‘Potentially devastating’ £49m music fee hike

By Stuart Stone

- Last updated on GMT

Out of tune: trade bodies have expressed disappointment at PPL's decision to increase music use costs
Out of tune: trade bodies have expressed disappointment at PPL's decision to increase music use costs
Industry trade bodies have expressed their disappointment at the decision to introduce a new tariff for hospitality businesses hosting music events.

What is the SFE tariff?

According to Phonographic Performance Limited (PPL), the new tariff relates to the playing of recorded music in public at events such as discos and DJ nights and applies to nightclubs, pubs, bars, cafés, restaurants and hotels.

Following consultation, PPL has decided that the fees associated with the current tariff, which has been in place for around 30 years, are too low to be an appropriate reflection of the value of using recorded music at Specially Featured Entertainment (SFE) events to businesses.

The new SFE tariff will, therefore, introduce a number of changes including:

  • Measuring the audience at an SFE event by using the total number of admissions
  • A change so that the fee will increase in proportion to audience size (measured in bands of 25 persons) helping to ensure SFE events with different audiences are treated fairly and consistently
  • The introduction of two new smaller tariff bands, for SFE events with attendances of 1 to 25 and 26 to 50 persons
  • The phased introduction of increased fees over a five-year period from July 2019, based on an initial rate of 4p per person per hour (up from the current average of 3.9p per person per hour). This will move to fees based on a rate of 9p per person per hour by 2023.

“I would like to thank our licensees for engaging with PPL’s Specially Featured Entertainment consultation,” PPL chief executive Peter Leathem said.

“We have listened to their views as part of finalising our new SFE tariff. Recorded music forms a very significant part of SFE events and we believe that the new SFE tariff delivers a fairer return for our members who create that music.

“We look forward to working with our licensees and their representatives to ensure as smooth a transition as possible to the new SFE tariff.”

Following a consultation between July and October 2018, Phonographic Performance Limited (PPL) has taken a decision that will see the introduction of a new tariff on the Specially Featured Entertainment (SFE) licence as of 1 July 2019.

The measure will see the SFE licence cost increase by 130% on average for music playing hospitality venues – potentially costing businesses £49m according to UKHospitality.

The SFE tariff applies to any event where recorded music is played at a nightclub, pub, bar, restaurant, café or hotel as “featured entertainment”, played by a DJ, and where there is dancing, or provision for dancing, at a venue.

As reported by The Morning Advertiser​ in November 2018, the Music Venue Trust found that 33% of small music venues (up to 350 capacity) felt increases in business rates had an “extreme, strong or moderate” impact on their existence in the past year.

Responding to the decision, the British Institute of Innkeeping’s chief executive Mike Clist told The Morning Advertiser​: “The BII is disappointed by PPL’s decision to raise the tariff on the SFE licence by 130% on average.

“Pubs and clubs that are liable for the tariff are predominantly in the night-time economy, which is so important not only to our high streets, but also our rural communities.

“We have been working for over a year and will continue to work with the British Beer & Pub Association (BBPA) and UKHospitality to protest against these totally unreasonable increases.”

Another ‘big blow’

“We are extremely disappointed by PPL’s decision to raise the tariff on the SFE licence by 130% on average,” Brigid Simmonds, chief executive of the BBPA commented.

“The night-time economy​ is vital to the future of our high streets, but businesses that are crucial to that night-time offer like pubs are already struggling with, on average, three pubs a day closing their doors for good.

“This decision will be another big blow to hospitality businesses that are struggling to survive.

“For the past 18 months, we have been in discussions with PPL and have highlighted how the changes proposed to the tariff would be disproportionate and unwarranted.

“While PPL has addressed some of these points, our fundamental concern is that increases by 130% on average and, in some cases, much more, are not sustainable.

“The SFE tariff has consistently grown already through annual RPI increases, which is an increasingly discredited inflation index and is consistently a percentage point above CPI.

“As a result, those who have been paying SFE licences over the years have already been paying more than their fair share. 

“We will consult with our members and the wider hospitality industry in more detail on these unreasonable increases.

“Copyright charges are established by law, but average increases of 130% that undermine the viability of pubs, clubs and the night-time economy are not justifiable.”

Stifling ‘exciting’ businesses

“The decision to introduce a new tax for music venues could be potentially devastating,” UKHospitality chief executive Kate Nicholls explained. “This new tax will see venues hit with an average 130% increase, which we estimate will cost the hospitality sector upwards of £49m.

“Hospitality businesses are already being bombarded with constantly increasing costs and, only today, a Government report ​highlighted the pressures being faced by music venues.

“The report stated that increasing costs were a major factor in the closure of venues. This additional massive cost is not going to help, it is only going to force more and more venues out of business.

“It is not just nightclubs and large venues that will be hit, either. Village pubs that host weekly discos will be strangled by the charge and there is every chance that such events, upon which many pubs might rely, will be forced out altogether.

“The UK’s music venues are some of the hospitality sector’s most exciting businesses. Music plays an enormous role in our lives culturally and socially as well as economically, but extra fees such as PPL’s will only wring the last life out of venues.

“UKHospitality has been in discussions with PPL and repeatedly highlighted the problems this new tariff would lead to.

“We had some success in avoiding proposed structural changes but it is disappointing to see them ignore our warnings and push ahead with a hike.

“Unless PPL rethinks this charge, it is only going to put the businesses they want to charge out of business.”

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