The UK Music Industry - building on a global success story
Faculty of Music - University of Hertfordshire
Monday 20th February 2012
RHT HON HARRIET HARMAN MP
SHADOW SECRETARY OF STATE FOR CULTURE, MEDIA AND SPORT
DEPUTY LEADER OF THE LABOUR PARTY
SHADOW DEPUTY PRIME MINISTER
Thanks David for that introduction and thanks to the University of Hertfordshire for hosting this event and to UK Music for helping to organise it.
Having just been on a tour of the facilities and having met some of the staff and students, it’s clear to see that Hertfordshire boasts one of the leading music faculties in the UK - from songwriting and composition to recording and production - and the pioneering course in music and entertainment industry management.
Despite the 18% drop in higher education applications across the creative arts sector, applications for music here at Hertfordshire have risen by 50%. That tells us that even with the real concerns about rising tuition fees, music is still an industry that young people want a career in.
So what better place to make my first major speech on music as Shadow Secretary of State for Culture, Media and Sport?
And what better time to make it - on the eve of the Brit Awards and just after Adele scooped so many awards at the Grammys.
This is a really big week for British music. But, music is important in everyone's lives every day - whatever your age. Even I managed to download Adele onto my iPad – to the astonishment of the young team in my office who often think I’m more facelift generation than facebook.
Important for young people
But it’s young people who music matters most to – like the young people in my South London constituency of Camberwell and Peckham. It’s a key part of their identity and many have hopes of a future working in the industry.
A public policy imperative
So we, as politicians, must take music seriously – there is a democratic imperative for us to represent what our constituents feel so passionately about – not just for fun, but for their own ambitions for their future.
So, as their representative, I want to ensure that I look to their future both as consumers and as creators so:
• That they can get the music they want from all over the world, as fast and as cheaply as possible
• That they can make the music they want and are able to distribute it – all over the world
• That they can work in the music industry or the many technology industries that support it. Some of you will want to end up working for a record label – and some of you will want to work for Apple, Google, Amazon or Spotify.
Putting the music business at the heart of government
One of the things that strikes me most from talking to people in the music business is the real sense of frustration that within government, music is invisible outside of the DCMS. Music is always praised for its importance for our culture but not recognised for its important to our economy. Its broader value in providing jobs and economic growth is still not acknowledged across Whitehall.
And it should be.
The British music industry generates £3.8 bn per year and is the second largest exporter of music in the world with a 12% share of global sales of recorded music.
As well as British performers punching well above their weight in terms of sales across the world, when it comes to jobs, music, visual and performing arts are the largest employers within the creative industries.
Music matters to our nation’s culture and identity but also matters to the economy.
My determination is that we in the Labour Party should have an integrated approach. So that music is not just in a silo at the DCMS. That it will be integrated across our teams in education, business and the treasury so that we put music at the heart of our economic agenda.
I know that many of you might feel that you’ve heard it before – but I believe that we can make that change and that we must. Our economy needs growth and jobs. Music as part of the creative industries is growing faster than the rest of the economy. It’s a no brainer.
Forging a 5 point plan for jobs and growth in the creative industries
So music has to be of equal importance to our treasury team, our business team and our education team as it is to me and our DCMS team. To show how we mean to go about this, later this month, I'm bringing together Ed Balls, Chuka Umunna and Stephen Twigg to forge our 5 point plan for jobs and growth in the creative industries. We want our Creative Summit to be take forward a meaningful dialogue between the Labour Party and your industry to ensure that we can both speak up for those issues in Parliament now and, over the coming years, develop the best policies to support jobs and growth in music and in the wider economy.
Through the course of the conversations, I and my colleague Dan Jarvis - Labour’s shadow minister for the arts and creative industries – have been having with people in the industry it’s clear that there are some themes emerging about what our vision should look like and I want to hear from you about what you think. The main areas seem to be: access to finance; exports; a regional strategy for growth; young people and skills; and intellectual property.
Access to finance
Access to finance is clearly a huge issue. The paradox is while London is a global financial capital and Britain’s artists are global success stories - most of the music industry still struggles to get finance. The government has to play its part in trying to improve the situation - to encourage the city to recognise the creative industries as an important investment for the future.
The banks have got to start lending to viable music businesses. The music industry is made up of thousands of small businesses - 92% of the UK music businesses employ fewer than 10 people. And they need to be able to get finance – to start up, to go from small to medium and for medium sized firms to grow. So it’s a big concern that the banks are not lending and Operation Merlin figures show banks still failing to meet their lending targets. It’s not good enough. It doesn’t seem too much to ask that in the global capital of banking we should have lending to our global music industry.
We are a net exporter of music and that’s growing. One in every 10 albums sold around the world is by a UK artist. British music puts us on the world map and helps attract tourists.
Music is a fantastic Great British asset – but the government has got to better support the industry as an export and respect it as a serious earner of overseas currency for the exchequer. When David Cameron and George Osborne lead British business on trade delegations overseas to bang the drum for UK plc, as well as seeing defence and pharmaceutical companies represented, I want to see music, film and other creative industries at the forefront.
In all the regions
We need to build a more balanced economy for the future – not just less reliant on financial services but also less reliant on London.
Just as our reach needs to be global it needs to be across all regions of the UK. Last week I was in Manchester – with its massive music tradition and now with the new BBC media centre in Salford. Historically Liverpool, Manchester and Glasgow have had a massive impact on music. And music has been a key part of economic regeneration in the regions too. The abolition of the Regional Development Agencies - which helped draw in investment and stimulate growth in our regions – including from European funds to our regions - hasn't helped. Their replacements, the new regional growth funds, in their current form, are not adequate and this must be addressed. There has to be a proper regional strategy for growth in the music industry.
Opportunities for young people
That’s one of the things that will make sure that there are opportunities for young people in the industry – wherever they live.
Unlike politics – the music industry has no problem appealing to young people. But we have to ensure that the music industry has the widest pool of talent to draw on and there is real equality of access. So:
• We must ensure that every child gets a decent music education, the chance to sing, play an instrument, learn to appreciate music and to get the cross-curricula benefits that music brings.
• We must ensure that the industry gets graduates with the right qualifications and skills.
• And we must ensure that a generation who get their music online pay for the music that they use.
To sustain the music industry in the digital age as well as encouraging new business models and innovation, we still need effective copyright protection. So if you create something – it is yours - to license for others to use, to sell or give away.
And this is the basis for all the industry including:
• Managers and marketers
• As well as the sound engineers and session musicians.
The collection of royalties makes money available for investing in new talent.
The BPI estimates the record industry reinvests over 20% of its revenue in developing new talent
Copyright infringement makes it difficult to run a business - especially if you are a small to medium sized business - as so many are in the music industry. You can't run a business effectively if the products you want to sell don’t generate revenue because they are downloaded for free.
Every music company would love to have a success story like Adele. But the reality is that most music businesses are not music giants but are small, independent companies making a living and breach of copyright inhibits their ability to grow especially when it comes to dealing with banks.
Let me give you and example. Music producer Steve Levine took out a bank loan to produce and distribute singer Natalie McCool’s first album. He released her single on iTunes for 99p per download. The week the single was released a website Freedownloadsong.com offered it for free. Her fans believed this to be legitimate and nearly 7,000 downloaded her song. Had Steve been able to sell these songs at 99p per track he would have been able to pay Natalie and the bank loan. The bank accused Steve of giving them inaccurate sales projections and demanded their money back. The paradox is that there was demand but because of the free downloads they generated no returns which meant that he, the artist and the bank all lost out.
And as you’ll all know, this is not just a one-off.
Research by this university and UK Music found that:
• Over 60% of 14 – 24 year olds were downloading music without paying for it.
Research from Harris Interactive found that:
• ¾ of all digital music obtained in 2010 was downloaded illegally.
Of course every illegally downloaded track would not translate into one which was paid for but even taking that into account Jupiter Research estimate:
• That revenue lost to the recorded music industry last year through piracy was £236m.
And despite the success of UK music, piracy has contributed to the fall in revenues of UK record labels - down 1/3 since 2004.
The last Labour Government started doing something about this with the Digital Economy Act.
The government commissioned the Hargreaves review – which has reported and soon, they are going to publish a Green Paper and then bring forward legislation. So now is the time to take things forward and for the government to strike the right balance between the content industries, including music, and the technology companies to create a climate where innovation can flourish while copyright is protected. This debate has been going on for long enough and needs to be brought to a conclusion.
I know these two sectors - technology and content - feel pitted against each other when it comes to discussions about piracy.
I've had discussions with both, I know the arguments from both sides.
It's too simplistic to point to one side as the villain of the piece. Because the reality is there a common interest - both need each other and both must be part of the solution.
The rights holders don't want to be seen as the opponents of the democratisation of culture. The tech companies don't want to be seen as supporters of piracy. Both need each other and there are big commercial incentives for both sides to come together and get this right.
What the music industry should do
Big strides have been made by the music companies - there are now 70 license services. But they should do more to support innovation and new business models. They could make more of their catalogue available and support simplification of licensing, such as provision for licensing of orphan works and making it easier for more deals to be struck through a Digital Copyright Exchange.
What the technology companies should do
The technology companies need to do more with the content creators to better signpost legitimate search.
And they should do more to tackle piracy including by stifling the income of the pirate websites. There are a relatively small number of very big pirate websites which make a lot of money. When they are based offshore they are hard to reach. But that mustn't lead us to conclude that nothing can be done. Google, as a major site for advertising, could take a lead to engage the advertising industry in depriving illegal sites of their advertising revenue.
If Google and the ad agencies drain the swamp of piracy by removing their financial incentive - online advertising - then we would have a fertile environment in which paid-for content could flourish.
No-one could imagine how we would survive without Google – most of us use it hundreds of times a day. But it is because they are so effective – and trusted – that Google and other search engines should use their creative energy to help the music industr