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Key Success Factors


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Key Success Factors

  1. 1. Key Success Factors for Composers Copyright Collective Management Regime in Asian Countries By Supatchara Distabanjong EC-ASEAN Seminar on Contract Law for Creators 26-27 May 2004Abstract. Implementing copyright regime in developing countries is quite challenging. Composersare generally in a low bargaining power situation. Furthermore, differences in cultural backgroundbetween western and eastern people may cause some difficulties. Although composers copyrightcollecting organizations are quite successful for representing composers for demanding their entitledroyalties in most developed countries, the composers in some Asian countries are still not able toappreciate the full benefits of such organizations. By examining the development of those in thedeveloped countries, the paper proposes key success factors of composers copyright collectiveadministration regime for Asian countries. The factors are grouped into three levels; individual,industrial, and national levels. Factors at individual level include the unity of composers and theproper awareness, which may reflect the issues of social and cultural background. Factors atindustrial level involve structure and practices of music industry. These are the proper function ofmusic publishers and composers copyright collective management organization in the country.Finally commitment of government policy and level of intervention, proper legal framework, andenforcement are factors at national level.Key words: intellectual property, copyright, music industry, authors rights, performing rights
  2. 2. 1. Introduction Copyrights have been increasingly important in cultural development as well as the globaleconomy due to the fast progress of globalization and information technology. At international level,several pressures, in forms of international treaties and agreements, from powerful developedcountries have forced both under-develop and developing countries to recognize and acceptcopyrights, one category of the intellectual property rights, as rules of the international trade. As members of World Trade Organization (WTO), developing countries in Asia have toreform their copyright laws conforming to the requirement of Trade-Related Aspects of IntellectualProperty Rights (TRIPS) agreement. However there are still many problems and difficulties inimplementation, especially in the music business, for some countries. Although piracy seems toobtain more attention at international level, communication to the public right should not beoverlooked. If the copyright regime is properly implemented, this right can directly benefit the localcomposers and contribute to the prosperous of the cultural industry in that country. It is extremely important for any developing country, especially those that have its owncultural industry, to ensure the balance of interests among local authors & composers, localentrepreneurs involved in dissemination of copyrighted products, and the copyright product users.Unless the local structure provides fair and equity incentives for the local authors/ composers withoutany abuse or distortion of the rights by the business entities, the country is not likely in the position toobtain the full benefits of collaboration with other countries at the international trade forum. Implementing copyright regime in developing countries is quite challenging. Composers aregenerally in a low bargaining power situation. Furthermore, differences in cultural backgroundbetween western and eastern people may cause some difficulties. Although composers copyrightcollective management organizations are quite successful for representing composers for demandingtheir entitled royalties in most developed countries, the composers in some Asian countries are stillnot able to appreciate the full benefits of such organizations. This paper examines authors’ rights in the music industry, emphasizing on the collectivemanagement organization. Firstly, the principle of copyrights and the development of composersrights in music industry are reviewed. Secondly, the concept and development of collectivemanagement organization in developed countries are presented. Then the paper further examines the 2
  3. 3. situation of the development and implementation of composers collective management organizationsin Asia Pacific. Finally several key success factors for the implementation of composers copyrightcollective management regime in Asian countries are proposed.2. Copyrights and Music Industry2.1 Principle of Copyrights Copyrights, one kind of the intellectual property, protects certain type of creative works thatprovide cultural, social and economic benefits to the society. Copyright works originally include suchworks as literary, musical, dramatic, artistic works, and, later on, computer programs. Because of itsintangible nature as well as cultural involvement, some forms of legal system and protectionmechanism are essential. Copyright law provides the authors/composers and/or the owners a bundleof exclusive rights to prevent unauthorized reproduction, public performances, broadcasting,communicating to the public, and adaptation of the works. Further most countries provide ‘neighboring rights’ or ‘related rights’ protecting the rightsof those who disseminate the authors/composers’ works, such as sound-recording producers,broadcaster, and performers, to prevent unauthorized duplication and performance of their efforts.Copyright protection is extremely essential to prevent the ease of free ride on those creative effortsand the price of copyright products. The protection has limited time period, typically the lifetime ofthe authors/composers plus 50 to 70 years. After expiration, the works become in public domain forfree use (Drahos, 1996; Bainbridge, 1999; and Zimmerman, 1999). The fundamental objective of copyrights is to provide incentives for talentedauthors/composers to create new works of music. Furthermore, marketing the copyrighted productsrequires costly investment. Being granted these exclusive rights, the authors/composers can beassociated with commercial exploitation and economic success resulting from the use of their works(Maskus, 2000 and Watt, 2000). At the same time, these works have social and cultural value to thesociety as well. Thus, theoretically speaking, the copyright system has to ensure the balance betweencreator’s incentives and society’s interest to exploit the creative works. In terms of economic point of view, copyright system can be analyzed as three perspectives:public goods; cumulative creation; and transaction cost. The first perspective views copyrightable 3
  4. 4. works as public goods. The system must ensure that the works of authors are protected, the authorsobtain proper incentive for their creations, and the society as a whole can gain access to the workbroadly. The cumulative creation perspective views that copyrighted works usually build on theearlier creations. Therefore the system should balance the incentive of early creations against theessential to provide incentives to later creations. The last perspective considers the nature of hightransaction cost of the copyright dependent industries. As a result, the system should facilitatetransactions among numerous copyright owners and among authors, publishers and recordingcompanies as they are working together to bring the copyrighted works to the market by clearlydefining the rights and the ways to exercise them (Anderson et. al., 2000 and Meurer, 2001). The strengthening of copyright system is expected to have positive impacts in developingcountries, especially the countries that have their own entertainment industries such as music, soundrecording and film. The protection of those industries can promote national culture, both within andoutside the country, as well as provide an opportunity for export. A national framework - whichincludes a specialized institutional arrangement that cooperates among government sectors,authors/composers, music business entities, and copyright collective management organizations –should be established. Besides, ensuring the protection of copyright products on both domestic and internationalmarkets, this framework should help facilitate the creation and dissemination of these cultural worksthrough business enterprise and define a reliable income flows through royalties and other relatedfrom copyright product users to creators. The collective management organizations, one of theessential institutional mechanisms, also ensure that local authors/composers, copyright owners, andperformers will obtain the royalties whenever their works are exploited.2.2 Development of Copyright in International Music Industry Music copyright has its root in Europe during the eighteenth century. From the 1880s to the1930s, the development of copyright was driven by the interest of songwriters and composers. Theinternational recognition of authors’ rights was reflected in the Berne Convention for Protection ofLiterary and Artistic Works in 1886 (WIPO, 1996). During the 1900s, technological revolution hascreated an economic environment in the music industry. Sound recording, radio and television 4
  5. 5. broadcastings had become new powerful commercial means to communicate musical works to thepublic. Since the Berne Convention emphasizes mainly on authorship without the interests of othercontributors who are involved in the creative process, the 1961 Rome Convention for Protection ofPerformers, Producer of Phonograms and Broadcasting Organizations was established. After that, theissue of piracy has been raised quickly in the music industry due to the advancement of technology. The rise of piracy coincided with a globalization of music and record industry. Both theUnited States and the European Commission had exerted pressure on Asian countries to reform theircopyright system (Laing, 1993). The attempt to incorporate the trade-related aspects of copyrightprotection was made in the Uruguay Round of the GATT (General Agreement on Tariff and Trade)treaty, later on became TRIPS (Trade Related Aspects of Intellectual Property Rights) agreementunder the World Trade Organization (WTO). As members of WTO, many countries in Asia had toreform their copyright regimes to conform to the minimum requirement of TRIPS agreement.Although piracy seems to obtain more attention at the international level, composer’s rights shouldnot be overlooked because they can directly benefit the local music industry when the system isproperly implemented.2.3 Composer’s Rights in Music Industry A musical work is normally defined as a musical composition, which is a rhythm with orwithout lyrics, created by composers (WIPO, 1996). According to Banbridge (1999), authorship andownership are two distinct concepts. The authors/composers have moral rights, the rights to berespected and recognized as the authors/composers of musical works. The owner possesses economicrights such as reproduction, public performance (or communication to the public), broadcasting, andadaptation. This implies that the owner of a musical work may not always be the composer. Forexample if the composer composes a song under the contract of employment, his employer will be thefirst owner of the copyright work. Moral rights allow authors/composers to control the integrity of their works. This certainlyreflects a deep cultural belief in the value of authors/composers to society. Some European countries,such as France, take the moral rights of authors/composers so seriously that the rights are notwaivable by contract. For the continental European laws, it is desirable to provide authors/composers 5
  6. 6. with rights in their works as rewards for their contributions to the enrichment of culture. In fact thecontinental European do use the term "droit d auteur" (the law of authors rights) instead of copyrightlaw. This approach is, to a certain extent, quite different from the Angro-American copyrightapproach whose emphasis is placed more on trade and economic rights (Leelataweewud, 1996 andSamuelson, 1999). In terms of economic rights, the owner of a musical work may exercise the rights of his workby himself, by an agent, or by the author’s administration organization using several types of contractsuch as license and assignment (Schepens, 2000). In the case of license, the owner still retains hisownership of the work. By an exclusive license, the owner (the licensor) grants the sole license to thelicensee to exercise the right. By a non-exclusive license, the licensor grants the same right to anumber of different persons. Contrary to license by an assignment, the copyright owner (the assignor)transfers his ownership of the right to the assignee. Assignment Performing Public Right performance Society right Right to publishComposer & sheet music Music Publications1st owner Exclusive Publishing Assignment ofof copyright license exclusive license Recording right Recording Recording Exclusive company no.1 company no. 2 license Sub-license for other countriesFigure 1 : Exploitation of musical work Source: Bainbridge, 1993, p. 25 6
  7. 7. A simple example of the musical work exploitation is shown in figure 1. Legally speaking,the composer who is also the first owner of the copyrights can exploit his work by dealing with eachright separately. For example he may assign the public performance right to the performing rightorganization. In terms of musical work’s reproduction rights, the composer can grant an exclusivelicense to a music publishing company who will transfer that license to a publication company topublish the sheet music. The recording right (or mechanical right), one other kind of reproductionrights, is granted to a recording company by means of an exclusive worldwide license, then thatrecording company will grant a sub-license to another recording company in another country. As aresult, the composer receives payment for the assignment or license. The payment can be in form of alump sum, a periodic payment or royalties (Bainbridge, 1993). However the actual practicing in thedeveloped music industry is more complicated. As summarized in figure 2, normally there is a business entity called a music publishingcompany who acts as a representative of composers aiming at exploiting music compositions forprofit. The music publisher will responsible for overall business administration of the work, includingmarketing promotion, collecting fees and handling the money (Lathrop and Pettigrew, 1999 p. 215).However, the relationships between music publishers and composers is both complementary andadversary. As a composer’s agent, the publisher is then responsible for marketing of the musicalwork. The publisher attempts to have the works recorded, used in advertisements or motion pictures,and performed in concert. In this scenario, both composers and publishers share the same interestsand benefits. Within these complementary relationships, there may be an element of conflict. First, conflictof interest is due to the fact that the publisher is an entrepreneur, who has more experience of themarket. The lower the royalty paid to the composer for exploitation of his works, the greater theincome for the publisher. Or sometimes the composer tends to over estimate his chance of success.And then, he may think that his publisher does not fully promote his works. Second, in recent yearsthe entertainment conglomerate has formed multinational corporations that embody music publishing,sound recording production, and audiovisual works production. In such situation there is no incentivefor music publisher to seek higher royalties for the use in sound recording or audiovisual because thecompanies are commonly owned (Sinacore-Guinn, 1993 and Towse, 1999). 7
  8. 8. COMPOSER MUSIC USERS Creates joins and assigns to (public performance;broadcast;cable)MUSICAL WORK pay royaltiesCopyright Law gives a licensesBundle of exclusive rights royalties COLLECTIVE REPRODUCTION RIGHTS ADMINISTRATION PUBLIC PERFORMANCE RIGHTS ORGANIZATION BROADCAST RIGHTS CABLE DIFFUSION RIGHTS royalties PUBLICATION RIGHTS CONSUMERS ADAPTATION RIGHTS Contracts with sells to joints MUSIC PUBLISHER Contracts reproduction rights to RECORDING CDs/ Contracts with COMPANY makes CassettesFILM ADVERTISING Arrangers ProducersCOMPANY COMPANY Musicians SingersFigure 2 : Composer’s rights and Collective Management of Rights in Musical Works Source : Ang, 1998 Exploiting musical work’s reproduction rights can be divided into several types of licensingfees. The income can be in forms of mechanical licensing fees, synchronization licensing fees, andcommercial advertising licensing fees. In the USA the fee of mechanical license, the license for audiorecording, is set at 7.1 cents per composition or 1.35 cents a minute of playing time (whichever isgreater) for every tape, CD, or record that is manufactured and distributed. Synchronization licensingfee is paid when recorded music is combined with visual images. The fee varies depending on 8
  9. 9. negotiation. For example, synchronization fee for a movie can be between $10,000 to $50,000(Lathrop and Pettigrew, 1999, p. 217-220). Exercising the communication to the public right or the public performance right is far moredifferent. Musical work’s public performance right (or sometimes called a performing right) meansthat whenever a musical work is playing- on radio, television, in pubs, or live concerts- the owner ofthe work can demand for payment. It is extremely difficult and ineffective for an individual composerto monitor and demand for payment from hundreds of premises (such as pubs, lounges, karaokes,restaurants, hotels, radio and television stations) that may perform his works. Utilizing a collectiveadministration is the answer to the problem of multiple users and multiple rights’ owners (WIPO,1990; Ang, 1998; Schepens, 2000; Suthersanen, 2002; and Ercolani, 2002).3. Collective Administration of Copyrights and Neighboring Rights WIPO (1990, p. 6) provided the definition of a collective administration as a system ofcopyright administration that consists of three parties: the collective administration organization, thecopyright owners, and the copyright work users. WIPO emphasizes on the functions of the collectiveadministration organization as a mediator on behalf of copyright owners regarding contracts for theuse of their works (by users). Those functions include administering the rights, monitoring the use,negotiating, licensing under appropriate fees and conditions, and distributing the fees among theowners of rights. Sinacore-Guinn (1993, p.10) further defined the collective administrationorganization by considering the elements of “legally cognizable entity” and “degree ofcollectivization” which imply the level of government intervention. The degree of collectivizationmeans the level of control retained by individual right owner as opposed to the level of controlexercised by the collective organization. Based on the level of collectivization, four general schemesof collective administration organization are identified. They are agency-collective organization,collective licensing organization, collection & distribution organization, and social collective. Within the collective framework, the agency-collective organization is one in which the rightowner retains the highest level of control over his works. In the collective licensing scheme, theowner surrenders the control of the licensing activity of particular rights in his works to theorganization. If the organization administered the rights of remuneration instead of the rights to 9
  10. 10. control, the collection and distribution organization is applied. This can be done by statute. In socialcollective frameworks, some form of statutory license is utilized to turn the licensing function to thestate (ibid., p.188-196). It is clearly seen that the lower level of control retained by individual rightsowner, the higher level of governmental intervention. Suthersanen (2002) further elaborated the governmental intervention by focusing on disputeresolution mechanisms. Four models are developed based on the establishment of an independentbody which can counsel on the dispute arising from the relationship between rights owners, users, andcollective administration organizations. From European Union experience those models are DeMinimis Supervision with Specialist Bodies, Global Supervision with Arbitration Bodies, GlobalSupervision with Limited Arbitration, and Global Supervision with Civil Courts. The very little governmental supervision is found in the de minimis regulatory model. Thereis a special tribunal that exercises the control of collective organization’s licensing schemes. Theefficiency of the system mainly lies on the achievement of dispute settlement without recourse to thegeneral courts. The other three models emphasize high level of governmental control wheredifferences are on dispute settlement bodies. Because there is no specialist court available, thedisputes are brought to arbitration boards or commissions for the models with arbitration bodies andlimited arbitration. The summarized of the level of intervention is shown in table 1. According to Sinacore-Guinn (1993) and WIPO (1990), there are two possible legal bases forgovernmental control over the operation of collective administration organization, shown in Table 2.The first is laws and regulations of general application. These include laws and regulationsconcerning the formation and operation of all economic entities, laws regulating contract, and lawsrelating competition situation. The second ground is to enact specialized laws regulating thecollective administration organization. These laws can be classified into four types depending onlevels of control. The lowest level of control is by recognition statues. These laws are to regulate andspecify the formation of collective and the types of the organization. For example, the laws shouldspecify whether the rights exercised by the owners via the organization are voluntary or mandatory,whether the organization is private, public, or semi structure and whether the organization ismonopoly or free market. 10
  11. 11. The next level of control can be either fair governance or fair licensing regulations. Theregulations under fair governance are trying to ensure the fair and equity balance between theinterests between the right owners and the public at large. These regulations concern about rightholder affiliation process, accounting procedures and report, revenue distribution process, etc. Theorganization management structure is also investigated to assure right owner participation.Table 1 : Government Supervision and Control of Collective Management Policy Decisions Characteristics1) Level of Collectivization: Four types of organization 1.1 Agency – Collective - Creator /Right owner retains high level of control over his work Management - Appropriate for musical work’s reproduction Rights (mechanical, synchronization and electrical transcription rights) 1.2 Collective – Licensing - Provide blanket license allowing users to use any work in the repertoire upon payment Management - Creators / Owners exercise control of their rights indirectly through the involvement of managing the organization - Appropriate for dramatic, literary, musical and neighboring public performance right; Cable retransmission right; reprographic reproduction right. 1.3 Collection and Distribution - Administer rights of remuneration instead of rights of control Management - Highest level of Collective management that still maintaints private reward for creations - Appropriate for audio and audio visual home taping royalties and public lending rights 1.4 Social Collective Management - Extreme level of Collectivization with no existence of private right - Appropriate for use of folklore and public domain works for some countries that provide protective of such works.2) Dispute Resolution: 2.1 De Minimis Supervision with - Little government supervision Specialist Bodies - Specialist tribunal controls over tariffs and licensing schemes 2.2 Global Supervision with - Government exercise control over creators/owners, collective Management Organization, and users Arbitration Bodies in terms of their duties among each other - Arbitration boards settle all aspects of dispute - Arbitration is a part of Global supervision 2.3 Global Supervision with - Government exercise control over creators/owners, collective Management Organization, and users Limited Arbitration in terms of their duties among each other Dispute only in special situations is settled by Arbitration 2.4 Global Supervision with - Government exercise control over creators/owners, collective Management Organization, and users Civil Courts in terms of their duties among each other - Civil Courts have jurisdiction over all disputes. 11
  12. 12. Table 2 : Method of Government Intervention Legal Bases Characteristics1. Laws of General Application - Laws that regulate the existence of all economic entities - Laws concerning contracts, interpretation and enforcement - Laws concerning Competition - Laws protecting consumers - etc.2. Specialized Laws for Collective Management Four Levels of Control 2.1 Recognition Statues - To regulate the formation of organization 2.2 Fair Governance - To ensure fair and equity balance between creators / owners and public interests. 2.3 Fair Licensing - To protect possible distort or abusive of rights and market position. 2.4 Complete Operation - Combination of 2.2 and 2.3 Under fair licensing approach, the regulations aim to govern collective licensing practices inorder to prevent any potential abusive of market position. It was also argued that while someregulations were aimed to assist the collectives in their operations, others are- to certain extent-restrict the discretion of the licensing (Sinacore-Guinn,1993, p 549 and Ang, 2000). Therefore the lastapproach, complete operational regulations, is developed to reach the extensive level of supervisionby combining the fair governance and the fair licensing regulations together. Whatever angle of looking at governmental intervention, it is just simply ranged from low tohigh level based on the ground of laws, regulations and the supervision authorities. In practice, thereseem to be no clear cut among Sinacore-Guinn’s four-type of specialized laws. Sinacore-Guinn’srecognition statute approach, to a certain extent, is similar to Suthersanen’s de minimis model. Thecomplete operational regulations also seemed to be closed to the global supervision model. Suggestedby WIPO (1990), the extent to what level of governmental intervention varies from country to 12
  13. 13. country. Looking at the development of the collective administration system in several countriescould reveal this variation.4. The Development of Collective Administration of Copyrights and Neighboring Rights The development of the copyrights collecting organization started during the 1700s in Francewhere the first authors’ society, SACD, was established to fight for the recognition of their rights.Later on a number of other European authors’ collecting societies such as SACEM (the replacementof SACD) in France, SIAE in Italy, GEMA in Germany and PRS in the UK were started in mid1800s. SACEM - Society of Authors, Composers and Music Publishers (France) - was establishedfor administration of a certain right in a certain category of copyright works, that is, the publicperformance right of musical works (WIPO, 1990). According to Suthersanen (2002), SACEM wasthe type of global supervision with limited arbitration. Role of collecting organization indicated bylegal provision involved both as trustees of the economic rights of its members and as promoters ofcultural activities. Governmental supervisions of SACEM were conducted by the Ministry of Culture. Theseincluded approval and appointment of an organization, investigation of annual statement accounts,and requisition all documents relevant to the organization’s function. The assurance of theorganization’s transparency was governed by statutory obligations under the Law on CommercialCompanies. The obligations were to appoint a certified auditor, to provide the right of member inaccessing accounting information, and to provide the right of one-tenth of memberships in appointingexperts for management operation monitoring. Serious disputes were settled by the Tribunal deGrande Instance (ibid., p.11-12). SIAE (Italian Society of Authors and Publishers) was a state-authorized collectingorganization. The organization was completely subsumed into the government structure under theItalian Copyright Law. SIAE was a multi-works organization, meaning that it administered severalkinds of copyright works. Besides musical works, it also collected royalties for literary, artistic, andaudiovisual works. However, the organization did not have the power to represent all authors. Thecopyright owners were still able to management their rights individually (Ercolani 2002). 13
  14. 14. SIAE was under the supervision of the President of the Council of Ministers. Furthermore,the Italian Antitrust Authority could investigate the organization’s management and distributionstructure. Since there was no special tribunal or arbitration, any dispute had to be submitted to civilcourts (Suthersanen, p. 18-19). GEMA (Musical Performing and Mechanical Reproduction Rights Society of FederalRepublic of Germany) was a state-recognized organization under a specialized law, the GermanCopyright Administration Act. The act set out a strict and comprehensive code of conduct concerningall details of conditions, duties and activities of the organizations. The statutory provision of bothpresumption concept and the shifting the burden of proof on the users help strengthening theorganization. Because it received proper authorization from the government, GEMA was entitled toclaim remuneration for all musical work owners. To balance the powerful position of the organization, GEMA was subject to strict supervisionand control by the President of the German Patent Office, the Federal Antitrust Office and the FederalMinistry of Justice (WIPO, 1990). According to Suthersanen (2002), the system in Germany wasclassified as global supervision with arbitration bodies. The Performing Right Society Limited (PRS) in the United Kingdom was formed as a privateenterprise. Thus, PRS had to comply with the normal company, agency, and contract laws. Thestructure and ownership of the organization were not under any governmental control. However, thenational competition authorities, the Monopolies and Mergers Commission, could examine theconduct of the collecting organization for any abuse of market position. The disputes concerninglicensing schemes were subject to the scrutiny of the Copyright Tribunal. So the collectingorganizations in the United Kingdom were the type of de minimis supervision with special bodies(ibid., p. 6). In 1926, authors’ societies in 18 countries set up the International Confederation of Societiesof Authors and Composers (CISAC) to support more efficient protection of authors’ rights throughoutthe world. CISAC is a non-profit, non-governmental organization that is officially accredited withUNESCO (United Nations Educational, Scientific and Cultural Organization), WIPO (WorldIntellectual Property Organization), the Council of Europe, and the European Community (CISAC, 14
  15. 15. 1987). Currently CISAC has about 200 Authors’ Societies in over 100 countries, representing morethan 2 million creators of musical works, mainly (WIPO, 1990; Schepens, 2000; and Ercolani, 2002). In most countries, the collective administration of musical works’ performing rights (orcomposer performing right organization, or composers copyright collecting organization) will act onits member behalf (composers and music publishers) to provide blanket license that authorizes usersto use any music from its repertoire. By means of reciprocal agreement with the collectiveadministration organization in other countries, all national organization can license the use of theworld music repertoire (Figure 3). Foreign Authors, Composers & Publishers By assignment/ entrustmentRoyalties or licence Reciprocal Representation Foreign Copyright Societies Agreement License for both Local and foreign Local Copyright works USERS Society Royalties collect royalties Local Authors, Composers & Publishers Deed of assignment/ Entrustment/ licenceFigure 3: Flow of musical work’s rights and royaltiesSource: Ang, 1998 The operation of a copyright collecting organization (or a composer’s society), that is amember of CISAC, is non-profit in nature. After deducting the actual administrative costs from theamount of royalties collected, the organization must distribute the money to the composers and musicpublishers based on music usage. In other words, the organization licenses collectively but distributesthe royalty individually (Ang, 1998 and Schepens, 2000). 15
  16. 16. Collective administration of mechanical right (the reproduction right of musical works in theform of audio recording) can also be done either by the performing right organization or by setting anew organization. For example in the United Kingdom there are PRS (The Performing Right SocietyLimited) administers musical works’ public performance right and MCPS (Mechanical CopyrightProtection Society Limited) for musical works’ mechanical right. In Germany there is GEMAadministers both performance and mechanical rights for authors and composers (WIPO, 1990). Besides those of musical works, there are also several collective administrations for othertypes of copyright and neighboring right works. The International Federation of the PhonographicIndustry (IFPI) was set up in 1933 to protect the rights of phonogram producers. Although the mainactivity of IFPI seems to emphasize on piracy, it also set up the collective administration of the rightsof phonogram producers. For example, there is PPL (Phonographic Performance Limited) in theUnited Kingdom. Figure 4 shows flow of payment for rights in music and records in the UK (Taylorand Towse, 1998). Moreover in some countries there are the collective administration of rightsconcerned by cable transmission of broadcast programs and home taping (WIPO, 1990; Suthersanen,2002; and Ficsor, 2002). Performers and PPL –Phonogram performance fees Users Record Companies Television, MCPS radio, discos, Mechanical restaurants, Rights shops, etc. Composers and PRS – Musical work performance fees publishers Figure 4 : Flow of Payment for Rights in Music and Records in the UK.Source: Taylor and Towse, 1998, p. 635. 16
  17. 17. There is no one solution to how right owners are represented by a collective administrationorganization. The situation varies from country to country, depending on the political, economical,cultural, social and legal circumstances (WIPO, 1990 and Schepens, 2000). For example, while thecollecting organizations of musical work in most European countries were monopolies in practice,there are three organizations for musical work’s public performance right, namely ASCAP, BMI, andSESAC, in the United States (Lathrop and Pettigrew, 1999 p. 221). Tremendous size of worldwideAmerican music business and the US’s nature of strong monopoly’s opposition are believed to be thereasons (Sinacore-Guinn, 1993 and Ang, 2000). Bear in mind that there is no collective managementorganization for sound recording’s public performance right under the USs copyright regime (Laing,1993), hence it is understandable that free-trade concept is applied for collecting organization ofmusical works. Local composers and the owners drove the development of the collecting organizations inmost developed countries. In other words, they fought for recognition of the rights. Proper level ofgovernmental intervention acted as catalyst for the mechanism. However giving that the reforms ofcopyright regime in most developing countries were driven by international forces, it was thechallenging for developing countries to set out the system that can balance the benefits of localcomposers and public as a whole.5. Implementing Collective Administration of Composers Rights in Asian and PacificCountries According to Ang (2002), the concept of collective management of copyright was somewhatlate in coming to the Asia Pacific. Similar to those in Europe and America, author and composerrights are the first category to appreciate the collective management concept. Australasian PerformingRight Association (APRA), which was formed in 1926, was the earliest collective managementorganization in the region. In 1939, JASRAC (Japanese Society for Rights of Authors, Composers,and Publishers) was established to administer the rights in musical works. CISAC had developed its activities to assist the formation and operation of authors’collecting organizations in developing countries in Asia. During 1965 and 1981, six organizationswere formed, namely in Philippines (FILSCAP in 1965), South Korea (KOMCA in 1965), India 17
  18. 18. (IPRS in 1969), Hong Kong (CASH in 1977), Taiwan (CHA in 1977) and Sri Langka (SLPRS in1981). The greatest growth was achieved in the year between 1987 and 2000 when nine neworganizations were established. For example there were COMPASS in Singapore (1987), MACP inMalaysia (1989), YKCI in Indonesia (1990), MCSC in China (1992), and MCT in Thailand (1994).The other four organizations were in Fiji (1993), Nepal (1997), Taiwan (1999), and Mongolia (2000).Currently there is also a discussion of forming a composer’s society in Vietnam. Government policies play a vital role for copyright implementation. Strong commitmentfrom the government with clear objective and plans seems to be a common ground for the success ofthe nation’s copyright regime. Government supports include improving legal framework, establishingthe relevant administrative institution, enhancing enforcement mechanism, and monitoring the systemto restrain negative effect of abusive use of the rights (UNCTAD 1996). In terms of legal situation, quite a number of Asia-Pacific countries are signatories of majorinternational trade agreement or treaties. China, Indonesia, Malaysia, Singapore, South Korea, andMongolia were new accessions to the Berne Convention in the last decade. Those countries includingThailand and Philippines had reformed their copyright law conforming to the requirement of theinternational agreement. In Japan, a country with fully developed copyright law in Asia (Mitsui, 1993, p. 126), thegovernment supported the existence of collective administration system by enacting a Law onIntermediary Business Concerning Copyright in 1939. Basically the law provides that any entitywhich engages in the intermediary business of copyright must be granted authorization by theCommissioner of the Agency for Cultural Affairs. Furthermore the royalty rate and fees, distributionrules, trust contract with copyright owners, and other issues of conducting the business must beapproved by the Commissioner of the Agency (Oyama, 2000). The law was modeled on GermanyCollective Administration Law with due consideration of Japanese’s social customs and other relatedlaws (Mitsui, 1993). At present, laws governing collective administration can also be found in HongKong, India, Pakistan, Taiwan, and Mongolia (Ang, 2002, p. 39). Besides the good structure of copyright legislation, speedy and effective implementation,enforcement, and dispute settlement has become important. Countries such as China, Philippines, and 18
  19. 19. Thailand have either established or designated specialized Intellectual Property Courts to facilitate theenforcement of intellectual property rights as a whole. Other countries such as Australia, NewZealand, Singapore, and Malaysia have created tribunals, especially for copyrights, as disputesettlement bodies for licensing schemes of collective administration (Ang, 1998). Thesedevelopments, to a certain extent, should enable collective administration organizations to developfaster enforcement of its rights leading to growth of its revenues. The issue of monopoly or anti-competition always seems to be brought up in the copyrightsystem implementation. By granting a bundle of exclusive rights to the owners, the possible negativeeffects can occur to the public when a powerful copyright owner exercise his rights. The relationshipsbetween copyrights and its potential abuses are complex and require significant expert to monitor.Australian government is quite active in such monitoring. In 1990 the Australia’s Prices Surveillance Authority (PSA) conducted an inquiry into pricesof sound recordings. The inquiry provided insight details of the industry and PSA recommendationshelped balancing the power of sound recording companies and public interests (Breen, 1993). TheAustralian’s Department of Communication and Arts also reviewed the structure and operations ofcollecting societies to ensure their proper functioning. The first comprehensive report, conducted in1995, provided more than 100 recommendations useful for the government policy development(Simpson, 1995). The presence of music publishing companies, which operate independently of the recordingcompanies, tend to be an important integral part of the music industry in both Europe and America. Ithas proven that in those countries where foreign musical works is more dominant, the collectiveorganizations tend to be more successful (Ang, 1998(b)). Foreign publishers with sub-publishingoperation cooperate readily with local right owners to create collective administration organization insuch countries as Hong Kong, Singapore, and Malaysia. It was stated that without a music publisheradvising the composers and acting in their interests, the composers are less likely to be able to obtainappropriate remuneration from their works’ exploitation (Ang, 2002). In such country as Thailand, powerful local recording companies have bought out thecopyrights from the composers or hired them as its employed staffs. Therefore, the local recordingcompanies own two categories of copyright works, musical works and sound recordings. Under these 19
  20. 20. circumstances, together with the improper function or non-existing of music publishers in thebusiness, the full benefits of collective management may be difficult to be achieved (Thanasawat,1999; Ang, 2002; and Distabanjong, 2002). It is not surprising to find that the organization’s performance over the period varied in eachcountry. Excellent growth was found in the organizations in Malaysia, Singapore, and Indonesiawhere the ratio of administration cost to gross revenue reduced dramatically over the three years afterthe operation of licensing activities. However, difficulties are still challenging the organizations inChina, Thailand, Fiji and Nepal (Ang, 1998(b) and 2002). The reason behind this variation may besimilar to other kinds of intellectual property rights implementation, that is, implementing copyrightcollective management system is complicated. Most of Asian countries were bound by international agreements or conventions to protectand enforce copyright. The Agreement on Trade-Related Aspects of Intellectual Property Rights(TRIPS) is a common ground to all World Trade Organization’s members for protecting intellectualproperty rights. Regarding the copyright protection, both Berne and Rome Conventions were alsoincorporated into TRIPS agreement. TRIPS simply set out the general principles and minimum requirements for protections,however the formation of copyrights collective administration was not the requirement. Nonetheless itdoes clearly state the objectives of the protection and enforcement in Article 7 that the creators andthe users of the works must have mutual advantage. The copyright regime must be implemented in amanner conductive not only to the economic but also to the social welfare. The creators, owners, andpublic all had rights and obligations to each other (WIPO, 1997 and Weeraworawit, 2000). It was described that the positive impact and benefit of a particular intellectual property rightdepended on several factors. Besides the selection of appropriate standards for local laws, an effectiveenforcement and administration mechanism as well as an application of competition policy areessential (UNCTAD, 1996; Braga and Fink, 1998; Maskus and Lahouel, 2000). These three factorsare mainly at the government policy level. Maskus (2000) further suggested that the factors at industry level such as market structureand business practices & norm are also important. Furthermore, the issue of both individual and smallgroups cultural background was also brought up in a few studies (Gopal and Sanders, 1998; Smith, 20
  21. 21. 1999; Marron and Steel, 2000). Additionally Burke (1996) and Ang (2001) suggested in his study thatsocio-economic environment in which the laws were applied also seemed to be a primary importantfactor. By taking all those factors into consideration, the success of the composers’ rights collectivemanagement regime in the Asia depends on the synergy among all relevant elements (shown inFigure 5). These elements can be grouped into three levels; namely national, industrial, individual andlevels. The national level encompasses a wide range of implementation and mechanism at nationalpolicy which includes legal framework, enforcement, and other forms of government interventionsand monitoring. At industry level, the factors mainly involve elements of structure and practices ofmusic industry and operations of the collecting organization. Lastly the individual level includesfactors at individual and small groups such as song writers/composers and music users. This certainlyinvolves such elements as knowledge, attitude and perception. The synergy of all three levels shouldassure a proper development of the regime for the benefit of the nation’s social and economic welfare. Figure 5 : Key Success Factors for Composer’s Copyright Collective Management 1.National Level 1.1 Commitment of Government 1.2 Proper Legal frameworks, Enforcement and Administration 2Industrial Level 2.1 Good governance of Collecting Organization 2.2 Proper Function of Publisher 3.Individual Level 3.1 Proper knowledge & Awareness 3.2 Unity of composers 21
  22. 22. 6. Key Success Factors of Composers Copyright Collecting Regime in Asia6.1 Factors at National Level6.1.1 Commitment of Government Policy and Mechanism with Clear Objectives Whether the copyright collecting regime can be of benefit to the nation mainly depends ongovernment policy and mechanism. As a policy- maker, the government must have clear objectiveswith short- and long- term plans to direct the national collective administration system. These includethe establishment of authority institution, enhancing enforcement, and monitoring the overall systemto restrain abusive use of the rights. The policy should decide proper level of government intervention on level ofcollectivization; what rights of the copyright works to be administered collectively; should theorganization be the type of agency-collective, collective licensing, collective and distribution, orsocial collection; and so on so forth. Then the policy should select what legal bases to be applied;whether they should be general application laws or specialized laws; what regulations to be enactedfor controlling fair governance and fair licensing of the organization. Finally the system essentiallyhas to provide speedy and effective dispute resolution mechanism. Most importantly, monitoring andadjusting the system to prevent any possible misconduct or potential abusive of the rights that canoccur by powerful right owners are crucial. This is a learning process for all developing countries.The government’s commitments for assistance and support composers’ copyright collectingorganization need to be translated into action and made effective without delay.6.1.2 Proper Legal Framework and Enforcement According to Lewinski (2002), there should be five main parts of a modern copyright law.The substantive law regarding authors’ rights should be separated from the substantive law regardingneighboring rights. The Laws involving enforcement mechanism is considered the thired part.Thefirst two laws as well as the part of enforcement are covered as the minimum requirements underTRIPS agreement. The provision of law on collecting societies (or organization), which is the fourthparts, is also recognized as an essential part. Although it is not mentioned in TRIPS, the nationalcollection societies are recognized as one important institution of the copyright regime in developingcountries (UNCTAD, 1996, p.39). 22
  23. 23. Finally, the copyright contract law is recently obtained more attention. Because of thedifferent bargaining positions between the authors and the business entities, freedom of contractprinciple may not be suitable to be utilized. The German government had amended its copyright lawto cover the new ‘Law on Strengthening the Contractual Position of Authors and Performers”, whichwas in effect on July 2002. Under this law, it is a statutory right of the author and performer to obtainan equitable remuneration to which they cannot abandon and which cannot be transferred beforehandexcept to a collecting society (Lewinski, 2002, p. 4).6.2 Factors at Industrial Level6.2.1 Proper Function of Music Publishers As mentioned earlier, music publishers were important in assisting the composers and actingin their interests. Because they shared the success with the authors, the publishers helped balancingthe bargaining positions between the recording companies and the authors. However, the publisherswere still business enterprises. Moreover, some of them were commonly owned by sound recordingcompanies. Still, the disadvantage situation of individual authors and composers existed. The truebenefits of implementing the system will exist when the eventual increase income of the recordingcompanies is reasonably shared with authors and composers. Inevitably, the industrial structure in Asian countries would be changed by copyright(UNCTAD, 1996) when the concept and roles of music publisher entities from international practicesare gradually disseminated. For developing countries, whether the changes are for the benefits ofauthors, business entities, or public at large still depended on several factors. Basically the importantfactors would probably be on the ground of the composers themselves together with the nationalpolicy concerning the copyright, creator and the promotion of culture.6.2.2 Good Governance of Composers Collective Management Organization The composers collecting organizations normally have a double nature. They areundertaking who supply services to composers and to users of the musical works as well asassociations among the composers or owners of musical works. As service providers, theorganizations perform four activities; which are acquisition of the repertoire, documentation of works, 23
  24. 24. collection of royalties, and distribution of the collected royalties. As associations, they have generalpurpose to promote nations’ culture. Transparency and trustworthy are crucial elements to ensure correct operation of theorganizations, both as service providers and as cultural promoters. At national level, the fundamentalrequirements for transparency include the publication and /or approval of annual report, account,tariff rates, distribution rules and articles of the organizations. At international level, CISAC sets out astandard principle for all authors organizations to cooperate globally (Schepen, 2000; Ercolani ,2002;and Suthersanen, 2002).6.3 Factors at Individual Level6.3.1 Unity of local composers Unity of local composers is essential in order to increase their bargaining power collectively.Consider the development of copyright system in European Continental countries. In France, forexample, the authors persistently protect their works and demand for payment (the case of PaulHenrion and Victor Parizot against Ambassadeures café-concert mentioned in WIPO, 1990, p.9).Later, the authors’ association was strong enough to fight for recognition of the rights (Laing, 1993).The situation in developing countries could be different. Smith (1999) suggested that the issues of culture and social attitudes should be taken intoconsideration when applying the rights to developing countries, especially in Asia. The study presentsthat there are two competing systems based on difference cultural background, the Anglo-Americansystem and the European Continental system. The first system emphasizes on free exchange ofproperty or free market while the latter emphasizes on author’s rights, especially moral rights (therights to be respected and recognized as the author). Therefore countries in either of these twosystems implement and enforce the rights that are economically and philosophically compatible withtheir cultures. For example, moral rights stay with the creators under France law. The fact that theUnited State’s concern for free market and France’s concern for art and culture have built two distinctapproaches to the rights of composers in their works. Thus, the problem with copyright regime inAsia may also seem to arise from the misalignment of western views with cultural background ofAsian countries. 24
  25. 25. 6.3.2 Proper Knowledge Attitude and Awareness Given that the need for strengthening copyrights protection is mainly driven from externaltrade pressure (not directly from local people), it is likely that local interest in developing countrieswill oppose effective enforcement (Braga and Fink, 1998). Even if the local cultural industries (suchas music, film, audiovisual, etc.) were also hurt from inefficient protection, there can be a chance thatthe rights are abused and distorted to be of benefit more to the business entities. It is very important for local people, especially users of copyright works, to realize a truebenefit of the regime as an incentive for local creators. And at the end, with a proper mechanism ofimplementation, the creators’ reward will finally contribute to cultural industry and economic of thenation.7. Implication for Further Studies The collective management organization is created within the political, social, cultural, andeconomic environment of that country. The developing countries are facing with internationalpressure on copyright protection as well as the growth of international trade in music business.Furthermore, advancement of digital communication imposes more difficulties to the countries. Thusimplementing the copyright collective management regime in developing countries is stillchallenging. It is proved that proper legal framework and enforcement alone can not guarantee thesuccessful of the regime. Composers always have less negotiation powers. The system should supportand enhance collective power of composers’ rights protection in order to raise their bargaining poweragainst the music business entities. Monitoring and preventing possible abusive or distort of rights arealso essential. Whatever works well in developed countries may not be fully adopted and applicablewell in some developing countries. Therefore, such factors as attitude, perception, local practice andcultural back ground of individual composers, music business entities as well as music users shouldbe taken into consideration. Still, opportunities for further studies are widely opened.8. Conclusions 25
  26. 26. The nature of copyright system in music industry is complicated. It involves several partiesand entities at individual level, industry level, and national level. Given that the need forimplementing copyright regime is mainly driven from international trade pressure, it is extremelyimportant for Asian countries to ensure the balance of interests among local authors & composers,local entrepreneurs involved in dissemination of copyrighted products, and the copyright productusers. Unless the local structure provides fair and equity incentives for the local authors/ composerswithout any abuse or distortion of the rights by the business entities, the country is not likely in theposition to obtain the full benefits of collaboration with other countries at the international tradeforum. The system of copyright collective administration is proved to work efficiently as a guardianof composers rights in developed countries. However composers in some Asian countries are still cannot enjoy the benefits of the system. This paper has focused on the development of copyrightcollective management in developed countries and examined the situation of such development inAsia–Pacific region in order to draw up key success factors of the regime. The key success factors areproposed at three levels. It is found that at national level, in terms of legal framework, most Asiancountries had enacted national laws that complied with minimum standard requirements of theinternational trade treaties. Thus further attentions should be put on the factors at industrial level andat individual level. By examining the factors at industrial and individual levels thoroughly, the policymaker is then in the position to decide the proper extent of government intervention. The synergy ofall factors at the three levels is extremely important to ensure the balance among composers, musicbusiness entities, and the public’s interests. 26
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