First COVID, now Brexit — how will this latest maelstrom impact the music industry?
From exporting goods, touring, working visas, data-sharing and the return of the dreaded carnets…. There are many extra challenges now faced by the UK music business and its artists
Music in the time of COVID
It has been well documented that 2020 — well, specifically COVID19 — has had a devastating global impact on the music industry. The live music and festival sector in particular saw a 90% downturn in revenues in 2020 and now faces the terrifying prospect of up to 50% of its workforce losing their livelihoods unless events can safely resume by summer 2021.
Recently released figures show that fans the world over turned to music consumption in times of crisis — the UK recorded sector grew by 8.2% YOY (an increase on the growth posted in 2019) with streaming and vinyl once more leading the charge. In fact UK vinyl sales reached their highest for 30 years, with direct-to-consumer sites such as Bandcamp not only thriving but offering fans an important way of staying connected to artists and supporting them through sales of physical product and merchandise. Some ‘good news’ you could argue.
However this has to be put into the context of working, touring musicians having lost the lion’s share of their income through the almost-overnight disappearance of gigging, touring and club nights. The closure of live music venues has left artists not only with financial concerns but also a loss of IRL connection to their fanbase and the mental health challenges this change to their lives has brought. As new film and TV production halted, so did a valuable revenue source from synchronisation licensing, on top of a huge decline in performance and broadcast income caused by the closure of bars, venues and retail which have been all but locked-down since last March.
And as shown by the Department of Culture Media and Sport’s recently launched enquiry into the economics of music streaming, the vast majority of artists simply cannot make a living from streaming income alone. In an article for the Harvard Business Review, venture capital Li Jin reveals a few stark statistics which indicate this is a global — not just a UK-specific — problem. US artists need 3.5 million streams per year to achieve the annual earnings for a full-time minimum-wage worker of $15,080, showing exactly why most jobbing musicians are forced to supplement their earnings with touring and merchandise. And their analysis of one of the leading streaming platforms showed that the top 43,000 artists — roughly 1.4% of those on the platform — pulled in 90% of royalties, making on average, $22,395 per artist per quarter. The rest of the 3 million creators, or 98.6% of artists, made just $36 per artist per quarter. Take into account that a growing number of these are independent or self-releasing/self-financing artists, needing to invest their own money into creating, promoting and marketing their creative output, it’s no wonder things have been looking pretty bleak for all but the very top of the recording artist pyramid.
Enter Brexit…
Of course none of us could have predicted the maelstrom of a global pandemic hitting at the start of last year, just at a time of great optimism and buoyancy for the music industry. Revenue had been on an upward trend once more, global audience reach was broadening, new technologies were providing new consumption opportunities for fans, and the market outlook was healthy for songwriters, publishers and rights holders.
What we could see coming however, from as far back as June 2016, was Brexit — another maelstrom in the form of a completely new way of working with our nearest neighbours upon leaving the European Union. And with the trade agreement only having been ratified days before the transition period deadline, planning for those changes has been confusing, challenging and unclear right up to the wire.
Even with the 1000+ page trade agreement document published some days ago, understanding the full implications of Brexit for the music industry will take months. Covering them all would be outside the scope of this blog post (War and Peace, anyone?). What I will attempt to do here is draw attention to some of the key areas of change, challenge and concern, as well as signposting some of the organisations who have worked tirelessly to pull together valuable resources and guidance.
LIVE MUSIC & FESTIVALS
Let’s start with the impact on the live sector. With the cessation of the free movement of people to travel and work in the EU come new requirements for musicians and crew to apply for working visa permits for the time they spend on tour in EU nations. Back during the transition period, composer and broadcaster Howard Goodall signposted a few of the upcoming challenges in a dark-humour series of articles and tweets in which he describes his Twitter thread as ‘a kind of Bad News Advent calendar’:
Goodall’s article draws attention to some of the new rules, including changes to working and carrying instruments abroad and the need for a passport with at least 6 months left on it. Perhaps most concerning is the fact that every EU member state controls who comes through their borders, meaning a work permit is required for every country, with different rules at play.
Some further clarifications on this topic have come from The Association for Electronic Music alongside the LIVE association, who issued a briefing specifically related to the events and live sector. Some of the key points include:
- UK citizens can still visit the EU for up to 90 days without a Visa, but the EU doesn’t have competency over individual member state immigration systems and it’s still unclear regarding the regulations applicable to each member state for outbound movement from the UK
- In terms of inbound immigration, EU musicians coming into the UK will now be doing so via the pre-existing routes which apply to non-visa nationals (eg. the US, Canada etc). The fear here is that extra complexities and increased costs will deter some artists from including the UK in their European tours
- For personal and business travel, anyone driving to Europe will need extra documentation, including a ‘green card’ certifying that sufficient insurance is in place and a GB sticker for the vehicle
- Europe-wide carriage is no longer permitted, with trucks over 3.5 tonnes leaving the UK now limited to three stops within EU member states before the tractor units would have to return to UK. The implications for vans and coaches is still being explored
- The carnet system will once again apply within Europe (as it did before the UK’s membership of the EU) and although well established, its reintroduction adds significant friction and cost to European touring
Needless to say, the news on these onerous requirements and obligations on our already struggling artists, DJs and tour staff have been about as welcomed as a positive COVID-test, with many now facing an even starker reality on the ‘viability’ of their livelihoods from music. Artists’ social media across the UK from early January has been full of despair from many questioning their longer-term futures as musicians and performers.
To muddy the waters further, it has recently come to light that the UK government rejected the EU’s offer of a visa-free touring arrangement for creatives which has quite understandably sparked a lot of questions, and has prompted our UK music trade bodies to spring into action lobbying the government to change course.
PHYSICAL PRODUCTS
So with the obstacles of touring, festivals and live outlined, how rosy does the EU-less future look when it comes to sales of vinyl, CD and physical merchandise, another crucial income stream for our musicians and creators? The short answer is ‘not very’.
Unfortunately for the UK music industry, physical goods manufacturing is not one of GB’s current success stories, with many of the UK plants that had existed over the decades having been closed and business consolidated to plants based largely in…you guessed it, mainland Europe. And whilst the vinyl revival of recent years has meant that a few pressing plants have reopened or started up, capacity is nowhere near sufficient for the huge demand created by our UK labels (the UK being, after all, the 3rd largest music market in the world and one of the biggest for physical album sales).
So capacity is limited, lead-times are getting ever longer and moving physical stock either in or out of the UK now is a lot more complex and time consuming. Since the tail-end of the transition period, orders placed for especially vinyl product which was due to arrive from European plants into the UK simply hasn’t arrived, either due to blockages at the borders, to plants refusing to ship as they are still unclear on the onerous and complicated new paperwork requirements or to shipping costs having risen by multiples of 4 times the previous costs, making some orders no longer commercially viable. Manufacture brokers and plants alike are under enormous pressure trying to put things in place to deal with the new Brexit ‘normal’ and many a record label team are struggling to figure out how to find the time and resources to potentially handle the huge amount of new paperwork and customs red tape. And here we were being promised that ‘bureaucracy’ would ease as we took back control…
GOODS & VAT
The Association for Independent Music has been keeping its thousands of indie labels and self-releasing artists members* updated in recent months with Brexit advice on the thorny issues affecting labels who manufacture physical items on behalf of their artists, and the implications on their distribution in and out of the UK, VAT implications and the numerous other headaches arising from the cessation of free movement of goods. Here are a few key highlights (or should that be lowlights?)
- For the movement and sales of physical goods in and out of the UK, it is essential to register for an EORI number via this link to continue trading with the EU
- Get familiar with all the regulation and legislation around the border your goods are crossing, eg. VAT. This resource published by DIT goes into greater detail
- Release schedules should be prepared for possible disruption, as many shipments due into the UK before Christmas are still stuck at plants, in transit or at border control.
- It is advisable to make the customer the ‘importer’ of goods being shipped to the EU for the first six months of 2021. You can find more information on this here and for a more detailed overview of related customs procedure, click here
- For those deciding to go through an intermediary, the advice is to consult a manufacturing broker, distributor or this list of customs agents published by HMRC. There is some helpful advice here regarding import and export of goods from broker Key Production.
*NB some of the advice linked to here is only accessible to the AIM membership, whilst many are available widely from UK Gov and other sources. The AIM website posts regular updates which you can view here
DIGITAL/ONLINE SALES & DISTRIBUTION
Still with us? Good. So now what about digital/online sales and how that is affected? And that increasingly important direct-to-consumer sector which is such a lifeline for smaller labels and independent artists, providing not only a key trading route to their hardcore fanbase but also a means to stay connected with fans, engage in dialogue about new releases and showcase higher-yielding apparel and merchandise items? Meerkat ‘simples’? Nope.
- It is now important to to ensure that you are compliant with requirements of each EU Member State you operate in if you’re involved with e-commerce (depending in the nature of your online services) You can find the Government’s step by step guide here for more info
- Rules for broadcasting in each EU Member State might vary, meaning all providers of on-demand and video services and broadcasters will need to comply with new rules. More info here
- DSPs (Digital Service Providers) must also comply with new regulations which cover the security of network and information systems. More info here
For further information in terms of digital sales and distribution, check out AIM’s guide here
If this is looking to you like every single facet of business for musicians is changing beyond measure, you’re right. And lest anyone is labouring under the misapprehension that new legislations and compliances is standardised across the 27 EU member states, then think on. Each and every state operates its own jurisdictions, legislations and compliance requirements — so that’s potentially 27 sets of new rules for UK-based labels and artists dealing with our closest neighbours with whom we had enjoyed frictionless trading and borders.
PERSONAL DATA
Is that it then? Hell no. What about data? Those carefully built mailing lists of customers and fans across the European block which the music industry relies on for promoting everything from news, tours, record releases, merch sales and more. Well that’s changing too, albeit with a grace period of a few months, with more clarity still to follow once it has all been figured out. Clear? As mud.
Personal Data Transfers (Mailing lists, metadata, HR records, …)
The new trade deal still enables the UK to continue to transfer personal data with the EU for at least 4 months (until 30th April 2021) as long as the data complies with the UK’s GDPR laws. After the 4 months, the UK will need to have received an ‘adequacy decision’ from the EU to confirm the UK’s data protection laws are strong enough to satisfy those of the EU.
If the UK does not achieve adequacy, you will have to ensure that all your agreements with anyone you transfer data to has the standard data transfer contractual clauses set out. You still need to adhere to GDPR.
It’s highly advisable that future contracts between a UK business and anyone to whom they plan to transfer data to or from have adequate standard contractual clauses on data transfer. A review of existing contracts, ensuring these clauses are agreed and renewed or that a suitable ‘side letter’ for these clauses is attached to the agreement, is also advised.
It’s 35 years since Timbuk3 sang ‘The Future’s So Bright, I Gotta Wear Shades’ — we can only hope and pray that the good ship UK Music Industry and all who sail in her will have a brighter future once more, beyond our own borders and before too long. For now, sadly, the need for those shades seems quite a way off.
Further links to guidance and helpful articles are listed below. There is yet more. Much more. This blog is intended to provide a round-up of some of the key challenges and new legislation that has been clarified at the time of publication and is by no means exhaustive (although you may be exhausted after attempting to read and digest all the information, let alone put it into practice)
Bonne chance, viel gluck, buena suerte, buona fortuna, succes, boa sorte, καλή τύχη, powodzenia….
(Or perhaps now we just have to stick with ‘good luck’)
Silvia Montello is Head of Business Development at Blokur.
Acknowledgements
Special thanks to Sara al Hamad at AIM, Greg Marshall at AFEM, Key Production, Proper Music and to the BPI, UK Music, DCMS, LIVE and our other fine Music trade bodies working tirelessly to help our sector navigate its way through the maze of information and — godspeed — to survive and eventually thrive again.
Useful links
- AIM’s information is constantly updated and published in their Brexit guidance.
- PRS has published guidance on how publishing royalties and rights are affected here.
- The BPI, which represents the overall recorded music industry, is also an excellent resource for advice for their members.
- A summary of UK Music’s Brexit policy activity can be found on their website.
- The UK government has published advice for Digital , Cultural, Media and Sport sectors, collective rights management, broadcasting and e-commerce.
- Avalara has a series of articles on the tax implications of Brexit, including VAT, distance selling, e-commerce and customs changes.
