Much of the recent conversation around Brexit has been speculative, but the UK music industry's voice is louder and clearer than ever. According to polls by the British Phonographic Industry (BPI), Featured Artists Coalition and Creative Industries Federation, nearly 90% of UK musicians and labels supported the Remain campaign. The fateful democratic vote to leave the European Union feels like a blow to these music communities, and brings into question whether they can continue to grow in an ecosystem that is potentially more fragmented and more hostile to free movement of labor.
It is not so much the Rolling Stones and Elton Johns of the world who will suffer, however, but rather the up-and-coming independent artist who is looking to build an international career and is strapped for cash. For such artists, separation from the EU means reduced access to key funding schemes in the arts, a tougher uphill climb in the battle for copyright reform, increased financial and administrative burdens around touring and immigration, and an imminent brain drain from the budding creative entrepreneurship hubs that they call home.
1. FUNDING: “Music Moves Europe," but will leave the UK behind.
Just weeks before the Brexit referendum, at a Midem gathering titled "Music Moves Europe," the European Commission announced a new funding stream exclusively for the music sector. The initiative falls under the Creative Europe umbrella and aims to provide financial support across all music professions, from education and data analysis to streamlined repertoire distribution and startup/SME support.
Historically, the UK music industry has not relied on EU funding as heavily as other member countries. A strong relationship does exist on an institutional level: the EU granted €40 million (~US$44.2 million) to British arts organizations over the past two years, and nearly a fifth of UK labels generate over 75% of their foreign revenues from EU markets. Nonetheless, the lion’s share of early-stage government funding from the EU has gone not toward music, but rather toward film and TV projects via subprograms like MEDIA. In addition, domestic arts funding in the UK remains stagnant, with Arts Council England’s annual budget standing at US$825 million (for comparison, the UK spends an average of $726.4 million every month in order to maintain its EU membership).
Coupled with the record industry’s arguably decreasing ability to support emerging artists and startups, these shifts lead many musicians to cast a wider net in terms of novel funding sources, from crowdfunding to artist accelerators. In this vein, the EU's upcoming funding stream for music could have provided another crucial support system for UK independents.
The EU's determination to help its musicians also indirectly challenges traditional industry business models, which give labels the majority of negotiating power. “The intermediaries used to be the most important music stakeholders, because they had a monopoly over all the ways to get to market,” explains Paul Pacifico, CEO of Featured Artists Coalition. “What are the ramifications of aligning directly with the artist? Nowadays, artists demand a different kind of deal, and Music Moves Europe could provide the cash necessary to catalyze these artists’ careers and cause a significant shift in the industry.”
2. COPYRIGHT: The UK will have a weaker voice in pan-EU (and perhaps global) copyright debates.
As you are reading this, the EU is pushing forth a significant copyright reform known as the Digital Single Market. The EU’s digital landscape as it currently stands is rather fragmented, housing 28 separate digital markets (one for each member country) whose individual complexities are often a hassle for both established and emerging online platforms seeking sustainable growth. Hence, the Digital Single Market strategy aims to benefit artists and consumers alike by breaking down legal barriers to cross-border consumption on digital platforms, and could contribute as much as €415 billion (~US$459 billion) per year to the EU economy.
While aimed at the broader demographic of creators across all fields, the Digital Single Market strategy is closely linked to the music business—particularly to the mounting protests against the Digital Millennium Copyright Act (DMCA), whose "safe-harbor" provisions allegedly allow platforms like YouTube to get away with certain forms of copyright infringement. As part of this movement, 58 members of the European Parliament recently signed a letter to the European Commission urging the latter to give explicit consideration to fair artist payments in Digital Single Market legislation.
“We believe that there will not be a Digital Single Market without content,” the letter asserted. “Therefore the upcoming copyright reform should make clear that liability exemptions can only apply to genuinely neutral and passive online service providers, and not to services that play an active role in distributing, promoting and monetizing content at the expense of creators.” This debate has particularly urgent consequences for independent musicians, who account for a larger market share in streaming than in physical formats in virtually every European country (including the UK), according to research by the Worldwide Independent Network.
Upon leaving the EU, the UK will likely no longer have an official say in the future of the Digital Single Market, which could significantly dampen British independent artists' negotiating power in both domestic and international copyright reform as a whole. “I worry that we will either be made to fall in line with any outcome without being part of negotiations or we will have to fight it on our own,” wrote Sammy Andrews, Music Industry Advisor and Director of Entertainment Intelligence, in a public statement. “These reforms are, I believe, crucial to the future of our industry and having no voice in shaping policy—in spite of how influential the UK music industry is in Europe—could lead to disaster.”
Much of the music world seems to agree with Andrews: according to pre-referendum BPI survey, 90% of UK labels felt it was important to remain involved in pan-EU copyright developments. While the UK music industry reportedly remains "bullish" about maintaining solid international relations, this sentiment relies heavily on the ability of both the EU and UK governments to pass legislation that will enable freer content consumption and fairer artist compensation across the entire continent, which may take several years to materialize.
3. TRAVEL AND THE BRAIN DRAIN: Financial and administrative burdens will not only increase the cost of touring for emerging bands, but will also make it more difficult for companies of all sizes to retain talent.
As expected, the markets reacted swiftly and negatively to the Brexit vote, with key international music stocks like Sony and Vivendi dipping by 6% to 9% the day after the referendum. On the level of individual bands, the pound's devaluation increased the cost of touring by as much as 10% overnight, which has severe implications for the independent sector.
“Going from loss to profit over the course of five years is already terribly difficult for independent musicians, and a lot of bands fold earlier on because there’s not enough money to be made from touring,” notes Chris Carey, CEO of Media Insight Consulting. “With a devalued pound, making losses in euros is even more costly for UK bands, and it could take even more time to cover that loss.”
Even countries outside of the EU, such as the United States, may feel the negative ramifications of the pound's devaluation with regards to touring musicians. Many British artists tour or work on American soil (and vice versa); as a result, they have to deal with complex eligibility criteria for the United States' O and P visa classifications, which are reserved for cultural travel.
“One of the criteria to qualify for a visa is that the applicant is being paid a wage which is commensurate with extraordinary ability,” explains Linda Rose, Managing Partner at Rose Immigration Law. “As the value of the pound goes down, British artists will be paid less on a relative scale, potentially eliminating this eligibility criterion and making it more difficult for them to qualify.”
All of the above factors tie into perhaps the only point of post-Brexit alignment between corporate and independent music companies: human capital flight and a potential absence of diversity. Universal Music Group’s International Division has already been moving significant digital jobs from London to Santa Monica, as part of a wider global restructuring effort. This migration may accelerate in Brexit's wake, and could instigate similar efforts not only from other major labels like Sony that house substantial international teams in London, but also from the city's emerging community of music-tech entrepreneurs.
“Historically, people have traveled to London for work because it provided a gateway to the rest of Europe,” explains Carey. “That will change if your UK citizenship no longer gives you EU citizenship. Because of financial and administrative difficulties, there may no longer be an incentive for rising entrepreneurs to work in London, but rather to explore other European cities such as Berlin and Paris.”
Conclusion: The warning signs were clear, and are now being dragged into the present.
One of the most helpful frameworks for understanding why independent musicians will suffer from Brexit actually predates the referendum by one month, when the BPI published an 88-page yearbook called Music Market 2016. The book simultaneously celebrates the UK music sector’s growing achievements and warns readers about the forthcoming challenges in keeping this industry fair and sustainable.
On one hand, the UK wields an undeniable influence on the international music stage. According to Music Market 2016, UK artists accounted not only for five of the world’s top 10 acts of 2015 (Adele, Coldplay, Ed Sheeran, One Direction, Sam Smith), but also for a record 17.1% share of the entire global market. In other words, one in six albums sold worldwide (and one in four albums sold in Europe) was released by a British artist.
On the other hand, what perhaps overshadows this success is the “value grab,” or the persistent discrepancy between consumption and compensation on digital platforms. In the UK, for instance, consumption in the ad-funded video streaming space increased by 88% in 2015, but corresponding revenue increased only by 0.4%. BPI Chief Executive Geoff Taylor asserted in a statement that the digital value grab necessitated “urgent action” by the EU and UK governments to invest more heavily in their creative communities and pass stronger and fairer copyright reforms.
As previously mentioned, this call to action goes hand in hand with the EU's plans for a Digital Single Market. Furthermore, the value grab prevents emerging artists from recording, touring and pursuing other activities with comfort and confidence, and compels them to seek new funding sources both within the UK and with their now-endangered network across the EU. By resting a heavy arm on all of these touch points, the Brexit vote not only creates an additional obstacle for the independent sector, but also slows down what the BPI recently laid out as the UK music industry's most fundamental goals from coming to life.
