Monday 27 November 2017
Minister, Secretary General, ladies and gentlemen.
It is good to be here in Tallinn during the Estonian Presidency of the EU. It could not be more fitting to be discussing our creative and digital future in the city described as Europe’s Silicon Valley - with more digital start-ups per head than any other.
After the Brexit vote we Brits are becoming an endangered species at EU events such as this. But I am pleased to say that as chief executive of Sky, I represent a company that is profoundly European in its founding, its outlook and its contribution. Our commitment to Europe remains as strong as it has ever been and will continue long after Brexit.
So this afternoon I want to talk about the importance of our European audio-visual sector. Of its contribution to our culture, to our democracy, to our freedoms and to our economic foundations. And how we are leading the world when it comes to creativity and technology.
I will also address how the internet has led to enormous changes, both good and bad, that have created huge challenges, not just for our industry and economy, but also for the values that we have built our society upon. And how I believe Europe can tackle some of these challenges by adopting lessons from television on how to import trust and responsibility to the online world.
Let’s remember what a powerful medium television has become since John Logie Baird first transmitted moving images by wireless a little over 90 years ago. From the widespread adoption of black and white cathode ray sets in Europe’s homes after the war, TV has told the stories that reflect the way we see ourselves and the world. Television has the power to bring together different generations, families, communities and nations in a way few mediums can.
It records our history, and determines our memories of past events that shape who we are today. Who here in Estonia can forget the television pictures of the Baltic Way, the human chain connecting Vilnius, Riga, and Tallinn which helped publicise the illegal Soviet occupation of the Baltic States and which led to your independence months later. Those memorable and vital events took place 28 years ago, the year Sky was born and we launched Sky News, Europe’s first 24 hour news channel.
A great deal has changed since then.
The Baltic States have become bastions of democracy, prosperity and peace. Estonia holds the Presidency of the EU and your former Prime Minister is a Vice President of the European Commission.
And television has leapt from a heavy stationary box in the corner of the living room to the tiny mobile device in our pockets. From anchored to portable, from scarcity to plenty.
28 years ago, few countries boasted more than a handful of analogue TV stations, many of them provided by the state. Today Europe boasts over 11,000 TV channels and 3,000 on-demand services. TV and film is worth over €100 billion each year and employs 1.2 million people. It is part of a wider creative and cultural sector worth over half a trillion Euros - 4% of GDP, employing 7 million workers. The creative industries are a jewel in Europe’s crown.
My own company Sky has played its part in this transformation and contribution. When we launched nearly three decades ago we used the newest technology of the day – then satellite - to radically improve the choice of TV.
Believing that customers want greater choice is central to our philosophy. In 1998 we embraced digital, enabling customers to watch over 200 channels, pause and rewind TV and store their favourite shows on the set-top-box. 10 years later we went into broadband, then HD, mobile TV, streaming services, 3D, Virtual Reality and earlier this year mobile telephony.
We now have nearly 23 million customers in 7 countries – that’s a greater number than Netflix has in Europe. We employ over 30,000 people and paid more than €2bn in tax last year.
Every year we spend €7 billion on audio-visual content, the vast majority being European in origin, making us Europe’s largest single investor in content.
We’ve also become one of biggest distributors of TV over the internet, delivering over half a billion streams per year to more than 80 different types of connected device.
And we have created our own world leading set-top-box technology that combines linear and on-demand programmes in a seamless, integrated programme guide. We’ve designed recommendation engines, used machine learning to improve the customer experience and we’ve built a voice recognition tool to help customers find their favourite programmes.
We compete with the world’s biggest technology firms to employ 4,000 software engineers across our European markets and we even have an office in San Francisco, seeking out the most interesting technologies from around the world to invest in and innovate around.
All of this from a business started and anchored in Europe.
Too much European political debate is spent worrying about the American model, rather than understanding what we have that is succeeding. Sky is an example of a European champion, a company that has no direct comparators in the US.
We are not going to win a global economic battle by trying to recreate the unique conditions found on the west-coast of America. Instead we should celebrate what makes Europe such a cultural and creative leader, and build on our own strengths.
The internet is reshaping the economics of the audio-visual sector and creating a highly competitive landscape for content distribution. There can be no doubt that efficiency and scale will be part of the story of our industry for some time to come.
But it is only one chapter. Scale alone cannot be sufficient to create winners in an industry based on creativity. It is European firms that are leading the way in combining the richness of local content and powerful story telling with world leading technology and innovation.
That’s why European companies, like Sky, continue to be successful – a distinct strategy of combing the benefits of multi-national scale with the depth of our local content roots.
Our closeness to our customers in each of our markets provides a huge advantage in understanding our viewers’ preferences, their tastes, their cultural reference points and their passions.
Our customers want to watch TV content which tells compelling stories of the highest quality. But they also want stories that they can relate to and which reflect their lives and experiences. It is no coincidence, for example, that the most watched sport in each country we serve is the local football league. Local content resonates strongly with our viewers and is the bedrock of our industry.
The vast majority of EU countries have complex and successful local broadcasting ecosystems with commercial broadcasters like Sky coexisting, competing and cooperating with public broadcasters like Rai, ARD and the BBC.
These valuable ecosystems are Europe’s competitive advantage over the US. America simply does not have our rich historic tapestry to tap into and, while US drama formats set the benchmark for quality, they cannot compete for diversity and cultural resonance.
Of course the global content platforms like Amazon and Netflix produce fantastically high quality programmes but they are aimed at their global customer base. Even when produced outside the US, there is a necessary uniformity to the creativity.
Competition is driving up quality. The amount of content available to our customers would have been unimaginable just a few years ago and they expect the best from Sky. Our strategy is to create entertainment for every household in each of our markets that everyone in that household will love.
As well as creating a winning portfolio of content brands, we have also become a powerful production force, making local content with international appeal that is licensed in every EU member state.
By marrying the highest quality production standards with the very best writing and acting talent we have been able to exploit the richness of the television production industry in the UK, Ireland, Italy and now Germany and Austria.
We now have over 1,000 hours of original content in production. Next year each quarter will see the launch of at least four major original dramas and we’ve currently got over 250 shows in production and development.
Shows like Babylon Berlin, currently in its first season in Germany, tells the story of Berlin’s political and social upheaval in the 1920’s through the prism of its criminal underbelly. A co-production with ARD, our first foray into major drama production in Germany it is the country’s most expensive TV series at over €40 million and already is the second most popular programme behind Game of Thrones.
Beating Game of Thrones in Italy is Gomorrah, about the modern Neapolitan mafia, with season three now on air. Gomorrah is based on the bestselling books by Roberto Saviano who has paid for the truth of his writing by requiring armed protection.
Also in Italy we are shooting the sequel to Paolo Sorrentino’s award winning The Young Pope which stared Jude Law and is a co-production with HBO. Paolo was a winner of the Grand Prix here at the Tallinn Film Festival in 2013 and is a measure of the quality of the talent we are able to work with.
And in the UK we have recently commissioned a second series of Riviera a thriller about the intrigues, glamour and seediness of the super-rich in the south of France. The first series was one of our most popular ever and was downloaded more than 20 million times.
All of these series are uniquely and noticeably European in storytelling, in production and in talent. But they have an international appeal and have been exported to over 100 countries, including of course in the US.
We should be confident as Europeans that our culture is in demand, is marketable and is valuable. And we must be careful not to undermine what makes us successful.
Financing expensive series by selling them abroad is one of the reasons European TV has begun to conquer the world which is why sacrificing territorial licences, as originally proposed in the Satellite and Cable Regulation, would be shooting ourselves in the foot.
Which brings me to the outlook for our industry and the lessons for policy makers.
Much of the debate about the future of Europe’s audio-visual industry has been coloured by a fear that the internet will destroy our business models. I hope I have convinced you that is not happening.
But that is not to say that the way the digital giants operate and are regulated doesn’t create some enormous challenges.
When paying taxes, employing people and complying with the law are competitive disadvantages, you know that you have a problem.
And you don’t need me to tell you that the future of our economy and society is at risk if we leave the playing field uneven.
Sky is in millions of Europe’s living rooms, we are trusted to provide entertainment and news to the different generations and to do so safely. At a time when there are serious questions over the veracity, safety and legality of much of the content to be found on the internet, television remains the gold standard reference point for responsibility.
And we take our responsibilities extremely seriously, from the scheduling of programmes to protect minors, the highly prescriptive consumer protection rules on advertising and the TV news channels like Sky News and TG 24 in Italy that must be accurate and impartial.
We produce at great cost locally based, highly regulated news services with a strong reputation for the fairness and quality of their journalism. Compliance with rules is not a burden but a stamp of quality and trust. And transparency over who produces and funds our news is a fundamental part of an open society and European traditions.
Contrast this with the global online platforms with their clickbait, bots and fake news. Where there is no regulation, no accountability and little transparency.
And yet we are in strange times. We increasingly see our carefully regulated content and our socially responsible services appearing on the same devices and screens side by side with a completely unregulated free for all. That is not good for our customers, it is not good for our industry and it is not good for our society. The TV screen used to be the safe space. No longer.
Not so many years ago, internet companies were small and pretty un-influential. Today they are some of the largest companies on the planet with a reach and scale of financial resources far exceeding that of previous media and communications companies. We are regulated because of our impact on society, yet their impact on society today is arguably much greater.
Yet they face none of the scrutiny or regulation that broadcasters meet.
It’s a lop-sided contest and left unchecked, represents a real challenge where European champions and national broadcasters, be they public or private, will suffer. At best, our valued standards of content are being eroded; at worst, fundamentally undermined.
It poses a direct economic and cultural threat too. Many of the global internet platforms are a safe haven for illegal streams and downloads which exploit the intellectual property that the creative sector has invested billions in. Their businesses often profit from the sale of adverting or monetise user data around content regardless of its provenance, legality or safety.
We are faced with one set of rules governing the exploitation of intellectual property by broadcasters, publishers and even state institutions while at the same time global internet companies have to take no responsibility for what is uploaded to their platforms and often only cursory responsibility for removing illegal content when informed of it.
This hits the smaller creators hardest, like many of those directors and producers at the Tallinn Film Festival, who are too small to have the time and resources to fight the piracy of their content.
It is to be welcomed that the Commission has issued guidelines on how tech platforms should respond to notices informing them of illegality, but it is a long way from the broad set of rules that should govern exploitation of IP in the digital world.
Online safety is one of the biggest issues of our time and it is about time we asked the question: why is there the least regulation where there is the most danger for viewers?
Our society and our industry face a tsunami of harms online from fake news to extremism, from theft of identity to theft of content. Everyone is struggling to navigate a path through a largely lawless internet landscape.
I know, as one of Europe’s largest brand advertisers, that I cannot be sure whether our family friendly brand is appearing alongside the vilest illegal content online. And if a company the size of Sky cannot hope to be certain, what chance has an individual, especially a minor, of keeping safe?
It is entirely legitimate for us, for you as policy makers, to ask what more the technology sector can do to protect both citizens and creators in the online world. And I would challenge whether legislators are creating the right regulatory environment for technology firms to change the way they look after our safety.
When it comes to broadcasting, regulation is seen as a valuable condition that guarantees the trustworthy and responsible flow of information. This is the opposite of censorship that the opponents to internet rules sometimes claim.
It is no longer good enough to say the internet is untouchable and beyond the norms that the rest of our society has to operate to. That includes, by the way, the tax that firms operating in the internet economy are expected to pay.
We in the EU now have the chance to set an example to the world and to make the internet a safer more responsible place, rather than the wild jungle that EU Commissioners have recently described it. The Digital Single Market strategy is a laudable initiative but now it is time for a Digital Safety Market strategy.
Europe’s audio-visual industry has never been more creative and our culture has never been more in demand. Technology, far from destroying what we value, has enabled us to reach new audiences and opened up a golden age of storytelling that our companies, authors and artists are poised to benefit from.
But the traditional role we play in society is threatened by the lack of a level playing field and a race to the bottom is in no one’s interests. A confident Europe can take the initiative and create a new framework that engenders trust, promotes transparency and establishes fairness in the digital age.
Creators are looking to Europe for this leadership, but so are other countries. Where Europe goes, the world will follow, and consumers, the internet and the creative economy are depending on it.