A report from the Digital, Culture, Media and Sport Committee calls on the United Kingdom Government to address profound industry uncertainty for the audio-visual sector in relation to the European Union. The key issue is the country of origin principle.

The cross-party committee report says that the government must as an urgent priority state its negotiating intentions with respect to the country of origin rules framework and set out its contingency plan, should the rules cease to apply after Brexit. In addition, the government should make clear whether the audio-visual sector will form part of the formal trading negotiations with the European Union.

“The UK is a global leader in the creative and digital technology sectors,” said Damian Collins MP, chair of the DCMS Committee. “The challenge of Brexit is to maintain these advantages in a new regulatory environment.”

An honest assessment of likely outcomes is needed from the government, the report says. It concludes that the risks of exiting the European Union are significant, and it is imperative for the government to negotiate arrangements that will be beneficial to both the United Kingdom and its European neighbours.

The ‘country of origin’ rules currently enable television companies to broadcast from the United Kingdom across the continent. This principle is part of the Audio-Visual Media Services Directive.

The committee found no evidence of any benefits that could be derived from excluding the United Kingdom from the AVMS arrangements and the country of origin principle.

The national communications regulator, Ofcom, currently licenses more than half of the 2,200 channels broadcast across the European Union and many operators have chosen London as their base.

Sharon White, the chief executive of Ofcom, told the committee this was the “biggest issue for our sector”. Asked whether broadcasters were preparing to relocate from the United Kingdom, she said: “I think it is clear that there are a number of companies who have contingency plans.” She suggested that they were waiting to see “whether the picture becomes clearer and more certain over the next few months”.

In its submission, Ofcom said: “We believe the country of origin principle should endure in the UK after Brexit, so that media companies based here do not face new hurdles, or feel compelled to move their operations to another European country.”

European Question - Media Summits Brexit Briefing

In addition to the AVMS directive there is a European Convention on Transfrontier Television, but this only applies to traditional ‘linear’ broadcasts, not on-demand services. It was last updated in 2002 and does not apply to all parts of the European Union. Significantly, it lacks any form of enforcement mechanism.

The DCMS committee reported: “Working on the assumption that there are no sufficient fall-back options, it will be for the government to negotiate a new arrangement with the EU.” It notes that it is likely that this will take place outside of negotiations of any trade deal with the European Union but “this is far from assured”.

“If country of origin rules cease to apply after Brexit then we must expect this will have an impact on the broadcasting industry within the UK,” the committee concluded. “The government must set out the steps it is taking to avoid that outcome, explaining its negotiating objectives and the timescale for such negotiation. The Government should provide an update to the Committee on progress made in securing a deal by the end of May 2018.”

While broadcasters in Britain appear keen for the country of origin principle to continue to apply, there is more concern about the provisions to extend this to ancillary online services in the current Draft Single Digital Market Directive. Although the European Commission has said that broadcasters will still be able to licence of a territorial basis, this has not allayed industry concerns about how licences are negotiated in practice and how loopholes could be exploited.

A working group chaired by PACT, which represents production companies, said “the continued ability to license content on an exclusive territorial basis is fundamental to the sustainable financing and distribution models that underpin the commercial viability of audio-visual content, whether it be high-end scripted drama, independent films, US films or the broadcast of elite sport.”

The committee concluded that such concerns show why it is crucially important that the United Kingdom needs to preserve its influence while Brexit proceeds. It suggested that the government should spell out how it proposes to embed its future participation in the widening of the digital single market in any withdrawal agreement.

The committee is also critical of the government for not publishing sector reports produced by the Department for Exiting the European Union. It concludes: “We cannot understand why setting out of the views of businesses and industry in the public domain — as we do here in this Report — should be so controversial and we call on the government to publish all the ‘Sector Views’, in the public interest, without delay.”

The country of origin issue was covered in a Brexit Briefing event produced by informitv that was held in London in November. The session can be viewed online at the Media Summits web site.

The potential impact of Brexit on the creative industries, tourism and the digital single market report is available through the Parliament web site.