The BBC wants to transform the way it makes programmes, scrapping the current quota system regulating external commissions and potentially allowing its in-house teams to make programnmes for other broadcasters.
Tony Hall, the director-general of the BBC, described the strategy as 'compete or compare' in a speech this morning at a seminar on the future of the licence fee. Hall called for 'proper competition in programme supply', a less regulated system of commissioning BBC programmes, and a more level playing field between BBC producers and independents. Under its present regime, 50% of BBC programming is guaranteed to in-house production, 25% to independents, and the remaining 25% is open to competition.
The main flaw in the system is that larger producers like All3Media, Fremantle and Endemol no longer qualify as independents, so that their commissions are forced into the third category. Major returning commissions like Masterchef (produced by Shine Group) thus 'take up space designed for new ideas'.
The new BBC policy - which will have to be approved by its management body, the BBC Trust and agreed with communications regulator Ofcom and producers body, PACT - would be for the quotas to be scrapped, so that BBC commissioners would be open to order programmes from wherever they wanted. In-house BBC producers would no longer have one buyer but would be able to take programme ideas wherever they wanted.
Hall argued that the present system of 'managed competition' was no longer sustainable in a world where the BBC is now a smaller part of the UK media market than it was (with the licence fee representing only 25% of UK radio and TV revenues) and with a flurry of recent merger activity - the acquisition of All3Media by Discovery and Liberty Global, Viacom's purchanse of Channel 5 and the potential merger between Shine Group and Endemol - shifting power balances in the UK TV market. BBC producers are also limited in the deals thay can make and cannot compete with the big independent studios'.
He added that a key aspect of the proposals is better value for money. The BBC is aiming to generate savings of £800 million before the end of its current charter (which expires at the end of 2016). With the licence fee frozen and now being used to finance the World Service and S4C, its funding will fall 26% over six years in real terms in that period, said Hall.
The BBC's guaranteed funding in the form of the licence fee (paid by every household in the UK equipped with the TV set or other device capable of receive live broadcasts) and the size of its in-house resources (2,500 full time staff in BBC Productions) gives it an important position in the UK media landscape. Regulations governing independent programme commissions are in principle designed to protect smaller entities from its power in the market. Independents are typically small and depend on commissioning budgets for their survival - as well as on being able to negotiate a favourable share of revenue from rights exploitation.
However, it is clear that mergers and consolidations in the independent sector - and the emergence of 'super-indie' groups with a global reach and often an ownership link with a broadcaster - has transformed the UK marketplace and, as Hall says, meant that some key programme suppliers no longer fit the definition of independent. Despite its 50% guarantee, BBC Productions has found itself increasingly squeezed out of the market for the additional 25%, known as WOCC (Window of Creative Competition). According to the trade magazine Broadcast, the in-house share of WOCC commissions overall was 26% in the financial year ending 31 March 2013. Independents accounted for 88% of entertainment programming, 96% of daytime and 100% of drama.
The BBC will no doubt have to prove that the deregulation of programme commissioning will not adversely affect access to its in-house budgets by independents, even though one possible theoretical outcome would be for BBC Productions' share to fall below 50%. Hall said that some core BBC programme-making areas like newsgathering and coverage of major events would not be affected, but the BBC would need to ensure that it continued to produce the kinds of programmes (high end drama and exportable entertainment formats) that create valuable intellectual property.
Hall also suggested that the BBC would continue to support smaller independents, suggesting the corporation could help with cash-flow and provide long-term stability.
Hall's speech this morning should also be seen in the context of discussions of the next BBC Charter - and in particular whether the licence fee system will continue, and if it does at what level. The BBC chairman said the corporation should be a 'great enabler for the creative industry in this country', while also discreetly pointing out that it is having to absorb the cost of the World Service and S4C on a licence fee which has been at the same level since 2011.