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Internet: Online Piracy

My Lords, I have tabled this Motion because I truly believe that this is a crucial moment in the history of Britain’s creative heritage. Areas of our cultural industries are under threat. It is imperative that we address these threats and bring all the creative industries’ future viability to the forefront of political debate. You may be wondering why I, someone who makes a living from live theatre, would initiate such a debate. While I am incredibly lucky that my life, my passion and my main source of income—musical theatre—is not affected by the problems afflicting other creative businesses, I see those problems damaging the cultural and economic fabric of the nation, and it worries me. I was further moved to initiate this debate after a conversation I had a few weeks ago with one of Britain’s leading orchestral players. He was agonising about whether to deter one of his children from following in his footsteps. His reason was that the backbone of the livelihood of many professional instrumentalists is film score work. He could foresee a situation in a decade’s time when there would be virtually no orchestral film work. Illegal downloading would so decimate the film industry that orchestral recording sessions would be a thing of the past. In this connection I was reminded that three of London’s main orchestral recording studios have closed since 2000. I hope, therefore, that I am speaking here on behalf of my many colleagues whose livelihoods and their children’s future livelihoods are being compromised by inaction. I do not come equipped with the answers; frankly, they are way beyond my world of musical theatre. My sole objective is to draw noble Lords’ attention to the cataclysmic consequences for all the creative industries if this area remains unregulated. The economic sustainability of Britain’s creative industries is hugely important to this country, culturally and commercially. It is estimated that our creative industries—film, music, literature, games, TV, software, books and printed media—have an economic output of at least £60 billion, equivalent to over 7 per cent of UK GDP. It is also important—in terms of employment and the hope they give to aspiring, usually young, men and women—that there are businesses in this country that can employ artists and invest in developing their talents. It is estimated that creative industries directly account for 1 million jobs, with a further 800,000 in related sectors. The interim Digital Britain report notes that, ""the digital economy underpins our whole economy and builds our national competitiveness"." The question that occurs to me is whether, in 10 years’ time, Britain will be a place from which, say, the Beatles could have emerged. Will Britain be a fertile environment for all creative talent? Will Britain be a place where music, TV, film, games and publishing companies are sufficiently healthy to invest in British creative talent and take it to the rest of the world? No, not when there are no longer shops selling the physical products and when the internet has become a sort of Somalia of unregulated theft and piracy. This is as much a battle against mindsets as against anything else. There are many people who like taking things for free from the internet, even though it is not legal. The fact that something is easy, and many people do it, has confused commentators and politicians alike. Content on the internet is a problematic issue for regulators because the matters are technologically and legally extremely complex, and also, in a period running up to an election, politically problematic. But, as we have seen throughout history, and recently in the financial markets, there are dire consequences when people drift down the path of unregulated behaviour. With the exception of live entertainment, all our creative industries are suffering, but none more so than the music business. It is in the forefront of the battle and the first example of what can happen to an industry whose survival relies on the protection of its intellectual property rights. The UK recorded music business is a major contributor to Britain’s creative economy. I would like to share with noble Lords some astonishing figures to illustrate this. In 2008 the UK recorded music market was valued at £900 million in trade terms. The UK music business punches well above its weight globally. It is a major exporter—four out of the top 10 global selling albums in 2008 were British. It is a major employer creating more than 100,000 jobs, but the market is being decimated by the impact of online copyright infringement. Recorded music revenue in the UK has fallen every year since 2003. In Europe as a whole the recorded music business is 60 per cent the size it was in 2001. It is estimated that 7.3 million people in the United Kingdom—28 per cent of the online population—are now engaged in illegal peer-to-peer file-sharing, a figure which is projected to rise to 8.7 million by 2012 if action is not taken. This activity erodes the commercial value of the UK’s world-renowned music sector. It is calculated that £180 million of losses were directly attributable to online copyright infringement in 2008 alone. The losses for the six-year period from 2007 to 2012 are projected to exceed £1.2 billion. As I am sure noble Lords will appreciate, such levels of loss are unsustainable. It is estimated that online film and music piracy could cost 30,000 UK jobs, and that does not take into account the performers and composers who will lose their livelihood and stop creating as a result. The biggest single cause of the music business’s demise, and indeed that of all creative industries, is the carriage of file-sharing services by internet service providers. Globally only one in 20 tracks which are downloaded from the internet are paid for—that is, a 95 per cent online piracy rate. Innovative business models, of which there are numerous examples which enable consumers to access legally any music they want, have to compete with the free providers, an unfair battle and an unwinnable one. The music business—because of the universal popularity of music, its ease of access and its relatively low bandwidth requirements—will be the first to fall, but other cultural industries will surely follow. Will it be film next? No one questions that improving the capability and quality of the UK's digital networks is an essential task. The improvement of fixed, cable, mobile and broadcast transmission mechanisms is crucial if the provision of digital services is to keep pace with what users, be they individual consumers or businesses, expect and demand. Our broadband industry is hugely important to Britain and will be the backbone to society as well as to commerce, but what will it deliver? Given that consumer demand for faster digital networks is largely driven by demand for quality content, in particular creative content—music, films, games, television, journalism, books—I believe that it would be a serious mistake to invest billions of pounds in faster networks without ensuring that there is a sustainable commercial arrangement for those creative works on which these new networks depend. At the moment, no such sustainable commercial arrangements exist. As their businesses increasingly move to digital consumption, the ability of UK creative businesses to continue to invest billions of pounds every year in creating and marketing new high quality content is constantly being eroded. The railway and roads opened up the first Industrial Revolution. Broadband and the internet are opening up the next one. Our internet service providers deliver excellent facilities that help so many people in so many ways. But we need to remember that one of the principal reasons for their popularity is that they search out information and creative content that people want. If internet service providers continually attract people to illegal sites, as they do now, and not to legitimate sources of content, then they are part of the problem, not part of the solution. These companies make billions in profits. In 2007, just one internet service provider made profits of £5.78 billion. That compares with the recorded music business's turnover in the UK which, as I mentioned, was £900 million. And yet these companies contribute nothing to the creative economies that they feed off and undermine. Forty per cent of their sales come from broadband and IT services, and P2P traffic is believed to account for an astonishing 60 per cent of all traffic on online networks. Internet service providers can help themselves: they are able to control bandwidth traffic when it suits them. They are not going to change without regulation, otherwise the good players could lose customers to the bad players; but I wonder how long this can be tolerated. People have got into the habit of talking glibly about "content providers" as if they are some sort of optional part of the process. The great wines of France are not content providers to the glass manufacturing business, and Britain's creative industries are not content providers for broadband. They are the experiences that bring consumers to the internet in the first place and they can only survive in a safe internet world. Lawlessness is not a model for any society and it cannot be a model for our digital future. The cultural "free lunch" is not free because film, music, printed media and so on cannot be produced, marketed and distributed for nothing. Investment must be rewarded and performers, composers and authors must be paid. Otherwise how can they survive? It is important to remember as well that pirates are bandwidth hogs who reduce the quality of service and raise costs to legal users. Illegal file-sharing spreads viruses and inappropriate, and unexpected, content for minors. There are even dire predictions that the internet will grind to a halt over the next few years. Dealing with piracy removes that threat. Through various reviews, notably the Gowers review in December 2006, Creative Britain in February 2008 and the July 2008 consultation on file-sharing, I have been very encouraged by the Government's stated determination to act. The interim Digital Britain report gives life to that commitment and to the prospect of legislative action. However, I wish to raise the question of whether we are giving this crucial issue enough prominence and whether we are creating an outcome that is in the interests of a section of the economy where Britain leads the world and has the precious chance to create new jobs and new world-beating content for the future. As I said, I do not have the answers. But I do have serious concerns as to whether the actions proposed to date will achieve the Government's aim, stated in July 2008, of reducing unlawful file-sharing by 70 to 80 per cent over two to three years. The Government would appear to be willing the ends but not the means. Proposing to legislate to require ISPs merely to write to infringers and leave rights-holders with the near impossible, deeply expensive and hugely unpopular task of suing those who persist is simply not going to produce the required deterrent effect. Internet service providers need to be made to do more to play their part in tackling infringement taking place on their networks. It should also concern government because fairly monetising the demand for creative works in digital form represents a key opportunity to generate revenue that can help to repay substantial investment in new digital infrastructure. If the regulatory response is right then massive value can be derived by internet service providers from legal services and there will be an incentive to invest. Notwithstanding government's repeated calls to industry to adopt new business models, government must accept that taking valuable content for free is not a business model. It creates no value. Only if illegal downloading is properly addressed can new business models have the room to breathe and succeed. As I said, I do not in any way oppose the laudable aim of improving networks. But next-generation networks need to be not just faster but smarter and safer, and they must work better as an ecosystem that allows information and creative businesses to prosper. I thought it crucial that we raise this issue in this House because we are at a point in history when our future will be set, and the world will look carefully at the direction that the UK takes. I look forward to hearing the contribution of noble Lords who follow me in this debate. I beg to move for Papers.