Money, Lies and Music

“The copyright regime encourages creativity and safeguards the livelihood of artists”. This is the major claim, in many variations, which is made in support of the way the copyright system works. Why? Well, presumably, because it’s a good way to collect and re-distribute money to those who are creative. In other words the question we tried to answer is: how do collecting societies re-distribute the royalities they collect. Hence we tried to figure out in a small research project to how many artists they give money. The astonishing answer: the collecting societies seem to hide that data.
The impetus to start this project was when I recently heard a music industry representative claiming in front of the Department for Culture, Media and Sport that he represents 95% of the revenue of the British Music Industry. When I asked him what that means in number of artists who make money he did not know.

Then I thought: If we know how much money the collecting societies get all we need to look at is how they redistribute the money in order to understand the fairness of the system. The hypothesis being: If 95% of the revenue of the British Music Industry are distributed to ten artists, or even 50 the system would not seem particular fair. Therefore, we have started a research project to find some concrete answers.

Below is a description, or better to say the strange tale of how and why the answer to this question cannot be found that easily. Or to put it differently why the music industry seems to hide the answer, which should be so obvious if the current is actually fair.

Question: How is the collected copyright income redistributed, and is there an elite who get the bulk of this revenue?

After some initial research it became obvious that the above question can be answered positively. There is system in place at the moment which rewards only a small minority of creatively active people extremely well, whereas the majority are left with rewards which do not contribute to a decent living.

As a law student I thought I surely knew where to look to find out the details about this issue. However, things didn’t go quite as planned as it seemed that the collecting societies (MCPS & PRS) were not keen to help. Even when I asked if they could supply an anonymous document with just the statistics on how their income is distributed I got the usual “No Sir, we can’t help you with your request” answer. The British Phonographic Industry (BPI), Britain’s music industry association was also very reluctant to give out any information, claiming their library was out of use ‘indefinitely’ because of flooding (in a second floor office!).

It might have all been correct, collecting societies not freely giving out details of financial transactions with their members, just as banks will never give out the bank details of their celebrity customers. The flooding in the BPI library could have been caused by a leak somewhere in the near ancient building, but in addition to the fairly hostile telephone manners of some of their employees it seemed too much of a coincidence. I must say, some employees were very friendly, but not particularly helpful. They did however give me a hint that I might be able to find some information in the British Library. However, after spending several hours looking into various publications and magazines in several departments the only concrete information I could find was the total amount collected and distributed this year compared to last year, numbers you find in their annual reports.

Without these specific statistics it is still possible to sketch a general idea of where this revenue is going. The following is not a summary of my findings, but it is an indication of how the copyright system is used at the moment:
It is well known that there are 4 giant record companies, often part of an even larger media corporation, who control more than 80% of the world’s recording industry. This is a clear case of an oligopoly where the barriers to entry for smaller record labels are so high that it is practically impossible for any of the thousands of labels to gain any worthy market share. Is it not the governments’ job to do something about this? The government has to, in theory, correct market failure and this is would be a good example. However, the government is so reliant on their corporations to have large turnovers for the economy to blossom, so leaving the media oligopoly in place gives the government power over part of its economy and to some extent; free speech (but that is another matter entirely)

From this, one can easily see where the bulk of the income is going. By looking at the music charts or into annual reports, such as the one recently published by the PPL, it shows very clearly that 100% of the top 20 highest income artists are signed to major record companies. What happens in most cases, if not all when you sign up to one of the majors, you give up your right to copyright and get a share of the income you have generated for the company. This goes against the original philosophy for the implementation of copyright where it was decided that artists need to be rewarded for their creative work, since otherwise creativity will not flourish in a market economy. Now, star-status is promised to artists to who give away these rights to the companies, and ultimately their share holders, often lacking in musical passion.

So could it be that the directors, managers and shareholders of these majors are exploiting the original idea supporting copyright and have created barriers of such size that musicians see giving up their rights as the only way to earn any substantial amount of money in the music industry?

Has this elite created a few (fairly narrow) gates through which artists have to pass to be rewarded for their creativity, leaving pretty much everyone else with talent and creativity unrewarded? Perhaps the collecting societies and industry associations who rely so heavily on major record companies keep this type of information secret, in the interest of their biggest partners lucrative oligopoly market position. It most certainly looks like the whole as not as transparent as a free society such as the UK would ideally want it to be, and an elite are reaping the profits, leaving the rest behind.