Music Business Forum (MBF) response to the Gowers Review
April 2006
The Music Business Forum (see note 1) welcomes the opportunity to respond to the Gowers independent review of intellectual property (IP). Our response covers the broad copyright arena and where possible we have indicated a number of recommendations which could help promote further economic growth, long term productivity and facilitate the inward investment positioning of Britain as the ‘World’s Creative Hub’ (see note 2). Many of our member organisations have responded to this review independently; and this submission reflects the consensus position across the broad music sector.
Overview
“Without the right intellectual property framework our creative industries could not survive. And given the pace of technological convergence, intellectual property will increasingly be the key to the UK’s future economic success. I believe that an effective intellectual property regime is a competitive advantage for the UK and helps make this country the location of choice for innovation and creativity” (see note 3)
Rt Hon. Tessa Jowell MP, Secretary of State for Culture Media and Sport
The music sector has long been at the sharp end of digital developments and is a trail blazer for other creative industries in developing new and innovative ways for consumers to access content. These new services and the creative industries as a whole rely on a strong IP system so this review is critical to this cornerstone of the knowledge economy.
The music industry has been widely acknowledged as a British economic success story contributing approximately £5 billion per annum to the UK economy (significantly, £1.3 billion being derived from exports), employing more than 120,000 people (see note 4). The UK is the third largest market in the world for sales of music, behind only the USA and Japan. Another factor, although more difficult to quantify, are the cultural benefits that the British music industry provides: - it widely promotes the UK in an international context and encourages further creativity in other sectors, particularly in the creative industries, and thus facilitates inward investment.
Copyright is the key means for rewarding creativity and the foundation for future commercial success; and the copyright regime has proved its flexibility over the years and is fundamentally different from the patent system. If the UK is to maintain its very strong position in the knowledge economy, Government support for the creative industries must be translated into strengthening the copyright system and its enforcement and valuing creative product in education, fiscal and economic policies. The co-ordination of Government support should be improved.
Recommendations
Substantial Comments
1. Government structures adequately support the copyright/creative industries
Government needs to consider how best to encourage closer links between each department when developing policy as a matter of best practice and better regulation.
Currently the Government deals with the creative industries in a somewhat piecemeal fashion with some sub sectors being the responsibility of DCMS, and others falling within the DTI remit. Similarly, cross-cutting themes such as innovation, education and skills policy for the creative industries fall within various Departments. This creates a lack of focus and the potential for a lack of understanding and cohesiveness within Government. As a result, other Departments such as Treasury and DfES do not have enough input from the creative industries, either from the industry itself or from its Whitehall sponsors. In addition, funding currently allocated by the Arts Council could be more effectively channelled and utilised than at present through better collaboration with the wider music industry.
Mechanisms are required to ensure that full cooperation between officials can transpire as effectively as possible in order to both maximise opportunities as well as to avoid the unintended negative consequences ensuing from restricted and silo policy formulation.
At a recent roundtable discussion called by the Smith Institute, the creative industries unanimously called for a cohesive approach to the sector from Government (see note 5). A possible model is offered by UK Trade & Investment. This is a single Government organisation, created by bringing together the FCO and the DTI. It has a clear role, promoting UK trade overseas and inward investment from abroad. It works closely with industry sectors, including the creative industries, and retains close links with other areas of Government. A similar structure could work for the creative industries, bringing together DTI and DCMS in a single organisation that could work with the creative industries and ensure that other areas of Government, such as Treasury and education, had informed input from the creative sector.
In light of the Labour Party manifesto commitment to reform the Patent Office, the Government must equip itself with the resource and expertise required to tackle copyright issues. The Government needs the greatest possible understanding of the dynamics of the copyright system and how it is driving value added and growth in the economy. A number of leading thinkers in the creative industries have called for a Copyright Office, charged with promoting the UK’s copyright interests. The USA has taken a similar approach and taken the lead in copyright creation and distribution. The UK should likewise take a pro-active approach to copyright as this becomes a key factor in international competitiveness and global success.
Recommendation:
2. Compile annual statistics on the value (including value added) of the creative copyright industries
Given that copyright is an acknowledged key to a successful knowledge economy the Government can take steps to encourage the full recognition of the economic value of IP. Public policy in relation to the creative industries should be evidence based and for this the Government needs basic facts on the value-added, growth, employment and export revenues of the creative sector. The most recent data on the copyright industries comes from a European study which revealed that they contribute over 8% of GDP. Before that, the DCMS conducted a mapping exercise for the creative industries but it was done independently of other Government economic analysis and has not been updated on an annual basis.
Recommendations:
3. Copyright education
In the digital world copyright is the currency of the creative economy. In order to develop a greater understanding of this fact there is a vital need to promote a better awareness of copyright as an economic driver of creativity to a number of audiences.
To maintain Britain’s capacity to compete on ideas, creativity and innovation, it is crucial that the UK develops a contemporary ‘information age’ curriculum in which copyright, and the creative entrepreneurship that translates rights into profits, jobs and economic growth, are central.
Producing creative work and understanding how it is owned should therefore be a core part of the curriculum from Key Stage 1 right through to Higher Education. Future generations need an understanding of the way intangible assets are owned and made available and at the heart of this is the principle of ownership, a concept that is well respected for physical goods. The easiest way for children to learn this concept of ownership is for them to apply it to their own creative work which would help both engender pride in their own work as well as respect for the work of others.
Future creators need to understand their rights in order to manage and exploit these effectively. This is particular relevant to SME’s and potential creative entrepreneurs if we are to develop the creative economy further. Being able to reach the non formal learning sector and develop collaborations with grass roots and underground communities are crucial steps; and the music industry is already establishing strong relationships with practical advice services. In London, the ‘Own It’ programme is a free Intellectual Property Advisory Service offering advice to creative professionals with the music industry already developing specific components offering advice to businesses on what intellectual property is and how to best protect and exploit it. There is strong demand for such a business focussed services and such support mechanisms should be made available across the regions.
With the streamlining of DTI business support services there needs to be further encouragement by Government for individuals and businesses to access to services across the UK. We recommend targeted policy solutions, such as Government further developing the Cox review consideration of a network of 'Creativity and Innovation' centres throughout the UK in order to strengthen the interaction between the various parties involved in promoting and representing creative skills and service, as well as promoting the export dimension and encouraging interaction and networking in a practical sense.
Future financers need to understand the value of the intangible assets of companies in order to play a key role in lending money to start up and growing creative businesses, as well as better comprehend the skills base being offered by the creative community. Our members have reported that too often they don’t speak the same language as bankers and investors, despite the fact it is in both their interests to do so. The Creative Economy Programme (CEP) work strand in DCMS is considering improving the possible support mechanisms available to creative industries and the MBF fully supports this initiative. There is a recognised need to further encourage potential investors in creative businesses to better appreciate the real value of creative assets by allocating a fair and commercial value to copyright (intangible) assets identified in the balance sheet. Government can play its role by brokering new ways for creative businesses and banks/investors to come together and understand each sector better
Public sector bodies also have a responsibility to promote copyright awareness, particularly where there is a perception of material being supplied free of charge. The BBC has a central role to play as a copyright education facilitator because of its unparalleled access to audiences on a variety of levels and in a multiplicity of ways. In the context of the BBC White Paper and the recognition of the duty to promote media literacy, the BBC should fulfil its public service obligations and act as a beacon of good practice in this area.
Recommendation:
4. Copyright Tribunal
Whilst we welcome the steps taken by the Patent Office in terms of mediation and alternative dispute resolution (ADR) the Copyright Tribunal remains in urgent need of reform. The Copyright Tribunal is antiquated having been exempted from the application of reforms to other courts and tribunals such as the Woolf and Leggatt reforms and measures should be introduced to improve the Copyright Tribunal
Recommendation:
5. Term of Protection for Sound Recordings
Strong rights help encourage the investment in creativity which leads to consumers to having the widest choice of music available to them. The EU currently provides a shorter term of copyright on sound recordings than a number of its global competitors. The MBF therefore supports government reviewing whether the EU 50 year term of protection on sound recordings should be extended.
As part of its review government should assess two key areas:
6. Parallel imports/exhaustion of rights
The impact of any change to the current system of Community exhaustion (as laid down in Article 4 of the Copyright Directive) would be detrimental. If wholesale parallel imports were permitted and those parallel imports were sourced from countries which do not observe European standards, the overall returns to UK economy would fall with more music being sourced / licensed through non-royalty paying countries.
Parallel imports bring with them a substantial reduction in the ability of the primary businesses to prevent financial profiteering from piracy and counterfeiting.
The justification for international exhaustion for Industrial Property relies on the possible global registration of Trademarks and Patents, which is not the case for copyright. International exhaustion would lead to creation of “free culture havens” with copyright material being distributed from countries where copyright law and the administration of rights are weakest.
Recommendation:
Uphold European exhaustion of rights as the correct balance between promoting free movement of goods while maintaining the value of our creative industries.
Notes
1. The MBF is an informal group of music businesses organisations that, since its inception in the spring of 2002, has gained a reputation as an effective representation of the interests of the music business in its widest sense to Government. A list of members is annexed to this paper.
2. James Purnell MP speech to IPPR, ‘Making Britain the Worlds Creative Hub’, 16th June 2005.
3. Rt Hon. Tessa Jowell MP, Secretary of State for Culture Media and Sport speech at Bloomberg 14th March 2006.
4. Further information can be read in a National Music Council report: Counting the Notes published in November 2002.
5. See c8 Transcript annexed to the MBF letter to the review team, dated 25th January 2006.
Annex 1: Contact details for the Music Business Forum
For further information on the Music Business Forum, please contact:
Amanda Hull
Music Business Forum Coordinator
Tel: 07702 790103 / Email: amanda@musicbusinessforum.org
Annex 2: Membership details for the Music Business Forum