representing the recording industry worldwide

Market and regulatory outlook in the music industry Lauri Rechardt Director Licensing & Litigation IFPI

What’s digital? On-line and mobile Permanent downloads, “rentals”, on-demand streaming, personalised webcasts, master tones, RBTs, New products: SMS tones, RBTs, etc No one “killer application”

Demands of digital Creating services that are both secure and meet consumer demands requires flexibility in licensing Licensing for on-line and mobile needs to be “business driven” not constrained by old structures

Market outlook 2005 Digital revenue US$ 1.1 billion in 2005, 6 % of industry revenue Mobile / on- line; 40 / 60

Market outlook iTunes: over 1 billion tracks sold WMG: Digital off-set decline in physical sales, 7 % of company revenue in 2005 Digital 25 % of revenue in from utopia to realistic projection

Market outlook Regional break-down in 2005 TotalOnlineMobile USUS$ %32 % JapanUS$ 2789 %91 % UKUS$ 3862 %38 % GermanyUS$ 3166 %34 % FranceUS$ 2847 %53 %

Factors inhibiting growth in EU Piracy Lack of “secure interoperability” cross services and players Absence of Pan-European blanket licenses for authors rights

Regulatory outlook Interoperability Virgin Mega v iTunes “French debate” – interoperability through regulation Regulatory intervention v market driven solutions

Regulatory outlook Collective licensing The issue: how to organise multi- repertoire, multi-territory licensing in the EU Pan-European licenses currently available only from producers’ societies

Regulatory outlook Competition law: from “Lucazeau / Tournier” to “Simulcasting” to “Santiago” to “RTL” Sets out a framework for effective EU-wide collective licensing for new on-line and mobile uses –Distinction between licensing of “traditional” uses and “new” uses –Based on ability to “monitoring at a distance” –Introduces competition between the societies, –Removes territorial restrictions to the scope of the licenses –Removes “customer allocation” clauses –Right to proper remuneration for rights safeguarded!

Regulatory outlook Normative activities: Commission Recommendation on collective cross- border management of copyright and related rights (2005/ 737/ EC) –Endorses the existing rules on “non-discrimination” and right holder freedom to split the administration of their rights –Recommends the setting up of dispute settlement bodies –Outcome – EMI publishing opts out from collective licensing? –Follow-up?

Conclusions Positive outlook Europe is lagging behind Key issues: inter-operabiltiy and collective authors’ rights licensing Markets best placed to solve inter-operability Competition policy and dispute resolution mechanisms key to solve the authors’ rights licensing

representing the recording industry worldwide