S4C ... The Proposed Funding Model

It's taken me a few days to consider all that has happened in the last week regarding S4C. We now have a proposal on the table which we know has been agreed between the DCMS and the BBC, and we know that the Westminster government is minded to impose this proposal on S4C irrespective of what S4C themselves or the Welsh government think of it. This is hardly a satisfactory situation for anyone. All the ingredients are there for a fight, and plenty of people in Wales are up for that fight.

In such a situation, we need to be able to strip away the inessential from the essential. We need to know what we can realistically hope and reasonably expect to achieve. So I want to set out what I think is realistic and reasonable.

In this post I want to concentrate on the proposed funding model for S4C, and I will address other issues such as its management structure and independence later.

The Principle

Whatever the causes of the economic mess we are in, we have to accept that public spending cuts are the primary way in which the elected Westminster government has decided to deal with the UK's deficit; therefore it is pointless to argue that any public service should be immune from spending constraints, including S4C. I think nearly everyone realizes that its funding model, and in particular the link between its grant and inflation, needs to be revisited. The question is how to do it fairly.

My first concern is that S4C is not singled out for unfair treatment. It is a public service broadcaster which receives the main bulk of its operating income from public funds, and I have therefore argued that the measure of how fairly it is treated should be to compare it with the BBC, which is in exactly the same position of receiving the main bulk of its income from the licence fee.

So in principle, I positively welcome the proposal to fund S4C from the television licence fee. It is a good idea, because in the long term it ensures parity of treatment between these two public service broadcasters. While S4C's income is linked to the licence fee, it means that S4C cannot be unfairly treated in the money it receives relative to the BBC.


But a few things about the TV licence need to be clearly defined. The main thing to be clear about is that it is not the BBC's money. Although the BBC fought for complete control of the money raised from it, their fight against "top slicing" the licence fee was lost some years ago when a proportion of it was set aside for the digital switchover. I'm sure the BBC hoped this might prove to be only a temporary arrangement, but we just need to look in detail at some of the points in the agreement just reached between the BBC and the DCMS to see that it's still there.

•  The current ring-fence of approximately £133m per annum will be raised to, and capped at, £150m per annum from 2013/4 to 2016/17 but re-purposed for broadband, consistent with the BBC’s public purposes.

•  The BBC will play an active role in supporting new local television services through a partnership fund providing capital costs of up to a total of £25m in 2013/14 for up to twenty local TV services, subject to any necessary regulatory approval. The BBC will also commit to ongoing funding of up to £5m per annum from 2014/15 to acquire content for use on its own services from these new services. Should capital costs be required earlier then this will be facilitated by access to the existing digital switchover underspend by mutual agreement.

So money from the licence fee is going to continue to be given directly to non-BBC organizations. In other words the principle of top slicing the TV licence fee is now firmly established.


When it comes to funding S4C, there are several sections of the agreement which provide an equal guarantee of this ring-fencing:

•  In 2013/14 and 2014/15, the BBC will contribute £76.3m and £76m respectively in cash in addition to its statutory commitments [i.e. the 10 hours per week of original programming]

•  In the event that a new partnership model does not prove viable for any reason, the Government will not take licence fee money itself for this purpose. But in this situation the Trust will propose a one-off reduction in the level of the licence fee which would be equivalent to the contribution that the BBC would otherwise have made to S4C.

Contrary to what some others have said, I think this last point is enlightening and reassuring. It sets out the principle that S4C's part of the licence fee does not belong to the BBC, and will not revert to the BBC if this proposed funding model breaks down. Elsewhere, the agreement says this:

•  Under the partnership, funding for S4C in future will come from three sources: the licence fee, a continued but reduced subvention from the Government, and commercial income

So it seems quite clear that S4C will continue to exist as an entity in its own right; but that, after a transition period, it will receive the bulk of its income from the licence fee (note that the agreement does not say "from the BBC") and will continue to receive a much smaller sum from the government, as well as its commercial income. Therefore, so far as the principle of the proposal to revise S4C's sources of funding is concerned, I don't have a problem with it. There are other things to fight about, but in my opinion we should not fight about this.

The Detail

However there are two points of detail about funding that should cause us considerable concern.

The first is about the the actual sums of money involved. It is not reasonable to expect S4C to be treated in a worse fashion than the BBC. So we should fight to make sure that it is not, and fully expect to win that fight.

The situation is not helped by a certain lack of objectivity, optimism, or simple spin coming from some quarters. In the video of the Westminster hall debate on Wednesday, Ed Vaizey had the audacity to call this proposed funding settlement "generous" to S4C. And in this post on his blog, Glyn Davies said that the only organization "with a genuine grouse that has real credibility" is the BBC. I'm sorry to say that neither of these assertions stands up to scrutiny.

As the BBC/DCMS agreement makes clear, the additional responsibilities that the BBC have agreed to take on are equivalent to a reduction in income of 16%. However the cuts proposed for S4C result in a loss of DCMS funding of 24%. I think we have a good case to fight for the reduction of funding from the DCMS to be 16% rather than 24%.

Now there are a number of ways of doing the maths, particularly when commercial activities are taken into account. But the shortfall is likely to be less than £10m. In terms of the DCMS budget of over £2bn and the BBC's budget of maybe £3.5bn this is peanuts, but £10m is a much more significant amount for S4C.

The second detail yet to be worked out is how to safeguard S4C's funding in future years, as this Comprehensive Spending Review only covers four years, and the TV licence fee is only set for six. In my view, the most equitable way of solving the problem is for S4C to receive a fixed proportion of the TV licence fee each time it is renegotiated. If it goes up, so will S4C's income from this source; if it goes down, so will S4C's income ... but it will mean that these two public service broadcasters are treated equally. The bottom line is that each round of licence fee negotiations in future must clearly define the sum that is to be paid to S4C. We must ensure that this is built into the new legislation now.


In discussing funding, my basic premise has been that it really doesn't matter to S4C whether it gets the bulk of its income by direct subvention from government or from the TV licence fee. Money is just money. We should accept that there needs to be a cut because everything else is being cut, but we should not expect S4C to suffer more of a cut than the BBC. A small adjustment of less than £10m per year should ensure this.

But the management of S4C is another matter entirely.

S4C needs to remain as an independent entity, and we must fight tooth and nail to make sure that its management structure and editorial independence is not subsumed into the BBC. This post is long enough, so I'll say more on that subject in the next.

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Cai Larsen said...

A couple of quick points:

Obviously at the very least S4C needs to retain it's editorial independance, but for me the funding issue is more important.

When we're comparing S4C to the BBC we're not comparing like with like. That's why I don't accept that the cuts the BBC will take through the licence fee should be a benchmark for those S4C will have to take. The BBC is a far bigger organisation, which does much, much more than support a single channel. In other words it does more than simply fulfill it's core objectives. It thus has more scope to cut without damaging the said core services.

It is not clear (to me at least) from the statement that S4C will not have to compete for resources with other parts of the BBC. If it finds itself in this position Welsh medium broadcasting will contract rapidly. BBC bosses look for high audiences & low production costs. S4C gives them low audiences & high production costs. S4C makes no sense in the the world view of BBC bosses.

Anonymous said...

Everybody looks for a high audience to low cost ratio, BBC budgets for comparative programming are actually higher, and I speak from experience of working for both organisations.

Its what programmes and how they're commisionned that's going to be the big issue in the coming months.

Interesting, challenging and potentially exciting times lie ahead.

Cai Larsen said...

That's the point isn't it? - S4C's audiences are tiny by BBC standards, so from a BBC perspective there's little to be gained from spending a lot of money on programmes who's audiences are in the tens of thousands.

Emyr Lewis said...

Thanks for a rational and thoughtful analysis.

I don't want to pre-empt what you might say in your next. While I agree that it is likely that S4C as a corporation will persist, it is by no means clear that we can take for granted its independence from the BBC.

This is (I hope) cock-up not conspiracy, but the letter from DCMS to the BBC emphasises the S4C Service (not S4C itself). Furthermore, the comparison with BBC Alba suggests a BBC-dominated jont venture arrangement, with a considerably reduced remit for S4C, if it is to play the equivalent part to Seirbheis nam Meadhanan Gàidhlig, the gaelic media Service, as seems to be envisaged.

The proposed governance arrangements for the new S4C service through the combined board and joint management board suggest that the S4C Authority will no longer be in charge of deciding what gets broadcast and when. In other words, S4C could lose its commissioning broadcaster role and editorial independence.

Which brings us back, in a way, to financing. the BBC will not(it appears) be paying money to S4C to run the channel. It will be putting money (and it better be money, not "money's worth") into the joint venture, as will S4C.

Somewhere there will be an agreement which says how decisions will be made about how the money can be spent, what conditions apply to the use of the money and how disputes are resolved, for instance about editorial matters.

Unless the conditions of funding from the BBC give at least as much freedom to the jont venture as the DCMS funding now gives to the S4C Authority, then the independence of the srvice will be considerably reduced. The obvious way to deal with this is for S4C to retain ultimate editorial control.

It is reassuring to note that Jeremy Hunt in his letter to John Walter Jones refers to S4C remaining as a unique entity and retaining its editorial independence. Nevertheless, the letter to the BBC is less forthrght, speaking only of S4C retaining its "brand identity and editorial distinctiveness". We need to get clarity on these ambiguities as soon as possible.

One other point. Where will the money come from to fund S4C if the partnership arrangement doesn't work? It will not come from the licence fee, so will have to come from somewhere else. That, above all else, makes me nervous.

It is always dangerous to draw lines in the sand, but it seems to me at first blush that the following are must-haves:

(1) the continued existence of S4C as a distinct legal entity

(2) editorial control of the service to be vested in S4C Authority

(3) funding arrangements from BBC must not compromise this

(4) A commitment to sustainable funding of S4C if the partnership doesn't work.

Anonymous said...

The BBC should be federalised, and we should cut out the middle man and retain licence fee revenue raised in Wales (with an agreed proportion being subvented to the federal BBC network for shared services, network programming etc.- and at least 5/6% of the total UK network budget should be reinvested in network production in Wales).

The licence fee revenue retained in Wales should be distributed by a Welsh Media Commission and shared equitably between BBC Wales, S4C and a future English-language equivalent (perhaps one based on the mooted Scottish Digital Network model, or that model integrated with a devolved and reformed channel 3 licence). Also, a public service media levy should be put on for-profit non-PSB commercial broadcasters, ISPs etc- the revenue again being shared between the three Welsh PSBs by the media commission.

I think we should also accept that BBC Wales should be free to raise its own additional revenue by carrying adverts after the licence fee has been top-sliced and redistributed, as many European PSBs (such as RTÉ in Ireland) do already.

An ambitious agenda,but certainly do-able over the medium term.

MH said...

MB, If I was simply being partisan, of course I would say that S4C should face less of a cut than the BBC because it is a smaller organization and therefore can't absorb them so easily. But I'm not sure that argument will work. We have to face the fact that the DCMS has made a decision to effectively cut the budgets of both S4C and the BBC, so I think the best chance of getting want we want is not to say "you got it ALL wrong" but to point out that one is being cut more than the other. We need to argue on the grounds of fairness and even-handedness.

But as for "competing for resources" I want to be adamant on what our line should be. The key is to stop thinking and talking of the TV licence fee as the BBC's money. That is the point we must now ram home at every opportunity. If we can keep clearly defining what money from the TV licence fee goes to S4C and what money goes to the BBC there can then be no question of competing for resources.


Anon 10:46 is right about the costs of commissioned programmes. According to S4C's 2009 Accounts) commissioned BBC programmes cost £89,000 an hour, and BBC repeats cost £10,000 an hour. Commission programmes from independent producers come in at £52,000 and £750 an hour. So BBC programmes are more expensive, but that might to some extent be because of the type of programme. Drama is expensive, news isn't. However that's a side issue because the DCMS/BBC agreement states that all money top-sliced from the TV licence fee should be used to commission programmes from independents.

The bigger question is why the BBC should have ANY say in commissioning the programmes, which I talk about in the next post.


Emyr, thank you, and I value your clarity and agree with pretty much everything. I would perhaps pick up only on one thing, where you say:

" ... the BBC will not (it appears) be paying money to S4C to run the channel. It will be putting money (and it better be money, not "money's worth") into the joint venture, as will S4C."

It will not be the BBC who will be putting money into the joint venture. By saying that, we concede that the money from the TV licence fee belongs to the BBC and is being "given" by them. That in turn would give the BBC some sort of right to say how "their" money is being spend.

Now I have no doubt that is how the BBC want to think about it, but we must challenge that view. We must always talk about "the TV licence fee" rather than "the BBC licence fee". Top slicing became a fact of life that the BBC was forced to swallow to help fund the digital switchover. Now top slicing is being retained to fund broadband development, and extended to cover the new local TV stations the ConDems government is so keen on ... as well as to fund the Welsh language TV programmes that are not produced by the BBC.


Anon 13:31, It is of course right that we look at the bigger picture, and at what model we want to see in the future. Particularly as we try and find a model for the way broadcasting as a whole is devolved. But that is not on the immediate agenda.

But you do appear to have grasped the significance of top slicing the TV licence fee and of distributing the money raised from it more widely. If we can get the principle of top slicing right, and if we show that it is a fair and viable way of funding Welsh language programmes and the new local TV stations, there should then be no objection to using the same principle for non-BBC Welsh, Scottish, NoI and English regional programming in English.

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