Independent Management Entities under Directive 2014/26/EU Practical consequences for individual music authors Master's thesis Program: LLM Informatierecht Institution: Faculty of Law - University of Amsterdam Name student: Ruben Bolder Student number: 10214933 Supervisor: mr. dr. Lucie Guibault Date: February 17, 2017 Abstract This thesis addresses the regulation of Independent Management Entities under Directive 2014/26/EU on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market. A study was carried out with two objectives: First, to determine which organisations qualify as Independent Management Entities, and, second, to assess the consequences of the regulation of Independent Management Entities under the Directive for individual music authors. This thesis provides an elaboration of the practical context of online music rights management in the European Union, based on academic literature and on information from organisations involved in the music industry. Subsequently, a qualification of a sample of selected organisations as Independent Management Entities under the Directive is carried out on the basis of information obtained on the internet. Seven organisations that qualify as Independent Management Entities are identified. Lastly, the consequences of the Directive's regulation of Independent Management Entities for individual music authors are assessed based on the provisions of the Directive and sources from academic literature and professionals from the music industry. Table of Contents 1 Introduction ...................................................................................................................... 1 2 Europe’s digital music industry ...................................................................................... 5 2.1 Digitization of the music industry ...................................................................................... 5 2.1.1 The EU music industry ................................................................................................. 5 2.1.2 Digitization ................................................................................................................... 6 2.1.3 Consequences of digitization ........................................................................................ 7 2.2 Actors in the music industry ............................................................................................... 8 2.2.1 Music creators ............................................................................................................... 8 2.2.2 Music users ................................................................................................................... 9 2.2.3 Rights managers .......................................................................................................... 10 2.2.4 Other actors ................................................................................................................. 13 2.3 Music rights management ................................................................................................. 13 2.3.1 Types of rights ............................................................................................................ 13 2.3.2 Online music rights licensing ..................................................................................... 14 3 Qualification of Independent Management Entities ................................................... 19 3.1 Set-up of the analysis ......................................................................................................... 19 3.1.1 Structure and methods ................................................................................................ 19 3.1.2 Definition of Independent Management Entities ........................................................ 21 3.1.3 Selection criteria for initial exploration of relevant organisations ............................. 21 3.2 Analysis ............................................................................................................................... 24 3.2.1 Collection of relevant organisations ........................................................................... 24 3.2.2 Application of selection criteria .................................................................................. 25 3.2.3 Qualification of Independent Management Entities under Directive 2014/26/EU .... 26 3.3 Results ................................................................................................................................. 30 4 Implications for individual music authors ................................................................... 32 4.1 Legal aspects of the regulation of IMEs .......................................................................... 32 4.1.1 Purpose of the layered regulation of rights management ........................................... 32 4.1.2 Legal norms of the Directive applicable to IMEs ....................................................... 33 4.2 Practical aspects of the regulation of IMEs .................................................................... 34 4.3 Implications for individual music authors ...................................................................... 35 5 Conclusion ...................................................................................................................... 37 Bibliography ........................................................................................................................... 39 Appendix 1: Excerpt from article 3 of Directive 2014/26/EU ............................................ 45 Appendix 2: Overview of selected organisations ................................................................. 46 1 Introduction In recent years, technological developments have transformed the music industry. Driven by those developments, there has been a continuous growth of new possibilities for the use of internet in the music industry. Digital technologies created new forms of music consumption such as the downloading and online streaming of music.1 Online possibilities have led to the market entry of music services such as Beatport and Spotify.2 Because of the cross-border nature of the internet, online music services typically operate on a multi-territorial scale.3 This has consequences for the licensing of the copyrights and related rights on music. In order to offer music through downloading or streaming services, the providers of these services need multi-territorial licenses for the use of the music. However, the management of copyrights and related rights for which licenses are needed is often done by different parties.4 Hence, under the traditional system, the management of music rights is fragmented on multiple levels and this leads to a complex licensing practice.5 In the EU, the collective management of copyright and related rights has traditionally been organised on a national basis.6 That mono-territorial system of collective rights management was effective for the licensing of music in an offline context. Online music services, however, require multi-territorial licenses.7 The inadequacy of the EU’s mono-territorial system of music rights management to meet the multi-territorial licensing demands of online music services put the traditional system under pressure.8 Recognizing the problem of the increasing obsolescence of the traditional system of collective rights management in the EU, the European Commission issued a directive that aims to stimulate multi-territorial licensing in the EU. This directive, known as Directive 2014/26/EU, has two main objectives.9 First, the Directive aims to promote multi-territory 1 Schwemer 2014. 2 Beatport (www.beatport.com) is a platform for the online streaming and downloading of music; Spotify (www.spotify.com) is a platform for the online streaming of music. 3 In this thesis, ‘online music services’ will refer to music downloading, streaming and other forms of music consumption that take place in an online environment. 4 Brinker & Holzmüller 2010, p. 558. 5 Mazziotti 2011. 6 Hereinafter, ‘copyright’ will refer to both copyright and related rights, unless specified otherwise. 7 Hilty & Nérisson 2013, p. 222-234. 8 Visser 2009. 9 In this thesis, 'the Directive' will refer to Directive 2014/26/EU, unless specified otherwise. 1 and multi-repertoire licensing by CMOs. Second, it is supposed to improve the transparency and good governance of CMOs by establishing legal standards for their functioning. This entails norms on transparency, control and accountability.10 The Directive employs a system of layered regulation. Two different layers of regulation apply to two different categories of rights management. The first category encompasses organisations that qualify as CMOs. For CMOs, the Directive is wholly applicable. As a second category, the Directive introduces independent management entities (IMEs). For these ‘entities’, a limited selection of provisions is applicable. Hence, the Directive’s regulation applies in two different ‘layers’. According to Article 3(b) of the Directive, an independent management entity is defined as ‘any organisation which is authorised by law or by way of assignment, licence or any other contractual arrangement to manage copyright or rights related to copyright on behalf of more than one rightholder, for the collective benefit of those rightholders, as its sole or main purpose, and which is neither