'International Terms of Trade'

Angela Littlejohn (Producer, Maxim Films, NZ) discussed the new UK terms of trade; how they came about, and the hugely positive impact those terms have had on their industry with Sara Geater (Head of Commercial Affairs, Channel 4, UK) and Tom Brisley (Head of Factual, Darlow Smithson Productions, UK).

Angela: Recently producers and broadcasters in the UK re-negotiated their terms of trade, enabling producers to retain a greater share of the rights to their programs.

Tom: It has led to a more exciting and creative environment. In the past broadcasters have owned our ideas and it has been a liberating, empowering experience being in control of our own intellectual property. People are now very motivated to sell their ideas. Ideas do not come out of thin air they take a lot of time. We have a team of seven in development and that is a hard cost, we plough money back into development that we get from offshore distribution. 

Sarah: It all changed in 2004 with the Communications Act. Under the Communications Act, broadcasters could only take core (screening) rights, the other rights sat with the independents.

The changes stemmed from lobbying that argued if you wanted a sustainable industry, and to create value in the UK market, then you needed to increase that creative value, building stronger, bigger, independent companies.  The good thing is that there has been a huge increase in wealth in the indie market. The independent sector needed to be stronger so that it was not so dependent on the broadcasters. It has created a much better relationship between broadcaster and the independents. Who in their right mind wouldn’t want a stronger, sustainable, independent sector.  Previously the relationship tended to be adversarial.  Hours would be spent going over a boring back-end deal, now we just move on.

Tom: The Independent Producers’ Association Pact ( UK ’s SPADA equivalent) got together and lobbied hard for the changes and now under the terms of trade we own 85% of the back end.  It has been hugely beneficial for the growth of the industry.

Budgets

Sarah: With the changes we agreed to stop looking at budgets, instead we published a range of tariff prices for programming and looked at fixed price deals. We don’t pick up the over-spend, although if we have requested editorial changes we might pay for it. We only really look at budgets if we have never worked with the company before.  Broadcasters are needing to put less funding into development than they did before as the independents are funding more development themselves as they are getting more returns.

Angela: How have the changes affected the indie sector?

Tom: We certainly get a lot more of the back-end.  Now broadcasters take 15% of the net, whereas in the past it was 40 or 50%.  We raise money from France , USA , Germany and it helps you look at opportunities that have international appeal.

Sarah: We were worried about the possibility of a consolidation in the market.  Some companies had floated on the Stock Exchange, and those companies now have a much more commercial focus.  It’s a balancing act, as broadcasters need to invest in new media services/platforms and if that is combined with falling ad revenue; whilst also maintaining the same programme budget.

Tom: We were acquired by an American company, which helps with our cash flow and gives us a greater safety net.

Angela: From what you know of the TV sector here do you think it is getting a fair deal?

Sarah: In the UK broadcasters knew it had to change and now we are not responsible for the health of the indie sector or producers’ profit margins.  It is easier to encourage voluntary change than have to force it; the terms have to come from the industry not the government.

Tom: Asking you to come up with ideas while having one hand tied behind you back is not the way to go about it. If you are empowered then that helps the TV world generally. If you are empowered it makes you more creative. If a funding body is trying to get recovery from the indie sector then it certainly doesn’t result in more creative programs.

Angela: The default position here is that 80% goes back to NZ on Air.

Delegate: NZ on Air argues that it is taxpayer’s money, so they need to get it back in order to fund more projects.

NZ on Air Rep: The 80% is negotiable, but it is not appropriate to talk about at this forum.

SPADA: What are some of the benefits to broadcasters of the better terms of trade for producers – this is important as we have an unregulated market here.

Sarah: Much better relationships with the industry; everyone knows where they stand; you commission on the strength of the ideas; you don’t spend time arguing about the back end split; a much more sustainable indie sector.

Angela: Do you think we have good terms of trade here?

Sarah: No

Tom: I feel your pain.

Delegate: Who is more passionate than an indie producer in trying to sell overseas? We would have a more robust industry if we are treated as a business.

TVNZ Rep: Increasingly interesting dialogue about how we handle rights for digital and other platforms. I believe there should be an ongoing dialogue to work through rights going forward. We need to have an exchange of ideas over the next few months.

Sarah: Channel 4 has seen a better return on investment since the terms of trade.  You are also contributing to the value of the creative sector.

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