Introduction

British Music Rights (BMR) is pleased to have the opportunity to respond to this Market Impact Assessment of the BBC’s new on-demand proposals.  It is vital that such proposals be the subject of a Market Impact Assessment in the light of the fact that the BBC is in a unique and dominant position and that its proposals will be funded by public money.  For this reason we particularly commend the fact that the BBC Board of Governors has committed to submitting these proposals to the Public Value Test (PVT) process in advance of it become a statutory duty on 1st January 2007.

In broad terms BMR is supportive of the BBC in its development of the proposed exciting and ambitious new digital services on the basis that they offer additional opportunities for music to be enjoyed, providing however that due respect is paid to the rights in such music and that such services do not stifle the nascent commercial market for online music services.

Executive summary of our concerns

• We support the BBC in developing its new digital services notwithstanding the fact that they may be free to consumers subject to the points made below.
• The BBC’s dominant position in commissioning and broadcasting audio visual content, and the fact that it is publicly funded, mean that this Market Impact Assessment is essential.
• The free nature of such services, combined with the BBC’s dominant position, demand that there be full transparency in the BBC’s negotiation and operation of the licences it needs for music in these new services from MCPS and PRS, the collecting societies representing composers and music publishers.  The BBC’s plans for its services are still very vague and this is making the assessment of the proper value of the rights to be licensed to the BBC very difficult. MCPS and PRS are being encouraged to sign a very broad licence – lasting until 2011 - and the danger in this is that they will have no recourse until then to ask for additional licence fees as the BBC develops and clarifies its plans and possibly expands its use of music.
• Music made available through the proposed new services within the BBC’s public service remit should:
  - be restricted to BBC Licence Fee payers and not be
    made available outside the UK;
  - not be made available beyond a limited catch up
    period; and
  - not be comprised of the type of music programming
    that commercial services could provide (whether in the
    form of CDs/DVDs/videos or as online content).
• With reference to the series stacking under catch-up services, there should be reasonable limits to the length of time early episodes in long-running series can be made available – e.g. 6 weeks.
• With reference to non DRM downloads, the proposed exception of “full track commercial music” should be strengthened to clarify that (i) it applies equally to live performances; and (ii) there should be a maximum duration of no more than 30 second of any single musical work.
• Music made available through new revenue-generating services should follow published licensing schemes.
• It is vital that the BBC reports promptly and accurately for all uses of music made under those licences so that MCPS and PRS can distribute correctly and efficiently the monies due to their members from the use of their music in such services.
• Licences for such new services will need to be reviewed every six months in view of the rapid rate of development of the services, their uptake, etc.
• The BBC should take an active role in raising consumer awareness of copyright.
• It is also very much in the interests of composers and songwriters that there should continue to be high quality in terms of original programming and as much diversity as is sustainable with respect to genre, with the BBC catering for minority audiences and interests that may not be commercially viable for others to try to serve.

The members of BMR

BMR is an umbrella organisation that represents the interests of nearly 50,000 composers, songwriters and music publishers and is a leading industry voice in raising awareness of the value of music to the British economy, culture and society (see note 1).  BMR is part of the wider UK music industry which in 2005 generated a total of £6billion in value and provided employment for almost 100,000 people.  The industry is composed mainly of SMEs and micro businesses. Only 3.5% of music businesses employ 20 people or more, with just over 11% of music businesses having a turnover of £1m or above. 

Therefore, our interest in the BBC’s on demand proposals comes from the perspective of thousands of individuals and businesses operating ‘upstream’ of the primary market in which the BBC’s new service would operate.

The potential impact of the BBC’s proposals

Music plays and is predicted to continue to play a leading role in driving the take up of new digital services, as can be seen from the graph below:

Source: Jupiter, European Paid Internet Content and Services Revenues Report, February 2005, Spectrum Analysis

Given the increasing importance of the commercial digital market to the music industry as a whole, any direct impact that the BBC iPlayer and its other non-DRM proposals may have on its primary market competitors will consequently affect the revenues of composers and music publishers.  

As the recent Spectrum Consulting report ‘Respecting the Value of Digital Music’ set out, downloaded music was valued at £30m in 2005 and this figure is predicted to rise to up to £186m over the next three years.  These growth predictions are based upon the continued aggressive expansion of commercial download providers.  If these commercial providers were to be adversely affected by the introduction of the BBC’s new services then clearly there would be a knock-on effect for the composers and music publishers who provide the very music that sustains those services. 

Specific licensing issues

Inter-relationship between Market Impact Assessment and current negotiations with the BBC:
As new technologies and platforms are developed to enable innovation in the delivery and consumption of music, new licensing arrangements are negotiated to ensure that composers and music publishers are remunerated for the use of their music.

The BBC is in a unique position in terms of its size, the way it is funded and its public service remit.  It is also the largest licensee for the content it makes available.  Its uniqueness as an organisation is reflected in the uniqueness of the arrangements it can negotiate with music rights owners. 

One clear example of this is the current round of negotiations between the BBC and MCPS and PRS for a licence for music on iPlayer, which at the time of writing this submission are not finalised.  The range and reach of the content to be made available on iPlayer is not fixed and a great deal of uncertainty remains as to what will ultimately be available over time and to whom.  The BBC has sought to reassure MCPS and PRS (and the members of both societies) by emphasising that all its ‘on-demand’ content plans will be subject to Market Impact Assessment and Public Value Assessment tests. They have therefore argued forcefully that no specific controls should be included in their agreements with these societies and that music rights owners should rely on the outcome of the ongoing consultations, rather than having the opportunity for a further direct dialogue with the BBC over its specific plans.

As the Market Impact Assessment is apparently intended to provide the opportunity for issues to be raised, we would urge that to the extent that the BBC is providing services within its public service remit, music made available through iPlayer should:

• only be available to UK licence fee payers and not outside the UK and that such restriction should be enforced through the application of appropriate technological measures;
• not be made available beyond a limited catch up period; and
• not be comprised of the type of music programming that commercial services could provide (whether in the form of CDs/DVDs/videos or as online content).

To the extent that the BBC provides revenue-generating services as a commercial player operating in a commercial marketplace, we would urge that the BBC should follow published licensing schemes so that it operates on a level playing field with other commercial service providers.

Territoriality:
There is an obvious risk that non-BBC Licence Fee payers will be able to enjoy the BBC’s services from outside the UK.  The BBC will be mindful of the need to manage this situation.

The requirement above that music made available through the new services should only be made available in the UK reflects the fact that MCPS and PRS are only empowered to grant licences for territories which are included within the scope of rights mandated to them by their composer and publisher members (generally the UK only).  It is a matter for such members alone as copyright owners to decide on the scope of rights which they are willing to grant to societies and their choice must be respected at all times.

Collecting societies are currently exploring possibilities for international and cross-border licensing and any developments in this regard will be reflected in future licensing negotiations.

Accountability:
MCPS and PRS are obliged to report to their members and pay them as efficiently and as accurately as possible for the use of their music as licensed by those societies.  MCPS and PRS demand as a term of their licences the prompt, full and accurate reporting of all music used by their licensees to enable them to fulfil their obligations.  It is therefore vital that the BBC should report promptly and accurately for all uses of music made under those licences in respect of the newly proposed services (as well as in respect of existing services) so that MCPS and PRS can distribute correctly and efficiently the monies due to their members from the use of their music in such services.

Conclusion

The BBC’s new services must therefore be subject to proper controls which will ensure that the BBC fully respects the rights of composer and music publishers and that it neither distorts the legitimate market for online music services nor is able to use its dominant position to force down the proper value of the music it uses in those services.

In its capacity as a rights owner itself we believe that is incumbent upon the BBC to play an active role in raising awareness amongst the consumers of its proposed new services about the need to respect copyright and to explain that the BBC has obtained a licence and paid for the right to use the music provided within those services (assuming always that it concludes an appropriate licence with MCPS and PRS).

It is also very much in the interests of composers and songwriters that there should continue to be high quality in terms of original programming and as much diversity as is sustainable with respect to genre, with the BBC catering for minority audiences and interests that may not be commercially viable for others to try to serve.

This paper summarises our position quite briefly but we would be pleased to expand on any aspect on which OFCOM may require further detail.

Notes

1. The members of BMR are the British Academy of Composers and Songwriters, the Music Publishers Association (MPA), the Mechanical-Copyright Protection Society (MCPS) and the Performing Right Society (PRS). BMR is co-chair of the Music Business Forum (MBF).