Culture, Media and Sport Committee - Minutes of EvidenceHC 674

Back to Report

Oral Evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 26 March 2013

Members present:

Mr John Whittingdale (Chair)

Conor Burns

Tracey Crouch

Paul Farrelly

Mr John Leech

Jim Sheridan

Mr Gerry Sutcliffe


Examination of Witnesses

Witnesses: David Arnold, film composer, Sandie Shaw, Chair, Featured Artists Coalition, and Matthew Griffiths, Chief Executive Officer, PLASA, gave evidence.

Q722 Chair: Good morning. This is a further session of the Committee’s inquiry into support for the creative industries. For our first session this morning, can I welcome David Arnold, the film composer, Sandie Shaw, who is chairman of the Featured Artists Coalition, and Matthew Griffiths, Chief Executive of the Professional Lighting and Sound Association? Can I invite Jim Sheridan to begin?

Jim Sheridan: Thank you, Chair. I think the general consensus seems to be, given I am the most experienced, then perhaps I should kick off the questioning. Basically, the first question is: can you give a brief overview of what you see as the main challenges facing the creative industries and what we can do to help? Who wants to kick off? Alphabetical order.

Sandie Shaw: I had a list of all the different things that you were interested in, so I have put little points of all the different things, so I have done it that way.

Chair: That is fair enough.

Sandie Shaw: I was working under a huge umbrella; I was trying to be-

Jim Sheridan: I am extremely sorry to disappoint you, Sandie, but that is now over. I may have done that back in the 1960s but we have moved on from there. Anyway, what are the main challenges, David? Kick off in alphabetical order.

David Arnold: I think there are a number of things. The issue of downloading is something that I think is working its way through, and it is almost impossible to predict the absolute effect that that has had. I think everyone is very aware that there are piracy issues. There are one or two artists who believe that giving away music for free is a good idea for exposure and stuff, but I think the general consensus among artists, who I know and have worked with, is that they are very aware of the impact that piracy is having, so there is an issue with that. On the ground, from a working musician’s perspective, I have noticed certainly over the last 10 years there has been a huge reduction in the amount of musicians walking through studio doors to work. Some of this is because of technology and people making music in their bedrooms. It is a very competitive business-studio ownership-and most of the big ones have closed and the ones that we do have left are in danger of closing, too.

The main studios that we have for orchestral recording are Abbey Road and Air Studios. Air Studios is currently up for sale, with an unpredictable future. We have gone from four or five major recording facilities to two. If we go back to one then I think we are in grave danger of losing London as a centre for recording, especially for media. Media film appears to be the place where there is still money to pay full rates. Musicians get full rates and the supporting infrastructure surrounding big studios, whether it is catering, taxis and hotels, do very well out of Hollywood productions. The good thing about it is, technically, it is all export. So I think the protection of our facilities for a start. Perhaps the other thing especially is music and education: maintaining a level of education in music tuition in schools as part of the curriculum-and traditionally that has been a great starting point, certainly for everyone that I know and certainly for me-inspirational teaching, peripatetic instrument tuition made available for people, instruments for kids to learn on, which will build the next generation and the generation after that, in terms of musicianship and competent musicians, to maintain the level of excellence that I think we have in this country, which is quite extraordinary.

Q723 Jim Sheridan: Is there another part of the country that can compete with London in terms of facilities, and you talked about accommodation?

David Arnold: In terms of recording facilities, no there isn’t really. You could record in places like the City of Birmingham Hall there, which is a beautiful acoustic space, but the amount of technology that you would need to put in for a contemporary recording negates that as a possibility. Plus the fact that, as fine an orchestra as the CBSO are, the core group of musicians who play for film music in London-there are probably about 300 to 400-are very used to working under those conditions. It is a very different job playing Tchaikovsky than it is playing the opening titles of Star Wars to Click, where there is a constant need to change performance, to change even the music that has been written and to produce a sound that is suitable for a film.

So, even though we have fine orchestras around the country, the skill of working to film is a very specific one, and you tend to only be able to learn that by doing it. So London, I think, will probably remain a central part for that. On top of that, we have all the post-production facilities, like De Lane Lea or Pinewood, where they do final dubs or mixes of the film and also cut the films. As far as film and TV is concerned, there seems to be a proliferation of post-production where music exists centred in London. It is nothing to do with musicianship elsewhere in the country but it is a very specialised facility that allows you to synchronise all these things together.

Q724 Jim Sheridan: The future of artists, Sandie? What is your view of that? What are the main challenges facing your organisation?

Sandie Shaw: I am going to address the point about what support we need, which is the main first point. Finance is the biggest barrier for emerging artists. At the moment, unless you are Mumford & Sons, and come from a public school and have a rich family that can support you, you are on the dole and you are trying to work and, by the time you get a sniff of a record contract, you just grab anything that they might offer you. We would like more independence. We would like to be able to get up to the stage where you have the work half done, so at least we can negotiate on fair grounds with record companies.

There was that thing that you tried to do with banks-give money to the banks the other year-and we didn’t get a penny. It stayed with the banks because banks do not lend money to creators. They don’t and they don’t know how. We even had a meeting with Ed Vaizey and a guy from the Royal Bank of Scotland, and it was very clear that he was just going round and round in circles, because he didn’t know what to do with the money, and he just gave it over to a load of other people that handled investments. They know nothing about creators. I have some ideas for how that money could come into the thing, but I will talk about that later.

There is this CDIS scheme, which looks promising, but it hasn’t kicked in yet. So many artists are disadvantaged. They cannot start because of their background, and the best music comes from those in challenging backgrounds. It comes from Glasgow. It comes from Manchester. It comes from Essex. It comes from places and people that are struggling to make some meaning out of their existence. All we are getting is a load of Simon Cowell-type stuff, which is being paid for and owned by people, and the artists are just mere puppets now I say.

Q725 Jim Sheridan: Sandie, if I was being a devil’s advocate-

Sandie Shaw: Please do.

Jim Sheridan: And looking at a working class singer performer, somebody like Adele, but when she has made it, cannot wait to get off to LA, starts complaining about paying taxes-

Sandie Shaw: Adele, I think she is fantastic for us. She is a great ambassador for British music. She is a wonderful artist, and exactly what we should be known for. We should not be attacking her in any way, we should be giving her, and people like her, as much support as possible.

Can I tell you about the life cycle of an artist? An artist is really lucky if they have three years. They are really exceptionally lucky if they have five years. They are a living legend if they get 10. Their money comes in fits and starts. To be a great artist, to have longevity as an artist-I can talk from experience here-you have to be able to afford to have fallow field periods. We don’t work 9 till 5; we work under extreme pressure for an amount of time. You can probably manage to stagger through it for six months and then you need a whole time off after that, perhaps a year. Women need to have babies. We can’t go on stage with a big lump in front of us. It is hard. You can but you can’t breathe.

This isn’t taking into account that we don’t earn an annual income, so therefore we should look at our tax in a different way. We should look at it at perhaps over a five year period, so that we can manage our affairs over a five year period, so that we can be more creative. What we could also do with tax-the huge amount that we do pay in tax when we do make it-we could have a portion of that taxable income kept aside for us to reinvest in the business. We have the option of being able to do it because who else-other than somebody who has already been a success in the business, rather than bankers-knows how to invest money in the creative sector? These are really important points that would really make our life so much more pleasant and easy. We wouldn’t have people dropping down dead all the time. We wouldn’t have people disappearing before their time. We would have people that were able to develop a lifetime career in music. Even if they were no longer an artist, they would have the wherewithal to start a different kind of business and use their experience in a different part of the business. I am banging on now, sorry. I am very passionate about this. I am an artist.

Matthew Griffiths: From my point of view, we come in at the live entertainment end. The companies I represent, which are predominantly small and medium-sized enterprises, perform entertainment technology and they form the connection between the artist and the audience. So everything that Sandie and David were talking about in the modern world only happens with our members being able to make that connection. We are often seen as backstage or the invisible side of the industry. People don’t see what we do.

In terms of challenges that we have, I would probably categorise them in five general areas, picking up on themes that David and Sandie mentioned just now. Skills: particularly for us getting apprentices into the industry, getting a younger labour force that can come on and succession plan. IP: both protection and investment in the intellectual side of it. Finance, I think, is a theme that will run through all of this. Promotion: we are leaders in the world backstage as well as front of stage. We are leaders in the world. We need to be promoted by our Government. We have just come out of the most successful live event we have ever had in this country-certainly in modern day history-and we are still not allowed to promote that fact. I have comments about the Supplier Recognition Scheme if you want to get on to that a little bit later.

Then the final point I would make is engagement, and part of the engagement is this Select Committee, but we would dearly love to have more engagement at our local level. Sandie was very passionate about it now, and I would agree that it is people on the floor at the sharp end of what we do in creative industries, being able to engage meaningfully with Government or with the civil service or with people that are enacting policy, but that is-

Q726 Jim Sheridan: Can I just take you back to the London centre thing? What are the creative industries doing for young people in Glasgow or Leeds or Manchester or Bradford even? What are you doing for people in Glasgow?

Matthew Griffiths: From my point of view, we are looking to employ younger people. A lot of the backstage side-

Q727 Jim Sheridan: I do not just mean performers. I mean technicians, composers and-

Matthew Griffiths: Yes. We now have the Sector Skills Council for cultural and creative industries, and we have the National Skills Academy framework that is rolling out. We are very supportive of that and we would like to see more of that going in. In terms of our own members, they are looking to employ apprentices, but they would like to be helped as well. We all know the issues around apprentices and what have you. I would say over 50% of our sector is degree educated. What they actually need is vocational experience. We need people that come in, the fixers, and by "fixers" I mean people that can electronically fix things, technical, and what have you. A lot of these entrants into the industry do not want to go through degree courses; they want to get in and get their hands dirty.

Q728 Jim Sheridan: The question I am asking: do they have to locate in London?

Matthew Griffiths: No.

Sandie Shaw: No, they don’t, but it would be much easier and the FAC is really interested in setting up these creative hubs all over. At the very least, what they will do is give artists some sense of community and support, an exchange of ideas, the sharing of ideas. Look what we all did together at the Olympics. It was a sharing of creative ideas and not necessarily just recording artists or just composers. It needs a whole mix, and to have technology in there with it so we can play with it. We love technology and we love to play. The more openings and opportunities we have to do that the better.

David Arnold: There are very lively scenes all around the country in each different town. Last year, I spoke at colleges and universities in a few different places, in Cardiff, in Newcastle and in Edinburgh. There is an awful lot of stuff going on regardless. London as a place where record companies are located this is still just a matter of fact, but I think that is becoming less and less important. We talk about media centres. The BBC has moved to Salford, so now people from London are travelling there to do interviews if necessary, making it easier for people in the north of the country either to get access or to attend those kinds of things. There is still definitely-

Sandie Shaw: It is the moving on from that part, though, isn’t it?

David Arnold: Yes.

Sandie Shaw: It is to get into the finance, because they are stuck there unless they come to London and they sign their life away to somebody. In order to make it easier for them to be more independent, we need to be able to give them this access to finance first, because otherwise that is the only other option that they have.

Q729 Jim Sheridan: From my understanding that is what the creative council is for. Is that working?

Sandie Shaw: I am not a member of the creative council. We are artists we don’t get invited.

Matthew Griffiths: My only engagement with that is through the skills and training side through the Sector Skills Council. However, it strikes me, when you look at the make-up of the council, from our industry point of view it is sort of disengaged; it is something else. It is very digital. It is very big company led, and so I suspect a lot of our members would have exactly the same reaction, which is that if they know it exists they do not particularly engage in it. I would encourage that; we would like to have more engagement in something that would get a very real feedback back into that system.

Jim Sheridan: Thank you.

Q730 Mr Sutcliffe: You have already mentioned the Olympics and the Paralympics and the success of that. There is no doubt that Britain is riding large on this. Having been around through the Select Committee, and I was in America recently, everywhere I go internationally people have said, "Wow, what a fantastic event." The issue now is how do we maintain, promote and develop the legacy from the Olympics and Paralympics, which means that we can continue to be leaders? Another specific issue is around PLASA, which I will come back to. In general terms, what would you like to see happen on the back of what happened with the Olympics? Sandie, you said it was everybody working together; but tangibly, what can we do in creative industries to benefit from the legacy of the Olympics and the Paralympics?

David Arnold: To a certain extent, the Olympics were a magnification of what happens in this country anyway in terms of the arts. That is why people connected to it so effectively because I think people who consume or listen to music, or watch films or plays, have an understanding and a connection with the people that create that work, which is beyond something that you can teach. This is the great mystery of it, isn’t it? Why do we feel a certain way when we hear certain pieces of music? In the Olympics, it was exclusively about creativity, whether it is to do with architectural design or theatre or song writing or composition or performance or playing or musicianship-anything-because it was a celebration of all the things that people say that we do very well as a country anyway. Most of the people who appeared on that were self-made artists. As Sandie said, they were people who struggled on the dole in the ’60s and ’70s, and the ’80s to a certain extent, and found a voice and found a way through it. I don’t think there is that much undiscovered great talent in this country. Great talent tends to be noticed reasonably quickly.

In the ’60s and ’70s, when there was a traditional sort of bedsit idea, they were kids together, formed a band. Of course there is going to be myriads of failure in that, but the ones who made it through, that struggle and found a voice and then found an audience, did it in a very old-fashioned way. They found places where they could play. They found places where they could play and hopefully not have to pay to do that. To a certain extent, I think word of mouth with the digital age now, and I think probably a demise in record company influence; the idea of word of mouth and democratisation of promotion is probably where we are heading. People recommend things to people, and they discover it themselves and they have more of a sense of ownership of it.

Going back to the original question, I think whatever support we can give to people who feel that they are driven to create music as artists-and I would say that as far as actors or playwrights or anything is concerned, even designing hats or something-if they feel that there is a burning passion for them to do that, it is irresistible and they would be doing it anyway, then I think whatever we can do to support those people, rather than perhaps force them to do something that they do not want to do in order to be assisted, in the hope that you will get an artist who becomes-

Q731 Mr Sutcliffe: I think that is great in general terms, David. I agree with you, but it is specifically: what can we do? You look at the different platforms that music and film is available on now and the whole issue around contents. There is going to be a need for more content, we are being told by the big companies and all that. On the back of the Olympics-and I agree that was the role that people came through-what is it that the Government or the industry can do to channel in to making these things happen? You are right to say we have to create the environment, and I understand that, but there must be other specific things that we can do as well.

Sandie Shaw: Why do we have to wait for the Olympics for there to be an event? Why do we-

Q732 Mr Sutcliffe: I am not saying we have to, but I am saying on the back of that success.

Sandie Shaw: You are saying that that was an opportunity to make a community out of the creative industries. It was a really lovely feeling, wasn’t it? We felt great to be able to start liaising with other people and playing with other people. There must be at least one small scale thing that we could do in the year, and perhaps by doing that it will be clearer what the steps are that we can take. We need to have a frame for our picture. That is what we need.

Matthew Griffiths: I would probably pick up on that theme a little bit, which is: the games itself became a great place for British innovation all round, be it construction architecture, technology, the arts, everything was great about it. I think what we should be doing at a bigger level is promoting that worldwide: 70% of my members export their services. If you can promote it, if we can use it as a showcase then they will do the work for you. They will be able to take on and innovate on the back of that. I think that is what can come out of these situations.

I might point out that creative industries always get judged by other industries, "There is all that creative lot over there." All of this came together within a minute of 9 o’clock when the deadline was. There was no putting it back because we didn’t have the right colour light or an artist had not turned up or something had not been rehearsed. It went live to a worldwide audience within a minute of the scheduled time. The fact that these events are now being broadcast globally to so many people, the technology all has to work, the artists all have to know what is going on. That is something that should be celebrated in this country, and I think nobody else has done it as well as we did it last year certainly.

Sandie Shaw: You are saying what we need is like a show off thing that we can do once a year?

Matthew Griffiths: Yes. Let’s be proud. Let’s be un-British about it and celebrate it.

Sandie Shaw: Why not?

Q733 Mr Sutcliffe: What we decided to do in sport was to bid for every competition, so we bid for the Rugby League World Cup, the Rugby Union World Cup, and the Commonwealth Games. We bid for everything, on the basis that that was then the event that would take place. It was hoped that we would have a decade of sports that could lead to those frameworks that you were talking about. I think you could do the same thing with the-

David Arnold: We won’t probably know the influence that the Olympics have had probably for another five or 10 years with the people who saw that and decided, "This is what I want to do." So those are the people in a way that are the most important: the people that appeared at the Olympics, for example, the rehearsal facilities that we had. I have to tell you it wasn’t easy. By the time we got down to 8 o’clock on the Sunday night, when the show was beginning, it was very much fingers crossed because some stuff had never worked up until the point when we actually did the show. I have never felt as confident as I have in my life surrounded by so many people-a lot of British people who did a lot of the heavy lifting at Beijing as well, in terms of the design and lighting-that have done Olympic ceremonies before. As everyone got together and did it, you just felt that there was a sense of absolute excellence, calm and professionalism. You felt that everyone knew what they were doing. That was through years and years of experience and nearly all of them started, as Sandie described, at the rough end of things.

There were not that many people there who were university educated or went on courses and things like that. Education is fine for certain things, but in terms of raw kind of smarts and creativity, it is like you have either got it or you haven’t. Usually, those people are the worst at looking after themselves-I am probably one of them-in terms of looking after finance or worrying about contracts or any of these kinds of things. All you want to do is do the work. That is all you want to do, and you want to do that to the best of your ability and everything else is a hindrance to that to a certain extent, which is why you have managers; it is why you might have assistants or you might have accountants.

I think whatever can be done to help younger people, first, to have the facility and the right to rehearse and to practice, but, more than that, somewhere where they can play and be seen. Because I don’t think it is anyone’s right as a musician to make a living at it. If people like what you do then well done. If they don’t like what you do, if you are going to do what you do anyway, then the fact that other people like it and perhaps might want to buy it or come and see you, as they used to say in the music press, that is all a bonus.

Artists will always create. If anything, the Olympics was a showcase for the people that had already made that journey and had already got there. The next generation of people, the people that felt like picking up a guitar or a computer or a violin or a trumpet, having seen anything that they saw on that, those are the ones that we need to make sure that we have the right venues available, rehearsal facilities that are perhaps reasonably priced. At Chalk Farm in Camden, at the Roundhouse, they have rehearsal facilities and studio facilities in the basement and it is a community-based thing. Dozens of kids from local estates come there and practice with their bands, and it is an amazing thing. That is a fantastic thing to have.

Sandie Shaw: They also need to learn to look after themselves.

David Arnold: Yes, and I think if you are among other musicians as well, other performers and other artists, and that sense of, "This happens to you as well," in terms of having support networks and what you can do is very useful. So anything like that, facilities, venues and protection against bad practice-although I guess it will always be there-but to a certain extent the Musicians’ Union have legal facilities for that for people.

Sandie Shaw: Not for new starters. Not for recording artists-

Q734 Mr Sutcliffe: Matthew, can I move to you now on the marketing issues in terms of what has happened, and can you explain to the Committee what the issues are in terms of the marketing rights and what the Government have done so far?

Matthew Griffiths: Thank you for the opportunity. I don’t want to bring a downer on this particularly, but it follows on from the showcase element of the Olympics. It was a unique opportunity to promote what a lot of companies that took part did and the excellence that was there. Of course we were prevented from doing so because the arrangements in place with the main line sponsors, which, when speaking to the main line sponsors, the understanding was to stop gorilla marketing and utilising all the benefit that comes from the Olympics that these sponsors had. Post the Olympics, it would seem only fair and right that companies that took part would be able to say that they took part, and that did not happen immediately afterwards.

A couple of months ago we had the Supplier Recognition Scheme that came in, which we widely applauded. We thought that was a great thing. Although, unfortunately what has happened is that the categories that have been drawn up are so broad-for instance, there is a category that prevents anybody talking about audio, video or audiovisual. That covers everything. A number of our companies-people that did the sound in the live event, people that provided entertainment lighting-are getting caught under broad categories like industrial lighting, so it bears no relation to what we were trying to protect. It means you have a disconnect. You have people going down to Rio to try to bid for the games down there, paid for by the British Government through UKTI, but they are not allowed to talk about the work that they have done on the Olympics, technically, because of these restrictions.

Q735 Chair: They are bidding for an Olympic contract, and they cannot talk about their experience in working in the Olympics?

Matthew Griffiths: At the Olympics, correct. If you follow the-

Sandie Shaw: It is ridiculous, isn’t it?

Matthew Griffiths: It is ridiculous.

Q736 Jim Sheridan: It is linked to the IOC and the protection of the main sponsors, is it not? That is the problem.

Matthew Griffiths: That is what it is. I don’t know if I am allowed to use names here, but the one covering audio and audiovisual I suspect is Panasonic, which is fine, absolutely right and good, and they ploughed a lot of money into it. However, someone that was doing an audio system, or the entertainment lighting on the opening sound, doesn’t come anywhere near Panasonic. Someone that is doing entertainment lighting doesn’t come anywhere near GE. These are big billion-dollar corporations. They are not going to be affected by someone saying, "Look, we did this. We helped get the cauldron working as an iconic event." There is a company in the south of England; 20 people in there; they built the iconic Olympic rings that went up. One of the best images of the games I thought in the opening ceremony. They are not allowed to talk about that. Consequently, SMEs have given up. They just see it as-again they are a bit cynical-something put in their way.

Q737 Mr Sutcliffe: It is not just protection of sound; it is the people that laid the tracks in the velodrome. It is all the small companies.

Matthew Griffiths: They are all small and medium-sized companies. I genuinely believe the intent was to try and help and everybody understood why the restrictions were there, but it is blown up in our face a little bit. All it leaves the companies that are trading and trying to work is just bitter. They have become cynical about it, and they give up on it basically.

Q738 Mr Sutcliffe: For the record, what would you like to see happen further to that scheme?

Matthew Griffiths: Either we need to be more specific in those restrictions with the Supplier Recognition Scheme immediately, or if they would like to engage with groups like us, clearly I would be very open to that. You have companies out there shouting about it, so you have to review those restrictions or lift all restrictions completely.

Q739 Mr Sutcliffe: Have you had any discussions with the IOC, the International Olympic Committee, about this or anybody else?

Matthew Griffiths: Yes, we have been constantly trying to get meetings. We have been speaking to Members of Parliament; we have been speaking to Lords, trying to get the heat underneath this. I think it is one of those nettles people don’t particularly want to grasp and it will go away in time.

Q740 Mr Leech: How important are further tax reliefs to the creative industries?

Sandie Shaw: I have done my bit.

Matthew Griffiths: Any type of tax relief would be great for the creative industries. We are no different from any other industry. I think anything that centres around perhaps R&D, innovation and skills training, bringing new entrants into the industry, anything that helps the smaller companies do that, to encourage the young into the creative industries is a good thing. Very broadly, yes, tax relief is obviously a good thing. Film benefits from it, particularly in TV. I think the live side could do with it. We are a big contributor to the British economy and any sort of relief would help us.

Q741 Mr Leech: Are there any examples from abroad that you think the UK could learn some lessons from?

Matthew Griffiths: Nothing I could pull off the top of my head for my sector at the moment. I don’t know if anybody else has anything.

Sandie Shaw: We are leading the world in creativity anyway, so what can we learn from them really?

Q742 Mr Leech: I am interested that you make that point. On that basis, given that the creative industries here are doing quite well, in relative terms to other parts of the economy, why is it that we should give additional tax relief to the creative industries when other industries are struggling and the creative industry is doing relatively well?

Sandie Shaw: My idea was for us to give ourselves the money. We are not asking for the Government to do it. We are asking for the money that we would have paid in tax-a portion of that-for us to be able to reinvest it in our business. It is not like it was in the ’60s, ’70s or even ’80s. You can see the vast amounts of technology that a new artist needs to get going, get on the ground. We live a lot in the past here. We have to live for the future. We have to invest because it is all going to run out.

If you look at copyright extension, if you look at that that is not going to benefit any of those old people-all the recording artists in the ’60s and ’70s are not going to get a penny. The only people that are going to get money are the record companies, the collection societies and the session musicians. The people that made those records are getting a tiny portion of it because nobody cares for them. Why shouldn’t they be looked after when they are old? None of them go on stage anymore. You don’t really want the Troggs jumping about on stage, do you? You want them to have a life. They have put enough money in. It is like looking at it as R&D. Those are people from the past and we should look after them and treasure them, which we don’t. The people for the future they need investment. The R&D is in these artists. You cannot just pick up a guitar nowadays and do it. You need much more than that. We need access to technology so we can play. We need to be able to work directly with technology without all these people in-between that take bits of our money away. We want to learn how to be more independent. The more independent we can be, the more income we can make, the more longevity we will have. We don’t want this feast and famine thing going on; the stress that is totally unnecessary to work in. We can have so much more creativity. Why should there be an end to it, a finish to it?

Q743 Mr Leech: Are further tax reliefs more about keeping ahead of the game, rather than taking us even further forward though from the industries’ perspective?

Sandie Shaw: If you don’t keep ahead of the game you are finished because creativity is like this.

Q744 Mr Leech: I come back to the point I made earlier, about there are other industries that are struggling and the creative industry is doing quite well. Are you suggesting that, without further tax reliefs, the creative industries in this country are going to start falling behind other countries or are you suggesting that, by giving additional tax reliefs, we can expand the creative industries much further?

Matthew Griffiths: Yes, I would go for your second option. We are a growing sector at the moment, given the economic situation. Because we are a growing sector, if you support it a bit through the tax relief, you will get an even more successful sector. For all the reasons that Sandie was laying out just now, we are growing, we are not stagnant, and we can do a lot more. If we don’t invest it is true to say that we will be overtaken.

We have a massive threat coming in from Asian companies at the moment-China, with the manufacturing. What we have unique in this country is creativity, and we have to support that every which way we can. That allows us to stay ahead, and if we stay ahead that means we have more people paying tax-be it corporately or individually-and that goes back into the system. So I would say it helps us not only to stay ahead, but it will give us the edge going forward.

Q745 Mr Leech: I think in your written evidence you suggested that the support should be towards innovation, research, development and manufacturing. What shape would you see those tax reliefs being then?

Matthew Griffiths: In any shape at all. Anybody that is investing, we in this country-

Mr Leech: The reason why I push you on that is because it is all very well to say, "Yes, tax reliefs would be great." Everyone accepts that tax reliefs would be great, but if there are going to be tax reliefs what we need to know is exactly what shape and form they should take to be the most effective. What would be the most effective way of helping the creative industries in terms of tax reliefs for you?

Matthew Griffiths: Purely from my perspective, the two areas where we need to put it in is into the innovation end of IP tax reliefs, so for companies that are innovating new technology, for new products, purely at that end because they are the ones that are shaping the industry going forward. The other would be tax relief for companies that are going down the route of employing apprentices and bringing a younger workforce in. They would be the two areas that I believe our members would greatly appreciate as opposed to just general tax relief.

Q746 Mr Leech: As an aside, do you think that the current focus from the Government on pushing for apprentices is encouraging the creative industries to take on enough apprentices? If it is not, what is missing from that process to encourage the creative industries to be taking on those apprentices that you need?

Matthew Griffiths: Without wishing to hog this, I would say it has heightened the whole issue of apprentices, which I think is good. I think it suffers from bad press, though, where we have had people working for nothing type of media that flies around. Sorry, I have lost track of the original question. I was going to make the point. You were asking how we can we encourage it.

Mr Leech: The question was whether the Government’s focus on apprenticeships was enough to encourage the industry to take them on, and, if it was not, what more did the Government need to do to make those apprenticeships attractive enough for creative industries to take them on?

Matthew Griffiths: I don’t think it is ever enough. The more we can do to help small businesses in some way, shape or form to encourage them to take them on. We are not big corporations that can take on cohorts of apprentices-like 20, 30 apprentices at a time. We have to do this at a local level, where people have been taking on ones, twos or whatever.

Apprentice Week was a couple of weeks back, I think. It was good to see the Deputy Prime Minister down in South London-funnily enough at a PLASA member-supporting the work that they are doing but they are employing half a dozen apprentices. It is at that level. It is trying to get support in at that level and also encouraging school leavers that this is an option, "You can go through this. You are not going to be abused as a workforce, you are going to…" Some 60% of the apprentices that go into these companies actually stay with the companies, so it does work. I suppose better promotion in that respect, but that is purely from a technical point of view. I think from a creative side it would be different.

Sandie Shaw: Each artist is a small to medium business, so it is quite difficult to take an extra person on board and be stuck with the employment laws because, as I say, your business is feast and famine. It is quite difficult for us to do that, but we would love to do it. We love training people in that way. We don’t really favour degrees.

Can I go back to your thing about, if a business is good, why should we keep putting more money into it? At the moment, we have no UK record companies. We have lost all of our record companies. They all belong outside of here. They are all multinationals. If we reinvest, and if artists can learn to become more independent and learn to make new ways of accessing their audience, working with technology, then we would replace that old industry that is dead now. It is dead. It has gone. It doesn’t exist. We need to create new record labels here that are UK-based. It was the worst thing that ever happened that EMI went. That was such a national treasure.

Q747 Chair: This Committee, two weeks ago, had a meeting with Lucian Grainge. He is a Brit-

Sandie Shaw: Lives in America and works for a multinational.

Chair: who is currently in LA, but, none the less, is re-launching some of the most famous labels, the ones that signed the Beatles and some of the greatest artists. He is investing in British artists. He says that he is going to send his A&R guys out and find lots more artists, and he was more positive about the future of the music industry than I have heard him particularly speak for quite some considerable time. The fact that his label happens to be centred in Los Angeles, does that matter, as long as he is investing in British artists and British artists are going to have that opportunity again?

Sandie Shaw: I think Lucian Grainge should be allowed to dig his own grave and if he wants to do it is not for me to-

Chair: Do you think that is digging a grave?

Sandie Shaw: No, I was just being facetious. I am saying it is none of our business what he does. Let him do what he does. However, we need to start reinvesting here and having our own UK business. It doesn’t matter what Lucian Grainge does anyway. That is fine; it will help some artists. It won’t help some others. All I am saying is why don’t we have a record business here? It is outrageous.

David Arnold: Musicians tend to not be very good at running businesses. They tend to be not very good at running record labels. That is why they are-

Sandie Shaw: I am very good at running my own business. What are you talking about? Most artists are brilliant at it. We do courses all the time, teaching them about copyright, and the first thing is the more you teach them, the more they realise they are being ripped off by everybody.

David Arnold: Yes, I agree. I know it is essential that they do know all about it, but I think a lot-

Sandie Shaw: What is their manager’s job?

David Arnold: If you have a manager. There are two strata that we are talking about: there is the music industry, which is the record companies and so on, and there are musicians. The majority of musicians in this country don’t have anything to do with the music industry as we are describing it, as record labels. Most of them are not signed. Most of them don’t have publishing or recording deals. Most of them don’t have management help. Lucian, when he does his sweeps of the country, which if he manages to find a brilliant talent and make it work it is the most fantastic thing, but we cannot-

Sandie Shaw: We cannot all rely just on Lucian; there have to be other options.

David Arnold: I am not saying that. In terms of what we are talking about, where tax breaks might help, if there are facilities where people without any of these facilities can rehearse, gather, perform and practice, if they can have access to instruments in school, if they can have access to peripatetic teaching in school, if we continue to keep music seriously as a subject in school, so that people can learn the mechanics of it in terms of being a musician at a grass-roots level, I think that is really important that we manage to keep at least an option of opportunity available for people who want to try it.

Q748 Jim Sheridan: David, I am surprised that from the music industry nobody has suggested that they want a comparison in terms of VAT with the games industry or the phones industry?

Sandie Shaw: We are creatives. We are not thinking like that; we are thinking about how we could be more creative.

Q749 Jim Sheridan: In terms of tax or VAT, you do not want to be compared with other creative industries, such as films and games and so on?

David Arnold: In terms of what, sorry, Jim?

Jim Sheridan: VAT. They have different VAT payments.

Chair: It is not VAT, no.

Jim Sheridan: Is it not VAT? I apologise.

Chair: For tax reliefs, it is a tax write-off against corporation tax.

Jim Sheridan: I thought it was VAT.

Q750 Tracey Crouch: None of this is particularly new-is it?-in terms of the fact that the creative industry has always been part of a global industry in many respects and, over the years, peaks and troughs as to whether or not the UK is more competitive than others; whether or not it is more beneficial for artists to be based here or to record aboard. I saw the documentary recently on BBC4 about Queen and the fact that they had to go to LA to record some of their albums because they were being charged 83% tax in the UK and things like that. So none of this is new. You talk about technology taking over. I am a big vinyl enthusiast, and watching all the series about the history of the record industry and everything else, this is just the next step in that surely? What is important for the industry-is it not?-is that we are still providing the most competitive, most creative base for the industry as a whole. Something like tax relief, whether it is the existence or continuation and development of them, is surely something you would be in favour of for that base to still be here.

Sandie Shaw: Of course.

David Arnold: I completely agree. I think we are in huge transition at the moment, and to a certain extent, a lot of people rely on collective representation in order to have their affairs taken care of, whether it is through PRS or PPL if you are releasing your own work. If you are not a writer or if you are just a musician, for me if there was incentive for someone to open up a recording studio or a rehearsal facility in a town where people could gather and do that sort thing. People will always want to be making music and are always going to be wanting to, so I think if we can offer them some facility whereby they can continue that and do that to the best of their ability, that would be helpful.

The digital world is such a minefield. For example, when you get a new service that turns up, like Spotify, which all of a sudden pushes up the amount of access people can get to music. Post Spotify, I think PRS processed 65 billion individual uses of music in 2012-65 billion-which is an extraordinary amount of things to keep a hold of. As a musician, no matter how adept you are at knowing your business, contractually or whatever it is, these are the kind of runaway things that we have very little control over and, to a certain extent, would rely on sensible legislation, in terms of what people can and cannot do with material that is produced by content effectively.

Sandie Shaw: Please don’t keep saying that. These are my babies. First of all, it was called "product" and now it is called "content".

David Arnold: Yes, but it is just an easy way. The songs that you make someone can build a business on and somehow say, "We can’t afford to pay you anything for this until we become incredibly…" It is a bit like building the greatest car showroom in the world and expecting BMW to give you all their stuff for nothing until they can make their business model work. I don’t know the Spotify numbers in terms of what they pay to artists, but it is a very different environment.

Sandie Shaw: Nobody knows. It is all these NDAs.

David Arnold: Yes, it is a bit smoke and mirrors and it is a little bit unknowable, and that is the thing that troubles most people. With a physical record, you send 10 to a record shop, if they sell five, you get the money for five and you get the other five back. With the way music is now, it is a very different scenario. When you talk to kids who are of record buying age, the way that they experience music is completely different to the way that we used to. They are not interested in ownership; they are not interested in buying necessarily something that they can have. I am not saying that this is everyone, but certainly 13, 14, 15-year-old kids, who are buying music or experiencing music, tend to do it either by streaming or what they call sharing.

Q751 Tracey Crouch: So short-term consumers basically?

David Arnold: Yes, and then the argument always is for musicians, "Well, you should somehow make the money that you might make from a sale from doing something else." You could do adverts, which is fine if you are Paul McCartney. Although if you are Paul McCartney’s keyboard player, it is less easy for you to go out and get sponsorship.

Sandie Shaw: It is fine if you are a young, slim girl; you can get lots of branding. However, if you happen to be a bit big or not so young then you cannot rely on that. It is stopping people from being what they are, and that is singers or musicians. Why would they have to be clothes dollies?

Q752 Chair: Sandie, I want to come on to something you have strong views about, which is IP. Just before we do, can I make it absolutely plain in my mind what Matthew was saying earlier because we might be able to help on this very specific issue about your marketing. Is it that the contracts that your members signed with LOCOG, I assume, specify that they are not allowed to basically publicise the fact that they have a contract?

Matthew Griffiths: That is correct; that is where it started from. The original contracts were absolutely clear that you could not promote your involvement in the games. Everybody understood that because a lot of money was coming in from the headline sponsors, so everybody signed up to that. What also fell out of it was that a lot of the work was subcontracted down, so you have people who are signing the contracts and then you have about three or four levels underneath that. So everything became a bit messy as to who could say what, but the general view was nobody could promote prior to the Olympics.

Q753 Chair: However, what of the contract? Did the contract say "promote" or did it say "make any kind of public statement at all"?

Matthew Griffiths: There are three or four clauses in it. If you were reporting in a news piece so, "Matthew Griffiths supplied a javelin to the Olympics," I could say that, but I could not have an advertorial. I could not promote it in publicity. I could not market it and that sort of stuff, and clearly that is what we need to do. Some of the rigging technology that was used was very special to that stadia and how it was put together, but we cannot advertise that.

Q754 Chair: Your interpretation that you cannot even put it in a tender document, is that explicitly stated in the contract originally signed?

Matthew Griffiths: No, you are allowed to put a short piece that is factual along with other things that you have done. So, "I have done this, this, this and this," and one line or two lines of that will be, "We provided X, Y and Z to the Olympics," but that is not the same as going out there and promoting and pitching for contracts by showing what you did at the Olympics.

Q755 Chair: Right and that is the explicit result of the contract, which is all you are allowed to say. Presumably, your members did know that when they signed the contract?

Matthew Griffiths: Yes, they did. Of course they did, and they understood why that protection was in place. What no one thought would happen is that that ban would stay in place post the Olympics, or that there wouldn’t be a relaxing on that ban, more particularly to the companies that are two or three levels down from the people that signed the contract.

Q756 Chair: Once a contract has been fulfilled and you have supplied the equipment, I mean how is the ban enforced now?

Matthew Griffiths: Badly. I cannot give you any anecdotal evidence or any evidence at all that the ban has been enforced, but we cannot go around saying, "There is a contract in place but don’t worry about it, ignore it, just go around and promote." We would rather we were doing it legally, I suppose.

Q757 Mr Sutcliffe: It goes back to what I was saying; they blacklist companies and refuse to allow contracts from-

Chair: No, I understand the IOC rules. What I am not clear about now is you signed a contract with LOCOG to supply rigs or whatever. You have done so. The games are over, end of contract. If your member now went and put in a tender document, "This is what we did; here is a great picture; it was a great success," who is going to come? LOCOG has been dissolved.

Matthew Griffiths: It is the BOA now that takes those rights on, yes, and my understanding from the contracts is that it was implicit in that that the ban was for ever. There is no end date to the matter. They don’t say, "After six months".

Q758 Chair: Have you sought legal advice on behalf of your members?

Matthew Griffiths: No, we thought trying to work with the system and trying to get it clarified would be the easier option than trying to get the legal beagles involved. To be honest, a lot of our members again, because of their size-if we had massive legal departments that might be another thing-a lot of them are thinking, "You know what, it’s too late now; we have had the opportunity; we have blown it; let us just plough on and do something."

Q759 Chair: Would it be helpful to you if we contacted the BOA and said, "What is your view of what is permitted and what is not?"

Matthew Griffiths: Yes, that is absolutely what we should be-

Chair: I am very happy that we pursue this with BOA and try and get some clarification because it sounds completely impossible.

Matthew Griffiths: Any help, Chairman, would be absolutely encouraged.

Q760 Chair: Can I now turn to IP more generally? Just to set the scene, can you say what you think of the current state of copyright law and, in particular, what you think of the proposals from the Hargreaves report? It is probably more David and Sandie.

Sandie Shaw: Can I just make a suggestion rather than keep-

Chair: Yes.

Sandie Shaw: Regarding piracy-

Chair: I was going to come on to piracy.

Sandie Shaw: I will come back to that, okay. All right then, I am concerned that the IPO are not listening to us. I am concerned that there is a Bill just about to go through about the extension of copyright, which is so totally and utterly unfair to artists. The finances are such-

Q761 Chair: Which particular measure are you talking about?

Sandie Shaw: It is the copyright extension.

Q762 Chair: You are talking about term extension?

Sandie Shaw: Term extension, yes. When the artist’s royalty ends up as 1p and the records company gets 46p and the session musicians get 9.4p, there is absolutely no sense in that whatsoever. Why are they getting 1p? Nobody has asked us; we have not been consulted on it. We are left out of it and they are saying that they are just going to do it. They do not want to listen to us. Is it possible for you to say, "Could you possibly take on board what this group of people would like to happen?" because they just won’t listen to us. We have tried time and time again to get some kind of hearing, but what they are going to put through is just going to be awful. They say something about, "We can’t have gold-plated arrangements. We have to do what Europe does," but Europe have left us to do it as we see fit within our own culture. So why can’t we sort our own mess out, come to an agreement and then advise the IPO how it would work best for us, including the artist? We are always excluded from all of these talks and nobody is representing us. The Musicians’ Union do not represent us; they represent the session musicians but not us. It is grossly unfair and we would like the IPO to give us some say in what is our future.

Q763 Chair: The term extension proposals are obviously subject to consultation, but you feel you are not being listened to?

Sandie Shaw: They are not inviting any comment at all. I started this whole thing off about copyright extension myself years ago with Eric Nicoli, who used to run EMI, and said, "Do you realise that all you record companies, you are dependent on the money from your back catalogue to finance all your R&D, and the back catalogue is going to finish soon?" because it only had 50 years. He said, "I had no idea." I said, "I think we should work together on this." Nobody worked together with us; they went ahead and did it on their own and just screwed the artists.

Q764 Chair: I remember when the campaign started, there was a full page advertisement signed by something like 500 artists all calling on the Government to campaign for term extension, which I supported, and we then finally got term extension through Europe, but you are saying of the 500 artists none of them are going to see any benefit?

Sandie Shaw: They will see 1 penny per download. The record company gets 46p and the session musician gets 9.4p. Is that fair?

Q765 Chair: How does that compare with the existing?

Sandie Shaw: You see all of these artists from that time do not owe any money to the record company. They are all repaid. It is all sheer pure profit. There is no outlay whatsoever, nothing from the record company. All they have to do is to make it available to the public for downloading, and why should we only get 1p. This is the heritage of the music industry; why are we being treated so badly?

Q766 Chair: However, this is less about term extension than about the contract between artists and-

Sandie Shaw: No, it is to do with the terms of the term extension-our terms, among ourselves, and how it is implemented. It is wrong to implement it in that way. They will not listen to us and we need them to listen to us, at least for us to be able to explain to them what the outcome is going to be. Then if they want to screw us, you know, we are getting used to it now.

Q767 Chair: We are talking to PPL later obviously about a slightly different matter.

Sandie Shaw: PPL are also getting a huge amount from this, too, but we have no governance, proper governance in PPL. Our moneys are split 50:50. You know about PPL; it is the money from broadcasting fees and all of that. So they collect that money: 50% is for the labels; 50% is for the creators. The labels own PPL; we don’t. We have no ownership of that of which we are a member. Like PRS, PRS has proper governance; PPL doesn’t. We have two artists on the board. They have four label people. They have an MU on there for the session musicians. Equity are on there and two people from PPL exec. That is not very fair when we own 50% of the money. What is going on here? Why aren’t we offered ownership the same way as PRS is done?

As we move forward from the past historically, lots of things have to be cleaned up and made fit for purpose. How can we even think of doing a hub with PRS and PPL, doing this and taking control of this, which would be great if we were the London centre for the whole of Europe at least? How can we think of that when we do not even have proper governance in one of the organisations? This has to change.

Q768 Chair: We will obviously talk to PPL about that in our next session. Can I ask you about what you also mentioned at the start, which is piracy? You said in your submission to us, "Peer to peer should be dealt with through education," and then you say, slightly later on, "Organised piracy is theft and should be stringently dealt with by the law." I am not quite sure how those two-

Sandie Shaw: Well, it is theft, so sue them, take them to court.

Chair: I know, but when you say, "Peer to peer should be dealt with through education," that implies you do not support the legal measures.

Sandie Shaw: Peer to peer or sharing is often used by artists to find a way to an audience. If it is done with the artists’ consent, then why not? However, if it is not done with the artist’s consent, it should be dealt with by law. One of the ways of really disadvantaging the piracy people is to stop their advertising money. There are so many people advertising on that, it should be illegal to advertise on a pirate site. Why not? It is sense, isn’t it?

Q769 Chair: Those are remedies that we have explored with Google and such like. The way they tackled the original pirate radio stations was to try and cut off the advertising.

Sandie Shaw: I like the original pirate radio stations, but at least it gave birth eventually to BBC and how it is today.

Q770 Chair: I remember the Featured Artists Coalition had some unhappiness with provisions, for instance, of the Digital Economy Act and the measures being taken there to deal with piracy.

Sandie Shaw: I think as we have gone on we have learnt a lot. We have learnt a lot about what can and what cannot be done, and so we are only putting forward now the things that we think can be done. As a creative, I would like to work creatively with other people and follow the money.

Q771 Chair: David, do you have any thoughts?

David Arnold: I think piracy is a very complicated issue. It basically comes down to one very simple thing. As a creator of a piece of work, I think I should have the final say in what happens to it. If I choose to give it away then that is my business. If I choose to allow other people to give it away on my behalf, that is my business. If I choose for other people to sell it on my behalf, that is my business. Every day in my inbox on Google Alert I get two or three pieces of information about where I can download various sound tracks or records or songs that I have done for free, like torrent sites and sharing sites. That is just a matter of fact. I think education is where the whole thing could probably be nipped in the bud. Most people that I know who I have spoken to about, "Do you know what happens to the regular musician who might"-the majority of PRS members earn less than £5,000, £6,000, £7,000 a year in PRS payments. It is a very small amount that gets the big numbers. Every time someone brings up Elton John’s flower bill it does everyone else a huge disservice because it is not like that for anyone other than Elton John.

People’s perception of sharing music, in the way that we have come to know it, is that it is harmless and no one is losing anything. I have had discussions with those people about what happens from the grass roots, at the working musicians’ level. When you don’t buy something then that money doesn’t get through to the studios, it doesn’t get through to the musicians, it doesn’t get through to the instrument manufacturers, it doesn’t get through to the facility providers and, one by one, those things disappear. The musicians will not be coming into studios, either the musicians do not exist or there is no money to pay to employ them. This is what we are seeing; we are seeing a very gradual erosion of our skills base, of the people that know how to mic up a piano properly, how to record an orchestra properly, even how to get a guitar to sound good in a room. That is what we are in the process of seeing at the moment, which is obviously very distressing. Most people do not know that that is the result of them downloading something for nothing.

To a certain extent-and we thought about this a few years ago-if you were to show people the everyday life of a working musician, like the everyday life of most working people, it is really not a very spectacular thing. You are doing what you love, which is fabulous, but you have to get up, you have to go somewhere, you have to perform at a level of excellence that I have to say is only required by surgeons. They practise seven or eight hours a day if they are working or they are not working. If people understood the impact of piracy on our skills base is so great, I think most people would probably choose a facility whereby they feel that their money is getting through to the people whose livelihoods are being most affected by it.

A subscription-based service, like Spotify, as an idea is a great idea. How it works in practice I do not know the mechanics of it, but you hear varying degrees of satisfaction or dissatisfaction with that. However, I think we are probably moving more towards subscription-based music consumption where people will be paying so much a month, like they do for Sky or Netflix. You pay them £6 a month, £10 a month and you get the choice of access to music. As long as that is accounted for correctly to the people that own the music, own the copyright and the performance, then I think that is probably where we are going to end up heading. It is very difficult to-

Sandie Shaw: We could do a great education programme on that, couldn’t we? We could get together and we could do something inspiring for kids. You have to realise that most kids don’t have a pot to piss in and they don’t have any money. They are unemployed. They have no hope. Music is something that can build that up inside them. So first of all, you have to remember that that is the situation that we are dealing with. We could grab their imaginations and teach them and show them in some way. We could make a film or something, or do some music. We could do something. If we were saying, "Here is a lump of money. We will use it and we will do it that way." We could do that. They don’t want to listen to record companies; they do not really care about them; but they do care about their artists. They love their artists, and so it would be great if we could speak to them directly about our situation-also to make more legal things more accessible.

David Arnold: In a way, I think, successful artists are the worst people to be fronting these things because they look at people that have had success and achieved success and say, "You’ve done all right out of it." However, it is such a tiny minority of people that get to that level. We are constantly talking about education, education, education.

Sandie Shaw: I do not mean education like learning by rote.

David Arnold: No, I am talking about how do we make this a physical, actual practical thing that can be done, that can be achieved? How do you tell people, "This is what happens when you download something that you haven’t paid for that the artist would have liked you to have paid for."?

Sandie Shaw: We could make a film about it.

David Arnold: We could make a film about it or you might be able to-

Sandie Shaw: We could get it scripted. We can get-

Chair: A lot of these things either have been tried or indeed are happening. There is no shortage of attempts to educate people about copyright law. We are going to have to move to the next session.

Q772 Tracey Crouch: One last question on training and skills. I think we have established that you think that music should still be on the curriculum and that we should be doing more to encourage our creative youngsters. Matthew, there is a reference in your own evidence about further and higher education institutions having a central training role, but you also allude to the large number of regulations that inhibit the development of these, and I wonder if you could expand on that slightly.

Matthew Griffiths: It is about getting the access to 16 to 18, 19-year-olds. It is more around vocational training, bringing people in. I suppose a lot of our companies, a lot of the people that we represent feel there are a number of hurdles trying to get access into that community for obvious reasons. You know, just making sure that youngsters are not abused in any way, and I am talking about in an employer rights sort of way. I suppose it is making that entry system easier, simpler. Again, we are echoing the points we have just been talking about here. It is about education; it is about knowing that there is somewhere that 16 to 19-year-olds can go and there is a career for them, and it can nurture their skills base without having to go through tons of regulation and whether it fits into particular frameworks.

Every time you start delving into this, there is always a framework that you have to look at, there are always certain restrictions, barriers to entry; there are certain checks that you have to go through, all these sort of things. A lot of our companies started with people very much like the musicians, where they did not conform to the usual look of a student; they wanted to get in there and make something and do something. I think we just want to get back to that. So anything that removes those barriers, where we can make those connections would be helpful.

Q773 Tracey Crouch: Do you think a student of today-a young Matthew-would be able to start in your industry as a tea boy and work his way through the maintenance and technical side?

Matthew Griffiths: Yes, I think he or she could. We would love it. That is the lifeblood of our-

Q774 Tracey Crouch: Do you think you do enough to promote that, though?

Matthew Griffiths: We do internally. However, it is very difficult. If you are hitting a community that is getting hit all the time by the industries, like defence or aerospace or any of the big of industries, it is very difficult for creative industries to go in there and get to a big enough community and say, "Look, come on, we need as many engineers." We have a shortage of engineers in the creative industries, in my side of the sector. The shows that we are doing now need engineers-

Sandie Shaw: I will tell my son.

Matthew Griffiths: I will give you my card afterwards. We also need marketers. We need financial people. We need all of these things, and we need to get on to people’s radar. We talk about STEM-and I know this has come up in previous sessions-but arts do not feature in that. It is still considered as one of those things that we do not get to. We need to get arts, creative industry, whichever way you want to call it, on to the agenda. However, we also want to get it on early enough in the school system so that people think, "Okay, I can be entrepreneurial and go and work over there."

Just to speak to the point we were listening to just now, I would make a very general observation that nothing happens in creative industries until somebody sells something. You can only do that when a creative person creates something-a new baby, as it were-and from that point all this other stuff; we don’t have an industry unless we are working with artists or with theatre or whatever. So it all starts at the creative end. It all starts from the nurturing bit of this, so we have to encourage that end of it. I would say the same about bringing people into our industry. It is not all about degree education; it is about getting to kids early.

Sandie Shaw: It is also difficult if somebody has no qualifications to see whether they can do anything or not. So what we tend to do is we take them on as an intern for six months. If they show any nous or any aptitude, then we take them on part-time and then further on from that, and that seems to be a good way of finding things out.

David Arnold: For your information, when we did all the Paralympics recording and engineering, my engineer was a woman and the assistant engineer was a woman. I was the only bloke in the room, which was great, and they did a brilliant job. Just going back to the Olympics, I think it is a bit of a shame that part of the legacy is an enormous cut in arts funding. A lot of times, in the very places where the talent that we trumpeted so loudly last summer was born and developed, it feels a little short-sighted to me to pull the rug out from underneath those people at a point where you feel like if anyone was going to be inspired to do something it would from last year.

Chair: Okay, I think we need to move on to the next session, so can I thank all three of you very much?

David Arnold: Thank you very much.

Sandie Shaw: Thank you.

Matthew Griffiths: Thank you.

Sandie Shaw: We lost our audience. What did we say?

Chair: You have an audience out in the wider world as well.

<?oasys [np[pg6,cwe1] ?>Examination of Witnesses

Witnesses: Adam Barker, Director of Business Affairs, Universal Music UK, and Peter Leathem, Chief Executive Officer, PPL, gave evidence.

Q775 Chair: Thank you for waiting. We now turn to the second session this morning. Can I welcome as our witnesses, Adam Barker, who is from Universal Music, and Peter Leathem, the Chief Executive of PPL. Perhaps we might start with a general overview. Could you give us your view of what the present challenges are facing the industry are and what changes you would like to see?

Adam Barker: Perhaps I should start. I should probably explain what I do. My role with Universal Music is Director of Business Affairs, so broadly that makes me reasonable for the legal affairs of Universal Music in the UK. Universal Music UK is part of a broader company, Universal Music as a global organisation that operates in about 70 countries throughout the world. The UK operation is based here in London. It employs around 450 people. It is broadly split into what we call frontline record labels, which are Island Records, Polydor, Decca and now Virgin EMI. Through those frontline record labels, we release artists that we have signed here in the UK, predominantly British artists, and we also release artists that have been signed by our overseas companies, again predominantly American artists that have come through our operation here. In terms of the challenges that the music industry faces, I think the number one challenge that we have is simply piracy. It is a barrier to the growth of the music industry.

We have heard from the last session that the music industry in the UK is thriving. I take a more measured view of that. Over the last 10 or 11 years, we have had almost double digit decline in the music industry, or certainly in the recorded music industry in the UK. To a degree, that decline is levelling out. The global recorded music industry grew last year by, I believe, 0.02%, so a turning point of sorts. However, again, I think the number one peril that we face is piracy. We know that the retail value of the recorded music industry in the UK is around about £1 billion, and from research we believe that there are also about £1 billion-worth of illegal downloads in the UK as well. I am not pretending that all of those illegal downloads could be converted to legal downloads. Although research shows that that figure would be around about £250 million, so it would be an enormous boost to the music industry and would remove one of its great barriers to growth. That said, I think it is a fantastic industry. It punches way above its weight globally, and in very simple terms, we like to believe that the Government should do all it can to support such a wonderful industry. It is not an industry that is struggling or in terminal decline. To a degree, it is thriving, certainly creatively, and it could do even better. That is my simple point.

Peter Leathem: I support Adam on that point as well. It is not a question of the Government helping at the expense of the industry doing nothing. Certainly, as Adam was identifying there, this year in the UK the music industry is going to do a majority of digital business in terms of the revenue streams, when you look at getting four out of the top five albums in the US last year, which is a significant achievement and a gain of a 13.7% share of the US market. So, in terms of getting support for piracy, it is very much against the backdrop of the industry here having really developed its business model, embraced digital and continued to punch above its weight on the world stage. Certainly, from PPL’s perspective as well, I think that we do not need a lot from Government. We just need a strong IP framework, and we need to be given some support around what we do. That is something that does baffle PPL, the music industry, the creative sector, as to why for such a thriving sector there is not more understanding or more supports, even if it is just in a way of talking to business around what we do and so on. It is just a bit surprising. It feels like we are a bit of a company that has forgotten the products that we produced that are good, or the territories that we deal with, and are so keen to search for the new product, the new territories, we are forgetting about the ones we are quite good at and focus on trying to support and promote what they are doing. So, in terms of what we need, it is not that much other than just letting us get on with our business.

Q776 Chair: When you say there is a lack of understanding and recognition, are you talking about within Government or more generally?

Peter Leathem: If you take PPL’s business, if you look at the work we have to do with the Intellectual Property Office, when we have recently been having some impact assessments that are put out; it shows a clear misunderstanding as to what we do in terms of the impact on the market and the things that are put in there. It tends to be things of fairly low-quality work, which are quite important because it is then driving policy around what then happens in the IP sector. It also creates an impression, in terms of the wider public, as to how well things are run, how things work and so on. So I think there is certainly some understanding and quality issues there.

Chair: We will come on to IP particularly in due course. First of all, let me pass to Jim Sheridan.

Q777 Jim Sheridan: I have a question for both of you, but in particular Peter. You heard the previous evidence session. How would you categorise your relationship with individual artists?

Peter Leathem: I would characterise it as being very positive. We have been on a journey with PPL in that performer rights came in in 1996. So PPL was formed back in 1934, at the time when only record companies had rights in public performance, licensing, nightclubs, bars, restaurants and so on. Then later came broadcast, the likes of the BBC, commercial TV, commercial radio and so on. In 1996, there were a couple of other performance societies that were set, PAMRA and AURA, at that time, and over a dialogue realised that that was probably an inefficient way of trying to represent record companies and performers, and they would be much better placed by putting them into one organisation.

So, in 2006, we had a merger of those three societies into PPL, and that was something that was a five-year discussion and negotiation with the performing community, the Musicians’ Union, Equity and so on. That led to us bringing everything together, and we had to go for a merger clearance at the Office of Fair Trading to make sure that performers’ interests were being properly looked after and represented within PPL. Since 2006, we have then been on a journey of trying to increase collections, provide better services and show that we are a fantastic home for performers. So, generally speaking, that has been a very successful journey and work with the performer community. I think what Sandie is saying there, in relation to representation, is that we have the chief executive of the FAC as a director at PPL. They would be very pleased, as are the MU, as are Equity, in terms of the journey we are on. They are talking that they want the equal representation of directors on the PPL board to finish that journey. What we have effectively been on has been a journey, from having no representatives on the board to then make sure we increase the representation. In fact, we have just been having a dialogue as to the next stage, when we come to our AGM in June, to then increasing the representation of directors on the board again to carry on that journey. We wanted to have quite a controlled process of change and understanding who is going to come and represent; is that going to add to the running of PPL; is it going to make it carry on being more efficient? So the relationships are very good actually.

Q778 Jim Sheridan: Who represents the individual artist at PPL?

Peter Leathem: What we have is a whole governance structure. We have a main board, we have a performer board, we have a finance committee, a distribution committee, so what you have is you have a range of representatives that will stand and represent performers. We also had a Director of Performer Affairs who was appointed, a person called Keith Harris, who had a long career as a music manager, who was brought in to work on a day-to-day basis to make sure the interests of performers were being properly represented. There is a whole structure there where that works, and ultimately, in terms of how performers choose to distribute their money between the featured and non-featured talent on different policies, that is completely decided by performer representation only. So they are in control of how their affairs are dealt with. That is a very good control mechanism for how their affairs are dealt with.

Adam Barker: I think for Universal Music, and I am sure for most record companies, the most important relationship that those companies have is with their artists. When we work with our artists what we are trying to do is give them the right environment to produce the very best work that they can, and a great deal of our time and resources are spent on our relationship with those artists. There is obviously a framework initially for how we work with artists. Usually the framework is initially a recording contract. Although the relationship goes way beyond that, and in most cases the recording contract sets out the very basic commercial terms of a relationship with an artist: how many albums they are going to produce; what advance they might get; what royalties they might get. There are an enormous number of other activities that we perform with the artists, making videos, providing tour support, providing studios, providing recording funds. Often those are not laid down in any contract. They are a matter of the personal relationship that we have with the artist. If we are not able to have good relations with our artists, we are not able to attract new artists and we cannot survive as a company. So I am sure that most people in Universal Music would say those are the most important relationships we have.

I know Sandie has said that there are certain old contracts that she might see as being unfair. I think it is incredibly difficult to generalise about artists’ recording contracts. There are recording contracts that were signed in the early ’60s that say one thing; there are recording contracts that were signed in the ’80s, ’90s and the noughties that say something entirely different. Over time, most artists will inevitably renegotiate their contracts, things change, and it is a very fluid relationship. Often in a very short space of time, an artist might sign one particular recording contract, have great success and then we will be meeting with them nine months later to complete a new contract.

Q779 Jim Sheridan: Do you have any empathy at all with the artists who are perhaps not getting what they think they deserve?

Adam Barker: I do. I think it is very important that artists should be properly paid for the work that they do. Their work is the lifeblood of the recording industry. It is the lifeblood of the music industry, and I think it is worrying to think that some artists feel they are not properly paid. However, as I say, it is a very fluid thing, and we have conversations and meetings with not only the artists that are currently recording for the company but those that recorded for the company 30 or 40 years ago. So I would stress that it is very much an open door policy and it is a fluid relationship.

Q780 Jim Sheridan: Can I move on to these collecting societies? What has generated the discussion on regulation for the collecting societies? What is the catalyst?

Peter Leathem: I think the catalyst came from the Hargreaves process, and I would say that is one of the things that has not been the greatest piece of work in relation to looking at why collecting societies need to have statutory regulation. Certainly, we had already committed to and are part of a voluntary scheme for regulation, where we have a whole range of codes of conduct, a range of information that is provided about us, our structure, where you can do things, complaints, a third party ombudsman for any complaints that need to be escalated and things like that. So I think that it was coming out of Hargreaves looking that there are a number of overseas countries that have a statutory regulation regime and then came to a range of reasons, which, as I say, I think were not the greatest piece of work as to why then it would be something that was needed in the UK. So it came from the Hargreaves process.

Q781 Jim Sheridan: So, regardless of the size of the company or the artist-I probably know this question-is everybody treated equally?

Peter Leathem: Everyone is treated fairly and proportionality. So yes, absolutely. PPL works as a fantastic lowering of barriers to entry and a very demographic process because, effectively, if you have rights and recordings, which nowadays more and more it is not just a record company; it is individuals; it is people who are actually producing music. In February, we had a number of hundred people join us. You can join for free, and if your recordings are played then you will get exactly the same amount per second on that recording that you do as Universal would or anybody else would. If you are setting up in business now, you don’t have to think about setting up a collection arm for business to business licensing; you have PPL there. You can join it for free; you get exactly the same rates. I think it works as a really good incentive to allow business to think, "Right, I don’t have to worry about that part of the business." Due to our collections and the way the market is working, the amount of money that comes from business-to-business licensing is a very important part of the overall amount of money you make in the music industry now, in today’s world.

Q782 Jim Sheridan: Yes, but they operate country by country. Would it not be more productive to operate globally?

Peter Leathem: As I say, this is the journey that we are all on, so in the last few years we have put the performer and record societies together. We are now in a range of discussions with PRS in the UK about committing to further joint working, joint licensing and a whole range of activities, which will continue to bring us together in the UK over the years to come. We are also in ongoing substantial discussions around how do we make the world work better. One of the things we have done in PPL is, because we are effectively the leading operation of a sound recording society for record companies and performers of what we do, we are trying to look at taking a lead and try and take the investment we have made in repertoire, technology, to look at how we can use that around the world and try to consolidate if not the front-office at least the back-office operations. That is something certainly that the international companies, like Universal, are very keen for us to try to do, so you are not continually reinventing the wheel in different countries.

There is a good opportunity for PPL and the UK to be a real lead driving force in the work that we have done to date, and we will then benefit from a world market that works better, that is more accurate and more consistent in what it pays then because the UK produces so much good repertoire that is played around the world then British artists, British record companies will benefit. So we are very keen to continue to drive that forward and look to break down barriers in how we operate overseas.

Adam Barker: There is an important distinction here between the systems that are required in a digital world, when one is dealing with copyright. It used to be a very much simpler model in the physical world, speaking on behalf of record companies. Record companies, by and large, going back 20 years used to pretty much control the ability to distribute vinyl and CDs through their distribution centres to certain record shops. To a degree, record companies had a monopoly in those days on the distribution of records.

The digital age has brought the great democratisation of the business, not only in terms of being able to distribute recordings, an artist can distribute a single recording themselves to iTunes and sell it to a global audience without going via a record company. However, also in the way that music is made. It has never been cheaper to record music. In all respects there is a much greater amount of activity that takes place outside record companies, outside major record companies, outside smaller record companies. The challenge that the digital age has brought to record companies in particular is: how do you effectively distribute hundreds of thousands of recordings, via multiple digital services in multiple territories, and effectively get paid, so that you can account to the artists and the producers? It has become very much more complicated. The systems that we have had to develop, and the resources that we have had to invest in those systems, that is a real challenge but it is a very different thing than saying that copyright is broken in any way. Systems need to constantly develop, but the copyright framework that we have is a robust one. There are things that we need to do to enforce that. There are issues we need to deal with, such as piracy, but the Hargreaves supposition, that the copyright laws themselves are broken or are a barrier to growth, I think is nonsense. I think we need to keep developing systems. We need to protect artists and rights owners against rampant piracy, but to say that the copyright rules are a barrier to growth I think is simply wrong.

Q783 Mr Sutcliffe: I want to touch on a couple of things that Jim was focusing on, and you talked about fairness for artists and artists’ representation. I am looking at the makeup of the PPL board, four major record companies, four indies, two PPL execs, one non-exec and Musicians’ Union and Equity, two performers and then you go on to the performer board. I take the point there is diversity in different contracts over many, many years and that sort of thing, and I was interested to hear what you said about there is an open door policy for people from 30 to 40 years ago, but they do not come with any power-do they?-in the sense of if you are not under contract you have no power. I wonder how that example that Sandie gave us could occur-I do not know if you have seen the piece of paper; I will hand it over to you-where the artist only gets 1p.

Adam Barker: I do not know of any contract where the artist only gets 1p.

Q784 Mr Sutcliffe: It just seems to me there is an unfairness there and you are looking to the variety of groups that are there. Adam, you said that many years ago the record companies had complete power over distribution and over the contracts for people, and we see some of that now perhaps in terms of the X Factor and some of that sort of thing where new young musicians are under contract to people like Simon Cowell and they have control. What are the mechanisms for allowing people to have longevity? Sandie said in careers three years was good, five years was brilliant, 10 years a superstar. So what are the mechanisms that companies can help and assist young people to have long careers?

Adam Barker: I think the X Factor example is a very specific case, and I am sure that the Committee is aware that talent shows-such as the X Factor-operate in a very different way and in many ways are outside of the music industry. That is part of the broader entertainment industry. Certainly, the contractual arrangements that those contestants enter into are not representative of the broader music industry. When we sign a particular artist, and Universal Music in the UK probably signs between 60 and 75 new artists a year, each of those artists has a legal representative, has a lawyer. We would never sign them unless they had legal advice. Often we will pay for that legal advice for them.

Most of those deals that we do are highly competitive, so we are competing against other major record companies, independent record companies or, in some cases, a desire and the power on behalf of the artist to simply do it themselves, and it never has been easier for them to do it themselves. I am not pretending it is easy for them to get the capital together, but it has never been easier or cheaper. It is not a perfect world. So, when we come to negotiate those contracts, there are powerful forces on the other side, and I would say that those contracts are very fairly struck. In many cases, it is the record companies that would be squealing because they feel that they have perhaps had to overpay because of the competitive nature of the deals.

The issue of very old artists’ contracts is a different one. I think they were structured very differently. Most of the artists that had any kind of success at all will have long ago renegotiated those contracts. Then they have had the ability to renegotiate them because the record company needed more rights. The record company often requires consents and approvals from artists, which artists are able to use to leverage into better terms. So I am not sure where Sandie gets the 1p example from. I am certainly not aware of anything like that.

Peter Leathem: I think also linked to the longevity point, though, is the availability of a paying market. So clearly the decline in the value of the recorded music market, because of piracy, has impacted how long people can invest in. Basically, as a physical retailer, it does not matter how good a retailer you are, about the staff you get, how you deck your shop out, how you try and sell your products, if the shop next door is selling those same products for free it is going to impact your business. It is not just the creative sector that is impacted by that; it is anyone wanting to provide a service because if you are going to go and buy recordings from Universal and say, "Right, I am going to open up some sort of streaming service or other activity," you are still competing with "for free" plus the 70 other digital services that are out there. The pressure on the amount of money available has meant that the record companies can spend less time taking risks on a certain number of artists, and that does impact the longevity as well.

Q785 Mr Sutcliffe: Which is interesting because, in the film world, what the big studios are saying is that they will make a small number of films each year, which has opened up the opportunities for independents to make films that might not otherwise have been concluded. Is that the sort of thing that will happen with the music industry that you might see some independent companies coming through?

Adam Barker: To date, certainly Universal Music has tried to maintain its level of investment in new music. We spend between £20 million and £30 million a year investing in new artists making new recordings. It is increasingly difficult to justify that level of expenditure when the returns are under threat. Having said that, I think in the UK we also have a very thriving, independent music sector as well that can compete on every level. It is a much-used example, but there is the example of Adele who sold 25 million copies of her album. Adele was signed to XL, Beggars Banquet-an independent company in Wandsworth. So again, I think there has been a democratisation of the music industry, and it is easier for people to interact with it, easier for artists to get their music played, whether it is on YouTube or whether it is via a licence to iTunes.

Q786 Mr Sutcliffe: Are you seeing more artists performing live? I seem to have noticed more concerts, and more specific concerts, because it is a better way of showcasing and building a fan following. Does that impact on your contracts?

Adam Barker: I think that is true. I do not know the statistics, but I think a greater proportion of artist money comes from live, as opposed to records, than it used to and there has been a proliferation of bigger concerts and-a lot of festivals but obviously, like anything, there are only so many festivals and concerts that people want to go to. Ultimately, that particular bubble might burst. I think it is always important to artists to have a broad range of income to support them, whether that is song writing, recorded music, or live work.

Peter Leathem: It is interesting; in February, we had around 400 new businesses join us as owners of rights of sound recordings-traditionally, record companies, but increasingly more individuals. They are from all over the country, Cornwall, Devon, Kent, up to Yorkshire, Cumbria, Lancashire, Scotland, and Northern Ireland. It is all over the place. That is clearly a range of sizes, and quite how successful they are all going to be I don’t know, but they can come and join us for free. They are clearly doing something around setting themselves up and owning recordings and wanting to register. They might be in a trading name themselves or have attached their name to records or something, or whatever. So it is interesting that we are certainly seeing hundreds of owners of recordings continuing to join PPL, continuing to do something in the sector, and it really is the entirety of the UK that they come from.

Mr Sutcliffe: That is good to hear. Thanks.

Q787 Mr Leech: I want to follow on from one of Gerry’s questions, and that was in relation to the balance of live music against recorded music, because I think perhaps one of the positive things to come out of falling sales is that artists have done more live music. When we were in America we were told that, as a result, contracts that were being negotiated between artists and record companies often included a slice of the revenue from touring that did not go to record companies previously, but is going to record companies now. What proportion of your income from an artist now comes from live touring compared with previously?

Adam Barker: You are right in that, over the last few years, there has been a development in the way that labels sign artists. In some cases now, labels are entitled to a small share of the artist’s live income.

Q788 Mr Leech: What is a small share?

Adam Barker: Possibly between 5% and 10% of the net profits that they might make during the term of the recording agreement. Not for the rights period, not for the length of time that the record label might own the rights and the recordings, but for the term which is the length of time that the artist is recording with that company, which might be one year or it might be five years. That traditionally would be a small share of the artist’s live income, which very often, because it is based on the net profits, might well be zero and in many cases it is zero. It takes artists quite a long time to build up a profitable live business. As to how much of our own income that amounts to, it is a tiny percentage. I would say it amounts to, last year, less than 1% of our revenues would come from that.

Q789 Mr Leech: I presume there can be a massive discrepancy between artists though, depending on how successful they are and whether they fill 80,000 stadiums or 2,000 venues.

Adam Barker: That is right. One thing I would say is very few artists play stadiums. A handful of artists will play stadiums. The majority of artists are playing in much smaller venues, clubs with 100 people, and theatres with a few thousand people possibly, and the profits from those are relatively modest.

Q790 Mr Leech: In terms of the artists themselves, traditionally tours were to promote albums, rather than to necessarily generate revenue.

Adam Barker: Yes. It often works the other way around now, it seems.

Q791 Mr Leech: Yes, but what sort of proportion of income that an artist gets comes from their live performances these days?

Adam Barker: I don’t have the exact figures, but I would imagine at least half. Again, it varies enormously by artist. You might have a guitar band like Coldplay who will play in stadiums, or you might have a solo pop artist that is not necessarily suited to playing bigger venues.

Q792 Mr Leech: That cannot perform live?

Adam Barker: Yes, exactly, so certain artists have a disproportionately large live business. They make almost no money, sell almost no records, but have a very healthy live business, and for some artists it is vice versa.

Q793 Mr Leech: Do you think there is a likelihood that the proportion that the record companies get from live tours is likely to increase over the coming years if something is not done about falling record sales?

Adam Barker: If something isn’t done about falling record sales, or not so much about falling record sales but about piracy, I think record companies are always going to be under more pressure to look to finance the investment they make in recordings from other sources. If records are selling less then record labels have to find some other way to keep investing.

Q794 Mr Leech: So the easy answer would be yes?

Adam Barker: I think there are barriers to that, and artists are usually very well-represented by lawyers, managers and agents whose job it is to resist certain elements of a record contract that we might want to impose. So it is a very open negotiation.

Q795 Conor Burns: It is not unusual in this place for the two sides of the House to hold diametrically opposite views on the same set of facts. Before coming to this place, it was my experience that that tended not to be the reality in the real world and the commercial world, but it does seem to be very much the reality in your world. I think you were in for the previous session. You will have heard what Sandie Shaw said about how badly treated she perceives that artists feel by record companies under the rules. Can I ask you to respond to some of the points she made?

Adam Barker: I think Sandie’s main point was that certain artists with older contracts don’t receive sufficiently high royalties from the sale of digital downloads, or I suppose from the sale of records. It is impossible for me to comment. Record contracts vary enormously. As I say, I have no experience of a record contract that would deliver as little as a penny to an artist from a digital download. It really is very difficult to generalise. I suppose, if I attempted to generalise, I would say that the royalties that are payable to artists under record contracts have increased steadily from the birth of the modern music industry to today.

In my own experience, (I have worked for Universal for about 10 years), and certainly the standard artist rate-if there is one-is probably about 30% higher now than it was when I started working at Universal. So what causes that I don’t know. I think falling record sales is one element. Artists are looking to get a bigger piece of a smaller pie. It is difficult to say. Certainly, if you go back to the ’50s and ’60s, we have all read stories about unscrupulous managers or unscrupulous producers (not always record companies) that have signed artists to unconscionable agreements. I do not think that is a feature or has been a feature of the music industry for many decades now.

Peter Leathem: On the term extension there, for example, I think that Sandie was being a little bit unfair. I do have lots of concerns around the IPO and how they are treated, but I think that is a bit unfair in relation to the IPO.

Conor Burns: Be careful, she is still behind you.

Peter Leathem: So I think that what has happened is there was obviously a European directive, and often with European directives it has lots of ambiguities, flaws, and so on, but that is a directive, and that is a directive that the IPO has to implement and it wants to implement it pretty much in accordance with the way it does with directives nowadays, which is pretty much to say, "That’s the directive; that is what we’re going to implement." There are some nuances around that. As part of the encouragement to try to get the Government to support term extensions, there was an agreement entered into between the BPI, AIM on behalf of independents, the Musicians’ Union, and also on PPL as the administrator, around saying, "We will make sure the performers are looked after. We will have a session fund for the session players." There was an agreement to have a 10% minimum royalty without any deduction, which brought it pretty much up to modern day royalty. If there were any past old contracts for feature performers, there was an agreement in there to do that. There was a whole range of other things contained within that, trying to address the issue of older contracts.

What has now happened is that was going to be on a particular basis of how the rights were to be administered by PPL, broadcast, and so on. That is now not going to come through, so there is a discussion going on as to how those terms can be replicated by whatever is then implemented by the Government. There were quite a lot of attempts by the record companies to address the issue of older contracts and to make sure there was a minimum royalty, and then when we came to the administration side that the session players were also getting looked after.

It just so happens that the way the directive works is that the session fund for the session players is very high, and it will mean that often they are going to get paid more than the feature artist, but that is the way the direction has come through and that is something that has to be implemented into UK law.

Adam Barker: I would support that. It does seem slightly odd, but I am not sure if anybody really understands how the session musicians’ fund-which I understand to be effectively a 20% royalty set aside, on term-extended recordings for session players-how that figure came about. It seems disproportionately high, because that royalty applies whether there are 20 session players or whether there is just one. So in theory, if you were lucky enough to play the triangle on an early Beatles track, you would be getting a royalty that might well be higher than the Beatles themselves receive, so that seems slightly arbitrary. However, certainly as Peter says, there are a number-

Q796 Chair: Do you think that has come about just because of the power of the Musicians’ Union lobbying?

Adam Barker: I think it may be. To Sandie’s point, I think there are a number of discussions about whether there should be a minimum artists’ royalties as well, and there is some fairly vigorous discussion around that.

Q797 Chair: The term extension was something which the entire industry campaigned for, for years. For a long time it appeared we were getting nowhere. We finally got it through Europe. There was much cheering, but now what I am hearing from quite a lot of people is that they are unhappy about the way it is being implemented. You have highlighted the anomaly of the proportion that the session musicians were getting, but do you think the directive is flawed?

Peter Leathem: I think having the directive has been a good thing, definitely in terms of term extension, and one of the things that is not talked about there is that in relation to public performance, broadcast income, that will continue to be paid through. That was not mentioned earlier on, but those are other areas of exploitation which can be very valuable for feature performers and session players and that will carry on being paid through. The problem is that in relation to implementing the directive there are quite a few things that are going to be problematic, just to make sure that they work.

It will be a bit of a shame to get bogged down in the fact that implementing has this range of uncertainties and what that means. There is going to need to be a lot of joined-up discussion across the industry to not turn a success into a disaster, when it has been a good thing to have the extended term and it is just going to be a lot of work to try and make it work and understand what certain undefined terms mean, and so on. There is no doubt that there is going to be a lot to be done.

Q798 Chair: That work is ongoing with the IPO?

Peter Leathem: With the first stage, there has been a significant amount of work with the IPO who only have a limited ability to address those issues in implementation. The next stage is there has been some frustration around that process, and about what cannot change and there are constraints as to implementing a directive. Going forward, when we then have the directive implemented, there are going to be lots of terms as to "what does that mean". So there is going to be a lot of working around what that means in practice, how that is going to work and that is just going to be the reality of the work that needs to happen now.

Adam Barker: I think Peter is right. There is an element of fine-tuning required, and there is going to be a lot of discussion and debate, and it is important that that is right, but it should not take away from the fact that the term extension was a very positive thing for the creative industries in the UK. It was the last positive, major positive, step that I think the Government has taken, and it leads on really to there are more steps required. I am sure you have heard people talk about the implementation of the DEA, the Digital Economy Act, which again, to many people, it is quite baffling how the Act has not yet been implemented, despite having been passed three years ago. I think most people in the creative industries would agree it would be a very important step to combating piracy.

Q799 Chair: Yes. We have taken evidence on that, obviously. In terms of particularly the evidence we heard earlier, you seem to be suggesting that a lot of the problems relate to contracts with artists that were signed in the ’60s and ’70s. Is it partially that when you signed a contract with an artist in the ’60s the word "streaming" was meaningless? The concept had not been invented and the contracts therefore do not reflect the modern technology which allows music to be distributed in all the different ways.

Adam Barker: That is true. In many very early contracts, there is a specific reference to records, and it is very clear that that meant, in those days, vinyl records. However, I come back to the point that recording contracts are a very fluid thing. It is very seldom that a contract is simply signed and put in a drawer, and obviously a large part of what I do is constant refinement, renegotiation, discussion, interpretation of contracts with artists, with their lawyers, with their advisers, with their accountants, so it is a very fluid business. We do not simply sign an artist, put a contract in the drawer and wave goodbye. We have a relationship with those artists, and whether that is an artist that is no longer recording for us and last recorded in 1974, or whether it is an artist we signed last week, we exist because we have relationships with all of those artists. As a record company, if for a minute we forget that we are lost, simple as that. That applies to recording artists from any decade.

Q800 Chair: The suggestion that was being made at the time was summed up by "use it or lose it". Do you have sympathy with that argument?

Adam Barker: I think record companies use their copyrights and use the copyrights that they have. In many ways, this is one of the great boons of the digital age, that it has never been easier to distribute records on a global basis. We know there are challenges around collecting income; there are certainly challenges around enforcement; but in terms of pushing music out to its widest possible audience on a global basis, the internet has been a boon. It has clearly brought some challenges, but we are hopeful that we can overcome those challenges.

Q801 Conor Burns: I think the Chairman has hit the nail on the head. We have had quite a number of these evidence sessions and heard from both sides. Is there not a sort of sense that we, as legislators with the capacity to create regulators, are constantly looking to regulate yesterday’s problem, whereas the pace of technology advances so rapidly that the reality is none of us know what to do? You do not really know what to do; the artist does not really any longer know what the right way to make money is any more; we do not know how to regulate when we regulate within a jurisdiction, when the web has abolished jurisdiction in a really profound sense, and this will only all become clear in five or 10 years’ time.

Adam Barker: I think it is obviously impossible to predict the future. In terms of technology and how people consume music, I think we get a peek into the future. We know that people want to consume music whenever they want, wherever they want and however they want, and more and more people want to consume music on their portable devices. One of the limitations of the Digital Economy Act is that it does not have any application to mobile devices, so that is a shortcoming. We are never going to be able to look 20 or 30 years into the future. As one manager has said to me, "How do we know? Maybe people will have brain implants that will play music to them digitally. How do you legislate for that?" We do not know, but what we do know is there is a great proliferation of legal music services, whether they are download services or streaming services, which cater to people’s needs, and as an industry if we do not cater to what people want and how they want to consume it, we get very quick feedback, because they either take the music without paying or they do not consume it in sufficient quantities for us to be able to survive and for the artist to be able to survive. So we have to constantly react.

Do we know what is going to happen in 10 years’ time? No. Do we know what is going to happen in five? We think we do. We have seen a proliferation of streaming services and certainly with my own children I know that they see music really as a utility. That they know it should be paid for by somebody, but hopefully not them, and they would like to consume it wherever they are, whether it is on their iPod, on their mobile phone, or less and less on a PC. So we have glimpses into the future, and I think we can legislate for the near future. Beyond that, of course, no, we cannot.

Q802 Conor Burns: Short of a whole-scale nationalisation worldwide of the internet. This is a very depressing conclusion for the report, but I am struggling to see really anything profoundly significant that we can do, in legislative or regulatory terms, that will satisfy the demands of the artists and will continue to ensure that people are paying to consume what you are pumping out.

Adam Barker: I think it comes back to a grass-roots basis that, if Government is able to provide a level playing field for the legal sale of music, then record companies get paid, artists get paid, producers, engineers, and studios.

Q803 Conor Burns: Doesn’t that only work if you can close off the illegal download through the web? The web is a recognised jurisdiction in that sense.

Peter Leathem: The industry does know the challenges it faces, and with the legislative tools available, it does try to take action to block websites that do things like that. It is interesting that if it was pornography how things seem to move along a lot quicker, so I think if there is a willingness-and I think you are right-there would be an ability for the industry to identify the things that are causing the most harm and the remedies that would help to then stop some of the worst illegal actions. I think there would be a process of knowing exactly the challenges that are faced today and what action would help, and I am sure that is something that could be helpful in terms of identifying.

Q804 Conor Burns: We sense no urgency on the part of Google to do what you are asking the way they do with child pornography. What you are advocating is that we become a sort of slightly more effective King Canute?

Peter Leathem: I think it is one of the questions, so is downloading music illegally just slightly immoral, as opposed to pornography being very immoral? I think there is a whole issue about attitudes and that is where Google’s attitude is going to be also driven by public opinion, by Government pressure, so volunteering to start to delist infringing sites from searches was probably based on a bit of public perception as to the way the legislative process was going. I think a number of things can be joined up to try to make progress and have more people interested in helping to get the right outcome.

Q805 Mr Leech: What elements of the music industry do you think merit the sort of tax reliefs that the film industry is enjoying?

Peter Leathem: Historically, the music industry has not asked for that many tax reliefs. It has wanted to get on with a clear IP framework, be allowed to go and conduct trade business and to invest and to just keep generating success. So certainly, from PPL’s point of view, I would not have a particular view on tax relief.

Adam Barker: I do not think it is anything that the music industry has specifically asked for.

Mr Leech: I think you are the only creative industry that has not.

Adam Barker: Yes, more fool us. I think if we were to focus our minds on it, it would be geared around the very creative end of the industry, and it would be some kind of favourable tax regime that encouraged investment in music, in innovation within the music industry, and it would need to be at a very grass-roots level.

Q806 Mr Leech: In her written submission, Sandie Shaw suggested that one of the ways of supporting artists would be doing tax returns every five years rather than every year. Are there any changes to the tax system that would assist the industry, not necessarily tax reliefs, but any changes that would be beneficial to the industry as a whole?

Adam Barker: I do not think there is anything specific I can think of, other than to give companies and individuals a greater incentive to invest even more money in creating content and creating music would be a very good thing.

Q807 Mr Leech: Are you aware of any tax incentives or changes in other countries that have been beneficial to their music industry?

Adam Barker: Not so much on tax, but, for example, Canada has a wonderful track record of supporting its creative industries and providing funding for musicians and film makers to travel overseas. Again, rather like the UK, I think Canada punches perhaps less above its weight than we do, but again they see that it is something that they should be nurturing and supporting. As someone that works within a record company, it is quite baffling that it does feel that the Government takes for granted the wonderful, creative industries that exist in Britain, and they exist almost despite rather than because of what the Government does or does not do. It is baffling and it is disappointing, and it is perhaps indicative of an almost apologetic attitude towards the wonderful assets that we have in the UK. The Olympics were a great thing because we were able to trumpet those assets across the globe, and I wish we could do more of that and I wish the Government would support it more.

Q808 Mr Leech: Finally, why is it that other creative industries have been very keen on tax reliefs and have argued very strongly that they are needed to compete, yet that has not been the case within the music industry?

Adam Barker: I think the music industry has always taken an approach of self-sufficiency. To my knowledge, it has never looked for basic handouts. Perhaps it should be looking for handouts. It has never been the attitude of the music industry. What it has sought the Government’s help on is achieving a level playing field, to say, "Look, we create these wonderful things. Please at least remove some barriers to us selling even more of them than we do," and it is indicative of the music industry that it has not sought a tax handout.

Q809 Mr Leech: So, if lots of other countries suddenly started giving tax relief to the music industry, you would be knocking on the Government’s door straightaway?

Adam Barker: I think we might well review our attitude, yes.

Q810 Chair: You just said that the success is despite the Government rather than because of it, and you said that you cannot understand why the Government does not support the creative industries more. Most of this inquiry we have heard evidence that the Government does support the creative industries a lot and that is one of the reasons why we are so successful. Where do you want the Government to support the creative industries that it is not?

Adam Barker: Again, I come back to a point we have talked about a lot, piracy. It seems to me that the Government can take some simple steps in completing a course of action that was started that would have a very significant, positive impact on the music industry.

Q811 Chair: Are you talking about the Digital Economy Act?

Adam Barker: Absolutely, and I think there are other things that the Government can do. I think the Government needs to get to grips with the process by which illegal websites are taken down. It costs many hundreds of thousands of pounds, takes a great deal of time for any organisation, whether it is the BPI or a record company, to have a wholly illegal website removed. I think it is very disappointing that when one searches for a particular artist or a particular song on Google, the first four or five pages come up with illegal sites.

Q812 Chair: Google now tell us that is no longer the case. That was the case, but they have changed the algorithm and they have addressed the problem.

Adam Barker: There has been some recent research that was submitted to the BPI, which is a progress report on Google’s steps, and it has found very little change in the way those search results are produced. I think there is always going to be a delicate balance between tech companies and content companies, and it is very important to us that companies like Google exist. Google, iTunes, Spotify, they are great companies, but again it is about a level playing field and it is about finding a delicate and correct balance between creative and tech, so that both can thrive.

Peter Leathem: It also looks like the Government is going to continue to follow the not having a compensation route for copying, in terms of that has been something that has not been in place in the UK for the last 25 years, so the UK has aligned itself with Ireland, Malta, Cyprus and Luxemburg as being the only other EU countries that do not have a fair compensation scheme for copying on to devices or other media.

Q813 Chair: You are talking about the hardware levy?

Peter Leathem: Yes, so when you look at the rest of Europe, in 2010 there were €650 million passed through to the creative sector to help fund and generate those creative sectors that we have to compete against. It depends how you look at these things, because I understand that because of the way in which you look at the law now and you say, "Well, of course you can copy a CD on to an iPod and it sounds daft that you cannot allow that to occur." That was a decision that the Government took many decades ago and, of course, when you look at it now it looks rather odd that we moan about it being a problem. However, it is interesting that all the other EU countries and many other countries beyond have a compensation scheme to help fund the creative sector for the loss that would occur through piracy and other things that were going on there, and in 2010 it was €650 million and, as I say, while we all share in that to some extent, when there is exploitation of our works in those countries, that is still quite a significant amount of money going into the creative sector which we have to compete with.

Q814 Chair: When you say, "The loss that occurs," are you suggesting that if I bought my CD and I then wished to put it on my iPod I should pay again to download it?

Peter Leathem: The original idea of setting up a compensation scheme was that when you had blank tapes and so on there was an ability to record it.

Q815 Chair: That was compensation for law breaking. That was compensation for the fact that everyone was using blank tapes to take music off the radio instead of buying it. When it comes to private copying, which is the exception proposed, that is arguably not because of any loss of sales. This is simply somebody who owns a piece of music and just wants to put it on a different device.

Peter Leathem: I understand that. I am just trying to talk about the previous history that has led us to this point, and where we differ from who we are competing with in the rest of Europe, and identifying the sums of money that then get pushed into the creative sector to help them and compete with us. I accept exactly what you are saying; I am just trying to point out that was a different route to where we arrived at today.

Q816 Chair: Okay, so are you suggesting you are unhappy with the private copying exception proposal, if it does not also have associated with it some kind of compensation or licensing?

Peter Leathem: I think the music industry does have to look at fair compensation for activities that take place, and where other people are going to make money off the back of that. Certainly, it has been more interested about the cloud issue, which I know you have had evidence on, as opposed to the iPod. It is just unfortunate that, by not having closed that loophole many decades ago about private copy, it has been a significant peg for detractors of copyright to point to to say, "Copyright is not fit for purpose because, look, you cannot copy a CD on to an iPod, how ridiculous," and in some way also the music industry has been tainted by that as well.

Ultimately, if there are activities and services that are being provided, which in some small way also are from the use of music-and I know that cloud services are to be used to store photographs and so on-I think the juxtaposition is that there should be some sharing of arrangements. Again, I suppose the industry feels that having missed out on these fair compensation systems for decades, just at the point of licensing of cloud services that are making money for providing services around music and those licensing activities are taking place, just at a point that money is being made from those, that is now going to be proposed to be shut down as well as an option for earning money. I am just trying to put the historical context into what is quite a tricky area to deal with.

Adam Barker: I think Peter is right; it is important that we establish that if someone wants to copy a CD on to their iPod that should not be an illegal act. I think it is nonsense to say that is an illegal act, and I think going back a couple of decades that should have been clarified, and I think it is right that it is clarified. What is also important is that that clarification does not extend to cloud services.

Q817 Chair: It does not extend to cloud services? You would not allow private copying onto a cloud-based service?

Adam Barker: I think at that point that becomes a licence which is generating revenue for a third party and at that point that should become something that is licensed, not something that can be achieved without any revenue flow-back to the creators. I think there is an important distinction between copying it on to your iPod and using a Google service or whatever it might be to store it in the cloud that a company is charging the consumer for.

Q818 Chair: You see it as an important difference. I am not quite sure what the difference is.

Adam Barker: I think the difference is in value transfer. If a company is providing a service to the consumer and charging the consumer in order to allow copyrighted material to be stored in a certain way, and is charging in many cases a specific subscription charge to the consumer, I think at that point the creator or the owner of the copyright has a right to license those rights, rather than to have all of that value from that transaction shift away from the consumer into the hands of effectively an online storage facility.

Q819 Chair: You could make that argument about an iPod.

Adam Barker: I think an iPod is a commonplace physical/digital storage device.

Q820 Chair: The cloud may become a commonplace storage device which just happens to be up there rather than down here.

Adam Barker: I think one distinction is that you buy an iPod. You do not pay a subscription to operate your iPod. If you want to have a cloud service or a locker service, you will invariably have to pay a third party to facilitate that storage function, to facilitate a transaction around copyright.

Peter Leathem: I just question aligning ourselves with Malta, Luxemburg and Cyprus. Are we in the right place?

Chair: Yes. I do not want to have our policy dictated by what the Germans do, however. I think we probably have finished all our questions, so thank you very much.

Prepared 25th September 2013