Demystifying Pan-European Digital-Music Rights Simon Dyson, Senior Analyst, Informa Telecoms & Media (UK)
Table of Contents 1. Overview 2. The multiterritory catalyst 3. Slow progress, but progress nonetheless 4. Fragmentation and reaggregation 5. No more standing on the sidelines for the EC 6. Informa viewpoint
1. Overview Key points Music publishers, collection-societies, and more recently, the European Commission (EC) have all been grappling with what to do to streamline and simplify the licensing of digital-music services across Europe. In Europe, each country has either a single collection-society or two societies that manage their members performance and mechanical rights and provides licenses to music users. Operating on a national level worked fine when music services and users were based in just one country. Prior to the advent of digital distribution, territorial licensing did not present any problem. With digital-music services wanting to expand beyond national borders, the licensing structure in Europe quickly started to look archaic and cumbersome. This is because a collection-society in one country cannot issue a license for the repertoire of another collection-society in that collection-society s country For example, a collection-society in Austria cannot issue a license for the use of the repertoire of the Belgian collection-society to a service operating in Belgium.
2. The multi-territory catalyst In 2005 the EC proposed big changes to the system of authors' rights management by national collection societies. In order to remove obstacles to the growth of the online music market, the EC said it wanted to introduce a system whereby any national society can offer a pan-european license for online uses of music. At the time the EC said improvements to the structures for crossborder collective management of copyrights were the central requirement for the emergence of a sizeable and commercial viable European online music market. And the winner is? The EC s proposal was made in a document entitled Study on a Community Initiative on the Cross-Border Collective Management of Copyright. In the study the EC outlined three different options for online licensing. These were; to retain the current system of reciprocal agreements between national societies (Option 1); to modify that system (Option 2); or to introduce a new scheme whereby rights owners can authorize a single society to manage the online uses of their works throughout the European Union (EU) (Option 3). The EC chose Option 3. Music users welcomed the choice, but there was a mixed reception from the smaller European collection societies. They said the choice of Option 3 could undermine the cultural diversity that European music represents by weakening their influence.
3. Slow progress, but progress nonetheless Since the selection of Option 3, several collection societies and music publishers have made significant moves toward adopting Pan-European licensing. In 2006, CELAS was formed by PRS for Music (UK) and GEMA (Germany) to administer the Pan-European licensing of EMI Music Publishing's Anglo-American repertoire to online and mobile music companies. Major publishers Pan-European digital-music licensing initiatives Warner Chappell has operated the initiative Pan-European Digital Licensing (PEDL) since 2006. PEDL is open to all collection societies that satisfy Warner Chappell s terms. To date the publisher has concluded Pan-European licensing agreements with BUMA/STEMRA (Netherlands), PRS for Music, SABAM (Belgium), SACEM (France), SGAE (Spain), SPA (Portugal) and STIM Source: Companies (Sweden). All the collection-societies in PEDL can issue national or Pan-European licenses for Warner Chappell Anglo American repertoire. In 2008, Universal Music Publishing Group (UMPG) and SACEM formed the licensing model Direct European Administration and Licensing (DEAL) to administer UMPG's Anglo-American and French repertoire in the digital market. DEAL is an initiative and so has not required the creation of a separate agency. UMPG has provided SACEM with a non-exclusive mandate to administer the licensing of its Anglo-American repertoire.
In 2009, Sony/ATV Music Publishing teamed up with GEMA to create Pan-European Central Online Licensing (PAECOL) to administer the Pan-European licensing of the major's Anglo-American repertoire. Sony/ATV s Spanish and Latin American repertoire is managed by SGAE as part of the Pan-European Licensing Initiative of Latin American Repertoire (PEL). Independent publisher moves Pan-European licensing initiatives have not been limited to the major publishers. Peermusic is involved in PEL and the indie publisher has a Pan-European representation deal with PRS for Music for its Anglo- American repertoire. PRS for Music operates the Independent Music Publishers European Licensing (IMPEL), which administers Pan-European licensing of IMPEL members' repertoire. PRS for Music, along with BUMA/STEMRA, was appointed in 2010 to license and administer the Pan-European digital rights of publisher IMAGEM. Chrysalis also has a Pan-European representation deal with PRS for Music.
4. Fragmentation and re-aggregation In contrast to a few years ago when digitalmusic has reduced the necessity for endless services were required to sign countless licensing deals, a process of re-aggregation by all of the licensing hubs and major publishers rounds of licensing negotiations. Each digital-music service is treated on a case-by-case basis. For example, low revenue services wanting to launch in one country will almost always only have to deal with the national collection-society. On the other hand, a big digital-music service with multi-territory ambitions will need a license from the publishers hubs or collection society acting for the publishers, as well as the national collection society. But a set procedure for gaining licenses is now in place and the process is thought to be considerably less painless than in the early days.
5. No more standing on the sidelines for the EC For a number of years the EC has offered encouragement to authors' societies and music publishers to solve the problems associated with the licensing process for digital-music services in Europe. A number of commissioners have often voiced concerns about the complexity of multiterritory licensing in Europe and how the time-consuming process involved in securing rights to operate in several countries has held back the digital-music industry in the region. EC attempts to please all All this is about to change. Plans to be unveiled by the EC next month will start a process that could eradicate many of the difficulties associated with Pan-European licensing. In its latest update on actions expected to be adopted, the EC estimated that the directive on collective rights management would be adopted by end-june. However, pleasing all involved will not be easy. A number of Europe's smaller collection societies are concerned that the introduction of competition across the region between collection societies for author and publisher representation would favor the largest societies, because they would be able to offer greater economies of scale. This would mean lower costs and bigger payouts to their members.
6. Informa viewpoint Bigger does not always mean better. Few could disagree with the simple fact that national collection societies are best placed to deal with issues affecting local artists and repertoire. But with revenues from so many music sources under pressure, a collection society that promises to take a smaller share of an artist or publishers' royalty payments will be an attractive draw. All collection societies, to differing degrees, are involved in cultural initiatives in their respective countries. Many of the smaller collection societies fear the introduction of competition and the potential loss of income could marginalize their organizations and greatly affect the granular level of service they perform. Publisher consolidation concerns Consolidation in the music publishing sector will also shape the EC s strategy for reform. The coming together of Sony/ATV and EMI Music Publishing could result in a consolidation of the two publishers' licensing hubs and further isolation for the smaller collection societies. With openness and competition at its heart, the forthcoming EC legislation is widely expected to put in place structures that will result in wider access to multiterritory licensing. There are, of course, Pan-European initiatives involving other collection societies in Europe aside from the big three of PRS for Music, GEMA and SACEM. But music publishers that have concluded Pan-European licensing-administration deals seem to have decided that the bigger the collection society the better placed it is to handle their rights on a regionwide basis. There is little evidence to suggest that any new legislation will change the situation, and so for smaller collection societies, the EC might be about to signal the start of a difficult future.
About the author Simon Dyson is the editor of Music & Copyright, a newsletter covering global copyright and legal issues affecting the music industry. Prior this, he authored several management and strategic reports on all aspects of the music industry and has also completed several music-related consultancy projects for music companies and music retailers. His opinion is widely sought by TV, radio and newspaper journalists on digital music issues as well as the traditional sector. Email: simon.dyson@informa.com Twitter: http://twitter.com/mandcop LinkedIn: http://uk.linkedin.com/in/simondyson Blog: http://musicandcopyright.wordpress.com This research forms part of the Informa Telecoms & Media report Demystifying Pan-European digital-music rights (May 2012). For more information please visit www.informatandm.com/digitalmusicrights. This report is brought to you by midem midem is the place where music makers, cutting-edge technologies, brands & talent come together to enrich the passionate relationship between people & music, transform audience engagement & form new business connections. midem takes place every 4th week of January and brings together 6,900 professionals from 75 countries. Contact us: info.midem@reedmidem.com Visit midem s website - www.midem.com Follow us Download midem iphone App http://road.ie/midem