Letter to the Chairman of the Committee
from the Deputy Chairman of Ofcom, dated 13 November 2006
You will recall that when Ofcom gave evidence
last month to the CMS Select Committee as part of your inquiry
into the creative industries and new media, you asked a question
to which I indicated we would respond to you with a written answer.
The exact question was:
Can I ask you one very specific regulatory
question quickly. The downloading of content on to different platforms.
As I understand it, the downloading of premium content on to mobile
devices, Ofcom is arguing, should be covered by the ICSTIS rules
and requirements whereas the downloading of content (at presumably
much the same price) through the Internet through for instance,
iTunes is not regulated. Doe3s this not seem unbalanced to say
the very least?
In these examples, you are drawing attention
to a regulatory distinction which appears illogical at first glance—but
which in fact has a good basis in consumer protection objectives.
ICSTIS regulates services independently of the
device used to receive them: its responsibility is for services
which are purchased using a telephone billing account. ICSTIS
regulates such services because the telephone account has some
characteristics which distinguish it from other means of payment.
Such other means of payment, for example credit cards, attract
consumer protection regulation and afford rights to consumers.
In order to protect consumers from unwittingly
incurring excessive telephone bills (which could have consequences
for their continued access to a telephone), or from buying services
which have been described in an inaccurate or misleading way,
ICSTIS regulates all services where a provider is selling information
or entertainment and is charging consumers via the telephone bill.
These are described as Premium Rate Services, and are subject
to the ICSTIS Code of Practice which is approved by Ofcom under
the Communications Act 2003.
The Code of Practice focuses both on the way
the service is promoted as well as the service itself. One key
focus is information about the charges for the service.
If a mobile network operator or other service
provider in the UK offers phone users a content download service,
where content is paid for via the telephone account, this service
would of course be subject to the ICSTIS Code—even though
the same services might be available in other ways which are not
subject to the ICSTIS Code. The availability of music downloads
which use other means of payment does not affect the requirement
that services sold using telephone accounts be appropriately regulated.
Other consumer protection law is likely to apply to those other
payment mechanisms such as credit cards.
While this is the position at present, Ofcom
is undertaking a review of the scope of regulation for premium
rate services, which will consider whether the current regulatory
approach is fir for purpose. The review will look at the issues
raised by the Committee to both ensure there is effective regulation
of premium rate services in a converged communications market
and that regulation is fairly applied to competing services. This
review should be finalised by the end of 2007.
Memorandum submitted by Entertainment
& Leisure Software Publishers Association
INTRODUCTION
1. The Entertainment & Leisure Software
Publishers Association (ELSPA) was founded in 1989 to establish
a specific and collective identity for the British computer and
video games industry. As the industry has rapidly developed and
matured, ELSPA membership has grown fivefold and now includes
nearly 70 companies concerned with the publishing and distribution
of interactive leisure and entertainment software in the UK. ELSPA
is an active member of the Digital Content Forum and the Alliance
Against IP Theft, both of which are making submissions to the
Committee, which we endorse.
2. The UK is one of the world's leading
countries for interactive games. The majority of global industry
players—publishers, software and hardware companies—have
their main European or worldwide base in the UK. We are recognised
globally as the gateway to the European games market, with around
35% of software sold in Europe emanating from UK studios. The
UK industry employs directly around 22,000 people and attracts
significant inward investment from the US and Japan—the
largest markets in this US$21 billion sector.
3. The UK has the world's third largest
computer and video games market by value, recording sales in excess
of £2.3 billion annually. There is about one games console
for every three people in the UK and some 335 million units of
games software have been sold in the last decade. A December 2005
report, "Gamers in the UK", commissioned for
the BBC found that 59% of UK 6-65 year-olds—some 26.5 million
people—play interactive games, with 21.6 million of these
regularly playing at least once a week. As a comparison, recent
UK Film Council figures show average weekly attendances at UK
cinemas in the first half of 2005 at between 2.5 million and 3.7
million people per week, around a tenth as many people as play
interactive games.
4. A consistent success story, the interactive
games industry is a net exporter of products reaching a value
of around £200 million in 2003. In comparison, the film and
TV sectors recorded trade deficits of £282 million and £553
million respectively in the same year. At current rates of growth,
even without the pressures on convergence of interest to the Committee,
it has been forecast by PricewaterhouseCoopers that the global
games sector value will have doubled by 2008.
RECENT AND
FUTURE DEVELOPMENTS
IN DIGITAL
CONVERGENCE AND
MEDIA TECHNOLOGY
5. The UK's interactive games industry is
rapidly growing commercially and creatively successful because
it is, and always has been, at the leading edge of digital technology.
Interactive games are integral to the process of convergence,
which the Committee is investigating, so it is important to understand
how our sector defines convergence. History shows that it will
be our definition and our vision that drives creative energies
in related sectors. In brief, convergence is both a technological
and an organisational process.
6. Firstly, there is the convergence of
the physical technology itself—devices already available
can play interactive games, films, music, radio and television,
operate telephony and interact with other people and devices over
networks and the internet. In our experience, these devices are
fundamentally interactive games machines and computers which now
have additional input channels. Many new game consoles are internet-enabled
devices, often portable, which also play video and music from
both broadcast and recorded sources. Modern home computers can
be single control points for an entire household's audio-visual
and information requirements.
7. Future developments in technological
convergence are likely to include the end of many traditional
single-purpose devices and further blurring of the boundaries
between passive viewing or listening and active engagement with
broadcast or recorded content—using interactive gaming technologies
and techniques. Popular TV programmes such as "Ask the Nation"
have already demonstrated the public's willingness and appetite
to take part in interactive entertainment.
8. The visual and acoustic capabilities
created by interactive games companies go well beyond simple Q-and-A
interactivity, however. Technology developed for interactive games
can graphically recreate lost civilisations, inaccessible structures
and forgotten species in fine detail. Many films and TV programmes
already employ these technologies, and the creative people and
processes behind them, to enhance their output. The same techniques
will allow creative fulfilment of neglected art, music and drama,
providing new and exciting opportunities for consumers and for
securing employment, developing skills and creating wealth for
the UK interactive games industry.
9. Interactive games are getting more popular
as technology improves. In South Korea, for example, a country
with a similar size of population to the UK but a considerably
faster and more widespread broadband network, there are some five
million registered users of the most popular MMOG (massively multiplayer
online game) with up to 200,000 people playing online at any time.
Broadband, increased portability of devices and increased ability
to access and play interactive games using any platform will lead
to a wider penetration of such games.
10. The second convergence, driven in part
by technology, is the convergence of organisations. It is no longer
appropriate rigidly to compartmentalise music, film, TV, computer
and interactive games companies. Often these are parts of the
same corporation. If not, they are likely to have close working
relationships and a high degree of interdependence. ELSPA believes
that interactive games will often be the common thread running
through diverse media corporations.
11. Interactive games companies are amongst
the world's biggest commissioners of original artwork and music—the
scenery and scores heard on modern interactive games. Several
interactive games companies now have music publishing operations
and exhibitions of digital artwork, such as recently held at the
Institute for Contemporary Arts, are becoming more commonplace.
12. Games are inextricably linked with film.
Lara Croft: Tomb Raider, Super Mario Brothers and Mortal
Kombat, for instance, were interactive games long before they
were films. In the last few months, cinemagoers have been able
to watch, for instance, King Kong, Harry Potter or Narnia
and then enact their own version in an interactive game, or
link with many players online to create new adventures. Major
directors, such as King Kong's Peter Jackson and Munich's
Stephen Spielberg, are creating content specifically for interactive
games.
13. In sport and television, interactive
games have built a unique position. This month TV viewers could
watch the Winter Olympics whilst battling near-identical virtual
ice and snow in Turino 2006, the interactive game. Gamers all
over the world will be lifting the FIFA World Cup in Germany this
year, even if they haven't left home and their country didn't
qualify. You may see the venues and compete in virtual games before
the Olympic flame is lit over London in 2012.
14. Film, TV and music organisations, computer
corporations and telephony providers, have already begun to shape
the converged creative industries of tomorrow. It is not possible
to predict where such convergence will end, but interactive games
will be integral to successful new organisations. In understanding
recent and future developments, the Committee will recognise that
the challenges and opportunities it identifies may be unrecognisable
to, say, a successor Committee conducting a similar investigation
in the next Parliament.
15. Finally, convergence is not limited
to media organisations or the creative sector and others have
already recognised the wider applications of interactive entertainment
software and technology. Medical experts use interactive simulations
and interactive games both as therapeutic aids and as educative
tools. Interactive games exist, for example, which test and train
teenagers' understanding of contraception. In education, universities
already teach programming and interactive games design. The industry
is working with Skillset and DTI on a programme of accreditation,
unique in Europe, for games-related degree courses. In schools,
interactive software is both being used and being tested in a
range of teaching and training settings. Even the US Army has
an online interactive game as a recruitment tool. Downloaded 1.5
million times in its first six months, it was one of the world's
most successful interactive games launches.
GOVERNMENT'S
ROLE IN
UNDERSTANDING AND
SUPPORTING CONVERGENCE
16. It is clear that technological and organisational
convergence will radically alter the shape, reach and accessibility
of creative industries. It has long been the case that interactive
games have been viewed as less significant than other creative
industries. However, we have shown in this submission that interactive
games are central to today's debate about all creative industries.
Today's interactive game player could be anyone; tomorrow's interactive
game player will be nearly everyone.
17. Convergence is a difficult word for
Government, since it involves breaking down traditional barriers—in
this case between Departments and spheres of influence. It is
not, in our view, in the interests of the creative industries
or the country as a whole for one Department to try to hold all
the aces. Convergence heightens, not lessens, crosscutting issues
of regulation, supervision and sponsorship of our industry.
18. It is somewhat surprising for example
that the industry's co-sponsoring department, DCMS, does not devote
even a single page of its website to the interactive games industry.
By contrast, for example, there is a small but well presented
suite of pages and downloads available at the DTI site. Responsibility
for the industry passed from DTI to a shared position with DCMS
after the 2005 General Election, but the new Department has yet
to make an impact with ELSPA members. The DCMS has stated its
desire to make the UK the world's "creative hub", but
announcements so far have been vague about the importance of the
interactive games sector.
19. A body devoted to supporting the UK
interactive games industry at a time of international change would
appear to be worthy of urgent consideration. However, there is
no DCMS interactive games industry equivalent for example of the
Film Council, nor is there a Treasury scheme of direct comparison
to that which supports additional tax breaks for UK development
of film. Yet the interactive games industry faces similar problems
of stimulation of employment for new market entrants and leakage
of creative talent among member companies both to overseas competitors
and to organisations with convergent products.
20. In this submission so far, ELSPA has
concentrated on economic and cultural impacts. But the industry
has educational, intellectual property and regulatory interests,
which are also affected by convergence and related pressures.
The approach required to respond to convergence in these areas
is one of joint working between HM Treasury, DTI, DWP, Home Office,
DfES, HMRC ODPM and DCMS.
EFFECTS OF
UNAUTHORISED REPRODUCTION
AND DISSEMINATION
OF CREATIVE
CONTENT
21. The Alliance Against IP Theft is making
a detailed submission to the Committee concerning crime against
the interactive games industry and others and we endorse its sentiments.
22. It should be noted, however, that the
interactive games industry faces additional and unique problems
as a result of such theft. Since the industry has always been
digital in nature, it has always had some form of built-in technological
protection measures (commonly known as TPMs). As the number and
type of devices (consoles, handhelds, mobile phones, etc) that
can relay interactive games has increased, so the type, complexity
and range of TPMs has adapted.
23. However, the biggest area of change
is the move to online, subscription, downloaded and streamed content.
Consumers demand these versions since they may provide increased
playability, wider opportunities for interaction or greater challenge.
They improve the "how, where and when" to play options
and may also allow easier updating in some instances.
24. Widening access for consumers comes
at a price in the form of stronger types of TPM protection against
criminals. The newer online delivery technologies are using digital
rights management (DRM) protections to prevent attempts to infringe
the patents, to control user ability to enable or disable features
such as copy protection, and to encrypt certain core data so that
it can be accessed only by authorised users as a lock against
illegal distribution. ELSPA and its members have been engaged
in product protection activities from the outset. We support measures
to continue the development and implementation of secure DRM systems
and we would not support attempts to mandate DRM systems from
external sources.
25. ELSPA is at the leading edge of tackling
software theft. Almost half our time, efforts and resources as
a trade organisation are devoted to our anti-piracy unit. This
assists Police, Trading Standards, DWP and HM Revenue & Customs
personnel in tracking, gaining evidence against and prosecuting
often well-organised and funded gangs of illegal software producers,
traffickers and traders. We find public bodies to be well motivated
but often lacking in funds or sufficiently highly prioritised
on software crime. More resources for trading standards work and
a legal duty to combat software crime via copyright legislation
could help tip the balance in favour of intellectual property
protection.
26. It is important for the Committee to
recognise that software theft is not a victimless crime. In an
average constituency this year, criminals involved in software
piracy will pocket close to £1,000,000 by making, distributing
and selling stolen, poorly reproduced and incomplete copies of
genuine interactive games. There is an obvious loss to the Exchequer:
the estimated retail value of interactive software piracy is in
excess of £2 billion. There is an often less-regarded increase
in associated criminal activity, including extortion, people trafficking,
violent assaults, benefit fraud and intimidation from software
theft. Yet, the Government and public bodies have some way to
go before piracy is seen as antisocial, let alone deeply damaging.
27. The extent of losses and lack of firm
action by Government has several knock-on effects for the industry.
Key among these is the effect on innovation. If IP theft continues
to take such a high toll on genuine sales, the balance of risk
and reward in interactive games development, publishing and marketing
will tip too far towards safety. There is already something of
a trend towards sequels and licenses in interactive game publication.
Producing new versions of tried, tested and well-sold products
offers greater protection against losses through piracy. Although
more copies may be illegally produced and sold of a "blockbuster"
interactive game, there are still enough genuine copies to adequately
create a return on investment.
GOVERNMENT'S
ROLE IN
ATTACKING IP CRIME
28. In addition to the comments made by
the Alliance on this matter, it is important that the Government
should without further delay implement section 107A of the Copyright
Designs and Patents Act 1988 thereby placing a duty on Trading
Standards Authorities to enforce the criminal offences within
the Act. In doing so, it should also seek to increase funding
for IP protection by these Authorities.
29. The Government should further commit
to working closely with the industry to ensure that the offences
for circumvention of technical protection measures found within
section 297ZB of the same Act keep pace with the development in
particular of DRMs within the digital industry.
THE FUTURE
REGULATORY ENVIRONMENT
30. Finally, ELSPA has already mentioned
that regulatory challenges for the interactive games industry
may become more complicated as convergence proceeds, with more
Departments and Agencies seeking a role in regulating sales, content
or performance of entertainment and leisure software. The UK's
role as a regulator should be set in the context of the simultaneous
sale and launch of many interactive games through the EU and wider
Europe and the global nature of the interactive games industry.
Interactive games are becoming increasingly global in nature and
increasingly expensive to produce. The UK is currently in the
front rank of the industry worldwide and it is important for the
economy and the future of creative talent development and retention
that the UK maintains its flexible approach to regulating global
industries.
31. ELSPA has led the sector's response
across Europe to content related regulatory challenges. The industry
has fully adopted robust Codes of Practice on age suitability
ratings and advertising. Currently only a small proportion (less
than 5%) of interactive games are subject to compulsory age ratings
under the regime of the Video Recordings Act 1984. The remainder
are classified in accordance with a well-respected and supported
European self-regulatory system known as PEGI. In the UK the industry
has agreed with DCMS to display more prominent age ratings than
are required by the Video Recordings Act in relation to DVDs or
Video.
32. The European Industry is currently developing
a self-regulated age ratings scheme for PEGI for the on-line environment.
This scheme, which is shortly to be unveiled, will complement
the parental controls which have been made available in the new
generation of consoles. These will allow parents to set controls
on the content that the consoles will allow users to access both
on- and off-line.
28 February 2006
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