Artistic Remuneration for Online Content

Lord Vaizey of Didcot Excerpts

Wednesday 6th July 2016 Westminster Hall

[Nigel Adams (Selby and Ainsty) (Con)]

I beg to move,

That this House has considered artistic remuneration for online content.

It is a pleasure to serve under your chairmanship this morning, Mr Gray. I thank my hon. Friends the Members for Somerton and Frome (David Warburton) and for Folkestone and Hythe (Damian Collins) for helping me to secure this important debate.

Everyone is aware that the creative industries are one of this country’s greatest assets. The Government’s own analysis shows that the gross value added of the creative industries in 2014 was in excess of £84 billion, which accounts for around 5.2% of the UK economy. Essentially, they have been a source of growth in recent years, increasing by 6% since 1997, compared with 4.6% for the UK economy as a whole. However, we would be doing the industry a disservice to consider its value in purely economic terms, because its impact is far wider.

Our creative industries are our voice to the world. Very little, if anything, contributes more to the UK brand around the world than our artists, writers and directors.

[The Minister for Culture and the Digital Economy (Mr Edward Vaizey)]

Hear, hear.

[Nigel Adams]

Quite right.

Just a few weeks ago, the trade body, UK Music, published a report on the value of music tourism to the UK, which showed that direct and indirect spending in 2014 from music tourism was £3.7 billion. Some 38% of live music audiences are music tourists: music lovers from outside the UK. They come because they love our world-class artists and our fantastic venues and festivals. It might be easy to take our creative industries for granted and to assume that the country that gave the world Shakespeare, the Beatles, Harry Potter and Banksy will also be at the forefront of the global culture landscape, but that would be a massive mistake. Indeed, we in this House have a duty to ensure that our cultural sector has the tools to grow, including a copyright regime that is fit for purpose in a digital online market.

Members may have read about the recent public disagreement between songwriters and artists and YouTube over royalties paid by the service. In the last few weeks, 186 major artists in the US and over 1,000 in the UK and Europe have signed public statements of dissatisfaction addressed to the US Congress and to Jean-Claude Juncker. Signatories range from Sir Paul McCartney and ABBA to Ne-Yo, Idina Menzel and deadmau5, and even includes the former French first lady, Carla Bruni, who is also a recording artist—although I do not have too many of her tracks on my iPhone.

Last month, I met members of PRS for Music and songwriters and composers whose music and songs are enjoyed around the world. I heard from them the dissatisfaction that millions of streams can result in just a few hundred pounds in royalties or, in some cases, no royalties at all. Most dramatically, I spoke to one songwriter who was entitled to 25% of the revenue from a song he wrote, but who had seen a mere £5.39 from almost 3.2 million plays of that song on YouTube by listeners who actively sought out that track. Meanwhile, the same songwriter saw several times that amount—a princely £87.79—from the 180 occasions on which the song was played in stadiums in the UK, despite those listeners being passive and hearing what others chose to play for them. That seems to be a pretty upside-down arrangement.

To show how far behind the law the balance is, Geoff Taylor of the British Phonographic Industry recently said that British artists saw more revenue in 2015 from the 2.1 million vinyl LP sales than from the 27 billion music video streams on YouTube and similar platforms. It is not difficult to understand the despair of a writer or artist who sees their life’s work online with little hope of any financial reward now or in the future. This is particularly a problem for less high-profile producers, writers and creative people, who are less likely to have additional income streams from endorsements or touring.

High-profile artists are often very concerned about this problem and its impact on other members of the creative community and their teams. A big artist will often get little sympathy and, as we have seen recently, there may even be a backlash from the media and consumers for speaking out about the problem if they are perceived to be well off. Fair or unfair, this reaction just makes it harder to expose the problem and to support fair remuneration for those in the industry who are less famous.

The basis of the music industry’s concerns is the so called “safe harbour” laws, which in the US, EU and UK give user upload streaming services the same protection from copyright as host providers, such as personal cloud locker services. This is despite the fact that they operate entirely differently and, more importantly, impact the market in different ways. Take, for example, a comparison between Spotify and the user upload site Dailymotion. Both sites allow users to search for and listen to Adele’s track “Hello”, one of the fastest-selling tracks of all time. Spotify is licensed to stream that track and thus pays the artist, songwriter, producers, musicians, publishers and labels that are so crucial to creation of the content, but Dailymotion does not. Due to ambiguity in the safe harbour framework, user upload services can claim to be mere hosts of their user’s content and, as such, are not required to share with the creators the wealth they generate for themselves. That does not seem fair.

When a business model is based on making available to consumers creative content created by others, surely we as lawmakers must ask whether this is right. In fact, the very premise of copyright is to ensure that creators are paid when their work is exploited by others.

It may be easy to argue that the current framework is good for consumers. How can it not be, when music can be enjoyed more easily than ever before? However, I would add a note of caution to such assumptions and suggest that the user experience may not be as positive as it might first seem. When faced with piracy, it was universally agreed that creative content has an intrinsic value that must be protected if the future generation of creators are to be nourished for society’s economic and cultural benefit. These principles remain true today and we must not replace one market failure with another.

Equally, there are impacts on the licensed streaming services to which many users pay a monthly subscription. These services are forced to compete on an unequal playing field with user-upload services that pay little or nothing to creators. They are forced to offer their own ad-funded services, which are often run at a loss or subsidised by income from the subscription service. The net result is less competition in the market for subscription pricing and ultimately consumers could lose out.

In March, the all-party parliamentary group on music, which I chair, hosted a dinner to discuss the growing music streaming market. The dinner was well attended by services such as Apple Music and Spotify, as well as representatives of the music industry. It was clear from the dinner that streaming presents many opportunities for the industry and that it is embracing them. However, there are challenges in ensuring the music industry captures this value, such as whether advertising revenue and ad-funded models are sustainable and the growth of ad-blocking and stream-ripping technologies that can have an impact on the amount of remuneration the industry receives in return. The legal position of safe harbours and how they interact with the market perhaps presents an even more fundamental problem, and this will continue unless action is taken.

The Creative Industries Council launched its strategy this week, with many recommendations to the Government and industry alike. The council is seeking legal clarity concerning the liability of platforms that actively host and market content. Specifically, it argues that to maintain an intellectual property framework fit for the digital age, such platforms should not benefit from safe harbours. The Government have indicated that they would support a clarification too. I would be grateful if my hon. Friend the Minister said what plans the Government have to respond formally to that recommendation and what further steps they are taking to achieve that.

[Nigel Adams]

It is absolutely an issue that needs to be addressed. I have myself searched online and found that the results I get are from piracy sites. Something has to be done. There is a responsibility in this respect not just for Government, but for the search engines themselves. Perhaps afterwards I can help the hon. Gentleman spend his £5.60 as we discuss what should come out of this debate.

We are in a unique place to address these issues and ensure that we are world leaders in striking the right balance between the promotion of technology and creative innovation. With the recent vote to leave the EU, the UK Government will have full control over policies related to digital streaming and artist remuneration. Will the Minister undertake to investigate whether provisions can be put in place so that once we eventually leave the EU, our UK industries can fully achieve the value in their rights?

[Mr Vaizey]

Hear, hear.

[Nigel Adams]

That is encouraging. Will the Minister investigate, for example, the possibility of introducing a sunrise clause into the Digital Economy Bill? That could ensure that active hosts of content do not benefit from safe harbour when legal systems have been transferred and the European Communities Act 1972 is repealed.

It will not surprise hon. Members to hear me say that the music industry has undergone tremendous change and readjustment in its business models over the past couple of decades. The latest Intellectual Property Office and Kantar Media online copyright infringement tracker, published yesterday, concludes that the top three sources of music are YouTube, with 52%, Spotify, with 30%, and the iTunes App Store, with 20%. Use of Spotify has increased by 5% since last year’s tracker, while iTunes has fallen by 6%. The consumer trend is clearly moving away from music ownership. Copyright still reflects ownership for the creators of content and the infrastructure that supports it. We must ensure that those ownership rights are respected.

--- Later in debate ---

[Mr James Gray (in the Chair)]

I call Kelvin Hopkins.

[Mr Vaizey]

Hear, hear.

--- Later in debate ---

[The Minister for Culture and the Digital Economy (Mr Edward Vaizey)]

It is a great pleasure to serve under your chairmanship, Mr Gray; it feels like normal service has been resumed. I thank the hon. Member for Selby and Ainsty (Nigel Adams) for securing this important debate. I saw him briefly on the television as the Tory leadership campaign got under way, and he looked a bit like a special branch officer as he held open the door for one of the candidates getting into their armoured vehicle. But he has now returned to normal service, campaigning for the rights of artists as he has done since he became a Member.

The quality of the debate has been second to none, with fantastic contributions from the hon. Member for Bristol East (Kerry McCarthy), my hon. Friend the Member for Somerton and Frome (David Warburton), the hon. Members for Bristol West (Thangam Debbonaire), for Strangford (Jim Shannon), for Cardiff West (Kevin Brennan) and for Perth and North Perthshire (Pete Wishart), and of course the hon. Member for Luton North (Kelvin Hopkins), whom I have to formally welcome as the official Labour party spokesman on cultural matters. I gave my maiden speech just after he had spoken, so there will be a wonderful symmetry if I give my final remarks as a Minister with him sitting opposite me, before I get fired by the new Prime Minister in the coming fortnight. That would be a lovely bookend to my comet-like parliamentary career.

[Kelvin Hopkins]

The Minister is being modest. He stands to be promoted, rather than sacked.

[Mr Vaizey]

It is invidious of me to single out individual contributions, but I particularly welcome the contribution of the hon. Member for Bristol West. I did not get the chance to have debates with her while she was briefly the Opposition culture spokesman, but I thank her for her kind remarks about me in one of her speeches when she held that role. In that speech she showed what a huge contribution she would have made to debates on culture as a Front-Bench spokesman, and definitely will make as a Member of this House.

I do not want to be snarky, but I noticed that the spokesman for the official Opposition spoke for around four minutes, whereas the Scottish National party spokesman spoke for 15 minutes. Perhaps we are seeing the shifting sands in the SNP campaign to become the official Opposition, although sometimes brevity is the soul of wit. Before I am ruled out of order, Mr Gray—

[Mr James Gray (in the Chair)]

You are close.

[Mr Vaizey]

Let me get on to the subject in hand.

This is an important debate about a very successful industry. It is important for us to recall just how successful the British music industry is. For example, in 2015, one in six albums purchased around the globe were by British artists. We are the second-largest source of repertoire in the US and one of the biggest music markets in the world, alongside the US, Japan and Germany. Last year, Adele once again released the world’s best-selling album. Interestingly, that was the eighth time in 11 years that the global bestseller has come from the UK. Indeed, five of the world’s top 10 best-selling albums in 2015 were by British artists.

As hon. Members noted during the debate—particularly my hon. Friend the Member for Somerton and Frome, who took us right back to the beginning of music streaming—the digital technology revolution in consumer behaviour, which is disrupting almost everything at varying speeds, has of course disrupted the traditional model for distributing music. In the decade or so that I have covered this brief, both as an Opposition spokesman and as a Minister, I have seen that change take place. Indeed, when I first became a Minister, we inherited the last Labour Government’s proposals to tackle piracy, which involved sending notices to individuals who were breaching copyright. At the time, I was sceptical about how effective that would be.

I do not want to prejudge matters, but I think the strategy we adopted has, to a certain extent, been successful. There has to be a combination of carrot and stick. We were successful—this is actually thanks to the music industry—in using existing fraud legislation in the courts to ensure that the most egregious pirate sites were blocked. Interestingly, because that was existing legislation, it did not provoke the kind of controversy that surrounds almost any attempt to “regulate the internet”. When such a measure was proposed in the United States, it resulted in a lively campaign, with people claiming that it would mean censoring the internet. Why anyone would accuse people who want to take down illegal content of censoring the internet is beyond me, but people somehow feel it is a legitimate point to make.

Alongside using legislation to block websites, the carrot, as it were, has been the rise of legal music services. I was particularly pleased to see the report issued yesterday by the Intellectual Property Office, which showed that the establishment of well-known music streaming services such as Spotify has helped to shift more people towards using legal sites. It is clear from reading the IPO report that we are not nearly out of the woods yet in terms of illegal downloading and listening, with some 7 million people in the UK apparently still accessing illegal content, but it is good that music streaming services have become more mainstream, even to the extent that I now use such a service. Some progress has been made.

Before Baroness Lucy Neville-Rolfe took over the intellectual property portfolio with such enthusiasm, I regularly held round-tables with Google and many others in the industry to discuss how they would help reduce access to illegal sites, with particular attention paid to searches that threw up such sites. I am pleased to say that the Minister in the other House has continued those round-tables. I have a huge degree of sympathy with those who say that Google could and should do more. Indeed, when it came to images of child sexual abuse, we were able to work with Google to ensure that something like 130,000 different search terms would result in a blank search return, so it is clear that Google can do work on its algorithm.

The Google argument is twofold. First, an image of child sexual abuse is clearly illegal and criminal, so Google feels it can act without the intervention of the courts. Secondly, Google likes to say that for material that infringes copyright there can sometimes be a grey area. Nevertheless, there is no doubt that it can do more. It has claimed that it has changed its algorithm, but any of us who go on Google every so often and type in the name of an artist to see what emerges will still see a list of illegal content websites coming up in the results. Google does work with some of the trade associations to ensure that links to illegal sites are taken down. As the hon. Member for Bristol West pointed out, the debate is shifting and Google is starting to take a more proactive attitude on such issues, in partnership with the music industry and artists.

We have also worked with the advertising industry. People put up websites with illegal content not as an act of altruism—if one can call it that when they are stealing somebody else’s property and giving it away—but to make money. We should not forget that. One way the people who run such sites make money is by having advertising on their websites, so we have worked closely with the UK advertising industry to ensure that legitimate advertisers do not see their advertising put on such websites. We lead the world in taking such action.

Before I address some of the substantial issues that have been raised, I should mention the Digital Economy Bill, which recognises the importance of tackling online infringement. We have extended the penalties for online infringement to match the penalties for physical infringement, as the hon. Member for Perth and North Perthshire mentioned, and the Bill will give us a chance to debate many of these issues again. I look forward to some of the brilliant contributions we have heard today being echoed in that debate. In congratulating hon. Members on their contributions earlier, I should have said how impressed I am by how many active musicians there currently are in the House.

On the issue of platforms, when we talk about safe harbour we are referring to the situation that has traditionally existed for the past 15 years. Intermediaries such as YouTube claim that they are passive recipients of content and that it is not necessarily their responsibility to police that content, although they claim that they do so voluntarily but do not have the resources to ensure that such content is not online. They claim simply to be a platform on which people can put their content.

As the hon. Member for Cardiff West said, the safe harbour legislation was introduced to encourage innovation. In many respects, it has been successful. When we debate these issues and look at the negatives, we should also remember the positives. A lot of platforms, and indeed the internet as a whole, have given an extraordinary opportunity to many artists who would potentially have remained undiscovered without them. Before the existence of the internet such artists had only one door to a successful career in the music industry, which was through the record labels. The internet has widened opportunities for artists as well as causing them considerable problems.

Obviously, what sits behind the idea of safe harbour is the e-commerce directive, but that is now quite legitimately a subject for debate, and it is perfectly appropriate for rights holders to argue that the hosting defence is being abused to allow copyright-infringing content to be hosted indiscriminately without their being remunerated. That is why the hosting defence creates a value gap, as it benefits intermediaries without compensating rights holders. The hosting defence also leads to a mismatch in negotiations, giving the whip hand to intermediaries rather than to artists themselves. There are also concerns about the different types of streaming business models, and about whether they provide the correct levels of remuneration to rights holders.

As a Government, we believe that businesses must act in a socially responsible manner. That applies to platforms, which should co-operate in the removal of copyright-infringing material without harming freedom of expression. However, as I said earlier, we must also recognise the role that platforms play in driving innovation.

[Kelvin Hopkins]

Too often we have heard Ministers just exhorting people to behave well. Is the reality not that we need strict, firm, strong regulation to make sure that things happen, so that we do not just have to rely yet again on warm words to help musicians when what they really need is legislation to protect them?

[Mr Vaizey]

The hon. Gentleman makes a fair point. Many hon. Members have asked what the position on the copyright framework will be going forward, given that as a member of the European Union we have sat within the EU copyright framework. They will know that the situation is currently being considered to ensure that the right balance is struck between providing the right incentives and having the right protections.

The European Commission is considering reform in this area as part of the digital single market package. Clearly, circumstances have changed in the last fortnight. The UK was a leading voice in the debate on the future of the digital single market, and the Government and individual Ministers have built strong relationships with the Commission and with leading nations such as France and Germany, which obviously also have strong voices in this debate.

It is my personal view that we will continue to have some influence on how things develop, because this is a very public debate and the UK, along with a number of other countries, submitted a letter a few weeks ago to make the point about platform regulation. We argued first that not all platforms are the same, so we cannot simply have one-size-fits-all regulation, and secondly that we must ensure that we do not throw out innovation. I have said consistently to the commissioners that the UK Government welcome a debate on platform regulation. We are not saying that the Commission should not examine the issue; at this stage, we are simply raising some of the concerns that exist.

[Pete Wishart]

People have suggested that we may be trying to use France and Germany as a proxy for our influence, to achieve our requirements in the digital single market. Is there any truth in that suggestion? If there is, is that not evidence of how we are being further reduced and diminished in our relationship with Europe, such that we expect others to do our bidding on our behalf?

[Mr James Gray (in the Chair)]

I call the Minister to speak with reference to the subject under debate.

[Mr Vaizey]

I am sorry if I gave that impression; that was not the point I was trying to make at all. The point I was trying to make was that countries such as France and Germany clearly have very strong views on the issue, and their voices are heard. The situation pre-Brexit was that the UK, France and Germany had slightly different positions on some of these issues but were all influential voices, and I was engaging quite closely with both the French Government and the German Government about their attitude, as well as with the Commission.

It is my intention, particularly as we remain a member of the European Union for the foreseeable future, that the British voice—the voice of British artists and the voice of the British music industry—is heard in future negotiations. At the moment, however, we are at a relatively early stage when it comes to formulating principles and identifying issues.

[Kelvin Hopkins]

I appreciate what the Minister is saying, but Britain’s interests in this area are far greater than those of the other nations he mentioned. We need to have national legislation that is at least as strong, if not much stronger, than what the EU proposes. Does he have any idea of the sheer volume of our interest in popular music compared with that of France and Germany? I would guess that the popular music industries in those countries are much, much smaller than ours.

[Mr Vaizey]

I accept that the British music industry is probably bigger than the music industries in France and Germany given the profile of British artists. However, a company such as the French firm Vivendi, which owns Universal, is a pretty big music company. I do not know what impact Brexit will have, but at the moment the projections are that we will overtake Germany in the overall value of our entertainment market. Nevertheless, the German market is currently bigger than the British one, and no one needs any lessons about how seriously the French take their own cultural offer and the work they will do to ensure that it is protected.

What I am really saying to the hon. Member for Perth and North Perthshire is that I see a partnership developing between France, Germany and the UK, in which we look for areas of agreement. However, I hope that at the heart of that partnership there will be an emphasis on protecting remuneration for artists and achieving a fair balance between the innovation that platforms have brought to the distribution of music, for example, and some of the issues that have been thrown up by trade bodies in particular. For example, it has been pointed out that the number of music videos on YouTube has doubled, yet the revenue for artists and labels has flatlined.

It is also important to remember that there are different emphases within the music industry itself. Clearly, the BPI does a fantastic job in representing the music industry and talking about issues such as safe harbour and copyright infringement, but of course the Featured Artists Coalition, the artists’ organisation that is so ably led by people such as the brilliant musician Sandie Shaw, has its own proposals that we need to consider properly and seriously, for example about transparency in the value chain.

I want to talk briefly about the relationship between creators, their producers and the publishers, because that relationship is absolutely vital in helping creators bring their product to market. Nevertheless, as we have already heard from some hon. Members, there is a fear that authors and performers are missing out as a result of restrictive, imbalanced or opaque terms and practices. We take such issues seriously. We want to understand how we can make progress and what the impact of certain reforms might be in different sectors and scenarios. We want to ensure that there is a balance; we want creators and performers to receive fair remuneration, but we also want investment in innovation and resources.

Any proposals that would result in restrictions on freedom of contract would need to be subject to rigorous examination. Transparency is an important feature of well functioning markets, and I know that creators would welcome moves to make it easier for them to understand the value that their works have generated. Again, there is an opportunity for partnership in that regard. For example, I welcome the BPI’s introduction of a portal that allows an artist to measure the remuneration they are receiving from streaming services.

I have covered a lot of ground, and this has been a great debate, but we should have the opportunity to hear again from my hon. Friend the Member for Selby and Ainsty about what progress he thinks has been made in the past hour and a half.