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 - Summary of the impact assessment on the legal and economic situation of performers and record producers in the European Union {COM(2008) 464 final} {SEC(2008) 2287}
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) 2288 

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 

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

{COM(2008) 464 final} 
{SEC(2008) 2287} 

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

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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) 
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 

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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 
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?  

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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 

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.  
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. 

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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