Copyright (Parallel Importing of Films) Amendment Bill

on behalf of the Minister of Commerce: I move, That the Copyright (Parallel Importing of Films) Amendment Bill be now read a second time. I want to thank the Commerce Committee and its chair, the hard-working Jonathan Young, for its timely consideration of this bill. The select committee received 10 submissions on the bill, including four accompanied by oral submissions. The bill proposes to amend the Copyright Act 1994 by reinstating the ban on parallel importation of films for commercial purposes.

The ban is important to support New Zealand’s cinemas in the final stages of transition to digital exhibition technology. The Government strongly supports the transition to digital exhibition, as it reduces the need for delays in film exhibition, giving consumers earlier access to films. In its report, the select committee noted that the ban allows cinemas flexibility in scheduling films, particularly for school holiday audiences, creating better financial viability, which enables more movies to be available at times when wanted by consumers. I also acknowledge the select committee’s comments that as consumer viewing technology develops, it expects that this will force cinemas to develop new revenue streams to meet consumers’ expectations, rather than relying on past business models.

The bill reduces the period of the ban from 9 months to 5 months. This reflects the changes in film distribution practices, recognising that New Zealanders now often receive films at the same time as international viewers. The bill also imposes a sunset clause so that the bill will expire in 3 years, on 31 October 2016. The 3-year time frame will give cinemas that have not yet converted enough time to transition to digital exhibition technology.

The Commerce Committee reported the bill back to the House with no amendments. I support the decision of the committee. Many films are released on DVD between 3 and 4 months after their cinematic debut. The 5-month ban will effectively give cinemas a further 1 to 2 months to exclusively screen films without competition. The shortened period will allow retailers to parallel import copies of films earlier and encourage authorised distributors to provide consumers with earlier access to films. I commend this bill to the House.

I thank the Minister of Immigration, Michael Woodhouse, for his contribution—

💬 Hon Members: Short contribution.

—on the Copyright (Parallel Importing of Films) Amendment Bill. I guess, to give the Minister his due, this is quite a small bill, just a mere two pages, but—

💬 Hon Michael Woodhouse: Short does not necessarily mean bad.

As the Minister said, short does not mean that there is not quality contained within. There is controversy within this bill, however, and I want to be very upfront about that. It has not been an easy decision for the Labour Party on where it would go on this particular piece of legislation. There has been much debate within the caucus and between caucus members. It is fair to say that some probably would have preferred to fall on the other side of the debate, but, ultimately, what we reached was what I would describe as a time-limited compromise and a very strong message to the industry that this is it.

We have been in this place before. In fact, the Copyright (Parallel Importation of Films and Onus of Proof) Amendment Act 2003 placed a partial ban, a time-limited partial ban, on the parallel imports of movies, including VHS—because people were still using them—and DVDs, into New Zealand, based on two—

💬 Hon Michael Woodhouse: The member wouldn’t remember VHS.

I do remember VHS. I remember my parents saving up a significant amount of money to purchase the first VCR we ever had, and I had an Amstrad computer at that time as well, just to date me a little further.

There were two reasons that the ban was put in place, and at that time it was articulated and viewed—these were the reasons—that distributors would release fewer films in New Zealand for theatre. Distributors would, if possible, have to release films earlier, in conjunction with or closely following the international release date, and therefore would no longer have access to second-hand prints. There was a view that it would increase costs, which could result in increased ticket prices, and would create disincentives to make films available for theatrical release in New Zealand. The second reason for the ban was that rural and smaller communities could face a loss of movie exhibition facilities as a result of fewer films being available for exhibition in smaller theatres, and audiences would have to wait longer for a smaller number of films to become available.

The response to those two concerns was to put in place a 9-month parallel importation ban to try to allow that element of the theatre industry to have the ability to continue to have the right to thrive. The view was that that was necessary. It was “sunsetted”, though. We are at a point where Parliament has the ability to consider whether or not that ban should continue, whether it should lapse, or whether or not it should be amended. The position that this Parliament has reached, and certainly some parties across the House have reached, is that that window should become smaller, moving from 9 months after a film’s international release to 5 months, and that the time at which that parallel import window should lapse should be 31 October 2016.

Some have raised the question of what happens if we come to that point and the industry again comes to seek another extension. Well, our strong message from this side of the House is that we will not support any further extension of a parallel importation ban, because the time has come for this industry—in fact, the time is already here for this industry—to start adapting to the new digital environment we find ourselves in. Other industries have been forced to do that. I think the music industry in New Zealand, in particular, has tried to move at a commendable pace, particularly since the copyright debate, to try to offer consumers a greater range of options. This falls again into the realm of the arguments of why this industry needs to do exactly the same. We need to move to a more accessible environment, but, as I have said, we chose to move to a time-limited compromise because we are not clear in our minds that the industry took the last expiration date as an end point or that it has prepared itself adequately.

There are arguments to be made that as a consequence there would be a considerable jolt for some aspects of the industry—in particular, regional provincial cinemas, where we cannot deny that there would be consequences, certainly based on reports like those prepared by PricewaterhouseCoopers that indicate that we would see job losses as a result and a loss of facilities, which offer a different kind of consequence for families. We weighed that up, of course, against the consequence to families of potentially increased ticketing prices and a loss of access via DVDs or live streaming that they currently face. So we ask—we implore—the industry: “We have given you this brief window. Do not abuse it. Move forward with greater pace, because there is an inevitability to this expiration.”

But in the meantime the industry must find a way to cushion the potential loss of jobs and, as the Minister has said, to finish converting as soon as possible to digital exhibition technology. In the interim we know that there was a potential for—some estimated—in the upper band of up to 165 fulltime-equivalent jobs lost through the industry through the loss of potential revenue and release in New Zealand if the ban was not continued. But, like I say, there is an absolute inevitability in this, and it is time that the industry moved on. It is time that we see an end point to this window. We are flagging it clearly in the Hansard today that that is what Labour expects will happen by October 2016. We encourage, though, in the interim, greater pace by the industry and greater options for consumers, and we send this message that, from our perspective, this is certainly the last time.

I do think it is important to acknowledge that, as the previous speaker, Jacinda Ardern, has said, losing 165 fulltime-equivalent jobs is what PricewaterhouseCoopers estimated that completely removing this temporary ban would have as an effect. We know through the Commerce Committee’s consideration of the Copyright (Parallel Importing of Films) Amendment Bill that 57 percent of theatres in the country have converted to digital format, and principally all of those are in the major metropolitan areas. Little towns like Huntly probably have not converted yet and little towns like Hāwera, where I was born, probably have not converted yet. The reason is that it costs $100,000 to convert from a 35 millimetre format to a digital format, and that is what the industry told us. The reason why the previous Labour Government in 2003 instituted this legislation was to give time for that transition to take place, knowing that it was going to cost a considerable amount of money. Of course, in 2008 it renewed that for another 5 years through a Supplementary Order Paper when it was considering a copyright bill.

The pending lapse of the temporary ban on 31 October 2013 is a trigger to assess whether the original rationale for the ban justifies its continuation. It has been an interesting process through the select committee as we have looked at all the pros and cons of what this temporary ban has provided. One of the things is that we saw that, arguably, if the ban was not extended, those revenue decreases because of the transition and then the transition costs of $100,000 per theatre would be too large an expense to make digital conversion viable. That would simply put many, many theatres out of business, which is where those 165 fulltime-equivalent job losses would occur. For small towns in New Zealand—even for small cities in New Zealand—the closures of these theatres would see those estimated 165 job losses. Added to that, it would also see the closure of a significant number of theatres that are places of entertainment and of social value for those small towns and cities. So it was quite a complex discussion looking at all of these things.

I felt through the discussion of the committee and hearing the different submitters that could see validation in extending the temporary ban. Of course, not for 5 years, only for 3; not for 9 months but for 5—certainly a reduction. The report of the committee to the industry said that there was an obvious change in digital technology and the way that people are accessing movies, so our words to the industry were to make this 3-year period, this window they have been given, the window that they certainly choose to take advantage of this period of time to do the transition and to complete it.

I also acknowledge the argument put forward by the distribution and exhibition industry for the extension of this temporary ban to ensure that the general public have access to a wider variety of movies, particularly family movies, at times when they want to see them. In fact, some said that they desired the ban to actually be permanent, not temporary. However, the bill did not present that option, nor was there an appetite in the committee to do that.

Essentially, the ban on parallel importation of films until 5 months after the release date—most often in the USA—is principally focused on family films. To explain, this week The Smurfs 2 will be launched in New Zealand. One could be forgiven for thinking that this is talking about the cartoon of the Labour Party and that “Smurf 2” is a code name for its intrepid leader, “David 2”. I can imagine his chief of staff saying to the Diplomatic Protection Squad: “ ‘Smurf 2’ is on the way.” The New Zealand audience has been enthralled by watching “Smurf 1” for the last little while and we are ready for the sequel, “Smurf 2”, to be released in a theatre near you. But I think New Zealand is looking forward to seeing “Smurf 3”: David, David, and David.

However, coming back to The Smurfs 2, it was released on 31 July in the USA, which is in the middle of its summer holidays. But for us on this side of the world in the different hemisphere, 31 July was the first week of term 3. So, although it is great to release the film over there, here it does not work, because it is just not the right time. As a parent, I am not going to be sending my kid—and other parents are not going to be sending their children—out to the movies in the first week of term 3. It is time for settling down to school work, is it not? This is the problem that the industry is identifying—that you just cannot do global release dates, not for family movies. They are best to be released in the school holiday time, and this is what this bill is all about. It is about staggering the release dates so they work for the population according to the seasons of their holidays.

The decision of the committee was to support the bill in that we have this extension of a temporary ban not for 5 years but for 3, not for 9 months but for 5. We believe that that is the right window, and we want to see the industry transition and to see entertainment available for New Zealanders. Thank you.

I am not a Smurfs fan, I have to say—Monsters, Inc., I reckon; Monsters, Inc. There are a few of them on the other side of the House. Look, there has to be a circuit-breaker on copyright and intellectual property in New Zealand, on the laws, and on the whole of the policy regime that surrounds that. There has to be a circuit-breaker for that. The Copyright (Parallel Importing of Films) Amendment Bill is not that circuit-breaker. I have got a bit more to say on that, but this bill is not that circuit-breaker. It is a temporary measure. Yes, it is a bit vexed, and, yes, as I think you might have gathered, there is grudging support for it—grudging support for it—on this side of the House after a lot of thought and discussion. But there has to be a circuit-breaker on copyright and intellectual property in this country, and there has to be a wider debate on what needs to happen next. This bill is the continuation of a temporary measure.

There is a bit of a difference between the Opposition parties here tonight on which side we came down on. But, ultimately, one of the best things about the process that this bill has shown evidence of is that around the Commerce Committee, in which it was debated, there was pretty much unanimous support in terms of the actual issues that we are addressing. I think that if anything good has come out of this process, it is that there is now an acknowledgment of the influence of the digital environment in the copyright area, and of the fact that the movie industry has to change.

We have got a time-limited bill in front of us. Labour has pretty much come down on the position, as, in fact, our minority report states, that the time period—when it should expire—should actually be earlier than what the bill says. But there is a time limit. There has been a very, very clear message given to the industry that if it comes before the select committee again, it is not going to get any truck, because it has to change. That is the fact of the matter.

Ultimately, for our creative and internet industries, we have to have a review of copyright laws. There was supposed to be a review of the gamut of copyright laws in this country this year, but that side of the House, the Government, decided that that was not the direction it was going to go in. Ultimately, it said that that was because of the process of the Trans-Pacific Partnership agreement, which is a shame. It is a shame for our country. The Government has abandoned that commitment to hold a review this year. We say that it should have undertaken a review and that what we will do when we are elected next year is immediately undertake such a review. It is so important that we try to address the wider issues that are involved in copyright and how people are accessing content in this country and around the world, the impact that that has on our laws, and why it is so important that we get this right.

We consider—and our minority report said—that New Zealanders should be able to access media in the same time frame as others in different countries. I have to say that the argument used on that side of the House that one of the reasons for supporting this bill is around movies being watched in the school holidays is actually a spurious argument in this day and age. There was very dubious evidence provided to the select committee on that particular matter.

The main reason why Labour is supporting this bill, grudgingly, as I have said, is the impact on smaller cinemas around the country and their transition to the digital exhibition technology. We take the view very strongly that those communities should not be disadvantaged. That is the significant reason why we have come down on the side of supporting this bill for this limited amount of time. We supported the shortening of the ban from 9 months to 5 months, within that limited time frame, until what we say should be the end of 2015, rather than towards the end of 2016, because we think that the technology involved in changing from the current system to digital exhibition technology should have occurred by then. It should have occurred by now, but there are lots of communities in New Zealand—in Hāwera, as Jonathan Young has talked about tonight; I do not know about Hāwera but I certainly know that Palmerston North is one—where they have struggled to make that transition. We think it is important that they have the ability to do that without being penalised. But, ultimately, that is the only reason why.

We believe that if there is a push from the movie industry to come back to Parliament in 3 years’ time and say “Oh, no, no, no, we haven’t managed to make the transition. We need another extension.”, they will get no truck. It is absolutely important that that is made very clear today. This is the last chance for the industry to make that transition, and, ultimately, that is all this bill is meant to do.

Kia ora, Mr Assistant Speaker. Ngā mihi nui ki a koutou. Kia ora. It is a real privilege to rise to speak on the Copyright (Parallel Importing of Films) Amendment Bill. Copyright is an incredibly important issue. It has moved from the arcane and sort of dusty world of law libraries of maybe 10 years ago to something literally changing global politics. The front pages of our newspapers will say that the Kim Dotcom case is changing the representation of the nature of Parliaments all around the world, with new political ideas coming in, new business models, and new jobs being built. It is good to be debating it in our Parliament, but not in the context of this bill, which is a bill that the Green Party will be opposing. It is disappointing that both the Labour Party and the National Party will be supporting it. When we heard the submissions and the arguments in the Commerce Committee, I think there was a very compelling argument not to support this bill. But, oh well, the Greens will be opposing it.

What this bill does is reinstate the ban on parallel importing of films for 5 months following the film’s first release to the public in New Zealand. The rationale is to give distributors and cinemas sufficient time to have the films screened, to make money out of it, without the risk of competition. This ban will be in place for 3 years, until 2016. Of course, it comes on the back of a 10-year ban, which we are just about at the edge of now. No one in this Parliament thinks that we should have this parallel importing ban post-2016. What the Green Party says is: “Let’s deal with the issues now. Let’s not disadvantage new competitors, new business models emerging in New Zealand. Let’s do it now, in 2013, not 2016.”, which every party in this Parliament agrees with.

I first want to touch on the process. What we have seen is an incredibly poor process. As I said, we have had 10 years’ warning. We have had a 10-year parallel importing ban that is soon to expire. We have had 10 years’ warning, yet the Government still introduces this legislation under urgency. In fact, the Green Party was considering a letter from Minister Foss in our caucus meeting, inviting us to share our opinions, and that afternoon this legislation was slammed down on the parliamentary Table, introduced under urgency. It is not a good process at all, because what we should have had is a robust consideration of the issues. We were willing to engage with the Minister of Commerce and we would have liked to hear from officials, but when you ram through a bill under urgency it is an incredibly poor process. Something like this, where we have had 10 years’ warning, is surely not adequate to be debated under urgency. That is why the Green Party abstained in the first reading. We did not have time to talk to submitters. We did not have time to talk to the public and experts, so that is why we abstained.

I would like to acknowledge the people who were involved in the select committee process. We had only a handful of submitters, but I would like to acknowledge them. I would like to acknowledge and thank the select committee members and the chair. In the select committee we heard the arguments, we heard the submissions, we weighed up the evidence, and that is where the Green Party reached its position to oppose this bill.

So when you look at the advice the Commerce Committee received and see the advice the Minister received in the regulatory impact statement, even the officials are not clear that this bill is a good idea. In fact, the officials were advising against this legislation, as I pointed out in my first reading speech. There is just no justification to treat cinemas as a special case. I find it rather ironic that the two older parties, apparently talking about free markets and neo-liberal economics, railed against examples of, say, margarine being prohibited versus butter.

💬 Dr David Clark: What about community facilities? What about the community facilities? Destroying communities.

I will get to that point in a minute. But the analogy, like this bill, is that in the 1970s New Zealand protected its butter industry by blocking out competitors in statute. It is exactly the same case. It is like how we stopped margarine. This bill is about using a statute to protect a temporary monopoly to block out competitors. I find it deeply ironic—and the members on the select committee know this because of the arguments we had on the select committee—that it is the two old parties that support this bill. It is just like blocking out margarine to protect the butter industry. We have heard about the digitalisation of cinemas argument. The fact is that they have had 10 years to prepare, as we know. If the cinemas cannot do it now, they are still going to struggle in 2016 with the release of, say, children’s films, which is what we heard on the select committee. If they have trouble now, it is going to be difficult to see success there.

I want to touch on the member’s point, which is that the Green Party loves cinemas. I personally love cinemas. There are some fantastic cinemas around New Zealand. They compete not because they have a statutory monopoly of the rights to material, disadvantaging competitors; they do it because they have got good-quality facilities and because they provide a great service. They do not compete because they have lawmakers and the ability to lobby to try to get a temporary statutory protection of the material, disadvantaging their competitors. So what we see is just another example of this Government doing special deals for its mates.

We have seen this Government put aside its so-called principles when it comes to economics. When it came to Tīwai Point we saw the Prime Minister literally pick up the phone and give $30 million when we had Tīwai Point bend the Government over a barrel because of the asset sale. We saw the Government pick up the phone and give $30 million to protect it because of the asset sale agenda. We have seen it with Chorus—$600 million in excess costs being paid by New Zealand consumers. We have seen it with Skycity. We have seen it with Warner Bros. And here we are seeing it again.

The fact is that this bill is very much a temporary solution. It is a transitory measure. It stifles competition and new business models, where I want to see new jobs being created. It, ironically, encourages piracy, online copyright infringement. People in, say, the disability community—and this is what we heard on the select committee, Miss Martin—for whom the only way they can see a film is in a cinema, say, a Westfield Group cinema, and perhaps cannot actually visit a cinema because of their disability, are going turn to torrenting or file-sharing sites.

It stifles current cultural participation because it says that this is the only way you can see this content for 5 months. Of course, it is occurring in isolation because the Government has delayed the much anticipated copyright review, ostensibly because of the Trans-Pacific Partnership. But I find it deeply ironic that we cannot review our much-out-of-date copyright laws because of the Trans-Pacific Partnership, but we can rush through legislation like this Copyright (Parallel Importing of Films) Amendment Bill through a rushed process in Parliament.

Canada, Australia, and the United Kingdom are all going through copyright reviews, despite two of the countries having Trans-Pacific Partnership involvement. The fact is that we need to update our copyright laws. They were written in a pre-internet age. They are not fit for purpose. They are not protecting New Zealand jobs or New Zealand industries promoting innovation. We have got the ironic situation that you can legally copy a CD to your iPod—

The ASSISTANT SPEAKER (H V Ross Robertson): I am sorry to interrupt the honourable member. Honourable members, the time has come for me to leave the Chair.

Debate interrupted.

The House adjourned at 10 p.m.