A few weeks ago, the UK’s cultural industry organisations presented evidence to Parliament regarding the challenges faced by creators and performers in receiving fair compensation and, most importantly, the relevance of the Smart Fund. The initiative seeks to ensure fair remuneration to creators for the access, distribution and storage of their work on digital devices. For its functioning, technology sellers will contribute a levy or small fraction of the value of each device sold into the fund, which is estimated to raise between £250 and £300 million every year. This is not new, and with it, the UK will join 45 countries that are generating over £900 million a year for creators.

The Smart Fund

In 2021 the creative industries sector contributed £109 billion to the UK economy. Ironically, the visual art community was described, in particular, as “a culture of low fees, unpaid labour, and systemic exploitation”. The report further found that artists earned a median rate of £2.60 per hour (based on a survey of artists delivering commissions to public institutions) compared to the UK minimum wage of £9.50 as of April 2022. The evidence shows, then, that artists currently face common challenges such as a lack of remuneration, working as freelancers and relying on both public funding and copyright royalties to sustain their careers.

As the world turns to digital media, and visual content is limitless and massively shared, artists face a new instance where their work is being copied without remuneration. In this respect, a YouGov poll revealed that 81% of individuals consider accessing cultural content digitally essential, 63% download content for free and only 5% believe every creator is fairly compensated for online content consumption. Today, it is extremely challenging for an author to grant authorisation and oversee the subsequent uses of their work.

Here is where the copy levy comes into play. This figure, as an exception to the right of reproduction, allows a person to copy a work protected by copyright for its personal use or non-commercial purpose. However, to seek a balance between rights holders and users of protected content, the private copy requires a remuneration scheme for authors for loss of revenues or harm caused by the act of copying.

Currently, private copying levies are a relevant source of income for creators and rights holders in different countries. The 2023 Global Collections Report published by CISAC shows that digital media became the largest source of revenue for creators, with private copying accounts worth EUR 368 million. Particularly in the visual arts, revenues in 2022 from the copy levy were up +39.2%, reaching EUR 30 million.

But what is happening globally in favour of the artists that the UK is missing?

To date, the UK royalty system has no available mechanisms to fairly compensate creators when their content is shared and copied on digital devices. “[a]t the moment, we get a lot of royalties for relatively analogue uses for creative work—photocopying, reprography and educational broadcasting—but we have not followed the way people actually access, copy and download creative content… Our policy framework and our copyright framework has not kept up to date.” Reema Selhi, Head of Policy and International at DACS. Yet, cultural organisations recommended the UK Government introduce a “private copying scheme into law to compensate creators and performers, and to protect income from overseas by creating reciprocity between the UK and other countries”.

Assorted-color paint brush on brown wooden table top

It is important to remember that in 2014, under Article 5(2)(b) of the EU Directive 2001/29, the UK introduced a private copy to align the law with the reasonable expectations of consumers in a digital context. Thus, Section 28B of the CDPA adopted a private copying exception, allowing reproductions of a copy of a work lawfully owned (bought or gifted) made by a natural person onto any medium or device owned or controlled by that individual (e.g., a tablet device or MP3 player) for their private and non-commercial use. However, it did not include any provision for a compensation system in favour of the authors.

At that time, the Secretary of State considered that the copy levy exemption could cause minimal harm to right holders and that fair compensation was not required. However, in BASCA v. Secretary of State [2015] EWHC 2041, the exemption was held to be unlawful by the High Court, and the legislation was overturned in July 2015. Therefore, a copy of a work for private use technically constitutes an infringement in the UK today, even though it is a common practice.

With the Smart Fund, the UK cultural organisations then revive the copy levy discussion and the importance of fairly compensating the authors in digital media, legalising a practice that occurs daily. According to the initiative, the fund will generate two sources of creative investment for authors and society. For creators and performers, it will provide a source of income to reinvest in their practice. For society, it will provide infinite possibilities for supporting local community projects with a focus on digital creativity and skills. For instance, in France private copy cultural funds help over 12,000 projects each year, including, in 2019, over 6,600 creators, 4,800 festivals and concerts and more than 300 grants for professional education and art schools.

Imagine Art Here

One of the facilities for implementing the Smart Fund is that the proposal is not new. Private copy levies have existed since the 1960s, and the UK can learn from other countries’ experiences, creating a model for its own needs. Also, it is a sustainable initiative that can be adapted to the different types of distribution used by people. Instead of focusing on a specific type of device or method of distributing content, it will be revised and updated, taking into consideration what is currently being used by consumers to store and share creative content. In the 1960s, it was on blank media such as cassette tapes, then later CDs or DVDs, but most EU countries have introduced the levy to smartphone devices, and other countries are even looking at cloud storage.

Furthermore, it does not require government intervention and could be made without further drawing on public funds. Under the initiative, an independent panel will decide the proportion that would be paid out to each creative industry based on consumer behaviour data. Additionally, the collection and distribution will be done within collecting societies that already have the knowledge, experience and understanding of consumer needs.

However, there are some concerns about the increasing price of digital devices for consumers. Despite that, an economic study found that the imposition of levies on devices in other countries over a decade did not result in any noticeable inflationary impact. People in the UK still pay more for their devices compared to countries with such levies, suggesting that selling overseas has not posed a risk. In other cases where levies changed or reduced, consumers did not experience cost savings and were not even aware of them. But, even if there is an increase, “people would not mind paying £2 to £3 when they buy a smartphone or a smart TV or a similar device every four, five or six years if it guarantees that the actors who are able to be watched on that device benefit from that Smart Fund,” says John Hollingworth, Ambassador of the British Equity Collecting Society (BECS). Therefore, what is a small fraction to consumers can be a relevant source of income for creators and performers.

Another challenge lies in the necessity for collaboration among creators, tech companies and the government, which may face uncertainty due to differing levels of willingness to support the initiative. Despite discussions with the government through the DCMS and the suggestion of a mechanism in the Digital Markets and Competition Bill, progress has been limited. At the same time, efforts to reach out to tech companies and their trade bodies have been unfruitful.

With this picture, the Smart Fund seems to be a sustainable option for cultural funding, enabling the public to continue copy protected works for personal use in good faith. If successfully implemented as discussed, the Smart Fund would address a gap in the UK policy framework, remunerate creativity and provide a sustainable solution to rebuilding the UK’s cultural economy. It sounds fair, then, that while many of us enjoy and share the creative content, artists receive fair compensation for their work and their invaluable contribution to culture.

Image Credits:

The Smart Fund ©TheSmartFund. The image is used here under fair dealing for criticism, review and quotation (s. 30 CDPA). The source of the image is The Smart Fund and can be found here: https://thesmartfund.co.uk/what-is-the-smart-fund/  If you are a rightholder in this image, please contact us at info@nullial.uk.com and we will happily respect your wishes around image use.

Assorted-color paint brush on brown wooden table top by Khara Woods. Free to use under the Unsplash License: https://unsplash.com/photos/assorted-color-paint-brush-on-brown-wooden-table-top-KR84RpMCb0w.

A yellow sign that says imagine art here by Bob Osias. Free to use under the Unsplash License: https://unsplash.com/photos/a-yellow-sign-that-says-imagine-art-here-qxnKmvB07wU.