Why does the BBC see the future of television production as a commercial venture?

The BBC plans to take the bulk of its television programme production out of its public service division to create a separate commercial body, BBC Studios, which would be a wholly owned subsidiary of the BBC Group.

Pat Younge
17 November 2015
BBC/Mentorn/Des Willie. © BBC

Credit:BBC/Mentorn/Des Willie. © BBC

In its submission to the DCMS Charter review the BBC has proposed a radical plan to hive off the greater part of its programme production, taking some 2,500 television programme-makers out of the public service part of the Corporation to put them in a stand-alone commercial entity to be called BBC Studios. The BBC Trust in turn has announced a stakeholder consultation on the proposal due to close on November 20th.  

The new body BBC Studios would continue, as at present, to be able to pitch to the BBC, but its producers would also be free to pitch to other broadcasters in the UK and abroad. Some people call that commercialising production, I don’t necessarily think so. I see it as being about liberating BBC production. In return the BBC is offering to remove the quota which currently guarantees 50% of all BBC programme hours to its in-house producers. That protection would go and BBC in-house producers would compete on a level playing field with independent producers for every hour in the schedule.  

I want to explain why the BBC is right to move to the Studios model.

Most people still think that the BBC makes all of its own programmes and it’s true that the BBC does make a lot of its biggest hits such as Natural History Unit, EastEnders, Holby City, Casualty, Dr Who, Strictly among others; but many long-running BBC favourites are made by independents: Bake Off by Love Productions, Sherlock by Hartswood, and Question Time by Mentorn Media for instance.

Following the establishment of Channel 4, which was set up as a publisher-broadcaster to encourage independent UK production, the 1990 Broadcasting Act imposed upon a new provision on the BBC.  In future at least 25% of its output would have to come from independent producers. ITV have a similar requirement. This led to a downsizing of BBC in-house production and the introduction of a commissioning system because now there was a need to choose between the ideas from in-house producers and the ideas from outside companies.

Then in the 2003 Communications Act the Government capped the BBC in-house guarantee at 50% and introduced the system currently in place which guarantees 50% of broadcast hours to BBC in-house production, and 25% to qualifying independents. Indies and in-house compete for the remaining 25%, the so-called WOCC, or Window of Creative Competition.

Back in the 1990s when I first started at the BBC, we accepted a salary below market rate because at the BBC you had a staff job, creative freedom and a good pension. Over time as the independent quotas have cut in, the BBC had to down size the production work force, make it more flexible and gradually reduce the terms and conditions of its pension provision. Today some 75% of BBC Drama and Comedy staff, 60% of those in BBC Entertainment, and about 50% of BBC factual and documentary programme makers are freelance or on fixed term contracts. 

Previously the production departments dealt directly with the channel controllers and programme editors decided the content of their series and when shows were fit to air. So to work in production was the route to getting your ideas broadcast. Over time the BBC also had to introduce a commissioning system to select between in-house and indie ideas. Now if you work for the BBC and you pitch and idea to a BBC commissioner and they don’t like it, that’s the end of the idea. However if you work for an independent producer and you pitch it to a BBC commissioner and they don’t like it, you say “Fine: I’ll take it to Channel 4,or I’ll take it to ITV”.

The old offer - that we’ll pay you less but you’ve got creative freedom, a degree of security and a good pension at the end - is gone. In production many of the salaries, the working conditions and creative opportunity have become uncompetitive. As head of production part of my job was to try to bring creative and talented people into the BBC. You can imagine the sort of discussion I would have: 

Me: Come and work for the BBC, we’re brilliant we’ve got all these great shows and you can work with all these great people.

Target talent: Hang on a minute. I get market rate salary here; I won’t get that from the BBC will I?

Me: Maybe not quite, but you know, it is the BBC.

Target talent: Hmm. I don’t have to make my expenses public here, will I have to do that at the BBC?

Me: Well you might do, especially if you’re paid over £150,000 a year.

Target Talent: Hmm. Ah, if I come and work at the BBC, who can I pitch to?

Me: You can only pitch to the BBC.

Target Talent: Hmm, but where I am working now I can pitch to the BBC anyway, and I can pitch to ITV and Channel 4, and Discovery and Nat Geo and other channels and businesses all round the world.

Let’s just say it’s not the most compelling pitch to attract and retain the best creative people in a competitive marketplace.

 That’s why I believe the BBC has to make this shift to the Studios model. By making the shift they will take production out of the public service part of the BBC and put it in a stand alone commercial entity. That means they’ll be able to pay staff market rates, it means staff will be able to take their ideas to a range of potential channels, which means that staff will have the same creative freedom and opportunity as other producers in the industry; remember they already have most of the downside insecurities. And for many that sense of creative freedom is as important as the money, if not more important.

There’s also a strategic imperative around intellectual property that needs consideration. 

In 2003, as well as shifting the levels of In House Guarantee and Indie Quota, new Terms of Trade (ToT) were introduced. Up until then if a broadcaster paid for a programme, the broadcaster would own that programme; they could sell it to overseas broadcasters, offer it to Amazon, or sell the DVD. The broadcaster would give a small percentage of the profit to the independent producer (if it was an independent production) and the broadcaster would keep the bulk of it (all of it for a show they’d produced in-house). However, the new ToT turned that on its head: even if a broadcaster had paid the full costs of the programme the independent producer would now take 85% of all back end revenues, including DVD sales, overseas sales, or to Netflix or Amazon. Moreover, the independent producer would henceforward own the underlying copyright, so after a limited number of transmissions the broadcaster would have to pay to renew the licence.

The introduction of TOT made independent production companies very attractive to investors, both private equity and global broadcasters, because it gave producers control of their intellectual property (IP). Since 2003 the sector has seen rapid consolidation, with 55% of the revenues of the indie sector now ultimately controlled by major broadcasters ranging from Sky to ITV, and NBC Universal to Discovery.

If you want to see what this means in reality compare the BBC iPlayer to the channel 4 player or ITV Player.

Because under the current regime the BBC owns at least 50% of its output, it had such a critical mass of content that it could make the investment necessary to launch the iPlayer in the way in which it did.  It could also largely set the terms to the independent producers about how long content can be available. Compare that to the video players of some other broadcasters, where sometimes after a couple of days the content has gone. It’s not available any more, because the independent producer owns that content and it’s up to them how they choose to monetise it. Some of these independents are owned by international media companies that have their own channels, some of them want to monetise it through their own websites.

Owning IP is therefore absolutely crucial for the future of the BBC: first of all, in terms of enabling it to serve its audiences on multiple platforms, which is how we consume more and more of our content. Secondly because its commercial arm, BBC Worldwide, sells that content and the money comes back into the BBC to subsidise the licence fee. So from the BBC’s point of view maintaining a secure supply of intellectual property is the fundamental and strategic issue for its future survival. This is likely to become more important in future when more and more of us will not care what platform we get the programme on, as long as we can get it, when we want it. And in order to achieve that the BBC has to own the intellectual property rights so that it can place that content wherever people want to consume it – and ownership comes via production. 

Taken together the BBC Studios proposal creates a modernised creative environment for staff which matches the external environment, so the BBC can secure the best creative talent. Also, because the in-house producers are able to pitch for business from other channels, you offer producers greater creative freedom and can maintain (even grow) a supply of intellectual property that BBC Worldwide can monetise. All the profits from Studios and BBC Worldwide activities come back to subsidise  the licence fee, and you end up in a position where you modernise what it means to be a BBC producer and you safeguard the BBC, certainly for the next ten to fifteen years.

It’s not a proposal without challenges. Will jobs have to be cut, and if so how many? How do you organise this in the Nations? How do you ensure EU State Aid rules are complied with? How do you ensure this new Studio, proposed as a limited company, isn’t subsequently privatised by an ideologically driven government?

These are significant challenges, and the staff need to be fully engaged. The price of inertia, imho, is creative atrophy and a withering on the vine as the production paradigm continues to evolve without the BBC. But the prize for success, a reinvigorated BBC production base, outward looking, once again at the heart of the BBC and guaranteeing a UK owned producer of scale, that’s worth fighting for. 

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