Direct Licensing: A Look At The New PRS Tariff For Concerts & Festivals In The UK

Performing rights society PRS For Music got its new live music tariff approved by the UK Copyright Tribunal. The new tariff provides a mechanism by which festival and concert promoters can reduce their PRS rate, in case a rightholders – publishers, songwriters – decide to license their repertoire directly to the promoter.

Adam Bielawski / AdamBielawski.com – Rammstein at Chicago Open Air, Toyota Park, Bridgeview, Ill.
One of the bands known to direct license their repertoire to promoters

Rightholders started direct licensing because their respective performing rights organization (PRO) had been granting kickbacks to promoters on the fees the promoters had to pay for the performing rights, the size of management fees PRO’s deducted for the service, the delays in payment, and the opacity of the accounting.

This didn’t cause problems for single concerts: a rightholder withdrew their performance right from the PRO and licensed directly to the promoter. 

But multi-day and multi-artist festivals in the UK already paid a license fee to PRS For Music for the use of its members’ repertoire. If a rightholder wanted to license directly, the festival promoter paid more for live rights licensing than they had originally budgeted to pay, because PRS did not have a way of adjusting the tariff it charged accordingly, i.e. proportionately, until now.

Pollstar spoke to Rob Kirkham, Head of Business Development, PRS for Music, to get the lowdown.

“In the relatively limited number of cases where a licensee requires a license from the PRS and then a separate license in respect of rights which are being directly licensed – typically, because they have been withdrawn from the PRS repertoire by one of our members – we agreed in principle with the sector, that it would result in a carve-out from the charge that would be made by us in respect to the PRS license,” he explained.

By “the sector,” Kirkham is referring to the representatives of the UK’s live sector, who took part in the tariff negotiations: the Association of Festival Organisers (AFO), Association of Independent Festivals (AIF), British Association of Concert Halls (BACH), Concert Promoters’ Association (CPA), Glastonbury Festivals Limited, Music Venue Trust (MVT), National Arenas Association (NAA), Society of London Theatre (SOLT), and the UK Theatre Association.

– Rob Kirkham
Head of Business Development, PRS for Music

Kirkham explained that the carve-out granted to promoters who paid a direct license would be commensurate with what the PRS’ distributable value of those withdrawn rights would have been.

“The operating principle is that we put the players in the market in a position, whereby if they’re objective is having to deal with directly licensed rights, they should pay no more than they would have paid, had all the rights been collectively licensed by the PRS,” according to Kirkham.  

This means that promoters, knowing what PRS would have charged for the withdrawn rights, can use that amount as a basis for negotiating the license fee with the licensor.

“We could go no further than that,” Kirkham continued, “because were we to have gone further than that, we would have risked not being compliant with the competition considerations here. Any direct licensors and potential licensees they deal with, have to have a free negotiation in respect of what the value of those directly licensed rights might be.”

Another questions is: How is that carve-out going to be calculated in relation to a direct license at a festival?

According to Kirkham, it’s a relatively straight-forward process. 

“It will be done on the same basis that we calculate PRS distribution values. The way that works in the festival context is: the festival/event takes place; we are in touch with their licensee to review the licensing arrangement. We ask the licensee to submit certain information to us so that we can calculate the charge.”

The key components of that information are the gross receipts from the event, which is what the royalty rate is based on, the stages on which performances are held at the festival and their respective capacities, and set-list information — a list of all the works that were performed on the various stages.

“Using that information, we make a calculation of what the distributable value of any directly licensed performance would be, just as we would to calculate what would be distributed were those rights still a part of the PRS repertoire,” Kirkham outlined.

“Having identified that value, we deduct that value from the invoice that we submit to our licensee, and therefore we are paid in respect of the collectively licensed rights, and there will be a margin of some scale, as far as the licensee promoter is concerned, that will be taking into account the value of the directly licensed right from our perspective.”

A mechanism to provide for direct licensing isn’t the only modification that was made to the PRS’ live music tariff. Equally important to the sector, is the increase of the royalty rate from 3 percent to 4 percent for live music events, concerts and festivals. The rate increases to 4.2 percent in cases where the licensee elects not to account to PRS in respect of revenue generated from booking fees, administration and service charge.

There will also be a reduced royalty rate of 2.5 percent for festivals that meet the following conditions: “a single event offering a series of music performances or music and other entertainments which is marketed as a festival and is held at a predominantly outdoor site using temporary infrastructure which is (i) erected for the purposes of that festival (including as a minimum all of the following: the construction of infrastructure relating to performance areas, the presence of temporary perimeter fencing or controlled access by other temporary means and the provision of toilet facilities and a clean water supply), (ii) used mainly for the purposes of that festival, and (iii) substantially dismantled after the festival. A Qualifying Festival must take place over consecutive days (but no more than ten in any calendar year) with at least twenty unique music performances in the official line up (or at least ten if the event is held over no more than four days) and where a charge is made for admission which allows entry to any performance areas holding performances of artists listed in the official line up.”

And, finally, the new tariff got rid of the minimum fee charged for events provided that PRS’ reporting requirements are met.

The Association of Independent Festivals is celebrating what it describes as “a hard-fought victory for its members.” 

Its chief executive Paul Reed commented: “AIF is pleased that, having made the case and called for festivals to be treated differently to concerts at an early stage of the process, this has been acknowledged in the new Tariff LP with a reduced rate for festivals. By working with PRS and our partners across the live industry – including the Concert Promoters Association and others – a resolution has been reached. We have all worked hard on this issue over the last three years and it is a significant result not only for AIF members but the entire festival sector.”

Live Nation’s Phil Bowdery, in his role as chairman of the Concert Promoters’ Association, added that the agreement “recognizes the importance of the live industry but also … of huge significance is that it recognizes the sector’s diversity. By coming to this agreement, and the recognition of the common ground we share, we believe it works in the best interests of all parties involved.”

PACE Rights Management, the company that takes care of the necessary paperwork on behalf of rightholders, who want to direct license, also claimed victory: “After years of refusal to license festivals proportionally, the PRS has finally been forced to accept proportional licensing at festivals,” a statement from PACE reads.

It remains to be seen how the new direct licensing mechanism will play out in practice. 

“Given the terms of the deal, the solution may well see the live-sector parties having to pay more than is envisioned within the deal, either due to increased license fees and/or increased administration costs,” the statement continues.

What this means is that rightholders who want to Direct license may not agree with the way PRS is calculating their royalty rate. It’s one of the reason they chose to Direct License in the first place.

PRS’ public performance policy states: “Pop concerts are paid on an event-by-event basis. The licence fee relating to the event is paid directly over the relevant event set lists after administration is deducted. No distinction is made between headline and support acts, with all works being treated in the same way. Revenue is apportioned to all individual works performed within a licensed event, based on duration.”

– Pace Rights Management
Pace Rights Mangement was set up by artist manager Paul Crockford and Adam Elfin, who’s held many positions in the music industry for the past 25 years

Some rightholders lament that PRS is calculating the value of the amounts that it pays out on a pro rata temporis basis, meaning proportional to the time their works are played. These rightholders state that the value of a right depends on totally different parameters than play time, such as and most importantly: popularity of the artist performing their rights. At headline shows the value of the rights is based on the ticket income that those rights generate.  Whereas at festivals that can be better calculated using the fee paid to the artist performing the rights, and then every work performed by that artist having equal weight, irrespective of the performance length of each work, according to PACE.

PACE therefore thinks it unlikely that direct licensors will agree to license their rights by the amount deducted by PRS, which means that promoters may still end up paying more than was intended by the new tariff. What is more, “to operate PRS’ policy requires expensive administration to time each work performed by the second. If festivals expect rightholders to license according to the same methodology as PRS does, in reality a new independent organisation will be required to operate this system, which will mean extra administration and expense for the festivals,” according to a PACE spokesman, who concluded: “the deal seems to have been rushed through, with little or no thought about how it will actually work.”

PACE also points toward a recent ruling by the Belgian courts in a case that involved the country’s festival industry and SABAM, the local PRO. That ruling effectively interpreted an EU directive, which is intended to simplify copyright proceedings on the continent, and came to the conclusion that Tariff rate for license fees couldn’t be applied to a festival’s gross ticket income, since a lot of that income was connected to non-music related activities.

According to PACE, the UK Copyright Tribunal interpreted EU law differently, and ratified PRS calculating its festival Tariffs based on the gross the licensee makes. 

“Both interpretations [of the EU directive] can’t be right. Either The Tribunal is wrong or the Belgium courts are wrong. Either way, it will have consequences for one or both of those decisions.”