Tumbled Logic

Digital Britain Report: Chapter 4

Chapter 4: Creative Industries in the Digital World

AMBITION: TO MAKE THE UK ONE OF THE WORLD’S MAIN CREATIVE CAPITALS

• The UK is well-situated, geographically, legally, and socially, for playing host to a vibrant creative industry.
• Creative industries are growing faster than other sectors.
• New technologies bring about (and require) new models and strategies.
• There were a number of policy interventions for the “linear analogue world”; significant work will need to be done to bring these up to date.
• About 7.5% of UK music album purchases are downloads
• A smaller (but increasing) proportion of films and TV programmes are streamed or downloaded.
• The Universal Service Commitment has the explicit aim of providing universal “video quality broadband”.
• Britain’s Got Talent and X-Factor are used as examples of partial democratisation of content creation against a backdrop of traditional media.
• Operators such as Hulu, Spotify, and so on should be supported (towards the creation of a real marketplace in streaming and download services).
• The shift towards downloaded and streamed content will require “a significant reappraisal of traditional positions by most operators in the market”.
• The Gowers Review is to be the baseline for IP policy.
• Creative industries claim various losses due to file-sharing (although clearly have no way of quantifying it in real terms, and figures are repeated unchallenged in the report); BPI claims losses of £180m for 2008, while IPSOS claims a loss of £152m in 2007 for TV and films.
• Loss figures have not been estimated for other content industries, but the report states “we do know that all are suffering significant losses” (again, no sources cited).
• The report states “unlawful downloading or uploading, whether via peer-to-peer sites or other means, is effectively a civil form of theft”.
• The aim is to reduce unlawful file-sharing by 70-80%.
• The report asserts that most consumers would prefer to behave lawfully if given a convenient and affordable opportunity.
• A recent study in Scandinavia showed that the biggest users of unlawfully-shared material were also the biggest paid-for consumers of music.
• Advice will be given to consumers in a straightforward fashion (as the intricacies of copyright law are unknown to many).
• Action is required by the creative industries themselves.
• Ofcom will be expected to issue guidelines to ensure that commercial agreements don’t conflict with other areas of policy.
• Legislation will be designed to shepherd consumers towards lawful sources of content.
• Ofcom will be given overall responsibility for reducing filesharing.
• ISPs will be required to notify account-holders when unlawful activity has been made available.
• For those account-holders, ISPs must store information relating to them such that, when presented with a court-order, “the minority of serious repeat infringers” can be identified.
• There will be a detailed code of practice drawn up which will detail how the process will work.
• In the first instance, the content industry itself will be responsible for creating the code of practice, but Ofcom will charged with the task of creating it if the industry either will not or cannot do so satisfactorily.
• Evidence suggests most people will stop unlawful file-sharing if notified, educated and have the threat of legal action hanging over their heads.
• Ofcom will have the power to require ISPs to take action (including port and content filtering, capping and throttling) if necessary.
• Ofcom will only be permitted to make use of these powers if a notify-and-measure policy has failed after 6-12 months of operational use.
• If after 6 months the measures aren’t having a significant impact, Ofcom must consult with ISPs and rights-holders on how the additional measures should be deployed.
• The target for notification-to-cessation of unlawful filesharing is 70%. That is, the aim is for 70% of those users who receive notifications to cease their activities.
• The Government is considering how to proceed on the subject of fair use.
• Last.fm and Spotify are examples of how industries can innovate within existing intellectual property frameworks.
• Copyright strategy requires further work, within both a global and EU-wide setting.
• The British Library estimates 40% of its archive content is “orphan works” (that is, in-copyright content, but the owner cannot be identified or located).
• Legislation will be introduced to allow for commercial schemes to deal with orphan works.
• Penalties for digital copyright infringement will very likely be harmonised with those for physical infringement; the Government will deal with this at some point in the near future.
• Section 73 of the Copyright, Designs and Patents Act, which covers “retransmission rights” will not be removed.
• The right of consumers to time– or space-shift (“right to record”) will be kept under review, and Ofcom will be invited to assess cost/benefit and mechanisms for implementing “re-use fees”.
• It’s noted that UK consumers already pay disproportionately large amounts to broadcasters, which is not an argument in favour of re-use fees.
• In terms of “interactive media”, the Government is publishing a report on the subject, and believes emphasis should be on giving freedom to innovators.
• There does not appear to be a case for large-scale intervention.
• A number of low-cost, low-risk “Next Generation Digital test Beds” will be set up to help develop and trial new media offerings and determine their relationships with existing business models, effectiveness and profitability.
• The Technology Strategy Board has allocated £10m to the testbeds.
• The testbeds will focus on: micropayments, encouraging sharing and exploitation of IP (as an alternative to illegal mechanisms); new identity management, security and privacy systems; and context– and content-aware networks.
• One thrust is examining the use of micropayments with respect to catch-up TV services (FreemantleMedia has a proposal with charges as low as 5-10p per programme—equivalent to advertising revenues per viewer/hour on a primary channel).
• The UK is the world’s third-largest computer games producer by revenue (behind the US and Japan); in 2008 UK-developed games saw more than £2bn global sales. There are currently 10 000 games developers working in the UK, who generated an average of £124 000 global sales each in 2007.
• Projections are that UK-based games development is expected to fall behind other countries (falling to 5th in 2009).
• There is a shortage of skills, thanks to lack of experienced staff (in part due to emigration to the US and Canada).
• Companies actively avoid recruiting from Higher Eduction’s games courses (preferring maths and science graduates)
• There are few UK-based IP owners for games in the UK—most publishers are based elsewhere in the world.
• There will be a tax relief programme, based on the model used by the British film industry, for “culturally British games development”.
• There will be a shift in educational policies to recognise the shortcomings of existing courses.
• Attempts will be made to address issues surrounding skills development and work-related training.
• In the film industry, cinemas are gradually shifting towards digital projectors, although the majority still operate 35mm equipment.
• In light of the last Comprehensive Spending Review, £25m was awarded to the BFI, and others, in support of a “Strategy for UK Screen Heritage”, aiming to ensure access to and the ability to learn about cinematic heritage.
• Legislation governing public libraries (the Public Lending Right Act) is too narrowly-focussed, and the Government is seeking to address this.
• Digital Rights Management in the context of e-books is a concern due to interoperability constraints.

The Government is therefore consulting on a proposal to legislate to give Ofcom a duty to take steps aimed at reducing copyright infringement. In order to fulfil that duty Ofcom will require ISPs to accept two specific conditions. These are the obligations set out in the Interim Digital Britain Report, namely to notify account holders when informed in an agreed format that their account appears to have been used to infringe copyright and an obligation to maintain and make available (on the basis of a court order) data to enable the minority of serious repeat infringers to be identified. This will allow targeted court action against those responsible for the most damaging breaches of copyright.

The Government will also provide for backstop powers for Ofcom to place additional conditions on ISPs aimed at reducing or preventing online copyright infringement by the application of various technical measures.

If at the end of the 12 month period, provided that the combination of measures set out above have been fully implemented and tested and the other factors such as education and commercial developments have been taken forward, it is clear that there has not been a significant reduction in unlawful file sharing Ofcom should move to use its backstop powers to introduce those additional measures. In order to exercise their reserve powers Ofcom will need to consult, and to make an Order in Parliament.

We are consulting on the trigger mechanism, which we believe needs to give both rights-holders and ISPs strong incentives to make the notification system work.

In order to pave the way for a more effective framework to deal with orphan works, the Government proposes to introduce legislation to enable commercial schemes for dealing with orphan works to be set up on a regulated basis.

As such a scheme would enable the operators of orphan works schemes to grant rights without the consent of the rights holder, appropriate safeguards will need to be put in place. The form of the new legislative provisions will be outlined fully as work progresses on how such schemes might be administered. However, the expectation is that anybody wishing to use orphan works will be expected to secure an appropriate permission from the Government first, and permission will only be granted where the proposed operator can satisfy the Government that the business methods and procedures involved satisfy key minimum requirements, including making appropriate searches for the true owners and making provision for the reimbursement of rights holders who are subsequently found and claim for the use of their work.

[In response to endorsements of an option of introducing an exceptional statutory maxima of £50 000 for all “IP offences”] the Government therefore intends to address this issue in line with the other legislative changes detailed in this report.

[On the subject of charging consumers a levy for time-shifting] the Government will keep this issue under review and will invite Ofcom to assess the cost/benefit and framework required for the introduction of ‘re-use’ fees for private copying and format shifting.

The Technology Strategy Board will lead and co-ordinate the necessary investment for Next Generation Digital Test Beds and has allocated an initial budget of up to £10m for this purpose.

[In terms of games production] Digital Britain recommends three actions to address the challenges identified above to this important interactive digital sector.

The Government has therefore committed to work with the industry to collect and review the evidence for a tax relief to promote the sustainable production for online or physical sale of culturally British video games.

Secondly, in relation to skills, the measures set out in Chapter 6 on skills for Digital Britain are clear recognition by the Government of the importance of this issue. The forthcoming Higher Education Framework and its shift in incentives from purely demand-led emphasis in courses towards meeting recognised skill gaps; developing and promoting Graduate and post-Graduate courses that combine ‘hard’ excellence in Science, Technology and Mathematical skills with the ‘softer’ excellence in business and creative skills mark a sea change in the Government’s approach to the Skills for Digital Britain.

Thirdly, and linked to this, we will examine the options arising from a feasibility study into a new Usability Centre for Video Games.

This is—it’s reasonable to say—a monster of a chapter, and one which has received a lot of press attention in one specific area: file-sharing.

My opinion on this differs from that of many commentators in that I think the authors of the report have actually been incredibly clever about it: they’ve held out an olive branch which doesn’t require ISPs to act as an inspectorate, and similarly allows rights-holders to accuse people of sharing files unlawfully. The whole thing will be overseen by a body who really couldn’t care less about the whole thing, but who has a vested interest in everybody playing nicely with one another. While many point out that the headline figure of reducing filesharing by 70% is unrealistic—in no small part because identifying all of those who are doing it is extraordinarily difficult—that isn’t actually what’s proposed.

To the content rights-holders, the headline is a good thing. Their aim is to scare the public into submission, and grandiose claims of a massive reduction only serve to reinforce this. In actuality, though, the target is to reduce filesharing by 70% amongst whatever proportion of people it is that receive notifications that they’ve been caught. It isn’t even 70% of all those people identified as sharing files unlawfully: just those who are notified of the fact. This subtle detail has clearly been lost by mainstream news outlets, and presumably the Government’s hope is that it’ll lost on the content industry (and preferably consumers), too.

To put this in perspective (ignoring the finer detail of consequences for a moment), it’s like aiming to reduce speeding by 70% amongst the group of people who have been caught speeding. Not everyone who breaks the speed limit, just those got caught. In any other context, this would be branded a horrific failure of regulation. Here, it’s been described as draconian.

Indeed, the biggest deal of this chapter is actually in what it doesn’t do: specifically, there are no immediate plans to codify fair-use or time-shifting rights for consumers. In the latter case, there’s even talk of investigating creating a fee arrangement for it. Nor is there a restructuring of Section 73 on the cards, which permits “cable networks” (I need to check precisely how this is defined) to rebroadcast over-the-air television transmissions where the receiving area of the two overlaps. It’s not clear why the opportunity isn’t being taken to expand on “cable” such that all alternatives to terrestrial broadcasts are treated equivalently. Perhaps it isn’t required?

Two things which are undoubtedly well-intentioned are the reforms of the Public Lending Right to cover works other than books, and the moves to wrestle back access to orphan works.

When discussing television, there is a clear sense that the industry has lobbied sufficiently well to convince those that matter that things are pretty much on the rocks. Clearly, free catch-up services aren’t perceived to be sustainable, even though in the case of the BBC, it’s difficult for them to demonstrate anything but benefit as a result.

I’ll be watching this one with interest, though: if there is going to be experimentation (as part of the “test beds”) with micropayments and content-sharing, perhaps there are opportunities for providing catch-up of free-to-air broadcasts in a more liberal fashion than current services permit in exchange for a nominal fee.