175-185 Grays Inn Road London WC1X 8 UE Department for Culture, Media and Sport 2-4 Cockspur Street

London SW1Y 5DH 30th June 2011 Dear Sirs, Response to the open letter - A Communications Review for the Digital Age The D-Media Network is a global network of digital media professionals who are serious about business growth and who value collaboration. Members of our network are largely content creators and solution providers. Having the right regulatory framework is fundamental to the success of small and medium sized content creators, but it is a challenge for those developing legislation or government policy to make sure that the needs and views of small and medium sized enterprises are made known and are taken into account and so are the focus of this response. D-Media wants to ensure that small and medium sized content creators are sufficiently engaged in the process of considering the regulatory regime so as to allow them to make a meaningful contribution to that process, and for this response has consulted within the membership and beyond. Within this context, D-Media welcomes the opportunity to respond to the open letter - A Communications Review for the Digital Age and to contribute further in order to support the interests of small and medium sized content creators in the UK. Our relatively brief response is focused on those questions in the open letter that are of most relevance to our members. Q10. Are there disproportionate regulatory barriers to investment in content? If so, what are they and how can increased investment in UK content production be encouraged? D-Media believes that the following issues need to be addressed in order to encourage a thriving content production sector in the UK: • Data: an ongoing relationship with the audience is crucial for games or apps
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175-185 Grays Inn Road London WC1X 8 UE developers. Anything that stands in the way of this relationship affects detrimentally the creation of further innovative content. At the moment broadcasters and publishers collect data about the use of the content but are unwilling to share that data with content creators. Therefore, measures should be introduced which encourage the sharing of data with content creators. • Price capping: companies such as Apple and Facebook regularly look to take as much as 30% of revenues. A cap of 10% would help to encourage investment in content creation companies and further stimulate growth. Intellectual Property: D-Media supports the creation of the Digital Copyright Exchange proposed in the Hargreaves Report, but the effectiveness of that Exchange, will be very much dependent on this initiative being extend to other European Countries and beyond. Therefore, it is imperative that the UK Government promotes the establishment of the Digital Copyright Exchange as quickly as possible and advocates its adoption on an international basis. Moreover, D-Media supports the recommendations of the Hargreaves Report in the area of orphan works and believes that the UK should advocate their adoption on an international basis. However, an innovative content industry will only be stimulated in the UK if the intellectual property rights are retained by the content creators and can be further exploited by them. If the person commissioning the content owns the intellectual property rights, pays the content creator only for providing a service, and is not interested in exploiting the IP rights or allowing the creator to exploit them online and on mobile platforms, the investment in content production will continue to be limited. • Microtransactions: compliance with the regulations on returns and the administration involved in processing small payments for low value content are disproportionate issues for small companies, and limit their ability to generate revenues from such transactions. Therefore, consideration should be given to measures that alleviate these disproportionate burdens. State aid: the European Commission is consulting on state aid for audiovisual works and D-Media believes that the UK government should advocate that state aid should be permissible for cross media or new media projects. Currently, an audiovisual
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175-185 Grays Inn Road London WC1X 8 UE work for the purposes of the Cinema Communication is limited to films and TV production. This provision should be extended. • The BBC: the BBC has an excellent business model for producing online content. The BBC’s six public purposes include "stimulating creativity and cultural excellence” and “delivering to the public the benefit of emerging communications technologies and services”. However, a review of awards for "online innovation" confirm that the BBC is simply not stimulating creativity or promoting innovation in the online and mobile arena. By contrast, the National Film Board of Canada - with a budget that is a small fraction of the BBC's - is doing an excellent job of helping to create innovative content specifically for the Internet, and creating a national centre of excellence (see http://www.nfb.ca/interactive). This is an example of a publicly funded body genuinely stimulating creativity and promoting innovation online. Therefore, increased investment in UK online content production could be encouraged by insisting that the BBC fulfill its charter obligation to "stimulate creativity” and “deliver to the public the benefit of emerging communications technologies and services"; to insist that the board of the BBC Trust sees that this is done - and perhaps to help them to do so by bolstering their numbers with board members who have significant experience of new media. Q11. Should the core focus of public service broadcasting be on original UK content? D-Media believes that the core focus of public service broadcasting should be on developing original UK content. But there are concerns among D-Media’s membership that both the BBC and Channel 4 use online and mobile platforms to market their traditional broadcast content, and do not commission original online or mobile content except for that purpose. The creation of Channel 4 resulted from recognition that there was a need to support independent production and stimulate a plurality of voices in the broadcast arena. In the 1980s it helped to stimulate and grow an independent sector of broadcast content creators. However, today there is no comparable support for fledgling businesses in the internet/mobile arena and consequently there is a lack of any recognised or established
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175-185 Grays Inn Road London WC1X 8 UE route to market for content. There is a role for a new type of approach which is fit for purpose to support new business models and commercially viable independent production companies. Moreover, as previously mentioned, the BBC’s six public purposes include "stimulating creativity and cultural excellence” and “delivering to the public the benefit of emerging communications technologies and services”. Within this context the BBC needs to play a much more prominent role in the development of creative content creation online, at least matching what is produced by the organisation for TV, Radio & Film. Q12. What barriers are there to innovation in new digital media sectors, including video games, telemedicine, local television and education? D-Media believes that, while there has been support for technically innovative platforms there has been a lack of support for content innovation, but it is often the content, which makes the technology a viable business proposition. Innovation has been seen as the perogative of science and technology with support from organisations such as the BBC, NESTA, TSB and Channel 4. There is an assumption that content will be developed without similar support for its creation, even though consumers are reluctant to pay for online content. For example, where there has been support for content through measures such as tax credits for film, it has not been extended into other relevant content areas such as innovative marketing, distribution content solutions (including local television content) or video games. D-Media believes that it is a barrier to innovation that sectors such as video games are not provided with suitable tax breaks. Were such measures to be introduced investment in the UK would increase, the talent drain would and video games would be properly recognised for what they are - an essential part of the UK entertainment industry. Q13. Where has self- and co-regulation worked successfully and what can be learnt from specific approaches? Where specific approaches haven’t worked, how can the framework of content regulation be made sufficiently coherent and not create barriers to growth, but at the same time protect citizens and enable consumer confidence? D-Media believes that regulatory convergence would need to incorporate both broadband and mobile in order to cover content on both platforms. However, any extension of broadcast regulation to cover the Internet should be considered both unwelcome and
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175-185 Grays Inn Road London WC1X 8 UE unenforceable. Instead, significant efforts need to be made on behalf of Government to engage with ISPs and content creators in a dialogue to develop and achieve a shared agenda of interests. Within this content, D-Media believes that lessons could be learned from approaches adopted from the following nation states: • Canada: invests heavily in its content industry with a dedicated fund for innovative content. Although there has been concern that this approach could lead to a ‘subsidy culture’ rather than a thriving independent industry, there is evidence that the Canadian tax regime has been successful in attracting talent from the UK. France: the state broadcaster is held responsible for stimulating a sustainable independent sector. Under this approach, ownership rights remain with the production company that, in exchange for the production budget, licenses it to the broadcaster for a limited number of transmissions/screenings. In a similar vein the film sector with ‘avance sur recettes’ enables the CNC to collect revenues on behalf of the film producer’s future projects, thereby using their power to support smaller independent content creation.

Although many innovative digital services covering film, music and television already operate in the UK, there are still significant opportunities for investment, innovation and growth. To this end, D-Media believes that the UK Government must do all it can to support companies as they explore new business models and consumer offerings. These are undoubtedly challenging times, however D-Media believes that if the UK economy is to enjoy a strong recovery then we must continue to encourage innovation and creativity. Therefore, D-Media will continue to work with its members and all relevant stakeholders in taking forward the approaches outlined in this response and looks forward to working with the DCMS as the work on A Communications Review for the Digital Age progresses. If you have any queries or require any further information please contact: Gina.Fegan@dmedia-network.com Yours faithfully,
D-Media Network Ltd. Registered address: Camburgh House, 27 New Dover Road, Canterbury, Kent, United Kingdom CT1 3DN Company Registration number 7335385. VAT No: 105831536

175-185 Grays Inn Road London WC1X 8 UE

Gina Fegan, Chief Executive Officer, D-Media Richard Ayers, Head of Digital at Manchester City Football Club, (previously portal director Tiscali) Ian Baverstock, Partner Tenshi Ventures (previously CEO Kuju Entertainment & Chair TIGA) Frank Boyd, Creative Director Crossover Lab, Director Unexpected Media Jason DaPonte, Managing Director, The Swarm (previously Managing Editor BBC Mobile) John Dower, Director of Video Games, New Media, Film & TV Kathryn Corrick, Digital Media Consultant & Trainer Nigel Hartnell, Chairman, South East Media Network, Director FfastFill Linda James, Producer, Sly Fox Films (previously Manager Wales Creative IP Fund) Nick Kalisperas, Policy advisor, D-Media (previously Director for External Stakeholders at BusinessLink.gov.uk) Martin Percy, Interactive Film Director Christine Reid, Solicitor, Northwood Reid

D-Media Network Ltd. Registered address: Camburgh House, 27 New Dover Road, Canterbury, Kent, United Kingdom CT1 3DN Company Registration number 7335385. VAT No: 105831536

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