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Introduction

1. The UK television industry generates annual revenues exceeding £9bn, and spends almost £5bn on programming – of this, over £2.5bn represents spending on original programming by the five main terrestrial broadcasters. This means that UK television viewers enjoy one of the highest levels of domestically originated programming in the world.
2. UK programming is delivered by a production sector comprising programme-making activity both within the main broadcasters (in-house production) and without (independent and external production). This part of the industry has been and remains an integral part of UK television.
3. Ofcom is beginning a review of the television production sector. This document sets out the terms of reference for the review, which will commence in May 2005, and is expected to be completed by April 2006.

Background

4. Ofcom has a number of responsibilities which relate directly, or at least indirectly, to the television production sector. These include:

• The setting of quotas regarding original production on the main terrestrial channels, designated as public service broadcasters (PSBs) under the terms of the Communications Act
• Setting out-of-London production quotas for the PSBs
• Recommending quotas for the commissioning by the PSBs and other channels of programming sourced from independent producers
• Monitoring the operation of codes of practice for dealing with independent producers
• In addition to its formal powers, Ofcom needs to take account of the impact on the overall production sector of proposals made in the context of the Review of the BBC’s Royal Charter.

5. The last major review of the sector was conducted by the Independent Television Commission (ITC) in 2002. As well as reviewing existing quotas, the ITC’s review recommended that new codes of practice should be put in place between independent producers and existing public service broadcasters. These have since been implemented by the broadcasters, based on guidance issued by Ofcom.
6. The sector was also considered as part of Ofcom’s recent review of public service television broadcasting (PSB) in 2004. In the PSB Phase 2 report, Ofcom suggested that the new codes of practice should be given time to work before any detailed assessment of them could take place. Ofcom therefore concluded that it would be sensible to wait for 12 months before conducting a further review of the production sector.

The current review

7. This document describes how Ofcom will review these codes of practice, as well as other fundamental issues relating to the long-term development of the production sector. In subsequent sections, we provide a background to intervention in this sector, summarise the main work programme that will be taken forward over the coming months, and set out the key questions that the review will address.
8. Overall, this review concerns essential aspects of the relationship between television broadcasters and the production sector – focusing in particular on the key production quotas, and the operation of the commissioning system between producers and broadcasters. While the role of in-house production will be considered, the main focus of Ofcom’s analysis will be on the position of the independent production sector.
9. Intervention in the production sector has been an important contributor to the sector’s development. Ofcom will use this review to re-examine the case for this intervention. We will consider whether changes to existing regulations are necessary, and assess the continuing need for intervention in the sector.
10. More specifically, the review will cover:

• The economic and public policy arguments for intervention in the production sector
• The effectiveness of existing quotas on origination, independent production, and production outside the M25
• The extent to which the new codes of practice have helped the market to function more effectively
• Issues surrounding the exploitation of programming rights on new distribution platforms
• The transparency of the commissioning process
• The case for further action or for alternative solutions, which if required may mean investigation of:

• The appropriate definition of an independent producer, and of qualifying programmes
• The appropriate level of the independent production quota, and whether it should be defined by volume or value of programming

• The circumstances that might result in the relaxation or withdrawal of intervention.

11. In examining these issues, the review will address the fact that the available data on the state of the production sector is of insufficient quality and quantity. We will therefore aim to establish a solid evidence base on the size and status of the production sector.

The timing of this review

12. This review comes at a critical time for the UK television broadcasting sector in general, and for the production sector in particular. For instance, the Government’s review of the BBC’s Royal Charter is now well underway. The recent Green Paper indicated that the future of independent production is a key issue, and the Paper also highlighted the need to give detailed consideration to the BBC’s plans for the reform of its commissioning system (including the proposed Window of Creative Competition).
13. More generally, the sector is moving ever closer to digital switchover. A firm date is yet to be set, but Ofcom recently published an indicative schedule for a switchover process running from 2008 to 2012. It is sensible to consider what implications this significant shift might have for producers, as well as for the broadcasters they supply. For instance, as the independent production sector evolves in this changing market environment, might it be possible to define the circumstances that might lead to the withdrawal or relaxation of intervention? This will be a key question for the current review.

The full document is available below

• Review of television production sector [pdf]
  Full print version published 11|05|2005

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