Memorandum submitted by the Music Managers
Forum UK
INTRODUCTION
The Music Managers Forum UK wishes to thank
the CMS Committee for the opportunity to respond to the inquiry
into new media and the creative industries.
The Music Managers Forum UK represents featured
artist music managers and through them the featured artists (performers
and creators) themselves. These featured artists are those that
are the source of over 95% of the economic activity in the global
music industry. Featured artist music managers are uniquely placed
to comment on music industry issues, as they are the only group
of professionals that deal with every aspect of the music industry
and the copyright system as it applies to music on a daily basis.
Music managers are responsible for every aspect of the artist's
career including interfacing and negotiating with phonogram producers,
music publishers, making arrangements for touring, sponsorship,
merchandising, and ensuring that all the available income streams,
including those from collection societies, are properly managed.
Managers are generally remunerated on a commission basis (usually
in the region of 20% of income actually received by the artist)
so income streams affecting the artist also directly affect those
of the manager. The Music Managers Forum UK is one of 15 Music
Managers Forums around the world, which collectively are part
of the International Music Managers Forum, which is also based
in the UK. The IMMF participates as an NGO at WIPO processes in
Geneva.
GENERALLY
We are very pleased that the Government is undertaking
this important review. The music industry is currently in a crisis
period with creators (songwriters and composers) and performers
(recording artists) being squeezed to the point where it will
be difficult for all but the most successful to make a living
from their endeavours.
At one end of the creative chain there are creators
and performers, without whom there would be no music industry,
and at the other end, consumers. The difficulties occur in all
that happens between these primary groups.
Indeed there is much empathy between consumers
and creators/performers. Most creators and performers have an
idealistic and cultural view of the world, which they wish to
share with as many people as possible who might be interested
in their creations and performances. It is the process by which
that is achieved that concerns us most at this technologically
revolutionary period we find ourselves in.
The consumer is not generally interested in
who the phonogram producer (record company) is. Neither are they
particularly interested in who the publisher or digital music
service provider is. Rather, the consumer is interested in the
direct activities of the creators and artists themselves. The
consumer wishes to acquire recordings (audio and audio-visual)
for their personal use and enjoyment, share that music with close
friends and be able to go and see their favourite creators/performers
in a live environment.
There needs to be far more consultation with
these two primary end groups by government in order to achieve
a fair balance in the new digital environment. Due to the lobbying
power of very well funded phonogram producer organisations such
as IFPI and the BPI successive governments have come to regard
these organisations as "the music industry." Nothing
could be further from the truth. These organisations represent
phonogram producers who wish to exploit the creators/performers
works to their maximum financial advantage. In order to create
a balance government should pay far greater attention to creator's
organisations such as BACS (The British Association of Composers
and Songwriters), the MU (Musicians Union) and indeed ourselves.
THE VALUE
OF THE
INTERNET FOR
CREATORS AND
PERFORMERS
Whilst the development of the internet has thrown
up many issues which national government, the EU and the international
community need to be constantly addressing, it has also opened
many opportunities for creators and performers to do it themselves.
It is now possible for creators and performers to have their own
website from which they can provide information on upcoming shows
and record releases and sell their recordings directly to the
consumer. However, due to a lack of resources, which record producers
and publishers can provide, this approach inevitably has limitations.
With this model the creator/performer, bypassing record producers
and publishers, will generally rely heavily on the collection
societies and it is essential that government monitor the fair
governance and efficiency of these organisations.
THE BOARDS
OF COLLECTION
SOCIETIES SHOULD
ACCURATELY REFLECT
THE RIGHTS
THEY ADMINISTER
In the UK we have several national collection
societies four of which are monopolistic. In such situations it
is essential that the board structure of these monopolies accurately
reflect the rights the society administers. Only one of these
societies fulfils these criteria this being the Performing Right
Society (PRS). This collection society with six creators and six
publishers on the board is a shining example of how the board
of these societies should be structured to ensure a fair and balanced
approach to the distribution of income. Contrast this with Phonographic
Performance Ltd (PPL), which is wholly owned and controlled by
the phonogram producers even though it is supposed to be administering
equitable remuneration to performers and copyright owners. In
recent times two performers representatives have been included
in the PPL board and this year further new structures with some
performer participation are planned, but in effect this is mere
window dressing. The balance of power is still very much with
the phonogram producers. The Copyright and Related Rights Regulations
1996 gave performers the unwaivable right of equitable remuneration
in the public performance of their sound recordings. Two serious
abuses have resulted. The first is that hundreds of thousands,
if not millions of pounds, of performers money has been spent
on anti-piracy campaigns without the performers' permission. Performers
are powerless to approve or deny such expenditure of their own
money. The second is that the vast amount of public performance
income collected by PPL from non-qualifying performers (particularly
American performers) all goes back to the phonogram producers
instead of being shared with qualifying (UK) performers, as it
clearly should be. This has resulted in a huge loss of income
for British performers. It has been suggested that such non-qualifying
income represents in the order of 25% of all performer money collected
by PPL, which equates to some £10 million per year.
In the Copyright and Related Rights Regulations
2003 performers were granted the exclusive right of making available
which was an important additional right performers received from
the WIPO WPPT Treaty. Performers would very much like PPL to represent
them in monetising this right but with the current board structure
this is impossible.
We call on government to introduce regulations
which ensure the democratic operation of monopolistic collection
societies.
USE IT
OR LOSE
IT
One of the issues that concern us is the practice
of phonogram producers to insist on assignment of copyright in
recordings for life of copyright and then to fail to actively
exploit those copyrights.
Even though the performer is expected to pay
for all of the recording costs in audio recordings and usually
50% of the costs in promotional audio-visual recordings, from
the performers' audio royalties. The records on view in record
retailers are just the tip of the iceberg. Most performers' recordings
are sitting in phonogram producers' vaults and are not available
to the public. The phonogram producer sits on these copyrights
hoping for some windfall use such as inclusion in a film. The
performer is powerless to do anything about this. It is effectively
keeping art from the people and puts the performer in the position
of being in restraint of trade.
It should also be noted that in the literary
world the copyright is returned to the author if the book goes
out of print.
We call for assignment of copyright to be limited
to 25 years so that after this term the copyright is returned
to the original performers who can re-assign it or make the recording
available to the public themselves. We also call for evidence
that the phonogram producer is actively marketing and seeking
exploitation opportunities for the performers work during the
assignment period. If the recording is deleted for more than say
two years the copyright assignment should cease to be valid.
In the United States assignment is limited to
35 years but the term of protection of copyright in sound recordings
is 95 years rather than 50 years in the UK.
TERM OF
COPYRIGHT EXTENSION
The terms of copyright for creators (authors)
and performers need to be harmonised. If copyright law were being
created today there would be no possible justification for the
discrimination against performers that we currently experience.
The current term of copyright protection for sound recordings
is 50 years from first release whilst the term of protection for
creators can be up to 150 years (70 years after the death of the
last surviving creator). The reason for this is entirely historical.
Author's rights started 100 years before performers rights.
We call for the term of protection of sound
recordings to be harmonised with that of creators with a proviso
that assignment is limited to 25 years; ie 70 years after the
death of the last surviving performer on a recording with a limitation
of assignment of 25 years.
We would also be happy to consider an additional
benefit to session players at each point of assignment expiry;
ie that every 25 years session musicians might receive an additional
payment.
ENFORCEMENT
Whilst we support strong and effective enforcement
of copyright we are concerned about some of the heavy-handed practices
being used by the major phonogram producers in the digital environment,
which alienates consumers and reflects badly on creators and performers.
Blatant copyright infringement in the physical
world such as market traders manufacturing, distributing and selling
counterfeit copies of CDs and DVDs should be effectively policed
by trading standards officers. Penalties should be substantial
and include prison sentences for serious offenders. Similarly
in the digital environment anyone commercially exploiting illegal
downloads should be dealt with in a similar manner.
We call on government to provide greater resources
to trading standards officers and the police to circumvent illegal
use of copyright for commercial gain.
ILLEGAL FILESHARING
Whilst any illegal use of copyright is undesirable
there is a world of difference between criminal activity to circumvent
copyright law for financial gain and music lovers sharing files
without permission for no commercial gain. Recent developments,
which involve phonogram producers suing children and grandmothers,
could well be counterproductive. In a recent survey by research
company The Leading Question it was discovered that regular illegal
file-sharers spent £5.52 per month on music compared with
those music fans that did not illegally share files who spent
only £1.27. It would therefore seem that the record companies
are actually suing their best customers. Only by improving public
awareness of the importance and benefits of a thriving copyright
regime will the mindset in the public consciousness change.
We call for the principles and importance of
copyright to receive higher priority in school education and for
it to become a compulsory part of the school curriculum. We also
call for the BBC to take a far more responsible position in measures
to improve the understanding of copyright in the public at large.
DRM AND TPM
Digital Rights Management (DRM) and Technical
Protection Measures (TPM) urgently need regulation. Whilst a degree
of DRM and TPM are essential we have recently seen some very heavy-handed
approaches from some phonogram producers which make the consumer
angry and in one recent case have caused huge problems for one
of the major phonogram producers. Sony-BMG made headlines last
year when it was discovered that the company had infected eight
million CDs comprising 51 titles with copy-restriction technologies
that covertly installed themselves, hid themselves from users,
exposed users to vulnerability to hackers and viruses, and monitored
user activity. The company spent months denying that this was
a problem and refusing to release an effective uninstaller. An
estimated 500,000 networks were infected, including many government
and military networks. The company has settled one class action
suit, but still faces government suits in the US, Canada, Ireland
and Italy. As a result Sony-BMG have removed all restrictive DRM
from their physical CDs but still apply it to digital downloads.
DRM can be very useful as a way of identifying
works, providing marketing data and tracking purchasing trends
etc and we fully welcome this kind of DRM use. Highly restrictive
DRM regimes, however, cause huge levels of resentment from consumers
who tend to blame the performer, who in the vast majority of cases
has no say at all as to whether restrictive DRM and TPMs are applied
to their work or not. So here you have a situation where both
the creator/performer and the consumer are unhappy and feel disenfranchised
and powerless.
Also as we all know there is "the analogue
hole" wherein if a sound carrier or digital file are played
through any digital decoding device such as a CD player or MP3
player the music being played can be recorded on to another analogue
device. This analogue copy will automatically remove all DRM and
TPM restrictions. With the quality of music and audiovisual players
constantly improving and recording devices also improving it is
already very difficult to tell the difference between the digital
original and the analogue copy. This drives a coach and horses
through all DRM and TPM technology. The use and development of
DRM and TPM technologies cannot be left completely to the market.
There must be some oversight to remedy and prevent current and
future abuses.
We call for all DRM and TPMs to be clearly labelled
on the product and the packaging so that they are identified to
the consumer before the purchase is made; eg if a CD will not
play on a personal computer or there are other restrictions, the
consumer should be made aware of that prior to purchase.
INTEROPERABILITY
The entire music industry seems to be united
in the need for some kind of move towards compatible operating
systems in regard to online dissemination of music. Any help government
can give to achieve this would be of major importance. At present
if a download is purchased from Apple's I Tunes, for example,
it cannot be played on a Windows MP3 player and vice-versa. There
are similar issues developing for high definition television.
Whilst it is essential to maintain a free market the issue of
interoperability is a major concern to the entire industry.
Competition in the music industry should be
between tracks (songs/recordings) rather than between delivery
systems. Non-interoperability makes for a restriction of choice
for consumers and is anti-competitive.
We call for the government to assist in any
way it can to achieve interoperability across digital regimes.
AUDIO VISUAL
RIGHTS
Whilst the Music Mangers Forum represents the
interests of both creators and performers it is in the area of
performer's rights that there is the most need for action. Nowhere
is this more acute than in the area of audiovisual performers
rights. It was a major disappointment for audiovisual performers
worldwide that in December 2000 the WIPO Diplomatic Conference
on an Audio Visual Treaty failed which has resulted in the continuance
of a severe lack of balance in the arena of copyright and related
rights.
But we have seen that in other EU member states
it is perfectly possible for member states to introduce national
laws to give enhanced protection to audio-visual performers. At
present in the UK if a performer makes a recording and the recording
is played on the radio, the performer gets paid their equitable
remuneration on the public performance. If that same performer
then combines the same recording with visual images then no remuneration
is payable. The most striking example of this is where the performer
appears in a promotional video. In this example the performer
is not only performing on the audio recording as a musician or
singer but is also appearing in the video as an actor or actress.
In other words the performer is performing twice as much. Yet
as soon as the performance becomes audiovisual the performer gets
nothing with all performance income going to the audiovisual copyright
owner, which in the case of music is usually the phonogram producer.
This imbalance needs urgent government action.
In the above example it is a controversial point
as to whether in the case of a promotional video this is a an
audio-visual work in the same sense as a feature film or television
programme. The collection society VPL which is again wholly owned
and controlled by the record companies is not prohibited from
doing the right thing and sharing the public performance from
these videos with the performers, especially as the performer
will have paid between 50-100% of the cost of making the video.
Instead they choose to pay themselves 100% of the income and the
performers get nothing.
We call on the government to take urgent proactive
measures to influence the European Commission and WIPO to seek
to achieve an international audiovisual treaty. In the mean time
the UK Government should introduce national legislation to implement
performers rights for audio-visual performers as has been done
in Germany and elsewhere.
THE INTRODUCTION
OF A
PUBLIC PERFORMANCE
RIGHT IN
SOUND RECORDINGS
IN THE
ANALOGUE ENVIRONMENT
IN THE
UNITED STATES
When the WIPO internet treaties (WPPT and WCT)
were agreed in 1996 there was an opt-out provision in regard to
the public performance of sound recordings. The United States
alone decided to exercise this opt-out provision, which has subsequently
resulted in a huge loss of income for UK performers and copyright
holders. The USA represents some 35% of the world music industry.
We call on government to apply as much pressure
as possible on the US government to introduce a public performance
right in sound recordings in the analogue environment.
THE VALUE
OF AN
UNWAIVABLE RIGHT
OF EQUITABLE
REMUNERATION AND
THE PROBLEMS
ASSOCIATED WITH
ASSIGNABLE EXCLUSIVE
RIGHTS
One of the success stories of recent copyright
legislation is the right of equitable remuneration for performers
in the public performance of sound recordings. The reason for
this success is that it has provided an income stream for performers
that cannot be assigned or waived by contract. Contrast this with
the recently introduced moral rights for performers (as obligated
by the WPPT treaty and the subsequent EC's Information Society
Directive), and the exclusive right of making available. The former
can be waived in contract and the latter is assignable which at
present renders both meaningless. When a new performer or performer/creator
engages in negotiations for a recording agreement they have a
very limited and unequal bargaining position. Both the waiving
of the performer's moral rights and the assignment of the performer's
right of making available are completely non-negotiable as far
as the record company is concerned. Performers need a collection
society like PPL (if it had balanced governance) to which they
could assign their exclusive right of making available BEFORE
they start negotiating a recording agreement. Only then could
this important right provide a new income stream in the digital
environment for performers. A parallel exists here with the PRS.
It is accepted by publishers that songwriters will always assign
their public performance rights to the PRS usually before they
negotiate a publishing agreement and publishers accept that this
is the normal procedure. Creators and performers need moral rights
that are unwaivable in contract and exclusive rights that are
not swallowed by contracting parties in a dominant position. Certain
exclusive rights should only be assignable to a collection society.
We call on government to legislate rights for
creators and performers that cannot be waived or assigned in contract.
Also any assignment of copyright should be illegal, transfer always
being by license. Certain exclusive rights should only be assignable
to a collection society.
ROYALTIES IN
THE DIGITAL
ENVIRONMENT
The most serious practical issue currently facing
creators and performers is the amount of remuneration they are
receiving from digital downloads, limited downloads, on-demand
streaming, premium webcasting and general webcasting. Physical
distribution of recordings and digital distribution of recordings
are fundamentally different processes. With digital distribution
the phonogram producer does not have the following costs:
1. The cost of manufacturing the CD.
2. The cost of manufacturing the CD booklet.
3. The cost of the jewel case or digi-pack.
4. Warehouse and storage costs.
5. Vehicle delivery costs.
6. Retail costs such as window displays
and positioning costs.
7. The cost of field staff selling in to
stores.
8. The costs of processing sale or return
stock or damaged/faulty stock.
Despite this the major phonogram producers are
insisting on applying the same royalty rate structure as in the
physical world which in real terms means that on a 79p I tunes
download the performer can expect around 3-5 pence as a royalty
and on a £3 ring tone download the performer can expect somewhere
in the region of 11p. This means that in the future, other than
the handful of very successful performers and creators, it will
be very difficult for them to make even a basic living. This business
model is simply not sustainable for the vast majority of performers
and creators. Because the consumer can now cherry pick recordings
rather than being obliged to purchase an album of perhaps 12 tracks
it is essential that the phonogram producers share their huge
savings as listed above with the creators and performers. The
PRS/MCPS alliance are quite rightly demanding a new mechanical/performance
royalty of 12%, which is entirely reasonable under the circumstances.
Some phonogram producers are even applying a format reduction
in the royalty to replace the packaging deduction of old. This
is again an example of phonogram producers exercising their dominant
position against the comparatively soft target of the creators
and performers. This policy will push aspiring performers to follow
a do it yourself model or to sign to smaller independent phonogram
producers who operate on a 50/50 profit sharing basis. With a
50/50 net receipts deal performers can receive up to four times
as much from digital delivery than they would with one of the
major phonogram producers. The telecoms such as T-Mobile, O2 and
Vodaphone and music service providers such as I tunes, Napster
and AOL, due to their sheer size are also operating in a dominant
position.
The Music Managers Forum has launched its "Know
More" campaign to inform interested parties and consumers
as to the imbalance that creators and performers are currently
experiencing in the digital environment.
We call for an industry norm in regard to digital
royalties for performers of 50% of net receipts.
HOME COPYING
LEVIES
We all know that whatever legislation is in
place consumers will still want to record music at home and share
it with their friends and family. Most of our EU partners and
countries such as Canada have for many years successfully operated
home copying levies on hardware and/or media. Britain was supposed
to introduce a home copying levy in the 80s but the government
of the time changed its mind at the last minute. As a result performers,
creators and copyright owners have suffered by losing a very valuable
income stream. With DRM and TPM being rendered largely ineffective
due to the analogue hole it is essential that the government re-examine
the potential of home copying levies.
We call for the government to introduce home
copying levies on hardware and media without delay to compensate
creators, performers and copyright owners for the domestic copying
of their works.
BLANKET LICENSING
Generally the anarchy due to the possibilities
of the new technology suggest that systems of blanket licensing
for the use of music would enable easy access to all music for
consumers, but would ensure compensation for creators, performers
and copyright holders. A voluntary user license analogous to the
BBC license may be worthy of consideration in future years.
Current French legislative proposals demand
serious study as a first attempt by any government to address
this issue. The role of collection societies will be central to
the viability of any of these schemes making the regulation of
collection society governance and efficiency paramount.
THE BBC CREATIVE
ARCHIVE
We are delighted that the government intends
to continue the BBC licensing system. The BBC like the NHS is
one of Britain's great success stories and whilst we accept that
certain changes in governance and structure are necessary the
Music Managers Forum strongly supports the BBC in its mission
to inform educate and entertain.
Whilst it is clearly the BBC's duty to provide
the best value for money possible for the BBC license fee payer
it is also essential that the BBC show respect and consideration
of copyright and the valuable pool of talent this country possesses.
The UK has produced some of the world's finest creators and performers
and it should respect, nurture and reward that talent so that
this rich heritage can continue and thrive.
An invitation to "find it-rip it-burn it-share
it and use it" has the air of an organisation which seeks
to undermine copyright rather than a publicly owned authority
which should emphasise best practice.
We call for performers, creators and copyright
owners to be compensated if their works are included in the creative
archive (unless they choose not to be) and the BBC should have
an obligation to educate the public in the importance of respect
for copyright and its cultural importance.
We are also concerned that some performers and
creators are signing away their rights based on the Creative Commons
license without being fully informed as to what they are signing.
CONCLUSION
Whilst the Music Managers Forum represents managers
and artists of some of the most successful British artists such
as Robbie Williams, Snow Patrol, The Gorillas and Phil Collins
our organisation also represents many managers and artists who
are finding it hard to make even a basic living from their creative
endeavours. It is those creators and performers that need government
help and protection in order to develop in to the successful artists
of tomorrow.
Creators and performers need the government
to introduce reform of contract law in order to give greater protection
for the "underdog" in music business contract negotiation
as occurs in the legal regimes of many of our EU member state
partners. We have seen with the equitable right of remuneration
in sound recordings that this can be done in the UK. This right
is unwaivable in contract which has meant a genuine guaranteed
income stream for performers that cannot be swallowed by record
producers in a dominant position. Contrast this with the recently
introduced moral rights for performers and the exclusive right
of making available both of which are in effect meaningless as
they are waivable or assignable in contract. We would also like
to see assignment of copyright outlawed so that any such transfer
is only by license as is the case in Germany, Austria and Spain.
The reform and regulation of the governance
of collection societies is of fundamental importance, particularly
if they are monopolies. Collection societies will become ever
more important as we go forward into the digital environment of
the future, making such regulation essential.
We would like to see the BBC play a far more
responsible role in the education of the principles of copyright
and its importance to the nation for cultural diversity, and economic
prosperity on a global scale.
20 March 2006
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