Source: EURLEX
Language: en
Format: md

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# 52012SC0205

**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**

  

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.

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 costly[1] 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 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 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 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.

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.

[1]               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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