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08.01.11 Music Week 3

Retailers plan to offset VAT hike as December’s late rush improves trading outlook

Stores formulate their VAT strategies

Retail By Ben Cardew

MUSIC RETAILERS LOOKING TO BOUNCE BACK from a Christmas period dominated by bad weather and economic uncertainty face a fresh squeeze on profits, as VAT goes up tomorrow (Tuesday).

The Coalition Government announced in June that it was to increase VAT from 17.5% to 20%, as it took desperate measures to reduce the UK’s debt mountain.

Those changes come into effect tomorrow (Tuesday), with the British Retail Consortium (BRC) already warning of the effect it could have on the fragile retail sector. BRC director general Stephen Robertson says, “Our snapshot shows retailers expect a difficult December to be followed by a tough 2011. They believe the VAT rise will contribute to higher prices and people will be put off spending.”

However, while findings released by the BRC show 74% of retailers plan to offset their rising overheads by increasing prices in the wake of the VAT hike, most music retailers plan to swallow the increase because they want to maintain the rounded price points – £10 for an album, for example – that customers are accustomed to.

HMV witnessed a big upsurge in the final few days before Christmas while online shopping (below) hit record levels

Online retailers’ trade body IMRG estimated that a record £153m was spent online on Christmas Day itself...

“We are going to absorb [the rise in VAT] and see what happens in the rest of the market,” says Malcolm Allen, owner of Malcolm’s Musicland in Chorley. “It is all we can do, otherwise you end up with all sorts of other price points.”

HMV is also doing its best to minimise the impact on customers by spreading the VAT rise across a range of products that it stocks. A

spokesman for the retailer says this means it will be able to

“maintain the integrity of our price points as well”.

However, Allen and others believe the VAT rise will give bigger retailers, who can profit from Low Value Consignment Relief (LVCR) – a tax mechanism that allows retailers to use distribution centres in the Channel Island and Switzerland to sell goods under the value of £18 into the UK without paying VAT – a further advantage.

Independent retailers, who are unable to afford the complicated logistical setup needed to benefit from LVCR, have long complained about what they see as a tax loophole that allows bigger retailers to undercut them on the price of CDs.

Now Allen says, “If you look at the prices, when VAT goes up they will be 25% cheaper than stuff on the high street.”

The final days of 2010, however, were not all bad news for retailers: after a December that was the coldest since 1910, the snow and freezing weather started to thaw out after Boxing Day – encouraging bargain hunters back into shops.

And the British appetite for a bargain proved as unerring as ever, with store staff taking a record £2bn at the tills on December 26, despite the restriction of Sunday trading laws.

An HMV spokesman says that, while the weather proved a challenge during the run-up to Christmas, the company saw a big upsurge in-store in the final few days before Christmas, with many stores “absolutely heaving”.

And this has continued into the post-Christmas sales. “As we thought, large numbers of shoppers, including many who couldn’t make it out pre-Christmas due to the adverse weather conditions, have been hitting the high street to redeem their gifts on music and other entertainment products, or to bag some bargains in the sales,” the spokesman adds.

For the mail-order operators, the festive period generally proved buoyant, with the bad weather driving many shoppers online, despite fears over delivery dates.

In addition, online retailers’ trade body IMRG estimated that a record £153m was spent online on Christmas Day itself, as shoppers looked to grab early bargains. ben@musicweek.com

Music execs recognised in Queen’s Honours

Independent Music Group CEO and former PRS for Music chairman Ellis Rich and producer Trevor Horn were among a raft of musicians, songwriters and executives recognised in the New Year Honours list last Friday.

Some 25 people associated with music picked up honours, with Rich gaining an OBE; a knighthood going to English National Opera chairman Vernon Ellis; and CBEs for the national ambassador for singing Howard Goodall and Horn.

Songwriter Herbert Kretzmer and the musicians Annie Lennox and Richard Thompson were also in the 2011 list – each receiving an OBE – although the Eurythmics singer was actually recognised for her charity work for Oxfam.

Rich says his OBE “means a great deal to me personally and also I hope raises the profile of music publishers in our industry. I feel very privileged to have received it. I am seriously chuffed.”

Meanwhile, producer Robin Millar and Aim chairman and chief executive Alison Wenham picked up their respective gongs – announced in the Queen’s Birthday Honours list in June – at a snowy pre-Christmas reception at Buckingham Palace.

Millar (pictured with his CBE for services to the record industry) held a dinner at the Groucho Club with friends from the industry including PPL chief executive Fran Nevrkla.

Millar adds, “When you are taken to Buckingham Palace, shoved forward to have a gong put round your neck and share a chat with Prince Charles you are pretty moved by the whole thing and you think all the things you might imagine – ‘why me? I don't deserve this, surely some mistake’.”

Wenham received an OBE for her work for the indie association and the creative industries.

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NEWS RETAIL RESOLVE With VAT on the rise, will 2011 prove to be an uphill struggle for retailers?

NEWS ADDRESSING IP Intellectual property debate raises its head yet again

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Frustration grows as Government continues to stall on small gigs exemption in Licensing Act

Live music awaits licensing liberation

Licensing By Robert Ashton

THE MUSIC INDUSTRY HAS TOLD THE GOVERNMENT to stop dragging its feet over a small gigs exemption to the Licensing Act, after new research shows the majority of those impacted by the legislation favour a change in the law.

UK Music has produced incontrovertible proof that there is a real commitment from local councils, licensees and venue owners for the DCMS’ own proposal to allow small live-music events to operate outside the bureaucracy of the Licensing Act – something that was proposed exactly 12 months ago by a consultation set in train by the last Government.

While nothing has happened during 2010 with that DCMS consultation – which opened on December 31, 2009 – or with further Coalition promises to cut the red tape around the live music scene, the industry organisation has uncovered clear evidence that nearly 75% of stakeholders now want an exemption for limited audiences.

Some, like Oxford City Council, have provided strong backing. It

The current Licensing Act is hurting small-scale live music, says UK Music states in its response to the proposal to exempt small live-music events from the Licensing Act 2003, “We believe that the proposal fully reflects the need for small venues to provide live music should they choose in order to generate much-needed streams of revenue and provide much-needed diversity.”

Other councils are not quite as enlightened. The Staffordshire Moorlands Licensing and Regulatory Committee, for example, remains vehemently opposed to the proposal because it fears a change would permit all-day small music events and attract a litany of complaints.

Similarly Camden Council, which polices Britain’s live-music capital, has concerns over loud music’s impact on local residents and believes an exemption – were it applied – should only relate to unamplified live music.

The UK Music analysis also shows: ● of the 243 non-confidential responses to the DCMS consultation from bodies such as the Association of Noise Consultants, Alliance of British Clubs, Musicians’ Union and British Beer & Pub Association, 181 say they are in favour of an exemption. Among these:

● 62 want an exemption for premises with up to 100-person capacity; ● 56 want an exemption for premises with capacity exceeding 100 people; and ● 16 want an exemption, but do not suggest how many people should be permitted.

Commenting on his organisation’s findings, UK Music CEO Feargal Sharkey says that the current Licensing Act is hurting small-scale live music, something already flagged up by no fewer than eight previous consultations, including two Government research projects and a Parliamentary select committee.

Sharkey adds, “While [we are] delighted an overwhelming number of respondents wanted small venues to be exempt from the red tape of the Licensing Act, there is immense frustration that we are still waiting for the Coalition to deliver on their promises.

“Live music is part of this country’s DNA. It stitches communities together. And, particularly in the current economic climate, it remains a vital part of the livelihood of musicians, pubs, clubs, bars and a host of other businesses. “

Liberal Democrat peer and live music campaigner Lord ClementJones is currently awaiting a second reading of his rewritten and rebooted Live Music Bill, which has widespread cross-party support and would remove the barrier to smallscale gigs at a stroke.

The hopes of many campaigners now lie with the Clement-Jones Private Members Bill, although Sharkey points out that Licensing Minister John Penrose, who in June told Parliament he was committed to moving fast on better arrangements for small venues, can use a legislative reform order to quickly (within 40 days) change the conditions of the Licensing Act.

Sharkey adds, “I hope Penrose can take the overwhelming message of this belated consultation onboard: give power back to local communities, liberate small-scale live music and take it out of the Licensing Act.”

Of those respondents that indicated to the DCMS they are against an exemption, 43 said they were against premises of up to 100person capacity being exempted; while four are against an exemption but do not specify the size of premises. robert@musicweek.com

...as Tate Britain fends off the ‘daft’ red-tape of Licensing Act provisions

WESTMINSTER CITY COUNCIL has ordered the Tate Britain to apply for a licence normally required by venues hosting rock gigs if it wants to exhibit an award-winning art installation, in a move that highlights the shortcomings of the Licensing Act.

Glasgow-born artist Susan Philipsz’s sound installation at the London gallery features a recording of her singing the traditional folk song Lowlands Away, which is played through two loudspeakers.

When the work won the £25,000 Turner Prize at the beginning of December the local li i h i i i i ll exhibition was licensable under the Licensing Act 2003; people were considered to be visiting the gallery to view art and the music element was ancillary to that.

However, after discussions with the Live Music Forum, which like UK Music supports a small venue exemption and wants to highlight other inconsistencies and pitfalls with the Licensing Act, Westminster Council appears to have had second thoughts.

The council has now advised Tate Britain that a possible exemption under the incidental music provision of the Licensing A i i bl d i h ld k wants to continue to display Philipsz’s work.

LMF campaigner Hamish Birchall admits it is “daft” that the art gallery should require the licence and faces a £20,000 fine if it fails to do so. But he believes this shows up the inadequacies of the Act as it currently stands.

“I think it is the first time a gallery with a sound installation has been licensed and it means some other art galleries should think about what they do,” adds Birchall.

“It illustrates the drafting of the Act never envisaged this sort of hi I i fi i h coming up with high-profile examples of madness.”

But Birchall offers an intriguing way out for the gallery. Because morris dancing is exempt from the public dancing requirements of the Act and can be accompanied by unamplified live music, he suggests Philipsz could sing Lowlands Away unaccompanied by a mic next to a group of morris dancers.

However, if this comprises the integrity of the artwork, then a licence seems unavoidable. The cost of Tate Britain’s licence application could be in the region of £600 plus the cost of advertising i h l l A l h

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