JOINT COMMITTEE ON COMMUNICATIONS, MARINE AND NATURAL RESOURCES díospóireacht -
Thursday, 11 Jan 2007

Fair Trade Practices.

Chairman

I welcome everyone in attendance for the joint committee's continued public hearings on the draft ministerial proposals for broadcasting legislation. I am especially pleased to welcome all those who tuned into the proceedings yesterday as they were broadcast live on the Internet.

Today's first session deals with RTE and TG4. We will cover fair trade practices, the Audience Council and the staff obligation of the public service broadcaster. In examining fair trade practices, members are concerned to explore the rights of those who make programmes under commission. Members are conscious that the Audience Council is the body which gives the listener a voice. In a changed single regulatory environment, it is considered important to explore what voice the listener will have in future. Finally, the members consider it important to examine the implications for the staff of the public service broadcaster as RTE moves from being answerable to the RTE Authority to being subject to the various Acts dealing with companies.

I request that all mobile telephones be switched off and draw the attention of witnesses to the fact that while members have absolute privilege, the same level of privilege does not extend to those appearing before the committee. The committee cannot guarantee any level of privilege to witnesses appearing before it. Members are reminded that, under the salient rulings of the Chair, they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable. I do not want any abuse of that rule today.

For the information of those joining us on the Internet, we are discussing heads 107, 108, 91 and 100 in this session. We are live online at www.econsultation.ie. Deputy Eamon Ryan will begin with the first group of questions on fair trade practices.

Deputy Eamon Ryan

I will run three or four questions into one slightly lengthy initial opener. I praised RTE yesterday for the investment which has been made in programme-making on foot of the increase in the licence fee. There is no doubt it has had beneficial effects on the quality of broadcasting and the development of the independent sector which has never been stronger. However, my comments today will be very critical of RTE's trading arrangements with that very sector. If there are representatives in attendance from the Irish Playwrights and Screenwriters Guild or of independent screen producers, I would be interested to hear their comments.

My understanding is that RTE opposes the introduction of a code on fair trading practices which might change the current scenario in which it holds a 100% interest in the majority of material it commissions. It would be preferable if the organisation were to recognise that the financial investment in a programme is not the only investment and that creative investment is just as valuable an asset as the financial contribution. This could be done by transferring a proportion of rights to independent producers, screen producers or screen writers. Does RTE regard such a development as appropriate? What type of mechanism does Screen Producers Ireland seek? Should we follow the example of Ofcom in Britain or adopt a variation of that model?

From conversations with people involved in this sector, I understand that if the independent sector had a percentage share in programming it would be more ambitious and dynamic in selling the programming products into international markets. Ireland has a distinct advantage in that programmes are, by and large, produced in English. I understand RTE does not take a dynamic or progressive approach to selling programming produced here. It may even be in the organisation's interests to relinquish a share because such a step would lead to an increase in exports and while its return would no longer be 100%, it would be higher. If RTE does not support this idea, I ask its representatives to explain its reasons. I am interested in hearing from the representative of Screen Producers Ireland whether my brief summary of the position is accurate.

Yesterday, the joint committee discussed the fact that RTE rather than the commercial sector is the dominant commissioning body. I understand from discussions with those involved in the sector that one of the other unfortunate difficulties experienced by the independent sector is the nature of its relationship with RTE. On one side is a powerful single body with all the money, while on the other is a multiplicity of smaller producers. In such a relationship individual producers will lack power and, as a result, cut prices to the bone to secure a commission because the market is so competitive. This is not necessarily in the long-term interest of good programme making.

The experience of independent producers over the past three or four years is that RTE takes decisions in its annual decision making round on which programmes to commission two or three months late. This sets the whole industry back by three or four months and forces companies to play catch up. In addition, they must work to tightly priced commercial deadlines because of the imbalance in the market, with a single buyer dealing with a large number of sellers. I ask witnesses to comment.

I also request a response on the appropriateness of the code in specific areas of expenditure. For example, the independent fund commissioned within the Broadcasting Commission of Ireland will have an annual budget of, I believe, roughly €8 million, a not insignificant sum. When one considers that the Irish Film Board has a total annual budget of approximately €12 million, the €8 million figure constitutes a large chunk of commissioning money. Is it appropriate that a company seeking funding from the BCI must first have the broadcaster on board? Does this requirement not give RTE too much power over a large part of independent programming funding? It effectively gives the broadcaster editorial and commissioning control over the process.

These are some of the problems in the sector. A code, as set out in the proposed legislation, provides an opportunity to iron them out. Why not give the independent producers a percentage share in programming, as is the case in the United Kingdom? Perhaps we could go further than our counterparts in Britain. Should a code be introduced setting down timeframes within which RTE must make decisions and establishing a mechanism to shift power to the producers to address the imbalanced relationship between them and RTE and ensure the former are paid properly? This is the only way to sustain a proper industry in the long run. Why should the broadcaster be involved in the first phase of securing BCI funding for independent productions?

Chairman

We have asked the representative of TG4 to join the proceedings in case questions arise for the BCI.

Mr. James Hickey

I am the chair of the broadcasting subcommittee of Screen Producers Ireland which represents 150 independent film and television production companies. I welcome the draft legislation on which SPI was in dialogue with the Department of Communications, Marine and Natural Resources. We particularly welcome the introduction of head No. 107, a code of fair trading practice. It is an important step forward.

I agree with virtually everything Deputy Eamon Ryan said on the experiences of Screen Producers Ireland and its members in dealing with RTE. The national broadcaster refuses to adopt the Ofcom model operating in the United Kingdom under which broadcasters are accorded only certain rights and the remaining rights in the programme are retained by the programme's creators. In the United Kingdom and Ireland the producers are regarded as the creators of the programme. Screen Producers Ireland has tried to persuade RTE to agree to an Ofcom-type arrangement but has, unfortunately, failed to do so. As late as 9 January 2007 we received a letter from Clare Duignan, director of programmes in RTE television, in which she agreed to disagree with us, in other words, she stated RTE was not prepared to agree to our position on copyright ownership. We have brought the matter as far as we can with the organisation but it has not agreed to follow a model similar to that adopted in the United Kingdom and other countries such as the United States. Screen Producers Ireland will continue to try to persuade RTE to take this route.

As regards the Deputy's comments on the commissioning process, RTE needs to improve the speed and timing of the process. Commissions are awarded at a late stage and are cut to the bone in terms of price. As a result, the quality of programming is in danger of suffering. This is a difficulty.

The Deputy is also correct on the BCI fund. Although it amounts to €8 million to €10 million per annum, two or three years of funding were accumulated before the process was set in train, with the result that the commission has between €20 million and €30 million to spend on television programme production. The establishment of this fund is welcome because it has engendered a small improvement in competition in the sector. However, in the final analysis, the difficulty is with RTE as the dominant broadcaster. To put the matter in context, RTE spends between €60 million and €70 million per annum on the independent television production sector. When one compares this figure to the €10 million per annum spent by the BCI and approximately €12 million to €15 million per annum spent by TG4 on the independent sector it is clear RTE has a dominant position in the market.

Overall, approximately €150 million per annum is spent on independent film and television production. Internal expenditure by RTE on television programme production amounts to approximately €200 million per annum. These figures show that the industry is of major importance. Ireland needs to be part of the information society and the digital content creation society. Unless we step up to the plate in this area others will steal a march on us. Ireland needs to have developed, sophisticated industries able to pay the wages and salaries people deserve. To achieve this, we need the right industries with the right focus.

Deputy Eamon Ryan

I am interested in hearing the views of the representatives of RTE.

Chairman

Mr. Hayes had his day in the sun yesterday.

Mr. Conor Hayes

I am basking in the shade today.

Chairman

He got us all into trouble over having two television licences. He is very greedy.

Mr. Conor Sweeney

I will answer the four points raised by Deputy Eamon Ryan. In terms of recognition of the creative investment of the producer, this investment is recognised in that producers are paid to make the programmes. They are paid a production fee and if they work on the programme, they are paid as producers. They also receive a share of revenues from the exploitation of the programme. Their creative input into the programme is, therefore, recognised.

On the question of using the UK model, the market in the United Kingdom is substantially different from the Irish market. We would be better off examining countries such as Austria and Switzerland where the position is similar to that here in that their respective public service broadcasters compete against competitors in the domestic market and also face substantial external competition. Austria has German channels whereas we have the BBC. The United Kingdom model should not be applied to RTE because the markets are different.

In terms of exploitation of programmes it is not the case that RTE has total control and decides everything that happens with programmes. Under our new terms of trade we have agreed with SPI that if a proposal is made to exploit a programme separate from the broadcast on RTE, we will discuss it with the producer and decide on the best deal. It is a partnership in that sense. It is not a case of RTE controlling things and producers getting no money out of it nor having any control over it. I want to make that clear.

As to whether the retention or ownership of rights by producers would make them more ambitious and dynamic, we carried out a test a few years ago in which we agreed with SPI to get an established international UK sales company to take our product and try to sell it. It was a three-year deal but very few sales were achieved. At the end of the three-year period, when asked if it wished to continue, the company declined on the basis that the material was not internationally saleable. Unfortunately, the notion that there is a big market for the product we make is not necessarily true. There is a market for formats and our arrangements with SPI on that is that if a producer owns the format then he or she is free to go abroad to exploit and sell that format. We do not control that side of things. The producer has the format rights.

Chairman

Will Mr. Sweeney address his comments through the Chair?

Mr. Sweeney

I am sorry. What happens is that RTE-IPU puts out rounds during the year to which people respond. There is an ongoing process. Situations may arise at short notice where we have a slot and money is available. In such cases we go to the market and look for someone to make a programme quickly. I realise such a scenario is not perfect but it happens in the industry.

Deputy Eamon Ryan

What I hear from people in the industry is that it happens every year. It is said that everything is done on Christmas Eve. Panic then sets in as the budget has to be spent. Projects are three months late and people hear about it at the last minute.

Mr. Sweeney

I accept that may happen in some cases but it is not the general rule.

Chairman

Let us hear from Mr. Ó Gallchóir of TG4 about his experiences in regard to this matter.

Mr. Pól Ó Gallchóir

We have similar terms of trade with the independent production sector as RTE. We are currently in negotiations with SPI. We believe the broadcaster should retain broadcasting rights for the island of Ireland in perpetuity. In return, the independent producer would retain ownership of the programming for exploitation. We will continue our negotiations with SPI.

Regarding the BCI, we welcome the fund and the additionality it brings but we feel it is important for a broadcaster to be on board before the submission goes to the BCI. The danger is that submissions may be approved but no broadcaster may be interested in showing the programme. It is important for the public that all the material produced by the BCI is shown on national television.

Chairman

What experience does Mr. McMunn have in dealing with independent producers?

Mr. David McMunn

As discussed yesterday, we have obligations which we meet. We do not spend anywhere near the same as RTE or TG4 as we do not have the funding. The rights to be accorded involve a policy decision at Government level. Since the Ofcom model in the UK has freed up some rights, we now have deals with independent producers in the UK which would not have been possible previously. This is an area that requires more examination.

Chairman

Would Mr. O'Keeffe like to comment on the questions posed by Deputy Eamon Ryan and the replies already made?

Mr. Michael O’Keeffe

We support the principle of the proposed code of fair trade as set out in the heads of the Bill. We do not take issue with it. The objective of the programme fund is to fund new programmes. Within the legislation and the approval we got from the European Commission, it was an absolute prerequisite that there would be a commitment from a broadcaster on the basis that if one provides money for a programme that is not broadcast subsequently, one can ask if the money has been well spent. There is no leeway on that. We must have a commitment from a broadcaster that a programme will be broadcast.

Deputy Eamon Ryan

What is to stop RTE with a possible budget of €60 million for programmes having a programme made from the €8 million BCI budget? It can go to a producer and offer €50,000 for a programme and leave it to him or her to seek the balance from the BCI.

Mr. O’Keeffe

That is a matter for RTE. Our concern with the fund revolves around its objectives and the type of programming for which funding will be provided. We assess everything on an open basis. We are about to complete our third round of applications. The applications we receive are assessed independently. Money is allocated for programming that is broadcast on whichever broadcast service has agreed to take part. We take an open approach. We will provide funding as long as programming is in line with the objectives of the scheme and is broadcast on a service, irrespective of what that service may be.

Deputy Eamon Ryan

Let me return to the question of RTE. We should compare ourselves with Austria or Finland rather than the UK. Given the immigrant English speaking population in the UK, the US, Canada, Australia and New Zealand, Irish programming must be of a broader interest.

Mr. Sweeney

I accept the Deputy's point but that is not the experience. We may have such a view in Ireland but that is not the case internationally.

Deputy Eamon Ryan

Screen producers can be reasonably substantial companies with expertise and international reputations. What do we have to lose because we are building up an industry that will have an ability to export? Why would we not give them 20% or 30% and let them try to sell their product, given that we are not selling much programming currently?

Mr. Sweeney

As I explained, we have an arrangement with them to allow them to do that. We encourage producers to try to make sales and come back to us to do the deal. We will get 50%.

Deputy Eamon Ryan

How can there be any incentive if RTE has 100% ownership rights?

Mr. Sweeney

The incentive is the 50% share. The producers will also get a sales fee. The rights are separate from the income from the exploitation of those rights.

Deputy Eamon Ryan

Rights are significant when one looks at Riverdance. There are examples of where there would be an incentive for people to try and sell programmes.

Mr. Sweeney

Riverdance was not a 100% RTE commissioned programme. We are talking about programmes fully paid for by RTE. In such cases we pay the producer a fee, etc.

Deputy Eamon Ryan

Perhaps that is one of the reasons Riverdance went around the world. There was an incentive for people to sell it.

Mr. Sweeney

We have a catalogue of programming we try to sell every day. Unfortunately, the market is not out there.

Deputy Eamon Ryan

There are 40 million Irish-Americans, Irish-Canadians, Irish-Australians and Irish-English.

Mr. Sweeney

We tried to sell the series "On Home Ground" to the Americans but, unfortunately, they did not want to pay us anything for it. They said they would do us a deal and do it for free. That is what we are up against.

Chairman

Does Mr. Hickey wish to contribute again? Two members are offering.

Mr. Hickey

There is a cause and effect problem here. First, producers do not own the rights, RTE owns the rights. RTE has now agreed it will not sell the rights without the producer's consent but, equally, the producer cannot sell the rights without RTE's consent so there is a deadlock. It does not do anybody any good. Ultimately, the problem is the producers need an incentive to go out and sell their products. We share revenues but if one has to go cap in hand to RTE every time to ask permission to sell a programme, that is difficult and it is not fair. We want a new code of fair practice. The United Kingdom has already done this to the great benefit of its producers.

Chairman

We had an experience in 2004 when going to Australia representing the committee when we were looking at broadcasting. We went to Chile two years ago. We had a good discussion with screen producers down under where they have a different model. Is Mr. Sweeney familiar with that model?

Mr. Sweeney

They have a rights model arrangement which allows producers to retain rights. In general terms, in Australia producers are able to retain rights. The organisation in Australia is called the Screen Producers Association of Australia and our equivalent is called Screen Producers Ireland. There is much more competition between broadcasters in Australia because they have a much more diverse broadcasting sector than in Ireland. They have better opportunities to negotiate rights and a better regulatory arrangement. The Australian model is very complicated.

Deputy Durkan

Has the performing rights group indicated a preference regarding this issue? At the time of commissioning a programme, would it not be possible to agree on a price that is somewhat removed from that which currently prevails to allow the producer to retain some rights? Has the Competition Authority made any comment on this process? It appears that there is a slight infringement in terms of competition and restrictive practice. Does the measure apply to all programmes or is it selective?

Mr. Sweeney

The market in Ireland is very small. Therefore, if we were to create a business model with producers in which we did not put up all the money for the production on the grounds that they would come up with the balance from international sales or otherwise, most projects would not be feasible.

Deputy Durkan

That is not what I had in mind. I presume that if RTE or any other body is buying the full rights, root and branches, to a production, it must pay more for it than it would pay if it were buying a product with rights attaching elsewhere. Is this the case?

Mr. Sweeney

If we acquire programmes from the United States, for example, we obviously pay less than we would if we were commissioning a programme.

Mr. Hickey

For the cost of producing a programme, RTE acquires all rights pertaining to it and does not pay any additional money, although it is also acquiring international television rights or international DVD rights. It retains all such rights without having to make any additional payment to the producer. Therefore, the Deputy is correct that it does not pay anything extra.

Mr. Sweeney

The payment we make covers the costs of creating all those rights. Flowing on from the cost of making the programme are all the other rights. There is no extra cost involved.

Mr. Hickey

The creator is entitled to have his rights recognised and the Deputy is correct that if the creator employs additional creativity, which is so important to the making of the programme, he is entitled to own it and benefit therefrom. This is the creator's trade.

Deputy Durkan

A battle ensued for several years over the rights and entitlements of contributing artists. This was resolved a long time ago. How does this tie in with the existing process? It appears that the artists contributing to a programme would still have rights. The production agency would have rights that would extend across the board and they would have to be recognised in any event.

Mr. Sweeney

Absolutely, but they are, in a way, removed from the producer. In the case of an independent commission, we would hire the producer, who would then hire the actors, musicians or other performers. They would obviously get paid and share in the income that would accrue.

Deputy Durkan

The participants do get remuneration-----

Mr. Sweeney

They do.

Deputy Durkan

-----but the producers do not.

Mr. Sweeney

They do. They get paid to make the programme.

Deputy Durkan

I refer to the ongoing royalties that would accrue to the artists.

Mr. Sweeney

Yes. They get a 50% share.

Mr. Hickey

The producers, artists, composers and all the people to whom the Deputy refers, including the actors, musicians and scriptwriters, do not get additional payments if the programmes do not sell outside Ireland. The problem is that RTE does not sell them satisfactorily. If they were sold, not only would the producers get paid but so too would the performers, composers, writers, directors and all the others involved in the making of the programme. They are paid for the initial work but they would make more money if the programme was sold internationally.

Deputy F. O’Malley

It is interesting to see this development whereby people are protecting their areas. I am worried that the spirit of the legislation with which we are dealing is not being honoured. I am interested in hearing the response of all sectors. If 100% of the rights to a programme are owned by the commissioning body, which is RTE in so many instances, how can one say the sector is independent? Is RTE not just subcontracting?

I was interested in the views of Enterprise Ireland on the development of this sector. Existing practice has not led to sufficient development or a system sufficiently robust to allow a proper, independent television production sector to develop. It is a case of the dominant incumbent controlling everything.

The exchange on the deadlock involving the independent screen producers and production companies was interesting. Unfortunately, RTE is by and large commanding everything. The system clearly has not worked. It is not satisfactory from the point of view of the licensee that the sector is not being developed sufficiently. I do not know if there are delegates present from Enterprise Ireland who made comments on the ability to develop the sector.

Mr. Sweeney

We do not accept that there is not a healthy independent sector in Ireland.

Deputy F. O’Malley

If RTE retains full ownership, the sector is no longer independent.

Mr. Sweeney

In order to build a company, one needs income. Rights and money are separate issues. If one is paid to make a programme, one is receiving 50% of the revenue from its exploitation and this is what one uses to build one's company. Owning rights is no use unless one is receiving income from their exploitation.

Deputy F. O’Malley

That is not being progressed.

Mr. Sweeney

I do not accept that point. Unfortunately, many of the programmes we make would not sell in the United States or be released on video.

Deputy F. O’Malley

Mr. Sweeney does not regard it as his responsibility to sell them.

Mr. Sweeney

We do.

Deputy F. O’Malley

There are not many instances in which it has been done.

Mr. Sweeney

"Killinaskully" is out on video. We have sold the Keith Barry show around the world and we are constantly trying to sell and exploit programmes in partnership with the producers.

Chairman

What has Mr. Hickey to say about that aspect?

Mr. Hickey

The difficulty is that unless the producers themselves are in control of the situation and able to make the sales themselves, the system does not work. If one must ask permission of RTE every time, one is disincentivised. It is not just a question of having a passive share in revenue. The programmes are created by us and we want to make them better so we can sell them internationally.

Most television programmes do not sell internationally. This holds true for every country in the world but there are always a few exceptions. "Riverdance", to which the Deputy referred, is a classic example of an exception that truly proves how a small six-minute programme, produced creatively, can make a global impact. The production companies produce such programmes and they want to own the rights to them so they can go forward. The fair trade proposals are welcome and we would like to see them strengthened in the legislation.

Chairman

The committee is extremely concerned about the submission by Enterprise Ireland. While it does not criticise anybody in particular, it makes the very strong point that television producers must fully exploit opportunities to secure export revenue from the sale of their productions in international markets and that any issue regarding the ownership of rights is reserved to best support this objective. Enterprise Ireland regards television production as a growing industry.

Just before Christmas, the members of the committee attended a presentation by media producers, including screen producers. I was amazed that there were 10,000 to 12,000 people involved in the various facets of the industry. I am sure the officials from the Department will take note of the points made by members and that this matter will be teased out in the Bill.

Deputy Eamon Ryan

If I had said to someone 15 years ago that I would make a show on Irish dancing that would take over the world or a comedy about three Irish priests in a parish in the west of Ireland, I would have been laughed at. If cultural barriers can be crossed by "Killinascully", imagine what else can be done.

Mr. Sweeney

"Killinascully" has done very well in Ireland but has not performed as well internationally.

Deputy Eamon Ryan

It is brilliant.

Mr. Hickey

We presented a letter from Enterprise Ireland to RTE on the points Enterprise Ireland is now making to the committee and RTE declined to accept its position. We support Enterprise Ireland.

Chairman

It is a matter for the Government to draft legislation for the new broadcasting authority of Ireland. I am sure those drafting the legislation will take into consideration all of the submissions made and the exchange of views here today.

Mr. Hayes

It is not appreciated that many of the programmes commissioned in Ireland are not commercially viable; if there was no State support, they would not be commissioned at all. That is why the committee might ask TV3 or the other commercial broadcasters why they do not commission programmes in that way. There is a presumption that because a programme can be sold internationally it will sell internationally. There are many other issues to do with why an independent production sector may or may not be-----

Deputy F. O’Malley

That is no reason to choke independent productions and hold on to the intellectual property rights.

Mr. Hayes

There is a misapprehension that we want to choke it but that is not the case. Everyone would be keen to see more.

Deputy Eamon Ryan

I dispute the point that home-produced programming is not commercial. I go back to what I said in praise of RTE: we have seen local productions receiving money, attracting the figures and commercial revenue results. If independent production companies were not used, RTE would not have the same viewer figures. That is what makes it commercially viable, as well as the licence fee. To say we are doing people a favour because a programme is not commercially viable is misleading; the production companies are doing RTE a favour because they work hard on tight budgets, even though RTE does not give them any recognition by granting them the rights.

Mr. Hayes

It is a false assumption that all programmes necessarily are commercially viable; they are not. The concept of a public service broadcaster is precisely that programmes will be made whether they attract large audience figures. Even if they do attract large audience numbers, in a state of 4 million many programmes will not be commercially viable, which is why some of our competitors do not commission home produced programming. We must balance this with the need to develop a healthy independent production sector. It is misplaced, however, to say it is all in one place.

Chairman: We could spend all day on this issue but the work programme has been laid out and we must stop at this point.