Support for the creative economy

Written evidence submitted by UKTV [SCE 036]

Overview 

1. Formed in 1997, UKTV is an independent commercial joint venture between BBC Worldwide and Scripps Networks International.

2. We are the second largest non-terrestrial broadcaster and one of the most successful multi-channel providers in the UK and Ireland, with a network consisting of 10 parent channels including Dave, Watch, Gold, Alibi, Yesterday, Blighty, Eden, Home, Really and Good Food, and attracting over 40 million viewers per month. UKTV currently operates 22 broadcaster streams when its eight multiplexes and four HD channels are taken into account. We provide branded video on demand services across Sky BT Vision and Talk Talk, and have recently launched a PCVOD service for our free to air channel, Dave, with PCVOD services for Yesterday and Really launching in early November 2012.

3. All channel brands are available through Sky and Virgin Media. Three channels Really, Dave and Yesterday are also available free-to-air on Freeview. The content of this submission only reflects the views of UKTV, and not those of our shareholder companies.

4. UKTV welcomes the opportunity to respond to this inquiry into support for the creative economy. This inquiry comes at an opportune time as the Government considers the next steps for a range of areas as part of the Communications Review. This response will look at a number of aspects of this review but also explore a broader range of topics impacting on the TV industry generally and more particularly from the perspective of a multi-channel broadcaster, in particular:

· securing a regulatory framework which balances the ability to make most of the opportunities available whilst ensuring that consumers have confidence that their rights will be protected;

· the opportunity to consider the consequences of an increased investment in the UK television industry, including:

· the need for greater levels of investment in training in relevant skillsets to ensure that any increased demand for skilled personnel is met;

· the effect of subsidising the larger players in the industry on smaller and medium sized enterprises;

· the concentration of funding in "hubs" to the detriment of out of town producers;

· the unintended consequence of proposed regulation of the EPG and the possible detrimental effect on investment in original programming;

· the limited spectrum of the current tax relief proposals for high-end television production.

5. It is the view of UKTV that failing to take into consideration these various different elements would be an opportunity missed for the reasons which we set out in our responses to the questions below.

Answers to specific 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

6. The ceremonies created a worldwide stage, showcasing the wide variety of creative expertise available within the UK, from technical set design to costume design. Indeed, the fact that there are ongoing discussions about the "Cultural Test" as a requirement for tax relief can only reaffirm the contention that there is something very distinctive about productions with their roots in the UK. This, in conjunction with the availability of tax relief for such qualifying productions, can only serve to increase the large number of large budget productions produced in or attracted to the UK.

7. Alongside this, UKTV will seek to continue to commission programming reflecting the people, culture, voices and stories of Great Britain. It would be unfortunate to lose the perception and momentum created by the Olympics and Paralympics due to the inability to provide the appropriate level of skilled talent necessary to take advantage of any increased desire to produce content in the UK and the subsequent increased investment in UK production. It is therefore imperative that the government take this opportunity to consider the current proposals for the creative industries hand in hand with consideration of the requirement for relevant education and training.

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.

8. The overall aim of government policy should be to encourage the economic development opportunities provided by technological change, whilst ensuring that consumers are safeguarded and have confidence in the media which they consume.

9. One aspect which we would urge the committee to consider is how the regulatory framework can best support the creative industries. A number of these aspects are already being discussed as part of the Communications Review.

10. One issue which is being considered as part of the review which could impact access to investment finance is the suggested change to the regulation of the Electronic Programme Guide (EPG).

11. Research and experience have shown that EPG positioning can have a significant impact on audience and consequently revenues, so it is important that any changes made to the current system are fully considered in order to avoid any unintended consequences. In particular, it is important that the EPG model provides enough transparency and stability to allow broadcasters to plan investment in UK content with a reasonable level of certainty about the likely return on their investment. If this is not achieved, then attracting investment could become more difficult.

12. We have concerns about the possibility, suggested as part of the Communications Review, of linking EPG positions to commissioning spend or investment in public service type broadcasting, with the potential for positions to be reviewed on a frequent basis. Such a move could only serve to work in the favour of the already dominant broadcasters and against the smaller and medium sized networks, and would therefore not support plurality and choice.

13. Further, both of the proposals referenced above could affect investment decisions and likely return on investment, which is difficult when based upon a potentially frequently changing formula. As the EPG position has already been demonstrated to have a direct correlation with share of audience, should radical changes be made, commercial impacts and the resultant revenue would be affected.

14. The recent independent report from Technologia, in which we participated, considered a number of policy options, ranging from doing nothing to totally reforming the regulatory framework. The report concluded that at this point there is no desire or need to transform the EPG regulatory framework. A significant change to the current EPG policy could, on the contrary, be potentially harmful to the Communication Review’s intended goal of encouraging additional investment in content.

15. There is also greater scope for co-ordination between different departments on policies which impact on the creative industries. For example, the creative industries tax credits policy is led by HM Treasury, with the main focus being on the generation of increased revenue. Greater involvement from DCMS in this policy could have led to an expanded consideration of areas such as skills development, or the need to support production outside of London, which could potentially have led to a more widely conceived tax credit rather than the very narrow focus of the high end television tax credit.

16. In addition, this would be an opportune moment to address the dominance of the public service broadcasters and the subsequent effect of this dominance on the creative economy. With the emergence of new technologies where the PSBs are in a position to respond before many of the other entrants to the market, consideration should be given to the effect of that position of influence on how the introduction and exploitation of any such new technology is played out.

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).

17. Given that television, like many other sectors of the creative industries, is currently experiencing an era of growth and innovation, we would caution against producing primary legislation which is too specific. Rather, the creative industries could be better supported by primary legislation which deals with general principles, with subsequent specific secondary legislation being introduced to allow regulation to keep up with technical developments.

18. We were supportive of the recommendation within the Hargreaves Review that "Government should deliver copyright exceptions at national level to realise all the opportunities within the EU framework, including format shifting, parody, non-commercial research, and library archiving". Our own response highlighted the benefits of opening up the particular provisions relating to criticism and review to ensure that the criticism of clips or excerpts from a work fall within any new provisions, rather than the ability simply to comment on a work as a whole.

19. UKTV is broadly supportive of the orphan works regime suggested as part of the review and would suggest that it is extended into a wider framework for all works used under any new exemptions of creative, transformative or derivative works as well. We are also supportive of the copyright licensing regime suggested in the review.

20. In terms of enforcement of intellectual property rights, UKTV supports the development of a low-cost dispute resolution alternative to using litigation in most circumstances. This could include mediation but a separate approach may be needed for more complex or principle-based disputes, such as arguments, for example, about programme format rights.

21. UKTV welcomed the broad principles of the Digital Economy Act; however we did have some concerns about Ofcom’s proposals for implementing the provisions of the Act and whether they represented any progress for small and medium sized creative business which have to deal more with specific business critical examples of copyright infringement rather than regular mass infringement.

22. The regime implemented by Ofcom relied on predictable volumes on infringement and worked much less well for those companies suffering more sporadic, lesser scale infringement. Whilst our shows are sometimes uploaded to file sharing websites, this does not occur at a frequency which would justify the audited detection regime envisaged under the Digital Economy Act, and is not at a level which would allow a reliable estimation of future infringements on which the Code’s obligations are based. A more flexible regime is needed for the smaller creative business such as UKTV.

23. We would like to see a regime which is a "fast track" flexible system that could allow a rights holder to qualify for access to the ISP’s enforcement process on the basis, not of predicted volume infringement, but of business critical unpredictable infringement. For example, should a clip from a show which reveals important plot information or a result from a show not yet broadcast appear-even if it is the case that the clip is not necessarily repeatedly infringed-information contained within it may then go on to become the subject of social media discussion which the broadcaster would be able to do little about. This could result in what could be perceived as a minor infringement, but actually have significant consequences for the broadcast of the show.

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

24. Whilst welcoming the principle behind introduction of tax credits for the creative industries, UKTV has consistently argued that the tax credit for TV production could have a greater impact if its scope were to be extended.

25. The model which is likely to be enacted, with a threshold of £1 million an hour in production costs, will only benefit larger producers, the public service broadcasters and the big international players. The average programme per hour budget for a multi-channel production would be closer to £100,000.

26. Therefore, this tax incentive will not benefit multi-channel broadcasters like UKTV that, whilst continually investing in the UK production industry do not achieve the £1 million threshold, or provide assistance to small and medium production companies and those outside of London. (In 2011 UKTV spent 99% of its commissioning budget with a small to medium production companies, and 20% outside of London). A tax credit which applied to a broader range of productions would be more effective in attracting investment in the UK creative industries.

27. We have suggested alternative approaches to the Treasury such as measuring tax relief in relation to annual investment over a year, or offering a tiered approach to the tax relief available, which would offer greater levels of relief for greater spending. We understand that this is unlikely to happen at the moment given the Treasury’s stated aim with the TV tax credit of increasing the competitiveness of the UK compared to other countries for high end productions.

28. However, we would argue that future consideration needs to be given to rapidly developing markets such as multi-platform which have the potential to contribute significantly to skills development and economic growth. Multi-platform content takes advantage of the increasingly diverse ranges of ways in which the public watch and otherwise interact with TV programmes, for example by mobile applications. This has the potential to be a real growth area for the future and the Government should consider how to make the most of the opportunities which this presents for the creative industries.

29. Consideration could also be given to using the tax credit to incentivise work with small to medium sized production companies, or those independent production companies outside of London. The aim should be to benefit the industry as a whole and not simply the well-established subset of the industry to the detriment of others.

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

30. In recognising the requirement for an increased investment in the provision of skills to support any increased investment, and that further and higher education play a role in encouraging the distribution of knowledge in these areas, consideration should also be given to the potential for increased opportunities for apprenticeships and other forms of training.

Whether there is too much focus on hubs at the expense of encouraging a greater geographical spread of companies through effective universal communication.

31. UKTV has previously raised the issue of ensuring that there is sufficient support for production companies based outside London. In particular, we have raised concerns that the tax credits for high end TV production could benefit production companies based in London at the expense of those based outside the capital.

32. Before implementing policy, the Government needs to consider what impact this could have on different sectors or regions, even if this is not the key reason for introducing the policy.

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

33. Whilst we do not have any specific comments about the Creative Industries Council and other public bodies, we would draw attention to the launch of the £1 million multiplatform TV fund by Creative England in recognising and supporting our contention that this is an area where further investment could lead to increased growth.

Conclusion and recommendations

34. The Communications Review is already providing one opportunity for the government to consider the means by which the UK creative industry can be supported. As part of this review, we have already suggested that the Government should consider the potential consequences of significant changes to the current regulatory system, such as:

· the impact that changes to EPG regulation could have on the ability to attract investment in new programming;

· the impact of any increased demand for creative and technical talent in the UK and

· the requirement for education to ensure that the UK develops the skillset to meet such opportunity and demand.

35. In considering their policy changes, different departments, such as Culture, Media and Sport and HM Treasury, should work together closely to consider the overall impact changes such as the creative industry tax credits to ensure that all consequences, financial educational or otherwise, are taken into account. In particular, HM Treasury and the Department for Culture Media and Sport should review the impact of the tax credit following implementation and be tasked with giving active consideration to other areas where such an approach would be beneficial.

36. In considering the copyright regime, consideration should be given to the broader picture and to those smaller companies which do not necessarily suffer infringement on a large scale but for which, in certain circumstances, even limited infringement could have potentially significant consequences.

37. As a general comment, across this policy area, consideration should be given as to how particular policies impact on not only the major market players, but the consequent impact of any changes on SMEs and business based both inside and outside of London.

November 2012

Prepared 17th November 2012