COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Directive of the European Parliament and of the Council on the collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market
Date: 2012-07-11
Institutions: European Commission
Subjects: Internet, copyright, costing, exchange of information, harmonisation of standards, impact study, music, patents licence, single market

EUROPEAN COMMISSION 

Brussels, 11.7.2012  
SWD(2012) 205 final 

COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Directive of the European Parliament and of the Council  

on the collective management of copyright and related rights and multi-territorial 
licensing of rights in musical works for online uses in the internal market 

{COM(2012) 372 final} 
{SWD(2012) 204 final} 

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COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Directive of the European Parliament and of the Council  

on the collective management of copyright and related rights and multi-territorial 
licensing of rights in musical works for online uses in the internal market 

1. 

INTRODUCTION 

Creative industries contribute significantly to GDP, employment and growth in the EU. The 
distribution  of  copyright  protected  goods  and  services  (e.g.  books,  films,  recorded  music) 
requires the licensing of rights by different rightholders (e.g. authors, performers, producers). 
Collecting  societies  are  often  essential  in  facilitating  the  licensing  of  such  rights,  notably 
when direct licensing by rightholders is not feasible or practical. From the viewpoint of many 
commercial  users,  whether  active  in  traditional  (e.g.  broadcasting,  cable  retransmission)  or 
new forms of exploitation (e.g. download, streaming services), the role of collecting societies 
is  also  essential.  Moreover,  they  play  a  key  role  in  the  protection  and  promotion  of  the 
diversity  of  cultural  expressions  by  enabling  the  smallest  and  less  popular  repertoires  to 
access the market. 

Collective rights management has a Single Market dimension. Even when collecting societies 
grant  licences  limited  to  their  own  territory  their  licences  normally  cover  the  rights  of  both 
domestic rightholders and rightholders from other Member States. For online uses, collecting 
societies are increasingly requested to grant licences that cover several or all Member States. 

The degree to which different rightholders and sectors rely on collective management varies, 
depending largely on the preference of rightholders and on the needs and practices of different 
industries. Authors, in particular of musical works (composers and lyricist), rely the most on 
collective management.  

2. 

PROBLEM DEFINITION 

The  impact  assessment  identifies  two  problems:  problems  as  regards  the  functioning  of 
collecting  societies  in  general  (irrespective  of  the  category  of  rightholders  they  represent  or 
the  category  of  rights  they  manage)  and  problems  specific  to  the  supply  of  multi-territory 
licences for the online exploitation of musical works. These problems are interlinked as the 
licensing  problems  derive,  to  a  large  extent,  from  the  inability  of  rightholders  to  access 
information and exercise real control over certain societies. In this sense, the second problem 
(licensing) cannot be solved without addressing the first one. 

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2.1. 

The functioning of collecting societies in general  

A substantial copyright acquis has been adopted over the years to facilitate the functioning of 
the  Single  Market.  This  acquis  deals  almost  exclusively  with  the  definition  of  rights, 
limitations  and  exceptions  and  related  provisions.  Very  few  provisions  in  the  copyright 
directives  deal  with  the  management  of  rights;  none  establishes  a  framework  for  the 
functioning  of  collecting  societies.  Important  principles  concerning  their  governance  and 
transparency have been developed by the CJEU and by Commission decisions on grounds of 
competition law but these principles are not uniformly and properly applied in the EU. 

The  approach  to  the  regulation  of  collective  rights  management  varies  between  Member 
States  and  over  recent  years  evidence  has  accumulated  pointing  to  insufficient  checks  and 
balances on the functioning of a number of collecting societies. Rightholders, including non-
domestic  rightholders,  are  not  fully  informed  of  the  activities  of  their  societies  and  cannot 
exercise meaningful control over them, especially with regard to the collection, handling and 
distribution  of  royalties.  There  is  also  evidence  of  poor  financial  management  of  some 
societies;  royalties  due  to  rightholders  accumulate  with  little  oversight  and/or  are  poorly 
handled.  Many consulted  authors'  associations, publishers, commercial users and consumers 
argue that there is a need for specific measures focusing on their governance and transparency 
whereas collecting societies consider that self-regulation would suffice. 

For rightholders, underperforming collecting societies mean lost (licensing) opportunities and 
excessive cost deductions from their royalty income. For users, insufficient transparency and 
accountability lead to poorer quality services and, in some cases, to more expensive licensing.  

2.2. 

The  supply  of  multi-territory  licences  for  the  online  exploitation  of  musical 
works  

Online  service  providers  often  need  to  secure  multi-territory  licences  of  the  aggregate  or 
entire  music  repertoire  in  order  to  launch  their  services.  Currently  they  must  combine  a 
number of multi-territory licences (from some collecting societies and music publisher agents) 
with  territorial  licences  (from  some  collecting  societies)  which  is  cumbersome  and  often 
restricts  the  territorial  scope  of  online  services.  Several  stakeholders  consulted  including 
commercial  users,  publishers  and  record  producers  complain  of  this  situation  and  call  for 
improvements in the multi-territory licensing for the online exploitation of musical works. 

Whilst  a  number  of  factors  contribute  to  the  territorial  fragmentation  of  online  music 
provision,  including  the  commercial  decisions  of  service  providers,  copyright  licensing 
practices  play  an  important  part  in  it.  The  licensing  of  authors'  rights  for  the  online  use  of 
musical works, notably obtaining coverage for the entire repertoire ('aggregation'), is proving 
difficult, time consuming and costly1 for commercial users (in particular small ones and new 
entrants).  It  is  not  adapted  to  a  very  fast  moving  market.  This  is  important  for  commercial 
users who expect repertoire aggregation and simplified rights clearance and licensing. Many 
societies are not equipped to manage multi-territory online licensing which is demanding and 
costly  (managing  repertoire  across  multiple  jurisdictions,  interacting  with  large  and  multi-
territorial service providers and processing the usage data generated in different jurisdictions). 
Entering  the  market  without  the  required  capacity  and  technical  resources  leads  to  further 
problems  (inaccurate  or  'double'  invoicing,  significant  delays  in  invoicing  to  users  and  in 

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These difficulties are specific to this area partly because other sectors and rightholders rely far less on 
collective management for the licensing of online rights and partly because of the manner in which the 
management of rights in musical works has evolved in Europe. 

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payments  to  rightholders).  Additionally,  multi-territory  licensing  is  subject  to  legal 
uncertainty as regards the application of the acquis and the possibility for collecting societies 
to  provide  licences  covering  several  EU  countries  and/or  to  licensees  established  in  other 
Member States. 

As  a  result  some  services  may  opt  to  launch  only  in  one  or  a  few  Member  States,  thus 
depriving themselves of the larger consumer base that the Digital Single Market has to offer. 
Alternatively,  some  services  may  choose  to  launch  on  the  basis  of  a  major  repertoire  only, 
which can be secured with a smaller number of licences. This would be detrimental to niche 
and local repertoire and cultural diversity. For consumers, this means that access to the wide 
range and types of music services on offer is unevenly spread across the EU. For rightholders, 
the  increased  income  that  could  be  generated  by  consumers  accessing  their  works  via  new 
services and throughout the Single Market is lost. 

3. 

SUBSIDIARITY 

The rationale for European action arises from the trans-national nature of the problem. For all 
collecting societies, a significant share of collections derives from non-domestic repertoire as 
they  represent  rights  of  foreign  rightholders.  Protection  of  the  interests  of  EU  rightholders 
requires that all royalty flows, including cross-border flows, be transparent and accounted for. 
It is also in the interests of commercial users across the EU that societies function efficiently. 
This  can  only  be  achieved  if  basic  common  rules  address  the  collection  and  distribution  of 
royalties in a manner which is consistent across the EU.  

Facilitating  the  granting  of  multi-territory  licences  for  the  use  of  musical  works  in  online 
services and the aggregation of repertoire is a cross-border issue by nature and it can clearly 
be  better  solved  at  EU  level.  A  European  framework  should  ensure  that  users,  rightholders 
and consumers can benefit from the opportunities of the Digital Single Market. 

4. 

OBJECTIVES 

The objective of the initiative is to ensure the contribution of collective management of rights 
to  the  development  of  the  Single  Market,  through  a  coherent  and  efficient  governance  and 
transparency  framework  for  the  collective  management  of  rights  and  through  an  improved 
supply of multi-territory licences in musical works. This should help to improve consumers' 
access to a wider variety of cultural goods and services. Commercial users will benefit from 
better  functioning  and  more  transparent  collecting  societies  and,  in  the  online  environment, 
from  a  framework  facilitating  access  to  licences  for  the  provision  of  music  services 
throughout  the  EU.  Rightholders  will  maximise  their  earnings  by  widely  promoting  their 
works. Cultural diversity will be fostered by the availability of a large and diverse repertoire. 
In consequence, more content and more services will become accessible to European citizens, 
including across borders.  

5. 

POLICY OPTIONS ON TRANSPARENCY AND CONTROL IN COLLECTING SOCIETIES 

5.1. 

Options 

Four options were analysed, including the 'status quo' option. Option A2 (better enforcement) 
would  not  involve  any  legislative  intervention  and  would  rely  solely  on  the  enforcement  of 

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existing national and EU rules. Option A3 (codification of existing principles) would involve 
the codification of existing EU rules and non-binding recommendations issued with regard to 
collective  rights  management.  Option  A4  (governance  &  transparency  framework)  would 
complement  Option  A3  with  principle-based  rules  which  would  'fill  in  the  gaps'  and  be 
specifically adapted to the nature of collective rights management (transparency of financial 
operations  and  the  participation  of  rightholders  in  the  decision-making  process).  Sub-option 
A4a would combine the regulatory intervention with industry self-regulation. Sub-option A4b 
would  involve  more  extensive  legislation  creating  an  exhaustive  legal  framework  for  all 
collecting societies in Europe. 

5.2. 

Impacts 

Better  enforcement  would  improve  the  regulatory  oversight  of  collecting  societies  but 
governance  inefficiencies  would  be  addressed  only  to  a  limited  extent  and  in  consequence 
rightholders' control over collecting societies would not be significantly improved. Option A3 
would  be  more  effective  as  it  would  introduce  a  minimum  governance  and  transparency 
framework but it would not improve the quality of key issues such as financial management. 
Option  A4  would  provide  rightholders  with  access  to  relevant,  detailed  and  accurate 
information benchmarks on the performance of societies, including financial information, and 
would  ensure  effective  rightholder  participation  in  the  decision-making  process.  Sub-option 
4a and Sub-option A4b could deliver similar results but past experience raises doubts about 
the  effectiveness  of  Sub-option  A4a,  while  Sub-option  A4b  would  leave  no  flexibility  for 
Member States in the regulation of collecting societies. 

5.3. 

Costs 

Option A2 would not create compliance cost for collecting societies as it would not entail any 
legislative intervention. The burden would be on the Commission and on national authorities 
responsible  for  enforcement.  Option  A3  would  require  the  setting  up  of  dispute  resolution 
mechanisms for rightholders and users (the actual costs would vary according to the nature of 
the chosen mechanism). The cost of the preferred Option A4 would be relatively higher, as 
this option combines Option A3 and additional elements. Most additional costs of Option A4 
would be related to the application of new rules for the handling of funds (no data is available 
for  the  estimation  of  these  costs)  and  financial  reporting  and  audit  (the  annual  cost  is 
estimated at approximately €4.1 million on average  for all EU collecting societies). However, 
the cost of Option A4 must be seen in relation to the efficiency gains to be achieved by this 
option.  Costs  of  Sub-option  A4a  would  depend  on  the  extent  of  rules  agreed  in  the 
stakeholder dialogue. Sub-option A4b would result in the highest compliance costs. 

6. 

OPTIONS ON THE SUPPLY OF MULTI-TERRITORY LICENSES FOR THE ON-LINE USE OF 
MUSICAL WORKS 

6.1. 

Options 

Five options were analysed, including the 'status quo' option. Option B2 (European Licensing 
Passport) would encourage the aggregation of repertoire for online uses of musical works at 
EU  level  as  well  as  the  licensing  of  rights  through  effective  and  responsive  multi-territory 
licensing  infrastructures.  It  would  do  so  by  requiring  that  collecting  societies  wishing  to 
license  the  online  rights  of  musical  works  on  a  multi-territorial  basis  comply  with  a  pre-
defined  set  of  conditions  designed  to  ensure  sufficient  data  handling  and  invoicing 
capabilities,  compliance  with  certain  transparency  standards  in  respect  of  rightholders  and 

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users  and  scope  to  use  a  dispute  resolution  mechanism.  A  right  to  tag  on  repertoire  to  a 
'passport entity' would ensure that all rightholders could have their rights licensed on a multi-
territory basis. 

Option  B3  (parallel  direct  licensing)  would  give  rightholders  the  ability  to  conclude  direct 
licences  with  users,  in  parallel  with  their  membership  of  a  collecting  society.  In  order  to 
achieve this, societies' mandates would have to become non-exclusive: a rightholder would no 
longer have to withdraw his rights from a society to grant licences himself.  

Option B4 (extended collective licensing and country of origin principle) would establish the 
presumption that each authors' collecting society had the authority to grant 'blanket' licences 
for online uses covering the entire repertoire, subject to the possibility for rightholders (and 
other societies) to opt out of such licences. This would be combined with the establishment of 
a  country  of  origin  principle  so  that  the  licence/s  would  be  obtained  under  the  law  of  one 
Member State only.  

Option  B5  (Centralised  Portal)  would  allow  collecting  societies  to  pool  their  repertoire  in  a 
central  portal  for  multi-territorial  licensing.  This  option  would  allow  the  creation  of  a  pan-
European  organisation  with  de  facto  monopoly  power  and  would  raise  prima  facie 
competition concerns. Impacts of this option were accordingly not analysed. 

6.2. 

Impacts 

Option  B2  would  lead  to  the  aggregation  of  repertoires  in  licensing  entities  and  allow  all 
societies to license their repertoire on a multi-territory basis through such entities. Option B3 
would  allow  rightholders  to  grant  flexible  and  responsive  parallel  direct  licences  to  online 
services, and to benefit from improved management services. But it would also risk creating a 
two-tier  licensing  system,  with  smaller  local  or  niche  repertoire  in  the  lower  tier,  having  a 
negative  impact  on  cultural  diversity.  Option  B4  would  put  all  local  societies  in  a  position 
prima  facie  to  administer  rights  to  the  entire  repertoire  on  a  multi-territory  basis,  without 
ensuring  that  such  societies  were  able  to  provide  adequate  licences  to  users  or  that 
rightholders'  rights  were  properly  managed.  It  is  also  likely  to  result  in  those  societies  and 
rightholders who already grant multi-territory licences opting-out of local societies (creating 
further disaggregation). 

6.3. 

Costs 

Option B2 would entail costs for 'passport entities' but these would improve the effectiveness 
of the rights management services provided. Only those entities best placed to meet such costs 
would be expected to incur them, while other societies could use the services of such entities. 
Option B3 would be the least costly option, requiring only that collecting societies' mandates 
be made non-exclusive. Option B4 would require Member States to increase the supervision 
of  societies  granting  extended  licences,  and  would  entail  costs  for  societies  (notifying 
Member  States  and  changing  their  statutes  to  safeguard  the  rights  of  'non-represented' 
rightholders) and for rightholders and societies which would need to opt out to carry out their 
own multi-territory licensing activities.  

7. 

POLICY CHOICE 

A  governance  and  transparency  framework  (Option  A4)  combined  with  the  European 
Licensing Passport (Option B2) is the most suitable way to achieve the objectives. 

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8. 

CHOICE OF INSTRUMENT 

A Directive best ensures coherent and effective governance and transparency standards across 
the  EU,  while  allowing  individual  Member  States  to  adapt  their  existing  legal  regime.  A 
Directive also allows for different degrees of harmonisation depending on the specific aspects 
touched upon, which is particularly important given the different, although related areas that 
will be regulated.  

9. 

MONITORING AND EVALUATION 

Immediately  after  the  adoption  of  the  proposal,  the  Commission  will  organise  transposition 
workshops with Member States representatives to assist them in the transposition process and 
to facilitate the mutual exchange of information. 

In  the  mid-term  to  long-term,  the  Commission  will  focus  on  monitoring,  on  the  basis  of  a 
well-defined  set  of  indicators,  direct  effects  such  as  improvements  to  the  transparency  and 
governance of collecting societies and the ease of obtaining multi-territory licences.  

A first comprehensive evaluation could take place 5 years after the transposition date. 

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