Hargreaves Review of Intellectual Property

Written evidence submitted by FremantleMedia Group

Summary

· FremantleMedia supports many of the Hargreaves Report recommendations

· We have concerns about the possible complexity and expense of the Digital Copyright Exchange, particularly if there were to be penalties for failure to use the Exchange.

· We also are anxious that any attempt to encourage cross-border licensing is subject to thorough consultation to examine both whether this is necessary and what the impact would be on the UK television industry’s current business models.

1. Introduction

1.1 FremantleMedia welcomes the commitment to review and update the UK’s intellectual property laws to ensure these are suitable for the digital age. The creative industries are a valuable contributor to the UK’s economy and intellectual property provides the foundation stones on which these are built. As one of the larger international rights companies, which produces and distributes television programmes and other audio-visual content worldwide, and owns and exploits in all media high-profile brands such as ‘Idols’ and ‘X Factor’, our business is dependent on the ability to acquire, produce and license a variety of intellectual property rights around the world [1] .

1.2 Robust and effective IP laws can enable and encourage the creative industries to flourish, so that while it is clearly important that these laws do not act as a discouragement to investment and growth, it is also crucial that they provide adequate protection for investment in these areas. We recognise, and are happy to see, that the Hargreaves Report also recognises, that there is a balance to be struck between growth and innovation and the protection that exclusive IP rights gives to investment in the creative industries. We would also like to emphasise the need for determined enforcement of IP rights, and encourage the speedy implementation of the Digital Economy Act.

1.3 We fully welcome a great deal of the Hargreaves Report and the Government’s Response on its proposed implementation including:

1.3.1 A solution to the Orphan Works issue which can only be helpful to everyone who uses copyright works in any way;

1.3.2 Improvements in the efficiency of collecting societies not just in the UK but across Europe.

1.3.3 The introduction of a small claims track for copyright claims which will make it easier for rights holders to enforce their rights – the cost of a high court action is a clear disincentive to action particularly in the area of online infringement where the costs of enforcement on a case by case basis may well outweigh any possible lost revenues, particularly when such legal enforcement costs and lost revenue are unlikely to be recovered from the infringer.

However, the areas where we believe care needs to be taken in the implementation to ensure the proposals have the positive effect intended are primarily

· the proposed Digital Copyright Exchange

· the issue of cross-border licensing.

2. Digital Copyright Exchange ("DCE")

2.1 In principle the idea of a central digital registry where information on who owns which rights, what rights are available, and how to acquire them is very appealing. We can see how this might work well in areas of simple copyright, such as book or music publishing, and where collective licensing is in effect. Audio-visual works such as television programmes, however, have many layers of different contributors who may have granted a variety of different territories and rights. In addition, there are currently no agreed industry definitions for many different digital rights such as ‘catch-up’ and ‘video-on-demand’. These would have to be agreed before any digital recording of rights across different companies and industries could be effective.

2.2 This is therefore an extremely ambitious and complex project, and our concerns relate primarily to the idea that any rights owner who did not take advantage of the DCE would be penalised in some way, including being unable to enforce their rights fully. Our experience of trying to automate rights information is that it is extremely complex, and at best there will still be a need to check rights and availability with the rights owner. It would also be expensive to develop and implement and would need constant investment and upkeep to ensure it was an accurate record. We would want to be sure that the costs of setting up and administering the DCE would not outweigh the benefit either for the industry generally or us individually.

2.3 In summary:

We would be delighted to use a DCE if it is practical and we can accurately summarise the necessary information, or alternatively we can simply register ourselves as the point of contact in relation to properties we control. But we would not support this initiative and be extremely concerned if we were penalised because we were unable to use the Exchange if it could not properly reflect the complexity of our right position.

3. Cross-border licensing

3.1 The issues with cross border licensing are different for different industries. We welcome any efforts to improve cross-border licensing by collecting societies. However, where audiovisual works are concerned the issues are more complex. In the first instance, we may not have the rights for all territories to comply with this, and unless we are going to take away the right from writers, actors and other contributors to negotiate which rights they license to producers, this will continue to be a difficulty.

3.2 In addition, we need to be able to deal with our rights in a way the market wants. The issue with cross-border licensing of audio-visual works is not really that rights owners are blocking this, so much as that there is little market demand for this. The markets for audio-visual content are still predominantly national and linguistic, and this is the basis on which we distribute television programmes and other material. The one exception to this is English language programming for which there is some very limited demand in non-English speaking countries.

3.3 We do not therefore have customers coming to us seeking to acquire multi-territory or cross-border rights which we refuse to give them. We would be happy to license rights on this basis, provided any such exploitation was additional to our current business rather than substitutional. Our concern would be that if cross-border licensing were encouraged without careful thought and consultation, we might reach the position that once an English language programme had been placed online in one country, we were compelled to make it available in other countries. This would mean we were unable to sell that programme in any other country, or at least only at a much reduced price. This would have a serious impact on the economics of the production and distribution of audio-visual content:

3.3.1 Our experience is that the revenues we might earn from cross-border licensing, whether we negotiate this, or some form of collective licensing is applied, would not compensate for the reduction we would suffer in the value of the national rights we could otherwise licence. Broadcasters pay for exclusivity; if a programme was easily available in their territory online, then the price they would pay would be significantly discounted. UK TV exports are currently worth £1.3 billion a year and this has helped fund an increase in the investment in original UK content which is now worth around £2 billion [2] .

3.3.2 The funding of international programmes (ie. programmes such as high cost drama funded currently by broadcasters in several territories) would be eroded as the value to any but the initial broadcaster would be seriously undermined . We were reassured to see that the UK Government believes that any facilitation of cross-border licensing must be compatible with current effective licensing models. Our concern is that it is difficult to see how these two could be married to create a cohesive and effective system.

3.4 We realise that there may be some consumer interest in being able to access online material from different countries that currently might be geoblocked. We do in fact allow cross-border licensing where that will not materially damage the value of the rights we control, where for example a small minority population in one country may wish to access programmes in their own language from outside the country. We are happy to allow this if either the local broadcaster only has rights in their own language, or we can persuade them to agree. What we would not want to do is allow this where it materially undermines the value of the rights the broadcaster acquires, for which reason generally speaking we do not allow access to the English language version from outside the UK.

3.5 Finally we would have concerns that any form of mandatory licensing would encourage online piracy and make the tracking of infringers that much more difficult.

3.6 In summary:

This is a complex area where intervention in the market may have significant negative impacts on the UK audio-visual industry unintended by its proponents. Any action should be preceded by thorough and widespread consultation on the demand for and consequences of cross-border licensing and whether this is an area that requires government intervention, or is best left to the market to evolve business models that work.

9 September 2011