The Featured Artists Coalition has launched a petition calling on UK song rights collecting society PRS to reconsider its decision to reduce the funding it provides to the PRS Foundation. The society confirmed last week at its AGM that that funding will be cut from the current £2.5 million a year to £1 million a year from 2024.

PRS created the standalone Foundation in 2000, having previously supported new music initiatives via a Donations And Awards Committee. The society then committed to provide the organisation with an annual grant. That donation comes from what PRS calls ‘non-licence revenue’, which is basically interest the society earns on investments and royalties awaiting distribution.

Since its creation in 2000 the Foundation has launched numerous schemes providing funding to individual songwriters and artists, as well as various talent development organisations, aiming to help music-makers pursue innovative music-making projects and to progress in their music careers.

Those schemes have funded thousands of projects over the years, and have become all the more important in an era where music-makers often need to build more momentum around their music-making themselves before commercial music industry partners are able to invest. And also where independent artists have more international opportunities, often because of digital distribution, but then need financial support to truly capitalise on those opportunities.

As the number of funding schemes and the number of applicants has grown, the Foundation has also found other sources of income to boost those schemes, with various music companies and organisations providing additional cash, including record industry collecting society PPL.

However, the PRS grant remains a key part of the Foundation’s income. That is now being reduced, PRS says, because it is making less from those interest payments than it used to. A spokesperson told The Guardian: “Donations from PRS For Music are generated separately from the royalties paid out to our members. This income has declined significantly over recent years. As such, the difficult decision was made to reduce our donations”.

Providing more context, the Foundation’s CEO Joe Frankland confirmed in a statement that conversations have been ongoing for some time regarding future PRS funding, with the society’s management team and Members’ Council exploring possible alternative ways to support the charity ”once it became clear that the specific source of revenue from which charitable donations are made will no longer be sufficient to maintain a higher level of support”.

“Regretfully, no alternative solution was found which worked for all parties and the Members’ Council delivered their decision to the Foundation in December 2021”, Frankland added. Although insisting that the £1 million a year commitment from PRS will ensure that the Foundation can continue to operate, he admitted “this is disappointing given that PRS’s overall collections are on an upward trajectory and the society is on a path to collect £1 billion annually from its licensees”.

Many in the wider music community have responded negatively to PRS’s decision to reduce its funding to the Foundation, insisting that – if ‘non-licence revenue’ is indeed slumping – the society should have found another way to continue supporting the charity at the current level.

After all, as Frankland noted – although the monies PRS collects and distributes were hit by the COVID-19 pandemic and especially the shutdown of live music – beyond that temporary blip the organisation’s income continues to grow each year. And that self-stated ambition to become a “billion pound society” – ie to be processing more than a billion pounds in royalties every year – was repeated at last week’s AGM.

Many other collecting societies around in the world actually divert a portion of the royalties they collect to funding initiatives like those run by the PRS Foundation. And while some societies have been criticised for diverting too much money to such schemes – especially when those deductions also apply to royalties they collect on behalf of songwriters in other countries – many people would support a modest diversion of this kind being instigated by PRS. Especially if the diverted money came out of the so called digital black box.

‘Black box’ is the colloquial term used to describe monies collected by collecting societies which cannot be accurately paid through to the members whose music was specifically used by each licensee. The black box exists because many of the licensees licensed through the collective licensing system are unsophisticated users of music who are not able to provide comprehensive usage data – ie they can’t tell the society what music they actually used.

They are also often paying relatively nominal licence fees into the system each year, meaning it would be impractical for PRS to monitor usage itself, because the costs of doing so could exceed what is actually being paid by the licensee in the first place.

Societies do now receive and gather more usage data than in the past, and the use of audio ID technology should increasingly help societies identify what music has been used and therefore which members should be paid. However, for now the black box remains and each society has to come up with ways of distributing that income to its membership, often based on general market share data.

Such black box distribution rules are often controversial, perhaps inevitably given there will always be winners and losers whatever rules are adopted. Though the distribution of the digital black box is arguably the most controversial.

Because, in the case of streaming services like Spotify, we know exactly what recordings have been streamed, with the services providing super comprehensive and accurate usage data. However, under the current system the services don’t know what songs are contained in those recordings, so each month music publishers and collecting societies receive recordings based usage data and must then identify what songs have been streamed and who owns the rights in those songs.

With some recordings, the song itself or the owner of the song isn’t identified. Song royalties due on those tracks then end up in the digital black box, usually administered by a collecting society, and ultimately distributed across the industry according to that society’s distribution rules.

However, given that publishers and societies have all had the opportunity to claim what they are actually due before any money ends up in the digital black box, it seems likely that a sizeable portion of that cash relates to songs created and released by DIY and hobbyist musicians who are not published and are not members of any collecting societies, and who are therefore not part of the big old matching and claiming process.

In the ideal world those song royalties would be passed through the DIY distributors back to the DIY and hobbyist musicians. But while that is not practical, some argue that digital black box should instead be used to support DIY-level artists via organisations like the PRS Foundation.

In its 2019 ‘Song Royalties Guide’ – which discussed the digital black box – the MMF stated: “Unallocated monies [should not be] distributed on a market share basis. Because it is almost certainly the case that unallocated monies relate to streams of songs created and controlled by more grassroots writers and publishers, who never benefit when market share distributions are employed”.

“The songwriting community should be rigorously consulted regarding what should happen to this income”, it added. “One solution would be to allow these monies to be distributed to grassroots music makers through the talent support initiatives many societies already operate”. In the UK, that would be the PRS Foundation.

MMF CEO Annabella Coldrick re-stated this position when responding to last week’s confirmation that PRS was reducing its support of the Foundation. “It’s extremely disheartening to hear today’s confirmation of funding cuts to the PRS Foundation’s budget”, she said. “We’d urge PRS to rethink this decision, and to consider redistributing unallocated ‘black box’ royalties in order to support emerging and grassroots talent”.

And yesterday the FAC made a similar call when launching its petition against the funding cut. It noted: “The £2.5 million donation to PRS Foundation in 2021 represents just 0.32% of PRS For Music’s collections, and 0.37% of distributions to members according to the society’s 2021 reporting. A £1 million donation would represent 0.13% of collections and 0.15% of distributions at 2021 levels. Should the collecting society reach its £1 billion target [for collections], a £1 million donation to PRS Foundation represents a mere 0.1% of collections”.

It then cited the most recent Transparency Report published by PRS, which “includes ‘amounts invoiced and collected but not attributed’ of a massive £235m and ‘delayed distributions’ including for ‘data issues’ of over £20m. In other countries, monies collected by societies, which are not able to be attributed to the society’s members, are used to fund new talent initiatives. That is not how PRS distributes such funds, although it’s not particularly clear how those funds are distributed”.

As for the potential impact of the PRS Foundation’s guaranteed income being reduce, FAC CEO David Martin added: “This decision seems to have come at the worst possible time. With a difficult post-pandemic landscape, new barriers to touring in Europe and the crippling effect of a cost-of-living crisis, with its knock-on impact for touring costs and consumer confidence, it’s hard to reconcile the decision to cut funding with what our sector actually needs to get back on its feet”.

“It’s hard to overstate”, he went on, “we really are facing the most difficult time for our artists and songwriters in a generation, and we are at real risk of the UK ceding its status as a global, music powerhouse”.

You can find out more about the FAC petition here.

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