Fixing the Music Industry

‘Fixing The Music Industry’ by Amanda Harcourt

Amanda Harcourt, renowned music industry lawyer, Honorary Professor of Practice at UCL Faculty of Laws, and IP Consultant at Blue Highway examines the UK pre-election landscape surrounding the worlds of the creative arts. This piece was first published in The Blue Highway Beacon Bulletin Vol. 1, No. 3, Chapter 2 on 1 July 2024. 

Electioneering, not love, is in the air and I am asked what neophyte MPs in an incoming UK government might do to help the music industry.

For a start, I would forget about the music industry per se and concentrate on the music itself. By that I mean the creators - the thousands of people responsible; such as songwriters, composers, recording artists, session musicians and the huge back line of tech talent that moves the music from the spark of an idea to inspiring performances and recordings.

Of course, there are legislative tweaks that will improve the lot of creators whose livelihoods have been decimated by the digital delivery of their work. But to trawl those reading here through those would be dull. We don’t tend to specialize in or focus on the ‘dull’ at Blue Highway.

So instead, here’s a map of the plumbing and a few ideas for beginners:

Most people do not realize that only a very few music creators make serious money out of their music. Advances against future royalties and paid by contractual partners go unrecouped over years. And session musicians are stuck in a system where they get NOTHING, that is nada and zilch, from the streaming services. Surprised? 

Poor quality copyright data at the record labels (for recording artists) and music publishers (for songwriters and composers) have the effect that the corporations’ shareholders and executives can trouser any money where the specific song or recording cannot be matched “directly and identifiably” to the cash. Yes, those three little words appear in every creator contract. … Kind of a baked in disincentive for the corporations to clean up their data, wouldn’t you say?

UK music sector lobbying is, in theory, performed by a body called UK Music. But check out its membership: https://www.ukmusic.org/about/members/. One wonders how creators can get a really improved shake when, for advocacy, they are in bed with the companies that own their rights and also have those three little words to play with? 

So, new members of Parliament, please look no further than the Council of Music Makers: a band of passionate, committed, well-informed and hardworking creative people who can explain to you exactly what is needed to improve their lot. Listen to them. And please listen well: https://councilmusicmakers.org/.

The Council will confirm that any singer-songwriter on, say, Spotify, who owns 100 percent of their music worldwide gets a little over US $3 for 1000 streams, or US $0.003c per stream! Imagine what that figure becomes when all the band members or maybe a co-writer has to be paid a slice from that bounty! Imagine too how creators might feel when they find out Daniel Ek, who founded Spotify, is worth US $4.9 billion? That is four times Sir Paul McCartney’s net worth. 

In 2023, Sir Lucien Grange, Chairman and CEO of Universal Music Group, once knighted for his ‘accomplishments in the music industry’ (not music, note), was awarded an annual pay package published as, directly and identifiably, €47 million. Plus, he has a US $100 million stock option to entice him to stay on for a further five years. Imagine his tax bill. Then, imagine the pile of money he’s left with, even after all of those taxes.

Nonetheless, while we are talking taxes, (because every aspiring MP is doing that up and down the country as Thursday draws ever nearer), consider where the taxes on profits go for the three major music companies. Together, they control nearly 70 percent of a global market worth US $28.6 billion in 2023. Sony Music Entertainment is owned by the Japanese Sony Group Corporation; Warner Music Group is headquartered in New York; Universal Music Group is headquartered in the Netherlands and has French, American and Chinese ownership. How much do you think these three giants are sending through to the UK’s fiscal supply lines?

In contrast, consider where the taxes of the 210,000 people (real people, mind you), employed in the music industry are going. Only a very select few creators are rolling deep in the dough, but collectively they are the bedrock of the £6.7 billion UK industry (2022 figures) including £4 billion in exports. These 210,000 are the ones who will pay taxes into the coffers of UK plc.

Oh, and as for the word ‘employed’ here’s another bit of fiscal madness that ties the hands of music creators. 

Many, if not most music creators, are not employees. They are either self-employed or they operate via a service company that manages their various revenues sources (such as they are). Unless a music creator’s trade association is legally a trade union (such as the Musicians’ Union or Actors’ Equity), that association will encounter difficulties should it try to close a collective agreement containing basic terms on which their members shall provide their services. Any such attempt to conclude a collective agreement to help entry-level creators earn enough to eat and pay the rent (remember how that used to be possible for entry level workers?) is met with an unfriendly letter from the Competition and Markets Authority. Yes, folks, these self-employed creators are adjudged to be ‘undertakings’ at law and their proposed collective agreements are labelled anti-competitive, as such agreements might, shock, horror, distort the market. 

Move over Google, step away De Beers, a folk singer is wrecking the house.

There are two key de-facto monopolies based in the UK music industry, and both are not-for profit. Surprised? Thanks to the UK adopting EU legislation, these two collective management organizations (CMOs) are, in theory, the most highly regulated music companies out there, with transparency obligations that creators can only dream of being applied to their commercial partners: www.legislation.gov.uk/uksi/2016/221/contents/made.

These two music CMOs are membership organizations that issue licences and collect licence fees on behalf of music creators and their commercial partners for the use of music.

PRS for Music, which new MPs will doubtless have heard of, issues licences to music users that publicly perform or stream its members’ songs and compositions. Half the money collected in the UK is sent directly to the songwriters, lyricists and composers; the other half goes to their publishers, and if the contracts award more than 50 percent to the creator, the publisher sends them a quarterly or half yearly ‘top-up’. That is how it works for the UK money. 

For license fees generated by UK creators works played abroad, PRS for Music is dependent upon reciprocal agreements with their equivalent societies overseas. The international song royalty plumbing system has one very important difference. The publishers’ halves of the foreign revenue are paid direct to music publishers’ local offices abroad, and it is only the creators’ shares that wander back to the UK through the network of societies. The commercial power of the English-language music repertoire means non-English-speaking countries are net exporters to the UK (and the USA, Canada, Australasia and South Africa). So, it is essential that relations worldwide are cordial and systems efficient. The publishers are getting their whack from their own overseas representatives. It is only the songwriters and composers who rely on PRS for Music for that vital foreign revenue.

The organization has been much beloved. Monies are paid quarterly directly to creator members, often serving as a lifeline as money managed under creators’ publisher contracts may be yet to recoup the advances. Shockingly and unusually, this year there are currently two legal claims having been served on PRS and both come from creator members. This should be a real concern for this century-old and vital institution. PRS for Music is not a Fortune 500 company, despite its impressive annual distribution of over £940 million, according to its most recent figures. One need only look across town to the Public Inquiry into the Post Office/Horizon scandal to be reminded of the dangers to which a large organization can be exposed when it forgets the hundreds, the thousands, of ‘little people’; the boots on the ground that form the core of their operations. Given the comprehensive CMO regulatory structure, MPs need to firmly remind this august body of its precious responsibilities to all its creator members equally and its clear statutory obligations.

Phonographic Performance Ltd (PPL), the other not-for profit CMO monopoly in the industry, collects money for broadcast and public performance, but for recordings and the performers on those recordings. But PPL does not license or collect money from the big streaming companies – they pay the record companies direct. That licence fee money is then distributed to recording artists, in sometimes ‘imaginative’ percentages, according to the individual artist / label contract terms. But nothing goes to session musicians! As I noted earlier, they are all left out in the cold, dependent upon their session fees. Does that sound fair? There is a fix for the problem but that, readers, must wait for another day.

© Amanda Harcourt 2024

Photo by Etienne Girardet on Unsplash