representing the recording industry

worldwide

Market and regulatory outlook in the music industry

Lauri Rechardt Director Licensing & Litigation

IFPI

What’s digital?

On-line and mobile

Permanent downloads, “rentals”, on-demand streaming, personalised webcasts, master tones, RBTs,

New products: SMS tones, RBTs, etc

No one “killer application”

Demands of digital

• Creating services that are both secure and meet consumer demands requires flexibility in licensing

• Licensing for on-line and mobile needs to be “business driven” not constrained by old structures

Market outlook

2005

• Digital revenue US$ 1.1 billion in 2005, 6 % of industry revenue

• Mobile / on- line; 40 / 60

0

500

1000

1500

2000

2500

2004 2005 2006

Digital sales

Market outlook

• iTunes: over 1 billion tracks sold

• WMG: Digital off-set decline in physical sales, 7 % of company revenue in 2005

• Digital 25 % of revenue in 2010 -- from utopia to realistic projection

Market outlook

Regional break-down in 2005

Total Online Mobile

US US$ 636 68 % 32 %

Japan US$ 278 9 % 91 %

UK US$ 38 62 % 38 %

Germany US$ 31 66 % 34 %

France US$ 28 47 % 53 %

Factors inhibiting growth in EU

• Piracy

• Lack of “secure interoperability” cross services and players

• Absence of Pan-European blanket licenses for authors rights

Regulatory outlook

Interoperability

• Virgin Mega v iTunes

• “French debate” – interoperability through regulation

• Regulatory intervention v market driven solutions

Regulatory outlook

Collective licensing

• The issue: how to organise multi-repertoire, multi-territory licensing in the EU

• Pan-European licenses currently available only from producers’ societies

Regulatory outlook

• Competition law: from “Lucazeau / Tournier” to “Simulcasting” to “Santiago” to “RTL”

• Sets out a framework for effective EU-wide collective licensing for new on-line and mobile uses

– Distinction between licensing of “traditional” uses and “new” Distinction between licensing of “traditional” uses and “new” usesuses

– Based on ability to “monitoring at a distance” Based on ability to “monitoring at a distance” – Introduces competition between the societies, Introduces competition between the societies, – Removes territorial restrictions to the scope of the licenses Removes territorial restrictions to the scope of the licenses – Removes “customer allocation” clauses Removes “customer allocation” clauses – Right to proper remuneration for rights safeguarded! Right to proper remuneration for rights safeguarded!

Regulatory outlook

• Normative activities: Commission Recommendation on collective cross-border management of copyright and related rights (2005/ 737/ EC)

– Endorses the existing rules on “non-discrimination” Endorses the existing rules on “non-discrimination”

and right holder freedom to split the administration and right holder freedom to split the administration of their rightsof their rights

– Recommends the setting up of dispute settlement Recommends the setting up of dispute settlement bodies bodies

– Outcome – EMI publishing opts out from collective Outcome – EMI publishing opts out from collective licensing? licensing?

– Follow-up? Follow-up?

Conclusions

• Positive outlook

• Europe is lagging behind

• Key issues: inter-operabiltiy and collective authors’ rights licensing

• Markets best placed to solve inter-operability

• Competition policy and dispute resolution mechanisms key to solve the authors’ rights licensing

representing the recording industry

worldwide