the Welsh Affairs Select Committee inquiry into broadcasting in Wales. A subsidiary of ITV plc, we are part of the UK’s biggest free-to-air commercial public service broadcaster. We believe any consideration of Welsh broadcasting should take into account the contribution of ITV.

1.2 Please note that ITV’s main corporate response to the BBC Charter Review Consultation         has been presented separately to the Department of Culture, Media and Sport and will be published imminently.

The contribution of ITV Cymru Wales

1.3 It is a crucial time for the Welsh media sector as politicians and policy makers prepare to make important decisions affecting the future of the BBC and S4C as part of the Charter Review. By contrast, the public debate about ITV’s future in Wales has already taken place and we now have the stability to deliver our range of services and programming under our new stand alone Channel 3 Wales licence at no direct cost to the taxpayer.

1.4 Under the terms of the licence, the provision of news, current affairs and other programming will continue at existing levels until 2024. This works out at four hours of news and 90 minutes of non-news programming per week. This level of commitment is unchanged since 2009.

1.5 We are also delivering beyond our licence obligations, for example through our investment in our online news service and the recent launch of the new ITV Wales HD channel. ITV’s investment in the Welsh independent production sector, via the acquisition of Boom Cymru, and Six Nations Rugby will also benefit audiences in Wales.

1.6 The stability afforded by a new 10-year licence ensures ITV’s continuing contribution to the public service broadcasting (PSB) system in Wales providing the main competition to the BBC in Wales, as a key player in the Welsh media sector.

1.7 From our new HD broadcast centre in Cardiff Bay, we are Wales' only commercially funded, national broadcast and digital news services. We’re also the largest producer of commercially funded current affairs programming in English and in Welsh.

1.8 The public value of accurate, fair and impartial news about Wales - news that is universally available, reaching mass audiences and offering genuine choice - cannot be underestimated in the Welsh context.

1.9 ITV News Wales at Six reaches some 800,000 people a week in Wales and its share of viewing has grown for the last four years in a row.

1.10 We also play an important role in covering the daily life of a politically devolved Wales, including coverage of politics in both Westminster and Cardiff Bay, providing competition to the BBC in these and other important genres.

1.11 Without ITV Wales, the so-called “democratic deficit” in Wales would be far greater. The BBC would have no rival for its news services - on BBC Wales or on S4C - and there would be no rival for its current affairs and political programming in the English language.

1.12 At least half of our non-news programmes, including current affairs, are scheduled in peak viewing time at 8pm between episodes of Coronation Street, delivering a significant audience for our programmes for and about Wales.

1.13 ITV Wales is now also a multi-platform news provider. The ITV digital news service for mobile and tablet users in Wales have seen spectacular growth of 400% year on year and now has half a million unique users a month in Wales.

Changing media landscape

1.14 The public service broadcasters operate in an era where old certainties regarding captive audiences with access to a small number of channels have long since disappeared.

1.15 Today we are part of a diverse ecology of many hundreds of TV channels: pay TV platforms, Internet streaming and social media platforms. Technology has transformed a once captive and passive audience into millions of individual consumers exercising the power of choice.

1.16 This presents a challenge to broadcasters who now compete for viewers in an increasingly globalised marketplace. For commercial ITV it means securing policy outcomes that will allow the company to make a reasonable return on successful investment in UK programmes.

1.17 These policy outcomes include changes to rules on advertising and the introduction of re-transmission fees (i.e. payments by cable, satellite and other platforms) for the right to carry Channel 3 services.

1.18 We would also seek continued access at a privileged rate to sufficient radio spectrum to guarantee universal digital transmission of the main Channel 3 broadcast services and future proofing the appropriate prominence of the main PSB channels on Electronic Programme Guides and other content interfaces.

1.19 Such measures would help to secure the long-term strength of ITV, which is based around a mass audience channel with high levels of investment in original-free-to air UK content.

2. The implications of further efficiency savings on broadcasting in Wales

2. 1 We believe that viewers in Wales should continue to benefit from a plural broadcasting system that serves their needs across the civic, cultural and linguistic landscape, delivered by a mix of public and commercial PSBs and independent production companies.

2.2 We consider the BBC to be an important part of life in the UK and believe it should remain strong, successful and popular. At the same time, it is impossible to ignore the impact that decisions around the future funding, shape and remit of the BBC will have on the rest of the UK media sector, including ITV.

2.3 Despite the 25% reduction in spending and hours on its English language programming (outside news and current affairs) since 2008[1], the BBC in Wales remains a dominant force.

2.4 It provides news, current affairs, sport (including Six Nations and PRO 12 rugby) and other programming across BBC1 and BBC2 in Wales. It has two national radio stations: the English language Radio Wales and the Welsh language Radio Cymru. It has a well-resourced online presence. And, since 2009, it has a hugely successful drama production centre in Cardiff Bay, producing network and worldwide hits such as Doctor Who, Sherlock and Casualty as well as S4C’s popular soap opera Pobol y Cwm.

2.5 It might reasonably be concluded from the above that audiences in Wales are well served by the BBC. The BBC’s proposed relocation to a modern new base in the centre of Cardiff in 2018 suggests future stability and progress.

2.6 It is the case, however, that there has been a sharp decline on the spending, range and diversity of programming for Wales by the BBC in Wales.

2. 7 We would like to see the BBC’s latest pledge to be more distinctive translate into a genuine and lasting commitment that might enhance BBC services in Wales where there is market failure.

2.8 It is time for the BBC centrally to focus on where it can cut costs and overheads and re-invest savings in the distinctive, high quality content and services that it should be providing under its Public Purposes. These purposes include “catering for the different nations, regions and communities of the UK”.

2.9 We believe the BBC should spend more licence fee money on these and similar areas and less on activities that encroach on or impede commercial markets - such as copying commercial programme formats on BBC One, the scale of its online services and proposals to establish a new BBC Studios arm [2].

3.    The suitability of current broadcasting governance and accountability arrangements

3.1 ITV’s detailed proposals on governance and accountability arrangements for the BBC are contained in our separate response to the DCMS BBC Charter consultation.

3.2 In summary, we believe that the current arrangements are flawed. At the heart of the problem is the fact that the BBC Trust is a core part of the BBC, playing a key role in its strategy development and decision making (e.g. appointing the Director General, spending of the Licence Fee etc.) but at the same time is also the BBC’s arms length regulator in key respects.

3.3 ITV believes that there are three key elements for an effective governance and regulatory framework in future:

• A clearer and more demanding regulatory framework than exists currently;
• The creation of a BBC unitary board with a majority of properly supported non-Executive Directors and a non-executive Chair;
• A new regulatory framework to be set and enforced by a well-resourced and independent regulator. We believe that Ofcom would be best suited for this responsibility.

3.4 Whatever solutions emerge, we believe the interests of Wales should be represented at the highest levels of BBC governance and on those of the independent regulator, supported by effective and properly structured advisory bodies for Wales. 

3.5 With regards to S4C, we believe the continuation of separate accountability and governance arrangements through the S4C Authority are critical for the future independence of the channel. Moreover, it would appear that the Operating Agreement with the BBC Trust has been a success and we would support its continuation beyond 2017 in conjunction with the Trust or its successor body.

3.6 On the regulation of ITV, we are accountable to Ofcom with detailed PSB licence obligations that we are obliged to fulfil. Under the terms of our licence, we are subject to the Ofcom Broadcasting Code.

3.7 At ITV Wales, we engage with the Ofcom Wales Office on a regular basis. We demonstrate our public accountability by engaging both formally and informally with politicians in the UK Parliament and in the National Assembly for Wales.

3.8 As a publicly limited company, ITV is of course also accountable to investors and shareholders. The Board of ITV plc is committed to business integrity and high ethical values across the Group’s operations. As an essential part of this commitment, the Board supports high standards of corporate governance and has a policy of seeking to comply with the recommendations of the UK Corporate Governance Code and voting guidelines of our major institutional investors where appropriate.

4. The cultural importance of English and Welsh language broadcasting

4.1 The Welsh broadcasting sector is unique in that its services are delivered through the medium of two languages, English and Welsh. This arrangement, going back more than 60 years, reflects the linguistic traditions of modern Wales that are both separate and interlinked. It could be argued that the coexistence and synergies of English and Welsh language broadcasting are not only a cultural success story of Wales, but of the UK’s PSB system as a whole.
 

4.2 Before the advent of S4C in 1982, both the BBC and ITV in Wales made and broadcast Welsh language programmes alongside English language output. Today, with S4C now long established as a mixed-genre Welsh language channel, we have a linguistically plural media sector with the English language tradition reflected in news and programmes on ITV Wales and BBC Wales and their respective online services.

4.3 At the same time, both the BBC and ITV make programmes in Welsh for S4C  - the former funded by the licence fee and the latter as part of ITV’s commercial relationship with the channel. Their contributions add to the plurality of supply to S4C and hence to diversity in Welsh language broadcasting.

4.4 Meanwhile, Wales’ independent production sector - which grew from the creation of S4C - remains the main programme supplier to the channel with a number of companies now consolidated and established as successful UK media players.

4.5 Some 19% of the population of Wales speaks Welsh – a sizeable minority. In a multi-channel, globalised world dominated by English language content, it is surely fair that those who choose to live their lives through the medium of Welsh - and want to be informed and entertained in their preferred language - should benefit from a public service broadcasting system that allows them to do so as a civic and cultural right.

4.6 S4C’s investment in original children’s programming performs an important role in providing Welsh language content to young viewers, contributing to their linguistic development.

4.7 Of course, like all viewers, S4C’s audience will “channel hop” – sometimes watching S4C, sometimes watching the English language channels, depending quite simply on “what’s on”. Non-Welsh speakers and learners can also watch the channel through subtitles and red button services.

4.8 Equally, the non-Welsh-speaking majority should have the benefit of services that reflect the Welsh nation through the medium of English, be that in news, current affairs, sport and a range of other programming.

4.9 At ITV Cymru Wales, we often make “back to back” versions of series with an English version being shown on ITV and the Welsh version on S4C – a strategy that makes efficient use of editorial and production resources, makes sound commercial sense and serves two distinct audience groups.

5. The economic impact of broadcasting in Wales

5.1 With three public service broadcasters producing content in English and in Welsh, a hugely successful BBC network drama production centre, a number of successful independent television production companies, two BBC national radio stations, a range of commercial and community radio stations, one, soon to be three, local TV stations, digital media businesses… plus Pinewood Studios, Bay Studios and Dragon Studios…Wales has a diverse and fast-growing creative industries sector.

5.2 Though largely dependant on public money, the sector supports hundreds of highly skilled jobs right across Wales. The BBC, S4C and commercially funded ITV all contribute to the national economy.

5.3 ITV is by far the largest provider of commercial network, nations and regions news in the UK with a total investment of around £100 million, a substantial commitment of which ITV Cymru Wales - and public service broadcasting in Wales - are beneficiaries.

5.4 From our new base in Cardiff Bay - a long-term multi-million pound investment – ITV Wales employs around 100 people working across news, programmes and operations. We also have a team in Colwyn Bay in North Wales and dedicated reporters around the country.

5.5 ITV’s Sales arm delivers high impact advertising opportunities to Welsh businesses on the nation’s biggest commercial mass audience free-to-air channel: ITV.

5.6 We are investing in the next generation of broadcast journalists through our strategic partnership with Cardiff University’s School of Journalism and other Welsh educational institutions. In partnership with Creative Skillset, our new apprenticeship scheme provides training opportunities for young people wanting to pursue careers in the technical side of broadcasting.

5.7 And, as part of our production growth strategy, ITV recently acquired the award-winning production house Boom Cymru that forms part of the TwoFour Group.

5.8 With a Welsh production powerhouse now a part of a major UK producer-broadcaster, it can only increase the opportunities for programmes made in Wales to be commissioned and seen by audiences across the UK.

5.9 However, as we say in our submission to the DCMS, the BBC’s proposals to create a spun out production business in the form of BBC Studios[3] risk seriously distorting the UK production market through unfair competition.  In particular, we have concerns that the venture will materially distort competition in the market as a result of hard and/or soft subsidies from public resources. The clear risk is that independent producers in Wales could well be disadvantaged by such a development.

5.10 Furthermore, it is not clear to us how a purely commercial venture such as BBC Commercial Studios which the BBC says will deliver “best in class commercial efficiency” will at the same time be able to maintain its current public service delivery without falling foul of the EU State Aid rules. 

5.11 So, for instance, whilst running a business with leading edge efficiency, the BBC says it remains committed to:

• “Embracing production across the UK” with a focus on “fostering local creative economies”;
• BBC Studios will also “delight in range and specialism rather than just those genres with the most commercial appeal”;
• And that “a presence across the UK will likewise be central to BBC Studios’ heritage and public service mission”[4].   

5.12 It is not obvious that, as a purely commercial company with legal obligations to operate efficiently and to profit maximise, BBC Studios will, any longer, be able to justify continuing to deliver these things given the economies of scale and scope in the TV industry.

5.13 In addition to the issue of whether in practice a new BBC production subsidiary would materially distort competition or continue to deliver PSB benefits, clearly the question of whether it is appropriate, as a matter of policy, for a publicly owned broadcaster to develop a large, global, commercial production company is ultimately a separate political question. However, to date, we do not believe that the BBC has made a credible case for consent to do this.

6. The implications of a reduction of English language programming output

6.1 Ofcom recognised as far back as 2008 that the nations and regions programme obligations on Channel 3 licensees (ITV, STV and UTV) would be challenging to sustain in the multi-channel age where PSB licences are diminishing in value. As a result, there has been a reduction in the number of required hours to the present levels.

6. 2 It is extremely difficult for ITV to make a commercial return on Wales-specific content particularly in such fields as drama and arts whereas the BBC, free of commercial pressures, is able to prioritise its programme strategy under its Charter to address such market failure in these and other genres. This is surely a key role for the BBC in return for £3.7bn of public money each year.

6.3 In a speech to the National Assembly of Wales in April 2014[5], the Director General of the BBC spoke of the decline in English language programming output on television services in Wales under the Delivering Quality First initiative. 

6.4 “Faced with budget cuts,” said Tony Hall, “BBC Wales took the decision locally to prioritise and protect specific areas of national output – including news, current affairs and political coverage.” Areas such as drama, entertainment and comedy had been squeezed because of the cuts, he said. He concluded that the BBC would need to think hard on how it strengthens its support for national and regional self-expression as it prepares its case for a new charter.

6.5 However, in its Charter Review document[6], the BBC says it cannot afford to increase investment in nations television and radio unless there is an increase in its income. It says: "We will protect funding for the nations, ensuring that they are cut less than other areas.”   

6.6 The difficulty with the BBC’s position is that the budget of the most mainstream and least distinctive BBC service, BBC One (which accounts for approaching half of the entire Licence fee income of the BBC), appears to be increasing with the savings from the closure of BBC Three.

6.7 By contrast, more distinctive services (including in Wales) that can only really be provided by the BBC with public funding appear to have to deliver savings. ITV believes that the BBC should continue to offer popular, mainstream, services such as BBC One, but this should not be at the expense of content which may not be provided at all if the BBC doesn’t provide it from the Licence Fee.

6.8 In Wales there have been calls (from the Welsh Government and others) for an additional £30 million a year to be given to BBC Wales for English language programming on top of news and current affairs.

6.9 We would welcome any re-prioritisation of funding to address market failure in Wales that further serves Welsh audiences with diverse and distinctive content - providing this was done in a way which did not distort competition and provided an opportunity for the Welsh TV market to flourish, developing plurality of supply to the in-house BBC production operation.

6.10 Crucially, if extra funding did become available, we believe that the non-BBC production sector in Wales should have the opportunity to compete for business as part of an open and transparent commissioning process. Such an approach would ensure competition for quality and ensure value for money in delivery. 

6.13 In this context, as we point out in our submission to the DCMS, it is striking that in recent years where the BBC has been obliged to tender network production contracts, the market has won most of the commissions in competition with in-house BBC Production. 

6.14 With such a significant amount of public money, the BBC should be held to account with clear targets and accountability and with proper sanctions if it failed to deliver. Moreover, any extra funding for BBC Wales should be strictly audited to ensure that it is proportionate and used only to extend the range of programming for audiences in Wales.

6.15 In particular, such funds should not be diverted to boost key genres such as news and current affairs which are already well resourced and where ITV already provides competition, or to other areas such as its dominant online services (which would encroach on commercial regional news organisations that have long been at loggerheads with the BBC). 

6.16 A key criterion is that funding should be directed to programming that is distinctive and proportionate to the needs of audiences in Wales and which the market will struggle to fund commercially.

7. Should Welsh language broadcasting be ring-fenced?

7.1 Uncertainty over the future funding of S4C is a concern for ITV.  Primarily funded by the licence fee, S4C has undergone a 36% cut in real terms since 2010[7].

7.2 For a “minority language” single PSB channel that has to appeal to all Welsh-speaking viewers, maintaining and growing audiences in the face of a globalised, English-prevalent media market is a major challenge. With further reductions in its budget, the implications for the future health of S4C would be serious.

7.3 Aside from the negative impact such a move would have on the culture of bilingual Wales (and indeed the potential public backlash it might trigger), it would also impact on the quite small market for Welsh programme supply.  ITV is part of this market, for instance making award-winning current affairs programmes such as Y Byd Ar Bedwar, thereby helping to sustain diversity, and plurality in Welsh content production. This is particularly important in current affairs given that the BBC supplies S4C’s news output.

7.4 With the BBC having to look at economies on all fronts, there may be a case for the future funding of S4C to be ring-fenced as part of the licence fee settlement. S4C’s independence is vitally important and we believe that it is important that the DCMS grant to supplement licence fee funding of S4C should continue.

Submitted by Huw Rossiter, Public Affairs Manager, on behalf of ITV Cymru Wales

29 October 2015