Setlist, the music business podcast from CMU. This week, FAC steps up its campaign against music venue merch commissions.

Andy: Welcome to Setlist, the music business podcast from CMU. I'm Andy Malt. With me is Chris Cooke. Hello Chris.

Chris: Hello there.

Andy: Now we've once again had a bit of a break, haven't we? It's happened again.

Chris: We did. We had a week off and then that became two weeks off. And because we are told that three weeks is the new two weeks, we then took a third week off. Nobody knows why, really. You went to Glastonbury. One of those weeks, one of them was because you were at Glastonbury. So that was kind of a legitimate excuse, wasn't it? Because you were in a field, you were watching. I assumed you watched some bands. Did you watch some bands?

Andy: Some, yeah.

Chris: So you were too busy watching bands to be recording a podcast. And then I guess it took you two weeks to recover from going to a music festival before you're in a position to record a podcast once again. Is that the reason?

Andy: I think you're shifting all the blame onto me here. I think the second week it was your fault.

Chris: I can't believe it'd be my fault. How could it possibly be my fault? I've not left London in weeks. Definitely your fault.

Andy: But last week I was ill.

Chris: The last week you were ill, yes, post-Glastonbury illness. These are all the reasons why we have been missing. But hey, this now, this moment here is where we are going to get every single Monday morning in your podcast feed without fail from now until the end of time, aka mid-September because I am doing some traveling in September and maybe that will result in us missing a couple of weeks. But that’s ages away. We are going to be in your inbox so frequently, you are going to be very bored with us. You'll be pleased by mid September when we take another week off. You'll be saying, please take another week off. So I think that is our plan for the weeks ahead. But when this turns out to be the last one before Christmas.

Andy: I think we should stop promising to be here every week because we keep doing that. And then we're not. We should also acknowledge that this week we are using a brand new recording setup, which should make everything better. But who knows what teething problems we're going to have with it. So just in case this episode is a complete disaster, that's why. So there you go.

Chris: The main difference between this setup and the old setup is I can see Andy with this setup. And for quite some time now, we've not been able to see each other while recording a podcast. And I'm not convinced being able to see each other is an improvement, but who knows, maybe, maybe it will make the conversation that more compelling, or maybe it will put us off. We'll see.

Andy: That might be the main thing for you. It's not the main thing for me. All the rest of it is the main thing for me. But anyway, that's all the the the disclaimers done. Let's just get on with the show. So as ever, we're going to take a look back at some of the biggest and most interesting music industry news stories of the last week. A week when there were various AI related stories. Some would say too many to fit into a podcast, but not apparently too many to fit into a short intro to a podcast. Far too many to talk about, but weirdly not too many to talk about. Yeah.

Chris: So it's been a busy week for music and AI news. At the moment, that's pretty much every week. So obviously the conversation around AI and generative AI and the impact that's having on the music industry, while not a new conversation, because we've had that conversation in the past, but in the last year and especially the last six months, it's become a really, really big talking point in the music industry.

We've had editions of Setlist already this year where we talked about it. If you are a CMU Daily subscriber, you will have seen the number of stories stacking up. Some of it is around the way that generative AI is being used and new platforms that are coming to the market, although a lot of it is around the legalities and most of the developments over the last week were in the legal domain.

For example, here in the UK, UK Music, which is the cross-sector trade body for basically setting out the music industry's position on things like how the law should deal with AI, copyright law and other regulations. No surprises in there really, because they're pretty much what has already been said by the music industry, for example, through the human artistry campaign. Then Universal Music spoke at a congressional hearing in the US, basically saying the same things.

We've got some litigation. Actually not music yet. There's been quite a lot of litigation building in relating to copyright and AI, and it's all around whether or not, when you train a generative AI on existing content, do you need to get a license from the copyright owner in that content? The copyright industries would say, yes, you do. Some AI companies don't necessarily agree. We are starting to see lawsuits stacking up, mainly in the US, although some here in the UK, testing the copyright obligations of these AI companies.

We’re yet to have any music cases, but the cases that are going through the motions will be very interesting from the perspective of the music industry because most of the debates and arguments are the same. The one that we reported on in the last week in terms of litigation, the comedian Sarah Silverman has sued the makers of ChatGPT OpenAI and also Meta over their text-based AI and the fact that it may have been trained on lots of text, including books without permission from the copyright owners. That's a bit of litigation in the US.

Andy: Yeah. It's not just copyright. Both Universal Music in the US and UK Music over here spoke about publicity rights. In the US, publicity rights are a thing that exists. They're not in the UK, but maybe they should be.

Chris: Yeah. Publicity rights or personality rights or image rights, no one can quite agree on what we should call these. It's a principle that exists in many countries, including the US, which it is thought is the bit of law that artists could potentially use to protect their voice.

Because of course, another part of the Genitive AI conversation and from a universal music position, they were very much focusing on that track that was doing the rounds with imitated vocals to make it sound like Drake and The Weeknd both signed to Universal. That got a lot of press, of course. Can artists stop people from using their voice beyond any copyright protection that might be in the original songs and recordings. If they can, it will probably be by relying on this concept of publicity rights. Here in the UK, we don't have that, so the UK music letter was saying we probably should if we're going to see an ever-increasing amount of people using generative AI to create cloned vocals.

Meanwhile, in the US, although there are publicity rights, they currently exist at a state level rather than a US-wide federal level. So basically what Universal Music were saying when they sent their top lawyer to Congress was, okay, yes, we do have publicity rights in the US, but we should have a clearer federal US-wide right of publicity to give artists control over their voice and possibly their visual identities as these AI tools get ever more sophisticated.

Andy So lots of stories in the last week on generative AI, which we're not going to discuss in any great detail this week, but we do have some resources coming up to help you navigate all this.

Chris: Yes, if you are a member of Impala, the pan-European organisation for the independent music community or a national organisation for independent labels in Europe that is affiliated to Impala, you may be aware here at CMU through our consultancy unit, CMU Insights, we have a partnership with Impala called One Step Ahead, supported by Merlin, where we publish regular reports, helping independent music companies stay one step ahead on all things digital music. And the next one of those reports, which is arriving as we speak, is all about generative AI. There's also a webinar for members of Impala coming up this week, where myself and my colleague, Sam Taylor, will talk you through both from a technical perspective, what is it that generative AI can do? And just as importantly, what is it that it can't do? Because quite a lot of people make claims about AI, which aren't particularly accurate.

Plus we will go through the legalities and the conversations around copyrights and publicity rights and what's happening in the EU and the US and the UK with all of that. So if you're a member of Impala, do make sure you access that report and come along to that webinar. Plus we have a bunch of other resources and webinars in the pipeline on this topic coming your way very soon. So we will no doubt be talking about all of this on setlist every week. Now that we're gonna be every week, oh, we said we weren't gonna commit to that.

But we will no doubt be talking about it here on the podcast, but do keep an eye on the CMU Daily for updates on all of the other resources coming your way, helping you to navigate and understand everything to do with music and AI.

Andy: But let's get on to the stories we are discussing this week. Later on, we'll be talking about the new legal challenge to the UK government's festival drugs testing policy. But first, the UK's Featured Artists Coalition has stepped up its 100% venues campaign, which encourages music venues to allow artists to sell merchandise at their shows without being charged any commission on sales. In an open letter, the FAC called on the live sector to embrace four key principles around merch sales at shows, and also urges music fans and the wider music community to sign a petition backing those principles.

Chris: Now, you may remember, because we talked about it on Setlist and we reported on it in the CMU Daily, that the FAC launched its 100% venues campaign back in January of last year. And as part of that, it now maintains a directory on its website of all the venues in the UK that have confirmed that they never charge commissions on merch sales that happen on their premises. It should be said that most grassroots venues have never charged commissions anyway, so it was very easy for those venues to add themselves to that directory.

But if you go in there, there are also some bigger venues that have also said, yep, you can come to our venues, do a show, sell merchandise before and after the gig, and we will not look to take a commission. But there's still quite a lot of work to be done in this space, which is why FAC is now taking this campaign to the next level.

Andy: Now, I think we all know that since the live sector returned after the pandemic, touring has become more challenging than ever before for many artists with production costs rising and the cost of living crisis making it hard to actually increase ticket prices to account for that. And this means that while at the top level, the live industry is generally doing well again, it's in the mid tier as well as at the grassroots level that it can be hard for artists to stage profitable shows, making things like merch sales at gigs all the more important.

Therefore, venues taking a commission of up to 25% is even more problematic with that commission usually taking up a significant portion or even all of the profit margin that any one merch sale might make.

Chris: Now, I said that there are a lot of venues in the UK who have now added themselves to the FAC's directory to say that they do not charge commissions on merch sales in their buildings. In some cases, that was always the case at those venues. In some cases, that's venues making that commitment for the first time.

Obviously, the FAC would like as many venues as possible, maybe all the venues in the UK to sign up. That hasn't happened yet. One challenge is that some venues, and this is generally the bigger venues, actually have deals with third-party merchandise companies and the way those deals work is that those companies would usually pay in advance to the venue and in return for that, they get rights over merchandise sales that happen in those buildings. And there's two parts to that. One is that means they actually do the management of merch sales.

So generally speaking, they will provide the personnel that run the merch store and manage all of that on behalf of any artists who are playing at the venue. But the other part of that is they then take the commission off the artists in return for that management and also to recoup any advance that they've paid to the venue. So obviously where you've got a venue that is locked into one of these deals with a third party merchandise company, it's not as easy for them to just overnight say, right, no more merch commissions, because actually it's not them taking the commission, it's this merchandise company. It also means that if artists want to negotiate with a venue, and maybe agree to pay a slightly higher fee or whatever in return for there being no merch commission, well, that flexibility doesn't exist because if the venue has already done a deal with a third-party merch company, it can't then negotiate merch terms with each artist on a gig-by-gig basis. Meanwhile, at the top level of the live sector, probably talking arena level, some of those venues have said, and maybe they're right, maybe they're wrong.

But some of those venues have said at the upper end of the live market, where the artist tends to get the majority of the box office, whether that's as an upfront fee or box office split, but whatever, at that level, venues have sort of put into their business model that they have to take a cut of merch sales that happen on their premises in order for the whole thing to add up. And if they stop taking a merch commission, they'll need to restructure how they work with promoters and artists elsewhere in the business, which may or may not be right. It may be if we give them the benefit of the doubt that perhaps at the top end of the business, the merch commissions are necessary.

I'm not saying I necessarily agree with that because I know some managers and some promoters who would disagree, but even if we accept that case, one thing that quite a lot of artists and managers are saying, but okay, maybe with the headline artist who is getting the lion's share of the box office at those big shows that is a justifiable position. But what about the support acts who are usually also charged the same Merch Commission? And we know quite often, even at big shows, support acts are not making much money when it comes to the fee they're earning for playing the show.

Andy: So as I said, in this open letter, the FSC has set out four principles that acknowledge these complexities. And they are as follows. So number one, support acts must never be subject to commission charges on merchandise sales. Two, artists should be offered the option to staff and operate merchandise operations at their own shows. Three, there must be no surprises for artists regarding commission rates when they get to the venue. All rates need to be agreed upfront. And finally, every show must be open to negotiate on merchandise commissions.

Chris: So the aim now for the 100% venues campaign is to persuade as many venues to sign up to those principles, even if they can't say outright, obviously the preference would be for them to do so, but even if they can't say outright, we will never charge commissions on merch. So that is the current message that the FAC is pushing out there and trying to get as many artists and industry people and indeed, as we say, music fans to back those aims.

Andy: So commenting on this new stage of the 100% Venues campaign, FAC CEO David Martin said, "Since launching our campaign, awareness amongst fans and across the wider industry has increased about the devastating impact that onerous commission fees can have on the livelihoods of artists. Fans in particular have become aware that money they thought was being used to support their favourite artists is in some cases spent on punitive commission fees.”

He also noted that “for many artists, the money made from merchandise sales is crucial to keeping shows on the road going on. Ironically, it is when artists step up to play bigger venues and the moment they cost an opportunity to increase that the most crippling fees kick in. In many instances, venues have sold on or outsourced their merchandising rights to a third party, meaning that fees appear baked into higher costs with little room for negotiation. It is these outdated contractual terms that we now intend to address," he concludes. “But if every UK venue implemented the four pragmatic principles outlined in our open letter, it would mark a significant step forward.”

Chris: Now, this open letter has been signed by more than 60 music companies and organizations. So that includes a number of management companies and some merchandise companies and then lots of music industry organizations like obviously the FAC, but also the Music Managers Forum and the Music Venue Trust and many others.

It's also signed by Kevin Brennan, MP, who is chair of the All-Party Parliamentary Group for Music. And of course, the campaign is backed by the FAC membership, including many, many artists. Indeed, this campaign came about because people like Tim Burgess from the Charlotten's and Peter Hook took to social media as the live industry sort of got back into action after the pandemic, stressing how problematic it was that in a very challenging touring market, artists were losing chunks of their merch income, which is as we've said, and as David's Martin said, is really important for those tours to break even.

So this was very much a campaign that began with artists on social media and plenty more artists have signed up in support since then. Some statements were issued by some artists alongside the letter, including from Steve Mason.

Andy: Yes, the former Betaband frontman Steve Mason said, “The current cost of touring is higher than ever before. Everyone is struggling with rising costs and especially solo musicians who must pay a band. The one income that all artists rely on to make a worthwhile profit is the sale of merchandise in the venue before and after the show.”

“Certain venues”, he said, “appear to now be refusing to allow us to sell merchandise without handing over up to 50% of the profit. This is completely unworkable and will cause the majority of artists to think long and hard about the costs of touring. Because live music is where we earn 70 to 80% of our income, this could potentially mean artists being unable to sustain their careers any longer. Britain has a strong global reputation as a leader in music and performance, but do not think for one moment this reputation was easily earned, he says. Unlike other countries who love and support their artists' output, British performers are continually ignored by the government and have to face constant obstacles being placed in our path.”

“We endure because we love what we do. That is often used against us," he concludes. “This stripping of our merchandise profit is very wrong and could be the end for many of your favourite bands and singers.”

Chris: So if that has persuaded you, I'm guessing for most of our listeners you're probably already persuaded, but on the off chance it was that that persuaded you that this is a campaign you should be supporting and getting behind. As we say, alongside this open letter that was published last week, a petition was also put live and I am pretty certain I would almost go as far as guaranteeing that Andy Malt will include a link in the show notes for this edition of Set List to where you can go and sign that petition if you so wish.”

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Andy: And finally, on this edition of Set List, something that actually happened not last week, but while we were on our latest break, the Nighttime Industries Association and the founder of Manchester Festival Parklife, Sasha Lorde, confirmed that they are seeking a judicial review of the UK government's current position regarding on-site drug testing at music festivals. Ahead of that, they called on the government's Home Office to voluntarily reverse that position so that drug testing can go ahead as planned at various festivals this summer.

Chris: So, yes, let's quickly do the background to this story. You may or you may not be aware. I mean, if you read the CMU Daily, you definitely should be aware. But maybe you don't, who knows. But you may or may not be aware that a number of festivals in the UK and in other countries now have a system on site of testing drugs that are in circulation in order to see whether or not there are any substances doing the rounds, which pose a heightened risk to anybody who chooses to consume them.

And this testing activity has been introduced at various festivals and indeed other events in some cities. It happens around where all the clubs are. And in terms of where the drugs come from to be tested, it depends on the country and the region and what the law allows. In some places, actually, people who are at a festival, for example, can go to a stand, hand over drugs that they have acquired from somewhere. And then the testers test those drugs and actually tell that person what it is that they have bought and whether there are any concerns about the substances they bought. For example, sometimes drugs are in circulation that are a much higher strength than they usually would be.

And obviously it's really important for people to know that. But in many other cases, it's not that somebody is actually going into a tent with some drugs and saying, please test them. The drugs are sourced in another way. Sometimes there are dump bins. I know some Irish music festivals in partnership with the health department of the Irish government are doing that this summer, where there will be dump bins, where people can voluntarily put some of the drugs they've bought to be tested.

Here in the UK, often it's just that when drugs get confiscated, whether that's by police or security, they go to these testers. In those latter scenarios, what happens is if, as a result of the testing, they're not the testers identify that there are substances in circulation where there is a heightened risk. They can do two things. First of all, they can communicate that through social media so that people at the festival who may be choosing to buy and consume those drugs are aware that there are those substances in circulation. Plus, of course, they can give that information to police and to onsite medical support. So if there are any issues, the people at the medical tent at the festival already have information about the substances that are doing the rounds.

So this is a system that has been in place at a number of festivals, including here in the UK. But the big development this year is that generally how many festivals have done this in the UK is that the festival promoter has an agreement with the local police force. And the local police say, okay, we are happy for this to happen. And an agreement is set up for exactly how it will work logistically on site. And then with the local police forces endorsement, it is generally accepted that this testing can go ahead.

A lot of festivals actually work with a brilliant charity who are specialists in this called The Loop. And that is what has been happening at UK festivals for a number of years now, including the Park Life Festival in Manchester. But this year, just before the Park Life Festival was due to take place, suddenly it was announced that there's some extra bureaucracy that festivals are meant to go through in order to be able to legally and legitimately undertake this testing activity.

Andy: Yes, this year the Parklife Festival was told that a license was also required directly from the Home Office. And given that getting that license can take up to three months, the event wasn't able to carry out any drug testing this year. So in their recent statement, Parklife boss, Sasha Lord, who is also the night time economy advisor for Manchester and the NTIA said, “Since 2014, there have been on-site drug testing labs at music festivals in the UK. The service has been provided with the agreement of local police and councils by way of a memorandum of understanding with festival organisers and the drug testing companies. Operating on a cross-agency basis means information about dangerous drugs circling at an event can be passed on to festivalgoers, organisers, police and medical services, while any harmful substances can be destroyed or passed to the police.”

“On-site testing”, they continued, “also enables medical teams to treat anyone who has an adverse reaction quickly and effectively because they will already be aware of the drug's chemical composition.”

Lorde himself added, “This on-site testing has saved lives and the absence of it puts lives at risk."

Chris: Now for its part, the UK government's Home Office insists that it hasn't actually changed its position. As far as the Home Office is concerned, or this is what they're saying currently, there has always been this requirement in addition to any agreement with the local police force or local council to have a license from central government in order to undertake this drug testing. So they're basically saying we didn't abruptly change the rules, meaning that because of the last minute notice, Parklife couldn't do any drug testing this year. These rules were always there. The license was already required.

That said, in their letter, Lord and the NTIA pointed out that there have been previous discussions in parliament about drug testing at festivals and the value that that drug testing can have. Some of those discussions have involved relevant ministers from the Home Office. Those discussions have also talked about how festival promoters are working with local police forces on that activity and it seemingly at no point during those discussions was ever formally said on the record, oh, by the way, for this activity to be conducted, a license is needed from the Home Office.

Andy: Now, beyond festivals needing up to three months to even get a license, that requirement poses other challenges. First, the license costs thousands of pounds, which is an issue for festivals operating on tight profit margins. Plus, it requires that a permanent location for the testing be identified, which clearly doesn't work for testing that's gonna take place on site at festivals.

So setting out their demands in this open letter, the NTIA and Lorde said, “We request that the Home Office considers resolving this matter by consent, reaching an agreement that on-site drug testing by organisations continues by agreeing a memorandum of understanding. Should the Home Office wish to pursue its current stated position that on-site drug testing requires a controlled drug licence and a fixed premises, then it should undertake a consultation exercise so as to reach a rational decision taking into account relevant considerations and allowing these organisations sufficient time to comply with the government's decision.”

It then concludes that “in the absence of any or any satisfactory response, we will have no option but to issue proceedings for the judicial review of the Home Office's decision,” which would basically mean that the NTIA and Sacha Lorde would ask the courts to intervene.

Chris: Now, even before this letter was submitted to the Home Office, there was already support building in parliament itself for the government to say even if it's going to change the rules in the future, that drug testing can happen at festivals this year. So for example, Sam Terry MP organized a letter which was then signed by a bunch of other MPs and a number of musicians as well, which told the home office that the decision that they've made to prevent testing from going ahead this summer is short-sighted and dangerous. And those MPs in their letter were saying, we urge you to reconsider this decision and allow this vital testing to continue.

So already pressure building within parliament on the government in addition to what was coming in this letter asking the home office to have a rethink certainly in the short term for festival season 2023 and maybe in the longterm as well.

Andy: But that's all we've got time for on this edition of Set List. If you want to read more about anything we've discussed on this edition of the show, including all those AI updates right at the top, go to the show notes, which you'll find in your podcast player now at setlistpodcast.com. There'll be links to everything. Don't forget to subscribe to the show if you haven't done that already. Rate and review the show because it helps and it's nice. I like seeing ratings and reviewings. Ratings and reviewings? Oh yeah, it's nice. That's nice to see them. So do that. And if there's anything you want to tell us about anything at all, you can email us setlist@unlimitedmedia.co.uk.

Setlist is the music business podcast from CMU. It's presented by Andy Malt and Chris Cooke. And for more on CMU, go to completemusicupdate.com.