Written evidence submitted by pact (BBC0006)

              House of Commons Scottish Affairs Committee inquiry into the new BBC Scotland channel

November 2018

Introduction

1)      Pact is the trade association that represents the commercial interests of the independent production sector across the UK. Pact has 500 members including around 40 companies, largely small and medium sized businesses, based in Scotland across TV, film, digital, animation and children’s production.

2)      The UK independent television sector is the second largest in the world, with revenues growing over the last ten years to around £2.7 billion in 2017 with international revenues largely driving growth.[1]

3)      UK TV exports are also a success story with international revenues from the sale of UK TV programmes and associated activities at £900m in 2016/17[2].

4)      In 2015, the Scottish original production market was worth approximately £190 million, and has grown by 9% per annum since 2009 (rising from a low base following the introduction of network quotas for the UK Nations by the BBC and, later, Channel 4).[3] Scotland now has an increasing number of producers that are competing nationally and internationally across a number of genres. Pact modelled that the production market in Scotland could rise to £250m by 2020 if the recommendations in the Pact report ‘Building a sustainable independent sector in Scotland’ are implemented.

5)      Pact is pleased that the BBC has committed to both more investment in Scotland in the form of the new channel and to ensure that proportionately more of the licence fee raised in Scotland is spent on dedicated services in Scotland (currently 69% according to the latest BBC Annual Report, a slight fall from the previous year[4]).

6)      The BBC has a Public Purpose to support the creative economy across the UK and overall the new channel should be a positive catalyst for the creative industries in Scotland including independent production. Investment in the local production sector will bring a diverse range of quality content to audiences in Scotland, the UK and internationally.

7)      For further information, please contact Pact’s Director of Nations and Regions, Rosina Robson, at rosina@pact.co.uk or on 020 7380 8248.

Inquiry questions

Thank you for the opportunity for Pact to put forward its views on the new channel in Scotland. Please let us know if you require any further clarifications regarding the points raised.

1. What this channel can deliver for Scotland
2. How it will reflect the views and issues that matter to Scotland
3. What opportunities it presents for Scotland’s creative industries.
    

What this channel can deliver for Scotland

How it will reflect the views and issues that matter to Scotland

1.1  Pact is pleased that the BBC has committed to more investment in Scotland through the new BBC Scotland channel. We welcome increased funding for production which we believe overall will benefit Scotland’s production sector, the creative economy as a whole and the representation of the population in Scotland on screen.

1.2  A series of positive initiatives and announcements over the last 18 months have meant that the landscape has shifted for independent TV production companies in Scotland in a potentially positive way:

• In terms of the BBC, under the new BBC Charter, commissioning opportunities in both TV and online content will open up to 100% contestability with external providers by the end of the current BBC Charter in 2027.
• The BBC Director for Scotland, Donalda Mackinnon made a commitment at the start of her tenure for an increase in the licence fee raised in Scotland per head to be spent in Scotland.
• Specific quotas were agreed under the new BBC service licence for spend in Scotland (at 8%) and each of the other the nations across the UK.
• A new injection of funding for local content in all of the nations of the UK was agreed including funding for the new Scotland channel.
• Channel 4 has importantly committed to spending 50% out of London by 2023 (including previous target of 9% nations spend by 2020) and has chosen to base its creative hub in Glasgow with 20-30 staff with further information to follow over the next few months following consultations with staff.
• STV made a recent commitment at the Edinburgh TV Festival in August to invest in content from Scotland based independent production companies which is a significant shift from their historical position.

1.3  In addition to these announcements by the broadcasters, the Scottish Government has set up a new Screen Unit - Screen Scotland with a new Broadcast Content Fund for Scotland based indies and is shortly to be agreeing Memorandum of Understandings (MoUs) with the broadcasters i.e. BBC, Channel 4 and STV) to guide the work of the Unit and its growth objectives for the sector. Pact has been seeking to influence the shape of the MoUs. The Screen Scotland collaborative proposal[5] outlined that partners will help the sector double production spend by 2022-23; and increase Scottish company growth to boost the number from two to six reaching the UK top 50 (turnover ≥ £10m).

1.4  Ofcom is also in the process of consulting on the rules and guidance around how programmes qualify under the regional TV production definition which aims to incentivise regional production. Pact has been feeding into this exercise with input from members in Scotland. The second phase of the consultation may lead to a tightening up of the guidance (and the programmes that qualify under the definition) and how this is audited. This should be positive for companies based in Scotland and in the other nations and regions of the UK.

What opportunities it presents for Scotland’s creative industries

Current challenges for the independent production sector in Scotland

2.1 Overall, Pact welcomes the setting up of the new channel in Scotland which offers important creative opportunities for Scotland based production companies. However, there are two main issues raised by recent Ofcom consultations on the channel:

Channel budget risks squeezing out small companies

2.2 Despite the positive climate for the production sector in Scotland. Pact has one concern around the risk that low channel budgets could lead to small companies and producers being squeezed out of the market. Pact has previously outlined in submissions to Ofcom about the new channel, its concern about the low cost per hour model envisaged. The risk is that companies in Scotland may be either forced to raise finance by selling their IP in order to deliver quality content. However, there is no guarantee that the domestic or international markets will be prepared to advance these funds leaving the smaller producer having to defer their own fees and margins and effectively subsidize the BBC Channel or that only larger companies such as BBC Studios will be able to absorb additional costs for the budgets envisaged due to a larger portfolio of commissions where margins and risk can be amortised.

2.3 Pact has called on Ofcom to actively monitor this situation into the future, particularly after the channel has been in operation for 1-2 years with regard to the impact on the market and ensure that fair and effective competition is maintained. Ofcom could provide further comment and analysis if it becomes clear that suppliers to the new BBC Scotland channel are dominated by a small number of large companies including BBC Studios. We would want to avoid a situation where programme budgets are set artificially low which would inhibit competition and innovation.

Risks around disincentivising co-commissioning

2.4  Pact is concerned about the potential risk of planned future amendments to the BBC service licence to accommodate the new channel that could undermine co-commissioning opportunities. Co-commissioning happens when BBC network (UK wide programming) work in partnership with BBC local services (i.e. To a Scotland audience only). The benefits for producers are that BBC network brings important increased investment to the table and that their content reaches a wider audience and could convert into a returning network series. The process promotes joint working and discussion between BBC local and BBC network services which is positive for the independent production sector.

2.5  Pact has presented a number of solutions to Ofcom to ensure that co-commissioning opportunities are increased into the future, which is also the BBC’s ambition and not undermined or decreased in any way. We are open to further dialogue with Ofcom and the BBC on this issue to make sure that any solutions do not undermine the Out of London targets and 8% BBC network quota in Scotland. We also recognise that any solution could evolve over time and that Ofcom has the opportunity to amend and update the BBC service licence in the future on an ongoing basis.

December 2018

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