Support for the creative economy

Written evidence submitted by The Newspaper Society [SCE 017]

The Newspaper Society (NS) represents the UK’s regional media. Our members publish over 1100 local and regional newspapers, paid-for and free, daily and weekly, circulating throughout the UK. In addition they offer 1600 companion websites, hundreds of niche and ultra local publications and a range of digital and broadcast services, including several local radio stations. 42 million users visit their websites every month. The regional press industry’s investment in new platforms, converged multimedia newsrooms, video journalism, UGC, mobile sites, smartphone apps and other digital and print innovations means that local newspapers are now reaching more of the population than ever before as well as attracting new online advertising revenues. The industry is finding new ways to open up public bodies to scrutiny, for example via live webcams, Twitter, and blogging. Local media has increased its monthly online audience by 16% over the past year, with publishers citing increased access through smartphones and tablets.

1 Summary

The NS submission concentrates on three issues, namely barriers to growth in the creative industries, VAT and proposals to amend UK copyright law.

· Ownership regulation: the Government’s communications review and any new Communications Bill must facilitate local and regional media companies’ innovation and development;

· Future of Press Regulation: the NS and regional and local newspaper publishers oppose any special press laws or state controls over the press;

· Interaction of Government Departments: it is important that DCMS and BIS share intelligence on our sector and recognise its contribution to the UK economy;

· Taxation: zero rate VAT on the printed word must be maintained;

· Hargreaves Review: publishers must be able to rely on strong and effective protection of IP rights to ensure that they are properly rewarded for quality content, and to choose how they market their IP assets;

· Digital Economy Act 2010: there must be doubt as to whether the DEA will prove effective against piracy, given the long delay in implementing the law;

· Enterprise & Regulatory Reform Bill: any changes to the copyright framework should be subject to full Parliamentary scrutiny; secondary legislation is not an appropriate vehicle.

2 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.

Ownership regulation

2.1 The development of local media companies is still constrained by the media ownership rules and their application by the competition authorities. It is important that the Government’s communications review and any new Communications Bill facilitate local and regional media companies’ innovation and development.

2.2 The industry welcomed the abolition of local cross-media ownership rules. The Committee will be aware of regional media companies’ case for further liberalisation of the media ownership rules, on newspaper company mergers and transfers of newspaper titles. Local and regional media companies should no longer be subject to special controls and should instead be able to compete fairly within the local media market, unfettered by the regulatory burdens which do not handicap their competitors.  The media ownership rules and market definition, as interpreted and applied in practice, can still adversely impact upon the regional and local press, even where newspaper mergers and transfers would have helped to sustain titles.  The industry has stressed the need for the competition authorities to recognise the realities of the modern local media market in their interpretation and application of the current rules, as well as improve their processes and procedures to reduce the inhibitions, crippling costs and delays occasioned by their investigations.

2.3 The industry was very disturbed by the OFT’s cautious decision to refer the anticipated acquisition by Kent Messenger Group (KMG) of several newspapers from Northcliffe Media Limited to the Competition Commission for further investigation on competition grounds.  This led to the parties’ reluctance to proceed,  not least due t o the disproportionate costs of  any reference, whatever the outcome , and to the subsequent closure of some titles. It has also had a chilling effect upon other regional media transactions, which might have prevented closure of local titles .

2.4 The NS welcomed Ofcom’s acknowledgment in its recent supplementary advice to the Secretary of State for Culture Media and Sport on Measuring Media Plurality that the existing regime to deal with competition issues raised by local media mergers is widely perceived to be too onerous. Ofcom believes it is important that this concern is not exacerbated by the plurality framework and has recommended that the public interest grounds associated with mergers should be modified so that they did not impact upon local and regional media mergers:

"For local areas (below the level of a nation), we believe the issues facing local media are more about sustainability than plurality. In our June report, we said there was a tension between plurality and commercial sustainability that was exacerbated at smaller geographic units. The same may be true of the English regions. In this context, we would not recommend that a periodic review of plurality considered local or regional media, except insofar as they contribute to plurality at the level either of the UK or of one or more of the devolved nations [para 2.25].

In making this recommendation we note that the existing regime to deal with the competition issues raised by local media mergers is widely perceived as being too onerous. This is not the place to address that concern, but we do believe it is important that it is not exacerbated by the plurality framework. We therefore recommend that the Government considers whether the public interest grounds associated with mergers should be modified so as to have the same focus as the periodic review; namely, on those mergers which might affect plurality at the level either of the UK or the devolved nations" [para 2.26].

Future of Press Regulation

2.5 The NS and regional and local newspaper publishers are firmly opposed to any special press laws or state controls over the press. The local and regional press opposes any unnecessary encroachment upon freedom of expression in general and press freedom in particular, whatever the medium of publication.  Where regulation of content over and above the general law is necessary, the industry remains a firm supporter of voluntary industry self-regulation, for both advertising and editorial, rather than imposition of statutory regulation in any form or to any extent.

Interaction of Government Departments

2.6 The local and regional media industry’s interests with regard to editorial, ownership, competition, advertising, local government, environmental, taxation and business issues-in respect of both UK and EU Commission policy and prospective legislation-span numerous government departments. There are key areas of fundamental importance to the industry, such as intellectual property, where helpful interaction between the Department for Culture, Media and Sport and the Department for Business, Innovation and Skills is vital. Shared knowledge and understanding of the sector, of regional media companies’ plans for the industry’s future direction and development and their contribution to the local, regional and national economy, by both departments is very important.

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

3.1 The retention of zero rate VAT on the printed word, including newspapers, is very important. The NS and regional media companies trust that the UK Government will be robust at every stage of its negotiations with the EU Commission on the review of the EU VAT system to ensure that UK zero rates will be maintained.

4 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)

Hargreaves Review of Intellectual Property and Growth

4.1 IP rights are erroneously characterised in some quarters as inhibitory, anti-competitive and ‘anti-consumer’. Sadly this negative approach found echoes in the Government’s Consultation on Copyright, which should have presented an objective and neutral policy assessment. In truth it is the existence of IP rights that incentivise the substantial investments that drive creativity and consumer choice. Publishers face an uphill task in developing paid content digital offerings in an environment where the belief persists among many that such content should be free. Advertising revenues alone are insufficient to sustain innovation and development in the newspaper sector. Publishers must be able to rely on strong and effective protection of IP rights to ensure that they are properly rewarded for quality content.

4.2 The NS does not favour any major changes or additions to the current copyright exceptions, and refutes the premise that increased economic growth will ensue from weakening copyright in this way. The existing copyright regime strikes largely the correct balance between the interests of rightsholders in the control and exploitation of their works on the one hand, and society's interest in the free flow of information and the dissemination of knowledge on the other. We have particular reservations over the proposal to allow quotations and extracts to be taken from protected content for all purposes, or to add further categories of use such as ‘information’, ‘analysis’, ‘argument’ or ‘comment’. We foresee that a broader exception for quotations would unfairly benefit search engines and content aggregators-organisations that rely on the reproduction of others’ content-because on this pretext they may be able to use material without paying for it.

4.3 Proposals to truncate licensing in such areas as photocopying in schools and private copying could harm the creative industries by depriving publishers and authors of revenues and avenues for growth. On the assumption that a substantial proportion of the demand for reproduction rights online is for small value licences (for example, for use on amateur blogs), publishers are already addressing the market via large scale and low cost licensing technologies. Considerable work has already been done on the conceptual and practical modelling of rights, including the <indecs> metadata framework and the ODRL v2.0 data model, with various profiles including RightsML. Licensing is a one-click process, with the communication of permissions and terms taking place automatically. Other approaches, such as businesses which offer microlicensing and authentication services to content owners and licensees are also emerging. Rightsholders must have the ability to choose how they market their own IP assets.

Failure to implement the Digital Economy Act 2010

4.4 We understand that the anti-piracy measures enacted by the Act, such as letters to suspected illegal downloaders and potential disconnection, will not be enforced until 2014 at the earliest. The legal challenges instituted by the ISPs have largely failed, but they have celebrated the fact that they have effected this long delay in implementing the law. Four years is a very long time in the rapidly evolving world of digital content. By the time the process of sending letters to suspected illegal file-sharers finally gets underway, the whole landscape may have been transformed. It remains to be seen whether the DEA proves to be as effective a weapon against piracy as rightsholders had hoped.

Enterprise & Regulatory Reform Bill

4.5 We are concerned that a great part of how copyright law governs the exploitation of copyright content will be removed from Parliamentary scrutiny via proposals in the Enterprise & Regulatory Reform Bill. Orphan Works and Extended Collective Licensing will be managed by schemes introduced by SI rather than in primary legislation. Of particular concern was Clause 57, which equipped the Government with wide-ranging and far-reaching powers to amend, remove or introduce exceptions to copyright via secondary legislation. This raised questions about the purpose of the measure and the Government’s intentions in relation to policy-making and the legislative process around changes to copyright.

4.6 According to statements by officials at the Intellectual Property Office, Clause 57 was a solution designed to meet a technical need, specifically to ensure that criminal penalties for copyright infringement are not limited to a maximum of two years. This is an objective we support. However, the language and scope of the clause were not consistent with this objective, and it is regrettable that the Minister was unable to provide any reassurance on this point during the debate before the Bill Committee. 


4.7 We are aware that amendments tabled on 10 October 2012 would clarify that regulations under proposed new clause 28ZA of the Copyright, Designs & Patents Act (Power to add or remove exceptions to copyright) "may make only such provision as may be made under subsection (2) of section 2 of European Communities Act 1972 or such provision as could be made under that subsection if paragraph 1(1)(d) of a Schedule 2 did not apply". We appreciate that the Government’s stated aim is to "make it clear that clause 57 offers no further power than Parliament already has to make changes to copyright exceptions". Furthermore, new criminal offences could be created which are punishable by more than two years’ imprisonment. However, we are disappointed that the language and scope of the clause continues to focus on exceptions to copyright, rather than criminal penalties, and will potentially facilitate wide-ranging changes via secondary legislation. In order to bring the clause into line with the stated objective of maintaining penalties it need only state: "The Secretary of State has the power by regulations to maintain penalties for infringement of copyright in accordance with the penalties laid down in the Act", or similar wording. No mention of exceptions to copyright is needed, or appropriate.

4.8 The NS urges that any changes to the copyright framework should be subject to full Parliamentary scrutiny. Seemingly minor amendments related to changes in the scope of copyright exceptions can have significant commercial consequences for organisations that invest heavily in content creation and preservation. Such measures demand thorough-going scrutiny; secondary legislation is not an appropriate vehicle.

November 2012

Prepared 17th November 2012