Music Venue Trust response to Music Industry in Wales Inquiry

1. About Music Venue Trust

Music Venue Trust is a registered charity which acts to protect, secure and improve Grassroots Music Venues in the UK. ^{^[1]}

Music Venue Trust is the representative body of the Music Venues Alliance ^{^[2]}, a network of over 500 Grassroots Music Venues in the UK.

A full list of the 34 Music Venues Alliance Wales members is provided at Annex A.

2. Grassroots Music Venues in 2019

A. A nationally and internationally accepted definition of a Grassroots Music Venue (GMV) is provided at Annex B. This definition is now in wide usage, including by the UK, Scottish and Welsh Parliaments. ^{^[3]}

GMVs exhibit a specific set of social, cultural and economic attributes which are of special importance to communities, artists, audiences, and to the wider music industry. Across sixty years, this sector has played a vital research and nurturing role in the development of the careers of a succession of UK musicians, for example The Beatles (The Cavern, Liverpool) through The Clash (100 Club, London), The Undertones (The Casbah, Derry), Duran Duran (Rum Runner, Birmingham), Housemartins (Adelphi, Hull), Radiohead (Jericho Tavern, Oxford), Idlewild (Subway, Edinburgh). All three of the UK’s highest grossing live music attractions in 2017 (Adele, Ed Sheeran, Coldplay) commenced their careers with extensive touring in this circuit. ^{^[4]} In Wales, GMVs have played a central role in kickstarting the careers of The Manic Street Preachers (TJs, Newport), Supper Furry Animals (Clwb Ifor Bach, Cardiff), The Joy Formidable, (Central Station, Wrexham), Gruff Rhys (Neuadd Ogwen, Bangor), Funeral For A Friend (Hobo’s Bridgend), Skindred (Sin City, Swansea).

B. GMVs constitute a network with comprehensive geographical presence and with a reach that extends into communities which are otherwise not engaging with culture.

“Coming from a rather bleak town such as Doncaster, opportunities are few and far between. These are the places where the ecstasy of musical fusion is both witnessed and achieved for the very first time. They are the cornerstone of modern music itself, the big bang, the beginnings of our time as both music lovers, and musicians.” - The Blinders

C. During the last twenty years, this sector has declined substantially:

I. 144 Grassroots Music Venues were trading in London in 2007

II. Only 94 GMVs were trading in London in 2016, a reduction in the number of trading spaces of 34.7% ^{^[5]}

III. Iconic spaces in Wales that have closed during this period, including TJs (Newport), Central Station (Wrexham), The Point (Cardiff), Buffalo Bar (Cardiff), Barfly (Cardiff), Gwdihw (Cardiff), The Parrot (Carmarthen), Muni (Pontypridd).

IV. Every major town and city saw a decline in the number of trading venues

V. Of the 25 venues that launched the live career of Oasis in 1993, only 11 remain open. ^{^[6]}

D. Alongside closures, these venues also experienced ^{^[7]}:

I. Significantly reduced audience attendances; GMVs operate at significantly reduced capacity, with an average attendance of 160.5, only 51%.

II. Reduced opportunities for artists to perform; GMVs are open for live music 3.89 times per week, only 55% of the time

III. Rapidly deteriorating infrastructure that is inadequate to support the delivery of artistic excellence.

E. As a result of the decline, entry prices have stagnated, resulting in:

I. reduced earnings potential for artists

II. a downward spiral of under investment.

F. Despite this decline, there are still circa 550 such music venues currently operating in the UK.

G. Audience research conducted by Music Venue Trust in April 2016 formed part of the UK Music Wish You Were Here Report 2016 ^{^[8]}, the first time accurate tracking of activity in this sector had been attempted.

H. Additional venue and artist research carried out by Music Venue Trust in May and June 2016 provided further information about audience attendance and performance activity related to GMVs. That research established that GMVs

I. Have an average capacity of 316, a total capacity of 126,400 per night

II. Deliver 1556 shows per week, 80,912 shows per annum

III. Create 4,668 performance opportunities per week, 242,736 performance opportunities per annum

IV. 249,667 people attend every week, 12,982,667 people per annum.

I. Based upon the above and in-depth research carried out in 2015 to 2017 by the Mayor of London and the Greater London Authority, specific to the function and operation of GMVs within London ^{^[9]}, it is deduced that these 550 GMVs:

I. Contribute circa £390millon to the UK economy

II. Invest circa £187million per annum in talent development

III. Support circa 9600 full time equivalent jobs.

J. Grassroots Music Venues are the small business entrepreneurs of the UK music industry, taking exceptional risks with programming and support for new and emerging artists. This activity produces long-term significant economic outcomes for the wider industry and for the UK. In 2015, the UK Music Industry provided:

I. Total GVA: £4.1billion

II. Total Export Revenue: £2.2billion

III. 119,020 FTE jobs.

K. GMVs have demonstrated a strong and passionate engagement with local and regional audiences, addressing Arts Council Wales core aims; to foster an environment for the best artists and organisations in Wales to create their best work; to help valued organisations to find and develop new business models that encourage resilience and longevity, to build a place where we can find, nurture and share the best talent.^{^[10]}

“Music fans that attend gigs in these grassroots venues have a voracious appetite for live music and a high percentage attend shows regularly, which not only helps build an active local music scene but also supports local talent, enterprise and business.” – UK Music, Wish You Were Here 2016

L. Despite the intent of Arts Council Wales’ core aims, Grassroots Music Venues receive almost no funding from Arts Council Wales or other cultural distribution agencies.

I. Core funding to Arts Portfolio Wales organisations for 2017/18 distributed £26,744,402 to 65 organisations, out of a total funding distribution for 2017/18 of £30,904,329

II. Opera received £4,857,237 (15.7%) distributed to just 3 organisations. Opera was acknowledged within a specific designated category in the funding round

III. Music received £1,387,329 (4.49%) distributed to 6 organisations. ACW do not provide details of the 6 organisations within their report. However, their Report and Financial Statements^{^[11]} indicate that BBC National Orchestra (Grant of £805,133) equates to 58% of this allocation.

IV. No Grassroots Music Venue appears in the list of funded organisations. The distribution to those venues is therefore concluded to be 0%.

M. Arts Council Wales have several schemes to support artists but nothing specific for grassroots music venues which are the infrastructure that support them.

N. Across the EU, governments have provided a variety of mechanisms to subsidise and underwrite investment in Grassroots Music Venues, resulting in an average subsidy of 42% of total turnover, as high as 70% in France.^{^[12]} These initiatives have resulted in exceptional facilities in many of our neighbouring territories, with greater performance fees to artists, higher employment levels, greater numbers of apprentices and training opportunities being just some of the outcomes.^{^[13]}

O. Wales’ comparative lack of support and investment into Grassroots Music Venues is failing to compete with emerging markets and to support the development of skilled UK artists and supporting professionals, specifically those at the beginning of their careers.

P. Examples of comparative investment in emerging markets:

I. Arts Council England created a ringfenced funding programme to specifically address the needs of Grassroots Music Venues in May 2019, an allocation of £1.5 million in 2019/20

II. The German Government announced a package of investments into Grassroots Music Venues to a value of €8.2million in November 2016 (Förderprogramme zur technischen Erneuerung der Aufführungstechnik von Musikclubs).^{^[14]} The programme is specifically aimed at a move to digital equipment which is high quality and reduces energy consumption and costs.

III. In the Netherlands, every middle-sized town or city (approx. 100.000 inhabitants) has a music venue for popular music genres. Fifty-one of these music venues receive funding from the Government following the advice of Muziek Centrum Nederland.^{^[15]}

IV. In Denmark, the Government has established an infrastructure and trading subsidy budget which has developed 19 Grassroots Music Venues of exceptionally high quality. These venues receive ongoing subsidy to create local jobs, support for musician micro-businesses, and platforms for local emerging talent – at the full subsidy rate, each of these 19 venues commits to paying each performing musician 2000 Krone, a fee equating to £250 per band member per performance.^{^[16]}

V. In Norway, The Musikkutstyrsordningen (Norwegian Musical Equipment Foundation) gives bi-annual grants to studios, venues, community groups, and rehearsal spaces for upgrading facilities and maintaining and purchasing equipment. It was established in 2009 and distributes circa 27.5 - 30 million kr per year (£2.5 - £2.8 million). Although it is a national subsidy/state funding scheme, it is governed by a General Assembly comprised of some of the key music trade bodies in Norway ^{^[17]}.

VI. In France, GMVs receive operational support from: Le ministère de la Culture et de la Communication, Le ministère de la Ville, de la Jeunesse et des Sports, Le ministère de la Justice L’Union Européenne - Lifelong Learning Programme and La SACEM. Le CNV - Centre National de la chanson des Variétés et du jazz – administers two schemes by which a levy is paid by all live music events and distributed to Grassroots Music Venues:

i. to promote risk taking with programming at grassroots level.^{^[18]} 195 venues benefitted in 2015

ii. to improve the infrastructure at Grassroots Music Venues.^{^[19]} 59 venues benefitted in 2015.

Each of Wales’ nearest geographical competitors for international touring have established programmes to support infrastructure for GMVs.

3. Our Response to the Inquiry

A. Music Venue Trust warmly welcomes the Call for Evidence and the opportunity to offer specific input on the crisis facing Wales’ Grassroots Music Venues

B. The closure of small music venues across the country has resulted in:

I. Reduced access to live music experiences

II. Decrease in performance/earning opportunities for musicians

III. Decline in the number of touring dates taking place in Wales

IV. Decline in the number of affordable quality live music experiences

C. These direct impacts have short and long-term implications for the UK live music industry

I. One third (29%) of Promoters responding to the UK Live Music Census said that venue closure had an extreme, strong or moderate negative impact on their events in the last 12 months.

II. When asked to describe the most significant problems faced as a live music promoter, one third of respondents (34%) mentioned venues

III. 44% of promoters who responded to a question about the barriers that impact on putting on live music in their locale also mentioned venues. Problems and barriers included a lack of venues, cost of venues, and a lack of suitable infrastructure within the venue itself.

IV. 42% of promoters who responded to an open-ended question about what the (local, national and/or UK) government could do to improve the live music scene mentioned venues, 37% mentioned funding or grants; and 16% mentioned schools or education

V. Festival Headliners are ageing^{^[20]}

VI. New artists are struggling to build audiences^{^[21]}

D. Music Venue Trust believes strongly that the Wales’ cultural sector and music industry have failed to understand the social, economic and cultural value of these spaces. We have undertaken substantial research and partnered with a range of agencies to establish a clear and evidenced picture of the strengths, weaknesses, opportunities and threats faced by Grassroots Music Venues. An inconsistent approach to what constitutes a cultural venue from the cultural sector has created a common perception that theatres, arts centres, concert halls and galleries require subsidy to operate, yet a suggestion that GMVs may require support too is regularly met with the assertion that these are commercial operations. The fact that talent developed in these spaces may in future generate significant money does not make them commercially viable when there is no connection with the future wealth. And the same principle is not applied to development of talent in other styles of music or artforms.

E. The Call for Evidence offers the opportunity to deliver bold interventions and vitally needed support. In considering these opportunities for sensible investment and support for this sector, Music Venue Trust has considered short and long-term threats to the future competitiveness of Welsh GMVs

F. Music Venue Trust has identified three key initiatives which would support Grassroots Music Venues:

I. Improve the quality of audience and artist experiences through a programme of infrastructure investment

II. Attract Private Investment and secure long-term sustainability

III. Resolve long term financial, legal and sector challenges.

Opportunity 1: Updating Infrastructure

Sound + Vision ^{^[22]}: A fully developed and costed plan to improve the performance infrastructure in 101 Grassroots Music Venues in the next five years, delivering high quality in every aspect of the sound, lighting, artist and audience facilities and reducing running costs and environmental impact by converting GMVs to high quality, low impact digital equipment.

Delivery of this project would significantly boost artist and audience experiences and addresses key elements of existing Arts Council England, Creative Scotland, Arts Council Wales and DCMS policy. Sound + Vision is a fully costed five-year proposal with a total project value of £8.35million. Music Venue Trust has already secured £3.6million in matched and in-kind funding from manufacturers and music industry partners, and a fund of £1.5 million has been established in England. To deliver this project requires a total UK cash investment of £4.75million across five years and could be achieved through the creation of specific funding stream within existing Arts funding distribution and Lottery sources, without significant impact upon existing funding demand.

Alongside the capital investment programme sits an audience development package for each venue, and the development of a national apprenticeship and training programme. Full details of Sound + Vision are provided in Annex A.

Delivering Sound + Vision would support key outcomes for Grassroots Music Venues:

I. Create 101 world class GMVs in the UK by 2023

II. Create a national network of high quality spaces which has local and regional impact, directly engaging hard to reach audiences in disenfranchised communities - supporting business to grow and driving growth across the whole country

III. Significantly strengthen the touring circuit and deliver high quality to new and emerging artists and the audiences which support them

IV. Substantially reduce running costs within these venues, creating economic benefits and improving financial resilience which can directly increase payments to artists and supporting staff

V. Increase opportunities for apprenticeships, training, mentoring, with an aim of creating 101 new apprenticeship positions across the UK by 2023

VI. Modernising venues and increasing venue capacity - if the average capacity of venues increased, it would enable venues to sell shows at a higher capacity which would create additional income for venues from both the door and the bar.

Opportunity 2: Securing Investment

A principle cause of closure of Grassroots Music Venues is the comparative financial returns from the physical bricks and mortar which house these spaces; landlords can achieve higher financial returns from alternative tenants or from conversion to residential space.

Music Venue Trust has created a ten-year plan, Grassroots Investor, which aims to acquire freehold ownership of these buildings and create a protected network of spaces – a ‘National Trust for Venues’. Grassroots Investor aligns the intent of the freehold owning landlord, Music Venue Trust, with the leaseholder or tenant, the local GMV operator, creating a supportive partnership where the aim is to maintain a thriving GMV. Music Venue Trust has established a key clause lease which will enable the Trust to provide these spaces to future tenants on the basis of that over-riding objective and has undertaken substantial discussions with key stakeholders.

Creation of a Culture & Heritage Investment Tax Relief: Based upon existing provisions contained with the Social Investment Tax Relief (SITR) and the Social Venture Capital Fund (Social VCT)^{^[23]}, establishing a specific CHITR would enable MVT to create investor packages to tackle a central issue facing GMVs; the freehold ownership of the buildings.

To support schemes such as Grassroots Investor, Government should establish a new Cultural & Heritage Investment Tax Relief:

I. Referencing directly EU GBER carve-out for state aid in relation to culture and heritage conservation (Article 53 of EU Regulation 651/2014) ^{^[24]}

II. Adopting social enterprise/asset lock requirement from SITR model to ensure appropriate application of tax relief incentive

III. £5m investment limit over three-year period – in line with EIS and previously stated SITR objective

IV. Maximum investment £20m – culture and heritage conservation is likely to involve acquisition of assets with potentially significant market value, which needs to be reflected in any investment cap

V. Gross assets restrictions may also need to be increased from £15/16m (pre/post) to £25/30m to reflect increase in permitted investment level above

VI. No restrictions on maximum age of company/trading activities or acquisition of existing business, assets, goodwill etc – culture and heritage conservation by definition implies long-term existing activities

VII. Trading activities should be limited to culture and heritage as consistent with Article 53 – this may require some elements of “positive” approach to prescribing allowed activities rather than just identifying a list of “excluded activities”, although a combination of both approaches may help with clarification.

Otherwise, rules relating to the investee company should be applied in a similar vein to existing SITR and Social VCT schemes:

I. Social enterprise / asset-lock requirements

II. Investment capital in form of debt or equity allowed – same tax reliefs applicable

III. Requirements in relation to non-listing, independence, control of other companies, partnerships, employees, subsidiaries

IV. Prescribed limits on dividend distributions – per share and per year

V. No restrictions on use of assets as collateral

VI. Ranking of debt and equity at lowest level – but clarity on how this works in insolvency would help

VII. No charges/security allowed on debt and “reasonable, commercial rate” cap on interest

VIII. No pre-arranged exit or risk avoidance arrangements

IX. Requirement to use investment funds within 2 years

X. Payment allowed to directors and management

XI. Annual report to be filed alongside annual accounts to provide transparency.

Similarly, rules relating to the investor should be applied in similar vein to existing SITR and Social VCT schemes:

I. Individual but exclusions relating to employees, partners, paid directors (subject to exception)

II. Investor not allowed more than 30% of share capital, loan capital or voting power

III. Investment capital in form of debt or equity allowed

IV. Same tax reliefs applicable as SITR – 30% deduction on Income Tax, CGT exemption/deferral

V. Minimum holding period of 3 years (equity or debt).

Opportunity 3: Reviewing and Updating Policy, Regulation and Taxation

An overhaul of Government and music industry policy and approaches to this sector with the aim of achieving a light touch approach to compliance and regulation and considering supportive measures in taxation by:

I. Further extension of the provisions on capacity within the Live Music Act 2012 ^{^[25]} to remove regulation from additional Grassroots Music Venues

II. Clearer direction and guidance to local authorities on the intent and implementation of the Licensing Act 2003 ^{^[26]} In particular, the licensing conditions for GMVs needs to be reviewed. For example, burdensome licensing conditions are currently making it prohibitively difficult for GMVs from hosting 14+ plus shows in Wales whilst arts centres, which also have alcohol licenses, are allowed to host 14+ events. This inequality in licensing conditions needs to be addressed.

III. Heavy handed licensing conditions are also placing exorbitant costs on GMVs’ ability to run shows. For example, security costs. Licensing stipulates that 1 security personnel needs to be employed for every 100 people at a live music event. At this current rate, a 400 capacity sold out show would need to employ four security personnel at £15 an hour. For a four-hour shift that equates to £240 per sold out show.

IV. A national review of the existing premises licences within this sector, with the aim of removing grandfather clauses and outdated practices and conditions, specifically those rendered obsolete by the Live Music Act 2012.

V. Establish a statutory right of consultation on planning and development that impacts upon GMVs to mirror that enjoyed by theatres (Statutory consultee Theatres Trust ^{^[27]})

VI. Reform of Business Rates in this sector, with the aim of establishing a sector specific framework for use by the Valuation Office Agency ^{^[28]}

VII. A review of VAT on ticketing within the Grassroots Music Venues sector to:

(i) clearly understand the impact on investment and talent development from taxation within the sector

(ii) consider the appropriate rate of taxation on small venue ticketing (with specific regard to comparison to neighbouring territories and parity with other aspects of the cultural sector ^{^[29]}).

VIII. A review of the collection of royalties for live performances within this sector to clearly understand the impact on investment and talent development of collection agencies and methodologies within this sector, with a specific focus on identifying the use of digital collection management tools to limit administration, collection costs and eliminating minimum fees that obstruct the presentation of small scale shows. ^{^[30]}

IX. Underpinning all the above, a drive towards achieving cultural parity with already recognised creative spaces such as theatres, arts centres, galleries, museums etc, resulting in the adoption of the term Grassroots Music Venues within cultural policies, guidance and funding.

Reviewing and updating policy, regulation, taxation and working practices provides a series of ‘nudge’ opportunities to support GMVs which would have limited cost impact but significant outcomes. Additional work in this area is an effective intervention opportunity which can support the broader aim of cultural parity for our Grassroots Music Venues.

ANNEX A: Music Venues Alliance Wales Members

Venue	Location
Club Db	Bangor
Neuadd Ogwen	Bethesda
Hobos Music Venue	Bridgend
10 Feet Tall	Cardiff
Big Top (The)	Cardiff
Clwb Ifor Bach	Cardiff
Fuel Rock Club	Cardiff
Glee Club	Cardiff
Globe (The)	Cardiff
Live Lounge (The)	Cardiff
Moon (The)	Cardiff
Porters	Cardiff
Tramshed	Cardiff
Undertone	Cardiff
Pie Records	Colwyn Bay
Blue Bell (The)	Conwy
Patriot (The)	Crumlin
Mcleans Pub	Deeside
Pavilion Mid Wales	Llandrindod Wells
Tabernacle (The)	Llandudno
Courtyard (The)	Newport
Le Pub	Newport
Meze Lounge	Newport
Warehouse 54	Newport
Dragonffli (The)	Pontypool
Clwb y bont	Pontypridd
Rhondda Hotel	Porth
Green Rooms (The)	Rhondda Cynon Taff
Creature Sound Ltd	Swansea
Garage (The)	Swansea
Mozart's	Swansea
Pontardawe Arts Centre	Swansea
Sin City	Swansea
Uplands Tavern	Swansea

ANNEX B: Grassroots Music Venue Definition

DEFINING GRASSROOTS MUSIC VENUES (GMV) - CULTURAL AND SOCIAL ROLE

We define the cultural and social importance of a grassroots music venue (GMV) by testing its reputation, role and activity against six criteria:

1. The elephant test

Everybody in the town/borough/city thinks that is the grassroots music venue.

2. Focus on cultural activity as its main purpose and its outcomes

The venue's raison d'être is the music it programmes.

3. A pattern of relationships and specialised knowledge related to music displayed in a person/team actively seeking to programme cultural activity

An organisational focus on music. Other ancillary services (alcohol, food, merchandise) subsidiary or dependent upon music activity.

4. It takes risks with its cultural programme, and that risk taking is the ignition system of the engine that is the UK music industry.

Programs artists that deserve audiences with no expectation of direct financial reward; as a result of this loss-making activity, significant economic returns become available to the UK music industry.

5. A Beacon of Music and key generator of night time economic activity

The presence of a grassroots music venue (or venues) provides a central beacon of music activity that inspires towns/ boroughs/cities to be musical, and the absence of one causes a dearth of music activity. By programming and reputation, GMVs attract audiences who add significant value to other aspects of the night time economy (restaurants, pubs, bars, clubs, transport).

6. Plays nicely with others

Occupies an important role within its local community and is open to further networking.

A Grassroots Music Venue displays some or all of these characteristics, dependent upon factors such as location, economic climate, or seasonal variations.

DEFINING GRASSROOTS MUSIC VENUES (GMV) - ECONOMIC ACTIVITY

We use capacity, activity, employment and financial return to seek to categorise GMVs in three bands:

SMALL GMV:

less than 350 capacity
over 144 live music events per year, providing opportunities for more than 180 micro-businesses (bands)
entry level musicians, some limited activity in established acts
3 to 10 direct FTE jobs (programming, lighting, sound, bar, security etc)
significant number of unpaid roles/volunteers
high running cost to capacity ratio
little if any profit potential

MEDIUM GMV:

351 to 650 capacity
over 96 live music events per year, providing opportunities for more than 144 micro-businesses (bands)
mix of new and established acts
5 to 15 direct FTE jobs (programming, lighting, sound, bar, security etc)
some unpaid roles/volunteers
medium to high running cost to capacity ratio
propensity to programme non-live music (such as club nights) to support live music programme
limited potential for profit

LARGE GMV:

651 plus capacity
over 72 live music events per year, providing opportunities for more than 108 micro-businesses (bands)
programme of mainly established acts
10 to 20 direct FTE jobs (programming, lighting, sound, bar, security etc)
internships and apprenticeships
may be profitable dependent upon external factors (location, additional uses, ownership)

These bands and activities are flexible. Final definition of a GMV within these bands should include variable factors such as location, economic climate, competition, or programming.

DEFINING GRASSROOTS MUSIC VENUES (GMV) – AMENITIES & INFRASTRUCTURE

1. Has a fixed or temporary stage, or as a minimum an area defined as a stage, and exhibits at least one other structural hallmark conducive to live music, such as:

Defined audience space, sound booth, ticket hatch, sound proofing, room adapted to enhance acoustics, stage facing or elevated seating, dressing room, photo pit, external poster frames for advertising gigs, overnight band accommodation

2. Possess a mixing desk, PA system, and at least one other piece of equipment to facilitate live music, such as:

Stage monitors, lighting rig, drum kit, back line, stage microphones, stage box & snake, spare instruments, instrument consumables, signal processors, recording rig, smoke machine

3. Employs or otherwise utilises at least two of the following (they may be the same person):

Sound engineer, booker, promoter, cashier, stage manager, security personnel

4. Applies a cover charge to some live music performances and incorporates promotion within its activities, such as:

Publishes printed or electronic gig listings, issues printed tickets, utilises on-line ticketing, produces displays and distributes posters, advertises gigs involving original music via local media