Commission staff working document accompanying the proposal for a Council directive amending Council Directive 2006/116/EC as regards the term of protection of copyright and related rights - impact assessment on the legal and economic situation of performers and record producers in the European Union {COM(2008) 464 final} {SEC(2008) 2288}
Date: 2008-07-16
Institutions: European Commission
Subjects: approximation of laws, copyright

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 16.7.2008 
SEC(2008) 2287 

COMMISSION STAFF WORKING DOCUMENT 

accompanying the 

Proposal for a 

COUNCIL DIRECTIVE 

amending Council Directive 2006/116/EC as regards the term of protection of copyright 
and related rights 

IMPACT ASSESSMENT ON 
THE LEGAL AND ECONOMIC SITUATION OF PERFORMERS AND 
RECORD PRODUCERS IN THE EUROPEAN UNION 

{COM(2008) 464 final} 
{SEC(2008) 2288} 

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EXECUTIVE SUMMARY 

This  Impact  Assessment  (IA)  analyses  the  economic  and  social  situation  of  performers  and 
record producers in the European Union.  

With  respect  to  performing  artists,  this  IA  shows  that  many  European  musicians  or  singers 
start  their  career  in  their  early  20's.  That  means  that  when  the  current  50  year  protection 
ends,  they  will  be  in  their  70's  and  likely  to  live  well  into  their  80's  and  90's  (average  life 
expectancy in the EU is 75 years for men and 81 years for women). As a result, performers 
face  an  income  gap  at  the  end  of their  lifetimes,  as  they  lose  royalty  payments  from  record 
companies as well as remuneration due for the broadcasting or public performance of their 
sound  recordings.  The  latter  income  streams  are  paid  to  performers  directly  through  their 
collecting  societies  and  are  not  affected  by  their  contractual  arrangements  with  the  record 
companies.  

For session musicians, who play background music, and lesser known artists, that means that 
broadcasting  and  public  performance  income  decreases  when  performers  are  at  the  most 
vulnerable  period  of  their  lives,  i.e.  when  they  are  approaching  retirement.  Once  copyright 
protection expires, they will also lose out on potential revenue when their early performances 
are sold on the Internet.  

Moreover, when their rights expire performers are exposed to potentially objectionable uses 
of their performance which are harmful to their name or reputation. Performers are also at a 
disadvantage  as  compared  to  authors  whose  works  are  protected  until  70  years  after  their 
death. This could be seen as unfair since performers are nowadays not only just as necessary 
as authors but also more identifiable with the commercial success of a sound recording.  

As regards producers of sound recordings, the IA shows that their principal challenge is peer-
to-peer  piracy  and  their  need  to  adapt  their  business  to  the  challenges  of  dematerialised 
distribution. In these circumstances, they face the challenge of keeping up the steady revenue 
stream  necessary  to  invest  in  new  talent.  Record  companies  claim  that  they  invest  around 
17%  of  their  revenues  in  the  development  of  new  talent,  i.e.  to  sign  new  talent,  promote 
untried  talent  and  produce  innovative  recordings.  Therefore,  a  longer  term  of  protection 
would  generate  additional  income  to  help  finance  new  talent  and  would  allow  record 
companies to better spread the risk in developing new talent. Due to uncertain returns (only 
one  in  eight  sound  recordings  is  successful)  and  so-called  'information  asymmetries'  such 
revenue is often not available on capital markets. 

The impact assessment analyses the economic, social and cultural impacts of six options 

This IA presents a total of seven options, but one option was discarded before the analysis of 
impacts.  Apart  from  the  standard  option  of  'doing  nothing'  and  letting  the  music  market 
develop, the IA analyses two options linked to the term of protection for sound recordings and 
three  options  that  would  not  require  a  change  in  the  current  terms  that  apply  to  sound 
recordings.  

With  respect  to  the  term  of  protection  this  IA  looks  at  the  option  of  extending  the  term  of 
performers to 'life or 50 years', whichever is longer. This option would enhance the status of 
performers and, by linking protection to their lifetime, recognise the individual and creative 
nature of their performances. This option would not only apply to the performers' exclusive 

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rights  but  also  to  the  variety  of  broadcasting  and  public  performance  rights  that  are  not 
transferred to the record companies.  

Another option involving the term of protection would be to extend the current 50 year term to 
95 years for performers and record companies. This option ensures full equivalence with the 
longest term of protection in the world. In order to ensure that the benefit of term extension 
accrues to performing artists, especially session musicians that have transferred their related 
right against a one off payment, the extension of the term of protection for record companies 
should  be  accompanied  by  the  payment  of  a  certain  percentage  of  record  companies' 
increased  revenues  into  a  fund  dedicated  to  improving  the  situation  of  session  musicians. 
Again,  as  in  the  'life  or  50  year'  option,  the  remuneration  for  broadcasting  and  public 
performance would remain with the performer for 95 years.  

Another  set  of  options  looks  at  ways  to  address  the  problems  identified  above  without 
modifying  the  term  of  protection.  These  options  comprise  various  possibilities  which  could 
improve  the  financial  situation  and  moral  rights  of  performers.  These  measures,  of  course, 
could  be  used  either  as  alternatives  to  a  term  extension  or  as  measures  to  complement  an 
extension  of  the  term  of  protection.  Several  of  these  measures  could  only  be  the  subject  of 
Community legislation. 

This  IA  describes  how  performers  contractually  transfer  their  exclusive  rights  to  record 
labels, (including their reproduction, distribution, rental and making available rights, but not 
their  remuneration  claims  for  broadcasting  and  public  performances.  In  order  to  limit  the 
effect  of  the  systematic  contractual  transfer  of  performers'  exclusive  rights  to  record 
companies, the IA examines the possibility of an 'unwaivable' right to remuneration to which 
performers would remain entitled even after having transferred their making available right 
to a record producer. The creation of a claim for equitable remuneration for online sales or 
other forms of making performances available online is an interesting option, whose time may 
yet come. However, at this stage, the uncertainties surrounding the issue of who should pay 
this 'equitable remuneration' are such that the likely effects of this option cannot be quantified 
with  any  reasonable  measure  of  certainty.  In  light  of  the  uncertainties  surrounding  the 
practical administration of the claim for equitable remuneration, further study on this option 
is imperative. While in the future this option might well be introduced to enhance performers' 
participation in revenue generated online, it is too early to discuss at this stage. This option 
was therefore discarded before the analysis of impacts. 

Another option analysed is to strengthen performers' moral rights. The scope of their moral 
rights  could  be  harmonised  to  include  a  right  to  restrict  derogatory  uses  of  their 
performances.  

A further option is to ensure that 'use it or lose it' clauses are included in agreements between 
performers and record labels. This means that, if a record company is unwilling to re-release 
a performance during the extended term, the performer can move to another record company 
or exploit the record himself.  

The impacts of the different options 

All options are assessed against the following six operational objectives: (1) gradually align 
authors'  and  performers'  protection;  (2)  incrementally  increase  the  remuneration  of 
performers;  (3)  diminish  the  discrepancies  in  protection  between  the  EU  and  US;  (4) 

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incrementally  increase  A&R  resources,  i.e.,  the  development  of  new  talent;  (5)  ensure 
availability of music at reasonable prices; and (6) encourage digitisation of back catalogue.  

The  IA  concludes  that  'doing  nothing'  is  not  a  preferable  option.  If  nothing  was  done, 
thousands of European performers who recorded in the late fifties and sixties would lose all 
of  their  airplay  royalties  over  the  next  ten  years.  This  would  have  considerable  social  and 
cultural impacts. Equally, the sound recording industry would be obliged to cut down on the 
creation of new sound recordings in Europe.  

The  IA  considers  the  impact  of  options  not  involving  the  term  of  performers'  and  record 
producers'  rights  (options  3a,  b,  c  and  d).  Option  3a  (unwaivable  right  to  equitable 
remuneration) appears premature as it is unclear who would pay for this remuneration and it 
is hard to estimate the financial benefit it would bring. Option 3b (the strengthening of moral 
rights), has no financial impact on performers and record producers. Option 3c, the 'use it or 
lose  it'  clause,  would  be  beneficial  to  performers  by  allowing  them  to  make  sure  their 
performances are available on the market. It would also be beneficial for cultural diversity. 
Option  3d,  the  fund  to  be  set  up  by  record  companies,  would  be  very  beneficial  to  non-
featured performer. Record producers, however, would have to pay into the fund at least 20% 
of  the  additional  revenue  generated  by  the  term  extension.  However,  the  IA  concludes  that 
marketing sound recordings would remain profitable for record companies despite having to 
pay 20% towards thus fund.  

Options involving a term extension (2a "life or 50 years" and 2b "95 years for performers and 
record  producers")  seem  to  be  rather  more  suitable  in  contributing  towards  the  six  policy 
objectives.  Both  options  2a  and  2b  bring  financial  benefits  to  performers  and  would  thus 
allow more performers to dedicate more time to their artistic activities.  

Option 2a, by linking the term to the life of a performer, would contribute to aligning the legal 
protection  of  performers  and  authors.  It  would  reflect  the  personal  nature  of  performers' 
artistic  contributions  and  recognise  that  performers  are  as  essential  as  authors  to  bringing 
music to the public. It would also allow performers to object to derogatory uses of their works 
during their lifetime. 

In  addition,  option  2b  would  increase  the  pool  of  A&R  resources  available  to  record 
producers  and  could  thus  have  an  additional  positive  impact  on  cultural  diversity.  This  IA 
also demonstrates that the benefits of a term extension are not necessarily skewed in favour of 
famous  featured  performers.  While  featured  performers  certainly  earn  the  bulk  of  the 
copyright  royalties  that  are  negotiated  with  the  record  companies,  all  performers,  be  it 
featured  artists  or  session  musicians,  are  entitled  to  so-called  'secondary'  income  sources, 
such  as  single  equitable  remuneration  when  the  sound  recording  incorporating  their 
performances is broadcast or performed in public. A term extension would ensure that these 
income  sources  do  not  cease  during  the  performer's  lifetime.  Even  incremental  increases in 
income  are  used  by  performers  to  buy  more  time  to  devote  to  their  artistic  careers,  and  to 
spend less time on part time employment. Moreover, for the thousands of anonymous session 
musicians who were at the peak of their careers in the late fifties and sixties, 'single equitable 
remuneration' for the broadcasting of their recordings is often the only source of income left 
from their artistic career.  

In  addition  to  ensuring  the  increased  availability  of  A&R,  option  2b  is  also  easier  to 
implement  than  option  2a,  because  the  latter  option  is  linked  to  the  life  of  individual 
performers. As the example of co-written works demonstrates, linking a copyright to the life of 

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individual contributors raises complex issues when several performers contribute to a sound 
recording. These would increase the legislative and administrative burden on Member States 
and create legal uncertainty, because the term of protection to the term of protection would 
no longer be linked to a certain and uniform date, i.e., the publication of the phonogram that 
contains  the  performance,  but  to  the  sometimes  very  different  lifetimes  of  individual  co-
performers. 

What are the likely provisions in the proposal to ensure that it is the performing artists that 
benefit?  

In  order  to  ensure  that  the  benefit  of  term  extension  would  accrue  to  performing  artists, 
especially  session  musicians,  this  IA  concludes  that  record  companies  should  contribute 
towards  a  fund  for  session  musicians  (option  3d).  In  order  to  have  the  financial  volume 
necessary  to  ensure  real  benefits  for  session  musicians,  this  IA  proposes  that  the  record 
companies  set  aside  at  least  20%  of  the  revenue  that  accrues  during  the  extended  term  for 
session musicians. The fund's impact on session musicians would be positive, as the average 
performer' additional annual revenues during a 45-year term would almost triple 

In  respect  of  featured  artists,  the  Commission's  analysis  concludes  that  original  advances 
paid  by  the  record  companies  should  no  longer  be  set  off  against  royalties  in  the  extended 
term. That means the artist would get all the royalties during the extended term.  

The  IA  also  proposes  that  a  term  extension  should  be  accompanied  by  a  'use  it  or  lose  it' 
provision (option 3c). This means that, in the event that a record company is unwilling to re-
release a performance during the extended term, the performer can move to another record 
company or make his performance available himself.  

Empirical  studies  show  that  the  impact  of  a  term  extension  would  not  be  negative  for 
consumers.  

Empirical  studies  show  that  the  price  of  sound  recordings  that  are  out  of  copyright  is  not 
lower  than  that  of  sound  recordings  in  copyright.  This  is  true  in  relation  to  statutory 
remuneration claims and for the sale of CDs. 

The 'single equitable remuneration' due for broadcasting and performances of music in public 
venues  would  remain  the  same  as  these  payments  are  calculated  as  a  percentage  of  the 
broadcasters or other operators' revenue. As far as CD sales are concerned, very few studies 
analyse the price between prices of in-copyright and out-of copyright recordings. A study by 
Price Waterhouse Coopers concluded that there was no systematic difference between prices 
of  in-copyright  and  out-of  copyright  recordings.  It  is  the  most  comprehensive  study  to  date 
and  covers  129  albums  recorded  between  1950  and  1958.  On  this  basis,  it  finds  no  clear 
evidence that records in which the related rights have expired are systematically sold at lower 
prices than records which are still protected.  

Other studies have been considered in analysing the impact of copyright or related rights on 
prices. Most of them focus on books. However, even in this category, either no overall price 
difference  is  found  between  the  samples  of  books  in-  or  out-of-copyright,  or,  the  impact  of 
copyright  on  the  price  is  extremely  model-dependant  and  therefore  the  estimates  obtained 
cannot be seen as very robust. Given the lack of widely accepted models and the length of the 
time span, it is fair to say that there is no clear evidence that prices will increase due to term 
extension.  

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In addition, overall, the extended term should have a positive impact on consumer choice and 
cultural  diversity.  In  the  long  run,  this  is  because  a  term  extension  will  benefit  cultural 
diversity by ensuring the availability of resources to fund and develop new talent. In the short 
to medium term, a term extension provides record companies with an incentive to digitise and 
market  their  back  catalogue  of  old  recordings.  It  is  already  clear  that  internet  distribution 
offers unique opportunities to market an unprecedented quantity of sound recordings. 

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International dimension 

The IA also looked at the trade implications of a longer term of protection and provisionally 
concludes  that  most  of  the  additional  revenue  collected  in  an  extended  term  would  stay  in 
Europe  and  benefit  European  performers.  This  is  good  for  promoting  Europe's  performers 
and the cultural vibrancy of European sound recordings.  

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1. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

A Commission Staff Working Paper on the review of the EC legal framework in the field of 
copyright and related rights1 was published on 19 July 2004. Interested parties were invited to 
submit their comments by 31 October 2004. Full information can be found at the following 
link  to  the  DG  MARKT  copyright  unit  web  page  set  aside  specifically  for  this  exercise: 
http://ec.europa.eu/internal_market/copyright/review/consultation_en.htm.  Even  though  all 
copyright issues were open for comment, of the 139 contributions received, 76 position papers 
commented  on  Directive  93/98/EC  harmonising  the  term  of  protection  of  copyright  and 
certain related rights2. More specifically, 36 organisations and stakeholders were in favour of 
extending  the  protection  of  related  rights  (performers  and  record  producers)  while  29 
indicated  that  they  were  against  any  extension.  Table  1A  indicating  the  summary  of  these 
submissions can be found in the Annex, section 1. 

In 2005, the Commission contracted out a study entitled "The recasting of copyright for the 
knowledge economy". Part of this study was to consider the term of protection for performers, 
record  companies  and  broadcasters  in  Europe  in  general  and  whether  these  related  rights 
holders are at a disadvantage when compared to those in the USA and other major economic 
competitors  (see  Annex,  section  4).  The  study  was  completed  in  December  2006  and 
published  on  the  Commission's  web  site  on  January  2007.3 During 2006-2007,  Commission 
services had meetings with a variety of stakeholders on a bilateral basis4 to discuss relevant 
issues  in  more  detail.  A  questionnaire  was  prepared  by  the  Commission  and  distributed  to 
major  stakeholders  in  the  framework  of  these  bilateral  discussions.  More  or  less  detailed 
responses were received from performers' associations and the recording industry.5 It was not 
possible to establish a steering-group on the subject of this impact assessment. 

The  Commission  also  analysed  other  independent  studies  such  as  the  "Gowers  Review  of 
Intellectual  Property"  (2006)  in  the  UK,  "The  Economy  of  Culture  in  Europe"  (2006),  by 
Kern European Affairs, "Performers' Rights in European Legislation: Situation and Elements 
for  Improvement"  (2007),  by  AEPO-ARTIS,  "What  are  the  Consequences  of  the  EU 
extending  Copyright  Length  for  Sound  Recordings"  (2006),  by  Liebowitz,  "The  Impact  of 
Copyright Extension for Sound Recordings in the UK" (2006), by Price Waterhouse Coopers, 
"Review  of  the  Economic  Evidence  Relating  to  an  Extension  of  the  Term  of  Copyright  in 
Sound Recordings" (2006), by the Centre for IP and Information Law. 

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SEC(2004) 995 of 19 July 2004. 
Directive  93/98/EEC  has  been  superseded  by  a  codified  version  (Directive  2006/116/EC  of  12 
December  2006  on  the  term  of  protection  of  copyright  and  certain  related  rights,  OJ  L372  of 
27.12.2006, p.12 (hereafter referred to as the "Term Directive"). This codified version did not include 
any substantive changes. 
http://ec.europa.eu/internal_market/copyright/docs/studies/etd2005imd195recast_report_2006.pdf 
Telecom Italia/ETNO, FIM/FIA, IFPI, PPL, MPA, GIART, Eurocopya/Eurocinema, Naxos, EMI, AER, 
EBU, BEUC, British Library, ACT 
AEPO, BEUC, IFPI, Naxos.  

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2. 

PROCEEDINGS BEFORE THE IAB 

A draft version of the impact assessment was discussed before the Impact Assessment Board 
(IAB) on 2 April 2008. In the course of this meeting the IAB raised a series of issues that DG 
MARKT undertook to address. In particular, the IAB asked for clarification on: 

–  The relationship between the EU acquis and international conventions governing the field 

of performers and producers rights; 

–  The  scope  of  the  intended  initiative,  especially  as  the  impact  assessment  distinguishes 

between performers and producers in the musical and the audiovisual sectors; and  

–  The events that triggered the initiative.  

2.1. 

International conventions and the EU acquis 

The impetus behind the initiative can best be explained against the backdrop of international 
conventions.  These  also  explain  the  distinction  between  performers  and  producers  in  the 
musical and audiovisual fields.  

Performers,  whether  in  the  musical  or  in  the  audiovisual  field,  are  not  covered  by  the  1886 
Berne Convention on Literary and Artistic Works. Although several proposals were made to 
include  performers  and  performances  within  the  scope  of  the  Berne  Convention  at  later 
revision  conferences,  none  of  these  proposals  found  sufficient  support.  The  need  for 
protection  of  performers  and  record  producers  was  only  perceived  as  imminent  with  the 
proliferation of phonographic technology and the subsequent introduction of sound recordings 
and  broadcasting.  In  these  circumstances,  performers  and  producers  were  first  granted 
protection against a variety of unauthorised acts in the 1961 Rome Convention. Both groups 
of rightholders were considered jointly under the Convention not because of the similar nature 
of their rights, but because of the development, in the 1950s, of commercial markets for sound 
recordings.  Most  significantly,  to  compensate  both  rightholders  for  the  relatively  narrow 
scope  of  their  exclusive  rights  (there  is  no  right  governing  the  communication  of 
performances to the public), the 1961 Rome Conventions provides both groups of rightholders 
with a right to receive 'single equitable remuneration' for the broadcasting or communication 
to the public of a commercially published phonogram. Significantly, this important claim to 
equitable  remuneration  only  covers  the  broadcasting  or  public  communication  of  a 
phonogram and would thus exclude audiovisual performers or film producers from its scope.  

It is also relevant to note that film producers, based on Article 14bis of the Berne Convention, 
already  enjoy  a  far  better  status  than  the  producers  of  sound  recordings.  By  virtue  of  this 
Article,  a  film  producer  can  either  be  granted  co-ownership  in  the  copyright  that  applies  to 
authors (like in the UK or Ireland) or benefit from a variety of statutory assignments (Italy, 
Austria) or presumptions of copyright ownership in their favour (Belgium, France, Germany, 
Luxembourg,  the  Netherlands  or  Spain).  Ownership  of  copyright,  of  course,  entitles  film 
producers  to  a  copyright  term  that  spans  the  life  of  the  film  authors,  plus  seventy  years.  In 
respect of the term of protection, the situations of film and phonogram producers thus differ 
fundamentally. 

The 1996 WIPO Performances and Phonograms Treaty (WPPT) upgraded musical performers 
and  producers  rights  by  introducing  a  new  right  of  'making  available'  that  is  tailored 
essentially  to  cover  digital  downloads  offered  on  an  individualised  basis.  The  1996  WPPT 

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does not cover audiovisual performances or productions. Indeed, a 2000 conference at WIPO 
aimed  at  introducing  a  WIPO  Audiovisual  Performances  Treaty  ended  in  failure  as 
delegations were unable to agree on provisions governing the transfer of rights of performers 
to film producers. 

The  EU  acquis  essentially  mirrors  the  above  mentioned  international  conventions.  Like  the 
Rome  Convention,  the  acquis  only  provides  for  equitable  remuneration  in  case  of 
broadcasting  or  communication  to  the  public  of  a  commercial  sound  recording  (cf.  Article 
8(2)  of  Directive  2006/115)  and  there  are  no  comparable  provisions  governing  audiovisual 
performances.  Audiovisual  performances  do,  however,  benefit  from  the  reproduction  right 
now contained in Article 2 of Directive 2001/29 and would thus also appear eligible for levies 
that apply in case of private reproductions.  

2.2. 

The scope of the intended initiative 

The  impact  assessment  focuses  not  only  on  the  term  of  protection  that  would  apply  to 
performers'  and  producers'  exclusive  rights  but  also  on  the  (identical)  term  that  governs  a 
series of highly relevant 'secondary' remuneration claims. Special emphasis is put on the claim 
to receive equitable remuneration for broadcasting and communication to the public it is not 
transferred to producers but administered by performers' collecting societies directly. As this 
claim does not apply to audiovisual productions, the analysis of the impacts of term expiry is 
limited to musical performances and phonograms. 

In addition, as mentioned above, the term applicable to phonogram producers differs from that 
applicable  to  film  producers.  As  the  latter  usually  enjoy  copyright  ownership,  a  statutory 
assignment  of  the  author's  rights  or  at  least  a  presumption  of  such  a  transfer,  copyright  for 
film producers essentially lasts  for seventy years after the death of the last surviving author 
while  the  phonogram  producers'  right  expires  50  years  after  the  recording  was  made  or 
published. This, again, explains why the impact assessment deals with phonogram producers 
only. 

2.3. 

Events triggering the term initiative 

Since  promulgation  of  the  2004  Staff  Working  Paper,  a  series  of  studies  on  the  social  and 
economic  situation  of  the  European  performing  artist  were  conducted  and  published.  Most 
notably, a study by AEPO ARTIS 'Performers Rights in European Legislation: Situation and 
Elements for Improvement' have brought the social and economic difficulties of performers to 
the  fore.  This  study  has  also  revealed  the  crucial  importance  that  secondary  remuneration 
schemes play in rewarding the creative efforts of performers. For many performers, equitable 
remuneration collected for broadcasting and communication to the public is a more important 
source of revenue than the exercise of their exclusive rights, which are often transferred to the 
producers.  For  example,  57%  of  monies  collected  by  performers  collecting  societies  stem 
from  equitable  remuneration  for  broadcasting  and  communication  to  the  public.  A  term 
extension  to  cover  at  least  the  life  of  a  performer  would  thus  benefit  individual  performers 
primarily by extending their eligibility to receive a share of equitable remuneration payments. 
None of these issues had been fully considered in the 2004 Staff Working Paper. 

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3. 

INTRODUCTION 

This impact assessment will cover the issue of performers' and record producers' rights under 
the  Community  acquis.  Only  performers  whose  performances  are  included  in  a  sound 
recording are considered. Audio-visual performers and producers are not considered, as their 
economic and legal situation is significantly different. This concerns their legal status as well 
as the assignment and transfers of their rights. Film producers, in certain Member States, are 
considered as co-authors of a film6 while in others they are considered as proprietors of so-
called  'related'  rights7.  Moreover,  contracts  in  the  film  industry  differ  from  those  in  music, 
especially in respect of presumptions of rights transfer to the producer8.  

3.1.  Who are performers? 

A performer is a person who performs or executes a work such as a piece of music, an opera, 
a play or a film. "Actors, singers, musicians, dancers, and other persons who act, sing, deliver, 
declaim, play in, or otherwise perform literary or artistic works" are all performers9.  

The status and income of performers varies considerably. A small number of performers such 
as "featured artists" (whose name appears on the album credits) achieve fame and fortune or 
"superstardom". At the other end of the spectrum, most performers are less well-known and 
cannot  earn  a  living  from  their  creative  activities.  They  include  session  musicians  (whose 
names  do  not  appear  on  the  album  credits)  who  are  employed  inter  alia  to  provide 
background music and performers who are aspiring to a career as featured artists. 

It  is  difficult  to  provide  a  precise  estimate  of  the  number  of  performers  in  the  EU. 
Membership in performers' collecting societies or artists unions or the number of artists active 
in  musical  education  only  provide  rough  proxies.  In  2004,  the  total  number  of  members  of 
performers' collecting societies amounted to nearly 40000010. 

3.2.  Who are record producers? 

Record producers create sound recordings (i.e. the "fixation" of a performance)11 and ensure 
their  subsequent  promotion  and  marketing,  distribution  to  retail  outlets  and  sale  to 
consumers/end users. Record producers provide the financial investment necessary to produce 
and  sell  music  records.  They  also  invest  in  discovering  and  developing  performers  both 
commercially  and  artistically.  As  it  is  estimated  that  only  1  in  8  CDs  is  profitable,  the 
investments of record producers in the music industry are regarded as risky. 

The recording industry is dominated by a few large companies (often integrated into bigger 
media conglomerates), which are also known as "the majors": Universal Music Group, Sony 

6 
7 
8 

9 

10 
11 

For instance in the U.K., under section 9(2)(ab) of the 1988 Copyright Patent and Designs Act. 
E.g. in France, see Article L.215-1 Intellectual Property Code. 
See, at international level, Article 14bis Berne Convention, and at Community level, Article 2(5)-(7) of 
the Rental and Lending Directive. National laws contain more detailed provisions regarding transfer of 
rights and the status of film producers. 
See Article 3 of the Rome Convention for the protection of performers, producers of phonograms and 
broadcasting organisations). 
Based on AEPO-ARTIS data complemented by Commission's own research. 
See Article 3 (c) of the Rome Convention for the protection of performers, producers of phonograms 
and  broadcasting  organisations  (the  first  international  convention  which  provided  performers  with 
exclusive rights). 

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BMG  Music  Entertainment,  EMI  group  and  the  Warner  Music  Group,  which  control  about 
80% of the recorded music sales12. The remainder of the market belongs to a myriad of small 
and  medium-sized  cultural  entrepreneurs,  the  so-called  independent  record  companies  or 
"indies"13. Some recent successful bands are signed up to independent labels (Franz Ferdinand 
with Domino Records founded in 1993 and Kaiser Chiefs with B-Unique founded in 2004)14. 
The independent record companies are more vulnerable financially than the music majors and 
have more difficulty accessing financing to keep them afloat between successes. 

3.3. 

How are record producers and performers protected under copyright law? 

At  Community  level,  both  performers  and  record  producers  enjoy  a  similar  set  of  so-called 
'related'  rights  in  their  records  and  recorded  performances.  These  rights  are  referred  to  as 
related rights to distinguish them from authors' and composers' copyright that arises in respect 
of the 'works' they create. Performances and phonograms are not works. 

Record  producers  and  performers  are  therefore  granted  'related'  rights  under  Directives 
2006/115/EC  and  2001/29/EC.  These  related  rights  were  harmonised  at  European  level  by 
Directive 93/98/EEC (now codified by Directive 2006/116/EC) and last for 50 years from the 
date  of  the  performance  or  from  the  publication  of  the  sound  recording.  This  length  of 
protection  represents  the  minimum  international  standard  as  provided  for  in  the  TRIPS 
Agreement of 1994 and the WIPO Performances and Phonograms Treaty from 1996. In this 
impact assessment the rights in performances and sound recordings will either be referred to 
as rights in performances (held by performing artists) or rights in sound recordings (held by 
the record producers) or collectively as 'related' rights. 

Related rights can either be exclusive rights or rights to receive equitable remuneration for the 
commercial use of performances and sound recordings. Performers' exclusive rights (such as 
the  right  of  reproduction,  distribution,  rental  and  'making  available'  online)  are  usually 
transferred to the producer of the sound recording. The latter licenses the exclusive rights to 
end  users,  such  as  broadcasters,  rental  shops  or  online  music  shops.  Rights  to  receive 
equitable  remuneration  are  not  transferred  to  producers  but  are  exercised  by  performers 
themselves  through  their  collecting  societies.  Such  claims  for  equitable  remuneration  are 
collected  from  broadcasters,  a  series  of  public  venues  (bars,  hotels,  shopping  arcades,  etc.). 
Compensation for private copying is also administered by collecting societies and paid by a 
variety of ICT industries15. 

4. 

PROBLEM DEFINITION 

4.1.  What is the problem? 

If  the  present  term  of  protection  were  maintained  for  performers,  some  7000  performers,  in 
the  UK  alone,  over  the  next  ten  years,  would  lose  the  single  equitable  remuneration  they 

12 
13 
14 
15 

IFPI –The recording industry in numbers 2007. 
According to IFPI there are around 1000 independents active in the European music market. 
Gowers Review 2006, page 57. 
It should be noted that exclusive rights are almost always governed by individual contracts between the 
performer  and  the  producer  of  the  sound  recording  while  remuneration  claims  are  administered  by 
collecting societies. 

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receive  for  the  broadcasting  and  communication  to  the  public  of  their  performances16.  It  is 
expected that a corresponding number would be affected in the other big Member States and a 
proportionally lower number would be affected in the smaller Member States.  

Expiry of related rights would not appear as urgent with respect to famous superstars, featured 
artists like Sir Cliff Richards or the Beatles. But an expiry of related rights would be a serious 
blow to the thousands of anonymous session musicians, i.e., musicians hired for one recording 
only and not members of a group, who contributed to sound recordings in the late fifties and 
sixties.  They  will  no  longer  get  single  equitable  remuneration  for  broadcasting  and 
communication  to  the  public,  private  copying  levies  and  equitable  remuneration  for  the 
transfer of the performers' rental right. They will find it more difficult to devote time to their 
artistic career,  as  they generally  respond to small  increase in revenues, such as provided by 
the  income  flows  mentioned  above, by devoting more  time to their creative activities. They 
will also lose protection just when online retailing promises a new source of revenue.  

Single  equitable  remuneration  is  important,  especially  with  respect  to  early  performances. 
Many performers or singers start their career in their early 20's, if not earlier. That means that 
the current 50 year protection ends when they will be in their 70's. Once protection has ended, 
performers no longer receive any income from these sound recordings. For session musicians 
and  lesser  known  artists  that  means  that  income  from  those  sound  recordings  stops  when 
performers are at the most vulnerable period of their lives (retirement). 

Record  companies  argue  that  their  main  problem  is  a  decrease  in  revenues  following  large 
scale piracy over the internet. They also point out that record producers in the USA and other 
countries  in  the  world  enjoy  a  much  longer  term of protection.  This, they argue, will divert 
creative  efforts  away  from  Europe  and  toward  those  markets  that  grant  longer  periods  of 
protection  and  thus  income.  They  point  to  a  tendency  for  record  producers  to  orient  their 
productions to cater to the taste of those jurisdictions where most revenue could be achieved.  

The underlying problems of performers and record producers will be considered separately. 

4.2.  What are the underlying drivers behind these problems for performers 

4.2.1.  The treatment of performers, in comparison with authors, is unfair 

The term of protection for performers is much shorter than that for authors. 

Their  moral  rights,  which  entitle  them  to  restrict  objectionable  alterations  to  their 
performances, are weaker than those of authors. 

Performers  are  essential  contributors  to  the  cultural  industries.  They  are  often  the  necessary 
intermediary between the author and the public. For instance, very few people can derive the 
same  enjoyment  from  reading  sheet  music  as  from  listening  to  a  sound  recording.  The 
contribution of performers is socially accepted and recognised by the public, as the popularity 
and success of well known performers suggests. 

However, performers are concerned about the disparities that exist in relation to the length of 
protection they currently enjoy as compared to that given to authors. Authors are protected for 
70  years  after  their  death  whereas  performers  are  only  protected  for  50  years  from  the 

16 

UK House of Commons Committee for Culture, Media and Sport, May 2007, p. 78. 

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performance or when their performance is published or communicated to the public via a CD 
or DVD, or a radio or TV broadcast, for example. Performers believe that their creative input 
is as important as that of the author of the work17. In view of the development and importance 
of music over the past few decades, performers feel that the value of their contribution to the 
success of a piece of music is at least equal to,  and  sometimes  even  more  identifiable,  than 
that of the authors (i.e. the composer, the lyricist, the photographer/art designer of the cover of 
the compact disc, the writer of the sleeve notes). It could seem unfair that "the graphic artist 
who  designs  the  artwork  on  a  CD  cover  is  protected  for  longer  than  the  singer  or  musician 
who performs on the recording"18. 

The  following  examples  illustrate  the  different  terms  of  protection  between  performers  and 
authors: 

In addition, the moral rights of performers are weaker than the moral rights of authors.  At 
international  level,  the  moral  rights  of  performers  are  not  recognised  under  the  1961  Rome 
Convention  for  the  Protection  of  Performers,  Producers  of  Phonograms  and  Broadcasting 
Organisations,  but  are  recognised  under  Art  5  of  the  1996  WIPO  Performances  and 
Phonograms Treaty (WPPT)19. However, the level of protection under Article 5 WPPT is in 
some respects lower than that afforded to authors under Article 6bis of the Berne Convention 
for the Protection of Literary and Artistic Works. While authors are protected against "other 
derogatory  action  in  relation  to  the  said  work",  performers  can  only  object  to  "other 
modifications". The term "derogatory action" used in the Berne Convention allows authors to 
restrict objectionable uses of their performance (for instance use in pornographic material20, 
use  in  advertising  or  in  a  political  context  which  is  contrary  to  the  performers'  opinion  or 
beliefs)  which  do  not  imply  a  "modification"  of  the  work  but  simply  its  use  in  an 
objectionable context.  

This  discrepancy  between  the  moral  rights  of  authors  and  performers  is  also  reflected  in 
national laws. In addition, the duration of moral rights varies. In some countries, these last as 
long as economic rights, while in others they are perpetual21. While in any case authors are 

17 

18 

19 

20 
21 

"I  put  as  much  creative  effort  into  my  performances  as  I  do  into  my  compositions,  so  there  does  not 
appear  to  be  any  justification  for  this  big  discrepancy",  letter  from  Udo  Jürgens  to  Commissioner 
McCreevy, 12 July 2007. Mr. Jürgens is both an author and performer. 
Submission  from  the  Irish  Recorded  Music  Association  to  Michael  Ahern,  Minister  for  Innovation 
Policy in Ireland, November 2007. 
Art  5  (1)  of  the  WIPO  Performers  and  Phonograms  Treaty  1996  provides  that  :  "Independently  of  a 
performer's economic rights, and even after the transfer of those rights, the performer shall, as regards 
his  live  aural  performances  or  performances  fixed  in  phonograms,  have  the  right  to  claim  to  be 
identified as the performer of his performances, except where omission is dictated by the manner of the 
use  of  the  performance,  and  to  object  to  any  distortion,  mutilation  or  other  modification  of  his 
performances that would be prejudicial to his reputation". The Treaty is in force in some, but not all, 
Member States, and has been signed but not yet ratified by the EC. 
Sam Ricketson, "The Berne Convention: 1886-1986", p. 469, 1987. 
For  example  the  moral  rights  of  performers  are  perpetual  in  France  and  Romania,  protected  50  years 
after death in Portugal and the Netherlands, life or 25 years after the performance if longer in Germany. 

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protected during their lifetime and beyond, this is not the case for performers. In the UK for 
instance, their moral rights will only be protected for 50 years from the first publication of the 
fixation of their performance22. They will thus be exposed to distortions or mutilations of their 
performances during their lifetime at least in respect of their early performances. 

4.2.2.  Performers create young and live longer: the performers' age gap 

Performers suffer from an "income gap" towards the end of their life 

Performers have no control of their performances after the 50 years. 

Protection  for  performers  stands  at  50  years  from  the  event  that  triggers  protection  (the 
performance  or  the  publication  or  communication  to  the  public  of  a  recording  of  the 
performance).  An  increasing  number  of  performing  artists  are  seeing  their  performances 
falling  into  the  public  domain  during  their  lifetimes23.  PPL,  the  UK  collecting  society  that 
represents  performers  has  indicated24  that  sound  recordings  from  1955  to  1965  will  involve 
7000  performers  who  will  stop  receiving  royalties  or  equitable  remuneration  from  2005 
onwards as the sound recordings reach the 50 year protection cut off date. 

Current  average  life  expectancy  stands  at  75.1  years  for  men  and  81.2  years  for  women,25 
although it is not unusual for persons to live well into their 80's and 90's. On average, most 
performing artists or singers start their career in their early 20's which means that the current 
50 year protection ends when they are in their 70's. For instance, the singer/songwriter Elton 
John signed his first contract aged 2026. Once protection has ended, performers no longer have 
a say in how their performances are used nor do they receive any further remuneration from 
the  commercial  exploitation  of  their  performances.  In  fact,  income  from  those  recordings 
stops when performers are at the most vulnerable period of their lives. 

4.2.3.  Most performers do not earn a living from their artistic work 

Performers' earnings are on average low and distribution of income is highly uneven. 

Performers are under-employed and supplement their income with part time jobs 

The current employment status and conditions for the average performer are not necessarily 
very rewarding. Apparently, only famous performers make a living from their profession. For 
instance, in the UK, in 2001, only 5% of performers earned over £10000 annually. Moreover, 
between 77 and 89.5% of all income distributed to performers goes to the top 20% of earning 

22 
23 

24 
25 
26 

See "Study contract concerning moral rights in the context of the exploitation of works through digital 
technology",  (April  2000),  available  at  http://ec.europa.eu/internal_market/copyright/docs/studies/ 
etd1999b53000e28_en.pdf.  
Section 205I — (1) of the 1988 Copyright Designs and Patents Acts. 
The market for recorded music started in the 1950's and really blossomed in the 60's and 70's (and has 
increased ever since) so the number of musical works that will be falling into the public domain after 
the 50 year protection period will show a significant increase from 2010 onwards. 
In an interview on 31/3/2006 in premises of DG MARKT Copyright unit. 
Eurostat, Life expectancy at birth. 
See  Elton  John  and  Others  v.  Richard  Leon  James  [1991]  FSR  397,  High  Court  decision  of  29th 
November 1985. Other examples include Irish performer Bono, from U2 (first record released when he 
was 17), French singer Johnny Halliday (first record released when he was 17), Greek singer George 
Michael (first record released when he was 19), etc. 

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performers27. Economists have shown that the great discrepancies between the low earning of 
the majority of little-known performers and the significant earnings of "superstar" performers 
are endemic to the music industry28. However, the lesser paid performers are as essential as 
superstars,  as  the  latter  are  invariably  plucked  from  a  large  number  of  lesser-known 
performers. 

Moreover, the social situation of performers is not very secure. It is difficult for performers to 
find sufficient employment and most need other jobs to supplement their incomes29. Overall, 
only 5% of performers actually make a living from their profession  – all the others have to 
seek parallel employment. Often, performers qualify as self employed. This limits the impact 
of collective bargaining through unions30. 

However, studies suggest that performers use incremental increases in income to devote more 
time  to  their  artistic  careers31.  This  means  that  when  performers  receive  additional  income 
from a part time activity or from royalty payments, they spend more time creating. 

4.2.4.  Performers  lose  the  financial  benefits  of  their  exclusive  rights  when  they  transfer 

them 

Session artists transfer their exclusive rights against a lump sum payment, irrespective of the 
success of the work. 

The  rights  recognised  to  performers  under  the  acquis  do  not  result  in  concrete  benefits  for 
performers. 

Performers  usually  transfer  their  most  economically  significant  exclusive  rights  to  record 
companies via  contract. In  most cases,  individual performers have little bargaining power32. 
Session  musicians  may  be  part  of  a  union  or  association  and  benefit  from  collectively 
bargained  minimum  terms.  Featured  artists  are  generally  willing  to  accept  the  contract  they 
are offered because the reputation and exposure gained by signing with a record label gives 
them the possibility of reaching a broad audience. Consequently, it is difficult for performers 
to negotiate which type of contract or which level of remuneration they will obtain. Session 
musicians cannot negotiate at all, they have to transfer their rights 'in perpetuity' against a one 
off payment.  

Contractual  relations  between  record  companies  and  performing  artists  vary  greatly  but 
typically fall into three categories:33 

27 

28 

29 

30 

31 
32 

33 

AEPO study – "Performers' Rights in European Legislation: Situation and Elements for Improvement.", 
July 2007, p. 89 
For  a  survey  of  economic  "superstar  theories",  see  R.  Towse,  "Creativity,  Incentive  and  Reward" 
(2000), pp. 99-108. 
FIM  –  EP  Hearing  31.1.2006  and  meeting  in  Commission  offices  on  16  March  2006.  For  example, 
Luciano Pavarotti and Sting were initially teachers and Elton John worked in the packaging department 
of a record company. 
"The Collective negotiation and its actors in the culture and media sector", Research project conducted 
on behalf of the Social Affairs Directorate of the European Commission, March 2005. 
E.g. R. Towse, op.cit (for artists generally). 
In  several  instances  courts  have  intervened  to  cast  aside  excessively  harsh  agreements,  noting  in 
particular  the  "immense  inequality  in  bargaining  power,  negotiation  ability,  understanding  and 
representation"  between  artists  and  professionals  of  the  entertainment  industries",  Silvertone  Records 
Limited v. Mountfield and Others, [1993] EMLR 152. 
Adapted from contribution from Naxos to Commission questionnaire – May 2006. 

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Table 1: Types of performers' contracts 

Session  artists  are  generally  paid  a  flat  fee  as  their  rights  are  bought  out  by  the  producer. 
Accordingly, their remuneration does not increase if the record becomes a huge success. For 
instance, the school of the children singing in the choir in Pink Floyd's hit Another brick in the 
wall (part II) in The Wall (1979) album, which sold 30 million copies worldwide, was paid a 
flat  fee34.  The  2004  film  Les  Choristes  included  the  contributions  of  an  amateur  choir  of 
children.  Although  the  soundtrack  achieved  considerable  commercial  success35,  the  choir 
association was paid € 21000 for three days of  work and subsequently obtained only 1% from 
sales. 

Featured  artists'  contracts  usually  provide  for  a  royalty-based  remuneration  on  terms  which 
the  highly  successful  British 
are  not  necessarily  very  favourable.  For  example, 
singer/songwriter  Gilbert  O'Sullivan  was  initially  paid  £10  a  week,  the  equivalent  of  his 
previous wages as a postal clerk, when retail sales of records of his music between 1970 and 
1978 realised a gross figure of some £14.5 million36. More generally, depending on their fame 
and bargaining power, performers usually receive net royalties of 5-15% of revenues37. 

The  deduction  of  a  variety  of  record  producers'  costs  from  the  royalty  payments  can  also 
significantly  undermine  the  remuneration  of  performers.  These  deductions  are  often 
formulated  in  technical  terms  and  included  in  complex  legal  documents38.  In  practice,  after 
the  various  contractual  deductions  (for  costs  borne  by  the  producers  such  as  music  videos, 
promotion, master costs), the average percentage of royalties actually received by performers 
can be lower. Moreover, as most performers' sound recordings do not sell enough copies for 

34 

35 

36 

37 
38 

School  children  were  "hired"  and  the  school  received  a  lump  sum  payment  of  £1000,  without  any 
royalty  payments.  The  children  received  no  remuneration  other  than  a  concert  ticket,  a  single  and  an 
album each. They were denied the right to participate in the video of the album on the ground that they 
did not have card from "Equity", a UK union of performers. However, at that time performers enjoyed 
very  limited  protection  in  the  UK.  After  the  law  was  revised,  an  agent  sought  to  relocate  the  choir 
performers  and  initiated  legal  proceedings  to  obtain  payment.  See  The  Times,  November  27  2004, 
"Payout after Pink Floyd leaves them kids alone", available at http://www.timesonline.co.uk/tol/news/ 
uk/article395989.ece  and  BBC  News  Magazine,  2  October  2007,  "Just  another  brick  in  the  Wall", 
available at http://news.bbc.co.uk/1/hi/magazine/7021797.stm . 
According  to  the  parents  of  some  choir  boys,  the  soundtrack  generated  €20  million.  Some  parents 
initiated legal proceedings against the producer, as the children had received no remuneration at all for 
their performance. 
See  O'Sullivan  v  Management  Agency  and  Music  Ltd.  [1985]  Q.B.  428  at  444  before  the  Court  of 
Appeal of England and Wales. See also Financial Times, 29/30 September 2007, Life & Arts, p. 3. 
CIPIL Study, p.36. 
This  has  led  courts  to  conclude  that  artists  such  as  the  "Stone  Roses"  rock  band  or  Elton  John  were 
insufficiently  aware  of  the  sometimes  excessive  deductions  operated  from  the  basis  for  calculating 
royalties, see Silvertone Records Limited v. Mountfield and Others, [1993] EMLR 152. 

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the record company to recoup its initial investment (only 1 in 8 CDs is profitable)39, royalty 
payments are often not paid out at all. 

However,  performers  also  receive  revenue  from  other  sources.  In  most  cases,  they  do  not 
assign certain exclusive rights to record producers, such as their right to authorise use of their 
performance  in  advertising  or  films  (so-called  'synchronisation  rights').  Moreover,  they 
receive  income  from  collecting  societies  which  administer  their  secondary  remuneration 
claims.  There  are  three  principal  sources:  equitable  remuneration  for  broadcasting  and 
communication  to  the  public,  private  copying  levies  and  equitable  remuneration  for  the 
transfer  of  the  performers'  rental  right.  All  of  these  sources  are  commonly  referred  to  as 
'secondary' sources of income and performers receive them directly.  

4.3.  What are the underlying drivers behind these problems for record producers? 

4.3.1.  Loss of revenue for record producers 

Declining sales and profits of record producers. 

Loss of revenue through piracy. 

The EU recorded music industry has indicated a slump in their activities: sales of music CDs 
peaked in 2000 and have been falling at an average rate of 6% ever since40. Estimates for the 
future show a continued decrease in physical album sales from $12.1bn in 2006 to $10.3bn by 
201041. Since 2001, the total European market for recorded music has lost 22% of its value42.  

Revenues in general and profits in particular have decreased, largely due to increased piracy. 
In January 2006 the music trade publication ‘Billboard’ indicated that, worldwide, there were 
350 million legal downloads for the whole year of 2005, but that there were also 250 million 
illegal  downloads  per  week.  The  music  industry  indicates  that  approximately  a  third  of  all 
CDs bought in 2005 in the world were pirated – a total of 1.2 billion CDs. EMI's expenditure 
on anti-piracy and protection of IP for 2006 was in excess of £10m. 

4.3.2.  Loss of revenue entails a reduction in Artist & Repertoire (A&R) spending 

Less profits means fewer new acts (new releases or re-releases). 

Less profit means fewer artists under contract. 

Less profits means less diversity, particularly in (smaller) niche markets. 

Due  to  losses  in  revenue,  the  worldwide  music  industry,  during  the  last  five  years,  has 
contracted by some 25%. For instance, Universal's total number of employees which in 2003 
amounted  to  12000  was  down  to  7600  in  200643.  After  an  initial  reduction  in  employees  in 
2006, EMI also announced a second reduction of 2000 jobs (about one third of its work force) 
in January 200844. EMI indicated in addition an intention to be more selective with its artist 

39 
40 

41 
42 
43 
44 

Comment from IFPI. 
"Back to the Digital Future: The Role of Copyrights in Sustaining Creativity and Diversity in the Music 
Industry", page 3, April 2006, Professor Joseph Lampel, Cass Business School, London. 
Figures from PricewaterhouseCoopers, Financial Times, 6 July 2006. 
Article from the Times, 14 February 2007. 
Interview with IFPI - and John Kennedy - on 29/3/2006 in Copyright Unit of DG MARKT. 
International Herald Tribune, The Associated Press, January 14, 2008 

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partnerships despite a significant reduction in its artist roster already in 200645. EMI has also 
been reducing its advertising expenditure46. 

Record  companies  claim  the  creative  cycle  will  become  unsustainable  under  the  current 
financial  constraints.  According  to  record  producers,  the  music  industry  is  a  risky  business 
and  finding  and  developing  talented  artists  (A&R)  is  expensive47.  They  claim  long  term 
earnings  are  required  to  discover  and  market  new  talent48.  Record  companies  point  out  that 
their  A&R  spending,  which  can  be  up  to  20%  of  their  turnover,  is  comparable  to  R&D 
expenditure in other sectors. The comparison reveals that they invest substantially more than 
the  automobile  and  parts  industrial  sector  (4.2%  of  turnover)  or  than  the  software  and 
computer  services  sector  (10.4%  of  turnover)49.  In  popular  music,  it  is  estimated  that  only 
about  10%  to  12%  of  all  recordings  reach  break-even  or  become  profitable50.  It  has  been 
suggested  that  profitability  is  achieved  only  once  sales  exceed  20000  CDs51.  With  online 
piracy, this target is increasingly difficult to achieve.  

The recording industry has indicated that if their revenues are lower they will spend less on 
A&R52 and discovering and promoting new talent. If these trends persist, there will be a real 
risk that European based talent will not be developed nor benefit from the possibility of global 
exposure offered through on-line exploitation. 

The  digitisation  of  record  producers'  back  catalogue  will  also  be  hampered  by  declining 
revenues.  Digitisation  is  an  ongoing  process  which  is  costly  but  necessary  to  ensure  the 
availability of local repertoire and cater for the needs of niche markets. 

4.3.3.  Cultural diversity 

The  term  gap  could  lead  to  record  companies  producing  sound  recordings  to  cater  to 
American taste in music. 

In the US, the record companies point out that the longer term of protection (95 years) gives 
incentives for companies to invest in repertoire that will appeal to US markets, and thus yield 
higher  returns.  The  economic  benefits  of  the  longer  terms  of  protection  in  the  US  should 
nevertheless take into account the fact that the protection of record producers and performers 
suffers more exceptions in the US53. This would offset some of the benefits of the longer term 
of  protection  in  the  US.  However,  the  US  is  considering  the  adoption  of  the  performance 

45 
46 

47 

48 

49 
50 
51 

52 

53 

EMI response to Gowers Review, 2006. EMI's workforce was reduced by a third to 6,000 persons. 
Advertising expenditure by music industry dropped by 25% in 2002 and 7% in 2003. The four music 
majors are in the top 100 spenders on advertising and 2 of them are in the top 20. ("Evolution of the 
recorded music industry value chain", anonymous report) p. 13.  
Input from responses to public consultation carried out on the Commission Staff Working Paper on the 
review  of  the  EC  legal  framework  in  the  field  of  copyright  and  related  rights,  SEC(2004)  995  of 
19.7.2004. 
"The Recording Industry in numbers", IFPI, June 2007, p. 17; EMI says it invests over 20% of revenues 
on musicians and music in more than 50 countries" – 2006 Annual Report. 
DTI figures – "The Top 800 UK and 1250 Global Companies business R & D investment", 2006. 
Comment from Naxos on 10% and IFPI for the 12% 
Study  entitled  ‘The  Recasting  of Copyright  and  related  rights  for the Knowledge  Economy’,  October 
2006, Institute for Information law, University of Amsterdam, page 112. 
International Herald Tribune, The Associated Press, January 14, 2008 and EMI contribution to Gowers 
Review 2006. 
Under  US  Copyright  law,  broadcasters  as  well  as  a  number  of  public  venues  are  exempted  from 
payments to rightholders, see Gowers Review of Intellectual Property, p. 49. 

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rights bill54, which would significantly increase the scope of protection in the US and increase 
the appeal of the US market. Overall, record companies argue, the level of protection in the 
US  will  divert  creative  efforts  away  from  European  repertoire  and  performers  and  towards 
those  markets  that  grant  longer  periods  of  protection  and  thus  income.  They  point  to  a 
tendency  for  record  producers  to  orient  their  productions  to  cater  to  the  taste  of  those 
jurisdictions  where  most  revenue  could  be  achieved.  Some  economists  point  out  that,  over 
time,  this  could  lead  to  fewer  incentives  to  produce  sound  recordings  that  appeal  to  the 
European  market55  and,  in  turn,  to  a  decline  in  European  repertoires  and  cultural  diversity. 
However, it is difficult to assess the precise extent of this problem as other parameters than 
the term of protection may affect the investments of the record industry.  

4.4. 

How would the problem evolve, all things being equal? 

The impacts of 'doing nothing' are analysed in detail in section 7.1 below. Suffice it to say at 
this stage that, if nothing were done, this would have individual impacts on the roughly 24500 
performers  who  will  see  their  term  of  protection  expire  over  the  course  of  the  next  decade 
(24500  is  3.5  times  the  number  of  UK  performers  that,  over  the  next  decade,  will  lose 
protection. This multiplier was chosen because European sales account for roughly 3.5 times 
of UK sales). These performers will lose revenue from royalties and, more importantly, from 
equitable remuneration for broadcasting and communication to the public. They will also lose 
their entitlement to compensation for private copying.  

On the other  hand, there  will  be  few,  if any, positive impacts if nothing was  done,  as  retail 
prices for consumes and equitable remuneration payments for commercial users are unlikely 
to  be  affected  by  the  term  of  protection  of  sound  recordings  and  performances.  The  only 
beneficiary of the 'do nothing' scenario would be 'public domain' record companies who could 
progressively  re-issue  sound  recordings  from  the  period  between  1957  and  1967  without 
paying royalties to performers. As there is little evidence that records in which the rights of 
performers and producers have expired are cheaper than those still protected, the 'do nothing' 
option  would  lead  to  a  shift  in  economic  income  from  performers  to  "public  domain" 
companies. 

4.5. 

Does the EU have the right to act? 

4.5.1.  Treaty base 

The  Term  Directive  was  adopted  on  the  basis  of  the  Articles  47(2),  55  and  95  TEC.  Any 
amendment  to  this  Directive  should  be  based  on  the  same  legal  basis  because  the  subject 
matter covers the free circulation of services and the good functioning of the Internal Market. 
If  alternative  measures  not  involving  modification  of  the  Directive  were  chosen  to  be  the 
optimal remedy to the problems identified in this IA, further consideration has to be given to 
the identification of the most appropriate instrument and legal base. Operational action may 
have to be taken at the level of Member States. 

54 

55 

Performance  Rights  Act.  Bill  H.R.  4789,  introduced  on  December  18,  2007,  in  the  House  of 
Representatives: “To provide parity in radio performance rights under title 17, United States Code, and 
for other purposes.”  
Liebowitz  (February  2006),  "What  are  the  Consequences  of  the  EU  extending  Copyright  Length  for 
Sound Recordings, report prepared for IFPI., p. 22.  

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4.5.2. 

Subsidiarity test 

The length of protection of copyright and related rights has already been  harmonised  at  EU 
level  and  falls  under  the  exclusive  competence  of  the  Community.  However,  the 
harmonisation achieved in Directive 93/98/EEC was not complete in that, as provided for in 
its  Article  10(1),  certain  Member  States  were  allowed  to  keep  longer  terms  of  protection 
already  in  place  before  1  July  1995,  as  is  the  case  in  Greece56.  Options  involving  a  term 
extension (2a "life or 50 years" and 2b "95 years for performers and record producers") would 
involve modifications to Directive 93/98/EEC and thus could only be achieved at Community 
level.  

4.6. 

Summary of problems 

Performers are treated unfairly, in financial, legal and social terms: most performers are in a 
precarious financial and social situation. In addition, from a legal perspective, the importance 
of  their  contribution  to  musical  creation  is  not  appropriately  recognised.  They  are  granted 
lesser moral and economic rights than authors. 

The record industry faces significant challenges which undermine its competitiveness: online 
piracy has lead to significant  losses. The  ability of the  music industry to finance new talent 
and adapt to dematerialised distribution is severely undermined. In addition, the longer term 
of protection in the US risks undermining the production of European music.  

Consumers may not have access to the widest choice of music available at reasonable prices. 
The  opportunities  offered  by  online  digital  distribution,  allowing  the  dissemination  of  local 
repertoire and catering for niche markets, may not be fully seized by the music industry under 
the current conditions. 

5. 

OBJECTIVES 

The  following  graph  presents  an  overview  of  the  general  policy  objectives,  the  specific 
objectives and the operational objectives. 

56 

Article 52 of Law 2121/1993 provides for 'life or 50 years whichever is the longer' for performers. This 
applies to the last surviving performer of any set of performs who are members of the same group. 

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Figure 1: Overview of objectives 

5.1. 

General objectives 

Promoting  music  production  in  Europe:  The  protection  of  performers  and  record  producers 
should ensure a sustainable level of creation. The European music industry should also play a 
leading role in promoting European music in the world.  

5.2. 

Specific objectives 

Contribute to enhancing the welfare of performers in the music industry: Performers should 
feel that they are receiving a just reward for their effort and creativity throughout their lives.  

Contribute  to  enhancing  the  competitiveness  of  the  European  music  industry:  The  music 
industry should remain competitive57. It should be equipped to face the challenges of piracy 
and  the  opportunities  of  dematerialised  distribution.  It  should  not  be  at  a  competitive 
disadvantage, in order to preserve the place of European music.  

Increase  available  music  repertoire:  the  public  should  have  access  to  a  large  and  diverse 
choice of music.  

5.3. 

Operational objectives 

Gradually  align  authors'  and  performers'  protection:  The  legal  protection  of  performers 
should  reflect  the  importance  of  their  contribution  to  cultural  diversity.  They  should  not  be 

57 

Competitiveness  is  a  comparative  concept  of  the  ability  and  performance  of  a  firm,  sub-sector  or 
country to sell and supply goods and/or services in a given market. In this case, competitiveness is used 
to refer in a broader sense to the economic competitiveness of the region (the EU) on global markets. 

EN 

22 

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treated  as  second  tier  contributors  to  cultural  diversity,  in  particular  in  comparison  with 
authors. 

Incremental  increase  in  the  remuneration  of  performers:  Ensure  that  performers  receive  an 
increase  in  revenues  from  as  many  different  sources  as  possible  to  alleviate  their  difficult 
financial situation, especially at the end of their lives. Revenues accruing to performers and in 
particular  less  well-known  performers,  who  are  mostly  self-employed,  will  ensure  they  can 
devote more time to creation and possibly make a living from their artistic activities. 

Diminish  the  discrepancies  in  protection  between  the  EU  and  US  music  markets: The  legal 
protection afforded to record producers should encourage investment and production of music 
for the European market. 

Incremental  increase  in  A&R  resources:  Revenue  streams  derived  from  current  repertoire 
should be sufficient to finance a healthy A&R sector in the recording industry.  

Ensure  availability  of  music  at  reasonable  prices:  a  balanced  protection  should  both 
encourage the creation of music and ensure that as wide a public as possible can access it. 

Encourage the digitisation of back catalogue: the widest possible choice should be offered to 
consumers, including niche and local repertoire. 

6. 

POLICY OPTIONS 

Some  of  the  options  considered  would  be  complementary  to  options  involving  a  term 
extension.  Apart  from  options  2a  and  2b,  other  combinations  of  options  are  not  mutually 
exclusive. 

Table 2: Overview of Options 

6.1. 

The wait and see option 

The first option is to leave the copyright acquis as it is.  

6.2. 

Options related to an extension of the term of protection 

The  second  option  is  to  extend  the  term  of  protection.  There  are  various  possibilities  (sub-
options)  for  such  an  extension,  all  of  which  would  require  an  amendment  to  the  Term 
Directive, in particular to Article 3. There could be three options in the application in time of 
a term extension: it could apply only to new recordings, be 'partially' retroactive (applying to 
all  recordings  which  are  currently  sill  protected)  or  be  fully  retroactive  (applying  to  all 
recordings,  including  those  in  which  the  rights  of  performers  and  producers  have  expired). 

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Out of these three options, which are analysed in the Annex (section 2), the preferable option 
is to extend the term with 'partial' retroactive effect. This means that only  recordings which 
are  still  protected  at  a  certain  date,  such  as  the  implementation  date  of  the  Directive,  will 
benefit  from  the  term  extension.  It  is  the  simplest  option  to  apply  and  brings  immediate 
benefit  to  many  right  holders.  It  is  also  in  line  with  previous  practice,  such  as  Directive 
2006/115 (rental and lending Directive) and Directive 2001/29 (copyright in the information 
society).  

6.2.1.  Amend the term of protection for performers only to "life or 50 years" 

Sub-option  2a  amends  the  term  of  protection  for  performers  only  to  "life  or  50  years", 
whichever  is  the  longer.  This  option  ensures  that  the  performer  enjoys  protection  during 
his/her  entire  life.  It  would  apply  to  the  performers'  exclusive  rights  and  to  the  variety  of 
'secondary'  remuneration  or  compensation  claims  that  a  performer  enjoys  under  the  acquis 
(see section 3.3 above).  

6.2.2.  Extend  the  term  of  protection  for  performers  and  record  producers  from  50  to  95 

years 

Under sub-option 2b the term of protection is extended from 50 to 95 years for performers 
and  record  companies.58  This  option  ensures  equivalence  with  the  term  of  protection  in  the 
US.  

6.3. 

Complementary options not involving an extension of the term of protection but 
which improve the situation of performers 

The third option comprises various possibilities which could improve the financial situation 
and  moral  rights  of  performers  without  necessarily  extending  the  term  of  protection.  These 
measures  could  be  used  either  as  alternatives  to  a  term  extension  or  as  complementary 
measures to an extension of the term of protection for performers. 

6.3.1.  Create an 'unwaivable right to equitable remuneration' for performers who transfer 

their rights to record companies 

This  impact  assessment  previously  describes  how  performers  contractually  transfer  their 
exclusive  rights  (including  their  reproduction,  distribution  and  making  available  rights)  to 
record  labels.  As  a  result,  performers  are  often  deprived  of  a  fair  share  of  the  revenues 
generated from the exploitation of their performances. To address this issue in relation to the 
rental  right,  Article  4  of  Directive  2006/115  provides  for  an  unwaivable  right  to 
remuneration to which authors and performers remain entitled even after having transferred 
their rental right to a producer. In view of the fact that performers do not enjoy any share in 
the  money  collected  by  record  producers  for  sales  of  music  on  the  internet,  one  option  to 
improve the social situation of performing artists would thus be an amendment to extend the 
scope of Article 4  of the Rental and Lending Directive to also cover the situation when the 
making available right is transferred. The remuneration right would have to be administered 
by a collecting society. 

58 

Concretely, one would have to substitute the number '50' by '95' in the respective paragraphs in Article 
3 of Directive 2006/116/EC. 

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The  impact  assessment  identifies  three  possible  approaches  in  respect  to  the  issue  of  who 
should  pay  the  equitable  remuneration  to  performers.  It  could  be  paid  by  a  number  of 
stakeholders:  (1)  equitable  remuneration  could  be  paid  by  users  and  distributors.  Such 
payment  will  be  likely  to  occur  through  a  collecting  society,  because  performers  are  not 
contractually  linked  to  distributors;  (2)  equitable  remuneration  could  be  paid  by  record 
producers  and  (3)  it  could  be  left  to  interested  parties  to  decide  who  pays  the  equitable 
remuneration to performers. 

For  example,  Article  108  of  the  Spanish  IP  Code  stipulates  that,  where  a  performer  has 
transferred his exclusive 'making available' right, he retains an unwaivable claim to equitable 
remuneration.  The  remuneration  has  to  be  paid  by  whoever  makes  the  fixation  of  his 
performance  available,  usually  online  music  providers,  and  the  claim  is  exercised  against 
them by collecting societies. Since this provision was only introduced in July 2006, collecting 
societies have not yet collected any monies under the new provisions. It is thus too early to 
say whether  this scheme  of  collectively administered performers'  remuneration will work in 
practice.  

It  is,  at  this  stage,  also  hard  to  quantify  the  financial  benefit  that  would  arise  from  a 
remuneration  claim  for  the  making  available  of  performances  online.  A  study  conducted  by 
the French collecting society ADAMI suggests that a performer receives between € 0.03 and 
0.04 for a download sold at € 0.99 59, and that online music yielded € 120 million in revenues 
in  the  EU  in  200460.  This  implies  that  the  new  claim  would  yield  roughly  between  €  3.6 
million  and  4.8  million  per  year.  This  compares  to  approximately  €351  million  collected  in 
2005 by performers' collecting societies' from single equitable remuneration, private copying 
levies and the rental right61. Given the fast pace of change in the online music market, which 
is far from mature, it is also difficult to predict how such figures would evolve in time. 

Moreover,  the  uncertainties  surrounding  the  issue  of  who  should  pay  this  'equitable 
remuneration'  also  contribute  to  the  difficulties  in  quantifying  its  impact.  Should  equitable 
remuneration be paid by the record producers, the latter would likely shift the overall payment 
burden to performers by reducing royalty payments and the buy-out fees to session musicians. 
On  the  other  hand,  if  payment  of  equitable  remuneration  were  made  incumbent  on  online 
retailers  or  operators  of  similar  online  services,  such  a  measure  might  well  complicate  the 
administration of online rights. Indeed, online retailers, in order to offer legitimate services, 
would  now  have  to  clear  another  right  with  a  collecting  society  representing  performers. 
Finally,  if  it  were  left  open  to  interested  parties  to  decide  who  should  pay  the  claim  for 
'equitable  remuneration',  as  is  the  case  under  Belgian  law,  the  entire  option  might  well 
become moot. 

In light of the uncertainties surrounding the practical administration of the claim for equitable 
remuneration,  this  option  appears  untimely,  as  further  study  would  be  required  to  assess  its 
impact.  While  in  the  future  this  option  might  well  be  introduced  to  enhance  performers 
participation in revenue generated online, it cannot be considered at this stage.  

59 

60 

61 

ADAMI  study,  'Filière  de  la  musique  enregistrée  :  quels  sont  les  véritables  revenus  des  artistes 
interprètes?' (April 2006), p.27. 
Study  for  the  European  Commission,  'Interactive  content  and  convergence'  (2007),  p.  42  (source: 
Screen Digest). 
KEA Study, 'The collective management of rights in Europe' (2006), p. 33. 

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6.3.2.  Moral rights of performers 

Several Member States recognise the moral rights of performers but to a lesser extent than 
they  recognise  the  rights  of  authors.  The  moral  rights  of  performers  could  be  strengthened. 
The scope of their moral rights could be harmonised to include a right to restrict derogatory 
uses  of  their  performances.  However,  since  moral  rights  have  not  been  harmonised  at 
Community  level,  it  would  be  preferable  that  Member  States  strengthen  the  protection  of 
moral rights under their national laws.  

6.3.3.  A "use it or lose it" provision for performers' rights 

A safety net protecting performers against practices which deprive them of the benefits of a 
term extension could be promoted. This could take the form of a so-called "use it or lose it" 
provision. 'Use it or lose it' provisions are currently in force in some EU Member States for 
authors' rights62 and in some cases for performers63. We have learnt from our discussions with 
stakeholders that some independent record companies transfer rights back to the performer if 
they are not selling his record any more64. 

The effect of a use it or lose it provision would be to allow the performer to move to another 
record  company  or  exploit  a  recording  himself  if  the  producer  does  not  exploit  it.  This 
provision would also apply should the record company decide to only use certain channels of 
distribution (like sales of CDs) but not others (like online sales). In order for a use it or lose it 
clause to achieve this result, however, it must also be clear that the producer cannot use his 
exclusive right in the recording to oppose the new exploitation or ask for remuneration which 
would render the exploitation of the performance not viable economically.  

"Use it or lose it" provisions could be made mandatory, in order to ensure that all performers 
benefit  from  them.  However,  as  they  must  articulate  with  existing  national  copyright  and 
contract  legislation  of  the  Member  States,  sufficient  flexibility  should  be  allowed  for  the 
transposition of such a provision. 

6.3.4.  Create a fund for session musicians 

In  order  to  ensure  that  the  benefit  of  term  extension  would  accrue  to  performing  artists, 
especially  session  musicians  that  have  transferred  their  related  right  against  a  one  off 
payment,  the  extension  of  protection  for  record  companies  should  be  accompanied  by  a 
payment of 20% of the increased revenues the record companies will enjoy into a fund, set up 
in each record company, dedicated to improving the situation of performers, including session 
musicians  whose  performances  are  used  in  recordings.  The  basis  for  calculating  this 
percentage  would  comprise  producers'  revenue  (and  not  profit)  from:  (1)  the  sale  of  sound 
recordings and (2) online distribution of sound recordings65.  

62 
63 

64 

65 

Austria, Belgium, Germany, Luxemburg, Nordic Countries, Portugal and Spain. 
Denmark (articles and of the Danish Copyright Act) and Germany (articles 41 and 79(2) of the German 
Copyright Act). 
Comment  from  the  Chairman  of  IMPALA  (the  independent  music  label  association)  on  5  December 
2007. 
In order  to have  the  financial  volume  necessary  to  ensure  real  benefits  for  session  musicians,  this  IA 
proposes  that  the  fund  should  reserve  at  least  20%  of  the  annual  revenue  that  accrues  during  the 
extended  term.  This  fund  should  be  administered  by  each  record  company  in  close  cooperation  with 
performers and their representatives. Such an obligation would be in line with an earlier commitment by 

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7. 

ANALYSIS OF IMPACTS 

This  section  looks  at  the  economic  and  social  impacts  resulting  from  the  options  presented 
above. For purposes of better presentation such impacts are presented according to the group 
of stakeholders that is affected by the option in question. Environmental impacts are neglected 
since they are marginal. If there is no obvious impact on one group of market players, they are 
not necessarily mentioned in the impact analysis. 

7.1. 

Doing nothing 

7.1.1. 

Impact on performers 

Over the next 10 years performers and records producers will lose their neighbouring rights 
over an increasing amount of recorded music (those recorded and released between 1957 and 
1967).  It  is  estimated  that  around  7000  performers,  in  the  UK  alone,  will  lose  all  of  their 
airplay  and  reproduction-related  payments  (e.g.,  the  'single  equitable  remuneration'  for 
broadcasting  and  any  communication  to  the  public  and  compensation  for  private  copying) 
over the next ten years66. This concerns the thousands of anonymous session musicians who 
contributed to recordings in the late fifties and sixties. Their income will stop when they are at 
the most vulnerable period of their lives, i.e., as they are approaching retirement. 

For  those  individual  performers  affected  by  the  expiry  of  their  term,  this  would  entail  an 
annual  loss  of  between  €  181  and  €  3663  in  e quitable  remuneration  payments  that  they 
currently receive67. 

Moreover, in view of the current  and suggested future steady  increase in digital sales many 
older sound recordings get a second life in the digital format. Performers whose performances 
fall  into  the  public  domain  will  lose  out  on  immediate  and  future  revenues  from  the  digital 
exploitation  of  recordings.  Furthermore,  income  from  primary  exploitation,  such  as  sound 
recording  sales  may  stop.  Only  the  big  names  will  enjoy  financial  security  and  good 
bargaining power with record companies.  

The  number  of  performers  able  to  sustain  a  long  term  livelihood  from  their  performances 
would  perhaps  decrease,  and  performers  would  not  be  able  to  devote  as  much  time  to  their 
artistic  career.  Over  time,  the  problem  will  worsen  as  the  rights  of  performers  and  record 
producer  will  expire  in  an  increasing  numbers  of  recordings.  Finally,  in  several  Member 
States  performers  would  also  not  be  in  a  position  to  restrict  objectionable  uses  of  their 
performances. 

66 
67 

the sound recording industry and the musicians' union FIM. In a joint letter of 5 June 2007 addressed to 
Commissioner  McCreevy,  IFPI,  on  behalf  of  the  international  sound  recording  industry  and  FIM,  on 
behalf  of  musicians  unions  from  several  countries,  stated  as  follows:  "FIM  and  IFPI  are  working 
together  to  find  ways  to  ensure  that  all  performers  benefit  financially  from  any  extension  of  term  of 
protection and that their older recordings can be made available to the public". The Commission might 
undertake to monitor how this fund develops and how many session musicians benefit from it.  
UK House of Commons Committee for Culture, Media and Sport, May 2007. 
According to the AEPO study ('Performers' Rights in European Legislation: Situation and Elements for 
Improvements',  July  2007),  collecting  societies  in  the  EU,  in  2005,  collected  €  351  million  and 
distributed this sum to around 400000 performers. This revenue is not evenly distributed. 77-90% of the 
revenue  is  distributed  to  20%  of  the  performers.  On  average  €  293  million  is  distributed  to  80000 
performers, whereas € 58 million is distributed to 320000 performers. The average annual income per 
performer that is attributable to secondary remuneration claims therefore ranges between € 181 and € 
3663 per year.  

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7.1.2. 

Impact on record producers 

Record companies will continue to suffer from piracy and spend a lot of money on anti-piracy 
law  suits.  The  financial  situation  of  record  producers  would  not  improve.  While  popular 
recordings from the 50's and 60's are still in demand and the record company that holds the 
master copy would still derive revenue from their exploitation, this revenue stream might now 
be subject to competition from re-releases by public domain companies. Indeed, an increasing 
number of popular performances (from the golden 1950s and 1960s) will fall into the public 
domain  and  the  revenue  from  these  recordings  will  no  longer  be  available  to  fund  the 
production and marketing of new recordings (see below).  

their  share  of 

Record  producers  would  still  receive  remuneration  for  'secondary'  forms  of  exploitation,  in 
'single  equitable  remuneration'  for  broadcasting  and 
particular 
communication to the public of music. These revenues would not be significantly affected by 
some records falling out of protection. According to KEA, they amounted to € 293 million in 
200468. 

the 

7.1.3. 

Impact on broadcasters and public venues where music is played 

While  the  rights  of  performers  and  record  producers  will  expire  in  certain  recordings,  this 
would not affect the fees paid by broadcasters and public venues for using music. Such fees 
are  not  calculated  on  a  'per  track'  basis  and  the  amount  of  recordings  which  are  no  longer 
protected by related rights is thus not relevant to establishing the fee. 

Broadcasters (TV and Radio) pay the 'equitable remuneration' due to performers and record 
producers  via  a  variety  of  payments,  all  of  which  are  not  linked  to  the  number  of 
performances  and  sound  recordings  protected  by  copyright.  For  instance,  commercial  TV 
broadcasters pay a percentage of their total revenue (France), net broadcasting revenue (UK), 
or  advertising  (Germany).  In  Germany,  an  additional  graduation  is  made  according  to  the 
percentage of music that is contained in the broadcast. Cable re-transmitters, for example, in 
Germany, pay on the basis of their subscription income. In addition, equitable remuneration 
by  broadcasters  represents  a  relatively  small  share  of  their  revenues.  According  to  IFPI 
estimates,  only  1%  of  broadcaster's  total  revenue  is  paid  to  rightholders  in  'equitable 
remuneration'.  

Equally, public venues where music is played – bars, hairdressers, fitness studios or doctors – 
do not pay on a 'per track' basis. These establishments pay according to seating capacity (UK, 
hairdressers),  square  meters  (Germany,  bars,  hotels,  hairdressers,  UK,  public  houses,  pubs, 
restaurants),  revenue  (France,  discothèques),  on  the  basis  of  the  number  of  instructors  (UK, 
gyms).  In  Germany  and  France,  the  revenue  for  related  rights  is  sometimes  calculated  as  a 
percentage of the revenue charged for authors. Again, those payments are not influenced by 
the number of performances or sound recordings that are in copyright.  

7.1.4. 

Impact on public domain record labels 

By  doing  nothing,  public  domain  record  companies  would  continue  to  profit  from  a  larger 
share of sound recordings, from late fifties and sixties, which would no longer be protected by 
the rights of performers and record producers. 

68 

KEA, 'The Collective Management of Rights in Europe: The Quest for Efficiency' (July 2006). 

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7.1.5. 

Impact on consumers 

There is no clear empirical evidence that price difference between sound recordings that are 
in- or out-of copyright would be significant. This would imply that public domain companies 
would  not  necessarily  sell  sound  recordings  at  prices  lower  than  those  applied  to  protected 
recordings  marketed  by  recording  companies.  Thus  if  the  term  of  protection  were  not 
extended the economic rent would be shifted away from the artists and record producers to the 
public  domain  labels.  While  this  may  be  good  for  public  domain  record  labels  it  is  not 
beneficial to cultural diversity, because the revenue would not be redistributed to performers 
nor used for A&R. 

7.1.6. 

Impact on cultural diversity 

By doing nothing there may be a risk that a percentage of recordings phonograms in regard of 
which the performer and the phonogram producer are no longer protected disappear due to a 
lack of stewardship by the original record company. Once out of protection, and thus of lesser 
value,  there  will  be  no  incentive  to  'look  after'  master  copies  of  old  recordings  and  public 
domain  companies  will  only  reissue  the  better  known  and  potentially  profitable  repertoire. 
Cultural diversity might therefore suffer. 

7.1.7. 

Impact on information society services 

The impact on digital libraries and other services which organise collections of digital content 
made available to the public would be neutral. While digital libraries would have to clear the 
rights of producers and performers in phonograms for an additional period, it should not be 
forgotten that, even after expiry of all neighbouring rights in a phonogram, the rights of the 
author of the musical compositions performed and recorded must still be cleared during the 
entire  life  of  the  author  plus  seventy  years  thereafter.  Information  society  services  would, 
even in the absence of term extension, be obliged to clear a variety of authors' rights.  

7.1.8.  The international dimension 

The gap in length of protection as compared to the US would not be closed. Records produced 
or recorded in the EU are protected in the US for 95 years69. Investors would be more inclined 
to  support  creators  who  produce  sound  recordings  destined  for  the  USA  as  a  recording 
popular in the US market would bring them better revenue streams for a longer period than a 
recording popular in the EU. 

7.2. 

Extend the term of protection for performers to "life or 50" 

7.2.1. 

Impact on performers 

A  term  extension  to  life  or  50  years  whichever  is  longer,  will  benefit  all  performers.  The 
financial benefits to performers will be positive (see further, section 7.3.1.)  

Extending the term of protection would also lead to more fairness in the remuneration of all 
performers:  also  It  would  lead  to  increased  revenues  for  performers  whose  performances 
experience popularity late after the initial release of the record. For example, the song 'Build 
me up Buttercup', performed by 'The Foundations' and released in 1968, was used in the film 

69 

See 17 U.S.C. 104. The US does not apply a 'comparison of terms' with the term of protection in the EU 
and thus grants the full 95 years term of protection to EU phonograms. 

EN 

29 

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'There's Something About Mary' (1998). The sudden renewed interest in this tracks brought 
significantly  increased  earnings  to  the  performers.  An  extended  term  would  ensure  that 
performers  or  their  heirs  do  not  see  commercially  successful  exploitations  free-riding  their 
performance  and  are  not  unfairly  deprived  of  their  share  of  the  revenues.  In  addition, 
performer's 'life' in the term of protection would also mark a convergence between the legal 
protection of performers and authors. This is because linking a term to the life of the creator 
is  indirectly  an  acknowledgement  of  the  personal  nature  of  the  creator's  contribution. 
Academics  indeed  point  out  that  linking  the  term  of  protection  to  the  life  of  creators 
acknowledges to some degree the personal nature of their creative contribution and this is one 
reason  why  the  term  of  protection  of  an  author  is  linked  to  the  individual  author's  life.  As 
Mick  Hucknall  states:  "Modern  music,  especially  popular  music,  with  its  roots  in  the  oral 
traditions of the blues, country and folk music, lays far greater emphasis on the characteristics 
of  performers  and  performances,  than  on  the  nuances  of  composition  or  musical  structure. 
Given the huge increase over the past 50 years or so in the importance of sound recordings to 
consumers,  the  law  should  strive  to  catch  up  and  grant  performers  equivalent  protection  to 
composers"70. 

In those Member States that recognise some moral rights of performers only for the duration 
of  the  economic  rights,  performers  would  also  be  protected  during  their  entire  lifetime. 
However, in Member States which do not recognise the moral right of performers to restrict 
objectionable uses of their performances, performers would remain powerless to prevent such 
uses. 

7.2.2. 

Impact on record producers 

For  record  companies,  the  term  extension  for  performers  would  bring  a  smaller  financial 
impact  than  an  extension  to  95  years  (sub-option  2b).  Even  though  producers'  rights  would 
not  be  affected  by  this  option,  producers  would  benefit  from  additional  sales  revenue  when 
they have been assigned of the performers' exclusive rights of reproduction, distribution and 
'making available' online. 

7.2.3. 

Impact on broadcasters and public venues where music is played 

There is no evidence that TV broadcasters or venues that perform sound recording in public 
(bars, discotheques, hairdressers or doctors) would have to pay more for the blanket licenses 
covering the 'secondary' uses they make of a performance incorporated in a sound recording71. 
The Gowers report argues that, once protection in a sound recording ends: "No royalties are 
due for that recording and fewer licences are required to play those songs. … Because the cost 
of licences reflects the royalties payable to the copyrights, as those copyrights expire, so the 
cost of licences will fall"72. This implies that broadcasters or the operators of venues where a 
public performance occurs pay royalties for sound recordings on a 'per-track' basis. However, 
this is not the case, as explained above (see section 7.1.3). 

70 
71 

72 

Mick Hucknall, Simply Red (UK), Speech to AIM Annual Assembly, June 2004. 
For example, the BBC alone uses around 180,000 music items per week and spends over £230 million a 
year  on  the  acquisition  of  IP  rights  from  programme  contributors  (actors,  writers,  musicians  and 
presenters) in BBC-produced programmes. 
Gowers Review on Intellectual Property, December 2006, p. 56. 

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30 

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7.2.4. 

Impact on public domain labels 

An extension covering life of the performer or 50 years, whichever is longer, will imply that 
those record companies that republish so-called "public domain" music under their own labels 
will have to wait longer for recordings to fall out of copyright. However, the term extension 
would  only  marginally  affect  the  availability  of  sound  recordings  phonograms  in  regard  of 
which  the  performer  and  the  phonogram  producer  are  no  longer  protected,  because  it  is  not 
fully retroactive, and thus the recordings which are currently free of any related rights would 
remain so. Moreover, performances which have fallen into the public domain are not always 
freely available for public domain labels to use. This is because several Member States allow 
performers  to  use  their  moral  rights  to  restrict  certain  uses  of  performances  even  after  the 
performance  has  fallen  into  the  public  domain.  Performers  can  for  example  restrict  the  re-
release of public domain records which have not been re-mastered, object to the inclusion of 
their performance in new compilations or even to a sales environment which is detrimental to 
their reputation. For instance, the French performer Henri Salvador was allowed to object to a 
public domain label issuing a cheap and low quality compilation of his early performances73. 

The  impact  of  the  term  extension  would  also  be  limited  as  there  are  very  few  labels  that 
specialise exclusively in distributing copies of records which are in the public domain. Music 
is truly in the public domain once both (a) the copyright in the musical composition and (b) 
the neighbouring rights of performers and record producers have expired. There are very few 
labels  distributing  such  music,  and  they  tend  to  be  very  small,  release  a  limited  number  of 
recordings  and  employ  very  few  people  -  in  fact,  they  are  usually  a  one-man  operation74. 
However, other so-called public domain labels tend to focus on releasing new recordings of 
compositions which are in the public domain (essentially classical music). This is for example 
the case of Naxos, a leading public domain label75. For Naxos, reissuing public domain music 
is only a marginal part of its activities, and in this sense, the company acknowledges it would 
benefit from an extension of the term of protection76.  

Any negative effect on public domain labels would also have limited, if any, knock-on effect 
on performers. Indeed public domain companies have no A&R costs and they do no discover 
and develop new talent. 

7.2.5. 

Impact on consumers 

As broadcasters and other venues that owe equitable remuneration for broadcasting and any 
communication to the public do not pay on a 'per track' basis, the impact of a life or 50 year 
term  is  neutral  on  these  operators  and  thus  on  consumer  prices  (e.g.,  licence  fees  to  public 

73 

74 

75 

76 

In a judgment delivered on Thursday 15 November 2007, the Paris Court of Appeal ruled in favour of 
Henri Salvador by holding that a song, even if recorded more than 50 years ago and thus in the public 
domain, cannot be used without restrictions. The Court of Appeal condemned the company for having 
violated Henri Salvador's moral rights in his works and performances by publishing a compilation of his 
songs without his prior authorisation and awarded € 85000 of damages to the artist (including € 35000 
for  the  moral  rights  as  a  performer  and  €  30000  for  the  moral  rights  as  an  author).  Paris  Court  of 
Appeal, November 14th, 2007, SARL Jacky boy Music v Salvador, JurisData : 2007-349990.  
Sepia  Records  has  a  catalogue  of  80  titles  from  the  1930s  to  the  1950s  and  has  one  employee;  Flare 
Records has a catalogue of 45 titles and has one employee; Windyridge has a catalogue of 76 titles. 
For example, in 2005, Naxos released 194 new recordings of currently unavailable works that had fallen 
into the public domain. 
As acknowledged by Naxos in its response to the Commission questionnaire on the term of protection 
for sound recordings, point 61. 

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31 

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broadcasters). In addition, a life or 50 year term for performers only would have no impact on 
retail prices as the performers' share on a retail sale is very low. 

7.2.6. 

Impact on cultural diversity 

Term  extension  for  performers  only  will  also  lead  to  some  financial  benefit  for  record 
producers. This might result in a limited increase in A&R investments, the development and 
the promotion of new artists. Without a significant improvement of the financial situation of 
the  recording  industry  there  might  be  less  opportunities  for  promoting  performers  in  both 
popular and niche repertoire. 

7.2.7. 

Impact on information society services 

The  impact  on  digital  libraries  and  other  similar  services  would  be  negative.  However,  it  is 
difficult to identify such services and to quantify to what effect they would be affected, given 
that have yet to fully develop on the market. 

Clearing the rights of performers would be more complex, as it would involve identifying all 
performers whose performances are embodied in a sound recording. Moreover, when the term 
of  protection  for  record  producers  and  performers  is  the  same,  all  the  rights  can  be  cleared 
from  the  record  producer.  This  is  because  the  producer  has  an  assignment  from  all  the 
performers who perform on the record. If the rights of performers only are extended, it may 
no longer be possible to clear the performers' rights from the producer, and the rights of each 
performer would have to be cleared individually during the extended term. 

7.2.8.  The international dimension 

A term extension for performers only would have a negligible impact on the flow of royalties 
between the EU and the US. Section 7.3.7 describes in more detail why the impact on royalty 
flows would not be significant. 

7.2.9.  Administrative burden  

Extending  the  term  of  protection  for  performers  would  require  an  amendment  to  Directive 
2006/116/EC and Member States would then have to amend their national laws accordingly. 
This would only require Member States to adapt their existing laws covering performers. The 
administrative  burden  incumbent  on  Member  States  would  be  considerably  lower  than 
introducing a new law.  

However,  linking  the  term  of  protection  to  the  lifetime  of  performers  would  raise  complex 
issues,  essentially  because  co-performances,  i.e.  performances  by  a  band,  an  orchestra  or  a 
featured artists accompanied by session musicians77 are the rule.  

This leads to an increased legislative burden for Member States. There are currently no rules 
providing for the calculation of the term of protection for co-performances, because the event 
which  triggers  the  current  term  of  protection  is  the  publication  of  the  performance.  If  the 
event  triggering  the  term  of  protection  is  the  death  of  a  performer,  then,  when  several 

77 

Under international and national laws, performers enjoy rights in their performance, unlike copyright, 
irrespective  of  its  originality.  It  is  likely  that  all  performers  would  have  to  be  taken  into  account  to 
calculate the term of protection. 

EN 

32 

   EN 

 
                                                 
performers  contribute  to  a  recording  or  performance,  it  might  seem  more  appropriate  to 
calculate the term from the death of the last surviving performer, but this could also lead to 
excessively long terms of protection. Alternatively, it could be provided that the contributions 
of  session  musicians  should  not  be  taken  into  account  to  calculate  the  term  of  protection78. 
However, there are currently no Community rules on this matter. The analogy with the term 
of  copyright  protection  of  co-written  works  is  of  limited  assistance,  as  there  are  no 
Community rules on the calculation of the term of protection for co-written works. 

In addition, the calculation of the term of protection from the death of the performers would 
also  have  a  negative  impact  on  tracking  costs  and  transaction  costs.  Tracking  costs  are  the 
costs  of  identifying  the  performers  whose  performances  are  embodied  in  a  sound  recording 
and registering their death. In practice, it would be excessively cumbersome to identify all the 
members of an orchestra, which includes more than 80 musicians, and of session musicians 
which are hired on an occasional basis to perform certain parts or instruments in a recording . 
Because session musicians are paid a flat fee for the assignment of their rights, the recording 
companies do not keep track of them.In addition to identifying performers, the databases used 
to  manage  performers'  rights  and  to  calculate  the  term  of  protection  would  then  have  to  be 
modified to include additional data on the death of all the performers in a sound recording. In 
addition, for collecting societies, the cross-border administration of rights would also become 
more  complex  and  more  expensive79.  This  could  be  even  more  complex  if  Member  States 
adopt different rules on the calculation of term for co-performances. 

Finally,  the  term  of  protection  of  co-performed  musical  works  would  give  rise  to  legal 
uncertainty, because the term of protection would no longer depend on an easily identifiable 
and certain event, namely the date of publication or broadcasting of the record. Instead, the 
term of protection would depend on two factors: first, which performers are performing in the 
record, and second, the date of each performer's death. Third parties exploiting a record which 
they  believe  in  the  public  domain  would  face  the  risk  of  unidentified  performers  bringing 
claims in sound recordings and thus extending the term of protection of that record. 

7.3. 

Extend the term of protection for performers and record producers from 50 to 
95 years 

7.3.1. 

Impact on performers 

The effect on performers would be more extensive than under the 'life or 50 years' term. For 
instance, Edith Piaf's interpretation of 'Non, je ne regrette rien', recorded in 1960, was used in 
the film 'La Môme' (2007), and experienced renewed success. However, as Edith Piaf died in 
1963,  the  term  of  protection  under  the  "life  or  50  years  term"  would  effectively  not  be 
extended and expire on 1st January 2011, thus leading to a shortfall after that date. Under the 
95 years option, the recording would be protected until 1st January 2056.  

78 

79 

This  would  be  possible  because  the  minimum  term  of  protection  required  under  international 
agreements (50 years from end of the calendar year on which the performance took place, under Article 
14(5)of the TRIPs agreement) would be complied with. However, it would require articulating in legal 
term a difficult distinction between session musicians and other performers. 
In effect, collecting societies often exploit each other's repertoire on their own territory and exchange 
information and payments under so-called "reciprocal agreements". For a more detailed explanation of 
the cross-border management of copyright, see 'Impact Assessment Reforming Cross-Border Collective 
Management  Of  Copyright  And  Related  Rights  For  Legitimate  Online  Music  Services',  SEC  (2005) 
1254, 
at 
http://ec.europa.eu/internal_market/copyright/docs/management/sec_2005_1254_en.pdf.  

available 

p.6, 

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Performers  derive  revenue  both  from  royalty  income  linked  to  the  sale  of  sound  recordings 
and from secondary remuneration claims linked to the broadcasting and communication to the 
public  of  their  performances.  As  the  overall  level  of  revenue  generated  from  secondary 
remuneration claims should not increase because of the term extension, the impact is difficult 
to  determine.  Individual  performers  would  however  benefit  from  income  streams  for  45 
additional years.  

For  the  sale  of  sound  recordings,  the  PWC  study estimates  the  present  value  of  performers' 
and producers' additional income in the extended term between € 44 and € 843 million in the 
EU (see section 7.3.2). On this basis, an estimate of the additional annual revenue accruing to 
performers from a 45 year term extension can be drawn up. 

The  calculation  of  annual  revenue  for  an  average  performer  is  based  on  a  variety  of 
assumptions that are further explained in the Annex, section 3. These assumptions concern the 
distribution of financial benefits between performers and record producers (performers getting 
10% and producers 90% of the revenues), the annual distribution of the overall present value 
gain and the number of performers that would benefit from a term extension. On the basis of 
these assumptions, the additional term of protection would generate between € 46 and € 737 
per performer per year. Just as for the 'life or 50' option, one should also mention that a term 
extension would be a boost for performers' and session musicians' social status. They will feel 
that their artistic contribution is properly valued by society. 

7.3.2. 

Impact on record producers 

Several economic studies attempt to analyse the impact that a term extension from 50 to 95 
years  would  have  on  the  sales  revenue  of  record  producers.  All  of  them  come  to  the 
conclusion  that  an  extension  would  have  some  financial  benefits;  however  they  are  not 
unanimous  on  how  large  this  benefit  would  be.  This  IA  is  based  on  three  principal  studies 
submitted  by  stakeholders80.  These  studies  consider  the  future  revenue  stream  that  record 
companies can expect to receive from an additional 45 years of protection and compare this 
revenue  with  the  revenue  stream  generated  during  the  initial  50  years  of  protection.81 

80 

81 

for 

IFPI. 

report  prepared 

for  Sound  Recordings, 

These  studies  are:  1)  Liebowitz  (February  2006),  "What  are  the  Consequences  of  the  EU  extending 
("Liebowitz");  2) 
Copyright  Length 
PriceWaterhouseCoopers  (April  2006),  "The  Impact  of  Copyright  Extension for  Sound  Recordings  in 
the UK", report prepared for BPI. ("PWC"); 3) Centre for IP and Information Law (2006), "Review of 
the  Economic  Evidence  Relating  to  an  Extension  of  the  Term  of  Copyright  in  Sound  Recordings", 
report prepared for the Gower's review. ("CIPIL") 
The estimates vary on account of the basic assumptions that each study makes with respect to three key 
parameters:  (1)  the  discount  rate  that  is  applied  to  determine  the  present  value  of  future  income  that 
results  from  term  extension;  (2)  assumptions  as  to  the  depreciation  of  annual  sales  value  with  the 
passage of time (so-called 'cultural depreciation'); (2) the possible loss of market share upon expiry of 
the 50 year term. The choice of the discount rate is one of the core issues addressed by all of the studies 
surveyed.  The  authors  of  theses  studies  find  it  difficult  to  choose  the  appropriate  discount  rate, 
especially  in  relation  to  a  45  year  period  in  the  future. Due  to  differences  in  the  appraisal  of  the  risk 
inherent  in  the  production of  sound  recordings,  the  three studies  apply discount  rates that  range from 
3%  to  9%  in  real  terms  (Liebowitz:  3-6%;  PWC:  9%  and  CIPIL:  5-9%).  The  European  Commission 
Impact Assessment Guidelines SEC(2005) 791, (p. 37), recommend, on the other hand, application of a 
standard  discount  rate  of  4%.  This  rate  broadly  corresponds  to  the  average  real  yield  on  longer-term 
government debt in the EU over a period from the early 1980s onwards. The economics of copyright 
literature is, however, unanimous that using a 4% discount rate to calculate the present value of a 45 
year  term  extension  yields  results  that  are  too  optimistic.  For  the  purpose  of  this  analysis,  therefore, 
more conservative estimates are presented.  

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Estimated  future  revenue  from  extension  is  then  calculated  as  a  percentage  of  the  revenue 
achieved  in  the  initial  50  years.  The  uncertainty  that  accompanies  these  studies  is 
understandable since estimates must cover almost five decades. Besides, not all impacts are of 
economic dimension.  

The three studies come to the following conclusions as to the percentage that estimated future 
income generated in the extra 45 years of protection represents when compared to the income 
achieved in the initial 50 years: Liebowitz: 3-14%; PWC: 0.1-1.9%; and CIPIL: <1%.  

The  PWC  study  is  the  only  study  based  on  actual  data  and  enables  us  to  add  a  concrete 
dimension to the results. This study applies to the UK and it analyses the revenues from music 
sales, license fee income and other royalty income. The value of the initial 50 year term for 
sales in the UK is calculated to reach £ 8.568 billion. The high-end estimate of total present 
value  of  the  95-year  period  would  amount  to  £  8.731  billion,  whereas  the  low-end  estimate 
would  yield  £  8.576  billion82.  A  45  year  extension  of  the  term  of  protection  would  create 
between £ 8.4 million and £ 163 million in additional revenues. The PWC study is limited to 
the UK sales revenue. As EU sales are 3.5 times larger than the UK sales, it can be roughly 
estimated  that  a  45  year  term  extension  would  generate  between  €  44  million  and  €  843 
million in additional revenues for the EU. If record producers get 90% of the sales price and 
performers only 10%, the benefit to record producers would yield between € 39 million and € 
758  million.  If  a  fund  of  20%  were  set  up  for  performers,  the  benefit  to  record  producers 
would decrease to between € 31 million and € 607 million. 

If the benefit from term extension were to be calculated on the basis of other, higher estimates 
(using a lower discount rate) (see Liebowitz study), the music industry could get an additional 
£ 1.182 billion in the UK. Extrapolated to the EU level, this would yield to over € 6 billion. 
However, some economists have expressed reservations on this high-end estimate. This is due 
to the fact that Liebowitz relies on very optimistic assumptions with respect to the discount 
rate,  the  continued  popularity  of  repertoire  (the  so-called  'cultural  depreciation')  and  the 
potential loss of market share if the term of protection expires. 

7.3.3. 

Impact on broadcasters and public venues where music is played 

For  the  reasons  explained  in  relation  to  the  'life  or  50'  term  extension  for  performers  (see 
section  7.2.3),  there  would  be  no  impact  on  prices  paid  for  broadcasts  and  performances  of 
music in public venues. 

7.3.4. 

Impact on public domain record labels 

The impact of a term extension for both performers and record producers would be similar to 
the impact of a term extension for performers only (see section 7.2.4). This is because record 
producers are usually granted an assignment of the performers' rights. The longer term would 
imply that the impact on public domain labels would last longer. Their loss of earnings would 
be equivalent to the additional earnings of record producers (see section 7.3.2). 

82 

The  higher  range  estimate  assumes,  in  favour  of  the  proponents  of  term  extension,  that  the  expiry  of 
copyright entails a 100% market share loss, whereas the lower end estimate assumes no market loss.  

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7.3.5. 

Impact on consumers 

A  term  extension  would  have  no  negative  impacts  on  consumer  prices  and  would  have  a 
positive impact on the quality of services offered to consumers as well as on consumer choice. 
It would send a clear signal that the interests of the music industry and of consumers are not 
opposed but instead concur on a competitive music market.  

The impact of on consumer prices is expected to be minimal. The only study that compares 
prices  for  in-copyright  and  out-of-copyright  sound  recordings  is  the  PWC  study  on  "The 
Impact of Copyright Extension for Sound Recordings in the UK"83. The PWC study looks at 
129 albums recorded between 1950 and 1958. It finds no clear evidence that records in which 
the related rights have expired are sold systematically at lower prices than records which are 
still protected.  

Other  studies  have  considered  the  price  impact  of  copyright  protection84.  For  instance,  the 
Gower's review relies on a study analysing the impact of copyright on the price of books, and 
relies  on  partial  results  of  that  survey85.  Studies  on  books  are  not  directly  relevant  to  the 
impact of copyright on prices of sound recordings. This is because books are only subject to 
one copyright (i.e., of the authors) while sound recordings, as well as being protected by the 
related  rights  of  producers  and  performers,  incorporate  copyright  protected  musical  works. 
Thus when the related rights in the sound recording have expired, the copyright in the musical 
composition  often  has  not.  As  a  result,  the  gradual  "de-protection"  (first  the  neighbouring 
rights,  then  the  authors  in  co-written)  leads  to  even  less  price  fluctuations  as  with  books. 
However, even in the category of books, either no overall price difference is found between 
samples of books in- or out-of-copyright, or the impact of copyright on the price is extremely 
model-dependant and therefore the estimates obtained cannot be very robust. Given the lack 
of  widely  accepted  models  and  the  length  of  the  time  span,  it  is  fair  to  say  that  there  is  no 
clear evidence that prices for sound recordings will increase due to term extension.  

Consumers can also access music online or from mobile phones. The digital music market is 
growing and currently accounts for approximately 15% of the music market worldwide. The 
various pricing models of online music clearly show that whether a sound recording is in or 
out of copyright is not a relevant factor to determine consumer prices. For instance, as far as 
"download  to  own"  is  concerned,  several  music  vending  platform  operate  by  selling  tracks 
individually,  for  instance  MSN  Music86,  Nokia  Music  Store87,  iTunes88,  Napster  Light89, 

83 

84 

85 

86 

87 

88 

89 

PriceWaterhouseCoopers  (April  2006),  "The  Impact  of  Copyright  Extension for  Sound  Recordings  in 
the UK", report prepared for BPI. 
Liebowitz  (May  2007  –  preliminary  draft),  "Copyright:  How  Large  are  the  Deadweight  Losses";  and 
Heald  (2006),  "Property  Rights  and  the  Efficient  Exploitation  of  Copyrighted  Works:  an  Empirical 
Analysis of Public Domain and Copyrighted Fiction Best Sellers". 
The Gowers review relies on Heald (2006). In the whole sample of bestsellers, no difference in price is 
to  be  found,  which  is  however  not  true  for  the  much  smaller  sub-sample  of  durable  books  (i.e.  most 
enduringly popular), where books in-copyright were priced higher than books out-of-copyright. Gowers 
presents only these latter results.  
MSN  Music  operates  in  Austria,  Belgium,  Denmark,  Finland,  France,  Germany,  Italy,  Netherlands, 
Spain, Sweden and the United Kingdom.  
Nokia Music Store operates in France, Finland, Germany, Ireland, Italy, Netherlands, Sweden and the 
UK. 
iTunes  operates  in  Austria,  Belgium,  Denmark,  Germany,  Finland,  France,  Greece,  Ireland,  Italy, 
Luxembourg,  Netherlands,  Norway,  Portugal,  Sweden,  Switzerland,  Spain  and  the  U.K.,  at  the  same 
price. See Apple press release, London, January 9, 2008. 
Napster operates in Germany and the UK. 

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Musicload.de90 or Fnacmusic.com91. The vast majority of these services sell tracks at a single 
fixed  price92,  whether  or  not  it  is  in  copyright  or  not93.  Other  business  models  offer  their 
customers access to music on a subscription basis, either for a limited number of downloads 
or  on  an  "all  you  can  eat"  basis  (unlimited  downloads).  Such  services,  for  example 
Omniphone  Music  Service94,  FNAC  musique  illimitée95,  eMusic96  (which  includes  the 
complete classical music catalogue of Naxos Records) or Napster to go, charge a monthly fee 
whatever  the  tracks  downloaded,  i.e.  whether  they  are  in  copyright  or  not.  Finally,  some 
services offer music "bundled" with another product such as a mobile phone ("Nokia comes 
with  music"97)  or  services  such  as  Internet  Access  (for  example,  in  France,  Neuf  Cegetel 
bundled with access to Universal's catalogue or Alice bundled with EMI's catalogue). Again, 
in that case, it is clear that the price paid by the consumer is the same whether he downloads 
music  which  is  in  or  out  of  copyright.  Finally,  it  should  be  noted  that  public  domain 
companies do not release their sound recordings on the internet, but instead only sell them as 
CDs. 

The above circumstances would indicate that the very small copyright payments to performers 
and the producers of sound recordings might not be the most relevant factor determining retail 
prices. This is partly because sound recordings are only fully in the 'public domain' when both 
the related rights in the performance and the record and the copyright in the musical work are 
no  longer  protected.  Accordingly,  other  than  classical  music,  few  records  are  completely  in 
the 'public domain'. Moreover, the sound recordings will still be protected in the US where the 
term of protection is 95 years. Making available a work on the internet would therefore not be 
possible on a global scale, because the making available would amount to an infringement of 
the record producer's rights in the US98. Moreover, sound recordings compete with all other 
sound  recordings  of  the  same  genre  for  the  same  audience  whether  they  are  in  or  out  of 
copyright99. This competition between protected recordings and between protected and non-
protected recordings keeps prices down.  

The  impact  on  the  quality  of  the  products  and  services  offered  to  consumers  might  also  be 
positive.  Although  competition  in  offering  public  domain  sound  recordings  might  increase 

90 
91 
92 

93 

94 
95 
96 

97 
98 

99 

Musicload.de operates in Germany. 
Fnacmusic.com operates in France. 
With  some  exceptions,  such  as  Musicload  in  Germany.  Several  factors  come  into  account  in 
Musicload's pricing, such as the price of the album in relation to the number of tracks, and the duration 
of the tracks. 
MSN Music: €0.99 per track; Nokia Music Store: €1.00 per track, £0.80 in the UK; iTunes: € 0.99 per 
track; Napster Light: €0.99, £0.79 in the UK; Fnacmusic.com: €0.99 per track. 
UK. 
France. 
Austria,  Belgium.  Denmark,  Finland,  France,  Germany,  Greece,  Italy,  Luxembourg,  Netherlands, 
Portugal, Poland, Slovenia, Spain, Sweden and the UK. 
Yet to be launched. 
In the US, the Federal term of protection only applies from 1972. All records previously released are 
still protected under most state laws and are not pre-empted under federal law. Only in 2067 will the 
rights in records start falling in the public domain in the whole of the US under federal law. See New 
York  Court  of  Appeals,  5  April  2007,  Capitol  Records,  Inc.  v.  Naxos  of  America,  Inc,  decision: 
USCOA,2 No. 30. 
"In the vast majority of instances, copyright provides no monopoly power to the copyright owner and 
the only cost advantage that would accrue to consumers of non-copyright protected works would be the 
saving  for  not  having  to  pay  the  creator  of  the  work"  (Liebowitz,  February  2006,  'What  are  the 
Consequences of the EU extending Copyright Length for Sound Recordings', report prepared for IFPI., 
p. 22).  

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their quality, it is not clear that this is the case. Indeed performers and record producers have 
an  interest  in  defending  their  artistic  integrity  and  their  reputation  which  ensures  that  they 
offer  only  the  highest  quality  recordings  to  the  public.  In  contrast,  some  public  domain 
companies re-release recordings without due regard for the quality of the recording, without 
re-mastering old titles, and often without regard for the value of the performance. Instead, the 
records are used as cheap promotional material to bring consumers to supermarkets. This is 
true  to  such  an  extent  that  in  some  instances,  such  as  the  Henri  Salvador  case100,  the  moral 
rights of the performer can be infringed. Also, the record company which continues to exploit 
a sound recording has an incentive to maximise the value of the recording. Record companies 
therefore invest heavily in the promotion and marketing of their records – up to 16% of their 
revenues101  –  thus  ensuring  that  there  is  demand  for  those  sound  recordings  and  that  they 
reach a wide audience. 

Likewise,  it  has  been  seen  above  that  very  few  public  domain  companies  market  records 
which are genuinely out of copyright, i.e. when the copyright in the musical composition and 
the related rights in the phonogram  and performances have expired. While some companies 
do, they perform this on a very limited scale, and the sound recordings are not available for 
download. Indeed when all rights have expired, there are few incentives to publish old sound 
recordings,  because  any  competitor  can  free  ride  the  effort  expended  in  digitising  and 
marketing the sound- recording.  

The impact on consumer choice is also expected to be positive. In the long run, this is because 
a  term  extension  will  benefit  cultural  diversity  by  ensuring  the  availability  of  resources  to 
fund  and  develop  new  talent  (see  below).  In  the  short  to  medium  term,  a  term  extension 
provides record companies with an incentive to digitise and market their back catalogue of old 
recordings. It is already clear that internet distribution offers unique opportunities to market 
an unprecedented quantity of sound recordings. The major download services currently offer 
more than six million tracks available online. In addition, many recordings are now expected 
to  enjoy  a  'second  life'  on  the  Internet.  Since  digital  distribution  can  represent  new  cheaper 
ways in which to offer a very wide variety of recordings on a global scale, record companies 
will be incentivised to benefit from what has been coined as the 'long tail' effect – low sales 
volumes in small markets (especially in the digital online context) which can collectively add 
up to and even rival the relatively few bestsellers102. For instance, in the UK, the top 40 single 
tracks account for only 10% of all tracks downloaded, while the 'long tail' accounts for most 
online sales volume103. Universal’s download only re-issue programme, which includes only 
“deleted” recordings, launched in 2006, has prompted 3 million downloads since its launch in 
2006. Many record companies will make their entire back catalogue available online and the 
still  popular  sound  recordings  from  the  1960s  will  experience  a  further  upturn  in  sales  as  a 
result  of  an  expansion  in  digital  distribution.  For  example,  Universal  makes  available  to 
consumers 18 000 previously ‘deleted’ tracks and the digitisation of its back catalogue should 

100 

101 

102 
103 

Paris  Court  of  Appeal,  November  14th,  2007,  SARL  Jacky  boy  Music  v  Salvador,  JurisData  :  2007-
349990, see above, section 7.24. 
ADAMI  study,  'Filière  de  la  musique  enregistrée  :  quels  sont  les  véritables  revenus  des  artistes 
interprètes?' (April 2006), p.13. 
"The Long Tail", by Chris Anderson, 'Wired' magazine, October 2004. 
IFPI Digital Music Report 2008, p.8. 

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reach  60  000  tracks  by  the  end  of  2008;  Deutsche  Grammophon  offers  a  music  download 
service which includes 2500 albums, 600 of which are not available on CD104.  

This contributes to  enhancing consumer choice as many recordings that are not available in 
retail  stores  due  to  limited  shelf  space  can  now  be  made  available  online.  Older  or  niche 
European  repertoire  will  be  more  widely  available.  While  it  might  be  expected  that  public 
domain  companies  would  make  more  recordings  available,  this  has  not  been  the  case.  As 
explained  above,  there  are  few  companies  who  market  public  domain  sound  recordings  of 
out-of-copyright musical compositions. Moreover, as far as niche markets are concerned, they 
do so at relatively high prices and do not offer those recordings for download. This is partly 
because  absent  property  rights,  public  domain  companies  are  exposed  to  free  ridding:  they 
have  no  incentive  to  invest  in  promotion  and  marketing  which  could  be  free-ridden  by  any 
competitors. This is why companies such as Naxos opt to re-record public domain classical 
music105. 

7.3.6. 

Impact on cultural diversity 

Since term extension will lead to some financial benefit for record producers, more resources 
from  old  recordings  are  available  to  fund  new  talent.  Resources  from  old  recordings, 
especially from recordings in the golden fifties and sixties, can still be considerable, even in 
the  years  to  come.  Sales  of  sound  recordings  have  an  initial  boost  in  the  first  few  years 
following their publication and then decline from that level to remain, for decades, at a fairly 
constant level106. Record companies state that they often use the income derived from older 
recordings to produce and market new recordings. More income from the golden 1960's and 
other enduringly successful recordings will help finance investment in new recordings.  

According to Nigel Parker, "the music business has grown based on the long-tail income from 
established  copyrights.  Accumulation  of  copyrights  spreads  risk  and  generates  funds  to 
finance new music. Without long term profits from the most successful creators, investment in 
new music would be almost non-existent"107. This means that the music industry is essentially 
a portfolio business where successful recordings will generate the revenue required to finance 
new recordings. This would mean that new successful European repertoire would need to rely 
on older repertoire providing the revenue necessary to finance cultural diversity.  

An increase in  A&R spending  and a  better financial  situation  of the  recording  industry will 
therefore provide increased opportunities for performers in both popular and niche repertoire. 
According  to  the  PWC  study,  A&R  amounts  to  17%  of  revenues.  If  the  estimated  financial 
benefit of the record producers is between € 39 million and € 758 million, this results in the 
additional  A&R  value  of  between  €  6.7  million  and  €  129  million.  In  the  first  decade,  the 
additional  A&R  value  would  be  between  €  1.7  million  and  €  28  million
additional investment will benefit directly new EU performers. 

108.  Part  of  this 

104 

105 

106 

107 
108 

IFPI Digital Music Report 2008, p.11; Universal press release, LONDON, January 18, 2006, available 
at http://new.umusic.com/News.aspx?NewsId=355. 
See e.g. W. Landes, R. Posner, 'Indefinitely Renewable Copyright', John M. Olin Law and Economics 
Working Paper 154, p. 19, available at http://ssrn.com/abstract_id=319321 . 
Liebowitz  (February  2006),  'What  are  the  Consequences  of  the  EU  extending  Copyright  Length  for 
Sound Recordings', report prepared for IFPI. 
Nigel Parker (2004), 'Music Business: Infrastructure, Practice and Law'. 
All  figures  should  be  adapted,  if  a  fund  diverting  20%  of  record  producers'  additional  revenue  to 
performers was accounted for (see Annex, section 3). 

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7.3.7. 

Impact on information society services 

The  impact  on  digital  libraries  and  other  similar  services  would  be  negative.  Although  the 
issue of rights clearance would not be as complicated as under option 2b, it would arise over a 
longer  period  of  time.  However,  flexible  solutions  for  rights  clearance  and  orphan  works 
could be found on an ad hoc basis. 

7.3.8.  The international dimension 

The  impact  of  a  term  extension  on  the  international  flow  or  royalties  should  be  considered 
separately  in  relation  to  sales  and  secondary  exploitation.  The  income  from  secondary 
exploitation  is  collectively  administered  and  as  a  consequence,  the  distributions  to  EU 
performers are more easily traceable. Moreover, a significantly larger share of remuneration 
from secondary exploitation is distributed to performers than from sales109. 

As far as sales are concerned, according to available IFPI figures, the domestic repertoire of 
each Member State represents in EU aggregate terms 48% in value of music sales in tangible 
form  (mainly  CDs).  The  international  repertoire  accounts  for  45%.  But  'international' 
repertoire  here  includes  European  repertoire  from  other  Member  States  as  well  as  US  and 
non-US repertoire (e.g., Latin American repertoire).  

Equally,  the  Gowers  report  claims  that  43%  of  the  revenues  that  would  be  earned  in  the 
extended term would be remitted 'overseas'110. However, these 43% include US repertoire and 
repertoire  from  other  European  states.  It  is  therefore  a  fallacy  to  believe  that  43%  of  UK 
remittances  in  a  longer  term  would  all  go  to  the  US  or  to  other  non-EU  countries.  On  the 
contrary,  much  of  this  revenue  would  remain  in  the  European  Union.  For  example,  figures 
available  for  Denmark  show  that  45%  of  the  repertoire  sold  in  Denmark  is  of  Danish  (i.e., 
domestic) origin, 37% comes from other-European Member States and only 14% is imported 
from  the  US  and  4%  from  other  non-EU  sources111.  This  means  that  most  of  the  additional 
revenue  collected  over  an  extended  term  of  protection  would  therefore  stay  in  Europe  and 
benefit  European  performers.  The  Gowers  estimates  would  not,  therefore,  be  relevant  to 
determine the trade balance of the EU as a whole. 

The flow of royalties from broadcasting and performing phonograms in public venues would 
be  only  very  marginally  affected  by  a  term  extension.  This  is  because  the  EU's  only 
significant  trading  partner  for  music  is  the  US112,  and  under  the  applicable  international 
conventions, the remittances between the EU and the US are currently minimal (see Annex, 
section 4).  

Under the Rome Convention and the WIPO Performances and Phonograms Treaty (WPPT), 
the  royalty  flows  from  the  EU  to  the  US  are small.  Indeed  most  EU  Member  States  do  not 
grant  equitable  remuneration  under  the  Rome  Convention  to  phonograms  produced  by  US 

109 

110 
111 
112 

The split for revenues from the single equitable remuneration for performers is usually 50-50 between 
performers and producers. Overall, in the EU in 2004, performers collecting societies collected € 351 
million and producers collecting societies collected € 293 million, KEA Study, p. 34. 
Gowers Review on Intellectual Property, December 2006, p. 55.  
2004 Annual Report of KODA, the Danish Performing Rights Society. 
In particular, in 2004 EU-15 imports of record materials from the US amounted to USD 752 million in 
2004 , while the added imports from Japan, Australia, Canada and China amounted to USD 260 million 
(source: OECD). 

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record producers or first fixed in the US113. Under the WPPT, to which the US and the EC are 
signatories, the US applies equitable remuneration only to certain digital audio transmissions 
(such  as  webcasting).  Accordingly,  EU  Member  States  are  under  no  obligation  under  the 
WPPT to grant phonograms produced by US record producers or first fixed in the US a right 
to  equitable  remuneration  for  broadcasting  and  communication  to  the  public114.  In  practice, 
only  a  small  number  of  Member  States  (e.g.  UK,  Ireland)  pay  royalties  to  US  record 
producers for records produced by US producers or published simultaneously in the US and 
another country which is a party to the Rome Convention or the WPPT. Even though, the UK 
and Ireland do not grant such payments to US performers. 

The  term  extension  would  thus  not  result  in  additional  remittances  to  the  US  for  secondary 
remuneration claims. 

7.3.9.  Administrative burden 

Changing the term of protection would require an amendment to Directive 2006/116/EC and 
Member  States  would  then  have  to  amend  their  national  laws  accordingly.  However,  this 
burden would not be substantial since they would not be introducing new laws but amending 
existing legislation. 

7.4.  Moral rights of performers 

The  impact  on  performers  would  be  positive.  Performers  would  have  the  right  to  object  to 
derogatory  uses  of  their  performances.  This  would  not  provide  them  with  supplementary 
income other than awards for damages. It would allow them to restrict objectionable uses of 
their  performances,  for  instance  use  in  advertising,  use  in  conjunction  with  pornographic 
material  or  use  in  certain  political  contexts.  It  would  also  improve  their  social  standing  and 
signal the recognition of their artistic contributions more or less on a par with authors.  

However,  merely  granting  performers  the  right  to  restrict  objectionable  uses  of  their 
performances would not necessarily protect them during the whole of their lifetime. In some 
Member  States,  the  moral  rights  of  performers  are  perpetual.  In  others,  moral  rights  last  as 
long  as  the  performer's  economic  rights:  performers  thus  lose  their  moral  rights  when  their 
performances fall into the public domain. 

The  impact  on  record  producers  would  be  negative.  Performers  might  be  able  to  restrict 
certain uses of their performances, for instance in commercial advertising. As music is often 
used  in  advertising,  this  could  in  certain  cases  deprive  record  producers  of  revenues.  The 
performers might also have a claim for damages against producers who allow objectionable 
uses without the performer's authorisation. For instance, the French singer/songwriter Gilbert 
Montagné successfully relied on his moral rights (as an author) in the song "On va s'aimer" to 
sue Universal Music publishing, for allowing the use of a modified version of the song ("On 
va fluncher") in a commercial for a food chain115. 

The Impact on broadcasters and public venues where music is played would also be negative 
as performers could object to certain uses of their performances in radio and TV broadcasts. 

113 
114 
115 

This stems from notifications made under the Article 5(3) of the Rome Convention. 
Article 15(3) in conjunction with Article 4(2) of the WPPT. 
Didier B., Gilbert M. and SNAC v Universal Music Publishing and others, French Cour de Cassation, 
1st section, 5 December 2006, case n°1718 FS-D. 

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The  impact  on  public  domain  labels  could  be  negative.  Performers  may  be  able  to  restrict 
certain  uses  of  their  works  once  they  are  in  the  public  domain,  depending  on  whether  their 
moral  rights  are  limited  in  time  or  perpetual.  For  example,  in  France,  the  performer  Henri 
Salvador successfully sued a label for releasing and distributing in supermarkets at a minimal 
price a cheap compilation including his songs116. The public domain labels wishing to exploit 
songs in the public domain would thus have to request the authorisation of the performer or 
his heirs. 

The impact on cultural diversity would be positive. Strengthening moral rights of performers 
would  be  beneficial  for  European  cultural  diversity,  as  their  social  status  and  recognition 
would be improved. Although this is a non-pecuniary aspect of protection, it would contribute 
to  a  'feel  good'  factor  for  performers  who  would  be  confident  in  their  ability  to  exercise 
control over objectionable uses of their work 

The  administrative  burden  would  be  significant.  Since  moral  rights  have  not  yet  been 
harmonised at European level, the Commission would have to propose stand alone legislation.  

Harmonising moral rights would thus entail a significant legislative burden on many Member 
States, as there are currently significant disparities in the moral rights granted to performers in 
Member States, relating to the substance and the duration of those rights. Such differences are 
permitted  under  international  law  and  reflect  the  different  copyright  traditions  of  Member 
States. For instance in the UK117, the moral rights of performers are limited in time and some 
must  be  asserted  or  can  be  waivered,  while  in  France,  the  moral  rights  of  performers  are 
unwaiverable and perpetual118.  

7.5. 

Protection of performers’ rights: ‘use it or lose it’ 

The  impact  on  performers  would  be  positive.  Performers  would  be  in  a  better  position  to 
ensure  their  creative  output  reaches  the  public.  The  rights  in  unexploited  recordings  would 
revert  to  them  and  they  could  re-release  them  through  another  record  company  (or  do  it 
themselves)  if  the  original  company  does  not  publish  or  release  the  record.  This  is  already 
possible for authors under some national laws119 and it appears that some independent record 
companies do actually give rights back to performers if they have stopped selling the record 
for a certain time. Specific legislative measures would nevertheless strengthen the position of 
performers. 

The impact on cultural diversity would also be positive. If performers were to make use of the 
possibility  to  get  their  sound  recording  re-released  by  another  record  company,  or  by 
themselves, more repertoire, including niche and local music, would be widely available. This 
would strengthen European cultural diversity. 

Consumers  would  also  benefit  from  a  wider  selection  of  repertoire  because  the  performer 
would be able to reissue the sound recording if the original record company ceases to market 
it. 

116 

117 

118 
119 

Paris  Court  of  Appeal,  November  14th,  2007,  SARL  Jacky  boy  Music  v  Salvador,  JurisData  :  2007-
349990.  
See  The  Performances  (Moral  Rights,  etc.)  Regulations  2006,  which  amends  the  1988  Copyright 
Designs and Patents Act. 
See Article L. 212-2 of the French Intellectual Property Code. 
Austria, Belgium, Germany, Luxemburg, Nordic Countries, Portugal, Spain. 

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In  terms  of  administrative  burden,  further  amendments  to  Directive  2006/116/EC  would  be 
required,  as  well  as  transposition  measures  from  Member  States  which  do  not  currently 
provide  for  a  ‘use  it  or  lose  it’  provision.  Flexibility  should  be  allowed  in  transposition,  in 
order  for  measures  to  fit  in  with  the  Member  States'  existing  copyright  and  contract 
legislation. Alternatively the Directive could adopt a softer approach, by encouraging Member 
States to be vigilant that record companies voluntarily introduce 'use it or lose it' conditions 
into their contracts. 

7.6. 

Creation of a fund for session musicians 

The  fund  dedicated  to  session  musicians  would  include  20%  of  the  revenues  derived  by 
record  companies  from  the  sale  of  sound  recordings  benefiting  from  a  term  extension.  The 
20%  should  be  based  on  revenues,  as  this  allows  transparency  and  enforceability  of  the 
provision. The 20% strike an appropriate balance between the interests of session musicians 
and of the record producers.  

The  impact  on  session  musicians  would  be  positive.  The  amount  of  additional  revenue  for 
session  musicians  would  depend  on  the  extent  of  the  increase  in  the  term  of  protection  for 
record  producers.  An  average  performer  would  benefit  from  €  47  to  €  737  in  additional 
revenues every year (see Annex, section 3 for methodology) from a 45-year term extension.  

As there are no estimates available as to the number of session musicians whose performances 
would fall into the public domain, we present indicative estimates on how much an average 
performer would benefit if the term were extended to 95 years and the fund were to benefit all 
performers. The payment to an average performer would increase to an average of € 130 to € 
2065 every year, i.e. 2.8 times120.  

The  impact  on  record  producers  would  be  negative,  but  should  be  considered  against  the 
benefits of the term extension. In the course of a 45 year term extension, the benefits of the 
extension of term for record producers would be reduced from € 758 million to € 607 million 
(high  end  estimate)  or  from  €  39  million  to  €  31  million  (low  end  estimate).  Consequently, 
this would also reduce the additional revenue available for A&R from € 129 million to € 103 
million (high end estimate) or from € 6.7 million to € 5.3 million (low end estimate).  

A simple model calculation in the IA shows that a 20% share would strike the right balance 
between  the  profitability  of  phonograms  that  are  exploited  in  the  extended  term  and  the 
creation of a tangible added benefit for performers. This calculation attempts to measure the 
impact that a revenue-based fund would have on record labels' profit margin in the years after 
term extension. 

Average  self-declared  overall  company-wide  operating  margin  of  the  phonogram  majors 
(EBITA/revenue)  in  2007  is  9.1%  (EMI  3.3%  -  Universal  12.8%  -  Warner  14%  -  BMG 
6.2%). As mentioned above, according to IFPI, only one CD in eight is profitable. 

If  only  1  in  8  CDs  is  profitable  and  the  average  profit  rate  is  9.1%,  this  one  profitable  CD 
must be generating a profit margin that is high enough to compensate for seven unprofitable 
CDs and still produce an aggregate profit of 9.1%.  

120 

As  the  fund  would  be  drawn  from  the  income  of  record  companies,  the  revenues  of  featured  artists 
would not be adversely affected. The overall impact for performers would thus be positive. 

EN 

43 

   EN 

 
                                                 
On  this  basis,  one  can  estimate  the  profitability  of  the  one  successful  CD  by  comparing  its 
profit margin with that of the remaining seven CDs. Assuming that: 5 CDs ("CD2" through 
"CD6"  in  the  example)  break  even  (profit  =  0),  which  is  extremely  optimistic  and  2  CDs 
("CD7" and "CD8") make a loss (for "CD7" the loss is 30; for "CD8" the loss is 40); then the 
successful  CD  "CD1"  has  to  make  a  substantial  profit.  In  our  example  the  profit  margin  is 
60%.  

As  phonogram  producers  will  focus  on  reissuing  the  "premium"  CDs  during  the  extended 
term,  i.e.,  those  with  very  high  profit  margins,  a  revenue-based  fund  (setting  aside  20%  of 
revenue achieved with the premium CDs) would mean that 20% of the revenue attributed to 
CD "CD1", 250 (i.e., 50) would be set aside for performers. Therefore, even after taking into 
account the fund, the phonogram producers' profit margin in the extended term would still be 
100/250=40%. 

Table 3: Profitability of CDs 

Administrative  burden:  the  creation  of  the  fund  for  session  musicians  would  require  each 
record company to set up an account in favour of session musicians. Such accounts appear to 
be  relatively  straightforward  to  set  up  as  the  US  example  on  the  remuneration  scheme  for 
webcasting  shows121.  The  administrative  burden  on  record  companies  would  be  further 
limited by the fact that the record companies would not have to identify the beneficiaries and 
distribute  the  monies  collected  in  the  fund.  Distribution  would  be  incumbent  on  the 
performing  artists  collecting  society  that  represents  session  musicians  and  that,  in 
consequence, has a database on session musicians in place. 

7.7. 

Summary of impacts 

Table  4  summarises  the  impact  analysis  contained  in  section  7  identifying  economic  and 
social (cultural) impacts of the different options.  

121 

Under the Small Webcasters Settlement Act of 2002, session musicians are entitled to 2.5% of royalties. 
The  royalties  "are  deposited  in  an  escrow  account  managed  by  an  independent  administrator  jointly 
appointed by copyright owners of sound recordings and the American Federation of Musicians".  

EN 

44 

   EN 

 
                                                 
Option 2b 
"extension to 95 
years with 
conditions"
++

++

O

--

O

+

-

O

-

Option 2a 
"extension for 50 
years or life"

Performers

Record producers

Broadcasters

Public domain 
record labels
Consumers

Cultural diversity

Information Society
services
International 
dimension
Administrative 
burden
++

+

O

-

--

+

+

O

-

O

+

--

O

--

larger impact

some impact

no impact

some negative impact

larger negative impact

Option 3b "moral 
rights"

Option 3c "use it or 
lose it"

Option 3d "fund 
for session 
musicians"

+

-

-

-

O

+

-

O

--

++

O

O

O

O

++

-

O

-

++

-

O

O

O

+

O

O

-

Table 4: Summary table of impacts 

8. 

COMPARISON OF OPTIONS 

in  contributing 

Table 5 summarises the degree to which the different options are suitable to achieve the six 
operational objectives identified in the impact assessment (section 5.3). It becomes clear from 
this  table  that  the  options  involving  a  term  extension  (2a  and  2b)  seem  to  be  rather  more 
increasing  performers' 
successful 
remuneration  and  international  competitiveness.  Both  options  2a  and  2b  bring  incremental 
financial  benefits  to  performers  and  would  thus  allow  more  performers  to  dedicate  more  of 
their  time  to  creation.  In  addition,  option  2b  would  also  increase  incrementally  the  pool  of 
resources available to record producers for A&R and digitisation of their back catalogue, and 
could thus have an additional positive impact on cultural diversity.  

the  policy  objectives  of 

towards 

Option 2b is easier to implement than option 2a, as the latter links calculation of the term of 
protection  to  the  life  of  individual  performers.  As  the  example  of  co-written  works  shows, 
linking  a  copyright  to  the  life  of  individual  contributors  in  practice  raises  complex  issues 
when several performers contribute to a sound recording. Each co-performer in a performance 
would have to be registered and the term would only be triggered upon the death of the last 
co-performer.  

On the other hand, Option 3c has very substantial and undeniable benefits as well. It would 
incrementally  increase  the  revenue  stream  channelled  to  performers  as  they  regain  control 
over recordings which would otherwise not be commercially exploited by the record industry 
and the revitalisation  of this  long  'dormant' repertoire would open up business  opportunities 
for new recording labels, especially those who rely on smaller repertoire.  

EN 

45 

   EN 

 
 
This option would thus be useful as a complement to enhance the positive impact of a term 
extension on the revenue of performers.  

Table 5: Analysis of options against objectives 

9. 

MONITORING AND EVALUATION 

Monitoring and evaluation will be conducted in line with the policy objectives as identified 
above. As policy options have not yet been chosen, the details of monitoring and evaluation 
will be more specifically defined at a later stage.  

The monitoring could develop along three models: 

(i)  The  first  concentrates  on  the  short-term,  starting  right  after  the  adoption  of  the 
proposal. It focuses on the sheer implementation of the proposal, i.e. amendments of 
national rules. 

(ii)  The  second  would  be  mid-term  and  focus  on  direct  effects  such  as  performers' 
income and A&R spending by record companies in Europe. 

(iii) Finally, monitoring could be set up of the overall economic and social impacts of 
the proposal “on the ground” in the mid- to long-term.  

9.1. 

Contribute to enhancing the welfare of performers 

The remuneration of performers can be monitored using the following indicators: 

Income from secondary remuneration claims: information on how much is collected 
and how it is distributed can be provided by collecting societies. 

Income from performers and trade unions about the evolution of types and content of 
contracts  and  collective  agreements  between  performers  and  session  musicians  and 
record companies 

EN 

46 

   EN 

 
Remuneration from exclusive rights: precise information is difficult to obtain as the 
remuneration  is  governed  by  individual  contracts.  However,  record  producers, 
collecting  societies  and  performer's  unions  can  provide  indicators  of  the  level  of 
remuneration of performers. 

Remuneration  from  record  companies'  in-house  funds  for  session  musicians: 
information on whether such in-house funds have been set up and whether payments 
have been made to session musicians. 

Gradually align authors' and performers' protection:  

Implementation of the proposal by Member States: depending on the option chosen, 
the  transposition  process  would  be  monitored  and  indicate  the  level  of  protection 
enjoyed by performers in the Member States. 

Case law upholding the moral and economic rights of performers would also provide 
an indicator of the practical and legal effects of implementation. 

9.2. 

Contribute to enhancing the competitiveness of the EU music industry 

Diminish the discrepancies in protection between the EU and US music markets:  

The  amount  of  'European'  music  broadcast  in  Europe,  and  the  size  of  the  music 
market, are indicators of whether the production of European music is commercially 
attractive  for  record  companies.  This  information  can  be  provided  by  collecting 
societies  which  collect  single  equitable  remuneration  for  performers  and  producers 
and by broadcasters. 

Information on the trend in the number and size of record producers in the EU and in 
the US would give an indicator on the development of the general economic situation 
of the music industry in the EU. 

Incremental increase in A&R resources:  

A&R expenditure would be directly obtained from record companies. Alternatively, 
the evolution of the revenues of record companies would also provide an indicator, 
as A&R expenditure is usually in proportion to record producers' revenues. 

9.3. 

Increase available music repertoire 

Ensure availability of music at reasonable prices:  

Information  on  the  pricing  of  records  could  be  obtained  from  record  companies, 
distributors and consumer groups. 

Information on the evolution of broadcasting tariffs can be obtained from collecting 
societies. 

Encourage the digitisation of back catalogue 

Repertoire and back catalogues made available online by record companies, and the 
revenues  derived,  are  indicators  of  whether  the  record  industry  used  the  additional 

EN 

47 

   EN 

 
income  from  term  extension  to  develop  the  offer  of  music  to  consumers.  This 
information could be provided by record companies, distributors, 'brick and mortar' 
and online music retailers. 

Information on revenues generated from the 'long tail' effect would indicate whether 
record  companies  have  an  incentive  to  digitise  and  offer  as  many  recordings  as 
possible.  This  information  could  be  provided  by  record  companies,  distributors, 
'brick and mortar' and online music retailers 

A more detailed set of indicators will be considered in the light of the policy choice selected. 

A first comprehensive evaluation could therefore take place 5 years after the entry into force 
of the proposal. 

EN 

48 

   EN 

 
To  the  impact  assessment  on  the  legal  and  economic  situation  of  performers  and  record 
producers in the European Union 

ANNEX 

EN 

49 

   EN 

 
 
 
 
1. 

PUBLIC CONSULTATION ON THE REVIEW OF THE EC LEGAL FRAMEWORK ON COPYRIGHT AND RELATED RIGHTS 

The following table presents the results of the above public consultation as concerns the length of protection of related rights. 

NAME OF CONTRIBUTOR 

REMARKS 

REASONS GIVEN 

ISSUE 1 : Duration of protection of related rights 

(Association 

of 
Performers 

AEPO 
European 
Organisations) 
AFI 
fonografici italiana) 

(Associazione 

dei 

70yrs 

 - Expiry in 2004 of recordings from 1954 (additional income) 
- compare to authors 

95 yrs 

AFYVE 
(Asociacion 
Fonografica  y  Videográfica 
Española) 

BAMP  (Bulgarian  Association 
of the Music Producers) 

(British  Phonographic 

BPI 
Industry) 

Phonographic 

Croation 
Association 

EMI Music 

FGPA (Lithuania) 

FIMI (Italian Federation  of  the 
Music Industry) 

GIART 

(International 

-increased investments, promotion of new talents 
- music in past not recouped investment costs 
- new technology good for global exploitation by (especially SME’s) 
new technology good for new business models 
- new fashion for singles (via internet) 
- phonogram producers are current ‘weak links’ ? in production chain 
- countries with significant markets have already extended protection: India (60), Turkey, Chile, Brazil 
(70), Mexico (75), USA (95 if published, 120 from fixation if not published); Singapore and Australia 
have signed Free Trade Agreements with the US to extend protection to 70 years 
- producers need longer to recoup investment 
- lifespans increased 
- cost of producing & marketing original material increased 
- losses due to piracy reduced recoup on investment 
- present famous artists still alive seeing their recordings fall into public domain – unfair + not in line 
with objectives of protection 
- differences in term between EU and US cause legal uncertainty, and lead to infringements 
-  especially  problematical 
simultaneously in many different countries) 
- different terms could hamper development of new legitimate on-line business models 
- longer term of protection gives incentive for RH to create and disseminate works in that territory 
- longer term indicative of commitment to protect RH, local culture & creativity in general 
-  lower  term  of  protection  in  EU  difficult  for  RH  to  meet  foreign  competition  and  obtain  adequate 
international protection (“comparison of terms”). 

in  on-line  environment  (where  a  phonogram  can  be  exploited 

EN 

50 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Organisation  of  Performing 
Artists) 

(Gesellschaft 

GVL 
Verwertung 
Leistungsschutzrechten) 

zur 
von 

IFPI  and  its  national  groups 
(Austria,  Belgium,  Czech 
Republic, 
Denmark, 
Germany,  Finland,  Greece, 
Hungary,  Slovakia,  Sweden, 
Poland [ZPAV]) 

LaMPA 
Producers Association) 

(Latvian  Music 

NVPI (Dutch Music Industry) 

PPL & VPL 

UPFR  (Romanian  Association 
of Music Producers) 

RICHARD, Sir Cliff 

(ARTIS – GEIE 

BECTU 

IMMF 
Managers Forum)) 

(International  Music 

Music Manager’s Forum 

- discrimination with film producers who are considered as authors 

Extension 
(for at least the lifetime of 
the artists) 

- present famous artists still alive seeing their recordings fall into public domain – unfair + not in line 
with objectives of protection 
- matter of protecting European culture 
- should align with the term applicable to films  

Extension  
(same as authors) 

- unacceptable that compositions should enjoy a term of protection up to three times longer than that 
for performances; no justification for such discrimatory treatment (the reason is entirely historical) 
- the argument that a shorter term of protection benefits consumers is not borne out in practice since 
phonogram  producers  continue  to  sell  recordings  that  are  in  the  public  domain  at  the  same  price  as 
when they were protected by copyright 
-  an  extension  of  sound  recording  copyright  will  also  take  thousands  of  musicians  off  means  tested 
benefits and greatly lessen the burden of the state; the state will benefit both from the a reduction in 
benefits  paid  to  poor  musicians  and  from  increased  taxation  of  rich  musicians  and  phonogram 
producers 

EN 

51 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
- recordings are principal source of income. 
- internet possibilities are competition to sales of CDs 
- internet use of recordings in public domain are unfair competition to recent recordings 
-  Urgent  consideration  should  be  given  to  changing  the  term  of  copyright  in  sound  recordings  to 
safeguard  the  revenues  of  European  produced  sound  recordings  that  would  otherwise  be  due  to 
producers and performers  
- concerned that any adjustment of the term of protection of phonograms applies a parallel extension to 
the performers’ rights to equitable remuneration 
- It promotes entrepreneurship in the creative economy, a sector of increasing importance for the UK’s 
international competitiveness, and benefits consumers by generating innovation and investment in new 
British music 
- An appropriate duration of copyright for performances and sound recordings is fundamental to the 
ability of the music sector in Britain to continue to take a leading role, culturally and economically, on 
the international stage 
Actually talk about author’s rights….(but can presume same for related rights) 

AZNAVOUR, Charles 

ESDA 
Directors’ Association) 

(European 

Sound 

Music Business Forum 

ASLIB 
Information Management) 

(Association 

for 

LACA  (Libraries  and  archives 
copyright alliance) 

McLean, Wallace 

SCONUL  (Society  of  College, 
National 
University 
and 
Libraries) 

Extension 

NO extension 

EN 

52 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARD / ZDF 

BAK (Bundesarbeitskammer) 

BEUC  (European  Consumers’ 
Organisation) 

Naxos 

PEARLE 
(Performing  Arts 
Employers Associations League 
Europe) 

Publishers Association UK 

S., Christiano 

Schaefer, Franz 

STM (International Association 
of  Scientific,  Technical  and 
Medical Publishers) 

Wirtschaftskammer Austria 

BSAC (British Screen Advisory 
Council) 

Law Society of Scotland 
CRID  (Centre  de  Recherches 
Informatique et Droit) 

EDRI 
Rights) 

(European 

Digital 

FIPR 

(Foundation 

for 

NO extension 

-IP  Content  should  be  available  for  public  –  Art  11  and  Art  17  EU  Charter  of  Fundamental  Rights 
(Freedom of expression and information & Right to Property) 
- Good balance of interests already found in 1993 
- Too soon to re-open debate and extend again 
- Music will disappear in archives 
- Only “top seller” works will be produced for economic reasons 
- US protects especially producer industry. 
- Further extension will benefit producers and not artists. New creative impulse would be hindered, not 
encouraged. 
- most artists that would be affected of an extension are either no longer recording or have deceased 
and will not therefore be motivated to make new recordings just because copyright extension has been 
granted to them 
-  The  effect  of  extending  the  copyright  period  would  diminish  the  availability  of  a  broad  range  of 
music at an affordable price 

- US legal regime of copyright does not know the notion of a related right in the musical sector (the 
95-yrs-term  of  protection  for  musical  works  applies  to  copyright  in  sound  recordings  and  not  to  a 
related right in music productions) 
-  the  extension  of  the  duration  of  copyright  in  the  US  was  based  on  the  will  to  align  the  term  of 
protection to that of the EU (some specific provisions of the US copyright regime – e.g. works made 
for  hire,  sound  recordings  –  required  another  way  of  calculating  the  duration  than  the  death  of  the 
author) 
-  extension  would  diminish  the  choice  of  music  on  the  market  in  Europe  and  undermine  reprint 
houses, depriving them of income they now earn lawfully by republishing out-of-copyright works; and 
it is not possible to motivate dead authors to create new works 
- a “use it or lose it”-clause should be introduced into copyright law: if a work has been unavailable to 

EN 

53 

EN 

 
  
 
 
 
 
 
 
 
 
 
Information Policy Research) 

VOSN  (Foundation  for  Open 
Source, Netherlands) 

EFFI 
Finland) 

(Electronic 

Frontier 

EICTA 
Association) 

(European 

Industry 

Intellect 

Nokia corporation 

TMPDF (Trade Marks, Patents 
& Designs Federation) 

Foundation 
Information Infrastructure 

for 

a  Free 

National Consumer Council 

Wind 
S.p.A. 

Telecomunicazioni 

the public for three yrs the creator should be able to reclaim the copyright from the publisher; if the 
creator does not exercise this right, then, after a further two yrs, the copyright should expire and the 
work should fall into the public domain 

Term of protection is part of the balance between interested parties which in this field includes not just 
the producers of the sound recording and the public but also would have impact on balance between 
owners of copyrights and right owners of related rights 
-  a  change  in  the  term  of  protection  would  undoubtedly  be  argued  to  impact  the  question  of  fair 
compensation  (“levies”)  for  private  copying,  which  would  serve  to  further  exacerbate  current 
problems with levies as applied in some MS 

- lack of economic rationale: the expansion mechanism does not provide a long time  perspective on 
which the market can trust; an ex-post prolongation would not provide any incentive for businesses as 
only  historic  works  are  covered  that  are  already  there  (only  the  RH  of  expiration  candidates  would 
benefit) 
- public domain creates a lot of opportunities for businesses to make profit from recycling old works 
- trust in legislation would be undermined 
- prolongation in the US is often regarded as an example of political failure 
-  it  remains  unclear  how  an  extension  meaningfully  adds  to  the  incentives  to produce new works  to 
justify the loss of public benefit 
- there can be little justification for extending the term merely because the US has 
- suggests a system of (ex ante) compulsory licensing and (ex post) determination of the appropriate 
consideration thereof, according to fair and reasonable criteria by independent third parties 
- favours reduction of copyright term 

EN 

54 

EN 

 
  
2. 

RETROACTIVITY 

For  both  options  concerning  term  extension,  the  issue  of  when  the  term 
extension should apply (either retroactively or not) has to be considered. There 
are  different  degrees  of  retroactivity  that  can  be  chosen  in  providing  a  term 
extension.  

–  If one applied the term extension only to new recordings, created after the entry into 
force  of  the  amended  Term  Directive,  one  could  perhaps  imagine  that  performers 
would  be  stimulated  to  increase  their  creative  activity.  Moreover,  the  real  financial 
benefit for the extra protection would be found far into the future, although could be 
accounted  for  as  net  present  value  in  the  short  term.  Extending  the  term  for  new 
performances  and  recordings  only  is  a  simple  solution,  but  does  not  provide  any 
immediate relief to the problems identified earlier in this impact assessment. It is for 
this reason that it is not of interest to performer representatives and is excluded from 
further detailed analysis.  

–  A  partially  retroactive  term  extension  would  provide  supplementary  revenue  for 
existing  recordings  that  soon  to  fall  into  the  public  domain.  This  is  the  sort  of 
extension  that  is  of  greater  interest  to  related  rights  holders  because  the  financial 
advantages would be felt in the near term, especially for recordings that are from the 
50's and 60's. This is the approach used in Directive 2001/29/EC in its Article 10. This 
means  that  the  extension  would  apply  to  all  sound  recordings  which  were  still 
protected on the date of adoption (or coming into force) of the amended Directive122.  

–  Full retro-active extension covers all recordings which are under protection as if the 
extended term had applied as from the start of protection. In other words, it would be 
as  though  the  recording  was  protected  for  95  years  when  it  was  produced.  This 
solution generates the maximum value for right holders, but requires a mechanism to 
compensate  for  the  revival  of  rights  and  to  exonerate  users  of  music  which  was  no 
longer  protected  under  the  old  term  but  is  protected  again  under  the  new  term.  The 
problem of revival of rights arose after the adoption of the Term Directive in 1993. A 
case was brought to the European Court of Justice (the Butterfly Case – see footnote 
106) to clarify what would be a reasonable time to allow for third parties to continue 
selling reissues of public domain material when the rights had revived and therefore 
returned to the original copyright holder. 

New acts only 

Partially retro-active 

Fully retro-active 

Advantages 

Simple 

Simple 

Disadvantages 

No immediate benefit 
to right holders 

Immediate benefit to 
many right holders 

Maximum value for 
right holders 
Complicated 
Risk of legal uncertainty 

Table 1A: Impacts of retroactive extension 

122 

This will avoid the problem that arose with acquired rights on recordings which had fallen out of 
protection before the amended Term Directive entered into force on 1 July 1995, but which were 
eligible for the extended term and resulted in a legal dispute at the ECJ. (Case C-60/98, Butterfly 
Music v CEMED, judgement of 29 June 1999). 

EN 

55 

   EN 

 
 
                                                 
It appears that a partially retro-active extension, with a specific cut off date, would be the 
simplest  solution  as  regards  the  legal  and  administrative  aspects  and  would  bring  the 
most benefit to right holders from the start. 

3. 

IMPACT OF 45 YEAR TERM EXTENSION: METHODOLOGY 

This section explains the methodology employed to quantify the impact of a 45 year term 
extension  on  performers  and  record  producers.  The  estimation  is  based  on  the  PWC 
study, which is the only study that is based on actual historical data. Other studies would 
lead to different estimates. 

Because the PWC study is based on actual data, it enables us to add a concrete dimension 
to the results. This study applies to the UK and it analyses the revenues from music sales, 
licence  fee  income  and  other  royalty  income.  The  value  of  the  initial  50  year  term  for 
sales  in  the  UK  is  calculated  to  reach  £  8.568  billion.  The  high-end  estimate  of  total 
present value of the 95-year period would amount to £ 8.731 billion, whereas the low-end 
estimate  would  yield  £  8.576  billion.123  A  45  year  extension  of  the  term  of  protection 
would create between £ 8.5 million and £ 163 million in additional revenues.124  

The PWC study is limited to the UK sales revenue. As EU sales are 3.5 times larger than 
the UK sales125, it can be roughly estimated that a 45 year term extension would generate 
between € 44 million and € 843 million 

in additional revenues for the EU.126  

The additional income, however, will not be evenly spread over the additional period of 
the  45  years.  Different  assumptions  of  the  distribution  of  income  have  been  taken  into 
account.  This  impact  assessment  is  based  on  calculations  provided  by  the  PWC  study 
which  states  that  the  financial  benefit  that  will  accrue  to  the  UK  music  industry  in  the 
first ten years amounts to between £ 2.2 and £ 35 million. Again, this benefit could be 
approximated  to  a  financial  benefit  of  between  €  11.4  million  and  €  181  million  in 
Europe in the first ten years.  

Furthermore,  the  estimates  provided  by  the  PWC  apply  to  the  music  industry  (i.e. 
performers and record producers together). In order to determine the impact of a 45 year 
term  extension  on  individual  performers,  it  must  first  be  determined  how  much  of  the 
additional  income  would  accrue  to  performers  as  opposed  to  record  producers.  The 
CIPIL  study  assumes  that  performers  obtain  a  5-15%  share  from  sales  of  sound 
recordings. We take the average value of 10% to estimate the performers' share of sales 
revenue. The sum of € 44 to € 843 million 

is therefore distributed as follows:  

–  Performers obtain a present value of between € 4 million and € 84 million during the 
extended  term,  whereas  record  producers  obtain  a  present  value  of  between  €  39 
million and € 758 million.  

123 

124 

125 
126 

The higher range estimate assumes, in favour of the proponents of term extension, that the expiry 
of copyright entails a 100% market share loss, whereas the lower end estimate assumes no market 
loss.  
The  low-end  estimate  assumes  the  loss  of  market  share  of  0%,  whereas  the  high-end  estimate 
assumes the loss of market share of 100%.  
IFPI, 2007. 
2006 exchange rate EUR/GBP. IFPI, 2007. 

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–  In  the  first  decade,  performers  would  get  between  €  1.1  million  and  €  18  million, 

whereas record producers would get between € 10.2 million and € 163 million.  

To determine what, on average, this implies for an individual performer, the number of 
performers benefiting from the additional revenue must be estimated. The UK House of 
Commons Culture, Media and Sport Committee report provides an estimate. It concludes 
that, over the next ten year, over 7000 performers would lose protection if the term was 
not  extended127.  This  means  that  if  we  extrapolate  the  UK  estimate  to  the  EU, 
approximately  24500  performers  would  lose  protection  in  the  first  decade.  By  dividing 
the  financial  benefits  for  performers  (€  1.1  million  and  €  18  million)  by  24500 
performers, the average additional benefit per performer ranges from € 46 and € 737. 

The  average  additional  benefit  per  performers  would  increase  if  the  effects  of  a  fund 
proposed  in  sub-option  2b  would  be  factored  in.  Under  this  model,  20%  of  the  record 
producers'  benefit  from  term  extension  would  be  redistributed  to  performers.  The  fund 
would therefore yield between € 7.8 million  and € 151.7 million in the whole period and 
between € 2 million and € 32.5 million in the first decade. 

If the fund were set up, the income to performers and record producers would therefore 
have to be redistributed:  

–  In  the  first  decade,  performers  benefit  would  be  increased  to  between  €  3.2  million 
and € 50.6 million; whereas record producer s would obtain between € 8.2 million and 
€ 130.1 million.  

–  Average financial benefit to a performer would yield to between € 130 and € 2065. 

It  results  from  the  above  that  the  establishment  of  the  fund  would  increase  average 
payments per performers 2.8 times.  

An  increase  in  A&R  spending  and  a  better  financial  situation  of  the  recording  industry 
will therefore provide  increased opportunities for performers in both popular and niche 
repertoire. According to the PWC study, A&R amounts to 17% of revenues.  

–  If the estimated financial benefit of the record producers is between € 39 million and € 
758.5 million, this results in the additional A&R value of between € 6.7 million and € 
129 million. If, however, a fund diverting 20% of record producers' additional revenue 
to performers were set up, record companies' additional revenue would be between € 
31.3  million  and  €  607  million,  which  would  re sult  in  the  additional  A&R  value  of 
between € 5.3 million and € 103 million. 

–  In the first decade, the additional A&R value would be between € 1.7 million and € 

27.6  million.  If,  however,  a  fund  diverting  20%  of  record  producers'  additional 
revenue to performers were set up, the additional A&R value would be between € 1.4 
million and € 22.1 million.  

–  Part of this additional investment will benefit directly new EU performers. 

127 

UK House of Commons Committee for Culture, Media and Sport, May 2007. 

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WHOLE PERIOD 

UK (million £)  EU (million €) 

Loss  of  market 
share of 100% 
Loss  of  market 
share of 50% 
Loss  of  market 
share of 0% 
FIRST TEN YEARS 

Record producers 
Performers 
Record producers 
Performers 
Record producers 
Performers 

162.8 

143.1 

8.4 

842.7 

740.8 

43.5 

UK (million £)  EU (million €) 

Loss  of  market 
share of 100% 
Loss  of  market 
share of 50% 
Loss  of  market 
share of 0% 
avg = average 

Record producers 
Performers 
Record producers 
Performers 
Record producers 
Performers 

34.9 

27.3 

2.2 

180.7 

141.3 

11.4 

Benefit 
without fund 
(million €) 
758.5 
84.3 
666.7 
74.1 
39.1 
4.3 
Benefit 
without fund 
(million €) 
162.6 
18.1 
127.2 
14.1 
10.2 
1.1 

/  average 

128.9 
/ 
113.3 
/ 
6.7 
/ 

A&R 
(without fund) 
(million €) 
A&R  
avg 
A&R 
avg 
A&R 
avg 
A&R 
(without fund) 
(million €) 
A&R  
avg 
A&R 
avg 
A&R 
avg 

27.6 
737.4 
21.6 
576.8 
1.7 
46.5 

/  average 

Fund 
(million €) 

151.7 

133.3 

7.8 
Fund 
(million €) 

32.5 

25.4 

2.0 

Benefit  with 
fund 
(million €) 
606.8 
236.0 
533.3 
207.4 
31.3 
12.2 
Benefit  with 
fund 
(million €) 
130.1 
50.6 
101.7 
39.6 
8.2 
3.2 

A&R  /  average 
(with fund) 
(million €) 
103.2 
A&R  
/ 
avg 
90.7 
A&R 
/ 
avg 
5.3 
A&R 
/ 
avg 
A&R  /  average 
(with fund) 
(million €) 
A&R  
avg 
A&R 
avg 
A&R 
avg 

22.1 
2064.7 
17.3 
1615.1 
1.4 
130.2 

Table 2A: Impacts on performers and record producers  

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4. 

ROYALTY  FLOWS  BETWEEN  THE  EU  AND  THE  US  FOR  SECONDARY 
EXPLOITATION OF PHONOGRAMS UNDER INTERNATIONAL AGREEMENTS 

The main international conventions for the protection of phonograms are the 1961 Rome 
Convention for the protection of performers, producers of phonograms and broadcasting 
organisations,  and  the  WIPO  Performances  and  Phonograms  Treaty.  The  EC  is  party 
only to the WPPT but has not yet ratified. The U.S. is also party to the WPPT but has 
ratified. All EU Member States are parties to the Rome Convention. 

4.1. 

Broadcasting and communication to the public of 'US phonograms' 

4.1.1.  Under the Rome Convention 

The  Rome  Convention  provides  that  broadcasting  and  communication  to  the  public  of 
phonograms gives rise to the payment of a single equitable remuneration to the producers 
or  performers  or  both  (Article  12).  Although  the  US  is  not  a  party  to  the  Rome 
Convention,  it  can  still  benefit  from  protection  under  the  Convention,  because  in 
principle  Contracting  Parties  to  the  Convention  apply  the  so-called  'national  treatment' 
principle  to  performers  and  producers.  This  means  that  in  a  Contracting  Party  certain 
producers and performers who are not nationals of that state should be treated in the same 
way as nationals, i.e. granted the same rights. 

The  Rome  Convention  provides  criteria  (so-called  'points  of  attachment')  to  establish 
which record producers and performers are entitled to national treatment. Under Article 5 
of the Convention, producers are protected if they are nationals of a Contracting State to 
the Convention ('nationality criteria'), or if the sound was fixed in the record in another 
Contracting State ('fixation criteria'), or if the phonogram was first published in another 
contracting  state  ('publication  criteria').  This  would  not  cover  US  records.  However, 
under Article 5(2), if a phonogram is published first in a non-contracting state, such as 
the US, and published within 30 days in another contracting state, such as the UK, it will 
be eligible for national treatment ('simultaneous publication'). In that situation, by virtue 
of article 4 of the Convention, the performer whose performance is recorded will also be 
eligible  for  protection  under  the  Convention.  This  means  it  is  possible  for  records 
produced by a US company, recorded in the US and by US artists, published first in the 
US but published in the UK or another State which is party to the Convention within 30 
days, to enjoy protection under the Convention in all the contracting states, i.e. in effect 
in all EU Member States. 

However,  Contracting  Parties  to  the  Rome  Convention  may  limit  the  application  of 
certain criteria by way of notification under Article 5(3). Parties may decide not to apply 
either the 'publication criteria' or the 'fixation criteria' to determine whether a producer 
(and indirectly, a performer) is eligible for national treatment. If a State retains only the 
fixation  criteria,  'simultaneous  publication'  will  no  longer  qualify  a  US  phonogram  for 
protection  under  the  Convention.  This  is  the  case  in  the  following  EU  Member  States: 
Belgium,  Denmark,  Estonia,  Finland,  France,  Italy,  Luxemburg,  Poland,  Slovenia  and 
Spain. As a result, these EU Member States will not apply the Rome Convention and will 
not grant a reproduction right or a right to single equitable remuneration to phonograms 
produced by a US producer, or fist fixed in the US.  

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Moreover,  under  Article  16(1)(a),  States  may  decide  to  not  apply  or  limit  the  effect  of 
Article 12 of the Convention (single equitable remuneration). Possible limitations include 
not  applying  equitable  remuneration  to  phonograms  the  producer  of  which  is  not  a 
national of another Contracting State. This reservation has been notified by the following 
EU Member States: Austria, Belgium, Bulgaria, Estonia, France, Italy, Lithuania, Latvia, 
Netherlands,  Czech  Republic,  Romania,  UK,  Slovakia  and  Spain.  As  a  result  of  those 
exemptions, these Member States will not apply equitable remuneration to phonograms 
produced by a US record producer. 

4.1.2.  Under the WPPT 

The  WPPT  is  currently  in  force  in  the  US  and  in  several  EU  Member  States,  i.e. 
Belgium, Cyprus, the Czech Republic, Hungary, Latvia, Lithuania, Poland and Romania. 
The EC is due to ratify the WPPT.  

The  WPPT  provides  for  a  right  to  equitable  remuneration  for  broadcasting  and 
communication  to  the  public  of  works128.  It  also  applies  the  principle  of  national 
treatment to certain producers and performers. The notifications made under Article 5(3) 
of the Rome Convention may be notified also under the WPPT, thus allowing Parties to 
choose a first publication or first fixation criteria for eligibility for national treatment. It 
is  generally  understood  that  EU  Member  States  will  be  free  to  make  such  notifications 
even  after  ratification  of  the  WPPT  by  the  EC.  However,  these  reservations  lose  their 
significance regarding the US, which is a party to WPPT. Phonograms produced by a US 
producers will in any case be entitled to national treatment under the WPPT. 

However,  the  US  has  notified  reservations  in  relation  to  single  equitable  remuneration 
under Article 15(3). The US reservation reads as follows: "the United States will apply 
the provisions of Article 15(1) of the WIPO Performances and Phonograms Treaty only 
in  respect  of  certain  acts  of  broadcasting  and  communication  to  the  public  by  digital 
means  for  which  a  direct  or  indirect  fee  is  charged  for  reception,  and  for  other 
retransmissions and digital phonorecord deliveries, as provided under the United States 
law". This means that in effect, the US does not apply single equitable remuneration for 
broadcasting and communications to the public.  

Due to the US reservation, other parties to the WPPT are entitled not to apply national 
treatment  to  US  nationals  (Article  4(2)).  Under  WPPT,  EU  Member  States  would  not 
have  to  provide  that  US  companies  receive  single  equitable  remuneration  for  the 
broadcasting and communication to the public of phonograms produced by US producers 
and recorded by US performers. They would have to protect US produced phonograms 
only  in  relation  to  certain  acts  of  broadcasting  and  communication  to  the  public  as 
provided under US law. 

However,  phonograms  produced  by  a  US  producer  would  still  be  entitled  to  national 
treatment  in  other  respects,  i.e.  in  relation  to  the  rights  of  reproduction,  distribution, 
rental and making available.  

128 

Under the WPPT, Performers and producers enjoy rights of reproduction, distribution, rental, and 
making available. 

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4.2. 

Protection of 'EU phonograms' in the US 

Under  US  Law,  sound  recordings  enjoy  copyright  protection129.  Sound  recordings  are 
protected by law provided that the author is a US or 'treaty party', that the work was first 
published in the US or a 'treaty party', or fixed by a national of a 'treaty party'130. In other 
words,  a  record  produced  by  an  EU  record  producer,  first  published  in  the  EU  or  first 
fixed in the EU qualifies for protection in the US. 

Term of protection: The author and of a sound recording is the person who creates it by 
fixing  it  in  a  copy  or  phonorecord  for  the  first  time.  Although  the  author  is  the  initial 
owner  of  a  copyright,  it  seems  sound  recordings  generally  qualify  as  works  made  for 
hire131 (at any rate they are usually registered as such with the US Copyright Office), and 
thus  enjoy  a  term  of  protection  of  95  years  from  creation132.  Under  US  law,  works 
created after January 1st 1978 are protected, as long as the work qualifies under section 
104 of the US Copyright Act. Thus US does not apply a comparison of terms. 

Rights in sound recordings: the copyright in a sound recording entitles the owner to the 
rights  of  reproduction,  distribution,  rental,  lending,  the  right  to  make  derivative  works 
and  the  right  to  perform  the  copyrighted  work  publicly  by  means  of  a  digital  audio 
transmission133. The copyright owner does not have the right to authorise performance of 
the sound recording publically, i.e. to authorise broadcasting and communication to the 
public,  other  than  'digital  audio  transmissions'.  The  right  to  authorise  digital  audio 
transmissions covers essentially webcasting and digital subscription services. In addition, 
where the transmission is not interactive, the consent of the owner of the copyright in the 
sound  recording  is  not  required.  Instead,  use  of  the  sound  recording  is  subject  to  a 
statutory  licence.  Payments  under  the  statutory  licence  are  divided  between  producers 
and performers on a 50-50 basis. 

Rights  of  performers:  Performers  are  not  the  initial  owners  of  the  copyright  (i.e.  they 
don’t undertake to fix the record and they might be subject to work for hire) in a sound 
recording. They enjoy very limited rights (in addition to the share of the revenues from 
the  statutory  licence  for  non  interactive  webcasting).  The  protection  of  performers  is 
essentially  limited  to  a  protection  against  bootlegging  and  trafficking  in  bootlegged 
recordings, see 17 U.S.C. 1101. 

129 

130 
131 
132 
133 

17  U.S.C.  102(7)  refers  to  'sound  recordings',  which  are  defined  in  section  101  as  'works  that 
result  from  the  fixation  of  a  series  of  musical,  spoken,  or  other  sounds,  but  not  including  the 
sounds accompanying a motion picture or other audiovisual work'. 
17 U.S.C. 104. 'Treaty party' refers inter alia to parties to WTO and WPPT.  
17 U.S.C. 201(b). 
17 U.S.C. 302(c). 
17 U.S.C. 114(a) and 106. 

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