Further written evidence submitted by David Smith, Managing Director of Matchlight Limited
Thank you for the opportunity to respond to the evidence gathered by the Scottish Affairs Committee in Dundee.
My comments are restricted to the BBC’s current Nations commissioning quota and that tactics used by the BBC to achieve this quota.
At Q36 Mr Hepburn asked: What determines how much of your out of London spending goes to productions in Scotland and what would encourage you to commission more productions from Scottish-based companies?
Mr. MacQuarrie responded by drawing to the Committee’s attention the BBC’s currently voluntary target of 8.6% of overall network television spend to be spent in Scotland. He then, rather confusingly, raised a figure of £200million of annual spend which is not in any way connected to the 8.6% Out of London target but is rather the combined total of BBC network and BBC Scotland spend on TV production. In any event the question asked by Mr. Hepburn was not answered. Mr. MacQuarrie did not indicate what would encourage the BBC to commission more productions from Scottish-based companies.
If the SAC would like to encourage the BBC to commission more network TV from Scottish-based companies I would suggest that the SAC consider carefully the wording and intent of the current quota. If this quota was applied strategically it could deliver real sustainable growth to the Scottish TV production sector, and add considerably to the value of our creative economy without adding a single penny to the Corporations current budget.
Currently the 8.6% target for Scotland is voluntary. The BBC adopted it without being compelled to do so in 2007/8 in response to the establishment of the Scottish Broadcasting Commission. At that time the value of network spend from Scotland had fallen well below 4% and this was recognised to be indefensible. The then DG, Mark Thompson, moved to quash criticism by adopting the current voluntary target of 8.6%. which correlates directly to Scotland’s share of the UK population. However, rather than foster growth from Scottish-based companies to meet this target the BBC immediately moved to ensure its London-to-London commissioning patterns could be maintained by adopting the strategy of “lift & shift”. This enabled programmes, devised, developed, sold, managed and owned in London to be badged as “Scottish” and set against the Scottish network output quota provided a three part test set by Ofcom was met. By using Lift & Shift I would argue that the BBC is able to have its cake and eat it – it can claim Scottish spend at an acceptable level while continuing to buy from suppliers in London who then outsource elements of production (and no more than that) to Glasgow.
This Ofcom test is set out below, it relates to productions ‘Made outside of London’ (MOL) rather than made specifically in Scotland:
The three criteria under which a programme can qualify as MOL are:
1. The production company must have a substantive business and production base in the UK outside the M25. A base will be taken to be substantive if it is the usual place of employment of executives managing the regional business, of senior personnel involved in the production in question, and of senior personnel involved in seeking programme commissions;
2. At least 70% of the production budget (excluding the cost of on-screen talent, archive material, sports rights, competition prize-money and copyright costs) must be spent in the UK outside the M25; and
3. At least 50% of the production talent (i.e. not on-screen talent) by cost must have their usual place of employment in the UK outside the M25. Freelancers without a usual place of employment outside the M25 will nonetheless count for this purpose if they live outside the M25.
This test has been circumvented, or at least not applied rigorously, by the BBC in its determination of “Scottish” output to be set against the 8.6% quota. Programmes like The Weakest Link, Egg Heads and Question Time are all counted against the quota when the usual place of employment for those “senior personnel involved in the production in question, and of senior personnel involved in seeking programme commissions” (vague wording at best, what is “senior” – is the production manager senior or should it be the editorial head, the executive producer?) is more often corporate headquarters in London. Crucially this part of the test does not address questions of ownership or value – IP and profits generated by the “Scottish” project put against the quota are often held outside of Scotland.
Similarly the second and third parts of the test allow a great deal of leeway as they apply to spend “outside the M25” rather than in Scotland. Ofcom’s guidance that sits behind these rules actually allows for as little as 10% of either the “production budget” or “production talent” to be spent or based in Scotland, provided at least 70% or 50% (as applicable) are outside of the M25. By this means millions of pounds worth of BBC spend are set against the 8.6% Scottish quota for projects that can have only tenuous links to Scotland and limited actual impact on our creative economy.
If the SAC would like to encourage the BBC to commission more from Scottish-based companies it needs to work with DCMS and Ofcom to ensure:
a) that the currently voluntary quota is enshrined within the new Charter; and
b) that the rules for determining “Scottish” content are tightened and applied.
I would suggest that the following would have the desired effect:
The three criteria under which a programme can qualify as MOL are:
1. The production company must have a substantive business and production base in Scotland. A base will be taken to be substantive if it is the usual place of employment of executives managing the business, of the executive producer responsible for the production in question, and of senior personnel involved in seeking programme commissions;
2. At least 70% of the production budget (excluding the cost of on-screen talent, archive material, sports rights, competition prize-money and copyright costs) must be spent in Scotland; and/or
3. At least 50% of the production talent (i.e. not on-screen talent) by cost must have their usual place of employment in Scotland. Freelancers without a usual place of employment in Scotland will nonetheless count for this purpose if they live in Scotland.
This would deliver real and sustainable growth to the Scottish TV production sector and, I estimate, add circa £45million to the Scottish creative economy without requiring any additional spend from the BBC.
It would also address the concern implicit in the Chair’s Q30 – “Is it not the case that out of London quotas are applied only to production spend, it does not cover things like HR? What, therefore, could you do to make sure that these sort of skills are going to be covered in terms of how you are looking at the out of London activities?”. If the companies whose work is set against the Scottish quota are genuinely head-quartered here then all of the essential back-office skills – HR, finance, business affairs – would also be located in Scotland. That is how companies like Matchlight, Tern, Raise the Roof and IWC Media currently operate – their HQs are all in Glasgow or Aberdeen and all of their back-office staff live and work in those cities. It is not how Lift & Shift companies like 12 Yard, Shed Media or IMG Sports work – their corporate HQs and back-office functions are all located in London. All they out-source are lower value, temporary production jobs. These are useful but contribute relatively little to sustainability and the overall creative economy. They may provide for training opportunities in production (Q40) but not necessarily in idea development, senior editorial roles or business management.
Under Q42 the Chair raised more directly the issue of Lift and Shift and Mr. MacQuarrie acknowledged that it was a policy that both existed and had attracted criticism. He then suggested that it was “designed for an equitable sharing ... of the BBC’s production capacity”. This is not accurate. The quota itself was designed to allow for such an equitable sharing – Lift & Shift was designed to subvert the sharing of BBC network spend across the UK Nations in line with our share of population. Lift and Shift may, in the early years of the quota’s adoption by the BBC, have enabled the Corporation to augment Scottish capacity but its continued use only undermines our sector’s stability while ultimately frustrating that equitable division of network spend.
Finally, the Chair, under Q44 asked if the BBC was trying to rebalance its commissioning strategy for Scotland away from Lift & Shift. In his response to Q44, Mr. MacQuarrie indicated that the BBC in Scotland had worked with 60 production companies across radio, TV and online in Scotland in the last year. This did not address the question. Network supply, the 8.6% Network TV quota and Lift & Shift have nothing to do with radio or online and they do not affect BBC Scotland opt-out TV production. According to the BBC’s own submissions to Ofcom’s Made Outside London Register for 2014 notes only 35 production companies as suppliers of network TV. 19 of these are genuinely head-quartered in Scotland, here for the duration whether or not they are in active production, owning IP, retaining profits and delivering sustainable jobs in Scotland. 16 (46%) are temporary offices, established for the duration of a production or two but not housing senior creative staff, not retaining IP or profits and ultimately closing as commissions come and go.
Lift & Shift is a tactic that has a role to play at times – in the early days of the quota it made some sense. Today it is over-relied upon by the BBC and works to the detriment of Scotland’s Creative Economy. I would suggest that the SAC consider carefully the purpose, spirit and application of the current quota for Scottish Network TV. I would also refer again to the conclusion of my original submission to the SAC:
· The BBC’s current, voluntary Nations quota of 17% (9% from Scotland) by volume and value should be enshrined within the Corporations new Charter.
· “Lift & Shift” projects commissioned by either the BBC or Channel 4 should no longer count against their respective Scottish commissioning quotas.
· Failing the outlawing of “Lift & Shift”, if a UK PSB broadcaster requires a project commissioned in London from an English production company to be made in Scotland they should make the commission conditional upon the originating producer co-producing that project with a genuinely Scottish head-quartered independent production company.
As the broadcaster and English producer are accessing Scottish quota commissioning budgets they should sub-contract the production of the project to a Scottish production company, whilst retaining IP rights and profits.
David Smith
02/11/2015