Directive on collective management of copyright and related rights and multi-territorial licensing
04 February 2014by eub2 -- last modified 04 February 2014
New rules on music copyright approved by the European Parliament on 4 February 2014 aim to make it easier for online providers to get licences to stream music in more than one EU country. The Directive on collective rights management and multi-territorial licensing of musical works for online use, already informally agreed with Council, should stimulate the development of EU-wide online music services for consumers and ensure that artists' rights are better protected and that they receive adequate royalties promptly.
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1. What is copyright and what are the related rights?
These are rights granted to authors (copyright) and to performers, producers and broadcasters (related rights) to ensure that those who have created or invested in the creation of music, or other content such as literature or films, can determine how their creation can be used and receive remuneration for it. Copyright is both an incentive to and a reward for creativity.
Copyright and related rights include so-called "economic rights" which enable rights-holders to control (license) the use of their works and other protected material (such as performances, records, audiovisual productions and broadcasts), and be remunerated for their use. These rights normally take the form of exclusive rights and include the right to copy or otherwise reproduce any kind of work and other protected subject matter; the right to distribute copies to the public and the right to communicate to the public performances of such works and other protected subject matter. These rights are, to a large extent, harmonised at EU level.
Authors are also granted so-called "moral rights". Moral rights may include the right to decide on when or whether to make the work public, the right to claim authorship of the work and the right to object to any derogatory action in relation to the work. Moral rights are not harmonised at EU level.
2. How important are copyright and related rights for the European economy?
Copyright is a spur for growth: it has significant economic and social importance. The European Competitiveness Report of 2010 showed that the creative industries (1) accounted for 3% of EU27 employment (around 6.7 million jobs). On the global stage, the contribution of these industries to GDP and national employment is much higher, reaching a contribution of 5.4% to GDP, and representing 5.9% of employment on average (2). There is therefore still more economic potential to be drawn from the creative industries in Europe, which legislative changes like the one proposed today would help to tap.
In Europe, the value of the EU recorded music market amounted to approximately €4.1 billion in 2012. (3)
Collective management organisations
3. What is the collective management of copyright and related rights?
An author (for example an author of a book, a song composer, or lyricist), a performer, record or film producer or broadcaster (the holder of a copyright or a related right) can normally choose between individual management (management by the author of a book or by a publisher), or collective management of their rights.
Collective rights management is mostly carried out by collective management organisations (often also referred to as "collecting societies"). Their key activities are:
to grant licences to commercial users (TV channels, radio stations, online music service providers) on behalf of the rights-holders; and
to collect royalties and redistribute these to rights-holders.
Collective management organisations make it possible for commercial users to clear rights for a large number of music tracks or other works, where individual negotiations – such as with individual composers and lyricists, in the case of musical works – would be impractical. Collective management is mostly used by authors and performers (as opposed to producers or publishers), and it is particularly important in the licensing of rights for musical works.
4. What is a collective management organisation?
Collective management organisations are organisations traditionally set up by authors, performers, and other kinds of rights-holders, to collectively manage their rights. They aggregate the rights of one or several types of rights-holders for licensing purposes to grant licences to commercial users (TV channels, radio stations, online music service providers) on their behalf. They also provide services such as monitoring the use of rights and collecting and distributing royalties. They provide services to rights-holders, to users and to other collective management organisations.
Collective management organisations are historically established on a national basis and, in particular as regards off-line uses, they license rights for their own territory (although there are important exceptions to this principle).
5. How many collective management organisations are there in the EU?
There are more than 250 collective management organisations in the EU. In general, there is one collective management organisation representing all or some of the rights of a category of rights-holders in a given Member State: a collective management organisation for authors, another one for record producers, another one for audiovisual producers, another one for performers, and so on. Examples of collective management organisations are SACEM which handles rights for musical works in France; PRS for Music, the association of composers, songwriters and music publishers in the UK, and GEMA in Germany.
In some cases, it is possible that a collective management organisation manages the rights of more than one category of rights-holders (for example, there are often joint collective management organisations for performers and record producers, such as PPL in the UK). In a few cases, it is possible to find competing collective management organisations which represent the same category of rights-holders in the same country (for example, SGAE and DAMA in Spain both manage the rights of authors in audiovisual works).
6. What is the size of the market: how much money do collective management organisations manage?
Collective management organisations collect around €6 billion in the EU every year. The vast majority of this income is in the hands of approximately 70 EU collective management organisations managing authors' rights (for over one million authors). Most of this income is derived from musical creations (more than 80% in the case of authors' societies).
7. What is a repertoire?
A collective management organisation normally represents and licenses the rights of a high number of rights-holders (authors such as song-writers and composers, performers such as singers and musicians, and so on). The sum of the rights of all the rights-holders a collective management organisation represents directly constitutes the society's own repertoire. This is often limited to domestic works.
8. What is a reciprocal representation agreement?
Collective management organisations from different countries traditionally grant each other the right to license their repertoires in each other's territory through a network of reciprocal representation agreements. Through these bilateral agreements, a collective management organisation can license its own repertoire and the repertoire of other collective management organisations in its own territory, thus facilitating access by domestic users to a broader repertoire. In the case of authors' rights in musical works, the reciprocal agreements are normally limited to the territory in which the collective management organisation operates.
Legislative proposal – key changes
9. Why did the Commission propose legislation?
Firstly, the functioning of some collective management organisations has raised concerns as to their transparency, governance and the handling of revenues collected on behalf of right-holders. Cases of risky investment by certain collective management organisations of royalties that should have gone to rights-holders highlighted the lack of oversight and influence of rights-holders on the activities of a number of collective management organisations, contributing to irregularities in their financial management and investment decisions.
Secondly, the collective management of rights is also important for the licensing of online service providers (music download services, streaming services). This is particularly the case as regards authors' rights (the rights of those that compose the music or write the lyrics). Online service providers often want to cover a multitude of territories and a large catalogue of music. They also often want to test new business models. All this makes online licensing very demanding. Many collective management organisations today are not ready for this: they do not have the capacity to process data from service providers (like Spotify or Nokia Music) on music downloads and streaming, or to match this data with their repertoire of songs. This can lead to incorrect invoicing, dual invoicing, or sometimes no invoicing at all. To address this, collective management organisations need to set up proper databases to be able to keep better track of their own repertoire – one of the requirements in today's legislative proposal.
The result is fewer music services available to consumers across the EU (in particular in certain Member States - Malta, Luxembourg, Cyprus, Slovenia, Hungary, Estonia, Latvia, Lithuania, Bulgaria, Greece and Romania), a slower uptake of innovative services and poor allocation of revenue to rights-holders.
10. Why did the Commission propose to impose rules on collective management organisations?
Collective management organisations need to modernise their operations to meet the challenges of a fast-evolving digital economy. An underlying problem is the insufficient transparency and control of the way collective management organisations are managed. It is necessary that they provide a more efficient service to rights-holders and users (service providers) alike: better collection and redistribution of revenue, accurate invoicing and more granting of multi-territorial licences for aggregated repertoire.
11. What are the specific objectives of the Directive?
The specific objectives of the Directive are to:
- improve the way all collective management organisations are managed by establishing common governance, transparency and financial management standards;
- set common standards for the multi-territorial licensing by authors' collective management organisations of rights in musical works for the provision of online services; and
- to create conditions that can expand the legal offer of online music.
12. Who will benefit from the Directive?
rights-holders, service providers and consumers will be the main beneficiaries.
It will be easier for service providers to clear rights (by lowering transaction costs) with better functioning and more transparent collective management organisations adapted to the challenges of the 21st century. This should facilitate the rolling out of new services, in particular in the online world across the single market. European consumers would thus benefit from access to a wider variety of creative content.
rights-holders will exercise more control over collective management organisations than today and will be able to exercise informed choices as to who manages their rights. While in principle rights-holders can choose to have their rights managed by any collective management organisation, the Directive would enshrine this in law. Thus, they would be able to reap the full benefits of the Single Market. Moreover, increased business opportunities and better managed collective management organisations should result in increased revenue distributed to rights-holders. This, in turn, should provide additional incentives for creativity.
13. What are the expected impacts on collective management organisations?
Firstly, all collective management organisations will have to improve their standards on governance and transparency:
- They will have to ensure adequate participation of rights-holders in the decision-making process.
- They will have to ensure adequate financial management of the revenues collected on behalf of the rights-holders they represent.
- They will have to increase their transparency vis-à-vis rights-holders, other collective management organisations, service providers and the public at large.
Secondly, collective management organisations managing authors' rights in musical works, for the licensing of those rights for online uses, will be subject to modern requirements adapted to the digital era, such as enhanced capability to process large amounts of data, accurate identification of the works used by the service providers, fast invoicing to service providers and timely payment to right-holders.
14. How is music licensed for use on the internet today? What will change?
Today, if an online music provider like iTunes wants to provide a music track for download, it needs to obtain a licence to do so from three separate entities: the track's author (the composer and lyricist), the record producer, and the performer. Collective management organisations manage one of these: the author's rights. (The record producer and the performer's licences are usually both managed by the record producer). It is the functioning of the licence of authors' rights for on-line use which is set to be improved by the Directive.
15. Why not one entry point – a single European licence?
A single entry point would require that collective management organisations pool their repertoire for licensing online rights to a centralised organisation. This would create an organisation with a de facto monopoly power. There is a high risk that this could create restrictions to competition, such as customer allocation or price fixing. This behaviour would not be allowed by the competition rules of the Treaty on the Functioning of the EU.
Bear in mind that today's collective management organisations can issue licences for use of music tracks across the EU. The problem is that many still do not do so, or do not do it in an accurate or fast enough manner. The Directive will improve this situation. For example, a French collective management organisation which seeks to make its repertoire available in other countries will have four choices: It could either license its entire repertoire for the whole EU or in certain Member States of its choice, if it is able to comply with the new requirements for efficiency and transparency.
- If it finds it difficult to comply with these requirements, it could outsource the back-office function to a different company which would e.g. operate the electronic database for the French collective management organisation,
- If it finds it difficult to comply with these requirements, it could ask, for example, an Italian collective management organisation (which does comply and which already aggregates repertoire i.e. licenses not only its own repertoire but also the repertoire of other societies) to license the repertoire of French songs on its behalf, across all the territories where the Italian society licenses its own Italian repertoire - whether this is three countries, or 27. This is aggregation of repertoire.
- Or finally, the French collective management organisation could create a subsidiary e.g. with a Swedish, British, and Dutch collective management organisations. This new subsidiary would aggregate, and license across multiple territories, the French, Swedish, British and Dutch repertoire.
What is important to note is that if a Polish collective management organisation, say, were to ask for its Polish repertoire to be licensed across multiple countries by the Italian collective management organisation in the example above which aggregates its own and the French repertoire, or the French-Swedish-British-Dutch subsidiary which also aggregates repertoire and licenses it across multiple territories, they could not refuse to do so.
Furthermore, if a collective management organisation does not do any multi-territorial licensing, through any of the four methods just described, then the rights-holders it represents will have the right to withdraw from their original collective management organisation their rights to the extent necessary for multi-territorial licensing for online uses and leave the same rights with their original organisation for purposes of mono-territorial licensing. They can entrust the withdrawn rights to another collective management organisation or another entity to do multi-territorial licensing on their behalf, or to do it themselves, without losing of the possibility that their original collective management organisation continues to grant mono-territorial licenses for them. These measures would ensure that no national repertoire of music remains locked in to one territory.
16. What is the expected impact on access to cultural content and cultural diversity?
Safeguarding innovation and intellectual creation, notably through an effective protection of copyright and related rights, is particularly important from a cultural point of view. It is one of the main ways of ensuring that European cultural creativity and production receive the necessary resources, as well as a way of safeguarding the independence of artistic creators and performers.
More efficient collective management organisations should be better able to promote their different repertoires and the new rules should foster the development of online services providing cross-border access to all kinds of musical works (see Question 15). Consumers would have easier access to national and niche repertoires, beyond the traditional national boundaries. This would make cross-border access to cultural content easier and cultural diversity would thus be enriched.
Article 167 of the Treaty on the Functioning of the European Union requires the Union to take cultural aspects into account in its action, in particular in order to respect and to promote the diversity of its cultures.
17. Which are the key measures to improve the governance of collective management organisations?
First and foremost, rights-holders should be free to choose a collective management organisation to manage their rights (or categories of rights or types of works) regardless of the country of establishment of the collective management organisation or of their own residence. They should also be free to terminate the authorisation they gave to a collective management organisation for the management of their rights or withdraw only some of their rights. Collective management organisations should not discriminate between rights-holders.
Secondly, the general meeting of the members of a collective management organisation should decide on the key matters within the collective management organisation. In particular, they should decide on the key policies such as the distribution and the investment of the collected revenue and the rules on deductions from the collected revenue.
Thirdly, as the general meeting is usually convened only once a year, collective management organisations should establish a supervisory function to monitor the activities of the management in the interest of the rights-holders. Supervision could be carried out within the board by non-executive board members or via a separate supervisory board.
Finally, the senior management of the collective management organisation should make sure that the society is managed in a sound and prudent manner, using sound administrative, accounting and internal control procedures.
18. How will the financial management of collective management organisations improve?
Since collective management organisations collect and handle revenue that ultimately belongs to rights-holders, they need to establish sound financial management practices. In particular, they have to keep and manage these amounts separately from their own assets and cannot use them for their own account. They should also ensure sufficient transparency on any deduction they make. Finally, collective management organisations should regularly and diligently pay royalties to rights-holders - no later than nine months from the end of the financial year in which the amounts were collected.
19. What will improved transparency mean for rights-holders, users and for the public?
rights-holders can only exercise their rights if they have sufficient information available from the management of the collective management organisation. Therefore collective management organisations should provide rights-holders and other collective management organisations on whose behalf they manage rights under a representation agreement, with detailed information on the collected revenue and the deductions.
Transparency towards users and rights-holders would also have to improve; in particular they should be able to receive information on the repertoire a collective management organisation represents.
Finally, collective management organisations should make public on their website information on their structure and their financial management. As regards their structure, they will have to publish their statute, the membership terms, the available dispute resolution mechanisms, etc. As regards financial management, they have to draw up and publish an annual transparency report including detailed accounts, financial information and a special report on the use of the amounts deducted for purposes of social, cultural and educational services.
20. How will innovative online services benefit from the Directive?
New services on the market will, as all users, benefit from the increased transparency and better functioning of collective management organisations and from the obligations to base licensing terms on objective and non-discriminatory criteria. The Directive has a number of provisions that will allow collective management organisations to be more agile and flexible when providing licences to innovative services. At the same time, the creation of hubs aggregating the repertoire of different collective management organisations should reduce transaction cost and increase legal certainty for service providers.
21. Why are different dispute settlement mechanisms foreseen for rights-holders, members and users?
Disputes between the rights-holders or members or other collective management organisations and the collective management organisation most often concern the authorisation by rights-holders to have their rights managed by a collective management organisation, membership terms, deductions or the collection or distribution of royalties. These issues can often be resolved within the collective management organisation through a complaint-handling mechanism or externally, via court, mediation or other forms of dispute resolution.
The disputes between collective management organisations and users mainly concern licensing conditions or breach of contract. In these cases, the resolution of a dispute can only be achieved through an independent and impartial dispute resolution body, i.e. via mediation, arbitration or a court. On the other hand, due to the specificities of multi-territorial licensing, the proposal foresees the submission of related disputes to an alternative dispute resolution procedure (such as arbitration). This however does not prevent the parties from going to court.
Multi-territorial licensing
22. What is a multi-territorial licence of authors' rights in musical works for online uses?
It is a licence granted by a collective management organisation which includes authors' (for example composers or lyricists) rights in musical works for online uses (such as for a service provider offering streaming services) and which covers the territory of more than one Member State (and possibly the whole of the EU).
23. Who needs to get the multi-territorial licences of authors' rights in musical works, and for what purposes?
The providers of online services which make use of musical works in more than one Member State, such as music services that allow consumers to download music or to listen to it in streaming mode, as well as other services providing access to films or games where music is an important element, must first obtain the right to use such works.
These rights are the exclusive right of reproduction and the exclusive right of communication to the public of musical works, which includes the right of making available. While record producers (who often have the rights of performers) and music publishers tend to manage their rights individually, music authors generally rely on collective management organisations that provide collective management services to them.
Any service provider wishing to provide an online service on a multi-territorial basis across EU Member States including a wide choice of musical works to consumers, needs to aggregate rights in works from different rights-holders and collective management organisations.
24. Which collective management organisations will be able to grant multi-territorial licences of authors' rights in musical works for online uses?
In order to be able to grant multi-territory licences covering authors' rights in musical works, a collective management organisation will need to comply with certain quality standards: it has to be able to accurately identify to the service providers the music repertoire it licenses on a per-work basis, to rapidly invoice online service providers on a per-work basis and to pay the amounts due to each right-holder on time. This requires the capacity to appropriately and accurately handle data electronically.
25. Why would only a limited number of collective management organisations be able to grant multi-territorial licences of authors' rights in musical works for online uses?
Any collective management organisation complying with the quality standards will be able to grant multi-territorial licences of authors' rights in musical works for online uses. However, it is possible that given the need to invest in appropriate ICT equipment and data processing (such as databases) some collective management organisations decide not to undertake such an investment. All collective management organisations will have in any event the possibility to aggregate their repertoire with the repertoire of a collective management organisation that complies with the quality standards and is involved in the aggregation of repertoires (that is, licenses not only its own repertoire).
26. How will Member States evaluate whether a collective management organisation has the capability to grant multi-territorial licences of authors' rights in musical works for online uses?
The Directive will not require Member States to set up a prior authorisation or licensing system for collective management organisations. However, it requires them to have competent authorities to monitor compliance with the requirements laid down in the Directive by collective management organisations established in their territory when granting multi-territorial licences for online rights in musical works.
These national competent authorities must be empowered to impose effective, proportionate and dissuasive sanctions. However, the Directive does not require Member States to set up supervisors specifically dedicated to the oversight of collective management organisations (for example, a national ministry may undertake the monitoring function).
27. What happens if a collective management organisation is not equipped to provide multi-territorial licences of authors' rights in musical works for online uses?
A collective management organisation may decide not to grant multi-territorial licences for authors' rights in musical works for online uses, but it could continue to grant national licences for its own repertoire and/or national licences for the repertoire of other societies, provided it is authorised to do so through reciprocal agreements.
However, in order to ensure that repertoires can be easily aggregated for the benefit of online service providers who want to offer a service as complete as possible across Europe and for the benefit of cultural diversity and consumers at large, specific safeguards will apply to ensure that the repertoires of all collective management organisations have access to multi-territorial licensing:
a collective management organisation may request another organisation granting multi-territorial multi-repertoire licences to have its repertoire represented for the purpose of multi-territorial licensing. The organisation receiving the request may not refuse if it is already representing (or if it offers to represent) the repertoire of one or more collective management organisations for the same purpose;
following a transitional period, rights-holders may withdraw the online rights for multi-territorial licensing and grant such licences (either directly or through another intermediary, such as another collective management organisation) for their own online rights if their collective management organisation does not grant multi-territorial licences and does not enter into one of the agreements mentioned above.
28. Why the requirements of the Directive on multi-territorial licences for authors' rights in musical works for online use partially do not apply to the licensing to broadcasters?
Broadcasters generally rely on a licence from a local collective management organisation for their broadcasts which include musical works. They increasingly include in such licence agreements the clearing of the rights required for the making available of such broadcasts online. It seemed clear when discussing with all stakeholders, including the users that this system of licences for so-called "ancillary uses" is working, based on the voluntary aggregation of the required rights in the local collective management organisations. That is the reason why the Commission proposed a particular provision for these licences and the Parliament and Council endorsed it.
29. Who will benefit from multi-territorial licences of authors' rights in musical works for online uses?
The aggregation of rights and territories by the collective management organisations granting this type of licence will allow service providers ("users" or "licensees") to use a large amount of musical works in several territories with a single licence. The licensing process will thus be simplified, more cost efficient (fewer licences, faster procedures, more territories covered). This will make it easier for service-providers to launch new services, for the benefit of consumers, who will have a wider choice, and also for the benefit of rights-holders, who will see their content used more often and would be remunerated for this.
30. When will the new rules come into force?
Once the Council has formally adopted the new legislation, the new rules will enter into force on the twentieth day following that of the publication of the Directive in the Official Journal of the European Union. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with the Directive within 24 months after its entry into force.
Further information
Notes
1 : Creative industries include information services such as publishing activities (books, periodicals and software), motion pictures, video and television programme production, sound recording and music publishing activities, programming and broadcasting activities, computer programming, architectural and engineering services, advertising, design activities, photographic activities, translation and interpretation activities, creative, arts and entertainment activities.
3 : IFPI, Recording Industry in Numbers - The Recorded Music Market in 2012
