Response of the Music Publishers Association Ltd (MPA) to the Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee On the Management of Copyright and Related Rights in the Internal Market
Published 16 April 2004
1. Introduction
The business of managing copyright and related rights on a collective basis has evolved over at least the last two centuries. Copyright works can now be delivered over the Internet at such speed and with such ease that there needs, more than ever before, to be a robust system of management of rights which is capable of dealing with unprecedented volumes of transactions, mostly involving micro payments, whilst maintaining the proper value of copyright. We therefore welcome the European Commission's initiative to address key factors affecting the efficient and effective management of rights in this modern environment.
We applaud the Commission's aspirations for good governance, transparency, accountability, efficiency and cost effectiveness in the management of rights, all being principles which music publishers have endeavoured to promote through the Cannes Agreement and the Cannes Extension Agreement . Regrettably not all the objectives of these agreements have been met and, in particular, the Online Memorandum of Understanding designed to facilitate online licensing has still to be concluded.
Whilst we maintain the view, as expressed in our letter to the Commission of 21 December 2000 that legislative intervention should not be necessary to achieve an effective management of rights system and that contract law and competition law should be adequate, we have been disappointed that it has not been possible to achieve adequate satisfaction by these means. It would appear that codes of practice have not after all been sufficient and we therefore accept that the Commission's case for "the establishment of a legislative framework on good governance" to complement existing competition rules has become compelling providing it does not increase the bureaucratic burden on collecting societies.
2. Scope of this Response
Given that our members' experience is confined to the administration of copyright and related rights in musical works, both on an individual basis and collectively through relevant societies throughout the world , our comments are limited accordingly. However, we believe that the experience of rightholders and collecting societies concerned with musical works is such that our comments may well be applicable to other sectors of rights management.
We are members of ICMP and refer to their submission on this Communication which has our full support. We are also members of British Music Rights and refer to their submission which also has our full support.
3. Role of Music Publishers
Music Publishers are guardians of creators' interests. The role of a music publisher involves developing songwriters and composers ("writers"), adding value to their careers and their music and upholding the value of their music through the promotion, licensing, royalty collection and protection of copyright in their musical works. They assume such role under their publishing agreements with writers in which a writer may either assign his/her rights, whether in whole or in part, or exclusively license his/her rights to the publisher. Music publishers advance royalties to writers early in their careers upon signature of a publishing agreement in return for the rights in their copyright works being granted to them. In this way, music publishers provide new writers with income, often their only source of income, which enables them to develop their skills and further their careers. Such advances vary in amount but relevant factors in determining the amount include the writer's own standing and previous rate of success, as well as the competition from other publishers to sign that writer. Advances represent an investment worth on average at least 20% of publishers' income. This money is entirely at risk given that it is paid so often to new and untried writers and given that the music publisher will only recover such advance if and to the extent that a writer is successful.
The only writers who do not use the services of a music publisher on a general basis tend either to be some media composers, who are commissioned directly to write music for film and television, or fledging or low earning writers.
Whilst music publishers are responsible for collecting most of the income deriving from the use of musical works, whether directly or through collecting societies, on average at least 75% of all such revenues is paid on to their writers. Accordingly, any system for the management of rights should take account of the economic importance of music publishers and provide them with appropriate influence over the management of their rights.
The business of music publishing is concerned with licensing different uses of musical works. Whilst the traditional role of the music publisher was to produce and sell printed music, this aspect of the business now accounts for only some 10% of the turnover of the music publishing industry (although it remains core business for a significant number of music publishers). For the most part music publishers are now principally concerned with licensing: all reproductions of musical works, including for example in sound recordings and ringtones; the use of musical recordings in synchronisation with visual images, whether in commercials, television or film; the performance of musical works, both live and recorded; the broadcast of musical works and their use online.
In the circumstances, music publishers are rightholders, not producers as suggested in the Communication .
Music is an international phenomenon and is used and enjoyed across the world, regardless of its territory of origin. Music publishers must therefore engage in managing the use of their rights not only domestically but throughout the world.
4. Members of the MPA
The MPA represents over 90% of British music publishers. Its members include both large and small companies including the UK operating companies of five major music publishing companies, almost all the leading independent music publishers and the leading classical music publishers. The combined turnover of the members of the MPA is approaching £500 million. 96% of the members of the MPA are SMEs with 92% being "small" companies. As mentioned above, on average at least 75% of their income is paid on to individual writers.
5. Individual versus Collective Management of Rights
The features attributed to individual management of rights in paragraph 2.1 of the Communication are in fact features of copyright which apply to all works, whether managed individually or collectively. Music publishers and non-published writers have a choice as to whether to manage their rights on an individual basis or on a collective basis through a collecting society. The collective management of rights has long been viewed as the most practical and economic way of administering high volume usage of rights, whereas an individual approach is more appropriate in the case of special uses which, for example, might require the writer's approval (by virtue of his/her publishing agreement) and in circumstances which justify an individually negotiated fee. Collective management provides for economies of scale and the collective bargaining power of rightholders in the case of high volume uses is more likely to result in the value of the rights being maintained at a proper level. This is why one finds that collecting societies generally administer the reproduction of musical works on CDs and other recorded formats and the performance and broadcast of works whilst rightholders reserve to themselves the right to license the use of works in print, in commercials and films and the individual performances of large scale works such as operas and ballets (Grand Right works).
British music publishers have demonstrated their commitment to collective management of mechanical rights through the MPA's acquisition on their behalf in 1976 of MCPS and the conclusion of a new Membership Agreement in the late 1980s which is quite distinctive from those of other collecting societies around the world. That Membership Agreement enabled for the first time a single society, MCPS, to collect all mechanical royalties in the UK, so providing ease of access to the repertoire for users.
Collective management of rights provides an orderly market place for the benefit of users who can, as a result, secure the licences that they need in respect of their choice of musical works from a single source rather than from all the rightholders, a one-stop-shop. This represents a significant convenience and costs saving for users in terms of not having to trace each rightholder individually and in saving negotiating time and costs in negotiating licences.
The reference to a "remuneration right" in the Communication under response is not understood as this does not fall within the categories of rights conferred on rightholders by copyright legislation. All rights in the nature of copyright attract remuneration, whether in the form of a flat fee or a royalty, subject only to the discretion of the rightholder (or collecting society on their behalf). A right does not become a remuneration right by virtue of its being administered by a collecting society nor does a rightholder necessarily renounce the right to approve a particular use merely because it is being licensed on behalf of the rightholder by a collecting society. If what is meant by a remuneration right is a levy then this is something which is usually imposed by Government, beyond the control of rightholders, and should be treated separately from the rights of copyright which a rightholder may choose to entrust to a collecting society.
6. Digital Rights Management
We believe that the Copyright Directive has established the framework necessary for the development and protection of DRM systems and for the safeguarding of the public interest arising out of any exceptions to copyright. Such systems are at an early stage of development and show no signs yet of being useful in terms of security. Whilst they are a useful tool for managing rights they can equally be abused by those seeking to under-account for royalties. They do not as yet provide a meaningful alternative to copyright policy and we agree with the Commission's conclusion therefore that the market for DRMs should be left to develop without any further legislative intervention.
7. Governing Principles
7.1 Community-Wide Licensing:
We support the Commission's desire for community-wide licensing providing this is not used to diminish the value of copyright or to undermine the tariff applicable in the territory of destination, principles supported by the Commission in its Decision on the IFPI Simulcasting Agreement . This is all the more important given that the rights in a particular musical work are quite often owned by different rightholders in different territories. Whilst we do not believe that legislation is necessary to achieve community-wide licensing the Commission needs to provide more clarity as to what societies are allowed to do within existing competition law in order to effect this in the light of its recent pronouncements on both the IFPI Simulcasting Agreement and the Santiago Agreement.
Whilst competition between societies seeking to offer Community-wide licensing may ultimately result in a reduction in the number of collecting societies in Europe, we believe there will always be a need for a local presence in each Member State to deal with local issues such as tariffs, monitoring usage, enforcement and anti-piracy efforts, local media, language issues and VAT.
7.2 Balance of Interests:
The management of rights is concerned with balancing the interests of rightholders against those of users. On the one hand, rightholders are entitled to proper remuneration for the creation and dissemination of their works, as recognised by the Commission in its decision on the IFPI Simulcasting Agreement (see 7.1 above). Indeed, we fully support the Commission's view, as expressed in that Decision, that a proper licence fee in the context of the Internet is by reference to the tariff in the country in which each use of a work occurs.
The interest of users, on the other hand, is to secure access to works they wish to use (although it is arguable that Apple is using their iTunes Music Store as a vehicle to sell their hardware in the form of iPods rather than as an end in itself). The interest of users in accessing the widest possible range of music is in fact common to music publishers whose business it is to achieve the widest possible dissemination of their works, but only on condition that all uses are properly paid for.
7.3 Territoriality:
We fully support the Commission's view that the territoriality of copyright needs to be preserved and respected. The territoriality of copyright was recognised in the Berne Convention, as noted by the Commission, and having evolved on that basis it continues to be treated territorially in the recent Copyright Directive . Any new legislation of the kind contemplated in the Communication should therefore be confined to the management of such rights as are conferred by law and should not in any way attempt to alter the territorial basis of copyright. The mere fact that musical works can now be delivered via the Internet, which does not respect territorial borders, is no justification for changing this fundamental basis of copyright. After all, no such change was required to deal with satellite broadcasting . Furthermore, any Community exhaustion of rights, as suggested in paragraph 1.2.4 of the Communication, would represent an unacceptable erosion of copyright. It is for rights management systems to adapt to meet the demands of international licensing rather than for any changes to be made to the underlying rights.
7.4 Competitiveness:
We support the Commission's objective for a competitive environment in the management of rights. We believe that this can be best achieved by a system which gives rightholders full choice and flexibility as to which society should administer their rights as well as providing users with full choice and flexibility as to which society they may approach for their licences, subject however to there being safeguards against any possible abuse of such freedom of choice . Equally, rightholders should remain free to determine whether to manage their rights individually or on a collective basis through a collecting society, whether on an exclusive or a non-exclusive basis. None of this, however, requires legislation.
We respond as follows to the specific issues identified by the Commission as requiring legislative intervention:
It is vital that any legislative intervention should not result in any additional bureaucratic burden on collecting societies nor in any increase in the costs to rightholders of collective management of rights (but subject to what we say below with regard to a one-stop-shop licensing fee to users) as this will almost certainly have an adverse impact on the value of the rights to the detriment of rightholders.
8. The Establishment and Status of Collecting Societies
8.1 Role and Purpose:
In considering the appropriate establishment and status of collecting societies, it is important first of all to identify their role and purpose. The licensing of musical works and the collection of royalties thereon, together with protection against the unlicensed use of such works, are all matters which fall within the management or administration of rights and it is these functions alone which should define a collecting society. This is supported by the definition of a collecting society in European legislation , namely, "any organisation which manages or administers copyrights or rights related to copyright as its sole purpose or as one of its main purposes". We would suggest that educating the public as to the value of rights and fostering a culture of respecting copyright through licensing is an increasingly important area of work that should also be undertaken by collecting societies, alongside rightholders and Government as suggested in the Communication , to support their licensing activities.
The performance of their role involves registering their members' works and thereby building substantial databases , securing reciprocal agreements with equivalent collecting societies around the world in order to ensure that their members' rights are represented abroad and that they can represent foreign repertoire in their own territory, negotiating and concluding licence agreements with users, collecting the royalties due to rightholders under such licences, distributing the monies collected to their members and other collecting societies on behalf of overseas rightholders, auditing users to ensure compliance with their licence agreements, monitoring all uses of their members' works and preventing unlicensed use. Most of these functions have to be handled by computer and accordingly collecting societies have to make substantial investments in IT systems. Such investments must be made out of the administration fee charged to their members.
Collecting societies were established by rightholders to perform the function of administering their rights. They have no separate role or purpose and their priority must at all times therefore to be to serve the interest of their members and not themselves. The royalties that they collect belong to their members at the point of collection subject only to a deduction for their reasonable and proper administration costs.
8.2 Non-Essential / Secondary Roles
If and to the extent that a particular collecting society may choose to offer services additional to the essential services outlined above then they should provide their members with the choice as to whether or not they wish to take advantage of those additional services. Only those members taking advantage of this should have to pay an additional and appropriate service charge.
Should a collecting society apply any part of its funds towards social and cultural functions, such activities are ancillary to their main purpose and do not have any bearing on their role as managers and administrators of rights. The use of funds for such ancillary purposes should be as transparent as possible. A good model of how this can be achieved is to be found in the example of the PRS Foundation, a charitable foundation established by PRS as a means of enabling its members to contribute a small part of their income towards cultural activities. The PRS Foundation is entirely separate from PRS and, as a charitable body, must comply with stringent rules under UK law which ensure full transparency and accountability.
We suggest that social and cultural functions are more properly within the remit of Government rather than collecting societies, subject to the right for individual societies to engage in such activities on the basis above.
In addition, the only funds which should be applied towards such social and cultural functions must belong to those who are given the opportunity to decide whether or not they wish any part of their monies to be so applied. All too often foreign rightholders have no influence over, or understanding of, the internal workings of a collecting society and so are unable to control decisions which may result in part of their income being applied towards social and cultural functions which essentially benefit only those in the Member State in which the society operates. It is essential that societies do not discriminate against foreign rightholders and societies.
8.3 Status
We agree that there is a need for commonality in order to achieve satisfactory multi-territorial licensing. However, we would suggest that the status of a collecting society, providing it is established in accordance with local laws and current principles of good governance, does not have any bearing on the ability of the collecting society to manage rights effectively and efficiently and that there is no need therefore for regulation as to the legal form that a collecting society should take. We should mention that in the case of the UK societies, the governance of PRS was reviewed as recently as 1996 and that the governance of MCPS is currently under review.
The status of collecting societies should allow for them to offer the best possible value for money and to pass on to their members as much as possible of the licence fee, which is, after all, their members' money at the point of collection and is only subject to the deduction of their proper and reasonable administration costs. They must not seek to profit from the administration fees charged to their members.
8.4 Establishment
No category of rightholder should be precluded from establishing a collecting society and, in particular, music publishers should be at liberty to do so in the light of their economic importance in relation to the use of musical works .
8.5 Board Representation
Equally, it is important that no category of rightholder is precluded from being represented on the Board of a collecting society. Whilst there is no such exclusion in the UK collecting societies , we understand that music publishers are not entitled to be represented on the boards of collecting societies in, for example, France (SACD), Portugal, Greece and Poland.
Furthermore, the economic importance of music publishers should be one of the key factors taken into account in considering the balance of rightholders entitled to be represented on the Boards. Whilst music publishers have at least equal representation on the Boards of MCPS and PRS, they are in a very clear minority in a large number of Member States. If rightholders are to be encouraged to entrust the management of their rights to a collecting society in the interests of promoting one-stop-shop licensing, they must have confidence in the way that the collecting society itself is managed. Such confidence is more likely to be won if they have representation on society boards which is at least equal to that of all writers (i.e. songwriters, composers and lyricists) with no restrictions as to who may stand for election to the boards.
8.6 Operational Standards
One of the objectives under the Cannes Agreement and the Cannes Extension Agreement has been to achieve cost efficiencies within the operation of the collecting societies, to increase the speed with which they account to their members and to improve and streamline their operational standards. It is regrettable that the International Music Joint Venture (IMJV), an initiative between the UK (MCPS-PRS Alliance) and Dutch (BUMA/STEMRA) societies and an American society (ASCAP) to amalgamate databases and so streamline systems, had to be abandoned on account of the vested interests of individual societies. We applaud a recent announcement by the Ducth (STEMRA) and Belgian (SABAM) societies of an initiative concerning their back offices. Some degree of light regulation would ensure that societies must be more co-operative in finding more efficient ways of operating.
9. The Relation of Collecting Societies to Users
9.1 Users' Criticisms of Collecting Societies
9.1.1 Tariffs:
It is not unexpected that users should criticise the tariffs offered by collecting societies and anyone paying for a service is naturally anxious to limit their costs. However this is not in itself a justification for criticising the raison d'etre of collecting societies.
9.1.2 Transparency:
Users, like rightholders , require that collecting societies should be obliged to be transparent by publishing their tariffs. Users themselves should also be fully transparent in their dealings with copyright works in that they should declare the purpose and territories for which they require a licence and they should report and account for all uses of copyright works to the licensing society in a manner that enables that society to be able to account on to their members without additional costs of processing.
9.1.3 Decision-Making Process:
This process within collecting societies can appear slow and cumbersome to users. Their frustration becomes the frustration of rightholders who in turn have to wait longer to be paid. Accordingly, more clarity and commonality of approach to the process of making decisions within collecting societies, possibly through light touch regulation, would be helpful all round on the clear understanding that rightholders must in many circumstances retain the ultimate right to be able to refuse a licence if there is a valid reason to do so. An important reason for refusing a licence would be that a proposed licensee had previously defaulted.
We deal elsewhere in this response with users' other criticisms of collecting societies.
9.2 Community-Wide Licensing
The interests of users in a one-stop-shop for obtaining a multi-territorial licence is well understood. This has been accommodated by the mechanical right societies in Europe since the early 1990s through the mechanism of "European Central Licensing Agreements" ("ECLs). These came into being following the intervention of the Commission's Competition Division when GEMA was attempting to license the manufacture of records in Germany, albeit a licence to do so had already been secured from a collecting society in another Member State. ECLs did not require legislation to develop.
ECLs have allowed major record company users to obtain the licences they need to manufacture and sell CDs and other audio products throughout the EU from a single collecting society in the following manner. The chosen collecting society issues a central licence, then collects the royalties due for all such uses at the rate applicable in the territory of sale and remits the monies to the collecting society in the country of sale for distribution to the relevant local rightholder. Providing such convenience for users has involved building complex and expensive systems, but the benefit for the user in being able to obtain a one-stop-shop licence has been achieved.
We see no reason for this system not to be replicated in the online world for the benefit of large users of copyright works and for multi-territorial online licences to be secured from a single source subject to what we say in section 9.6 below. The establishment of such a system does not require legislative intervention since it has already been achieved without legislation in the offline world.
9.4 Value of Music
It is essential that in providing such convenience there should be no reduction in the value of the music. Unless the value is upheld rightholders will not entrust the management of their repertoire to collecting societies. The principle of paying a licence fee at the tariff in the country of destination of the online delivery is one way to try and uphold the value. This principle is already supported by the Commission, as mentioned above , and should be quite possible to administer given that VAT, for example, has to be paid at the rate applicable in the country in which the service is delivered, i.e. the country of destination.
9.5 Economic Residence Test
We note the Commission's concern about the trial licence adopted by the performing right collecting societies in order to achieve one-stop multi-territorial licensing, namely the Santiago Agreement . We believe that the Santiago Agreement is an important step towards community-wide licensing and would urge that it is not dismissed out of hand but rather that it be used and adapted to form the basis of a one-stop shop licence.
We understand that the Commission's primary objection is the fact that users are obliged to apply for licences from the collecting society located in the country in which they are economically resident. We believe that such requirement enables more efficient monitoring of the activities of particular users to ensure that their activities are properly licensed. We would not want a situation to be allowed to develop whereby users could continually avoid securing licences by entering into an effective perpetual negotiation with one society after another without ever concluding a licence, invoking their right to obtain licences from the society of their choice in response to any challenge. We would wish to see safeguards introduced through legislation to prevent such abuse if such test is to be abandoned so that one-stop multi-territorial licensing can be allowed to develop.
We support the development of one-stop-shop licensing, based on the model of ECLs as outlined above , as the best solution to the need for community-wide licences and would suggest that the alternative means of securing such licences outlined in the Communication (compulsory licensing etc) to be unacceptable.
9.6 Costs of One-Stop-Shop Licensing
Given the benefits for users on the one hand of one-stop-shop licensing, namely convenience and costs savings, and the cost and expense involved on the part of collecting societies in making this possible on the other hand, we would suggest that collecting societies should be entitled to charge users a special fee over and above the licence fee for multi-territorial licences secured on this basis in order to assist with the costs. It is unacceptable that collecting societies should be penalised for offering such a service through having to repay some of the licence fee to the users just to secure their business particularly when such monies are needed to build and operate the systems to support such centralised licensing.
10. Relation of Collecting Societies to Rightholders
10.1 Fiduciary Duties:
Collecting societies are described throughout the Communication as trustees of rightholders, presumably because they collect and hold monies on behalf of rightholders. They in fact operate under a mandate from rightholders, generally either under an agency agreement as agents for rightholders, as in the case of MCPS, or under an assignment of rights, as in the case of PRS. In all cases they are entrusted with managing rights upon which rightholders depend for their livelihood and as such they owe fiduciary duties to their rightholder members to maintain and realise the value of their rights. Whilst theoretically rightholders are not obliged to entrust the management of rights to a collecting society at all, and some music publishers choose not to, the fact is that smaller rightholders simply do not have the resources to administer all such rights themselves and so they have to depend on the collecting societies. These fiduciary duties are therefore of paramount importance to rightholders.
10.2 Freedom of Choice:
Rightholders should retain the freedom of choice as to which rights, if any, they choose to entrust to collecting societies for administration. Consistent with such freedom of choice they should be able to entrust those rights on a non-exclusive basis. Equally rightholders should be free to choose either to join a local or overseas society. We believe that this will promote more competition between societies.
10.3 GEMA Categories:
Collecting societies must be obliged to maximise the value of the rights they administer, maximise the collection of royalties in respect of the use of such rights and distribute the maximum amount collected to rightholders. This can only be achieved if members remain free to choose between individual and collective management of rights and this means they must have the right to remove their repertoire from a collecting society, either in its entirety or by category of use. The GEMA Categories which allow for such removal are therefore a vital mechanism for ensuring that collecting societies deliver the best and most effective service to rightholders. They can also be used to negotiate the best possible deal with users on the basis of the threat that rightholders will use the GEMA categories to remove their repertoire if a particular deal is not good enough.
The GEMA Categories and the conditions permitting withdrawal of any category of rights therefore need to be re-stated, updated to reflect adequately all aspects of online use of musical works, harmonised and made compulsory for inclusion in the constitutions of collecting societies. This is a matter which should be regulated.
In addition, we suggest that there would be a healthier market place if something analogous to the GEMA Categories were applied to reciprocal agreements between collecting societies.
10.4 Transparency:
There must be full transparency as to every aspect of a collecting society's business, as promoted in the Recitals to Copyright Directive , analogous to the level of disclosure to which mutual financial societies across Europe are subject. Transparency must include publication of their tariffs, publication of their distribution rules, full disclosure of their administration costs and financial information and making available for inspection all significant agreements, licences granted to users and reciprocal agreements with other collecting societies. Members should be entitled to audit all of these aspects of their collecting societies in the same way that music publishers are subject to auditing by their writers and users are subject to audit by the collecting societies. It is noteworthy that music publishers have established a right to conduct "technical visits" of European collecting societies under the Cannes Agreement and the Cannes Extension Agreement to ensure they are complying with the agreements, although this rather less exacting means of auditing has not proved as effective a means of establishing compliance as music publishers had hoped for. Until full transparency exists, it is impossible for rightholders to negotiate and discuss any of these issues with their collecting societies on an informed basis.
10.5 Accountability:
Collecting societies must be fully accountable to their members. Full transparency as outlined above is a pre-requisite for proper accountability. The money collected by a collecting society belongs in its entirety to the rightholders. In accordance with their fiduciary duties to their members, collecting societies must pass on the maximum fee possible for the use of their members' rights subject only to the deduction of their reasonable and properly incurred costs of administration.
10.6 Efficiency:
Consistent with their fiduciary duties, collecting societies must organise their systems and procedures so as to be as efficient as possible ion order that rightholders receive their licensing income as quickly as possible.
10.7 Cost Effectiveness:
On the basis that rightholders should retain absolute choice as to which collecting society they wish to join up to it goes without saying that it is in the interests of societies to be as cost effective as possible. This does not necessarily mean that they must charge the lowest administration fees, as low charges do not always equate to efficiencies and good service, but rather they must provide the best value for money.
11. External Supervision
Whilst users often complain of the difficulty and cost in contesting tariffs, rightholders and collecting societies are equally concerned about this.
11.1 Supervisory Body:
It is vital that disputes and any other issues that may be relevant for consideration by a supervisory body are resolved as quickly and cost effectively for both sides as possible. We do not therefore favour any kind of pan European supervisory body and would suggest that the kinds of issues that arise for consideration, namely largely disputes over tariffs, are best addressed by a national body in the country in question. However this presupposes that the body in question functions satisfactorily.
In the UK collecting societies are subject to supervision by the Copyright Tribunal. Only users, and not collecting societies themselves, are entitled to refer matters to the Copyright Tribunal and we would suggest that a fairer system should give both sides full access to such a body. We have expressed our reservations to the British Government on a number of occasions about the make up and approach of the Copyright Tribunal and these are summarised in a recent submission to the Commission in response to certain aspects of the Communication under response by British Music Rights, of which we are a member. These issues, coupled with the results of Tribunal decisions and the fact that in the case of music the lay members' only previous relevant experience is most likely to be as users and consumers of music rather than as rightholders, have resulted in the widely held view that the Copyright Tribunal is pro-user. In summary our concerns and suggestions are as follows:
11.1.1
The legally qualified Chairman should be obliged to declare any potential conflict of interest and, if necessary, withdraw if his experience in his legal practice has been in representing either side of the relevant industry.
11.1.2
There should be transparent criteria for selecting non-legally qualified members who sit with the Chairman and a transparent selection process. There are no currently published criteria;
11.1.3
There should be adequate training provided on the business of collective management of rights and the relevant industry, subject to what we say below. We understand that there is currently minimal training and that it does not touch on these areas;
11.1.4
The three person panel should be a legally qualified chairman with experience in copyright together with two industry experts, one nominated by each side of the dispute;
11.1.5
The system should positively encourage mediation as a quicker and cheaper alternative to the Copyright Tribunal.
11.2 Interim Solutions during Disputes:
In addition to our specific suggestions above for reform of the UK Copyright Tribunal, we take this opportunity to urge the Commission to identify a satisfactory common approach to the handling of royalty payments during the process for dealing with disputes which will not harm the interests of rightholders. We are particularly concerned that in Germany, for example, a user can unilaterally take a view as to what the tariff for a particular use should be and whilst the case is processed by the relevant tribunal, a process which can take many years, the difference between the tariff demanded by the collecting society (GEMA in this case) and the tariff of the user's choice (which can be abusively low) is held in escrow beyond the reach of the rightholders. Such unilateral action must be within reasonable parameters if such a system is to be allowed to continue.
We would suggest that there should be an expedited system for dealing with tariff issues which allows a supervisory body to set at least an interim tariff pending full resolution of the dispute on the basis that the rightholders should not have to repay any part of such interim tariff in the event that the supervisory body ultimately determines a lower tariff. We understand that there is a system along these lines in existence in France.
Music Publishers Association Limited
June 2004
APPENDIX I
Dr Jörg Reinbothe
Copyright Unit Internal Market DG
European Commission
200 Rue de la Loi
1049 Brussels
BELGIUM
21 December 2000
Mr Dr Reinbothe
Collective Management of Rights
Introduction
The Music Publishers Association Limited, UK, (MPA) attended the recent hearing held by the Internal Market Division of the European Commission in Brussels on 13 and 14 November 2000. The MPA welcomes the opportunity to express its views in writing directly to the Commission on the issues raised in the course of the Hearing. The MPA is a member of the International Confederation of Music Publishers (ICMP) which represents the interests of British music publishers in the international arena. ICMP was also at the Hearing.
The MPA represents over 90% of music publishers in the UK who have a total turnover of at least £450 million. The UK operating companies of all five major music publishing companies are members of the MPA, but the majority of the MPA's membership is comprised of SMEs. 73% of members have a turnover of less than £150,000 and a further 21.5% have a turnover of between £150,000 and £5 million. The music published by the membership spans every genre from serious to pop music.
Music publishers have developed their businesses over many decades around a system of collective management in respect of many of their rights. This system provides for a practical, effective and cost-efficient means of licensing the use of publishers' catalogues of works throughout the world and enforcing the copyright in those works. Collective management lends itself particularly well to the licensing of high volumes of music usage, providing convenience to the music user whilst at the same time ensuring that proper value is accorded to each use. The areas of licensing which publishers have reserved to themselves are those which generally demand a more individual approach and/or involve low volume of usage such as synchronisation, print and grand right works (operas, ballets and musicals).
The main focus of this submission will be the relationship between collecting societies and their music publisher members. The collective management of rights in musical works is handled in the UK by Mechanical-Copyright Protection Society Limited (MCPS) and Performing Right Society Limited (PRS). British music publishers have demonstrated their commitment to the principle of collective management through the MPA's acquisition on their behalf in 1976 of MCPS and the conclusion in the late 1980s of a new Membership Agreement which is quite distinctive from the membership agreements to be found with societies in other Member States. This has enabled publishers to oversee the satisfactory management of that Society and to monitor the proper exercise of their rights.
Historically, collecting societies have been subject to the scrutiny of the Competition Directorate as well as the European Court of Justice and the national courts. The MPA understands the need for scrutiny by the Competition Directorate. The MPA is not aware of any reason for this approach to change or of any internal market issues which cannot be adequately addressed through negotiation and agreement. The fact that there may be tensions between a) members and their collecting societies, b) respective collecting societies and c) collecting societies and users is a normal function of those relationships. For example, in so far as collecting societies and users are concerned, a collecting society will set out to achieve the best possible licensing conditions on behalf of its membership whereas a user will inevitably be seeking the widest possible rights at the lowest possible cost.
Scope of Mandates
While it is in the interest of writers, publishers and users to have collection societies administer the majority of their rights, there are certain categories of rights over which writers and publishers need to maintain control. These include both the rights which publishers continue to administer themselves as outlined above, namely synchronisation rights, print rights and grand right works, as well as moral rights which are particularly relevant in the case of any arrangements or adaptations and product endorsement etc. It is crucial that writers (and where they have entered into publishing agreements, publishers on their behalf) retain control of these rights, and that they have the right to decide whether to licence or assign the economic rights to any particular society or to administer them personally. This was endorsed by the EC in their 1971 and 1972 decisions on GEMA1 which recognise that it is for rightholders to decide which of their rights should be administered by which societies. Furthermore, in 1974 the European Court of Justice stated that a collecting society could not demand an assignment of rights beyond that which was absolutely necessary for attaining the objective of the society in protecting the interests of its members against users2.
Although long established, the MPA remains disappointed that compliance by the collecting societies with the GEMA decisions is patchy and that those societies which have complied have generally only done so as the result of a legal process. Most societies have still not taken adequate steps either to inform their members of the effect of these decisions or to ensure that their constitutions allow members to exercise their right to limit the scope of their assignment of rights to the societies through non-exclusive voluntary mandates.
Furthermore, the MPA recommends that the Commission should review and assess the categories defined in the two GEMA decisions1 which are, after all, nearly 30 years old and have not necessarily kept up with new forms of exploitation.
Other Membership Issues
To the extent that music publishers have otherwise been concerned over the operation of the collecting societies, the MPA considers that these matters should be, and indeed are being, addressed by means of negotiation between the societies and their members. The conclusion of the Cannes Agreement between certain publishers (but designed to be for the benefit of all members of each society) and mechanical rights collecting societies dated 13 November 1997, recently endorsed by the Competition Directorate of the European Commission, demonstrates that such matters can be addressed in this way.
The 4 year term of the Cannes Agreement, expires on 30 June 2001 and an agreement to follow on from this is already under negotiation between the parties. This further negotiation takes place in the context of the performance of the original 1997 Agreement and provides the parties with the flexibility they need to ensure that the next agreement meets any further challenges presented by developments in the Information Society and otherwise. In this fast moving world, such flexibility is both appropriate and necessary and is something which could not be achieved through legislative intervention.
The Cannes Agreement begins to address the following issues which have been of concern to publishers, namely:
a) achieving cost efficiencies within the operation of the collecting societies;
b) increasing the speed with which collecting societies account to their members;
c) increasing transparency by establishing a proper pan-European audit programme.
In addition, the publishers and societies agreed to work together in relation to such matters as:
i) investigating the reasons for and level of social and cultural deductions;
ii) establishing a Memorandum of Understanding to cover both the exploitation of multi-media products off-line (this has subsequently been agreed) and on-line transmission and
iii) the adequacy of publisher representation on the boards of the societies.
In addition, the societies have agreed to co-operate and work together to integrate their systems and eliminate duplication. To this end we have already witnessed the establishment of the International Music Joint Venture project (MCPS-PRS, BUMA/STEMRA and ASCAP), Fast Track (GEMA, SACEM, SGAE, SIAE and BMI) and the development of a system of common works registration under the auspices of CISAC (CWR).
Conclusion of a Memorandum of Understanding for on-line exploitation and development of the IMJV, Fast Track and CWR initiatives will benefit music users as well as members of the societies.
Dispute Resolution
The MPA maintains that in relation to the issue of disputes resolution, such matters are best handled at national level. Furthermore, this is likely to be more cost effective for users. The Copyright Tribunal is currently the relevant body within the UK with jurisdiction over disputes affecting collective licensing. The experience of British publishers and the collecting societies is that the decisions of the Copyright Tribunal are unduly balanced in favour of users. They are currently making submissions to the UK Government as to how the structure and rules of the Copyright Tribunal could be improved to redress the balance. Notwithstanding this, their preference is that such matters should continue to be handled nationally.
Conclusion
By way of conclusion, the MPA believes that the issues mentioned above do not have sufficient impact on the internal market to warrant any new legislative initiative but rather that the collective management of rights should continue to be regulated by contract and competition law alone.
Publishers are particularly concerned that nothing should be done to interfere with the status quo which might be taken advantage of by music users to the detriment of publishers and composers and songwriters. The volume and complexity of licensing should not be used as an excuse either for compulsory licensing or for undermining the value of music.
Publishers are currently confident that matters which are of concern to them can be addressed adequately by means of agreement and through the national and EU courts together with the Competition Directorate, as appropriate. If and to the extent that it should prove to be impossible to achieve their objectives by these means then music publishers may well invite the Commission to introduce appropriate measures or formulate such recommendations as the Commission considers necessary, for example, by way of guidelines or codes of conduct.
I hope you will find these comments helpful in your deliberations.
Yours sincerely
SARAH FAULDER
Chief Executive
- Re GEMA OJ [1971] L134/15 and Re GEMA (OJ [1972] L166/22)
2 Case 127/73, BRT-v-SABAM