Supplementary written evidence from PRS for Music (FLM 56)

 

Response to evidence of representatives of RadioCentre on 27th October 2009 concerning the Future for Local and Regional Media.

 

PRS for Music has been requested to comment on certain assertions made by RadioCentre, namely:

 

That the licence fee for radios in the workplace is effectively a double taxation.

The licensing demands made by PRS (and PPL) on workplaces are aggressive.

The licence fees on radios in the workplace is leading to a decline in listenership and jeopardising local radio stations.

There is confusion amongst licence fee payers who sometimes, wrongly, assume it is the radio station demanding the fee.

 

PRS for Music does not agree that these assertions are fair or, indeed, factual. We have commented on all these issues below, with our responses split into two sections. Section 1 gives an outline of PRS for Music's activities and licensing practices. Section 2 deals with the particular questions concerning the interplay between the licensing of music played in the workplace and radio audiences.

 

Should any members of the Committee have any further questions or require any additional information, we will, of course, be happy to provide whatever is required. In addition, we would like to extend an open invitation to Committee members and any relevant representative bodies who would like to come to visit one of our call centres and find out more about the reality of our licensing operations. As described below, Andrew Harrison of RadioCentre has undertaken such a visit and we believe he will able to confirm our professional and informative approach to customers.

 

In summary our position is that:

 

The licensing of music played in the workplace is a valid and important role, which we carry out on behalf of the 60,000 songwriters, composers and music publishers we represent, given the proven benefits that the use of music brings to the workplace.

Our licensing practices are professional and most certainly not aggressive in any way. We are sincerely committed to good conduct, as demonstrated over the last year, with campaigns to increase awareness of what we do and the launch of our Code of Practice.

We have been licensing music in workplaces for many years and we have endeavoured always to reach an appropriate balance between the interests of our creator members who depend on royalties for their livelihood and the interests of our customers, especially small businesses.

We are aware of no evidence whatsoever that indicates any link between our licensing of workplaces and the decline of commercial radio revenues.

 

In support of our submission we attach the following:

 

Appendix A - a typical letter to a potential customer[1]

Appendix B - our Code of Practice[2]

 

Section 1: PRS for Music's Licensing Activities

 

1.1 The licensing process

 

We were most concerned about the accusations made towards PRS for Music regarding our conduct and aggressive licensing demands and do not consider that these comments give a fair or accurate representation of our approach to licensing.

 

Unfortunately many of these concerns have been based on a lack of awareness or a mis-perception of our activities. We have worked hard to increase general awareness and, as a result, many businesses have a much better level of understanding when we contact them by phone or letter.

 

Before we call any business, as part of a licensing campaign, we always send a letter. Our letters explain clearly who we are, whom we represent and the licensing requirement. A typical licensing letter to prospective customers is attached as Appendix A.

 

Not only does this letter specify the appropriate factual information but it also encourages business to introduce music and highlights the benefits of using music. In this way, it's just as likely that we are helping to grow audiences for music.

 

We may follow up the letter with a telephone call to businesses to establish whether they are using our copyright music, by what means and to what extent. All individuals who undertake such calls on our behalf are rigorously trained and every call we make is recorded and logged. Calls are proactively monitored and scored based on the quality of the call. Any issues arising from this monitoring or from customer complaints or feedback are addressed quickly and thoroughly.

 

1.2 Our Code of Practice

 

To demonstrate our sincere commitment to good conduct, we introduced a customer Code of Practice in July this year (a copy is provided in Appendix B) and became the first copyright licensing body in the UK to introduce an independent Ombudsman scheme to handle complaints which we are not able to resolve. So far, the Ombudsman has not taken a single complaint case. The Code is also available on our website at www.prsformusic.com/codeofpractice.

 

Comments at the Committee hearing alluded to a high volume of complaints and businesses that choose to turn off music, rather than obtain a licence. The facts appear to contradict these accusations.

 

We only receive a relatively small number of complaints and these complaints have significantly reduced following process improvements made last year. Complaints have reduced by more than half in 2009 (compared to 2008), and are currently are at a rate of just 1 per 5000 customer contacts.

 

1.3 Recognition of our customer service

 

Our approach seems to be working. In 2009, PRS for Music was a regional finalist for a National Business Award for Customer Focus.

 

And we're continuing to enhance the quality of our service - listening to customer feedback and improving our tariffs and processes.

 

1.4 Licensing music in workplaces

 

There's no doubt that workplaces require a licence for public performance, if they choose to play copyright music, for the benefit of staff or customers.

 

The legal precedence for workplace licensing was established back in the 1940s, confirming that a licence for public performance is required if music is played in a workplace (Ernest Turner Electrical Instruments Ltd v PRS and PRS v Gillette Industries Ltd, 1943). The Copyright, Designs and Patents Acts 1988 is clear that a licence is required regardless of the means of performance, whether live music, recorded music, internet or via TV and radio broadcasts.

 

We have been licensing music use in the workplace for decades, charging a fee in return for our licence, which allows our customers to use millions of pieces of music from the UK and around the world. This is not only vital to support the creators of music; it is fair that they should be paid for their contribution to businesses. Studies show that music in the workplace increases productivity and morale.

 

When good music is played:

 

74% of employees say they like going to work more

1 in 3 employees are less likely to take time off sick

77% of staff say they are more productive

82% say staff morale improves

 

 

From MusicWorks survey of 2,000 people

March 2009

 

We have more than 40,000 workplaces licensed in the UK - mainly office and factories. Many of the other 340,000 premises we license will also include staff-only areas.

 

1.5 Reduced rates for small workplaces

 

PRS for Music represents 60,000 music writers and publishers - most of whom are individuals and small businesses and many rely on their income from royalties. That's why we make sure that 90% of the money we collect goes straight back to our members (we only deduct costs). And we want to make sure we address the needs of small businesses - whether our members or our customers. It's important to us that we get the balance right - protecting our members' ability to make a living, while ensuring that businesses can get all the benefits of using music at a reasonable price.

 

Of course, bills are generally not popular with businesses and we appreciate the significant burden that businesses face from bureaucracy and administration. We are very supportive of reducing administration for our members and other small businesses. Keith Gilbert, the Managing Director of Public Performance Sales, is actively involved with the Genesis Initiative and PRS for Music is sponsoring the all-party manifesto for small businesses.

 

As well as working closely with trade bodies to raise awareness, such as the Federation of Small Businesses (FSB) and regional Chambers of Commerce, we have also carefully considered the circumstances which we license and the charge we make for our licence.

 

In certain circumstances, we assess that no licence fee is payable (e.g. home offices and where employees use personal devices with headphones). Earlier this year, working with the FSB, we halved our charges for small workplaces (with 4 workers or less). Small workplaces can get a licence for only 44 + VAT per annum - less than 1 a week. This change has been well received by small businesses.

 

 

"Playing music in the workplace can help boost staff morale and the FSB is pleased that PRS for Music has put in place an affordable way for small business owners to enhance the working environment for their staff."

John Wright, National Chairman of the FSB (Jan09)

 

Section 2: Issues relating to radio

 

2.1 Is the requirement for workplaces to obtain a licence from PRS for Music a case of "double taxation"?

 

Firstly, it is important to clarify that copyright licensing is not related to taxation. The royalties PRS for Music collects on behalf of its 60,000 members directly represents their income, in many cases vital income. The use of the term 'taxation' undermines the value and purpose of copyright legislation, which exists to protect the rights of creators to earn a living from their work.

 

Secondly, there is certainly no 'double-charging' when we license workplaces for the use of music, made by any means including radios. Copyright is a bundle of rights including copying, communication to the public (broadcast) and public performance. These rights are usually licensed separately, with a separate licence fee. To suggest there is 'double-charging' undermines the entire basis of the bundle of rights defined in the statutory framework.

 

It is usually fairer that music users pay only for the specific uses they want to make of music. If, for example, CDs were bought, with the right to make copies of that CD or make a public performance using the CD, the charge for all CDs would have to be significantly higher.

 

The licences issued to TV and radio broadcasters and, indeed, to the CD manufacturers and online music retailers do not include the right to make a public performance of that music.

 

TV and radio broadcasters are aware of the value of copyright, as copyright holders themselves. In the same way that our writer and publisher members ask for payment for different types of use, TV and radio broadcasters do not allow members of the public to use their material which has been publicly broadcast for any other purpose, without additional permission from the broadcaster. In fact, many broadcasters will take action to stop members of the public creating copies of their content or posting the content on sites such as YouTube.

 

2.2 Is the requirement for workplaces to obtain a PRS for Music licence causing radio audiences to decline?

 

There appear to be many reasons why commercial radio audiences have declined but we are not aware of any data or analysis that suggested that workplace public performance licences are an issue. Indeed, we have not found any published research on declining radio audiences which cites our licences as a factor. Radio audiences have declined since the turn of the century, particularly amongst younger age groups. Music consumption has shifted to different platforms, most notably iPods and MP3 players. It also appears that commercial radio has lost listeners to BBC stations.

 

As we have said before, we have been licensing workplaces for many decades and this will include premises which play the radio. Through that time commercial radio - both national and local - has been developed and blossomed into a large and successful business. None of that growth was hindered by PRS for Music licensing of workplaces.

 

Our data shows that, of the 820,000 businesses we have contacted so far this year, less than 600 workplaces told us they would rather stop playing music than pay for a licence. Around 50% of workplaces tell us they are playing radio. Consequently even if one accepted that premises may cease to use music via radio and that could be picked up in RAJAR figures, the numbers (extrapolated from this proportion) would be so small as to have minimal effect.

 

2.2 Is there confusion amongst licence payers who assume it is the radio station demanding the fee?

 

You asked us to comment on whether there is any confusion amongst music users, who might assume that the radio station is "demanding the fee". We've not heard of any customers raising this issue to us and there's no reference to radio broadcasters in our customer literature. All our letters make it clear that the money collected is distributed to our members - music writers and publishers (see the information on the back of the licensing campaign letter attached). We also provide information to any customers who have queries about what different PRS for Music licences cover.

 

3. Our relationship with radio broadcasters

 

We are aware of the difficulties currently facing the radio industry. Indeed the challenges posed to the radio industry by the ever-changing internet landscape is one with which we have much empathy. Further, as the licence fees paid to PRS for Music by radio broadcasters are based on audience figures and advertising income, we obviously want to support this sector wherever possible. Consequently we are keen to further plans with the radio sector to jointly promote the value of music in the workplace.

 

We are keen to ensure that our tariffs do not present a barrier to businesses who want to use music and if the radio sector can provide evidence which illustrates that there is a real impact, it would be in our own interests to consider the information.

 

We also wish to ensure that there are no misunderstandings about our operational activities. Last week, Andrew Harrison visited one of our customer call centres and we were pleased to provide full details of our processes and quality monitoring (this meeting had been arranged for some time and prior to the Committee meeting). Andrew was also invited to listen to live telephone calls made to businesses. We are confident that Andrew will be able to confirm the professionalism and quality of our operations. We were also able to identify ways in which PRS for Music can work with the radio sector to increase music use and radio audiences and we look forward to progressing these plans.

 

November 2009



[1] Appendix not published here

[2] Appendix not published here