PRS for Music, the U.K.'s royalties-collecting society, can expect a rough ride this year, after an equally difficult one in 2010, declared CEO Robert Ashcroft at the Annual General Meeting (AGM) last Thursday (May 26).
Speaking to an audience of PRS' composer and publisher members at London's Millbank Media Centre, Ashcroft predicted that the continuing decline in CD sales will hurt the society's income.
Ashcroft also noted that the government's austerity measures, to shrink the national deficit through cuts in public services, have impacted how much consumers and businesses spend on music.
"The year 2010 was a tough year for the music industry," Ashcroft said. "There were fewer live tours scheduled and businesses across the country faced uncertain trading conditions."
After noting that revenues collected in 2010 fell slightly by 1.1% to £611.2 million ($1 billion) from £618.2 million ($1.02 billion), hurt by the 8.2% drop in CD sales and 56% fall in ringtones, he said the industry should brace itself for another demanding year.
"This year (2011) will again be a difficult one and I fear that CD sales are now going into accelerating decline," he added.
According to international industry trade group IFPI, global music sales fell 8.4% to $15.9 billion in 2010, and U.K. recorded-music sales slumped 11% to $1.38 billion during the same period.
Ashcroft, however, said he remained optimistic because of the 1.4% increase in royalty revenue to £442.9 million ($729.6 million) collected for PRS members. He was also buoyed by the society's three-pronged solution for recovering income in future.
First, he believed the industry must "redouble" its effort to support digital sales. PRS' income from the 63 digital music services now licensed in the U.K. grew 4.3% to £26.5 million ($43.7 million).
He was encouraged by the recent report called "Digital Opportunity: A Review of Intellectual Property and Growth" by U.K. academic professor Ian Hargreaves (Billboard.biz, May 20, 2011) and commissioned by the U.K. government.
The report concluded that the U.K. should not copy the U.S. "fair use" provisions, Ashcroft observed.
"Google launched its U.S. (cloud-locker music) service, breaking off negotiations with the record labels when Amazon launched a similar service without a license. Whatever the position in the U.S., these services will, as currently conceived, require a license under U.K. law."
He also attacked search-engine platforms like Google for still offering access to unlicensed music services next to licensed ones. "If they wanted to, they could do so many things to improve the environment for copyright without offending the principle of Net Neutrality."
A second solution for reviving PRS' financial fortune is to strengthen ties with other collecting societies, he offered.
This could be done by creating "hubs" that would pool back-office resources, and existing rights to compete more effectively for the mandate to license authors' works.
As an example, he cited ICE (International Copyright Enterprise), PRS' joint venture with Swedish counterpart STIM. This includes combining their databases for their combined 17 million registered works, and unites their business processes.
"I think we can be seen to have simplified the licensing process ourselves, to improve our businesses on the Internet."
He also disclosed that PRS is in talks with PPL, the U.K. society that collects public-performance royalties for labels.
PPL has started licensing venues and business that play music on their premises. The situation is confusing music users who assumed they needed only PRS licensing. "As a result, we have begun to receive complaints," Ashcroft admitted, hence the planned cooperation with PPL.
Thirdly, he said, it is PRS' future mission to capitalize on the value of its members' works overseas, especially in the emerging major BRIC (Brazil, Russia, India and China) economies. PRS' 2010 international revenues grew 1.7% to £169.8 million ($279.7 million).
Ashcroft's presentation was followed by the keynote speech by Conservative MP (Member of Parliament) John Whittingdale, who is also chairman of the Culture, Media and Sport Select Committee at British parliament's House of Commons.
Whittingdale also agreed with the Hargreaves report to avoid adopting "fair use" provision which, if adopted, could create "…a gaping hole in which copyright theft takes place."
He added: "There had been concerns that Hargreaves was there to dilute copyright legislation, and was taking its agenda from Google, but (the report) has been found to be a good defense of intellectual property."
When an audience member demanded to know what his government is going to do about implementing tougher copyright laws against digital piracy, he answered: "The 2010 Digital Economy Act has pretty tough measures. Although it has been resisted by Internet service providers (who insist they shouldn't be asked to police consumers' online activities), it is a significant victory."
However, he said it was about time that the communications regulator Ofcom started issuing warning letters telling serial copyright infringers they are stealing people's works.