UNBURDANING COSTLY
TERMS OF TRADE
&
UNLOCKING ECONOMIC
POTENTIAL
TVIEC PROPOSALS TO SABC BOARD
24/03/2010
Costly terms of trade?
1. Processes that are perceived to save or manage money for SABC but in practice either
cost more, or frustrate the core function of creating/procuring content.
2. Micromanaged system versus an incentivised approach – encourage entrepreneurial
spirit and an innovative relationship between SABC and producers – discourage costly and
patronising micromanagement practices.
3. Offer mechanisms that enable SABC and Producers to be swift in a competitive market
and harness broad base potential of industry creatively to benefit of both
4. Locked IP is costing both the SABC and industry money - How can IP unlock economic
potential – save the SABC money, retain for SABC what they need and want, generate
income for both SABC and Producers – thereby move away from an economy of poverty.
5. Costly Terms of Trade are not limited to cash only - relationships, innovation, diversity and creativity
should be viewed as capital.
Intellectual Property
Current Situation

All intellectual property in and to productions is vested in the SABC – beyond the rights required by a public
broadcaster.

The SABC does not effectively exploit the rights they own, thereby effectively rendering the value zero to
both the SABC and producers.

Producers are not able to access valuable 3rd party funding thus relying totally on SABC. This creating a
broadcast ecology predoninatly reliant of SABC
Considerations:

SABC has limited cash resources and needs content – good content to get ad spend to increase cashflow.

DTI/IDC has money – it is not being spent. SABC cannot get the money due to its ownership policy.

The copyright act states the person commisioning owns BUT it does not state that you HAVE to contract in
that way. It is a default not an instruction.

Currently when it procures it puts no value on the notion of each transmission. i.e. When SABC licence from
BBC, they pay a fee for broadcasting the programme but do not own it. They also pay a ‘Format fee” for
some shows but don’t own it. So if one applies same thinking to local content, a new regime can be created
that is already precedented.

SABC can choose to procure for its own best interest if it shows fiscal sound thinking. IE: Copyright vests in
creator because it saves SABC money and will make our budget travel further and does not loose us
anything.
Intellectual property continued.
Proposal

Short-term: Board fast track an empowered working group to explore a new IP regime that is acceptable to
both the broadcaster and the sector.

Medium-term: Shift IP terms of trade on projects currently in development, recommissions, as well as
future RFPs so that terms are aligned with mechanisms that allow for e.g. co-production funding, access to
DTi rebate schemes etc
Impact

Producers are able to attract 3rd party investment from alternative funding sources which reduces the
burden on the broadcaster.

International best practice around the liberalization of the IP regime has seen significant increased revenue
where Producers are incentivized to become drivers of exploitation (sustainable reward system).
NB: The SABC requires the producer to obtain all worldwide rights in perpetuity. This is unrealistic given the
budgets – and it contradicts some of the other arrangements it has made with writers, actors etc.
Asset management of independent productions
Current situation and effect
 2 years ago SABC implemented new policy requiring all items purchased on a production returned to SABC
 80% of props/wardrobe on a production are basically consumables and have no 2nd use value
 The net effect - SABC costly storage facility, costly staffing to properly manage assets of little value,
costly inventory process and truckloads of junk being delivered to SABC (cups, saucers, socks, etc),
paperwork that holds up payments of productions for months costing interest, frustration. Valuable items
rendered useless as inaccessible –no database or way to access without schlepping through hundreds of
boxes, theft potential increased. No cost saving to future budgets. Additional cost to SABC and to
producers.
Recommendations
 Abandon Asset register system in its current form.
 Items above a cost of R X be considered an asset, the balance consumables.
 SABC warehouse to be manned with proper system to receive goods
 Reasonable allowance for breakages – props and wardrobe are vigorously used on a production, breakage
is common.
 Create a charity relationship – ie: SABC and prod donate all wardrobe consumables to ‘Gift of the Givers”
Impact
 Cost saving to SABC and Producers
 Focus on core business for both SABC and producers
 Build CSI portfolio –and get everyone on board.
Budget and Procurement Models
Current Situation and effect
 SABC CPM rates have lagged behind the real cost of production – creates either unsustainable model or
impacts on deliverables or creates ‘smoke screen budgeting’.
 Very limited procurement and payment options which rely on SABC cashflowing 100%
 Cost capping – unrealistic cost capping creates dishonest budget practices .
Recommendations
 A variety of content procurement options be enertained such as licenses, co-productions and cofinancing.
 Payment systems should include but not be limited to the cashflow system. This could assist SABC with
cashflow and liberate producers from cost reporting system which is time consuming and costs both SABC
and producers money.
 Procurement has to be sensitive to inflation. SABC cannot have it’s own inflation rate that bears no
relevance to national inflation.
 Stop practice of cost capping items/individuals
Impact
 Variety of content procurement options will ease the financial burden on the organization and encourage
innovation and entrepreneurship as well as
Cost Reporting
Current Situation
 Productions submit monthly cost reports against the production cash flow.
 Final payment will only be made when the cost reports have been reconciled. Producers have waited up to six
months and more for this final payment.
Guiding Principle
Once CPM has been agreed, cost is fixed and not subject to any increase (bar emergency/beyond control)
Recommendations
 The producer may choose whether he/she wishes the SABC to cash flow the production or not. Only in instances
where the producer requires the SABC to cash flow the production is the requirement of cost reporting on the cash
flow necessary. Time frame for final verification must be limited. SABC to commit to paying the final phase
payment for the production within two months of receipt of the final cost report.
 Provision should be made for the SABC to provide to the producer the option of a milestone based payment where
the producer receives a 30% upfront payment and then on completion and delivery of agreed
milestones/programmes.
Impact
 SABC is protected against foibles of inexperienced producers
 Reduction and more effective utilisation of SABC resources
 Producers who conduct themselves professionally and have proven track record are liberated to put energy into
content.
SABC Facilities and insurance
Current Situation and effect
• Producers are required to use SABC facilities (which are not competitively priced or staffed).
Inexperienced producers can feel intimidated and end up with facilities that are not best option for their
production or staffed by technicians with unrelated skills.
• If these facilities are not available, producers are required to make use of facilities as per SABC approved
supplier list which appears to have no apparent value to SABC as prices are not competitive.
• Independent producers are forced to use SABC insurance – this puts producer at risk and encourages
reckless trading. (currently SABC staff are acting as “brokers” for an outsourced insurance company)
Guiding Principle

Producers should be able to choose a facility/Insurance of their own choice. Productions have very
different needs, choice of facilities is often linked to skills or proximity. If SABC facilities are competitive
and well run they would automatically be the 1st choice.

SABC is not in the business of insurance.
Proposal

Insurance is vested with the producer. SABC can protect their investment simply by releasing production
funding only when an insurance policy is in place. There are international norms for this.