Artist Exemption. Importance of Irish Music Industry

Transcription

1 Artist Exemption The Irish Music Rights Organisation ( IMRO ) is a national organisation that administers the copyright for the public performance of music in Ireland on behalf of its 8,500 members - songwriters, composers and music publishers - and on behalf of the members of the international overseas societies that are affiliated to it. IMRO s function is to collect and distribute royalties arising from the public performance of copyright works. The purpose of this submission is to demonstrate IMRO s support for no further changes to the existing provisions available to songwriters and music creators under the Taxes Consolidation Act 1997 (Section 195) as amended and to outline the importance of this provision not only to the Irish music industry but to the Irish economy and wider society. From an Irish perspective the retention of the existing tax status for music creators both present and future is a very cost effective way of respecting our regional and national diversity. While the majority of creators benefit little from the scheme it does afford them recognition which to many creators, both high profile and others, is as important as financial reward. It is a way of recognising the contribution of this sector to our national culture and identity. Importance of Irish Music Industry Cultural - This tax measure is a very cost effective way of respecting our regional and national diversity. The diversity and quality of music in Ireland is the most important ingredient in fostering our reputation as a dynamic and culturally rich nation. This can best be achieved through a partnership of individuals who create the copyright material, Government who support these creators though special incentives and the implementation of copyright law and private organisations who assist the creators in maximising the value of their copyright material. The success of Irish music creators and writers on the international stage has contributed significantly to the positive and vibrant image Ireland enjoys throughout the world. Economic - In economic terms the Irish music industry is of great significance. It is widely accepted that music delivers significant positive impacts on the development of inward investment and local community development. The creative body plays a significant role in this area and therefore should be encouraged in order to sustain employment and economic activity in the music industry. Tourism - In 2010 an estimated 2.9 million overseas visitors engaged in cultural activities while in Ireland, including visits to places of historical and cultural interest and attending festivals and events. The latter attracted an estimated 433,000 overseas visitors. Music is a vital and vibrant component of almost all of our festivals and events throughout the country. Cultural tourism is the point at which culture and tourism converge. It is an area of rapid growth worldwide at a rate of 15% per annum according to the World Tourism Organisation. Fáilte Ireland, in September 2011 estimated cultural tourism to be worth over 2 billion annually to the Irish economy. The Government s commitment to The Gathering in 2013 presents them with an opportunity to partner with the music industry as well as other cultural organisations in developing this market further. 0

2 Current Situation Exemption is limited in scope Under the provisions of the Artist Exemption scheme only public performance rights, mechanical rights and synchronisation rights are exempt from taxation. Other income arising from areas such as record sales, live performances and merchandising is fully taxable and for most songwriters/music creators the majority of earnings arise from these activities. Generally royalty income represents a small proportion of the artists total earnings. There is a belief that Irish artists generate significant royalty income from their works. This view is dispelled from a review of the average annual royalty earnings of songwriters who are members of IMRO, for the period from 2009 to Only 1.9% of songwriters earned greater than 5,000 per annum in royalty income for the above period. Of the total membership of 7,918 (which does not include publishers), 194 members (2.45%) accounted for 75% of total royalty income earned for the period under review. The advent of satellite, digital and the internet, has placed copyright earnings under constant threat. THE CASE FOR RETENTION 1) Cultural & Social Aspect It is widely accepted that the creativity, diversity and quality of music in Ireland is an essential ingredient in our reputation as a dynamic and culturally rich nation. Irish music is considered to be a cherished expression of national identity. This view was fully endorsed with the emergence of acts such as Riverdance and the Lord of the Dance which received worldwide acclaim. Irish people see music as part of their culture. International success for artists such as Paul Brady, The Chieftans, The Corrs, The Cranberries, Enya, Sinead O Connor, Damien Rice, The Script, Westlife and U2, has given the Irish music industry a self confidence that spills over from culture into wider fields. The large majority of indigenous Irish independent companies share less than 25% of the domestic market, a market that is dominated by imports with multinationals investing insignificant amounts on the development of local Irish artists. This lack of development in new artists is regarded by many as a significant handicap to the future development of the Irish music industry. Multinational companies tend to be market driven and are focussed primarily on the sales potential and profitability of their products. In this environment music is essentially a commodity product to be sold in the market place to the consumer. To maximise the profitability of these sales the characteristics of the commodity is driven away from risk and innovation towards familiar and well tested formulae and formats. In such circumstances overall diversity of creativity is necessarily reduced and the opportunity to develop new artists is similarly limited. To counter this globalisation of music it is essential to provide music creators with the opportunity to bring local music to the attention of the population in general. This can be achieved through the provision of training and grant aid together with the continued provision of the Artists exemption from taxation. These initiatives will enable songwriters to create and disseminate local music. Abolition of this important relief will merely serve to decimate the development of young Irish talent which represents the future of Irish music leading to a reduction in the number of successful Irish acts in the years to come. 1

3 2) The Economic Importance of the Irish Music Industry It is estimated that the core copyright industries in Ireland in 2011, of which the music industry is a key player, comprised 8,600 enterprises with 46,300 full time equivalent persons employed (70,400 persons engaged) a turnover of billion and gross value added (GVA) of 4.6 billion. The latter, which represents the direct economic contribution, is equivalent to 2.93% of GDP. Due to the nature of the Irish music industry and the lack of readily available statistical information it is difficult to calculate a definitive figure for employment levels within the industry. Notwithstanding this, it is widely accepted that from an economic perspective the Irish music industry is of great significance. Previous research conducted by independent consultancy firms Pricewaterhousecoopers and BDO Simpson Xavier concluded that the music industry was the most significant employer out of all the cultural industries. The Goodbody report estimated full time employment in the Irish Music Industry at 8,101 for the year Performance artists comprised the bulk of this total at 6,157 full time equivalents. The support sector was estimated to provide 1,444 full time roles whilst recording artists were estimated to account for 501 full time employees. The Irish music industry is over one-eighth the size of the UK industry which is a notable achievement when one considers the established position of the UK music industry and the size of its target market. The Irish music industry is almost six times as large as its Scottish equivalent. 3) Key issues impacting on the success of Irish songwriters/music creators There are a number of industry specific issues that impact on the success of individual songwriters/music creators that are worth focusing on. The lack of widespread access to broadly based music education in the formative years is resulting in an underdevelopment of music proficiency and appreciation among the general population. Traditionally music education in Ireland has been directed at producing music teachers and has not been creativity focussed. Furthermore gaps in the provision of pre-professional training are resulting in a high fall out rate for some artists. Due to regulatory and other local issues Irish songwriters operate at a disadvantage to songwriters in other countries. In this regard a quota system operates in many countries whereby a set proportion of all music played by radio stations must be produced domestically. In this regard, French radio broadcasters are obliged to broadcast as follows: 60% French songs of which 10% must be new material or; 35% French songs of which 25% must be new material. Similarly in Canada, Canadian radio broadcasters are required by law to play 35% local content. No such rules exist in Ireland with the result that Irish songwriters are at a distinct disadvantage in marketing work both at home and in these countries. Irish songwriters operate under the UK market. This market is a relatively unprotected sector in which Irish songwriters/music creators represent a very small minority. Furthermore many local radio networks have been acquired by UK operators with the result that the trend is continually moving towards the Top 40 format which does not offer new artists much opportunity for airplay. It is generally accepted that most radio stations play a safe selection with the result that opportunities for new artists and local music are thus constrained. The Irish market is relatively small compared to our European counterparts. 4 million CD's were sold in Ireland in 2011 as against over 53.9 million in France, 96.9 million in Germany 2

4 and 86.2 million in the UK. As a result of the above, Irish artists, unlike most of their European counterparts do not have the benefit of high sales levels in their domestic markets to assist in launching their careers Furthermore it is generally accepted that indigenous Irish artists share approximately 25% of the domestic market as the domestic market is dominated by imports. The level of activity of the multinational enterprises in Ireland, in terms of development of local artists, is traditionally very low and in some cases non-existent. This lack of investment in new artists is a significant handicap to the future development of the indigenous Irish music industry. By contrast, in the UK over 50% of sales by value is accounted for by domestic artists whilst in the US the corresponding figure is 95%. The creative artist sector is highly competitive and dynamic with high levels of entry and exit. The sector entails a huge amount of risk only a tiny fraction of CDs released into the UK market manage to feature in the weekly Top 100 charts. Whilst there are plenty of good studio facilities in Ireland, there is a scarcity of top level producers capable of bringing a quality recording to the attention of the international record companies. As a result, most commercially successful Irish acts have, in recent years opted to use producers, studio and production facilities abroad, particularly in Sweden. The Goodbody Report states that whilst Ireland is a very important player in the world music market, the music industry support sector in Ireland (ie. the record companies, the music publishers etc) is small relative to the overall size of the Irish industry. The support sector can only grow if the number of artists demanding their services increases. For this to happen, the number of middle ranking recording artists must also increase. The arrival of multinational retailers has had a mixed impact on the indigenous record companies. The benefits include the expanded market and the pressure to upgrade it but it has also had the effect of homogenising the record industry by eliminating the small local record shops where a local band might attract greater attention. 4) Intellectual Property Rights There is a belief that successful music creators benefit financially from the protection afforded by Intellectual Property Rights. A report conducted under the Economic and Social Research Council ( ESRC ) entitled Intellectual Property in Music A Historical Analysis of Rhetoric and Institutional Practises stated that the chief beneficiaries of copyright are a minority of creators at the top of their profession together with investors in Copyright. The report further supports this assertion through reference to the income distribution of author members of the British Performing Right Society. It is stated that 80% of musical authors earned less than 1,000 from performance royalties in The report concludes that only very few artists can expect sizeable income from royalties and that the typical composer requires additional sources of income. It is stated that these findings would be representative for much of the distribution of creative income in the western world. The above trend is further evidenced in the royalty earnings of songwriters who are members of IMRO as quoted earlier, and the Governments own statistics on the artist s tax exemption. It is also important to note that whilst the high earnings of a very few songwriters has brought the topic of lost tax revenues into the public domain, there is no guarantee that 3

5 any of the current high earning artists will be in the charts in a few year s time and indeed with the advent of satellite, digital and the internet copyright earnings are under constant threat. Many of the current band of high earners have experienced lean times in the past and based on historical trends many may do so again in the future. As stated above a growing problem facing successful music creators is the control and protection of music rights. Due to the non-physical nature of music compositions it is extremely difficult to monitor usage and prevent unauthorised usage. In a report prepared by Bruce Lehman, Assistant Secretary of Commerce at the US Patent and Trademark Office, it was estimated that inadequacies in the system of intellectual property protection for copyrights resulted in losses to the copyright industries of US$12 billion to US$15 billion annually. Finally it should be noted that a copyright asset is fundamentally different to other forms of income generating assets such as property. Unlike property assets a copyright has a finite life and last for 70 years following the death of the artist and therefore diminishes in value on an annual basis. When the copyright expires the works return to the public domain and are thereby returned to the nation. On this basis we feel that it is appropriate that current levels of copyright income should continue to be exempt from taxation. For further information contact: Keith Johnson Director of Marketing & Membership Irish Music Rights Organisation Copyright House Pembroke Row Lower Baggot Street Dublin 2 Ireland DD: P: F: E: keith.johnson@imro.ie W: Pay Online IMRO Cherishing Music In A Changing World About IMRO The Irish Music Rights Organisation (IMRO) is a national organisation that administers the copyright for the public performance of music in Ireland on behalf of its 8,500 members - songwriters, composers and music publishers - and on behalf of the members of the international overseas societies that are affiliated to it. IMRO s function is to collect and distribute royalties arising from the public performance of copyright works. 4