volume 2
july 1999

The economic importance of music in the European Union

2. Performing and mechanical rights

by Dave Laing

In September 1996 the European Music Office published its report on "Music in Europe". The first part of this study, written by Dave Laing, describes the economic importance of music in the European Union. This is the second chapter of his study, treating the subject of performing and mechanical rights.

Composers' and music publishers' royalties. Table 2.1 shows the gross revenues received by the authors' societies of the fourteen European Union countries — royalties from Luxembourg are collected by the Belgian society SABAM.

Table 2.1:	Composers' and music publishers' royalties 1995 (millions of ECU) (sources: authors societies, National Music Publishers Association (US))
	Public Performance			Radio and TV	Mechanical	PC	Other	Total
	A		B
Austria	10.6		14.5	23.9	24.6	2.4	12.1	96.6
Belgium	6.7		24.3	29.3	33.6	n/a	11.1	105.0
Denmark	1.7		8.6	16.1	4.7	1.3	4.5	36.9
Finland	1.9		5.1	10.8	5.4	0.8	0.4	24.4
France	46.0		66.0	61.7	108.4	140.1	17.9	499.0
Germany	56.2		66.9	163.8	383.1	17.8	24.8	712.6
Greece #	3.8	*		0.9	4.8	n/a	0.0	9.5
Ireland	5.7	*		3.9	3.6	0.0	0.3	13.5
Italy	75.0		62.5	56.9	49.8	n/a	18.3	262.5
Netherlands	5.4		22.2	11.7	96.8	n/a	20.4	156.5
Portugal	0.7		1.3	1.8	5.6	n/a	0.0	9.4
Spain	6.0		33.2	40.9	38.6	9.3	17.6	145.6
Sweden	3.1		6.1	12.8	48.1	n/a	19.8	89.9
United Kingdom	16.4		49.1	72.9	165.3	0.0	79.5	383.2
(A) concerts and other "live" performances; (B) recorded music including discotheques and background music; (PC) proceeds from private copying levies; () A and B combined; (#) 1994 figures*

The societies operate by administering the various rights granted to composers by copyright law. Royalties must be paid to composers or their heirs when their works are used up to 70 years after the death of the author. This duration of copyright has recently been extended from 50 years to 70 years by a directive of the European Union.

There are two broad categories of rights — mechanical and public performance. The main mechanical right is that relating to sales of sound recordings. This represents about 80% of the revenues listed in table 2.1 under the heading "Mechanical". Other payments for mechanical rights concern sales of video cassettes and various uses of recorded music in radio and television programmes. It is not possible to aggregate the national mechanical rights totals to achieve a pan-European total because some mechanical royalty payments appear twice in the table. This is because under "central licensing agreements" with major record companies certain authors societies receive royalties from sales of MC's and CD's made in another EU country. These royalties are transferred to the society in the country of sale for distribution to publishers and composers. Because of this transfer, the same royalties can appear in the accounts of both the society operating the central licensing agreement and the society which distributes the royalties.

Performing rights collections. Performing rights fees are payable whenever music is used in a public situation. These situations include broadcasting, concerts and other live performances and the many hundreds of thousands of premises where recorded music or broadcast music is relayed to the public through juke-boxes, radio sets or background music systems. The value of all performing rights payments in the EU in 1995 was close to 1 billion ECU's.

The total of the royalties collected from radio and television stations in the EU in 1995 was over 420 million ECU's. Societies negotiate fees based on a percentage of advertising revenues or, in the case of state broadcasters, revenues from licence fees or taxes. Some typical tariffs for broadcasting royalties are 2% in Greece and between 2% and 8% (radio) and 1.5% and 4.75% (television) in Italy.

The other categories of public performance brought total royalties of over 555 million ECU's. Table 2.1 shows that royalties from concerts and other performances by musicians and singers (column A) were substantially smaller than the fees paid by users of recorded music (column B). The royalty rates vary between countries. The amount of ticket sales revenue payable by the promoter of a pop concert varies from 3% in the UK to 10% in Italy and Spain.

The other column in table 2.1 includes interest on investments and payments for foreign uses of the music administered by the national societies. The international success of English-language pop music is reflected in the high figure of 79.5 million ECU's for the United Kingdom.

Private copying royalties. A relatively new source of rights revenue is the private copying levy which exists in most EU member states. These royalties are payable on sales of blank audio and video cassettes and, in some countries, on the audio and video recording equipment also. Those entitled to receive a portion of the levies are composers and the neighbouring right owners — performers and record companies.

Table 2.2:	Audio private copying levies 1995 (sources: EMO, Stichting de Thuiskopie, society accounts)
	Tapes ECU/hour	Price (%)	Hardware ECU/hour	Price (%)	Total	Cultural purposes (%)
Austria	0.12				2.4	51
Belgium	0.05			3	n/a	30
Denmark*	0.36				1.3	33
Finland	0.27				1.6	50
France	0.23				19.4	25
Germany**	0.06		1.38		17.6	0
Greece		6		6	n/a	n/a
Ireland	—	—	—	—	—	—
Italy		10		3	2.7	0
Netherlands	0.30				5.4	15
Portugal	n/a	n/a	n/a	n/a	n/a	n/a
Spain	0.19		0.63		8.0	20
Sweden	—	—	—	—	—	—
United Kingdom	—	—	—	—	—	—
() ??; (*) 1993

The countries without a levy in operation are Ireland, Luxembourg, Portugal, Sweden and the UK. The legislatures of Portugal and Sweden have voted in favour of a levy but no date for its introduction has yet been announced. No proposals for a levy have been put forward in the other three countries although a government appointed committee has recommended that Ireland should adopt a levy of 0.06 ECU's on each hour of blank audio tape.

As table 2.2 shows, there are two methods of calculation of the levy, a fixed amount per hour of blank tape or a percentage of the wholesale price. In Belgium, there is an additional rate of 0.13 ECU per hour of digital audio tape or disc. European Union revenues from the levies were over 150 million ECU's in 1995. However the market for blank cassettes is in decline both in volume terms and in the price level of these cassettes.

In most countries, the legislation establishing the levy included a provision that a proportion of the money collected should be used for collective cultural purposes such as subsidies for concerts or training for musicians.

Table 2.3:	Performers and record companies: performance royalties 1995 (source: EMO, collecting society accounts)
	Radio and TV	PC	Other	Total
Austria	n/a	n/a	n/a	n/a
Belgium	n/a	n/a	n/a	n/a
Denmark*	5.0	n/a	2.4	7.4
Finland	n/a	n/a	n/a	7.0
France	10.1	16.4	1.5	28.3
Germany	51.1	12.9	16.8	80.8
Greece	n/a	n/a	n/a	n/a
Ireland	n/a	n/a	n/a	n/a
Italy	0.1	0.2	3.0	3.3
Netherlands	n/a	n/a	n/a	11.8
Portugal	0.02	n/a	n/a	0.02
Spain	n/a	n/a	n/a	19.7
Sweden	5.8	n/a	—	n/a
United Kingdom	n/a	n/a	—	47.8
() 1994; (PC) proceeds from private copying levies*

Performance revenues for neighbouring rights owners. The European Union directive on Rental and Lending Rights (92/100/EEC) introduced a common set of performance rights for performers and for producers of sound recordings (the record companies) throughout the EU. These rights already existed in the national copyright legislation of many EU members. In most of those countries performers and record companies also share in the proceeds of the private copying levy while in Germany studio producers are also entitled to payments from the levy. In 1995 the value of all these "neighbouring rights" was over 200 million ECU's. In most countries the revenues were split equally between performers and producers.

Printed music markets. The right of composers to distribute sheet music copies of their works is exercised by the music publisher. Before the advent of sound recordings and the establishment of performing rights systems, this was the most important source of a composer's income. The composer typically receives 10% of the retail value of the songbook or other printed music format.

Table 2.4:	Printed music sales 1994 (in millions of ECU) (source: National Music Publishers Association (US) / NAM)
Austria	6.5
Belgium	n/a
Denmark	n/a
Finland	3.0
France	37.0
Germany	91.5
Greece	n/a
Ireland	n/a
Italy	12.6
Luxembourg	n/a
Netherlands	29.2
Portugal	1.9
Spain	1.4
Sweden	12.0
United Kingdom	40.9
Total	234.1

The 1994 total for printed music sales in the nine countries where figures are available was 5% higher than in 1993. Sales of printed music rose fastest in Sweden (68%) and Germany (15%) but they fell by 27% in Italy and by 14% in Finland.

Employment in music publishing. The total number of composers registered with European authors' societies is over 250,000 (see table 2.5). However, most of these composers receive very little money from the use of their compositions and some are inactive (heirs of deceased composers can receive royalties for up to 70 years following the death of the composer.

One method of calculating the numbers of economically active composers is to examine the numbers which earn royalties above the national average wage or national minimum wage. According to SACEM, the French authors society, no more than 10% of its members ( about 6,000) had 1995 royalties equal to or above the country's national minimum wage.

Table 2.5:	Music publishing industry: employment (sources: EMO, authors societies)
	Composers	*	Publishing	Authors' societies
Austria	13,400		n/a	189
Belgium	25,695	#	n/a	270
Denmark	17,000		n/a	79
Finland	8,000		100	96
France	68,000		500	1,480
Germany	34,539		2,232	1,317
Greece	n/a		n/a	n/a
Ireland	1,000		n/a	n/a
Italy	50,000		n/a	800
Netherlands	n/a		400	200
Portugal	n/a		200	40
Spain	13,000		374	425
Sweden	29,000		1,400	117
United Kingdom	23,407		2,387	1,000
() composer members of authors societies; (#) includes publishers*

If about 8,000 to 9,000 ECU's in total annual royalty payments from mechanical and performance right sources is taken as the lowest level at which a composer can be said to be earning a living, in Denmark, only 3% (417) of the composer members of KODA received performance royalties in excess of 4,127 ECU's and only 164 members had that level of mechanical royalties. In Austria, 500 or 4% of the composer members of Austro-Mechana received mechanical royalties of more than 4,000 ECU's in 1995.

In the larger music market of the UK, about 1,750 or 7.5% of Performing Right Society (PRS) members received more than 6,000 ECU's in performance royalties in 1995. If these composers also received mechanical royalties, they might be said to exist as full-time composers, though in many cases with an income below the UK national average. If this percentage of authors' society members is projected across the European Union, the number of people earning a living from composing music would be 15,000. Based on the lower royalties paid to other PRS members, it is possible to estimate that the payments to UK composers who do not earn a full income from their song-writing is equivalent to a further 1,000 "full time equivalent" (FTE) composers. If projected across the EU, the number of FTE composers would 8,600, making a employment total of 23,600 full-time jobs in music composition.

Music publishing companies employ over 8,000 staff in Europe and the authors societies have a total of about 6,000 employees. The advent of computerized systems has caused employment in these sectors to fall in recent years.

National origin of public performance music. Table 2.6 shows the national origins of the music for which authors societies collected royalty payments in 1995. In general, the proportion of the royalties attributed to music by national composers is higher than the figures for sound recording sales (table 1.8). The reasons for this include the existence of radio stations playing national language music only in most European countries, the relatively high level of concert royalties (a sector where national music is performed more often than foreign music) and also the methods of calculating music use employed by some societies.

Table 2.6:	National shares of royalty payments to authors and music publishers (%) (sources: society reports, estimates)
	National	Other EU	Rest of world	Total EU
Austria	57	28	15	85
Belgium	39	39	32	78
Denmark	37	36	27	73
Finland	58	21	21	79
France	60	18	22	78
Germany	68	20	12	88
Greece	n/a	n/a	n/a	n/a
Ireland	n/a	n/a	n/a	n/a
Italy	77	9	14	86
Netherlands	30	n/a	n/a	n/a
Portugal	45	40	15	85
Spain	82	n/a	n/a	n/a
Sweden	20	38	42	58
United Kingdom	57	6	37	63

The comments made earlier on the preponderance of United Kingdom music in the "Other EU" category of soundcarrier sales are also relevant to this table (see page 2X). The annual report of the Performing Right Society (PRS) shows that in 1995 the royalty value of UK music performed elsewhere in the EU was 26.9 million ECU's while the royalty value of music from other EU countries performed in the UK was only 3.9 million ECU's.

The figures for foreign music in this table are generally higher than the payments to foreign authors societies stated in the annual reports of authors societies. This is because payments due to foreign music publishers are usually made to associate publishers (sub-publishers) which are members of the authors society in the country where the music is performed. These fees are thus included in the total payments made to domestic composers and publishers. The statistics are also not fully comparative because some national totals include performing rights payments only while others include mechanical rights payments. In a few cases (notably Germany, [18] Sweden, [19] and France, [20] the authors society has made its own estimate of the total amount paid for foreign music. These estimates are used in table 2.6.

Notes

18. Financial Times Music & Copyright, no. 93, London, 1996.

19. STIM, Årsredovisning 1996, Stockholm.

20. Financial Times Music & Copyright, no. 92, London, 1996.