Memorandum submitted by Ofcom
SECTION 1
The issues raised and Ofcom's responses
1. The Committee identified four issues
on which it seeks evidence. These are set out below, alongside
a description of the evidence Ofcom is submitting.
(i) the impact upon creative industries
of recent and future developments in digital convergence and media
technology;
Ofcom's evidence on this question outlines some
key changes in the creative industries, and describes steps Ofcom
is taking to build a more comprehensive view of future market
developments, to form a base for the debate about future regulation
(ii) the effects upon the various creative
industries of unauthorised reproduction and dissemination of creative
content, particularly using new technology; and what steps can
or should be taken—using new technology, statutory protection
or other means—to protect creators;
This evidence is a brief review of piracy and
competition in the online content market. Ofcom has not completed
a comprehensive review of piracy, but our current thinking, laid
out in the evidence, is that piracy is a significant concern which
is now being tackled by market mechanisms. In line with Ofcom's
regulatory principles, we do not therefore believe that legislative
or regulatory intervention is necessary at present to protect
creators
(iii) the extent to which a regulatory
environment should be applied to creative content accessed using
non-traditional media platforms.
Ofcom believes that a range of new approaches,
which lie outside the regulatory frameworks set out in the 2003
Communications Act, may be required in the long term to ensure
a strong and innovative content industry, and to protect the interests
of the citizen-consumer. These new models would be necessary both
for non-traditional and traditional platforms, for a converged
world where new and old are competing equally for the audience's
attention and money. Our evidence describes a programme of work
scheduled for the next year to develop options for that future
converged media environment
(iv) where the balance should lie between
the rights of creators and the expectations of consumers in the
context of the BBC's Creative Archive and other developments.
Ofcom would not prescribe the right balance between
consumers' expectations and creators' rights, and does not have
the power to determine what a BBC Creative Archive might comprise.
However, it does seek to ensure that the TV programme rights market
is operating efficiently and fairly, to enable the market to deliver
a balance between consumers' and creators' interests. On this
issue, evidence is drawn from Ofcom's consultation document Review
of the Television Production Sector, published on 11 January.
Context to Ofcom's evidence
2. In launching this inquiry, the Committee
has identified some substantial and complex issues: a brief answer
to question 1, about impact, would be that the creative industries
will be profoundly affected by digital convergence, which will
create substantial new opportunities as well as threatening some
existing businesses and business models.
3. Ofcom does not have detailed answers
on all the issues raised. Each question is likely to involve further
debate and research with consumers, industry, and with Government.
Ofcom itself has just launched a programme of work to develop
our understanding of the development of the creative industries
in a converged world, and to explore regulatory options for the
future environment (Q1 and Q3); and are currently consulting on
the question of ownership of digital rights, raised in Q4.
Ofcom's principles for the regulation of new media
platforms
4. However, Ofcom does have some basic principles
which will inform its approach to the regulation of new platforms
and to the evolving regulation of traditional platforms:
— an expectation that where possible
market solutions are preferable to regulatory intervention; and
— a commitment that where intervention
is necessary it be evidence-based, proportionate, consistent,
accountable and transparent.
5. Although our view is that markets are
generally preferable to regulation, Ofcom is not solely an economic
regulator; our duties require us to be concerned with both citizen
and consumer outcomes. Ofcom therefore follows a path between
these sometimes competing conceptions of the purposes and ends
of regulatory activity.
6. In developing our regulatory strategy
we aim to continue:
— to be engaged with consumers and
industry to understand changes and developments, so avoiding the
role of passive observer;
— to reflect the highly dynamic nature
of industry and technological evolution, remaining therefore at
all times cautious of an excessively static view of markets;
— to take a broad view, seeking to
look at the connections and similarities between obstacles to
competition and innovation; and
— to make choices between competing
approaches, based on evidence and analysis and thorough review.
7. This approach is made necessary by the
dynamism of media and communications markets, arguably greater
today than any time in the past. These markets are being driven
by great technological change and at a pace which means that decisions
made on the basis of static analysis, assessing a narrow set of
evidence, will be overtaken by events.
8. The scope and pace of change in communications
markets supports a further principle: that the option of regulatory
intervention must always be weighed against the option of doing
nothing or at least doing less. Ofcom will take particular care
in considering the regulation of nascent markets, where the cost
of intervention may inhibit the development of competition by
creating new or higher costs of doing business.
SECTION 2
Creative Industries: recent and future developments
in digital convergence and media technology
9. The creative industries support some
two million jobs in this country and account for 8% of GDP: the
music industry alone employs 130,000 people, and broadcast TV
and Radio a further 85,000. Convergence in digital media technologies
will transform these industries over the next decade.
10. Securing the right environment for success
in this field is a complex task; we will need careful assessment
of the creative industries' likely development before making decisions
about regulation. Among other important trends, we can expect
to see the development of:
— new forms of content, blurring existing
boundaries: the experience of console games could become more
like theatric films; the internet will become a fully multimedia
platform, incorporating TV and radio content along with text,
graphics and interactivity;
— new distribution platforms and devices:
many providers offering distinct bundles of content and communication
services; new fixed and portable devices offering access to media
inside and outside the home;
— a proliferation of traditional programmes:
consumers will be able to choose from a virtually unlimited range
of audio and video material when they want to listen or view;
— more opportunities for interaction—both
in new services and as part of traditional broadcast propositions.
Audiences will be able to play a part in the media they consume,
ranging from the simplest engagement (eg voting), to the most
complex (eg sharing films or music they have created). Not everyone
will wish to do so, but the collective contributions of those
who do will make a substantial contribution to the pool of available
media;
— the audience will increasingly rely
on navigation tools to help them choose the content they want
from the vast choice they are offered. These will include sophisticated
EPGs (Electronic Programme Guides), search tools like Google,
and recommendation engines which learn about individual consumers'
preferences and select relevant new content (as Amazon does, today);
— changing patterns of payment for
media and a new industry value chain from content creator to consumer;
and
— alongside all these developments,
new consumer expectations and behaviours will emerge.
11. These developments create an extraordinary
range of opportunities for the players in the creative industries—to
create and deliver innovative new services to consumers, and to
generate extra income from existing intellectual property.
12. Examples of creative industries innovations
already offered widely include:
— the creation and sale of audiovisual
content specifically for mobile consumption—the mobisode;
— on-demand TV services already available
to about one in 12 UK homes;
— hundreds of channels broadcasting
exclusively on the internet; and
— applications or services, from the
podcast to Al Gore's Current TV service,[1]
which give content creators direct access to audiences.
13. Ofcom has recently launched a project—Convergent
Media and the Implications for Regulation—whose first
task will be to develop a more comprehensive picture of the development
of the UK's media environment.
14. The project will explore:
— What the future content landscape
might look like:
— What forms of new content may become
available, on what platforms;
— How will the availability of existing
content change—via new distribution platforms and new devices;
in new places, most obviously via mobile;
— How should we classify content—(for
example Radio versus streamed Music; interactivity alongside linear
TV content):
— what role will search engines and navigation
tools play; and
— what are the longer term trends of which
we should take account?
— How the media economy might evolve:
— what new sources of revenue will emerge,
and how will existing content revenue streams change;
— how might the media value chain evolve:
with new intermediaries (search engines, mobile operators); with
disintermediation of existing players (producers selling directly
to consumers, not via broadcasters); where will the balance of
power lie?
— How consumer needs and expectations
may evolve:
— What support will they require to be
confident (literate) users of the new media?
— What are their attitudes to new content
and new platforms, and how might we expect these to change?
— What new capabilities can we expect them
to develop in their engagement with new media platforms and content
(eg use of search tools, parental control filters etc)?
— What protections will they need or expect
from harmful or offensive material?
15. Ofcom proposes to publish the findings
of the project Convergent Media and the Implications for Regulation
in Spring and Autumn of 2006. The earlier publication will address
developments in the media environment and the regulatory challenges;
the second stage will cover regulatory implications and options.
SECTION 3
The regulatory response to digital piracy
Overview
16. The current regulatory and legislative
context for media copyright is intended to protect rights-holders'
positions, while also protecting existing consumer rights, such
as timeshift viewing, or fair uses like reviewing or research.
These protections are essential to the development of viable content
businesses, and to ensuring the continued flow of attractive,
innovative content.
17. The rapid growth of music downloading
from the late 1990s demonstrated significant consumer demand for
digital music, distributed online. Piracy and file-sharing in
breach of copyright developed in the absence of a legal means
of access to music online. Piracy can therefore be understood
in part as the consequence of a market failure—the absence
of a legal download market. Since legal services developed, piracy's
share of the market for downloaded content has declined, with
some firms building viable, highly profitable businesses.
18. There is evidence that the market for
online TV and film is following the same development path, though
the TV/film market is some years behind the music market. Online
TV/film distribution has lagged because typical digital video
files are many times larger than audio files; in the past, low
speed internet connectivity and limited local disk storage together
reduced opportunities for online video. As these barriers disappear,
demand for downloaded TV and film content is growing. But, like
music in the late 1990s, a substantial proportion of this demand
has been addressed by illegal downloads.
19. However, the commercial (legal) market
for online TV and film markets is now developing quickly: there
is a host of services offering audiences access to audio-visual
content when and where consumers want it. Examples include mobile
content provided by partnerships between broadcasters and mobile
operators; a range of film download services operating now in
the US, and the recent launch by BSkyB and others of video download
services in the UK; the BBC's interactive Media Player; on-demand
TV and PVR[2]
services from pay-TV operators; IPTV services from HomeChoice,
Kingston Communications, and, from 2006, BT; video search engines
from Google and Yahoo!, amongst others.
Downloading in the music industry
20. As internet penetration grew during
the 1990s, consumer demand emerged for media content, delivered
online in digital form. By 2005, over half of all broadband users
in the UK were downloading music, video or other content, and
a little over a third were watching video clips online (Figure
1). Initially there were no authorised services providing access
to music, TV or video content online, creating the conditions
for mass-market unauthorised file-sharing of media content.
Source: Ofcom Residential Tracker Survey,
2005.
21. Napster, the first widely-used peer-to-peer
(P2P) file sharing service, was closed by court order in 2001
but was followed by a wide range of similar services including
Kazaa, Limewire, Bearshare, Grokster and Morpheus. Demand was
established, though few legitimate suppliers existed.
22. When it launched in 2003, Apple's iTunes
Music Store service was able to offer the record labels access
to a secure distribution channel on which to develop new revenue
streams. iPods, equipped with Apple's own digital rights protection
technology, had been on the market for 18 months when the iTunes
Music Store launched. Sales of iPods then rose sharply, demonstrating
the potential for virtuous circles of development for content
owners, digital distributors and consumers.
23. Despite the success of iTunes and other
legal download services, illegal music file-sharing is still widespread,
although the decentralised nature of newer P2P networks makes
it difficult to establish the exact scale.
24. There is some evidence that use of P2P
networks is declining as a proportion of total internet activity.
Figures from IFPI[3]
show that in the first half of 2005 the number of files available
on file-sharing websites rose by 3% while installed broadband
lines grew by 13% globally. Research in Austria shows that the
number of illegal file-sharers fell by 26% in the year to March
2005 and earlier research in Germany showed a sharp fall in illegal
downloads.
25. And legal music downloading is growing
exponentially, as illustrated by the performance of iTunes (which
has over 70% of the legal download market)—see figure 2.
IFPI figures also indicate very big increases in legal downloads.
iTunes Music Store recently launched a video download service
from which users downloaded three million videos in the first
two months, suggesting that the downloading of DRM-protected content
will prove just as popular.
Source: Ofcom, Apple
26. Finally, the development of the legal
download market has also led to innovation in the ways in which
music is sold to consumers. As well as the iTunes Music store,
which operates a traditional "buy the song to listen to it"
model, audiences can subscribe for unlimited access to a music
library. Rhapsody subscribers can listen to any one of more than
1.3 million songs, without buying them; access to the music ends
when the subscription is terminated.
The parallel with TV and film content
27. In the past, demand for online video
content has been technically constrained: good quality digital
video files are large, and in consequence downloads would take
many hours, and quickly fill local PC storage. As with music,
there was little mainstream content legally available, as content
owners were extremely concerned about the risks of piracy.
28. The widespread adoption of new technologies
has the potential to improve the consumer proposition:
— broadband connections of 2 mbps or
greater are now commonplace, with 8 mbps services becoming available
and affordable;
— new video standards like MPEG4 are
enabling significant reductions in the file sizes required to
store high quality video content;
— the plummeting cost of hard disk
storage is making it easier to store video content on home PCs;
and
— new portable devices like the Playstation
Portable and the video iPod allow viewers to watch TV wherever
they want.
29. Inevitably, these developments have
led to an increase in unauthorised sharing of TV and film content,
with the BitTorrent filesharing application reportedly accounting
for 70% of downloads. The economic scale of the problem is uncertain—even
the MPAA is reluctant to put a figure on the impact of filesharing,
though it has indicated that as many as 150,000 titles are shared
daily.
30. Perhaps most importantly, there are
now several digital rights management (DRM) technologies which
video content owners trust; and this has allowed the development
of legal services offering mainstream TV and cinema content.
31. In response to these developments, there
is some evidence that TV and film industries have learnt from
the experience of the music sector and are seeking to develop
innovative services designed to meet demand for downloaded video
content (and to encourage, or enforce, a responsible approach
to wider distribution of that content). For example:
— Five major studios—MGM, Warner,
Sony, Universal and Paramount—jointly formed Movielink,
the digital video service (currently only available in the US).
Viewers pay between $2 to $5 to download a film to their PC, to
which access is automatically blocked 24 hours after they start
watching. The site also carries material from other studios, including
Fox and Disney.
— CinemaNow offers both a similar pay-per-view
service and a subscription offer, for which users pay a fixed
fee to watch certain titles as often as they want. CinemaNow has
more titles than Movielink, although fewer recent films and major
blockbusters.
— Starz provides an on-demand online
subscription service, offering unlimited downloads of a rotating
selection of titles for a fixed fee, again currently only available
in the US.
— Google has launched a video download
service that allows US consumers to buy and download content from
providers including CBS and the National Basketball Association.
— In the UK, BoxOffice365.com sells
video content on a per-download basis, which viewers are free
to watch as often as they wish, although downloads are copy protected
to prevent unauthorised sharing. The content is limited at present
but the company has plans to introduce more. Lovefilm launched
a movie download service in late 2005, initially offering films
from Warner's back catalogue.
— Sony has started offering video downloads
to Japanese owners of its PlayStation Portable.
— The BBC's interactive Media Player,
if approved by a public value test, will use P2P technology to
give viewers the chance to catch up on TV and radio programmes
they have missed for up to seven days after broadcast.
— The UK's cable operators are now
offering video-on-demand (VoD) services and plan to provide a
nationwide service in 2006.
— BSkyB has just launched a service
offering on-demand access to films delivered to the PC, and news
bulletins for video iPods, to Sky's premium subscribers, and a
number of other companies including BT, Wanadoo and AOL are exploring
the prospects for VoD services delivered over broadband to PCs
and living room TVs.
32. The strength of developments like these
is that they represent different ways of meeting consumer demand
for downloaded video content without challenging the legitimate
rights of content owners. A range of new opportunities for the
UK creative industries should be created, as well as for those
businesses that create imaginative and compelling new distribution
channels. A particularly exciting opportunity might be created
for British film-makers, who have the potential to distribute
their films much more cost-effectively, and with much more direct
access to audiences in the UK and overseas, than in the past.
33. In some jurisdictions, mostly notably
the US, attempts to legislate for the introduction of anti-piracy
technologies for film and video content have been made. The "broadcast
flag" proposed by the US Federal Communications Commission
(FCC) in 2003 would have prevented the distribution of "flagged"
TV and film content over unsecured networks, and required equipment
made for receiving, recording or playing video content to be compatible
with the flag. It faced criticism from consumer groups and the
consumer electronics industry, who argued that it would constrain
innovation in product development and place undue power over the
creation of new technologies in the hands of the content owners.
The Electronic Frontier Foundation, for example, argued that video
recorders, PVRs, DVD recorders and TV tuners for PCs would all
have failed the test of compatibility with the flag.
34. In 2005 a US appeals court struck out
the flag, ruling that the FCC had overstepped its authority in
its attempt to control how receiver apparatus works. In Europe,
any such initiative by an individual Member State would conflict
with single market principles—any imposed copy protection
system would need to be agreed at a European level.
35. More generally, some producers' attempts
to restrict consumer uses of media have run into stiff opposition
and legal challenge. Sony's recent attempts to introduce copy
protection technologies received widespread criticism for its
use of virus-like techniques, and the company has recently announced
its intention to rethink its anti-piracy policy.
36. In considering whether new regulatory
or legal intervention is required to protect film or TV rights
holders in the digital environment, we should in the first instance
assess the extent to which the market will deliver a solution
under the current legislative arrangements. In the case of music,
the market failure which helped to encourage widespread piracy
of music has been addressed through the creation of legal services;
and these services are proving to be a competitive alternative
to illegal file-sharing.
37. In the case of the radio industry, there
were serious concerns raised by music copyright owners that listeners
would be able to capture "perfect copies" of tracks
broadcast on DAB. Rather than seeking a regulatory intervention,
the music and radio industries are working together to develop
solutions which will help reduce such piracy
38. The most effective role for regulators
may be to maintain conditions that encourage innovation, and enable
the market to address the concerns both of producer and consumer.
This will facilitate the development of innovative services which
address consumer demand for downloaded content for their desired
uses, and substituting for illegal (and complicated and unreliable)
alternatives.
39. Maintaining these conditions will involve
ensuring:
— equal access to networks;
— regulatory requirements that are
not so onerous as to discourage investment in new services;
— competition in both content and network
access markets;
— support for technical trials which
enable the development of experimental and innovative services;
and
— individual operators are not exploiting
dominant technologies to distort the market (no identified examples
at present, though there are clear future risks in the area of
DRM standards).
40. We will continue to monitor the operation
of content markets to assess whether, in our view, the market
is operating effectively, to enable a balance to be reached between
the interests of rights-holders, content aggregators and consumers.
SECTION 4
The regulation of content delivered on non-traditional
media platforms
Ofcom's duties as they relate to non-traditional
media platforms
41. Ofcom carries some specific duties towards
the audiovisual creative industries, at least to the extent of
supervising certain rules over production quotas and the development
of guidelines for Codes of Practice in the programme supply market
(eg for the terms of trade drawn up between producers and broadcasters).
These duties are set out in the Communications Act 2003 ("the
Act").
42. These duties are narrowly defined, specifically
directed to television production within the context of licensed
television services. A summary of the Act's requirements in this
respect is given below, together with the appropriate section
reference from the Act:
— Codes relating to programme commissioning
by the main terrestrial broadcasters: concerns the commissioning
by licensed public service channels from independent producers,
and focuses on the principles under which commissions are agreed—section
285;
— Programming quotas for independent
production: requires Ofcom to set quotas for the proportion
of independent television production commissioned by licensed
public service channels—section 277;
— Involvement of C4 Corporation
in programme-making: relates to Channel 4's model as a publisher-broadcaster,
restricting the channel from production—section 295;
— Regional programme-making for
Channel 3 and 5: requires Ofcom to ensure production (of a
range) of programming beyond the M25—section 286;
— Regional programme-making for
Channel 4: essentially similar provisions for Channel 4 as
for channels 3 and 5—section 288.
43. The Act also sets out content standards
objectives which are defined and amplified by a code, the Ofcom
Broadcasting Code, and accompanying guidance notes. The Code covers
the protection of under-18s, harm and offence, crime, religion,
due impartiality and due accuracy and undue prominence of views
and opinions, elections and referendums, fairness, privacy, and
sponsorship.
44. These requirements are placed only on
licensed broadcasters—and the more rigorous obligations
apply only to the licensed public service channels—and do
not extend to other publishers or aggregators of content such
as might operate exclusively on the internet, for example.
45. For this reason, the codes drawn up
by public service broadcasters for the commissioning of independent
productions do not cover the commissioning of content by any non-PSB
licensed television service or indeed by services that do not
require a broadcasting licence.
46. Section 316 of the Act also makes specific
provision for Ofcom to have powers to use licence conditions to
ensure fair and effective competition in the provision of licensed
broadcast services and connected services. This power enables
Ofcom to use licence conditions to achieve these objectives. Broadcast
licensees are therefore regulated under the section: Ofcom is
not empowered under Section 316 to regulate other entities or
markets to secure fair and effective competition in broadcasting.
47. These responsibilities do not apply
to most services delivered on new platforms. The Communications
Act specifically excludes on-demand services and websites from
licensing requirements. However, a TV channel delivered to a TV
set using the Internet would, in principle, be subject to the
licensing regime and related codes of practice.
48. In addition to the UK legislation, there
are some overarching minimum requirements for the scheduling of
European works and independent production within the European
Directive "Television without Frontiers" (TWF). The
provisions of the Communications Act meet or exceed those obligations.
49. However, there is currently a revision
to this EU Directive under discussion which would extend some
of the EU regulatory requirements to all audiovisual communications
services. The draft directive distinguishes between non-linear
(which might include content delivery via the internet and mobile
phones) and linear services with a lesser level of regulation
proposed for the former. Although advocated by the Commission
as a harmonisation measure, there are significant concerns among
industry stakeholders that the proposal will add to the regulatory
burden faced by new and potential audiovisual service providers.
50. Ofcom shares these concerns: we believe
that
— in seeking to extend the scope of
the Directive, the Commission may be seeking to apply regulation
ahead of the development of audiovisual content markets;
— this extension of regulation could
act against the Commission's Europe i2010 objectives;
— the need for regulation in this emerging
business sector has not yet been proven; there are a large number
of business stakeholders who have urged the Commission to delay
the potential extension of regulation until such time as a need
becomes apparent.
The regulation of new content platforms
51. There is clearly some uncertainty about
the right approach to the regulation of new platforms. As part
of the project noted above, Convergent Media and the Implications
for Regulation, Ofcom will identify and debate options for
the regulation of new platforms:
— examining the need for and the potential
efficacy of current regulatory arrangements in delivering a successful
and innovative media economy, which can effectively serve the
interests of the citizen-consumer;
— developing proposals for new approaches
to regulation (or deregulation) where the current model will become
ineffective or unnecessary.
These areas of work are expanded upon in the
paragraphs which follow.
52. The examination of the role and efficacy
of current regulation to the future environment will explore:
— the potential of the current broadcast
licensing model to control future content markets;
— the relevance or applicability of
existing content regulation to content on new platforms (the internet,
mobile networks etc);
— the regulatory model which might
be required for content navigation and search tools, if any; and
— the challenge of maintaining consumer
protection (eg against harm and offence; rights to fairness and
privacy) in a media landscape which is vastly more diverse—from
the viewpoint of both consumers and producers.
53. The final phase of the project will
seek to develop appropriate regulatory policy. The broad areas
anticipated are:
— the potential for a platform-neutral
approach to content regulation, and the implications of platform-neutrality
on internet-delivered services and on traditional broadcast services;
— the ways in which competition and
self- or co-regulatory models can be relied upon to deliver desired
outcomes for citizens and consumers; and
— aspects of new media markets where
additional regulatory or competition intervention is likely to
be required.
54. As noted above, our intention is to
publish an initial consultation document in Spring 2006 which
will discuss the future environment and the regulatory challenges;
with some options and preferred approaches set out in a consultation
document published in Autumn 2006.
SECTION 5
The television programme rights market and new
television platforms
Overview
55. Ofcom has been conducting a review of
the television production sector,[4]
which follows on from Ofcom's review of public service television
broadcasting (the PSB Review) carried out in 2004-05.
56. The review examines the key aspects
of the television production sector, which comprises programme-making
activity both within the main broadcasters (in-house production)
and outside the broadcasters (independent production). It seeks
to explore the key developments in the sector, and how the interests
of television viewers—as both consumers and UK citizens—are
met by the industry. The review's particular focus is on the key
production quotas, the operation of the commissioning system between
producers and broadcasters, and the Codes of Practice which govern
the relationships between the main terrestrial broadcasters and
independent producers. The passages in italics below are taken
from the Review consultation document, published on the 11 January.
57. One of the most significant aspects
of the Review consultation are questions over the ownership and
exploitation of TV programming on new platforms—most importantly,
the supply of programming to new media platforms:
58. This is an issue of great importance
to players across the industry as well as to consumers:
— Consumers will benefit from the wider
access to programming that new platforms potentially enable, when
(if) these services develop and become more widely available.
— Broadcasters, independent producers
and potential entrants on new platforms (Google, AoL etc.) are
all concerned to have access to TV programming so that they can
operate new services and/or participate in the incremental revenues
generated.
— The current arrangements in the UK
support a system in which more than £2.5 billion of original,
domestically produced television content is commissioned each
year. This is one of the highest levels of original production
anywhere in the world. Ofcom's aspiration is that the changes
brought about by the emergence of new media platforms supplement
this level of programme investment.
59. The issue is complex: Ofcom has set
the industry the challenge of reaching a negotiated settlement
as the most appropriate approach to resolving these issues. However,
if at the end of the consultation period the industry indicates
that it will not be able, then Ofcom would seek to intervene.
That intervention would be by means of changes to the Code of
Practice framework. In order to encourage debate and to make progress
towards a negotiated settlement the consultation document sets
out a set of principles for stakeholders to consider in the course
of their negotiations.
60. This issue is dealt with in summary
on pages 9-12 and in detail on pages 82-95 of the consultation
document. The summary sections are quoted below, and the full
extract is appended to this evidence:
1.48 In relation to the distribution of
television programmes on alternative distribution platforms, we
agree with industry stakeholders that more clarity is needed on
the rights position. In attempting to deliver this clarity, we
do not seek to propose a prescriptive solution to this issue.
We believe that the detail of any solution should be a matter
for commercial negotiation between broadcasters and producers,
rather than a matter for regulatory intervention—the latter
risks being pre-emptive, and the definition of specific terms
is also outside the scope of Ofcom's powers.
1.49 Moreover, we recognise that the Codes
of Practice are still bedding down, and that it would not be desirable
to change the existing Codes of Practice guidance unless absolutely
necessary. There is already much uncertainty around new media
rights—our concern is that an early change to the guidance
would delay resolution of these issues into 2007, and could reopen
broader debates between broadcasters and producers. As such, our
strong preference is for the industry to resolve these issues
by negotiation—without the need for intervention by Ofcom.
However, if a negotiated solution is not found within a reasonable
timeframe, we will have little choice but to intervene.
1.50 In order to assist in the process
of securing a negotiated solution, this document sets out a possible
approach that Ofcom might adopt were it required to intervene—by
setting out this possible approach, our intention is to assist
industry stakeholders by stimulating debate. We note that, as
platforms and types of rights proliferate, a possible approach
might involve a new definition of rights windows based on time,
rather than platform. We seek views and reactions to this approach
during the consultation period.
1.51 The option presented in this document
suggests a new approach, which could involve two main rights windows:
— A "primary" window
in which the rights acquired by a public service broadcaster apply
across any distribution platform; across any wholly-owned channel;
for a specified duration; and for free-to-view UK distribution.
— A subsequent "holdback"[5]
period in which the broadcaster is able to apply a restriction
in relation to the subsequent exploitation of rights by the producer.
This restriction could be shorter than the current five-year holdback
that forms part of the current primary licence; this could involve
holdback against the transmission of the whole or any part of
the programme on a scheduled broadcast service in the UK; and
the broadcaster could retain an option to extend the holdback
period on further payment.
1.52 At the end of the holdback period,
the ability to control exploitation of the programme would then
revert to the producer.
1.53 Ofcom considers the above approach
to represent a potential framework for negotiation between broadcasters
and producers—allowing the negotiating parties to define
and agree the specific contractual terms. We emphasise, however,
that these are initial thoughts that we now put to consultation—we
are consulting on the principle of moving to a windowing system,
and on the practical issues that may arise.
1.54 In terms of the nature of this discussion,
and the process for taking these issues forward if necessary,
it is important to be clear about the following:
— We do not seek to present
a prescriptive ruling or decision in this document—but an
outline approach for consultation. We will consider the consultation
responses on this issue, following which we will set out our conclusions
in our policy statement in 2006.
— Specifically, we expect industry
stakeholders to inform Ofcom by the end of the consultation period
whether they expect to resolve these issues through commercial
negotiation—so intervention by Ofcom would not be needed.
We would also expect stakeholders to define a reasonable timetable
within which these issues will be resolved.
— If, by the end of the consultation
period, it is clear that the industry is unable to agree that
these issues can be successfully resolved, Ofcom will have little
choice but to conclude in its policy statement that intervention
will be needed through changes to the Codes of Practice. Under
this outcome, a separate process will then need to follow.
— Specifically, before the Codes
could be changed, Ofcom would need to issue new Codes of Practice
guidance. Ofcom would therefore need to run a separate and additional
consultation process with stakeholders on any proposed changes
to the guidance. Moreover, we highlight that Ofcom's guidance
will only contain general guidance—we will not dictate specific
terms. If required, we envisage that the initiation of this separate
process could coincide with the publication of our policy statement
in 2006.
— Amendments to the terms of
trade between broadcasters and independent producers would only
be necessary once any required changes to the Codes of Practice
had been completed.
1.55 We are therefore seeking stakeholders'
views on this issue in the current consultation, and we would
welcome a commitment from stakeholders that these issues will
be resolved through commercial negotiation. We will set out our
conclusions on this subject in our policy statement in 2006—following
which a further consultation may be required on revisions to Codes
of Practice guidance.
1 The Current TV network features "pod"
video segments of between five seconds and 15 minutes, which are
created by the network's viewers. Viewers are able to pick their
favourite videos and get instructions on the Internet on how to
construct and submit their own segments. Back
2
PVR: Personal video recorder. A digital set-top box which can
record programmes, making timeshifting easy and simple. On average
40% of TV viewing is timeshifted in PVR homes. Back
3
IFPI-International Federation of Phonogram and Videogram Producers-a
global body representing the music industry. Back
4
It should be noted that film production is outside the scope
of this review. As noted in the terms of reference for the review,
published on 11 May 2005, Ofcom does not have powers to intervene
in relation to film production. Back
5
"Holdback" is the right of a broadcaster to prevent
a producer exploiting secondary rights within a fixed period of
time. Back
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