A call for action to European and national decision makers to grant music SMEs a specific status to reinforce the sector and give a real boost to the European cultural economy

Music in Europe has huge potential thanks to the talent of thousands of artists, SMEs and micro actors. Europe’s leaders have formally recognised (1) that the cultural economy (2) and the sector’s SMEs are key to its Lisbon strategy. Cultural and creative SMEs are the drivers of “growth, job creation and innovation”, at the same time strengthening cultural diversity and social integration.

Europe’s leaders also recognise that these SMEs need support (3). The EU’s economy of diversity is the future. SME empowerment is an economic, cultural and social imperative. In music, it is a precursor to market recovery.

What is needed is a practical solution and this is what IMPALA now seeks to provide. Based on the experience of thousands of cultural SMEs, IMPALA calls for the urgent adoption of a visionary three-pronged plan (4) which gives cultural SMEs a specific status and which engages the EC and all Member States:

Investment package for financial viability and independence:

- Lower VAT for music, apply tax benefits for SME innovation/risks/production (5), roll out public/private loan guarantee schemes (6) and SME friendly growth loan finance. Disseminate national initiatives amongst other member states such as:

  • French tax credit
  • Flemish cultural investment fund
  • UK tax shelter
  • French loan guarantee scheme (IFCIC)

- End EC and national discrimination between film and music, in terms of funding and other regulatory measures (7).
- Provide 1.5bn Euros per annum in EC investment for culture (8), re-model European Investment Bank schemes, establish a European Creative Industries Bank and adopt new national investment programmes.

Market access package to allow SMEs to compete on their own merits and counter chronic concentration (9):

- Recognise the specificities of culture and give a specific status to cultural SMEs.

- Make preferential terms for cultural SMEs a commercial and regulatory reality (10), legislate for SMEs first as the main players with exceptions for the big players (11), adopt new competition rules (12) for the cultural sector which prioritise diversity and consumer choice, conduct music sector enquiry.

- Provide dedicated independent space in all distribution channels - radio, broadcast, digital and retail (offline and online) (minimum 30%) (13).

Copyright and digital package to promote the market in Europe:

- Extend term of protection for sound recordings, making sure revenues benefit all artists and performers.

- Adopt groundbreaking EC deals on ISP engagement and their responsibility in resolving P2P issues (14), promote the right of creators to fair private copying compensation, implement new education plans to promote creativity and copyright as an enabler (15).

- Find out why Europe’s digital market lags far behind the USA and adopt real solutions which counter the exclusion and discrimination faced by the independents online.


(1) In the conclusions of the main EC Council (meetings between the Heads of State of all EC members), as well as Culture Council, of March, May and December 2007.
(2) The culture economy is bigger than any of chemicals, automobiles or ICT manufacturing.
(3) See footnote 1. The EC’s Agenda for Culture will implement this. It seeks to unlock the potential of culture and the cultural industries, in particular SMEs as one of the EC’s key priorities. The Action Plan identifies the concrete measures required to do so. It would also implement the UNESCO Convention on cultural diversity. This is because it would help secure one of the fundamental principles of the convention - fair and equitable access for all actors to the means of creation, production and distribution of cultural expressions.
(4) IMPALA’s experience (the only pan-European association dedicated to cultural SMEs) shows that music SMEs can only deliver their potential if three key conditions are met: i) financial viability and independence; ii) market access to give SMEs space to compete on their own merits and counter chronic concentration; iii) properly functioning copyright systems and digital market in Europe.
(5) For example, music tax credits and wealth tax exemptions as introduced in France and also tax benefits, which apply in other countries to innovation/research in other sectors. Lowering the fiscal burden for small cultural actors (for example professional taxes and social security) would also incentivise investment in music.
(6) Such as the scheme used by IFCIC in France (Institute for Financing Cinema and the Cultural Industries).
(7) For example, the measures used in the audiovisual sector to promote independent production, distribution and broadcasting (state aid, independent production commitments, industrial support programme such as Media Plus).
(8) Including support for risk-taking in independent music production and distribution, as already exists for film. Culture contributes 2.6% of the EU’s GDP but currently receives less than 0.05% of the EU’s budget (862.3 billion euros, 2007 to 2013, of which 400 million euros for cultural programmes which do not even support the industry). This is not a balanced investment in culture. In 2008 the total EU budget is 129.1bn euros, of which 58bn will be spent on competitiveness, knowledge based economy and social cohesion. 2.6% of that budget would be 1,5bn euros per annum.
(9) Concentration creates severe market access problems and gives the major companies excessive power. For example, the majors, who create less than 20% of the music produced in Europe today, control over 95% of Europe’s hits and main airwaves. Furthermore, the gap between the majors and the independents means the majors are able to leverage their power and squeeze the independent’s space more and more. The biggest major now controls over 50% of the world’s music while only a handful of the biggest independents have more than 1% and only one has 1.5%.
(10) In recognition of the SMEs’ disproportionate contribution to cultural diversity and innovation (80% of all new releases in music are from independents). Commissioner Kroes has already recognised that preferential treatment for SMEs is fully justifiable “economically and politically”. She acknowledged that “… we must give SMEs an extra boost to help them overcome the gaps” (speech on SMEs, November 2007).  New competition guidelines are needed to set out an approach which is better adapted to the cultural and creative sectors with respect to cultural economics, mergers, merger remedies, state aid, dominance and anti-competitive agreements.
(11) 99% of all music operators are SMEs and micro actors, producing over 80% of all new releases. SMEs are the norm, not the exception and EC needs to legislate for them first, with exceptions for the bigger players.
(12) See footnote 10.
(13) Based on the precedent of the EC audiovisual independent production and distribution commitments, or other systems such as those implemented in France, or in Canada to make sure Canadian content has space.
(14) Such as the «Olivennes Agreement » adopted in November last year by the French President.
(15) Through specific education and awareness raising initiatives. This is necessary to improve understanding and appreciation of creativity and cultural entrepreneurship, as well as foster identity and pride in Europe's culture and diversity. This would include of course the role of copyright as an enabler - helping creators earn a living and disseminate their works.  Copyright is seen by some as an obstacle. The following question should be considered: Is copyright really an obstacle or is the problem excessive market power of big players? In reality this is not a copyright question. It is a market power and education issue, which has been allowed to be highjacked by the ICT lobby.


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