Examination of Witnesses (Questions 140
- 158)
TUESDAY 6 JUNE 2006
BRITISH PHONOGRAPHIC
INDUSTRY
Q140 Chairman: How come then eMusic
are making available downloads without DRM; they seem to be able
to make money from it?
Ms Groome: There are different
methods. For example, the subscription services to which Mr Sanders
was referring, you cannot have a subscription service without
DRM, there is no way of tracking, if it is a portable service.
For example, I subscribe to Napster To Go and my creator ZEN Micro
MP3 player is full of music that is tethered, if you like, so
as soon as I stop paying my £15 a month my MP3 player is
emptied of that music and STRM. Certain services rely on DRM and
certain services do not.
Mr Jamieson: I think, Mr Chairman,
you were also referring to copy control as opposed to DRM, which
has been introduced somewhat unsuccessfully from time to time
by record companies seeking to protect CDs, with a sort of DRM
built into the CD, and, by and large, it has not been successful
and the most problematic ones have been withdrawn. It has also
never been employed in the UK.
Chairman: Thank you. We should move on.
Q141 Mr Evans: So, how is business?
Mr Jamieson: I think we are cautiously
optimistic. We need to embrace constantly, every day, digital
and technological changes. We are proven, as I said before, I
think, to be the most resilient market in the world, but it is
not time to break out the champagne. We have a lot of volume to
achieve in a digital arena, and to do this we are going to need
some help; copyright term is one of them, to try to redefine private
copying, illegal and legal, is going to be another. We are going
to need some help in the broadcast arena, in particular, because
there is great danger to us from broadcast. If the broadcast quality
diversity is increasing such that new types of technological hardware
and machinery enable consumers—forget the internet, forget
a computer—simply to convert to their own use from broadcast,
this is a process called `stream ripping', and things like this,
it is one of the problems which will face us in the future in
the digital age. There is a whole series of problems surrounding
the British music industry in its search to get the volume back.
Music has never been more popular, music is everywhere around
us, it is ubiquitous. It continues to be this great ambassador
for Britain, but we are not recouping the investments as fast
as we should be. Revenues are still up, margins are down and difficulties
still exist.
Q142 Mr Evans: To be quite bleak
about it, about three or four years ago when you could see what
was happening with downloading, but that bleakness is now going;
now you see the prospect that the music industry not only will
survive this revolution that is occurring but actually will prosper
because of it?
Mr Jamieson: Yes. Digital, as
always, was both a threat and an opportunity. I think we have
gone clear of the major threat stage but there are still some
issues; interoperability, for example, amongst download formats
is another one that we are having difficulty with.
Q143 Mr Sanders: How realistic is
that, given that iTunes is just so dominant, that actually you
could increase interoperability?
Mr Jamieson: I think it is always
difficult when one provider is occupying 80% of the market, which
it is currently, in the download market. As mere recorders of
music, it is very difficult to have control over that sort of
thing. We cannot control the retail of music, just as we could
not control it in the physical arena. It is not particularly healthy.
We would advocate that Apple became interoperable, but advocation
is their business not ours, so we have got somewhat limited power
to influence there. We hope and believe that there will be more
entrants into that online field, that interoperability will occur
across a broad scale, and that really will give digital business
a huge boost.
Q144 Mr Evans: How big is the problem
of people downloading illegally?
Mr Jamieson: It is vast and uncharted.
Q145 Mr Evans: How much is it costing
the industry, if people do that?
Mr Jamieson: Have you got the
statistics for that?
Ms Groome: We commissioned a study
recently into the extent of the damage, by TNS, and they interviewed
a selection of downloaders and their activity over a three-year
period, and over the three-year period they estimated that the
loss was about £1.1 billion, looking at their activity over
the three years. The key harm is not so much in downloading, it
is in uploading, so it is where individuals are acting like mini
free retailers, by copying their entire CD collection onto their
computer, that is the first act, and then making it available
to the millions of other people around the world who are at that
moment also uploading and file-sharing their illegal peer-to-peer
file-sharing networks.
Q146 Mr Evans: Are there a lot of
them around?
Ms Groome: Yes, there are still.
Obviously, there has been an international litigation campaign
by the record industry against the software providers in other
jurisdictions, like in America, against Grokster, which you will
have heard of, and against KaZaA, in Australia, and in the UK
we have been suing those egregious uploaders, people who are uploading
thousands and thousands of files at any one time, in an attempt
to stem the tide.
Q147 Mr Evans: Is not part of the
problem that people do not see downloading stuff for free as stealing?
Mr Jamieson: I think you are dealing
to the crucial education question, and I was going to answer your
original question by saying go to the schoolyard and you will
find that people are beginning to believe that music is a voluntary
purchase, in other words, you can buy it if you want but if you
are clever you do not have to. There is an enormous amount of
education needed. I think what I said earlier on private copying
will help that considerably, because we must educate the consumer
that to copy is okay, to give away is not okay. That is a campaign
I think we would like to do together with the Consumer Council,
with government, with us and generally begin to change that mindset.
Q148 Mr Evans: Really do you see
that being effective, because people might see walking into Tesco
and picking up CDs and running out with them as being stealing,
but they have got a different concept about going on the internet
and downloading stuff because they really do not think anybody
is being damaged?
Mr Jamieson: This is an indication
of the enormous task we have faced over recent years and which
we still face, but we think we are making progress. We think that
the litigation campaign that we conducted garnered headlines.
Statistically it is difficult because it is a sort of global business,
you cannot really get the statistics, but we believe that, at
the very least, we managed to plateau what at that time was an
exponential growth and really we have got some people. We get
hundreds of inquiries a day, just "What can I do?" and
"What can't I do?" and "Is my child doing the right
thing?" or "Is my child doing the wrong thing?"
MPs call us and say "Please tell me, what can I do and what
can't I do?" It is an enormous education task.
Q149 Mr Evans: You are still talking
about records, are you?
Mr Richardson: Probably not.
Q150 Mr Evans: Touché.
Tell me then, how much damage did Robbie Williams do to the industry
when he said that he supported youngsters downloading stuff for
free?
Mr Jamieson: I do not think really
I should comment publicly on a member of mine's artist, but I
think you could surmise, if we did not identify a single person,
that the more successful artists who make that sort of pronouncement
are not helpful in any way to the industry. They do not really
understand it. There is always, unfortunately, the ability to
obtain publicity from making outrageous statements and some people
seek to do that from time to time.
Q151 Mr Evans: Is not the only way
you are going to get this message across to youngsters, other
than saying to them "If the source of money dries up then
how are we going to encourage creativity in the future, how are
we going to bring on the new bands?", and they look at that
and really they do not believe it, the only thing they would believe
is the fear that they were going to get prosecuted if they were
found in possession of stolen music? You mentioned my new iPod,
which had on the front of it, "Do not steal music,"
it was a cellophane thing which you can peel off. Is not that
exactly part of the problem, that as they peel off and discard
it the message will be discarded as well and they cannot wait
to get on the internet to download as much free stuff as they
possibly can? It is an uphill battle, is it not?
Mr Jamieson: Yes, it is. Do remember
that a long time ago, in the seventies, the industry invented
a campaign called `home taping is killing music' and that was
condemned because of its ferocity, and that we are still trying
to drive home the point you mentioned, that profligate copying
makes it just far more difficult to create, but it was condemned
out of hand. We are very, very cautious about doing anything overly
aggressive, we are not even prosecuting at the moment, in terms
of the individuals we are catching, who are egregious uploaders;
we sue them simply in the civil courts. It is a costly procedure
but it gets the message across in a far more cost-effective way
than anything else we have tried to do; to try to educate by taking
advertisements, for example, would cost millions of pounds. I
think that the private copying thing I spoke about earlier will
help that sort of education, if we can implant that to copy is
okay, to give away is not, and help save music by doing this.
Q152 Mr Evans: In the last resort,
if it is not working, will you prosecute individuals who are downloading
stuff for free?
Mr Jamieson: We have to. We are
careful of the word `prosecute' but at the moment, yes, we are
suing individuals who private copy and upload, ie disseminate
globally, significant files of music and that process will have
to continue. In all cases, we will try to educate rather than
do that sort of thing.
Q153 Alan Keen: Could you just elaborate
on statutory damages?
Ms Groome: Our position in relation
to damages is that for IP infringement it is very difficult to
obtain a deterrent effect in relation to damages. It is very difficult
to obtain additional damages because of the way the legislation
is, and we would like to see some statutory damages which would
ensure that those who infringe copyright face a deterrent. At
the moment, what happens in relation to damages is that simply
they have to pay the licence they would have had to pay had they
got a licence, so statutory damages would take you above that
and act as a proper deterrent in the civil court.
Q154 Chairman: Presumably you would
like to see that as part of some new copyright act, which you
say that you have now come round to the idea is necessary?
Ms Groome: It could be done by
an amendment to the current Act, and certainly there is a section
in the current Copyright Act.
Q155 Chairman: The BPI's position
now is that actually you would like to see a new Copyright Act?
Mr Jamieson: No. I think the BPI's
position is that the Copyright Act is fit for purpose but it needs
to be tweaked in certain areas; but, by and large, copyright is
essential, it is in the Act a relevant legal mechanism in today's
world.
Q156 Rosemary McKenna: Can I ask
you about your views on the BBC's current, very aggressive approach
to allowing access via the internet, in particular the Creative
Archive message to "Find it. Mix it. Rip it. Come and get
it." and their decision to aim to be the premier destination
for unsigned bands?
Mr Jamieson: First of all, in
terms of the latter, I think it is admirable that the BBC wish
to become a destination for unsigned bands; that is absolutely
their prerogative, notwithstanding their own arrangements with
the Charter, with which I am not that familiar. For example, the
BBC has decided to make every World Cup match available on the
internet, which is something which I think, having paid for the
rights to the World Cup, it is every bit entitled to do. I think
we have to draw a big distinction between their policy with purchased
programming; almost all of the output of the BBC is either funded
by the taxpayer and paid for fully when it transmits or it is
bought from an independent production company. The sole exception
to this really is music, because music is given to the BBC free
of charge by compulsory licence at the birth of a recording; therefore,
music depends on ongoing sale and usage so the BBC do not pay
for the music that we provide to them until such a time as they
play it, at which point it is collected by PPL. Instead of that,
if simply they find a way to provide the consumer with music free
of charge, on the basis that they have got it and they would like
to make the consumer have it, and so enable the consumer to convert
BBC output to his own private collection, we have a serious problem.
In that respect, we have a serious problem, as I referred to,
with every broadcaster, but it is particularly in respect of the
BBC because they are a publicly-funded body. When the BBC did
its much-publicised Beethoven downloads, in terms of current copyright
legislation they had every right to do so, but we mounted a legal
complaint because enabling the free download of every Beethoven
symphony had a huge commercial effect on the market-place. A non-state-funded
body could not afford to do that and so we had to protest, and
they took the protest on board and have not done it since. Sampling
and teasing and stimulating interest is one thing, but providing
a full solution to music ownership is a problem that we have.
Q157 Rosemary McKenna: There is a
dilemma, is there not, because people see it that the BBC is publicly-funded,
and if they produce programmes they have already paid for them
and the public are entitled to have access to them whenever they
want them? If you are a BBC licence-payer then you feel you have
already paid, apart from recorded music. I am talking about the
music that they generate themselves; they do so many concerts
which encourage young musicians, therefore people feel they have
the right to have access to that?
Mr Jamieson: That is fine. I think
we are talking about, recorded music which is provided to them
under our compulsory licence we have a problem with, but their
own activities, other than the fact that if they use their publicly-funded
position to mount unfair competition to the private sector investment
then that is the Beethoven symphony one.
Q158 Adam Price: Returning briefly
to the question which Nigel Evans asked, you have not taken action
so far against illegal downloaders but have focused on the uploaders,
but a BPI spokesperson is quoted in the Guardian today
saying that you are not ruling out action against users of AllofMP3,
a Russian site which it is claimed has now got 14% of UK downloads.
That is a site where you do pay for the music, to meet Mike Hall's
scenario, where people believe, because the site says, that it
is complying with Russian law, operating within the law. Are you
considering taking legal action against UK-based users of that
site?
Ms Groome: Let me clarify our
position in relation to AllofMP3.com. We have been looking at
it for some time. It is Russian-based and we have had trouble
in Russia closing the site down, but it is an illegal site, the
music is out there illegally and unfortunately it is very popular
in the UK because it is incredibly cheap. What we are looking
at doing is obtaining a judgment against the site in the UK and
then using that either to enforce in Russia, which is quite difficult,
or in some other way, but we are going to be taking action now
against not the users of the site but against the site itself
in the UK.
Chairman: Thank you very much. We have
taken up a lot of your time. It has been most helpful. Thank you.
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