Amendment 14

Media Bill - Committee (1st Day) (Continued) – in the House of Lords am 9:30 pm ar 8 Mai 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Viscount Colville of Culross:

Moved by Viscount Colville of Culross

14: Clause 8, page 9, line 29 at end insert—“(2A) After subsection (1), insert—“(1A) The regulatory regime for Channel 4 includes the conditions that OFCOM consider appropriate for securing that, in each year, not less than 35 per cent of Channel 4’s total spend on qualifying audiovisual content is allocated to independent productions made by independent production companies with an annual turnover not exceeding £25,000,000.(1B) The Secretary of State may by order amend subsection (1A) by substituting a different figure for the annual turnover specified in that section.(1C) Before making an order under subsection (1B) the Secretary of State must consult—(a) OFCOM,(b) Channel 4, and(c) independent production companies that are likely to be affected by the order.””Member's explanatory statementThis amendment would add an “SME Guarantee” for Channel 4 commissioning, requiring that at least 35% of Channel 4’s annual spend on qualifying audiovisual content is allocated to productions made by “indie” producers with annual revenues smaller than £25m. This amendment also provides the Secretary of State the power to amend, following consultation, the revenue figure defining the production companies eligible under the SME Guarantee.

Photo of Viscount Colville of Culross Viscount Colville of Culross Deputy Chairman of Committees, Deputy Speaker (Lords)

My Lords, I declare an interest as a freelance television producer who works for small independent production companies making content for public service broadcasters. I am also an officer of the Channel 4 APPG, so I speak as a critical friend to the channel. I thank the noble Lord, Lord McNally, for putting his name to this amendment. I also thank the many small independent companies to whom I have spoken, as well as Tom Chivers from the Media Reform Coalition, and Channel 4 itself.

I put down Amendments 14 and 15 to Clause 8 because I want to ensure that Channel 4 focuses its commissioning on future support for the SMEs. I hope the amendments will encourage the channel to expand its present commissioning process, which too often rewards large suppliers with large commissions. There will be much argument about the level of the cap below which companies qualify as SMEs. However, subsections (1B) and (1C) of this amendment give the Secretary of State the power to be flexible and alter the threshold figure if it proves to be too low for small drama producers, for instance, but only after she has consulted Ofcom, Channel 4 and independent companies.

Amendment 15 requires the criteria to be extended to an annual revenue of £25 million a year over five years. This would mean that a single large drama commission would not adversely affect a company’s status as an SME by pushing its annual revenue in a single year over the £25 million mark. The information on the company’s revenue will not be hard to find; it will be readily accessible in Companies House.

Channel 4 was set up in 1982 by Mrs Thatcher’s Government in order to break the duopoly of BBC and ITV. Its purpose was to disrupt the television ecosystem, which it did wonderfully well. Its aim was not just to have content different from the existing public service broadcasters and to reach new audiences, but to allow a thousand flowers to bloom. As Mrs Thatcher’s deputy, Willie Whitelaw, said:

“We must aim for a channel that says something new in new ways”.

He added:

“We must seek to provide an outlet for the talent of independent producers”.

Channel 4 has been very successful in encouraging thousands of people across the television industry to leave their comfortable staff jobs in the other public service broadcasters and take the risk of setting up small, independent television production companies. It created a culture in the media where independent producers became risk takers and small business owners, supplying a channel which aimed to reach minorities and poorly served audiences.

For much of the last few decades, Channel 4 has been at the centre of nurturing Britain’s independent television sector, which is the engine of our world-beating creative economy, the seed corn of the industry. But the media environment has changed dramatically in the last few years, both in content commissioning and in the supply side of the industry. Hundreds of small companies, which make up the lifeblood of the industry, have been bought up by mega television production companies such as Banijay and All3Media, which is owned by the American company Warner Brothers.

It is not surprising that these big companies have been so successful. In 2022, over three-quarters of Channel 4’s UK commissioning spend went to production companies with turnovers in excess of £25 million per year, while just 21% went to producers with annual revenues of under £25 million per year, despite these smaller companies making up more than half of all independent production companies in the UK.

Unfortunately, the latest figures, from 2022, show the percentage of Channel 4’s spend on commissioning from those bigger companies to have increased from 64% in 2020 to over three-quarters two years later, while the figures for the under £25 million companies have gone down from 36% in 2020 to 26% in 2022. This has happened at a time when Channel 5—which is privately owned—commissioned an amazing 81% of those smaller companies, a figure which has gone up even further in 2022.

This is contributing to the crisis in the industry, with commissions to smaller indies, and regions, collapsing. The latest BECTU survey of its members estimates that nearly three-quarters of its members are not working. Some 30% have not worked in the past three months, while 34% have had less than a month’s work since November 2023. As a result, there is a dramatic exodus from the industry, which has been one of the beacons of our economy. In February 2024, 37% of the respondents to the BECTU survey said that they were planning to leave the industry, with 40% of women and half of black respondents saying that they were going to look for work outside the sector within five years.

The money to build these small companies comes from the terms of trade, set up to ensure that they get the majority share of the back-end revenue from further sales of these programmes. This comes only from commissions by British broadcasters. US companies pay a straight production fee and keep all the back-end profit, so the Bill needs to focus on ensuring that British broadcasters support the future of up-and-coming content suppliers across the UK. The BBC is carrying much of the burden, but I and many other colleagues have fought hard to ensure that Channel 4 remains in public ownership. That mission having succeeded, the emphasis must be to encourage the broadcaster to support the next generation—the seed corn of television production.

I fear that Channel 4’s attitude can be summed up in its submission to Ofcom when renewing its 2024 licence, in which it said that

“the UK production sector continues to be significantly smaller outside London”, with

“fewer production companies, often smaller in scale, and therefore with less capacity to develop creative ideas and produce them”.

This statement also relates to Amendments 16 and 17 in the next group, in the name of the noble Baroness, Lady Fraser of Craigmaddie, which will support quotas for commissioning in the regions and nations.

I have been talking to small indies across the country and have been told horrendous stories of the Channel 4 commissioning process—or lack of it. One told me of a series being cancelled just three weeks before filming was due to start. Others had the extreme difficulty of getting programme ideas through the channel’s commissioning process.

I want to balance my statements by pointing out that Channel 4 is capable of commissioning astonishing programmes from small production companies, such as “The Push”, from a small Leeds-based company, Candour, which had good ratings, and told an important story from a diverse community, but there are not nearly enough of these. The channel did point out to me that its emerging indie fund has invested £17 million over the last four years, to identify and nurture emerging talent and to help them grow their businesses. The fund also provides guidance to selected indies about the Channel 4 commissioning process, to provide them with the skill set to pitch for further work. This help must, of course, be welcome, but it is not revenue from commissions.

This great channel, which is still one of the jewels of public service broadcasting, is battling against the headwinds of a fiercely competitive television economy. As it is a publicly owned company, I call on the Government to push it further in supporting SMEs and to help to bolster the future of our creative industries. Channel 4’s slogan is “4 All the UK”, and I ask the Minister at least to look at Amendments 14 and 15, to ensure that this publicly owned channel does just that.

Photo of Lord McNally Lord McNally Democratiaid Rhyddfrydol

My Lords, I point out that I did not speak at Second Reading. I was here until 6 pm and then went off to speak at a long-standing engagement at Queen Mary University of London.

It is a great pleasure to follow the noble Viscount, Lord Colville. I put my name to Amendment 14 because I strongly support his campaign, as he has explained it, to make sure that we do not get stampeded or bamboozled into policies because the world is changing, globalising and internationalising and we therefore think that certain things are inevitable. One of the things that we enjoy in the British broadcasting environment is that, for 100 years, we have been bucking the market. It was a Conservative Government that created the BBC as a public corporation safeguarded by a royal charter. It was a Conservative Government that introduced ITV as a confederation of regional television companies. Even today, ITV retains some of the DNA of that regional network; I still consider myself as coming from “Granada land”, and you can still find some of that company’s ethos in ITV today. As was pointed out, it was a Conservative Government, under Mrs Thatcher, that created Channel 4. Let us not be bullied; we have a good record of making television that is national—in the broadest sense—and distinctly British and that sets standards for others around the world.

Unfortunately, I cannot stay for the debate on the next group, but I crept into the meeting that was held on it. I felt like a Sassenach in the gathering of Scots and Welsh and Northern Irish people, putting the point, which has been proved time and again with a little nudging by government, that there is talent out there in the regions. But if you leave it just to the market, you have to make some effort to get results, because London is such a massive black hole of energy.

I am sometimes teased by my colleagues when I refer to the fact that I was on the Puttnam committee that gave pre-legislative scrutiny to the 2003 Act. One of the great advantages of the House of Lords is having that kind of perspective. When I look at that, I see that it was amazing that we got so many things right when we were not just looking through a glass darkly at what was happening. There was no internet and none of the technologies that have been developed in the last 20 years. In that Act, there were still various safeguards for making sure that our broadcasting ecology retained a British stamp to it—a British DNA—and that is why I support this amendment now.

I do not think that the idea for Channel 4 was to create a whole new industry of successful British indies, but that is what it did. It was perhaps too successful, in that many of those indies, as was referred to, were then swallowed up by other companies or themselves became big—not little—minnows.

However, that is the great effort: if we can keep this diversification of commissioning in Channel 4, and in the other countries and the regions, we are distorting the market to a certain extent but beneficially, by forcing it to find the talent in the regions and in the smaller companies. The noble Lord, Lord Vaizey, in his intervention earlier referred to the crude market forces “squeezing out” those opportunities. I therefore hope that Channel 4 will think again.

As I said, many of Channel 4’s friends, who fought for it when it was going to be privatised, want to see it in its new form using social responsibility as part of its strengths. I hope that the fact that so good a friend as the noble Viscount, Lord Colville, and others in this House who supported it, are worried about the direction it is going in will make the Minister think about how we can strengthen the ideas of the talent in the regions.

This is not the end of the story. There is still an opportunity to give it a very British twist in making sure the sector goes forward—not just bending to global market forces but looking with integrity for British solutions, be it in children’s programmes or in using the talent in the regions for the benefit of our television.

Photo of Lord Bassam of Brighton Lord Bassam of Brighton Shadow Spokesperson (Science, Innovation and Technology), Shadow Spokesperson (Culture, Media and Sport) 9:45, 8 Mai 2024

My Lords, Amendments 14 and 15 in the name of the noble Viscount, Lord Culross, seek to finesse the Channel 4 commissioning regime that has worked so well for this highly innovative channel. I was one of the sceptics when Channel 4 was first thought of, and I remember writing an article which challenged the model. However, I have been proven wrong over those 40-plus years.

As the noble Viscount explained, he seeks to add an “SME guarantee” by virtue of Amendment 14 to the commissioning process to further stimulate the growth of indie production houses, in particular those with revenues of less than £25 million. Amendment 15 qualifies this to average out the £25 million cap over a five-year period.

The first amendment would require at least 35% of the channel’s spend to be on companies with a revenue of less than £25 million. We on these Benches can see some merit in this approach, and certainly in the direction of travel, given that the strength of Channel 4 has been the diversity it has brought to production, and that it has led to far more production outside the M25 and the south-east.

I am highly conscious that Channel 4 is thinking long term about the removal of the publisher/broadcaster restriction and its potential impact on independent producers. The channel is keen to protect the ecology of small production companies. It argued in a briefing earlier in the year that a move to in-house should be gradual, over a five-year period, and should not alter the value it places on the importance of independent production houses. As it says, its partnerships with indie producers have led to these companies growing, expanding and owning their intellectual property. Moreover, it has helped to spawn a whole new industry.

I can see that increasing the qualifying independent production quota from 25% to 35% would probably strengthen the indie sector, so today we would do well to listen to the Minister’s responses as to the workability of the amendments. I think we all share a common view—I hope we do—that the uniqueness of the Channel 4 commissioning model is of immense value to TV production generally and the development of the market, innovation, and the high production standards that UK TV is internationally renowned for. The Channel 4 approach has helped to give an edge to that. The question is, ultimately, whether this is the most appropriate way of protecting that reputation and ensuring that we have a sustainable independent production output.

The noble Viscount has done us a service this evening in tabling these amendments. We know that we must be very careful in tweaking the commissioning approach; as the noble Viscount said, there are industry concerns that we must listen to, and we have to find the best way forward to protect something that has become uniquely valuable in TV production. It is something that we support right across the House.

Photo of Lord Parkinson of Whitley Bay Lord Parkinson of Whitley Bay Parliamentary Under Secretary of State (Department for Culture, Media and Sport)

The diversity of our world-leading television production sector is one of the main reasons that it is so successful. We have companies of different sizes operating all over the UK, focusing on genres ranging from specialist factual to high-end drama and everything in between. Last year, these companies delivered the highest sector revenues on record: just under £4 billion. Smaller producers are, of course, hugely important for ensuring a healthy production ecosystem, and the current regulatory regime for independent production has been very successful indeed in promoting and supporting them. Boosting this independent sector was one of the purposes behind the design of Channel 4. I do not want to make the noble Lord, Lord Bassam, feel old, but I was not around to be a sceptic at the time of those debates—they happened before I was born. But Channel 4 has, as I have said from this Dispatch Box, done a great service over the last four decades, and the regulatory regime has supported that too.

PACT, the industry body, estimates that there are more than 250 independent producers with an annual turnover of less than £1 million operating in the market today. Its statistics also show that 75% of independent producers have an annual turnover of less than £25 million. These are the producers that the noble Viscount, Lord Colville of Culross, had in mind, particularly with his Amendments 14 and 15. The issue of providing further support for smaller independent producers is one that we have looked at closely, most recently through our work on the mitigations to accompany the removal of Channel 4’s publisher-broadcaster restriction, which noble Lords have noted.

The clear message from the sector when we did that was that the measures which singled out smaller producers specifically—for example, via a turnover threshold, as the noble Viscount’s Amendment 14 proposes—would not be welcome on the grounds that they would be anti-competitive and penalise success. Producers want an incentive to win more commissions and grow their businesses, not to stay small. Those we spoke to also raised concerns that such measures would be difficult for Ofcom to enforce and could lead to increased monitoring and compliance costs for the regulator. Although these issues are addressed in part by the additional flexibility which the noble Viscount offers through his Amendment 15, the overarching concerns that we have with this approach still stand.

The Government recognise that this is a challenging time for producers and the production sector because of the slowdown in commissioning activity as a result of the downturn in the television advertising market, and we are taking steps to support producers and the production sector at this time, including the generous tax reliefs across studio space and visual effects, investing in studio infrastructure, supporting innovation and promoting independent content through the UK Global Screen Fund, but, for the reasons I have set out, we do not feel that we are able to support the amendments which the noble Viscount has put before us, but we are grateful for the opportunity to have this debate.

Photo of Viscount Colville of Culross Viscount Colville of Culross Deputy Chairman of Committees, Deputy Speaker (Lords)

I thank the Minister for his reply. I think we all agree that we want to try to encourage the diversity of Channel 4, which has been so successful in creating a vibrant independent sector. But the truth is that the small indies that I have spoken to are having a really hard time. I am grateful to the noble Lords, Lord Bassam and Lord McNally, for talking about the diversity of the production sector and the role that the channel has played in helping that to develop. I listened carefully to what the Minister said about the regulatory regime as it stands having been successful in developing the market, and that his work with PACT and other producers has delivered a message that the sector and small producers do not welcome any kind of threshold, which I am suggesting in this amendment.

All I can say is that I have spoken to a great many small independent production companies across this country. They are really struggling; they are having a really hard time getting their commissions even looked at, let alone getting any kind of positive response. I ask the Minister to go back and talk to some of the smaller ones—not just PACT, but some of the smaller indies as well. I know that the Conservative Government see themselves as being on the side of entrepreneurs, so I encourage the Minister to do all he can to support the courageous and determined men and women who have set up these independent production companies across our country and made the sector so successful. I beg leave to withdraw the amendment.

Amendment 14 withdrawn.

Amendment 15 not moved.

Clause 8 agreed.

Clauses 9 to 13 agreed.

House resumed.

House adjourned at 9.57 pm.