Public service broadcasting, streaming services and the future for ‘terms of trade’

Response by CREATe (www.create.ac.uk) to the Parliamentary Inquiry by the Digital, Culture, Media and Sport Committee into ‘The future of public service broadcasting’


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CREATe has submitted today evidence to the parliamentary inquiry into ‘The future of public service broadcasting’ conducted by the Digital, Culture, Media and Sport Committee. Our response focuses on Question 1 of the call:

Regulation: Are the current regulations and obligations placed on PSBs, in return for benefits such as prominence and public funding, proportionate? What (if any regulation) should be introduced for SVoDs and other streaming services?

We address whether current obligations placed on public service broadcasters (PSBs) with respect to the assignability and licensing of intellectual property rights from independent producers (so-called ‘terms of trade’) should be introduced for streaming services.

We offer evidence by

– reviewing historical precedent for limiting the assignability of intellectual property rights;

– assessing, in particular, the empirical effects of the introduction of ‘terms if trade’ following the Communications Act 2003;

– evaluating current exploitation practices of streaming services.

We find that

– intervening on the assignability and licensing of intellectual property rights is a powerful tool, shaping investment decisions and industry structure, with strong cultural effects (for example on diversity);

– the introduction of ‘terms of trade’ following the Communications Act 2003 led to a period of investment and growth of the UK screen production sector, in particular accelerating international exploitation;

– the introduction of ‘terms of trade’ following the Communications Act 2003 led to a number of unintended consequences, in particular the consolidation of the independent production sector and the acquisition of independent production houses by multinational firms.

We recommend that

– corrective regulatory interventions with respect to the assignability and licensing of intellectual property rights from independent producers are required following the entry of streaming services as commissioners into the sector;

– a thorough review of the current production system be undertaken before ‘terms of trade’ type interventions are applied to streaming services.


The submission draws on CREATe’s research within the AHRC Creative Industries Policy & Evidence Centre (PEC). The work stream led by CREATe focuses on Intellectual Property, Business Models, Access to Finance and Content Regulation.  Important evidence in relation to changing business models and the emergence of powerful new entrant gatekeepers (such as Netflix, Amazon, Apple and Disney) is presented in a new CREATe working paper by Naysun Alae-Carew, Managing Director of Blazing Griffin, an innovative independent production company based in Scotland.

Dr Kenny Barr (who edited the transcript of the lecture) says: “Naysun Alae-Carew’s account of the ‘lived experience’ of a cultural producer navigating the many creative and commercial decisions that must be made around intellectual property provides rare and valuable insights into the trade-offs between principle and pragmatism that must be made in order to build and sustain a business”.

CREATe Working Paper 2020/5: Intellectual Property and ‘Terms of Trade’: The Challenges for Entertainment Businesses in the Emerging Platform Economy

by Naysun Alae-Carew


Abstract

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For the last two decades, the industrial organization of the UK screen sector has been shaped by the so-called ‘Terms of Trade’. Terms of Trade are codes of practice adopted by public service broadcasters, regulated by Ofcom under the 2003 Communications Act. Under these terms, independent producers retain ownership of the intellectual property rights in their programmes. Commissioners typically receive a licence for a package of primary rights in their home market for a specific period. Revenues from international sales are split. The paper explores investment decisions and business models that evolved in response to this intervention, and how they are changing with the entry of Video on Demand (VoD) platforms (such as Netflix) into the commissioning market. VoD services are outside the current scope of Ofcom’s supervision, and therefore free to pursue exploitation models outside the Terms of Trade. Drawing on Blazing Griffin’s experience as an innovative digital entertainment company, the paper explains difficult trade-offs between retaining rights and up-front payments, as well as the effects of information asymmetries in three industries: video games, TV, and film. Television is characterized as a highly regulated oligopoly, and subject to considerable consolidation within the independent production sector (now often foreign owned). Film, while less regulated, is described as a ‘bisected market’ dominated by a handful of large studios and many smaller producers. By comparison, business model innovation in the online games market continues to rapidly and fundamentally alter relationships between producers, publishers and platforms. Finally, the paper reflects on the changing role of digital users, and a new understanding of copyright under which unauthorised ‘mash-ups’ may be seen as an opportunity. 


Ofcom: Terms of Trade and the 2003 Communications Act

Section 285 of the 2003 Communications Act sets out Ofcom’s role relating to Codes of Practice adopted by PSBs for programme commissioning. Ofcom supervises that such codes are transparent and appropriate for the conditions of the licence, and that they are complied with and revised according to guidance issued by Ofcom. 

The resulting Terms of Trade adopted in 2004 enshrined the principle that the PSB commissioner of a programme from an independent producer does not take ownership of the intellectual property rights in the programme produced.

Following consultation with the sector, and engagement with regulators on the wider issue of Platform regulation, we anticipate that new research for the AHRC Policy & Evidence Centre (PEC) will explore further

  • to what extent regulatory parity between Public Service Broadcasters (PSBs) and Video on Demand Services (VoDs) in respect of their dealings with content-producing companies is desirable and achievable;
  • to what extent limiting the assignable dimensions of copyright and implementing reversal rights can have positive effects in balancing the interests of creators, investors and consumers of cultural works.

This requires a better understanding

  • about the effects of a wider range of rights reversal options, be they implemented by statute, collective bargaining, or codes of practice; and (specifically for the UK’s regulatory options);
  • how codes of practice supervised by national regulators can work in a global market.

The work relates closely to two other ongoing research projects.

PEC research on Platform Regulation. See Kretschmer, M., Furgal, U. and Schlesinger, P. (2020) ‘Platform regulation: Mapping an emerging regulatory field’, CREATe web resource, available at: https://www.create.ac.uk/platform-regulation-resource-page/

Collaborative work with Prof. Rebecca Giblin’s team at Melbourne University on copyright contracts and rights reversion: https://authorsinterest.org/about/

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