Copyright (Parallel Importing of Films) Amendment Bill Supplementary briefing to the Commerce Select Committee 29 July 2013
Chair Commerce Committee Purpose This briefing provides the Select Committee with additional information about parallel importing of films requested by members following the Ministry s initial briefing about the Copyright (Parallel Importing of Films) Amendment Bill 2013 on 11 July 2013. Exhibiting films during the period of the ban for fundraising purposes 1 The public showing of a film can only be done (lawfully) with the authority of the copyright owner or the local distributor as the local licensee (sections 29 and 32 Copyright Act 1994). This is the case whether or not the film is parallel imported. Buying a film for private and domestic use typically does not include a right to show the film publicly. 2 There is no prohibition on a film being shown for fundraising purposes before it has been shown in New Zealand cinemas, so long as the person showing the film has authority to do so. Such authority to show a film publicly would usually be sought from the local distributor. 3 A film could not be imported before the ban ends for the purpose of showing it as part of a fundraising event. Such a purpose does not come within the private and domestic use exception that allows for films to be parallel imported during the period of the ban. The gap between first market and New Zealand cinematic releases 4 The graph below depicts the spread of 130 films 1 released in New Zealand between January and October 2012. 60 Films released in January - October 2012: gap between first market and New Zealand cinematic releases 50 40 30 20 10 0 0-30 31-90 91-150 151-210 211-270 271-330 331-390 391-450 451-510 511-570 571-630 631-690 Over 691 Days between first market and NZ releases Source: Data provided by the New Zealand Motion Picture Distributors Association 1 This includes films brought to New Zealand by major distributors, excluding films first screened on television in the first market.
5 Over one-third of films (51) were released within 30 days and over half of all films (72) were released within 90 days. 6 The table below summarises information about the gap between the first market and New Zealand cinematic release of films in release for January to October 2012. Gap between first market and New Zealand release for films released during January October 2012 No. of days Average gap Average gap for top 40 films by revenue Average gap for bottom 40 films by revenue Largest gap - Letters to Father Jacob 148.29 (4.9 months) 39.85 (1.3 months) 315.93 (10.5 months) 1208 (40.3 months) Shortest gap - (nineteen titles) 0 Family films 7 Family films are typically released in the US to suit the US school holidays. The New Zealand and US school holidays do not align. The New Zealand releases are therefore often delayed to meet the New Zealand school holidays. The following table summarises the delay between the first market and New Zealand cinematic releases for 22 family films. Gap between first market and New Zealand release for family films released during October 2011 October 2012 (total 22) Films released within 1 month Films released between 2-3 months Films released after 3 months 10 9 3 8 Appendix A sets out the cinematic and DVD release dates for family films released from October 2011 October 2012. The longest delay in 2012 was approximately 4 months. According to the film industry, Madagascar 3 was released before the mid-year holiday in New Zealand but was delayed until the October holidays in order to avoid coinciding with the screening of a competing film, Ice Age 4. 9 Appendix A demonstrates that the family films were generally released on DVD within 3-5 months of the first market cinematic screening. The first market DVD releases of five family films are likely to have occurred during or towards the end of the New Zealand cinematic screening of those titles. If the ban was not in place during the screening of these five films, distributors would have needed to have brought forward the New Zealand cinematic release date to avoid potential competition with parallel imported DVDs. Cinema admissions 10 The annual number of cinema admissions in New Zealand over the last 16 years, shown in the following graph, reflects overseas trends in Australia and the US.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Millions 10000 Cinema Admissions 1000 100 10 1 North America Australia New Zealand Source: Data from Statistics New Zealand; New Zealand Motion Picture Distributors Association; Screen Australia; and National Association of Theatre Owners. 11 The introduction of the nine month ban for commercial purposes in 2003 does not appear to have had a notable impact on the cinema admissions. In fact, there has been a slight decrease over the last decade in cinema admissions. Countries that ban parallel importing of films 12 Appendix B provides a table comparing the various parallel importation regimes across a range of developed and developing countries. Ten out of 16 countries impose a ban on commercial parallel importing of copyright works, including films. Officials found no evidence that any country has introduced a temporary ban specifically for parallel imports of films (with the purpose of protecting cinemas and then subsequently removed such a ban). 13 Hong Kong and New Zealand appear to be the only countries currently operating a temporary ban on parallel imports for commercial purposes. Unlike New Zealand s specific temporary ban for films on DVDs, Hong Kong s temporary ban applies across all types of copyright works. The 18 month ban applies from the first date the work in question was first offered for sale in an overseas market. In other words, the temporary ban on films is calculated from the date corresponding DVDs were first offered for sale by the copyright owner or a licensee in an overseas market and, therefore, is not linked to first cinematic release. 14 Because Hong Kong s temporary ban is not related to first cinematic release, the ban does not function to protect cinemas against competition from parallel imports of DVDs. Costs and benefits of the ban on stakeholders 15 The analysis below is partly based on data provided by the film industry and the impacts of the ban raised in public submissions in response to a discussion document. 2 Some information gaps have been encountered: 2 http://www.med.govt.nz/business/intellectual-property/pdf-docs-library/parallel-importing/discussiondocument-review-of-parallel-importation-of-films.pdf
a. The current impact on cinema and home video revenue of consumers importing DVDs for personal use and illegally downloading or illegitimately streaming films b. The extent to which consumers would switch to purchasing DVDs from a New Zealand retailer instead of attending the cinema if the ban lapsed c. The likelihood of retailers parallel importing DVDs. Allowing the ban to lapse 16 Consumers and domestic retailers would be the key beneficiaries if the ban lapsed. Although the extent to which parallel importing would occur is uncertain, it is likely that some retailers would parallel import DVDs where they can obtain a better price overseas or where the DVD is not available through domestic distributors. Some domestic retailers may be able to compete with overseas online retailers by offering DVDs as soon as they are available. 17 It is likely that consumers would benefit from earlier access to films. It is likely that distributors would bring forward the release dates for films in cinemas and home video in order to mitigate any impacts of parallel imported DVDs. Consumers would also benefit from increased competition amongst retailers, distributors and cinemas. 18 Cinemas may be negatively impacted if the ban lapsed. If distributors bring forward cinematic release dates, this would mitigate any impacts of competition with parallel imported DVDs. However, in some cases, particularly family films, this could result in films screening outside of peak screening periods such as the school holidays, thereby reducing admissions and revenue. Distributors would similarly be impacted by any reduction in box office revenue. In a worst case scenario, reduced revenue could affect the viability of some cinemas. 19 The extent of the impact on cinemas would depend on the number of films that would be screened off-peak. Based on the data in appendix A, five 3 out of 21 family films, screened during January October 2012, would be affected. Together, those five films make up approximately 4.74% of box office revenue for that period. The revenue of these family films may have reduced if they were screened earlier. However, the exact reduction in revenue is difficult to predict. Note that one film was not screened during the holiday period 4 and the other three could have been brought forward and still have screened during the holiday period. Maintaining a ban 20 Cinemas and distributors are the key beneficiaries of the ban. The ban protects cinema revenue and provides flexibility to distributors to determine the best time to screen films. In some cases the ban also provides distributors with time to determine the success of a film in overseas markets before bringing it to New Zealand. 21 The ban also ensures that retailers cannot offer DVDs for sale before rental businesses and online streaming and download services, all of which are tied to the distribution model (rental rights are separate rights under the Copyright Act). 3 Dolphin Tale; Hugo, Madagascar 3, Diary of a Wimpy Kid, and Tinkerbell: Secret of the Wings (The Smurfs is not included as it falls within the 2011 period. 4 Tinkerbell: Secret of the Wings.
22 Domestic retailers and consumers may be negatively impacted by the ban. In some cases domestic retailers may be losing customers to overseas online retailers. However, the extent to which consumers buy DVDs online is uncertain. The ban also provides no incentive for distributors to provide consumers with earlier access to content in cinemas or on home video. There may also be little incentive for cinemas and distributors to provide competitive and innovative services to meet consumer demands. 23 A summary of the costs and benefits is provided in appendix C. International obligations 24 International intellectual property agreements, such as the World Trade Organization s Agreement on Trade-Related Aspects of Intellectual Property Rights (i.e. TRIPS Agreement) and Berne Convention for the Protection of Literary and Artistic Works do not address the issue of parallel imports. It is up to each Party to determine at the domestic level whether or not to permit parallel importation. 25 New Zealand s free trade agreements similarly do not address the issue of parallel imports. Information about the number of films imported for personal or private use 26 There are no trade related statistics available on the number of films on DVDs and Blu-ray that are imported for personal or private use. Silke Radde Manager, Intellectual Property Labour & Commercial Environment 021 584 107
Appendix A - Table comparing family films cinematic release dates during October 2011 October 2012 Key: First market release (e.g. US) NZ release date and approximate screening period Holiday Periods Overseas DVD release date likely to have occurred within the New Zealand cinema screening Overseas DVD release date likely to have occurred outside the New Zealand cinema screening NZ DVD release date Columns are approximately two weeks Jul/Au g 2011 Sep Oct Oct 8/8-24/8 Nov Nov Dec Dec 20/12 Jan 2012 Jan Until 29/1 Feb Feb Mar Mar Apr Apr 6/4-22/4 May May Jun Jun Jul 30/6-15/7 Jul Aug Aug Sep Sep Oct 29/8-14/10 Oct Nov Nov Dec Dec 20/12 Smurfs, The (Sony) 29/7 6 th 2 nd 11 th Puss in Boots (PPI) 27 th 8 th 24 th 11 th Alvin and the Chipmunks 3: Chipwrecked (Fox) Happy Feet 2 (Roadshow) We Bought a Zoo (Fox) Adventures of Tintin, The (PPI) Muppets, The (Disney) 15 th 27 th 16 th 27 th 18 th 26 th 13 th 27 th 26 th 26 th 3 rd 26 th 26 th 13 th 25 th 23 rd 29 th 20 th 16 th 3 rd Dolphin Tale (WB) 22/9 20 th 5 th 23 rd Hugo (PPI) 23 rd 12 th 28 th 16 th Big Miracle (UIP) John Carter (Disney) Dr Seuss (UIP) Mirror Mirror (Roadshow) 5 th 16 th 19 th 8 th 5 th 11 th 7 th 1 st 29 th 7 th 15 th 29 th 26 th 26 th 19 th 7 th Pirates! (Sony) Brave (Disney) Ice Age 4 (Fox) Finding Nemo (Disney) 28 th 5 th 28 th 28 th 21 st 13 th 19 th 21 st 28 th 28 th 10 th 27 th 10 th 6 th 4 th 5 th Madagascar 3 (UIP) 8 th 20 th 16 th 9/1 Hotel Transylvania (Sony) Diary of a Wimpy Kid (Fox) 27 th 17/1 20 th 29/1 3 rd 27 th 28 th 20/3 Tinkerbell (Disney) 16 th 4 th 23 rd 7 th
Appendix B Countries that ban parallel imports of films Country Parallel import for private use? Parallel import for commercial purposes? Temporary ban in place Australia yes no n/a Canada yes yes no China yes no n/a Brazil yes yes unknown European Union, including UK yes yes - from another EU member state no - from countries outside of the EU Malaysia yes yes no Hong Kong yes yes yes, 18 months for first release for sale overseas India unclear no, but under review n/a Indonesia no no n/a Japan yes yes no Russia unclear no n/a Singapore yes yes no South Africa yes yes no Switzerland yes yes no Taiwan no no n/a United States 5 yes yes no no 5 Until earlier this year, the Supreme Court ruled that US copyright law permitted parallel importation of copyright works. The general view before the ruling was that parallel imports of copyright works were only permitted in the case of re-importation of copies originally made in the US.
Appendix C Costs and benefits of a parallel importing ban Cinemas Distributors Online content providers Retailers Rental services Consumers Allow ban to lapse Maintain ban Risk of reduced revenue through competition with DVDs and screenings outside peak periods. Risk of reduced revenue through reduced cinema admissions and DVD sales to local retailers. Risk of decreased uptake in services if consumers purchase parallel imported DVDs. If distributors bring forward electronic home video release dates, this may encourage consumers to use such services. Domestic retailers could compete more effectively with overseas online retail services. Risk of reduced revenue if consumers purchase parallel imported DVDs. If distributors bring forward the DVD release date, this may encourage consumers to use rental services. Maximise revenue through less risk of competition with DVDs and flexibility to delay cinematic releases to peak periods. Maximise revenue through cinema admissions and DVD sales to local retailers. The ban would protect the first to market privilege of electronic video services. Risk of reduced revenue if consumers purchase DVDs from overseas retailers. The ban would protect the first to market privilege of rental businesses. Earlier access to some films and videos. Increased innovation and competition among retailers, cinemas and distributors to meet consumer demands. Continued delayed access to some films and videos. Few incentives for competitive and innovative services provided by retailers, cinemas and distributors.