Music: commission wants 1 internet clearing house

By EDRi · July 14, 2005

The European Commission wants to create 1 European internet rights clearing house for internet content providers. An in-depth study into the current collective management of copyrights shows that a company that wishes to start an online music business has to seek clearance with 25 national copyright management organisations and has to sell no less than 4.75 million copies of a single song to just recover the cost of the necessary licenses.

The Commission quotes an example from Edima, the organisation representing online music providers. “The direct cost of negotiating one single licence amounts to 9.500 euro (which comprises 20 internal man hours, external legal advice and travel expenses). As mechanical rights and public performance rights in most Member States require separate clearance, the overall cost of the two requisite licences per Member State would amount to almost 19.000 euro. As clearance is required in all 25 EU territories, the cost of obtaining the necessary 50 copyright licenses would amount to 475.000 euro. On the basis that a profit of 0.10 euro can be achieved per download, the online music provider would have to sell 4.75 million downloads merely to recover the cost associated with obtaining the requisite copyright licenses.” (p47-48)

The European Commission now proposes a serious reform of rights clearance, following a consultation and a communication in 2004. The Commission concludes that the current territorial system “is a source of considerable inefficiency.” In a special feature of Single Market News, the Commission summarises the responses to the consultation: “The 139 replies received in response to 2004 consultation paper demonstrate that copyright is at a crossroads. In the era of electronic dissemination of music, film or text by means of downloading or Internet ‘streaming’, traditional business models, including remuneration mechanisms that have been designed for the analogue environment, may no longer function in an online environment. (…) Furthermore, electronic media seem to have created a climate of public indifference or even hostility toward the notion of copyright, an indifference which seems to have increased with the wider dissemination of content on the Internet.” (p.2)

The new study concludes the online market in Europe is considerably lagging behind the US, due to the inefficiency of rights clearance. While “the available repertoire in Europe has doubled over 12 months to 1 million tracks from January 2004 to January 2005”, worldwide the growth has been much stronger, with a tenfold increase in 2004. According to the 2005 IFPI annual report, there are 150 legal music sites available in 20 EU countries, of which “30 services in the UK alone. More than 20 are available in Germany and 10 in France.” (p.20-21) But obviously, this growth in the amount of services does not represent a similar growth in the amount of available songs.

The Commission now proposes that every right-holder chooses a single EU rights manager, irrespective of residence or nationality of either the rights-manager or the right-holder. The Commission hopes this new single channel will solve the issues of transparency, “obliging the collecting society to distribute royalties in an equitable manner.” The Commission also wants to introduce the principle of non-discrimination, to “introduce a culture of transparency governance as to how rights are collectively managed across EU borders.” (p.56)

Perhaps the greatest progress in the availability of online music is the new provision that individual artists should be able to break up the current monolithic contracts with collecting societies, for example to carve out their internet distribution rights from the package, in order for them to legally start their own distribution. “Right-holders should be able to withdraw certain categories of rights (in particular categories of rights linked to online exploitation) from their national CRMs and transfer their administration to a single rights manager of their choice. For that to work, these online rights must be withdrawn from the scope of reciprocal agreements as well.” (p.56)

Commission press release (07.07.2005)

Study on a community initiative on the cross-border collective management of copyright (07.07.2005)

Special feature Single Market News (May 2005)

Communication on the management of Copyright and Related Rights COM(2004) 261 (16.04.2004)