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1 Window of Creative Competition for Television BBC Trust review March 2013 Getting the best out of the BBC for licence fee payers
2 Contents Window of Creative Competition for Television / BBC Trust review About this review 1 Introduction to the WoCC for television 1 The Trust s approach to the third review of the WoCC 1 Scope of the review 2 Key sources of evidence and inputs to the review 3 Key findings and recommendations 5 Context 9 The concept of the WoCC 9 Development of the UK television market 10 Analysis 13 Part 1: Compliance 13 The independent production quota, in-house guarantee and Window of Creative Competition 13 Operation of the WoCC in accordance with the Framework Agreement 14 Part 2: Outcomes 20 Commissioning the best ideas 20 Outcomes for audiences 21 Outcomes for suppliers 24 Value for money 34 Progress against previous review recommendations 35 Appendices 37 Submissions and responses to the review and public consultation 38 PACT s submission 38 BBC management response on progress made against 2010 actions and recommendations 39 Stakeholders 43 March 2013
3 About this review In , the BBC invested 887m in commissioning new network television programmes. Around 457m (52%) of this total was commissioned from the BBC s inhouse television production teams, and around 430m (48%) was commissioned from independent producers 1. This represents a significant investment in content by the BBC on behalf of licence fee payers, and plays a crucial role in sustaining and developing the UK's television sector and the UK creative economy as a whole. Introduction to the WoCC for television BBC television output is subject to a number of formal quotas and targets relating to television commissioning. These quotas and targets are defined in either the Communications Act 2003 or in the BBC s Framework Agreement. The BBC Executive is responsible for ensuring that all of the BBC s television quotas and targets are delivered each year. The BBC Trust has responsibility for assessing the BBC s compliance against these quotas and targets 2. In particular, the Communications Act 2003 requires the BBC to commission 25% of its original network and non-network productions from the independent sector each year, set out in the Ofcom independent production quota 3. In addition to this, the BBC s Framework Agreement requires that 50% of BBC television commissioning is reserved for its own inhouse production teams. The remainder, around 25%, is set aside for competition between the BBC and independent producers. The Framework Agreement refers to this as the Window of Creative Competition (WoCC). Introduced in 2007, the WoCC was designed to stimulate competition between the BBC's own producers and independent television producers by allowing them to compete for network television commissioning opportunities in an environment where the best programme ideas would be selected by commissioners regardless of source. It is these arrangements that form the subject of this review. The Trust s approach to the third review of the WoCC Under the terms of the Framework Agreement, the Trust is required to review the operation of the WoCC, and the BBC Executive s compliance with it, every two years. The last review, published in 2010, found that the WoCC was generally operating well, and that the principle of competition in commissioning engendered by the WoCC was well established. In addition, it found that the BBC had: 1 Source: BBC Executive 2 Ofcom has statutory responsibility for assessing compliance with the independent production quota as set out in the Communications Act Ofcom has statutory responsibility for setting the independent production quota (currently 25%) as set out in the Communications Act 2003 March
4 complied fully with the requirements set out in the Agreement relating to the operation of the WoCC and the in-house guarantee delivered benefits to licence fee payers, the BBC and the independent television production sector through the operation of the WoCC made good progress in implementing the recommendations of the Trust s first review of the WoCC in 2008 The previous review also recommended that the BBC should: clarify remaining areas of uncertainty as to how the WoCC operates in practice provide information around the scope and scale of opportunities in individual genres, particularly for those producers who do not have regular access to the BBC improve the quality of audience information shared with the independent sector, particularly the frequency and format with which this information is communicated consider how tendering can best be used to increase levels of competition continue to make BBC commissioning easier to access for all independent producers, and in particular, to ensure that information is made available consistently to all independent production companies in the Nations and Regions assess the frequency with which sports rights contracts are re-tendered for production, in order to evaluate opportunities to support greater levels of creative competition over the long term clarify the exact nature and permeability of quota boundaries, particularly in Children s programming review the Knowledge quota to understand whether the number of predetermined commitments can be reduced to mitigate the risk of pre-determined output For this third review of the WoCC, we have conducted the review using the Trust s own inhouse resource. Scope of the review We published terms of reference at the launch of the review in September 2012 which formed the basis of our evidence gathering and subsequent analysis: a. Has the relevant proportion of network television programming been the subject of competition as envisaged under the WoCC arrangements? i. and in particular, has an appropriately wide range and diversity of programmes been made through the WoCC? b. Has the process of competition been fair and transparent? i. have sufficient levels of information/ engagement been provided with regard to the commissioning process and forthcoming commissioning opportunities? March
5 ii. does the geographical location and size of producers who made bids to make programmes through the WoCC suggest that the process of competition has been fair and transparent? c. What outcomes have the arrangements led to in terms of content commissioned in-house versus externally? i. have commissioning decisions been made on the basis of the best ideas winning? d. Have previous Trust actions and recommendations been implemented? e. Have the arrangements worked well in practice? Have there been any complaints? We have assessed the BBC Executive s compliance with the requirements set out in the Framework Agreement, which include meeting the requirements of the in-house and independent guarantees. However, we have not gathered evidence specifically in relation to, nor assessed, the relative advantages or disadvantages of changing the percentage of BBC television output to which these quotas relate, which is a matter for the next review of the BBC s Royal Charter in Key sources of evidence and inputs to the review The review has considered evidence and data from a wide range of sources and stakeholders. We publicised the review internally within the BBC and externally, and approached individuals from the independent television production sector directly to ensure as many people who might wish to share their views about the operation of the WoCC, and the BBC s competitive commissioning arrangements under it, would have known about the review and had sufficient opportunities to submit their views to us. We are grateful to everyone who gave up their time to share their insights and experiences with us in the course of conducting our review. The key sources of evidence and inputs to the review included: a public consultation comprising a set of online questions about the operation of the WoCC. We received 28 submissions (mainly from independent producers) including one from the Producers Alliance for Cinematography and Television (PACT) and four from BBC management setting out perspectives from BBC commissioning, BBC in-house production and an overview of progress made since the Trust s last review of the WoCC in 2010 follow up discussions with independent producers who submitted views via the public consultation, and roundtable discussions with independent producers based in the Nations genre based interviews with BBC commissioning staff, comprising commissioners and business affairs staff who manage compliance with the various output quotas genre based interviews with BBC in-house production teams attendance at a pan-genre commissioning briefing given by the BBC in Salford to independent producers March
6 discussions with the UK s main industry body for independent television producers PACT discussions with BBC management desk research, including reviews of data supplied by the BBC Executive, data published by Ofcom, surveys conducted by BBC management into the efficacy of its commissioning arrangements and PACT s annual census of its members March
7 Key findings and recommendations The BBC is complying fully with the requirements for television production and the WoCC as set out in the Communications Act and Framework Agreement Under the independent production quota set by Ofcom in accordance with the Communications Act, the BBC must source not less than 25% of its original television programming from the qualifying independent sector. Our review shows that the BBC commissioned 40% of eligible hours from the qualifying independent sector in , and 39% in , made up of commissions under the independent production quota and the WoCC. The BBC has also met the requirement set out in the Framework Agreement to produce 50% of its television production in-house, producing 57% of all television hours in broadly comparable to previous years falling to 54% in Non-qualifying 4 independent producers delivered a further 3% of network TV output in and 7% in , making up a total independent share of network TV commissioned hours of 43% and 46% respectively for the two years under review. The BBC has opened up the required proportion of network television hours under the WoCC Although the total amount of BBC network commissioned hours has declined slightly over the last 5 years, and underwent a reduction in of around 8% against levels, the required proportion of network television commissioning opportunities has nevertheless been opened up to competition by the BBC over the course of the two years under review, with a variation across genres in line with that seen in previous reviews. Relatively few hours continue to be allocated within Sport owing to the rights-based nature of its output. Independent producers secured 72% and 83% of the available network television hours under the WoCC in and respectively, in particular winning a large proportion of hours in Drama, Entertainment and Children s in the two years under review, and particularly so in In addition to network commissions, the BBC is also required to ensure there are appropriate opportunities for competition between in-house and external producers for the provision of non-network programmes. In the two years examined under this review, the BBC commissioned 33% of its non-network programming from independent producers across Northern Ireland, Scotland and Wales in both and , with the remainder coming from independent producers in England. 4 The distinction between qualifying and non-qualifying independent producers is set out in the independent production order that sits alongside the Communications Act, which broadly defines non-qualifying independent producers as those production companies who are employees of a broadcaster, or who have a shareholding greater than 25% in a broadcaster, or who are the subject of a shareholding by a single UK broadcaster of more than 25% (or by several UK broadcasters of more than 50%), or who are required by the production contract to use the production facilities of the broadcaster or not to use the production facilities of some other broadcaster. March
8 An appropriately wide range and diversity of programming has been made through the WoCC Our analysis of commissioning outcomes over the last five years between BBC in-house production and independent producers provides good evidence that an appropriately wide range and diversity of programming has been made under the WoCC. In parallel with the independent sector s continued strong performance under the WoCC, we note that the BBC has worked with a record number of independent production companies over the last two years, providing a good indication of the BBC s continued focus on working with new talent, and of a strong and diverse independent television sector. The BBC engaged with 222 independent producers to help it deliver its network output in , and 205 in This compares with 194 and 199 respectively in the preceding two years. In addition, against a backdrop of consolidation in the market, a good proportion of new independent producers were commissioned in each of the two years under review, providing evidence that commissioners are actively seeking out new independent producers in securing the best programme ideas. The principle of selecting the best programme ideas for audiences regardless of source is now fully embedded in the BBC's commissioning culture. The benefits extend beyond the WoCC itself across all of the BBC s commissioning activity The evidence gathered as part of our review strongly suggests that the selection of the best programme ideas takes precedence over pre-determined quotas, buying models or programming slates. On the basis of our assessment of a range of evidence, focused principally on the direct experiences of BBC commissioners, in-house teams and independent producers, we have formed a clear impression that commissioners have sufficient flexibility to focus on commissioning new programme ideas on merit. We have also noted throughout the review the declining importance of the WoCC as a discrete process for all those involved. The positive benefits of the cultural impact of competitive commissioning appear to be generally recognised by the BBC and independent producers as also being delivered beyond the WoCC throughout the commissioning process, encompassing both the requirements of the in-house guarantee and the independent production quota. The WoCC has continued to help deliver a range of television programmes through competition that are rated highly by licence fee payers Our analysis of a range of audience ratings for programmes broadcast on the BBC, including average Appreciation Index (AI) scores 5 for all of the BBC s network television output, shows a general increase in scores over the three years between and When ratings that measure audience perceptions of fresh and new and high quality are compared on a like-for-like basis, the differences in average scores between in-house and independently produced programming are relatively small, with independent producers on average scoring slightly higher for fresh and new and BBC in-house productions scoring slightly higher for high quality. While precise cause and effect is difficult to establish, the Trust believes that on the balance of evidence, the WoCC has continued to help deliver a range of television content that is rated highly by licence fee payers. 5 Appreciation Index scores are calculated by asking respondents to rate programmes they have watched out of 10. These scores are then averaged up to give scores out of 100. March
9 The process of competition under the WoCC appears to have been fair and transparent The geographical location and size of producers who made bids for, and were commissioned to make, network television programmes by the BBC suggest that the process of competition has been fair and transparent. There appears to have been a broadly equitable allocation of development funding to explore new television programme ideas between BBC in-house teams and independent production companies. While the WoCC continues to work well, the Trust is asking the BBC Executive to consider a number of further improvements as a result this review Disseminating information about commissioning opportunities On balance, we have found that sufficient levels of information and engagement have been provided by the BBC with regards to commissioning opportunities, but efforts should continue to achieve consistent and reliable information sharing as follows: ensure that the commissioning website is regularly reviewed and kept up to date maintain the commitment to providing an appropriate level of information for independent producers and in-house teams alike to address any potential information imbalance, particularly between those suppliers who have greater levels of direct access to commissioners and those who do not examine the most appropriate seating arrangements within BBC buildings for commissioners, independent executives and in-house teams to ensure no undue advantage is provided to any one party. Building greater confidence in an open and fair commissioning framework BBC management should investigate ways of building greater confidence in an open and fair commissioning framework, particularly for those producers based further away from commissioning hubs. On the basis of the evidence we have gathered as part of our review, the BBC should consider ways in which it can address the following key areas: developing and enhancing processes that build confidence in the commissioning process for all suppliers. In particular, the Executive should examine carefully the function of the new commissioning executive structure in the Nations to ensure it delivers benefits for all parties finding ways to facilitate quicker commissioning responses to pitches for all programme ideas examining ways in which the BBC can better harness and sustain the relationships that content producers build up over time with commissioners, particularly during times of organisational change. March
10 Fulfilment of all the BBC s television production quota requirements Continuing consolidation in the independent television production supply market and the recent growth in the number of independents with non-qualifying status being commissioned may be an indication of future potential difficulties for the BBC in complying with its quota requirements, which it must continue to fulfill. In light of these developments, we have asked the BBC to continue to monitor the evolving market situation more generally so that the Trust can monitor developments and consider whether, as the supply market continues to evolve, the current framework of television production quotas and the WoCC continues to serve the best interests of audiences. Competitive tendering opportunities in Sport Despite efforts to improve the levels of competitive tendering in Sport, constraints on the number of new commissioning opportunities remain. While we are pleased to note that some progress has been made within Sport since the last review, we expect BBC management to continue to make progress subject to the overall limitations that apply to the number and timing of genuine competitive tendering opportunities within this genre. Improving reporting Due to the differing scales of opportunity within each WoCC genre, there can be large variations in outturn figures on the basis of relatively small movements in hours won or lost. We believe that in order to improve openness and transparency, the BBC should look to improve the context it provides around the annual reporting of the WoCC performance figures. We also note that the Sport genre is not currently reported in the published annual WoCC figures. While we acknowledge the specific issues surrounding the implementation of the WoCC in Sport, we believe that publishing the WoCC performance figures for Sport on the same basis as in other genres will help maintain a close focus on progress in delivering a competitive commissioning environment within the Sport genre. In its submission to this review, PACT made a request to the Trust to provide more information about the diversity of the BBC s supply base in terms of location and other key characteristics, to help ensure a range of voices and perspectives continue to be heard as part of the BBC s commissioning of independent television content. We have endeavoured to ensure an appropriate data set has been published as part of this report, and will continue to do so in future reviews. March
11 Context The concept of the WoCC The vision of the WoCC was first set out by the BBC in 2004 in the context of discussions leading to the last Charter review. While setting out the benefits of a strong in-house television production capability, the BBC set out its intention to secure the best programme content for licence fee payers through a commissioning system that focused squarely on building public value and benefits for audiences. The BBC aimed to bring this vision to life through investing the licence fee in the best ideas and the best talent irrespective of whether they came from inside or outside the BBC. Prior to this the BBC had struggled to meet its existing statutory requirement that 25% of its original television productions should be commissioned from the independent sector each year, falling short of the required percentage of hours in both and After a wide ranging review, the BBC published a new strategy for the digital age in 2004 entitled Building Public Value. 6 The strategy acknowledged the critical importance of retaining a strong in-house production base, citing security of supply and quality; critical mass; training and the development of a long-term creative tradition; greater efficiency; and greater ease of developing flexible crossmedia products and services. However, the BBC also concluded that there should be a one-off reduction in its in-house television production capacity to create an appropriate space for competition between inhouse and independent producers. This led to the current arrangements, which were put on a formal footing as part of the BBC s Framework Agreement which came into effect with the current Charter in This framework introduced a new requirement that 50% of relevant programmes should be reserved for in-house production (referred to as the inhouse guarantee) and that the remaining proportion of relevant network programme hours beyond the 25% independent production quota should be allocated openly and transparently among in-house and independent producers through the WoCC solely on merit. The expectation was that the reforms would result in a significant increase in the amount of BBC television output for which external suppliers were eligible to compete. With the WoCC in place the intention was that half of all BBC network television commissioning would effectively be open to being produced by external production companies. The in-house guarantee of 50% was, as it is now, spread across genres with the level of the guarantee varying from genre to genre. Retaining the necessary critical mass to secure programme supply on a sustainable basis was a key consideration in determining the level of the guarantee. Guarantee levels for individual genres were set on the basis of a tipping point analysis which took into account the future programming needs of the BBC in key public services genres and the extent to which different types of production contributed to these. Factors including the balance between returning strands and new output, the opportunity for in-house departments to innovate and the range and diversity of in-house output including the spread across London, the Nations and the English regions were taken into account. 6 See online at: March
12 Development of the UK television market The BBC depends on independent producers for up to half of its network television output, and it is therefore important to keep a close eye on the supply market which has evolved significantly since the WoCC was first introduced in During that first year, the BBC spent around 937m on new network television content 7, 44% of which was spent on commissioning from independent television companies, both qualifying and non-qualifying 8. Since that time, although the BBC s total spend on network television content fell to 887m in , the proportion of this total spent with the independent sector grew to around 48%. This growth appears to reflect the comparative strength of the television sector as a whole in the UK economy. Ofcom s Communications Market Report for 2012 reports that over the five years between 2007 and 2011, total television industry revenue grew from 11.0bn to 12.3bn, representing a compound annual growth rate (CAGR) of 3% against a backdrop of a general downturn in the UK economy. 9 Within this overall picture, figures published in Broadcast indicate year on year revenue growth of 8.5% between 2010 and 2011 for the top 10 independent television producers by turnover, and the industry body PACT (the Producers Alliance for Cinema and Television) reported overall revenue growth of 10.6% over the same period in its annual survey of independent production companies. The market outlook is evolving and complex. Along with growth in the independent television production sector, we have also seen some evidence of the impact of the general economic downturn on broadcasters being reflected in pressures on independent producers to trim costs, which may in turn be driving some market consolidation along with a focus on building revenues in international markets and a recently observed increase in format-driven programming. An analysis of Ofcom s Communications Market Report for 2012 suggests some underlying factors behind these changes. The report shows that while spend on network television content (including acquisitions) by all UK TV channels grew to 5.5bn in 2011 at a five year CAGR of 3%, spend on first-run originated programming (excluding acquisitions) for the five main PSB channels decreased to 2.5bn at a rate of 4% CAGR over the same period. The competitive pressures emerging from this decline in spend on first-run originations may to some extent be responsible for hastening further consolidation in the market, and is likely to have underpinned the recent sharp upturn in the proportion of network hours commissioned by the BBC from the non-qualifying independent production sector, which more than doubled during (see figure 1 below). 7 The Trust previously reported a figure of 933m in its 2008 and 2010 reviews of the WoCC. However, this figure omitted around 3.7m on news-funded current affairs programming created by the BBC s own in-house teams. 8 The distinction between qualifying and non-qualifying independent producers is set out as part of the Ofcom Tier 2 independent production quota framework, which broadly defines non-qualifying independent producers as those production companies who are employees of a broadcaster, or who have a shareholding greater than 25% in a broadcaster, or who are the subject of a shareholding by a single UK broadcaster of more than 25% (or by several UK broadcasters of more than 50%), or who are required by the production contract to use the production facilities of the broadcaster or not to use the production facilities of some other broadcaster. 9 Office of National Statistics figures. CAGR based on inflation adjusted Gross Domestic Product figures (final quarter figures for each year from 2007 to 2011) March
13 Figure 1: Proportion of network commissioned hours by year and supply type Source: BBC Executive Non-qualifying independent production companies (NQIs) are defined by Ofcom as those production companies who are employees of a broadcaster, or who have a shareholding greater than 25% in a broadcaster, or who are the subject of a shareholding by a single UK broadcaster of more than 25% (or by several UK broadcasters of more than 50%), or who are required by the production contract to use the production facilities of the broadcaster or not to use the production facilities of some other broadcaster. The effect of commissions from NQIs in terms of the WoCC is to reduce the total number of hours available for competition in the WoCC for independent production companies not aligned to broadcasters, as these commissions cannot sit within the independent production quota, which is calculated on the basis of commissions from qualifying independents only. While consolidation in the television production sector continues, evidence gathered as part of this review nevertheless suggests a vibrant sector undergoing frequent churn through the creation of newly spun off independent producers. This appears to have been fuelled by a number of factors including the rapid growth in new multichannel commissioning opportunities (see figure 2 below), and a market driven by a limited pool of top on-screen and production talent. Figure 2: Number of channels representing 75% of viewing by age group (2002 v 2011) Source: Ofcom Communications Market Report 2012 March
14 Despite some evidence of churn, we note concerns raised in PACT s submission to this review around the potential impact on the levels of BBC commissioning from smaller independents due to consolidation. Through our discussions with PACT and independent producers, the acquisition and trading of revenue-generating intellectual property rights also appears to have emerged as a key driver in the current trend for consolidation of ownership of production companies. Indeed, a drive to bolster originated content portfolios in order to expand rights opportunities may be driving the recently reported increases in in-house production investment in certain key genres by broadcasters such as Sky and ITV. 10 The territorial focus of the UK independent television production sector has also shifted as new forms of digital and rights income have driven independent producers to broaden the markets in which they operate in order to develop new opportunities and revenue streams. For example, recent data published in Broadcast relating to appears to suggest that, on average, just over a quarter of all turnover for UK-based production companies is now derived from international markets, and some commentators have suggested that secondary rights sales and international revenues may now overtake income from UK primary commissions in a timeframe as early as Despite the economic uncertainties and the complexities of the evolving UK television production market, discussions and interviews undertaken as part of our review suggest that the BBC appears to have continued to play an important and stabilising role in the sector. In , the BBC invested just over 430m of licence fee funds in new network commissions from the independent sector, and Ofcom figures show it has consistently invested more in new network originated programming as a whole in each of the previous five years than the UK s commercial Public Service Broadcasters combined. Figure 3: Network programme spend on first-run originations, m Source: Ofcom Communications Market Report See, for example, fig 2.28 in Ofcom CMR 2012 which shows Entertainment as one of the largest revenue generating genres for multichannel broadcasters, and one that has exhibited one of the highest year on year growth rates (19% between 2010 and 2011) 11 See, for example, Oliver & Ohlbaum: Prospects for UK Television in a Connected World (December 2012) March
15 Analysis Under the terms of the Framework Agreement, the Trust is required to assess the BBC s compliance with the WoCC, and in particular, its operation of clauses 54, 55 and 56 of the Framework Agreement. Beyond this specific duty, the Trust also has more general duties under the BBC s Royal Charter to ensure, for example, that the BBC observes high standards of openness and transparency. 12 With these requirements and duties in mind, our analysis is divided into two parts Part 1 deals with compliance against the requirements set out in clauses 54, 55 and 56 of the Framework Agreement, and Part 2 deals with a broader analysis of outcomes, both in terms of audiences and in terms of suppliers of television content. Part 1: Compliance The independent production quota, in-house guarantee and Window of Creative Competition The BBC is complying fully with the requirements for television production and the WoCC as set out in the Communications Act and Framework Agreement Ofcom, the UK s communications regulator, has set a quota for the BBC and other public service broadcasters in accordance with the Communications Act to commission not less than 25% of their television programming from the qualifying independent sector. Our review shows that the BBC commissioned 40% of eligible hours from the qualifying independent sector in , and 39% in , made up of commissions under the independent production quota and the WoCC. The BBC has also met the requirement set out in the Framework Agreement to produce 50% of its television production in-house. Our review has demonstrated that BBC inhouse teams produced 57% of all network television hours in broadly comparable to previous years falling to 54% in Non-qualifying 13 independent producers delivered a further 3% of network TV output in and 7% in , making up a total independent share of network TV commissioned hours of 43% and 46% respectively for the two years under review. 12 Charter, Article 23(f) 13 The distinction between qualifying and non-qualifying independent producers is set out independent production order that sits alongside the Communications Act, which broadly defines non-qualifying independent producers as those production companies who are employees of a broadcaster, or who have a shareholding greater than 25% in a broadcaster, or who are the subject of a shareholding by a single UK broadcaster of more than 25% (or by several UK broadcasters of more than 50%), or who are required by the production contract to use the production facilities of the broadcaster or not to use the production facilities of some other broadcaster. March
16 Figure 4: Percentage of BBC network commissioned hours split by producer type BBC in-house 57% 57% 58% 57% 54% Qualifying independents 41% 40% 39% 40% 39% Non-qualifying independents 2% 3% 3% 3% 7% Source: BBC Executive Operation of the WoCC in accordance with the Framework Agreement The required proportion of network television hours has been opened up to competition under the WoCC The Framework Agreement requires the BBC to open up to competition in the WoCC all eligible network television hours beyond those produced under the independent production quota and the in-house guarantee. In order to meet these requirements, as part of its annual planning process, BBC commissioning generates a buying model which sets out the relative proportions of network television hours available in each of the inhouse guarantee, the independent production quota and the WoCC, taking into account returning series and other commissions that have already been made in the previous year. Our assessment of this data shows that the BBC has consistently opened up the required proportion of network television hours to competition under the WoCC, and has done so again for the two years under review. We have found that although the total amount of BBC network commissioned hours has declined slightly at a compound annual growth rate (CAGR) of -1% over the last 5 years, and undergone a reduction of around 8% against levels, the required proportion of network television commissioning opportunities has nevertheless been opened up to competition by the BBC over the course of the two years under review, with a variation across genres in line with that seen in previous reviews. Relatively few hours continue to be allocated within Sport owing to the rights-based nature of its output as shown below in figure 5. March
17 Figure 5: Percentage of network commissioned hours allocated to the WoCC, to Source: BBC Executive In terms of outcomes, independent producers secured 72% and 83% of the available network television hours under the WoCC in and respectively, in particular winning a large proportion of hours in Drama, Entertainment and Children s in the two years under review, and particularly so in , as shown below in figure 6. Figure 6: Proportion of WoCC hours won by supply type and year, to BBC in-house production % Independent producers % 07/08 08/09 09/10 10/11 11/12 07/08 08/09 09/10 10/11 11/12 Drama Entertainment Comedy Children s Knowledge Overall proportion of WoCC Source: BBC Executive In addition to network commissions, the BBC is also required to ensure there are appropriate opportunities for competition between in-house and external producers for the provision of non-network programmes. The Trust s previous review of the WoCC in 2010 showed that the BBC commissioned around 35% of its non-network programming from independent producers in the Nations and Regions in both and In the two years examined under this review, the BBC commissioned 33% of its non-network programming from independent producers across Northern Ireland, Scotland and Wales in both and , with the remainder coming from England. March
18 Figure 7: independently produced non-network commissioned hours as a proportion of total non-network output English Regions Northern Ireland Scotland Wales Overall proportion Music & Arts 18% 65% 30% Current Affairs 14% 23% 13% Drama 4% 56% 10% Education Formal 34% 23% Entertainment 55% 96% 100% 65% Factual 66% 66% 63% 60% 63% Religion 100% 100% Sport 59% 5% 38% 36% 36% Overall proportion 25% 34% 35% 37% 33% Source: BBC Executive Most independently produced non-network programming was commissioned in the Current Affairs, Factual and Sport genres, with smaller proportions being commissioned across other genres. We believe that the spread of non-network commissioning across the key genres indicates that the BBC has continued to create appropriate opportunities for competition between in-house and independent producers, and that the overall stability in hours of non-network independent commissioning is most likely a direct consequence of the BBC s continuing investment in out of London television production, serving to highlight the important role that the independent sector continues to play in BBC television production in the Nations and Regions across the UK. On the basis of the evidence we have gathered as part of our review, we are satisfied that the required proportion of network television hours has been opened up to competition under the WoCC, and that there have been appropriate opportunities for competition between in-house and external producers for the provision of non-network programmes for the two years under review. An appropriately wide range and diversity of programming has been made through the WoCC The Trust believes that the range and diversity of programming made under the WoCC is an important measure of the success of the BBC s competitive commissioning arrangements. We have looked at four key areas in making our assessment: variability in commissioning outcomes; the spread of total and peak hours across genres won by independent producers; the diversity of the BBC s television production supply base; and the variation in network commissioning hours sourced by Nation and Region and supply type. Our analysis of commissioning outcomes over the last five years between BBC in-house production and independent producers provides good evidence that an appropriately wide range and diversity of programming has been made under the WoCC. Figure 8 illustrates not only the consistently strong performance of independent producers competing under the WoCC, but also the year on year variability in commissioning outcomes across the key ouput genres. We believe this variability is a key indicator not only of the principle of competitive commisioning at work, but also of the range and diversity of programmes being made under the WoCC. March
19 Figure 8: proportion of the WoCC won by supplier type, year and genre Source: BBC Executive Figures provided by the BBC Executive also show independent producers winning a fair share of total and peak network programming hours in the two years under review across the range of output genres, performing particularly strongly in Comedy and Entertainment (note peak hours are not defined for Children s output and are therefore not reflected in figures 9 and 10 below). Figure 9: Independent share of total and peak network hours Source: BBC Executive Looking across the two years, independent producers have secured increases in total hours across Drama, Entertainment, Knowledge and Children s from to However, while independent producers have generally won a good share of peak hours in relation to total hours (particularly in Drama where peak hours have grown by 12% in relation to an increase in total hours of 10%), there have been some year on year reductions in peak hours programming in other genres attributed to independent producers. This is particularly evident in Comedy (-19%) and to a lesser extent in Knowledge (-6%), Entertainment (-3%) and Sport (-2%). These outcomes appear to be March
20 consistent with our findings in previous reviews of the WoCC, where a generally observed variability in out-turn figures in the WoCC contrasts with known areas of inherent stability in commissioned hours from the independent sector such as Sport. Figure 10: Independent share of total and peak network hours Source: BBC Executive In parallel with the independent sector s continued strong performance under the WoCC, we note that the BBC has worked with a record number of independent production companies over the last two years, providing a good indication of the BBC s continued focus on working with new talent (particularly in light of evidence indicating a consolidating supply market) and of a strong and diverse independent television sector. The BBC engaged with 222 independent producers to help deliver its network output in , and 205 in This compares with 194 and 199 respectively in the preceding two years. In addition, against a backdrop of consolidation in the market, a good proportion of new independent producers were commissioned in each of the two years under review, providing further evidence that commissioners are looking to secure the best programme ideas regardless of source. Figure 11: Total and new independent producers commissioned (network) to Year Total independent producers commissioned on network New independent producers commissioned on network Percentage new independent producers 11/ % 10/ % 09/ % 08/ % 07/ % Source: BBC Executive Figure 12 below shows the spread of network transmitted hours during as produced across the Nations and Regions by supply type, showing a reasonable spread of outcomes both in terms of geographical origin and the proportion of hours won by the March
21 BBC s in-house teams and qualifying and non-qualifying independent producers respectively. Figure 12: Network transmitted hours by Nation and Region and supply type 2011 Source: BBC Executive On the basis of the evidence we have gathered for the two years under review, the Trust is satisfied that an appropriately wide range and diversity of programming has been made through the WoCC. Part 2 of this report looks in more detail at how the WoCC has been implemented by the BBC Executive, and assesses feedback from independent producers and BBC in-house teams which reflect their experiences over the last two years of working within the BBC s competitive commissioning framework. March
22 Part 2: Outcomes Commissioning the best ideas The principle of selecting the best programme ideas for audiences regardless of source is now fully embedded in the BBC's commissioning culture. The benefits extend beyond the WoCC itself across all of the BBC s commissioning activity The evidence gathered as part of our review strongly suggests that the selection of the best programme ideas takes precedence over pre-determined quotas, buying models or programming slates. On the basis of our assessment of a range of evidence, focused principally on the direct experiences of BBC commissioners, in-house teams and independent producers, we have formed a clear impression that commissioners have sufficient flexibility to focus on commissioning new programme ideas on merit. We have also noted throughout the review the declining importance of the WoCC as a discrete process for all those involved, with commissioners framing commissioning opportunities to suppliers as a matter of course without explicit reference to formal quotas or targets. The positive benefits of the cultural impact of competitive commissioning appear to be generally recognised by the BBC and independent producers as also being delivered beyond the WoCC throughout the commissioning process, encompassing both the requirements of the in-house guarantee and the independent production quota. Although definitive conclusions cannot be drawn, one of the ways in which the success of a meritocratic commissioning framework in securing a range and diversity of programming can be seen is through a comparative analysis of the share of total and viewer hours achieved. Figure 13 below shows the comparison between the share of total and viewer network hours for independent productions for , which indicates that the independent sector is winning a representative share of viewer hours across all genres in comparison to the total hours produced (the lower relative share of viewer hours for Sport is most likely due to the specific allocation of rights that was possible during and a higher share of BBC in-house produced content). Summarising the data set out in Figure 13 below, an average of 46% of total hours was produced by independent companies, winning an average of around 42% of all network viewing. Figure 13: independent share of total and viewer network hours Source: BBC Executive March
23 Outcomes for audiences The WoCC has continued to help deliver a range of television programmes through competition that are rated highly by licence fee payers The WoCC has enabled a higher proportion of BBC network television hours to be opened up to competition than possible through the independent production quota alone. Although direct cause and effect is difficult to establish, the weight of evidence indicates that the competitive commissioning arrangements under the WoCC has helped to deliver a range of positive outcomes for audiences, independent producers and for BBC in-house production. As part of our public consultation, we asked respondents whether they believed that the competitive commissioning arrangements engendered by the WoCC had had an effect (positive or negative) on the quality of the BBC s network television programmes. Although the number of responses to our consultation is too small to draw definitive conclusions, respondents generally considered the WoCC to have had a positive effect on the quality of programmes. The main reasons cited for this by respondents were: BBC in-house production has to fight harder for commissions and within a larger pool of opportunities for independent producers Competition in itself was also thought to have raised programme quality. In this regard, some respondents suggested that the WoCC should be expanded to enhance its perceived positive impact on higher standards The main measure used by the BBC for programme quality is the Appreciation Index (AI) score. The BBC also measures audience perceptions of programming being fresh and new as a proxy for programme distinctiveness, and also audience perceptions of the quality of programming. Our analysis of average audience Appreciation Index (AI) 14 scores for all of the BBC s network television output shows that, in line with other broadcasters, there has been an increase in AI scores over the three years between and , and average AI scores for BBC in-house and independently produced programming across all genres on a like-for-like basis are very similar Appreciation Index scores are calculated by asking respondents to rate programmes they have watched out of 10. These scores are then averaged up to give scores out of Source: BBC Pulse Survey 16 The BBC commissions a number of Long Running Series (LRS) such as Holby City and East Enders that are mainly produced by BBC in-house teams. To ensure like-for-like comparisons, LRS programming is excluded from our analysis of AI, fresh and new and high quality scores for both BBC in-house and independent producers. March
24 Figure 14: Average appreciation index scores by supplier type to Source: BBC Executive / BBC Pulse Survey NB: 09/10 figures updated using weighted AIs (consistent with 10/11 and 11/12 figures). Excludes LRS. There are no AI figures for CBBC, CBeebies, and BBC HD programmes after midnight. The BBC s audience surveys also measure perceptions of programming being fresh and new and high quality. Results show that from to there has been an increase in the proportion of respondents who strongly agree that these qualities apply to BBC network TV programming. The trend for audiences who strongly agree BBC network TV programming is fresh and new across all genres is shown below in figure 15. Figure 15: Proportion (%) of audience who strongly agree programming felt fresh and new Source: BBC Executive (all network television output) / BBC Pulse Survey. NB: No data available for Childrens. Insufficient responses available for 09/10 to rely on data. Excludes LRS. March