Culture, Media and Sport CommitteeWritten evidence submitted by the Film Distributors’ Association

1. Film Distributors’ Association Ltd. (FDA) welcomes the opportunity to respond to the CMS Select Committee’s Inquiry.

2. FDA is the trade body for UK theatrical film distributors, the companies that release films for cinema audiences. The feature films brought to market by FDA member companies—ranging widely from international blockbusters to classic revivals; and from British films to productions of 42 other countries in 2011—account for 97% of UK cinema admissions. Lord Puttnam of Queensgate CBE is FDA’s President.

3. Theatrical film distribution is a sophisticated, competitive and dynamic business that depends on product and the extent to which it connects with audiences. In 2011, FDA’s membership invested more than £330 million in bringing more than 570 individual titles to market. With 1% of the global population, the UK generates 7% of global cinema box-office receipts (£1.12 billion from 171.5 million admissions in 2011). Overall, the sector operates successfully and delivers a significant contribution to the economy in terms of revenue and jobs, as well as the consequent cultural and creative impacts. An economic multiplier effect applies: for every £1 spent on cinema tickets, at least a further £2 is pumped into the economy on directly related expenditure.

Issues

1. 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

FDA was very pleased to see film strongly represented in the Opening Ceremony of the Olympics. The use of film properties—including the James Bond, Harry Potter and Mr Bean franchises, Chariots of Fire, Mary Poppins and Slumdog Millionaire—underlined the strength and vitality of the UK film industry and the importance that film has in representing the UK to the world. It was also a testament to the effective distribution of those films around the world such that audiences everywhere instantly recognise these titles and identify them as British.

FDA would like to see the Government build on the legacy of the Olympics and the Paralympics by ensuring that film distribution is placed more firmly at the heart of policy for the creative industries. The use of film in the Opening Ceremony in particular, clearly demonstrated that it is a powerful symbol for representing the UK to the world. It is the distribution of film to cinema audiences in the UK and across the globe that ensures that audiences recognise film in this way.

The continuing strength of cinemagoing in the UK is demonstrated by this year’s cinema admissions. Despite intense competition for media and public attention from Euro 2012 and the Olympics, cinemagoing has remained broadly healthy and we estimate that admissions will reach 170 million this year. Nevertheless, the week of the Diamond Jubilee double bank holiday in June was one of the strongest weeks for cinemagoing in 2012 to date, and we would welcome the introduction of one additional bank holiday weekend annually for UK citizens.

Yet most policy and financial support for film in the UK tends to be focussed on the supply side rather than on further stimulating demand. We welcomed the strong emphasis placed on audiences in Lord Smith’s Film Policy Review published in January this year, and some of this emphasis has been reflected in the British Film Institute’s recently published plan Film Forever. However, the fact that, for example, the BFI is not providing a financial uplift in Lottery support for the distribution of films, even though support for other sectors is being significantly increased, demonstrates that more needs to be done in getting the balance right between measures to support supply and measures intended to help stimulate demand.

Without effective distribution at home and abroad, backed by significant investment in prints and advertising (P&A) costs, films or characters such as James Bond, Harry Potter and Slumdog Millionaire would not have become beacons which can be used to symbolise the UK at global events such as the Olympics and Paralympics. FDA believes that Parliament and public policymakers need to ensure that this strategic importance of distribution is more appropriately reflected in policy for film and the creative economy as a whole.

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

FDA welcomes the support provided by Government funding—via the BFI—to support some distribution activities where there are identified market failures which make accessing private finance difficult—for example in relation to the distribution of specialised films and in audience development and film education, although as noted in answer to Q.1 above we believe that a better balance needs to be struck between interventions addressing supply and those addressing demand.

We believe there are barriers to growth within our sector, in particular the insufficiently flexible operation of windows of theatrical exclusivity and the funding mechanisms for conversion from 35mm to digital cinema systems, and at this stage we would like to draw these to the attention of policymakers.

Regarding the delivery of policy, the Department for Culture, Media and Sport (DCMS) is responsible for sponsoring the creative industries. The Government however has made major cuts to the budget of DCMS such that it is barely recognisable as a stand-alone department. There is an increasing mismatch between statements from Ministers about the Government’s view of the strategic importance of the creative economy (worth £4.6 billion to GDP in 2011) and the level of resources devoted to championing that economy. Given the level of cuts already absorbed by the DCMS we would like some reassurance that in the next Comprehensive Spending Review the Government will not further reduce the Grant in Aid money available to champion and help support the creative economy including film.

While the DCMS sponsors the creative economy, responsibility for Intellectual Property (IP) lies principally, although not exclusively, with the Intellectual Property Office (IPO) which sits within the Department for Business, Innovation and Skills (BIS). This means that policy is not always as joined up as it should be. We would welcome moves by the Government to make sure that IP policy is more joined up—for example through the creation of a Cabinet Committee for IP.

3. 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

FDA supports the statement in the Hargreaves Review that: “Government should pursue an integrated approach based on enforcement, education and, crucially, measures to strengthen and grow legitimate markets in copyright and other IP protected fields.”

Likewise we welcomed Hargreaves’s recognition that “without copyright protection, British creators and creative industries, from film directors to video game developers, would have less incentive to create new works, to the detriment of the UK’s culture and economy”. The Government response to Hargreaves noted that “there is a fundamental role for copyright in providing appropriate incentives for the creation of valuable works.” However, we would underline that it is the distribution of works to the public, as well as their creation, which copyright helps to protect.

We also welcomed Hargreaves’s assertion that “certain restrictions on copyright are necessary to ensure an appropriate balance between benefits to the creative economy, from protecting works and wider benefits to the public and society from allowing them to be used freely”. Licensing is an excellent way of allowing the correct balance to be struck between providing access for consumers on the one hand with the ability of rights holders to monetise their own works on the other. We support Richard Hooper’s proposals for a voluntary copyright hub to the extent that it will, in the words of Hooper’s final report, “act as a signpost and be a navigation mechanism to the complex world of copyright…[and[] be the place to go for copyright education.”

But FDA believes that the estimates made by Hargreaves that economic growth of up to £7.9 billion could be driven by changes to copyright legislation are not supported by meaningful evidence and they are a gross over-estimation of the likely impact of any such changes. It is highly unfortunate that the Government appeared to accept Hargreaves’s estimates in its response to the Review.

We believe there is no evidence that there should be wholesale changes to the current system of copyright exceptions in order to deliver growth. However, we do recognise that some reform is necessary in order to reflect on-going changes in technology and consumer attitudes (eg to parody), and we support certain proposals which are consistent with EU and international legal and business practice—for example, the proposal in the Enterprise and Regulatory Reform Bill which would allow the legal distribution of orphan works.

However, it remains extremely frustrating that more than two and a half years after the Digital Economy Act became law that the provisions intended to significantly reduce copyright infringement have yet to be implemented. The delay has been caused principally by legal challenges but we believe that the Government must do everything in its power to ensure that Ofcom now implements the relevant clauses as quickly as possible. We welcome the publication of the Draft Initial Obligations Code by Ofcom. But we remain extremely concerned that the level of costs and the way in which the Government and Ofcom have decided they should be apportioned between rights holders and Internet Service Providers means that smaller companies—and the film distribution world includes many Small and Medium-Sized Enterprises (SMEs)—will simply not be able to afford to take advantage of the provisions to help protect their copyrights online. We do not believe it was the intention of Parliament to exclude many smaller companies in this way and we would urge the Select Committee to consider this issue and ways in which it might be addressed.

Section 97A of the Copyright, Designs and Patents Act has now been used to block access to Newzbin2 and Pirate Bay But we believe that the Government should look at ways in which the legal process by which Section 97A is implemented in such cases could be speeded up.

We are now content with Clause 57 of the Enterprise and Regulatory Reform Bill, as amended by the Government, having accepted the Government’s assurances as to its purpose.

But we remain concerned that in future changes to copyright exceptions may be introduced by secondary, rather than primary, legislation thereby preventing effective Parliamentary scrutiny of any such proposed changes. We are especially concerned that the Government may seek to ‘bundle’ future changes to copyright exceptions into one Statutory Instrument (SI). The effect of this would be that there would be no scope for Parliamentarians to accept some proposed changes, while rejecting others. We therefore believe that the Government should state that it any changes to copyright exceptions will be made by separate SIs to allow Parliament the opportunity for proper consideration of the advantages and disadvantages of changes to each proposed exception.

Finally, it is important that effective enforcement is matched by effective copyright education to help the public understand what is and what is not legal, while the development of new services also plays a vital role in helping to stem infringement and theft. The new offers from LoveFilm, Netflix and Sky (via its Now TV service) are all very welcome additions to a dynamic online market for film.

As a member of both the Creative Coalition and Alliance for IP, FDA also supports their submissions to the inquiry.

4. 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

We believe that the tax reliefs introduced in the 2012 Budget should be given time to work and that their impact needs to be demonstrated before any case is made for extending them to other parts of the creative industries.

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

FDA believes that investment in skills is essential to maintain the competitiveness of our creative economy. FDA is a long-standing key partner sponsor of the National Film & Television School, having contributed for and on behalf of its member distributors more than £1 million in direct funding in recent years. FDA is also represented on the Council of Skillset, the Sector Skills Council for the creative industries.

The industry as a whole supports many courses and resources at all levels of education, as well as many regional film schools around the UK.

FDA believes that it is in the industry’s best long-term interests to support and encourage more distribution business expertise too, including marketing, communications, finance, trailer-making, events management, partnership negotiation and new technologies. In the film skills strategy that is now being developed by Creative Skillset and the BFI, we would like to see a better balance between production and distribution skills development than has been the case with previous strategies.

We suggest that, where practical, more film industry apprenticeships and mentoring schemes are considered and that a foundation in distribution is offered to all young people entering any branch of the industry. FDA itself offers a foundation course to recent starters in the distribution sector.

We are very concerned about the implications of the de-skilling that has taken place in the UK exhibition sector with the roll-out of digital cinema. To the extent that it diminishes the quality of the experience and on-screen presentation enjoyed by paying audiences, it has the potential to reduce the business development opportunities for film distributors. FDA is developing plans to work with industry partners to address this key issue, but we are keen at this stage to draw it to the attention of policymakers.

6. The importance of “clusters” and “hubs” in facilitating innovation and growth in the creative sector. Whether there is too much focus on hubs at the expense of encouraging a greater geographical spread of companies through effective universal communication

Most distribution companies have their headquarters in or around London, although they distribute their films across the UK. This is a long-established model and has worked well over many decades. From a distribution perspective, therefore, we do not see any public policy issues arising in relation to “clusters” or “hubs.”

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

The Creative Industries Council has commissioned some valuable research on skills and on access to finance. However, we broadly support the proposals made by the Secretary of State at BIS, as reflected in the last published minutes of the Council from June 2012 that “future meetings should enjoy greater industry direction including [an] industry chair.” This will help to ensure that the Council remains attuned to the needs of businesses operating across the creative economy.

We liaise regularly with the BFI in its role as lead agency for film. While the BFI’s plan, Film Forever, is broadly welcome—albeit coming more than two years after the abolition of the UK Film Council—we would like to see greater and continuing engagement with the film distribution sector over policy matters as a whole. For example, in relation to matters affecting copyright, and stronger engagement with funding plans such as proposals to make available 10,000 titles from the BFI’s and other archives. It is crucial that public bodies in the creative economy listen to and work closely with the private sector, to ensure that opportunities to grow the creative economy are maximised and efficiently implemented.

November 2012