Article Archive

Could Music License Fee Increases Kill Clubland-

Author: Rachel Olding
Sunday, 9 December 2007
An increase in the musiccopyright licensing fees payed by nightclubs has club owners concerned for thefuture of their industry. 3D’s Rachel Olding investigates.Just a few weeks ago, with little fuss or fanfare,a small fee increase quietly came into effect in Sydney’s nightclubs. Just fifty-one cents tobe collected and distributed to recording artists as royalties, andprogressively rising to $1.05 over five years. But, according to promoters andnightclub owners, this fee may mean your favourite club might no longer bethere. It is the first phase of a decision made by theCopyright Tribunal in July to increase the copyright licence fees thatnightclubs and bars must pay. Initially brought forward by the PhonographicPerformance Company (PPCA), who collects the fees and distributes them torecording labels and artists, the ruling increased the fee from seven cents perpatron to $1.05, a 1500 percent hike many nightclubs have since argued isunsustainable. On the one hand, the PPCA defended the move as itchannels more money to the artists. “The recorded works of artists and theirrecording companies have been undervalued in many areas for far too long,” saidJohn O’Donnell, Chairman of the PPCA Board. “This decision goes some way toaddressing that and is very much welcomed by the artist community and recordlabels.” On the other, the nightclubs aggressively opposedthe ruling. Trystan O’Brien, marketing director of World Bar in King Cross,believes they misunderstood the nightclub industry. “They’ve played on this image of the stereotypicalnightclub owner as some sort of gangster raking in all this money and tried towin their case over by the ‘starving musician’ argument but in actual fact it’sa complete role reversal,” he said. “We run on such a slim margin on absolutelyeverything. It’s just going to help keep fat cat music executives happy withtheir yearly bonuses.” World Bar previously paid $12,000 each year to thePPCA but this has now risen to $93,000 and will reach $191,000 within fiveyears. The increase doesn’t only affect smaller clubs. In a report put together for the Tribunal, Sydney’s largest nightclubs expressed concernthat the fees are based on the capacity of the club rather than actualattendance. Home Nightclub in Cockle Bay has a capacity of 1800 but wasaveraging 800 paying customers per night at the time of the report. Their feehas risen from $26,208 to $190,944 and will hit $393,120 within five years. Thepicture was just as bleak for Tank nightclub in the city, with a capacity of900 but averaging numbers closer to 400. Yet it is only now that punters filling the clubsevery weekend may be joining the nightclubs in crying foul. As a partial olive branch, the Tribunal agreed tophase in the tariff, starting with an increase to fifty-one cents andincreasing progressively to $1.05 per patron, based on capacity and for everynight the club is open. The first phase came into effect on 17 November and itwon’t be long until our wallets and schooner glasses feel the effect, saysJames Moses, owner of Favela Nightclub in Potts Point. “We are absorbing the cost but I think you willfind all the clubs will eventually increase the entrance fee,” he says. “It isa business and the idea is to maximise profit margins, so once it is evidentthat our profit margins are decreasing as a result of the PPCA fee, the covercharge will be altered.” O’Brien says World Bar is reluctant to pass thecosts on to patrons via drink prices or cover charge, leaving staff wage cutsas the only possible way of balancing the fee increase. “It’s hurting the staffthat work in nightclubs and it’s hurting the underground independent musiccommunity. It just seems grossly unfair – and quite obviously so,” he says. Asthe fee increases over five years, he believes World Bar will essentially beput out of business. “It’s completely unsustainable, certainly for us and Iwould say pretty much any venue of a similar size.” However, the PPCA maintain that the increase is notexcessive, with chairman Steven Peach stating in the PPCA media release that, “Themusic is the key to attracting patrons and driving revenue in these venues. TheTribunal has recognised its important role and accepted our evidence in supportof a rate rise.“This is a modest increase when consideringnightclub operators typically charge $10 per person for admission, $5 for adrink, $2.80 for a bottle of water and $2 to hang up a coat.”Other clubs are looking into ways of side-steppingthe regulations. Loopholes include playing imported or live music, or turningit off all together, all to the detriment of the artists, the local musicindustry and the PPCA. Candy’s Apartment in Kings Cross avoids the PPCArate increase as it has a mix of recorded music, live bands and producerperformers but promoter and event organiser Tal from The Music People says theywould be forced to pass the fee on to customers as a ‘dance tax’ if their musicpolicy changed. Like most other independent clubs and bars, theyrun on very small margins and would inevitably have to cut jobs.“Unfortunately, we are a rare exception and others in the industry may not findthey have the music policy, club and people to weather this storm,” he says.“This concerns us because when the local industry suffers inevitably so do we.”Moses is also tempted to play all non-PPCA licensedmusic yet is aware of where that will leave local dance music producers. Butconsidering the fees rarely even trickle down to the producers, it’s easy totake the bait and snub the PPCA. After the fees are collected, the PPCA pays alltheir expenses and then splits the remainder with half going to artists and theother half going to record labels. Artists cannot expect to receive royaltiesby simply registering with the PPCA as the money is distributed according tothe ARIA charts, which is based on units sold. In an industry that ticks on12-inch record sales, digital downloads and DJ sets, local dance musicproducers barely feature in commercial charts like ARIAs.  Sydney DJ and producer James Frew has beensuccessful in the industry, reaching thousands of sales on digital downloadnetwork Beatport for his tracks and receiving rave reviews from DJs abroad, yethe hasn’t seen a cent from the PPCA. To him, a thriving nightclub industry isfar more important. “Without a healthy club scene the local DJs havenothing to produce quality music for. If clubs aren’t successful, there is novibrant local scene,” he says.  The PPCA have proposed a system in which DJs wouldlog all their tracks so as to divide the royalties more accurately, yet Frewsays DJs mix up to hundreds of songs a night, often spontaneously, making atruly accurate system little more than a pipe dream.It won’t be entirely clear for a while to comewhether local producers will reap the benefits of the PPCA rate increases, butit’s plain that, whether absorbing the costs themselves, passing them on topatrons, changing their music policy or closing their doors, Australia’s clubs will be footing the bill.(NB – a representative ofGilbert and Tobin, the law firm acting for the PPCA, could not be reached atthe time of print.)