Select Committee on Culture, Media and Sport Written Evidence

Memorandum submitted by Cinema Exhibitor's Association

  The following submission has been written specifically for the Committee's new inquiry into New Media and the Creative Industries. It is a précis of numerous consultation exercises that CEA has conducted, members' opinions expressed during CEA Board/Branch meetings and other gatherings when members have taken the opportunity to express views and attempts to provide a consensus view of cinema exhibition to the emergence of new delivery systems to the public of filmed entertainment. There is much speculation and misinformation circulating within the sector on both current and future developments within the new media sectors and it is therefore very difficult to state with certainty the outcome of current and future developments.

  Cinema exhibition believes that, notwithstanding the means of delivery of film to cinemas, the importance of exhibiting a film in the cinema will continue to be the pinnacle for the creator of filmed entertainment and the bedrock on which the future exploitation of that filmed entertainment is built. We believe that the creative community who make filmed entertainment will continue to aspire to having its work initially appreciated by the public in the place for which it was intended. The creative norms required for cinematographic exhibition will continue to be of a higher quality than those required for other delivery systems and the opportunity for creative experimentation is greater. Cinematographic exhibition will continue to be the most efficient method of launching a cinematographic work, though not all works intended for cinematographic exhibition will be judged to be of a quality that deserves exhibition in cinemas. The intention of all involved in making a cinematographic work will have been to have it launched in cinemas. Launching a work in the cinema provides the opportunity for the filmmaker to exploit all forms of publicity prior to its launch to bring to the notice of the general public that his work is available and worthy of viewing in the cinema. Viewing of a film by the general public in the cinema provides the filmmaker with the opportunity to gauge the reaction of the public to the work. We firmly believe that the cinema will continue to be the prime place for viewing movies with like-minded individuals that will re-emphasise the importance of cinema in the social fabric of society.

  Though it is speculation, it is likely that the numerous consequential windows through which cinematographic product is currently exploited by filmmakers will contract and their sequential order may change. In time it is believed that there will be only two distinct and effective windows for the exploitation of cinematographic product; namely theatrical exhibition and personal/domestic consumption. Theatrical exhibition will remain the first window and we believe will continue to be exclusive. It is acknowledged that currently there is much speculation in the press based on reports of statements made by film producers that theatrical exclusivity will effectively disappear but we believe that the importance of theatrical exhibition for the marketing of the film is such that the majority of film producers will acknowledge and accept that the cinema sector needs a period of exclusivity to remain viable and that for the marketing purposes of their cinematic work they need the cinema. It is the most effective way for the creator of the cinematographic work to create a "must see" factor even if the "must see" desire is fulfilled outside the period of theatrical exclusivity. Over the last 18 months in the UK the period of theatrical exclusivity has been reduced (notwithstanding piracy) to between 3 and just over 4 months. Exhibition believes that the absolute minimum should be 4 months for the best financial return to both the production sector and cinema exhibition. The domestic/personal consumption window will be dominated by on-demand services which will be subdivided into either single timed viewing, long term viewing or home burnt copies of product but this will not be widespread until the security of downloading is guaranteed. Currently the largest source of income for film producers is created from the rental and sale of DVDs and whilst we do not believe that these two sources of income will totally disappear, their importance over time will steadily decline. The time may come when the only legally produced DVDs are in collector's sets or produced for the Christmas market.

  As to the delivery systems for personal/domestic use, it is thought that both pay TV and free-to-air TV will continue to utilise cinematographic product though the price paid may be at different levels to those currently enjoyed by producers. VOD in all its guises, the purchase of the licence for one viewing, a period of viewing or the right to burn a copy, will we believe become the largest source of income for the producer and this could be delivered through either adapted televisions sets, computers or even telephones. Development of VOD will be ultimately dependent on the security that the producer of the product is able to engineer into the delivery systems and obtain payment for the delivery.

  The importance of cinema exhibition both as a marketing tool for the production sector will continue and also remain the benchmark for the calculation of the amount charged for personal/domestic deliveries of cinematographic product. The method of delivery of cinematographic product to cinemas will over time change to a form of digital delivery. Whether this will be via direct satellite link online or a downloadable copy will be dependent on technological advances particularly in the area of piracy protection and cost. The producer/distributor through the use of digital delivery systems will be able to reduce costs of delivery and exhibition believes that this saving should initially be used to fund the digitalisation of cinema exhibition. The digitalisation of cinema must, if it is to be successful, produce an image for our audiences, which is preferably of better quality than that produced by projection of 35mm film with a minimum of equality with it. Currently 2K projectors produce such an image and we believe that this should be the minimum quality benchmark for all cinematographic performances in cinemas. It must also be possible that films produced by all filmmakers globally be capable of being projected from one machine. The projector must be capable of accepting product from throughout the world for if different machines are necessary to exhibit different producers product the cost of the provision of those machines will be prohibitive. Exhibition does not wish to see the promotion of different delivery systems which has occurred over the provision for enhanced sound that means two reading and delivery systems are required or what is currently developing in the improved DVD market where two standards are to be issued. A common open standard for digital projection in cinema is needed to progress. This common standard must be acceptable to the major studios and European producers. It must also be capable of preserving the independent editorial control of the exhibitor and be free from additional reporting systems and controls imposed by the distributor/producer. During the period of transition exhibitors with cinemas which have not been able to be digitalised must continue to be supplied with 35mm prints on the same basis as now to ensure that the choice of product remains available to all throughout the UK and the public are not deprived of choice.

  It has been argued in some territories that a test market for digital projection should be developed first to identify problems that may arise in the delivery of cinematographic product and the exhibition of it before a whole territory is encouraged to convert to digital projection. In the UK the UK Film Council's Digital Cinema Circuit, which is being introduced to widen the choice of film and increase availability of specialist product in the UK, will in practice achieve a wide test bed for digital projection. This will advance the knowledge of distributors and exhibitors concerning digital delivery and exhibition's from that already gained through limited testing that has taken place over the past few years.

  If the industry decides that the digitalisation of cinemas is worthwhile and it goes ahead it is likely that the relationship between exhibition, distribution and production will change from the current business models. If total digitalisation were to take place in the UK there will probably be benefits to cinema exhibition though these will not arise overnight. It will undoubtedly be necessary for distribution to fund the changeover for benefits are unlikely to be achieved until all sites in the UK have at least 50% (and this figure may not be high enough) of their screens digitalised for only then will the possibility of fully exploiting the digitalisation of cinema be possible. Only when there is a film bank of digitalised film, both current and historical, will it be possible to utilise digital projectors fully by offering the public the widest possible choice and combination of cinematographic product.

  With the digitalisation of cinema it is likely that exhibitors will explore the possibility of simulcasts and other non-film programming for their cinemas. The development of simulcasts may be hampered by the potential of increased musical rights fees that may be payable for this form of entertainment. It is expected that filmed stories will remain the most important entertainment product shown in cinemas. The European Commission's proposal that rights holders for music where it is delivered across borders on-line if applied to all creative product delivered across borders may detract from the importance of the UK as a film distribution centre. It is likely that in time there will only be one uplift facility for all major films that are distributed by satellite in Europe and it is likely to be in the country where the financial rewards for the rights holders is greatest.

  Creative product has a value to the creator but until distributors, licensed by the creator, exploit it legally it has no monetary value. Monetary chains currently in place ensure that the creator receives income for the creative product. As far as is technologically possible the current legislative framework should be replicated for the new media delivery systems. The unauthorised copying of creative product damages not just the creator of the product but all those employed in the licensed legal delivery systems. The number of people employed in the legal delivery system sector are substantially more than those directly involved in the creative process (UK film production—10,000 employees, UK film exhibition—17,000 employees) and there is tax loss to the exchequer as most unauthorised exploitation of creative product is within the "black" economy.

  Programmes being undertaken by such organisations such as FACT and the increased security being operated by the industry are barely containing the problem of unauthorised copying of copyright works. A new law making cam-cording of a film within a cinema illegal, whether carried out for profit or not, would help cinema staff in their fight against piracy. To halt the unauthorised copying, the sources from which the copies are made must be stopped but—just as important—if there were not market places in which illegally copied material could be sold, the public's ease of access would be curtailed. The Licensing Act 2003 introduced an offence for designated premises supervisors who permitted the licensed premises for which they are responsible to be used for the misuse of copyright material and, under the Section 182 Guidance, gave encouragement to the licensing authorities to review premises licences where copyright offences are committed. This will help with the removal of marketplaces for the illegal sale and misuse of copyright product. Whilst many trading standards officers are taking their responsibilities much more seriously to prevent the sale of stolen copyright product in both formal and informal markets greater power must be given to them to enable them to close markets and prosecute both the traders and the organisers of the market if the sale of stolen copyright material takes place. The penalties for copyright theft, though recently increased, should be increased further.

  The source of much copyright theft is the Internet and Internet providers who permit their servers to be utilised for the distribution of illegally circulated product should, wherever possible, be closed down or access to their sites blocked. Persons illegally downloading stolen copyright material should be vigorously pursued and prosecuted. Until the persons who take advantage of the illegally sourced material suffers harsh consequences for their actions, the incentive remains to buy the product. The person purchasing stolen copyright material should also be prosecuted.

  To enable industry members to help police illegal and legal uses of copyright material and with the ever diminishing windows for the traditional exploitation chain it is becoming increasingly important that they are made aware what product is legally being or about to be released into new or the next delivery system. This will enable those making reports to an enforcing authority to only pass on actionable information on the copyright material. It may be necessary to legislate to ensure that this information is provided by rights holders.

2 February 2006

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