Collective Licensing of Music in Europe – A Legal Perspective

01 December 2009

Brooke Whitaker, Emily Forsyth

Within Europe, music licensing has traditionally been dealt with on a country-by-country basis as individual copyright owners assign the worldwide exploitation rights in their works to their national collecting society, which then licenses copyright works on its members’ behalf. This outdated model has restricted the growth of legal online content distribution, which has driven the problem of illicit filesharing.

Traditionally, most collecting societies have entered into reciprocal representation agreements so that they can each offer the repertoire of all the artists represented by all the collecting societies participating in the reciprocal agreements. These reciprocal agreements have attracted recent scrutiny because they prescribe territorial restrictions and membership restrictions, which mean that national societies cannot grant a licence outside their own territories and copyright owners are only allowed to assign their exploitation rights to their home society. In effect, this means that collecting societies often cannot grant cross-border licences, an increasingly serious problem for businesses that wish to clear rights in music for online use.

Reciprocal representation agreements in Europe are based on a model provided by the European collecting society umbrella organisation, the International Confederation of Authors and Composers Societies (CISAC). A number of significant developments in recent years have started to change the way in which music is licensed across Europe and undoubtedly the most important of these was what has widely become known as the CISAC case.

CISAC Case

In January 2006, in response to separate complaints about practices by collecting societies from broadcaster RTL and Music Choice Europe, the European Commission sent a Statement of Objections to CISAC setting out the Commission’s concerns that certain clauses of the model contract, including the territorial and membership restrictions, contained anti-competitive elements.

In its response in March 2007, CISAC members agreed to a set of draft commitments designed to remedy the Commission’s concerns, which included undertakings that the societies would lift the membership restrictions and grant multi-territorial licences for performing rights exploited over the internet, satellite and cable. However, following pressure from a group of Europe’s biggest media groups and telecom companies, the Commission rejected the commitments on the basis that they were insufficient to reintroduce effective competition into the market.
In July 2008, the Commission found that the clauses of the CISAC agreements on membership restrictions and territorial exclusivity were in breach of the Commission’s ban on restrictive business practices (Article 81) and that the “concerted practices” amongst the collecting societies were anti-competitive. Whilst the Commission considered the imposition of punitive sanctions on the societies would be counter-productive, the decision did require societies to amend their representation agreements and practices. Appeals against the decision launched by CISAC and a number of collecting societies are pending.

Subsequent Developments

During and since the CISAC case, a number of national collecting societies have introduced new licensing initiatives. In 2007, the Spanish, French and Italian collecting societies launched ARMONIA, a one-stop-shop licensing platform for online and mobile use of their catalogues on a Europe-wide basis. Also in 2007, the British collecting society launched ‘Alliance Digital’, a new platform offering EU-wide licences for the repertoire administered by small and medium-sized publishers. To date, over 800 publishers have assigned their rights to Alliance Digital. Furthermore, in line with the Commission’s recommendation, several national collecting societies have launched joint ventures, such as the formation of CELAS by the German and British collecting societies to administer the repertoire of EMI Music Publishing in the online/mobile world throughout the EU.

On 21 July 2008, just days after the CISAC decision, the Dutch collecting society BUMA announced that it had issued a pan-European licence of its worldwide music repertoire (including the repertoire of the British collecting society PRS) to online music store Beatport.com. BUMA had assumed that the reciprocal representation agreement entered into between BUMA and PRS prior to the CISAC decision, under which BUMA was prohibited from licensing PRS’ repertoire anywhere outside the Netherlands, would be rendered null and void following the CISAC decision. However, PRS was granted an interim injunction ordering BUMA to refrain from licensing PRS’ catalogue outside of the Netherlands, based on the judge’s view that the CISAC decision had deemed concerted practice between CISAC members anti-competitive, but not agreements between individual members. Despite the CISAC ruling, it appears that some barriers to creating a pan-European licence remain.

More encouragingly, at the fourth meeting of the Roundtable on the Online Distribution of Music in October 2009, representatives from Amazon, BEUC, EMI, iTunes, Nokia, PRS for Music, SACEM, STIM and Universal signed a joint statement confirming their commitment to developing new EU licensing platforms and delivering multi-territorial licences. In late October, the European Commission launched a consultation on the development of a single European market for digital distribution of creative content including music, films and video games, the findings of which are eagerly anticipated.

Despite some setbacks, it is clear that the European collective licensing landscape is changing to accommodate the evolving requirements of licensees and the realities of the online environment. In the light of recent developments, it seems that a workable licensing model may soon become a reality, the downstream effects of which will be welcomed by ISPs.

Brooke Whitaker and Emily Forsyth, Bird & Bird LLP, London

This article first appeared in ISPA’s Hardcopy newsletter, Winter 2009