European Commission proposes reforms to the EU-wide copyright licensing structure to promote online music services.
The European Commission believes that online music distribution can be a driving force for overall online services, particularly for broadband services, and it has concluded that existing copyright licensing structures across the EU present a barrier to the effective development of an EU-wide online music market. The Commission has published its conclusions in an in-depth study "on a Community initiative on the cross-border collective management of copyright".
The problem with the existing structure
According to the study, the existing cross-border arrangements for the management of collective copyrights "do not function in an optimal manner and hamper the development of an innovative market for the provision of online music services". The study describes the main problems with existing cross-border collective management of copyright, including discriminatory practices in cross-border distribution of royalties, restrictions on members from providing cross-border services, and territorial restrictions on copyright licensing. These and other issues present real obstacles to the efficient development of a pan-EU digital online music service, and the Commission is concerned that these difficulties are partly to blame for the significant difference in the size and development of the EU online music market when compared to the much larger US market.
As explained: "revenue achieved with online content services in the US is ten times bigger than online content revenue produced in the EU. As music pervades European culture and society, only music has the real potential to kick-start online content services." According to the study in 2004 the online music market in Western Europe was worth €27.2 million, compared to €207 million in the US. Projections for 2005 indicate that the Western European market will amount to a value of €106.4 million whereas the US market will be worth €498.3 million. This is the gap which the Commission wishes to narrow with these proposals.
The proposed solution
The Study considered three different options for dealing with this perceived problem:
Option one – to do nothing and allow the market to continue its natural, if imperfect, development;
Option two – to suggest changes to the existing cross-border collective management arrangements in place; or
Option three – to give right-holders the choice to authorise a collecting agency of their choice to manage their works across the entire EU.
The Commission is clear in its belief that option three offers the best solution: "the Study concludes that option three offers the most effective model for cross-border management. With respect to cross-border licensing, allowing right-holders to choose a collecting society outside their national territories for the EU-side licensing of the use made of his works, creates a competitive environment for cross-border management of copyright and considerably enhances right-holders’ earning potential.
With respect to cross-border distribution of royalties, the right-holders’ freedom to choose any collective society in the EU will be a powerful incentive for these societies to provide optimal services to all its right-holders, irrespective of their location – thereby enhancing cross-border royalty payments. The Study therefore proposes a series of principles that Member States would have to adhere to in order not to stifle the emergence of option three as a competitive model for the cross-border management of copyright works."
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