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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1091-viii House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE CULTURE, MEDIA AND SPORT COMMITTEE
NEW MEDIA AND THE CREATIVE INDUSTRIES
Tuesday 7 November 2006 MR STEWART TILL and MR JOHN WOODWARD MR DAVID COOKE and MR PETER JOHNSON MR SHAUN WOODWARD MP and RT HON MARGARET HODGE MP Evidence heard in Public Questions 589 - 655
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Culture, Media and Sport Committee on Tuesday 7 November 2006 Members present Mr John Whittingdale, in the Chair Philip Davies Mr Nigel Evans Paul Farrelly Alan Keen Rosemary McKenna Mr Adrian Sanders Helen Southworth ________________ Memorandum submitted by UK Film Council
Examination of Witnesses
Witnesses: Mr Stewart Till CBE, Chairman, and Mr John Woodward, Chief Executive, UK Film Council, gave evidence.
Chairman: Good morning. This is the last session of the Committee's inquiry into the challenges and opportunities for creative industries in new media. Certainly in the first two sections we are going to be concentrating on film. It is a pleasure to welcome Stewart Till, Chairman of the UK Film Council, and John Woodward, the Chief Executive. Can I invite Helen Southworth to begin. Q589 Helen Southworth: In your report for 2005-06 you tell us that you have commissioned research into the potential of digital platforms to enhance public access to British and specialised films. Can you tell us a little bit about what your expectations are for that and how you are hoping things are going to develop in the next few years. Mr Till: Obviously it is a very big question. We are optimists absolutely but there are dangers attached. I think that we know that the consumer generally enjoys films, and film as a medium has driven pay television and has driven DVD, so I think in its widest sense film as a content will both drive digital and benefit from it. Digital obviously covers a multitude of areas, from digital screen networks (DVD itself is a digital platform) through to video on demand, and I think if you make it easier for the consumer to consume films, then they will embrace it in larger numbers. For example, the video rental market-place at its peak worldwide was worth about $20 billion, with all the inconvenience wrapped around renting videos, which we all know. If you could have all the benefits of renting videos with none of the inconvenience, and the convenience of doing it from a laptop or a remote control on a TV, I think that $20 billion that consumers spent around the world could multiply by two or threefold without all the distribution costs and manufacturing costs, so with just that window alone you could add $20 billion/$30 billion/$40 billion to consumer expenditure on a worldwide basis, which is obviously incredibly exciting. Within that context I think that British films should do very well for two reasons. Obviously if people are spending more money consuming films in this country and around the world where British films are watched, then obviously, by definition, more people will spend more money on British films, obviously to the benefit of both British producers and British distributors. Also we have seen in all the other digital forms of distribution the "long tail" effect by which people not only rent or buy or watch the blockbuster films more frequently, they also delve deeper both into the new releases or go wider and into catalogue, which again we think will be to the benefit of British films. Mr Woodward: I think that last point is a really important point in the context of the Committee's interest in British cinema because historically, as you know, one of the problems with getting British films in front of British audiences is they are literally crowded out in the market place whether they are stacked on the shelves at Woolworth's, in the video store, or on television channels, and the beauty and opportunity of on-demand and digital delivery of films is that those physical constraints of things in boxes no longer apply. Therefore the long tail effect that Stewart has talked about and the economists have noted suggests to us very strongly that is where the opportunity really lies for the British film industry and for the British public because when you give people the opportunity to choose from a much, much wider range of titles there is evidence already to suggest that that is what they do. That is why fundamentally we are very bullish and we think that the digital revolution is going to be very good for the British film industry. There are other challenges, as we all know, but overall we are optimistic. Q590 Helen Southworth: Do you feel that there is sufficient focus on the economic opportunities? You are obviously promoting from your perspective with a lot of vigour but are you getting that same sort of response back from, say, government departments or regional development agencies? Mr Woodward: The answer is broadly yes, but I think it is also true to say, in the same way that your Committee is currently looking at this issue, everyone is grappling with the digital revolution. We are all on the frontier and in terms of running their businesses people are literally making it up as they go along. That is why we commissioned the research you referred to earlier on because the film business is going to have to make a very important and potentially quite difficult transition from the stable business model that has been in place for the last 15 or 20 years, whereby whether you are financing films or distributing and selling them you have been relatively confident about what values you can extract from television broadcasters, from DVD, and from cinemas, to what has to happen over the next few years, which is that the industry has to make a transition to a new business model which is untested which is about selling films mainly on demand. Nobody is quite sure at this point whether the audience demand is going to rise or fall - although we think it is going to rise as Stewart said, nobody is quite sure what the volumes will be, and nobody is quite sure where the profit margins are going to settle. So it is a period of change but for us we would come back to say that represents an opportunity as well. Q591 Helen Southworth: In terms of developing an audience for British films what opportunities are there in terms of school film clubs, for example, or other educational establishments using new technologies? Are you focusing on that? Mr Woodward: I am glad you asked that, as they say. We are currently running a pilot project which we do not have the funds at present to take through to implementation, but the ambition is to set up a free-standing charitable body which has the objective of getting a digital film club into one-third of schools within the first three years of operation. The idea would be to work with schools through the extended hours programme to enable them to have interesting, important, valuable but entertaining films that children can watch and to support the delivery of the films through a website and educational materials so the children can then talk and think about the films in terms of citizenship, and whatever the issues might be contained in the films and also, frankly, to build more of a cinema-going habit amongst children. As I say, we are piloting that so we hope by March/April next year to be able to say this is how it would work between the films and the film industry, but we will still be casting around for the funds to deliver it in the next CSR. Helen Southworth: If you are looking for somewhere to pilot it, Warrington would be a very good place. The reason I was asking the question is I have been prompted by young people in my schools who are saying, "What is being done?" so that we can develop creativity. Thank you. Q592 Chairman: You say that you are commissioning the research into the potential for enhancing access to British films. Digital channels have been around for quite a long time now. Why are you only commissioning research now and why have we not got a UK digital British film channel, when we seem to have channels available for horror films, science fiction films and every other niche genre imaginable? Mr Till: It is an evolution rather than a revolution, but there is a change. In terms of pay television there was the Sky digital revolution obviously, and probably the worst thing that happened to the British film industry in the last 20 or 30 years (which it is important going forward is not repeated) is the deals that Sky did at the end of the 1980s/early 1990s where they did very rich deals with the Hollywood studios to try and get the best of the American films and then following the merger with BSB, having consolidated that and having got the prime movie channel, then chose to neglect British films. I think over the last what must be now 15 years the British film industry has suffered dramatically from not getting a fair price out of the pay television window. Going forward, obviously there is going to be a dramatic evolution and it will be literally hundreds of film channels and a blurring between a film channel, a pay movie channel where you are paying either a monthly subscription or part of a subscription package, to video on demand and near video on demand, to absolute fragmentation, and it is vital going forward that the British producers and distributors get at least parity with the American studios in their deals with the various providers of the video on demand film channels. Mr Woodward: Also the conceptual leap that we all have to make is, if we try and look five or ten years ahead, is we need to probably stop thinking about films being delivered by channels because the future will be about the availability of a massive number of films of which British films, we hope, will be an important part. For the consumer/for the viewer the key issue is going to be the way in which those films are electronically ordered for the viewer to look at in terms of the context of the films, how they are packaged together, and the electronic navigation to get the viewer to the right screen which says "here are the best of British films" for example. What we have to move away from is delivering films to British viewers, particularly British cinema, in terms of a linear television channel because that is fundamentally where the industry came from in terms of electronic delivery of films but that is where it is moving away from as well. The future is about unlimited choice and the future will largely be controlled by the platforms who have the job of organising the data for viewers to make their buying decisions, so the issues around EPG, which I know you have looked at before, pertain to the film industry as much as they do to other areas of entertainment. Q593 Chairman: When we move to an on-demand world will there be a role potentially for the Film Council in making available British films? Mr Till: I hope so. We do not so much make them available; obviously what we try to do is encourage British films commercially within the market context. I cannot foresee a role where the Film Council will say to government, "Can you dictate the windows and the sequences and the pricing policies of the various windows," because I think it is a market. I think the Film Council will need to be more active in trying to influence and publicise and put the spotlight on certain issues. Mr Woodward: Piracy would be a very good example, Chairman. Chairman: That leads very neatly into Rosemary McKenna's questions. Q594 Rosemary McKenna: First of all, can I say how much I agree there is a huge opportunity for the British film industry. However, I think you have to move a lot quicker. There is a huge catalogue, is there not, of films that people have not been able to see because of the windows being so narrow and being pushed out? I think there is a real opportunity and I hope it is successful. However, those opportunities have threats as well and that brings us on to piracy, as you mentioned. You said, Stewart, in your Annual Report that it was a "rampant pestilence". Mr Till: Yes. Q595 Rosemary McKenna: So you want a drive for IP education and awareness. What are you doing in that area to make people aware of the criminal aspect of what they are doing? Mr Till: Let me, if I may, tell you the size of the piracy problem and I will hand over to John to give you some specific thoughts that we have. We calculate that over £800 million was lost last year, and as much as one in four/one in five of every pound spent by the consumer in the UK on film product - going to the cinema or buying or renting DVDs - was on illegal pirated product, and that one in four people watched a pirated DVD, and these numbers are only growing. It is not only in the UK but particularly in the UK and particularly in Germany within Europe, and it is absolutely a pestilence and we make no apologies for the emotion of that. It is a huge problem and growing at very ugly rates. Mr Woodward: I think to a point it is accepted in the film business that there is no one magic bullet to deal with piracy. There are three and they all need to be fired pretty much simultaneously. The first one is about people in the business changing their business models in the way that the music industry has had to change its business model because piracy is going to move away from physical DVD sales over time to on-line piracy. The brutal truth is that if you do not give people the opportunity to buy something in an easy and convenient way on-line, then the evidence suggests that a large number of people will steal. So the industry itself has to react and change the way it operates in order to be more consumer friendly. I think that is something the industry is doing and, as Stewart said, it is an evolution rather than a revolution and people are very keen in the film industry to learn from the mistakes of the music industry. I think that is bullet number one. Bullet number two is about education and awareness. That is very much about teaching consumers, the public, children, to respect intellectual property, to understand that stealing a video is as damaging to the owner of that intellectual property as the theft of anything else, which is why one of the things we will be using the digital film club for, we hope, is to take that intellectual property message into schools, for example. The industry is grouping together at the moment around the theme of "respect creativity" as a kind of tag-line. We will be doing a lot of messaging and marketing over the coming months and years to try and push that message home. That would be the second bullet and is also a bullet for the industry to make the running on. I do not think industry would say it is the role of government to do their advertising for them to protect their own assets. Where, however, we would suggest there is a role for government is in the third bullet which is about enforcement, and I think, to be candid, we would suggest to you that there is more that might be done by government in terms of tougher enforcement to sit alongside education and improved business models. There are particular issues that the industry has flagged in the past which still remain to be resolved. In no particular order and very briefly I would mention tougher enforcement around what are technically called "occasional sales", what I would call car boot sales. There are thousands of them up and down the country each week and they are a major source of physical piracy. We think there is probably an argument to move towards a review of the damages system to allow for exemplary damages in the case of copyright infringement, which is not possible at the moment. We would also suggest that trading standards should be given powers to enforce copyright infringements in a way that they are not currently. Fourth and perhaps most obviously of all, it is still, remarkably, not an offence to go into a cinema in Britain and camcord off the screen, which seems to us to be not sensible. We would suggest criminal legislation which would enable prosecution of people going into movie houses and recording off the screen for commercial gain to make that a criminal offence. I would say those, very briefly, are the four big issues that we believe government has a role in taking forward and obviously they are things that the industry of itself cannot do. Q596 Rosemary McKenna: Is it not really too late? Young people just think it is great fun. I think the problem is that young people do not see that what they are doing is taking away anything from anyone. They do not see it as stealing, which it is, they are stealing from the people who have created it, and there is a feeling that this is okay and the same with the car boot sale thing. There is a real problem there in getting that message across. Mr Till: Absolutely, that is why if we were just going to rely on education it would not be enough. I think you can persuade some people and I do not think you should give up on the education message, and that is why it should be and is one of the three planks, but it has got to be alongside legislation, government action and the industry doing better business practice. Q597 Rosemary McKenna: I think the recording industry discovered that. They spent a lot of money campaigning against downloading and discovered that they really had to get involved in selling it. What about simultaneous release; Spielberg did that? Mr Till: There have been some instances, absolutely. The good news about the film industry is the music industry obviously had a model for decades of retail sale where they made the product, they put it onto a carrier - vinyl, CD, cassette - and sold it through stores. The film industry already obviously has a culture of selling films to the consumer through a myriad of windows from free, and pay television, cinema and DVD, so already they are not obsessed about only retail distribution. I think the challenge facing the film industry is to be smart and clever about how it organises its window, which is really only about two factors, timing and pricing. It needs to be very careful because obviously simultaneous releasing has been experimented with. The big, big danger obviously is that that could be to the dramatic detriment of cinema going because cinemas have a very heavy fixed cost, by definition. We are doing some research into this, but intuitively we know that if cinema admissions went down 10% or 20% or 30% it would have a much more significant impact on cinemas than those sort of percentages because of their fixed costs, at a time when cinema admissions around Europe are increasing, so it is not as if the consumer is turning his or her back on cinemas. I would be nervous personally of simultaneous day and date. Absolutely it would impact on piracy but I think it could be to the detriment of cinema-going and cinemas. Cinemas obviously play an incredibly important cultural and commercial part in this country's entertainment landscape. Q598 Rosemary McKenna: It is about getting a balance. Going to the cinema is an evening out and people do that. Downloading is something that they would do to watch at a different time. Is there not a balance to be struck? Mr Till: There is. Absolutely there is a balance and obviously different balances for different people in different social situations. I just feel intuitively that if you went day and date cinema and VoD that would be to the detriment to some degree of cinema. Obviously people still go for the social occasion but I think it would be dangerous to do that. That is the value about timing. Pricing is important as well. Because the web is a worldwide web decisions are going to have to be made in the context of worldwide releasing because obviously what happens in the UK is only part of the impact, particularly on piracy, and we have already seen much more worldwide simultaneous release dates and we have seen a closing of the gap between cinema and DVD and on-line. However, I do not think anyone, as yet, has got the optimum situation and everyone - British film industry and Hollywood - is looking at it. I have to come back to where we came in. If we get it right then we are in a very attractive position because I do believe that digital will mean more availability and therefore more demand, particularly for Britain and the British film industry, but if we get it wrong and get the windows and the pricing wrong we could cannibalise our industry. Mr Woodward: Following from that there are cultural and social benefits to the community from cinemas as places that people gather, and I think our concern would be that if the operating margins of cinemas are tight, if we start to lose cinemas, we also start to lose in a sense, the USP of what a film is because what differentiates a film from a television programme or a single drama is the impact and the scope and the scale of the way that product is released in the market place and the impact that the cinema release gives it, so in the short term it might be in the interests of rights' holders to spend less time and energy and care with their product in the cinema in order to increase their on-demand revenues but this balance is important because if it goes too far the wrong way, you end up potentially killing the golden goose. Chairman: We have nearly covered all the areas we wished to talk about but I will bring in Alan Keen quickly. Q599 Alan Keen: You have just been explaining the things I was going to ask about. Who is it who is making the decisions? How much do the people who make the films care about the cinema aspect of it? Obviously you have just been saying it could damage the whole industry if the balance is not right. Are you confident that the producers of the films are really aware of what is happening? Are you aware of discussions? Are there discussions going on or is it just marketing people who are going to make the decisions? Mr Till: Certainly the volume of the debate is deafening and whatever decisions will be made will be made very publicly. That does not mean necessarily they will be rational and smart and sensible decisions, but obviously everyone hopes they are. There is an emotional commitment to cinema from a marketing perspective. It is still the platform that launches the film. It is where the marketing money is spent. It does differentiate it from high-quality television, as John said, and films are still made. I am sure 999 directors out of 1,000 when they make their films, if they have one vision, it will be for the cinema screen rather than the television screen. People are committed emotionally but it is important that the industry worldwide does make the decision that produces the highest aggregate of revenue. Obviously in a commercial industry that is their motivation, so the hope is that there will be a rational conclusion. Q600 Alan Keen: You talked in the submission about going from cinema to DVD, pay TV, free TV and you said that might go down to just two. I know you are hoping deeply that it is cinema and then, I presume, video on demand or films on demand? Mr Till: Yes, I am sure you are aware the current cycle is cinema, four months to DVD, 12 months to pay television, and then another 12 to 15 months to free television. Then obviously there is catalogue and syndicated cable value. With video on demand it will get much, much more complicated. I personally think - and this is a personal point of view, the Film Council has not got an official point of view yet, we are still debating it - it is also worth stressing that it is not today's issue, it is tomorrow's and the day after's issue because video on demand is not widely available at this point in time. It is coming, but it is tomorrow and the day after. I would hope that you would launch theatrical and you would keep that whole value of the cinema and then the three to four month window seems appropriate to differentiate it and then you go video on demand. At the same time it is available on DVD because the consumer still, as the music industry has found, in large numbers wants a finished package or product to own. Even then, there will still be a value for pay television because people still want movie channels, a lot less than now because of video on demand, but, after Sky, video rental still existed in this country and there will still be some value on free television. The broadcasters in this country absolutely have a critical part to play going forward. We must learn from mistakes with Sky on pay television. I think it is very significant at the moment that in the last 12 months we have had very good conversations with the BBC who said they appreciate in this changing landscape the value of film to their schedules as a broadcaster, and they have dramatically increased several-fold their commitment, subject to a satisfactory licence fee agreement, going forward to British film. I would like to think we are in the middle of a dialogue with Channel 4, the other public service broadcaster, and we have said to them, "Look, you particularly have always been very film aware. You have taken your pay film channels and free channels and in many parts you are a broadcast entity in your own right, but as a window into video on demand we believe that you Channel 4 as a public service broadcaster have to get much more supportive of British film," and we are a little frustrated at a time when they are saying they do not agree with us that they are doing a 250 million deal with News Corporation Twentieth Century Fox for American films. One of the Film Council's priorities over the next few months is to encourage and persuade Channel 4 to be much more supportive of British film in this changing landscape. Q601 Alan Keen: We have gone from very large screens to tiny screens. We saw in South Korea live TV on mobile phones from satellite and people on trains getting their own service. Have you any thoughts of film going out at that level? It is new media we are looking at in this inquiry. Mr Till: What we have found in the last 20 years in this country is the consumer really enjoys film as an entertainment medium as much as anything else and they will absorb it wherever they can. Obviously the telephone screen is not suited necessarily to the production values of a huge film, but I think the consumer has such loyalty to film they will still embrace it on telephones. Also the mobile telephone is an incredibly valuable marketing tool to market films, so at the very least it is a fantastic market medium. Q602 Helen Southworth: What impact are high-definition television and plasma screens having now and what impact are they going to have in terms of film? Mr Till: Predictably because film is a medium which usually has higher production values, by definition it will benefit more than most from the quality of the viewing. The DVD player and the high-definition television and these big home screens are tailor-made for film. Q603 Helen Southworth: Is it increasing the market at the moment? Mr Woodward: If behind your question is a suggestion that the availability of big plasma screens in the home means possibly people will not go out to the cinema in future, we do not believe that. Q604 Helen Southworth: No, what I was actually asking was will they also be wanting to see things fast at home? Mr Woodward: Yes. Mr Till: Fast? Q605 Helen Southworth: Rather than waiting 12 months? Mr Till: That is video on demand, that is why personally I think three to four months on the back of theatrical, as I said before, is the optimum window. They will not wait 12 months for a pay television channel, but I believe they will wait three to four months and then very much enjoy the experience, going back to the point earlier about how you can have a two or threefold increase in the video rental marketplace which in itself is pretty buoyant. Q606 Paul Farrelly: Could you just remind me how cinema attendance figures are stacking up at the moment compared to, say, five or ten years ago? Mr Till: This year there has been a little blip in the UK and they will probably be down - obviously we do not yet know - 5% to 10%, but in the previous four years there has been growth. Q607 Paul Farrelly: So there is no downturn trend? Mr Till: Not at all. What has been really interesting is we have found throughout Europe that there has been a pretty steady growth over the last five years, with peaks in years where the country does very well with its local films, so some of the bigger European markets had a soft 2005 because there were not many successful local Italian films in Italy and German films in Germany, but this year it is the other way round so Europe has had a very good 2006. The UK just from a timing point of view has had a slightly softer 2006 with British films, although the Bond film may single-handedly change that, compared to 2005. As long as local films are strong, which is obviously very important for the British film industry, there is an increase in cinema admissions throughout the UK and Europe. Q608 Paul Farrelly: I asked the question because I have got one of the excellent briefs from the Clerks here which talks about video on demand, which we have touched on, and then goes on to the catch-all question very gloomily: "What will cinemas need to do to survive?" It is not immediately clear to me that video on demand as a new medium through either cable or satellite or streaming through the internet will necessarily eat into cinema attendances rather than other formats such as DVDs. The industry has gone through a number of formats. I will take my son and daughter to watch a film and afterwards you would not buy them the video but you will buy them the DVD because the little blighters will pester you because they want the interactive Thunderbirds games to play, so that has lifted the income to the film industry. I am not quite clear, are there competitive pressures inherent in media such as video on demand that will push producers and distributors to release everything at the same time? Mr Woodward: I think you are at the core of the issue here. If you own a cinema you only have one way of making money. Well, you have two because you can sell popcorn and concessions, which is an important part of the business, but leave that to one side. You only really have one way of making money, which is for the limited period of time in which the film is available only in cinemas, you hoover up as much money as you can by bringing as many customers in through the door. Once the film is out on any other medium, be it DVD, video on demand or television, your audience will drift away, so if you are a rights' holder as opposed to a cinema owner you have more choices and more options and you are able to say, "In order to maximise my revenue, how long do I want to put it in the cinema for and create a massive marketing campaign and, while there is still a halo affect around all the advertising money I have spent, how quickly do I want to take the product out on to DVD now and video on demand in the future?" That is the crux of the issue because the danger the cinema owners will say that they are facing potentially is that their window of exclusivity is being squeezed by rights' holders who want to get the product out to other media as quickly as possible, and that takes us to the question of where is that flexibility, where is that balance. Q609 Paul Farrelly: Their share of the profit is going to be under even more tremendous pressure as a cinema owner? Mr Woodward: That is correct and the fundamental point about the UK is, unlike countries like France, there is no regulation or any legislation around these window period times. It is entirely a matter for the market to decide and negotiation between the rights' holders who own the films and the cinema owners. Q610 Chairman: Can I thank you very much. Mr Till: Thank you. Memorandum submitted by British Board of Film Classification Examination of Witnesses
Witnesses: Mr David Cooke, Director, and Mr Peter Johnson, Head of Policy, British Board of Film Classification, gave evidence. Q611 Chairman: Can I welcome David Cooke, the Director, and Peter Johnson, the Head of Policy, from the British Board of Film Classification. Good morning. In your evidence you have identified a number of ways in which loopholes of the existing laws are being exploited but obviously the pace of change is very fast and we are hearing about different ways of distribution. Do you actually think that we are going to need to go back and look at the whole way in which we regulate content to take account of these changes or are you still concerned that we should address these existing loopholes? Mr Cooke: We think that most of the existing loopholes are pretty marginal. In a way they are things that are enabled by the internet and things that film classifiers all around the world are probably facing. They certainly do not seem to have had a damaging effect on the DVD market in recent years, which has been booming. Our fundamental concern is about what might happen in the future, starting right now when things could be very different and we would face not so much a loophole but possibly a bypassing of the Video Recordings Act in quite a major way. Let me just try and explain this. Last year 17,000 titles were classified by the BBFC and 13,000 of those were DVDs, so that is very much the bulk of our business at the moment. In principle, all of those titles could at some point in the future migrate to distribution by download rather than in physical format. Lawyers disagree about what precisely the impact of the Video Recordings Act is in that situation, but I think that the general view is that the Video Recordings Act probably would not bite. That has not been tested in the courts yet. That could produce a situation in which our current, we believe, quite well respected and trusted system of age ratings and consumer advice would cease to apply and we know from our workload at the moment that there would be some very abusive material included in that content, and we have given some examples of some of that in our evidence. Self-regulation would obviously apply in that context but the question is really do we believe that that would be adequate or would we be in the kind of situation that we faced in the early 1980s with the concerns on video nasties. We think that there are probably two broad approaches to tackling this problem. We are certainly not pitching to trespass on anybody else's patch or to rub up against other regulators and we are certainly not pitching to try and regulate all downloads, which will constitute a huge and variegated mass of material, but we do think it would be possible to look quite carefully to seek to identify that part of the download market which would be very similar to DVD retail and DVD rental and to seek to bring that within the Video Recordings Act. That would be one approach. We can well see that that would be controversial and would be against the tenor of some of the other discussions you have had in the Committee. Another approach which could be considered, either in conjunction or separately, would be to look at what kind of co-regulatory offerings were possible in this new environment. We believe that our expertise and the trust which BBFC ratings and consumer advice have and the high recognition factor that our ratings have, are the kinds of things that would enable us to play a part. Q612 Alan Keen: There is obviously going to be some need for self-regulation. What connections and discussions are you having with other people that you cannot really control yourselves? Mr Cooke: We talk a lot and have very close links with the self-regulatory organisations at the moment. We were talking earlier this week to ATVOD, who bring together a number of the current and future video on demand offerers, and we have also talked a lot to Icstis who operate in the area of mobile phone content. We talk a lot, too, to broadcasters such as Sky, the BBC and Channel 4, and we also, as you know, cover the top and difficult end of the video games market. We have very close links with PEGI, which is the pan-European games system. We have had exchange visits with these organisations. In some cases we have provided training sessions for them because we have particular areas of expertise like child protection or dealing with pornography where they have been very interested to pick up on it. There is a worry for us though to what extent are we diluting our brand and passing on our expertise in a form that will not get operated in quite the way that we would like to operate it. Q613 Alan Keen: What about websites which are almost uncontrollable? What is being done and what more can be done towards that and should you be involved? Mr Cooke: Are you thinking of things like user-generated content and so on? Q614 Alan Keen: Yes? Mr Johnson: We cannot honestly claim that what we regulate at the moment - films, DVDs, video games - involve very much user-generated content, so in a sense we cannot come along and say we are the experts because this is part of our current practice. What we do know, though, is some of the worrying material, some of the abusive material, whether it is generated by users or others, is the kind of area where we do have particular expertise. We spend quite a lot of our time looking, for instance, at sex works and trying to spot what is abusive in sex works because sometimes it seems to us that no human intelligence has been applied at all to what is being submitted to us, and we really need sometimes to make very detailed cuts to that kind of material. We have developed quite an expertise in the area of indecent images of children, which again is a very important element of our general aim of protecting children through the classification system. We have developed expertise in the area of animal cruelty. We have developed a lot of expertise in areas like what kind of techniques might children imitate and which are the ages to be particularly worried about issues like self harm or the portrayal of drugs and so on. So we believe that we do provide a pool and a source of expertise that we would be very happy to make available in dealing with material on websites. Peter, is there anything you want to add to that? Mr Johnson: With websites everyone has to recognise, and certainly we recognise that the days in which you could control everything that people could access are gone, unless you want to impose some sort of Chinese solution, which I do not think anyone is in favour of. I think what can be done and what the BBFC can offer is a way to enable content providers and those who are seeking content to access that content in a safe area and enable content providers to make their material clearly labelled in a way that the British public understand so that members of the British public who are seeking content for themselves or children in their care will know that that content will meet certain standards. I think with the standards that we have established on film for over 90 years and on video for over 20 years, which are widely recognised and trusted in the UK, it seems sensible that websites make use of those in order to label their content in a way that the public can understand. Q615 Alan Keen: Do you feel that government and Ofcom come to take advantage of your expertise enough? Are you surprised sometimes that you do not get more requests? Mr Cooke: We have very good working relationships both with government and with Ofcom. For instance, we have been talking a lot to Ofcom recently about labelling and also about media education, because that is another strand of our activity. We do quite a lot of work with schools and colleges. I think everybody is wrestling - and I am sure lots of other people have said this to the Committee as well - with what the implications of the new world are going to be and which are going to be the kind of approaches which might be most fruitful. We would be quite happy to consider alternative offerings to our current system of regulation, which essentially involves seeing everything all through in advance, and it is a very thorough and careful system of regulation, but one that you could not describe as light touch. It is one that has been used for films for a long time, but we would be very happy to look at whether there were other kinds of regulatory offerings that we might provide in this new world. For instance, we classify films and DVDs on the basis of guidelines which we update every three or four years to make sure that they are in line with public opinion and the issues that the public thinks are important. The last time we did that it involved consulting 11,000 people so it was a very major exercise, one of the biggest consultation exercises that a regulator has done in this country. It may well be that individual players in the new markets might not want to undertake anything like that but might see some attraction in trying to derive some rules of practice from the guidelines which have served us well in the area of film and DVD. Q616 Alan Keen: Finally can I say that in an uneducated past, like many people, I thought you must have an interesting job but having read your submission this morning I think it is one of the last jobs in the world that I would like to do. I would like to thank you for what you do. Mr Cooke: It has its compensations but it has its less pleasant side as well. Q617 Mr Evans: 20 years ago you were all powerful; now you have not got a leg to stand on really with the new media. You say that you have got all this expertise but, quite frankly, when you are looking at the internet broadcast stuff that people can receive as good a quality as if it was on the telly, and you say you have got a role there, are people not in reality bypassing you? Mr Cooke: It is obviously a danger and that is why we are bringing these issues about the scope of the legislation to you. We think that it is worth looking at whether the Video Recordings Act, which is obviously 20-odd years old now, is able to cope with the kind of situation we are in, but I do not think it follows that there is nothing you can do, and countries obviously all around the world are looking at this and different approaches are being brought forward. One piece of work which I am involved in in a personal capacity is that I am a member of the PEGI advisory board. This is the pan-European games system and it is doing work on whether it is possible to provide any kind of regulatory service in the on-line area. That runs right up against the difficulties that you have just mentioned of how on earth do you regulate on-line games. PEGI is doing some work to see whether it is possible to provide a kite-marking service for portals that distribute on-line games allied to a modified version of its questionnaire which is a self-regulatory questionnaire for classifying games. Nobody pretends it is straightforward, and I think the jury is still out on whether this is going to fly or not. That is a very real example of an attempt to try and provide an offering for parents and the public in this very new and difficult area. Q618 Mr Evans: Peter mentioned there is the Chinese route but nobody wants to go down that. So then you are left with the reality of the situation which is that you exist and you can provide a safe haven for people who want to use the internet so that the youngsters and the kids and those who do not want to see video nasties and various other things can feel safe in the knowledge that they are not going to be harmed in that way, or their kids will not be harmed in that way, and then there is the other side of it which is the free-for-all where everything is available to everybody. In the past, you were able to control all of that with film classification and the classifications that you gave for games, but the reality is that basically 12-year-olds can see things now on the internet that before you at least guarded them against. Do you accept that that is roughly where you stand now? Mr Cooke: There is a difference. It is possible now but it is not in a way that fundamentally affects the regulatory protection that we provide. Yes, you can find things on the internet, for example you can probably find uncut versions of films that we have cut and you can probably find versions of films that we have banned as well. Q619 Mr Evans: Do you look on the net to see if that is so? Mr Cooke: Yes, we do. Q620 Mr Evans: Have you found versions of films that you have banned being made available? Mr Cooke: Yes indeed, and every film regulator in the world has the same experience, but that is not a reason for giving up. I wonder if I could perhaps ask Peter to talk a bit about some of the discussions that we have been having with distributors and with others to indicate what some of the possibilities might be. Mr Johnson: I think it is worth saying just before that that since videos have been brought into the home, essentially children have been accessing age inappropriate material in a way that they did not before that but that did not make the Video Recordings Act irrelevant or pointless. Part of what we are saying is that it is not just about control classification, it is not just about controlling viewing; it is also about being of public value in itself. Parents especially but also other people find it useful to have a trusted guide to what they intend to view that they can use in order to control their children's viewing. It is not going to work without parents taking control of what their children access on-line, but if we have a system which people understand of material being tagged and classified, for instance using the BBFB's classification symbols, that can work with parental control systems so that parents can control their children's viewing with our help. What we have been talking to content providers and others about over the last few months (and talks are continuing) is about what service we can offer. For instance, a lot of the companies which have started to offer downloads have started appending our classification symbols to them because they recognise that that is a useful piece of information for the public. What we want to do and what we are talking to the industry about is formalising that so that, for instance, when a work is classified for DVD release we would also give it a download certificate which would carry with it the right to use our symbols and our consumer advice but also an obligation to tag it so it could be read by parental control systems with information that tells them what the classification means, and links into our website as such. We are finding a positive response from the industry about that because they recognise, faced with the jungle of the internet which offers everything, there is a value in offering to their customers a guidance which they understand. Especially with film content the guidance they understand is the guidance of the BBFC classification and consumer advice that they see every time they go to a cinema and every time they rent a DVD. We are also talking about, as David mentioned, offering some sort of franchise model to the more dynamic websites where you do not have a fixed offering but where things are much more dynamic, which could be done at one removed perhaps using our guidance and our training and our supervision but not actually involving pre-publication oversight. Q621 Mr Sanders: In your evidence you made the point that unregulated new media does not yet overwhelm the regulated sphere and you said "it is still some way off". Firstly, how long is that period of it being some way off, and even if it is some way off it still means there is an enormous amount of unregulated content out there that is not being looked at and regulated? Mr Cooke: There is but it is not causing a flight from our classification system at the moment because the download services which are being launched just at the moment are starting small and the DVD market up until have recently has still been very healthy. It is showing one or two signs of saturation at the moment and things could move quite quickly, but it is very difficult to predict. All sorts of industry analysts are trying to make predictions at the moment and it could take five or ten years or it could start to move very quickly, but our worry I think is that there could be a bit of a knock-on effect once we start to see a substantial movement of what would have been material released on DVD for sale or rental. Once that starts to go the download route exclusively, rather than in parallel with two offerings, then you could see a flight from the DVD market and the effects could start to happen quite quickly. I do not know if there is anything you want to say to that. Mr Johnson: I think it is very difficult to predict how quickly it will happen. The Film Council suggested people are making up their business models as they go at the moment. Certainly the offerings that are going to be made are going to be quite experimental. The industry will see how the public wants to consume this and what business models they want to follow, and will follow that. As I think was suggested earlier as well, there is still an appetite for the finished, packaged thing. People like to own "the thing" and not just a computer file and our research has suggested that, certainly going forward to 2010, there is not likely to be a significant decline in the number of DVD titles released in the UK. Predicting beyond 2010 is probably a bit of a mug's game when the industry has not really decided how it is going to do this itself yet. Q622 Mr Sanders: When uncensored material is available, does that influence how you censor material that is submitted to you? Mr Cooke: No, it does not at all. It is, as we have said, marginal at the moment and our approach has always been that we should apply our guidelines to the material which is submitted to us in accordance with the public's wishes. Q623 Mr Sanders: But are the public's wishes not being determined by the numbers that perhaps are accessing uncensored material elsewhere? In other words, if there is obviously an increasing demand (technologically driven admittedly but there is a demand) does not that then influence how you play a role as the censor to submitted material? Mr Cooke: I do not believe it does because certainly when we most recently redid the public consultation, which was 2004-2005, we found that all of the typical concerns around areas like violence, drugs, depiction of sexual activity, and so on, were replicated in much the same way from the kind of concerns that the public had expressed four or five years before. Okay, there are small variations at the margins. You get things like people may be slightly less worried about particular techniques in relation to drugs because there is a lot of drugs education going on and there is a lot of knowledge, so in that area the concern shifted a bit more towards glamorisation of drugs, but there was no evidence at all from the big consultation that the fact that at the margins some of this material is available on the internet it meant that the public did not think we should still have a proper classification system for films and DVDs and video games. Q624 Mr Sanders: To turn it around the other way, is it possible that the way you regulate material influences what is not submitted to you and appears in new media? Mr Cooke: It is difficult to know. We do know that our classifications and our consumer advice do influence self-regulation in areas that are not covered by the Video Recordings Act. We see, for instance, lots of attempts to copy our consumer advice in a way which we do not think is always very good. I do not think we have any evidence that we are causing a problem in the other direction because at the moment the material that we see on film and DVD and games is still coming in in large numbers. Pete, is there anything you want to add to that? Mr Johnson: That is very true. The mainstream market in particular, where we have already seen a flight away from DVD to the online market, has been in the world of pornography, where the mainstream market in the UK is particularly constrained by the specific controls on how that can be accessed, because people have to visit a licensed sex shop and the material cannot be sold by mail order. That has had an effect of driving some producers to do their business online exclusively because they can access their customers more easily, but that is a very specific effect of a specific aspect of the Video Recordings Act. We still have submitted to us very large numbers of R18 material, even though we cut 23% of it for being violent, abusive or obscene. That still comes in to us and, if there is a mainstream market for hard core pornography, that still comes to BBFC for classification. That has not been driven out by the ease with which it can be delivered by other means. Chairman: I am sorry we do not have more time, but thank you very much. Joint Memorandum submitted by the DTI and DCMS Examination of Witnesses
Witnesses: Rt Hon Margaret Hodge, a Member of the House, Minister of State, Department for Trade and Industry, and Mr Shaun Woodward, a Member of the House, Parliamentary Under-Secretary of State, Department for Culture, Media and Sport, gave evidence.
Chairman: Can I welcome to the final session of our inquiry the two Ministers with direct responsibility in this area, the Rt Hon Margaret Hodge from the DTI and Shaun Woodward from DCMS, and invite Helen Southworth to begin? Q625 Helen Southworth: Could you start by giving us an outline of your evaluation of the strengths of the UK creative industries? Mr Woodward: Yes. I think our vision for the UK's creative industries is to ensure that we maintain our position and build our position so that we are one of the world's creative hubs, by which I mean the talent involved in content creation, in technology, right the way across the board in all the creative industries that we might define from film, television, through architecture and video games. That obviously is about engaging fully with the whole agenda of new media, again about content and about technology. We are in the UK, as you know, in a position whereby the creative industries, if you put them together into a block, represent something in the order of 7.5% of GVA of the economy. They have grown in the last five years at about twice the rate of the rest of the economy. Each year they employ an additional 2% of the workforce which compares with around 1% for the rest of the economy. For the 21st century for the UK, this is an enormous engine of growth and an enormous opportunity. The digital revolution that is taking place, the consequences of convergence of platforms and of content are presenting the UK with an enormous opportunity which puts us, I think, as primus interpares in Europe and creates enormous opportunities for us globally. Our task is to ensure that those industries are enabled to grow. It is not our task, I think, to pick the winners and spot the losers. What does matter is ensuring that we create an environment in which those industries can prosper and grow. That is about therefore enabling them in terms of access to skills, access to finance. It is about ensuring that we have the right regulatory environment which is not an invitation to regulate; it is, on the other hand, an invitation to make sure that the environment in which these grow - and the consumer enjoys these incredible choices now - is one which, on the one hand, protects vulnerable groups like children but, at the same time, does not stifle innovation, enterprise and progress. You see that, for example, with the problems that we are currently encountering with the European Union and the Audiovisual Media Directive that we have been engaged in in the current year. You see it in the challenges to issues around intellectual property and, as you know, the Gowers Report will look at that very shortly. It raises challenges for government of course because we are operating across a number of government departments. I think that is as much an opportunity and probably the right place for this to be because the temptation is to think: is what you need is a department for the creative industries? The problem is that the creative industries engage across many government departments and you do not necessarily solve it by creating a special bureaucracy. What you do have to have is an awareness in government about the opportunities. One of the most important things that will be emerging in the next 12 months at a government level on this is the Creative Industries Green Paper out of the DCMS and the DTI next year, which will for the first time properly badge in the context of government these 13 creative industries, their role in the UK economy, the problems that were thrown up for them, the challenges, the opportunities of the global competition that takes place. I think that will allow the industries the opportunity as well to see themselves in the same way that manufacturing and financial services do. Instead of being seen independently as a group of craft industries operating in the margins of the economy, their full strength and positions, the opportunities and the challenges they face can be embraced collectively. We have a very strong vision in government emerging for the role of creative industries. Our task is to enable those industries to be extremely successful and to ensure that the UK holds a position as one of the world's creative hubs. Q626 Helen Southworth: In terms of the DTI are there any special issues for the department? Margaret Hodge: I think it is very good. Shaun and I work very closely together on the issues surrounding the creative industries and there is a lot of work that I do which is relevant to this particular sector. I am trying to pick up the primary examples. Many of the creative industries start as micro and very small ventures. Therefore, the work that we are doing to support SMEs is absolutely crucial, whether it is support through the RDAs, Business Link, trying to look at deregulation so you get an environment which enables them to grow or whether it is looking at equity finance for businesses. That is all important. There is a whole area of advice and support that we can give to the creative industries in the support we give through the RDAs and Business Link first. Second, there is a whole lot of work that we can do through our research and development endeavours which will support the creativity in those industries. I take, for example, the technology strategy, where we have a board which is business led, whose task is to ensure that knowledge created in the university sector can be translated into products in the market. Much of their work is supporting the creative industries and over the last couple of years there has been £30 million invested in a number of projects around the creative industries. That would be another example. The BBC has the money out of that and a number of other small companies have. The third one is for regulation. Shaun and I worked very closely together on the regulatory framework, particularly looking at the impact of European regulation on the UK and the development of creative industries. Fourth I suppose is the work that UKTI do in trying to ensure that we get the proper inward investment. We think of Nintendo and those sorts of people that we want to come in. Also, that we get exports and outward investment. I have just come back from a trip to Japan, Korea, South Korea and China where I spent some of my time working with British companies looking at the export of computer games and that sort of thing. That is something else. I suppose another area would be spectrum where again Shaun and I are working together on spectrum allocation to ensure that that also supports the development of the creative industries and other things. Those are just some examples where I do work, Shaun does work and we work together. Q627 Helen Southworth: We have taken evidence from people who have reminded us that Silicon Valley worked incredibly effectively in developing knowledge transfer because it had the lawyers, the accountants and the other business networks for people to be able to role things out. How effective do you think we are in developing relationships between universities and the RDAs and the local business sector to get that to work effectively here? Margaret Hodge: I think we are doing much better than we were ten years ago. When I compare us to the States, the States have a slight edge on us in two ways. There is a better entrepreneurial spirit there which we are still trying to grow here through the work that we are doing with education and training and through the work that we are doing encouraging entrepreneurship through the RDAs. The other thing is access to finance is much easier. People are willing to take risks more in the States than they are here, so it is easier to raise the first bit of money. If you do not succeed, that is not seen as condemning you to for ever being not good for credit ratings and therefore not able to raise alternative money. It almost becomes a badge of respectability to try and do business and fail. You can start again. I think that is the difference. Beyond that, I think we are getting much, much better. I do not have the patent figures in front of me but we are much, much better at developing the knowledge and converting that into products. We have to keep remembering we have more Nobel Prize winners per capita in the UK than anywhere else in the world, so we have a huge strength in our university sector. We have to consistently build on trying to get that translated into priorities better than we have. The move we are making with the Technology Strategy Board to establish that as an entity itself entirely run as a business but advised by the various sector skills councils and others who have an expertise in a particular sector of industry I think will strengthen our ability to translate academic findings, new ideas and research into productive endeavours in the UK economy. Mr Woodward: The issue of access to capital is an issue that we need to address in the UK. That is not the same as saying of course that the government should be stepping in and picking the winners and the losers. Undoubtedly, I think access to capital, the spirit and environment of venture capital investment in the US and the role of Angels in the US in relation to creative industries are more vibrant. I was there last week looking at that. Having said that though, I think we should be cautious about doing ourselves down by becoming enamoured with a mythical view of Silicon Valley. There is no question that Silicon Valley was the golden place to be in the 1990s but we also remember that burst that took place on the back of that. An awful lot of finance fell as a result of the collapse of that dot com billionaire boom that suddenly fell apart. I think it is worth therefore just saying to ourselves: "What are we trying to achieve as a result of this?" Let us take, for example, the global media and entertainment business. This is a business which is growing by 6% a year in the globe. This is a business which is valued at 2010 to be in the order of around 1.8 trillion across the globe. How is the UK placed? Again, last week I spent time going to Disney and Fox. It is incredible if you sit down and talk to them about their appetite for consuming UK television formats. If you look at the extraordinary success that has taken place for the UK markets in television in terms of programmes like Who Wants to be a Millionaire? The Weakest Link, Wife Swap, the export of those, the way that, for example, they are looking in the stations in the US at the format that Andrew Lloyd Webber developed with How do you Solve a Problem like Maria? - these may seem small things but they are very, very successful and they will not be bettered by having better access to capital or venture capital. Secondly, look at the video games industry. We are the third largest manufacturer in the world. We have more consoles sold in this country than any other European country. We have people on average playing 12 games a head here compared with three or four in France and Germany. Again, there are issues undoubtedly to do with access to finance for games developers in the UK, but we should not be swept overboard by some myth that in Silicon Valley they have the magic answer to this. Very clearly, although the US and Japan are first and second in relation to the video games industry, we have a very successful games industry here. The issue to address in relation to the video games industry I think is as much about access to skills, providing students and new people into the industry with degrees in physics as it is about access to finance. You have to balance those two. Government can create the environment for that but government has to be very cautious about trying to be responsible for picking winners and losers. Margaret Hodge: I agree entirely with what Shaun has said. What we are trying within DTI and across government to do is look at where there is a market failure on access to finance. It is in that SME sector so it is relevant to the issues that you are talking about in the course of this inquiry. We have established a number of funds where we are a partner. They are mainly private sector led and try to fill that equity gap for the very small SMEs who may not be able to find the risk capital, under two or three million, that sort of level of finance. Those are incredibly successful and appear to be really effective in filling that gap in the market. Q628 Helen Southworth: In terms of the government creating an environment or an environment being created, what is your evaluation of the significance of Media City in that? You describe the BBC as one of the country's most powerful creative engines. What role should it be playing? Mr Woodward: You only have to go anywhere in the world to hear about the reputation of the BBC. I think the government quite rightly values it, and thinks it is extremely important that we have a strong, independent, vibrant BBC that can be an engine which maps part of the digital world in which television is moving. That being said, whilst the BBC must be strong and independent, it must also offer value for money. I suppose it might just be worth therefore parenthetically reminding the Committee that is why it is taking so long to achieve a settlement on the licence fee because it is extremely important that at the end of the day whatever figure we emerge with is one that does give the public value for money. There is no question they are willing to pay for the BBC. There is no question that they want the BBC. There is no question that the government wants anything other than the strongest, best BBC we can possibly have but it is not a BBC at any old price. Having said that, I believe that the indication from the governors to say that they want to move to Salford is very, very important. You raise the issue of Media City. It is important for the Committee to recognise, as I am sure it does, that when the governors were looking at where they would move the three departments they had a choice in the end between Manchester city centre and a 200 acre site at Salford. They could have taken a brand new office building or reconverted building in the middle of Manchester. That undoubtedly would have been a fine thing to do for Manchester city centre and 3,000 people would have moved. The opportunity that is afforded by going to Salford is to create what you would see in Dubai or in Seoul, for example, which is a Media City. In other words, the 3,000 jobs that the BBC intends, as the governors have indicated, to put into Salford will create probably another 12,000 job opportunities as well, opportunities for other television production companies, for independent companies, for film companies, for video games companies, for other areas like architecture, publishing and software to move in; to create on the back of that a learning environment with an academy, links to research and development centres of the kind Margaret was talking about with universities, all for the creative industries. Suddenly we would have the prize that you see in other parts of the globe which represent our fiercest competitors. Why is Seoul doing so well? Why is Dubai doing so well in relation to this? Because they understand the importance of convergence and the opportunities that are created by having a physical environment for that convergence to also happen. I think the BBC's declared intention to move to Salford is essential and I obviously think it is extremely unfortunate that indications were given by the BBC that, if they did not get as much money as they had originally bid for, in some shape or form the move to Manchester might be at stake. That would be, quite apart from anything else, a huge mistake for the BBC's long term success because I think the environment they intend to create at Salford is one that cannot possibly be created in the physical spaces that are available to them in London. The physical space, that 200 acre site of which they would only occupy a quarter, is the vibrant digital community that I think has spurred much of the success in other parts of the globe. If we are to be successful in the UK in the long term, the opportunity created by the digital Media City in Salford is absolutely essential. Mr Evans: I hope also that your words will act as a restraint on the BBC from giving millions of pounds of licence payers' money to people like Jonathan Ross and his ilk. Chairman: I do not think we will go down that road at this moment. Q629 Mr Evans: Would you like to comment? Mr Woodward: On the one hand, I am wishing to accept the restraint of the Chairman whose physical and intellectual restraints I am always happy to be subject to but, more importantly than that, I think one should recognise that the BBC operates in a market. We have again to make a decision as to whether or not we want an independent BBC or whether or not we wish to say we want independence and, at the same time, to tell the BBC what contracts they can and cannot make. I think the BBC can be in no doubt of the displeasure they have incurred from Her Majesty's Opposition in paying Mr Ross so much money. Having said that, if they were going to have quite so much opprobrium from the Opposition, perhaps it might have been better for the leader of Her Majesty's Opposition to have declined the invitation to appear on Mr Ross's show. Chairman: Hindsight is easy. These are important issues that we are covering but, since both Ministers have indicated that they would like to get away roughly on time, we have a lot of ground to cover. May we try and move relatively briskly? Q630 Alan Keen: For those who have only worked in London, the reason Helen Southworth is so happy is that Warrington is near Salford. The Secretary of State for Culture, Media and Sport was here just before the recess and used almost oratory to describe what the Green Paper would achieve. She said that it would set out the next steps of concrete and tangible action led by the industry not just as it is now but as it will be in five or ten years' time. What progress has been made, particularly with the new media which is what our inquiry is really about? What tangible progress has been made? Mr Woodward: The description by the Secretary of State about the government's vision and plans for the Creative Economy Programme is absolutely right. If we do not aim high, it will be difficult for us to succeed. When you appreciate the scale of the competition that we are facing in China, Japan and South Korea and from the USA, it is perfectly clear to me that it is absolutely essential that the UK does draw the creative industries together and that we explore the opportunities, problems and challenges that they are facing so that government can do its best to enable them to succeed. The noble vision is absolutely right. In terms of the rhetoric being converted into action, which is obviously what you are pressing for here, one of the proofs of the pudding here is in relation to the Green Paper that we are planning next year which comes out of the Creative Economy Programme. If I may, I can best illustrate that by the sort of ideas that have come by bringing the creative industries together and working alongside the non-departmental government bodies for those creative industries, the government departments, the Regional Development Agencies, the local authorities, all the partners involved in making this a success. The reason it is a Green Paper and not a White Paper is it is still meant to be a discussion, not a prescription. What it will throw up are the specific challenges. In relation, for example, to education and games should we be having academies for computer games or a games development centre as they have in South Korea? Should we be setting up digital schools film clubs? I put the emphasis on film clubs in relation to schools because we want to nurture creativity, as the Roberts Review rightly pointed out, within schools. If we want young boys and girls to think about a career in the creative industries, let us capture their imagination early on. Let us enthuse them. Let us expand the opportunities inside schools to interest them in film and television and the creative industries. What is emerging from the Green Paper in relation to education is also the need for a new generation of creative partnerships led by NESTA. In relation to access to finance, the work on the Creative Economy Programme and the Green Paper has thrown up the idea of an Arts Council venture capital fund and a national programme for the Design Council, pairing up design students and business students to plug the gap again that we have spotted between those new small and medium sized enterprises that Margaret referred to, which emerge precisely because of the creative talent and skills of the individuals involved, who may have no formal education at all. Then, suddenly, they find themselves running a £100,000, a £500,000 or a multimillion pound business but they have no skills to run it as a business. How do we put the creative skills of people on the one hand together with the business skills on the other? There are issues around research and development. How do we develop the knowledge transfer network partnership around intellectual property? Gowers is doing some important work but Gowers is not the only master in this field. A great opportunity was created when the Chancellor said, "Let's review the entire intellectual property environment." What is important here is not again to think that Gowers in a few weeks' time is going to produce the answers. I think it will put onto the platform for discussion by everybody the issues that need to be addressed in intellectual property. They are many from piracy issues in film through to issues around should we have a Copyright Minister, for example. Should we revisit some of our own intellectual property law at the moment? The whole issue of access has to be balanced against protection of rights for people. It is important we put these issues out and I think Gowers is a great opportunity for doing that. Again, those have been thrown up in the Creative Economy Programme because intellectual property after all is at the heart of the creative industries because what defines these as opposed to, say, car manufacturing is that at the heart of these industries are ideas. It is the monetising of those ideas, building them into a business, that defines these industries rather than the others. What the Creative Economy Programme has done - of course it is a new venture by government - is to bring these industries together with an opportunity of seeing what are the issues that they have in common that government needs to address, but not only government. Again, we should be cautious here because the solutions we are looking at are not necessarily about regulation or legislation. Indeed, if they are about regulation, it does not follow that it has to be state regulation or Member State regulation in relation to the European Union. Self-regulation is the preferred option. What is interesting is to look at the creative industries and see where self-regulation - for example, in the video games industry - has been so effective and in the film industry as well. There is the case of the European Union with the replacement for the Television Without Frontiers Directive. In areas where people instinctively feel that they should get government involved and regulate, the consequences of their current proposals would be disastrous for creative industries, not only in the UK but in Europe, because whilst on the one hand with the best of intentions, protecting children, they might drive out some of the bad, new, on-demand services, at the very same time they would drive out the good, new services that are coming to market precisely because the cost of compliance, the cost of the licensing regime, the cost of the bureaucracy, which would only operate in a market of the European Union but not beyond it, would simply mean that the good, new services, the utunes and the myspaces, would never come here in the first place. Again, it is about producing a balance and the Creative Economy Programme has been a very important first step in that. Let us be clear: this is not the first or the last word; this is the beginning of government beginning to address the issues of the opportunities and challenges for creative industries and it is a task which should go on for the 21st century. Alan Keen: It is encouraging to know that you recognise that the infrastructure is important, particularly when you are trying to develop creativity, because people do not always want to be involved with the bread and butter building. Silicon Valley's success was due to the fact that finance was available and business was ready to move in to help the creative people. I am very happy with that answer. Thank you. Q631 Chairman: You say that the Creative Economy Programme is a new initiative in government. In fact, the terms of reference are almost exactly the same as those of the Creative Economy Task Force which was set up by Chris Smith eight years ago, when it identified precisely the same problems that you have been describing. What has happened in the last eight years? Margaret Hodge: I think it is a bit unfair to say there has not been action. The Green Paper will take us to the next phase. If you look across government as a whole - Shaun has been doing more work on it in the DCMS - there has been a huge effort with a substantial impact on ensuring that we maintain our leading edge in the creative industries. Whether you look at research and development, training and education, the development of the academies, what we have done around regulation in Europe successfully to date, what we are doing around intellectual property rights, where we have a flexible system which has been quite effective to date, quite a lot has happened which give us this leading edge position and this growth that we have enjoyed over the last decade or so. We constantly have to renew and refresh and that is what the Green Paper will do but it is renewing and refreshing on the back of a lot of success, cross-government effort and effort from the industry as well. Mr Woodward: You need to see a balance taking place here. It is not just about what the government does; it is about the whole environment with which business operates in this country. The whole success of the UK economy now, nearly ten years of uninterrupted growth alongside the rest of Europe and the western world, is extremely important to the creative industries succeeding. The point I am making is not that something magical has happened in the last year. I am not suggesting that at all. What I am marking is the fact that in the last decade the UK has rightly begun to recognise the power of the creative industries. If you put that alongside what is happening in France and Germany, you can see that part of the problem we have with the European Union is the envy they have of what is happening here in the UK. One of the things that worries me when you ask a question like that is that there is a tendency here to diminish this into some sort of political debate. I do not think this is about political ownership of the creative industries. When one day there is a Conservative Government again I am sure that Conservative Government will want to do the same as this government is doing for the creative industries, which is to enable them to succeed. The question is how you do it. I think Chris was visionary to want to put this together eight years ago. It is right that it is still there and it should be there in 80 years' time because I suspect the creative industries in the UK will by then far have outstripped financial services and manufacturing. If you look at the size of that global cake that is at stake that I discussed earlier on, the UK is best positioned of all the countries in Europe to have the primus interpares share of that. The question is how do we keep it there? What I would point out to you in the example of video games is: why is it that we are still doing so much better than Germany? It is not that German young people and indeed older people do not enjoy video games; it is just that we have a better climate here. The video games companies like being here. If you visit a company like Image Metrics in LA, which comes out of a UK company, what you see is that we have created the right environment here but it is the right environment now within which the CEO of that company can take the leap forward that he and the company now have. They are now employing 40-odd people in LA and they are absolutely at the cutting edge of the application of video games technologies to all the creative industries. Q632 Mr Sanders: Would it not be better if those 40 people were employed in the UK rather than LA? Mr Woodward: It would not be possible for them to do that because what they are doing is directly serving markets in LA. The point is that it has a back reference to what happens here because what the owner of that company wants to do is to continue growing here in the UK. They have not relocated out of the UK. They have just expanded into America. As a result of that, money is coming into that company in America that benefits us back here. It creates more exciting opportunities for the people working in that company. If you talk to lots of young people, it is not difficult to understand that they are ambitious to work all round the world. We should not restrain their ambition. The question is: can we harness that ambition and intellectual enterprise in a way that benefits the UK in the round. What a company like Image Metrics does, by moving into those markets in LA, which also by the way has application now into the medical industry as well in that company, is fantastic for the UK. It creates an image of the UK as this creative hub and the interest that Image Metrics has attracted in LA in what is happening in the UK is a kind of cross-fertilization process for companies in LA to want to invest in what is happening here in the UK. I think there are huge benefits for us and we should be very cautious of viewing sceptically why a company like Image Metrics wants to have an office in LA. I think it is good news for the UK, not bad. Q633 Rosemary McKenna: What you have described is an issue that is facing all of industry in this country, this fear of failure. It is encouraged by the media. Only last week there was an announcement about the number of bankruptcies in the country. It was portrayed in all of the television and news media as a dreadful thing, whereas if people are going to try and succeed in a business it is inevitable that some of them will fail, but there is this feeling in this country that, "I must not do that because ...". What is the DTI doing to try to overcome that fear of failure that inhibits a lot of our people not just in the creative industries but in industry in general? Margaret Hodge: I think we are being successful. We have 600,000 more small businesses today than we had in 1997 and their sustainability is better. They are maintaining the businesses over a longer period of time, so there is some success. What are we trying to do? We are trying to provide the right economic environment which is absolutely key, so low inflation, low interest rates and steady growth, the environment in which business can prosper. The right support, decentralising Business Link into the RDAs, for example, to ensure a much more localised effort and support to individual companies, is important; and rejigging, as I am presently trying to do, the schemes of business support. We have something nearing 3,000, we think, separate business support schemes across the country and we are reducing those to 100 so it is very clear what you can get in terms of business support. That is important. Getting peer to peer support is really crucial so that it is people who also become the mentors and supporters to new innovators in business. We are expanding that a lot. I talked about the access to finance. We are filling that gap because there is an equity gap for the SMEs. I think everybody recognises that that has been an incredibly effective intervention by government. I talk constantly to the banks. I compare ourselves with both America and Germany. If you look at America, there is a greater willingness by the lending institutions to take risks. Q634 Rosemary McKenna: Do you talk to the media? Is there any work going on with journalists in all sections of the media to try and get them on board to say that failure is not necessarily a bad thing. Is there anything going on? Margaret Hodge: Not specifically, if I am honest with you. It is a good idea. I also compare ourselves with Germany. Germany has a regional banking infrastructure and I think that is very helpful in getting the regional banks much more closely related to the economics of development agencies in the regional governments in Germany. Therefore, there is a much better collective view around putting money behind entrepreneurs. Can we get the press to be kinder about business failure and see it as part of the way in which you innovate and risk? You will not always succeed and you have to risk and innovate and innovate and risk again. I think it is a good idea. I will look at it. Q635 Philip Davies: What do you say the banks should do? Be prepared to take more risks? Margaret Hodge: Yes, take a bit more risk. Q636 Philip Davies: Do they not feel perhaps there is a mixed message coming from government? The government is always criticising irresponsible lending and lending money to people who may not be in a position to pay it back and yet, on the other hand, you are encouraging them to lend money to businesses that they think have a much higher chance of failing. Margaret Hodge: I think you are muddling two completely separate issues. One issue is the indebtedness of individuals which is of concern to us and the other is the risk around business ventures which is completely different. There may be a tiny overlap on the margin but they are two completely different sets of issues. I think there is a caution on the part of our financial services industry here which is not mirrored in the States. Hopefully, the more exchange that we have and the more global we become, the more we will engage in a little bit more risk to back a few more potential winners. Until that time, our role in filling that gap is very important and we are doing that. It has been welcomed. Q637 Mr Sanders: Turning to issues around intellectual property, what themes emerging from the consultation under the Gowers Review have particularly caught your attention? Margaret Hodge: This is an attempt probably to try and pre-empt the Gowers Review recommendations which you clearly want us to do and which we are not in a position to do. We wait with interest for the Gowers Review. If I say some general things, we have on the whole an IPR system in the UK which has served us well. It has been pretty flexible and that is important particularly in this area where technology is changing so rapidly. It is really important to maintain that flexibility so that you can respond to new circumstances. As Shaun said quite rightly, Gowers will not be the last word on it but what we are looking at is ensuring that our legislative and regulatory framework is appropriate for the digital age and ensuring that we have the right balance between the interests of those who produce the creative industries content and those who consume it. We will see what he comes out with. There are a whole lot of circumstances which at the moment do not make sense. If I take one, if you are a teacher in a classroom and you put something on a blackboard, that is fine because that meets the education exemption and is not seen as disseminating the information, the poem or something that you may put on the blackboard. You are not disseminating that poem to others so there is no intellectual property right that you could possibly contravene. If you use a white board and it therefore comes up on individual PCs, you are then accused of disseminating and you would then be contravening IP rights. That sort of instance is where we want Gowers to modernise the system and make sure it works. Some of the techniques certainly in the digital world, where people are trying to manage rights, are worrying. For example, you can get your CD or DVD and copy it twice. You can copy it onto your iPod; you can put it onto your computer but once it has perhaps been copied four times you are no longer able to copy it. That is fine until somebody breaks the code and therefore that management of the right in that way becomes ineffective. There are really complex and difficult issues that Gowers will be looking at. Q638 Mr Sanders: In general terms, are you minded to look at this from the view of the producer or from the view of the consumer? Margaret Hodge: No. The whole point is that Gowers has to balance the interests of the consumer - hence my example of education - against the interests of the producer. Hence the example of those who have rights around a CD or a DVD and do not want it copied indiscriminately. You have to balance it. There is not a magic bullet on that. The judgment has to be made around balancing those two sets of points. Mr Woodward: These two issues around producer and consumer have arisen again and again in the work of the Creative Economy Programme and I am sure not only were they in Chris Smith's mind eight years ago, John, but they will be in your mind in future years. This issue is not going to go away. There are a few things that may be worth remarking on here. Even if Gowers produces a review in which there are recommendations and the government follows every single one of them, I believe this is an issue that we will need to revisit again in five years' time precisely because of the speed with which things are changing. A very good illustration of that is traditionally, for example, if you produce a written piece of work, you deposit it in one of the copyright libraries. How today do you deposit a website in a copyright library? Huge amounts of intellectual property are being created because of digital technologies in websites. How do you enforce that? I am sure Gowers will have views of jurisdictions beyond the UK but by and large we have to recognise our own limitations here. We cannot legislate for the rest of the world, even though sometimes some people think that we can. The intellectual property framework takes place not only therefore in a global environment in the UK but at EU level - as you know, there is a review going on at EU level in relation to intellectual property - and on a world stage as well. We have to persuade our partners out there to want to work with us because we cannot legislate on their behalf. We cannot force them to do things that they do not want to do. That immediately is instanced by something I know this Committee has been very interested in and has taken evidence on in relation to intellectual property and piracy in the film industry. I know there are proposals that some would like to make here to make camcording illegal here in this country, but if you look at the way that Harry Potter was released on 4 June and was available on pirate DVDs within the day that camcording almost certainly did not take place here. We can pass all the laws we want to protect the intellectual property here and make camcording illegal, but the point is if it happens in Taiwan or somewhere else what are you going to do about it? We have to be realistic about what we think we can achieve in all this. That is not to say that government should not take an active role in protecting intellectual property rights. It is not to say that government should not want to strike a balance between the needs of consumers for fair access and the producer protecting her or his work. There are many ways of doing that and, as you know, there are many proposals on the table for how you achieve these things. Without in any shape or form diminishing the importance of the Gowers Review, we should see it in context. I know, Adrian, that to some extent that is what you are hinting at. What we are going to have to do, like it or not, is work with our partners at a European level to create a better framework for the protection of intellectual property and fair access. Equally, we are going to have to recognise that we are dealing with these issues in the US and in the Far East. If you look at some of the major challenges to piracy of video games, for example in China, how do you deal with that? One of the answers that is emerging now - and there is a whole set of issues that comes out of this - is that the video games industry, some people think in ten years' time, will only be available online. What they will do is make it available in the first instance completely free but then to sign up to different levels you have to effectively buy that dimension of the service. What does that mean for retailing? I do not share the view, by the way, that video games are going to disappear from retailers in ten years, but again talk to some of those in the industry in the US, which after all is the number one in this industry. There are people there who are very serious players in this industry who think that may be a way forward. One of the drivers for that is the protection of intellectual property. It is a very complex issue. It is right that government should be engaging in it but what I am trying to suggest here is that any solution that we come up with is limited by our own jurisdiction. Secondly, any solution we come up with is likely to be overtaken by the speed with which these industries are emerging and changing. Q639 Philip Davies: We certainly might not be able to stop piracy on video games in China but ELSPA, the body that represents the video games industry here, certainly felt that the government could do something to help here which would be to implement without delay, as they put it, section 107A of the Copyright, Designs and Patents Act 1988, which has been on the statute book since 1994 but has never been brought into force. Their director general told us that bringing it into force would enable piracy to be dealt with much more vigorously and he could not understand why it had not been brought into force after more than a decade of it being on the statute books. Could you explain to us why it has not been brought into force? Margaret Hodge: Let me deal with the Chinese point first because I discussed IPR with various ministries in China and they are now making enormous efforts with a huge policing exercise. An army of people have been put in there to try and ensure that they provide a more secure IPR environment because they see that as absolutely crucial both for inward investment and for their exports. Let us not just write that off in the first instance. Q640 Chairman: We were told when we were in China that they had 80 people to cover all of China. Margaret Hodge: When were you there? Q641 Chairman: Earlier this year. Margaret Hodge: I was told there were literally thousands. It is interesting. I do not know who you talked to. I discussed it with a couple of the ministries. Did you do a similar exercise? Q642 Chairman: We went to talk to the National Copyright Association. Margaret Hodge: They might have felt that the effort was not sufficient. Q643 Mr Sanders: We were also told there is not much of a problem on the mainland. It is all the islands offshore which are responsible for the piracy. Margaret Hodge: That is an interesting reflection. On the question as to why we have not implemented that particular part of the legislation, the answer is it would be an additional burden on local authorities and would therefore need to be funded for local government. It is that which has been holding us back on the implementation. It is as clear as that. Beyond that, the Patent Office is working extremely hard across government with people in the police and people working in standards and local government to try and be more effective. Q644 Chairman: Does that mean you are not going to bring it into force? Margaret Hodge: It is not for us. It is an issue for DCLG to ensure that the funding is available for local authorities. Q645 Philip Davies: Are you lobbying DCLG to provide the funding? From your department's perspective, is it important that they should provide that? Margaret Hodge: Clearly it is one of the many things where it would be far better if we were able to provide it within the current financial constraints. You too, if you were thinking across government, would have to prioritise that against other things and not see it as an issue on its own. It is on the statute book; it can be implemented as and when those resources become available but it is not the only means through which we can control and police piracy and those sorts of issues. Q646 Philip Davies: In terms of what you said at the start, Shaun, that the important thing was creating the right climate for these industries, this is something that they clearly feel is very important in providing the right climate for their industry in this country. Surely, from your perspective, it must be a priority to persuade the DCLG to provide this funding? Mr Woodward: You are making a perfectly fair point. The question is: is it the right instrument and the right tool? Will the resources that go into it produce the outcome that is wanted? It is worth thinking about the time of inception of the particular section 107A we are talking about. The kind of thing I just described to the Committee about what the video games industry was describing to me about the trends in this would make this whole thing obsolete. If you had a position in which video games were only available online, you would not need a trading standards officer. I am not trivialising it in any shape or form. Having been Security Minister in Northern Ireland dealing with video piracy and DVDs in areas like Armagh where you know that historically the profits made from that were used to fund terrorist organisations, I do not trivialise this industry for one second. You have to recognise whether or not you are going to get the outcome that you want. It is interesting, is it not, to look back on the music industry in relation to this? It is interesting to reflect on where, five years ago, consumers with huge demands using the internet, to have access to music, were downloading music files and it was all illegal. The issue is what did you need to do. Did you need lots of policemen looking over people's shoulders at how they were using the internet or did you need to find a legal way of enabling people to download music files? It is interesting to note now the success of the music file downloading industry effectively, which now outstrips the sales of physical records by a mile. You are absolutely right to point to enforcement and of course I am not remotely suggesting that enforcement is not an important component part. My view is that what the music industry has shown us is that the way forward is using technology. The way forward on piracy is to make this a business which organised crime, for example, does not want to be in because it is not profitable, partly because of enforcement but partly because the consumer can get it much more easily than going out to a market place and getting a ripped off DVD where the quality may be inferior and you run the risk of being arrested. The point is that most people, if you offer them a way of being legal, would choose to do it. That is what the music industry has shown us. It does not mean to say that downloading that is illegal does not still go on. Of course it does. The point is huge revenue streams have now been created legally by the industry using technology. If you visit Disney, Fox, the major companies that are producing movies, if you discuss this issue with them, what is interesting is to sit down with their intellectual property departments and their technology departments and to now look at where they are in preparing themselves for dealing with this issue. I think you have to recognise that probably technology is more important than enforcement here. That does not trivialise the role of the trading standards officer but, if you take the view of some people in the video games industry about how they want to develop the industry, I am not quite sure what you think a trading standards officer might be doing in ten years' time. Q647 Philip Davies: It is not just the video games industry of course. We had the Film Council earlier on this morning who gave a list of things that they would like to see, such as clamping down on car boot sales and some of the things that go on there. They called for an introduction of statutory damages for infringement of copyright. Do you see any merit in building into that 1988 Act statutory damages for infringement of copyright? Margaret Hodge: We can certainly look at that but we would then have to set up a whole bureaucracy around implementing that. We have already said to you this morning quite honestly that looking at the resources required for the implementation is an issue. We now have this legislation in place, the Proceeds of Crime Act, where 50% of the proceeds of crimes can be reinvested in fighting crime. I think there is some mileage in us examining that across our two departments to see whether or not we can use those resources to augment the efforts we are currently making to police intellectual property rights. That is hopefully a creative way through what is undoubtedly a tight fiscal environment with limited resources and many demands on those resources. If we get that right and we can then extend the bureaucracy and extend the way in which we police it and extend the crimes and penalties surrounding it all well and good, but we should not introduce new law until we have the ability to implement it. We should, as Shaun said, look at alternatives which are more cost-effective and probably more effective also in their implementation. Q648 Philip Davies: There is always a reason not to introduce something for some of the reasons you have highlighted, but do you accept that some of these creative industries will only feel that you really do mean what you have been telling us today when they see some concrete action put in place? Mr Woodward: No, I do not accept that. It does not follow that introducing more regulation is what the creative industries want; in fact, it is the very opposite of that. What they actually want is something to be effective. Again, I point back to the music industry. It was very effective when a legal way of downloading was created by the industry. Again, you are being a little disingenuous about what the Film Council said because, of course, they did not only talk about enforcement, they talked about the importance of technology. As you know, there is a big issue which the film industry faces which is that it does have a solution in its hands in large part, which is it could, of course, on the day that it makes a film available in a theatre make it available as a DVD or, indeed, as an internet download. The very understandable lobby that comes back from that comes from the movie theatres that very much worry, as I think the Film Council told you, about the impact that would have on them. You have to create a balance there. The truth is it is not for government to legislate that Disney releases Pirates of the Caribbean 3 on a DVD or a download at the same time as it is opening in Leicester Square at the Odeon. If you really want government to move into that sphere I think you would find the creative industries cutting off your head. It does not follow that regulation is the answer to this. What does follow, I think, is that government enables a dialogue to take place and this dialogue is not only a dialogue that has to take place in the UK, and that is why it was so important, for example, that last week when we visited with the industry in the USA we talked to them about piracy, because the government takes the piracy issue very, very seriously. I do not think it necessarily follows that your solution is to engage 100,000 trading standards officers and 100,000 people to see over your shoulder every time you go online about what you are doing. Part of the biggest role here is in education. Media literacy is absolutely essential here. What we have got to get the public to recognise is that when they do these things it is a crime. As I am sure this Committee knows, one in four people in this country have viewed a pirate DVD. People do not think of it as a crime, they do not see it as stealing from somebody who has created some intellectual property. We have got to change that. One of the things we are looking at in the creative economic programme and the work across government departments is - most of us can think about this for a minute - how many of our schools teach intellectual property in any shape or form. Chairman: On that specific point I am going to bring in Alan Keen. Q649 Alan Keen: Why do we not put it into the National Curriculum? Mr Woodward: We are looking properly at the role of intellectual property in the context of the curriculum, not just as a small component part but actually getting people to recognise that. Margaret Hodge: It depends on what you do. It is integrated into the curriculum with some GCSEs. It is not universally available but in some GCSEs it is covered. Q650 Alan Keen: Are you confident that it is going to be effective? Will you succeed with the Department for Education? Are you succeeding now? Margaret Hodge: It is in those GCSEs. We have got the Academies emerging. The Creative Academies will be around and they will have an influence on the curriculum. We will have the Sector Skills Councils, there are two of those now in this area, and they will have a role to play both in developing curriculum ideas and developing particular qualifications which are appropriate. There is quite a lot happening which will support the infrastructure to spread knowledge and understanding on IPR issues. Q651 Alan Keen: It still sounds very slow. Can we not do it quickly universally through education? Why not? It is such a big issue, is it not? Margaret Hodge: Alan, as an ex-Education Minister the answer always lies in adding yet another thing to education through the curriculum and it is not always the answer in getting our kids to succeed by just adding yet another element in. Q652 Alan Keen: You are almost saying that it is not the answer, whereas ---- Margaret Hodge: No, no, no. What I am saying is put it in appropriately. Put it into the right GCSEs, make sure that the Sector Skills Councils that have an interest in this matter pursue it both in setting the curriculum for the qualifications and in the training they do of teachers, make sure that we spread the extent of knowledge that we get from the development of Academies so that can filter through into the education system. There are other ways of educating people. We are coming to the end of this session but, just out of interest, you do not necessarily have to do things through schools. Ofcom did a very interesting study recently of under-24s and what that demonstrates is that if you are 16-24 you are far less likely to be watching telly but you are extremely likely to be in a chat room on a blog doing that interactive activity. Why on earth do we not use that sort of understanding of how people spend their time and where they get their information to ensure that we provide better understanding of things like intellectual property rights and what they should do about downloading music, looking at videos, all those sorts of things? That is a much more productive way forward. We are always saying add it as another element to education which, as an ex-Education Minister, I am much more wary of. Mr Woodward: Again, it goes back to this idea of it being part of a much more complex partnership. Your instincts about wanting to get this into schools and into the curriculum are absolutely right, but equally we could get every school kid in the country educated around intellectual property but the partnership needs to take place with the industry too, the education is not just about the consumer and young people, it is about everybody, which includes industry. As I was saying to Disney last week, in a sense they are the victims of their own success. You produce Pirates of the Caribbean 2 and there is an audience out there so longing to see what Johnny Depp does next, what Keira Knightley does next, that they are salivating at the mouth. It is like going to a lap-dance club and then going outside and saying to everybody, "Now go home and go back to the monastery". Q653 Alan Keen: I have never been to a lap-dance club, can you explain it to me? Mr Woodward: I have not been to a lap-dance club either. What I am suggesting here is the industry has got to understand that if it creates this kind of saliva of "We can't wait for the next Pirates of the Caribbean 3", people will do a lot to get it in their hands. Here is my point about the music industry: if you create a legal way for them to get it when it is available, I think most people will take it. We need to do more with education and media literacy to get some of those who might be on the edge of doing it, and regrettably there will always be some who will not for a whole variety of reasons, and organised crime, so long as that remains a large window, will take advantage of it. I think one of the biggest impacts we can make on video piracy and elsewhere is about the engagement of technology. If we do that, if we get the education right in terms of media literacy, of everybody recognising it is illegal, if we create a legal way for them to meet their consumer demand, I think we will make a big difference. Let us be under no illusion here, we are not going to end it overnight. There are plenty of countries that have got much tougher enforcement regimes than we have and they still have a problem with this issue. We will make progress. Without raising the expectations too high, just being realistic, we can make progress. We will not make progress just by the National Curriculum, we will not make progress just by technology, but I do think creating a legal way for the consumer to meet their demand is a big part of the trick and historically I think there are areas of the creative industries we can learn from. Q654 Chairman: We are nearly at the end but there is one issue I want to touch on before we leave because I think it is important. Minister, earlier this year I heard you say very robustly that there was nothing good in the European Union Audiovisual Media Services Directive at all, but you were frank in your letter which you sent the European Scrutiny Committee in saying that our position was not supported, apart from plucky little Slovakia. Do you think that you are going to be able to prevent damage to the creative industries if, as appears almost certain, this Directive goes through? Mr Woodward: I think we have made huge progress in the last three or four months. As you know, I originally looked at this Directive and my view was that it was very well-intentioned by the Commission. Who could be against wanting to protect children, which was ostensibly what they were putting forward as the reason for some of this work in relation particularly to the extension of scope? As you know, in the spring of this year the UK had a very strong position in which the UK resisted any change whatsoever in the new Audiovisual Directive to the extension of scope. We changed our position, although heroically the government in Bratislava were with us all the way and they should be mentioned in despatches, because when we looked at it my view was that if we already regulated a television programme as a linear service, a transmitted service, the logic of simply saying, as we were at that time, "Well, we will not actually allow regulation if it is a non-linear demand service, an on-demand service", did not really quite follow because it seemed to me that so long as you believed there should be regulation of a television programme, how you get it is not quite the issue. However, that being said, Chairman, it also seemed to me that the principle that would allow us to say that, if followed through, meant you could also say that if something is not a television programme, however you get it, it does not need to be regulated. So, for example, the community organisation that forms a website of kids in a football club that gets some sponsorship and happens to be a moving image and they get paid ten quid for it, that should not be regulated any more than I think the activities of a MySpace should be. That does not mean to say that Member States should not have very strong laws of their own to protect minors, to protect vulnerable groups, but does it need to happen at a state level in which the European Union prescribes how countries can operate? My view was no. What we came up with was a formula, and it is interesting to see how countries have responded to this, in which we said if it is a television programme, linear or non-linear, then it can be regulated by the Directive; if it is not a television programme and not a television-like service then it should stay outside the regulation. The interesting thing was that we built huge support around that proposal and if the Finnish Presidency should decide at the Council of Ministers next week to try and bring this to some general approach I think we will find that British model is the model that will now be adopted. We have also built into that an amendment for media literacy because we believe it is extremely important that we continue to get Member States to want to educate their consumers across the pitch on this field. That has won huge support. On product placement I think that we are in a reasonable place now. Again, it is important that we do not close the door on product placement, as some of our European partners would like, but it is healthy that we retain some scepticism about product placement. The example that I give people who are vehemently against it is could you imagine that somehow the UK conspired to produce a situation in which we said "No product placement" and then next year the entire team of Friends, all six of them, decide they are going to make the eleventh series, and product placement, as you know, in the United States has a far bigger place in the television industry than it does anywhere else, and they decide that Central Perk becomes Starbucks, what are we going to do, say that we are not taking the eleventh series of Friends? I think General Elections might be lost on that kind of thing! I think it would be a very brave Conservative Party that actually campaigned against there being an eleventh series of Friends, although if you wished to we would invite that position. I say that because I think we have got to recognise the market in which we live, which is a global market, and therefore keeping flexibility is important, keeping self-regulation is important, being able to move quickly is important. I think the direction in which the Directive has gone on extension of scope along the lines I have defined is one that we could live with. On product placement and the changes to advertising, whilst we would like more liberalisation there is perhaps enough there. The one issue that has emerged which interestingly, and worryingly, was not in the original proposal is around Country of Origin. Country of Origin, as the Committee knows, is about the Member State offering jurisdiction in its own Member State and, therefore, if you are Disney in London, for example, in the UK, your jurisdiction is here and not in those places in the rest of the European Union to which you might be broadcasting or offering your service. There were a number of Member States who got themselves extremely excited at the prospect of moving from Country of Origin to Country of Destination. There are some compromises on the table. We are fiercely resisting the move that is taking place by some Member States towards Country of Destination. I made that very clear when I visited all the major media outlets in the United States last week because from the UK's point of view we are an extremely successful Member State, being where many of the United States' operations want to locate precisely because of our very flexible environment for the creative industries. We are keen to resist any move away from Country of Origin to Country of Destination. Q655 Chairman: I am delighted to hear that because it is fundamental to the whole basis of the existing Directive that has been very successful to us. Are we going to be able to protect that position or are we going to find that we and little Slovakia are the only defenders of this? Mr Woodward: As you know, there was extraordinary scepticism in May that we would make any progress in resisting the extension of scope and I am glad to report to the Committee that the sceptics were wrong. I think you should recognise that these are always difficult battles, as I know you do, and it is important to have the battles but there are some major partners out there who are very concerned about the movement on Country of Origin. It is important that we do everything we can to get those businesses which have come to the UK because of the current rules to register their protest not only in Brussels but also at Member State level in other countries as well because, once again, this is one of those things whereby good intentions have completely allowed people to lose sight of what the plot is here. There is huge commercial interest at stake here, not just for the UK but for the whole of the European Union. What we have got to do, as we did with the extension of scope, is to do the painful work of going around country-by-country visiting government-by-government and getting them to recognise the consequences of what may on the surface seem like a good intention, although I do not happen to share that at all on this issue, and get them to realise the huge commercial downside if they were to move to Country of Destination. I think we can win that but we have got to do a lot of work. Chairman: Minister, on that I wish you luck. Can I also suggest that you take a copy of the evidence we received from Google a week ago and circulate it to the other ministers attending the Council, I think they will find it very interesting. Thank you very much. |