[x-pubpol] Europe Moves to Aid Digital Music Industry

[Joly MacFie]

(Reuters)

http://www.nytimes.com/2012/07/11/business/global/europe-moves-to-aid-digital-music-industry.html

By ERIC PFANNER

PARIS — The European Commission plans to introduce legislation on
Wednesday to bolster the digital music market in Europe by
streamlining the methods of agencies that collect royalties on behalf
of copyright holders.

Michel Barnier, the internal market commissioner, is expected to
propose a bill aimed at resolving problems at the 250 collecting
societies that operate in the European Union, some of which are
holding back growth in digital music. The move follows the disclosure
that some of these groups have lost money on risky investments or, in
some cases, failed to pay royalties owed to rights holders.

“Collecting societies need to modernize their operations to meet the
challenges of a fast-evolving digital economy,” the commission says in
a memo explaining the proposals. “An underlying problem is the
insufficient transparency and control of the way collecting societies
are managed.”

It is not the first time that the commission has taken aim at the
collecting societies, which gather about €6 billion, or $7.5 billion,
annually from radio stations, restaurants, bars and other music users,
and distribute the proceeds to authors, composers and other rights
holders. In 2008, lawmakers enacted legislation aimed at breaking down
national barriers in the digital music business, making it possible
for rights holders to issue pan-European licenses.

Yet cross-border licensing of music and other media content has not
developed as quickly as Mr. Barnier would like, limiting consumer
choice, hurting rights holders and promoting piracy as listeners seek
alternate ways to obtain the music they want, the commission says.
Only one legitimate digital music service, Apple’s iTunes store, is
available in all 27 E.U. member states and digital sales accounted for
only 19 percent of recording industry revenue in the European Union in
2010, compared with 49 percent in the United States, according to the
International Federation of the Phonographic Industry.

The commission acknowledged that there were several reasons for this,
but singled out collecting societies.

“The ability of collecting societies to efficiently deliver their
services is increasingly being questioned, leading to a loss of trust
and confidence in their services,” the commission says in a written
assessment.

Less than half the amount collected in royalties is distributed within
the first year, and as much as 10 percent not until three years after
collection, the commission says. Under the proposal, societies would
have to disburse the money within one year.

In the interim between collection and distribution, rights holders
complain, some societies have been making risky investments with the
money. The commission says an Italian collecting society in 2008 lost
€35 million in a “debt instrument” with the failed investment bank
Lehman Brothers.

Véronique Desbrosses, general director of Gesac, a Brussels-based
group that represents European collecting societies, said the
organization “welcomes the E.U. directive.” But she disputed the
notion that collecting societies were to blame for the problems of the
digital music business.

She said European collecting societies gather more than 60 percent of
the revenue collected worldwide by such groups, undermining the
argument that the European societies are inefficient.

“We believe that we are already active in working to achieve the
highest standards possible in transparency and efficiency,” she said.
“In some cases, these standards are already higher than what the
commission is proposing.”

Kelvin Smits, a spokesman for Younison, a group that represents
artists, said the proposal would improve the workings of the digital
market, but would not do enough to overhaul the offline segment, which
still represents 95 percent of royalty collections in Europe.

Among other things, the bill would let collecting societies keep funds
held on behalf of rights holders who cannot be located — after five
years.

“If that would change, the good life would be over for the collecting
societies,” Mr. Smits said.


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