Select Committee on Culture, Media and Sport Minutes of Evidence

Memorandum submitted by the British Phonographic Industry (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.


    —  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.


  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.


  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.


  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.


  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.


  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 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.


  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.


  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.


  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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