Members of the independent sector are calling for regulation to grant them favourable terms of trade, but could it just be time for indies to 'grow up' and take responsibility for operating in a more business-like manner?
At the 1993 Edinburgh television festival, Sir John Harvey-Jones dismissed the independent production sector as a 'lifestyle, not a business', casting doubts over its future.Nine years on, indies are still around but the sense of crisis remains.Profit margins are so slim they would be considered unacceptable in most other businesses. And investment for retaining creative and management talent is thin on the ground.As David Frank, managing director of production outfit RDF Media - maker of Banzai and Faking It - pointed out at the Production Show in London last week: 'From a business point of view, the independent sector is, let's face it, a bit of a joke.'Frank and indie colleagues want protection. They say that the recent draft communications bill favours broadcasters, by promoting investment through the relaxation of ownership rules while maintaining the licensing system. As the bill enters the committee stage, the hope is to persuade the government to do something for indies too.The bill is likely to herald the entry of deep-pocketed US media groups keen to distribute their own content into UK broadcasting. And following the removal of sale and leaseback tax breaks, this will add to indies' concerns that times are getting tougher.According to Frank, a former investment banker, broadcasters are still free to abuse the privileged position - their licence to broadcast - granted to them by the government.'It is wrong that broadcasters should be so strong in their business dealings with independents that they can simply dictate the terms of trade,' he says.Production fees, for example, are set as low as 10 to 15 per cent, meaning that most production companies 'operate at somewhere between break-even and a net profit margin of 1 or 2 per cent,' he says. And in most cases, there are no repeat fees or back-end deals, while the broadcaster gets the distribution rights as well.'We are effectively operating in a rigged market as well as a regulated market,' says John McVay, chief executive of Pact, which represents around 1,000 indies. 'It's regulated in terms of the licensing that the broadcasters have to comply with but rigged in terms of the terms of trade and the customs and practices that we find ourselves locked into.'So what do indies want? 'We need a regulator and it should be Ofcom,' says McVay, rejecting the current tutelage of the Office of Fair Trading.'That regulator needs to ensure that the conditions and the terms of trade applied to the supply of content for public service broadcasters are transparent, fair and a way for those people who create intellectual property to get a reasonable reward.'Pact wants the new bill to enshrine a code of practice that will be enforced by the soon-to-be created super-regulator Ofcom, and which would apply to all broadcasters who have more than a 5 per cent share of the television audience. Frank says: 'Minimum production fees, distribution rights, repeat fees and back-end shares could all be set in stone.'Broadcasters, unsurprisingly, show no enthusiasm for what is likely to cost them dear. 'The BBC does not dictate terms of trade,' says Sara Geater, director of rights and business at the corporation, which commissions more than 40 per cent of all UK production and is accused of paying the lowest fees and hogging programme rights. 'They are freely negotiated and agreed between ourselves and Pact,' she says.'The (ITV) Networking Arrangements already offer an adequate protection for the industry,' adds Granada Content managing director Simon Shaps, stressing the independence of the commissioning unit of the ITV Network Centre from ITV production outfits.Still, the likely merger of Carlton and Granada could prompt a revision of these arrangements, and Pact is keen to bring all broadcasters under one framework.But are calls for regulation simply a rearguard action of a sector that has not got its act together? Although outspoken in his calls for regulation, even Frank says the indie sector has to 'grow up' and quit being 'amateurish'.McVay is more understanding. 'People (in indies) do not lack the commercial skills, otherwise they would not be able to run their businesses in a difficult market.'Certainly, getting on a commercial footing is difficult in an industry awash with 'one-man companies with a lifestyle approach to television who do one project a year and live hand to mouth until the next one', admits another indie executive.If Bazal, Talkback and Celador represent the industry's weightier members, it is difficult to avoid the conclusion that, like any commercial industry suffering from low returns, the UK independent production sector should scale up.If indies merge, they will gain more leverage in negotiations says Lion Television managing director Jeremy Mills - maker of programmes such as Castaway, Soho Stories and Children's Hospital. And he predicts: 'There will be consolidation over the next few years.'Consolidation is more likely than ever since the government has committed to introduce secondary legislation lifting the 25 per cent cap on ownership of indies by foreign broadcasters.But that's not to say there won't be a role for smaller indies. Frank says the sector should comprise 20 to 30 larger companies, plus as many boutique outfits.Certainly, a bit more business and a little less lifestyle wouldn't do the industry any harm.