Written evidence submitted by the British Video Association (BVA)

About the British Video Association

1. The British Video Association (BVA) exists to champion video entertainment in all its forms, from packaged media such as DVD and Blu -ray Discs through to digital services available on demand, to rent or to own on portable devices and for home viewing.

2. The proliferation of content delivery channels is increasing consumer choice and the video industry releases about 8,000 titles a year, with a UK consumer spend of £2.6 billion last year, making it the most valuable part of the audiovisual sector.

3. The BVA’s members include film companies, television companies and independent labels who produce, license and distribute pre-recorded video entertainment, covering film, sport & fitness, music, TV, children’s and special interest programming. Its members account for some 90% of the sector.

The Hargreaves Review and Government response

4. The BVA believes that the Hargreaves Review has significantly under-estimated the impact of certain proposals on the audiovisual sector. There are many positives in the Hargreaves Review, particularly the importance of improved co-ordination between agencies and government departments around enforcement; however its recommendation to create a blanket copyright exception for format shifting has not been properly thought through.

5. The audiovisual sector has a unique metabolism. The production of audiovisual content is finance and labour intensive. The production of a film, for example, costs vastly more than a music album. The film industry has limited opportunities to monetise its output because most films are only watched once. 1 Returns on investment in film production are made through cinema exhibition, video distribution (physical or digital) and broadcast television, in the UK and international markets. By selling or licensing rights to these forms of distribution in advance, a film producer is able to raise finance to "green-light" a new film production. Apart from cinema exhibition, this financing system applies also to the production of high-end television drama. Some audiovisual properties also generate returns from merchandising and gaming, though this is limited to certain genres, particularly where a franchise can be established, such as with television and children’s titles. Any change to the way content can be monetised can significantly disrupt the industry’s unique metabolism and its ability to finance new production.

6. Unlike music, there are no other sources of revenue outside of those listed above, such as live concerts for music - you cannot go and watch a live performance of The King’s Speech, for example. The ability to drive as yet unexplored means of generating new revenue is therefore limited.

7. In suggesting that an exception should be created to allow format shifting, the Hargreaves Review has failed to understand the existing value of digital copies and format shifting to our sector. Our industry currently offers viewers different price propositions according to the timescale, quality and type of use/access desired, providing different levels of value to consumers by packaging different forms of content together. A DVD is priced differently to a Blu -ray Disc because it provides a different quality of picture, sound and viewing experience. In addition, a digital copy may be offered alongside a DVD and/or Blu -ray Disc with a different price point that reflects of the added value, flexibility and benefit they bring.

8. There is also a significant difference between the audiovisual sector and other sectors in the way consumers use content. As noted in point 5 above, for the majority of film productions, once a consumer has either seen it at the cinema, bought or rented it on DVD/ Blu -ray Disc (and in most cases watched it with other friends or family members) or on one of the many digital services, those viewers do not need/want to watch it again. This is not the case for music, where people frequently listen to a song, playlist or album many times and want to own their own copies so they can do this repeatedly with ease. This means for music a digital copy being taken from a legally purchased CD, as currently happens for use on mobile devices for personal use, will not stop others in their circle of friends or family buying their own copy for personal use.

9. The introduction of a new copyright exception to provide blanket format shifting for all sectors will give consumers the impression that they have a right to take copies of all discs they buy, regardless of the fact that technical measures and digital rights management systems (DRMs) exist on DVDs and Blu -ray Discs to determine the use to which the content may be put, therefore impinging on rights owners’ ability to create value from different consumer offers that allow them to monetise the value of their content. The mere announcement that the Hargreaves’ recommendation has been accepted has caused some members of the public to believe this now legalises circumvention of technical measures. For film it will certainly lead to lost revenue.

10. Developments in the audiovisual sector have seen rapid evolution in viewer services in recent years, so that there is no need to change copyright law to allow audiences to make personal copies of video content outside existing authorised uses. The 29 platforms currently operating in the digital marketplace provide 44 different points of access for audiovisual content on all manner of consumer electronics devices.

11. While the volume of transactions in the video entertainment market has declined since its peak in 2008, the overall value of video is declining at a faster rate due to the maturing market and shift to viewing on digital platforms, whether digital sales and rentals (which command lower prices than physical discs) or online services which are free at the point of use. A recent Oxford Economics report2 suggests that video entertainment makes up nearly 50% of the revenues for films and a third for TV series and that producers increasingly depend on this source of financing in the current economic climate. Thus a format shifting exception for video would be very likely to further reduce the value of video rights by introducing more uncertainty in the market and its role in the funding mechanism, thereby increase the difficulty in raising finance for new production.

12. The Review appears to assume that the current levels of format shifting between content types are similar. The Review again treats video usage in the same way as music, which does not reflect reality. DVD and Blu-ray Disc packaging generally carries a "no copy" symbol to make it clear to buyers that they are copy protected and there is no right to rip the contents. These days most consumers understand this, although there is software available on the market making illicit circumvention of technical measures very simple. Were a format shifting exception that included video be introduced, we believe it would actively encourage more people to make illicit copies. Rather than law being changed to catch up with consumer behaviour, as the Review suggests its recommendation is designed to do, it would actually drive a change in behaviour to the detriment of our industry.

13. The BVA is concerned that a format shifting exception will increase video piracy. It only requires one copy of a work to be uploaded to the internet in order for millions of digital replicas to proliferate and become available to file-share, post on social networks, stream and burn to discs, which are frequently sold for criminal gain. The number of British people who claim to be watching unauthorised video content via a digital source emailed, on a memory stick or burned from a disc (9%) is almost as high as the 10% who say they are downloading and streaming pirated film and TV content.3 We would argue that consumer confusion arising from a new copyright exception would contribute significantly to the 30.9% of the British population who are currently engaged in some form of copyright theft, currently costing the audiovisual sector over £0.5 billion in cannibalised revenues. We believe that some consumers will use this amendment to copyright law as an excuse to justify their engagement in digital copyright theft.

14. The Review is unclear as to whether a format shifting exception could be overridden by rights management technology or contract. Making DRM unavailable would clearly have a negative impact on a range of innovative services and platforms that are providing content in the digital environment as explained above. Video-on-Demand services would be harmed if they were included, for example, as they use contractual agreement and DRM to protect their content from being copied. It would therefore have a negative impact on the investment environment for these new services. The BVA understands that any proposal to allow the circumvention of Technical Protection Measures (TPMs) would be in breach of the EU Copyright Directive, so it would be useful for the Committee to examine whether Ministers agree that a right to format shift will not be interpreted as a right to circumvent TPMs.

15. The Hargreaves Review is silent on the issue of the legal protection of technological protection measures which gives rise to a number of concerns related to TPMs embedded in content sold as ‘view only’. Moreover, the Review ignores in particular Article 6(4)(4) of the Copyright Directive which provides that rights holders are under no obligation to accommodate exceptions where works are made available on-demand. As explained above, access to audiovisual content may be sold as view-only or provide the right to have a digital copy for one or more additional devices, but new technologies are being used to expand on this to create an "authorised domain" in which legally acquired audiovisual content may be moved and viewed on several registered devices in a household. An example of this is UltraViolet , due to be launched in the UK this Autumn. See http://www.uvvu.com/index.php for further information.

16. For the audiovisual sector, there is a specific concern with respect to on-demand transactions. According to article 6(4)(4) of the Copyright Directive rights holders are not required to accommodate exceptions where content is made available on-demand on agreed contractual terms. This vital provision was designed to encourage the launch of business models – and has done so particularly in the UK (see also Hargreaves’ own VOD study). Even in the examples of the two countries where exceptions have mandatory conditions, this essential element of the Copyright Directive was either taken into account (see the Belgian Copyright Act) or arguably does not apply in the on-demand sphere (see the Portuguese Copyright Act).

17. Viewers’ willingness to pay for the timescale, level of access, quality and use creates a market with varying price points in the same way that the public can choose what time and price they will pay to use other services in many other industry sectors, for example in travel services. Some who are time poor but value a premium service are prepared to pay a higher price and for those who wish to pay less there are services available at later times with more basic benefits. We do not believe it is for governments to determine how the market develops these services by reducing the value of copyright to rights owners.

18. Ultimately, in proposing a format shift exception, the Review has developed a ‘one size fits all’ solution to industries whose eco-systems are very different. We do not believe that IP law should be used to compel all copyright owners to provide a ‘Buy one get one free’ proposition. This would lead to a significant distortion in the highly competitive video entertainment industry, reduce investment in innovation through the lower expectations of a commercial return and, in reducing the industry’s ability to monetise its content, reduce investment in the development of future audiovisual production