Advanced Television

Brexit: Industry reaction

June 24, 2016

A number of TV and content industry players have shared their views on the UK electorate’s decision to leave the European Union. and potential implications for the media industry

Law firm Olswang notes that probably the defining characteristic of the EU is that it facilitates the free movement of people, goods and services, and suggests that at the production level, this means that the current free movement of cast and crew between the UK and the EU is likely to be curtailed; production companies are likely to be hampered with extra arrangements regarding travel, work visas and related tax and accounting considerations, for all of which it is likely that the UK would need to make new arrangements both with the remaining EU nations and other trading partners. In the worst case, work permits and carnets would be needed for UK crews filming in Europe or vice versa.

In terms of content distribution and exploitation, without free movement, Olswang suggests that physical goods such as DVDs might be subject to customs tariffs and other limitations on free movement between the UK and mainland Europe, although, as markets for content in physical formats diminish, more significant will be the extent to which broadcast and other audiovisual services will continue to benefit from free movement.

Olswang notes that the Audiovisual Media Services Directive (AVMS) guarantees to service providers freedom of reception throughout the EU, in return for a common framework which ensures that all media and broadcast services are regulated under the laws of the nation where the service provider is based and subject to minimum EU-wide standards. The law firm suggests that following the Brexit vote, the UK government has probably already lost any ability to influence how revisions to the Directive take shape, so even if the divorce negotiations allow for the continuing benefit/burden of AVMS to apply, there may be a less industry-friendly Directive than if the UK had retained a strong voice at the table.

Many broadcasters run international channels from the UK under the benefit of the relative flexibility of the Ofcom regime and even the current Secretary of State, the avowedly pro-Brexit John Whittingdale, has highlighted the benefits which accrue to the UK from free movement of broadcast services.

Some of the benefits of AVMS may also be retained through the Council of Europe 1989 European Convention on Transfrontier Television, to which the UK is already a signatory and which applies across a large number of European countries, including many non-EU members such as Turkey, Moldova and Ukraine. That treaty is in essence the same as the original TV Without Frontiers Directive which preceded the AVMS Directive; it only applies to linear broadcasts and it imposes the sorts of restrictions on linear broadcasters that the latest revisions to AVMS are looking to loosen. This also means that the cross-border transmission from the UK of on-demand services could be subjected to local regulation in every country in which it is receivable.

A similar analysis applies in relation to the content quotas within the EU. These provisions of AVMS guarantee a certain level of protection for ‘European Works’ broadcast by EU television channels (and, to a lesser extent, by EU-based on-demand service providers).

The definition of European Work is quite broad and it is very likely that, however the divorce negotiations shake out, the UK would be able to retain ‘European Work’ status for its producers so long as it remains a signatory to the Transfrontier Television Convention. In the unlikely event that UK produced programmes cease to qualify as European Works, this would impact upon their value in terms of sales to other EU broadcasters and make them harder to finance in the first place.

According to Olswang, the message as regards copyright law is similar. While copyright law largely operates on a national basis, it does so within both an international framework (including conventions administered by WIPO such as the Berne Convention, as well as the TRIPs provisions of the WTO treaty) and, in the EU, within a series of harmonising measures and CJEU case-law. In the short term nothing in UK copyright law need change (nor will this likely be a priority for an administration dealing with the necessary fall-out from Brexit).

The one possible exception is the proposed Portability Regulation. A Regulation has direct effect and does not need UK law to be altered to take effect. When the UK leaves the EU, at a stroke the Regulation then ceases to have effect, so UK consumers will lose the benefit of the proposed rules which would allow them to access their online video services while elsewhere in the EU (and consumers from other EU Member States will lose the same benefit while in the UK).

In order to retain the benefits of free trade with the EU, it is likely that, in negotiating the ‘divorce’, the UK will need to agree that it will continue to recognise the European copyright acquis to a greater or lesser extent. However, as a non-Member State, the UK government will have little or no influence on how EU copyright law will evolve.

This is of course particularly sensitive given not only the proposed Portability Regulation (of which the Cameron administration has been a vocal supporter) but the longer term Commission agenda/aspiration towards cross-border licensing.

Olswang suggests that one area for the forthcoming negotiations will be whether, in the event of Brexit, the UK would be able to grant artistic subsidies wholly free of EU oversight and how far EU aid currently helping UK businesses will still be accessible under new trade deals, the latter no doubt linked to the extent to which the UK ends up continuing to contribute to EU budgets.

Currently, producers can access both direct funding through the UK National Lottery scheme as well as indirect funding through film, TV drama, animation and games tax credits. The Lottery alone has helped 1050 film productions make over 1900 claims for a total of over £1 billion since inception in 2007. This will no doubt continue after Brexit and the UK will, at least in theory, no longer be bound by EU rules prohibiting the distortion of intra-EU competition by favouring certain types of services or productions and limiting the amount of state aid that can be granted to one project. We could also see a recasting of the so-called ‘Cultural Test’ so that it is more focused on UK, rather than EU, cultural elements and individuals. The EU will accordingly negotiate hard for the more level playing field to remain and is likely to take a hard line against any UK-based industry trying to distribute content in the EU which has been the benefit of ‘unfair’ state aid.

UK trade body BASE (British Association for Screen Entertainment) says that in light of the EU referendum outcome, there will be many questions from across the industry concerning the economic uncertainty that will follow this decision and its potential impact on the home entertainment market.

“In this immediate period the business implications of an ‘out’ vote are unknown.  We will continue to monitor further announcements and developments very closely.
BASE will provide a steady pair of hands and ongoing support to all of its members providing evidence to support in the transition and offer stability as the UK withdraws its membership of the EU. In addition, the organisation will continue to play a positive role in Westminster and within our wider European creative community to promote and protect the interests of the British video industry, along with our industry colleagues,” it confirms.

Michael Ryan, Chairman, Independent Film & Television Alliance and Partner, GFM Films, described the decision to exit the European Union as “a major blow” to the UK film and TV industry. “Producing films and television programmes is a very expensive and very risky business and certainty about the rules affecting the business is a must,” he stated.

“This decision has just blown up our foundation – as of today, we no longer know how our relationships with co-producers, financiers and distributors will work, whether new taxes will be dropped on our activities in the rest of Europe or how production financing is going to be raised without any input from European funding agencies. The UK creative sector has been a strong and vibrant contributor to the economy – this is likely to be devastating for us,” he concluded.

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