Support for the creative economy

Written evidence submitted by the Authors’ Licensing and Collecting Society Ltd
[SCE 016]

The Authors’ Licensing and Collecting Society Limited (ALCS) is the UK collective management organisation for writers. Established in 1977 and wholly owned and governed by the writers it represents (of whom there are currently over 85,000) ALCS is a not-for-profit, non-union organisation. ALCS exists to ensure that writers receive a fair reward when their works are used in situations in which it would be impossible or impractical to offer licences on an individual basis. To date ALCS has paid over £280m to writers.

Summary of key points

· The Hargreaves Review and subsequent Government Copyright Consultation identified a number of areas in which expanded copyright exceptions may stimulate economic growth. The evidence base for many of these assertions has been criticised as inadequate and/or insufficiently impartial.

· Evidence of the impact of the Hargreaves recommendations on creators, whose endeavours provide the raw materials for the creative economy, is limited. Independent research commissioned to fill the gaps reveals major risks in the current policy direction -for example, options for expanded educational exceptions could result in a 29% reduction in the creation of new material. To avoid adverse impacts on the creative industries, legislative proposals on exceptions must be justified by clear evidence and presented so as to allow proper scrutiny of their impact.

· The continued failure to implement the Digital Economy Act provisions on lending rights for audiobooks, despite annual loans of around 10 million, perpetuates a situation in which writers are denied their legal rights to remuneration and libraries are operating without the necessary authorisation.

Evidence

Our evidence focuses on the following aspect of the Inquiry:

The impact on the creative industries of the independent Hargreaves Review of Intellectual Property and Growth, and the Government’s Response to it. The impact of the failure, as yet, to implement the Digital Economy Act, which was intended to strengthen copyright enforcement. The impact of proposals to change copyright law without recourse to primary legislation (under the Enterprise and Regulatory Reform Bill currently before Parliament);

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

Some positive initiatives are already underway on the back of the Hargreaves Review:

· The institution of a small claims track for intellectual property disputes should assist individual creators in protecting and enforcing their rights.

· The impetus behind developing a ‘digital copyright exchange’ has created a broader framework for collaborative industry action aimed at improving access through licensing.

· Licensing bodies have worked together in consultation with the Intellectual Property Office to develop and apply best practice standards for transparency and accountability.

It is difficult at this stage to judge the wider impact of Hargreaves, as many of the recommendations have yet to be implemented. However the underlying policy intent is clear, exemplified by plans to widen UK copyright exceptions to the fullest extent permitted by the EU Copyright Directive, while at the same time questioning or rejecting accompanying measures to provide fair compensation to writers and other rightsholders.

In terms of the deeper, longer-term impact on the creative industries, this prioritisation of ‘access rights’ over creators’ rights is a high-risk strategy.

Writers’ creativity pervades the creative economy, providing the impetus for growth in traditional markets such as publishing and broadcast, driving emerging sectors such as online content and gaming and promoting cross-sectoral revenue such as the tourism income generated from visits to West End productions.

IPO figures [1] place investment in TV, radio and film at £2.3bn and books at over £1bn. These sectors depend on a reliable supply of original content from writers but research commissioned by ALCS [2] highlights the challenging environment in which new material is created:

· Writers receive the lowest income returns during the early stages of their career with median income for the 25-34 age-group of only £5k per annum;

· More than 40% of professional writers earn less than half their income from writing, while 60% of all professional writers hold down second jobs.

With such huge investment dependent on a relatively precarious foundation, the risks to the creative industries are self-evident.

One risk is to the diversity of content being produced. Recent cuts to the already modest Arts Council literature budget (representing only 2% of funding provided to creative organisations) have threatened the existence of a number of the small, independent regularly funded organisations that are the life-blood of literature in this country.

A further, more fundamental risk concerns reforms to the current rights and licensing frameworks. If these frameworks fail to provide the necessary incentives and support structures, individuals will either fail to maximise their creative output or stop producing altogether.

One such support structure is collective licensing. Last year ALCS paid £28m to 66k writers, providing a valuable supplement to payments from royalties and other sources. A significant proportion of this income (around £12m) is paid to writers for the use of their works in the education sector, under the licensing schemes operated by the Copyright Licensing Agency (CLA) and the Educational Recording Agency (ERA).

Extending the Hargreaves access principle, the resulting Government Copyright Consultation identified measures for widening educational exceptions and restricting licensing as being, "most in line with the Government’s objectives-freeing up educational establishments to use copyright works and delivering significant cost savings." [3]

The accompanying Impact Assessment did not assess the effect on writers and publishers of such reforms and the Consultation requested further evidence in this regard. ALCS gathered evidence from two sources: testimonies provided by its members and independent research [4] . The former provided an eloquent description of the role played by secondary licensing income in the development of educational materials. The latter found that even a modest narrowing of the scope of the current licensing scheme would see a 29% reduction in the number of new educational works being produced.

We understand that the Government will publish a paper setting out its policy on exceptions later this year and expect this to take due account of the evidence provided as to its impact within the education sector.

For other exceptions included within the Hargreaves review, predicting the possible impacts on the creative industries is more challenging. The Business, Innovation and Skills Committee highlighted the need for improvements to the evidence presented in the original Hargreaves report,

"Although we agree that certain estimates used to support recommendations in the Hargreaves Review might be criticised as optimistic, the Review itself acknowledged that further economic analysis would be necessary. We welcome the Intellectual Property Office’s reassurances that more detailed analysis is on-going and trust that it will pursue that work and act on external criticism of data and methodologies." [5]

Despite these reassurances, many of the Impact Assessments accompanying the subsequent Consultation document have been criticised for being insufficiently robust [6] , while the revised assessments still exhibit a worrying reliance on estimates and proxy data, particularly in the context of new markets. The recent report by the All-Party Parliamentary IP Group noted a widespread lack of confidence in the policy development process [7] .

Given the finely balanced relationship between copyright exceptions and licensing, the case for reform must be unambiguous and supported by accurate and impartial data. Only then can reasoned judgements be made as to the likely impact of these policies on the creative economy.

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

The Committee will doubtless receive substantial evidence on the impact of the failure to implement the provisions of the Act relating to the online infringement of copyright. We would like to highlight another part of the Act that has yet to be implemented: section 43, concerning the extension of the Public Lending Right (PLR) scheme to audiobooks and e-books.

ALCS has enjoyed a long and close association with the Public Lending Right Office and continues to collect fees for UK writers due under overseas lending schemes, with over £10m distributed to date.

Following UK implementation of the EU Rental and Lending Directive, ALCS and the British Equity Collecting Society (BECS) set up the Authors and Performers Lending Agency (APLA) and invested considerable time in working with DCMS and the Intellectual Property Office to develop a solution to the audio book lending issue. These efforts to develop a licensing scheme proved frustrating and ALCS subsequently ran a campaign with the support of the All Party Parliamentary Writers Group to update the PLR legislation to reflect modern library usage. As a result, provisions were included in the Digital Economy Act (2010) extending PLR to e-books and audiobooks. Following the 2010 Spending Review, the funding for this extension was frozen leaving the legislation unimplemented.

As a positive step towards implementing the Act, we welcome the independent review into e-lending set up by DCMS and are heartened to see writers represented on the panel. The main focus of the review concerns the lending of e-books in a changing landscape for public libraries. To avoid any conflict with emerging business models, the provisions of the DEA bringing e-book lending within PLR are fairly circumscribed involving downloads on the library premises. The review will need to address the wider issues associated with remuneration in respect of remote access to works through public libraries.

A more straightforward issue arises in relation to audiobooks. Currently around 10m audio book loans take place each year, the vast majority of which are loans in hard copy formats. In the absence of a licensing scheme, these loans are currently unauthorised in terms of the rights writers and performers hold in their works and performances. Quite apart from the inequitable treatment of rights holders, this situation also places the library service in a position where rights are being infringed on a daily basis.

Given the volume of loans involved and the fact that enabling legislation is already in place, we urge the Committee to strongly recommend to Government that adequate, additional funding is made available to implement section 43 of the DEA without further delay.

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

We refer above to evidence gathered by ALCS as to the impact of a favoured course of action in relation to educational exceptions. A 29% reduction in the creation of new educational material would have significant effects for domestic publishing markets, export values and overseas licensing revenues not to mention the impact, in pedagogical terms, of a sharp fall in the supply of quality teaching materials.

The proposals on educational use are part of a package of reforms linked to the Hargreaves aim of maximising UK copyright exceptions to the fullest extent permitted by the EU Copyright Directive. Within this package there are a number of options and proposals that would have complex and diverse impacts not just on rightsholders but also on users of copyright works.

During the Bill’s Report Stage debate in the Commons, the Government spokesman confirmed that proposals on exceptions would be brought forward as secondary legislation and failed to provide the requested assurances that individual proposals would be the subject of individual statutory instruments.

Given the potential for these proposals to have significant impacts on the creative industries (and the individuals contributing to those industries) and the concerns expressed as to the robustness of the Government’s current evidence base, it is vital that the opportunity for proper scrutiny is afforded to each proposal. We urge the Committee to take any available opportunity to analyse the proposals during this brief ‘pre-legislative’ window.

A final point on copyright exceptions-not covered by the Hargreaves Review but still the subject of current debate under the Communications Review-concerns the rules relating to the retransmission of TV channels. Currently UK copyright law provides an exception permitting the retransmission by cable of broadcast signals [1] . When combined with the mandatory carriage rules applicable to certain TV channels, an anomalous situation has been created in which value is ascribed to the process of retransmission/ carriage but not to the content contained within the broadcasts, including the programmes scripted by our members.

We commend to the Committee the Mediatique [2] report on carriage policy options and in particular the model it identifies for a ‘carriage consent regime’ which has the potential to provide for an equitable rebalancing of the current structure, resulting in additional funding for investment in new creative output in the UK film and TV sector.

November 2012


[1] Updating the value of UK copyright investment, Intellectual Property Office, June 2012

[2] Authors’ earnings from copyright and non-copyright sources, Centre for Intellectual Property Policy & Management , Bournemouth University, December 2007

[2]

[3] Impact Assessment No: BIS0317, November 2011

[4] An economic analysis of education exceptions in copyright, PricewaterhouseCoopers LLP, March 2012

[5] The Hargreaves Review of Intellectual Property: Where next?, June 2012

[6] Consultation on Copyright: Comments on Economic Impacts, Oxford Economics, 2012

[7] The Role of Government in Promoting and Protecting Intellectual Property, October 2012

[1] Section 73, Copyright, Designs and Patents Act (1988)

[2] Carriage of TV Channels in the UK: policy options and implications, Report for DCMS, July 2012

Prepared 17th November 2012