Written evidence submitted by Warner Bros. Discovery

 

Warner Bros. Discovery response to CMS Committee inquiry into British film and high-end television 

 

Warner Bros. Discovery (“WBD”) welcomes the opportunity to respond to the CMS Committee inquiry into British film and high-end television.  

 

About WBD 

 

Warner Bros. Discovery was created last year through the merger of Discovery and WarnerMedia. The completion of this deal brought together a family of iconic brands, including Warner Bros., HBO, DC, CNN, Cartoon Network and Discovery Channel, and we are proud to create and distribute high-quality entertainment, news and sports globally across television, film, streaming, games and consumer products.   

 

Warner Bros., which celebrates its 100th anniversary this year, has been present in the UK for more than 90 years. HBO, which just celebrated 50 years of setting the standard for ground-breaking television, regularly partners and collaborates with homegrown organisations on distribution and production.

 

Outside of the US, the UK is our largest territory, both in terms of scale and employee numbers with over 4,000 permanent staff a number that more than doubles as people join us to work on local film and television productions. Over the last five years, we have produced 26 feature films, 300 television series and 23 video games. A great many of these, including the Fantastic Beasts films, The Batman, Aquaman, House of the Dragon, Barbie and the soon to be released Wonka have been filmed at Warner Bros. Studios Leavesden (“WBSL”), our world-class production facilities just north of London. Barbie is now our most successful theatrical release of all time.

 

We also recently announced plans to expand WBSL with 11 new sounds stages, increasing capacity by 50% and for it to become the hub for future DC studios projects. It is anticipated that the expansion will drive the creation of 4,000 new jobs across the UK and contribute more than £200m to the UK economy.

 

Our Leavesden site also houses the Warner Bros. Studio Tour London – The Making of Harry Potter, while London is home to the iconic Hanna-Barbera Studios Europe, CNN’s largest broadcast and production studio outside of the United States and Warner Bros. De Lane Lea (“DLL”), our state of the art sound and picture post-production facility located in Soho.  

 

Beyond London, in addition to filming on location across the UK (including His Dark Materials and House of the Dragon in Wales) we have a strong presence across the country with production companies in Bristol, Brighton and Glasgow producing content including for the PSBs such as the BBC and Channel 4 and others as well as licensing a studio tour in Northern Ireland, which showcases the filming of Game of Thrones.  

 

We believe we offer the British public one of the most differentiated and comprehensive portfolios of content. We are the fifth-biggest commercial broadcaster in the country, with 22 linear channels and a newly-created joint venture with BT Group named TNT Sports – which, combined with our Eurosport portfolio, provides one of the most extensive line-ups of live sports coverage for fans in the United Kingdom alongside our broad entertainment offering. 

 

We are the home of the Olympic Games in Europe for Paris 2024, giving fans in the UK access to every moment through Eurosport and discovery+, whilst also working in partnership with the BBC as a free-to-air sublicence partner. Our coverage will continue across Europe under a new deal for the subsequent four Olympic Games until 2032, whilst our European Broadcast Union (EBU) partner will provide the BBC with continued free-to-air rights. 

 

We are committed to ensuring that the vibrant creative economy in the UK both succeeds and grows. As such, we run a wide variety of skills initiatives to offer opportunities to aspiring professionals, support their progression within the industry and grow the pool of highly-skilled talent for future generations. We have recently launched ‘CrewHQ’, an on-site training facility at Leavesden Studios, that will support existing crew and help create career pathways for people of all backgrounds.  Critically training will be delivered by filmmakers directly and then talent will be placed directly on productions. This gives a full pathway of training and ongoing upskilling.

 

The Warner Bros. Discovery Access programme which we are expanding, as well as partnership schemes with organisations like NFTS, BAFTA and the BFI, have and will continue to provide training, mentoring, placements and industry exposure to hundreds of people in areas where there is a need for skilled professionals and where barriers to entry have traditionally been high.    

 

The UK continues to be a vital place of business for Warner Bros. Discovery and we are keen to assist with ensuring it creates the very best environment to allow the audiovisual sector to thrive. 

 

While we will feed into various industry association responses to the consultation, we set out below our own observations on the issues raised by the Terms of Reference[1] and have focussed on highlighting some key measures that could assist in helping the UK remain a world-class production hub. 

 

Response to the Terms of Reference

 

  1.    The UK as a global destination for the production of film and high-end television 

Terms of reference questions: 

 

Overview

 

As a company that produces a wide range of global and local content, including film and high-end TV and which owns and operates WBSL and DLL as well as local production companies across the nations and regions (more details of which are provided at the end of the response to this question) WBD is well-placed to comment on the measures that are likely to continue to keep the UK as a compelling global destination for the production of content.

 

First, and foremost, it is vital to understand that the creative sector is fragile, even more so in the current economic environment. While the UK has a strong track record in attracting productions, this cannot be taken for granted - especially with more and more countries competing to attract inward investment. As such, it is important the UK continues to keep its regime under review to make sure it is fit for purpose. 

 

Fundamentally, productions are risky, often requiring significant upfront sunk investment, and so if a country provides a regulatory environment that offers ease of doing business, including movement of cast and crew, contractual freedom, a robust intellectual property regime, certainty and predictability, as well as first-class infrastructure and skilled talent pool, this will increase its chances of not only attracting productions but doing so on a sustainable basis. This can bring wider benefits including inward investment, jobs, tourism, and in the longer-term help build out the capability of a country to support more and more productions (indeed these benefits are amplified where content such as film franchises or long-running TV series (such as, for example, House of the Dragon) repeatedly return to the UK). Moreover, this has a knock-on impact in supporting the establishment and growth of SMEs and local businesses that are active in the film industry. By way of illustration, Barbie is now our most successful theatrical release of all time. During its production in the UK, it contributed over £80m in direct spend to the local economy, created 685 jobs, involved over 6,000 extras, supported 754 local businesses, paid over £40m in local wages. It has also generated over £95m in box office revenues in the UK alone. As such the benefit of attracting such productions are that they are net positive for the UK. 

 

While Barbie has proved tremendously successful, this is not the case for all films. As such productions look for locations that make producing content certain and predicable, including as to the budget given a film requires significant upfront investments not just in production but also then in distribution and marketing. This planning certainty can be delivered through a range of means; looking beyond infrastructure and skills, this can extend to an attractive tax incentive that is clear and dependable, government support (for example, the Creative Sector Vision plan) and ensuring that any regulatory changes are designed to support the sector, rather than raising costs or introducing regulatory complexity. 

 

Current Issues

 

If a regime creates any material financial uncertainty or leads to disadvantageous terms or factors compared with other jurisdictions this will have significant impacts on production-location decision-making and the UK’s competitiveness. Below are some key areas in which the UK’s choices will impact its competitiveness: 

 

Business Rates 

 

A current key issue impacting the UK’s competitiveness relates to the significant increases to the business rates payable by production studios in the UK. In the case of WBSL, liability for business rates have increased five-fold since the April 2023 revaluation. This is an ongoing matter under review by the Valuation Agency Office. 

  

Audiovisual Expenditure Credits 

 

Early this year the Government announced reforms to the creative sector production incentives, which we broadly welcomed, including moving to expenditure credits, maintaining the ability to switch between film and high-end TV, increasing the rates of relief for animation and children’s programming.  

 

However, we, and the wider industry, are concerned that important aspects of the recently published detailed legislation aimed at implementing these reforms will lead to unintended negative impacts and harm the UK’s overall competitiveness. 

 

In particular, while we understand some of the changes are intended to guard against any risk of abusive practices, the definition of connected party profits as currently drafted risks unintended consequences leading to market distortion, unequal treatment between vertically integrated and third-party companies as well as disincentivising productions from choosing the UK and harming the significant investments in the provision of production infrastructure and services by companies such as ours. 

 

We are in dialogue with HMRC regarding our concerns and we are hopeful that the final draft legislation will fully deliver on the overall objectives of the tax relief reforms. 

 

It is critical to the UK’s competitiveness that both the individual and cumulative impact of any changes to business rates or the audiovisual expenditure credits is considered given the Government’s overall objective of growing the creative sector - and fundamentally to remain competitive globally. 

 

Skills  

 

We recognise that there is a skills labour shortage in the UK’s production screen sectors which needs to be addressed.  

 

We already invest a significant amount into training and upskilling across our businesses and have increased our investment in, and our focus on, below the line crew and entry into the industry with our recently announced CrewHQ programme, mentioned above.  As part of this programme, we recently hosted a Careers Day involving 150 students from all backgrounds from four partner organisations; London Screen Academy, BAFTA, The British Film Institute’s Film Academy and Into Film, focused on supporting and retaining careers in the film and industry. The event gave students the opportunity to take part in talks, workshops and sessions covering a broad range of roles and departments in production. They had the unique opportunity to hear from industry experts and leading creatives, offering valuable insights into their craft as well as practical advice for starting a career in the industry.  

 

We are also a key participant in the industry-led Skills Task Force, originally convened by the BFI in response to the BFI Skills Review commissioned by the DCMS. The Task Force is committed to working together to design a comprehensive and clear industry response to this review, in order to address the skills shortages, gaps and related challenges over the next five years including potential suggestions on how to strengthen use of the Apprenticeship Levy. We are hugely supportive of this initiative and look forward to working with government on this once the Task Force reports back with a plan of action.    

 

Export of Films and High-End TV  

 

Currently, UK films and high-end TV qualify as European Works under the European Audiovisual Media Services Directive (AVMSD). The AVMSD provides for European content quotas for both linear and VOD services of 50%+ and 30% respectively. As such qualifying UK Works have added value as they can help broadcasters and streamers meet those quotas. It is important that the definition of European Works continues to include UK Works. 

 

More generally, as the UK continues to negotiate trade deals, it is important that such trade deals place great importance on robust intellectual property frameworks and effective enforcement tools, as well as wider support (such as movement of cast and crew). For example, strong protections for intellectual property in the context of AI, requiring no-fault blocking tools and Know Your Business Customer obligations (as per the Creative Industries Sector Vision) are vital. 

 

Global Film and High-End TV at Warner Bros. Studios Leavesden and De Lane Lea  

 

The appeal of the UK has underpinned our significant investment in production facilities and services in relation to WBSL and DLL .

 

WBSL is a purpose built, state-of-the-art film and TV production facility in Hertfordshire, which is used both by WBD and by third parties for all kinds of production work. Since its opening in 2012 and given its scale[2], it has helped stimulate the UK’s appeal as a place to produce audio-visual content. We also own-and operate DLL, one of the UK’s leading post-production facilities located in Greek Street, Soho[3]. 

 

It is vital to understand that WBD has, year-on-year, invested significant capital infrastructure in the UK – not just its first-class production facilities at WBSL and its post-production facilities at DLL in Soho but also in the build out and provision of a wide range of production support services. By way of illustration: 

 

 

 

 

All of these facilities are used both by WBD and third parties. 

 

WBD’s investments have been with the long-term goal of providing comprehensive production infrastructure, not just physical production space, to support both WBD and third-party productions. WBSL has become the first choice for filmmakers and the production home for some of the world’s most famous franchises, including WBD’s Wizarding World, DC Comics, House of the Dragon, third-party franchises such as Spider-Man, Mission Impossible and Fast and Furious as well as British films such as The Kingsman franchise, The Kid That Would be King and Last Night in Soho. 

 

Local Productions Across the Nations and Regions 

 

In addition to WBSL, we also produce a wide range of local television content across the nations and regions through Warner Bros. International Television Production and its companies such as Ricochet, Wall to Wall and Twenty Twenty. With production bases across the UK including Brighton, Bristol, Glasgow and Manchester, we have been able to play an important role in developing the growth of regional production clusters. For example, these companies have an estimated aggregate investment (in terms of costs incurred in the nations and regions) in the region of £30-40m, with approximately 2,500 employed during 2022 alone. Notable content produced includes Waterloo Road, The Repair Shop, First Dates and Food Unwrapped.

 

 

  1.    The UK’s independent film production sector 

Terms of reference questions: 

 

All films wishing to benefit from the UK’s film production incentive will need to either qualify as a co-production or meet the cultural test[4] which is a points-based system. As such, all qualifying films will have a British identity of some kind. However, we understand the question focus is British films made by independent producers. 

 

WBD has a long history of supporting and investing in British independent film. Since 2006, we have distributed 65 local productions and acquisitions in the UK and Ireland. Typically, we invest in local productions by partnering in development and finance and in acquisitions by purchasing rights in return for a financial commitment.   

 

WBD actively supports independent British film by acquiring theatrical distribution rights, and potentially other rights. Often we pay an upfront minimum guarantee in return which helps the production meet its overall budget and ensure the film gets made. Examples of this include (1) “One Life”  due to be released early in 2024 and (2) “Operation Mincemeat”. Other examples include  Boxing Day” where we acquired UK theatrical distribution rights and “Blinded by the Light” where we acquired US theatrical distribution rights, supporting the film’s distribution outside the UK.  

 

British independent producers will be better placed to speak to the challenges they face but as a general proposition the production business has become even more challenging, with rising costs and challenges to raising finance. This has been particularly acute for smaller independent films.   

 

Support to ensure these films have a theatrical distribution channel is also vital. Distributors typically incur significant upfront publicity and advertising costs to market a film and raise consumer awareness. They take the risk based on performance predictions and need to be confident that there will be a sufficient level of appeal for consumers otherwise there is a high risk that exhibitors may choose not to show the film or give it only a limited run. Consideration needs to be given to the important role theatrical distribution plays in helping such films reach exhibitors and consumers. Even then a wide range of factors can impact the individual performance of a film.  

 

If the UK concludes that as a policy objective additional support is required to help fund independent British films (not only because they will represent British stories and experiences but also because they will help develop the next generation of British talent), WBD would suggest that a form of targeted production tax relief aimed at small- to medium-sized films (over and above the new expenditure credit regime) would merit further consideration to help such productions get made. However, WBD would also stress that consideration should be given to a holistic set of measures to help such productions. This would extend beyond enhanced production tax reliefs, to also encompass, for example, skills training and development as well as ensuring projects are able to be supported through distribution.  

 

  1.    How to incentivise film and high-end television production in the UK 

 

Terms of reference questions: 

 

See response to question 1.  

 

 

 

 

 

 

  1.    The UK’s film exhibition sector 

 

Terms of reference questions 

 

Through a joint venture, WBD formerly owned Warner Village Cinemas (since sold to Vue) to help ensure the exhibition sector remained competitive with attractive venues for consumers to view newly- released theatrical films.  

 

While no longer a cinema operator, WBD is a long-standing UK theatrical distributor and remains a strong supporter of the exhibition sector. During the COVID-19 pandemic, where government or local restrictions permitted, WBD was one of the few distributors to continue to release films, such as TENET, as a way to support the exhibition sector. Most recently, WBD has restated its commitment to theatrical distribution:  

https://variety.com/2023/film/news/david-zaslav-theatrical-movies-cinemacon-windows-1235594027/ 

 

Exhibition continues to be an exciting way for consumers to see films but there is no doubt with the impact of the pandemic, rising inflation and living costs, as well as ever-increasing choice as to how consumer spend their free time, that the exhibition sector has been significantly impacted by these recent challenges. 

 

It is important to note, however, that exhibition is not alone in facing such challenges. Film production continues to remain a risky business with increasing cost pressures and rising production costs. Distribution also faces pressures, including greater competition for consumer attention, which means film publicity and advertising campaigns having to either increase budgets or restructure the business in a bid for viewers in the information-rich world.

 

As a general proposition, any improvement to the economy, including reducing inflation and energy costs, will help exhibitors manage costs and give consumers potentially more disposable income to choose going to the cinema.  

 

In our view, the most effective support that can be provided by the industry to exhibition is a continued supply of a variety of films that will appeal to consumers. Exhibitors are always free to choose which films they wish to exhibit and for how long, but a steady supply of content is fundamental to ensuring consumer choice and competition. 

 

While we understand the inquiry is looking specifically at exhibition, any such analysis should sit within an overview of the wider creative sector as a whole. For example, while the inquiry may consider what additional levers can be deployed to help film production, it is important that once films are made, exhibition is considered as a viable route to consumers. As we mentioned, for films that are being released theatrically there is a need for an appropriately tailored marketing campaign to help raise consumer awareness. That can be costly and is a risk that sits with a distributor (given that if a film does not appeal, then exhibitors may choose not to show it at all, or give it a limited run, or quickly remove it for another film). The long-standing Film (Exhibition Periods) Order 1996[5] limits the period a distributor may require an exhibitor to show a film for in the first six weeks of theatrical release to a maximum of two weeks. A potential option to consider is whether, given the move to digital exhibition and additional flexibility exhibitors have to show screenings, this order is now outdated and should be repealed. By removing such a restriction, this may give theatrical distributors, including for independent British films, more confidence and incentive to release films theatrically because they may be able to negotiate a longer exhibition run with individual exhibitors. For example, generally speaking most films generate the majority of their box office admissions in the first four weeks of release and so the opportunity to secure an extra two weeks of exhibition may make a material difference as to whether some films are released theatrically and/or are able to justify an increased publicity and advertising campaign.

 

To the extent the inquiry considers to what extent additional support may be offered for local film production, such as targeted tax incentives for films within a certain budget range, it may also be appropriate to consider targeted tax incentives for theatrical distributors for such films to assist with publicity, marketing and advertising. It then follows, that exhibitors are encouraged to show such films. While we do not believe a content quota would be an effective measure as it would potentially limit exhibitors from choosing the films they consider will have the most consumer demand, there may be other schemes that could be considered, such as financial incentives for exhibitors for supporting a variety of such films. 

 

It is also important not to ignore that piracy continues to be a threat for the UK exhibition sector (and also for the broader AV sector). Films continue to be recorded in cinemas, both in the UK and other territories, and those illegal copies are distributed online for free via pirate sites and services during the films’ theatrical window. This illegal competition harms the ability of exhibitors to generate revenues, as well as harming the distributors and producers of those films. It is important that this threat is addressed via robust and effective enforcement actions. 

 

Whilst the AV sector continues to take action to address this threat, including via trade associations such as the global Alliance for Creativity and Entertainment[6] and the Film Content Protection Agency[7] in the UK, continued support from the UK law enforcement bodies is essential, for example the work undertaken by the Police Intellectual Property Unit (PIPCU). We would also call for the introduction of a Know Your Business Customer requirement, as referenced in the Creative Industries Sector Vision.  

 

  1.    Protecting and promoting the UK’s screen heritage 

 

Terms of reference questions 

 

While we anticipate that other parties are more likely best placed to comment on what can be done to protect and promote the UK’s screen heritage, we would highlight our contribution to the UK’s screen heritage through the Warner Bros. Studio Tour – London – the Making of Harry Potter, which is a walk-through tour showcasing sets, props, costumers and a behind-the-scenes look at one of the biggest film franchises in the world. The tour provides a first-hand opportunity for consumers to better understand the film-making process as well as providing educational classes for students and is one of the most popular attractions in the UK.  

 

  1.    What can be done to ensure British film and high-end television can adapt for the future? 

 

Terms of reference questions 

 

The film and high-end television industry is at a delicate point, not just with evolving consumer demand and challenging economic headwinds but also with technological changes. As such, industry and Government will need to remain flexible and agile to adapt to fast-evolving environments. With that context: 

 

Skills

 

Please see our response to questions 1 and 2.  

 

 

AI 

 

As both an AI user and (potentially) provider of copyright protected content for training/input data, we have a balanced perspective on this issue. We think AI offers exciting possibilities for the creative sector but it is imperative that IP rights including copyright are respected. 

 

The technologies and how they are used are evolving rapidly, and we think the current IP framework is broadly fit for purpose, so legislation/regulation at this point around the AI/IP interface would be premature. 

 

Specifically on the Text & Data Mining exception, we were pleased the previous proposal was withdrawn by the Government, and are willing to engage with the Government and Intellectual Property Office to review how licensing mechanisms for using IP-protected works as training inputs might operate, but we do not think the existing exception needs amending and we are not aware of any problems with licensing of copyright content which an expanded TDM exception needs to fix. 

 

 

Inclusivity and Sustainability 

 

At WBD, we strive to be the global leader in media and entertainment, serving audiences and consumers around the world with content that informs, entertains, and, when we are at our best, inspires. 

 

We have a rich history of achieving positive, lasting impact through both our on-screen content and off-screen activities. As a relatively newly formed entity, WBD intends to build upon our previous commitments and legacy programs as a champion for the diverse voices, perspectives and experiences in our workforce and our world.

 

Inclusivity 

 

WBD seeks to amplify the voices of global storytellers to reflect audiences around the world. Creating a culture of equity, inclusion, and belonging is imperative to our company’s success; through embracing and empowering our talented, diverse workforce and creative teams, we remove barriers to opportunity, open access to our industry at all levels, and help shape the most inclusive and equitable world for all. 

  

WBD’s commitment to inclusivity[8] is reflected in the way we equip our productions to promote access, equity, and safety for our employees, staff and on-and off-camera talent. Black Britain Unspoken (BBU), launched in 2022, set out to give access and voice to Black British creatives as the industry continues to address the critical under-representation of Black talent in the screen industries. We are proud of what BBU stands for and seeks to achieve, and of the success it has already demonstrated in identifying three incredibly talented filmmakers, launching for a second series with even broader support offer in partnership with Media Trust and Bounce Cinema.  

 
WBD has a strong commitment to inclusivity with a variety of internal and external initiatives, including inclusive story telling guidelines, business resources, data gathering, learning, pipeline programmes and business councils.

 

At WBD, we recognise that there is always more to be done. In addition to our own internal initiatives, we strongly support industry-wide efforts such as the TV Access Project which is aiming to galvanise broadcasters, production studios and production facilities to develop a ‘roadmap to full inclusion by 2030’ including short- and long-term changes, seek regular feedback from deaf, disabled and neurodivergent people, and participate in industry drives with ringfenced places for disabled talent are pertinent to achieving industry-wide change from compliance to full inclusion.  

 

The TV Access Project’s pilot to fast-track the government’s ‘Access to Work’ grants, which offer funding for UK disabled workers who need equipment or extra support to be able to do their jobs, is a great example of how to bring change to ensure the industry is supporting inclusivity and accessibility and removing barriers to access these important schemes. 

 

In the UK, we are a member of the Skills Task Force, as mentioned in response to question 1, one of whose aims is to make recommendations to improve the inclusion of under-represented groups.

 

As such, these pilot projects and recommendations should be closely followed to determine whether the UK can introduce additional support and programmes to support inclusivity in collaboration with the industry. 

 

Sustainability 

 

WBD is also firmly committed to sustainable behaviour and has for many years been a member of the Sustainable Production Alliance aimed at addressing climate change, including being a key player in developing the Green Production Guide to implement sustainable plans for production and reduce the industry’s overall environmental impact. 

 

All our films in production at WBSL follow the Green Production Guide and for over a decade we have hired dedicated sustainability staff on all our UK film productions.  

 

Warner Bros. International Television Production (WBITVP) companies are committed to sustainable production practices. They use a carbon calculator on their productions as required by most UK broadcasters’ and complete a carbon action plan on a large and increasing number of their productions.  

 

At WBSL we have a whole range of measures to reduce our environmental impact through effective waste management and recycling schemes. 100% of electricity used on site is sourced from a renewable supplier, our Leavesden buildings are certified as good or very good by BREEAM (the sustainability assessment method) and we design all new buildings for maximum efficiency. The new studio facilities planned for WBSL will target Excellent certification and will include one of the largest arrays of pv solar panels in the Greater London area. 

 

We are also a proud participant in the BAFTA albert Studio Sustainability Standard which helps studios measure and reduce the environmental impact of their facilities and allow for targeted business decisions to help protect the environment.  

 

There are always more opportunities to support decarbonisation and greater environmental efficiency in production but some examples of initiatives that UK Government could consider exploring further: 

 

 

10

 


[1] https://committees.parliament.uk/committee/378/culture-media-and-sport-committee/news/196602/new-inquiry-cms-committee-to-examine-british-film-and-highend-tv/

[2] https://www.wbsl.com/

[3] https://www.wbsl.com/de-lane-lea/

[4] https://www.bfi.org.uk/apply-british-certification-tax-relief/cultural-test-film

[5] https://www.legislation.gov.uk/uksi/1996/3140/made

[6] https://www.alliance4creativity.com/

[7] https://filmdistributorsassociation.com/safeguarding-copyright/fda-strategy/

[8] https://wbd.com/dei/