Intellectual Property and 'Terms of Trade': The Challenges for Entertainment Businesses in the Emerging Platform Economy

For the last two decades, the industrial organization of the UK screen sector has been shaped by the so-called ‘Terms of Trade’. 'Terms of Trade' are codes of practice adopted by public service broadcasters, regulated by Ofcom under the 2003 Communications Act. Under these terms, independent producers retain ownership of the intellectual property rights in their programmes. Commissioners typically receive a licence for a package of primary rights in their home market for a specific period. Revenues from international sales are split. The paper explores investment decisions and business models that evolved in response to this intervention, and how they are changing with the entry of Video on Demand (VoD) platforms (such as Netflix) into the commissioning market. VoD services are outside the current scope of Ofcom’s supervision, and therefore free to pursue exploitation models outside the 'Terms of Trade'. Drawing on Blazing Griffin’s experience as an innovative digital entertainment company, the paper explains difficult trade-offs between retaining rights and up-front payments, as well as the effects of information asymmetries in three industries: video games, TV, and film. Television is characterized as a highly regulated oligopoly, and subject to considerable consolidation within the independent production sector (now often foreign owned). Film, while less regulated, is described as a ‘bisected market’ dominated by a handful of large studios and many smaller producers. By comparison, business model innovation in the online games market continues to rapidly and fundamentally alter relationships between producers, publishers and platforms. Finally, the paper reflects on the changing role of digital users, and a new understanding of copyright under which unauthorised ‘mash-ups’ may be seen as an opportunity.