1. Jean K. Chalaby – j.chalaby@city.ac.uk
Managing governance in global value chains: The case of the UK TV content production sector
Jean K. Chalaby –

2. The theoretical framework: Globalisation and the international fragmentation of production
Globalisation is shifting patterns of production by fragmenting production, breaking down the vertically-integrated mode of production and stimulating a world-scale division of labour.
Increasingly, commodities are no longer produced in a single economy and then exported as a final product to other countries, but the production process itself is characterized by an increasing share of inputs from several countries.
International production processes have become characterized by inter-firm networks that span borders. We call these networks global value chains.

3. What is a global value chain?
“The value chain describes the full range of activities that firms and workers perform to bring a product from its conception to end use and beyond. This includes activities such as design, production, marketing, distribution and support to the final consumer… In the context of globalization, the activities that constitute a value chain have generally been carried out in inter-firm networks on a global scale. By focusing on the sequences of tangible and intangible value-adding activities, from conception and production to end use, GVC analysis provides a holistic view of global industries.” (Gereffi and Fernandez-Stark, 2011: 4)

4. Why do GVCs matter?
Today, trade within value chains represents more than half the total value of non-fuel global exports: the WTO estimates that trade in intermediate goods was worth US$ 7,723 billion in 2011, or 55 per cent of world non-fuel exports (WTO, 2013: 182-3).

5. Governance in global value chains
GVCs have several attributes, one of them being governance.
Governance analysis allows one to understand how a chain is controlled and coordinated when certain actors in the chain have more power than others. Gereffi defines governance as ‘authority and power relationships that determine how financial, material and human resources are allocated and flow within a chain.’

6. Governance in global value chains
“The GVC literature distinguish between “buyer-driven” and “producer-driven” chains. “Analysis of buyer-driven chains highlights the powerful role of large retailers, such as Wal-Mart and Tesco, as well as highly successfully branded merchandisers (e.g., Nike, Reebok), in dictating the way the chains are operated by requiring suppliers to meet certain standards and protocols, despite limited or no production capabilities.”

7. Why do GVCs matter in the TV industry?
Value chains are a structural reality of the TV industry and the key to unlocking an understanding of its rapid globalization.
The focus today is on the TV content global value chain.

8. The global TV content value chain
Facilities sector (media asset management, TV eequipment hire, etc.)
THE GLOBAL CONTENT VALUE CHAIN
Suppliers in the communications chain such as infrastructure and media services companies
AGGRECATION
(TV channels and, entertainment platforms)
DISTRIBUTION
PRODUCTION
Other suppliers such as business affairs consultancies, market reserch companies, etc.

9. Governance in the TV content global value chain
Research shows that the TV content global value chain is dominated by its retailers: the aggregators.
They are in control of the chain because they are much bigger than independent content suppliers, have large commissioning budgets and are far fewer in number than producers.
Production remains in a fragmented sector characterized by low barriers to entry and thus operates in a market that is ferociously competitive.
Whilst ITV’s revenues reached £2.6 billion in 2014, the turnover of the country’s largest independent producer, IMG, stood at £173 million, dropping to £53 million for the tenth largest, Wall to Wall. Terrestrial broadcasters in the UK deal with a large number of content suppliers: the BBC commissioned programmes from 276 producers, Channel 4 from 338, and Discovery from 78.

10. The UK TV content production sector: A success story
The sector began to grow with the creation of Channel 4 as a ‘publisher-broadcaster’ in 1982.
Following further regulatory support, the sector was supplying 10,000 hours of TV programmes to the UK’s terrestrial channels, had an annual turnover of £722 million and employed 12,000 staff by the mid-1990s.
The Communications Act 2003 was the final piece of the regulatory puzzle: giving the independents full control over their rights, it led to the rise of larger production companies (known as the ‘super-indies’) and to the sector’s unprecedented international growth.

11. The UK TV content production sector: A success story
Today, the UK indie sector is worth £2.9 billion and export for £891 million worth of IP.
UK-based production companies have pioneered several genres/strands in unscripted programming, including factual entertainment, talent competitions and fix-rigged productions.

12. Key factors
Policy was a determining factor, in particular the Communications Act 2003 which recommended the terms of trade that were subsequently negotiated between broadcasters and producers:
The term of trade, which disaggregated and disentangled IP rights, helped create a market for these rights which used to be warehoused by broadcasters.
This new IP regime limited the scope for unfair commercial practices from a handful of dominant players and improved the programme supply market by encouraging investment into the production segment, since IP rights were now a tradeable asset for producers.

13. Other factors
Balanced ecology of the British broadcasting system that accommodate diverse business models.
Risk-taking, innovation and IP creation is rewarded.
Low barriers of entry to the TV content production sector.
Connection with English-speaking markets, in particular the USA and Commonwealth countries.
Business-friendly environment
Open society: recognising all talents (work in progress: diversity issues)

14. Threat and uncertainties
Threats:
Re-scaling and re-scoping of the BBC
BBC 3, entertainment, licence fee, etc.
Privatisation of Channel 4 (may not be a complete disaster but C4 remit would undoubtedly change in order to limit risk-taking and the ecology of the British broadcasting system could be potentially disrupted).
An incredible number of British TV formats were first screened on C4, from Faking it in the early 200s to Benefits Street today.

15. Threat and uncertainties
Revision of the terms of trade (if and how)
Launch of BBC Studios (my estimate is that it will have a positive impact in the medium term but many have doubts)
Conglomeration:
Either through concentration (e.g. Endemol Shine Group, Banizay/Zodiak)
Or vertical integration: ITV Studios made 9 major acquisitions over the past few years, and US investments have been numerous, including 21st Century Fox (Endemol Shine), Discovery/Liberty Global )(All3Media), and Warner Bros. (Shed).

16. The future of the UK TV content production sector: what should be done?
Preserve the unique ecology of the British broadcasting system.
Ensure that producers and broadcasters who take risks and innovate are rewarded.
Continue to protect IP creativity and IP producers.
Ensure that the TV industry and remains diverse and competitive.
Future sectoral policy decisions (e.g. terms of trade) must take into account governance issues in the TV content global chain.

17. Conclusion
Global value chains in the TV industry – and the position of British firms in these chains – must be taken into account in the process of policy making. It means that the impact of new policies on the performance of British firms in GVCs must be carefully thought through.