PRS AGM: CEO Robert Ashcroft's speech in full

20 May 2015 - News

Good afternoon everyone and welcome to the PRS AGM. 

2014 was a landmark year, as we celebrated our centenary, outsourced our data centres, modernised our IT infrastructure, refurbished our Streatham office and moved out of Berners Street.

We moved 200 staff members to Streatham and 90 to home working, outsourced our Peterborough operations to DBF and our data capture to OnMusic in Belfast. It was a remarkable year in every sense and I would like to thank all our staff for their dedication and hard work throughout a period of significant disruption.

Their commitment did not fail for a moment: December saw the licensing teams making huge endeavours to bring in new revenues to counter the effect of strong sterling on our International collections, IT & Operations found a way to quintuple throughput on our Online matching systems and we made a series of mini-distributions to ensure that the revenues got into the hands that mattered – yours, before year-end.

I could dwell on both the effort and the achievements, but we face a period of unprecedented change in our industry, as downloads give way to streaming and I would like to devote the few minutes I have at this meeting to reflect upon that.

I have been reading a book, first published in 1975 by Faber Music and written by Alan Peacock and Ronald Weir, entitled “The Composer in the Marketplace”.

It is an economic history of the business of music copyright from 1900 to 1970, which was, of course, then termed “the present day”.

How things have changed and yet not changed throughout the piece.

In 1905 the Music Publishers’ Association announced that they would accept no more music for publication until the law afforded adequate protection against pirates, who sold cheap lithographed reproductions without permission or payment.

In 1970 J.A.L. Stirling asserted that “the problem of piracy still remains, for millions of disc records are made and sold each year without payment to authors or composers of copyright works”.

By 2014 the battle against piracy had largely moved onto the Internet, and thanks to the UK courts’ pioneering action in granting site blocking orders, and our government’s pursuit of a “follow the money” strategy that deprives infringing sites of income, Internet piracy has reduced.

These charts show traffic to The Pirate Bay across the Globe and in the UK and illustrate the effectiveness of our courts’ action compared with those across the world. …….. But does this mean that the battle is won?

Far from it. Who needs to pirate music when it can be accessed for free from sites that claim that they can operate without a licence, or others that hide behind the legislation to set their own rules as to what token payment they will, or will not, make?

How can it be that UGC services can use safe harbour legislation to avoid the need to pay a licence and insist that they are mere conduits of content when their business models are predicated on monetising the creative works they carry? 

How do we secure fair value for our members as more and more Internet traffic slips into darkness, hidden behind the encrypted walls of Apps and Social Media platforms?

How can we ensure a future for songwriters when legitimate, fully licensed digital service providers have to endure unfair competition and operate with their hands tied behind their backs?

We all know that the big item on the agenda today is the shift from downloads to streaming. What’s really going on?

What are the real battles and what is PRS doing to secure the value of your rights on the Internet?

Last year downloads and streaming overtook physical media in the same year as our royalties from streaming sites overtook those from downloads.

This transition has come about with incredible speed. PRS for Music has actually increased its share of total industry revenue from sound recordings over the past ten years, even if, in a declining market, we have seen overall royalty revenues decline from £197.7m to £142.8m over the period from 2004, when the value of CD sales peaked.

We have faced a gradual decline in the value of sound recordings for a decade now, so what is it that has triggered such concern among our members over the past year?

In the past, an album might have had a number of hits on it but, of course, the writers of all the tracks on the album were paid the same whether or not their songs on the album were hits. 

Though album sales remained popular on the iTunes Store, there was a shift towards single downloads and as this happened, only the hits, or popular songs, off an album were bought, so writers who had made the album, but whose songs weren’t individually downloaded, got nothing.

In marketing language, ‘breakage’ is a term used in the context of when a service is paid for but remains unused and the ‘breakage’ began to go to the consumer at the expense of songwriters and recording artists.

Now this trend has been exacerbated in the era of streaming services: not only do you have to have your song chosen, but you have to achieve at least 50 streams before it earns an amount of money equivalent to a sale, and depending on the streaming outlet it could be many more.

Nowadays you have not only to write a popular song, but it has to remain popular if you are to earn good money from it – and it has to compete every day with streams from the back catalogue.

The fact of the matter is, that while in the long run subscription streaming could be a viable substitute for CD sales – and even now they are paying substantial amounts of money to rightsholders overall – it is, during the transition period from downloads to streaming and while these services still serve a relatively niche audience,hard for new songwriters to make a living from them.

If there are challenges for songwriters in a world of subscription streaming though, there is a real problem with ad-funded streaming services. By comparison with subscription services they do not produce values even remotely equivalent to a download sale and we’re talking about hundreds of streams being the equivalent of a download for the songwriter rather than 50 or so. This clearly does not work on its own.

There is a dilemma for the digital services though. Spotify, for example, have presented evidence that their valuable subscription layer is fed by the ad-supported layer. Yet Taylor Swift famously removed her catalogue from the service when Spotify refused to include it in the paid subscription layer only.

Now in an ideal world I’d disagree with Spotify – why not increase the differentiation between premium subscriptions and free by windowing content? After all, this has been a successful strategy pursued by the film and TV industries for years.

But I am not here to beat up Spotify.  They have to compete with user-generated content platforms, which have all the content anyway. Even when Beyoncé made her new single “Die with You” available exclusively on Tidal it was available on YouTube within minutes.

Taylor Swift is still absent from Spotify, but available on YouTube. And for those consumers who have little awareness of copyright, YouTube will helpfully point them to Apps that will enable them to download streams from the service and strip ads from them, effectively offering a music experience equivalent to Spotify Premium – for free.

Meanwhile, Spotify can’t feed its subscription layer without bringing consumers into the ad-funded layer and they can’t get them into the ad-funded layer unless they have all the content that is available on UGC platforms.

If they don’t carry Taylor Swift or Beyoncé they’re not only at a pricing disadvantage, but also at a content disadvantage.

This is unfair competition.

While there are challenges in songwriters adapting to the flow of money from subscription streaming services such as Spotify Premium, they are not, in the end, the problem.

The problem is that UGC platforms are claiming protection from copyright under Safe Harbour legislation that was intended to protect the companies that invest in the fundamental infrastructure of the Internet.

This legislation was not intended to protect those that host, curate and distribute copyright material while claiming to have no knowledge of it on the grounds that their users, and not they themselves, have the knowledge and are responsible for clearing copyright.

Selectively, of course, some of them do admit knowledge if rightsholders submit a claim for their works and ifthey monetise the associated sound recordings, but the net result is payments that represent a mere fraction of the true value these platforms derive from music.

We do not accept that this is right.

Last year I co-authored an economic theory paper with George Barker, which laid out the argument that an unintended consequence of the way in which Safe Harbour legislation has been interpreted has been to deprive creators of the ability to consent to the use of their creative works and resulted in a transfer of value from the creative industries to the technology platforms to the detriment of the economy as a whole.

We are all worse off under this interpretation of Safe Harbour, not just the creators, though you are in the firing line and worst affected. 

There is a huge gap between the value that some digital platforms derive from music and what they pay to creators and this cannot continue.

This is our battle. … If Asia owns the device business and America owns the Internet, as President Obama claimed recently, our competitive advantage in Europe lies in our creative industries. It certainly does in Britain, where your music has punched above its weight on the world stage for decades and continues to do so.

The creative industries in Europe provide 7.1 million jobs. That number has grown even through economic hardship, at twice the rate of the economy as a whole. The British music industry contributes £3.8 bn to the economy, half of which is exported. You pay your taxes. You must be protected by strong copyright law and our government must support us with the European Commission in our demand that the boundaries of Safe Harbour be re-drawn to ensure that any service that aggregates, disseminates or curates copyright works is fully licensed in a free market.

In the last few weeks there have seen some very encouraging signs.  The European Commission has, thanks in no small part to the work, influence and economic arguments made by PRS, IFPI and GESAC, set out a commitment to clarify the rules on the activities of online intermediaries in relation to copyright by the end of this year.  This is an important opportunity for change and one that we must grasp.   

This must include any social media platform or App that enables the sharing of creative works.

They should have a duty of care to obtain what knowledge they can about copyright material that is hosted on and distributed on their platforms and in their Apps.

Why should they be free at your expense?

Though we celebrated our centenary last year this battle is very current.

It is being fought at the very frontier of the development of modern society and we are fighting it with every ounce of energy we possess.

In this respect, nothing has changed in 100 years, and though the battlefield has changed out of all recognition, our determination to fight it on your behalf has not.

Thank you.