Friday, 18 September 2015

Broadcast Y'Self Fitter

While it might not be the most exciting game in town, it is instructive to compare the remits of the UK's music collection societies. A Venn diagram would place PRS in the middle. It overlaps with PPL in that it is concerned with the performing right: the income that is derived from the licensing of music to public premises and broadcasters. However, whereas PRS collects this money for songwriters and publishers, PPL collects this money for performers and record companies.
            MCPS overlaps with PRS because it has the same constituency: songwriters and publishers. The money that MCPS collects on their behalf comes from the mechanical licensing of music: the copyright income that arises when songs are reproduced in recorded form, whether this be the sale of physical formats, the broadcast of recorded music on radio and television, the online reproduction of recorded music, the synchronisation of recorded music with moving images or various lesser categories, such as the mechanical reproduction of music in greetings cards. There is no mechanical collection society for performers and record companies. The distribution of money from these sources is something that record companies handle themselves.
            It is appropriate that MCPS and PPL sit at the margins of a Venn diagram, as they collect less money than PRS.  I have written elsewhere about one of the crucial monetary differences between PRS and MCPS. Songwriters and publishers assign the performing right to PRS. The collection society therefore owns this right and collects income from all performance uses. MCPS, in contrast, merely administers the mechanical right. Its members can opt to self-licence the use of their music for films, adverts and some TV broadcasts. Many chose to do so, as the fees that they can extract will be larger than can be derived from MCPS’s blanket licences.
Another crucial difference between PRS and MCPS is the way that money is distributed to songwriters. The standard arrangement at PRS is that 50% of royalties go directly to the songwriter, while 50% of royalties go to the publisher. The songwriter might also receive a share of the publisher’s 50% of royalties: a common deals are for total income to be split 75/25 or 80/20 in the songwriter’s favour. There is nevertheless a difference between the 50% that is paid directly to the songwriter and the 25%-30% of their income that PRS distributes to the publisher. The 25%-30% can be used to pay off the publisher’s advances; the 50% cannot. When it comes to mechanical royalties, a songwriter will enjoy a similar 75/25 or 80/20 split. MCPS distributes its income directly to the publisher, however. Consequently, the entire share that is due to the songwriter can be used to pay off their advances. A songwriter will not receive any mechanical income until these advances have been recouped.
            PPL has similarities with both societies. In response to the European Union’s Rental Directive, it elected in 1996 to distribute 50% of its income directly to performers and 50% to record companies. Here the society parallels PRS in that the artist’s share is safeguarded: it cannot be used to recoup record company advances. This is enshrined in law. In 1996 an amendment was made to the Copyright, Designs and Patents Act concerning the ‘right to equitable remuneration for exploitation of sound recording’. The amendment states that where a recording is ‘played in public’ or is 'communicated to the public' then this performance right ‘may not be assigned by the performer except to a collecting society for the purpose of enabling it to enforce the right on his behalf’. Crucially, this means that artists are not permitted to sign over the performance right in their recordings to their record companies. There is, however, one exception to the 'communication' provisions. Keen readers of updates to the 1988 Act are referred back to the earlier clause 182CA(1), which covers 'electronic transmission in such a way that members of the public may access the recording from a place and at a time individually chosen by them'. This is the 'making available right', which was added to copyright law following the WIPO Treaties of 1996. The electronic transmission being referred to here relates specifically to the online delivery of music. In this sole area of 'communication', performers are not entitled to 'equitable remuneration'. 
            Reflecting this state of affairs, the majority of online income falls outside of PPL's remit. The society’s Annual Review for 2011 states that:
PPL’s online revenues remain limited as the majority of online sound recording licensing is carried out directly by rights owners. This reflects the prevailing view of record companies that downloading and on-demand streaming is analogous to the distribution of sound recordings, a traditional record company function.
Their 2012 Annual Review states:
The scope of PPL’s online licensing rights remains largely limited to online radio, and income from this sector showed further growth in 2O12, albeit from a modest base. The majority of online usage of sound recordings is directly licensed by rightholders and PPL maintains a regular dialogue with its members as to the appropriate extent of PPL’s online licensing.
And in 2013:
The number of small online radio broadcasters licensed by PPL continued to grow, facilitated by the introduction of ‘self-service’ online licensing functionality on the PPL website. Revenue growth from such licensees however, was offset by a decline in revenue from the larger online radio services licensed by PPL, where the market has moved to more interactive online services licensed directly by rightsholders.
The latest Review, for 2014, tells us:
Overall growth in Broadcast & Online licensing income of 1% was delivered in 2014. This was achieved despite increased competition from new online services, which are largely licensed directly by PPL’s members.
What do record companies have to gain by regarding downloading and streaming as analogous to the distribution of sound recordings, on the one hand, or being classified as part of the 'making available right', on the other? First, it means that this income goes directly to the record companies rather than to PPL. Consequently, the money that is due to artists is not safeguarded against their advances: it will instead be used to recoup them. Secondly, it means that the record companies do not have to abide by PPL’s 50/50 rules for splitting income equitably with performers. Recording artists are, in fact, receiving a far lower percentage of online royalties than this. You’ve probably heard about the fuss they’re making.

Thursday, 10 September 2015

Sympathy for the Mechanical

Although I’m not always sure of the motivations, there is a politics to the reporting of music industry sectors. In particular, there has been a desire to emphasise the health of the live music industry at the expense of recorded music.
The statistics that have been most widely used in support of this scenario come from Adding Up the Music Industry, a series of reports issued by PRS for Music. Sadly these reports are no longer compiled: the last of them concerns revenues for 2011. It calculates the total money generated by the UK music industry in this year at £3,793m. Out of this figure £1,057 comes from business-to-business income and £2,736m from business-to-consumer. The latter is divided into £1,112m for recorded music and £1,624m for live music.
And so live music triumphs over all other comers. It is this outcome that many analysts have taken up and run with. The reports have their problems, however. Live income is compiled in a different manner to the other streams. As well as documenting the primary market – the money spent on purchasing tickets from ticket agents and venues – the figure includes secondary ticketing and ancillary spend. Secondary ticketing is money derived from the resale of tickets. Although the report states that this business model is ‘legitimate under UK law and is an established practice’ it is somewhat contentious. Moreover, none of the money from these sales goes to writers, musicians, publishers or record companies. At the very least this income is comparable to the second hand sale of records, an income stream that is omitted from the figure for recorded music. Under a different legal system it could be considered more akin to bootlegging. The report calculates its worth at £208m.
Ancillary spend is the extra money that is spent at gigs and festivals: the purchase of ‘merchandise, food, beverages, parking and public transport’. It is questionable whether the money spent on food, drink and transport should be included as part of music industry income. Some money from these sales might trickle through to a few performing artists, but it will be tangential and minimal, and in these instances should be included in the business-to-business figures, rather than business-to-consumer. Moreover, although these sales are included in the live income stream, money spent on food, drink and parking when going record shopping is not included in recorded music. This is the case even when the record shops are serving food and drink themselves.
Artists can make money from merchandise. There are famous cases where bands have made more money from t-shirt sales than they have from ticket sales. It is unfair, however, to include the sales of merchandise in the live tally while omitting it from recorded music: these reports do not include the sale of t-shirts and other merchandise in record shops.
It is difficult to calculate how much ancillary spend is worth as the 2011 report fails to provide precise figures. The best it offers is that festivals and arenas each account for ‘around 25 percent of the market’ and that ancillary spend at festivals is equal to ’95 percent of the average face value ticket per person’ while the ‘level for most other venue sizes was between 35 and 50 percent’. At the very least, then, ancillary spend is equivalent to a third of the money spent on primary tickets. The live income stream can therefore be broken down into £208m for secondary ticket sales, £472m for ancillary spend and £944m for primary ticket sales. It is only the latter figure that can effectively be compared with the statistics for recorded music. Looked at this way, live income is the lower of the two.
Recorded music is unfairly represented in other ways. In 2011 PRS for Music reported £65m income for ‘mechanical revenues’, i.e. the money that songwriters and publishers earn from record sales. Adding up the Music Industry contrasts the ‘continued decline of the recorded music market’ with the ‘phenomenal revenues’ earned in the live sector. However, live income for PRS for Music was £23m, which is lower than the mechanical income derived from its MCPS alliance.
In addition, the summarising table in the report equates ‘recorded music’ solely with business-to-consumer income. The total of £1,112m is made up of ‘payments for physical music products, downloads-to-own and subscriptions’. This obfuscates the fact that there is plenty of recorded music income that is derived business-to-business. A substantial amount of the £448m that is attributed here to PRS for Music comes from the use of recordings. Away from the main breakdown of figures, the report itself allocates £101.6m of PRS income to ‘recorded music’. Sound recordings also contribute to its other income streams: broadcast & online, public performance, and international. It should be conceded that live music also contributes to each of these remaining areas of business-to-business income, albeit that it is recorded music that dominates when it comes to the income generated by radio, television, the internet and the use of music in public premises.
Moreover, while PRS for Music owns the performance right in its members’ works, MCPS does not have complete jurisdiction over the mechanical right. Its members can opt to self-licence the use of recorded music for films, adverts and some television programmes. As such, recorded music makes up a significant proportion of the music publishers’ direct income. Out of the £210m that is allocated to them in this report, £48m comes from these sync rights. Ultimately, the mechanical income for songwriters and publishers is holding up better than much industry reporting would lead us to believe.
There is, in addition, plenty of business-to-business income that makes its way to record companies and recording artists. Recorded music is responsible for all of the £80m income that is attributed to PPL and the £220m accorded to ‘record label direct revenues’. The latter figure, in fact, includes some PPL revenue, as it is made up of ‘music synchronisation, “360 degree” artist deals, concerts, music-related TV production, broadcasting and public performance’.
Because of the way the figures are reported, it is impossible to make an accurate tally for the income derived from sound recordings. Recorded music is, however, worth considerably more than the £1,112m highlighted in Adding up the Music Industry. For the vast majority of professional songwriters and musicians it provides more money than live music does. While the same is obviously true for record companies, it applies to music publishers as well.
There are good reasons why some academics have seized upon PRS’s analysis: they like to emphasise the freedoms of the live music scene in comparison with the tyranny of being signed to a record company. PRS also has a performance emphasis. It is, after all, the ‘performing right’ that is enshrined in the society’s initials. Unlike the Musicians’ Union, however, it does not campaign to keep music live: it collects money from the performance of records as much as it does from performance in person. The reasons why PRS have chosen to under-represent recorded music in their reports are therefore obscure. Finally, I should concede that I have my own biases. Although I do think I’ve provided a fairer way of reading the statistics, I also know that I’m a record man. My main pleasures in popular music have always come from recordings. 

Thursday, 3 September 2015

Community Chest

When campaigners have wished to curtail the duration of copyright they have called upon the public. This practice is as old as copyright law itself.
The Statute of Anne (1710) is titled ‘An Act for the Encouragement of Learning, by Vesting the Copies of Printed Books in the Authors or Purchasers of Such Copies, during the Times therein mentioned’. The time being referred to is the term of copyright, which was set at a period of 14 years and could be extended by a further 14 years if the author was still living at the end of the initial period.
The Act also indicated how it would encourage learning. Copyright would inspire writers. It would motivate ‘learned men to compose and write useful books’ because they would now have some legal assurance of getting paid. In addition, the restricted duration of copyright would boost reading, as it would lead to cheaper books. Books in copyright would be monopolistically owned: an author would have the ‘sole right’ to their books, while any bookseller to whom they assigned that right would have ‘the sole liberty of printing and reprinting such book’. Although monopolies drove up prices, the public domain would bring them down. Expiry of the term of copyright would give any bookseller the liberty to reprint the work; the ensuing competition would result in lower costs.
The price of books had been a genuine concern. Prior to the Statute of Anne, the old licensing laws had given members of the Stationers’ Company monopoly rights to book titles. When they were due for renewal in 1693, a group of peers protested about the law, stating that it ‘subjects all Learning and true Information to the arbitrary Will and Pleasure of a mercenary, and perhaps ignorant, Licenser; destroys the Properties of Authors in their Copies; and sets up many Monopolies’. The Statute of Anne aimed to curb the practice of these mercenaries, not only via limited copyright duration, but also via a clause that allowed any ‘person or persons’ to raise a complaint to the Lord Archbishop of Canterbury about any book whose price they deemed to be ‘too high and unreasonable’.
Copyright law therefore aims to achieve a balance. It has raised monopolies in order to protect the interests of authors, and it limits them in order to make their works affordable. This idea was carried through from British law into the American Constitution, which talks of promoting ‘the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries’. It can also be seen in the Universal Declaration of Human Rights, which counters ‘everyone has the right freely to participate in the cultural life of the community’ with ‘everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which they are the author’. In 1841 Lord Macaulay made what is perhaps the most famous case for this balance. In a speech to the British Parliament he argued that:
Copyright is monopoly, and produces all the effects which the general voice of mankind attributes to monopoly. .... The effect of monopoly generally is to make articles scarce, to make them dear, and to make them bad. ... It is good that authors should be remunerated; and the least exceptionable way of remunerating them is by a monopoly. Yet monopoly is an evil. For the sake of the good we must submit to the evil; but the evil ought not to last a day longer than is necessary for the purpose of securing the good.
Mark Rose believes this statement is a ‘standard point of reference in discussions of the history of copyright’. It should be noted, however, that Macaulay was campaigning against an extension to copyright. It is therefore natural that the people who refer to him most are those who wish to free copyright from the extensive grip of monopolies. This includes Andrew Gowers, who quoted the speech in his 2006 Review of Intellectual Property. This report rejected an extension to sound recording copyright in Britain. Gowers argued that a properly functioning copyright system is one where ‘incentive to innovate is balanced against the ability of follow-on innovators to access knowledge’.
I think Gowers was right. If copyright is supposed to both inspire artists to create and enable audiences to access their work, extending the duration of sound recording copyright from 50 to 70 years would be of little account to either cause. I’m not sure that Macaulay was the best person to turn to, however. There is a lacuna in copyright debates. Campaigners against extension have made excellent analyses of the figure of the author, looking at the ways that corporations have hidden behind artists’ rights in order to achieve their own ends. In contrast, the effects of copyright upon the public have received less attention. Although campaigning centres upon the idea of ‘access to knowledge’, there is little investigation of how access works in different artistic fields.
Macaulay was arguing against claims for copyright extension that were being made in respect of books. Books work differently to music. Monopolies do make them expensive. Despite the textual expansion of the internet and a continuing tradition of book readings, the most common way of accessing a book is to pay for it: the majority of the trade takes place between businesses and consumers. As a result, a book that is in copyright will almost always be more costly than one that is in the public domain. In fact, in arguing that the public domain leads to cheaper prices, Gowers used the book trade as his example, even though this was in a section of the Review of Intellectual Property that was debating the merits of sound recording copyright extension. 
It should be noted, however, that there is a lot of ‘free’ music that is within copyright. Or, to put it another way, the public enjoys a lot of music without having to make a direct monetary exchange. We get to hear music for nothing on the radio; on television; in the cinema; in shopping malls; in bars, pubs and clubs; and on much of the internet, whether we are pirating or not. Many monetary transactions relating to music take place business-to-business, rather than business-to-consumer. According to PRS for Music figures from 2011 these business transactions make up nearly a third of the market for music in the UK. The value of B2B income for the music industries in that year was £1,057m, while B2C income was £2,736m (split £1,112m for recorded music and £1,624m for live music).
We do, of course, end up paying for much of this B2B music in other ways. If music is being played for free by a public broadcaster, its costs form part of the licensing fee. If it is free because it is advertising-funded, we bear the cost of that advertising in the goods we are encouraged to buy. Similarly, if music is being played for free in public premises, we pay for it indirectly via other goods that the retailers are selling us. There is also a human cost. We are denied agency: businesses choose our music for us, and they choose songs that best underpin their own needs. Moreover, we need to be aware that on many occasions when we hear music without paying for it, it is us who are being sold to advertisers.
Music’s monetary waters are muddied further when we begin to think about monopolies. There are situations when monopolies actually help to keep costs down. Most of the music that we hear over airwaves and through public address systems is paid for via blanket licences. The users of music don’t licence it directly from publishers and record companies, they instead use collection societies. In most countries there is just one collection society for each of the principal streams of income. There will be a society that collects public performance income on behalf of songwriters and publishers; a society that collects public performance income on behalf of record companies and recording artists; and a society that collects ‘mechanical’ income - money from record sales and other uses of recordings - on behalf of songwriters and publishers (the record companies act for themselves when it comes to collecting their own mechanical income and the royalties from recording sales that are due to their artists). In Britain these societies are PRS for Music, PPL and MCPS, respectively. They operate as monopolies.
One effect of blanket licensing is that all music costs the same. The BBC pays as much to play a track by the Beatles as it does to play a track by Bogshed (this is one of the reasons why it tends to use such well known music in its own promotional films). Some of the collection societies are more monopolistic than others, however. The writer members of PRS assign the performing right in their works to the society. PRS therefore ‘owns’ this right and can offer its whole repertoire of works to the broadcasters and premises it has licensing deals with. In contrast, MCPS merely administers the mechanical right. Its relationship with songwriters is instead enshrined in its Membership Agreement, which covers a number of standard and blanket licences. While PRS controls all aspects of the performing right on behalf of its members, there are some areas where MCPS members can opt out of blanket licences and instead negotiate directly with users. This includes music for films, adverts and some commercial TV broadcasters. One reason why members choose to operate in these areas is because they can negotiate higher fees. Here monopoly breaks down and the Beatles will cost more than Bogshed. PPL’s monopoly is also limited. It collects money from public premises and from broadcasters but generates little online income. The majority of this licensing is instead carried out directly by the owners of the sound recordings. PPL argue that this ‘reflects the prevailing view of record companies that downloading and on-demand streaming is analogous to the distribution of sound recordings, a traditional record company function’. Moreover, if you want to use a sound recording in an advert or a film you will have to negotiate directly with its owners. If you want to use a major star or a big hit this will cost you dearly.
As the income from recorded music declines, the money that can be made from licensing becomes more important. Consequently, some performers are seeking greater control of their rights. Artists such as Prince have successfully gained ownership of their sound recording copyrights. While most record companies use PPL to licence their catalogues of recordings to radio and TV at standard rates, and they will have their own blanket licences in place with streaming services, artist owners are more likely to operate in a restrictive manner. The performers whose music is not available on internet platforms such as YouTube or Spotify generally fall into two categories. There are artists who own their copyrights and there are artists who have the status to negotiate contractual clauses about licensing rights with their record companies. Although in each case they are standing up to monopolies, this does not result in music that is cheaper or more readily available.
In addition, there are publishers who are choosing not to be members of MCPS. They believe there is more money to be made if they avoid the collection society’s blanket licences. Recently the BBC announced that it would no longer be able to play music by Neil Young, Bonnie Raitt, Journey and the Doors. It was introducing a new iPlayer radio app, which would provide users with the opportunity to listen to BBC radio offline. Wixen music, the publisher for these artists, was not a member of MCPS and therefore the BBC was not covered in respect of this new mechanical distribution of their music. The publisher had decided to forego membership because they felt they could more profitably negotiate television rights for their artists’ songs independently. The situation was eventually resolved via an one-off agreement between Wixen, the BBC and MCPS. The case does, however, highlight the fact that it is not always monopolies who make music scarce or dear. On the contrary, in modern times this fate is more likely to befall music that has escaped the collection societies’ monopolistic demands.