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Fragmented and complex publishing arrangements are hindering the growth of a European online music market and must be replaced with more open and transparent agreements, music industry groups and the European Commission have agreed.

Record labels EMI and Universal, retailers Amazon and Apple and licensing bodies PRS for Music and SACEM have told the Commission that they will attempt to create new licensing regimes to make an increase in cross border music sales possible.

Europe's Competition Commissioner Neelie Kroes and the music companies participated in a 'round table' meeting on improving the online distribution of music in the European Union. They agreed a statement which identified licensing complexity as a major barrier to progress.

"The participants… recognise that there are legal and other barriers to the online distribution of music which hinder consumers' access to legitimate online music offers and limit business opportunities," they said in their statement.

"Extensive fragmentation of rights and the lack of effective rights clearance mechanisms create challenges to efficient and transparent music licensing," they said. "An open, fair and transparent licensing process that secures an appropriate level of royalties for right holders and authors is in the interest of all players and therefore of cultural diversity in Europe."

The companies agreed to attempt to establish a formal procedure for licensing music which would allow for its sale and use across national borders within the EU.

They pledged to "explore in the near term... the development of efficient licensing platforms including several collective rights managers offering multi-territorial licences for their repertoires. Such platforms would manage and, where possible, license the 'online rights' (performing and mechanical rights) of all right holders willing to entrust them," they agreed.

A retailer must make a number of agreements before selling music. It must ensure it has the agreement of record companies who will give it the sound recordings and license the mechanical and public performance rights they own.

It must also cut a deal with the collecting societies which represent the writers of the music. These societies tend to operate on a national basis, meaning that a retailer may have to contact 27 of them to make a song available across the EU.

The companies said that it was important to make information about licensing practices available to people so that companies or individuals know who owns the rights to material.

They agreed that their selection of rights management agencies should be open and based on sound business principles.

"The participants agree that objective, transparent and non-discriminatory criteria for the selection of entities entrusted to license online rights on a multi-territorial basis should be followed," they said. "These objective criteria should at least include the ability to secure an appropriate level of royalties for right holders; to manage and process efficiently all elements of a licence in accordance with the mandate granted; to accurately identify the rights; to meet certain technical standards; to ensure that royalty distribution is properly handled; to carefully monitor and enforce uses in each territory of the licence. Objectively justified concerns about the reliability, trustworthiness and/or track record of the entity concerned and the market conditions may also be taken into account."

Apple said that it was encouraged by progress towards making online licensing more efficient and said that this could help it to extend its iTunes service into more EU countries.

Amazon said that the agreements made by the companies and the Commission were "an important step" towards the creation of a pan-European online music market.

Copyright © 2009, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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