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Standing Committee on Communications and the Arts
21/11/2018
Australian music industry

AMATO, Ms Maria, General Manager, Australian Independent Record Labels Association

WOODFORD, Mr Ashley, Director, Australian Independent Record Labels Association

[09:44]

CHAIR: Welcome. Do you have any comments to make on the capacity in which you appear?

Ms Amato : I am also the CFO of the Australian Independent Record Labels Association.

Mr Woodford : I am also a board member of AIR.

CHAIR: Although the committee does not require you to give evidence on oath, I should advise you that these hearings are legal proceedings of the parliament and therefore have the same standing as the proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. I now invite you to make an opening statement.

Ms Amato : We would like to thank you for this opportunity to speak to what AIR does and the industry that we represent, the independent recorded music sector of Australia. Based on our submission, we would like to speak today to three key factors, and that is supporting investment in the micro to small businesses that exist in the Australian marketplace. These people are creating a financial future for themselves, doing something that they love. There have been enormous success stories with Australian independent artists and label businesses that have been created as a result of recognising the limitless potential in today's global economy and market opportunities. I would like to change the word 'support' to 'investment', because there are many economic and cultural returns that this sector can offer.

Ashley is not only a board member of the Australian Independent Record Labels Association; he's one of the largest, 100 per cent Australian-owned, independent distributors in Australia that look after hundreds of artists, and he can speak to their success. It's more stories like this that we want to see happen. And Susan, as you said before, a lot of musicians or creative people know what they would like to do, but they don't know how. When we go to university, we get our degree and we think that this is going to open doors for us. The great thing about the creative industries is that we already know the outcome that we want to achieve. Then we work backwards to gain the skills and support and the networks and the knowledge that we need to get where we want to go and achieve the results that we want, and that's what AIR would like to do.

AIR is not government funded. It relies on commercial endeavours to create win-win opportunities for celebrating the success of independent artists through our annual AIR Awards event, which has been the launch pad for lots of Australian independent artists. We also have a two-day music business conference that we hold in conjunction, in partnership, with the South Australian government, who is a strong supporter of the industry aspects of the music industry and the independent music industry. Our third year looks to be very exciting; but, again, we're relying on commercial partnerships and, like most independent artists in Australia, we definitely punch way above our weight. I'm a part-timer and I have two casual staff, and we deliver what we can with our limited resources. But, with greater investment, we could create workshops where we could teach people about financial literacy, cash flow management, understanding legal terms, how to negotiate, skills development, as well as bringing the key global giants into workshops to help our artists and label businesses do business better, break down barriers and gain greater understanding.

I said this was going to be a summary, and I'm going into detail! On export opportunities, AIR has been fortunate enough to work with Sounds Australia. For the past six years we've taken a group of labels to New York for the Indie Week conference, and that has produced great success for some of our Australian businesses and artists, such as Courtney Barnett et cetera. We would like to see Sounds Australia continue to be supported to provide such opportunity and we hope that AIR can be partnered with them to be part of it, because our members and our businesses have gained a lot.

On copyright, there has been a separate submission, which closed yesterday, which AIR and the Music Rights Association have all been part of; but, predominantly, the one per cent cap that currently exists should be removed. It has been around since 1969. It is anti-competitive and it dictates that broadcasters are only liable to pay up to one per cent of their fee, but removing that could introduce greater opportunity. I think that's my summation.

CHAIR: Could you explain a bit more about the one per cent cut?

Ms Amato : The legislative price cap in section 152A of the Copyright Act in 1968 has existed since 1969, where commercial radio broadcasters are required to pay artists and labels no more than one per cent of the station's gross annual revenue. We believe that that is anti-competitive, because the market has changed since 1969. That would be very helpful. It would create new opportunities for negotiation and for our Australian artists to not only be played more but receive greater income. It doesn't cost the government anything really, because it's a commercial negotiation, but we need the cap to be lifted to be able to do so.

CHAIR: So what would you lift the cap to?

Ms Amato : It doesn't matter. Just remove it.

Ms TEMPLEMAN: Can I just pick up on that? It's not something I'm very familiar with. What amount of money are we talking about?

Ms Amato : I can't give you the numbers on that, because I haven't done the exact research, but others before me have. Music Rights Australia, PPCA and ARIA could probably speak to this better. I could come back to you post this meeting with some facts and figures.

Ms TEMPLEMAN: That would be great. The musicians as a business—you've articulated some of the thoughts that I've had around watching young musicians know what they want to do musically and creatively but not quite have the stepping stones to do it. Presumably, as soon as they get a manager, there's an extra layer of sophistication that comes in, and I've seen those things happen. What do you see as the useful steps that, from a government policy perspective, you can provide to people? You can't get in there and subsidise them along the way while they're doing it, but what could we do that would lift that business acumen and skillset for them more quickly?

Mr Woodford : The hardest part these days is marketing. There are no set rules in what you do with marketing. I get the question all the time—'Where do we spend our money on marketing?' The answer is, 'Wherever.' You would assume that it's Facebook advertising and things like that, but even that's changed in the last 18 months. It's trying to find things where they can get a return on their marketing dollars—triple j does a great job; triple j Unearthed is fantastic. That's really broken ground for a lot of the new artists coming up. If you go into triple j Unearthed, you'll see a lot of the triple j presenters have actually ranked a few of these new artists and commented on these things. That's been an amazing platform for a lot of these young Australian artists, but it does focus on the 'cooler' side of the music, if you understand what I mean by that. It doesn't really help the regional country guys or even the more commercial dance guys—and girls, obviously.

CHAIR: Does triple j have a certain age group of Australians who listen to it? I don't know.

Mr Woodford : Yes, they do. They've opened up Double J again now, and that's aimed at an older demographic, but it's limited. It's inhibited in a lot of respects, because it's just on the digital bands of radio. Export is paramount to every artist these days. From my background, 80 per cent of our income would have been Australian income because the labels were all licensing product to release just for Australia and New Zealand and only owned Australia and New Zealand rights. In the last five years especially that's gone complete circle. Now those same labels are developing Australian artists purely for export opportunity, and we're really kicking goals overseas with Australian music at the moment. There's a lot of focus on Australian artists in many different realms, whether it be touring, DJ'ing, just on the radio or whatever. So what you find now is that those labels would will also sign to labels in other territories—the US, the UK, wherever it may be. Now they're spending more and more money on marketing overseas of that material and retaining those rights so that the money is coming directly back to Australia.

Our business is the largest digital distributor of music in Australia. It's a fully Australian owned company. Sixty per cent of our income now is purely from the US. We have a big issue with withholding tax against music royalties, because it's antiquated. That's inhibitive for us, and it makes us not competitive. We're now moving our business over to the US to cover that, so we can get around that. There are three or four other companies that have done the same thing in the last 12 months. They've grown to a certain level in Australia, and, because of opportunity and obviously the size of market and the lack of support in a lot of respects from this side, they're moving to the US.

CHAIR: Can you explain that a bit more? Sixty per cent of your income comes from the US. Why are you specifically now moving to the US?

Mr Woodford : Because of withholding tax. We can't compete with the multinational distributors, so we're moving it to the US. A lot of the labels and the artists are doing the same thing for various reasons like that.

CHAIR: This is because their tax is less over there?

Mr Woodford : Yes.

Ms TEMPLEMAN: How does that withholding tax work when applied to your business?

Mr Woodford : Great question. If you're in America and you buy something on iTunes in the US, that money comes back to Australia and we lose five per cent. But, if that originates from a US label, that goes back to the US as another five per cent. It's a double taxation, in the sense that they've basically lost 8½ per cent. The solution is to eradicate it.

CHAIR: If a consumer buys $100 worth of music in the US and that's sent back to you, what do you end up with?

Mr Woodford : We end up with $95. Are you talking about after the costs and the platform and everything?

CHAIR: With the withholding tax—I'm not right across it.

Mr Woodford : It's a five per cent withholding tax between the US and Australia. But, if that money's got to go back to the US, for example, then you're losing another five per cent going back. And, from a distribution perspective, it's highly competitive globally now. We're competing with declining margins, so that five per cent can make the difference between us, and a lot of the labels, making money or not.

CHAIR: When you say you're moving to the US, does that involve job losses here?

Mr Woodford : Yes, totally.

CHAIR: How big is your organisation? How many staff do you have? What will happen when you move?

Mr Woodford : There are 30 staff here. All the logistics and everything will remain here. Personally, I wouldn't move out of Melbourne. The logistics and the bulk of the business will all be done from here, but, where we've started with one person in the US, we imagine there'll be five or six in the US within 12 months. And that will obviously have an impact on certain jobs over this side.

Ms TEMPLEMAN: Can I clarify that these are the Australian withholding tax regulations we're talking about, and because we don't have an agreement with the US—I know that there are exceptions when there's an international agreement—that's the core of the problem. That means you basically go, 'It's too hard here.'

Mr Woodford : My limited understanding of it overall is we do have an agreement with the US which brings it down to five per cent.

Ms TEMPLEMAN: Right. Not the 10 per cent.

Mr Woodford : Maria may know a lot better than I do.

Ms Amato : There's a treaty between the US and Australia, meaning it's reduced to five per cent. Some other territories, like Germany et cetera, have 10 per cent. It's just a treaty that the Australian government has brought in to minimise what it would be. I'm unclear, though, of the other way that Ashley is talking about.

Mr Woodford : It's the same back the other way. But if you use the US and Germany—I don't know how recently, but I've been told quite recently, in the last few years, let's say—they've eradicated the withholding tax. But I know that for us, right now, that's making us quite uncompetitive in the global thing. I don't mean to distract. My example was basically that there are Australian entities moving to other countries now because of the opportunity and being able to earn more money.

Ms Amato : Basically I suppose, if that were removed, it would encourage more Australian businesses to stay in Australia and encourage more investment perhaps.

Mr Woodford : The bottom line with what I'm saying is that export is key. In a positive sense, Australian artists are really breaking great ground overseas. Sounds Australia is doing a great job for that. The EMDG grant is amazing. If anything, it's just not long enough. Obviously everyone is travelling a lot more. They're going to conferences overseas. They're touring more overseas. The EMDG grant is fantastic. It's just not long enough for us in the music industry. I was always told, when we were under the EMDG grant, that we were never claiming anywhere near a lot of other industries. So I see there's an opportunity there, maybe specifically for arts or something like that, for it to be continued on.

Ms TEMPLEMAN: How much longer would you like to see it continued on?

Mr Woodford : Forever. That's my obvious answer, but even double would be amazing. I think we are now three years out of it, and I'm travelling more now than I was in it. So there is opportunity for us to really grow export even more. The volume of music is there. The artists, the talent, in this country are amazing. It's just getting them out at a global level.

Ms TEMPLEMAN: I have a really naive question about the independent record labels. Can you just define that for me? How does the record label industry define itself?

Mr Woodford : You've got companies like mine that are wholly Australian owned. You've got artists that may be distributed by Universal, Sony and Warner. They're still considered independent because they pay for everything themselves. They pay for their own development, their own recording, their own touring—everything. So they fall under the majors. We still consider them 100 per cent independent. In terms of Australian companies, outside of the majors, you've got distributors, managers, touring companies and marketing companies. There are hundreds of people working underneath the music industry, under one umbrella, from all different parts of it.

Ms Amato : With the digital explosion, today, a lot of artists are starting their own small businesses and microbusinesses, and doing it themselves with help. So they're outsourcing their marketing et cetera. Rather than being signed to a major—getting a huge advance, and then you're at their mercy because it's unrecouped and you need to pay it back, and if you had a great hit with the first album, you may be dropped later down the track if you don't reach that same level, and your artistic freedom may be limited because you may need to do what they tell you—when you're running your own business, you decide where you will go, what you will do, what you will sing, what you will wear. There's greater freedom and self-empowerment. We want to empower more people to go and start their own small businesses because, let's face it, big business can't create the jobs of the 1960s, perhaps, under the Menzies era, and neither can government, and it shouldn't be the responsibility of either.

If there could be more encouragement for you to go and do what you love and we will invest in you—because we believe in you and believe that the outcome that you're providing has a huge cultural and economic benefit that we can't quite measure—all you've got to do is look at Italy after the Second World War and it was probably cinema that brought them out of those doldrums and created the fifties boom. We don't have the money to do the economic impact, but, when I was working in the film industry as the CEO of the Melbourne International Film Festival, we were able to determine that, for every dollar of government investment, we returned 12. That didn't even count the mental health benefits. It would be really great to do that kind of comprehensive study.

In relation to government funding, my understanding is that some funding decisions are based on ABS statistics, meaning the number of employees that a company may hold. In the music industry, that's a little difficult because most micro- and small businesses don't draw a wage, per se, but they take whatever profit is left at the end of the day, and it goes on their income tax return. So it can get missed from those stats. I don't know how it's all factored in, but something to consider is that it's being unmeasured. I'd like to educate the micro- and small businesses in our industry to recognise the importance of superannuation to make sure that they're looking after their own future. They may not be aware that you can have basic income protection from your super fund—life insurance and total and permanent disability. There are all these factors that need education. If I had more core funding so I could have more conferences and workshops and educate people without needing to enforce a membership fee—which is kind of a deterrent, but we need to fund our operations and core costs—that would be great. Who knows what opportunity that could bring!

Mr WATTS: On the export front, we've heard lots of evidence that this is a key to a sustainable career in the music industry these days, and we've also been hearing evidence about non-tariff barriers to trade. We heard about the costs of acquiring visas, going backwards and forwards, with the US. Are there any specific barriers to doing business overseas for independent artists that we should be aware of, over and above general—

Ms Amato : Independent artists probably can't afford to get themselves to a trade fair, and there are lots of them that happen overseas—Indie Week UK, Reeperbahn, The Great Escape. There are lots of them all over the world. They're a great opportunity to meet service provider industries, to be picked up by internationals, to explode your career. As Ashley was saying before, if there were more export grant opportunities that you could apply for to take yourself over there and also small business grants—let's all face it: it costs a lot of money to set yourself up in business. Two out of three businesses fail—that was the last stat I read—because they fail to plan how they're going to grow. If there was something like that where there was hand-holding with an organisation—like AIR, perhaps—where certain milestones can be delivered or administered or if there were opportunities such as attending conferences to gain a specific outcome, that would be good.

Mr Woodford : They garner more respect on their return to Australia as well by travelling like that, so they get more attention, whether it be from radio or media in general.

Mr WATTS: It's a legitimacy type thing—perceived.

Mr Woodford : Yes.

Mr WATTS: We also heard that one of the big obstacles to making a viable export push is the second trip. You make the first trip over, you make headway, but lots of artists don't have the cash flow to make the immediate follow-up trip. Is that something that you confront?

Ms Amato : Yes, and also understanding cultural differences. The way we negotiate with, say, China is very different to how you might negotiate in, say, New York, where you need to be more direct, and very different to how you would negotiate in, say, Europe. It's about having an understanding about how to go about negotiating a deal. I think negotiation skills, whether you're doing it through your independent label or through your manager, are really important.

Mr WATTS: Is this what you were driving at in your submission when you talked about how there has been a lack of focus on the business of music?

Ms Amato : Yes.

Mr WATTS: That's on the artist's side, not just the policymaker side.

Ms Amato : That's right. We've been fortunate enough to get a small grant out of the Australia Council last year for our conference, but mainly that's for community outcomes and the musician. We don't fully tick the box for a small business, so I could never get core funding from them—or anyone else really—because that side of it doesn't exist within the music industry grant funding, that I'm aware of. There might be a small business one-off grant opportunity, but it's not ongoing. If a valid case can be made to government from these organisations that we've identified, including AIR, perhaps they could be assessed on the potential that could be gained.

Mr Woodford : There's also a stat—Maria may know more specifically—around downloads. When that was happening pre-streaming, independent music consumption was about one-fifth of the overall. Now that we're into the streaming market, it's more than a third. That's the sort of growth that we've had in that three-year span. That's a global stat. As I said, I can't remember the specific percentages, but that's one thing you need to take on board.

Ms Amato : I can speak to that. Several years ago, we applied for funding to do a research grant. We didn't get it from Australia; we got it from overseas—from the worldwide independent network that we belong to. We received 100,000 euros, because that's how much it cost to engage Deloitte Access Economics to produce this research. They measured the Australian market for the 2014-15 financial year, which determined that Australia was a $400-million-dollar market at that stage—that was the independent size of the market—and our global market, according to the WINTEL report, shows that we're seventh in the world. For a small country, that's phenomenal; Australia's really punching above its weight to be seventh. This year's report isn't out yet, but I believe that we've still held that position, so that's phenomenal. The independent sector enjoys 33 per cent market share, so we're basically the largest major. There are three majors; collectively, they have the other percentage. That number can only grow, if more and more people are going out there. We want to capture young people in particular who are creating a successful career or business for themselves. How wonderful would that be?

Mr WATTS: That's a function of the changing structure of the market now.

Ms Amato : The opportunity is there, yes. Recognising that it's there, streaming has created challenges; there's perhaps less income per track.

Mr Woodford : Yes, there's much a longer long tail now with streaming. What Maria is alluding to is the fact that there's not that immediate cash flow like there has been with downloads and CDs et cetera prior to that.

Mr WATTS: So that new market structure puts a greater impetus on the need for that business side of music at the micro level, at the artist level?

Ms Amato : Yes.

Mr Woodford : They rely pretty much 100 per cent on touring. If they're not touring, they're not making money.

Ms Amato : If they're not being seen, they're not being heard and they're not going to make it into those global playlists. We need to make sure that Australian music is recognised everywhere in the world.

CHAIR: Ashley, with your clients, you've got a lot of Australian artists that come to see you when they're just kicking off. How does it work? How do you get in contact with them?

Mr Woodford : They come to us. Our marketing is just word of mouth. Obviously, we try and do the best we can by everyone. Then that creates more interest in other people coming to us. But, as a trend, we're seeing more music managers coming to us in the last two years than we were prior. Up until then, it was more labels, small organisations, whether it be a one-man show or 10-plus people.

CHAIR: What about the age of your clients and the mixture of men and women? Do you get people who are straight out of school who want to be rock stars that come and say, 'I'm going to have a go'?

Mr Woodford : Yes, you do. It comes down to genre in a lot of respects. Obviously, certain genres attract younger kids, if you want to call them that. But we're also seeing a lot of legacy artists coming out now, older artists from the sixties, seventies and eighties, around then, who hadn't brought their catalogues out for downloads et cetera. But Australian artists are bringing them out for the streaming, and I suppose the grandkids are telling them that they're not cool, because their music's not online. So we're seeing a lot more of the older legacy artists coming out.

CHAIR: With your business, your company, what sort of relationship do you have with radio stations? When you get these artists coming to see you, how important is it to contact radio stations and try and get their tracks played?

Mr Woodford : They each look after their marketing independently, unless they've specifically asked us to. We position ourselves purely in the logistics distribution side of things, so, globally speaking, putting their stuff on iTunes and Spotify—all the major platforms around the world. When it comes to them pitching their stuff to radio et cetera in Australia, you use third-party pluggers or third-party marketing companies. It's very hit and miss, because obviously there's a large volume of music being submitted to radio every week. If you're an Australian and you're not coming in with a story already around that track or that album, it makes it very hard to get any sort of notice on radio.

CHAIR: I'm just looking at your submission. You're saying most of the Australian music played on radio is from big labels and not from independent labels, is that correct?

Ms Amato : Sorry?

CHAIR: In your submission, it mentions that on commercial radio most of the content is represented by major labels and not Australian independent—

Mr Woodford : There are more and more Australian artists who are starting off on independent labels and then getting picked up by majors. That's the easiest way to look at it. So they're doing all their development, all that sort of growth, in the independent sector and then obviously getting picked up by the multinationals to try and break them out overseas in a bigger way.

CHAIR: They're just offering them cash to switch to them? Is that how it works?

Mr Woodford : Pretty much, yes. I don't know how—but, yes, it's cash.

Ms Amato : Adele started her life as an independent. If you get an offer you can't refuse, why would you knock that back? It's great. It's shows success if you start your roots off independent and then off you go.

CHAIR: You've got here:

It is also worth noting that based on modelling AIR conducted from radio air play in the 3 months from June - August 2018, of the 21% of content played on Australian commercial radio networks, 93% of the Australian content was represented by major label interests leaving just 7% of Australia radio airplay available to Australian owned businesses.

But, from what you're saying, that's not really that relevant if they're just getting picked up and starting off with you.

Ms Amato : It is relevant, because we still want to promote Australian businesses and Australian artists and have them played on commercial radio. Recently, Dean Ormston from APRA AMCOS and Dan Rosen from ARIA had conversations with the commercial broadcasters' association to investigate how much Australian content is being played on radio. It was found that not enough was being played. We still believe that not enough is being played. Sometimes Australian artists were being played at off-peak times and we're still continuing, collectively, the conversation to encourage Australian music being played. At the second panel that happened here in Melbourne, the commercial radio DJs were saying that they want to play more—because we're now shining the torch at them and we want to highlight the fact that there are lots of Australian artists to choose from. One or two DJs were saying that they need quality, but what are we saying here? Are we saying that Gotye's song, 'Somebody That I Used to Know'—which he could basically retire on—isn't quality? There are lots and lots more Australian artists like that that are worthy of being played on prime time, and we want to see that happen.

Mr Woodford : Tracks like that broke overseas. It wasn't the Australian media that broke that. They tend to play Australian tracks that charted years ago, rather than playing new stuff.

Ms Amato : Like eighties music—not that there's anything wrong with that, but there are lots of great Australian new, independent artists.

CHAIR: How hard is it for a new artist who comes to see you and who is trying to get on the radio here in Australia?

Mr Woodford : Impossible, basically.

Ms Amato : It is hard.

Mr Woodford : Unless it's something that suits triple j's playlist. They're very proactive, but it's probably on the cooler spectrum, if you can relate to that.

Ms Amato : We're bringing Spotify and Apple and YouTube to our conference to try and encourage global playlisting of Australian music.

CHAIR: What new music are other radio stations playing, then?

Ms Amato : Justin Bieber.

Mr Woodford : Multinationals.

CHAIR: Just American on the other—

Mr Woodford : Whatever is dictated to them from overseas. Again, you have companies—

CHAIR: Because of those big record labels?

Mr Woodford : It's more just the story that's been put around those records. It's already gone No. 1 in the US or No. 1 in the UK. It's just an easy add for them, rather than looking deeper in their submissions and saying, 'Oh this is actually a really good track.' They're just not doing that. They're playing it very safe.

Ms Amato : And they have huge marketing budgets and promo budgets and touring budgets that we just can't compete with.

CHAIR: It wasn't in your submission, but I think Melbourne is—per capita or something—the best live music venue in the world, in terms of the amount of live music that's happening. How—

Mr Woodford : More record stores here, too, per capita.

CHAIR: Record stores are still flourishing, are they?

Mr Woodford : New ones have been popping up. There are a few that struggled through the hard times and they've come out the other side, but there are definitely a lot of little pop-up ones and stuff happening.

CHAIR: In the domestic market here, you try to go for radio, but then you also try to get them into local venues. What's more important or are they both important?

Ms Amato : Both, because any way you can get your music heard is the door that's going to open your opportunity to greater success.

CHAIR: Thank you. Is there anything else you wish to say before we finish?

Ms Amato : Once again, thanks for the opportunity and we look forward to greater investment and being able to give you the returns you want.

CHAIR: Thank you for what you're doing in the industry and you'll be sent a record of the proceedings, just to check that everything was correct. If you've been asked to provide any additional information, please get that to the secretariat. Thank you very much.

Ms Amato : Thank you.

Mr Woodford : Thank you.