European Developments in Collective Rights

07 May 2008

Peter Brownlow

The ability to clear rights in music and other content on a national and European wide basis, is becoming increasingly important in the Media, IT, Communications, E-Commerce and Entertainment sectors. The advent of Web 2.0 and the rise of online digital distribution of content has meant that businesses need easy and rational solutions to the problem of pan-European rights clearance. Convergence, new means of distribution and new business and payment models challenge the existing schemes for rights clearances.

Music

In recent times, most developments in Collective Rights Management ("CRM") have focused on multi-territory music rights clearance. Both the European Commission and industry bodies are actively searching for solutions to simplify and harmonise the processes for the new environment.

The Commission published a monitoring report on 7 February 2008 ("Monitoring of the 2005 Music Online Recommendation"), as a follow up to its Recommendation of 12 October 2005 (the "Recommendation") regarding the cross-border collective administration of copyrights and neighbouring rights necessary for legal online music services (2005/737/EG). The Commission concluded that the Recommendation has now been endorsed by a number of collective rights managers (e.g. national collecting societies), music publishers and user groups. The Commission will be following further developments.

Background of the Recommendation

In 2005, the Commission conducted an impact study on the cross-border collective administration of copyrights and neighboring rights for online music services. This study resulted in a report of 7 July 2005, which introduced three alternatives for music rights clearance:

Option 1: Leave everything as it is. (That is, national collecting societies to manage rights on a national basis with scope for foreign licensing subject to the availability of reciprocal agreements with other national collecting societies or direct licensing from the rights holder.)

Option 2: Abolish the territorial restrictions for licensing rights (within the EU) so that each collecting society within the EU would be able to grant EU-wide licences.

Option 3: Enable copyright owners to assign their exploitation rights to any collecting society of their choice within the EU which can grant EU-wide (or even worldwide) licences (so called "EU-wide direct licensing"); this amounts to abolition of the "customer allocation clauses" in the reciprocal agreements.

The report led to the Recommendation of 12 October 2005. The Recommendation favored Option 3 of the impact study.

Market changes following the Recommendation

Following the Recommendation by the Commission (and possibly also as a result of the CISAC case, see further below) a variety of licensing initiatives have been announced.

In 2006 the Dutch collecting society BUMA/STEMRA issued a "test balloon" pan-European licence for online users of its worldwide repertoire, to online music service "eMusic". The licence was immediately contested by the other collecting societies.

Later, the collecting societies of Spain (SGAE), France (SACEM) and Italy (SIAE) announced a joint venture for a one-stop-shop licensing platform for online and mobile use of their repertoires on a European-wide basis. The alliance was announced at MIDEM in France in January 2007, but is not yet operational. The societies refer to this joint venture as ARMONIA.

Also announced at Midem 2007 was the proposal for a new pan-European licensing organisation for the independent labels in the recording industry. Known as MERLIN it is a sister organisation of WIN (one of the independent labels' trade bodies) and is intended to provide a one-stop shop for those seeking to clear rights to use the indies' catalogue. MERLIN became operational in April 2008.

In January 2007 the British collecting society alliance MCPS-PRS launched "Alliance Digital", a new platform that offers EU-wide licences for the repertoire administered by small and medium sized publishers. To date, over 800 small and medium publishers have mandated their online rights to "Alliance Digital".

Several publishers have, based on Option 3 above, made exclusive agreements with collecting societies, such as the creation of "CELAS", a joint venture between the German collecting society GEMA and the MCPS-PRS, which was created specifically for the EU-wide administration of repertoire of EMI Music Publishing in the online/mobile world. On 26 January 2008 CELAS signed the first EU-wide licensing arrangement with mobile operator Omnifone.

On 28 January 2008 SACEM and Universal Music Publishing Group announced that they had signed an agreement covering multi-territorial online and mobile uses. The platform should be operational by mid 2008. On 30 January 2008 it was also announced that GEMA, MCPS-PRS and the Swedish collecting society STIM will be authorised to offer pan-European digital licences in Warner/Chappell's Anglo-American repertoire.

On the same day independent music publisher Peer Music announced that they will offer pan-European online and mobile licensing for its Latin-American repertoire through SGAE and for its Anglo-American repertoire through MCPS-PRS.

Currently, the BBC is in talks with a number of independent and major labels over licensing deals to release archive music material (e.g. recordings of performances) on various media platforms. The proposed deals with the BBC will give record labels access to any of its artists' performances for use in, amongst other things, promotional material, while the BBC in return will be allowed to use the record label's content for TV and online distribution.

The CISAC Case

Prior to the Recommendation, on 30 November 2000, RTL filed a complaint to the EU Commission against the German collecting society GEMA concerning their refusal to grant a Community-wide licence to RTL for all its music broadcasting activities. On 4 April 2003, Music Choice Europe filed a complaint against the collecting societies' international umbrella association CISAC ("International Confederation of Societies of Authors and Composers") claiming that the CISAC territoriality model (i.e. that domestic collecting societies only grant rights with respect to their domestic territory) is in breach of article 81 of the EC Treaty. The cases have been merged under the so called "CISAC case".

Due to these claims, on 31 January 2006 the Commission sent a Statement of Objections ("SO") to CISAC and the national collecting societies within the EU. The concerns are that certain clauses of the model contract for public performance rights, between the collecting society members of CISAC, contain anti- competitive elements, such as membership restrictions which oblige authors to transfer their rights only to their own national collecting society and territorial restrictions, which oblige users to obtain a licence only from the domestic collecting society and limited to the domestic territory. The addressees of the SO expressed their views in their written replies and during an oral hearing in June 2006.

In March 2007 CISAC proposed a set of draft commitments designed to remedy the Commission's concerns, which a majority of its members agreed to abide by. The 18 collecting societies would, according to the commitments, lift the membership restrictions and grant multi-territorial licences for performing rights over the internet, satellite and cable. The Commission's following market test of the proposed commitments invited third parties to submit their opinions and on 10 July 2007, the EU Commission received an open letter from a group of 27 companies including some of Europe's biggest media groups and telecom companies, such as France Telecom, SBS Broadcasting, RTL, ProsiebenSat1, Deutsche Telekom etc, asking the Commission to reject the offer made by CISAC and most of the EU national collecting societies to settle the anti-trust case. The companies behind the letter favour Option 2 above and in the letter they urge the Commission "to not accept the settlement proposals which...would undermine the current system of licensing the global music repertoire as a single package and lead to a costly, inefficient and fragmented licensing system for music rights". The letter also states that the proposals made by CISAC "raise substantial issues as regards application of competition law and internal market rules, cultural diversity, and the relationship between smaller and larger representatives of rights holders".

The Commission will now evaluate the observations. The Commission can either accept the commitments through a decision declaring them to be binding, or it can reject the settlement offer, impose a fine for restrictive business practices and adopt a prohibition decision requiring CISAC and the collecting societies to no longer apply the membership and territorial restrictions. The Commission's delicate decision is eagerly awaited by the world of online content in general and music and radio broadcasting in particular.

Market developments

The outcome of the CISAC case and the question whether option 2 or 3 of the Recommendation, or a combination of the two, will apply in the future will be crucial for pan-European media services.

The two actions from the Commission, the Recommendation on the one hand and the SO on the other, have been criticised for inconsistency as they appear to favour different options. While the future of the regulation of the CRM system is uncertain some industry players seem to have found ways to collaborate outside the CRM system. Examples are the deals made between Google, Warner Music Group and Sony BMG to show music videos on Google Video and the deals between Youtube and all four major music companies (EMI Music, Warner Music Group, Universal Music Group and Sony BMG Entertainment) to provide music videos and allow internet users to incorporate music into their own videos. The collaborations have raised questions as to whether collective licensing is necessary at all.

Other developments

An ancillary issue is the licensing of music uploaded onto user generated content sites. To what extent hosts of such sites are liable for copyright infringement has yet to be established in many jurisdictions. However, in spite of the uncertainty, Youtube has on 30 August 2007 signed an agreement with MCPS-PRS to licence the use of music by users on its site.

In addition the new means of distribution have put in place new models for remuneration. The Swedish channels TV4 and Kanal 5 have challenged the royalty tariff applied by the Swedish collecting society STIM for broadcasts and the case is pending at the ECJ for a preliminary ruling. The hearing is expected to take place during 2008.

In the UK, the Copyright Tribunal examined in detail the terms of the MCPS/PRS joint online licence for music. In its decision of August 2007 (CT 84-90/05) the Tribunal makes a detailed examination of the way in which gross revenue is calculated when distributing music online, and confirms minimum royalties for songwriters, composers and their publishers for all types of online use of music (downloads, streaming, webcasting etc). As a basis for its decision the Tribunal looked at a 2006 settlement agreement made between the Music Alliance and a number of representatives of the online music industry.

Different tariffs are still used in different Member States and collective rights management is far from being harmonised within the EU. The fragmented organisation of the collecting societies even within certain jurisdictions makes the handling even more difficult.

Collective licensing of audiovisual content

Retransmissions of audiovisual content are covered by Directive 93/83/EEC on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission ("CabSat Directive") in which there is a system of collective licensing for such retransmissions. An interesting question for the media industry is whether the notion of retransmission also applies to new platforms such as internet and mobile devices. A revision of the CabSat Directive has been discussed for a couple of years but has not been taken further yet.

Similar to multi-territory licensing for music, multi-territory licensing of audio-visual works (i.e. both music and pictures) is complicated and has been identified by the Commission in its Communication on "Creative Content Online in the Single Market" of 3 January 2008, as an issue which may need to be subject to a similar recommendation such as the Recommendation of 12 October 2005. The Communication may prove to be a useful lobbying tool for the TV and film industry in order to improve the licensing for on line distribution of audio-visual material.

Authors