Memorandum submitted by Motion Picture
Association
1. The Motion Picture Association (MPA),
which represents seven major international producers and distributors
of films, home video material and television programmes[1],
welcomes this opportunity to submit evidence to the Culture, Media
and Sport Committee's inquiry into "all aspects of the British
film industry and British film, including the performance of the
Film Council in promoting both a sustainable industry and awareness
of and access to the moving image".
2. We note the very wide brief of the inquiry
and also that the invitation of 22 November 2002 calls for submissions
"which can be based around some or all" of the questions
posed. We will address below the issues we believe are most important.
What direct and indirect contribution does the
film industry make to the UK economy?
3. Work done in the past by experts such
as London Economics suggests that expenditure on film at the consumer
level is in the order of £3.5 billion to £4 billion
a year. However, film constitutes a key activity, in terms of
skills, standards, techniques and investment, in the much wider,
more significant and fast-growing sector of media and entertainment,
which today embraces video and DVD, digital television, console
games and broadband communications (and which is likely to embrace
entertainment content for mobile telephony in the not too distant
future). This sector, taken as a whole, is of enormous and growing
significance in all developed economies. We thus believe that
film can be characterised, directly and indirectly, as an economically
significant activity.
Does the film industry merit support from Government,
if so, how can existing support be improved?
4. Our members are generally persuaded that
the British film industry merits the support of Government in
three areas: incentives to offset the forbidding risks associated
with film investment; professional training in film and film-related
skills; and education in the appreciation of cinema. We believe
that on all three counts the present UK Government has a good
record. We would like to see the fiscal incentives provided by
Sections 42 and 48 of the Finance Acts maintained and/or extended.
These incentives have constituted a core pillar of success upon
which the UK sector is founded. We believe that continued and
well-focused investment in professional training is critical to
securing the future of British film. And we certainly would add
our voice to those, in the bfi and elsewhere, arguing for
more resources and more attention to be given to film education,
including respect for the rights of those who create audio-visual
works in the face of the stark dangers of digital piracy.
5. A key element in government relations
with the film industry concerns regulation.
6. In this regard, we note a number of positive
features of the UK framework that make it an attractive business
investment environment:
— There are no restrictions on capital
investment in any part of the audio-visual sector such as would
not apply equally to all sectors of the UK economy;
— The UK Government continues to show
its progressive, forward-looking outlook by proposing the elimination
of the UK foreign ownership restrictions on terrestrial television;
— British law contains a realistic
treatment of copyright in the context primarily of contractual
relations. We note, however, that this is an area that requires
constant vigilance and we have significant concerns about some
aspects of the planned UK implementation of the EU Copyright Directive;
— There is a well-established principle
of media independence from political interference at national,
regional and local levels;
— Within the framework of the relevant
requirements of the EU, UK employment law seeks to take into account
commercial realities and thereby to actually promote employment;
— The UK has no discriminatory levies
or subsides; and
— There is no licence system designed
to restrict the importation of foreign films or programs.
7. This combination of factors has existed
for many years and makes the UK one of the most stable and liberal
regulatory environments in Europe. At the time of the last major
review of the British film industry (UK Film Policy Review, 1998)
we submitted that it was partly for these reasons that the UK
has arguably Europe's most vigorous audio-visual economy and benefits
from an exceptionally creative audio-visual culture (see Annex
2).
How can the production, distribution and exhibition
of British films be improved in the UK? Is the right balance being
struck between these elements of the industry?
8. We believe that the distribution and
exhibition of all films, including British films, has improved
dramatically in recent years, largely because of the huge investment
(including significant investments made by some of our member
companies) in cinema exhibition. The contribution made by distribution
on pay-television, video and DVD has also added enormously to
the numbers of people that see films, including British films.
As for production, we tend to believe (although we have no data
to support this) that the combination of fiscal incentives and
financial support is a good one and that the perception of continuing
underperformance by British films, if well-founded, could be addressed
by paying more attention to the creative areas of script writing
and script development as any other area.
9. As to whether there is the right balance
between the three sectors, we would observe that where films are
made but don't get distributed there must be an imbalance, but,
since this happens in every film-making country of the world,
it is not clear that it can be legislated away. The problem, such
as it is, lies mostly on the production side of the equation:
ie the making of films for which there is no viable audience.
As to the recent discussion of incentives for the distribution
of qualifying films, we await concrete proposals, to which, we
hope, our members' expertise will have made some contribution.
However, we note that much thought and expert analysis of this
issue was carried out in the context of the Film Policy Review,
without yielding effective solutions. Our general sense is that
the focus is properly placed on getting good films produced. We
cannot emphasise too strongly that fiscal incentives for production
have revitalised the film industry in the UK, with consequent
important and beneficial effects on employment, skills and training
and on the strengthening of the infrastructure of facilities and
production services.
EFFECTIVENESS OF
THE FILM
COUNCIL
10. While we are not in a position to comment
in detail on this question, we do believe that the Film Council
has recognised the important contribution made by our members
to the UK sector and has fostered an unparalleled environment
of openness and dialogue with Hollywood. The MPA also has an excellent
working relationship with the British Film Office in Los Angeles.
Over the past two years, the Director has worked consistently
to raise the profile of the office, and to communicate effectively
with the MPA and its member companies, in our opinion, very successfully.
THE RELATIONSHIP
BETWEEN THE
FILM INDUSTRY
AND OTHER
CREATIVE INDUSTRIES
11. The health of the British film industry
depends upon the health of the broader audio-visual industry and
culture of which it is a key part. In the UK, that broader environment
appears to be in robust condition. Indeed, since the Film Policy
Review reported its findings in March 1998, there has not only
been continued rapid growth in the core activities of cinema exhibition,
video and pay-television, but there has been widespread take-up
of new technologies and media, such as the internet, digital TV,
mobile communications, console games and DVD. Together these different
methods of distribution provide funds for further investment and
sufficient employment and training opportunities to really build
the industry. The immense richness of Britain's audiovisual landscape
provides a very positive context for public policy initiatives
in the sector.
12. A sketch of the UK audio-visual sector
is provided in Annex 1.
THE ROLE
OF INWARD
INVESTMENT
13. A key element in maintaining the health
of the audiovisual sector, and especially film, is the role played
by inward investment. The renaissance in cinema-going in the UK
started with and has been driven by investment from overseas,
mostly from the USA. Similarly, the costly development of cable
networks has largely been driven by American corporations. Investments
made by News Corp and others have not only introduced multi-channel
satellite television to Britain but have enabled BSkyB to create
the UK's digital television sector—the biggest in Europe.
The consolidation and upgrading of specialist video retailing
has also been led by an American corporation
14. The British Film Commission estimates
that, in the last five years, 62% of all film production investment
in the UK has come from overseas and that 70% of that overseas
investment has come from the USA, the bulk of it from the member
companies of the MPA.
15. The scale of the MPA member company
contributions to the UK economy over the past five years exceeds
£4 billion, including the exhibitor's share (retained by
cinemas), cinema construction, general and administrative expenses,
manufacturing and laboratory expenses, marketing, advertising
and publicity, production and development. Recent noteworthy productions
in the UK include; The Hours, The Saint, Lara
Croft: Tomb Raider, Harry Potter and the Prisoner of Azkaban,
Harry Potter and the Chamber of Secrets, Harry Potter
and the Sorcerer's Stone, Eyes Wide Shut, The Avengers,
The Mummy Returns, Entrapment, End of the Affair,
and The World is Not Enough.
16. On average, each of the last five years
has seen £546 million (of which £339 million has come
from overseas) invested in 97 productions (of which 31 originate
from overseas).
17. Inward investment is attracted to the
UK partly by the stable and progressive regulatory environment
and partly by the straight-dealing business culture. As far as
film production is concerned, however, other factors are equally
important: the talent pool, the skills of British technicians,
the resources of the production-services sector and, crucially,
the favourable fiscal environment.
18. In an era when Britain will likely find
it increasingly difficult to compete with the much lower below-the-line
costs which the countries of Central and Eastern Europe can often
offer and where scenes that once would have been location-specific
(thus, perhaps, requiring production in the UK) can now be created
by Computer Graphics Imaging techniques, the viability of choosing
the UK as a production base depends very significantly on fiscal
incentives. It is no exaggeration to say that the incentives provided
by Sections 42 and 48 of the Finance Acts have been decisive in
determining the location of film production in the UK and have
thereby revitalized the UK film industry.
19. The ever-inflating cost base in the
UK is a cause for concern for both the big-budget films that are
mostly made by MPA member companies and for films in the low-budget
area, as was recently highlighted by the Relph Report. We would
support any sensible measures proposed by the British Film Commission
and/or The Film Council that would enable the providers of production
facilities and services to compete more effectively in the international
marketplace.
20. As well as individually sponsoring training
schemes all over Europe, including in the UK (internship programs
and funding for training activities and institutions), the MPA
companies have been completely committed to the Film Investment
Scheme set up in the wake of the Film Policy Review to support
film training. We are equally supportive of Skillset in putting
these resources to good use and we would recommend policy-makers
to consider what resources are needed to provide sufficient training
and education to ensure that the pool of craft skills and talent
is continually replenished.
LOOKING FORWARD
— The UK has the most liberal regulatory
environment in Europe.
— It has attracted massive inward investment,
especially from the USA.
— Partly as a result of that investment,
the UK has arguably the most successful audiovisual industry in
Europe.
— The benefits of success mostly accrue
to the UK itself.
— The UK film industry is a major beneficiary.
21. Matters could always be improved, but
we believe a measure of realism is also called for. Those who
advocate or evaluate policy can make the most meaningful contributions
by examining specific proposals. To the extent any specific proposals
require regulatory change, the industry would appreciate as much
advance notice as possible as well as appropriate transition rules
to grandfather projects commenced prior to the change. We note
the extensive preparatory work for the formation of the Lottery-funded
Film Franchises, the Film Policy Review and the debate leading
to the formation of the Film Council, not to mention the very
high level strategy reviews which the Film Council itself has
undertaken. These efforts have yielded a deep and detailed analysis
of the strengths and weaknesses, opportunities and threats to
Britain's film business and film culture. Each has led to action
and those actions have, largely thanks to the National Lottery,
been backed by significant resources. All this in a favourable
regulatory and fiscal climate with massive investment in infrastructure
and very strong growth in the audio-visual sector.
22. In the audio-visual sector, employment
is often serial rather than continuous. To foster an industry
where expertise and artistry can develop, we think it is more
productive to consider how the pieces fit together, with strength
in one area contributing to growth in the next. The UK has provided
a stable production environment over the past 10 years, which
together with Section 42 and 48 relief, has made it arguably the
most successful audio visual industry in Europe.
23. The result of all these initiatives
is there to see. In an ideal world, it would of course be improved,
but it is hard to think of an idea that hasn't already been tried,
or dismissed, or, in the case of distribution incentives, isn't
currently being considered. At the end of the day, good British
films are made and those films find their audience. We would all
like to see more of them.
1 MPA members include: Buena Vista Pictures Distribution,
Inc. (Disney); Metro-Goldwyn-Mayer Studios, Inc., Paramount Pictures
Corporation; Sony Pictures Entertainment Inc.; Twentieth Century
Fox Film Corporation; Universal Studios, Inc.; and Warner Bros. Back
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