Digital Economy Bill

Written evidence submitted by the Compact Media Group (DEB 03)

COMPACT MEDIA GROUP – RETRANSMISSION FEES

Compact Media Group Limited ("Compact") is the world’s largest independent collection agent for secondary TV and film rights. Compact’s clients include BBC Worldwide, ITV Studios, DreamWorks Animation, A+E Networks, Sky Vision, All3 Media, Fre/mantle Media, Sonar Entertainment and in total roughly 750 clients on long term contracts from the UK and worldwide. Serving content creators, Compact is the leading independent media advisory group that maximises the value of their creativity through its unparalleled commercial expertise across the entire intellectual property lifecycle. Compact is independently owned and trusted to manage confidential data. Compact account’s for exports of royalties in excess of £40m per annum.

Because of our unique position in the market we feel it would be helpful to provide the Committee with a brief based on our industry knowledge and resource. In terms of national and international policy development, the issue of secondary rights is hugely important for the UK creative industries sector.

Digital Economy Bill Part 4. Section Number 28 - Retransmission Fees, UK Producers Concerns.

British television producers are currently disdavantaged compared to producers in many other countries because the drafting of sections 73 and 73A of Copyright, Designs and Patents Act 1988. There was a specific reason for the drafting which was to encourage investment and growth in the nascent cable television sector. However, times have moved on and that sector has now matured and consolidated.

The disadvantage is that producers are not renumerated for the retransmission of their programmes in the UK.

There are two forms of retransmission royalty:

1. Payment to be made by platform provider to broadcaster, and

2. Payment to be made to platform provider to the rights holder in the programme.

Retransmission Fees – An Unlevel Playing Field in the UK

the debate on retransmission fees has centred around the exemption of platform providers from making royalty payments for the carriage of the PSB channels. (Section 73 Copyright Designs and Patents Act 1988.) The position of producers and rights holders has largely been ignored.

UK rights holders (whose works make up the bulk of the transmission schedules for the UK’s PSB’s) receive significant royalties through cable and satellite retransmission and other forms of secondary rights from other parts of the world but are currently missing out on being remunerated for the retransmission of their programmes in the UK, one of the most valuable television markets in the world.

To give an indication of the scope of revenue that is being missed out on, in 2015 Compact distributed £18.7m of secondary TV and film rights royalties to UK based clients (£28.3m in total worldwide).  This revenue was distributed to 332 UK based producers and distributors who rely on this income as part of their revenue mix.

The transmission schedules published by the UK’s PSBs demonstrate that the overwhelming majority of content shown is UK originated, whether first run or repeat. It would therefore follow that UK content producers are being significantly disadvantaged compared to their competitors in the USA, EU and Australia.

History and Legislative Background

The basis of the retransmission royalty for producers goes back to an amendment to the Berne Convention in 1979. This provides that as the cable operator’s signal is distinct from that of the originating broadcaster, their transmission must be treated as a separate transmission and therefore subject to the payment of a royalty to the producer of the audio-visual work in question. 

Directive 93.83/EEC on the Coordination of Certain Rules Concerning Copyright and the Rights Related to Copyright Applicable to Satellite Broadcasting and Cable Retransmission was then implemented to provide fair remuneration to producers of audio-visual content for the license of their works for retransmission.  The Directive requires platform providers to negotiate with rights holders on a collective basis in order to obtain authorisation for their use of the rights holders’ works.  A cable operator is only able to retransmit the work if permission for retransmission has been obtained from the relevant collection society.  In Europe, the cable retransmission royalties payable to producers are administered by AGICOA , the Association of International Collective Management of Audiovisual Works (Association de Gestion Internationale Collective des Oeuvres Audiovisuelles).  Rights holders register their works with AGICOA and grant them the right to manage the relevant rights on their behalf.

The Directive provides that when determining the royalty payable by the platform provider all aspects of the broadcast should be taken into account, including potential audience, actual audience and language version.  AGICOA has adopted rules which take these factors into account so a royalty can be set per subscriber per channel; per subscriber for a group of TV Channels; a percentage of the retransmission operator’s subscription revenue; a lump sum payment or a combination of these.  The AGICOA licence will then specify the form of transmission (cable, satellite, internet, etc.), the works covered and included in AGICOA’s repertoire and the channels covered (individual channels or blanket agreement).

The solution.

-The Government needs to act to ensure that the UK remain at the forefront of creative industry innovation.

-The next three years are vitally important in making sure we get our regulations right, as well as effective political support.

-We need to protect broadcast rights in ways which still encourage diversity of use and international sales.

-Regulation to make sure platform providers make payments for carriage of PSB channels and programmes.

BREXIT has the potential of hitting the production sector, one of the major contributors to GDP (over 5% and rising year on year), particularly hard. It is not yet clear whether British made programming will still count towards the quotas for European content under the AVMS Directive, such quotas being enforced in a rigid manner by a number of member states. In addition, a number of the international content and broadcasting organisations which are currently headquartered in the UK may migrate a proportion of all of their workforces to another Member state so that the content produced by them will continue to count towards these quotas. The sector will also lose access to the EU Media Funds and ERDF funding which have pumped millions into UK production companies. There will also be knock on issues in relation to mobility of the workforce and ability to attract talent to the UK.

The UK government has shown initiative through the introduction of a number of tax credit schemes which have been highly successful, particularly in the animation, film and drama sectors. Once free of the restrictions imposed by the EU’s rules on State Aid, the government may well be able to come up with further initiatives to foster growth. However, now is an ideal time to demonstrate support for a beleaguered sector and introduce legislation, ensuring compliance with the UK’s international treaties, which would greatly assist the production sector both in the short and long term.

On behalf of the UK production industry thank you for taking an interest in our work. If you have any questions on any of the above do not hesitate to contact me.

September 2016

 

Prepared 10th October 2016