The mystery of the new UK government’s culture czar and the £84bn treasure trove

TV/MUSIC/GAMES: Karen Bradley, the UK government’s newly appointed Secretary of State for the Department of Culture, Media and Sport (DCMS), could soon find herself with an £84bn (US$108bn) millstone around her neck.

That is the amount the country’s creative industries, including TV, film, music and games, contributed in value to the gross domestic product (GDP) in 2014, according to the DCMS.

That value has been growing, thanks in part to her predecessors’ largesse in the form of tax breaks, investment incentives and numerous funding schemes from the country’s membership of the European Union.

However, on the 23 June, 51.9% of Britain’s voters elected to exit (Brexit) the EU after 43 years of belonging to a political and economic powerhouse that gave Europe as much clout as the US, Russian and now Chinese superpowers during trade negotiations.

Ramifications of the Brexit result included the appointment of a new Prime Minister, Theresa May. She kicked out the then Culture Secretary John Whittingdale, as well as Ed Vaizey, the highly popular Minister of State for Culture, Communications and Creative Industries.

Enter left, Karen Bradley (pictured below), who has no experience in the media or culture professions.

She will soon be facing the concerns of the music, TV and video games businesses, which are among the several creative sectors that lobbied for the UK to remain in the EU.

A lot of the talent they employ and investments they benefit from come from continental Europe.

But the deed is done. Britain has voted to leave the European Single Market. The value of its Sterling currency has slumped. European investors have put future plans for the UK on hold as they wait for the exact nature of new UK-EU trade deals. And the London-based Institute for Fiscal Studies reckons the country could see its GDP lose £75bn (US$97bn) in value by 2030.

So back to that £84bn (US$108bn) question about the creative sectors. That value is what Bradley has to protect if the UK is to retain its status as one of the world’s largest creative hubs in terms of artistic talent, education and economic strength.

Public television
High on Bradley’s list of priorities will be safeguarding the nation’s long-standing commitment to public service broadcasting.

David Puttnam (pictured above), one of Britain’s most successful movie producers (Chariots of Fire; The Killing Fields) and a member of the British Parliament’s House of Lords, has spearheaded a new report called A Future for Public Service Television: Content and Platforms in a Digital World.

Published in June, the study urges the government to help make the funding and distribution of public service TV more relevant in today’s digitally driven world.

It comes at a time when public-service networks, such as the licence fee-financed BBC and its ad-funded counterparts ITV, Channel 4 and Channel 5, have seen their audience share slashed by competition from the privately owned Sky and new streaming platforms like Netflix and Amazon Video.

The BBC, arguably the world’s most profitable licence fee-funded public broadcaster, has been granted a new 11-year charter, a contract that will be overseen by the country’s communications regulator Ofcom for the first time.

Lord Puttnam believes the charter renewal should be an opportunity to kick the BBC, a broadcast behemoth made complacent by the mostly reliable licence fee, well and truly into the 21st century.

“This report is looking to the future,” he said during a private briefing for the UK’s Broadcasting Press Guild.

If digital media technology can democratise the TV space and enable resourceful newcomers like Netflix to challenge the dominance of the BBC, ITV and co., his report argues, the government should raise funds to support non-TV public institutions, such as museums, that use digital media to create equally compelling public-service videos.

To this end, the report calls for the launch of a new public-service levy. It would be charged to digital content platforms like Google and Facebook, and Internet service providers, whose very commercial existence increasingly relies on the availability of high-quality video content.

“We estimate that a 1% levy on (their) UK revenues would raise in excess of £100m a year,” the report says.

The value of sports
Lord Puttnam also expressed alarm about sports entertainment’s disproportionately high share of public TV’s content-acquisition budgets.

When inflation is taken into account, the report concludes, about 46% of the investment in all the UK’s first-run original programming is in sports rights.

“It’ll be 50% in the next two years,” he asserted. “At what point doesn’t that become insane? At what point do we find ourselves paying a significant portion of the licence fee to 600 football players?”

He then pointed out why the Brexit vote is likely to hurt the British TV industry. Currently British TV shows exported to the EU yield about £376m (US$487m) annually. Moreover, support from the European Regional Development Fund and the EU’s Creative Europe funding scheme benefit UK TV producers and European creators who want to work with them.

“We must give European producers an incentive to shoot on UK soil and work with UK talent. This creates jobs and boosts the national economy,” Lord Puttnam added.

“Most of the independent productions are possible because of the EU. The most creative people from France and Germany come to the UK because we are the pivot of the creative industries. Now they shall go to other European countries.”

Post-Brexit music
Bradley should also expect to hear from representatives of the British music industry.

The UK is hailed as one of the most robust markets in a struggling global recorded-music business that has seen sales plummet significantly since its heyday in the late 1990s.

Today, Britain is among the world’s five biggest music markets. And last year, one in every six albums sold globally was by British artists such as Adele (pictured below), according to trade body BPI.

At this summer’s Westminster Media Forum seminar, a government-policy conference centred on media and culture, PwC’s Director of Entertainment & Media Practice Jonathan Ford, also noted: “We’re advanced compared to other territories in terms of digital content.”

Industry executives among the presenters, however, warned that choosing to leave the EU has triggered insecurity about the music sector’s future.

Jane Dyball, CEO of the MPA Group of Companies that represent music-publishing organisations, highlighted Britain’s international influence: “We’re definitely a global music market. That’s why we were against leaving the EU. We don’t want uncertainty going forward.”

John Enser, Partner and Head of Music at London-based international law firm Olswang, underlined some of the potential pitfalls to expect.

“Companies based here will question whether the UK is the right place for them,” he said. “Why should Spotify remain here if there’s a degree of friction to trading from here? It might join Apple in (low-tax) Luxembourg or Netflix in the Netherlands.”

Moreover, British music companies are putting plans on hold as they await the outcome of what Brexit actually means for businesses. “There is already a hiring freeze in the UK music companies,” Enser said.

British music fans using Spotify or other international streaming music platforms might also be placed at a disadvantage compared to their counterparts in the other 27 EU member states. Leaving the EU’s Single Market threatens to block consumers’ easy access to their accounts when travelling to other EU countries.

Thrones of video games
TIGA, the trading organisation representing British video and digital games developers, is urging the new government to improve the tax breaks its members currently receive.

Jagex Games Studio, Ninja Theory and Rockstar North, creator of Grand Theft Auto (pictured left), are among the top games producers with international clout.

An estimated 15% of the £4.19bn (US$5.43bn) games sector’s skilled employees are from other EU countries. The recruitment costs could soar as Britain becomes a less attractive place for continental Europeans to work in.

In a report called Brexit: Priorities for the UK Video Games Industry, TIGA implores the government to use its split from the EU to set up more dedicated tax incentives for the potentially lucrative games businesses.

Its recommendations include hiking the tax incentives for qualifying games creators to 30% of their production costs from the current 25%.

It also suggests boosting the tax incentives awarded for R&D (research and development) costs, bringing forward plans to decrease the corporate tax rate to 17% from 2020 to next year, and abolishing punitive EU VAT (value-added tax) rules for small and medium-sized businesses, which most games developers tend to be.

Karen Bradley will certainly have her plate full as the TV, music, games and other creative sectors come knocking for post-Brexit government support.

It should give her food for thought as she gathers her resources to save the UK’s £84bn creative treasure trove.

Credit: David Puttnam image by Justine Walpole