Building on a musical success story

Date: 08/02/1996

THE music industry in Europe is healthy, competitive and a huge private investor in local culture.

This is not a recipe for grabbing attention in the corridors of Brussels, so it may be no surprise that the film industry, beset by arguments over quotas and subsidies, has overshadowed music on the EU policy agenda.

Yet this industry has very good reason to look to Brussels to promote its interests. Music as a business is rooted in Europe. Three of the six major record companies - BMG, EMI Music and PolyGram - are European. The industry in Europe employs 250,000 people, directly or indirectly, and invests 310 million ecu in new recordings every year.

Far from being overwhelmed by US competition, the European repertoire accounts for about 60&percent; of the continent's entire retail sales.

It is also a rapid-growth industry with an important part to play in one of the major investment and job-creating priorities on the EU agenda - the development of Europe's information society.

The European Commission estimates that the world market for 'multimedia' services will grow by at least 16&percent; (more than five times the Union's average GDP growth rate) over the next four years.

Online recorded music has a key role to play in the development of that enormous market.

So what exactly does the music industry look for from the EU? Certainly not subsidies, a form of support on which this business has never depended and will never do so. Today's record companies are highly competitive. Far from holding out the begging bowl for public money, the music industry simply needs EU policies which will enable it to continue succeeding where it succeeds already - investing in creativity and expanding in new markets to keep pace with the surging demand from consumers.

The EU can best support the record industry by promoting the basis of our business. That means relentlessly pushing for market access abroad, helping in the worldwide fight against piracy - which now robs producers and artists of more than 1.6 billion ecu a year - and securing a proper legal and economic system for online markets of the future. These are priority issues for the industry.

Creative industries such as ours should indeed take precedence over the physical elements of the information society's infrastructure.

In the battle against piracy, weak enforcement of copyright laws and barriers to foreign markets, there is no doubt that the Commission has strong regulatory tools available to help the record industry's cause. Markets where investment was only recently eroded by high piracy levels, or denied altogether, have been turned around with the help of firm action from the EU.

For example, in 1992, prompted by a complaint from the International Federation of the Phonographic Industry (IFPI), the Commission opened trade proceedings against Thailand, one of the fastest-growing Asian markets, where piracy was thriving on poor copyright legislation and enforcement.

As a result, piracy in Thailand has fallen from 90&percent; to 25&percent; of the market over the past four years. Last month, the Commission suspended the proceedings because of the improvement in both the quality and the enforcement of Thai copyright laws.

The EU's intervention was also directly responsible for transforming the market in Indonesia from one which was 100&percent; dominated by pirating to a situation which was 100&percent; legitimate, within a matter of months. This is evidence of how pressure from the Union works in problematic foreign markets. Trade instruments can be used to great effect.

Policy decisions in Brussels are all the more important to the music industry because some of our potentially most exciting growth markets are also ones most blighted by piracy and a lack of market access.

This is nowhere more true than in China. A recent independent survey forecast that music demand in China will grow a breathtaking ninefold in the next six years. Yet in 1996, European record companies are effectively denied any part in what is potentially their biggest growth market, while Chinese pirate exports account for 25&percent; of illegal recorded music sales worldwide. Historically, the US has tended to set the pace over China, but Europe has just as much at stake and, accordingly, an equally important role to play.

The EU can take on the challenge of helping to transform China in the way it has successfully done elsewhere. Above all, it should continue to insist on proper terms for China's accession to the World Trade Organisation (WTO).

That means demanding that Beijing first guarantees to implement, within a fixed time period, the intellectual property provisions of the WTO treaty and, second, dismantles barriers, particularly those in distribution, which currently exclude foreign music companies from the market.

The other priority for the music industry today is to secure proper intellectual property protection for those who will provide the lifeblood of the information superhighway. Technology is rapidly making national, and even continental, barriers irrelevant and, therefore, our industry's attention is increasingly focused on the EU for solutions and world leadership.

For the record industry, the information society is already starting to take shape. Throughout the US and Europe, thousands of consumers are already experimenting with music by Peter Gabriel and the Rolling Stones, for example, on the Internet.

'Digital diffusion' of music is still in its infancy, but already it shows an embryonic information superhighway working in practice. This new environment promises a dramatically wider range of consumer choice - provided that strong copyright protection is built into the superhighway as an integral part of its infrastructure.

The Commission was quick to recognise the sweeping implications of the communications revolution for industries such as music. Last year it presented the Green Paper on copyright and related rights in the information society, a consultation document welcomed by industries like ours because it asks the key questions about how rights-holders will retain control of their works in a very different kind of market place.

It considers, for example, how the legal rights and commercial roles of authors, artists, producers, broadcasters and consumers are affected by the transition from CD and cassette markets to that of digital transmission, and how 'private copying' should be treated when technology will, for the first time, allow perfect-quality copying and effectively replace retail sales.

IFPI's position in this debate, and on any new legislation which may result from it, is clear.

In the information society, distribution technology will change, but the basic principles of copyright protection must not. The record industry, including producers, artists and authors, has always thrived on strong intellectual property protection.

For example, in the mid-1980s Spain was a piracy black hole in Europe, with one in three of all recordings being manufactured and distributed illegally. Strong anti-piracy measures and tough new legislation have almost wiped out piracy in that country.

In the electronic age, there will be a new system for distributing music, but the needs of music rights-holders will basically stay the same. At the same time, the threat of piracy and weakened protection from a system that will cross borders, continents and regulatory systems across the world will be far greater.

There is only one answer to this problem, and that is for Green Paper consultations to result in legislation giving record producers an exclusive right to control all transmissions of their recordings on the information superhighway. This is the key to the IFPI's response to the Green Paper, submitted last November, and the point which will have most bearing on the future investment and employment potential of new music online services.

Many of the issues on which recording companies look to Brussels for solutions may seem highly complex, both legally and technically. But the overriding stakes are in fact very simple. It is no exaggeration to say decisions made in Brussels today, be they on foreign market access problems, piracy or regulation of the information society, will have a critical influence on investment decisions by the music industry in the future.

Frances Moore is director of the international recording industry's representation to the EU, the International Federation of the Phonographic Industry.