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«COUNTING THE NOTES The economic contribution of the UK music business A report by the National Music Council – November 2002 Preface This is the ...»

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• performance royalties, which are due whenever a copyright work is performed (live or recorded) in public, broadcast or transmitted online. These are collected and distributed in the UK by the Performing Right Society (PRS), with the exception of fees from performing and broadcasting dramatico-musical works (Grand Right Fees), which are collected directly by music publishers.

PRS is a non-profit making member organisation, established in 1914.

• mechanical royalties, which are royalties payable whenever a musical work is recorded for audio formats such as CDs, audiovisual formats such as videos and DVDs, computer games, broadcasts or distribution online.

Mechanical royalties also include synchronisation fees which are payable when music is synchronised with pictures, as in the case of commercials and films. A new revenue stream is that provided by the reproduction of music in mobile ringtones. Mechanical royalties are generally collected and distributed by the Mechanical-Copyright Protection Society (MCPS) in the UK, although many publishers collect synchronisation fees directly. MCPS acts as an agent for its members and was established in 1924 (although the first UK mechanical rights company, MECOLICO, was formed in 1910). It is a subsidiary of the Music Publishers Association (MPA).

• Printed music income, which is derived from the sale and hire of printed music, or the licensing of print rights.

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PRS issues licences, generally on an annual term, to music venues, commercial premises, broadcasters, cable companies and online music service providers. Such licences enable the users to perform, broadcast or transmit copyright music from the many millions of works under its control, subject to obligations to report back use. PRS distributes a proportion of its licence income directly to its composer members and a proportion to its music publisher members. In some cases publishers will remit a further part of their share to their writers as necessary to make up the royalty share agreed in the publishing agreement between them.

The total PRS membership reached 37,000 in early 2002, which is made up of 33,000 writer members, 2,700 publisher members and 1,300 successors to deceased members whose works are still in copyright.

PRS has reciprocal agreements with 71 other collecting societies around the world, through which it both In simple terms “copyright” is a property existing in defined categories of original works, including musical compositions and lyrics, which arises automatically once the work has been committed to some material form. It gives the owner of the copyright the exclusive right to copy the work, distribute copies, perform it in public, broadcast it and adapt it or to authorise such acts.

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In the UK, mechanical royalties are collected by MCPS and distributed to its members. There are 11,400 writer members and 4,500 publisher members of MCPS, though typically individual composers assign their compositions to a music publishing company which is a member of MCPS. The publisher will receive the total mechanical royalties from MCPS, and in turn pass on the composer’s share at the agreed rate.

The majority of MCPS income derives from mechanical royalties paid by UK record companies on their sales or manufacture of soundcarriers, which are calculated as a percentage of the dealer price of the soundcarrier. Other revenue sources include collections from similar societies overseas under reciprocal agreements, and income from blanket broadcasting agreements, authorising the broadcaster to record music for use in programming.

The following table sets out the sources of MCPS’s royalty distributions from 1995 to 2001.

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(a) From 1997 onwards, MCPS figures include the licensing and payment of royalties throughout Europe under a Central Licensing Agreement (ECL) with Universal Records. In 1997, £48.8m of the total is attributable to ECL (and see Table 2.8).

(b) Includes audit claims and licensing of many other sources.

In 1998 MCPS and PRS formed a jointly owned company, the MCPS-PRS Alliance, which is responsible for their operational functions. Whilst both societies have maintained separate identities, constitutions and responsibilities for licensing, the new arrangements were instituted to improve efficiency in their back office functions such as IT investment, databases and customer service.

2.3 Printed music sales

The sale of sheet music and other related distribution-based income (such as the hire of performing materials) was in the early years of the music publishing industry the principal source of income for music publishers. In 2000 income from printed music sales represents only c11.7% of music publishers’ domestic turnover. MPA survey figures suggest that in 2000 sales of printed music generated turnover in the UK at wholesale level in excess of £30m, a figure which has risen steadily from a total of £20m in

1992. One recent development in this area is the online sale of sheet music and scores; the Internet offers a simpler and faster method of distribution, but one which is probably better suited currently to pop music rather than classical.

2.4 Grand Rights fees and synchronisation income

These two sources of income, included in the summary of the domestic turnover of UK music publishing companies below, have already been described in the introduction to this chapter. One point which is highlighted in a comparison of income between 1997 and 2000 is the rapid growth of synchronisation income, which demonstrates the increasing importance of the use of music in media such as films and advertisements.

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The table below sets out an analysis of domestic turnover of UK music publishing companies based on comprehensive surveys by the MPA, the trade body for UK music publishing companies.

Such music publishing companies typically sign contracts with writers who generally assign the copyrights in their compositions to them, in return for royalty payments and advances against such royalties. Publishers aim to maximise the exploitation of the music in a wide variety of environments. They are typically concerned with discovering, developing and promoting new writers or composers, licensing and protecting copyrights, sales/promotion and royalty monitoring, collection and distribution.

The MPA has estimated that its 201 member companies, (for a list of current members see www.mpaonline.org.uk), at 31 December 2000, represented over 3,000 subsidiary or administered companies and accounted for approximately 90% of total UK music publishing industry turnover. The MPA’s membership includes the five multinational so-called “major” companies which together account for approximately 70% of music publishing turnover, namely BMG Music Publishing Ltd, EMI Music Publishing Ltd, Sony/ATV Music Publishing Ltd, Universal Music Publishing Ltd and Warner/Chappell Music Ltd. It also includes a large number of significant independent publishers including Boosey &

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Those engaged in the music publishing and composition sector fall principally into three broad categories:

1) songwriters and composers, 2) those employed by music publishing companies, and 3) those who work for the collection societies. The numbers of those in the latter two categories are relatively easy to determine, whilst it is much more difficult to ascertain the number of full-time composers and songwriters.

Four times a year PRS distributes performance royalties to around 25,000 individuals for their contributions as composers and publishers but fewer than 2,500 writer members earn more than £10,000 a year from this source.

One can gain an insight into the number and interests of the UK’s music composers and songwriters by analysing the membership of the British Academy of Composers & Songwriters (the Academy). The 2,700 members of the Academy can be divided into three main categories; around 500 concert/classical composers; some 300 members engaged in film/TV work and the balance of approximately 1,900 working principally in popular music and jazz. Career paths and sources of income vary considerably between the categories. We have taken the total of members of the Academy as our estimate of the number of full-time songwriters and composers for both 1997 and 2000.

Many composers, particularly in the popular field, are writer-performers performing and recording their own songs. Of the ten best-selling artist albums in the UK by British artists in 2001, five were by writerperformers, either working on their own or collaborating with others (Dido, David Gray, Stereophonics, Travis and Gabrielle). In the classical market composers are rarely also performers.

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Table 2:7 – Value added UK composition/music publishing sector (£ms) Value added 1997 Value added 2000 Music publishing companies (a) Collection societies - employment costs (b) Songwriters/composers (c ) Total Sources - (a) Media Research Publishing estimates based on analysis of published accounts, supplemented in 1997 by MPA Survey data.

(b) MCPS/PRS (c) Value added for the composition/publishing sector is generated by combining operating profits and employment costs for UK music publishing companies, employment costs for the non-profit making collection societies and estimates of songwriter/composer earnings. The latter are particularly difficult to determine with certainty. The method adopted in both 1997 and 2000 has been to double the figure disclosed in the MPA members’ survey of payments made to their own composers. The doubling of the survey figure is based on estimates of payments from non-responding and non-member companies, PRS revenues paid directly to composers, direct receipts from overseas companies and pure fee income for commissioned works (such as for film and TV companies).

The tables above highlight the composition/music publishing sector as one with relatively few employees but very high value added.

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The relative position of the UK domestic market within the world music publishing market can be ascertained from an analysis of the US-based National Music Publishers’ Association International Survey of Music Publishing Revenues. The latest edition of this report (11th Edition 2002) estimated worldwide international music publishing revenues for 2000.

It showed that overall the UK was the fourth biggest music publishing market in the world with a 9.8% share of international revenues ranked behind the USA (29.5%), Japan (12.2%) and Germany (12.0%).

For performance-based income the UK was ranked 6th with an 8.5% share and for reproduction-based income 4th, with a 11.7% share.

2.8 Overseas income and payments The table below highlights the substantial surplus of invisible exports over imports in the composition/music publishing sector, reflecting UK writers’ and publishers’ achievement in establishing the country as the second-largest source of musical compositions in the world, after the US. The music publishing company figures are derived from comprehensive surveys of MPA members.

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Sources – (a) MPA Surveys with Media Research Publishing estimates for non-respondents and non-members (b) PRS Report and Yearbook and MCPS internal data


MCPS figures include overseas earnings/distributions under the Universal ECL (see Table 2.4). In 1997 £48.8m of earnings and distributions are attributable to ECL. In 2000, this figure is £53.0m.

2.9 Current industry issues In common with other copyright-based media industries, many of the key current issues for the composition/music publishing sector relate to the development of new technology and the growth of the Internet. MCPS and PRS have established a joint online licensing scheme that enables music users to obtain mechanical and performing rights clearances for most online uses and are cooperating with international societies to construct a global licensing framework. However the proliferation of unauthorised Internet sites, the widespread distribution of music online without payment of royalties to the appropriate copyright owners and the general prevalence of the attitude that music should be available for free all pose threats to future revenues from compositions.

During 2001 the MCPS Anti-Piracy Unit noted an increase in the growth of physical optical disc piracy mainly as a result of the affordability of smaller, more advanced computers and copying equipment. There has also been a notable shift in the activities of counterfeiters who now tend to set up “mini factories” in their homes, using email and the Web to market and sell their product. This has two perceived advantages for the counterfeiter

• Producing large quantities of stock is not necessary since product can be made to order and mailed to buyers; and

• It is widely believed by counterfeiters to be an effective way of avoiding detection.

The MCPS Anti-Piracy Unit has redoubled its efforts in this area working alongside police and Trading Standards Departments throughout the UK. The unit has achieved considerable success in detecting home-based pirates who are increasingly being brought to trial. The UK will introduce a new law that will step up penalties for Intellectual Property theft in the autumn of 2002.

Online piracy continues to concern the creative industries worldwide and an important project to address some of the legal issues relating to liability is being co-ordinated in the UK by the MCPS-PRS Alliance.

RightsWatch - funded by the European Union (EU) - aims to reach consensus on a number of issues surrounding notice and takedown procedures which can ensure that unlicensed material is removed promptly from the Web. A series of working groups with participants from consumer and user groups, Internet Service Providers and the creative industries currently favour a self-regulatory framework for notice and takedown that operates fairly in the interests of all stakeholders. A final report will be published at the end of 2002 and will form an important contribution to a general review of the EU E-Commerce Directive scheduled for 2003.

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