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PRS/ PPL Fees

Tuesday February 9, 2016

 020116 Letter To ERA-page -001

 It has long been a bone of contention with music retailers that they have to pay for the privilege of playing in-store the music they sell - through the PRS and PPL licences all business premises which play music are obliged to have. 

To be clear, they do not question the principle of public performance licensing. No one doubts the justification for DIY stores or bingo halls or bars or crematoria to recompense rights-owners for the use of their work. 

No one needs to persuade music retailers that music has a value. 

What they do question is the idea that they have to pay to play music when the main reason they do so is to sell music. 

This is very different, for instance, to commercial radio stations who play music to sell advertising or bars who play music to sell alcohol. Music retailers use music predominantly to sell music. And naturally any sales they generate typically benefit rights owners far more than they do the retailer.

Against this background and a physical music market which remains challenged, the steady increases in the fees demanded by PRS and PPL from music retailers is causing increasing concern in retail circles. 

Many ERA members have reported fees which have risen at more than double the rate of inflation over the past decade. The level of licence fees charged to the bigger chains and supermarkets in particular seem excessive, and in many cases these fees can completely wipe out any retail profit on music sales. 

ERA's representations on this matter have not so far resulted in a lot of progress. One senior PRS executive suggested that perhaps retailers can regard licence fees as part of their "corporate and social responsibility" messaging!

So you can imagine that our hopes rose when we received the letter above last week revealing the news that PRS For Music and PPL are to form a new joint venture which will provide one-stop licensing for music users. It is a long-overdue move which should allow the two organisations to cut costs and streamline processes. 

It is clearly wasteful to have two entirely separate organisations collecting money from the same companies and so the cost savings should be substantial. 

Naturally we therefore assumed that much of these cost reductions would be passed on to licensees. Unfortunately not. A PRS and PPL spokesman was swift to quash any such suggestion. Any cost savings we must assume therefore will be kept by the PRS and PPL. 

Which rather cuts to the heart of the whole issue. In competitive markets, when cost savings become available they are invariably passed on to consumers (ERA members do it all the time). But PRS and PPL do not of course operate in competitive markets. They are effectively monopolies.

A meeting of ERA members last week demonstrated that this issue provokes strong emotions. With selling music only a marginally profitable activity for many, there is concern that the rising cost of PRS and PPL licences could even make playing music in store unviable for some players. 

It would be a shame if the announcement of what by any measure is a progressive move - the coming together of PRS and PPL to bring new efficiency to public performance licensing - were to become a catalyst for some major retailers to give up on music entirely.

ENDS

Posted at 09:43

Bayley on: 25

Friday November 27, 2015

Thoughts on a stellar week for music retailers

It was a week when UK entertainment retailers simply got on with what they do best: selling entertainment, and literally in truckloads.

From up and down the country this week the ERA office has heard reports of the quite extraordinary demand for Adele's25.

And while the headlines have been dominated by25 overtaking NSYNC's 1991 US week one sales record forNo Strings Attached, UK retailers have delivered a similar feat: by Wednesday this week Adele overtook Oasis andBe Here Now which in 1997 scored the biggest week one sale of any album in the modern era.

2463

There has been much focus on the decision of Adele and her label XL to withhold the album from streaming services, but by definition we cannot know what might have happened if25 had been available on streaming services. One thing is for sure, however: this week represents a ringing endorsement for the power of the ownership model and for physical formats in particular.

And in a sense what is most remarkable is how, after years of the record industry focusing (or so it seemed) exclusively on digital formats, the "old model" has apparently run like clockwork.

Apart from a few quibbles from individual retailers unable to get their hands on the much-coveted vinyl edition of25, there has been nary a hitch. One leading supermarket reports that in terms of a major release "the25 campaign has set a new gold standard".

 Much of the credit of course must go to Adele's label XL, but it is true to say that retailers have really pulled out all the stops from pre-order campaigns (Amazon reported that the title generated its biggest presale yet) to price offers through to digital stores offering high quality FLAC formats.

 After a period when the music industry has resigned itself to monetising an ever-declining number of music lovers, the overwhelming response from the public has been a welcome reminder of the ability of great music to cut through to a mass market. Quite simply, quality will out.

 And how fitting too that it took an artist who famously once worked at one of the UK's best indie record shops, Rough Trade, to produce such an album. 

So thank you, Adele. Thank you, XL. And thank you Britain's entertainment retailers, both digital and physical, for reminding us just how good a job you can do with the right product.

Posted at 09:52

Kim Bayley on the BVA's Video Insight Seminar

Friday July 17, 2015

Trust a retailer to tell it how it is. That was one clear takeaway from yesterday's Video Insight Day held by the BVA and supported by ERA.  Amid the glitzy presentation, lavish eats and hardcore security (attendees had to check in their phones and sign an NDA!) the presentation from Tesco Non-Food Category Director Ian Ditcham tackled one of the biggest challenges in the video industry with laser-precision: the negative effects of early digital release windows.

The ERA Manifesto, published in February, identified the issue.

"The video industry seems wedded to inconsistent windowing strategies," we said, "with titles available on download-to-own platforms far earlier than on physical formats.

"Studios need to adopt windowing strategies that work for the customer and recognise that a customer should not be forced to choose between physical and digital."

Ian Ditcham amplified the point at yesterday's event effectively telling video distributors: releasing digital before physical reduces the effects of in-store efforts and theatre.  In essence there's no point putting in enormous effort to promote something which has already lost its sparkle.

Instead, he said, the video industry should look to the example of the hugely successful games industry which has proven it can sell digital around physical, growing the overall market, rather than selling digital at the expense of physical.

The answer he said is more cross category promotion and cross physical/digital promotion.

To be fair many studios have acknowledged the point. In ERA's rounds of meetings with the video industry to discuss our Manifesto, many of them have acknowledged the need to do more to support Blu-ray and DVD.

The point now is surely to back up those kind words with action. As presentation after presentation pointed out, consumer appetite for physical formats is still robust. It is way too premature to push customers towards digital by using artificial windowing strategies.

Posted by Kim Bayley at 09:42

Kim Bayley on why ERA is backing Monday as the optimum day for music releases

Thursday November 27, 2014

Gut reaction and an unswerving conviction that you are right may be an admirable trait in an A&R man, but it fails to cut the mustard in the more pragmatic commercial business of music retailing.

That's the key to ERA's objections to the major record company-sponsored plan to enforce a worldwide Friday release date from next Summer.

Our view is that the numbers simply don't add up.

CDs

When news first leaked of the plan to adopt a Global Release Day a couple of months ago, retailers and digital services were intrigued.

With national release days currently spread through the week, it is certainly the case that this encourages short-term piracy. Pirate networks on theworldwideweb are by definition global so standardising on a single day seemed like a smart opportunistic move which could potentially help sales.

Full marks, major record companies.

But our enthusiasm soon waned when we heard that the chosen day was Friday. The objections focused on the impact on sales and the impact on costs.

On sales, the UK's current release day, Monday, provides a real boost at an otherwise quiet time of the week. In fact Monday is currently second only to Saturday for sales. Inevitably it generates not just sales of new releases, but impulse buys too. Moving to Friday would not only kill this Monday sales boost, it would likely lose those add-on sales, raising questions over whether many stores would bother opening on Mondays at all.

On costs, the picture was even bleaker. An early week release date gives time for restocking ahead of the weekend rush. Move to a Friday and retailers could be faced with an unappealing choice between being out of stock or paying expensive surcharges for weekend delivery.

On the basis that we anticipated that retailers arguing for the status quo would simply be dismissed as traditionalists, we decided to commission research to determine precisely what the costs - and any potential sales uplift - resulting from a switch to Friday might be. We polled our members both physical and digital. We modelled sales effects over every retailer type. We even commissioned consumer research to check the preference of music fans and of those who expressed a preference, most opted for Monday. (To be fair, a BPI survey showed music fans backing Friday, but in both cases the vast majority of consumers had no preference at all)

On costs, our research was clear: taking additional staff and delivery costs into account, a switch to Friday would need to generate a minimum of £8m in additional retail sales a year just for retailers to break even ie in a market which is clearly falling we would need an increase of £8m just to stand still (and that's without the additional costs to the record companies themselves which would inevitably be passed on to retail).

On sales the evidence is inevitably more speculative. IFPI commissioned research suggested a move to Friday would result in an overall increase in UK recorded music sales of around 4%. Sounds good, but that is equivalent to week one sales of every new release over the course of the year increasing by a third. It would be lovely if it were true, but it does not seem likely.

Intriguingly the IFPI numbers suggested that 95% of the benefit of switching to a Global Release Day would still be achieved on a Monday compared with a Friday.

For us it's a no brainer: if we can capture 95% of the benefit with none of the costs, why would anyone even consider a Friday? Adding risk and cost for a minimal benefit just doesn't make sense.

And that's why we have taken the position we have. It's not based on "gut feel" or "conviction" - just plain hard fact.

If there is to be a Global Release Day, an early week release really does make more sense. The fact that US retailers are prepared to abandon their time-honored Tuesday release date for Monday only serves to reinforce the point.

Retailers have no problem conceding that on matters creative, on matters A&R, record companies are far more qualified to make the call. But when it comes to what's best for retail, what's best for the consumer and what's best ultimately for sales, we really do know our stuff.

Posted by Kim Bayley at 14:37

Steve Redmond on the real story behind that controversial speech on copyright

Monday June 30, 2014

It would be true to say that ERA DG Kim Bayley's speech on copyright and licensing last week was not received with unalloyed joy by the music industry Establishment. Some of the language used to describe it was rather ripe to say the least. 

Kim Bayley

Kim Bayley: Controversial Speech

But reading the text - you can see it here - it's hard to see what the fuss is about. Its core premises seem self-evident. Although, credit where credit's due, things are considerably better than they were - streaming being a prime and positive example - the music industry clearly was and arguably still is slow in coming to terms with new technology. Licensing for digital services in Europe clearly is overly-complex compared with physical retailing. And there have to be opportunities to improve copyright law.

In fact Bayley's central argument that copyright law designed for a pre-digital age of sheet music and plastic discs needs to be updated is repeated almost word-for-word in a recent submission by the RIAA to the US Copyright Office.

To be clear, not everyone has been critical of Bayley's intervention. A stream of emails and calls to the ERA office, not just from members, but from artist and manager organisations have been overwhelming positive.

The explanation for the violent reaction from content owners is at least in part attributable to shock at the idea that retailers should have anything to say about copyright at all. For decades this has been a debate record companies and music publishers and collection societies have pretty much had to themselves. In that sense last week's kerfuffle is akin to that when the Music Managers Forum first came into being. Historically retailers have never taken an independent line on copyright, but there's a simple reason for that: in the physical world there was no need, not least because the relevant copyright law was designed for a physical age and worked pretty well.

Digital services in contrast only exist at all through licensing relationships based on copyright law. And many services feel the status quo is not working. Over the past months as the European Commission has conducted its consultation into copyright, they have watched bemused - and with increasing frustration - as one content owner organisation after another has lined up to declare that the current copyright regime is pretty much beyond improvement.

It was that frustration which formed the background to Bayley's intervention.

My sense is that digital services do not want a revolution, but they do feel the content industry has to wake up to some very real problems.

The important thing now is to get beyond the name-calling and frustration and see if the two sides can find common cause.

Posted at 13:34
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