253.  While the majority of BBC content is produced by BBC in-house staff some is bought from independent production companies. The BBC is in a unique position to invest in and support the independent production sector. However, in its response to the Green Paper the BBC says that in the past it has been slow to acknowledge the contribution of the independent sector.

Independent television production

254.  The BBC has an obligation under the Communications Act 2003 to source no less than 25 per cent of its qualifying television programme hours from a range of independent producers. "Qualifying programmes" include all broadcasts that last more than two minutes except repeats and news and live programming.[95] Ofcom has the power to impose fines (up to a maximum of £250,000) for failure to meet this quota.[96] In 2004 the BBC exceeded the 25 per cent quota but it has failed to meet this quota in two out of the last three years. Mark Thompson admitted that in the past the 25 per cent quota was regarded as a ceiling as well as a floor by the BBC (Q 62).

255.  Many of our witnesses agreed that an increase in independent commissioning at the BBC would benefit the industry and the quality of programming. Mark Thompson told us that "It is absolutely important from the point of view of the producers that the BBC should have a system which is fair to them. Also, it is in the interests of the licence payer that the licence fee investment should go to the best ideas and the best talent" (Q 61). John McVay of PACT told us that one of the strengths of the independent production industry is that "it brings price and creative competition to the programme supply market which overall ensures that you get better ideas on screen…" (Q 957). Lord Burns thought there needed to be "greater opportunity for people in the independent sector to be able to bid and get into the process of making programmes, either for television or for radio" (Q 256).

256.  However, support for increased independent commissioning was not universal. BECTU argued against proposals to increase independent commissioning at the BBC and questioned "the all-but-spoken presumption that further realignment is necessary in favour of independents and against in-house production". They stated that the in-house production base is undervalued, under-examined and under-appreciated in a debate "which seems to operate on terms set by the independents" (p 477). This was echoed by Equity (p 490). Dr Georgina Born, Fellow and Director of Studies in Social and Political Sciences at Emmanuel College, Cambridge, agreed. She asserted that "under present circumstances creativity, quality and innovation in content production are more likely to be secured by in-house than independent production". She went on to argue that "no increase in the quota should be made until it can be demonstrated that the independent production sector supports high quality training, evidences good employment conditions and reliably sources innovative and high quality programming" (p 283).

257.  The Government is considering two options for increasing independent production.[97] First, an increase in the BBC's existing statutory 25 per cent quota for independent television production. Second, the BBC's own plan to create a new "Window of Creative Competition" or "WOCC". The WOCC would mean that external and independent producers could compete against BBC in-house production for a further 25 per cent of the BBC's commissioning hours. The BBC state that it needs to retain 50 per cent in-house production as the point of "critical mass" for the organisation.

258.  In its response to the Green Paper the BBC argues against an increase in the mandatory quota and for the WOCC to be given a chance. It states that "the future of the production sector is best secured through effective creative competition, rather than through stronger regulation".[98]

259.  Many of our other witnesses were against further mandatory quotas at this stage. The Creators' Rights Alliance, representing 85,000 freelance copyright and content providers, were concerned that any increase in quotas for independent production would partly be at the expense of freelancers employed by the BBC for in-house productions (p 483). PACT thought WOCC should be given a chance but stated that "If the WOCC fails to demonstrably establish a greater creative competition by the BBC Trust's second biennial review… a 50 per cent by value quota [should] be imposed" (p 253). David Frank, Managing Director of the independent production company RDF Media and a member of the PACT Council, went further saying "In an ideal world we will move to a system where there is no guarantee for in-house production… The commissioning group at the BBC should just be buying the best ideas that are available in the market…" (Q 962). Channel 4 agreed that the BBC should be given the opportunity to make the WOCC work, before increases in the quota are considered (p 67).

SMALL PRODUCTION COMPANIES

260.  There is some concern about how to ensure that all independent production companies benefit from the BBC opening up its commissioning process. BECTU told us that the independent sector is dominated by the largest 5 per cent of companies which make 80 per cent of the programmes (p 477). Dr Georgina Born raised concerns over the potential domination of WOCC by large independent companies which would pursue profitability over PSB (p 279). She told us that a small number of large internationally orientated companies "wield considerable power with the broadcasters, and are able to set the terms and to operate with relatively light oversight and controls. As large businesses, they have become increasingly concerned with extending and securing their markets, resulting in a more commercial orientation and more risk-averse behaviour". She went on to recommend that the definition of the independent sector should be tightened "so as to exclude those independents that have achieved substantial scale, while regulatory interventions should be considered that nurture the growth of new and small independents, supporting their access to major commissions" (p 280).

WHAT IS AN INDEPENDENT PRODUCER?

261.  To qualify as an independent company in the eyes of the BBC a producer must not be more than 25 per cent owned by a broadcaster, or itself have a shareholding greater than 25 per cent in a broadcaster.[99] We note that the European Union is currently in the process of reviewing the Television Without Frontiers Directive and in the course of that review is considering the definition of "independent producer".

262.  Andrew Zein, Chairman of PACT, thought the BBC's schedule should be open to all suppliers, including independent producers, ITV, or external US and European producers (Q 960). ITV believed that the definition of "independent producer" should include any producer with no ownership ties to the BBC to qualify. It stated that this would produce a simple and consistent system, bringing non-qualifying producers within the scope of the statutory quota and the BBC's Code of Practice (p 120).

REGULATION OF THE WOCC

263.  If the WOCC is to be implemented then it is necessary to consider how it will be regulated. Some witnesses have suggested that it will be hard for independent producers to have confidence that the BBC is operating the WOCC fairly when BBC commissioners work closely with the in-house producers who compete against external producers for the commissioners' attention and for WOCC contracts. PACT explained that historically the BBC has "maintained a commissioning structure that was aligned to in-house production. There have been sustained and widespread concerns that commissioning was both undemocratic and opaque, with ideas submitted to the BBC from outside producers not having an equal chance". PACT therefore applaud the statement in Building Public Value that the BBC will aim to commission the best programmes regardless of who supplies them (p 252).

264.  PACT asserted that the BBC should ensure transparent competition by ensuring that in-house and external commissions are on the same tariff and terms and should share more audience information with external suppliers (p 253). The BBC has proposed the development of a "Network Centre" for the main genre commissioners separate from the BBC production departments. Mark Thompson told us that this would create fewer but more empowered commissioners with clearer lines of responsibility (Q 61). PACT supported the separation of in-house production departments from commissioners and controllers, which it believes will improve communication between BBC Commissioning and between external suppliers (p 252).

265.  The BBC has argued both that Ofcom's current powers enable it to adequately evaluate the commissioning process and that the BBC itself should be ultimately responsible for ensuring the WOCC's success.[100] PACT suggested that the Government's proposed BBC Trust should have a duty to publish an independent report on the performance of the WOCC every two years. John McVay suggested that this report should focus on how competitive the process has been and the fairness of commissioning (Q 967). If our governance model is adopted then the BBC Board should be given this responsibility. Lord Macintosh of Haringey told us that while the Government supported the objectives of the WOCC it would not be appropriate to specify how it should be managed by the BBC (Q 194).

266.  We support the proposal for the WOCC. We believe that in operating the WOCC the BBC should keep two objectives in mind: stimulating greater competition between the BBC and external producers in order to secure the best programming for licence fee payers, and achieving greater value for money for licence fee payers. The WOCC should open up competition to any supplier, whether the BBC, an independent production company or another broadcaster.

267.  We believe that the BBC's proposals have the potential to increase investment in the independent production sector without recourse to higher quotas. The management of WOCC should be the responsibility of the BBC. The BBC Board should have a duty to monitor it carefully and to publish a bi-annual report on its operation. We recommend that the BBC should set indicative targets within the WOCC for sourcing from small and regional companies.

Independent radio production

268.  The BBC has a voluntary 10 per cent target for independent radio production and also defines the genres which are classed as "eligible" for independent production. The Green Paper states that in 2003/04, approximately 12 per cent of eligible radio hours came from independent production companies.[101] Following the Content Supply Review in December 2004, the BBC will extend the 10 per cent quota to cover the newly eligible genres of sport, radio in the nations and digital radio. The BBC has also established a Programme Development Fund to support the development of creative ideas from independent radio producers.

269.  The Radio Independents Group further stated that the BBC's use of "eligible hours" for radio production is misleading and that measured as a percentage of total programme output, the independent sector produces only 6 per cent of the BBC's radio programmes. To strengthen the position of independent radio within the BBC, it advocated that the BBC's code of practice should include an "Independents Executive" to champion the sector; and a BBC commitment to support development of the independent radio production sector (pp 524-526).

270.  The Voice of the Listener and Viewer stated that "BBC Radio is without rival in achieving its public purposes and also provides a unique platform for commissioning new music and creative writing" (p 161). The Music Business Forum thought that high quality radio production can best be maintained by the BBC's continued commitment to training and the broad development of skills in the independent sector (pp 504-509).

271.  The Green Paper states that the BBC is the only significant purchaser of independently produced radio material and that therefore Government intervention to create a competitive market may not be possible.[102] However, PACT argues that the development of digital radio has increased opportunities for independent companies to provide content and therefore the 10 per cent voluntary quota for BBC radio should become a 25 per cent mandatory quota (Q 980). This is supported by the Radio Independents Group which proposed a window of creative competition for a further 25 per cent of radio production (p 525).

272.  The Music Business Forum stated that the BBC's role as a commissioner of music is extremely important to the UK's cultural diversity and that as a public service broadcaster it should foster and promote new and innovative musical talent. To perform this role it argued that the BBC must retain a strong in-house radio production base, to allow for a range of creative and risk taking programmes. It believed that there will be some music genres in which the independent sector is unwilling to invest and that the licence fee should be "venture capital for creativity" (pp 504-509).

273.  A mandatory quota for television production has strengthened the independent sector and provided stability and security for established and emerging companies. We believe that the BBC should continue to invest in independent radio production, but to secure growth in the sector further reforms are needed. We therefore recommend that the 10 per cent voluntary quota for independent radio production should be made mandatory. The BBC should consider the 10 per cent quota as a floor and not a ceiling and should operate a competitive commissioning process to secure the best programming available.

Independent online production

274.  The Green Paper refers to BBC Online as an increasingly important and trusted source of information.[103] The Graf Review in 2003 recommended that the BBC set a target of at least 25 per cent for online content (excluding news) supplied by external or independent suppliers.[104] Following this recommendation the BBC committed itself voluntarily to sourcing 25 per cent (by value) of its online content and services (excluding news) from external suppliers which it hopes to achieve by 2006/07.[105] It is impossible for us to know whether this is a realistic target as the New Media department at the BBC has not previously had to report how much of its content is produced externally. However, the BBC's data shows that only 14 per cent of eligible new media funding has been spent previously on external or independent production (p 29).

275.  The British Internet Publishers' Association (BIPA) stated that while many of the BBC's services on the internet are proper extensions of its traditional broadcasting activities, many are much more akin to publishing. They believe that the BBC enters and competes in areas already well served by commercial publishers and therefore impacts adversely on the market for independent online content producers. They told us that "To date there appears to have been insufficient effort taken by the BBC to ensure content is always innovative and distinctive which often leads to accusations of …the replication of existing commercial provision". BIPA stated that the new Charter should impose a mandatory quota of at least 25 per cent of all commissioned internet content (pp 463-474).

276.  The BBC has established a dominant position within the UK news and information sector of the online industry. It thus has a responsibility to invest public money not only to produce the best service, but also to support the economic strength and cultural diversity of the UK. We therefore recommend a 25 per cent independent production quota for BBC's Online commissions (excluding news). Ofcom do not have powers to regulate the internet and Lord Currie of Marylebone told us that even if Parliament gave Ofcom such powers it is not clear that they would be able to do so (Q 457). It is therefore the case that the BBC Board will have to be responsible for the self regulation of this quota. The BBC Board therefore will have to be responsible for ensuring that the BBC meets this quota. To ensure that wider industry has confidence in the process we recommend that the BBC Board have a duty to secure fulfilment of the online independent production quota, to monitor commissioning of independent online content and to report bi-annually.

The UK film industry

277.  In the Green Paper the Government propose that the BBC should devise a film investment strategy to ensure that the best UK films are shown to a wider television audience. They also state that the BBC's film strategy should reflect other aspects of BBC strategy including the commitment to original content and the UK's cultural identity.[106] In its response to the Green Paper the BBC stated that it will "continue to invest both in the production of UK films and the acquisition of quality UK films as part of its commitment to investment in UK talent". The BBC is also conducting an analysis of the level and value of its investment in original film production prior to publishing a film strategy.[107]

278.  The UK Film Council stated that the current level of investment by the BBC in UK film is not commensurate with its position as the nation's leading public service broadcaster (p 532). It recommends that the BBC work in partnership with the UK film industry to pursue shared objectives. PACT agreed and asserted that the BBC should more explicitly recognise its obligation to support British film talent and should commit to a significantly larger investment in new film production. PACT proposed that the BBC's annual film strategy should publish details of current and planned expenditure on US films compared to UK films, the amount invested via BBC Films and define a commitment to spend 50 per cent of BBC's film budget on British films (p 249).

279.  One of the proposed public purposes for the BBC is to stimulate creativity and cultural excellence. We recommend that an explicit part of this remit should be to do what it can to support British film but without compromising the objective of providing licence fee payers with the best programmes.

96   Section 198 (5) of the Communications Act 2003. Back

97   Department for Culture, Media and Sport, Review of the BBC's Royal Charter: A strong BBC, independent of government, March 2005, p. 7. Back

98   Review of the BBC's Royal Charter: BBC Response to A strong BBC, independent of government, p. 86. Back

99   The Broadcasting (Independent Productions) Order 1991 order sets out the definition of an independent producer. The Broadcasting (Independent Productions) (Amendment) Order 1995 increased the shareholding percentages from 15% to 25%. Back

100   Review of the BBC's Royal Charter: BBC Response to A strong BBC, independent of government, p. 85. Back

101   Department for Culture, Media and Sport, Review of the BBC's Royal Charter: A strong BBC, independent of government, March 2005, para. 7.18. Back

102   Ibid, para. 7.20. Back

103   Department for Culture, Media and Sport, Review of the BBC's Royal Charter: A strong BBC, independent of government, March 2005, p. 12. Back

104   Report of the Independent Review of BBC Online by Phillip Graf , 2004, p. 12, Para 2.2. Back

105   BBC Content Supply Review, 2004, para. 5.1. Back

106   Department for Culture, Media and Sport, Review of the BBC's Royal Charter: A strong BBC, independent of government, March 2005, p. 38. Back

107   Review of the BBC's Royal Charter: BBC Response to A strong BBC, independent of government, p. 34. Back