Memorandum submitted by the British Phonographic
Industry (BPI)
INFORMATION ON
THE BPI
The BPI is the British record industry trade
association representing over 300 record companies in the UK.
The bulk of these are small independent music
companies. The BPI also represents the four biggest multinational
players, the so-called "majors"—Universal, Sony-BMG,
EMI and Warner.
BPI members account for around 90% of recorded
music sales in the UK.[1]
The BPI welcomes the opportunity to give evidence
to this inquiry and would be happy to provide further supporting
evidence if required.
1. EXECUTIVE
SUMMARY
— The UK recording industry has embraced
the emerging digital marketplace and now has by far the most advanced
digital music market in Europe.
— The UK recording industry is also
tackling digital copyright infringement directly through litigation
and working to educate consumers.
— But there are measures that only
Government itself can take:
1. increase the term of copyright protection
for sound recordings;
2. education—working to help the
public and, in particular, children to understand their rights
and responsibilities in relation to copyright works in the digital
age;
3. enact legislation to ensure clear
and unambiguous liability for businesses—such as those running
unauthorised file-sharing sites—who facilitate industrial-scale
infringement by others;
4. eliminate any argument that the so-called
"time-shifting exemption" allows people to acquire a
permanent music collection without payment from services that
were intended for transient listening; and
5. establish a system of statutory damages
for copyright infringement in order to simplify and expedite proceedings
and increase deterrence.
— It is also essential that initiatives
such as the BBC's Creative Archive do not disadvantage rights
holders and their ability to benefit commercially from their work
— On the question of "regulation",
we believe the internet should not be immune from the application
of copyright law.
The BPI believes that a modern, clear, strong
intellectual property framework is as much in the interests of
consumers as producers and artists.
2. THE MUSIC
INDUSTRY
The essential role of record companies is to
discover, invest in, market and distribute new music to bring
the highest quality content to consumers. This makes it one of
the riskiest of the creative industries. Of the 31,291 albums
released in 2005 just 228 sold more than 100,000 copies[2]
and less than one in 10 releases is a hit, with even fewer returning
a profit.
BPI research shows that the UK recording industry
invested £207 million in new music in 2004.[3]
No other sector of the UK music industry invests as much in new
music as the recording industry.
The UK has one of the most successful recorded
music industries in Europe:
— Over a period from 2000-04 when the
worldwide recorded music market declined by 15.4%, the UK market
grew by 3.7% in value terms.[4]
— The UK recorded music industry is
second only to the US in its share of exports of music around
the world, with 8% of the US market and 12% of the German market
in 2004;[5]
But without adequate copyright law and meaningful
enforcement provisions this investment and success is jeopardised.
3. TERM OF
COPYRIGHT FOR
SOUND RECORDINGS
The term of protection for sound recordings
has been 50 years since the introduction of the 1911 Copyright
Act. Under the 1956 Copyright Act[6]
sound recordings were separately defined and protected for 50
years. However, this was still substantially lower than the term
of copyright for literary, artistic and musical works which was
for the life of the author plus another 50 years.
This discrimination was exacerbated when the
European Commission "harmonised" the term of copyright
with the EC Term of Protection Directive.[7]
implemented in the UK by the Duration of Copyright and Rights
in Performances Regulations 1995.[8]
This extended the term of protection for literary, artistic and
musical works for the life of the author plus 70 years.
"Related rights" were also reviewed
by the European Commission and they found a greater variation
of terms of protection ranging from 0-50 years.
The term was harmonised by the Directive to
50 years with a common trigger point and the position therefore
remained the same within the United Kingdom.
Why 50 years is not appropriate
— The current term is discriminatory
The recording industry is severely
prejudiced by the disparity in term of copyright protection for
sound recordings (50 years) when compared with other copyright
works such as literary, artistic and musical works (an average
120 years).
It is our view that the legislation
should not discriminate between types of works. Under the current
legislation, a mundane work such as a washing machine instruction
booklet can be protected as a "literary work" and thus
attract around 120 years of protection while a sound recording,
with all its concomitant creativity and endeavour, is merely protected
for 50 years.
— A longer term of protection is
essential for Investment in new music
A longer term of protection for sound
recordings would generate royalties which would help to fund continued
investment in new recordings and would encourage and facilitate
the creative use of back catalogue. This benefits consumers, who
want greater choice and access to wide ranging repertoire and
is also essential for the continued growth and success of British
music.
— The US and Australian Term Extension
Following the implementation of the
"Sonny Bono Copyright Term Extension Act" on 27 October
1998 the US extended copyright for all works by 20 years in response
to the basic "life + 70" term established by the EU
Directive. This included sound recordings.
Australia has, since 1 January 2005,
amended its Copyright Act 1968 to increase the term of protection
for sound recordings from 50 years from the end of the year in
which it was first published to 70 years.
Both the US and Australian governments
have recognised the cultural value of sound recordings and of
recording artists and those who invest in them.
The BPI believes that the UK recorded
music industry should no longer continue to suffer a discriminatory
term compared with that afforded to either the US recorded music
industry or to related copyright industries in the UK.
The UK Government should therefore
seek to increase the term of copyright protection for sound recordings
to create uniformity of term of protection between different types
of works.
4. THE UK RECORD
INDUSTRY'S
SUCCESSFUL TRANSITION
TO DIGITAL
From a base of literally zero in 2003, sales
of single track music downloads reached 5.7 million units in 2004
and 26.4 million in 2005.[9]
There are now more than 40 legitimate online services available
in the UK, offering over two million single tracks with different
business models from single track downloads to "all you can
eat" subscription services.
From essentially having just three revenue streams
less than five years ago (physical product; licence income from
public performance; and B2B revenue from the onward licensing
of master recordings), record companies now have a dozen or more,
putting them at the leading edge of the creative industries' embrace
of digital.
Interoperability
A key difference between the new digital music
formats is that they often only work with proprietary players,
for example a track bought from the iTunes store will only play
on iTunes software and only on iPod portable devices.
The recording industry generally seeks to license
its music to as many different players as possible.
However, we recognise that if one player has
a dominant position in the market, other players may be unable
to gain a foothold since they are effectively locked out of a
significant part of the installed base of players.
The UK record industry urges download retailers
to adopt interoperable standards which allow consumers who buy
licensed digital music formats through one technology provider
to play them on platforms provided by others while maintaining
the integrity of rights management systems which ensure that investors
and creators are appropriately paid for their work.
5. THE EVER-GROWING
PROBLEM OF
PIRACY
Two innovations in home computing technology—CD
burners and the rise in internet access speeds—have between
them delivered the greatest explosion in copyright infringement
yet.
In 2004, 227 million blank CD-Rs were used for
home audio recording.[10]
This is almost equivalent to the number of pre-recorded CDs shipped
in the same year.
In addition, the threat from unauthorised, copied
CDs sold, for example, at car boot sales remains potent. Estimates
based on BPI Anti Piracy Unit seizures totalled 13 million units
in 2004.[11]
This however may be the tip of the iceberg.
Meanwhile peer to peer (P2P) filesharing is
rising, with research suggesting that around eight million people
in the UK have uploaded and downloaded music illegally in the
UK over P2P networks.[12]
The cost of piracy
Overwhelmingly the evidence shows that consumers
who take music free of charge using unauthorised file-sharing
networks decrease their expenditure on music.
The latest research from TNS shows cumulative
losses to the recording industry over the period 2003-05 attributable
to unauthorised file-sharing totalled more than £1 billion.
Since the UK music industry is the biggest and
most significant investor in new music in the UK, this loss has
meant a real reduction in investment in new music. Applying a
notional retail margin of 30%, and taking the standard benchmark
of 17% of industry revenue re-invested in new recordings, it is
possible to estimate that £111 million has been lost in the
form of investment in new recordings by UK record companies over
the past three years.
How the industry has helped itself
As a deep instinct towards self-help runs through
the recording industry, it has therefore taken all possible steps
to control the problem of infringement.
In 2005 the BPI participated in more than 1,000
legal actions against "physical piracy" with more offenders
receiving custodial sentences.
The UK record industry has also taken part in
the concerted worldwide record industry action against individuals
who use peer-2-peer networks to make available sound recordings
for others to copy.
So far 138 people in the UK have been the subject
of legal action in our campaign, four cases have been found successfully
in our favour and 102 individuals have chosen to settle.
This litigation has struck a very difficult
balance between seeking to prevent unlawful conduct and educating
the public about the illegality of such conduct.
While the UK recording industry has been doing
what it can to fight music piracy, there are several key areas
in which the Government has a role to play to help ensure the
UK recording industry remains successful:
(i) Education
The UK recording industry has devoted significant
resources to educating the public about the illegality of making
available music on-line without authorisation, eg from creating
informational booklets for educational establishments to distributing
tens of thousands of leaflets through public libraries and record
stores; from supporting the international www.pro-music.org website
devoted to legal services to our highly-publicised deterrence
campaign.
We believe that the education of the public
is the responsibility not just of the creative industries themselves,
but—if the UK really is to become an "information economy"—of
government too.
The UK record industry supports the idea that
school children should be encouraged to have a greater understanding
of copyright. Copyright should be a part of the national curriculum.
A national campaign aimed at parents would also give them a greater
understanding of the issues.
The BPI also supports the submission made by
the Alliance against IP Theft (Alliance), outlining suggested
legislative changes to assist with the fight against physical
and digital piracy.
(ii) Recording for purposes of time-shifting
Section 70 of the CDPA means that the copying
of a TV or radio broadcast (whether analogue or digitally streamed)
by an individual in their own home for "time-shifting"
purposes does not infringe the copyright in the broadcast nor
any of the sound recordings contained within that broadcast.
Advances in digital recording technology mean
that individuals are able to specify particular sound recordings
that they wish to be recorded from part of a digital broadcast.
Using "stream ripping" services such
as this, sound recordings can then be recorded automatically from
any one of a number of digital broadcasts so as to create a database
of sound recordings in a digital format, along with all the relevant
metadata.
The selection and recording of individual sound
recordings in this way clearly does not take place solely for
the purposes of listening to the broadcast at a more convenient
time. Rather, the purpose is to create and keep a permanent copy
of the particular sound recording.
Accordingly, the making of that recording should
not qualify for the exemption provided by s.70 and should be regarded
as copyright infringement.
We do not believe that UK legislation should
make a distinction between analogue and digital, but we recommend
that s.70 is amended to ensure that digital stream ripping is
not covered by the exemption. There may be several ways of doing
this, including excluding music from the exemption or by making
it clear that the selection and recording of individual items
contained within a broadcast is not permitted.
(iii) Authorisation
We believe that the process of enabling claims
to be brought against businesses that facilitate, procure, aid
or abet and/or authorise infringement needs to be improved. Key
to this is providing a clearer statement in legislation for the
Courts to assess whether a particular business has authorised
the infringements of copyright committed by others.
The Government should enact legislation that
is based on the reasoning in the Grokster and KaZaA litigation,
to ensure clear and unambiguous liability for the businesses that
are feeding off the unlicensed making available and copying of
sound recording by others.
(iv) Damages
Faced with an act of copyright infringement,
rights holders are presently left with an option either to seek
damages or alternatively they can opt for an account of the infringer's
profits.
In many cases the infringer may make not profit
personally from the infringement, and calculating damages can
often be complex, time-consuming and costly—or even impossible.
In addition, unless an award of additional damages
is made, the reality is that an infringer only has to pay that
which he would have paid had he secured a licence. There is thus
little deterrent effect.
Other jurisdictions, have attempted to deal
with these difficulties by implementing the alternative of statutory
damages.
In the US, these damages range from $750 to
$30,000 per infringed work, with a further range to $150,000 per
infringement for wilful infringement.
We believe that in order to generate effective
deterrence and to avoid difficulties in proving actual damages
or profits, it is imperative that rights holders have a mechanism
such as statutory damages whereby they can effectively and efficiently
protect their rights without being required to undertake an often
unnecessary, burdensome and costly assessment of damages procedure.
(v) The liability of hyperlinkers, location tool
services and content aggregators
The BPI strongly opposes any extension of the
existing exceptions from liability under the E Commerce Regulations.
The proposed exceptions may have the effect of shielding from
liability services that exploit copyright material without permission
on a large scale, or encourage others to do so.
6. THE BBC AND
THE CREATIVE
ARCHIVE
The BPI holds the view that the Creative Archive
should not disadvantage rights holders and their ability to benefit
commercially from their work.
In particular we have concerns that calls for
"public access" may be the thin end of a wedge which
leads to the effective appropriation of intellectual property.
Much of the comment around the Creative Archive
has been provoked by its adoption of some of the licensing principles
of the Creative Commons movement.
Creative Commons is not an alternative to copyright.
It is a series of principles applied to existing copyright law.
It is not possible to grant rights unless you have them in the
first place;
Many of the exponents of Creative Commons work
in the not-for-profit or public sectors and have no desire or
need commercially to exploit their rights. If Creative Commons
does offer commercial benefits, we believe the market itself will
determine this and therefore no legislative action is required.
Finally we are concerned that some creators,
especially those at the beginning of their careers, may be unaware
that Creative Commons licences are granted in perpetuity and are
difficult or impossible subsequently to withdraw.
7. REGULATION
IN NON-TRADITIONAL
MEDIA
The BPI rejects the idea that activities in
non-traditional media such as the internet should be immune from
ordinary law and regulation.
Indeed in its successful pursuit of unauthorised
file-sharing networks, the recording industry has been among the
pioneers establishing the principle that established areas of
the law such as copyright are just as applicable to new media
as to the old.
8. PRIVATE COPYING
There is pressure from consumer groups, to create
a private copying exception.
We believe a change to the law that explicitly
authorises individuals to copy, from lawfully purchased copies,
in their own home (without the need for a licence or the consent
of the copyright owner) is unnecessary.
The introduction of such an exception could
have a significant knock-on effect on the record industry's rights.
For example, an individual could be entitled to copy from a digital
broadcast stream to create a compilation and library of sound
recordings which they would be free to pass to others who, using
new revolutionary copying equipment, could also create identical
digital products. This would clearly have a substantial effect
on sales of legitimate physical and digital products.
The UK record industry has never taken action
against an individual copying their CDs to their computer for
the purpose of transferring those tracks to another device (for
their private and personal use only) and the industry has no intention
of doing so in the future.
We urge the Committee to consider carefully
the "knock on" effect of creating a private copying
exception within the Copyright, Designs and Patents Act 1988 (CDPA).
Such an exception is not necessary in the current technological
and market environment, and could lead to dangerous misunderstandings
of what types of private copying are permitted. BPI members would
be pleased to participate in discussions on other ways in which
to achieve greater clarity on this issue for the benefit of consumers.
29 March 2006
1 BPI Research based on Official Charts Company (OCC)
data 2005. Back
2
As above. Back
3
BPI Research. Back
4
IFPI-Recording Industry In Numbers. Back
5
BPI Research based on SoundScan & Media-Control data. Back
6
Section 12 Copyright Act 1956. Back
7
Council Directive 93/98/EEC on "Harmonizing the term of
protection of copyright and related rights". Back
8
Duration of Copyright and Rights in Performances Regulations
1995 SI 1995/3297. Back
9
OCC data 2005. Back
10
Understanding and Solutions. Back
11
BPI Anti Piracy Unit estimates. Back
12
TNS 2004. Back
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