Here comes the judge, well Lord Justice Leveson, whose autumnal cascade of hearings promise to be the Olympics of the media industry. But Leveson, in another way, may be an enormous distraction. The chattering part of the nation will gorge on the intimacy of relationships between press, police and politicians, and cheerfully ignore the financial crisis quietly engulfing Britain's media industry – whose middle parts, from television production to music and computer games, are being swallowed up by folks from overseas.
Policy, when it comes to the creative industries, tends to be reduced to dreary discussions complaining about regulation or piracy. Preventing piracy, though, is like stopping the weather; it's worth taking some preventative measures but not spend whole days on end indoors. Contemplating an economic strategy, though, is only done occasionally, which is problematic when, say, over in Montreal, the Quebec authorities are prepared to hand back 37.5 cents on every dollar invested in computer games.
It's not that Britain can't get it right. There have been two or maybe three notable successes of the past decade. Film production benefits from a series of successful tax breaks that meant Brad Pitt spent a couple of weeks in August in Glasgow filming World War Z. We may not have a Hollywood studio, but at least film production in the UK is at record levels. The terms of trade in television production may not have helped ITV or Channel 4 so much, but they helped a string of clever British television producers export some of their finest ideas to the US – Wife Swap, Supernanny, that sort of thing. And the BBC, like it or loathe it, represents a massive industrial intervention, pumping cash into the system and investing heavily in British production, and demanding British music, for example, at Radio 1.
The problem, though, is that the thinking is patchy. Music, where Britain is the world's second largest exporter after the US, has long got nothing. Tax breaks for A&R, an argument advanced by EMI, was seen as a joke. Skills in crucial areas are poor, as Eric Schmidt noted in his MacTaggart lecture – our schools teach more ICT, ie how to use Microsoft PowerPoint, than software development, aka computer science. Yet almost every significant creative idea requires development skills now – try coming up with a non-text based interface for a newspaper page.
Long-term investment in broadband risks foundering because BT only has the spirit to invest so much in networks. Access to finance remains uneven and uncertain; all banks and the City appear unenthusiastic about British media companies, with their unpredictable cashflows. Indeed, the life-cycle for many such businesses seems to have amounted to an unhappy period on the stock market where credibility is shot to pieces amid periodic profit warnings. Then comes a sale, frequently to private equity, who load up a misfiring business with more debt. Think EMI, Hit Entertainment, Chorion and the rest.
The prevailing mentality is cottage industry: don't spend to invest in the long term, but instead build to sell out, almost certainly to a large, well-capitalised US player. In one sense, that's fair enough – a sale being the only reasonable way to generate a windfall return for founders. But alongside a tax system better structured to support content investment, it would be good if the Treasury were to look again at taxing more strenuously those who get out too soon. The problem, of course, is that the public finances are not exactly awash with cash now that a second recession may follow the first. But in an era where we can nationalise the Royal Bank of Scotland, isn't it possible to be more imaginative?
