Presentation MBL Digital Rights

The Evolution of
Digital Rights
Licensing
Challenges and Opportunities
10/4/15
Rick Riccobono New Media Law MBL
Hot Topics In Copyright Law
Conference

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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Conference

Collection Management
A Short History
• What is a CMO
o Monopolies
o Blanket Licenses
• Why Were They Created
• Who Created Them
• Performing Rights
• Mechanical Rights
• CISAC and BIEM
o Reciprocal Agreements
• Baskets of Rights
o Broadcast
o Hospitality
o Digital
o Reproduction/Mechanical
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Conference

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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Conference

From Traditional Society
to Collective Management
CMOs 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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Conference

Built in Controversy
• Authors and composers are the original rights owners
o 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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Conference

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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Conference

The First 80 Years
• Technological Innovation and the advent of radio and TV
• Income growth
• Rate Courts and challenges from the commercial user
o Pressure to keep rates down
o History of Radio and TV Licensing - Cable
• Government Control
o Monopolies – Consent Decrees in the US
o Cultural Deductions-protecting the small
o Favoring Local Content – Special Rates, Pensions
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Conference

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 bureaucracy
o CMO role questioned
o CELAS, PAECOL
o AMRA, GMR
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Conference

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
constructed
o Download to own-mechanical reproduction and performing rights
o On-demand Streaming-performing right and mechanical reproduction rights
o Cloud Locker Service
o Advertising based, supported
o Ring Tone-Ring back tone
o YouTube
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Conference

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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Conference

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

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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Conference

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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Conference

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-Star
o Pedl
o Aresa
o Armonia – Hub, SACEM, SIAE. SGAE, SPA, DEAL, Peer Music/Latino, Arisjus,
Sabam, Sony/Latino
o Deal
o IMPEL
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Conference

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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Conference

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
Ministère 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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Conference

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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Conference

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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Conference

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 rulings
o 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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Conference

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
10/4/15
Conference

Presentation MBL Digital Rights

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