6

Written evidence submitted by News Corporation

Summary

1. News Corporation welcomes Professor Hargreaves report, and the seriousness with which it regards the role of IP in creating a vibrant and competitive market for creative works.

2. Several of the Review’s recommendations can help the UK Government achieve its goal of robust economic and job growth. In particular we believe the establishment of a Digital Copyright Exchange, the implementation of a legislative solution for orphan works and the implementation of the Digital Economy Act (subject to the conditions outlined below) should be priorities for both Government and industry.

3. News Corporation however believes that the market, rather than Government, should dictate industry’s business models, platforms and services. We are concerned about any proposals to introduce mandatory cross-border or extended collective licensing, or broader copyright exceptions, where there is no evidence of market failure. Introduction of these measures could inhibit News Corporation and other companies in the creative industries from contributing to such growth.

4. We would urge Government not to take a "one size fits all" approach to implementing policy changes across content sectors but rather to acknowledge the substantive differences that exist between industries and accommodate and reflect these in any proposals which are put forward.

Introduction

5. News Corporation is a diversified global media company with operations in six industry segments: cable network programming; filmed entertainment; television; direct broadcast satellite television; publishing; and other. The activities of News Corporation are conducted principally in the United States, Continental Europe, the United Kingdom, Australia, Asia and Latin America. News Corporation had total assets as of March 31, 2011 of approximately US$60 billion and total annual revenues of approximately US$33 billion.

6. In the UK, News Corporation companies include News International, HarperCollins and BSkyB (in which the company holds an approximate 39% interest). News International is the parent company of the publishers of The Sun, The Times and The Sunday Times. News International also publishes The Times Literary Supplement, a weekly literary review. HarperCollins is one of the largest English-language publishers, with global revenues of over $1 billion every year. BSkyB operates the leading pay television broadcast service in the United Kingdom and Ireland, as well as broadband and telephony services.

7. Globally News Corporation owns businesses including the media network Fox, the film studios 20th Century Fox, and Dow Jones, which publishes the Wall Street Journal, many of which have a significant presence in the UK. News Corporation, through its investment in the production of entertainment, news gathering and reporting, and other media production is a significant contributor to cultural, creative and information knowledge base in the UK and worldwide.

8. News Corporation is pleased to have the opportunity to respond to this inquiry. We have long asserted that robust intellectual property protection and enforcement has helped the UK become a global leader among the world’s creative industries, including in the news, audio-visual, publishing and music industries, and it was in this spirit that we welcomed Professor Hargreaves’ Review.

9. In our response to Hargreaves we noted that like all content creators, we have two commercial objectives: to make our content more easily accessible to an increasingly global audience by enabling more market routes and choice for the consumer, and to ensure a fair return on our investment in that content so the value it generates can be reinvested in new content which drives, among other things, the demand for broadband and internet services.

10. To achieve the first of these aims we have become innovators in the technology space as well, creating platforms and services and investing in technologies that make our content responsive to consumer demand, including animation, 3D, etc, as much as we create content. We embrace new business models which improve our offering to our customers, even business models that disrupt our more traditional means of distribution, in the interests of maintaining a vibrant and competitive market for creative works.

11. We agree wholeheartedly therefore with Professor Hargreaves’ acknowledgement that IP is critical to innovation and growth. Content creators and technology concerns both depend upon and benefit from the same IP framework and in particular the existence of a robust copyright regime to prosper, regardless of whether it is content or software code that we are protecting.

12. We believe that several of the recommendations proposed in the Review, if implemented appropriately, can help the UK Government achieve its goal of robust economic and job growth whilst ensuring the continued development of a robust, competitive and flexible IP framework in the UK. We do note though that several of the recommendations raise concerns and could inhibit News Corporation and other companies in the creative industries from contributing to such growth.

13. There are also substantive differences between each industry’s business and licensing models. Therefore we would urge Government not to take a "one size fits all" approach to implementing policy changes across content sectors but rather to acknowledge these differences and accommodate and reflect these in any proposals which are put forward.

Specific proposals

Digital Copyright Exchange (DCE)

14. In our submission to the Hargreaves Review, we argued that the management of copyright can be revolutionised by the development of a lightweight standards-based cross media infrastructure. This would exist primarily for identification and communication of rights and permissions around which services can be developed for managing these and, where appropriate and at the discretion of the rights owner, automated and semi-automated tools for more effective transactional licensing. The result would be to broaden the legitimate market for rights transactions and use and reuse of content.

15. We therefore support in principle the creation of a DCE and have begun discussions with industry colleagues about how best to move its development forward. The primary function of a DCE should be as a signpost system which uses existing sources of metadata to direct users to information regarding rightsholder and how that content can be licensed. The technology already exists to facilitate this, and many initiatives are already under way across various content sectors. The challenge for a DCE is to create interoperability between the many technical building blocks that already exist. By the same token the DCE will need to be interoperable with other frameworks both in Europe and globally.

16. The voluntary nature of the DCE is of critical importance. Rightsholders should participate because it is in their commercial interests to do so. The DCE should not impose or in any way be prescriptive about licensing or other kinds of business models. Every industry is differently placed in this regard and already utilises different registries and sources of metadata, making participation in the DCE by necessity an evolutionary process. Beyond the signposting function, its evolution should be market led: some may quickly embrace its potential for transactional licensing; others may prefer to adhere to existing models.

17. Although we appreciate the need to incentivise participation, this should not be achieved by conferring the ability to enforce any IP rights, such as in relation to the Digital Economy Act, as Professor Hargreaves tentatively suggests in his Review. Such a proposal would risk making registration with the DCE de facto mandatory for those wishing to protect their copyright, which would in turn be in breach of our obligations under the Berne conventions to keep copyright free of such requirements.

18. Regarding the governance of the DCE, in the first instance we would strongly favour a self-regulatory rights management framework which has the support and endorsement of Government. In the short term the success of the DCE will be determined by the ability of those leading the initiative to persuade rightsholders and users of its viability. Strong commercial leadership will be needed to achieve this, as well as a detailed knowledge of every facet of the content sector, technical knowledge and political nous.

19. This implies someone who has a deep knowledge of the copyright industries without having a strong sectoral bias, and can provide strong commercial leadership, a global outlook, a good technical understanding and has a full grasp of the regulatory and governance challenges. This list of requirements may imply that the Governments’ apparent view –that it will need more than one individual to undertake this role – is a sound one.

Orphan Works

20. We have long argued that a legislative solution to enable a mechanism for licensing orphan print works is both desirable and achievable. A two-step process of diligent search and licensing is the most suitable and effective means to deliver this.

21. We support orphan works legislation that includes an obligation for a clearly defined diligent search which is sufficiently comprehensive and robust and by which a work can be accurately identified as orphan. This may include but should not be limited to consultation with one or more registries as well as the work itself (many films and books identify the copyright owner within the work itself). For this and other reasons an appropriate definition of diligence may vary on a sectoral basis.

22. However, the review of registries or the DCE should not be sufficient in itself to constitute a diligent search. Nor, under any circumstances, should a work not being on the DCE be interpreted as therefore being orphan. The rightsholder must reserve their right not to register a work with the DCE (a principle which is already enshrined in the Berne Convention).

23. In the case of AV content we are not aware that there is a problem of works being orphaned, nor has any evidence or impact assessments been produced to suggest otherwise. Therefore, orphan works legislation should exempt AV works.

Extended Collective Licensing (ECL)

24. We strongly urge Government to take note of Hargreaves’ recommendation that ECL "should not be imposed on a sector as a compulsory measure where there is no call for it". ECL schemes can operate in limited circumstances but mass licensing of rights where owners had not explicitly given permission would be contrary to a fundamental principle of copyright - that the onus should never be on the rightsholder to opt-out of a licensing scheme. Where evidence exists to suggest that ECL may be needed to address a perceived market failure, it should be voluntary and based on an opt-in procedure to ensure consistency with the UK’s international IPR obligations.

25. The VoD report referenced in Professor Hargreaves’ Review confirms that there is no need for ECL in the AV sector as the UK VoD market is competitive and vibrant, which underlines the ability of platforms to license AV works. It is important to note that in certain industries, such as film, the rights are concentrated in the producer preventing the need for multiple licenses for a single work.

Enforcement of IP Rights

26. We look forward to working with Government to ensure the cost-effective implementation of the Digital Economy Act, the creation of a self-regulatory regime for blocking rogue sites and other efforts to advance the enforcement of IPR on the Internet. Such measures are essential to ensure that the copyright industries can do their part in promoting economic growth and job creation. Moreover, they are essential to address a market failure in that unlike legitimate online distribution platforms, pirate sites do not pay licensing fees for content and often do not comply with regulatory obligations or pay taxes. Without effective IP laws and enforcement the long-term sustainability of new and innovative business models will be jeopardized.

Cross-Border Licensing

27. News Corporation believes that licensing terms should be dictated by the market. Our subsidiaries grant multi-territory rights when sought by distributors and where commercially appropriate to do so (i.e. platforms serving countries that speak the same language). Clearly there is therefore nothing in the existing EU copyright acquis to prevent this. It is critically important therefore that any legal changes to the EU framework to facilitate cross-border licensing do not impose a mandated solution for all sectors and thus take account, as Hargreaves recommends (4.43), "of the needs of particular sectors, including territoriality of pricing", and that licences of a national scope "remain available".

Format Shifting

28. We oppose such an exception for film for several reasons. First, it will likely require the illegal circumvention of technical protection measures that once hacked can allow for the uncontrolled and unauthorized redistribution of works via the Internet. Second, it will undermine the market-driven business models that allow consumers the ability to watch works on multiple devices in a secure way, such as Ultraviolet. Finally, it will undermine the vibrant VoD market recognized in the Hargreaves Report and indeed our ability to offer consumers different viewing options at different price points, thereby reducing consumer choice.

Non-Consumptive Use Exception

29. News Corporation has serious concerns about this vague recommendation, which is potentially much broader than the US Fair Use doctrine, and undermines a fundamental tenet of copyright in favour of a loose notion of ‘adaptability’. In practice it could inadvertently legitimise business models that benefit from creative works without the authorization from the copyright owner. This goes well beyond mere technical functions such as search and could include sites that link to unauthorized copies of copyrighted works on the Internet. Indeed, research commissioned by Google indicated that only seven percent of UK start-ups consider IP a barrier to innovation. Nor does the Review provide any evidence for its assertion that the absence of such an exception is blocking innovation. With this in mind, this overly broad exception seems a very blunt instrument for what evidence indicates is a very limited problem.

Other Copyright Exceptions

30. A data mining exception may undermine legitimate business models that comply with existing laws and obtain authority to mine data via a license. Attempts to define parody and express when it should be protected are inherently problematic. Measures to undermine contractual freedom (a well established principle in UK law) are likely to inhibit the same freedom which has given rise to flexible licensing for new and innovative distribution platforms and uses of works. Contracts are capable of providing greater specificity, clarity and certainty between rightsholder and licensee than copyright law. We are not aware of any economic evidence that justifies such a proposal.

5 September 2011