Kernochan Center for Media Law and the Arts - Columbia Law School Collective Management of Copyright: Solution or Sacrifice? New York, 28 January 2011 Giuseppe Mazziotti University of Copenhagen, Faculty of Law

Alternative licensing models for online music services in the EU Which roles for customized collective management and independent management?

Why are online music services still undeveloped in Europe? Digital sales: 15% of total music sales (in the US it is 44%) Music downloads: ¼ of the US downloads Internet broadband: 24% of the EU population had an access line subscription at 1 July 2009 Mobile broadband: 4,2% (July 2009)

A EU “Digital Single Market”?  No single copyright system (27 sub- systems, instead)  Philosophical and cultural diversities (copyright vs. droit d’auteur)  Different rules for transfer and management of copyright developed at national level by collecting societies (most of which have acted as authors’ “unions”)

Types of collecting societies Public or semi-public institutions enjoying a legal or de facto monopoly and pursuing cultural and solidarity goals beyond the main purpose of copyright management (continental-Europe: e.g. France, Belgium, Germany, Italy, Spain, etc) Fully private entities acting in a (supposedly) free market for licensing services with the exclusive objective to maximize their members’ revenues and without pursuing any social or solidarity goals (e.g. PRS in the UK)

Online music services and copyright Commercial users need authorizations from different right-holders  Authors and Composers/Publishers  Record Producers/Performers Collective management was well developed for the clearance of author/publisher rights Collective management for so-called neighboring rights is much more undeveloped (record producers’ agents) Each collecting society represents a domestic (i.e., national) repertoire

By courtesy of Violaine Dehin How has it worked off-line so far? Territory-based model (local and foreign repertoire) CS _ACS _B Reciprocal representation Commercial User Right holders (Authors & Publishers) Right holders (Authors & Publishers) License TERRITORY A TERRITORY B - CS (A) deductions - CS (B) deductions - CS (A) deductions World Repertoire

By courtesy of Violaine Dehin An alternative system for the UK music repertoire: mechanical rights CS _ACS _B Publisher Commercial User Sub-Publisher License Worldwide Repertoire - CS (A) deductions TERRITORY A TERRITORY B - Sub-publisher commission Authors - Publisher share Sub-publishing agreement

Recent EU Commission action DG Internal Market Recommendation 2005 Targeted copyright and related rights alike Right-holders’ freedoms: o join any collecting society (no economic residence) o select territorial scope o transfer online rights No involvement of the EU Parliament (soft law) DG Competition (2008) Cisac Decision Mutual representation agreements (public performance rights) No economic residence and no territorial exclusivity clauses in the bilateral agreements No territorial segmentation for online transmissions

Radical change of licensing structure  Global aggregated music repertoire  Strict country-by-country basis  Same licensing conditions and fees for all repertoires

New scenario  Mono-repertoires  EU-wide licensing  Different licensing conditions and different prices for each repertoire

Centralized online licensing trends Major music publishers CELAS (EMI+GEMA+PRS) PAECOL (SONY+GEMA) PEL (SGAE+SONY+Peermusi c) PEDL (WARNER+PRS+SACE M+STIM+BUMA STEMRA) DEAL (SACEM+UNIVERSAL MUSIC) CSs’ joint repertoires ARMONIA (SACEM+SGAE+SIAE) SCANDINAVIAN+BALTI C CSs SGAE+SPA

Unsettled or troublesome issues  Uneasy withdrawal of online rights Mechanical (easy only for the UK music repertoire) Performing rights (not until January 2010)  Split copyright (multiple right-holders) It concerns 40% of musical works. In case of distinct agents  ‘Tragedy of the anti-commons’ (Heller)  Legal status of these new agents (e.g., is CELAS a collecting society under German law?)  Non-exclusivity of the mandates (fictitious)

Individual licensing: a key role in the management of sound recordings Author’s/publisher’rights Performer’s rights Record producer’s rights

EU-wide licensing of all rights (one stop shops): for whom? Author’s rights (EU-wide customized collective management) Record producer’s rights (individually managed) Publisher’s rights (EU-wide collective management) Performer’s rights (acquired by the record producers and managed individually)

What about cultural diversity? European Parliament, Study (2009) Over-centralization of licensing power and reinforcement of dominant positions High risks of marginalization for the music repertoires managed by small and medium collecting societies (even more so with the predictable growth of digital sales) Dominance of the UK music repertoire (numbers)  Music sector (worldwide rankings): 1 st in performance rights; 3 rd in physical and digital sales  Revenues from foreign CSs: 60,9% of total revenues came from other EU Member States; 15% came from the US (2008)  Exchange flows: PRS revenues coming from other EU CSs were 6,71 times higher than what PRS distributed to EU CSs

From a very different perspective Start-up companies Beatpick (UK – Italian initiative) Flattr (Sweden) Magnatune (US company active also in the EU) Individual “open-access” management Members of traditional collecting societies (they are increasingly allowed to split the licensing of on-line and off-line uses) Non-members of CSs New collective rights managers combining licensing approach (e.g.“freemium” models)

Winners and losers Winners Major music publishers and their conglomerates Big (or widely representative) national collecting societies Commercial users interested merely or mostly in the “must-have” repertoire (i.e., the UK repertoire) Start-ups (Beatpick, Flattr..) Losers Medium- and small-size collecting societies (and the authors they represent) Medium and small music publishers Commercial users interested in a great variety of repertoires (e.g., iTunes or YouTube)

Where do we go from here?

Future scenarios  Copyright unification at EU level (?)  A new directive on copyright collective management (hopefully)  “Country of origin” principle to determine applicable laws for EU-wide licensing (?)  Global repertoire database (embodying freely available and non-proprietary electronic rights management information)

Thank you!