EU probes music licensing

'Anti-competitive' royalty system

By ElectricNews.net, 4th May 2004

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Sixteen national organisations that collect royalties on behalf of music authors may be in breach of European competition law. EU regulators are examining the so-called Santiago Agreement that allows societies to grant "one-stop" copyright licences to on-line commercial users for the downloading and streaming of music.

However, since the Santiago Agreement insists that companies wishing to purchase music rights do so from a collecting society in their own country, the system is anti-competitive, the regulators say. A French company looking to sell music online for example should be allowed to purchase rights from any licensing body in the EU rather than from only the French body that sells rights.

Music royalty collecting societies should be forced to compete for the benefit of companies that offer music on the Internet and to consumers that listen to it, according to the European Commission. New digital music formats and the loss of territoriality brought about by the Internet are difficult to reconcile with existing national copyright licensing schemes, according to the EU body. The current royalty structure results in monopolistic music licensing environment, said the commission.

The Santiago Agreement, aimed at assuring the fair distribution of license fees to authors, composers and music publishers, covers webcasting, streaming, online music on demand, as well as music videos transmitted online. The commission believes that the territorial exclusivity in the Santiago Agreement is not justified by any technical reasons and is irreconcilable with the worldwide reach of the Internet.

Although Brussels acknowledges the need for adequate copyright protection and supports the "one-stop shop" principle for online licensing contained in the Santiago Agreement, the commission also believes that online activities must be accompanied by an "increasing freedom of choice" by consumers and commercial users around Europe.

The societies, such as PRS in the UK, SACEM in France, GEMA in Germany and BUMA in the Netherlands, represent music authors and not recording companies, which have their own collecting societies. The Santiago Agreement was adopted at the 2000 International Confederation of Authors and Composers in Santiago de Chile.

California-headquartered Apple, which is currently in legal dispute with a French collecting society over iPod royalties, recently blamed a delay in launching a European download service on the collecting societies. At a recent informal summit of EU ministers of communications in Dundalk, Yahoo Europe managing director, country operations Martina King also referred to the lack of co-ordination in Europe on intellectual property rights policy as problem when it comes to Internet music sales.

The 16 collecting societies, which have until mid-July to reply to the European Commission's objections, may now ask for a hearing to submit their arguments to the representatives of national competition authorities.