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Brussels, 12 October 2005

Frequently Asked Questions (FAQs) on copyright clearance for online music services

What is copyright?

Copyright and related rights are rights which ensure that right-holders (e.g., writers, composers, lyricists, performers or record producers) get a share of the money earned from the commercial use of their creations.

Why is copyright exploited collectively?

Collective management of copyright is the system under which a right-holder authorises a body to commercially exploit his rights. As right-holders cannot individually monitor all the different uses made of their works, they entrust this task to collecting societies.

What do collecting societies do?

Collecting societies provide the following services for right-holders: (1) the grant of licences[1] to commercial users; (2) the auditing and monitoring of rights by ensuring payment and terms of licensing (enforcement); (3) collection of royalties; (4) distribution of royalties to rights-holders. Some collecting societies also provide social and cultural funding.

Why have we looked at the services provided by collecting societies?

We have looked at collecting societies’ services because the licensing of copyright-protected musical works across the EU should be improved. Improvements are necessary because new Internet-based services such as webcasting or on-demand downloads need a license that covers their activities throughout the EU. The absence of EU-wide licenses makes it difficult for the new Internet-based services to develop their full potential.

What needs to be done?

The main obstacles to the growth and availability of Internet-based services in the EU have to be removed by (1) introducing effective models for cross-border licensing of copyright-protected content in the online environment; and (2) introducing better governance in how collective managers work.

What options did we consider to remove these obstacles?

We have considered three options: (1) Do nothing (Option 1); (2) Suggest ways in which cross-border cooperation between national collecting societies in the 25 Member States can be improved (Option 2); or (3) Give right-holders the choice to authorise one single collecting society to license and monitor all the different uses made of their works across the entire EU (Option 3).

What do stakeholders think?

Stakeholders were consulted on the three options in July 2005. 85 stakeholders, from right-holders and rights management societies to commercial users, submitted their opinions on the three options. There was broad consensus that Option 1 is not an option. Stakeholders are divided between Options 2 and 3, with commercial users favouring Option 2, the majority of collective rights managers favouring modified versions of Option 2 and the music publishers’ community, the independent record labels and certain collective rights managers favouring Option 3.

What are we proposing?

In the light of stakeholder comments received, the Commission recommends a reform package for EU-wide licensing of musical works for legitimate online music services enabling the parallel deployment of both business models that are available to foster more efficient EU-wide licensing. The recommendation therefore proposes the elimination of territorial restrictions and customer allocation provisions in existing licensing contracts, while leaving right-holders who do not wish to make use of those contracts the possibility of tendering their repertoire for EU-wide direct licensing.

What about governance?

The proposed reform includes rules on governance, transparency, dispute settlement and accountability of collective rights managers, whether they manage rights according to Option 2 or Option 3. Governance principles setting out the principles that govern the relationship between collective rights managers and right-holders would introduce a culture of transparency and good governance enabling all relevant stakeholders to make an informed decision as to the licensing model best suited to their needs. This should stimulate EU-wide licensing and promote the growth of legitimate online music services.

How will this proposal be implemented?

In line with Better Regulation principles, the form and intensity of our policy intervention needs to be tailored to the severity and urgency of the problems to be addressed. In addition, all policy initiatives should ensure that the cost of compliance does not exceed the expected economic benefits.

[1] Permission given by the owner of copyright to another person to use a copyright-protected work

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