Kate Bulkley, Media Analyst.

Pact warns against Brexit

By Kate Bulkley

Broadcast News

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For Broadcast June 16, 2016

Pact chief executive John McVay has argued that a vote to leave the European Union next week will mean Britain loses a seat at the table when critical legislation on TV distribution is being negotiated.

If the UK chooses Brexit, McVay believes that the broadcasting industry will be at the mercy of plans for a digital single market (DSM), which could effectively ban the practice of selling TV shows on a territory-by-territory basis across Europe. The legislation is being promoted by the European Commission, which says it will give European consumers’ greater choice in the content they can access.

“This is an issue about our commercial rights,” said McVay. “The point is, do we want Eurocrats to tell us how our businesses are run? We need to make them aware of the consequences of their ideas, and to do that we need to have a seat at the table.”

He added: “Some people say, ‘Oh well, it’s better to get out [of Europe],’ but actually, if we leave, then the voices against DSM also weaken. And if we leave, we lose the opportunity to influence it and amend it, but we will still feel its effects regardless, so the choice seems obvious to me.”

DSM standoff

At the moment, the TV and film industry across the continent is in a standoff with European Commission president Jean-Claude Juncker about how his philosophy of a DSM for Europe should be applied to film financing and television programming sales.

Last month, economic consultancy Oxera and media consultancy Oliver & Ohlbaum published a report that argued against the EC’s plans, which could ban the traditional way of funding TV and film though third-party sales. The review concluded that removing the ability to sell exclusive rights to different territories at different prices results in less premium TV and film content being produced.

The report has broad support, with funders including Sky, ITV, Pact, Entertainment One and Endemol Shine Group’s parent company 21st Century Fox. Others associated with it include the Motion Picture Association (MPA) and Germany’s Constantin Film.

Lobbying in Brussels by Pact, the MPA and the Association of Commercial Television is in full swing, with legislative proposals expected to be announced in the autumn. Over the next few weeks, McVay is planning to reconvene the UK digital single market group, which contributed to the Oxera report, to finalise a “route map” of “where we are going with our efforts”.

The outcome of the Commission’s decision on DSM and other related issues, including revisions to the Audio-Visual Media Services Directive, are crucial to the UK’s creative industries, said McVay.

The sector represents about 8% of GDP and is one of the fastest-growing parts of the UK economy, making it “bigger than most of our European counterparts”, he added.

McVay’s comments follow a Pact survey that found that 85% of its members will vote for the UK to remain in the EU, with 15% wanting to leave. A similar survey by Broadcast in April revealed that 59% of producers, broadcasters and distributors believe Brexit would be bad for their business.

With the debate entering its final stages ahead of the 23 June vote, 63% of TV executives questioned said it was in the interests of the wider UK creative industries to remain in the EU. Some 23.1% disagreed, while 13.5% were unsure.

Analysts have also lined up to warn against Brexit. In a report published earlier this year, Enders Analysis said: “A post-Brexit recession will cause a hyper-cyclical decline in the advertising revenues of broadcasters and publishers.”

ITV has already felt the effects, blaming flat advertising revenues in the first quarter of 2016 on the EU referendum. In its first trading report of the year, ITV reported ad revenues of £433m in the three months to 31 March, slightly down on the £435m generated over the same period last year. Chief executive Adam Crozier said the revenue had been achieved “against the backdrop of uncertainty in the UK ad market, which we have experienced since the debate over Brexit began”.

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