Music copyright in a digital era

Copyright is both an incentive to and a reward for creativity. Authors of musical works are granted copyright over their creations to ensure that they determine how their creation can be used and receive remuneration for it.

The EC is seeking to speed up the creation of a pan-European digital music market- Josette Grech

Copyright is an economic right as it enables the right-holder to control – through licensing – the use of the work and other associated material such as performances, records, audiovisual productions and broadcasts, and be compensated for such use. A copyright holder has the exclusive right to reproduce any kind of work, the right to distribute copies to the public, and the right to communicate the public performances of such works. Authors are also granted moral rights that include the right to decide on when or whether to make the work public, the right to claim authorship of the work, and the right to object to any derogatory action in relation to the work.

Authors can normally choose between individually managing their own rights and entrusting their rights to royalty-collection societies to manage their rights on their behalf. Collecting societies are involved in the collective management of authors’ rights in musical works. They provide services to right-holders and users, including the granting of licences to commercial users such as TV channels and online music service providers, collecting and administering royalties due to right-holders and redistributing these to right-holders.

In order to exploit a musical work, a licence obtained either through the author or through the collecting society is required. Digital technology has made music licensing all the more important.

Within Europe, copyright licensing in music is currently issued on a country-by-country basis so consumers can only download music from, say, an iTunes store, in their home country. There are often significant variations in download and royalty rates set by national collection societies. The rollout of digital music services in Europe and their rate of take-up differ considerably from country to country. As a result, unless music providers obtain all the rights they need on a pan-European basis, users may be able only to purchase songs from their home country. This has led to limited consumer choice and piracy on a wider scale, as listeners seek alternate ways, often not legitimate, to obtain the music they wish.

The European Commission embarked on a task to harmonise Europe’s digital music sector by promoting licensing across the entire EU and introducing multi-territorial licensing of authors’ rights in their musical works. The EU has sought to promote pan-European licensing for years, and has now come up with a draft directive which seeks to create a single market in digital music.

Licensing has always been complex as it involves obtaining the necessary rights from different owners of different rights in extensive and changing repertoires. Online service providers often want to cover a multitude of territories and a large catalogue of music. This makes online licensing very demanding. Pan-European licencing does away with the fragmentation of copyright in music and creates a single interconnected market that is accessed by users irrespective of their country of residence.

The EC acknowledged that many collecting societies operating on the market today do not have the capacity to grant online licences, process data on online song downloads and streaming, or match this data with their repertoire of songs for royalty collection. This ineptitude harms the rightholder as invoices may be issued incorrectly or not at all, and fewer music services are made available across the EU to consumers. The Commission tagged Malta, Luxembourg, and Greece as some of the member states in which the market for music services is lacking.

As a result of the EC’s proposal, collecting societies will now need to adapt. Those willing to engage in the multi-territorial licensing of their repertoire will be required to comply with European standards. The proposal seeks to regulate the conduct of royalty-collection societies by establishing new European standards for improved governance and greater transparency in the conduct of their activities through strengthened reporting obligations and right-holders’ control over their activities.

Right-holders will have a direct say in the management of their rights, be remunerated quickly and choose which collecting society will administer their rights. While in principle right-holders can already choose to have their rights managed by any collecting society, the Directive will enshrine this in law.

With greater market integration and the emergence of digital networks, territorial approaches to licensing are becoming unworkable. The EC is seeking to speed up the creation of a pan-European digital music market. Once adopted, the new regulatory framework will meet the needs of a digital world which knows no borders.

jgrech@demarcoassociates.com

Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.