Download - Presentation MBL Digital Rights

Rick Riccobono New Media Law MBL Hot Topics In Copyright Law Conference

The Evolution of Digital

Rights Licensing

Challenges and Opportunities

10/4/15


Overview• A brief history of digital music rights licensing• Analysis of fragmentation in the European music

publishing industry• Examination of licensing hubs such as that

proposed by PRS, STIM and GEMA• Overview of the legislative landscape in Europe• Update from the US, including the battle between

ASCAP and Pandora

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Collection Management

A Short History• What is a CMO

o Monopolieso Blanket Licenses

• Why Were They Created• Who Created Them• Performing Rights• Mechanical Rights• CISAC and BIEM

o Reciprocal Agreements• Baskets of Rights

o Broadcasto Hospitalityo Digital o Reproduction/Mechanical

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Role of the CMO• Identify potential users • Negotiate a license fee with users(commercial

and legal negotiations) • Collect the license fee from the user • Monitor/verify the usage • Distribute royalties collected to the individual

rights holders • Generate standard contracts

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From Traditional Society to Collective

ManagementCMOs most commonly take care of the following rights where applicable:• The right of public performance (music played or performed

in restaurants, and other public places);• The right of broadcasting (live and recorded performances on

radio and television);• The mechanical reproduction rights in musical works • The performing rights in dramatic works X-US (theater plays)• The right of reprographic reproduction of literary and musical

works (photocopying) X-US• Related rights (the rights of performers and producers to be

compensated for commercially released recordings for broadcasting, Neighboring Rights where applicable.

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Built in Controversy• Authors and composers are the original rights

ownerso CMO’s are de facto writers unions often viewed as bulwarks against

music publishing bargaining power• The authors’ societies are monopolies that cannot

be controlled by corporations as their board is essentially composed of individuals

o Often not sophisticated in newer technologies and innovation – barriers to entry for new models-personal experience

• In the UK and the US music publishers have assignments of rights from the author/composer

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CMO’s in the EU• The collecting societies for musical works in

Europe are de facto monopolies. • All collecting societies in the EU apply funds for

social/cultural contributions. • For author/ composer: to collect and distribute

royalties fairly and in a timely fashion, management focus on protecting authors rights.

• The role performed for the music publisher: fast processing of payment with collection and allocation transparency with minimum management costs.

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The First 80 Years• Technological Innovation and the advent of radio

and TV• Income growth• Rate Courts and challenges from the commercial

usero Pressure to keep rates downo History of Radio and TV Licensing - Cable

• Government Controlo Monopolies – Consent Decrees in the USo Cultural Deductions-protecting the smallo Favoring Local Content – Special Rates, Pensions

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The Last 20 Years• Technological Innovation changes the game

o Digital=technological advancement that erodes CMO relevance in the marketplace

• Threatening the Status Quo• Income peaks• Receipts decrease• Rights owners rebel

o Transparency and reduced bureaucracyo CMO role questioned o CELAS, PAECOL o AMRA, GMR

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European Music Publishing Industry

• Age of disruption and breakdown of cooperation based on market conditions and P&L issues. Mechanical income recedes. Where’s bottom?

• The perceived failure of the local CMO’s to create value for copyright in a digital age

• Pressure to increase receipts as piracy proliferates• New on-line and mobile music distribution models enter

the market-new content (composition rights) licenses must be constructedo Download to own-mechanical reproduction and performing rightso On-demand Streaming-performing right and mechanical reproduction rightso Cloud Locker Serviceo Advertising based, supportedo Ring Tone-Ring back toneo YouTube

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The EU Commission• OPTION 1: do nothing • OPTION 2: improve cross border cooperation between

national collecting societies by eliminating territorial restrictions and discriminatory provisions in the reciprocal representation agreements (in particular customer allocation).

• OPTION 3: Creation of one stop licensing shops on a pan-European basis giving the rights holder the choice to authorize one or more CMO’s to administer digital rights across the EU.

o The recommendation on collective cross-border management of copyright for online music services went for option 3.

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Direct Licensing• Majors pull rights, re-aggregate all but digital rights• The Global Music Repertoire Database (GRD)

o DOAo Stakeholder driven o CMO’s crown jewels

• EU Commission steps in to normalize rate negotiation process

o Cross border licensing (labels have doing it since the 60’S)o Mitigate confusion and prohibit a race to the bottom

• EMI and CELAS• Others major music publishers follow• Growing Pains • What do the Indies do?

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Digital Rights Licensing

• Implications-Cut out the middle man• Question the viability of blanket licenses and

compulsory licensing• Documented usage• Census• Transparency – 10% administration rates-uncover

the hidden costs – marketing, advances in the US, local content partiality-pensions etc.

• Just the beginning as within 10 years most broadcast will be digital

o Why do you need a CMO for digital?

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Fewer Licensing Points of Contact For

the User• Commercial user driven EU decisions/recommendations• CMO’s are in a position to track commercial content usage

of on-line and mobile platforms from anywhere. This would allow them to enter the territories of other collecting societies favoring the offering of multi-territory licenses.

• The societies from “smaller” countries are concerned about becoming mere agents of the societies from the largest EU countries (in effect, Germany, France, UK).

• The demise of the sub-publisher• Pan-regional licensing • Major CMO’s take control

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The Licensing Hubs• Consolidating licensing points of contact for the user

o Dozens of Licenses needed for EEA alone• Pan-Regional licensing• Societies fight with their clients• CELAS is created by the then head of EMI• Major music publishers follow suit

o Paecol-Solar (Sony/ATV when using the tri-society hub for Admin pan EU)o K-Staro Pedlo Aresao Armonia – Hub, SACEM, SIAE. SGAE, SPA, DEAL, Peer Music/Latino, Arisjus,

Sabam, Sony/Latinoo Dealo IMPEL

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PRS-STIM-GEMA Hub• Major CMO’s in Europe = Licensors• Hubs for non-direct licensed catalogue

o An extra layer of bureaucracy on top of an already bureaucratic, opaque licensing collection and allocation platform?

• Zeta and Delta-Front Office, Back Office• ICE Database-Matching ownership information

o Ownership data base o Combining repertoire from 3 of Europe's biggest music exporters

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Reciprocal Agreements And Matching Rights

• CISAC membership o A reciprocal agreement is a contract between two collecting societies

whereby the societies give each other the right to grant licenses for any public performance of copyrighted musical works of their respective members – ECJ Ministere public vs. Tournier case 305/87 ECR 2521 Para 17.

o Without reciprocal representation agreements, it is impossible to empower a single society for the licensing of the world repertoire.

• For a publisher to license a DSP matching performing rights must be included

• Publisher only controls the reproduction/mechanical right• Anglo-American repertoire represents the main body of

usage o PRS and the US PRO’s o PRS and the pan-regional licensing platforms administered by other CMO’s o Board approval process-long term relationships

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EU Commission and Legislation

• The challenge: lowering the cost of access to content without compromising right holders income

• Relatively quite time after a number of recommendations did not resonate after unilateral publisher control

• Early Commission concerns o Authors rights and the value of copyright o Ease of cross border licensing for the user, ease of use for the consumer

• The Industry has been praised for facilitating the licensing process

• In most cases licensor and licensee agree enough to create a license (sometimes interim but a license nonetheless)

• Google and Soundcloud o Service provider/content provider-Safe Harbor

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EU v US• The two PRO system in the US is considered less efficient

and prone to legal uncertainty as large quantities of rights are not available collectively.

• Rights holders consider that competition among the two largest societies in the USA (BMI and ASCAP) to recruit members for their performance income leads to management inefficiency with resources spent on advertising/marketing services instead of managing and monitoring rights. They believe that such a system would work only for high earners with large sums of advances paid to well know authors by the societies to poach them from the competing society. US societies collect far less income percentage wise for their constituents than some of their sister organizations in Europe.

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Update From The US• The nature of music licensing in the US• BMI, ASCAP and SESAC• Licensed by virtue of request • The DoJ and direct licensing-avoiding chaos in the

market• Favoring the user• Pandora decision(s)

o Diametrically opposed DoJ rulingso Labels abuse the system

• 100% licensing-multiple writers• The legacy of past license agreements

o Generally lower rates o Radio TV

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Conclusion• Rights owners and direct licensing• The digital revolution demands transparency• Accounting function • The role of the CMO

o Global licenses o Authors rights

• The question of relevancy/survival• Controversy over alleged special deals with the majors to the

detriment of other rights owners-who pays for the overages? • Any impact on the ability of a CMO to license international

repertoire has important consequences for its ability to survive• Writers who control their own publishing may change the

game-AMRA for instance AND• The value of copyright going forward

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