MEMO/08/508

Brussels, 16 July 2008

Commission Proposal on a Directive for Term Extension – Frequently Asked Questions (see IP/08/1156)

1. What is meant by term extension?

Under current EU laws, recorded musical performances are protected for a maximum of 50 years. This means that over a period of 50 years, performers receive remuneration for each time their work is played on the air, in public places such as bars and discotheques and also receive compensation payment for private copying of their performances. After 50 years, artists lose control over the use of their works and no longer receive this important source of income.

Composers on the other hand enjoy this form of copyright protection for 70 years after their death.

With this proposal, the Commission aims to extend the term of copyright for performers to 95 years. This means that artists in Europe will be insured of a steady income for their performances during their entire lifetime.

2. Why is this directive aimed at performers?
If the present term of 50 years is kept, some 7.000 performers, in the UK alone, will lose all of their airplay royalties over the next ten years. We are not talking about featured artists like Sir Cliff Richard or the Beatles here. This is about the thousands of anonymous session musicians^[1], who contributed to sound recordings in the late fifties and sixties. They will no longer get airplay royalties from their recordings, even though these royalties often contribute to their pension. They will lose protection just when online retailing promises a new source of revenue.

3. What about consumer prices? Are they not going to rise?
Empirical studies show that the price of sound recordings that are out of copyright is not lower than that of sound recordings in copyright. One study^[2] concluded that there was no systematic difference between prices of in-copyright and out-of copyright sound recordings.
The study also indicates that there are many other factors that explain the price of a sound recording, such as the popularity of a performer's individual song or the stage in his career when he recorded a song. It is interesting that sometimes a particular performer's early song that is out of copyright is more popular, and thus more expensive, than a later and less popular song that is still in copyright.

The proposal will also not affect the amount of airplay royalties that broadcasters have to pay: all the public performance rights broadcasters rely on are managed collectively and broadcasters pay a fee based on turnover - irrespective of how many performers are protected or not. No broadcaster clears sound recordings on a 'per track' basis.

It should also be stressed that broadcasters pay less than 1% of their turnover to the music industry. In these circumstances, there is hardly a case to be made that copyright in general has a significant impact on the broadcasters.
To conclude: Harmonising the term of protection would not have a negative impact on prices. For broadcasters and music in bars and discotheques, the licence fee does not depend on whether parts of the works performed are in the public domain. For consumers downloading music, there would be no negative impact, as downloads are not priced according to whether a song is in the public domain.

4. What about historical archives? Will they be available for online use?
A term extension for performers will not affect projects to make available a variety of historic broadcasting archives available for dissemination. These archives are covered by the blanket license that is granted by performers' collecting societies. If old performers cannot be found, the collecting society will keep his share and try to locate him: this is not a problem to be borne by the broadcaster.

5. Will only superstars benefit from the proposal?
The Commission's impact study demonstrates that the proposal would give average performers additional income to the tune of anything ranging from € 150 to € 2000 per year. These amounts, mostly attributable to airplay royalties, might not appear spectacular for those that have salaried jobs, but they are often considerable for musical performers. In this sense, the extension is fit for purpose.

6. What about performers who already transferred their rights to the record labels?

The term extension will come with a provision that performers can recuperate their copyright if the label does not wish to market their recordings further. This is commonly referred to as the 'use-it-or-lose it' provision. Without a term extension, we could not introduce this very performer-friendly remedy. The clause will empower performers to market their early songs themselves.

In any case, if neither the record producer nor the performer shows any interest in marketing the sound recording within a year after term extension, the sound recording will not be protected any longer. It will be freely available for public use.

Also, the record industry will have to set aside a percentage of sales income and distribute these monies to performers who, at the beginning of the term, were bought off with a single payment.

In addition, airplay royalties and the compensation for private copying are never assigned to producers. Session musicians hold on to these income streams which, in old age, are often their principal pension. Airplay accounts for 57% of performers collecting societies' income.

7. Have performers not earned enough in the 50 years of protection?

Most performers or singers and session musicians start their career in their early 20's or even before. That means that the current 50 year protection ends when they will be in their 70's. Current life expectancy in the EU stands at 75.1 years for men and 81.2 years for women and it is usual for persons to live well into their 80's and 90's. Once protection has ended, performers no longer receive any income from their sound recordings. For session musicians and lesser known artists this means that income stops when performers are retired - the most vulnerable period of their lives.

Even after 50 years, performers still get airplay revenue and now with the Internet there is the 'long-tail' phenomenon. That means that a lot of 'niche' repertoire will be offered in specialised websites. If the revenue is too low for record labels, the use-it-or lose it provision kicks in and the performer recovers his copyright and can put out the recordings for his fans to enjoy. In this way performers can discover that there is still a fan base out there and earn a bit of money, even if the labels would not find further marketing commercially attractive.

8. Will record producers also benefit from this copyright extension?
Yes. With the copyright term extended, record producers will receive additional revenue from the sale of records in shops and on the Internet. This should allow producers to adapt to the rapidly changing business environment which is characterised by a fast decline in physical sales (- 30% over the past five yeas) and the comparatively slow growth of online sales revenue.

9. Are there other schools of thought on extending copyright protection?
Yes. Most prominently there is the Gowers Report prepared for the UK government.^[3] As it reasons against copyright extension based on economic analysis alone, the Commission feels that this cannot be the whole story. The Commission believes that Copyright represents a moral right of the performer to control the use of his work and earn a living from his performance, at least during his lifetime. The Commission has not seen a convincing reason why a composer of music should benefit from a term of copyright which extends to the composers life and 70 years beyond, while the performer should only enjoy 50 years. For his early and often most successful recordings, a 50-year term often does not even cover his lifetime.
Secondly, the Gowers Report looks at the situation from a UK standpoint and only talks about performers' royalties from their exclusive rights. Performers actually receive a large part of their income from remuneration for the broadcast of their performances in music (airplay royalties) and in most other EU Member States (except the United Kingdom and Ireland) from compensation for private copying. The Gowers Report does not mention these two types of very important sources of remuneration at all. Airplay royalties account for 57% of the revenue collected by performers' societies and private copying monies account for 38%. Both airplay royalties and private copying compensation are administered by collecting societies and are not transferred to record companies.

10. But isn't the Commission extending a monopoly?

No, copyright in a sound recording is not a monopoly. Copyright on a sound recording, maybe as opposed to a unique book, provides absolutely no monopoly power to its owner -- there are so many interchangeable sound tracks out there that compete for audience. Copyright protected recordings often compete with other protected recordings and with those that are in the public domain. That keeps prices down. Maybe there is a bit less substitutability than in the area of those eternal bestsellers we call 'durable books'.

11. What is a co-written musical composition and why is this part of the proposal?
A "co-written musical composition" is a musical composition which comprises contributions from several authors. A musical piece, for instance pop music or an opera, often includes lyrics (or a libretto) and a musical score.

In different Member States, such co-written musical compositions are either classified as:

(1) A single work of joint authorship with a unitary term of protection, running from the death of the last surviving co-author; or

(2) Separate works with separate terms running from the death of each individual author.

This means that a single piece of music will have different terms of protection in different Member States. Harmonisation of copyright terms with respect to those works is therefore incomplete.

The Directive on copyright term^[4], which will be amended by this proposal on term extension, already contains a special rule which solves a similar problem specifically for films. The proposal would simply extend that rule to co-written music, in order to ensure that such music enjoys the same term of protection in all Member States. A largely technical amendment would ensure that the objective of harmonisation of the term of protection is achieved.
12. Why have you added on a provision of co-written musical compositions? Is that really important?
The current discrepancies in the term of protection for co-written music cause problems in relation to the administration of copyright across the EU. Collecting societies administering cross-border payments to authors apply different rules to calculate fees and distribute payments to authors. This leads to legal uncertainty and creates unfair distortions in the way co-authors are paid.

This is a significant problem because music is overwhelmingly co-written. For example, in musical genres such as jazz, rock and pop music, the creative process is often collaborative in nature. Members of music bands are also often co-authors of the band's music. Estimates suggest that between 60% and 70% of music is co-written (based on data for Spain, the UK and France). With time, an increasing number of works will be affected.

More information on Intellectual Property is available at:

http://ec.europa.eu/internal_market/copyright/term-protection/term-protection_en.htm

^[1] Musicians hired for one recording only and paid off with one single payment when the recording is made

^[2] By Price Waterhouse The Impact of Copyright Extension for Sound Recordings in the UK, (report commissioned by the BPI), 2006

^[3] By Andrew Gowers The Gowers Review of Intellectual Property

(Report commissioned by HM Treasury), December 2006

Available at: www.hmtreasury.gov.uk/independent_reviews/gowers_review_intellectual_property/gowersreview_index.cfm

^[4] Directive 2006/116/EC, OJ L 372 of 27.12.2006, p. 12