Support for the creative economy

Written evidence submitted by the Creative Coalition Campaign [SCE 046]

Introduction

1. The Creative Coalition Campaign (CCC) welcomes the opportunity to make a submission to the Culture, Media and Sport Committee’s inquiry into support for the creative economy. The CCC is a partnership comprising trade unions representing workers in the creative industries, trade organisations and businesses in the music, video, film, TV, publishing and sports sectors. We have come together to articulate our member organisations’ shared view of the threat that online copyright infringement poses to jobs in the creative industries and to promote the continued success of the sector.

2. Copyright is a fundamental cornerstone supporting creativity of all kinds as it enables creators to monetise their creative talent. This in turn allows reinvestment in new innovations and creative content which supports a large and vibrant creative economy; the creative industries employ 1.5 million people and contribute more than £36 billion to the economy. The creative industries are recognised as a key growth sector, much of which is derived from exports. However, without copyright there would be no creative economy.

3. As such, it is our view that retaining a robust intellectual property (IP) system with strong copyright protection both online and offline is a pre-requisite to ensuring a healthy creative economy. Conversely, we also believe that some of the changes to the UK’s IP system, proposed by the Hargreaves Review and being taken forward by Government, have the potential to weaken intellectual property rights and enforcement. This could undermine the basis of a sustainable creative economy and exacerbate the problem of online copyright infringement-already a major barrier to growth for creative content producers. We are particularly concerned about proposals for new exceptions for personal use, parody and data and text mining.

Hargreaves

4. This submission outlines several areas of disagreement and concern that CCC members have with the elements of the approach and recommendations of the Hargreaves Review. However, it is important to note that the Review contained a number of recommendations which we believe to be entirely sensible and are willing to work with Government and others to implement.

5. For example, the recommendation for a voluntary Digital Copyright Exchange, which was thoughtfully developed by Richard Hooper, has led to industry figures agreeing to support the development of a ‘copyright hub’. We believe this industry-led approach is the most effective way of ensuring that copyright licensing is as efficient and usable as possible in the digital age. It is also important to acknowledge the valuable work undertaken by Richard Hooper on his feasibility study which helped to kick-start its implementation. We also welcome the introduction of the new small claims track in the Patents County Court (PCC) as recommended by Hargreaves Review.

6. Unfortunately however, we believe that narrow terms of reference and a policy backdrop with pre-existing assumptions about the nature of copyright and creative content resulted in Hargreaves’ final recommendations being unbalanced and potentially damaging to growth in the UK’s creative industries. In particular, CCC members hold concerns around proposals for new, loosely defined, copyright exceptions based on flawed assumptions that they would act as a catalyst for economic growth.

7. It is our belief that the Hargreaves Review was carried out against the background of a pre-existing assumption that the UK’s intellectual property and copyright framework acted as a barrier to growth, particularly for what has come to be termed ‘tech’ companies. Indeed, this is reinforced by comments in David Cameron’s speech in which he announced the Review: ‘The founders of Google have said they could never have started their company in Britain ... they feel our copyright system is not as friendly to this sort of innovation as it is in the United States ... So I can announce today that we are reviewing our IP laws, to see if we can make them fit for the internet age.’

8. Hargreaves claimed that ‘copyright law has started to act as a regulatory barrier to the creation of certain kinds of new, internet based businesses’. We do not accept this claim, nor the implicit attitude which sees copyright as a regulation. It is our belief that issues such as access to finance and attracting people with sufficient skills are the main significant factors which prevent small and medium enterprise (SMEs) (tech, content or otherwise) from starting and growing. We believe Hargreaves’ conclusion is partly the result of the terms of reference he was working to which specifically discuss IP in the context of it being a barrier to growth. We believe this contributed to the Review’s conclusions failing to acknowledge the broader picture both regarding barriers to growth for SMEs and of the importance of IP as a driver of, not a barrier to, economic growth.

Content drives growth

9. Much of the public debate which surrounds copyright and IP issues is characterised by false or misleading caricatures of the main organisations and industries involved. This is often seen as a ‘content vs tech’ debate with big film studios and music labels on one side and big search engines and social media outlets on the other. This simplistic view fails to recognise a much more complicated and fluid reality.

10. Creative content producers constantly utilise and develop new technology to aid their work; the UK is home to some of the most advanced CGI facilities in the world and content creators are driving innovative new technical innovations allowing people to access content in new ways such as UltraViolet. In addition, there are many small, independent and innovative companies across the creative sector making TV programmes and films, producing music, publishing books and much more that all rely on copyright.

11. Conversely, many large ‘tech’ companies such as Google are now investing significant amounts in original creative content and it is that very same content that drives demand for their services and takes up an (increasing) majority of demand for bandwidth across the internet. The reality is that both the technology and creative sectors are part of an interconnected eco-system which relies on high quality creative content to thrive.

12. It is therefore more helpful to instead consider the question from a different perspective; how can we ensure that the flow of creative content continues to create benefits for all players in the digital eco-system? Copyright provides a financial return for creators and investors in creative content. This then allows these people to innovate and re-invest in new content, thereby ensuring a steady flow of high quality content. Demand for content also drives take up of technologies used to access content. Content is a complement to technology not a competitor.

13. Hargreaves’ recommendations arise out of a failure to consider this broader perspective. The assumption that making it easier and cheaper to access and use creative content will lead to economic growth is based on a static view of this content. If you remove or weaken the ability of creators and rightholders to reinvest in new content, then quality content will not continue to be made in the UK and will not therefore be available for anyone to license at any price for any use.

Evidence

14. The CCC also shares considerable concern regarding Hargreaves’ comments about the evidence relating to copyright and IP related policy making. We agree whole heartedly that ‘Government should ensure that development of the IP system is driven as far as possible by objective evidence’. Unfortunately Hargreaves does not himself appear to follow this principle. We also believe it was misguided and unfair to dismiss economic evidence provided by industry as ‘lobbynomics’. Like many other sectors, the creative industries are keen to work with Government to ensure policy decisions are as well informed as possible, particularly when industry is well placed to provide insight into topics such as the damage caused by online copyright infringement. It is in this spirit that evidence has been submitted to Government in the past and we believe it is a mistake to take such a dismissive tone regarding the research provided (and often commissioned independently) by industry.

15. Furthermore, we believe there are significant questions regarding the evidential basis for many of Hargreaves’ own recommendations and to the impact assessment published alongside the subsequent Intellectual Property Office (IPO) consultation. This is particularly illustrated by a report from Oxford Economics which was commissioned by the Alliance for Intellectual Property. The report identifies a failure to fully consider the impact of proposed changes on content producers and a pre-existing assumption that the current IP framework is economically inefficient. We do not feel that these concerns have yet been adequately considered by the Government and hope that they will do so before publishing their final policy statement, specifically by providing new and individual impact assessments relating to each of their proposals.

16. It is our belief that, given the importance of intellectual property in supporting growth in the creative economy, any changes or new exceptions should be made only where there is a clear and fully evidenced case for doing so. We do not believe the case for many of the changes advocated by Hargreaves and the Government has been sufficiently evidenced. In particular, we have seen no substantiated evidence as to who benefits from weakening copyright protection.

Copyright exceptions

17. As regards the Enterprise and Regulatory Reform Bill, CCC members are now content with clause 57 following Government amendments clarifying that no new exceptions can be introduced outside the scope of European law, although there are some rightholders who believe further clarification or amendment is necessary. The CCC holds a greater concern regarding how any further potential changes to copyright exceptions, using either this mechanism or the European Communities Act (which also allows exceptions to be amended via secondary legislation) are introduced. We are concerned that the Government may seek to ‘bundle’ future changes to copyright exceptions into a single Statutory Instrument (SI), thereby making it impossible for Parliament to accept or reject only certain aspects of reform.

18. We strongly oppose this and think any changes need to be brought in via separate SIs and accompanied by individual impact assessments. Bundling changes into one SI would not allow the varying impacts of such proposals on separate creative sectors to be appropriately taken into account. We believe the Government should make a commitment that any proposed changes to copyright exceptions will receive the individual scrutiny and consideration that they (and the rightholders they will affect) deserve.

Digital Economy Act

19. Two years after the Digital Economy Act (DEA) was passed in May 2010, the CCC welcomes further moves to implement measures designed to protect copyright and promote the creative economy. In particular, we welcome the publication of the Draft Initial Obligations Code and Costs Statutory Instrument by Ofcom in June. This crucial step brings us closer to full enactment of the notice-sending system created by the DEA which is necessary to tackle the prolific problem on online piracy.

20. International examples support the case for a notice-sending system; similar systems in France, the US and New Zealand have reduced the level of online piracy. In its first two years of operation, the French HADPOI agency which administers the notice-sending system sent 1.15 million first-round notices, of which only 102,854 resulted in a second-round notice. In New Zealand, the incidences of top-200 movies being viewed illegally more than halved in the first month of a notice-sending system-falling from 110,000 to 50,000. These examples demonstrate that an effective notice system both has an impact on piracy levels and changes consumer behaviour, given that its primary function is to provide education and advice about copyright and where one can assess legal services.

21. The CCC recognises that Digital Economy Act implementation was significantly delayed by the Judicial Review process. However, we remain concerned about continued delays to implementation and call on both Ofcom and Government to work to ensure its continued smooth progress. In addition, we believe it is important to keep the costs of the notice sending process to a minimum. The success of the scheme depends on both the efficiency of the processes and widespread participation by rightholders. In particular, we are concerned that high costs will, at least initially, act as a deterrent to smaller rightholders and limit participation.

22. More generally, the costs of notice-sending should be kept to a minimum to maximise the number of notices sent; this will be important to effectively tackle the proliferation of infringement and also to achieve maximum impact in changing consumer behaviour. CCC members continue to work with Ofcom and the Internet Service Providers (ISPs) to try and ensure the system is implemented as efficiently and effectively as possible and we call on Ofcom to explore every avenue to keep the costs at a reasonable level.

Websites and intermediaries

23. It is important to view the DEA as an important part of a wider, emerging framework to tackle online piracy. This framework includes legal action to block access to websites illegally hosting copyright infringing material. The use of section 97A of the Copyright, Designs and Patents Act is a viable way to enforce copyright laws which has been tried and tested in the Courts and has now been successfully used by both the Motion Picture Association of America (MPAA) and the BPI in two cases. However, it is important that this mechanism can now be developed so that it can be used quickly and efficiently, whilst still retaining thorough judicial oversight. To this end we believe an expedited process should be created, based on the legal principal and precedent set by the recent cases. Such reforms would to enable illegal sites to be shut down much quicker and in greater volume.

24. This framework should also include steps to engage with intermediaries, including ISPs, websites and search engines, and also education programmes to encourage behaviour change amongst consumers and promote continual growth and the use of legal content sources. We also welcome efforts by the Department for Culture, Media and Sport to engage with various third parties on these matters. In particular, we appreciate the support of the Minister for Culture, Communications and the Creative Industries whose roundtable meetings, looking at issues including advertising revenue streams and the role of search engines, have demonstrated a willingness to engage with industry concerns.

25. The CCC has long been concerned by the prevalence of pirate sites appearing in search rankings. We welcome recent moves by Google to alter its search algorithm to take into account the number of removal notices served against sites by copyright owners, which is intended to decrease the prominence of pirate sites in search listings. We hope all search engines will engage constructively with creators moving forward on how best to protect and promote creative content online. While CCC members will monitor the impact of the changes, it is important that Government remains engaged; should Google’s changes fail to have the intended impact, the Government should support further action to ensure that consumers are directed first and foremost to legitimate, legal sources of content.

Development of the legal market

26. Another important aspect to tackling online copyright infringement is developing the legal market in digital creative content and it is important to recognise the considerable progress made on this front in recent years. The UK is one of the world’s most advanced markets for creative content online in the world. There are well over 70 services legally offering music and almost 50 digital video and TV catch-up services including iTunes, Blinkbox, Xbox Live, Netflix, Lovefilm, BBC’s iPlayer, and 4oD to name a few.

27. Furthermore, a recent report by the Competition Commission highlighted the exciting progress being made in the legitimate online market for pay TV, highlighting the success of Netflix, LoveFilm and the launch of Sky Movies on Now TV. These findings offer compelling evidence of the growing strength of the legitimate digital market for films.

Education

28. The maintenance of a strong and accepted framework of IP rights will need to be supported by continued education about the importance of IP and the risks of copyright infringement. We welcome moves by the creative industries to lead this education process, such as the Industry Trust’s Screen Thing initiative. We would like schools to contribute to this education process and hope that, following the impending reform of the National Curriculum, pupils will be able to gain an understanding of the principles of intellectual property, its importance and its role in the economy in relevant subjects at Key Stage 3.

29. Growth in the creative economy ultimately depends on the continued existence of consumers who appreciate and value creative content. We welcome action taken by both industry and government to promote cultural and creative activities to the public, such as the work of Film Education in coordinating the National Schools Film Week and the Film: 21st Century Literacy Strategy. However, we are concerned that creative education risks losing out in the wider picture. The omission of rigorous creative subjects from the new English Baccalaureate qualification is a worrying trend and we call on the Department for Education to review this move. We would particularly draw attention to the findings of the independent review commissioned by the Department for Education and the Department for Culture, Media and Sport on Cultural Education authored by Darren Henley, Managing Director of Classic FM. We support Henley’s strong defence of the value of cultural education and his call for its inclusion in the National Curriculum and English Baccalaureate . This change would help to ensure that creative industry relevant subjects are valued at all levels.

Conclusion

30. The creative economy is underpinned by intellectual property, which provides a sustainable model for driving innovation and growth by allowing reinvestment in new content. In order to support the creative economy Government must maintain our robust yet flexible intellectual property framework and ensure that it is enforced both online or offline. Threats to the intellectual property system, whether from widespread online copyright infringement or from poorly thought through policy proposals, represent the most significant threat or barrier to growth in the creative economy.

31. We believe that in order to best promote growth in the creative economy it is essential to retain a robust and enforceable intellectual property system. This means at the very least: ensuring that any changes to the system should be properly evidenced and any new exceptions should be scrutinised individually on their own merits; Ofcom, Government, rightholders and ISPs working together to implement the DEA as quickly, efficiently and cost effectively as possible; Government continuing to engage in and promote industry led efforts to ensure intermediaries (search engines, payment processors and advertisers) play their part in tackling online infringement; and encouraging the continued growth of the legitimate digital market for creative content.

November 2012

Prepared 17th November 2012