Written evidence submitted by Pact

Introduction

1. Pact is the UK trade association which represents and promotes the commercial interests of independent feature film, television, digital, children's and animation media companies.

2. The UK is a world leader in the sales of TV content globally and revenues continue to rise. Taken as a whole, the TV industry around the world is worth $400 billion.[1] UK independent television sector revenues have grown from £1.3 billion in 2005 to over £3 billion in 20202 largely driven by a growth in international sales and commissioning.[2]

3. The UK’s independent film sector is struggling and is now at the point of market failure.[3] Challenging market conditions, increased cost of talent and crew and changing viewing habits have made it increasingly difficult for indie films to compete with HETV and big budget US Studio films.

4. For further information, please contact Pact’s Head of Policy, Emily Oyama, or Pact’s Senior Policy Executive, Susie Heron-Halliday.

Executive Summary

1.1  The UK’s independent film sector is now at a critical point, Pact is very concerned that without urgent Government intervention the sector will no longer be viable, impacting the talent pipeline and jobs across the indie film sector and the wider audiovisual economy. We welcome this inquiry into how to maintain the UK as a global destination for production and particularly how independent film sector should be best supported and urge the committee to recommend the Government engage with Pact and others on this issue. 
 

1.2  Despite the UK’s strong history of independent filmmaking, the indie film sector has been in a long term decline with levels of investment in UK independent film having fallen in real terms since 2015. As a result of challenging market conditions, increasing costs and changing viewing habits the indie sector is now under strain to the point of market failure, as identified in the BFI’s Economic Review of Independent Film last year. Independent film producers are finding it increasingly difficult to finance projects and as a result films either do not get made at all or at a much lower budget level making it difficult to attract well known talent and produce films to the quality needed to be commercially successful.
 

1.3  Following the BFI’s Review last year, Pact commissioned Oliver & Ohlbaum Associates to look at the issues affecting the indie film sector and how the film tax relief could be adjusted to help address the market failure. This report found that the market has undergone significant changes in several areas, including a slow return to cinemas by older audiences post pandemic, a key market for indie films, and global economic factors driving an increase in the cost of labour and materials. British independent films also compete directly with US films for talent and box office share due to the shared language and similar narrative styles. As a result of this, the post-pandemic market share of UK independent films has decreased considerably to 5% in 2021 and 8% in 2022; the lowest level since 2016.[4] Whereas the US’s market share seems to have recovered post-pandemic to 66% in 2022.[5]
 

1.4  Pact also commissioned Alma Economics to analyse the role smaller budget films, which are predominately independent, play in launching emerging filmmaking talent. Their analysis found that low budget films (between £500k to £15m) are substantially more effective at launching emerging talent than large budget films, between 2010 and 2021 Alma estimate that 77 directors and 208 producers made their feature film debuts on low budget UK feature films and then went on to work on other films.[6] If independent producers are unable to finance films and less films are made then there is less opportunity for key talent to be discovered and develop their skills. This would have a knock on effect on the US studios and streamers who often rely on independent producers and films to find and develop the next generation of emerging creative talent.

1.5  The indie film sector will only continue to decline without further Government intervention, leading to fewer development opportunities for new talent and crews, which feed the wider production market, putting the strength of the UK’s overall, market leading production sector at risk. Pact’s reports recommend increasing the rate of the FTR to 40% (53.3% AVEC) at a targeted budget level of approximately £1m - £15m. An enhanced rate of 40% would cost the Exchequer very little[7] and see a net positive impact of £50m per year,[8] however the benefits from increased film production, such as tourism, would likely increase the economic value of an enhanced rate even further. An enhanced rate would also help strengthen the indigenous film sector’s ability to attract finance and continue developing key talent. Which would benefit the wider audiovisual sector and help to create a more equal balance of work between domestic and international productions for the UK’s workforce.

Questions

1. How attractive is the UK as a global destination for the production of film and high-end television?
    

2.1  The UK is a highly attractive destination for film and high-end television production, with £6.27bn being spent on film and HETV in the UK in 2022.[9] The attractiveness of the UK is a result of a combination of the UK’s carefully balanced regulatory and legislative interventions, high quality production talent and infrastructure. The current ecosystem has taken many years and successive Governments to build to where we are now. While the UK is one of the largest audiovisual economies in the world, there is strong global competition as many countries are seeking to boost their own incentives and attract inward investment into their own screen economies.
 

2.2  The audiovisual tax reliefs have played a vital role in making the UK one of the most successful audiovisual sectors in the world. One of the reasons the UK’s tax relief regime has been so successful is that the FTR was developed in very close consultation with the sector over a period of many years and this engagement helped to ensure that any arising issues or difficulties were worked out prior to its introduction in 2007. The successive tax reliefs for HETV, Animation and Children’s were all built on the success and tested design of the FTR. Not only have the tax reliefs been hugely successful at driving the UK’s international competitiveness, they also deliver substantial returns to the overall UK economy in terms of gross added value and demonstrate a good return on investment. The BFI’s most recent analysis showed that they delivered returns on investment for each £1 of tax relief of £8.30 (film), and £6.44 (High end TV).[10]
 

1B. What are the barriers to maintaining and increasing overseas investment in the sector?
 

3.1  The UK is in a strong position and remains a hugely popular location for production thanks to our infrastructure, talent and tax relief regime. These incentives increase production activity which then drives demand for skilled labour and infrastructure, which then drives further investment to meet this demand, all of which reinforces the UK’s reputation for high quality production. However, there is still a need to remain internationally competitive. Many other countries also have a strong talent base, infrastructure and competitive tax relief system as set out below in Figure 1.
 

Figure 1: International comparison of fiscal incentives[11]

3.2  Many countries, including France, Spain, Italy and Australia, have introduced uplifts in tax reliefs to support their domestic sectors over the course of the COVID pandemic, and some uplifts are still in place to support productions and to better compete for inward investment. Amendments to the tax reliefs shouldn’t be made simply because other countries are implementing them, however its important that the UK’s tax relief system remains internationally competitive and that the new audiovisual expenditure credit is just as generous as the current audiovisual tax reliefs are.

1C. What are the benefits and challenges of overseas investment for the UK’s film-making capacity?
 

4.1  Inward investment has been a vital part of growing the audiovisual sector in the UK. As a result, the UK now has a substantial network of studio space available to accommodate the increase in production. There are also a number of new studios in the process of being built. However, many smaller, indie film productions often do not utilise these studio spaces. Studios are often expensive and for those who do not have a large production budget, it is often more economical to film on location across the UK, or abroad. Many screen agencies, such as Screen Scotland and Screen Yorkshire, offer financing incentives for productions filming in those areas and many indie films choose to utilise these funds in order to close finance.
 

2. What are the current challenges facing the UK’s independent film production sector?
    

5.1  The independent film sector brings important cultural, social and economic benefits to the UK. Independent film also plays an important role in discovering and training new on and off screen talent. However, challenging market conditions and trends have increased the pressure on the independent film sector and made it increasingly difficult for smaller budget, independent productions to compete. A report by Olsberg for Pact in 2017 highlighted that the success of the FTR has obscured the worsening conditions for the UK independent sector.[12] Similarly, the BFI’s Economic Review of UK Independent Film in 2022 revealed that the situation for the UK independent sector had worsened since 2017 and the viability of the sector is inhibited to the point of market failure.[13] While the FTR continues to play a vital role in the financing of independent films, the outlook for the sector is unlikely to improve without intervention from the Government which works with the market, demonstrates additionality and stimulates investment into the indie film sector.
 

Market Challenges and Trends
 

5.2  New entrants to the market, increased competition for viewers, and changes in audience behaviour and expectations around content availability has weakened the commercial financing options, set out below, available for indie films. A report by Olsberg SPI for Pact in 2017 found that there was a decline in the international market value of independent films by about 50% on average from 2007 to 2015.[14] As a result, international buyers are offering lower guarantees and acquiring fewer films. Distributors are also cautious about theatrical release prospects due to difficulties launching films and securing screens for wider releases.[15] In turn, this has made it difficult for many indie producers to secure the funding necessary for projects. Which has led to a combination of a reduction in the volume of UK independent films being released and less ambitious, lower budget indie films being released; many of which struggle to attract key creative talent and recoup their initial investment. Pact commissioned Oliver & Ohlbaum to build on the work of the BFI and look at the issues facing the indie film sector and the impact of tax relief support. Figure 2 from O&O’s report shows that the number of UK independent theatrical releases peaked to 182 in 2015 and has remained broadly consistent before the pandemic. While the number of UK independent films did grow in 2022, this is still below the high seen in 2015 and 2018, and far below the amount of American releases.

Figure 2: Country of origin of films released in the UK and Republic of Ireland, 2012-2022[16]

5.3  Pre-pandemic the number of UK independent theatrical releases was fairly consistent. However, when indie films secure a theatrical release they struggle to compete for share of box office with larger budget US studio films. Figure 3 sets out the share of UK and Ireland box office by country of origin. This data shows that since 2012, UK independent films share of box office has remained low in comparison to the US, but has been fairly consistent with the occasional hit driving share of box office. However, post-pandemic the market share of UK independent films has decreased considerably to 5% in 2021 and 8% in 2022; the lowest level since 2016.

Figure 3: UK & Ireland box office share by country of origin, 2012-2022[17]
 

5.4  From the data currently available, it’s not entirely clear whether this decline is still related to the pandemic and lack of content availability associated with this, or if it’s the sign of a further decline for UK independent films linked to market conditions. We note that older audiences, who are a key audience for independent films, have been slower to return to cinemas post pandemic. With adults over 55 watching 61% fewer films at out-of-home big screen venues relative to 2019, compared to 29% less for 25-34.[18] It’s likely that the pandemic has further exacerbated long term trends in the market.
 

5.5  With a declining share of box office, increasing costs and competition for talent from HETV and larger budget films all impacting the ability to finance indie films, many projects are now being forced to be less ambitious and reduce their overall budget in a bid to close finance. Which ultimately affects the value of the project, and its ability to recoup investment. Figure 4 shows the disparity between spend for UK-Studio backed films[19] and UK independent films. UK spend on US studios films more than doubled between 2012 and 2017. For independent films, this spend has largely been flat or in decline; with the occasional bigger budget indie film increasing the overall UK spend.

Figure 4: Change in UK spend indexed to 2012 by start year of principal photography, 2012-2022[20]
 

5.6  The viability of the sector has been brought into question in reports by the BFI’s Commission on UK Independent Film report in 2017/18, Olsberg’s report for Pact, the British Screen Advisory Council (now British Screen Forum), and the Institute for Creative and Cultural Entrepreneurship at Goldsmiths University all from around the same time. Since then, the health of the UK independent sector has declined even further, as set out in the BFI’s Economic Review of Independent Film and O&O and Alma Economics’ reports for Pact this year, and the long term market failure has been further exacerbated post pandemic. The independent sector is now at a critical point and should be cause of concern for the Government and the wider audiovisual sector.

Financing and the Production of Independent Films

5.7  Film financing models for indie film are complex as it often involves a range of different financing sources. Funding typically comes from a mix of public finance, the FTR, commercial finance through preselling the distribution rights, equity or debt providers. Co-production partners can also supply finance. Films also typically have longer timelines from development to distribution and it can take years for producers to pull together these various sources of finance. Unlike TV and bigger budget films, there is less certainty in terms of distribution and a greater reliance on external finance; meaning that indie films are more sensitive to changes in the market or wider economic trends. Below we set out the different types of investors in films, the roles of distributors and sales agents and the typical release strategies of independent films to help illustrate why indie films are more susceptible to the ongoing market challenges and trends.[21]

5.8  The majority of independent films rely on funding from various sources. While the funding model, recoupment fees and structure will vary depending on the film; all indie films with multiple sources of financing are more susceptible to the ongoing market challenges in comparison to larger budget films, who typically receive funding from one source as well as tax reliefs. It should be noted that all investors will need to recoup their respective investments as well as any fees or expenses, before a film can enter net profit and deliver value on IP rights. In order to close financing, indie producers usually commit a significant portion of their share of IP value to key talent as they are what increases the value of a film and drive international sales interest. Very few producers see a return on investment into the film and share of IP.[22]
 

2A. What is the demand for and capacity for production of films with a clear British identity?

6.1  Independent film plays an important role in reflecting life across the UK through culturally specific stories and local talent, and exposes international audiences to UK culture and values. The UK indie film sector has a long history of successful British films, such as Bend it Like Beckham and This is England and more recent films such as Aftersun and The Duke. As we set out in our response above, many indie films usually struggle to compete with larger budget US Studio films at the box office. That said, there continues to be a demand for films with a clear British identity and when indie films are able to secure the finance necessary for a high quality project they can do well, as seen with The Duke below.

6.2  As we have discussed throughout, the issue is not that there is not a demand for these types of films; it’s that indie producers are finding it increasingly difficult to find the necessary sources of finance to make the type of British indie film that ends up being commercially successful. We note that the producer of The Duke is currently developing and producing similar distinctly British stories. However, given the difficulties in securing finance is looking to film these projects outside the UK in order to secure financing from abroad.

2C. Are the nations and regions of the UK adequately represented and supported in the production of British films?
 

7.1  There are many examples of indie films set in the nations and regions, that showcase their respective regions, such as Wild Rose and How to Build a Girl. However film production is heavily focused on London and the South East. The BFI’s 2021 Screen Business Report highlighted the regional concentration of production activity for films supported by the FTR. It found that over 80% of FTR supported production spend, employment, and GVA occurred in Metro London and the South East from 2017-2019. Of Pact’s approximately 43 film members, only 8 of these are based outside of London.[23] There are a number of screen agencies and regional funds available to producers in the nations and regions, while any additional funding is beneficial; these funds often tend to focus on short films, first time film makers and lower budget projects.
 

7.2  Unlike the TV production sector, the indie film production sector outside of London and the South East has shown very little signs of growth. The UK’s nations and regions are often used as filming destinations, however building a sustainable sector outside of London would require more investment and support. The BFI’s Economic Review of Independent Film suggested that linking some element of an uplift in the FTR could help to incentivise local production. Many other countries do also have regional uplifts for various tax reliefs however the existing skills and infrastructure available do vary depending on the region and may not be able to cope with increased production. Given that the whole indie film sector is experiencing issues financing films, dedicated support for the nations and regions may be better suited from something other than the FTR. For example, Screen Scotland have a Film Development and Production Fund which offers support towards the initial development costs of feature film or documentary projects.[24]. However, it’s important that any support works with the market, demonstrates additionality and stimulates investment into the indie film sector. We note that an uplift in the FTR targeted at the indie sector would help to support indie film production, including producers in the UK’s nations and regions.

 

3. What more can be done to incentivise film and high-end television production in the UK?

3A. Are the current funding routes, tax credits and governance for the industry fit for purpose?

8.1  Pact has chosen to answer these questions together as we believe that there is a link between the existing film tax reliefs and what more could be done to incentivise indie film production in the UK.
 

8.2  The audiovisual tax reliefs have been an incredible success story since their initial introduction via the FTR in 2007. The FTR was developed in consultation with the sector and this engagement helped to ensure that any arising issues or difficulties were worked out prior to its introduction. Following the success of this intervention, the Government introduced reliefs for High End TV (HETR), Animation (ATR) and Children’s Live Action programming (CTR). The tax reliefs were introduced by the Government to help address a specific market failure in their respective sub-sectors. For example, the HETR was introduced to help address the under provision of high quality British drama, which was sub-optimal at the time. Since then, the HETR has been the catalyst behind the British drama production sector, which has seen extraordinary growth since 2013.
 

8.3  The tax reliefs have also played a vital role in making the UK one of the most successful audiovisual sectors in the world. Not only has the relief boosted the volume of domestic production, but it has also led to substantial job creation in the economy. In 2019, screen sector production and development supported by the tax reliefs generated a total of 218,790 full-time equivalent jobs, an increase of 20.3% on 2017.[25] The reliefs also demonstrate a good return on investment for HMT and the overall economy. The BFI’s most recent analysis showed that they delivered returns on investment for each £1 of tax relief of £8.30 (film), £6.44 (High End TV), £4.53 (animation), £3.20 (children’s content).[26]

8.4  If the future growth of the UK production sector is to continue, it’s vital that the tax relief system remains as internationally competitive as possible while continuing to support domestic production and address the underlying market failures.

8.5   As identified by the BFI’s Economic Review of Independent Film in 2022, and our evidence above, there is clear evidence of market failure in the UK indie film sector. As we set out earlier, we commissioned O&O and Alma Economics earlier in the year to analyse how the FTR could be adjusted to help better support the UK indie film sector and examine what impact an uplift would have.

8.6   As we have set out above, UK studio backed films have seen a healthier increase in investment over the last decade in comparison to lower budget UK films, which tend to be independent films. To better support the indie film sector, an increase in the FTR should be targeted at films with a lower budget level, rather than films that are defined as ‘independent’, which could have unintended consequences and lead to a potential gaming of the system. It could also incentivise the US studios and streamers to commission indie film makers to produce films at a lower budget level. The maximum budget level for UK independent films typically sits around £15m.[27] These types of films often have support from co-production partners and need to generate significant commercial interest internationally in order to solidify funding, which means they are exposed to market challenges in securing financing and increased competition for major talent. Films above £15m are typically funded by inward investment from US studios or the streamers, who have the financial resources to deal with the ongoing market challenges.
 

8.7  Independent films at a lower budget levels similarly experience the same market challenges as those independent films on the higher end due to the multiple sources of financing and need to generate international interest to secure pre-sales. However, for films below £2m they tend to be less reliant on the international market and pre-sales to secure funding and often do not need recognisable on-screen talent to build international interest.[28] However, these films can play an important role in developing emerging talent. For micro-budget films (£0.5m and under) these films are often funded by a single private financier and in some cases, may go ahead even without the support of the FTR. As these types of films are less reliant on the international market and pre-sales they are less exposed to the challenging market conditions and decline in cinema admissions making it easier to secure finance. For the FTR to better support the independent film sector, the enhancement should only apply to those films that fall within a certain budget range which indie films are usually produced at. 
 

8.8  Combining the work of O&O, available industry data and the work of Alma Economics looking at the spillover benefits of independent film, Pact asked O&O to analyse where an enhanced FTR should start and where it should end and at what level should the rate be set to best support the indie sector. In line with the BFI’s Economic Review of Independent Film, the report finds that a 40% FTR rate would be the best way to target support and would have a relatively low cost to the Exchequer. At this enhanced rate, the net impact is estimated to be negative up to budgets of £1.1m and positive thereafter for budgets above £1.1m. Which suggests that the optimal budget range to target the enhanced relief would start at £1m and go up to around £15m to maximise the positive impact while minimizing costs to the Exchequer.
 

8.9  An increase to the FTR in line with our proposal would also have positive benefits to the wider audiovisual economy. Lower budget films are a talent incubator for emerging on and off screen talent, who then often go on to work on higher budget more high profile films taking the skills and experience from lower budget films with them. Alma Economics’ estimate that between 2010 and 2021 77 directors and 208 producers made their feature film debuts on low budget UK feature films and then went on to work on other films.[29] In comparison, films with a budget of over £15m only 3 directors and 2 producers made their debut and then went on to work on other films. They also estimate that £1 spent on low budget film is 140 times more likely to help launch a new director and 440 times more likely to help launch a new producer than a large budget film. This talent incubation benefits the US studios and streamers who often choose to work with talent who were discovered and developed by independent filmmakers. Having a strong indie film sector also provides more opportunities for production staff and crew and creates less of a reliance on work from the US studios and streamers. As we have seen with the actors and writers strikes in the US, a heavy reliance on international US productions has exposed a weakness within the UK system whereby any impacts on the US Studios negatively impacts the UK work force. Inward investment has been key to the success of the UK production sector particularly in making the UK one of the most successful audiovisual sectors in the world. But it’s important for production staff and crew to have a variety of domestic and international opportunities to help ensure that the sector’s workers have a continued flow of work available. Targeted support for the indie film sector so they can attract investment into lower budget productions will help to ensure this continued flow of work.

4.What are the issues facing the UK’s film exhibition sector?
 

9.1  The UK’s film exhibition sector plays an important role for UK independent film. We have set out some of the issues facing cinemas in the UK, and how this relates to the value and financing of UK indie film under question 2.
 

5. What more can be done to protect and promote the UK’s screen heritage?

10.1 Pact has no particular comments to make here.

6. What can the industry and Government do to ensure British film and high-end television can adapt for the future?

11.1 Pact is pleased that the Culture, Media and Sport Committee launched this call for evidence. We’re at a critical point for the independent film and TV production sector, with the ongoing skills crisis, developments in new technology and AI that have the potential to transform/harm the sector, and changes in the market exacerbating the market failure for UK independent film. Additional, targeted support from the Government would help to alleviate some of the problems the British film and HETV production sector is experiencing and go some way to future proof the sector.
 

11.2 As we have set out above, an uplift in the FTR for films of a targeted budget level would help address the financing issues the indie film sector is facing, and give the market and financiers confidence to invest in the indie film sector in the UK.
 

11.3 The UK TV production sector is hugely successful, with revenues of over £3bn in 2022. It is becoming increasingly difficult for productions to find the necessary talent and skills needed to meet the high demand. To be able to meet this demand, the sector needs to ensure that those currently working in the industry have the right skills, but also that there are new entrants into the sector. The current apprenticeship system does not work for the sector, and as result apprenticeship levy funds have not been fully utilised. This is because work within the sector is largely project-based and workers are usually on short term contracts. People usually work on a production for several weeks or months, and then move on to the next production with a different company when their contract comes to an end. Further changes to the apprenticeship levy would help the sector better utilise these funds and invest in the skills pipeline. As AI becomes more commonplace in all parts of the value chain the sector will need to understand how this can be applied in a safe, transparent, secure and trustworthy way. Both Film and HETV will and are already benefiting from the opportunities of AI. Since the early 2000s, AI has played an essential role in virtual film production by generating content such as landscapes, architecture and scenery as well as live action scenes; this has helped speed up processes to create digital scenes quickly. One of the very first uses of this can be seen in the Lord of the Rings films which required the studio involved to simulate detailed and realistic battle scenes using AI.[30] 

11.4 Although opportunities of this new technology will undoubtedly help increase productivity there are some profound risks that the industry must assess. These are both moral and ethical, which need to be carefully considered before AI technology develops even further. For example, if artists’ performances are used to create new AI generated content new contractual agreements will be required that persuade and reassure actors that their image/performance rights are being used in an ethical and moral manner with due payments. Currently without a standard agreed framework to govern the usage of AI actors are more likely to demand contractual prohibitions against using generative AI. Pact is currently in discussions with members on how best to assess both the opportunities and risks of AI in the coming months.

6A. What should be prioritised to ensure a strong skills pipeline and retention in the film and high-end TV industry?

12.1 The independent film sector plays a vital role as a developing ground for the next generation of creative talent. This benefits the wider audiovisual sector as this talent then goes on to work in HETV for domestic broadcasters, the global SVODs or large budget US Studio films. Without a thriving indie film sector to find and develop this talent, the pipeline for creative talent suffers. Attack the Block is very clear example of a UK indie film incubating new on-screen talent.

12.2 It’s important to note that while the whole audiovisual sector is suffering from a shortage of talent and crew, the ‘consequences of ongoing skills shortages are especially threatening for the independent film sector, which operates under a less profitable business model.’[31] Indie films have been disproportionately affected by the rising wage costs and are finding it increasingly difficult to compete with larger productions and HETV for crew and other key creative talent.
 

12.3 Targeted support for the independent film sector via an uplift in the FTR for films of a targeted budget level would help producers secure financing and increase spend on indie films. Which in turn would allow the indie film sector to develop more creative talent and compete with HETV and larger budget film productions. The BFI’s Skills Review 2022 also stated that substantial investment by the film and TV sector, from additional public funding and/or mobilising funding from the sector, in skills would ‘be transformative for the UK independent film sector, helping to relieve the significant inflationary pressures on key production inputs for film.’

12.4 We note that the sector is currently working together, through the Screen Sectors Skills Task Force, on the issue of skills. The Task Force was established in early 2023 to provide a response to the BFI Skills Survey and to set strategic direction for skills development across the screen sectors. Chaired by Georgia Brown, former Head of Amazon Studios Europe, the Task Force is a sector-wide collaboration, bringing together organisations from across the film and TV industries including broadcasters, platforms, production studios, screen agencies, membership bodies, unions and skills organisations. It will publish its report in November.

6B. What are the risks and benefits of artificial intelligence to the sector?

13.1 The TV and Film sector in the UK has always taken advantage of cutting-edge technology to help the filmmaking process. The character Gollum from the Lord of the Rings films required the studio involved to create new software from scratch, with traditional animation techniques and other editing used to transform the actor into Gollum. The TV production sector has also began utilising innovative technologies, such as virtual reality (VR) and augmented reality (AR) in recent years with Remarkable Television’s Doctor, Can You See Me Now? using augmented reality and medical imaging technology to allow patients to see inside their own bodies to better understand their medical condition.[32] Kindle Entertainment and Balloon Entertainment produced Kiss Me First, Channel 4’s first use of VR, which combined live action with virtual reality.[33] And most recently Tiger Aspect’s Deep Fake Neighbour Wars, Deep Fake Neighbour Wars produced by Tiger Aspect for ITV is a comedy impressions show and showcases the first use of deep fake technology in a long form narrative series. The series uses deep fake technology to turn impressionists into the celebrities they’re impersonating.
 

13.2 The opportunities that AI offers should be welcomed by the sector, however there are a number of issues, which need to be carefully considered before AI technology develops even further. It’s also important that AI technology companies and consumers comply with existing copyright and IP laws, particularly where copyrighted works and IP is being used to train generative AI technologies. We welcome that the recent Government commissioned Pro Innovation Regulation of technologies Review – Creative Industries by Dame Angela MacLean acknowledges that the Code of Practice being drafted by the IPO with AI Firms and Rightsholders ‘must not run counter to IP value creation, as IP is central to the Creative Sector accruing value and its capacity for growth.’ Pact considers that all copyrighted works need to be protected and if content is used illegally it will contravene existing UK copyright law. Furthermore AI developers need to have a clear understanding that existing copyright law must continue to be adhered to when used to train AI models.
 

13.3 Beyond IP and copyright related risks there are also ethical considerations to acknowledge. Most recently we can see this being played out in the industrial disputes that are happening in America with regards actors and supporting artists whereby some contention is being brought against studios looking to replicate scanned image data of actors some believe in perpetuity (although background actors have long forgone their image rights under current contracts). Negotiations about how producers will make use of these technologies without infringing ethical and image rights considerations are becoming more complicated.
 

6C. What needs to change to ensure the industry is supporting inclusivity and sustainability.

14.1 Pact is committed to promoting inclusivity and sustainability in the independent production sector and the broadcasting and film sectors more broadly.
 

14.2 Pact considers that an uplift in the FTR targeted at films of a certain budget level would also increase the levels of inclusivity seen within the sector. As outlined above a larger number of lower budget films have been produced in the market which has limited the renumeration for producers. This in turn may limit the diversity of talent able to sustain a career in the UK independent film sector without independent support.[34]
 

14.3 Pact has also signed up to the collation for change’s freelance charter. The Coalition is committed to promoting equal opportunities for production operatives (Freelancers). This Charter is born out of the Coalition’s commitment to create a transparent way of engaging and working with freelancers with the intention of promoting a positive workplace culture in which everyone is treated fairly and with respect.
 

14.4 On sustainability many of our member’s TV and Film productions are part of the Albert Initiative and often need to comply with sustainability protocols as a part of delivering a finish programme to broadcasters. As part of this drive we have also set up a resource for Pact members to utilise providing practical, relevant insights and actions for companies wanting to benefit from the growing Sustainability market and become a positive force in the industry. A recent  Creative sustainability event hosted by our partner Futuretivity and Channel 4 noted that greater collaboration between broadcasters, production companies and brands would further accelerate sustainability within the sector.

18