Source: EURLEX
Language: en
Format: md

**EN**

# **EN EN**

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}

# EN 1 EN

**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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