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Guidelines for broadcasters in drafting codes of practice for commissioning programmes from independent suppliers

Statutory basis

1. Section 285 of the Communications Act 2003 provides that the regulatory regime for every licensed public service channel should include conditions, to be set by Ofcom, that ensure the PSB broadcasters draw up, maintain and comply with Codes of practice governing the commissioning of independent productions for broadcast on their networks.

2. Section 198 and Section 203 of the Communications Act provide that Ofcom shall be able to regulate the activity of the BBC and S4C, respectively, in commissioning independent productions in the same way that Section 285 provides for the regulation of licensed public service broadcasters by Ofcom.

3. Section 285 also requires that Ofcom issues general guidance (“Guidance”) as to the terms of the Codes of Practice that licensed public service channels, the BBC and S4C must prepare and publish.

Scope of the Codes

4. The Communications Act provides that licences for every public service channel shall include conditions that Ofcom considers appropriate for securing that channel providers have in place Codes of Practice on the commissioning of independent productions. The Codes should secure that:

a reasonable timetable is applied to negotiations for the commissioning of an independent production and for the conclusion of a binding agreement;
there is what appears to Ofcom to be sufficient clarity, when an independent production is commissioned, about the different categories of rights to broadcast or otherwise to make use of or exploit the commissioned production that are being disposed of;
there is what appears to Ofcom to be sufficient transparency about the amounts to be paid in respect of each category of rights;
what appear to Ofcom to be satisfactory arrangements are made about the duration and exclusivity of those rights;
procedures exist for reviewing the arrangements adopted in accordance with the code and for demonstrating compliance with it;
those procedures include requirements for the monitoring of the application of the code and for the making of reports to Ofcom;
provision is made for resolving disputes arising in respect of the provisions of the code (by independent arbitration or otherwise) in a manner that appears to Ofcom to be appropriate.

5. These provisions provide a standard framework for what needs to be in each Code of Practice. This does not however mean that there needs to be a standard industry Code of Practice or that individual Codes need to be limited to the scope of these provisions. Codes of Practice should be informed by the specific operational features and the particular public service obligations of the individual public service broadcasters.

Role of the Guidance

6. The Communications Act notes that “Codes of Practice (should set out) the principles to be applied when agreeing terms for the commissioning of independent productions”. The Codes will therefore be high level in nature, and set out a broad framework within which detailed terms of trade and the detail of the commissioning process can be established.

7. Likewise, the Act requires any Guidance to be “general guidance” which should not “specify particular terms to be included in the agreements to which the Guidance relates”.

8. While the approval of the Codes of practice covered by these Guidelines is required from Ofcom, the Guidance itself is not binding upon the broadcasters involved.

9. The Act permits Ofcom “from time to time” to revise its Guidance. Where Ofcom undertakes a review of the Guidance it is required to consult the providers of licensed public service channels, persons who make independent productions (or persons appearing to OFCOM to represent them), the BBC and the Welsh Authority.

Core principles

10. We now follow the structure set out in the Communications Bill to discuss the key areas to be covered by each Code of Practice.

(a) that a reasonable timetable is applied to negotiations for the commissioning of an independent production and for the conclusion of a binding agreement.

11. An important objective of each Code is to secure a clear and transparent process for commissioning. Accordingly, broadcasters should set out their overall approach to the commissioning process in their Codes or related documents, the route through their organisation that an external programme proposal will take, a broad timetable for the process, and responsibilities in the organisation for dealing with it. Different timetables or processes might apply to different genres of programming.

12. Broadcasters should also explain if they propose to make available more detailed guidelines about the commissioning process, including a more detailed timetable. Such detailed guidelines should be capable of being easily accessed by producers, and might be attached to the Code. These more detailed guidelines are likely to include information on the specific steps in the commissioning process, such as the interval between the submission of and response to development proposals, the period after commission approval during which final editorial specification is established, and proposed turnaround time for rejected proposals.

13. The Codes should set out how broadcasters will ensure an adequate separation of responsibilities for programme commissioning from the management and operation of in-house production activities, where they exist. The assessment of the adequacy of separation would depend on the broadcaster in question e.g. for smaller licensees, it may not be practicable to have separate in-house/external commissioning editors for regional production.

(b) that there is what appears to OFCOM to be sufficient clarity, when an independent production is commissioned, about the different categories of rights to broadcast or otherwise to make use of or exploit the commissioned production that are being disposed of.

14. A key principle underlying Ofcom’s approach to the Codes of Practice is that producers should retain rights in their programmes unless these are explicitly sold to broadcasters and other parties. Broadcasters therefore should define in their Codes a minimum set of “primary rights” which they will acquire from independent producers.

15. The Codes should make clear that ‘primary rights’ refers to commissioning for and transmission on wholly-owned public service channels as defined in the Communications Act 2003. ‘Primary rights’ also needs to define the number of transmissions covered and the duration of the licence. Broadcasters should only have one automatic right to extend the licence period. Any subsequent extensions would be on commercially negotiated terms.

16. The Codes should confirm that negotiations for primary rights will be conducted separately from secondary and tertiary rights negotiations. Although pricing for primary rights must be separately established, this does not preclude broadcasters from acquiring other rights packages as well, should they wish to, and should the independent producer wish to make them available. Broadcasters should not seek to secure ‘matching rights’ provisions. Ofcom believes that this can stifle competition. Broadcasters can secure additional packages of rights but this should be through commercial negotiation.

17. The Codes should not however prescribe a particular funding arrangement nor should there be any bundling of rights (between primary rights and secondary rights) unless this is agreed by both parties. There should also be no terms in contracts making them (actually or in effect) conditional on the acceptance by the producers of a bundled deal, or on the use of a broadcaster’s own distribution arm.

18. Primary rights might also be defined to include certain new media rights, including simulcast streaming on the internet and interactive and on-line applications. Where such rights are not included in a primary ‘bundle’, it may be acceptable for broadcasters to impose a delay in the use or sale of rights for distribution of programmes over other media, such as the internet, in order to protect the value of at least the initial broadcasts on television networks.

19. Given that the inclusion of new media rights into the definition of primary rights is a new and developing area, this is an issue that Ofcom proposes to keep under review.

(c) that there is what appears to Ofcom to be sufficient transparency about the amount to be paid in respect of each category of rights;

20. Each broadcaster should develop a list of indicative tariffs relating to fees for primary rights. These tariffs might be in the form of ranges, in order to build in flexibility, but should incorporate a sufficient degree of disaggregation to ensure that they provide useful information to prospective suppliers. Where broadcasters have already been offering licence fee arrangements as a matter of course there should be a reference as to how the indicative tariffs relate back to previous pricing arrangements.

21. The tariffs could also be index-linked over time to account for general price inflation. Codes could also set out provisions for the review of tariffs.

22. Broadcasters should set out in their Codes the broad methodology they will use in drawing up indicative tariffs, but not necessarily the tariffs themselves. Tariffs might be informed by the average cost of making each type of programming, and by the contribution to the schedules made by that programming. Final prices should be a matter for commercial negotiation. Ofcom notes, however, that typically broadcasters will need to pay the full production cost (including, for the avoidance of doubt, a typical production fee) for primary rights of any programming which appears to have little additional commercial value at the time of commissioning. Furthermore, the indicative tariff ranges should be capable of encompassing the typical full production cost of programmes in that genre or genre category.

23. It is unlikely that indicative tariffs can be designed to cover all types of programming. Provision should therefore be made for commissions to be made in some cases outside the tariff system. For instance, Ofcom recognises that in the case of high-end drama and children’s animation it is already relatively common for broadcasters only to contribute a proportion of the production costs. Ofcom anticipates that these will be areas where producers and broadcasters will make use of “off tariff” arrangements.

24. The initial primary licence will cover a specific number of uses. Where a broadcaster wished make use of a programme beyond the number of uses originally specified in the primary licence, Ofcom would expect that to be covered by a specific system of repeat fees.

25. Specific negotiations can discuss the value from exploitation of secondary rights. Revenue sharing between producer and broadcaster may be appropriate in such cases.

(d) that what appear to OFCOM to be satisfactory arrangements are made about the duration and exclusivity of those rights.

26. As set out above, the standard duration of primary rights should also be defined in each Code. A broadcaster is entitled to look to secure primary rights (first transmission plus a specified number of repeats) for a sufficient period of time to enable an appropriate exploitation of the programmes it has commissioned. Ofcom considers that, at present, a typical licence period would be no more than 5 years, during which the broadcaster would have exclusive rights to use the programme on its wholly-owned PSB channels (for the defined number of transmissions). During this period, the broadcaster would be able to “hold back” the distribution to other UK television channels of any programmes in the strand. By agreement with the producer, programmes could of course be released for secondary exploitation on other UK television channels at an earlier date.

27. For clarification, all other rights retained by the producer should be available for immediate exploitation in the UK (post first transmission with the commissioning broadcaster) and overseas. Broadcasters might, however, reasonably choose to retain exclusive use of the programme format in the UK, subject to a periodic option to renew. All other – non-UK - format rights will remain with the producer, as is generally the case now.

28. Broadcasters should not seek to include rights in perpetuity as a matter of course. This does not mean that commercial discussions between broadcaster and producer cannot conclude with the producer agreeing to assign the rights in a programme to a broadcaster but that such a matter should be the producer’s explicit choice.

29. Broadcasters can specify separate arrangements for returning (re-commissioned) series to prevent conflicts of scheduling with other channels. As with new media rights, this is a particular aspect of the application of the codes of practice that Ofcom wishes to keep under review.

(e) that procedures exist for reviewing the arrangements adopted in accordance with the code and for demonstrating compliance with it;

30. In order to ensure effective oversight and monitoring of the application of the Codes of Practice, Ofcom believes that there needs to be a system of both internal review and external scrutiny. Ofcom expects the Codes of Practice to set a mechanism whereby the broadcaster and Ofcom can jointly review the operation of the Code.

31. Broadcasters cannot reserve the right to modify their Codes unilaterally. If a broadcaster wishes to modify their code, they should seek the formal approval of Ofcom. In the event of such an application, Ofcom will also consider whether the issue raised by the broadcaster is such as to require a more formal revision of the Ofcom guidance.

(f) that those procedures include requirements for the monitoring of the application of the code and for the making of reports to OFCOM;

32. In order to ensure effective oversight and monitoring of the application of the Codes of Practice, Ofcom believes that it will be necessary for broadcasters to provide for reporting arrangements and reports which – at a minimum – set out data on the number of commissions undertaken in a given period by genre, the nature of those commissions (e.g. whether primary rights only or inclusive of other rights), and the duration of the rights.

33. The reports should also include a summary of how any disputes have been dealt with should also provide for a review of the broadcasters’ compliance with their commissioning timetables.

(g) that provision is made for resolving disputes arising in respect of the provisions of the code (by independent arbitration or otherwise) in a manner that appears to Ofcom to be appropriate

34. The Codes of Practice should make provision for a dispute resolution mechanism in the event of a dispute arising between broadcaster and producer, about the application of the Code itself, rather than the terms of a specific negotiation.

35. It is not envisaged that Ofcom will have a role as final arbiter in any dispute. This means that, for example, if mediation has not resolved the dispute, a broadcaster and producer may need to be prepared to go to binding independent arbitration to settle a dispute. Broadcasters should consider how best to ensure that the costs of arbitration are minimised, so that smaller independent producers are not disadvantaged by the expense of following any such procedures. One other possibility might be that a non-executive director of a broadcaster could be brought in as final arbiter in a dispute.