Support for the creative economy

Written evidence submitted by the Publishers Association [SCE 013]

Summary

1. The creative industries are one of the most dynamic, innovative and above all successful sectors of the British economy. To further the economic, social and cultural benefits they deliver it is right that policy makers should focus their attention on assisting and promoting them. The PA believes that government support for the sector should principally focus on ensuring that the regulatory, legal, fiscal and policy frameworks are conducive to the creative industries continued success; particularly:

· Maintenance of a robust and flexible copyright framework, which adapts to technological change in an incremental manner, providing stability for investment whilst addressing changing consumer needs and behaviours.

· Ensuring that the UK’s tax regime-particularly VAT-does not place British companies at a competitive disadvantage with regards to other EU member states.

· Promotion of British creativity as a core part of export and trade promotion strategies.

· Supporting industry efforts to develop the skills and employment base necessary to make a successful transition to a physical-plus-digital world.

· More generally, adopting a positive and constructive stance to the sector where there is a genuine joint endeavour in developing growth; and conversely maintaining a sceptical approach to those who seek to undermine the UK creative sector for their own commercial-or even ideological-ends.

· Whilst direct policy interventions in the form of subsidies and tax breaks might be applicable in certain other areas (such as supporting the arts) or in specific sectors (such as computer games), it is not The PA’s contention that this form of support is necessary with regards to publishing at the current time.

Background

2. The Publishers Association (‘the PA’) is the representative body for book, journal, audio and electronic publishers in the UK. Our membership of 120 companies spans the academic, education and trade sectors, comprising small and medium enterprises through to global companies. The PA’s members annually account for around £4.6bn of revenue, with £3.1bn derived from the sales of books and £1.5bn from the sales of learned journals. The publishing industry is a vital component of the creative economy, and employs 33,000 people across 2,500 companies. 41% of our sector revenues are derived from exports, a bigger proportion than in any other country, and the publishing sector is the largest exporter amongst the creative industries. Based on publisher turnover, the UK book market is fourth largest market in the world.

3. Like all creative sectors, publishing is a complex ecosystem. At its heart lies the author, or scientific researcher-the individuals whose original talent, skill and insight creates the core copyright work, be that a novel, biography, scientific paper, or any other of the myriad forms of literary work. Behind the authorial talent, lies the publishing company, whose core roles are:

· to provide financial support and investment;

· to identify, nurture and develop authorial talent;

· to assist with taking the work to market, in all of its forms;

· to help defend the integrity of the copyright.

4. The advent of digital technology is bringing unprecedented change to the sector and how publishers perform each of these roles is a constant source of development. Throughout this transitional phase publishing continues to thrive as it drives and adapts to advances in technology to develop new offerings to readers. Through close engagement with technology companies, publishers have ensured that consumers have been able to enjoy ebooks (consumer ebook sales grew by 366% in 2011, with digital fiction increasing by 188% between January and June 2012). Equally, academic publishers are already fully immersed in digital, with scientific journals having been provided online for over a decade. Educational publishers too, whilst continuing to provide physical text books to schools, saw a 78% increase in digital sales to schools in the first half of 2012. Overall, digital sales currently represent approximately 12% of the combined digital and physical market.

Responses to Questions

How best to develop the legacy from the Olympics and Paralympics of the display of UK talent in the creative industries in both Opening and Closing ceremonies and more generally in the design of the Games;

5. The Olympic and Paralympic Opening and Closing ceremonies were an incredible demonstration of the vibrancy of our creative industries and of the way in which the content produced in the UK is globally renowned. Publishing was well represented in the ceremonies, through references and readings of Shakespeare, JK Rowling-and even Ian Fleming. In particular, as a showcase to the world, the Olympics emphasised the export potential of the creative economy and it is this specifically that the Government should seek to preserve and capitalise on.

6. In order to achieve this, the Government should maintain a strong focus on supporting the creative sectors in their export markets. Specifically we urge Government to continue tangible support in the following ways:

· The PA works in close collaboration with UK Trade & Investment and administers Tradeshow Access Programme funding, which assists small and medium sized publishers to have a presence at leading international book fairs such as Frankfurt, London, Beijing, New York, Bologna and Abu Dhabi. Attendance at these international book fairs is critical to these publishers in providing routes to market and creating opportunities both for exports sales and international rights licensing. The TAP funding should be seen as a high priority area, not to be diminished or removed.

· The PA was among the bodies advocating the establishment of a network of specialised IP attachés. The IPO is to be commended for the speed with which it has already established posts in India, Brazil and China-with Singapore soon to follow. The PA has been closely engaged with the IP attachés in each of these markets and our sector is already benefiting from their expertise. We support the IPO’s intention to broaden and deepen the programme in the coming years and we urge Government to ensure the continued funding to the programme to allow this to happen.

· The PA is a member of the Creative Industries Marketing Board and supports the recent reconfiguring of its role to act as a forum for information exchange, in particular so that creative sectors operating abroad can be aware of upcoming events and high level meetings taking place within other sectors.

Barriers to growth in the creative industries-such as difficulties in accessing private finance-and the ways in which Government policy should address them. Whether lack of co-ordination between government departments inhibits this sector;

7. Investment in all sectors of the economy relies on there being a stable and secure framework upon which to base business decisions for the long term. As we discuss further below, the proposed and, we would argue, unnecessary changes to the copyright framework, have done much to create uncertainty for the future, particularly in the area of copyright licensing.

8. To the extent to which complexities and difficulties in licensing are a barrier to growth in the creative industries these are now being actively addressed. The PA is one of the founding funding members of the Copyright Licensing Steering Group, a body set up in response to Richard Hooper’s "Copyright Works" report of July 2012, which advocated the creation of a voluntary, industry led body to establish the means of streamlining online licensing of copyright. The CLSG has already begun work in co-ordinating efforts across all creative sectors to establish a common portal for online licensing.

9. The Government may also wish to be mindful of developments within the market that are having an adverse effect on competition. These include the tactics of certain companies, often operating outside of the UK (but selling into the UK market), who are able to leverage their dominant position to undermine UK businesses or impose unfavourable terms on smaller businesses within the UK creative sector-those companies which pay tax and employ people within the UK.

The impact on the creative industries of the independent Hargreaves Review of Intellectual Property and Growth, and the Government’s Response to it.

10. The importance of copyright to the publishing sector and to the UK’s world-class creative industries cannot be overstated. It is the legal and economic foundation for everything the sector does, driving investment, facilitating innovation, generating revenue and stimulating growth.

11. It is therefore deeply regrettable that the Hargreaves Review and the subsequent Copyright Consultation were infused with a clear bias against copyright, which was portrayed as a hindrance to the economy and as a drag on growth. The Copyright Consultation in particular included repeated references to copyright as a form of regulation-which in the modern political vernacular is a "bad" to be removed or avoided at all costs. In this vein, both the Hargreaves Review and the Copyright Consultation proposed a general weakening of the copyright framework. If enacted these would undermine the licensing structure that balances access to our world class, revenue generating content with revenue generation and security for rights holders. To this point we strongly commend the recent report of the All Party Group for Intellectual Property into the "Role of Government in Protecting and Promoting Intellectual Property", which called upon Government to "revert to seeing IP as a property right."

12. In particular, the Hargreaves proposals to introduce copyright exceptions for data and text mining and education and research would undermine the business models of publishing companies, and would damage the prospects for learners and researchers.

13. At the time of writing we still await the IPO’s next stage of the copyright consultation process-the initially proposed timetable of October 2012 looks likely to be missed. From what has been set out by Hargreaves and Government to date, there is little confidence in the creative sector that the proposals will be based upon strong economic evidence. (Hargreaves himself recently described his own figures as "best guess estimates"). Economic Impact Assessments published in spring 2012 were based upon highly spurious calculations and there had been little or no engagement with industry to create a comprehensive costs / benefits analysis.

14. Given the lack of any parliamentary scrutiny of the Hargreaves measures to date, should the Government ever take forward to Parliament legislative proposals based upon them, we believe that each individual proposed amendment to copyright legislation should be subject to its own individual economic impact assessment and separate statutory instrument. There should be no possibility of measures being bundled together and voted en bloc. Only through such detailed scrutiny could Government be satisfied that it was acting in the best interests of the creative sector and the wider economy.

15. The biggest lesson to be learnt from the Hargreaves Review and from the Copyright Consultation is the need for robust evidence and analysis to back up policy changes. The Hargreaves Review signally failed to prove its central economic case that weaker copyright leads to greater economic growth, yet the IPO has put forward proposals-indeed lobbied for them at the European Commission-as if the case were proven. It has been left to rightsholder groups to have to make the case against the proposition. Government itself should always be looking rigorously at both sides of every coin at the very least. We would go further and suggest that Government should maintain a rigorously sceptical stance towards those who argue for an erosion of copyright to advance their own commercial advantage at British creators’ expense.

16. Finally, we hope the Government will heed the proposal put forward by the All Party IP Group’s report (as above) that the IP Minister should be a "champion of IP" across Whitehall and that the Ministerial team should have greater oversight of the IPO. This would help ensure the Government’s continued focus on promoting the creation of IP.

The impact of the failure, as yet, to implement the Digital Economy Act, which was intended to strengthen copyright enforcement.

17. The process of sending notifications to infringing subscribers, as set out in the Digital Economy Act, would be the best means of delivering educational messages on copyright to consumers, which is why The PA supports calls for its speedy implementation . We have long held that copyright infringement is best dealt with through a combination of education, the provision of legal services and enforcement. The DEA achieves this blend through educative letters, guiding users to legal services (as has been the case in France with the implementation of the HADOPI law) and carrying a threat of further sanction. It is deeply regrettable that the implementation of the DEA has been delayed to the extent that it has, but we welcome Ofcom’s publication of the Initial Obligations Code and Costs SIs, as good progress towards full implementation of the DEA.

18. However, as set out in our responses to Ofcom, we remain concerned about a number of areas, including the cost of rightsholder participation in the scheme (especially smaller rightsholders) and the future proofing of the entire DEA system, which presently does not take account of wifi and mobile network provision, which is likely to be a growing area of consumer usage.

19. It should also be recognised that the DEA is just one potential vehicle , and is focused on tackling peer-to-peer online copyright infringement. Equally important is the ability to tackle non peer-to-peer or direct downloading infringement. To this end, the use of site-blocking injunctions under section 97a of t he Copyright Designs & Patents Act (1988) (CDPA) , by the Motion Pictures Association of America and the BPI have been a success. But th is process remains prohibitively expensive to smaller rightsholders and is highly time-consuming. This should be remedied through the creation of an expedited legal process, whereby rightsholders and ISPs could agree on parameters for infringing sites prior to beginning court hearings. We call for Government support in making the case to the judiciary to create expedited proceedings.

20. As a further measure to reduce the impact of online copyright infringement, absent the implementation of the DEA, The PA, with other rightsholders, is explor ing initiatives, such as our work with the Digital Trading Standards Group of Internet Advertising Bureau to deal with online advertising on unlawful sites.

The impact of proposals to change copyright law without recourse to primary legislation (under the Enterprise and Regulatory Reform Bill currently before Parliament);

21. It is our understanding that existing legislation allows changes to copyright law to be made without recourse to primary legislation, using the provisions in Section 2 (2) of the European Communities Act (1972)-indeed, these provisions have been used to amend the CDPA on a number of occasions. To that extent the provisions (specifically now Clause 66) of the ERR would seem to have little overall impact. We welcome indications from Ministers and Officials  that the ERR will not be used to implement any changes to CDPA.

22. However, the means by which the Clause was introduced-with no prior consultation with rightsholders, and with initially no assurances that the aim of the Clause was not to hasten through amendments to copyright-were the source of great anxiety and instability in the sector. It has taken a great deal of time and effort to extract from Ministers the clear reassurances that their stated aim of Clause 66 (the ability to allow the adjustment of criminal penalties) really was the purpose of the legislation. We are grateful to the Secretary of State for now having made this clear through revised Explanatory Notes.

23. The details of the issue are perhaps less important than what the episode indicates about the climate of mistrust which can unfortunately occasionally exist between government and the creative industries regarding copyright. Perhaps the single biggest means of support the Government could give the creative economy would be a cast iron commitment to the support and promotion of a robust and flexible intellectual property regime.

The extent to which taxation supports the growth of the creative economy, including whether it would be desirable to extend the tax reliefs targeted at certain sectors in the 2012 Budget;

24. The fiscal system can be used as a lever to support growth and to ensure that British businesses are not unduly disadvantaged in a global market place. This was recognised in the Budget statement in 2012 wherein the Chancellor extended tax breaks to the video games, animation and TV production sectors. However, it is not our belief that such measures are currently required to support publishing.

25. An area of fiscal policy which is of concern to publishers is VAT. France and Luxembourg, have recently dramatically reduced the rate of VAT on the supply of ebooks, to 3% and 7% respectively. This puts British suppliers of ebooks at a clear competitive disadvantage within the EU. We therefore support the stated position of HM Treasury to call for the European Commission to bring infraction proceedings against those EU Member States which use the VAT regime to undercut other states. (N.b. on 25 October 2012 the Commission put Luxembourg on 30 days notice to amend its VAT policy or face action at the European Court of Justice.)

26. The PA strongly supports the reduction or removal of VAT rates for ebooks, given that the same social, cultural, educational and economic benefits which are the justification for the zero-rating for print books apply equally to ebooks. The European Commission is currently consulting on this issue.

Ways to establish a strong skills base to support the creative economy, including the role of further and higher education in this;

27. The PA is closely engaged with the 11 higher education establishments which operate under or post graduate courses in publishing. This is an important access point to the sector, but by no means the only one. It is vital-from both a commercial and moral point of view-that jobs in publishing and indeed all creative sectors are open to all young people in the country, regardless of their ethnic, racial and social backgrounds. Knowledge of the sector, from knowing what roles and jobs exist through to being aware of internships and foot-on-the-ladder roles must not be restricted to those "in the know" and with the right connections. For this reason, The PA is looking to work closely with the body Creative Access which is working to ensure young people from black and ethnic minority backgrounds can break into the sector. We are also working with the Society of Young Publishers to improve our outreach to students across the country and in academic disciplines not traditionally associated with publishing.

28. Underpinning all of this activity lies an incumbent imperative on the Government not to undermine the sector and thereby reduce or remove the employment opportunities it currently provides.

The work of the Creative Industries Council and other public bodies responsible for supporting the sector

29. The PA is fully supportive of the Creative Industries Council and we view it as a useful and important vehicle through which the creative industries can come together and engage directly with Ministers on issue affecting our sectors.

30. However, there are a number of ways in which the CIC could be improved to ensure it is of greatest value both to Ministers and to industry. Firstly the frequency of the meetings should be increased. Having only two meetings are a year means large gaps between them -which of course become even greater if a member is unable to attend one of them.  Although the CIC working groups may meet in the interim, these are naturally focused on their particular areas and do not maintain discussion in other areas.  It would be worthwhile introducing a routine "Sherpa" group meeting of nominated representatives by the CIC members who could formally maintain the detailed discussion in between meetings and ensure progress.  These would perhaps meet quarterly.

31. IP and copyright are the biggest concerns facing the Creative Industries, yet discussion on this was ruled out at the first meeting as, it was said, they are being dealt with elsewhere.  This huge lacuna in the deliberations of the group has now been addressed and IP will form part of the agenda. It is regrettable that it was not there in the first place.

32. In addition to representatives from both DCMS and BIS, the CIC should consider including the IP Minister as a member of the Council. This would greatly aid discussion around IP policy, and would help facilitate greater coordination of Government policy across Departments, in particular around the area of IP.

Closing Remarks

33. We greatly welcome the opportunity to submit eivdence to the Committee’s inquiry and would be delighted to provide any further useful information, or to provide oral evidence if this were required. If the Committee would find it helpful, we would be delighted to facilitate a visit to publishing houses, across the academic, education and trade sectors, to demonstrate the creativity and innovation underway in the sector.

November 2012

Prepared 17th November 2012