£400m commissions up for grabs as BBC plans to remove production quotas
The BBC director general is proposing that BBC production quotas should be torn up, signalling a potential commissioning bonanza for independent production companies. [full speech below]
He’s set to make the announcement at a Future of the Licence Fee seminar in London later this morning.
Current rules ensure that half of all BBC programming is made in-house.
Tony Hall will call for a “competition revolution” arguing that not only should the quota system be scrapped, but that BBC Production should be allowed to become more competitive and pitch programmes to other channels.
It means that a potential £400m of commissioning opportunities could be available to the independent sector.
However, it would take some time to be implemented, as it would require changes to the BBC Royal Charter, which is not renewed until 2017.
Last month, Pat Young, the BBC’s former chief creative officer also argued that the quota system was “irretrievably broken” and that it should be abolished to set “BBC Production free” to become part of the commercial operation, BBC Worldwide.
Much like Lord Hall, he pointed to the amount of consolidation within the independent sector, making the quota system “less about creative competition and more about accounting.”
Lord Hall stated to the conference:
Competition works just as you would expect. We do well. Others have to compete. They raise their game. They challenge us. We respond. Competition spurs us all on. It’s better for Britain.
Competition for supply
So I believe in competition as a tool to be used wherever it can make us better, and improve what we give the public.
And there’s one area which is top of my list because it goes to the heart of what the BBC is about. The way our programmes are made.
The BBC is its programmes. It needs, consistently, for its programmes to be outstanding, to be inspiring, to push barriers, to lead not to follow.
And I believe that more competition can help us achieve this.
Within the current Charter, we’ve had what I call ‘managed competition’ in the way we make our TV programmes.
This managed competition is part of a 20-year industry plan for the whole TV market.
It was designed to nurture and encourage an independent sector that then had lots of small producers selling to a small number of big broadcasters who had all the money and often their own production houses. Regulated terms of trade gave independent producers a framework to exploit their own intellectual property. And commissioning quotas tried to deal with the concentration of television production, commissioning and broadcasting in London.
Today with managed competition, 25% of BBC TV production is guaranteed to independent producers; 50% is guaranteed to BBC in-house producers; and 25% is left open to both in open competition.
This policy has had many desirable outcomes.
Managed competition has seen the creation of an amazing array of top-quality programming.
It has helped the independent production sector thrive and created strong production centres around the UK.
It has produced significant financial returns to the UK, because independent producers and the BBC have exploited their intellectual property in other countries and on new digital services. BBC Worldwide has been part of this, helping to support UK producers and take them around the world.
Yet this very success has produced the need for change.
The United Kingdom is enjoying a golden moment. The best of British talent and programming is flourishing at home and abroad.
Partly as a result, the production sector in the UK has changed rapidly. The sector is far more consolidated than it used to be, with a small number of super-producers now dominating the supply of content to UK public service broadcasters and with many new outlets for their ideas.
US capital has spotted this and swooped.
In the last few weeks, tectonic plates have been moving. We’ve seen 21st Century Fox and Apollo Global Management agree to merge Shine and Endemol – two of the biggest producers here. Discovery and Liberty Global have acquired All3Media. Warner are now going to rebrand their previous indie acquisition, Shed, as Warner Brothers UK.
At the same time, global broadcasters are also buying each other.
Viacom is acquiring Channel 5 in the UK. BSkyB is considering the acquisition of Sky Italia and Sky Deutschland – a deal worth billions of pounds. And in the States, AT&T is acquiring the pay TV company DirecTV for nearly 50 billion dollars.
You can feel the market changing.
Even the biggest broadcasters in the world are feeling the need for allies. This process is unlikely to be at an end.
In this new environment, ‘managed competition’ produces an increasingly distorted market.
Under the current rules some big, global producers no longer count as fully independent so their shows can’t go in the 25% of BBC television airtime guaranteed to independent producers. So a big long-running independently-produced series like MasterChef has had to move into the 25% window of creative competition that’s open to everyone. That squeezes out creativity and innovation. Big returning strands – brilliant as they are – now take up space designed for new ideas. A system set up to encourage competition and choice has begun to forcibly corral producers into three separate tribes.
The change in the structure of the market also adds constraints that now feel artificial for BBC in-house production.
With managed competition, BBC Production has only one buyer – BBC Commissioning – which inevitably constrains its opportunities. More importantly, it’s limited in the kinds of commercial deals it can make. It can’t compete globally in the way that big independent studios can. We’re finding it harder to retain talented people, who grew up with the BBC but who now feel they have the freedom to be more creative and competitive elsewhere.
So managed competition worked to develop a mature market for independent production and to protect BBC Production while this happened.
But now we need change.
Both big independent producers and BBC Production should be able to stand on their own feet.
We are going to work with our many partners to develop our plans for the future supply of programmes. These are far from final proposals. We will put them to the BBC Trust to form part of their own review of supply this autumn. And it will take a new Charter to put them into effect.
But I want whatever model we agree to follow three principles.
First, we must guarantee the secure supply of brilliant and innovative new programmes across the full range of BBC broadcasting. And that includes the sort of programmes that don’t have global commercial appeal as well as those that do.
I want our commissioners to be able to choose from the best ideas, from independent producers and BBC Production. They must have them at a price we can afford.
This is about us having the next Sherlock, the next Strictly, the next Springwatch and the next Shetland – a fantastic mix from independent and BBC producers.
It is also about us having challenging factual programmes that over time the market may no longer find it attractive to supply. And the live skills that allow us to cover, say, a national funeral at a moment’s notice.
Second, we must grow this country’s creative sector, right across the UK. We are world-beating at television and I want us to stay that way. I’m not interested in dividing up a smaller cake in different ways. I want a bigger cake for us all.
The ownership of intellectual property – whether by the BBC or independent producers – is a fundamental of the future across all industries. It is how we will help to take Britain to the world and bring the credit and the investment back to this country.
And then there is the third principle. Value for money.
Any new system must obtain value for money for the licence fee payer. When the BBC owns the rights to programmes we can return the full commercial value of them to the UK licence fee payer, to invest in new programmes.
Managed competition has also helped us to keep costs down. We have been able to compare between independent producers and in-house production.
Free competition should intensify this. But it must be fair competition, too. We must make sure we don’t use the licence fee to compete unfairly or subsidise commercial activity.
So I want to challenge the ‘managed’ part of managed competition.
Confidence in the BBC
This move is a symbol of my confidence in the BBC. Confidence in its ability to keep changing, keeping doing better.
And confidence in the future of BBC Production.
This is the team that created Doctor Who, Strictly Come Dancing, Frozen Planet and The Thick Of It. The team that created Mrs Brown's Boys, Miranda, Bluestone 42, Our War and Brian Cox's Wonders Of The Universe. The team that delivers the Proms, the World Cup, the Royal Wedding, and our coverage of the World War One Centenary.
I could go on. That track record gives me great faith in its future. It is also a reminder that it would be extremely odd to ban the BBC, one of the world's great programme-makers, from making programmes. Put it another way, I do not believe that the BBC’s future is as a publisher and broadcaster only.
We’ve got great talent at the BBC. I want them to want to stay here, to bring their best ideas to us. I want them to know that BBC Production will be the place to do their best work, to take risks. That it will offer them the broadest range of creative opportunities.
And I want them to spend less time ticking boxes. I want them instead invigorated by the challenge. In the last year, this has become my top priority, which is why Director of Television Danny Cohen and I have been working together on these issues so intensively.
I want our producers to feel they are working for one of the best, most prestigious, most influential media organisations in the world. Yet at the same time working for one of the leanest, hungriest, most flexible organisations. I want this to help strengthen what I see as I go round the BBC: a real sense of entrepreneurialism and creative ambition.
But proper competition and entrepreneurialism requires a level playing-field. We should have regulation in the TV supply market only where it’s needed so that we can let creativity and innovation flourish.
For instance, is it right that independent producers that are part of global media organisations bigger than the BBC need guarantees or special negotiating protections?
But small independent producers, the next generation of talent, may continue to need support. I want to work with them and with their representatives in PACT on a system that can help grow new production companies. I want to know what more BBC Worldwide can do to help small companies, and what the BBC can do to help with cash flow and long-term security.
But a true level playing-field between independent producers and BBC Production has big implications for the whole market. I welcome Ofcom looking at this question in their PSB Review and it’s clear that this will be one of the big debates in Charter Review.
After all, if independent producers can take their ideas to any broadcaster around the world, I would want the same for BBC Production. We’re up for a discussion as to whether they should offer ideas to other UK broadcasters. But the world should definitely be their market.
And in return for removing those protections we would remove our own – in other words, the overall in-house guarantee for the whole of BBC Production. If we can make the whole system work properly, I will be the first to say we don’t need it.
But let’s be clear. Wherever we get to, this will be a package. A level playing-field doesn’t tilt.
Compete or compare
Competition can bring efficiency and value for money to other parts of the BBC too.
I want to make the BBC as effective and efficient as any broadcaster in the country. That’s a bold claim. But I think we can do it, by listening to proper criticism and making changes where change is necessary. And by becoming pioneers in reform.
We will do this through a system of ‘compete or compare’. And we will do it all the time as a normal part of the way we run the BBC – not just when we need to prove our case.
We will extend competition where it works: where it can bring greater choice, value for money or innovation.
And where we can’t open ourselves up to competition, we’ll compare what we do with the best practice in the market.
With compete or compare, competition should go beyond television production.
Can we extend competitive access for independent producers in radio, if that will mean broader choice and better ideas? The market is completely different, of course. The global opportunity is much more limited and commercial radio commissions almost nothing from the sector.
Is there more we can do in news and current affairs, where independent producers and film-makers already make a vital contribution? James Harding asked the other week if local news groups could provide BBC News with sports packages or court reporting. A very interesting idea.
What can we do in online production? In the sharing of technology, so that we are building open platforms others can use and build on?
In extending competition into the way we run ourselves?
We already tender a lot of our back-office services. But I want this to be a firm principle. Every process in our back office services should be able to be contested: from production of trails through to paying invoices through to audience research.
We may not always outsource. Sometimes it’s better and cheaper to do things in-house. But by openly and transparently allowing every part of our back-office processes to be contested we’ll find out if there’s a better or more effective way of doing it.
I am encouraged by how much of this we are doing already. Around two-thirds of BBC activity is already part of some competitive process. Two-thirds. That is a remarkable figure and one that gives me great confidence in the way we spend the licence fee today.
But we can’t have competition everywhere. I am not ideological about competition – I want it where it will make things more efficient or better for our audiences.
So there are some BBC activities where competition would not add value.
Take our global newsgathering operation.
It has its own ethos, and the hard discipline of BBC training and neutrality. It would be hard to contract that out without losing control of our voice.
So what do we do when competition is not the right approach?
We still need to bring proper transparency, accountability and control to the way we spend licence fee payers’ money.
We still need to be able to understand whether these services are operating efficiently or not and compare them to similar functions inside or outside the BBC.
So where we cannot use competition we will use comparison.
Where the private sector has simple benchmarks for equivalent services that we can use to compare ourselves, we will use them.
In fact we already do, procurement being a good example.
Where we think there is duplication we will change the way people work to remove it.
And when we have a big event, we will create a single point of accountability for all resources. It’s what we did with the Olympics and what we do with Glastonbury: if you put one person in charge they have the authority to say yes or no. They’ll make sure we join up to do things effectively – but also efficiently.
We are using this approach more and more in newsgathering, so that we ensure that the decisions about sending journalists to big stories is properly controlled.
In fact, across the BBC today, we are in the middle of the biggest ‘compare’ exercise we have ever done. We’re using the widest set of industry comparisons we can access to see how the BBC matches up and what we can learn from others. It’s a big piece of work which will report in full this autumn.
But, overall, I want more compete than compare.
Wherever possible, we should rely on the forces of competition to make us more efficient. Others should be able to ask us if a particular area can be competed for – and if it can’t be, we would have to justify clearly why. With the ideas I’ve put forward today, I’m confident the amount that is open to competition will go up.
We will continue to do as much of this as we can over the next three years, to the end of the Charter. We’re asking the organisation to complete the delivery of £800m a year in savings by then, to fill the gap left by a 26% real terms reduction in funding for UK services over six years. We will need every saving we can from these initiatives so that we don’t have to close any more services.
But more than that, I will not make a case about the future level of the licence fee until I am confident. Firstly, that we have done everything to make the BBC as efficient as possible. Secondly, that we have a plan for how we will drive continuous efficiency throughout the organisation through the next Charter.
I think ‘compete or compare’ will do both of those things. Every licence fee period we will make sure that every significant item of BBC spend has been systematically tested in this way. Then we can live up to that ambitious claim to be as efficient and effective as any UK broadcaster.
Competition here and abroad
My aim in all this work is a world-class BBC. Not a low rent BBC.
This is a crucial distinction and one that our most vociferous critics sometimes fail to understand.
Value for money is what matters – not to be the cheapest, but the most efficient for the quality we are trying to achieve.
We are going to carry on sending our correspondents abroad, we are going to carry on flying crews to make natural history programmes on the other side of the world, we are going to carry on making history programmes about other places, we are going to carry on covering stories from all over the UK. And yes, the people who make them will have to stay in hotels.
We are going to carry on finding the best creative and operational leaders to run this great organisation.
We are going to carry on hiring the best talent and paying them what they are worth.
And we are going to carry on bringing people what they love about the BBC – high-quality, high-calibre broadcasting.
The BBC must be judged on the work, not just on its cost. We are competing in a commercial broadcasting market every minute of every day. That puts us in a different territory to other publicly funded services.
So if we ever get to the point where our choice, for instance, of a public sector comparator stops us meeting the expectations of our audiences, I will unhesitatingly choose the audience every time.
But I don’t think we are going to face such a choice.
The great joy of coming back to work for the BBC was to be reminded of how many great things it does, how many great people it employs, and how hard it works to spend the public’s money wisely.
The great joy of being Director-General has been to discover how much more we can still do.
To be Director-General of the BBC is to manage one of the most talented and creative teams of people in the world.
My job is simple. It is to make sure that they can do their job.
If the BBC ever becomes a company of bureaucrats that happens to make some broadcast output I will have failed because the way we manage ourselves will have overwhelmed what we do.
Instead we are going to be led by what we do best. By our creativity. We are going to trust it. We are going to let it speak for us. A confident BBC broadcasting to the world, open to the world. The greatest cultural force in Britain.