INTRODUCTION

  ITV Network Ltd commissions and schedules programmes for ITV1 and ITV2 and represents the collective interests of the holders of the 15 ITV regional licences—Carlton Communications, Granada Media, Scottish Media Group, Ulster Television and Channel Television.

  As well as being the UK's most popular commercial TV channel, ITV1 is a public service broadcaster with extensive regional and other programming requirements.

  This response is focused primarily on answering the following two questions contained in the Committee's terms of reference:

  1.  What is the relationship between the film industry and the rest of the creative industries including the broadcasters?

  2.  What should the relationship be between British broadcasters and the film industry?

1.  WHAT IS THE RELATIONSHIP BETWEEN THE FILM INDUSTRY AND THE REST OF THE CREATIVE INDUSTRIES INCLUDING THE BROADCASTERS?

Interdependence between the TV and film industries

  1.1  There are inevitably many points of crossover between the UK film industry and the UK's broadcasting industry. Many of the actors, scriptwriters, producers, editors, technicians and other highly skilled and highly talented people working in British television also have experience of working in film. The skills needed to make great TV programmes and great films are to a large extent interchangeable. Television therefore provides a significant training ground and stable base for those wishing to work in film.

  1.2  Examples of this interrelationship are widespread . Richard Curtis, writer of Four Weddings and a Funeral and Notting Hill, initially honed his talents by writing for TV on programmes such as Blackadder. The recent ITV adaptation of Dr Zhivago was directed by Giacomo Campiotti, an Italian feature film director, and many of the crew involved in the production had a feature film background. A number of ITV's home-grown stars such as Robbie Coltrane, Shaun Bean and Helen Mirren have also had major success in UK and Hollywood feature films.

  1.3  In 2003 the Network Programme Budget for ITV1 will be £835 million. The vast majority of this money goes on UK originated production and far and away the largest proportion, over £350 million in 2003, is invested in original UK drama. This level of investment provides an enormous range of opportunities for actors, writers, directors and technical staff to learn and exercise the skills needed to make feature films.

  1.4  In addition, all ITV licensees are obliged to pay a fixed percentage of NAR[1] to a central ITV fund that supports UK training-related organisations including Skillset. Skillset is the industry training body, which "exists to encourage the delivery of informed training and education provision so that the British broadcast, film, video and interactive media industry's technical, creative and economic achievements are maintained and improved."[2] Clive Jones, joint Managing Director of ITV, is the current chairman of Skillset.

UK broadcasters' investment in UK film production

  1.5  Terrestrial broadcasters have also historically made a direct investment in UK feature film production. Channel 4's current licence requires it to play a role in the UK film industry, developing feature films and new talent with a preference for innovative subjects and treatments.

  1.6  The scale of this investment has always been limited, given the secondary importance of this activity compared to the primary duty of making and broadcasting successful television programmes—and given that the movie making business is extremely high risk.

  1.7  However, over the years this investment has helped to produce some notable successes such as Four Weddings and a Funeral (Film Four) and Billy Elliott (BBC). Individual ITV companies have also invested directly in feature film production. Granada successfully backed the Oscar-winning UK film My Left Foot and over the last 10 years has supported a number of acclaimed productions for both cinema and television, including The House of Mirth, Ghostworld and Bloody Sunday.

  1.8  However, in recent times the BBC, Channel 4 and Granada have all scaled back their activities because they have been heavily loss-making. Channel 4, for example, has closed its loss-making FilmFour distribution and international sales arm and is concentrating on the production of smaller scale, home-grown films. Similarly Granada Films has merged into the larger Granada Drama department. Granada still plans to make occasional cinematic films but has shifted its focus to popular features aimed at British audiences.

The role of film in the ITV1 schedule

  1.9  Additional to ITV's investment in original UK production, ITV spends an average of £50 million per annum on the free-to-air terrestrial rights to feature films. These rights typically become available three years after theatrical release.

  1.10  For ITV to be able to continue to invest £800 million plus per annum in its schedule it has to deliver mass audiences and therefore the payment terms for films need to reflect their proven popularity in the UK. ITV will also buy broadcast rights to smaller films for screening in off-peak times but at much lower prices, reflecting the size and value of audiences available to view at those times and the minority nature of the film.

  1.11  The role of the Network Centre is to buy the relevant rights for ITV, not to invest in other media rights. In fact under the Networking arrangements which need to be regularly approved by the ITC and OFT, the Network Centre is not allowed to buy other rights as part of the TV rights package.

  1.12  ITV also buys broadcast rights to a large number of library films. As a customer for these, ITV provides an important part of the market in the second and subsequent cycles for films, thus supporting part of a film's original business case.

  1.13  Leading figures in the film industry have sought to suggest that broadcasters rely heavily on film in their schedules, reaping far greater rewards from film than they put back in. This is, in fact, not the case. The UK's public service broadcasters in particular are regulated to focus on domestic production across a wide range of genres. There is relatively little space available in the schedules for feature films and in terms of ratings feature films do not generally deliver as well as our own, domestically produced dramas. In 2002, for example, films made up only 3.7% of ITV1's transmission hours and 5.3% of our viewing volume. None of the top 500 rating programmes on ITV1 in 2002 were feature films. Of the top 1,000 programmes on ITV1 in 2002 only 2.3% were feature films.

2.  WHAT SHOULD THE RELATIONSHIP BE BETWEEN BRITISH BROADCASTERS AND THE FILM INDUSTRY?

  2.1  As set out in answer to Question one, there is a healthy and vibrant interrelationship between film and TV in the UK. We are, therefore, surprised at ongoing calls from the film industry for further direct subsidy of their activities by broadcasters. In its lobbying of the Government and the joint parliamentary committee appointed to scrutinise the draft Communications Bill, the Film Council proposed that "there should be a mechanism for Ofcom to establish, in consultation with the broadcasters, effective means for supporting the British film industry."[3] The Committee recommended "that the Government, the ITC and the Film Council explore with broadcasters the current relationship between the broadcasting and film industries and the role that Ofcom might play in fostering and furthering the contribution of broadcasters to that relationship."[4]

  2.2  In response the Government has amended the key clause in the Communications Bill that sets out the public service remit for television to include "feature films". Whilst our preference in principle would be for the Government to resist pressure to add more and more content obligations to an already lengthy list during the passage of the Bill, the scope of this amendment appears limited to reflecting the existing relationship between the UK film industry and broadcasters.

  2.3  The hundreds of millions of pounds invested by broadcasters each year in original production in the UK help to sustain a unique training ground and technical infrastructure for the film industry. It also provides a place where those wishing to work primarily in feature films are able to find regular, less high-risk opportunities for employment.

  2.4  The best way to safeguard strong links between the UK's broadcasters and the film sector is to create an environment in which the major public service broadcasters are able to continue to invest large sums of money in high quality UK production. This should be Ofcom's primary focus vis-a"-vis the broadcasting sector.

  2.5  In the current climate of massively increased competition, arising from the spread of multichannel television, additional financial burdens, in particular on the commercially funded public service broadcasters, would be damaging to broadcasting in the UK. This would benefit neither UK broadcasters nor UK film.

  2.6  Some elements of the UK film industry wish to see the UK adopt policies similar to those operated in continental Europe, such as in France where television broadcasters like TF1 are required to invest 3% of revenues (about £30 million per annum) in French films. However, this view fails to take account of the clear differences in the way that the television and film industries operate across the EU and the ways in which different Member State governments have sought to support indigenous production.

  2.7  It takes no account, for instance, of the fact that in the UK ITV licensees are required to pay to the Government annual fixed payments and levies ("licence payments") on their advertising and sponsorship revenues. In 2002 licence payments are likely to total £250 million, representing 50% of EBITA before licence payments. Broadcasters in France are not required to make similar payments. The approach adopted in France is only viable for French broadcasters because of its protectionist approach to the audio-visual sector, which "guarantees" a market for French films through quotas.

  2.8  It also ignores the fact that in the UK there are other methods through which broadcasters offer direct support to the film industry. Channel 4, through Film Four, has a special responsibility to promote and encourage new filmmakers. The BBC similarly commits resources directly to UK film production.

  2.9  The Film Council argues that "there is a mismatch between the benefits that the broadcasters reap from film . . . and the resources that they put back into film."[5] In fact, as referred to earlier in this submission, the schedules of the terrestrial broadcasters rely very little on feature films. The ITV1 schedule is predominantly built on original UK content, not on feature films, reflecting both our commercial priorities and public service objectives.

  2.10  The UK's film industry already benefits from substantial subsidy in the form of Lottery funding and tax breaks. In 2000-01, the Film Council's grant-in-aid amounted to £22 million and Lottery funding to £27 million. This £50 million government subsidy amounts to nearly a quarter of domestic investment in UK films in 2000. In addition, UK films have received around £9 million of EU funding for development and approximately £24 million for distribution over the last five years under the MEDIA II programmes. Under "Section 48 relief" 100% tax write-offs are allowed on the completion, production and acquisition costs of films whose budgets do not exceed £15 million.

  2.11  We believe that these direct public subsidies, coupled with the strong interdependence of the UK film and TV industries that arises from the coincidence of our commercial and creative self-interests, offers the UK film industry a significant level of support.

  2.12  As a public service broadcaster ITV's primary concern must be to ensure it is able to maintain its investment in a diverse, high quality range of television content made specifically for the UK audience. Requiring broadcasters to divert money into direct subsidy of the UK film industry is likely to weaken the UK's broadcasting sector.

  2.13  The Film Council has, in fact, in recent years publicly changed its policy on the areas where the industry needs support, recognising that the key obstacle to improving its health, especially given its secure access to Lottery funding, is the limitations of the distribution system. Identifying practical ways in which this issue can be addressed should be the focus of any new Government intervention in this area of media policy.

3.  SUMMARY
  (i)  There are close and constructive links between the UK broadcasting and film industries. UK television provides excellent opportunities for the development of skills both through its huge investment in UK drama production and through its support for Skillset.

  (ii)  The UK film industry already enjoys significant public subsidy.

  (iii)  There is no evidence that the UK television industry reaps greater benefits from the UK film industry than the resources it puts back. In fact, what evidence there is suggests that the opposite is true.

  (iv)  Requiring broadcasters to subsidise the UK film industry, as some in the film industry have argued, would divert money from investment in TV production at a point when competition in broadcasting is massively increasing. This runs the risk of causing significant harm to the UK broadcasting sector.

  (v)  The biggest problem facing the UK film industry is distribution. This is where any Government intervention or support should be focused.

March 2003

2   Skillset mission statement on Skillset Website Back

3   Paragraph 118 of the Puttnam Committee report Back

4   Ibid Back

5   John Woodward, CEO, Film Council, quote from letter to FT Creative Business, 1 October 2002 Back