Select Committee on Culture, Media and Sport Fifth Report


7  THE ROLE OF GOVERNMENT

212. We observed at the outset of this Report that many of the challenges posed by the rise of new media are ones for the market to address and resolve. Most of this Report has discussed the ways in which the various stakeholders—creators, distributors, broadcasters and indeed consumers—have tackled those challenges. Many of our recommendations have been directed towards the various industries or to Ofcom as regulator. Nonetheless, as we noted at the start, the Government has roles in helping to ensure (with Ofcom) an open and fair marketplace, and in preserving a balance between public access to knowledge and ideas and the ability of commercial entities to exploit full commercial value from creative products. The last few paragraphs of this Report discuss those roles.

Policy responsibility in Government

213. DCMS is the sole sponsor of the film, broadcasting, music and designer fashion industries, and joint sponsor (with the DTI) of the advertising, computer games, design and publishing industries. The DTI has specific responsibility for competition, innovation, consumer policy, the science base and the ICT sector; and it supports small businesses (through the Small Business Service), intellectual property (through the Patent Office) and trade.[531] The Government's stated aim is to ensure that an environment exists in which the creative industries can prosper and grow, by enabling access to skills and finance.[532]

214. The nature of DCMS as a Department without responsibility for core services, very often complementing others, and as a distributor of funds for public bodies, has in the past led us to question whether it has the weight within Government to represent its constituent interests.[533] In this case, however, there was comparatively little evidence suggesting directly that creative industries or broadcasters were poorly served by DCMS. The Entertainment and Leisure Software Providers Association (ELSPA), a trade body for the interactive games sector, told us that it had yet to be persuaded that DCMS was set to play an active part in promoting and supporting the industry, and it pointed out that the video games industry (unlike the film industry) had no Government-funded body to promote it and advocate its interests; nor, unlike film, did it benefit from tax advantages to stimulate and support production, even though it argued that it faced similar problems of leakage of creative talent overseas.[534] One witness told us that in Korea, which has a vibrant interactive games industry, the Government had done much more to support the industry through trade shows, helping to change the public perception of games.[535]

215. Phonographic Performance Ltd suggested that the Department's approach to the creative industries was "piecemeal" and that the split in responsibility between DCMS and DTI led to a lack of focus and understanding, with little input on the industries' behalf to other Departments, such as the Treasury.[536] PPL proposed that a new cross-departmental body, perhaps on the model of UK Trade and Investment,[537] should be formed to bring together the various arms of Government and handle jointly the relationship with the creative industries.[538]

216. This is not an inquiry into the creative industries per se, and we did not discuss PPL's suggestion in detail with witnesses other than the Government, which did not support the idea. The Minister for Creative Industries and Tourism accepted that the creative industries engaged across many government departments, but he questioned whether a special bureaucracy was necessarily a solution, saying that what was needed instead was "an awareness about the opportunities".[539] We are not able at this point to give a considered view on the merits of PPL's proposal, given the limited evidence on the subject.

Support for business development

217. Creative industries are in many respects industries just the same as any other: they need the right climate to prosper; individual enterprises need to be able to stand or fall on their merits; and they need business acumen to know how to monetise the product and generate revenue.[540]

218. The UK is well placed in terms of creative skills: it has a worldwide reputation.[541] The position appears particularly strong in the new media sector. Skillset told us that the proportion of the workforce in interactive media sectors educated to graduate level was unusually high when compared to other sectors.[542] Google told us that universities in the UK were producing "tons of talent" with "fantastic skillsets that are globally competitive", adding that it was able to hire "incredibly talented people" out of universities in the UK.[543]

219. In terms of investment climate, the UK may not be in such a favourable position. Mr Patrick Bradley, speaking on behalf of Ingenious Media, a major investor in the new media sector, said that unless the UK could "get it right", investment would flow elsewhere, and he warned against complacency.[544] We note that Silicon Valley in the US has a well-developed ecosystem of financing for start-up businesses, as well as an on-site infrastructure of office space, lawyers and accountants specialised in the creative industries.[545] Governments in the Far East are investing major effort in promoting industries (interactive games in Korea)[546] or in seeking to attract creative talent (Singapore).[547]

220. The Government described some of the instruments used to stimulate technology and innovation, for instance through Research and Development tax credits and support for overseas missions for industry experts to gain and disseminate knowledge.[548] Venture Capital Trusts also play a part; but Ingenious Media told us that the Government could do more to provide or encourage the provision of risk capital for businesses which were at a very early stage and which had no track record to enable them to attract investment from larger investment funds.[549] Ingenious Media suggested that the Government might contribute to public-private initiatives and help to share early stage risk capital investments.[550]

221. The Government is clearly aware of the difficulties in securing first stage capital, and it recognises that support for small and medium-sized enterprises is "crucial", whether through deregulation, through Regional Development Agencies or through Business Link.[551] To some extent, the problem arises from a difference in culture between the UK and the US: Google noted a greater risk aversion in the UK because of the fear or stigma of failure.[552] The Minister of State at the DTI accepted that access to finance was much easier in the US, where people were more willing to take risks, and she said that the DTI was monitoring to see "where there is a failure on market access to finance".[553] She also encouraged the banking sector to take more risk.[554] We recommend that proposals for policy development in the forthcoming Green Paper on Creative Industries should be accompanied by a strategy for research, to include an assessment of the investment climate for start-up businesses in new media sectors.

222. We note that the Government brought forward secondary legislation under the Communications Act 2003 to accommodate a request both to change the maximum amount of data which can be carried on a digital radio (DAB) multiplex and to change the definition of a "digital programme service", in order to allow television services to be carried on a digital radio multiplex. Doing so enabled BT to offer enough broadcasting channels on its Movio service (which offers TV broadcasts to mobile phone handsets) to make it a commercial proposition. This is one recent example of how the Communications Act is already proving outdated; we have no doubt that there will be others and that the Government and Ofcom will need to monitor the legislative framework to ensure that it does not stifle technological development.

Government policy on creative industries

223. In June 2005, the then Minister for the Creative Industries announced an intention to make Britain "the world's first creative hub",[555] and the Creative Economy Programme was established to drive forward that ambition. The Programme has the following aims:

  • Developing a strategic vision for the Creative Industries that can be shared at national, regional and local level;
  • Developing new policy for the Creative Industries, generating ideas from a wider range of contributors, NDPBs, industry and other stakeholders;
  • Creating better coherence for current policies, funding programmes and workstreams; and
  • Creating new projects between NDPBs and across sectors.[556]

224. The Minister for Creative Industries and Tourism presented the Creative Economy Programme as "a new venture by government […] to bring these industries together with an opportunity of seeing what are the issues that they have in common that government needs to address".[557] Although the Programme clearly has value, it is questionable how "new" it really is, given its resemblance to the Creative Economy Task Force launched by the then Secretary of State for Culture, Media and Sport in 1998. No substantive information was given on the Department's previous initiative, its results and what actions have or have not been undertaken in its wake since 1998. This must undermine confidence in the latest initiative and we request that the Government provide this information in its response to this report.

225. The Government plans to publish a Creative Industries Green Paper later this year.[558] The Minister told us that it would examine the role of the creative industries in the UK economy as well as the challenges (and opportunities) raised by global competition; and he added that the Green Paper would allow the industries the opportunity "to see themselves in the same way that manufacturing and financial services do" and that "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".[559] We welcome the intention to publish a Green Paper on the Creative Industries. We believe that it will mark a long overdue recognition of the importance of their role in the UK economy.

Government policy on copyright

226. Turning to copyright, we are not entirely confident that the Government and responsible agencies have taken a sufficiently vigorous approach to developing the law on copyright in recent years. The Government has taken action to bring together the various stakeholders with an interest in copyright to generate ideas and inform each other and Government. The Alliance Against IP Theft told us that it had lobbied very hard for a cross-departmental approach to counterfeiting and piracy, which had led to the formation of the Creative Industries Intellectual Property Forum, with representation from different Government departments and from interested parties.[560] The Association of Online Publishers described the Forum as having been important not only in enabling the weaknesses within the current legal framework to be considered and addressed but also in securing recognition from the Government of the importance of helping users and creators to recognise the value of intellectual property to the health of the creative industries in the UK.[561]

227. We have also noted the work of the Patent Office, sponsored by the DTI, in publishing an IP Crime Strategy and developing a National IP Enforcement Strategy, which has in itself led to the establishment of the IP Crime Group in 2005 to ensure that criminal activity was dealt with in a co-ordinated way.[562]

228. Despite the various strategies and the work done by cross-departmental groups, there has been little sign of copyright policy development within Government departments or relevant agencies. One of the Patent Office's objectives is to "promote and support moves to simplify the law on intellectual property and to harmonise international rules and procedures"; yet its most recent Annual Report makes no mention of any steps to develop copyright policy. Indeed, the word is hardly mentioned, and none of the present Agency targets specifically relate to copyright.[563] PPL said that copyright policy-making "had been in a state of malaise for the past few years" and that policy was handled as a subset of patents by officials in the Patent Office "who are remote from the copyright industries, with little ministerial input".[564] We note the statement in the Gowers Review of Intellectual Property that the Patent Office "has been less effective at taking a strategic view of intellectual property policy" and that it had not always been effective in linking intellectual property will other related areas.[565]

229. We question the Government's statement in its memorandum to this inquiry that "we are well placed in terms of modern copyright legislation that is up to date".[566] Certainly, we did not detect a widespread appetite for fundamental reform of existing law: British Music Rights suggested that "tweaking and clarifying the existing provision" was what was needed,[567] and others took a similar view.[568] Yet various inconsistencies and unsatisfactory elements in copyright law emerged during our inquiry, and the Gowers Review made a number of recommendations on enforcement which seem to us to be eminently sensible and which could, with ministerial encouragement, have been developed and put into action some time ago. We have in mind, for instance, the proposals on statutory damages and resources for local authority trading standards officers.

230. PPL believed that the value of copyright to the economy warranted a dedicated Copyright Office, charged with promoting the UK's copyright interests.[569] We await with interest the Government's response to the recommendation by the Gowers Review that a new Strategic Advisory Board for intellectual property policy should be established, to strengthen the mechanism for policy development.[570] We believe that the Gowers Review of Intellectual Property was timely. We hope that it will help to galvanise the Government into action in improving enforcement of copyright law and amending it where necessary. However, we note that a number have expressed disappointment at its findings.

231. The Government also stated in its memorandum that present copyright legislation "strikes the balance between the need for the right holders to be able to extract economic value from creativity and the legitimate expectations of others".[571] Given that representations to this inquiry suggest an equal measure of dissatisfaction with the law from both sides, the Government may be correct. We noted above (at paragraph 120) our preferred perspective on copyright: a means by which people can own what they create and earn a living from their creativity. We are aware of the concept that the purpose of intellectual property laws should be to serve the public interest and to enhance creativity and innovation, as enshrined in the RSA Adelphi Charter;[572] but we do not believe that this should mean that consumer interests should prevail over the rights of creators. This brings us to our final observations, on copyright term.

232. The copyright term granted to creators of literary, dramatic, musical or artistic works in the UK is 70 years from the end of the calendar year in which the author dies, subject to certain exceptions. The term granted to creators of sound recordings in the UK is 50 years from the end of the calendar year in which the recording is made, again, subject to certain exceptions.[573] In the USA, the copyright term was extended in 1998 to 95 years from release; in Australia, the term has recently been increased from 50 years to 70 years.[574] The Music Managers' Forum argued that the disparity in the UK was anomalous and dated from a time when life expectancy (and the scope for creators to exploit their work during their lifetime) was shorter; and it concluded that "there could be no possible justification for the discrimination against performers".[575] Phonographic Performance Ltd told us that the shorter term for sound recordings in the UK reduced the value of the recording industry in the UK, decreasing the value of any record company catalogue and consequently the amount that it was able to reinvest in new recordings. We were also told that the longer term available in the USA made it a more attractive base for recording.[576] Many other bodies supported an extension.[577]

233. A different view was put forward by the National Consumer Council, which argued that recording companies' business models are generally based upon much shorter periods for generating returns on investment, and that the concept of using returns on recordings to finance future recording investments is giving way to models in which each recording is treated as an independent investment vehicle.[578] The British Library cited research suggesting that 98% of works had no commercial value after 50 years.[579] A witness for the National Consumer Council said that she did not accept arguments that long copyright terms provided an incentive to create and invest in creation, and she suggested that, while it was legitimate to recoup returns on investment, it was not legitimate for "monopoly rights" to extend to the descendants of original creators.[580] The Libraries and Archives Copyright Alliance was also strongly opposed, believing that extension would "massively upset the balance between right holders and users".[581]

234. The 50-year term dates from the Copyright Act 1911 and was confirmed by the EU Directive on Harmonising the Term of Protection of Copyright and Related Rights,[582] implemented by regulations in the UK in 1995. Any increase in the term would need approval by the EU.

235. The Gowers Review undertook an extensive analysis of the argument for extending the term. On economic grounds, the Review concluded that there was little evidence that extension would benefit performers, increase the number of works created or made available, or provide incentives for creativity; and it noted a potentially negative effect on the balance of trade.[583]

236. Gowers' analysis was thorough and in economic terms may be correct. It gives the impression, however, of having been conducted entirely on economic grounds. We strongly believe that copyright represents a moral right of a creator to choose to retain ownership and control of their own intellectual property. We have not heard a convincing reason why a composer and his or her heirs should benefit from a term of copyright which extends for lifetime and beyond, but a performer should not. Under the present term, some 7,000 performers, including session musicians and backing singers will, over the next ten years, lose airplay royalties from recordings they made in the late fifties and sixties. They will also no longer benefit from sales just at a time when the long tail enabled by on-line retailing may be creating a market for their product once again. Given the strength and importance of the creative industries in the UK, it seems extraordinary that the protection of intellectual property rights should be weaker here than in many other countries whose creative industries are less successful. We recommend that the Government should press the European Commission to bring forward proposals for an extension of copyright term for sound recordings to at least 70 years, to provide reasonable certainty that an artist will be able to derive benefit from a recording throughout his or her lifetime.


531   Ev 288 Back

532   Q 625 Back

533   See, for example, Third Report of the Committee, Session 2005-06, Protecting and Preserving our Heritage, HC 912-I, paragraphs 38-41 Back

534   Ev 217 Back

535   Mr Livingstone Q 483 Back

536   Ev 58 and Q 105 Back

537   A Government body formed from elements of the FCO and the DTI, with a remit to promote UK trade overseas and encourage inward investment from abroad. Back

538   Ev 58 Back

539   Q 625 Back

540   Mr Bradley Q 508 Back

541   Mr Bradley Q 507 Back

542   Skillset Ev 438 Back

543   QQ 520 and 522 Back

544   Q 507 Back

545   Q 523 Back

546   Mr Livingstone Q 483 Back

547   Q 507 Back

548   Ev 293 Back

549   Mr Bradley Q 510 Back

550   QQ 511-2 Back

551   Q 626 Back

552   Q 518 Back

553   QQ 626-7 Back

554   Q 635 Back

555  http://www.culture.gov.uk/Reference_library/Minister_Speeches/Ministers_Speech_Archive/James_Purnell/James_Purnell_Speech01.htm

 Back

556   Ev 289 Back

557   Q 630 Back

558   HC Deb, 26 January 2007, Col. 2056W Back

559   Q 625 Back

560   Q 106 Back

561   Ev 109 Back

562   Ev 290 Back

563   Patent Office Annual Report and Accounts 2005-06, HC 1391, page 56 Back

564   Ev 58 Back

565   Gowers Review, para 6.6 Back

566   Ev 290 Back

567   Q 78 Back

568   Mr Stopps Q 79; Ms Carey Q 96; Ms Cave Q 96; Mr McGonigal Q 97; BPI Q 155; BSAC QQ 23 and 24 Back

569   Ev 58 Back

570   Gowers Review of Intellectual Property, Recommendation 46 Back

571   Ev 290 Back

572   A set of principles drawn up in 2005 by a commission of scientists, artists and legal experts: Ev 436 Back

573   Sections 12 and 13A of the Copyright. Designs and Patents Act 1988 Back

574   Ev 70 Back

575   Ev 27 Back

576   PPL Ev 59-60 Back

577   British Equity Collecting Society Ev 344; Equity Ev 369 Back

578   Ev 22 Back

579   Ev 350 Back

580   Q 66 Back

581   Ev 392 Back

582   Council Directive 93/98/EEC Back

583   Gowers Review of Intellectual Property, paras 4.20-4.39 Back


 
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