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Former EMI boss says Kevin Brennan MP’s proposed copyright reforms will “obliterate” the label investment model

By | Published on Tuesday 30 November 2021

Big Ben

The former boss of EMI UK and former Chair of record industry trade group BPI, Tony Wadsworth, has criticised the copyright reforms set out in Kevin Brennan MP’s Copyright (Rights And Remuneration Of Musicians etc) Bill, arguing that – although “well-intentioned” – those reforms will greatly impact on the ability of labels to invest in new talent.

Brennan’s private member’s bill follows on from Parliament’s inquiry into the economics of streaming, and seeks to alter the artist/label relationship through copyright law reforms, both in terms of rights ownership and how revenues stemming from an artist’s recordings are shared out.

It follows repeated criticism from artists and their representatives during the Parliamentary inquiry that many labels take too big a cut of streaming income, which means artists aren’t benefiting from the streaming boom. And they also couldn’t rely on digital music revenues to get them through the pandemic, even though subscription streaming was the one music revenue stream not negatively impacted by COVID-19.

Actually how streaming monies are split between an artist and the label or distributor they work with on their recordings is entirely dependent on each individual record or distribution deal. The artist could receive anything from a few percent to 100% of the money, depending on what level of investment and services the label or distributor provides, and when the deal was signed.

Most controversial are those record deals negotiated and signed in the pre-digital age which make no specific provisions for the sharing of streaming income. Because under a conventional record deal the label owns the copyright in the recordings it releases for life of copyright – currently 70 years in Europe – lots of legacy artists are still receiving royalties from deals negotiated in the 20th century. And some labels are applying royalty rates and other contract terms that were designed for physical releases to streaming income, which hardly seems fair.

That fact is all the more annoying for heritage artists when you consider that the record industry’s catalogue is more valuable today than ever before, because with streaming many of the logistical and transactional barriers that used to have to be navigated in order to exploit catalogue have been removed. So catalogue is accounting for ever more consumption on the streaming platforms, but the labels are often paying out the lowest artist royalties on those older recordings.

Brennan’s bill seeks to help aggrieved artists out in three ways.

First, performer equitable remuneration would be applied to streams, so that artists would be due a minimum share of streaming income at industry standard rates, oblivious of record contract, paid via the collective licensing system.

Secondly, artists would have a legal right to force labels to renegotiate old deals that seem unfair in the context of modern music consumption trends, aka a contract adjustment right.

Thirdly – and potentially most dramatically – artists would be able revoke any rights they previously assigned to a label after 20 years. Quite how that would work is debatable, though it could ultimately result in any sound recording copyrights owned by a label being transferred over to the artist after two decades, oblivious of what any old record deals say.

Although groups representing artists, songwriters and managers welcomed Brennan’s bill when it was published last week – ahead of another reading in Parliament this coming Friday – the label community has been unsurprisingly critical of the proposals. From a label perspective, there are at least three criticisms regarding what the bill proposes, or at least of the fact that these proposals are being presented to Parliament at this time.

First, introducing an ER system on streams would result in winners and losers within the artist community – it isn’t simply a case that all artists win while all labels lose. That said, Brennan’s bill tries to deal with that.

The artists most likely to be negatively hit by ER on streams would be those who run their own labels, self-release their own recordings and work with a distributor on very favourable terms. However, under Brennan’s proposals those artists would continue to receive their streaming royalties under the current system, circumventing any new admin costs or delays that would result from an ER system.

Though there remain plenty of questions regarding exactly how ER on streams would work in general – and how that exclusion for self-releasing artists would work specifically. Which leads to the second criticism.

Labels argue that the potential impact of the ER plan – and the contract adjustment and revocation rights – needs much more consideration. And, with all three having also been recommended by the Parliamentary inquiry, the government’s Intellectual Property Office has already commissioned research on each of these three reforms. That research should be completed before actual changes to copyright law are seriously discussed, many in the label community argue.

And that research not only needs to consider the potential impact on artists, although that’s obviously very important. But it also needs to consider the impact those reforms would have on the ability of labels to invest in new talent. Which, in turn, leads to the third criticism.

When it works, the traditional label model is sound. A label invests in a bunch of new artists, releases their records and builds a catalogue of recordings. Some – probably a minority – of that catalogue is super successful and therefore super profitable. And it’s those profits that allow labels to then invest in the next round of new artists, and so the process repeats again and again.

It is true that labels – especially bigger labels – tend to make their investments in new artists a little later in said artists’ careers than they used to. And some would argue that the label’s upfront risks have declined with the shift from discs to digital, because no physical product now needs to be produced and distributed. And some also would question the figures the record industry at large presents regarding the actual scale of those new talent investments.

However, when the label model works, it really works. Artists get access to investment, studios, collaborators, marketing, distribution and industry decision makers – plus, these days, the all important data, analytics and insights, not to mention marketing content and influencer networks – all of which not only drives streams of the music, but also grows the fanbase. And in doing so that boosts all of the artist’s revenue streams – so not just recordings, but publishing, live, merchandise, brand partnerships, direct-to-fan and so on. And chances are, the label isn’t actually involved in most of those other revenue streams (in fact, it might not be involved in any of them).

The big question is: if all or any of Brennan’s proposals became law, what impact would they have on the ability of labels to offer all that support to new artists? How big a catalogue and how big a cut of the digital pie do labels need to retain their position as key investors in new artist businesses?

It’s on this latter point that Wadsworth’s critique of Brennan’s bill in The Times yesterday focuses. So, what impact does the former EMI boss and BPI chair reckon Brennan’s proposals would have on the entire label system? It would “obliterate it”.

Having summarised the record industry’s steep decline in the first decade of digital music, and its subsequent streaming-led revival, Wadsworth writes: “Just as the UK industry is returning to health … it faces another threat. This time from a set of legislative proposals that, although surely well-intentioned, would harm the very model that has underpinned the industry’s renaissance”.

The proposed copyright reforms, he says, “would cripple the amount of investment labels are able to make in new artists, especially at smaller independent companies. In an era that demands instant gratification and success, labels are the only players still set up to play the long game. Thanks to our successful artists, labels continue to reinvest huge amounts each year in emerging talent through A&R, our equivalent of research and development”.

“When I was CEO of EMI Music in the UK”, he goes on, “I could see the returns from the hit acts of the 1980s funding the investment into new artists in the 1990s, which in turn funded the investment into the young artists of the 2000s. Artists such as Pet Shop Boys, Kylie Minogue, Radiohead, Blur, Robbie Williams, Coldplay and many others were supported by this music ecosystem, and continue to enjoy global success”.

Of course, he acknowledges, there are new players in the modern recorded music business that have a key role to play too, not least the streaming services and the user-generated content platforms. However, he reckons, “it’s still the labels which are set up to nurture and bring through the next generation of talent”.

“A draft backbench bill is now suggesting that the growing music streaming economy be abruptly turned on its head with proposals which would obliterate labels’ ability to invest in new talent”, he states. “The bill proposes as yet unquantified ‘additional right’ payments, the unprecedented potential for agreements already negotiated between willing parties to be pulled apart and the spectre of copyright assignment being retrospectively slashed from 70 years to 20 years”.

“If adopted, these proposals would create huge uncertainty, a mountain of red tape and make the UK a terrible place for investment in music”, he argues. “The unintended consequence of these proposals would be to break the link between success and investment forever, and new British artists would suffer”.

He then concludes: “The prosperity of the UK music community should not be undermined by these misinformed proposals just as it has got back on its feet. Those who will suffer most are independent labels and the next generation of British talent waiting to be discovered”.

The biggest supporters of Brennan’s proposals would obviously dispute Wadsworth’s claims, probably noting that if Universal Music can afford to hand a £123 million bonus to its CEO, it can probably afford to take a smaller share of the streaming monies generated by its catalogue and still invest in new artists.

However – despite plenty of people trying to write off labels over the last 20 years, arguing that various digital innovations would render the label model redundant – most artists continue to rely on labels, or at least companies that look a lot like labels, to help them grow their audiences and their individual artist businesses, so to boost all their various revenue streams and achieve long-term success.

And, as noted, when it works, the label model really works. Of course there are undeniable issues and inequities – and the majors in particular have repeatedly failed to deal with those issues and inequities in a timely fashion, which is how we got to this point, and why many would argue that copyright law now needs to intervene.

But, it would be nice if we could address those issues and inequities without blowing up all the good stuff. So, I guess the big question is this: quite how big a bomb is Brennan’s big bill?

The debate, of course, continues! That too could prove to be quite explosive.