EVENT TRANSCRIPT ARCHIVE. UK MUSIC INDUSTRY BUSINESS.

Should the Music Business Grow Up?

Should the Music Business Grow Up?

1. KEYNOTE – DOUG D’ARCY
When asked to make a speech about ?how the music industry should be more grown up?, I began working on the basis that since I’d worked in it since 1968, it ought to be reasonably easy to identify what the industry is. But frankly it wasn’t long before I started to question the whole premise. Where is the music industry represented? What does it do? How many people does it employ? What skills and education does it entail? I’m sure it’s successful, but how does it measure that success?

A mass of statistics seem to appear but apart from being part of a mapping exercise of the Creative Industries by DCMS in 1998, and a survey by the National Music Council, (NMC), ?Counting the Notes’ in 2000, there is very little evidence from across the entire music industry. Now, since we know from the DCMS and NMC that it employs 150,000 people and has an economic value of £3billion annually, this is pretty surprising. It really seems to stem from the lack of a body that represents the entire industry.

Representation in the industry is by function, music publishing, record labels (two), talent managers, concert promoters, entertainment agencies, record production, recording studio, musicians, composers and songwriters, collecting rights societies (three) – I’m sure I’ve missed some. There is no clearinghouse to put information, statistics, objectives and results into any regular and coherent context.

It’s even more surprising given that the UK music providers have been enormously and consistently successful in creative and economic terms; way beyond the size of the UK market. Furthermore, the impact of the UK music business in cultural terms has been huge and pervasive.

Think of two current examples of the cultural impact. First, Live Aid as the 20 th anniversary DVD and a new recording of ?Don’t they know its Christmas’ are launched, the effect it has had on awareness, fundraising efforts and social responsibility across the entertainment industries. Think about the global impact of ?Pop Idol’ developed by Simon Fuller’s 19 Management, which has created an entirely new platform for new music and artists globally.

Apart, of course, from all the new successes, great innovations in style and the major impact of UK music in film soundtracks, advertising campaigns, and new technologies, there is no doubt that UK music has grown up producing world champions of great longevity. The Rolling Stones are the top live performing group each time they tour, joined of course by Rod Stewart, Elton John, Eric Clapton and a host of others, but also backroom successes like a new U2 album produced by Chris Thomas and Steve Lillywhite – both of whom have produced classic records consistently for over thirty years.

There’s another side to the story. Feargal Sharkey has been quoting some interesting statistics, 60% of all musicians earn £10,000 pa or less, and 90% of all composers and songwriters earn less than £10,000 per year in royalties. We have an industry that needs to communicate a complex and changing story.

Perhaps the industry bodies should all get together early each year as the previous years data and results become available and create an annual Music Audit that could pool the collective information to present an overall picture of the industry? I can see your eyes glaze and your heads droop at the thought of yet another report that no one will read, but we’ve heard from the Film Council that their annual review is the key strategic document that guides and informs all their activities. Something similar would allow a music industry to present the whole picture to the media, government, the investment and banking community, the education establishment and the public.

It might even encourage a more strategic approach for an industry that is essentially reactive. Why reactive? Well we are all totally dependent on creativity to fuel public interest in new songs, new performances and new styles but we are equally driven by the hardware technologies that carry our music to the public, and yet of course, we have almost always panicked in the face of those new technologies.

When Fritz Phillips started his record company it was to ensure a regular supply of music that would drive the sales of Phillips record players. Their merger with Siemens music labels formed Polygram to help drive the sales of the new music cassette players that were to make pre-recorded music portable. The reaction of the music business was, (as you know), to create the slogan ?Home taping is killing music’ and to put skull & crossbones warnings on record sleeves. Copyright experts bored us breathless with arguments against monetising our loss through a blank tape levy which, with hindsight would have generated significant income to the industry without real damage to copyright, and perhaps created an important precedent for funding in the way the old Eady Levy* in the film industry began the notion of film subsidy and made it politically acceptable.

In the same way that Phillips created a record company to sell record players, Steve Jobs has created iTunes to drive sales of iPods. We should be embracing these new technologies and not making the same mistakes we made in the past. We attempted, unsuccessfully, to stop DAT and music cassettes, but the industry reaction to the immense possibilities for new markets and lower costs provided by the latest digital technologies seems to have completely ignored any lessons from the past, and equally been unable to create any coherent strategic view on how the industry might successfully face the change and benefit. .So? because we are reactive we can’t be strategic?

Going back to the bank tape levy, Feargal Sharkey has collected another statistic. He’s discovered that the Canadian radio industry has entered into an agreement with the music industry that when radio stations are sold part of the proceeds go into a music industry fund, which is then dispersed to new and developing music talent, a bit like the way we distribute the lottery money. You’ll be shocked to know that it comes to about 200 or 300 million Canadian dollars, available to develop new artists in Canada.

It would seem to me that those musicians and composers who are earning less than £10,000 a year would think to themselves why isn’t the British music industry lobbying for something like this, why can’t we have a way to develop musical talent in this country that doesn’t involve signing to a major record label?

The functional organisation of the industry representation doesn’t help. Trade bodies are obliged to represent their members’ interests as the first resort, and so functions become factions pretty quickly.

We also see consumers who have become accustomed to low price goods and services from food to travel, and so this affects music as well. Our reaction to this should be to derive income from a variety of different revenue streams, but people tend to concentrate just on what affects their function.

However most of the functions are inextricably entwined, most record companies have a publishing company, most publishers produce records, many record producers publish, studios produce and publish, artists produce, publish and have record labels?this is truly an ecology, and most practitioners work across the functions. Heads of major labels become managers, as do record producers, who also become label heads, as do artist managers. Equally most people in the industry have experience of at least two functions usually more, so the awareness and skills are there, but there is no forum for that experience and skill to contribute to a strategic forward-looking approach.

Copyright will remain at the core of our industry but in the post-CD selling world the challenges of tracking and monetising copyright uses, and the new income streams to be identified and maximised will force changes that need to be managed better than our response has been in the past. It’s a clear opportunity to demonstrate industry maturity.

* Eady Levy
In late 1949 a scheme was proposed by Harold Wilson, the President of the Board of Trade, to provide a form of subsidy to producers of British films that would not be regarded as a subsidy under the terms of the General Agreement of Tariffs and Trade (GATT)?to which American film interests would certainly have objected?and to reduce the effect of Entertainments tax on film exhibition, to which all the cinema industry was opposed.

The solution was a levy, named after Treasury official Sir Wilfrid Eady, in which a proportion of the ticket price was to be pooled?half to be retained by exhibitors (i.e. effectively a rebate on the tax) and half to be divided among qualifying ‘British’ films in proportion to UK box office revenue, with no obligation to invest in further production. The Finance Bill 1950 made the changes in the Entertainments tax.

The levy was collected by HM Customs & Excise and administered by the British Film Fund Agency.


2. PANEL RESPONSE

(RO – National Music Council)
The National Music Council was founded by UNESCO as part of the International Music Council. There are branches everywhere and they are funded by the local government to promote music as an industry in that country. There is even one in Azerbaijan which is embarrassingly better funded than the National Music Council in the UK.

What does the National Music Council do? It’s a question we’ve been asking ourselves for years, and goes back to what Doug was saying about factions. We now have members from all the key music trade organisations and umbrella groups since AIM joined recently. You would think it would be well placed to provide the linkages that Doug was talking about ? not so, at least at the moment. One of the reasons for this is that the National Music Council has been very shy of lobbying because of the fear that it would be unable to reach a consensus among it’s members, and in trying to do so would probably fall apart. That has been the view of the executive for the past few years.

Since I have been the chair every time we receive a consultation document the response of the executive is always that we can’t comment other than to say that it’s very interesting. If you try and achieve consensus across such a wide group of bodies instead of consensus you end up with conflict. There is also a non-commercial music industry that have their own concerns and factions as well, that we have to take into account.

2 or 3 years ago the Music Business Forum (MBF) was introduced and has partly filled this gap. One of the reasons they came into existence was to lobby on behalf of the music industry in certain specific areas such as the broadcasting bill, the licensing bill and general copyright matters; all area where the MBF has lobbied very successfully. These are, however, areas where we can all agree, so they were quite easy targets for the MBF.

Things are getting more difficult now for the MBF as they come up against issues for which there is less automatic consensus amongst the music industry.

A few of us who work with both the MBF and National Music Council have come to the conclusion that all this has to stop. I don’t think there is room in the music industry for both the National music Council and the MBF to exist side by side. I think they should be combined. This is not, however, everybody’s opinion. There is also another organisation called the Music Education Council, which I think should be bought under the same umbrella.

There are moves afoot to progress this agenda, but here the devil really is in the detail, the main issue being who’s going to pay for such an organisation?, But we have made a start even if we are still a long way off from seeing one organisation. That’s one of the great achievements of the MBF ? for the first time there is a dialogue going on between all parties concerned. All the parts of the industry have sat in a room together and grasped nettles, and this debate today is an example of the maturity we are developing. For this reason I’m optimistic that in a year or two we will have a body that is able to represent the interests of the music industry as a whole.

I have two fears for what could happen if we did have such a body. One fear is that it won’t work, that it will tear itself to shreds trying to obtain an impossible consensus. The other fear is the exact opposite; that it will work, but it will work too well. It could be incredibly bland and none of the interesting, entrepreneurial aspects of the music industry will be able to escape from under this suffocating blanket of consensus. In industry you do see very sterile trade associations that are hobbled by their requirement to obtain consensus.

I do however think that the idea is workable, we just need to be aware of avoiding of the pitfalls, so we should take our time making sure we get it right.

(CC – UK Film Council)
There’s a long history of attempts at film strategy in the UK. The BFI was formed in 1932, and the BFI’s production fund started in 1953. So this all goes back quite a way, but in a piecemeal fashion.

When the Labour government came to power in 1997, two things came together. There was broad industry consensus that we couldn’t go on as we were, and that there needed to be some common body that could deal with government and issues of broad strategy. Chris Smith, the incoming arts minister and others were enthusiastic to seize what was seen as a once-in-a-decade opportunity.

The Film Council came together after a lengthy consultation process with a range of industry bodies, companies and individuals. It was a merger of a number of existing bodies all of which were at least part-government financed. The Arts Council of England film department that was responsible for distributing lottery money for making films, the old BFI production board, the BFI’s nations and regions funding body, British Screen Finance and the British Film Commission all came together to start the Film Council. So the Film Council is not a trade association but rather a strategic industry body that came together as a result of a consensus among the industry that something needed to be done. The industry bodies all still exist and are all still autonomous, like the European Union, they decided that they would hand over some of their power to lobby and influence and represent to a neutral party. We at the Film Council have to earn the right to do that on a regular basis, certainly every single year, by getting things right.

We have a range of delivery funds. The New Cinema Fund deals with new and emerging talent and visionary filmmaking. The Premier Fund aims to support emerging mass-market filmmakers. The Development Fund, which does what it says on the tin, and a distribution and exhibition fund aimed at specialist film, art house film, foreign language film and occasionally US independent films.

We also have a very large hinterland dealing with issues of access and opportunity within the nations and regions and grass roots level. Above all, I would argue we are a strategic body, we carry out and commission research for the industry, from government and other authoritative sources. We build an evidence base for what we believe is in the best interests of our industry. We have a function to lead the industry, and to represent the industry to government and government back to the industry. We also have to prioritise to make sure that we achieve the most important goals, as there is too much to be done. We have at our core an absolute priority to develop diversity within the film industry, to deliver access ?for people to both see and do ? especially for specialist material that struggles to find a market in the UK. We have to have an informed and creative commitment to the creative economy.

I do think there are many characteristics in common between film and music. We are both industries intimately concerned with the creation and exploitation of intellectual property. We both combine the need to be creative with an industrial process. Hollywood has always had the issue that the problem with film from a cultural point of view is that it is an art and from a cultural point of view that it is an industry. We also both need to find the best ways to promote talent and creativity.

One possible difference is that the film industry has already suffered the disaster that some people say file sharing has bought to the music industry. When television came along in the early 50s the film industry in the UK saw 500 million cinema admissions a year, within a decade that had more than halved. Last year we had roughly 180 million admissions, which is the highest figure for 30 years, which is still along way off our peak. So the barbarians have already sacked our Rome when we fell to below 100 million cinema admissions a year, so there are comparisons to be made and lessons that can be learnt from each other.

(JG – Music Managers Forum)
The Film Council is always held up as the way that the music industry should deal with the government as it’s something that they do very well. Chris has confirmed something that I wasn’t completely sure about ? they don’t have any actors on the Film Council board. On the Music Business Forum we do have representatives from right across the industry.

When the Music Industry Forum started some 8 years ago, we got together roughly every 6 months. The only thing from the performance side that we did was that we managed to persuade the government to bring in the New Deal for Musicians. The only way that that occurred was that Alan McGee put an article in the NME saying he wouldn’t be supporting the Labour government any more if they didn’t expand the New Deal to cover musicians, and the following day he got a call from Blair’s office, and the day after he and I were meeting with the employment secretary to discus the New Deal for Musicians. We had no support from the record industry on that.

That was when I was chairman of the MMF the first time, and foolishly I did it again last year, by which time the Music Business Forum had started, and Keith had directed the MMF into joining it. I have to say I think that was a dreadful mistake, I resigned from the MBF 3 months ago, although the MMF still has its membership. I think the mistake we made is that there is a recording industry and a creative industry, and the two things aren’t the same. The needs of the creative community are different entirely from the needs of the exploitation industry, which is basically recording companies and publishers.

Our whole view of copyright is completely different. It was absurd that the British record industry didn’t take the opportunity and instigate the blank tape levy. People should know that the European record industry did accept the blank tape levy, but none of it got back to the performers. If we had an equivalent over here, performers probably wouldn’t receive any of it.

This is an industry where you have the performers on one side and the copyright holders on another, and that’s not me just being an aggressive manager, that’s just the way it is. We should accept that, we should probably have a Music Business Forum or a National Music Council which is comprised of the people who control copyright and are involved in its exploitation, and we should have a creative sector which would involve the MMF, Equity the MU ? the people who actually create the music ? it would make more sense. The two bodies could meet and on some issues that they agreed on could approach the government. But we have reached a point in the Music Business Forum where I think it’s not working as we’ve reached some issues that we can’t agree on.

Even where it’s reported that we’ve worked together (e.g. the extension of copyright) the MMF actually only said that we wouldn’t oppose it, but we didn’t feel we could support the BPI’s stance. Unless any extension of copyright goes back to the performer we see no point in supporting it. I don’t see why performers should support the extension of copyright so we get another 20 years in the hope that the BPI will then give them a deal. A deal needs to be done now, so we are supporting a look at copyright, but not in the way that the BPI have suggested.

I guess we haven’t grown up, we’re not together on the issues and I think it’s over for the MBF. There should be a creative and a business body who I’m sure could work together on some areas, but it’s silly to think we can work together on everything.

(KH)
I was at the meeting of the MBF when we discussed the extension of copyright on behalf of the MMF, and we did agree to support a call for a review of copyright. I don’t think any of our artists would thank us for not even engaging in a discussion about the review of copyright that we new would be taking place. The call for a review had to be made by the 31 October, if we hadn’t applied by then we would have to be silent on it so it was quite urgent that we said something.

(RO)
I think I might have been slightly misrepresented. First of all I don’t think the MBF is dead, but it is undergoing changes. Neither did I say that consensus had already been achieved on the issue of copyright extension, I was talking about the copyright discussions which we had a couple of years ago when the MBF first came into existence which were relatively uncontroversial issues such as piracy and illegal downloading. I think copyright extension is the key test because quite clearly there is a conflict of interest between performers and copyright holders; it will be very interesting to see how, if at all, that conflict can be resolved.

(DD)
Nothing of what I was talking about really was related to lobbying government. I don’t understand this obsession with lobbying government; it’s not really what the music business does. My comments were more about the issues that confront us as an industry, rather than the issues we might have with government.

It’s interesting because the panel we have here reflects the factional nature of the industry about, for example, copyright. If you say to the people who currently own copyright that they may have to share it, they run for the hills, but if you say to the people who don’t own copyright would you support an extension they will say why should I help the minted and sorted? That’s why I think that there is no industry in that sense.

The reality is that we should be having a dialogue with creators about what copyright is so that they can better understand it. Once they know what it is, if they then chose to make agreements with publishers, managers or record companies or anybody else that gives away their copyright, they have made a commercial decision. At least then they will have made it based on a full understanding of the situation.

There are still a lot of people who make deals which involve giving away their copyright as part of that deal. They know what they are doing because they are making that choice, but many of us feel that they are making an ill-informed or poor choice, but it is their choice. What we have to do is say to people ?here is the situation on copyright, here’s what copyright means to you in the long term’. I suspect that many creators at that point would want to structure their deals differently, they may even want to make concessions to allow them to participate in the exploitation of their copyright.

Since we are in an environment in which pricing is becoming a major issue, we are going to be earning less per unit or less per song than we have been in the past. Unless we can increase our ancillary revenue dramatically we will be under pressure to reduce our costs. One way in which we can do this is by having a different relationship with creators where they perhaps take less from us, but equally we take less from them. Not being a creator I’m looking at this from the point of the entrepreneur, but I think creators would appreciate something along these lines. It’s a conversation that needs to occur.

If we produced an annual audit we could take stock of who and what we are. If we keep it short and just highlight the main issues then all creators will be able to understand what is going on in the industry. We might actually get some of them participating in the process. We have a labour force of 150’000 people and only a handful that work for the trade bodies get to express an opinion. My suspicion is that there are people out there who have ideas about how our industry could be monetised, and how our industry could be run who are very smart but may at this point in time only be earning £10’000 a year.

There’s a man called Martin Higginson who has built up a public company in the last couple of years that is worth roughly £30 million. He’s done it selling ringtones. He wasn’t able to get ringtones from record companies because they wouldn’t do business with him, so he created his own ringtones and sold them directly to the public. He has built a company worth £30 million on that model. That’s creating income and revenue streams from music by thinking laterally. If we started to think like that instead of getting bogged down in the model of the past we could have more constructive dialogue about dealing with sensitive issues such as copyright.

(KH)
Is it deliberate that you don’t have any creatives on the Film Council?

(CC)
We don’t have actors on the panel, and I think the film industry tends to vacillate between treating actors like gods walking the earth or cattle and not much in between. It’s a small board ultimately appointed by the DCMS, but I think there would be a lot of interest in having an actor on the board. It would have to be the right name, and they would have to be available and have thoughtful and intelligent views on the industry ? someone who meets those criteria hasn’t come up yet.

The Film Council’s view of talent isn’t as narrow as actors. If you say talent to a film producer they will automatically think director and writer before they think actor, and a lot of producers would also see themselves as part of the talent. We do have at least one director on the board, and our previous chairman was a writer as well as a director. The film industry has a broader view of talent; especially as the writer, producer and director of a film are the people who hold the copyright. In the film industry we would see the lighting designer on the Rolling Stones world tour as part of the talent, it’s a more collaborative industry in that respect.

(RO)
I don’t agree that lobbying is not important. I think it’s crucially important for two reasons. One is that most of what we deal with in this industry is enshrined in government legislation – there are things that we can’t just do of our own free will. Secondly the government is a source of support and funds. If we don’t lobby them correctly and effectively we won’t get access to any of that funding.

I also don’t agree that the people who are minted and sorted have no interest in any of this. Presumably that description applies to Doug who is sitting here taking part in the discussion. We are all doing this on a voluntary basis. I think there is a lot of good will from people who have made it in the business; they often want to pass on some of their knowledge and talent to others.

(CC)
Lobbying has its roll, and lots of industries lobby, but what actually persuades government to do things is building an evidence-based case. The Film Council spends a lot of money on research into audience figures and employment statistics. I think you would find that a short, easy-to-read document might be good for a wider audience but a larger report such as we produce each year is key to persuading government that things like the tax break for the film industry and support for training are important.

I run a project called First Light, which helps school-age children make short films using digital technology. It’s focused at children from disadvantaged backgrounds working in such places as youth detention centres. It has to make a very good case for itself to get the funding from government, and just lobbying got us nowhere – we had to back it up with evidence.

(KH)
John, do you think that the industry should grow up and work together more?

(JG)
I think there are two industries ? the copyright owners and the creators ? and we made the mistake of joining them together because there are too many differences between them. I used to think they could be combined, but I don’t any more.

3. QUESTIONS FROM THE FLOOR

Don’t you think that any songwriter who is successful will be able to renegotiate their copyright?
(KH)
Copyright in sound recordings last for 50 years from the date of creation. Copyright in almost everything else, lasts for life plus 70 years. Because copyright in sound recordings lasts for only 50 years, a lot of valuable recordings that we all know and love are going to fall out of copyright in the next 10 years. Starting with Elvis Presley catalogue and alot of Frank Sinatra’s recordings from January 1 st 2005. It’s a major issue because then the recordings fall into the public domain, which means that anybody can manufacture those records and press them and sell them. They still have to pay the publishers, but they don’t have to pay the artist or the artist’s estate. One of the reasons why it’s come up is because the 50 years was originally seen as a lifetime.

(DD)
It’s also come up because the US government has granted an extension on copyright to 95 years, which arguably gives American companies competitive advantage.

(Comment from the floor)
If the record company has the copyright, the performer still gets paid. If they lose the copyright on January 1 st nobody gets paid, everybody can do as they want with it and it’s only the publisher and the composer that get paid. I think it’s a better idea to first extend copyright and then have our internal fights.

If we don’t have a proper industry approach we end up with Steve Jobs dictating how much an artist will get paid for their performance on iTunes. What right does he have to do that? He’s in the computer industry? We need a body to lobby or we get left behind by events. Steve Jobs already dictates the terms and Coca-Cola are selling my artists’ music on their web site.

What’s happened to the music industry in the last few years has also created a state of complete flux where it’s open for anybody with imagination. I’m part of a body of managers who represent significant artists on EMI records, we call ourselves the Black Hand Gang, and we’ve already wrought quite considerable change at EMI.

If you talk to mobile phone companies they will tell you that there are too many people to negotiate with to arrive at one price. If we don’t work together they will pick us off, one by one. Steve Jobs dictates rather than negotiating, and he can do it because iTunes is by far the most successful way of selling music for download So he dictates to everybody, what they get paid. Unless we have a coherent industry body these kinds of things will continue.

The creators have a choice whether to sign or not. All my artists are properly advised before they give up their copyright. I would say there is a cartel in existence that says if you are a new artist you can’t get to keep your copyright, but if you are an established artist you can get it back because you are in a stronger negotiating position. If you put in a proposal for a new artist to get their copyright back, you will almost certainly get rejected the first time. I believe this will change though.

I am concerned about extension of copyright. I managed Thin Lizzy, and in just 20 years Phil Lynott’s family are going to lose their income from his music, so personally I think it’s something we need to work together on. I also think if we continue with our factions we will end up being run by people like Steve Jobs. I’d much rather be arguing with a record company about getting a bigger share of the money. And I’d much rather a record company dictated how much our music should be sold for on the Internet instead of Steve Jobs.

(JG)
I think I agree with that position, and I’m a supporter of the Black Hand Gang and the meetings they are having with EMI are resulting in some real differences, although EMI are probably the easiest of the majors to work with.

I don’t disagree that extension of copyright is not important for artists like Thin Lizzy. Bigger acts can always negotiate something with the label if they want to, but general performers have no control over their copyright once they have signed it away. It means that we don’t even have the rights to say no to covermounts – if we did we would be able to stop that nonsense.

(Comment from the floor)
EMI have stopped doing covermounts after a meeting with the Black Hand Gang, and it turned out that they weren’t happy about it either. They’re the one major that have stopped the practice.

Is there any real value for a smaller artist if they get their copyright back?
(JG)
If after 50 years, you are an act like the Troggs who have probably never recouped, and you get your copyright back, you can then ask the record label if they want to keep it and if so, how much they are willing to pay for it. They could also then stop their music being given away with the Daily Mirror. I don’t think we will get that unless we negotiate first, I don’t think that is something the recording industry is going to give back to us ? only with the really big acts. My point is that we shouldn’t offer unconditional support; we should support the record companies with the proviso that they give us something back in return.

(KH)
I do agree with you in principal, but the Troggs could only go somewhere else with their copyright after 50 years if there were an extension of copyright. It will be in the public domain after 50 years unless we talk about it now.

Going back to the covermounts issue, we have a campaign to respect the value of music, saying that it shouldn’t be free. Although the record companies get paid for covermounts behind the scenes, what does it say on the cover of a magazine? It says ?Free CD’. Why are people supposed to take notice of a campaign to respect the value of music when we are doing that?

(JG)
Do you not think that the message that is sent out is the wrong one? People may have always got things for free, but not to the extent that they do now. Two weeks ago the weekend papers gave away 10.5 million CDs and 1.8 million DVDs.

(RO)
At first we saw it as a promotional activity that would help us to sell more records, but when we looked at the figures we realised that we weren’t selling more, we were actually selling less. I remember being able to get Warner compilations for 99p from a record shop of all their bands you had never heard of. Because you’d made the effort to go and get it though you would listen to it and then go out and buy albums by the artists. I think we’ve seen that music on the front of the Sun isn’t promoting the music but the Sun.

(KH)
The market research from the papers has shown that it only boosts their sales for one day, and that the amount of money they are spending on getting the music to use isn’t worth it so it will probably stop soon. My real problem with it is that you can’t tell people on the one hand that music has a value, and then even though it is being paid for tell the public that the music on covermounts is free.

(RO)
You don’t apply that to radio, people don’t think that because they have heard something for free on the radio it’s crap. You understand it as promotion, but the public don’t necessarily understand a covermount as promotion.

I find it quite strange because if you go and buy a PC magazine, you will get a really fancy piece of software that expires in 21 days and then you have to go out and buy it. Why don’t we do that? We have the technology to do that easily.

Chris says that barbarians have already sacked the film industries Rome with television, but I would like to know what he thinks of the fact that already we are seeing in South Korea for example where music has been overtaken by movies being traded on P2P systems. You must be aware that as more people get broadband this is going to be a huge issue, far more so than covermounts.
(CC)
All the big distributors and the studios are very scared about this. They’ve seen what’s happened with Napster and the other free download services. We have launched an anti-piracy campaign that shows we are taking it seriously, and it’s an area where we are trying to deliver evidence to government to get them to act on it. I don’t think the government realises how big a loss this could be for the film industry and also for TV as well. We have a cross European group that is trying to deal with the issue of piracy.

(DD)
Covermounts are an issue where even the majors disagree, Universal are very keen on them and as we’ve heard, EMI have stopped doing covermounts. However the record companies do make money from covermounts, so some of that does flow back to the artist. It’s the magazines that have to pay for the music rather than the public. The covermount market has already started to move on to DVDs anyway, and we still haven’t come up with a coherent position on the issue.

One of the things we should look at very closely is what it is costing to collect our revenues, and whether or not those revenues are being collected as aggressively as they might be. From a monetary point of view it could be by far the most important thing that we could talk about.

We should be looking at music to mobile and finding out how we can maximise it as a revenue stream and then worrying about how we account to each other for it. If we don’t take a progressive view we will always be arguing about markets that are moving past us.

(CC)
Covermounted DVDs are a new development, and we haven’t got a view yet. Film watchers have always been able to get films for free using TV, although so is radio. If the production company can license a film to a newspaper then they have made an ancillary sale, which we are quite used to in the film industry, and if the people selling the film think they can get more money by licensing to the Daily Mail than they will lose in DVD sales then that is what they will do.

Music plays an important part in films, if you give them away aren’t you giving that music away as well?
(CC)
We believe that people making a creative input to a film should be paid. Even in shorts the filmmaker will pay for any music used. On all ancillary sales the payments that go to musicians and even hair and make up people involved in the film has been worked out in pre-production. Whatever a distributor gets for a covermount will be divided up accordingly.

Are covermounts really an issue, because it’s mostly back catalogue music, and anyone who would buy it probably has done already? Could they be being used as an excuse for the difficulties that the music industry is currently facing?
(JG)
The issue here is that music has a value, which we are trying to protect. Also it’s not just back catalogue material that is on covermounts.

Do you not think that if we were being a grown up industry we should have got together and discussed the implications of covermounting before it really took off? It seems that we went for a short-term gain without thinking about the consequences strategically.

There will always be new artists that want to take the short-term buck. As a manager you can’t tell your artists not to take the money in the short-term for the greater good of the industry.

As a manager I will always go for the individual interest rather than the collective interest because I represent the individual. That’s my duty to do what’s in my artist’s interest.

I think that the record industry are putting their own spin on things saying that as an artist or manager, downloading is really going to affect you, and make you poor. Actually I think the reverse happens, as an artist if you were downloaded 100 million times, that’s 3 times the number of copies Thriller sold, you would sell out so many concerts that your value to a company like Pepsi or Microsoft would be higher than the value Thriller generated for Michael Jackson. The only people who would suffer would be the record company.

I have an artist on Richard Russell’s label XL, and his view of illegal downloading and covermounts is the opposite of Tony Wadsworth’s. Tony would say that it’s OK to give it away with a newspaper because you own the copyright, but it’s not OK for people to take it illegally because they are stealing. Richard Russell says that if the consumer steals something it means they value it, and if you give it away there is no value ? covermounts devalue the music. I would say that Richard Russell is correct on that point.

Covermounts may be on the way out, but we also used to give music away with chocolate bars, so you give away the hits but charge £13 for a new artist, it just doesn’t make sense.

I think we need to watch out for Vodafone, because they will be the market leader for music to mobile, and they won’t have the time to deal with everybody, they’ll just want to cherry pick the biggest artists. Then we will all be going to them saying ?please put my music on your phone’. We need to have a collective body that they can deal with.

(DD)
At the end of the day we are all music providers. If we don’t provide it in the form of copyright it doesn’t mean that we are not providing music. Copyright has not actually been with us that long. It was established in America by Charles Dickens who was upset on a speaking tour of the US to find that he wasn’t entitled to anything for his works over there. So it’s a recent phenomenon and we could end up in a digitised world where we provide music, but we don’t earn our money from copyright.

Where do you see the money coming from if not from copyright?
(DD)
I don’t know, but there are any number of ways that people can get paid, and we need to open to whatever will be the best model in the future.

(CM)
100% of the world listens to music, unless they’re deaf, but only 8% of the world pays for music, so music in general is free. What we have to do as an industry is monetise our streams. There was a suggestion put forward by one of my artists to put their music on a mobile, and someone said that was great marketing idea. But it’s not a great marketing idea, if they want the content it’s a great sales idea. We aren’t trying to sell pieces of plastic with a fat margin any more, we are trying to sell music in whatever form it’s used in. If it’s used in a lift it should be paid for, if it’s used on a mobile phone it should be paid for.

I have been doing management for 30 years and in the last 10 years I have one song, which the album it was on probably made £300,000, but on its licensing income has made $4 million. We all need to look at where the income streams are.

My artists have never been ripped off by a record company, but I have given them inappropriate advice to sign a contract that has a clause which is not in their interest.

Transcribed by James North & edited by Jonathan Robinson, MusicTank, Nov 2004.