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Chamber and committees

Constitution, Europe, External Affairs and Culture Committee

Meeting date: Thursday, June 23, 2022

Agenda: Decision on Taking Business in Private, Channel 4, Scotland’s Census


Contents


Channel 4

The Convener

Under item 2, we have two panels on Channel 4. I welcome our first panel: John McVay, chief executive officer, Producers Alliance for Cinema and Television; Nicole Kleeman, managing director, Firecrest Films; and David Smith, director of screen, Screen Scotland. I give a warm welcome to you all virtually.

I will open with a question for David Smith. How would you describe the working relationship between Channel 4 and Screen Scotland? Can you give us an update on the memorandum of understanding between the two organisations?

David Smith (Screen Scotland)

Thank you for inviting me in. We have a very close working relationship with Channel 4: with the Scotland team, which is based at the hub in Glasgow; at Horseferry Road; and nationally, with the base in Leeds.

We have not yet signed an MOU with Channel 4, but that has not stopped us from progressing lots of collaborative work with it. We have recently had a daytime co-development project. We have just launched an initiative based on an entertainment production for Christmas 2022. We have worked with Channel 4 to secure a specific spot for a new pilot for an entertainment format in the Christmas schedule, which we will jointly develop with it and with companies based in the Scotland sector. That directly feeds into our work at Kelvin hall and the redevelopment of the central vault in Kelvin hall as a television entertainment studio.

We recognise that entertainment is an area where Scotland-based producers have real capacity for growth. With the Scottish Government and Glasgow City Council, we have developed that space in Kelvin hall as what is known as a shiny-floor show stage. It is not a film studio in the normal sense; it is a television entertainment studio. It is almost an exact copy of 1 Television Centre in London, where “The Graham Norton Show” and various other shows are filmed every week. It is a useful space that augments our existing capacity in Scotland, which includes Pacific Quay, where we have two entertainment studios.

It is a collaborative and strategic approach. One of the things that we often say in Screen Scotland is that, essentially, everything is connected. You have to join up all the right parts at the right time, and we feel that we are doing that on multiple fronts.

Channel 4 is one of our closest collaborators. We work very well with it and its work with the Scottish sector over the past five years in particular has been fantastic. It has grown its supplier base and expanded its range of programming from Scotland—and that programming is from Scotland. We are seeing real Scottish representation on screen. Nicole Kleeman can speak for herself, but the “Rescue” series is a fantastic example of that. It is a project that we co-invested in alongside Channel 4, and it represents modern Scotland on screens across the UK.

The Convener

I will push you a bit on that, then ask a more general question to the rest of the panel.

If Westminster Government plans go ahead, how do you see that relationship changing and what would be your concerns about it?

David Smith

It 100 per cent depends on who buys Channel 4, but our concerns are major. At the moment, we have a very functional publicly owned public service broadcasting sector in the UK. The publicly owned public service broadcasters are the BBC and Channel 4.

Screen Scotland has just this morning published an economic value report, and it is the first time that such a level of detail on the sector has been delivered. The role that the public service broadcasters play in our creative economy is essential. Between them, the BBC and Channel 4 account for 87 per cent of all public service broadcaster spend in Scotland. Channel 4, from memory, accounts for 12 per cent of that figure. By comparison, ITV—which is one of the likely buyers for Channel 4—accounts for less than 1 per cent.

Obviously, ITV would argue that it has STV in Scotland, but its footprint is a United Kingdom-wide one. The STV service is an opt-out service within the overall channel 3 licence. For one of our public service broadcasters not to play a bigger part in our national conversation and not to represent Scotland across the rest of the UK is a lack.

ITV is one of the likely buyers—it is not the only likely buyer—and the model of its behaviour is that it tends to commission the majority of its content in house from companies that it owns, and mostly within England. Channel 4 does not do that. It is a publisher-broadcaster, so, along with the BBC, it is the cornerstone of our creative economy in Scotland, and it is absolutely the cornerstone of the independent production sector across the whole of the UK.

The white paper proposal is that Channel 4 will stop being a publisher-broadcaster. The independent quota of 25 per cent will be maintained, but that will be across the whole of the UK. I cannot remember whether the white paper says anything about the nations and regions quotas, but I suspect that they would be at threat. Quotas may feel like a blunt instrument, but they genuinely work. Broadcasters work to quotas and, in Channel 4’s case, it works above and beyond the quotas.

There is no evidence to suggest that the sale of Channel 4 to a private buyer will be good for Scotland and the independent production sector across the UK or deliver anything positive to the levelling-up agenda, and there are plenty of reasons to be concerned on all of those fronts. I am keen to see what evidence there is that it is a good idea.

I read a piece in The Times the other day by a colleague, David Strachan, who used to run Tern Television in Aberdeen and Glasgow. His description was quite telling. Essentially, the UK Government is proposing that we remove the commercial relationship between Channel 4 and the independent production sector and replace it with a system of grants that will level up in some way across the UK. That does not feel like a very conservative approach; it feels like a solution in search of a problem.

Ms Kleeman, what would you see as the major threats? Are there opportunities in what is proposed in the white paper?

Nicole Kleeman (Firecrest Films)

Having read the white paper, I am greatly concerned, for many reasons. First, we all think of Channel 4 as a broadcaster, but Channel 4 is also an incubator of businesses such as ours. Channel 4 recycles the profit that it makes into companies such as ours, supercharging our growth. When Channel 4 invested in Firecrest Films in 2017, it tripled our turnover in the first year, and we have seen steady growth ever since. We employ 65 people from our office in Govan. We have made it through the pandemic and we carried all of our employees through the pandemic.

Channel 4 has been there for us at every stage of our growth. It is the reason that the company started and it allowed us to expand into current affairs. It then gave us extra grants to encourage us to diversify, and we won a returning series called “Supershoppers”, which ran for eight series, providing long-term stability in the company and allowing us to grow further. Channel 4 then gave us another grant through their alpha fund to diversify out of current affairs, and we started developing documentaries.

Our first documentary commission was with Channel 4, and it gave us access to the Scottish Prison Service. It was the first time that a documentary such as that had been made up here. It showcased the very different way the Scottish Prison Service was running from prison services in the rest of the UK and beyond. We had international sales on that series. David Smith talked about another series of ours, through which Channel 4 has showcased modern Scotland to the rest of the UK and to the world.

Channel 4 then took an investment stake in the business. Since then, the business has been hugely successful, with the kind of growth and success that we would never have dreamed of. Channel 4 has been there at every stage of our growth, and no other broadcaster does that.

Channel 4 has a very special place in terms of boosting the screen economy in Scotland. Apart from company investment, it invests in skills and talent and is the growing the talent base here. There are not many documentary companies in Scotland, so we did not have an enormous talent pool to fish from when we started. Channel 4 has helped grow that talent base at every level, from new entrants to senior talent.

The other reason to be concerned is that the white paper set out in-house production at Channel 4. At the moment, Channel 4 gets 100 per cent of its production from independent production companies such as us. The white paper says that 75 per cent of production will go in house at Channel 4, so there will be a window of only 25 per cent for companies such as us, and that percentage is for companies across the UK. That can hardly have a positive effect on the sector in Scotland.

I cannot see any positives from privatisation. I am trying to, because I am an optimistic person and I am looking to the future, but I cannot see any benefits. What I can see is that it will be very difficult for other people to follow us and do what we have done at Firecrest, because that drawbridge will be pulled up.

John McVay (Producers Alliance for Cinema and Television)

Good morning and thank you for inviting me to give evidence. Nicole Kleeman and David Smith have touched on many of the key issues. Let us be clear: the Westminster Government is taking a wrecking ball to the successful British independent production sector, which is currently a £3.2 billion economy—both domestic production and international production from sales and formats.

We have done some impact analysis, unlike the Westminster Government, which has not done any impact analysis or published anything that is credible. We estimate that over the next 10 years, if the sale of Channel 4 is to go ahead, there will be a loss of £4.2 billion for the British independent production sector. Obviously, that means a massive impact on the Scottish independent sector. That is a loss of direct revenues and indirect revenues from secondary sales.

It will be a transfer of value from hundreds of entrepreneurial companies such as Nicole Kleeman’s to whoever buys Channel 4. They will then own the programming and the intellectual property, and if that is an American owner, that will be a direct transfer of money and British and Scottish intellectual property to them. If privatisation goes ahead, it will be a disaster for the independent production sector.

There will be not only a direct impact on Nicole Kleeman’s company, but an impact on the next company that thinks that it would like to set up a production business in Scotland, because those opportunities will be diminished. Channel 4 is the key incubator for people entering into the British production and broadcasting sector, and that will be lost under the Government’s current proposals.

I will open up the meeting to questions from the committee. I move first to Mr Ruskell, who joins us online.

Mark Ruskell (Mid Scotland and Fife) (Green)

We have heard some pretty sobering thoughts from the panel already. I turn to the international work that Screen Scotland does. Obviously, we will see increased investment in Screen Scotland for its international engagement work. How would the privatisation of Channel 4 affect that?

David Smith

The international work is a key component of our development of the sector in the next 10 years. The economic value report that we published this morning recognises a gross value added impact for the Scottish economy of screen in all its forms of around £550 million. Previous surveys indicated that, for the production of film and high-end television drama, the figure was roughly under £100 million.

I joined from the sector in 2019—I used to run a production company in Glasgow, and I was conscious that a large chunk of the work that we produced was never counted as part of the previous survey. It is a valid survey, and it continues, and it is a historical reference point. However, we needed to have something that showed that screen is not a singular creative industry; it is a whole range of creative industries, including film.

One area where we work closely with Channel 4 is Film4. When I joined Screen Scotland in 2019, the filming of a film called “Limbo” had just completed, and it went on to screen as part of the Cannes programme in 2021, or it might have been 2020.

08:45  

That international reach for films is possible only in collaboration with Film4 or BBC Film and the British Film Institute. Independent film from Scotland is a core component of our work, our international outreach and our cultural representation and of how we develop a sector of potential winners in the future. Douglas Mackinnon, who made “Good Omens” and “Anansi Boys” was not a film maker once upon a time and comes from Skye. He has grown to become an industry figure who can land multiple parts and multiple series for production in Scotland. I will not say that every independent film maker has that trajectory, but you have to grow talent and work in collaboration with companies such as Film4 and BBC Film to develop international film. That is a reputation building thing that adds to the whole economic argument.

We want economic growth and we want international development, in two directions—incoming and outgoing. I will come back to that in a second. However, we also want cultural growth. We want films and film makers and programme makers from Scotland winning international business. That very much involves Film4 and BBC Film, and it also means Channel 4.

When Channel 4 invests in a company such as Nicole Kleeman’s and buys a programme from it, that is a kite mark or quality standard for that programme. It means that it has real value in the international market and is very attractive. It indicates that it has been made to a high standard. That is crucial, because it means that the UK as a whole has a competitive advantage, because of the strength of our public service broadcasters and the work that they do with the independent production sector.

To answer your question—going back briefly to the international point—our strategy over the next 10 years is to grow the gross value added impact of screen in Scotland from roughly £550 million to roughly £1 billion. That will be possible only with continued investment in skills, growth and infrastructure. That will deliver international outreach and inward investment productions. Channel 4 has a role to play in both of those.

Before Mark Ruskell comes back in, can I push you on the point that production in Scotland was not counted? Can you explain that? I am struggling to understand an example of what that would be.

David Smith

All those counts focused on film and what is called high-end television drama. You are talking about drama that has production costs of more than £1 million an hour. The majority of production activity in Scotland was not captured by that count, because it was below that figure. More or less all day in, day out television production, all factual production and all entertainment production was missed from previous counts, because it did not breach that tax barrier of £1 million per hour for drama, and it was not film.

The count was valid, because it showed what Screen Scotland and its predecessors were focused on at that point, which was growth in film and high-end television drama. However, Screen Scotland, since it was reformed in 2018, has a much broader reach. We are interested in all forms of production across film and television. We are in the business of broadcasting from Scotland. We are interested in cinema and film, exhibition skills, and infrastructure and development, as well as education—they are all part of our brief. The new study is a fuller spectrum study.

Thank you for mentioning that. I have not been able to take it on board yet, but your report was mentioned on “Good Morning Scotland” this morning, and it sounds interesting.

I ask Nicole Kleeman for her reflections on the international work.

Nicole Kleeman

The international part of our business is becoming more and more important. That is about the intellectual property that we retain. When we make programmes for Channel 4 or the BBC, we are allowed to keep the IP of those programmes. That is important for us, because when we go on to international distribution, as David Smith said, having made programmes for a broadcaster such as the BBC or Channel 4 is worth a lot in the international market, because international buyers know that the programmes will be of premium quality. When we sell programmes abroad, we can use the profits to reinvest back into our business—into our staff and into developing future projects.

The problems that we have had over the past few years mean that it is now difficult for our business to make any margin on production at all. When we make a programme here for the BBC or Channel 4, we more or less break even on production costs. It is very difficult to make any margin, so the profit that the business generates that pays for development and us thinking up new programmes in future all comes from our international sales. It is critical for us that we retain IP and that we have international sales. That is the only way that the business can grow.

What would be the impact of privatisation on those international sales?

Nicole Kleeman

It is difficult to know without knowing who the buyer of Channel 4 would be. My reading of it is that we would have fewer opportunities to make programmes for Channel 4, because it will take 75 per cent of production in-house. We will then be limited by who our customers are. Although it is good to have business with streamers such as Netflix and Amazon, they retain IP because, when you make a programme for them, they put it across their platforms internationally. We do not have the IP, so we have to make sure that we do a good deal with them at the start, so that we are compensated for that. However, it would be a risky business if you only produced for companies where you gave up your IP at the point of commission.

John McVay

Over the past 15 years or so, thanks to the fact that, since 2003, British independent producers have legally been able to own the copyright in the programmes that they make for the public service broadcasters, we have seen a boom in international activity. Over half of the revenues for the independent sector in the UK come from international activity.

There are three components to that. One is sales of programmes, which Nicole Kleeman has just talked about. Sales are vital because, as Nicole said, that is often your margin—that is called your back end. It is where you generate revenues from selling the programme. There is also selling intellectual property such as format rights for reality programming or game shows, which are highly valuable. The UK is the leading creator of formats internationally. Over the past five years or more, we have seen independent producers being commissioned by international buyers to make new programming, such as “Gold Rush” and other ones on Discovery. That has become an important part of our international business.

I am just back from a major event in California called Realscreen. We had over 40 British independent producers there—it was the first post-Covid event—and without the Brits there, including the Scots and Welsh, and the Northern Irish, the event would not function. The North American buyers look towards the UK as a research and development lab for global creativity. Of course, the fuel for that is our original commissions in the UK, because that is where we develop the credibility, it is where we can develop our business and where we can reinvest, and Channel 4 is an important part of that.

The knock-on effects of the Westminster Government’s plans are multiple. They are not just a direct loss of revenue; they impact on long-term growth and reduce our competitiveness internationally. However, the Westminster Government has not been willing to listen to us on that. As I say, we have produced our own analysis to try to explain why the plans are such a bad idea.

I fear that, as a result of the Government’s plans, the independent sector, which has been a shining light in the British creative industries, will move to become more like a service sector. Rather than being creative entrepreneurs owning and controlling IP, we will just be guns for hire. We will be line producers who are hired by the new owners or global streamers to basically sell our creativity and work for a fee. That is not the right place to be in the 21st century economy, and it diminishes ambition and creativity overall.

Can I just confirm that, as you said earlier, there is no impact assessment from the UK Government of the pros and cons and of issues to do with international work?

John McVay

There is none at all. The assumption is somehow that Channel 4 needs to compete with Netflix, which is completely the wrong premise. Channel 4 needs to do something different from Netflix. We do not want to just watch lots of Netflix. We want to watch shows such as the one that Nicole Kleeman makes about the Scottish Prison Service. We want to watch things on UK television that reflect, investigate and interrogate who we are as a society and all our multiple views on that. The idea that Channel 4 should become a homogeneous competitor of Netflix is economically undoable but also culturally diminishing. We want to see different perspectives. I have no problem with Netflix or any of the other streamers—they bring some amazing product—but they do a different job from what we want Channel 4 to do.

Jenni Minto (Argyll and Bute) (SNP)

I thank the panel for their evidence. As Mark Ruskell said, it has been stark. I turn first to David Smith. You were quoted earlier this year as saying:

“Channel 4 and the BBC are keystones in Scotland’s growing film and TV production sector.”

I think that you used the word “cornerstones” today. You went on:

“Without these public service broadcasters, we would have no independent production sector, and the highly rewarding jobs they create would be lost to us.”

You have touched on that, as has John McVay in his figures. Will you elaborate on that and explain your thoughts on what the change could mean for the independent production sector in Scotland?

David Smith

I will build on the comments that John McVay and Nicole Kleeman have already made. One figure in the report that we published today is that, in 2019, the BBC and Channel 4 spent £196.6 million on content production in Scotland, which was more than half of all content spend in Scotland that year. The reason why we looked at 2019 is that such studies take a long time to tender, sign and complete, and Covid had an impact on our progress. We are currently working on 2021, and the figures on that should be published early next year.

As well as that figure of £196 million, there is the additional impact of the £61.1 million that the BBC and Channel 4 spent on their operations in Scotland. The majority of that was from the BBC, which has a big presence at Pacific Quay in Scotland. It runs a lot of departments out of Pacific Quay. Channel 4 also has a presence in Glasgow with its creative hub—Jo Street is on your next session.

The loss of that commissioning value—that transfer of value that John described—to a single buyer that will then self-commission 75 per cent of the content will have a huge damaging impact on the sector as a whole—on independent production across the UK and in Scotland, and on our Scottish creative economy. At Screen Scotland, we have an ambitious proposal to double gross value added by 2030. That is dependent on skills and infrastructure investment and to a large degree on continuing commissioning from the PSBs. Without them, we will struggle to reach that figure.

As Nicole Kleeman said, it is about investment in businesses as well as in programmes, and it is about investment in skills and training development. We work closely with Channel 4 on multiple projects through a body called TRC media in Glasgow. We have developed the rad diversity, FormatLab, Supersizer, factual fast track and international programmes. Those are all personal development programmes that are really business development programmes because, in the film and television sector, production companies do not hold much infrastructure. They do not have many capital items on their balance sheet—it is mostly people. Therefore, you have to develop the people to develop the businesses.

Channel 4 has recognised that for years and has worked closely with Screen Scotland and its predecessors to develop the sector here. TRC media is one example, and the BECTU vision project is another example of where we collaborate. However, Channel 4 also has its own diversity scheme, which directly implants new trainees into production companies across Scotland and across multiple genres, and helps them to build not just their confidence and career but their connections with Channel 4 as a broadcaster.

It is a people business, so you have to have relationships and the confidence to express your ideas. Channel 4 has a part in all of that.

Jenni Minto

I am interested to get John McVay’s thoughts as well. You mentioned the loss of £4.2 billion to the UK creative sector on television and film production. We talk a lot about the ideas, the producers, the directors and the researchers, but what do the proposals mean for the technical side as well for the different roles in television and film production?

John McVay

Basically, we are currently for freelancers and the labour market. Freelancers are hired when an independent producer is commissioned or BBC studios are commissioned in Scotland to make a show. It follows that, if there is less commissioning of Scottish independent producers, there will be less work for Scottish freelancers.

Film and television production is very interesting. It is one of the few activities that uses more of the rest of the creative industries than any other business, because we need designers, sound recordists, fashion, make-up and wardrobe, along with all sorts of other creative industries that are involved in creating a finished film or TV product. It has multiple ripple effects across the broader creative industries. It is not just about the money; it is about the skills and long-term investment. I am sure that Nicole Kleeman has fantastic relationships with freelancers in Scotland, so she will nurture and develop them and rehire them for different shows, and they will then develop their careers. They will then bring on assistants. Any diminished spend will have downstream consequences for those sorts of things.

09:00  

It is very hard for us to assess that. We have done an impact assessment on the direct consequences, but the downstream consequences are profound. It means that a company will not be set up and a set of relationships will not happen because that company will not be hired by Channel 4 to make a show. That is why it is counterintuitive of the Westminster Government to think that the proposals will contribute to levelling up or economic growth across the UK.

Of course, whoever buys Channel 4 will hire the freelancers, but the channel will make the shows itself. It will be a different set of relationships from the ones that you would get from multiple companies doing that, as they were commissioned to make shows for Channel 4. That is something else that the Government seems unwilling to talk about or consider.

David Smith

John McVay makes a good point about the industrial process of screen production. Most day in, day out television production does not rely on large sets and large crews of people, but the high-end work does. Channel 4 worked with STV studios to break ground in Kelvin hall in a separate vault where they built the prison set for “Screw”, a successful drama from Scotland from a Scotland-based production company, that is entirely filmed and made within Kelvin hall. It is a phenomenal series, but it is one built on plasterers, joiners, electricians, scaffolders, drivers and security people. It is not just about the roles that you would imagine are connected to television, such as directors, producers, writers and editors—the usual jobs. There is a massive chain.

John is right that those people will still be employed by whoever buys Channel 4 when it produces programmes in-house. My worry is that they will not be in Scotland. If you look at the way that ITV commissions its content, you find that it does not commission regular content from Scotland. The most recently published figures on that are for 2020, in an Ofcom report on content that is made outside London.

In that period, ITV commissioned two programmes from Scotland across the whole year—“Catchphrase” and “The Masked Singer”—both of which were filmed outside Scotland. The were made by Scotland-based companies but filmed in studios elsewhere, partly because we lacked studio capacity at that point. We have addressed that issue. In the same period, Channel 4 commissioned more than 50 programmes across the nation—excluding England—in Wales, Northern Ireland and Scotland. Those were often multiple-part series—they were dramas, entertainment shows and factual series.

It is difficult to say what will happen, because it depends on who buys Channel 4. You can guarantee that there is uncertainty. Based on what is in the white paper, you can guarantee that 75 per cent of that content will not be made by the independent sector any more and will be made in-house. If the buyer is ITV or something similar, it is likely that that activity will not take place in Scotland to the same extent.

Jenni Minto

That is a useful segue into the independent sector. Nicole Kleeman, you talked clearly about the support that Channel 4 has given you. If you are willing to share, I am interested to hear about the support that you have given the freelancers, the training that you are able to provide and how an independent production company’s business plan works, because we have heard a lot about collaboration and everything being connected, and the fact that you will be pitching ideas to different broadcasters.

Nicole Kleeman

That is an interesting question. The way that an independent production company’s business plan works is difficult because it is difficult for us to plan in advance. We pitch ideas that we hope get commissioned, but when we come to write our business plan every year for the following year, we have very little secured business going into the next year. We probably have less than a fifth of our income for the following year secured in autumn, when we are writing the business plan. It is an unpredictable business.

One of the things that has been important to us as a company, is to try to act as a buffer and to minimise how we pass on that insecurity down the freelancer chain because, if we want to broaden the base of people who work in this fantastic, creative industry, we need to make sure that we can get people from all kinds of backgrounds and not just people who can tolerate unstable employment.

We have always tried to take on new entrants to the industry and more junior employees on much longer contracts than we have secure work for, to make sure that we can get the best people and not just the people who can afford to work like that. Channel 4 has been instrumental in supporting us doing that, partly because it supports training posts—Firecrest Films has had nine new entrant training posts, which are a year long, and Channel 4 pays 50 per cent of the costs of those trainees.

However, also, because Channel 4 has always taken a strategic approach to commissioning, although it commissions the best ideas, it also understands from our point of view how difficult it is to grow a business and to support emerging talent. For example, with some of the returning series—“Supershoppers” for instance—it would commission two series at once, so that we would have that security going forward and we could make those commitments to people. Again, no other broadcaster has ever done that with us.

That is what makes me anxious about what will happen. It is an insecure industry. It is a mainly freelance industry. How do we carry on supporting people and how do we carry on being confident about our business in the future?

As I said in my first answer, it is much better for us now. We are a strong and robust company, thanks to Channel 4’s support through the years. We have emerged from Covid, we have had record years the last few years, and this year we are forecasting a 50 per cent increase on turnover on last year, so we can cope a lot better with insecurity and we can definitely buffer much better and not pass that on now in ways that are adverse. However, I know that that is not the same for the companies.

Sarah Boyack (Lothian) (Lab)

It comes out very clearly that, at the moment, Channel 4 is doing well in terms of production across the UK. It makes a profit. I want to focus particularly on the film sector, because the films that are produced and commissioned by Channel 4 appear more diverse but they also appear to be award-winning across the UK. Can you comment on that aspect? It feels like there is a huge potential loss here, if you look at the impact on the companies that potentially would take over, because it appears that they would lose some of their own internal production. It feels like a lose-lose for everybody in terms of geography, private businesses and quality. John McVay, do you want to kick off first? You have quite a lot of evidence.

John McVay

There is a report that will be published shortly by the British Film Institute that is an investigation into the dire circumstances of the British independent feature film sector—not television—which has, over the past 10 years, been in steady decline. In a world where more people have more access to more entertainment than we have ever seen in human history, it is a sad fact that the British independent feature film sector is not competing in that market. That is to do with some fundamental economic problems and market failures.

In the UK, we effectively have three interventions in the market that support independent feature film: Film4, which invests £25 million a year into British independent feature film; BBC Film, which has its own budget; and of course, the BFI, through the National Lottery, and then, through that, there is the money that is devolved to Creative Scotland and others to invest in independent feature film.

In the Government’s white paper, there is no mention of the future owners having any commitment whatsoever to independent feature film. If I was a commercial buyer of Channel 4—given that Film4 is generally loss making; it is there only because of its remit—and I am looking to get a return on my investment when I buy Channel 4, it is very unlikely that I would continue to invest in independent feature film. Therefore, there would be £25 million less each year that would be invested in the independent feature film sector, which would be very detrimental to Scottish independent feature film producers, directors and actors and everyone else. Therefore, I think that you are right to focus on this issue. It is one of the points that has not been highlighted much in the debate around Channel 4, but it would be a catastrophe for independent feature films, at a time when the sector is already struggling to raise the finance that it needs in the market because of post-Covid changes, and it will be yet another loss of cultural entrepreneurship that we would expect to see being supported.

I think that it is a very depressing day for the sector. We have 70 established feature film companies as members of PACT, many of whom have benefited from Film4 investment.

Sarah Boyack

That comes across clearly. It is not often that we get witnesses saying to us that a proposal will be a catastrophe, so thank you for that clarity. Nicole Kleeman, can you make a comment on the quality of films being made in terms of British Academy of Film and Television Arts wins? These films are not just being churned out; we are talking about award-winning, culturally impactful films that employ people—not just actors, but people in the wider system that make those films work. Can you give us a comment on the quality and what there is potentially to lose in that regard?

Nicole Kleeman

It is difficult for me to talk about it from the point of view of my business, because we do not make drama and we do not make films. However, I totally agree that we are talking about high-quality, premium productions that are award winning and world class. It is a grave concern. There is no reason for doing what is proposed. There is not a problem here that needs a solution.

What I would say is that Channel 4 allows us to innovate and innovation is the life blood of our creative industry, whether we are in drama or in factual. That innovation is what is underpinning the UK creative economy. The streamers that the Westminster Government wants Channel 4 to be more like do not innovate. They do not do news, they do not do current affairs, they do not do investigations, they do not do observational documentary and they do not commission companies like us in a way that takes us inside institutions and showcases Scotland to the rest of the world. The factual programmes that streamers make are retrospective stories with lots of twists and turns. They are not the programmes that are key for a democratic society to make about itself and to use to examine itself.

Sarah Boyack

That is equally useful in terms of the wider civic impact of Channel 4.

David Smith, can you give us a comment in relation to film making in Scotland, touching on that issue of quality and also the staffing issues and the behind-the-scenes impact for film making of having private production companies in Scotland?

David Smith

Reading from the notes before me, I note that Film4 has won 37 Academy awards and 84 BAFTAs across its existence. That speaks for itself; it is a phenomenal record.

As John McVay said, there are, essentially, a limited number of potential sources of funding within Britain for film, but I will say that there are four. There is the BFI, Film4, BBC Film and Screen Scotland. I am not whether I picked up John McVay correctly, but our money is not devolved from BFI; our money comes directly from the National Lottery. We are a National Lottery distributor as well. We have a £4 million fund for feature film production from Scotland and we regularly co-invest.

It is impossible for any single body to finance a feature film. It does not happen. We work in collaboration with BBC Film, the BFI and Film4 on almost every project—obviously not BBC Film and Film4 at the same time, as they operate separately. However, at any given moment, we will work with the BFI and one or other of the broadcaster’s film production arms. They absolutely are the drivers of quality and the developers of talent. In Scotland, they work with the Young Films Foundation, Christopher Young’s foundation in Skye, which is a world leader in film talent development—Channel 4 and Film4 are direct supporters of it.

09:15  

It is not just about the making of films; it is about the development of new talent. Because film is inherently an international pursuit, you want your films to play as globally as possible. Again, that kitemark idea comes into play. The fact that Film4 has invested in a film alongside us means that when we take a film to Cannes, Berlin or Venice, that film will get bought and will get seen in cinemas globally, because Film4 has that kitemark of quality that is very hard to replicate through anybody else in the UK, other than BBC Film.

Alasdair Allan (Na h-Eileanan an Iar) (SNP)

A couple of you have suggested that the proposal is a solution in search of a problem. My question is for John McVay and Nicole Kleeman. From a producer’s point of view, what do you see the motivation behind this exercise being? We have heard that Channel 4 is not a financial basket case. It is difficult to see, from what you have said today, how these changes would help the independent sector in any way economically. What do you think that this exercise is trying to achieve?

John McVay

Successive Governments of various political hues have regularly had a look at the public ownership of Channel 4, including Margaret Thatcher, who set up Channel 4 and then reviewed it shortly thereafter. When they have done so, they have concluded that it remaining in public ownership in the best interests of the United Kingdom, economically and culturally.

Sadly, the Government has not produced any evidence to explain why it should be sold right now. It is quite right and proper that any Government has a look at why we collectively own a public service broadcaster—that is legitimate. However, given all the other issues that we are facing as a society, with inflation, post-Covid recovery and a number of other issues, not least the war in Ukraine, this seems to be a strange time to sell off one of the national assets that drives a lot of economic growth as well as inclusion and, as my fellow witnesses have explained, is involved in many other issues around training and access. Of course, the Government has not put in the white paper that the new owners would have any commitment to any of those issues, either.

I do not know why the Government wants to sell it right now. I have not seen any evidence. We have asked various members of the Government to explain why it should be sold now and why it should be done in such a draconian way, and we have not had an answer.

Nicole Kleeman

I do not have an answer for that either. I do not understand why the Government is doing it. I have not seen any compelling explanation or rationale.

Alasdair Allan

In that case, I will ask what I suppose is a related question. Channel 4 provides a distinctive output in the UK in terms of news and current affairs. What do you think stands to be lost in that respect if this move goes ahead? Again, I put that question to John McVay and Nicole Kleeman.

John McVay

Currently, as Nicole Kleeman will probably come say, Channel 4 produces a range of factual documentary and investigative programming, which could broadly come under the current affairs heading, including many of the excellent programmes that Nicole Kleeman makes.

We do not know what the future owners will do with news. We do not know whether the operation will be of the same scale and have the same reach in terms of the reporters that the channel can bed in around the world to report on stories that are critical to our knowledge and understanding of what is happening elsewhere in the world. However, a commercial owner will always seek to do the minimum that it is required to do under the licence that it is granted by Ofcom. Until we see the terms of the sale and the nature of the licence that may be required on the new owners, it is hard to say what they will do, but they will probably argue to invest less in news than Channel 4 currently does because they will be looking to make a return on their original investment and the money that they have paid to the Government to buy the channel in the first place.

Nicole Kleeman

Channel 4 current affairs built our business. We started off as a supplier making 10-minute films for Channel 4 News out of my spare room. We grew by making “Dispatches” films. All of our output was with Channel 4 until we started making films for “Panorama” for BBC1. In 2020, Firecrest Films was the biggest supplier to Channel 4 current affairs. We made 11 hours of current affairs investigations in 2020.

Current affairs is not a commercial part of the television business. Those programmes cannot really be sold overseas. Often our investigations are very UK-focused and time sensitive. It is not something that anybody else I know of has built a business on. I do not have a lot of confidence that a commercially run Channel 4 that is run for profit would overinvest in news and current affairs in the way that the current set-up at Channel 4 has done. It remains to be seen what the Ofcom requirements will be on the new privatised Channel 4. ITV current affairs is good—it has won BAFTAs. It makes a certain kind of film. What Channel 4 does, which BBC and ITV current affairs do not often do, is take on its own advertisers. I have made films for Channel 4 about Cadbury, TK Maxx and Poundland that involved right of reply and legal correspondence, and those people advertise on Channel 4. I am not that optimistic that a privatised Channel 4 would have the same bullish attitude.

Alasdair Allan

Finally, I have a question for David Smith. You have all been talking about how the purchase could involve 75 per cent of the company falling into the hands of one giant. Could you say a bit about what that would mean in terms of the biodiversity of what would be on offer culturally? We have talked, quite rightly, about what the implications might be of this situation economically for Scotland, but just as Derry is keen to know how Derry is represented to itself through drama and other types of programming, so is Scotland. What would be the impact culturally in terms of diversity of the offering if so much of the channel was in the hands of one organisation?

David Smith

Again, I think that it would be fairly disastrous for audiences. You are essentially talking about an organisation self-commissioning its content. It will commission that content for reasons other than what is in the best interests of the UK or viewers—essentially, what is in the best interests of its public limited company business bottom line.

Diversity is not really served by what is proposed in the white paper. We have not made this up—I know that that is not what you are implying—this is what the white paper says will happen: 25 per cent will be ring-fenced for the independent production sector, as it is across all of the PSBs. That is a massive change. I think that it has come across quite clearly today that Channel 4 is fairly unique in its approach. It is a risk taker. It tells you it is a risk taker in almost every piece of its corporate communications, and it is true: it really does take risks. As Nicole Kleeman just pointed out, it is not afraid to take on its own advertisers. It is not afraid to invest in films that represent parts of our culture that are maybe not mainstream. It is not afraid to reach out and work and do the right thing; that is probably the best way of putting it.

Channel 4 had no obligation five years ago to open an office in Glasgow, but it did. It reached out and it expanded its base. You could argue that there was some political pressure that motivated that change, but it realised that it was the right thing to do quite early on and moved very quickly. The previous administration within Channel 4 was slightly less quick off the mark. Alex Mahon and her team at Channel 4 have been very responsive and very good at developing a varied culture across the UK. If one organisation self-commissions 75 per cent of its content internally, it is hard not to describe that as a monoculture.

Graham Simpson

I am just watching the clock. I see that Mr Cameron does not have any questions, so I will ask mine.

I will just say from the outset that I have probably learned more about Channel 4 this morning than I ever knew because, frankly, I have just been a viewer of television rather than someone who pays any attention to who makes the programmes. It has been really interesting.

I have a question for each of you, and we only have about five minutes, so we need quick answers. Nicole Kleeman, listening to you this morning and looking at what we have in front of us, I see that your business is not entirely based on Channel 4, because you have made some very successful programmes for other people, which seems to me to be eminently sensible. If Channel 4 was to be privatised, how would it affect your business and, indeed, others? Is anyone completely reliant on Channel 4?

I will add a supplementary question. You mentioned the investigative programmes you made. Who comes up with the ideas? Is that you or does somebody approach you?

Nicole Kleeman

To answer your first question first, Firecrest Films, like a number of indies in Scotland, was very heavily reliant on Channel 4 in the early days. Companies such as IWC, Finestripe Productions and Raise the Roof were all nurtured by Channel 4 in our early days and we have now grown away from Channel 4. Five years ago, Channel 4 accounted for about two-thirds of our turnover. It is around a third of our turnover now as we have diversified, and the companies that I mentioned have all followed the same pattern. It is the newer companies that it will affect. Who will support those new companies?

To answer your question about our current affairs investigations, we have a wider team here that consider things. Sometimes, journalists bring us stories; sometimes whistleblowers call us and ask us to look at stuff. I would definitely add to that that if I have a story that is in any way risky, I would always take it to Channel 4 first.

Graham Simpson

That is really interesting.

I have a question for John McVay that follows up on the question that Alasdair Allan asked. For me as a TV viewer, if Channel 4 is privatised, how does it affect me and what is on offer to me?

John McVay

What will be on offer will be whatever the new owners decide you will get, but they will be using their own in-house production to do that. That is not to say that what will be on offer will necessarily be lower quality, because ITV is a popular commercial broadcaster that makes very good quality shows. However, the channel will be commercially focused. It will be looking at a return on income on every slot in the schedule in order to make money to pay the shareholders who own Channel 4. That is a very different motivation than the current commissioning that Channel 4 does because it does not have to pay shareholders. All the money that it makes goes back into programming and commissioning great investigative shows from Nicole Kleeman and others in Scotland.

I am not saying that audiences will see less quality, but they will see different programming. It will not be the same, because there will be a very different model driving the commissioning at the channel.

Graham Simpson

I could follow-up on that, but there is no time. I have a quick question for David Smith. I am going slightly off tangent here. I was down at Leith docks yesterday and I saw your massive building there—I would have loved to have gone inside. You will be aware that there is a bid for freeport status there, and I think that you may be involved in that—I see that you are indicating that you are not involved. My question was going to be to do with whether it would help you if freeport status was achieved. Perhaps it would not.

David Smith

We are not the operator of the studio; we are the head leaseholder. FirstStage Studios operate the studio within the Leith dock facility. You are very welcome to visit—if you get in touch, I will speak to the team at FirstStage and I am sure that they will be very happy to take you inside. It is astonishingly huge once you are inside. It has just been vacated by its second Amazon production, a massive production called, “Anansi Boys”. We are very confident with regard to what is coming in next—I cannot say much more than that. It is a very busy facility.

I do not think that freeport status would necessarily impact on our part of it. We have a lease over the space for a number of years. It is also worth mentioning that that is not the only studio in Scotland. Since it came online, we now have the Pyramids facility in Bathgate and Wardpark in Cumbernauld. Kelvin Hall is about to open in Glasgow and there is also Pioneer Film Studios in Glasgow. Again, there is quite a varied offering. However, we need more because we think that we can grow further if there are more facilities.

Cumbernauld is in my region, so maybe that is the one that I should be visiting.

David Smith

Go for a look. It is good.

I am comfortable with time if you want to ask your final question, Mr Simpson. It is entirely up to you.

No, I am quite comfortable.

The Convener

I thank our witnesses for their attendance this morning and for their written submissions. It has been a really interesting discussion.

09:30 Meeting suspended.  

09:33 On resuming—  

The Convener

Welcome back. Our second panel this morning is on Channel 4 and, indeed, it is members of Channel 4 who are here with us. We have Alex Mahon, chief executive; Jo Street, head of daytime and features and head of the Glasgow hub; and Briony Robinson, senior external affairs manager.

I hope that you were able to hear the first panel. Something that came through quite strongly for me was the importance of relationships and location in Scotland. Could you elaborate on FormatLab, the new partnership with BBC, Screen Scotland and Glasgow Council, and say how that might impact on the output from the Kelvin hall studios in particular?

Alex Mahon (Channel 4)

Good morning, and thank you very much for having us. I will hand to my team, Briony Robinson and Jo Street, to talk about that particular relationship impact, but I will start off by reiterating your point that it is very much a relationship-driven industry. Perhaps that is particularly because of what you have heard from your first witnesses about the scale of companies that we work with and the areas that we work in, which are about innovation, taking risk, new talent and early-stage staff or young people coming into the industry or companies.

We are focused on our quite unique and vital role in how we grow those companies and how we give people a chance to develop their careers and the work that they are involved in, in a way that being a not-for-profit organisation allows us to, as we are able to take that risk. Jo Street and Briony Robinson know specifically about that partnership and can speak to the precise impact.

Jo Street (Channel 4)

Good morning, and thank you for having us. For those who do not know, my department, daytime and features, which is based in the Glasgow hub, is responsible for commissioning returnable, high volume and quite often formatted shows. When FormatLab was mooted, and during the consultation about whether we needed another resource or another studio, the resounding answer came that we did, and that we also needed to upskill the community. We have an amazing production community in Scotland, but we all know that the intellectual property is the valuable resource. Formats are a very good and efficient way for companies to get good, saleable international IP.

FormatLab has been a collaboration between all the agencies that you talked about in terms of identifying talent, putting resources in place to get placements with companies and upskilling already talented researchers or assistant producers to get them thinking about shows that can be based in studio, with a lens on innovation, but also broad, popular shows that can, for example, become returning fixtures in our schedules. Having Kelvin hall will be useful, because there have been several shows for which we just have not had studio capacity in Scotland to make them here, and they had to go down the road to Salford or elsewhere. FormatLab is about bringing together all the skills that we already have and leveraging the team that I have in the Glasgow hub with skills in that sector.

It is an industry of relationships, as you said at the beginning. The fact that we are here and the fact that we know each other and we know who the good people are who have the aptitudes has been transformational across the board with regard to a lot of the skills work that we are doing in Channel 4 broadly but specifically out of Glasgow, too.

Briony Robinson (Channel 4)

FormatLab is all about trying to maximise the impact of Kelvin hall and trying to develop that entertainment space. One thing that we are looking to do is to diversify the Scottish sector and make sure it is delivering commissions across the widest range of genres, including some of those high-value formats. FormatLab is also a great example of partnership with Screen Scotland and the BBC. A number of our Scottish training schemes are developed in partnership and it shows how we can have an impact when we work together.

Mark Ruskell

Thank you for joining us this morning. We heard from the first panel about the status of Channel 4 overseas, the high regard that the channel and its productions are seen in and how the independent sectors are a key driver of that success. I wanted to ask you the same question that I asked the first panel: how might privatisation affect that international work and that international standing of the channel and what it produces?

Alex Mahon

There are two things. I should state, first of all, that I ran a large independent production company that was global for many years before being at Channel 4. In fact, most of my career has been international, so I can probably speak to that with some experience.

There would be two effects. One is about IP and the other is about the image of Britain and Scotland abroad. The IP is a fundamental part of how Channel 4 is currently constructed, which is that we are currently constructed as what is called a publisher broadcaster, which really means that we cannot own the IP. The intellectual property in things that we buy sits within all the companies that we work with. It sits within those partner companies on their balance sheets, if you like, not on ours. That has been the fundamental driver of exports for the creative economy across the UK.

The companies that you heard from, such as Firecrest, own those programmes, which means that they can sell them abroad, working with organisations such as PACT or Screen Scotland, and can create their own export pipeline. That is really what has led to a huge amount of growth in the consolidation of big production companies, such as Shine TV or All3Media or Endemol—it is that ability to make your show in Scotland and then sell it to 200 other territories or to remake it in those countries. That brings money and the potential to export. That has been a huge factor in the growth of the industry. The proposal with privatisation would mean that that no longer exists. The intellectual property would be owned within Channel 4. That is a fundamentally different model.

The second piece is, I guess, a soft power point, which involves portrayal and how we are represented abroad. At the end of the previous session, there was a particular focus on film. As you heard, we spend £25 million a year on film through Film4. BBC Film spends, I think, about £8 million a year, so we are by far the biggest funder. We focus on innovation and risk and new directors and new writers rather than on making money. We produce films such as “Limbo”—which was shot in Uist, had a Scottish writer and a Scottish director and exported really well—“Wild Rose” and, of course, “Trainspotting” and “T2 Trainspotting”. I do not think that those shows would exist if we had not funded them, because they are not commercially profitable, that portrayal of parts of Scotland that the rest of the world sees perhaps would not be there—I am not sure how many other films have been shot in north or south Uist. It is that work that we do that is quite fundamental to our purpose in terms of representation of different parts of the UK that would be different.

Donald Cameron (Highlands and Islands) (Con)

Good morning. My questions are around Channel 4 in Scotland. In 2018, you launched the 4 all the UK strategy, which has resulted in significant investment. Could you help us by giving a comparison between Channel 4’s operations in Scotland and those in Wales and Northern Ireland? I appreciate that that is quite a general question, but I would like an overview, if possible.

Alex Mahon

I do not want to get in trouble anywhere else, but we do not have offices in the other locations that you mentioned. The first difference would be that we chose quite carefully to put the hub office in Glasgow. We looked at a lot of locations. We chose two locations for hubs—the other one is in Bristol. We thought extremely carefully about going places where we could make a significant impact on the industry as it was at that stage in the location. It was quite an involved pitch process that saw us travelling to many different locations and people pitching to us. We thought that we would make a significant impact in Glasgow and that, by choosing to locate there, with the multiplicity of things that we do—we will talk later about digital and skills as well as commissioning and programming—we could have a bigger than one-plus-one-equals-two impact.

Our Glasgow hub is about creating that activity, and is particularly about spending money in Scotland. Jo Street runs the biggest commissioning department across the whole of Channel 4 in terms of both spend and hours—I think that it is responsible for a bit more than 50 per cent of the hours that were on the channel last year. She is doing that for the whole organisation from Scotland, so that has an impact on how creative decisions are made for the whole organisation, because it involves the perspective of someone who does not live in London. There is then the impact of spend in Scotland. We spend about £22 million in particular in Scotland, supporting about 400 jobs and thousands of jobs across the industry. That makes a difference.

Those are the big impacts that we have created by being particularly focused in Glasgow. When it comes to Northern Ireland or Wales, we are obviously spending money in those locations through our commissioning operations elsewhere, but I do not think that it is the same volume of impact that we can make through the Glasgow office.

Briony Robinson could pick up on the situation in the other locations, or does that answer your question?

09:45  

Donald Cameron

Yes, it does. I should add that I suppose that another comparison is what you are doing within England itself—you mentioned the Bristol hub. I am just trying to get a sense of where Scotland fits within the UK strategy. Perhaps Briony Robinson or Jo Street could talk about that.

Jo Street

I will start seeing as I am on screen. One of the big impacts is the subtle cultural change that having the head of a network department in Scotland brings to the broader production sector. Briony Robinson will correct me if I am wrong but I think that I am the only network head in Scotland across PSBs or commercial broadcasters, and that matters. It matters to producers, because, historically, there has been a culture or a belief, true or not, that business is done in the corridors of Horseferry Road or when you bump into somebody in central London. Shifting that soft cultural way of working and having decision makers who are holding big budgets in Scotland really matters to the production sector.

What we are also able to do by being here is be a hub base for colleagues in Northern Ireland and for production sectors. There has always been quite a good synergy with colleagues there. I think that shifting the centre of gravity about how we think about things and how we live our lives matters and it permeates through my team, which is based mainly in Scotland but includes team members in Bristol, Leeds and London. The power sits in Scotland for a change and that matters. It gives us a lens with which to look at how we commission in Wales as well. It is the start of a sea change, I would hope.

Briony Robinson

The 4 all the UK strategy is about benefiting all of the UK—every corner of the UK—and our spend allows us to do that. Having people on the ground makes a huge difference in terms of those relationships and it facilitates that spend.

One thing that we do that we have not touched upon is the way we support independent production companies. We have production companies that are in our emerging indie fund based in Scotland, Channel X, Hopscotch and Black Camel Pictures. That supports high potential, relatively new emerging companies to supercharge their growth. We also have our growth fund, which takes stakes in businesses. That is supporting three Scottish companies already, and, this week, we announced support for another company, Freedom Scripted. That is positive and supports that diversification that I mentioned.

By supporting businesses to grow and investing in training and skills, we are enabling that growth in the sector, which is positive. You have seen from the new Screen Scotland numbers out today that the projection is that the sector will become a £1 billion industry by 2030. The success in Scotland is something that we are looking to emulate elsewhere. We are seeing good growth and we are starting to see more diversification in Wales—last week, we announced a Welsh language opera. I think that Scotland is ahead of the curve in terms of that growth and diversification and work, and that is positive and is what we want to see in the other nations of the UK.

Donald Cameron

My final question is about the consumption of Channel 4 in Scotland. In 2021, Ofcom compiled a report that found that Channel 4’s main channel percentage share of the total TV audience was 4.7 per cent, which was a little lower than the share in the rest of the UK, which was 5 per cent. That is a pretty small difference, but I wonder what reason you could give for that. Is there any reason for the marginally lower consumption rate?

Briony Robinson

The landscape is slightly different in Scotland. Obviously, STV has a slightly higher share than its equivalents in some of the other nations, so that is perhaps behind that slight difference. I would also say that that linear share is just one viewing metric. That same report points to 40 per cent of households in Scotland using All 4. Channel 4 is the youngest skewing PSB and we are pivoting to digital more rapidly than our competitors. The figure for younger Scottish audiences is likely to be higher. We know that about 80 per cent of 16 to 34-year-olds are registered on All 4. I think that it is important to look at those wider metrics, particularly those for digital viewing, when you are thinking about Channel 4’s impact.

Thank you. I do not know whether any of our other witnesses wants to comment on that, but that is fine for me.

Jenni Minto

I thank the panel for joining us this morning. I will start my first question with a quote from David Smith, director of screen at Screen Scotland:

“Channel 4 and the BBC are keystones in Scotland’s growing film and television production sector.”

Jo, I think that I remember you from BBC Scotland, so I would be interested in your thoughts on that specifically, perhaps from both a BBC Scotland and a Channel 4 perspective. How do both broadcasters support public service broadcasting in Scotland?

Jo Street

Hello, again. The relationship with Screen Scotland has been revelatory for me since I moved across to Channel 4. It coincided with David Smith’s tenure as director of screen. The first thing to say is that it is incredibly collaborative. We are able to work closely and strategically. There is a shorthand to saying, “Where are the skills gaps? What are we missing? How will we provide support together to leverage the power of Channel 4 and invest in the production sector, both production companies and individuals, including young people coming into the industry?” We are both funders of TRC; I sit on the board of TRC. We can be incredibly aligned in projects and initiatives that both parties will promote and support.

In a practical and operational way, the first thing that I did when I joined Channel 4 was a Screen Scotland initiative in daytime, which resulted in a 15-part commission for a small Scottish indie, which will hit the air later this year: Beezr’s “Tool Club”. This year, we have been able to encourage colleagues. Entertainment is doing a similar initiative, which David Smith spoke to earlier in the session. That will be a show at Christmas with a view to it being a returnable entertainment format.

There is that closeness of working together to identify opportunities and gaps. Having a genuine, collaborative and meaningful relationship is important. It also means that we can spread the benefits. What I observed when I was in the BBC is that it is a bigger machine to navigate. It was going through a central thing that I was not part of. I have much more control and much more autonomy, which again is part of the Channel 4 risk-taking mentality that Alex Mahon and my boss invested in me when I took this job. You can roll your sleeves up and get things done, and that is important. It speaks again to the legacy of relationships, of being in Scotland and of having that presence and understanding the sector and the people we are talking about.

That is helpful. Thank you very much.

Alex Mahon

There are two things that come together in what Jo Street was saying and in Mr Cameron’s last question: the role that Channel 4 is trying to play now in representing the whole of the UK and the question as to why audiences are not watching as much. Our hope would be that, as we adjust shows over time and as we make them more representative, we get that uplift. Last year, after I got a hard time from another Scottish committee, we put a Scottish family into “Gogglebox”. Lo and behold, the audience for the programme has gone up 3 per cent in Scotland. That is not rocket science, but that is exactly what we should be doing.

The other piece that you have heard from your previous witnesses is that we involved in skills and training and in the small and the risky. That is a fundamental part of our role. You will see in the white paper for privatisation that the requirement to do skills and training has been deleted as part of our organisational remit. You have heard that we would not be required to be present outside of London. However, it is that combination of things that is important when industries are at a fledgling, building-up or scaling point. As you know from the report that came out about the future of the industry in Scotland, that work takes decades. It is not one year and you are out—it takes time. When it is done well, it comes together in a network of things that work together to build an industry and give a sustainable route for young people into it in ways that they would not otherwise get. It takes quite a lot of precise, fine and expensive work to build up companies to a scale where they can survive by themselves.

Jenni Minto

Thank you, Alex. I think that your graphic at the end of programmes, which shows where your programmes are made, is really obvious. I noticed that the “Gogglebox” one now covers the whole of the landmass, so thank you for doing that.

Following on from what you have just said, I note that we had some powerful evidence from Nicole Kleeman of Firecrest Films, talking about the benefit of collaboratively working with Channel 4 and the support that you are able to give in training and in providing longer commissions and so on. It would be useful to hear from Briony Robinson, from her perspective as the external affairs manager, how she sees that working and what the benefit has been of Channel 4 being a nimble, innovative organisation.

Briony Robinson

We work with independent production companies in lots of different ways. Jo Street is the expert, because she is doing this day in and day out. Firecrest Films is one of our growth fund companies, but we have worked with Firecrest Films right from its inception. Channel 4 is often a route to a first commission for a lot of new companies. That is an important role in the industry. A lot of Firecrest’s initial commissions were with us. Then we supported it with what was the alpha fund and is now our emerging indie fund to help it to do more development to grow. I think that it has had nine production trainees.

Our production trainee scheme is all about improving representation in the industry and it is about working with our supply chain. Channel 4 only has about 1,000 employees, but its supply chain has more than 10,000 jobs. Supporting skills in that supply chain is important and valuable. We pay 50 per cent of the salary for trainees and we provide wraparound training and do the recruitment, which are the things that can be a bit of a blocker for indies. We have had some brilliant production trainees. That is helping to bring great people into the industry, including people from different backgrounds. That has been a benefit for Firecrest and for other companies in Scotland.

We are currently recruiting for three more positions. About 20 per cent of the last two cohorts of placements on the production trainee scheme have been in Scotland, which I think is positive. Firecrest Films also joined our growth fund: we have taken a stake in the business, and it is about getting to that next level and providing wraparound support for the business to grow.

We are trying to support businesses through all different stages. In the case of Two Rivers Media, which is another growth fund company, we are supporting it to move more into the digital space, because that is not a space that it has done a lot of work in. The way we work with indies is bespoke and depends on their needs and how we can work with them to add value. Jo Street can probably add more.

10:00  

Jo Street

I am happy to. I have already mentioned the work that we do very closely with TRC. We currently have a funded placement as part of the factual fast track working in the Glasgow office here as a commissioning executive. The other day, I signed up two junior members of the office here to work with GMAC Film to do some outreach work in local schools, again as part of a drive for underrepresented groups in particular. The presence of Channel 4 in Glasgow, having people here doing jobs at every level, is potent for the pipeline of the next generation of talent and those opportunities.

Briony Robinson has mentioned the work of the production trainee scheme, which places people in indies. We have a big returning drama, “Screw”, which will be filming in Kelvin hall later in the year. That is a prison drama that has training schemes for ex-offenders. It is an innovative way of Channel 4 making a difference in Scotland.

We have an apprentice in our office who never in a million years thought that she would have an opportunity to work in this industry. She had her six-month review yesterday and is cherishing every opportunity that she is getting. We work with the University of Strathclyde, the University of Stirling, the City of Glasgow College and the University of the West of Scotland. All of my team, wherever they are in the UK—there happen to be more of them in Scotland—have mentees. We work with organisations to keep that pipeline going. It is that parallel again between all the official corporate and emerging indies investment and the boots-on-the-ground work because we are here and visible with an open-door policy.

One of the joys of Channel 4 being here is that I genuinely think that it is now possible to have a career in Scotland, from coming through the door as a runner to running a department, and never have to move anywhere else. That is only because Channel 4 is here and has made the investment in Scotland.

Sarah Boyack

It has been good to hear your evidence today. I was struck when I read the justification for privatisation from Nadine Dorries. She said that it would

“give Channel 4 the tools and freedom to flourish and thrive as a public service broadcaster long into the future.”

The evidence that we have had today is that, although you are not for profit, you make money—you made £74 million last year that was reinvested into the sector—and we have had a lot of evidence about the positive impact that you make in Scotland in production, in the quality of filmmaking, in training and skills, and in diversity.

To kick off, Alex Mahon, could you put on record for us today what Channel 4 has presented as its alternative to privatisation? I understand that you have given that feedback to the Department for Digital, Culture, Media and Sport, but it would be good to get it on the record how you would want to continue to deliver the success that you have had in the past.

Alex Mahon

The figures that we have released for last year were even better than the ones you quoted. We made £1.2 billion in revenue, which is an absolute all-time record high. We made a surplus of £101 million, which gets reinvested. We have about £272 million in cash sitting on the balance sheet. We have no debt and our financial success has been unbelievably record breaking, so I would say that we are in an extremely strong financial position—the strongest in our 39-and-a-half-year history; hopefully, we will make it to 40.

As you have heard from some others, we have had huge success with young people, particularly as we have switched to streaming. We all know that involving 16 to 34-year-olds and making sure that they see proper, regulated impartial news and fact-based programming is more important than ever before in today’s society.

We laid out an alternative plan to privatisation. You will know that 96 per cent of the consultation responses were negative on privatisation, but we thought quite carefully about what we should lay out as an alternative, because I believe that we should not stand still. For the record, I do not believe in just preserving the status quo and I come from a background of running privatised organisations for profit, so I thought quite carefully about why one would not do that.

I focused on how we would increase our wider civic impact and how we would create a bigger public dividend as a reason to remain public. We laid out a set of key things. One was a bigger commitment to the nations and regions and becoming even more representative of the UK: formally putting in place a regulated target to spend 50 per cent of money outside of London and shifting a few more hundred roles outside of London, so that we would be a truly national broadcaster. Perhaps more excitingly, we proposed to double down our focus on skills and training individuals. We are now a year into training 10,000 young people a year to come into the industry, but we proposed to double that investment to create opportunities over the next decade for 250,000 young people. That would create £2 billion-worth of value, because of the investment in those people and their careers.

We also committed to setting up a physical skills school. The only one that exists in the UK for this industry is the National Film and Television School, which is in Beaconsfield, outside London. We wanted to set up another school somewhere outside of the south-east—in the north, presumably—which would be a career incentive for people.

You will know from your work as a committee that, if Scotland is to grow like that, it needs the young people who are trained to have the skills in the sector. If you are 14, which is when a lot of people make their exam decisions about what they are going to do and in effect pick their career, and you do not know anyone in the media and have never met anyone in the media, it would never occur to you that you could do that. I grew up in Scotland and it never occurred to me; I did not know anyone in the media. The only industries that are more socially exclusive are law and medicine, and it is shocking that media would come third.

The work that we will start to do in schools in Scotland next year changes the perspective and the prospective hopes for young people because, once they meet Channel 4 people and come into our schemes, they feel that it is a brand they can access; they feel an affinity to the brand in a way that maybe they do not with posher broadcasters. We can make a difference there.

We thought about that skills point and, clearly, part of our plan was to remain not for profit, to remain recycling the money into other companies and to remain as a publisher-broadcaster. As you will know, that is not the plan that the Government wishes to pursue. We laid out the economic case of the next episode. It would generate £11 billion of gross value added including £3.5 billion specifically in the nations and regions. It would create another 13,000 jobs, 40 per cent of them in the nations and regions. It was very much a plan focused on skills and training young people. It was focused on how we could spread the creative economy around the UK and, of course, it was focused on continuing to remain British as a company and to invest in Britishness in terms of the IP.

Sorry, did that help lay it out or is that too much detail?

Sarah Boyack

That is a very helpful summary. On one level, it is a case of building on success. I find the privatisation proposal hard to understand, particularly given that Channel 4 is successful for the whole of the UK—it is almost like levelling up in practice. You provide evidence that it works to spread investment across the UK.

Can you briefly talk about the importance of the quality of film production on the ground in terms of the people in the film sector, the artists and the people behind the cameras? Other witnesses have told us about the impact of the diversity of Channel 4’s programming. You have won a number of BAFTAs. Do you want to say a bit about the success of the film side, which is critical, given the difficulty of doing film production, because it is very expensive? Although you operate in a not-for-profit context, you manage to make a profit. Could you say a little about that?

Alex Mahon

Certainly. Of course, there are fundamentals that are the same across film and television, one of which is risk taking. Let us unpack what risk taking is. It normally involves innovation and creativity: new stories, new writers, new directors and new ways of putting things. We get to do that. We are not for profit, but we get to do it because it is part of what is written down as our purpose, which is to be challenging and to come up with new opinions. Of course, that is often what gets us into this kind of trouble. That is the purpose of the organisation. Therefore, we seek to work with diverse and new film makers. Fundamentally, that is what my team in Film4 does. There is a team of development professionals who spend all their time looking for the new, the untested, the people who have not been given a chance and the stories that have not been represented.

That tends to be the exact opposite of what you do when you run an organisation for profit, because you must make a profit. Therefore, you are searching for things that you can prove will make money. The untested, the untrialled, the brand new and the fledgling are often not that. Directors such as Steve McQueen and Danny Boyle are now hugely successful, but they started off with us when they were unproven and untested.

That is a fundamental part of our model. We are involved in all kinds of little films. We work with new film makers to fund their short films and help them through their careers. That kind of work is quite nurturing. It is about encouraging people and working hand in glove with them; it is not about closing down things that will not work. It is a very different way of approaching the film industry. It can result in tremendous success after three or four projects, but first you must have the three or four projects that might not go anywhere, which are wonderful pieces of work. That is the way that we approach the film industry. You can hear from hundreds of film makers who have worked with us in that way.

We also take risks on projects. For example, on the television side, last year, we had three episodes of “Putin: A Russian Spy Story”. I know from the producers that no other broadcaster or streamer would touch that. That kind of documentary is classified as too dangerous and too worrisome. That is the kind of risk that we run headlong into. The issue is what the story is, why that should be exposed and why it is important to do so.

My fear is that, if that were to be eliminated, the new work would not come, and we would run out of British or Scottish talent who have been developed. I know from conversations that Netflix and Amazon—expensive and wonderful as they are—regard us as a £0.25 billion a year research and development shop. Their attitude is, “Thanks very much for developing those people.” There is nothing wrong with that, but we need the research and development shop, and that innovation costs money and is done at a loss.

That work will continue to be a critical part of the industry. You create jobs and talent and offer diversity that we do not get from anywhere else. What you do is really impactful.

I am conscious of time, so I ask people to try to be succinct.

Alasdair Allan

I have just one question, which is for Alex Mahon or anyone else who wants to join in. We have talked about the economic and cultural benefits of what Channel 4 does in bringing new people on. An issue that we have not talked about so much is that of writing. We have talked about how important it is to portray Scotland and to portray places in Scotland. Surely part of that is about encouraging writing—old and new—in Scotland. What is happening on that front? What would privatisation mean for that?

Alex Mahon

Jo, would you be best placed to take that?

Jo Street

I do not work in scripted, so this is a view rather than an expert position. We had “Murder Island” last year, which was an Ian Rankin project, so it involved strong Scottish writing. “Screw” is a phenomenal success for the Scottish writing community because it is a returning drama. My neighbour is writing for it, having moved from BBC projects.

With writing, again, we are talking about opportunity and risk taking when it comes to the pipeline of talent. It is not a genre that I have a lot of knowledge of, outwith the two projects that I have mentioned. Briony Robinson might be able to say more.

10:15  

Briony Robinson

I am happy to come in. We are supporting Scottish writers in a range of ways. For the first time, in the past year, our production training scheme has had a specific scripted cohort. Four of those placements are in Scotland—three are with Black Camel Pictures and one is with Two Rivers Media. They are part of the way through those placements, which are all about new Scottish scripted talent.

We also support the Young Films Foundation’s work. It has a year-long programme that involves working with seven new, high-potential Scottish writers. That is a partnership, in which a number of partners are involved. The programme includes a residency on Skye for a week. This year, for the first time, each of them is being supported by the broadcasters to write a script for a feature film or a scripted programme.

We are doing a lot on the scripted side, as is Film4. “Limbo” has been mentioned a few times today. “Limbo” is Ben Sharrock’s first feature; he is the director and writer. There are lots of different ways in which we are trying to bring through new, exciting Scottish voices.

We have not touched on digital as much as we could have done. We have a digital commissioner who is based in the Glasgow office. She is trying to find exciting new voices, including in the comedy space.

There are many different avenues, but it is critical that we find authentic voices, because we do not want to just spend money in Scotland; we want to represent Scotland back to Scotland and to the whole of the UK and the rest of the globe.

How long do we have left, convener?

Five minutes.

Okay. I will be quick.

Alex, you mentioned working with schools. Can you say a bit more about that? Where are the schools?

Alex Mahon

As part of our 4Skills programme, we are doing a set of training initiatives that bring 10,000 young people a year into the industry. Those initiatives might be apprenticeships or specific courses, or they might involve funding work with partners with ex-offenders or teenagers without qualifications.

However, sometimes that work is done earlier, in the key stages of school. It involves going into schools and doing a programme there, so that younger kids at key stage 6—kids who are 12, 13 or 14—understand what a career in the media might be. As you have just heard, they get a sense that they could write and be in television and film or be a digital native—I am talking about people younger than us. We want them to be trained enough to know that there is a career for them in the media, but that they need to learn how to polish and hone those skills, rather than being on Snapchat all the time, so that they can use that knowledge to build a career. It is a case of exposing kids to that at an early enough stage that they see that as a possibility.

We go into schools and do a specific programme with kids. Sometimes that involves our own staff going into schools to speak to kids, and sometimes it involves designing that work. We might show them a day-in-the-life film about our work, so that they think that that is a possibility. We work with specialist partners to do all that. We have been doing that in schools elsewhere, and we will start doing it in schools in Scotland in 2023. It is a case of changing the perspective and the potential for young people as they think about their career and what they might do.

Graham Simpson

That is great.

You mentioned some figures that show that you have been doing well. We are trying to understand the motive of the UK Government. Is there any financial advantage to the UK Government of having Channel 4?

Alex Mahon

Channel 4 does not cost the Westminster Government anything. It does not cost the public anything. It is financially independent. Our balance sheet is not backed up by Government, so we do not cost anything. We earn all our money—it mostly comes from advertising. In effect, we recycle that money into other companies. The concern about the consequences of privatising the organisation is what is driving the interest and the noise that can be heard from the industry.

There is no direct financial benefit in terms of, say, a dividend to the Treasury. The financial benefit is in the gross value added, which comes from the impact of all those other companies on the sector. Depending on whose evidence you look at, removing Channel 4 into private hands would have a negative impact of somewhere between £2 billion and £4 billion over the next decade, because the profits would go into the hands of a private shareholder instead of going further into the industry and being recycled. The benefit is spread across the UK creative economy. The benefit also lies in the 10,000 young people—250,000 over the next decade—we are training.

If we were sold and reached a price of between £500 million and £1 billion, depending on the conditions that were put on a sale, given that we spend more than £700 million every year in the UK economy, it would be only about 1.2 or 1.3 years until that was evened.

My concern—people say that it is an odd concern, given that I have worked in private business—is that we apply proper legislative scrutiny to the proposal, because I think that the consequences may be unintended, but they are certainly not unforeseeable. All of us must think through what the impact assessment is and what legislative scrutiny is required, and ensure that there is enough time to discuss and debate such an action, because we are a critical part of the UK’s creative economy.

The committee has heard about the output on screen, our work with young people and our work on levelling up, and you can probably see that we all believe in that and are quite excited about it. As an industry, we need to think through what the impact is and what scrutiny is required to make sure that we do not do anything that, in five years, will be regrettable.

Those points were very well made. Have you spoken to Nadine Dorries about the issue? Will you invite her to your Glasgow hub?

Alex Mahon

I will always invite the secretary of state to all things. The support of the DCMS is very important to us, and I am sure that it very much believes in our levelling up mission.

But have you spoken to Nadine Dorries about this?

Alex Mahon

Absolutely. We are in good dialogue with the DCMS, and we have pitched very hard to it on our levelling up plan, “4: The Next Episode”.

The Convener

I thank Ms Mahon, Ms Street and Ms Robinson for their attendance at committee this morning. We have particularly enjoyed having a BAFTA in the room; we do not normally experience that in the Scottish Parliament. Thank you very much for your attendance.

10:22 Meeting suspended.  

10:26 On resuming—