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British Film and Television Industries (Communications Committee Report)

My Lords, I begin my remarks in the same place as the noble Lord, Lord Gordon, concluded his. I have been on the Communications Committee for some time now and have enjoyed it very much indeed. The work that we did was interesting and worth while. All those people involved, both the clerks and the Members, contributed to what, for me, was a very worthwhile experience. I pay tribute, too, to our chairman, who good-humouredly wielded an iron fist in a velvet glove, thereby, I suspect, skilfully getting his own way most of the time without ruffling our feathers too much—so thank you for that. I draw attention at the beginning of my remarks to my chairmanship of the CN Group. This is particularly significant in this context, given the blurring between web TV and conventional television and the fact that we are involved in the regional news consortium, which has been successful for the northern ITV region. In that context, as an aside, I point out that the smaller the region that any regional news consortium covers, the greater the amount of public subsidy will be necessary to make it economically viable at all. In discussing the film and television industries, one needs to be clear about one question at the outset. Are we talking about culture as seen as a kind of public good or are we talking about business? Are these activities, at least in one way, a trade like any other? Of course, there is an overlap, but I believe that the right point to start is in recognising, particularly in this digital era, that we are talking about business. In my own case, perhaps because I have a lot of book publishing in my genes, I think that the comparison to which the noble Lord, Lord Gordon, referred—the idea that digital technology is doing for TV, film and radio what moveable type did for books—is interesting and relevant. After all, in the case of the written word, moveable type led to a plethora of new products: high literature, low newspapers, university texts, trade catalogues, great culture and populist nonsense. There was a great growth and burgeoning of output. For those activities in the TV and film industries, the business process is basically the same. You start with creativity, leading to creation, publication, distribution and consumption. The relationship between those things determines the business model that is applied in any particular case. As is so often the case in this world, there is no simple, single answer to how to do that. The cultural component must be paid for by somebody in some way. In the case of the BBC, there is the licence fee, which is a form of compulsory subscription attached to having a television set. To use a phrase recently deployed in the context of care for older people, it is a compulsory levy. Alternatively, as has also been mentioned, spectrum can be provided at a discounted rate or for free in return for producing something. Or you can rely on advertising. The BBC has grown into the United Kingdom’s only real global TV player, but its legal framework and place in the market here is a peculiarly British compromise. I should make it clear that I am a strong supporter of the BBC and what it does, but I am firmly of the view that it will have to evolve, probably quite dramatically. In particular—this is something that the committee touched on on a number of occasions—the current split between the operational end of the BBC and the BBC Trust is not a long-term answer. As for the other ways in which to pay for what can be described as the cultural public goods provided by these industries, spectrum, which has been mentioned, is not worth much any more, while advertising has over recent years and months collapsed—hence the tribulations faced by ITV. We will, then, have to find other ways of paying for the provision of the things that we want to see. The fact that the regional news consortia are being directly paid is an interesting straw in the wind. We may, for better or worse, see more of that in future. However, in this context it is terribly important, as my noble friend Lord Fowler said, that there must not be a monopoly of public service broadcasting. The BBC alone cannot and should not be the only body carrying out that function. One of the most interesting aspects of the digital era is the role of interactivity, which is why I join those Members of your Lordships’ House who have commented on the video games industry. While I suspect that that industry is not of immediate familiarity to all that many of us, it is now a big and significant business in this country. That is why I was pleased that the Government, in the Budget, responded to our recommendations about the industry—the Treasury appeared to be more enthusiastic than the Department for Culture, Media and Sport. At first blush—certainly, it was this way when I began to be interested in these things—I rather assumed that film was in many ways similar to television in business terms. Of course, that is not really the case, in much the same way as writing, producing, publishing and selling novels is very different from doing the equivalent for magazines. We all know that successful films are incredibly lucrative and, like good books, leave an important and enduring mark on our culture. However, as with good books, you cannot buy them off the shelf just like that. The creative business is a curious business. The difficulty that the film industry faces, which has been touched on, is that its business model is distorted not only by a high incidence of risk and uncertainty but, as has been said, by the existence of subsidies that are permitted as cultural exceptions under EU and other international trade rules. I remember once asking Sir Sydney Samuelson whether he could tell me if a film was going to be a success. He said that he could not but that he could tell me the 10 films from which the successful film would come. In recent weeks, we have seen a great contrast between the financial success of "Avatar" and that of a film whose name the promoters will, I think, be glad that I have now forgotten. It starred Uma Thurman and had, I think, 38 theatrical performances; it has just closed. In this country, we have a slightly strange set of circumstances. The Treasury seems to take a perverse view about film-making. If a film or a number of films start being made in Britain, it takes the view that the tax regime is too generous and, almost invariably, makes changes to make it more onerous. Surely the opposite should be true. After all, profitable activities always contribute more to the wider economy than unprofitable ones. In particular—this, too, has been touched on by a previous speaker—the "use and consume" provisions and the tax reliefs associated with them seem perverse. If you want to film Shakespeare’s "Henry V", which is by any measure a British icon, and decide to go to France to film the battle of Agincourt or the siege of Honfleur, because you have gone to France it ceases to be part of British culture and you lose your tax relief. That is dotty; culture is not defined in that way. This might come as a surprise to most of your Lordships, but there may be certain apt comparisons between the film industry and agriculture—I am a farmer in another life—because each, at least to some extent, has its own tax regime. The reason put forward for that, whether or not one agrees with the argument, is that each is producing public goods that otherwise will not be paid for and that, if they are not paid for, those public goods will ultimately not be available for society. The much maligned common agricultural policy—in many respects, quite rightly much maligned—is intended, among other things, to establish a regime of equivalence across the European Union. That is a sound idea because, as the noble Lord, Lord Gordon, said, we need to have in place mechanisms to ensure that countries do not engage in bidding wars for subsidies while hiding behind the fig leaf of culture. I have been talking about supply and I now wish to discuss demand. Film and television, like many other media products, enjoy a huge range of different delivery or distribution systems. Increasingly, at their heart there will be congruence via the binary code of digital technology. The bottom line is that there are now about 1.4 billion users of the internet. Physical location is less and less an identifier of demand. In the future there will be huge demand for good material—even more than there is now. That, of course, is why intellectual property is so important and why, as was said earlier, the protection of intellectual property rights is important. Unless people gain a reward for their creative work, they will not do it and things will not happen. I am partly convinced that the Digital Economy Bill will get this right because it matters to the future of the creative industries that piracy problems are resolved. The biggest advantage that our film and television industries have—although it is also a threat—is the fact that across the internet the common denominator is the English language. We should not forget that and we should always try to use it to our advantage rather than see it as a threat coming from the United States or elsewhere. Those who are involved in these businesses must decide whether they will try to create a niche or a general product, just as those involved in hard-copy media must do. All the evidence suggests that there will be massive demand for media products, including film and television. We know—this is commented on in our report—the extent of that in the UK economy, but how much more will the future bring? In simple terms, it seems to me that we must allow the laws of supply and demand to carry this forward in the context of a free and fair marketplace. Of course, we cannot necessarily allow that market to work in a purely mechanistic way, because certain aspects of film and television—and what will evolve from them—are public goods. If part of the working of this marketplace destroys or degrades aspects of that, society will have to find ways to pay for what it wants. I suspect that that may involve direct payment rather than excessive regulation. As a nation we have been in the vanguard of film and television since their birth. They and their successors will become ever more important in our society, both economically and socially. There are great opportunities to be grasped. This country should set out its stall to be a fertile seedbed for creativity, with finance and trained people being made available. If we can have, against that background, policies of hands-off encouragement, I believe that great national benefits will be achieved.