Economy: Creative Industries

Viscount Colville of Culross Excerpts

Thursday 18th June 2015 Lords Chamber

[Viscount Colville of Culross (CB)]

My Lords, I declare an interest as a BBC producer. I congratulate the noble Baroness, Lady Wheatcroft, on her continued support for the creative industries.

This debate comes at a very important time for the broadcast industry in which I work. There are great British success stories from across the independent media production sector. Not only have there been increasing numbers of commissions from foreign broadcasters but the global streaming giants, such as Netflix and Amazon, are also investing in original content from the UK. My former colleague Alastair Fothergill, who runs Silverback Films in Bristol, has just completed a multimillion-pound deal with Netflix to produce an eight-part landmark natural history series called “Our Planet”, which will be a follow-up to “Planet Earth”, and there is serious talk that Jeremy Clarkson could set up a production company to start making programmes for Netflix.

British independent TV, radio and digital production companies are riding the wave of this new economy. The sector has in 10 years gone from a small cottage industry to making £3.1 billion last year. A third of that content is being provided for foreign, internet and broadcast channels. However, two-thirds is still being made for UK channels. This country is still the most important market by far for the independents. In fact, almost all the production in certain genres, such as output for children, religion and high-end science, history and arts, is made for the British market, and the BBC is one of the most important clients. It spent 46% of it content investment last year with independents, generating nearly half a billion pounds in revenue. BBC Worldwide is also the largest distributor of television content outside the United States, and so sells on the independents’ work across the globe.

However, I fear that the Government are putting this great success at serious risk. Their manifesto commitment to freeze the BBC licence fee is threatening one of our great success stories, and I am told that a freeze would be a good outcome. There is a possibility that the licence fee will be reduced, as well as being top sliced for non-broadcast services, which is what is happening under the present charter agreement. If the freeze goes ahead, by 2020 the BBC will have shrunk by half—maybe more—compared with the previous decade. Of course, there are strenuous efforts to generate funds from elsewhere—BBC Worldwide generates £1 billion in revenue—but the licence fee remains at the core of its funding.

The role of the BBC is crucial in supporting the independent production market across the whole of the British television industry. A reduction in its spending is mirrored by a reduction in spending by other public service broadcasters. What Ofcom said in its latest report is interesting. It stated that,

“ITV may be incentivised to invest only to the degree required to compete effectively for share. It mainly competes with BBC One, given the comparative reach and share of the two channels ... The level of BBC (and especially BBC One) investment in first-run original programmes therefore appears to be a contributory factor in stimulating ITV to spend more through competition”.

Indeed, the figures for investment by the two channels bear out the extent to which they shadow each other. The Ofcom report shows that in 2008 the BBC spent nearly £1 billion on original output, while ITV spent almost the same amount. By 2013, BBC1 was down to £747 million and ITV to £794 million. I fear that a freezing of the BBC licence fee will see spending by UK public service broadcast channels reduce further over the next charter period.

A reduction in public funding will affect the upfront revenue for production companies and will threaten what is becoming one of their most important sources of revenue: intellectual property, to which my noble friend Lord Berkeley referred—that is, the rights paid for reuse of the original content. Under the Communications Act 2003, the PSBs in this country are mandated to let independent production companies keep much of their intellectual property, once the original programme has been shown a number of times and for a certain length of time on digital catch-up services. For instance, when BBC Store is set up later this year to allow audiences to buy their favourite programmes, independent producers will be able to negotiate an extra fee for their content. In a world in which more and more programme content is watched at different times on the internet, there are all sorts of opportunities for independent producers to exploit this IP.

However, the ability of producers to exploit their intellectual property is not mandated for contracts outside those of the public service broadcasters in this country. It does not apply to Netflix, Amazon or a host of foreign markets, which are buying content from this country. Most of the producers are simply paid a one-off fee to make the programme and all the subsequent rights are held by the company which commissioned it. The producers do not have the right to exploit their content or to reuse it in ever more imaginative ways. A reduction in BBC funding would obviously inhibit the growth in extra IP revenue for independent producers and it would not be easily replaced by the contracts negotiated with foreign-based buyers.

I know that the Government want a smaller BBC but a smaller BBC will have wider ramifications for the whole media economy in this country. It is the bedrock of one of our most dynamic industries. I should like to ask the Minister whether he is concerned that a reduction in the BBC licence fee would adversely affect the economic success of this great British success story. After all, is not this Government the champion of business—small business and entrepreneurs?