Wednesday, 25 May 2016

The Collective Licensing Question: To B2B or to B2C?

Music industry income can be divided into two main categories. There is business-to-consumer (B2C) income, the music that the public pays for directly. This includes record sales and live music. There is also business-to-business (B2B) income, music that is purchased by licensees from licensors. This includes broadcast music and the use of recorded music in public premises.
            As always, when it comes to matters of music and copyright, there are oddities and there are complexities. Curiously, the music that public pays for is often private, whereas the music that is licensed between businesses is usually public. The B2C purchase of recorded music is regularly an individualistic affair. The consumer will select titles from the wide repertoire of music. They will choose when and where to listen to them. Each of these processes can take place in a solitary fashion. B2B licensing, in contrast, is the music of everyday life. This is particularly the case with the blanket licensing of music for radio stations, bars and shops. In these situations it is the collection societies who perform the task of the ‘2’. They sit between the licensor and licensee. If a music user obtains a blanket licence it will give them unfettered access to the entire repertoire of music of the collection society’s members. As I have written elsewhere, this process provides a reversal of Lord Macaulay’s oft-quoted beliefs. He argued that copyright ‘produces all the effects which the general voice of mankind attributes to monopoly ... to make articles scarce, to make them dear, and to make them bad’. The music industries’ most obvious monopolies are the collection societies. Collective licensing makes music abundant and it prices it democratically.
            The second issue is that the categories of B2C and B2B are not clear-cut. Although records and gigs usually classify as B2C, they include an element that can be considered B2B: the songwriting copyright. This money is passed from record companies and venue owners to composers and publishers by means of the collection societies. However, although the specifics of this income move from business to business, it is the consumer who generates the money. This income is built into the dealer price of recordings and forms part of the ticket price of gigs. This is Will Page’s viewpoint in his influential Adding Up the Music Industry reports. It is in fact possible to extend this line of thinking to the entirety of collection society income. In the final analysis, the consumer pays the copyright royalties for broadcast music: with public service broadcasting they are built into the licence fee; with commercial broadcasting they form part of the cost of the goods that are being advertised. And it is the consumer who foots the bill for the use of the collection societies’ music in public premises: this expense is added to the costs of the products that the premises are trying to sell.
This is not the perspective of the collection societies, however. They maintain that all of their transactions – broadcast, online, public performance or recorded media – should be categorised as business-to-business. Responding to a Monopolies and Mergers Commission (MMC) enquiry, PRS stated that ‘our primary customers are our members and affiliates but in our capacity as a rights licensing body, the licensee can be seen as a customer’. The MMC reported that ‘PRS did not accept that the ultimate music user, the listener, was its customer’. This outlook is reflected in the PRS for Music website, which is divided between sections for its licensor members and its licensee customers. There is no portal for listeners. PPL’s website is similarly divided between a section for its members and a section for music users. MCPS shares this twin perspective. When I worked for the company in the late 1990s, the executive director, Chris Martin, encouraged us to think of the society as being an estate agent, facilitating the sale and purchase of (intellectual) property. The concern was not with the music listeners, the people who actually had to live in these musical buildings.
The collection society’s B2B perspective has been influential. MMC investigations into PPL in 1988 and PRS in 1997 aimed to find out whether these societies were operating in the ‘public interest’. Their reports dealt with a circumscribed ‘public’, however. They dealt solely with the interests of licensors and licensees. In each case the MMC sought the correct balance between the amounts music users should pay and the amounts music creators should receive. Ultimately, they endorsed the practice of the collection societies ‘because the convenience they offer to both the owner and the user of copyright is unlikely to be matched by any other means’. They did not consider the listener.
The raison d’ĂȘtre of the collection societies is ‘to do collectively what creators cannot effectively do for themselves’. This is putting them in jeopardy, however, as what seemed ‘unlikely’ in the 1980s and 1990s is less so today. Creators are breaking ranks. Record company members of PPL are self-administering the income from streaming. Many publisher members of MCPS are also withdrawing from this field, as they too feel that they can negotiate higher streaming income licences on their own. These manoeuvres weaken the collection societies. They are losing out on a significant area of income, which has a knock-on effect for their cost-effectiveness as a whole. The collection societies also face the prospect of blockchain technology, which could make it possible for any of their members - whether large conglomerates or individual writers or musicians – to self-administer their rights. Graham Davies of PRS is fatalistic about this. He has stated, ‘If there were a new model which meant that our members didn’t need PRS that would be fine in principle. We should disappear because we would no longer add any value’.
This is B2B thinking. It is restricted to the value that collection societies hold for licensors and licensees. There is, however, a consumer value in collective licensing. If the collection societies go they will take blanket licensing with them. This will be disastrous. We are already witnessing its effects in streaming: the repertoire of even the biggest providers is patchy, principally because the biggest stars are holding out for more pay. Its effects will be felt more profoundly when it comes to the licensing of broadcasters and public premises. If we lose blanket licensing in these areas then music really will become more expensive and scarce. It is time, therefore, to start collectively thinking B2C.  

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