Written evidence submitted by the Motion Picture Association

Submission to the House of Commons Culture, Media and Sport Committee inquiry: British Film and High-End Television

SUMMARY

The film and television sector in the UK has enjoyed record levels of investment. To help sustain this country’s position as a creative and economic powerhouse in audiovisual content, Government and industry must continue to work closely together, particularly in the following areas:

• Maintaining an internationally competitive regime of production incentives, particularly as the UK transitions to the new system of Expenditure Credits from January 2024
• Addressing the future skills needs for the film and high-end television (HETV) industries, particularly responding positively to the forthcoming report from the Screen Industries Skills Task Force, and the Migration Advisory Committee recommendations on the future of Creative Visas.
• Avoiding any weakening of the UK’s strong IP framework, which underpins its economic success, including in relation to bilateral trade deals.
• Improving the UK’s tools for tacking online piracy, including through the introduction of “Know Your Business Customer” (KYBC) obligations for internet intermediaries.
• Continuing to support the growth in UK studio capacity, including through the review of applicable business rates.

ABOUT THE MPA

The MPA is the international trade association for the major companies that invest-in, produce, distribute and market film and television content in the UK: Walt Disney Studios Motion Pictures, Netflix Studios, LLC, Paramount Pictures Corporation, Sony Pictures Entertainment Inc., Universal City Studios LLC, and Warner Bros. Discovery.

MPA’s member companies have long enjoyed a strong presence in British life, and today represent a key part of the UK film and television industry, both as significant inward investors and with a strong permanent presence in this country. Working with local producers, crew, talent and facilities, our members continue to help the UK make and export great stories, to be enjoyed by audiences in every corner of the world: from His Dark Materials to The Crown; Welcome to Wrexham to The Full Monty; Bridget Jones and Harry Potter.

We welcome this opportunity to respond to the House of Commons Culture, Media and Sport Committee inquiry into British Film and High-End Television and to share our views on current challenges faced by the sector and, in particular, how the UK’s status as a global destination for production can be maintained and enhanced.

INQUIRY QUESTIONS

We have confined our comments to those areas where MPA members have the most experience and knowledge to share.

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

The UK’s light-touch regulatory regime, strong IP protections, targeted system of film and HETV tax reliefs, diverse and vibrant production ecosystem and highly skilled and productive workforce, have made this country one of the most in-demand places in the world to create new screen content.

For the last full year (2022), data from the British Film Institute (BFI) shows that the combined total spend on film and high-end television (HETV) production in the UK was £6.27 billion from 415 productions. This is the highest combined film and HETV spend ever reported for a single calendar year.[1]

[2]

Inward investment accounted for 88% of the total spend (£1.74 billion) on feature films and 84% of the total HETV spend (£3.63 billion).

Together, the products and services of the film and television sector are important contributors to the success of the UK’s vibrant creative industries, which collectively added more than £108 billion to the UK economy in 2021 and supported more than 2.3 million jobs.[3]

1(a) What are the barriers to maintaining and increasing overseas investment in the sector?

The UK’s film and HETV industry is, today, a global powerhouse, the benefits of which are felt UK-wide, with production expanding in the UK regions, creating jobs, developing skills and providing opportunities for people of all backgrounds to join the industry. With the right nurturing, the industry will continue to grow and retain its significant economic impact and regional reach.

However, there is intense competition from countries across Europe and globally, eager to attract investment to their markets and challenge the UK’s comparative advantage.

It is important therefore that all participants in the UK sector, businesses and public institutions continue to work together to enable the UK to meet the challenge of this international competition.

Particular attention needs to be paid to the following current issues (each of which is dealt with in more detail below in response to questions posed by the inquiry):

• Studies have highlighted the existence of serious skills gaps within the UK production workforce. A Screen Industries Skills Task Force is currently developing a major strategic report on future skills and workforce needs, to which we hope policymakers will respond positively.
• The UK is changing its system of production incentives, replacing the existing tax reliefs with an audiovisual expenditure credit from January 2024. It is important as part of the UK’s attractiveness as an international production hub, that the new system maintains the effectiveness and accessibility of the highly successful existing regime.
• The UK’s IP framework is a gold standard internationally and underpins the commercial success of the AV sector. Government should avoid steps that might undermine IP protections in the UK including in response to the challenges posed by AI and in bilateral trade deals.
• Further measures to enable the sector to tackle online piracy, and protect its IP, should be taken, including the introduction of ‘Know Your Business Customer’ obligations for internet intermediaries.
• The UK’s studio capacity has been expanding significantly in recent years, and it is important this continues in response to strong demand from producers. The ongoing examination of applicable business rates will influence plans for new studio developments. A material increase in UK business rates for studio space risks increasing costs and discouraging planned investment, which would cut across the Government’s goal to support and grow the sector.

1(b) What are the benefits and challenges of overseas investment for the UK’s film-making capacity?

Inward investment comprises more than 80% of the total spend in the UK on feature films annually. As such it represents a firm foundation for employment in the industry. It also provides the long-term security of regular income for those involved in developing studio space in the UK.

Available studio space in the UK has grown rapidly in recent years. Reports suggest that since 2019, the square footage of soundstages increased by 34%.[4]

As well as making movies here, MPA member companies are significant investors in developing UK studio capacity, for example:

• Warner Bros. Discovery – has owned and developed Warner Bros. studios at Leavesden since 1994, now offering 19 stages ranging from 10,800 sq. ft to 48,400 sq. ft and one of the largest interior water tanks in Europe. Further expansion is planned to add significant new capacity and capabilities for the benefit of Warner Bros’ own productions and those made by multiple third parties.
• Netflix – has developed a dedicated production hub, featuring 14 sound stages, workshops and office space, at Shepperton Studios since 2019, and expanded the Longcross Studios complex.
• NBCUniversal in partnership with Sky opened Sky Studios Elstree offering 13 sound stages in a new state-of-the-art Film & TV Studio in 2022.
• Disney has a long-term lease with Pinewood studios including all its 23 stages at its Iver Heath Location, as well as offices and workshops.

In addition, long running relationships with MPA members’ content franchises – from Game of Thrones in Belfast to His Dark Materials in Cardiff; Star War and Marvel at Pinewood – provide UK studios with the security of regular income on which to plan their long-term investments.

The audio-visual sector in the UK benefits from a unique ecosystem, comprising inward investment, a strong domestic broadcasting/production environment, and major public interventions in the case of the BBC and Channel 4. The balance between these different elements has led to the UK having one of the most successful film and television industries in the world. Maintaining that balance and keeping the UK on the path to growth should, in our view, be the predominant focus for policymakers looking at this area.

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

As the representative body for independent producers in cinema and television, Pact has undertaken detailed research in this area. MPA members are aware of and support the targeted proposals being made by Pact to boost the development of lower-budget feature films in the UK.

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

Content that is culturally British remains among some of the most in-demand in the world.

From Rebecca to Johnny English; Dunkirk to Bohemian Rhapsody, Rocketman to Bridget Jones; The Full Monty and Harry Potter, MPA members have invested in British writing, directing and acting talent producing movies full of British character and bringing them to audiences of millions in the UK and around the world.

The UK continues to punch well above its weight in terms of the share of UK qualifying films in the global box office. Prior to the Covid pandemic, films produced in the UK were regularly earning a greater than 20% share of box office receipts worldwide.

Although that figure dropped significantly in 2020, it was back up to a 16% market share by 2022. As the BFI, as noted, “the annual worldwide market share for UK films is closely aligned with the success of inward investment titles made by the major Hollywood Studios in the UK.”[5]

Whether it’s new original content or adaptations of great British writers such as Jane Austin, Agatha Christie, AA Milne, Arthur Conan Doyle, EM Forster, Ian McEwan, Roald Dahl, Ian Fleming, Helen Fielding, David Nicholls, Nick Hornby, Sebastian Faulks – stories told by British writers – historical and contemporary -continue to captivate audiences around the world.

2(b) Are the nations and regions of the UK adequately represented and supported in the production of British films?

The benefits from the economic activity associated with film and television production are felt across the UK. As the sector has expanded, training and employment opportunities have flourished beyond the historic studio developments in London and the South-East.

That includes investment in production businesses – such as Sony Pictures Television’s investment in Bad Wolf productions in Wales, long running filming commitments – such as Warner Bros. Discovery’s production of the Game of Thrones franchise in Belfast as well as strong commissioning relationships such as Nat Geo’s longstanding relationship with local producers in Bristol, a Natural Sciences Production Centre of Excellence.

MPA members’ production activity with shows such as Sex Education have provided valuable training opportunities for the next generation of talent in South Wales. More than 60 trainees have had their start on the series. Companies such as Netflix are also partnering with the National Youth Theatre on a new programme, Ignite, spotlighting careers behind the scenes in film and TV and targeting young people in South Wales, West Yorkshire and the North East. Netflix also sponsors the Women in Film and TV Four Nations mentoring scheme.

Its many cities with different architectural styles and varying landscapes make the UK highly attractive for location filming with activity taking place across the nations and regions helping to ensure communities across the UK can enjoy the profile, job opportunities and economic benefits that the sector generates.

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

Copyright is the bedrock of the success of the UK’s creative industries. It allows creators of all forms of creative content, including audiovisual content, to generate revenues from that content, allowing a return on investment and subsequent investment in new content, creating jobs and stimulating economic growth.

Unfortunately, the global proliferation of illegal and infringing content online (digital piracy) has a significant negative impact on creative sector jobs, growth and consumers. Piracy threatens permanently to damage or displace existing and authorised distribution channels, which are unable to compete with infringing business models. The increasingly professionalised online piracy of TV, film and live sports content is a lucrative criminal activity that generates hundreds of millions of pounds every year for offenders.[6]

The MPA’s experience (and that of other rightholders) of dealing with online infringement in the UK has shown that the growing complexity of investigating and tracing sources of illegal and infringing activity online is making the enforcement of IP rights increasingly difficult.

While there are a range of industry and law enforcement-led initiatives to tackle digital piracy, one of the greatest challenges remains the absence of reliable information on those commercial-scale pirates who are freely using legitimate business infrastructures – such as online hosting, advertising, payment processing and e-commerce platforms – to deliver illegal film and TV services.

Despite extensive use of the tools already available in UK law to try to trace the operators of illegal services, experience shows these efforts are being thwarted by the ability of criminals to provide commercial services online under a cloak of anonymity, from anywhere in the world. Often online intermediaries (who provide the infrastructure that enables the illicit services) cannot supply any information that leads to the verification of the illegal service provider. That, or the information they can provide has clearly been stolen, falsified, is incomplete or otherwise misleading. The ease with which bad actors can remain anonymous in their business transactions facilitates digital piracy and potentially other crimes perpetrated online, including acts of digital fraud.

To help tackle this, MPA members welcomed the inclusion in the Creative Industries Sector Vision of a commitment from Ministers to “actively engage with the tech and creative sectors to explore potential Know Your Business Customer [KYBC] requirements.”[7]. Inspired by UK anti-money laundering regulations, a KYBC obligation would require commercial entities to establish the true identity of their business customers as a precondition for selling, and receiving payment for, digital services.

The Creative Industries Council framework provides an opportunity to develop and introduce KYBC for business infrastructure service providers requiring their commercial business customers to reveal their basic identity information – the kind of information that one would expect any legitimate business selling products or services on the high street to provide. Indeed, UK’s Electronic Commerce Regulations 2002 already require online businesses to provide such information, but amendment is required to stop illegal operators from simply choosing not to comply. We urge Government and Parliament to move forward rapidly with its adoption.

3(a) Are the current funding routes, tax credits and governance for the industry fit for purpose?

The UK operates in a highly competitive international environment for attracting film and television production. An independent report commissioned by HMRC in 2022 concluded that, “there is strong evidence that the tax reliefs across film, high-end TV, animation and children’s TV have made the UK a more attractive filming and production location and led to more productions taking place in the UK.”[8]

The tax relief arrangements in the UK have also shown themselves to be highly effective in generating value for the UK economy. According to the BFI’s analysis, every pound of film tax relief generates £8.30 additional GVA.[9]

In the budget statement 2023, the Chancellor of the Exchequer announced the replacement of the existing audio visual tax reliefs with a single refundable Audio Visual Expenditure Credit (AVEC).

The Government is proposing to make this change in order to ensure the UK regime works effectively within the new rules agreed under OECD Pillar 2 for minimum tax rates.

The Government has stated that its aim for the expenditure credit is to “increase investment in the audio visual sectors in the UK, and stimulate the production of culturally British content”. Ministers say that they “expect the rate for the expenditure credit to be in line with the generosity of the existing regime.”

Under draft legislation, now published, the headline rates for the new expenditure credit do seek to maintain the appeal of the current beliefs, and in the case of animated films and children’s TV offer, provide a material uplift on the existing 25% relief.

The sector has been broadly supportive and closely engaged in the development of the new expenditure credit. However, some concerns regarding the draft legislation have arisen. For example:

• The treatment of expenditure with connected companies, especially regarding the treatment of profits at those companies. This seems a new feature and one which will have a negative impact on the overall 'generosity' of the scheme. Something HMT had previously maintained ministers were keen to maintain.

• The treatment of film and HETV content where the distribution strategy changes during the course of production. What is proposed now seems to be a step back from the welcome changes the Government introduced to the UK tax relief in April 2022. We understand this to have been an oversight to be rectified in the final draft, which we look forward to seeing.

• The definition of a documentary. As expected, this is to be laid out in legislation for the first time, and it is important to ensure that the language is sufficiently flexible to continue to support the growth of popular factual programming.

The industry continues to engage closely with HM Treasury and HMRC to ensure that, when implemented, the legislation introducing the new expenditure credit retains (and indeed enhances) the UK’s competitive position in the global market to attract film and television production.

We also recommend that a further examination of the international competitiveness of the UK reliefs applying to VFX and post-production work be carried out alongside the AVEC consultation. We note the House of Lords Communications and Digital Committee remarked in its report on “Our Creative Future” on the need for the Government to benchmark such incentives "against international counterparts.”

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

There were 437 films released in the first half of 2023 in the UK and Republic of Ireland, the highest volume of film releases for an H1 period on record[10].

Prior to the pandemic, UK cinema admissions had grown strongly to reach 1970’s audience levels, thanks to what the UK Cinema Association describes as “record levels of investment in improving the theatrical experience.”[11] 

Since the depth of the pandemic, cinema audiences have risen strongly. Content invested and distributed by MPA member companies continues to play a vital role in that growth.

For example, the success of two films this summer – Barbie from Warner Bros. Discovery and Oppenheimer from NBCUniversal – helped towards a £160.7 million total box office for the UK and Ireland in July, a 27% uplift on the same month last year.[12]

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

(Please see responses elsewhere in this document particularly in relation to, skills and workforce development; IP protection and AI; and sustainability.)

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

Having witnessed extraordinary growth in recent years in investment in film and HETV production, analysis for the BFI estimates the level of investment could reach well over £7 billion by 2025[13]. This growth in investment will be accompanied by the need to grow the production workforce, with an estimated 15,000 to 20,000 more people needed in the sector by 2025.

This presents an amazing opportunity, but also a challenge which Government, industry and other partners must work together to respond to. Already, the UK film and TV sectors are experiencing

significant skills shortages in key roles[14], and the availability of skilled crew could become the biggest constraint on the industry’s ability to grow.

MPA members are funding and engaged in extensive partnerships supporting training and workforce development right across the film and TV sector. These include supporting national training initiatives led by ScreenSkills, the National Film and Television School and Bafta as well as partnerships with specific institutions such as RADA, the London Screen Academy (founded by, among others, the co-chairs of Working Title Films, a member of the NBCUniversal group), and the Production Guild of Great Britain. Between them, MPA member companies support training initiatives in all areas of the film and TV sector, from film accountancy and production management to cutting edge post-production and VFX.

MPA members also contribute voluntarily to Skills Funds administered by ScreenSkills. In 2022 contributions to the funds reached record levels, exceeding £12 million[15]. The funds are used to finance important training initiatives such as Trainee Finder, First Break and Make a Move.

Despite the wealth of initiatives underway, MPA members recognise that there is still much to be done. In an unprecedented move in January 2023, representatives from businesses and organisations across the UK audiovisual sector came together to form and jointly fund a Screen Industries Skills Taskforce. The Taskforce is committed to producing a comprehensive plan to address the skills shortages and related workforce challenges over the next five years. As part of this, the task force has undertaken a detailed assessment of current skills gaps and an understanding of future industry needs.

The work of the task force is ongoing and expected to produce a report and recommendations in November 2023. The work focuses in particular on three areas:

• Industry training and investment
• Improving access to the Apprenticeship Levy
• And pathways to industry from further and higher education

The creative sector in general has struggled to make best use of the national apprenticeship programme with suggestions that only a quarter of the £75m in levy payments raised per year from creative industries’ companies have been used to fund apprenticeships in the sector[16].

Steps are being taken to address this, particularly with the introduction of Flexi Job and Portable apprenticeships, but the process of change has been painfully slow. Pilot programmes, in which MPA members have been actively involved have shown, as ScreenSkills reported in May this year, “serious systemic issues that are preventing our sector from taking full advantage of the opportunity that earn-as-you-learn training presents.”[17]

If the apprenticeship route can be made to work more effectively for young people wanting to enter the screen sector – unlocking apprenticeship levy funds so that they can be put towards training costs – it will make a significant contribution to overall recruitment and to improving diversity and inclusion across the industry.

We expect the recommendations of the Taskforce to be available to the Committee during its inquiry.

The industry also needs to continue to access highly skilled international workers, including through the provision of streamlined routes for freelance practitioners, as highlighted by the Creative Industries Policy and Evidence Centre.[18]

The Migration Advisory Committee (MAC) has recently recommended that the rules for the Creative Worker visa route – used across the screen sector - be updated, to reflect changes being introduced to the Shortage Occupation List. The MAC warns that if its recommendations are not implemented, the “immigration arrangements for the Creative Worker visa would inadvertently be made more restrictive and costly.”[19] We encourage the UK Home Office to respond positively to these recommendations to mitigate this risk.

6(b). What are the risks and benefits of artificial intelligence to the sector?

MPA sees great promise in AI as a tool that can enhance the filmmaking process, the audience’s viewing experience, and fan engagement. We see it a tool that will enhance human creativity, not replace it, by freeing creators from some of the more mundane repetitive tasks they have had to do in the past and allowing them to focus on the more creative aspects of their work and realise their vision on the screen. As such, we believe that humans will continue to be at the heart of the creative process that results in a film or HETV series.

While we see great opportunity for the sector in the use of AI, recent proposals from the UK Government in the area of AI have caused significant concern over their potential impact on the UK’s copyright framework and the creative sector.

A strong copyright framework is a vital tool in combating digital piracy and sustaining investment in the creative industries. It must strike the right balance between the needs of those who invest in, produce and distribute creative content and those who consume it – be that for entertainment, for the purposes of research or education, or companies that seek to license it for commercial purposes.

The current UK regime setting out exceptions to copyright is well-regarded internationally for striking that delicate balance and has supported the economic growth of the UK’s world-leading creative industries through decades of technological change, while taking into account the interests of users.

The good reputation of the UK’s treatment of copyright exceptions was threatened in 2022, when the Government proposed, as part of its national AI strategy, to introduce the new exception to copyright to include the training of AI models for “any purpose”[20]. Companies and organisations, across the creative sector, joined by Parliamentarians, were united in their concerns about these proposals.

Thankfully, the Government listened, and decided in February 2023 not to “proceed with the original proposals.”[21] The Intellectual Property Office has subsequently initiated a process of dialogue between representatives of the creative industries and IP rightholders, and AI developers, aimed at producing “an agreement and guidance on copyright”.[22] This dialogue is ongoing.

6(c). What needs to change to ensure the industry is supporting inclusivity and sustainability?

Inclusivity

The Motion Picture Association is committed to great storytelling that reflects the viewpoints and experiences of all creators and audiences, which is why we are working hard alongside our member studios collectively to address diversity, gender parity, authentic cultural representation and pipeline recruitment opportunities from under-represented communities throughout our industry.

The MPA’s member companies recognise the importance of diversity and inclusion and strive to ensure film and television content is more representative of the country at large. We understand the need to work at all levels within our organisations.

The best films and television programmes are those that showcase the diversity of the wider world and challenge how we view society. What we see on our screens can help broaden our perspectives. Success for our industry means reflecting the diversity of the UK, not just on the big and small screen, but in the broad ecosystem of talent and creativity behind the content we celebrate.

Like many other industries in the UK, the screen sector is working to build a more diverse workforce. This is a challenge that requires the industry to look closely at every level of its operation and, crucially, to work towards building a strong, diverse, and inclusive talent pipeline.

For MPA members this has to be a global effort – but of course it must also be customised and honed for the UK for reasons of law, of culture and for straightforward business reasons. MPA members fully recognise that this is an economic as well as a social imperative for the sector.

There are many examples of MPA company initiatives and programmes that are in process to help drive inclusion and greater diversity across the industry. MPA members are, for instance, active partners to organisations such as the Mama Youth Project, Women in Film and TV, the Equal Access Network, the Disabled Artists Networking Community, Creative Access and the British Black List, and supporters of S.O.U.L. Fest, the UK’s leading Black film festival.

As mentioned in response of question 6(a) above, one of the aims on the Screen Industries Skills Task Force is to make recommendations that include measures to improve the inclusion of under-represented groups through the sector workforce. We look forward to sharing those recommendations with the Committee in due course.

Sustainability

Given the nature of our business, MPA and our member companies view sustainability from two perspectives: what are our members and the MPA doing to promote sustainable practices in their studios, in their offices, and in the communities where they shoot; and how can we, as an industry, promote sustainable behaviour through our storytelling and inspire behaviour change amongst our audiences.

More than a decade ago, the Sustainable Production Alliance (SPA) was formed as a partnership between Hollywood studios and other producers and creators in recognition of the need to address climate change.

The goal was to make deep and systematic changes to production practices and integrate sustainability into all aspects of the industry. The alliance has grown to include 13 major studios and streamers, resulting in important changes to the production process that focuses on waste reduction, material reuse, food donation, and educating the cast and crew on environmental best practices.

As well as our collective efforts, MPA member companies are utilising cutting edge technology and environmental best practice to reduce waste and energy use.

For example,

• NBCUniversal’s Sky recently introduced the world’s first carbon neutral TV: Sky Glass.

• Disney productions have reduced fuel use of emissions, eliminated, single use plastics in catering and introduced central waste management systems to divert materials away from landfills and incinerators.
• During the filming of Bridgerton season two in the UK, Netflix successfully piloted a green hydrogen power unit to power many of the production’s energy needs.
• Sony is making infrastructure more climate efficient with 99% clean electricity power to its UK facilities and studios, and working with a United Nations’ campaign to promote sustainable agri-food systems.
• At Warner Brothers Studios Leavesden, the carbon footprint is being reduced by installing electrical substations.
• Paramount’s UK broadcast network, Channel 5 shifted to a 100% renewable energy plan to reduce the UK location-based emissions by 83% in 2021.

These individual efforts amount to a significant collective commitment to sustainable practices in the UK and across the world. And through the power of our storytelling, MPA members’ film and television content can help influence attitudes and behaviour towards raising environmental consciousness. Documentaries, dramas and children’s content - from Our Planet II to Don’t Look Up to Octonauts – all help raise awareness of environmental issues among audiences of all ages.

For further information on this submission, please contact either Nigel Warner or Michael Wilen
 

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