Bracing for Brexit: U.K. Music Industry Making Plans to Prepare for Chaos -- With Live Sector Most at Risk
Contingency plans are being worked out for several sectors of the British industry as the deadline to leave the European Union looms.
LONDON — When Imogen Heap announced that she was canceling a leg of her fall European tour due to the "extreme uncertainties of traveling throughout the [European Union], so soon after Brexit," it brought attention to one of the most pressing issues facing the live-music business.
The English singer-songwriter wasn't the only one concerned. In the past few months, other touring acts have canceled or turned down bookings to ensure they don't get stuck in the red-tape nightmare many Europeans are anticipating, as the United Kingdom inches closer to pulling out of the European Union on Oct. 31.
"We have made sure our European acts are not booked into a U.K. tour in November and vice versa for the U.K. acts," says Steven Braines, CEO of The Weird & The Wonderful, a London-based label/management company that represents DJs Maya Jane Coles and catz 'n dogz, and also promotes events across Europe. "It's absolute bullshit, but that was the only way we could mitigate it — to not have shows in either direction."
Deal or no deal, U.K. Prime Minister Boris Johnson has vowed the country will leave the EU on Oct. 31, and he hopes to reach a final agreement at an EU summit on Oct. 17. Of the possible scenarios in play, a no-deal Brexit — in which the United Kingdom pulls out of the EU customs union without negotiating a soft landing — is regarded by music executives as the worst possible outcome.
"The big concern is that businesses with smaller margins are going to find it more difficult to withstand changes," says Tom Kiehl, deputy CEO of trade organization UK Music.
The live sector is most at risk: UK Music estimates that additional costs and administrative charges could reduce income by up to 40% for touring artists.
In the event of a no-deal Brexit, customs checks for touring acts entering the country from within the EU — and U.K. artists touring Europe — are likely to take significantly longer. That could affect tightly planned schedules and lead to delays and cancellations.
Touring acts also may need to buy temporary international customs documents, or carnets, costing £325 ($400) in order to cover moving equipment across EU borders. Freight companies have warned that major British ports like Dover and Calais could grind to a halt, which could in turn stop artists from getting equipment and stage production into and out of the country. A no-deal Brexit would also see European artists touring the U.K. (and vice versa) required to pay import tax in advance on all merchandise they bring with them to sell to fans. Additionally, European health insurance cards may not be valid, necessitating the purchase of health and travel insurance.
The impact on financial markets is likely to be just as volatile, with the value of sterling expected to tumble in the event of a hard Brexit. "If you're a U.K. artist and you're touring the U.S. and Europe next year, getting paid in euros and dollars, great, you'll earn a lot more money," says Simon Liddell, director of music and entertainment at finance specialists Centtrip. "International artists playing the U.K., paid in sterling, can expect a lot less."
For labels, the major short-term consequence of a no-deal Brexit will be the disruption of the physical supply chain. In preparation, British majors and independents have been building up their stock of physical product in the United Kingdom and scheduling extra time in their distribution chain for fourth-quarter releases.
"We're confident we're in a good place," says Peter Breeden, the CFO and COO of Warner Music U.K. "We've secured a U.K. warehouse, stocked with all our key peak-season releases and this year's top sellers, and we've shifted our new release timeline so that we're shipping physical product earlier and mitigating any potential border delays."
Breeden says that Warner's HR teams have also been working with potentially affected employees from EU member states, and label teams have been factoring in possible Brexit disruption when planning artist campaigns.
Nevertheless, the industry is bracing for delays in physical distribution. "We do not expect new tariffs on CDs or vinyl, but we do expect administrative formalities, delays and costs, as with imports and exports to many non-EU countries," says Geoff Taylor, chief executive of label trade group BPI.
Retailers also fear that a no-deal Brexit could restrict availability and ramp up production costs of new vinyl titles, the majority of which are manufactured in Europe.
Another consequence of leaving the EU is that the United Kingdom will no longer be required to implement the European Copyright Directive, a vital piece of legislation that could revolutionize how user-generated content services like YouTube pay right holders. The music business fought hard to secure the law earlier this year, and although the British government has said it will implement the directive post-Brexit, even though it wouldn't have to, there's skepticism as to how quickly, or even if, that can be achieved.
"There is a pre-existing commitment there," says Helen Smith, executive chair of European labels body Impala. "The question is whether or not that will be upheld." She says it's vital that the U.K. music industry doesn't miss out on the copyright gains won in March and implements a legal framework that mirrors the EU's tough stance on UGC platforms.
The severing of ties between the United Kingdom and EU also would provide a regulatory hurdle that Vivendi would need to surmount before selling part of Universal Music Group. Right now, the United Kingdom can apply its own antitrust rules to mergers and acquisitions, although it typically leaves competition inquiries to the EU. After Brexit, any divestment of shares would need to be approved by both European and U.K. regulators.
Positive consequences from Brexit are few and far between, believe execs, although one silver lining could be the ability to negotiate "meaningful changes on things like touring visas for America and new trade agreements with the U.S. and other markets," notes Kiehl. But for now, the dilemma occupying the minds of artists, managers, promoters, touring musicians and retailers across Europe is how to prepare for the multiple Brexit scenarios that might play out, including the prospect of a delayed withdrawal until 2020 or later.
"The biggest problem is that everything is hypothetical," says Braines. "And if you're a business like us that represents both U.K. and European acts, then the problems are a hundred times worse."