The musicians were responding to a legal action filed by record
label trade group the British Phonographic Industry (BPI) in
June.
That claim, filed with the UK Copyright Tribunal, sought to
challenge licence terms set out by music publishers and composers
for the use of their compositions on the internet and on mobile
devices.
In 2002, music publishers and composers, acting through trade
association The Music Alliance – a joint venture between the UK
licensing and collecting societies MCPS (Mechanical-Copyright
Protection Society) and PRS (Performing Right Society) – approved a
Joint Online Licence, allowing online music providers to obtain a
licence for performing and mechanical rights in one easy step.
But the licence imposes a rate of 12% of gross retail revenues
on nearly all online music offerings (subject to a temporary
discount to 8%).
This compares with publishing royalties on physical products,
such as CDs, which stand at 6.5% of retail price (or 8.5% of the
published wholesale price) and broadcast radio rates, which range
from 3–5.25% of net advertising revenues.
The UK’s leading online music services and the BPI, representing
more than 300 UK record labels, have taken exception to the tariff,
and in June filed a complaint with the Copyright Tribunal.
Geoff Taylor, BPI General Counsel said at the time:
“The licence that the Alliance is trying to impose for online
music is unreasonable and unsustainable. It is charging a royalty
rate on a download that is double the rate it charges for a song on
a CD. It applies this excessive rate to a whole range of online
music services, without taking into account their different
characteristics. The Alliance’s tariff threatens to seriously harm
the development of the legal online and mobile music markets.”
According to the online music services and the BPI, the terms
set by the Music Alliance are unreasonable because the Alliance and
its members have not had to invest heavily in creating new legal
online services and fighting internet piracy. Moreover it simply
applies a single rate, without taking into account the nature and
features of the service involved.
The BPI also argues that imposing higher royalties on online
services than on their off-line equivalents puts online services at
an unfair commercial disadvantage.
The Music Alliance filed its response to the claim on Friday,
explaining that composers and songwriters currently earn around 5p
from the sale of a download. BPI proposals would see them earning
2½p. In contrast, record companies keep 40–50p from the same sale,
it says.
The Music Alliance proposes that, as of 1st January,
composers and songwriters receive 7–9p per download, to bring their
earnings in line with those they might have received in the
past.
This is not a cost to the consumer, says the Alliance, but a
cost to be recovered from the enhanced profits currently being
enjoyed by record companies as a result of the savings being made
from digital distribution.
Group Chief Executive of the Music Alliance, Adam Singer,
said:
“We have now submitted our reasons for why the record industry
should adopt fresh economic thinking in a digital age in order to
sustain the composing community upon which they rely. We believe
that this dynamic digital market should not be stultified in the
aspic of analogue thought; we should recognise that digital
liberates margin and why writers should share in the new wealth
that modern record companies will be able to create.”
