PRS tariff talks stall amid direct licensing dispute
The implementation of PRS for Music’s proposed new live music tariff has ground to a halt, following an objection over the lack of any provision for direct licensing, IQ has learnt.
The British performance rights organisation (PRO) announced last September it had the support of all “major relevant industry bodies”, including the Concerts Promoters’ Association, the National Arenas Association, Music Venue Trust and the Association of Independent Festivals, to push ahead with overhauling the 30-year-old popular music concerts (LP) tariff for shows and festivals, and had submitted plans for a new fee structure to the UK’s Copyright Tribunal for consideration.
However, “any organisation or person wishing to object” to PRS’s application was given until 27 October 2017 (later extended to 3 November) to do so, and PACE Rights Management – the company set up by manager Paul Crockford and agent Adam Elfin to assist public performance licensing directly on behalf of writers and publishers – made an official ‘request for permission to intervene’ over concerns that the new-look LP tariff failed to account for the growth of direct licensing.
The Copyright Tribunal agreed that PACE had a substantial interest, and granted it permission.
As revealed by IQ in July 2016, a growing number of major artists are choosing to bypass traditional blanket licences from PROs in favour of having their public performance royalties paid directly. The rise of direct licensing means many festivals are being forced to pay multiple licensees, as no PRO yet offers an ‘opt-out’ for artists who are not members and are licensing directly.
PACE made an official request for permission to intervene over concerns the new LP tariff failed to account for the growth of direct licensing
European festival association Yourope, for example, has advised against booking direct-licensing acts until a solution can be found.
On 22 February, PACE and lawyers for PRS appeared at the Copyright Tribunal hearing, which a person in attendance tells IQ went in favour of PACE, who sought non-ratification of PRS’s application and that all parties be asked to discuss a tariff that takes in to account direct licensing.
The parties are now in those discussions, ahead of a second hearing currently pencilled for 2 May. Any agreement reached by the parties, however, will only serve as assistance for the Copyright Tribunal to understand the various positions, as it has full authority to ratify or impose whatever tariff it deems reasonable and compliant with the law.
A spokesperson for PRS for Music declined to comment pending the tribunal’s decision.
Tariff LP has been levied at a flat rate of 3% of gross box-office receipts since 1988.
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The new rights reality for festivals
Without songwriters, the live music industry does not exist. Fans paying to see the songs they love being performed by their favourite musicians provides the income that everyone reading this article has built their livelihoods on. So it’s only right and proper that songwriters are also able to earn a living from the exploitation of their work and talents.
The established remuneration mechanism for songwriters (and their publishers) involves signing public performance rights to the relevant performing rights organisation (PRO). The PROs then license the rights to users (in this case festivals) and these licence fees are used to pay royalties to songwriters and publishers. The various PROs have reciprocal rights agreements (RRAs) with each other, so that international performances can also be licensed and songwriters paid – a simple and logical process in operation for over 100 years.
However, over time, PROs have become monopolistic; large opaque organisations lacking meaningful oversight, seemingly riddled with a self-serving and protectionist culture, having become hypersensitive to criticism, heavy-handed in approach and dismissive of requests for transparency or progressiveness. Many feel that they have lost sight of the very reason they exist: ie. to serve the best interests of their writers and publishers. Progressively a deep unhappiness with the established PRO system has developed amongst both PRO members and rights users.
With regards to licensing live public performance for festivals, it’s a legal requirement for events to license all the rights they ‘use’. If a festival doesn’t have a licence for all of these rights, they will be breaking the local copyright law.
Feedback regarding rights deals festivals have done with their PROs indicates that they have agreed to pay the PRO a certain amount of money – perhaps based on a percentage of ticket income – irrespective of the number of rights that the PRO can license. So when this number of rights reduces, as a result of reassignment and direct licensing for instance, the PRO seems to be trying to force the festival to pay the total amount of money, irrespective of how many rights they can actually license. As shockingly stated by one PRO: “Under the terms of [our] tariff, it only requires the performance of one [PRO]-controlled work at a festival for the tariff to apply.”
Many feel performing rights organisations have lost sight of the very reason they exist: to serve the best interests of their writers and publishers
The present formula being used for direct licensing rights to festivals is to take the tariff rate and apply that over the artist fee. This is to reflect that the bigger the artist, the greater the value of the live public performance rights they deliver. Some may argue that the public is not buying tickets for individual artists or that all artists in a festival situation are equal. But we all know that is not reality. That if a festival had no recognised headliners, and only ‘featured’ artists who would normally only appear as openers on the smallest stage, attendance would substantially decrease, as would the value of the live rights. To reflect the value of live rights in a festival situation, using the measure of the fee paid to the performer is a straightforward, easily calculated and transparent system.
There have been some suggestions made as to how festivals can adjust to the new direct licensing reality. However, it must be remembered, the performers might not be the writers of some of the works they perform, and therefore can’t agree terms on their behalf. Equally, publishers are stakeholders, and the performing artist won’t be able to agree licence terms on their behalf either.
The solution is for an inclusive and transparent forum, involving all the stakeholders, to discuss and create a new standard practice for licensing live public performance rights to festivals. The simplest, most straightforward and transparent solution would be for the deals between festivals and PROs to be renegotiated, so that the festival pays no more than their present tariff rate, and is also enabled to deduct the amounts they have paid for direct licensing from the fee they pay to the PRO. This would ensure that:
1. Festivals do not have to budget an increased proportion of their income for live public performance rights licence fees
2. Direct licensing happens in an understandable, straightforward and relaxed way
3. The PROs continue to license the majority of the works performed, fulfilling their requirement to collectively license
As direct licensing becomes an ever more standard part of our industry, it would seem advisable for festivals negotiating deals with their PROs in the future that the likelihood of direct licensing applications be taken into account.
Adam Elfin is co-founder PACE Rights Management, which administers direct licensing on behalf of artists. Its clients include Deftones, Fink and Mark Knopfler.
Festivals hit with direct licensing claims
Several European festivals are facing the prospect of paying multiple licensees this summer, caught in the middle between a growing number of headliners directly licensing their performance rights and local performance rights organisations (PROs) that only offer a one-stop blanket licence.
The situation follows a report by IQ in issue #64 that many European PROs (including SACEM in France, SGAE in Spain, GEMA in Germany and SUISA in Switzerland) rebate promoters up to 45% of performance royalties – money meant for songwriters, composers and publishers – for reasons including prompt payment, submitting setlists or being a member of a trade association.
With a number of headliners turning their backs on PROs to collect their performance royalties directly – and asking for a greater share of the festival’s performance royalty payment in the process – some believe the situation could have huge implications for festival promoters worldwide.
Adam Elfin of PACE Rights Management, which administers direct licensing on behalf of artists, and counts among its clients Deftones, Fink and Mark Knopfler, says he is in negotiations with “between 30 and 40” managers, as well as an accountancy firm that represents 140 artists and “wants to use [us] for all of them”.
“If you look at the larger festivals, 20% of the acts on the main stage might be directly licensing by next year,” Elfin predicts. “It could be more.”
The move to direct licensing is seeing artists further up festival bills arguing for a greater proportion of the festival’s performance royalty payment based on their fee versus the typical percentage of gross receipts collected by the PRO, but is primarily driven by writers and publishers who “don’t want to suffer from promoter kickbacks or PRO deductions, and want to receive the money faster and more transparently”, says Elfin.
In practice, this development is seeing some promoters having signed up to a blanket licence with their local PRO for performing rights at their festival this summer, only to discover that those licences are not inclusive of all rights.
“If you look at the larger festivals, 20% of the acts on the main stage might be direct licensing by next year”
Mads Sørensen, CEO of Copenhagen-based promotion/booking outfit Beatbox, which is involved in Tinderbox, Grimfest and Northside, says one band who played a Beatbox festival this year are direct licensing.
He says Beatbox isn’t “paying twice” and is currently in negotiations with Danish PRO Koda to discuss how the band is going to be paid. “It’s the first time this has happened,” he tells IQ, “so I’m speaking to the collection society…
“Festivals are already paying top dollar for our acts. Of course we have to respect [public performance rights], but it shouldn’t mean the promoter has to pick up the bill.”
“It all springs from the Dutch case,” he explains, referring to the initial revelations about rebates given by Buma/Stemra to promoters in the Netherlands, which first surfaced in mid-2010. However, Sørensen adds that to his knowledge nothing similar is happening in Denmark.
Ewald Tatar of Barracuda Music, the promoter behind Austrian festival Nova Rock, says it has also had one act opt to bypass collection societies in favour of direct licensing this year.
Tatar speaks of the “need to find a solution” – and notes that Barracuda already pays Autoren, Komponisten und Musikverleger (AKM) – but won’t be drawn on whether Barracuda will, like Beatbox in Denmark, take up the issue with the Austrian collection society. “We’re having lots of meetings regarding this matter,” he tells IQ. “It’s a new situation, so we need to check everything [first]…”
“Of course we have to respect public performance rights, but it shouldn’t mean the promoter has to pick up the bill”
He does, however, agree with Sørensen that it’s not an issue that’s going away any time soon, stating that he “expect[s] more bands to do it” (license directly) in the years to come.
Mojo Concerts’ Eric van Eerdenburg, festival director of A Campingflight to Lowlands Paradise (Lowlands), says he knows of the “same two or three artists” who handle their own performance royalties (Rammstein are one, he reveals) but that no one has gone the direct licensing route for Lowlands 2016.
If, as Elfin forecasts, that changes next year, “we would take it up with Buma/Stemra”, says van Eerdenburg, which “would have to work out a settlement” that doesn’t leave Mojo out of pocket. Alternatively, he suggests, “we’d make a deal inclusive of all performance rights” – or, failing that, “we’d say, ‘You can’t do this [collect your own royalties] at our festival'”.
“It would be too complicated,” he explains. “If you have lots of stages, lots of acts, how are you going to calculate the amount due to each artist?”
Folkert Koopmans of European festival heavyweight FKP Scorpio (Hurricane, Southside, Highfield) says his events have been unaffected, but, “If it comes to that point [with a significant minority of bands direct licensing], we will surely have a conversation with GEMA. But we’ll cross that bridge when we come to it.”
Elfin says his message to festival promoters worried about the rise of direct licensing is that it’s better to have the issue out in the open now before it takes off in a big way. Leaving promoters out of pocket “is not something we want or that should happen”, he says, but adds that it’s “beneficial that we’re having this conversation now, because if they weren’t aware of this [direct licensing] and they proceeded with their deals for next year with local PROs, the impact will be massively different.
“We absolutely feel for promoters, because we don’t want them to pay more. That’s not why we’re doing this”
“We absolutely feel for promoters, because we don’t want them to pay more. That’s not why we’re doing this: to squeeze promoters. The issue is that in the dealings between PROs and festival promoters, the PROs haven’t been transparent in their deals that this is a possibility – and, equally, the festival promoters haven’t been aware this is a possibility.”
When asked by IQ if the responsibility for the lack of awareness lies with the collection societies, Elfin says “absolutely” and asks why, when “it was a requirement of the 1997 MMC [Monopolies and Mergers Commission] findings into the PRS that they publicise the fact that people can direct-license and can reassign their rights, we’re only just discovering this [now]”.
He adds that existing public performance licensing deals between festivals and PROs have “got to change”.
Iain Black, senior international manager for PRS for Music, says the society last year received three requests from writers and publish to license concerts directly, noting that “this isn’t an unusual figure as, on average, PRS receives three to four requests of this nature per year”.
“If members are interested in exploring the option of direct licensing, we are entirely flexible and openly invite them to contact us,” he continues. “We can arrange a conversation with our UK and international concert specialists, who can answer any questions and discuss possible options.”
While it remains to be seen whether Elfin’s bold predictions come to pass, it’s clear that any significant growth in the number of main-stage acts deserting their local PROs next festival season could have major repercussions for the bottom lines of promoters across the world.
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