Producers Alliance for Cinema and Television (PACT) – Written Evidence (JTN0019)

Introduction

1)     Pact is the trade association which represents the commercial interests of the independent television, film and digital media production sector in the UK.

2)     Pact works on behalf of its members to ensure the best legal, regulatory and economic environment for growth in the sector. Pact has around 500 member companies based across the UK and the majority of these are SMEs (small and medium sized enterprises) with a turnover of less than £50m a year.

3)     Taken as a whole, the TV industry around the world is worth $400 billion.[1] The UK independent production sector is one of the biggest in the world. UK independent production sector revenues have grown from £1.3 billion in 2005 to over £3 billion in 2018 largely driven by a growth in international sales.[2]

4)     The British independent production sector is successful internationally and is strong, along with the wider UK creative industries, at promoting the UK ‘soft power’ brand overseas. UK TV export revenues were an estimated £1.4 billion in 2018/19 and sales to Japan totalled £14m. [3]
 

5)     The UK is the second largest exporter of TV content in the world (after the USA)[4] and the biggest international exporter of programme formats (the templates for ideas which make a TV programme).

28 August 2020

Overview

1.1           Japan is one of the key areas for growth due to its population size and range of broadcast channels which reach a large amount of people, for example NHK, which is funded by a universal subscription similar to the licence fee paid in the UK, reaches around 50 million households in Japan. Previously it had been difficult to break into the Japanese market, but competition from global subscription video on demand services (SVODs), such as Amazon Prime and Netflix, and a drop-in audience on traditional broadcast channels has made Japan more outward looking to international TV programmes and formats.
 

1.2           Pact is pleased that intellectual property and its importance is included in the Department for International Trade’s strategic approach. IP is producers most valuable asset. It is important that the existing protection for IP and enforcement that is contained within the current EU-Japan Economic Partnership is maintained in any new FTA with Japan. There have been cases of IP theft in other territories where the UK does not have an FTA, which can cost production companies a substantial amount of money in lost revenue and legal bills. It’s important that high standards of IP protection are included in a future FTA to ensure that production companies working in Japan are properly protected, and able to confidentially sell their IP to the Japanese market.
 

1.3           Pact has over 500 companies based across the UK and the majority of these are SMEs with a turnover of less than £50m a year. Last year we launched a Production Accelerator and a Business Accelerator free to all Pact members, which focus on helping start-ups and SMEs who are looking to grow their business. We are pleased that the Government are seeking a dedicated SME chapter and SME-friendly provisions in the UK’s future FTA with Japan. One of the biggest issues smaller companies, who may be unfamiliar with new territories, is understanding and navigating cultural working practices. Provisions in a future FTA that would help SMEs understand this and how to navigate the different cultural landscape would instil confidence in those looking to work in Japan and would also help trade associations such as Pact assist members wanting to trade there.
 

1.4           As mentioned in previous responses to the Committee, there are very few barriers to trade in Japan that would hinder the TV and film production sector. However, there are measures that the Government could seek to negotiate which would help the sector. For example, the introduction of a simplified ATA carnet system would ensure ease of access for those looking to bring filming equipment to shoot in Japan.
 

1.5           The Public Service Broadcasters (BBC, ITV, Channel 4, and Channel 5) are hugely important to the UK film and TV production sector. Many companies, particularly SMEs, solely rely on the PSBs for commissions. Pact is a strong supporter of the PSB system, and we want to ensure that the current balance of legislative and regulatory interventions is protected in any future FTA. Given this we consider that the audio-visual sector needs to be excluded in future FTAs. This is the best way to ensure that the sector continues to succeed and grow.
 

1.6           Lastly, Pact supports the view that retaining EU works status should also be a priority for all future UK FTAs including the current negotiations with Japan. We want to ensure that commitments made within the agreement do not prevent the UK from fulfilling any criteria necessary to retain EU works status nor strengthen the EU’s arguments for withdrawing EU works status from the UK.

Inquiry Questions

2.1           Pact has answered the questions most relevant to the film and TV production sector and included further information relevant to the UK’s negotiations with Japan.

Q1. Does the Department for International Trade (DIT)’s strategic approach, published on 13 May 2020, set out the right objectives for negotiations? How effectively does that strategic approach represent the interests of different groups and regions across the country, including the devolved nations, businesses, civil society, and individuals?

3.1           Pact is pleased that the Department for International Trade’s strategic approach recognises the importance of the creative industries and includes them as one of the sectors which will benefit from an FTA. In 2018, the creative industries contributed £111.7bn to the UK economy, an increase of over 40% since 2010.[5]  We want to ensure that the film and TV production sector continues to grow and the current high standards of IP protection and enforcement are maintained in any future FTA. Which is why we are pleased that the Government have set out a number of IP related provisions they are seeking in their negotiations with Japan.
 

3.2           As we discussed above, Pact has a large number of members who are SMEs. Which is why we launched a range of services last year specifically for SMEs to grow their businesses. We are pleased that the Government are seeking to support SMEs through a dedicated chapter in a future FTA. This will be of particular importance going forward as many SMEs have felt the economic effects of the current COVID-19 pandemic. We want to ensure that our members can take full advantage of all the opportunities available to them, including international opportunities. While SMEs may be more familiar with already established territories such as America or Europe, many may be reluctant to investigate working in territories which they are unfamiliar with. Ensuring SMEs can access support and information which would allow them to take advantage of the opportunities in Japan would be of great use.
 

3.3           The strategic approach also sets out that the Government are seeking to protect the right to regulate public services, including the Public Service Broadcasters. While we are pleased that the Government are seeking to protect the PSBs, Pact believes this should be done by excluding the audio-visual sector from any future UK-Japan FTA. This would protect the current legislative and regulatory interventions, which has made the broadcasting ecology in the UK one of the most successful and dynamic in the world. Independent TV production companies rely on the PSBs for commissions, whilst also supporting them in developing and retaining British audiences.

3.4 Without excluding AV from the negotiations, there is a risk that the interconnected framework of successful interventions, such as the BBC licence fee and the creative sector tax reliefs, could be weakened or undermined. This could not only damage the PSBs and their revenue but also the independent production sector. In 2018 total UK TV sector revenues increased to over £3 billion, largely fuelled by growth in international revenue. International revenues are a strong source of growth and grew by 20% in 2018 to £962m.[6] The TV and film production sector have felt the economic effects of the COVID-19 pandemic; a Pact survey of our members in April found that as a result of the production shutdown at the start of the pandemic, producers lost more than £250m because of cancelled or postponed productions, an average of £2,6m per producer.[7] We want to ensure that the sector can continue to succeed despite the pandemic,  and the Government should seek an exemption as a priority to ensure that this can happen. 

Q5. What effect could a UK-Japan trade deal have on the UK’s future ability to negotiate deals with other countries?

4.1           Pact considers that any future negotiations could see the Japan FTA being used as a floor by the UK Government. Therefore, for this reason we reiterate the need for excluding AV from any FTA negotiation with Japan. If the AV sector is included this will make it extremely difficult to retain a blanket exclusion with other future negotiations for example the ongoing US-UK FTA negotiations. If the sector is not excluded any deficiencies in the Non-Conformist Measures negotiated with Japan would be impossible to remedy in future negotiations with the USA.
 

4.2           As we set out at the outset, we also consider that retention of EU work status should be a strategic priority for the UK government. As such future FTAs including the current negotiations with Japan should not prevent the UK from retaining EU work status.
 

4.3           EU Work Status is important to the UK audio-visual sector because it provides UK producers of AV content 100% market access to the EU’s television and video-on demand markets. Europe is a key market for audio visual content at 34% of TV exports overall. The implications of losing EU Works status would be significant for the UK AV sector. It would eliminate the UK's commercially meaningful preferential access to EU markets; and threaten the ability of UK AV producers to compete in the EU. The UK based film, TV and TV-related sectors alone make a trade surplus of £1.3 billion a year with Europe.[8] The loss of EU Works status would also threaten foreign investment in UK film and television production. We believe many offshore studios would relocate their substantial UK operations to other European hubs in order to secure preferential access to the EU market.
 

4.4           While European Work Status will continue after the transition period by virtue of the UK’s commitment to the Council of Europe Convention on Trans Frontier Television this treaty alone does not protect the  UK’s ability to access EU works status; this is provided through the Audiovisual Media Services Directive (AVMSD) which the EU could amend at any time to exclude the UK. That is why it is vitally important that any future FTAs with third countries do not impede the UK’s ability to fulfil necessary criteria to retain EU work status nor strengthen the EUs justifications for removing EU works status from the UK.  The best way to protect this would be through a blanket exclusion of the AV sector in future FTAs including the Japan UK FTA.

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