THE COLLECTIVE MANAGEMENT OF RIGHTS IN EUROPE The Quest for Efficiency July 2006 EUROPEAN AFFAIRS TABLE OF CONTENTS EXECUTIVE SUMMARY..................................................................................................5 THE COLLECTIVE MANAGEMENT OF RIGHTS IN EUROPE: THE QUEST FOR EFFICIENCY ..........................9 PART I RIGHTS MANAGEMENT IN THE EUROPEAN UNION ............................................11 CHAPTER 1 THE MANAGEMENT OF COPYRIGHT AND RELATED RIGHTS IN THE EUROPEAN UNION - THE ISSUES .........................................................................13 SECTION I THE SONGWRITERS AND COMPOSERS ...............................................................13 SECTION II COLLECTING SOCIETIES...............................................................................15 SECTION III THE TRIGGER FOR CHANGES: DIGITAL DELIVERY OF MUSIC ........................................17 SECTION IV A COMMERCIAL BATTLE AS MUCH AS A REGULATORY ISSUE........................................19 SECTION V EFFICIENCY FOR ALL? .................................................................................20 SECTION VI COPYRIGHT – A BOTTLENECK TO THE EMERGENCE OF NEW SERVICES? ..........................21 SECTION VII THE VIEWS OF THE EUROPEAN COMMISSION........................................................23 SECTION VIII RIGHTS MANAGEMENT AS A CULTURAL ISSUE? ......................................................24 SECTION IX CONCLUSION ...........................................................................................25 CHAPTER 2 MUSIC RIGHTS MANAGEMENT IN EUROPE ......................................................................27 SECTION 1 INTRODUCTION ON COPYRIGHT AND RIGHTS MANAGEMENT .......................................27 SECTION 2 COLLECTIVE MANAGEMENT – BENEFITS AND COSTS................................................29 The functions of collecting societies ......................................................................29 Rights usually managed collectively ......................................................................31 Main advantages of collective licensing...................................................................31 Main disadvantages of collective licensing ................................................................32 1 CHAPTER 3 THE RIGHT MANAGEMENT BUSINESS IN MUSIC ................................................................35 SECTION 1 THE ECONOMIC VALUE ................................................................................35 SECTION 2 THE SOCIAL VALUE.....................................................................................39 SECTION 3 THE TRADE VALUE .....................................................................................40 SECTION 4 CULTURAL AND SOCIAL FUNDS........................................................................40 CHAPTER 4 EU INSTITUTIONS AND RIGHTS MANAGEMENT .................................................................43 SECTION 1 THE EUROPEAN PARLIAMENT .........................................................................43 SECTION 2 THE EUROPEAN COMMISSION.........................................................................44 Internal Market...........................................................................................44 EC competition ..........................................................................................49 SECTION 3 THE EUROPEAN COURT OF JUSTICE..................................................................51 CHAPTER 5 THE COMPLEXITY OF A REGULATORY APPROACH ............................................................53 SECTION 1 RIGHTS TERRITORIALITY VS INTERNAL MARKET .....................................................53 SECTION 2 RIGHTS MANAGEMENT AND LOCAL CULTURE ........................................................54 CHAPTER 6 RECENT MARKET DEVELOPMENTS...............................................................................57 SECTION 1 MCPS+PRS DEALS WITH GEMA, EMI MUSIC PUBLISHING AND SGAE. ...............................57 SECTION 2 IMPALA – MONETISING ONLINE LICENSING FOR SMES...............................................58 CONCLUSION – PART I ..............................................................................................61 PART II NATIONAL RULES GOVERNING COLLECTIVE MANAGEMENT OF RIGHTS .............................65 CHAPTER 1 THE APPLICABLE LAW REGULATING COLLECTIVE MANAGEMENT ..................................................................67 SECTION 1 LAWS APPLICABLE TO COLLECTIVE RIGHTS MANAGEMENT..................................................................67 SECTION 2 RIGHTS COVERED BY MANDATORY COLLECTIVE MANAGEMENT .........................................................67 2 CHAPTER 2 THE STATUS OF COLLECTING SOCIETIES AND PROVISIONS ON COMPETITION LAW ................................71 SECTION 1 LEGAL STATUS OF COLLECTING SOCIETIES.............................................................................................71 SECTION 2 SITUATION OF LEGAL MONOPOLIES...........................................................................................................72 CHAPTER 3 PROVISIONS ON GOVERNANCE, TRANSPARENCY, ACCOUNTABILITY AND SUPERVISION ......................73 SECTION 1 GOVERNANCE, TRANSPARENCY AND ACCOUNTABILITY ........................................................................73 SECTION 2 SUPERVISION.................................................................................................................................................76 CHAPTER 4 RULES ON MEDIATION AND DISPUTE SETTLEMENTS ............................................................................................81 SECTION 1 CONFLICTS BETWEEN MEMBERS AND COLLECTING SOCIETIES ..........................................................81 SECTION 2 CONFLICTS BETWEEN USERS AND COLLECTING SOCIETIES................................................................81 SECTION 3 FOLLOW-UP TO MEDIATION AND ARBITRATION PROCEDURES..............................................................83 CHAPTER 5 SOCIAL AND CULTURAL FUNCTIONS OF COLLECTING SOCIETIES ...................................................................85 PART III DETAILS OF NATIONAL LEGISLATIVE FRAMEWORKS .........................................................................87 TABLE 1 THE APPLICABLE LAW REGULATING COLLECTIVE MANAGEMENT ........................................................89 TABLE 2 THE STATUS OF COLLECTING SOCIETIES AND PROVISIONS ON COMPETITION LAW........................97 TABLE 3 PROVISIONS ON GOVERNANCE, TRANSPARENCY, ACCOUNTABILITY AND SUPERVISION ..............103 TABLE 4 RULES ON MEDIATION AND DISPUTE SETTLEMENTS............................................................................119 TABLE 5 SOCIAL AND CULTURAL FUNCTIONS OF COLLECTING SOCIETIES......................................................125 ANNEX A BIBLIOGRAPHY.............................................................................................................................................131 ANNEX B INTERVIEWS .................................................................................................................................................135 ANNEX C GLOSSARY....................................................................................................................................................139 ANNEX D QUESTIONNAIRE FROM THE CONTRACT NOTICE ..................................................................................141 3 EXECUTIVE SUMMARY In the EU there are approximately 65 music licensing societies that collected € 5 billion in 2004 on behalf of authors, composers, publishers, performers and record companies. Collecting societies in music representing authors, composers and performers count around 900 000 members in the EU (the definition of members includes: authors, composers, music publishers, musi- cians and performers). This study examines the legal framework governing collective management in the field of copyright and neighbouring rights in the European Union, with a particular emphasis on musical works1. The report also provides information on the economic, social and cultural value of collective manage- ment, predominantly in the field of music, highlighting Europe’s competitive strength in rights manage- ment and the characteristics of rights management in the European Union. It provides members of the European Parliament with information on national legislation governing collective management as well as a briefing on the reforms proposed by the European Commission in relation to the provision of online music services. The study analyses the different options and summarises the views of the stakeholders. It considers the consequences of the scenario promoted by the European Commission with respect to: – copyright and its management – stakeholders’ interests (users as well as right holders) – EU internal market and competition objectives – EU cultural objectives It assesses the justification for the European Commission’s action in this field and considers policy issues linked to the latest regulatory development in light of the EP’s work, the ECJ jurisprudence as well as the latest market developments. The merit of the Commission’s Recommendation coupled with DG Competition investigation is to trigger an important re-think on rights management. It also launches a debate on the place of copyright and its exercise in the European integration process as well as the Lisbon strategy. The