Supplementary written evidence submitted by Pact

Overview.

In our previous response to the Committee’s call for evidence, we outlined our concerns around the British independent film sector and urged the Government to increase the rate of the Audiovisual Expenditure Credit for films with a budget between £1m - £15m to 40%. We’re pleased that the Committee were supportive of our proposal, and the previous Government introduced the Enhanced Audiovisual Expenditure Credit for films with a budget under £15m at the Spring Budget. This has also now been formally implemented by the current Government and will play a vital role in stimulating investment into the British indie film sector.

In 2023, production sector revenues fell by £392 million to £3.61 billion.[1] International TV revenues also fell decreasing by £209 million, driven by a fall in linear international commissions.[2] There have been some signs of improvement in terms of commissioning from the UK Public Service Broadcasters however, there is now a renewed focus on high impact, high value commissions in a bid to drive streaming and digital advertising revenue. Pact is concerned that the shift in commissioning strategy, along with wider economic pressures, will impact on the diversity of supply of indies, particularly hitting those in the nations and regions and diverse-led indies.

Pact welcomes the opportunities that AI brings to the sector. Film and TV production has long embraced AI over the past three decades. 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. Generative AI presents the possibilities to create efficiencies and enhance the creative process. However, Pact also acknowledges that this technology comes with risks that need to be mitigated. We have concerns around the use of producers’ IP and copyrighted works being used to train AI algorithms.

AI.

The previous Government did not achieve clarity over the relationship between intellectual property rights and generative AI. This was referenced in Sir Patrick Vallance’s report ‘Pro-innovation Regulation of Technologies Review’. The review recommended that ‘Government should announce a clear policy position on the relationship between intellectual property law and generative AI to provide confidence to innovators and investors.’

The IPO had initially led a working group of AI developers and rightsholders to agree a code of practice on generative AI and copyright as a way to respond to this recommendation. However, after many discussions between the two sides an agreement was not reached, although elements of agreement were reached on transparency.

It’s clear that the new Government will want to rectify this situation but given the speed at which the technology is operating Pact is concerned that legislation may be rushed, and policies that allow a broad text data mining (TDM) exception would make rightsholders’ positions more precarious than they already are. Any broad TDM exception for commercial and research purposes should not be allowed and the current UK copyright regime should remain intact. Instead, policy levers to encourage licensing solutions to be sought by AI developers should be incentivised.

Diversity of Supply.

The UK production sector is one of the most successful, innovative, and creative in the world, with sector revenues reaching £3.61 billion in 2023.[3] The UK’s existing legislative and regulatory interventions have played a vital role in the success of the sector, with the audiovisual tax reliefs now being a vital component of production finance models and play a key role in attracting inward investment into the UK audiovisual economy. British crew and talent are also consistently cited as one of the key strengths and capabilities within the UK production sector.

There was a boom in production post-COVID, with sector revenues reaching their highest ever level at £3.9 billion in 2022.[4] However, the advertising recession in 2023 had a substantial impact on the commercial broadcasters’ advertising revenue, ultimately leading to a reduction in content budgets and fewer commissions for independent production companies. This, along with the wider economic pressures and increased cost of production, is having a sustained impact on the indie sector. Many companies have been forced to close due to the difficult economic climate, with at least six production companies having closed this year or are in the process of closing down.[5] Other production companies are merging with other labels and others are looking at how they can monetise their back catalogue of IP in order to stay afloat.

With the ongoing changes in the sector and economic pressures, many broadcasters have been reducing their budgets and rethinking commissioning strategies to focus on high value, high impact productions. This has made the outlook for the sector difficult, and we’re concerned that the cultural diversity of the sector may be permanently damaged, ultimately leading to a less diverse production sector.

Employment Rights Bill.

Careful consideration must be given to the impact of the upcoming Employment Rights Bill and the Government’s ‘make work pay’ agenda. Ministers and Officials must understand that there will be a trade-off between better work practices and revenue/profitability. For example, shorter hours or implementation of day one rights could make filming more expensive. Given the commissioning downturn and a move to fewer, bigger commissions it could mean less work for freelancers in the end. This could in turn damage the diversity of producers that we currently see in the sector as it becomes more untenable to maintain a business.