Supporting the Creative Economy

Kerry McCarthy Excerpts

Thursday 13th February 2014 Westminster Hall

[Kerry McCarthy (Bristol East) (Lab)]

As ever, it is a pleasure to see you in the Chair, Mr Benton. I congratulate the Committee on its excellent and timely report. The Chair of the Committee has given a thorough account of the many issues covered in the report. I apologise in advance for focusing, perhaps in tedious detail, on one specific issue, but I think it is important to get my views on the record. The private copying exception, which the Government are due to introduce soon, has already been mentioned by a couple of speakers. The exception remains a considerable concern to musicians and other performers working in the creative industries, but it has not been much discussed in the Commons; it has been discussed more in the other place. As a result of the Committee’s findings, I hope that there might be a change from the draft version presented for technical review last year, as there will be no opportunity to improve the exception once it is introduced under the affirmative procedure.

The Committee adopts the Department’s definition of the creative industries:

“those industries which have their origin in individual creativity, skill and talent and which have a potential for wealth and job creation through the generation and exploitation of intellectual property”.

In some circles, “intellectual property” has almost become a dirty word. There are people who evangelise that content ought to be freely available to anyone who wants to listen to it. Why should true music lovers have to pay for music? That is fine for consumers, but it is not so good for people who have expended time, effort and money to produce that work. I have always been baffled that people do not equate someone’s labour and input into artistic work with labour, time and money spent on producing something more tangible and less easily shared. IP and copyright are important. They allow musicians and artists to derive an income from their creativity and provide the basis for investment in one of the fastest-growing sectors of the economy. The CBI forecasts that the industry will play an even bigger role in our economy in the coming years.

The current working environment in the entertainment industry is one of worsening levels of pay, or indeed no pay at all, for many actors, musicians and writers. Research by the Musicians Union demonstrates that more than half of professional musicians work for less than £20,000 a year and that 60% have worked for free over the past year. Equity’s most recent survey of members found that 9.6% earn nothing from their work in the industry and more than 69% earn either nothing or less than £10,000 a year.

The Performers Alliance all-party group published a report late last year, and I declare an interest as its chair. “Work Not Play” sets out much more extensively than I can today the current state of play and the appallingly low pay in the industry. It is vital for us to get a grip on the situation, so that work in the sector will not become the preserve of the amateur, or those who are independently funded or from privileged backgrounds. It is also vital to the future of new music and drama that artists should be able to survive financially, and build sustainable careers.

In the environment that I have described, the loss of income from the right to be compensated for the copying of one’s work is significant. Artists are increasingly dependent on micro-payments from collective licensing agreements, and that is likely to increase. A few hundred extra pounds generated under a fair compensation scheme for format shifting would be significant for an individual musician or performer. The Government will argue that account is already taken of that in the purchase price, but the Committee was not convinced that a facility for private copying was factored into the purchase price either of music or of devices to store, play or copy it.

The introduction of an exception without fair compensation would leave UK artists worse off than their counterparts in 25 other EU countries. All 25 EU countries that have introduced private copying exceptions have also included fair compensation to rights holders by way of a small levy on certain hardware products that allow copying. Those countries have introduced exceptions to copyright granted under the European copyright directive, because they have decided, in interpreting the directive, that copying would result in economic harm to creators; so why is the UK, which has by far the biggest music scene of all EU countries, taking a different view, as flagged up by my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly)? What discussions has the Minister had with his EU counterparts about how the UK proposals will fit into the framework being set by the other 25 countries?

A process of reform of the levy system across Europe, which compensates creators for private copying of their work, is currently under way, and I fear that the UK proposals have the potential to undermine that. I understand that a legal opinion on how the private copying compensation system works in EU member states is likely to be given days before the measure is expected to come into force in the UK, although the Government currently have no plans to delay implementation. Have the Government received representations from UK collecting societies such as PPL, for British musicians, and the British Equity Collecting Society, for actors, which collect revenues from private copying levies in other European countries that operate such systems? I am concerned that what is happening is likely to put the relationship under strain, especially at a time when other European countries are already questioning the lack of reciprocity with the UK on the collection of levy payments.

Creators feel strongly that they should benefit from income streams to which their work gives value, when so much of the income generated by MP3 players, cloud storage and so on is derived from the value that consumers see in the music and films they hold on them. Research by UK Music shows that consumers ascribe between 32% and 53% of the value of an MP3 player to its ability to copy music. There is a need for balance between protecting creators’ rights and not placing inhibitions on innovation or on companies and technologies. People who work in the industry think that the balance has gone too far towards the technology industries. In her evidence to the Committee, Alison Wenham, chief executive of the Association of Independent Music, said:

“This is an opportunity to license so that the value that is created between industries can be shared and there is a balance of interests. At the moment what we are seeing is a race to the technology industries taking the value from the content industries, which would be a disaster for this country’s creativity at its root.”

It would be good to hear from the Minister why the Government are not taking the opportunity to compensate. I know from previous answers to written and oral questions that the Government’s argument is that private copying is factored into the price charged at the point of sale, that the exception is narrowly defined, and that economic harm would be minimal. The Minister nods, so I expect that I shall hear that again today when he makes his response. In their response to the Committee inquiry, the Government said that the proposed private copying exception will be the narrowest in Europe, but they have not provided sufficient evidence to support that. I asked them in a written question last year to substantiate that claim, and the answer referred to an out-of-date report more than six years old, which suggested that only two countries have wider exceptions, while the scheme in other EU countries was similar to that proposed for the UK.

That was taken up in a debate in the other place in December. The Minister with responsibility for intellectual property, Viscount Younger of Leckie, wrote to participants in the debate following up on points that he did not have time to answer, and it seems from that letter that the Government intend to make the narrowest exception. However, the draft exception, which was open to technical review last summer, was as wide as most European exceptions. If the exception is not seen before it is laid before the House, there are concerns about whether the intention to have a narrow exception will actually match the wording of the legislation. Will the Minister commit to provide greater clarity to rights holders before legislation is published? That is particularly true of whether the exception will cover cloud services.

It was encouraging to read in the Government’s response to the Committee’s investigation that the private exception will not now cover cloud services. I presume that the Government were persuaded by the Committee’s findings and are keen to address the Committee’s serious concerns, including, for example, that if the exception includes cloud services, it could

“mutate into a new mechanism for illegal file-sharing, such as a cyber locker”

and could make it more difficult to take enforcement action against illegal downloading from the cloud. The Committee also concluded that a private copying exception could harm the development of legal, subscription-based cloud services, such as UltraViolet and iTunes, which are already emerging from business-to-business deals in which rights holders are properly rewarded.

As with iPods and other devices, musicians and rights holders in film and television feel that they should be able to gain some value from these income streams, because part of the service that they offer consumers, and the money that they generate, is around providing greater convenience when listening to music or playing films. Cloud services are likely to grow in use and are a potential replacement for current methods of storage and delivery. Andy Heath, chair of UK Music, expressed that in strong terms to the Committee when he said that

“Apple and Google are not creating Cloud storage lockers for fun. They are doing it for immense profit. It is another brick in their moneymaking machine, and it is completely immoral for the transfer of the value to occur without any level of compensation.”

In their response to the Committee, the Government said that cloud-based music services such as iTunes Match and Amazon Cloud Player are out of scope, which was much welcomed, but that cloud-based storage is within scope. I and others are not aware of any cloud-based storage facility, which include Dropbox and Google Docs, that does not allow an element of sharing. If it is to be the narrowest exception in Europe, it surely cannot include facilities such as those? If they are included, the concerns raised by the Committee still hold about how that could

“mutate into a new mechanism for illegal file-sharing, such as a cyber locker”

and could have a significant impact on the ability to license value-added services, such as the cloud. A music industry representative said to my office that

“the cloud is currently the biggest technological development happening at the moment…so for the Government to create uncertainty in this area at this point before that market is fully realised and understood is not helpful”.

I appreciate that my points have been rather technical and detailed, so I suspect that I know what the Minister’s response will be today, but I would be pleased if he wrote to me to address some of my concerns in more detail.

--- Later in debate ---

[Damian Collins]

I note the hon. Gentleman’s point, but that is why I said that it is important that computer science is given equal standing and equal weight, alongside other areas of the science curriculum, as part of the core science subjects that young people can study. However, we must also consider what people do a long time before they get to GCSE choices. That is why code clubs in primary schools are important.

I saw Google run one of its code club projects at the Folkestone primary academy school in my constituency, getting primary schoolchildren to learn basic programming techniques, which is something that those of us who are old enough to remember did on BBC Microcomputers and Spectrum computers back in the 1980s, although advances in software render that sort of programming redundant. Teaching coding is being brought back to young children of primary school age. Code clubs can be part of extra-curricular activities, as part of a longer school day, as well as being something that young people can do in evenings out of school.

[Sandra Osborne in the Chair]

In Hackney, with the support of Tech City and businesses in that area, a concerted effort is being made to take coding in particular into the schools that surround the Tech City area, so that young people do not grow up just seeing the new glass buildings and office blocks and understanding that people are working there but never acquiring the skills to take advantage of the jobs that are being created. It is very important that we focus on the educational element of developing talent to work not only on the artistic and creative side of the creative industries, but on the technical side, through coding and programme writing and making.

Another important development that the Government are supporting through the Department for Education is studio schools. In Folkestone, we are about to embark on a project to create a new studio school with a focus on the creative industries, where young people will not only learn subjects linked to the examinations that they will take and the qualifications that they will gain, but do so in conjunction with direct work experience as part of the ordinary school day. Studio schools linked to creative businesses in the towns and cities that they serve are an excellent way to provide that and are an important innovation, alongside having more of an emphasis on creativity and creative skills as part of the school curriculum.

The final point that I want to add to the debate about IP is this. I followed very closely the argument made by the hon. Member for Bristol East (Kerry McCarthy) in the speech before mine. With regard to private copying, we can look at Nick Hornby’s book “High Fidelity” and the film made of it. In some ways, that book and that film celebrate private copying. That is an important part of the story in the book. It is something that everyone has done or certainly people who grew up with records and cassettes have done. Probably everyone in this room has breached copyright law by copying a record on to a cassette or by loading a CD into a computer and copying the contents on to the hard drive. Each time, they are infringing copyright. Some people may consider that once they have purchased an item of music—once they have paid the fee for it—it is theirs to enjoy personally. A change in the law that reflects something that is already commonplace—that people already do—is not necessarily something that we should be frightened of.

I agree with the hon. Lady, though, that when we get to a position where people can share music, in particular, or film or another form of content through the cloud and potentially with a wider audience, they are getting into a remit where they are no longer privately copying but, either intentionally or unintentionally, distributing content. That is a very different matter and something that we must be very careful of. The hon. Lady is right to raise that important point.

[Kerry McCarthy]

May I make it clear that what I suggested would not prevent people from copying things? It would just give the musicians and other artists some compensation by putting an additional levy on the devices that people would use to do that. Twenty-five other EU countries have decided that that is the right way to go. I hope that the Minister will explain just why the UK deserves different treatment.

[Damian Collins]

I understand the hon. Lady’s point. Of course, France has done what she describes for some time. Personally, I think that it is a blunt tool and that the key is to ensure that we do not, particularly as technology develops, make it easier for more people to distribute things. We have talked about the role that search engines play in taking people to sites where they can easily download music for free, in breach of copyright rules. We should clamp down on that.

We have only to look at the predictive search result that comes up when someone types the letters MP into Google. I did that earlier in the debate and the result was for an MP3 converter site where people can download tracks from YouTube directly on to their MP3 player. It is therefore right that we look at the various tools that exist in the internet world and that make it easier for people to infringe copyright. I believe that that is where our energies should lie. We should be careful that a private copying exemption does not have the unintended consequence of allowing people to distribute music through cloud systems such as Dropbox, as the hon. Lady mentioned. We should look at that technical aspect very carefully.

The Select Committee is looking at the role of the BBC in its current inquiry. Technology is playing an important role in how we consume television in particular. The distinctions between television that may be viewed through a portable device, through a satellite or cable subscription or through what we used to call terrestrial television are going. We have a single creative stream, which is distributing through multiple devices. That throws up not only long-term challenges for the role that the BBC licence fee can play in the future, because it is no longer wedded to the purchase of a television set. It also throws up challenges about the way in which different television companies—different content creators—distribute their content and pay a fair licensing fee for the distribution of that content through the multiple channels through which it is being used.

There is a debate to be had between the cable and satellite broadcasters, such as Sky and Virgin, and the old terrestrial television channels, such as the BBC, Channel 4 and ITV, about how they agree on a fair price to pay for distributing someone else’s content through their channels. That is particularly necessary if distributing through avenues where advertising is excluded or can easily be excluded by the consumer. As people consume television in ways that are very different from those in the past, we will have to debate the future of television and how it is funded through different revenue streams, such as the licence fee, advertising or subscription. I do not intend to go into that issue at great length now, but it is one for the future.