Night Mayor, Part 2: If Market Forces Are Killing The Music Industry, They Can Save It Too
By Jimmy Mulvihill
9th November 2015
In our previous blog post, we focused on the possible appointment of a London Night Time Mayor to boost the night time economy, with a particular focus on the entertainment industry. We also looked at the market forces that have been such a large factor in the decline of the music industry over recent years, particularly in London
Sadly it is depressingly easy to pinpoint the cause of this decline, and it all comes down to money. If music venues were generating the same amount of tax revenue as other businesses in Britain, then they would not be in such a perilous position. You can beat around the bush as much as you want, but that is what it all comes down to: market forces, and the ability to generate more taxes for the government.
But this does not tell the whole story. Grassroots venues are not meant to make as much profits. That is not their purpose. Instead they act as a filter and a breeding ground for the bands that will one day become successful. Saying that we should shut down music venues as they don’t make much money is as stupid as saying, “when was the last time we had anyone under 16 years old scoring a goal in the Premiership? We should shut down all youth teams and just concentrate on the adult game, that’s where the real money is!”
Whilst small venues make less, or even no profits overall, they are vital to the industry overall, yet they suffer from their role being less obvious. When decisions are made based only on the immediate profits, without there being any thought as to the knock on effect of those decisions, the short term gains are always matched by the long term problems. They are the same market forces that says giving people mortgages that are 1000% of their income is a great way to boost the economy, and that are then surprised when these people have problems repaying them. And that is the problem with these market forces: often they do not show the context behind the numbers. They simply show “no profit = bad” and “lots of profit = good,” regardless of how that profit was made.
Thankfully the answer to our problems may actually lie in the same cause of it. If music venues are being closed down as multinational companies can make more profits by replacing them with luxury apartments, with no consideration given to the knock on effects, and if these companies are being supported by the government hungry for an increase in tax revenue, then to prove the point of their worth we need to hit these companies and in turn the government where it really hurts: the wallet.
There is no debate that many of these companies make huge amounts of money from successful bands – the same bands that, only a few years ago, would have been playing the grass roots music venues that are now closing. Record labels, music venues and record shops make a profit from them, of course, but there have also been extensive studies conducted that suggest that nearly every business benefits in some way from the music industry. Music helps boost staff productivity, increase staff morale, and both attract and relax customers. It has been found that loud music causes customers to move through a supermarket more quickly without reducing sales volume, and that low-tempo music causes shoppers to move slowly, but they also buy more. Similarly at restaurants, slow music causes people to take their time but buy more.
Music is also vital in helping companies provide great customer service to their customers since it has been proved that playing music when callers are on hold makes them stay on the line longer before hanging up. Music also helps loosen the purse strings, as studies show that playing classical music versus Top 40 music at a wine store increases sales and leads customers to buy more expensive merchandise. These are just five of the literally hundreds of less obvious ways that music can help huge companies boost their profits, yet at the same time many of these companies take the benefits that music gives them, they are also playing a big role in the closure of so many of these venues, either directly or indirectly, which creates that foundation of great music.
However, in order for any of these companies to use a bands music to boost their profits, they need to get a licence from the PRS, the Performing Rights Society. As the PRS’s website says,
“If music is ever played on your premises for customers or staff; for example, through radio, TV, CD, MP3 or computer speakers, or at live events, this is considered a ‘public performance’. The Copyright, Designs and Patents Act 1988 states you need to get permission from the copyright holder to ‘perform’ music in public – and a music licence grants you this permission.”
So without the permission from the people who own the copyright of the song, these businesses cannot use that music to boost their profits and keep their customers entertained.
If the only reason that music venues are being closed down is to allow these (usually) large multinational companies to make even more profits, all we need to do is use the music that bands create, and that the music industry controls, as a bargaining tool. If a large multinational company applies for their new licence to allow music in their workplace, tell them that the fee is £50,000, per store. It may seem unreasonable, but then so is destroying 40% of the music venues in the capital, wouldn’t you say? If big businesses are happy to evict music venues by using free market economics as justification, then music publishing services should work with bands to exercise their legal right to massively increase the cost of controlling the product that they own, and that other people can use to make huge profits on.
This is where the music industry needs to stop asking for protection, and instead use the one product that they have total control over – music – to get what they want. A plan could be implemented to both make closing a music venue uneconomical, and also to reward the people who are doing their best to help the grass-roots music industry. At present there is a choice between 40 different prices that businesses have to pay, depending on their circumstances, to play music in the workplace.
“If you play any type of music in your shop or business premises you will be required by law to have both a PRS (Performing Rights Society) and a PPL (Phonographic Performance Ltd) Licence. PPL was established in 1934 and they grant licences for broadcasting and playing CDs in shops and business premises. The payments received from business owners then get passed on to record companies, recording artists and musicians. From 1 Jan 2011 Premises up to 600m2 (audible area) cost £113.19 + VAT, and a 50% surcharge if music has been played before without a licence. PRS is slightly different and was established in 1914. This board collects royalties for copyright owners like composes, lyricists and music publishers. From 1 Jan 2011 premises up to 100m2 cost £140.90+VAT or £211.35+VAT for first year if a licence has not been obtained previously and music has been played. Higher rates apply for larger premises for PPL and PRS.” (source)
So assuming that music had not been played on the premises before the licence was obtained, that is £254.09 + VAT, or £304.91 that needs to be paid a year, yet it doesn’t actually make much sense to have a flat rate for all businesses. Firstly, a 100m2 clothes shop in Shoreditch may rely on music more than a similar 100m2 clothes shop in the lake district, yet they pay the same rate? Even if they have vastly different yearly profits? It seems like a flawed system, and yet with a few tweaks it could easily be the device that swings the balance of power back in favour of independent music venues.
The first stage is to drop the flat rate that businesses pay for a licence to play music in their business, and replace it with a three-tiered system.
The first category, Category 1, would comprise of businesses that help up-and-coming bands in the music industry. Cafes that allow bands to put up posters for new gigs, independent record stores that allow unsigned bands to sell their records, and music venues and bars where bands play, these businesses should have a reduction in the fee that they pay, from about £300 to £50 per year. If the whole point of the license is for the PRS to collect music on behalf of bands to reward them for their hard work, and if a business is already going out of their way to help the music industry in other ways, such a saving may be justified and may actually encourage more businesses to help other bands. Terms would need to be set, of course, and the reduction in the fee could also depend on the budget that the store has, but either way it would still send out a message that if you help the bands at the start of their journey, you get to reap the rewards from the music industry overall for a cheaper price. If setting a small bit of the cafe aside for flyers, posters and independent music magazines can save a small business £250 per year, many may do it, especially in the current economy.
Category 2 would consist of businesses that currently neither help nor hinder the grassroots of the music industry and that have a turnover of less than £1,000,000 per year. These businesses would have the same fee applied to them as they currently do now, with the same conditions and the same regulation, no change.
Category 3 would consist of businesses that either
a) Applied for, or that intends to apply for the right to trade on the site of a former music venue that has existed within the last 10 years. This would apply if the previous venue had held over 100 nights of live music in any year in the last five, and whether the new business played a part in the music venues closing down or not.
b) If the business took over £1 million in revenue last year, regardless of what industry they are in or what contribution they made to the changes of circumstances within the music industry.
If either of these two clauses applied to a business, they would qualify for this category and would need to pay a fee of, at the very least, £50,000 per year to allow music to be played on their property. There would also be a tapering system, where for every extra £5million in revenue the business had, the fee would rise by £50,000.
This would be a two pronged attack, the first of which would be to hit back at the businesses that are playing the biggest role in the closure of music venues. This will send out the message loud and clear – if you are a part of the erosion of the live music scene, you will be hit in the pocket for it and denied the benefits of that great music. Any landlord that tried to evict a music venue to make way for anyone else would now be at a significant disadvantage, since it would be harder for them to get a new business to replace them.
Extra penalty fees should also be applied. If you move into a property near a music venue and you then submit a noise complaint, your business will then be hit in the pocket for it; for example, an extra £100,000 per year. It is not as if every street has a music venue, so relatively speaking it is very easy to avoid them, and such a measure may ensure that it makes good economic sense to do so. By rewarding the companies that help the music industry, and by financially penalising the ones that harm it, in the same way that the plastic bag tax has everyone heading to the shops with pockets full of used plastic bags, people will start to change their behaviour when it comes to music venues.
The other part of the plan is this: the government only listens to companies that generate huge amounts of tax revenue for them. When the banks needed a bailout, the government were literally – and I mean literally – willing to write them a blank cheque. If big business needs the law changed to preserve their profits, that change will come about. The big businesses have the lobbyists and the resources to get change to happen, so why not make them fight the battle instead? If any company has these resources, increase the fee for them to play music to such a level that they have two options – to either not play music, (and considering how much music plays a part in their ability to generate a profit, this is unlikely), or to make a deal with the music industry to help bring about the change needed, and in return they will have a substantial drop in their fees.
For example, if a large company were able to provide a good property lease for a music venue, and were able to sign a contract that ensured their ability to trade as a music venue, that company would have their fee dropped from a Category 3 fee to a Category 1 fee for the duration of the lease. Starbucks, for example, has over 800 stores in the UK. If they bought and soundproofed a freehold building for £800,000 and rented it out on a protected lease they would have their fees dropped from £50,000 per store to £50 per store, since they are now helping the music industry. A secure £800,000 investment to save nearly £40million per year in license fees? Sounds like a good deal. Starbucks get to sell more coffees, the music industry gets a secure music venue. Big business holds the key to making change happen, we just need to create an incentive for them to do so.
Instead of pleading the case for how important music is to the economy, show them. The next time that Arsenal or Manchester United need a licence to play music before, after or at half time at their next home game, tell them there is not a chance in hell of them getting it unless they pay ludicrously high amounts of money…. or unless they give some new bands lots of exposure at a half time show, or even start putting bands on in a bar in the stadium. If there are 60,000 to 80,000 people at each game you can bet that there is an area for them to drink in, which suddenly becomes a venue for people to win over fans, as long as they have the incentive to do so. We need to give them that incentive.
If a political party wants to use any music at their party conference they need a license for it – deprive them of that licence unless they give the music industry what they need. If Sky, BBC or ITV want to use music in their opening or closing credits, ask them, “what can you do for us?” If Tesco, Asda or Sainsbury’s want some music in the background of their adverts? “Make it worth our while and we’ll consider it.”
Remember, it is the legal right of copyright holders to determine how their music is used. If a neo-Nazi group wanted to use a bands music in their adverts they would need permission for this, and for obvious reasons bands would be allowed to refuse it since musicians have the right to decide who uses their music and in what context it can be used in. That’s the law. It would thus be a logical explanation to deprive organisations that right on the basis that you do not agree with their ethics, such as playing a part in the closure of live music venues.
Target everyone that uses music that is able to bring about the change needed. Companies that use phone lines that have on-hold music, large businesses that have a radio, put the emphasis on them to help bring about the change needed. Target the big companies and make them work for us. What do you think is going to have a bigger effect – a small collection of musicians and promoters getting together to say to the government, “the music industry is being hurt, please help protect us, we want to continue to play music” or the chairmen of some of the biggest companies in the UK contacting the government to say that their ability to earn the billions of pounds of profits each year, that also generate the tax revenue that keeps vital public services ticking over, are being compromised? If the government is allowing music venues to close for the greater economic good, withdraw the music that works towards that economic greater good.
It is hard to imagine the 1990 World Cup without Pavarotti’s Nessun Dorma.
and what would Friends be without it’s theme song?
Music is vital for the identity of products, and by taking away the right to use that music you have a great negotiation tactic. In fact, compared to many other examples, the music industry actually has a good chance of success if certain steps are taken. In the 1980’s the Coal Miners went on strike to reach their objectives and failed, due to many reasons, but one of them was that their whole argument of “if we don’t reach our objectives we will not mine the coal the keeps the power stations running, and the economy will be hit as a result” was undermined when the government could import similar coal from China, Russia and Columbia. There’s no point in withholding a product to reach your objectives if it is easy for the people you are negotiating with to get that product elsewhere. The same does not apply in music, as while there is still music that can be used that is royalty and copyright free, with respect to the people who make this music, would you ever consider using this music
in your advertising campaign, over this,
Companies want to use the best music and are willing to pay to do so, as is shown from the $250,000 that AMC paid Apple Corps to use The Beatles “Tomorrow Never Knows” in their Mad Man show for less than 30 seconds, and great music needs a healthy investment, and that’s what grassroots music venues are. 90% of bands that pass through their doors will fizzle out to nothing, but the few that hit the heights make it all worthwhile, and it is the people at the bottom of the industry who have to spend the time and money needed to filter these bands, while the hugely profitable companies then cherry pick the best of the talent that has been nurtured in these venues. On that basis, it seems extremely logical that companies that hinder that process should have to pay a lot more.
If any larger companies actually decide to pay the hugely inflated fees, it could be invested into securing a solid foundation for the music industry. Either way, a structured system of charging different people different amounts of money based on their ability, and their willingness to help the music industry could play a huge part in stabilizing it. By taking such an approach it would be a way to show big businesses that if they insist on depleting the music industry of the venues that helps to create great music, they will wither be deprived of this great music too, or the profits to be gained from it.
This could be a much more logical approach to overcoming the problem. At present the campaigns that are being run are, in my eyes, flawed for a few reasons. Firstly, many focus on the economic value of the music industry, saying “protect the music industry, it generates over £3.8 billion of wealth for the economy every year,” which is what I actually advocated also in earlier articles, but pleading the case on this argument is counterproductive as, sadly, the grassroots of the music industry has little monetary value compared to the businesses that they would be making way for. The property market within the London Metropolitan area has a value of at least £1,500 billion, (£1.5 trillion) and many of these music venues are being closed to make way for luxury apartments, so you have an either/or choice between venues and property since they cannot live side by side. Pleading the case on economic terms is therefore flawed, since the economic value of the music industry is a fraction of what the property market has.
Much is also focused on drawing attention to the plight of music venues in ways such as creating Facebook groups, holding gigs to raise awareness, and getting people to make statements on the matter, yet people knowing that there is a problem actually achieves very little. Let’s say that 50,000 people know about the destruction of grassroots music venues, and as a result of the campaign to raise awareness of it, 1 million people are now aware of the plight. Success. Yet with respect, the people that have been educated are not the people who are able to bring about the change that is needed.
The success of a campaign cannot be measured on the amount of people that support it, but instead on the change that happens. Selling out a gig to bring awareness about also means little. If over 1.5 million people can take to the street in an anti-war march in Feb 2003, and if that kind of action falls in deaf ears, why would getting 200 people in a music venue, out of the sight of the people who have the power to make the changes needed, have any effect? The government knows that we object to music venues shutting down but – brace yourself – they don’t really give a shit. They’re not stupid, they know that the music scene in this country will take a hit. They don’t need educating, they just don’t really care.
The government and the companies that are forcing music venues out do so as they have one concern – maximizing profits. They don’t want to be hated, by any means, but if that’s the price to pay to fill their coffers, so be it. Trying to appeal to their sense of morals to change their mind therefore means little. Do you think that the current politicians we have care if a demographic that would never vote for them disagrees with them?
Sadly, musicians don’t fit the demographic to be more likely to vote Conservative, so we should not be expecting anything from them, nor trying to win them over. Is it any wonder that the regions in the 2015 UK General Election where the Conservatives lost out to the Labour Party were in inner London, Birmingham, Manchester, Liverpool, Coventry, Leeds, Sheffield, Newcastle, Southampton, Cambridge, Norwich, Bristol, Hull, Nottingham, Derby, South Edinburgh, and nearly the whole of South Wales? Despite Labour being pummeled in the election, they still managed to cling onto the seats that have a complete control of the music industry. With that considered, do we really think that the government wants to work with the music industry that doesn’t vote for them?
In any case, playing the popularity card actually achieves little in terms of results. RyanAir is one of the world’s most hated airlines, yet they are also incredibly profitable as a direct result of this. Few companies receive as much negative press as PhilIp Morris, the manufacturers of over 5.5trillion cigarettes a year, yet they are still worth $150 billion, and as is shown by companies such as Nestle, Halliburton and Monsanto, there is no direct correlation between people being angry at a company and that companies ability to make profits. By focusing on the cultural and historical value that the destruction of the music scene causes, we are focusing on the one thing that the companies that are complicit in that destruction care little about. By instead focusing on their ability to make these profits, we will then be directing the attention to something that directly affects their entire objective.
The crucial part of the plan is that it can only work if there is a total and complete commitment to it. The four main groups, of the PRS, the Musicians Union, the bands themselves and the people who work in the music industry (promoters, venues, record labels, etc) would all need to pull together to make it work. If there is not complete unity, then the chances of success are immensely diminished. The same applies to other industries. For example, the property industry can only charge what they charge as the entire market is united. If a landlord suddenly put 1,000 London properties on the market for half price, the property market would take a drop. People only pay extortionate rents as they have no other option, and that’s because everyone is charging those rents.
Speaking honestly, I have not been able to track down the answers as to whether it is legal to charge such a large fee for the rights to have that music played, and the answers to this have been difficult to come by. Over 7 days of talking to the PRS themselves they were not able to come up with the answers to the questions that I asked them, of whether:
1) In a purely hypothetical situation, is there, or has there been any instance when the PRS has refused to issue a licence for a business completely? If so, is there a criteria that is used to make this decision?
2) Does the PRS have total control over the amount of fees that it charges? If it decided to raise or lower fees, is there another body it would need to go through?
3) Has the PRS ever been in a disagreement with the government about the prices of it’s fees, and could such an agreement ever come up? For example, if you put up fees, could you government step in and do they have the power to reverse that decision?
After a week of bouncing e mails, I was told (literally minutes from my deadline) that the relevant department that could give this answer was busy, a week after being told when the deadline was, but there are interesting precedents that suggest that it would be legal. Just 2 months ago in September 2015 Donald Trump used REM’s “It’s The End Of The World As We Know It, And I Feel Fine” against the wishes of the band themselves, and as intellectual property lawyer Joel Schoenfeld, a former counsel for the Record Industry Association of American and now an attorney at the New York firm Mitchell Silberberg & Knupp stated in an interview with Salon when he was asked
Jackson Browns said, after objecting to John McCain using “Running on Empty,” that, “Your songs are your property.” How true is that?
“It’s intellectual property – it’s intangible, but it’s property. They’re property rights under the U.S. Constitution and federal law… It’s their intellectual property – they may’ve chosen to license it to a record company, but it’s theirs. Even under a license, after a certain number of years. It’s a property right – just not one that’s tangible.”
Therefore, although there are obvious distinctions between the American and UK market, if the music is the property of the band themselves, my assumption (and I am happy to listen to any possible contradictions to this) is they have the right as to how it is used.
The chances of success depends heavily on there being a united front by the music industry. If only 10% of the bands stood firm, the other 90% of bands that allowed their music to be used would undue the work. The higher the profiles of the bands that joined the movement, the more attention it would garner and the more chance there would be of other bands joining the movement. If major festival organisers declared that bands that stood firm with the movement would stand a better chance of getting festival slots, it would swing the balance of power further.
The battle to save London’s music scene needs to be fought in a way where it is difficult for change to not come about, and it is also vital that we do not ask for change, but demand it. Did Martin Luther King ask for change? Did Ghandi? Of course not. When Rosa Parks was sent to the back of that bus, and when she refused, the agent for change did not come about from the civil rights leader asking for the attitude of the racist bus owners to change. They did not appeal to their better nature, they did not argue their case for why there should be no segregation on public transport as they knew that the reason that they were in the situation that they were in was because the bus company lacked that better nature.
Instead they fought for their rights, and got them, as they knew that the bus company couldn’t survive without the patronage of the African American population. They knew that they had control over something that the bus company needed, and when they did not get their way they withdrew it. For 13 months the people involved in the protest had to walk for hours a day to reach both their destinations and their objectives.
All things considered, the price that musicians would have to pay would be a fraction of what was sacrificed then. If only 30% of community had observed the bus boycott it would never have succeeded, and the same is true for the music industry now. If the music community as a whole does not unite then it will not succeed – and in a way if the music community cannot find a way to do that, then maybe it doesn’t deserve to.
Instead of the campaign being run on artistic and noble causes, it needs to be run with a focus to causing economic hardship if our objectives are not reached. In this way I am reminded of the joke: “Scientists say that they are having a hard time getting Panda’s to breed. I’ll say this: If WalMart was selling Panda Burgers for $450 a kg, they would have worked out a way to get them to breed years ago.” If the biggest cause of the music industries decline is due to market forces, then market forces need to be used to fight back. Extreme times call for extreme measures, and when more than 40% of the music venues in the country have closed down, extreme times have been reached.
I’ll leave with this: in November 2007 all 12,000 members of the Guild Of American Writers decided to strike in protest of the poor pay that they were receiving for their work. The strike lasted for 100 days, and economist Jack Kyser, the former chief economist of the Los Angeles County Economic Development Corp, estimated that the strike had cost Hollywood over $2.5billion. In just over 3 months. It was 3 months of missing out on wages, but as a result they were now able to claim percentage points on digital revenue, and improved payment on others revenues. It also meant that every time that in the future that the Writer Guild brought grievances to the table they were taken much more seriously.