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Charlie McCREEVY

European Commissioner for Internal Market and Services

Music copyright: Commission recommendation on management of online rights in musical works

UK Presidency Conference on Copyright and the Creative Economy
UK Presidency Conference on Copyright and the Creative Economy

Ladies and gentlemen,

It is a great pleasure to be here today. The Barroso Commission has put growth and jobs right at the top of its agenda – it is the greatest challenge facing us in Europe today. This means maximising the contribution of all parts of the economy, including the creative sector.

This Conference brings all of the key stakeholders around the one table to take a close and critical look at what needs to be done – how to deliver value to investors; how to ensure a robust intellectual property regime; how to respond to the needs of content users, while protecting the interests of others in the intellectual property value chain. These are vital issues and I pay tribute to the organisers for creating this important opportunity for dialogue.

I have already heard from several sources that your discussions this week have been lively- with so many articulate advocates and different point of view, I wouldn’t have expected anything else. I very much look forward to receiving your recommendations. I am absolutely sure they will give us much food for thought.

There is clearly a European dimension to this work, and the Commission has an important contribution to make – I know that officials from my DG have been taking a full and active part in the discussions over the past few days. Where there are obstacles to economic growth and performance, action at European level can ensure that they are removed.

For some time we in the Commission have been looking at the way that copyright has been managed and cleared. We have come to the clear conclusion that the current situation can be improved. It has been acknowledged for many years that without an initiative in this area, the European copyright edifice would be incomplete.

I am pleased to be able to tell you today how we plan to fill that gap.

It is clear to us that the market for online music holds enormous potential that has yet to be realised. To ensure maximum benefit, therefore, we have chosen to concentrate our first efforts in this field.

The digital market for music was worth $330 million in 2004 – estimates expect it to double in 2005. Analysts predict that digital sales could read 25% of record company revenues in five years. 50 million portable music players were sold in 2004, including 10 million i-pods. All players in the industry stand to benefit from this growth.

But Europe does not appear to be making the most of these new opportunities and, unless it is better equipped to exploit this potential fully, it will continue to lag behind.

Of course, there are important differences between the US and the European markets - for one thing, Europe has greater cultural and linguistic diversity. There are also differences in bandwith availability.

But these do not account for the full extent of the shortfall and where there are inefficiencies that can be addressed we cannot afford to let them stand.

Europe’s model of copyright clearance belongs more to the nineteenth century than to the 21st. Once upon a time it may have made sense for the member state to be the basic unit of division. The internet overturns that premise.

In the nineteenth century, music was primarily performed in cafés, bars or music halls that needed to be monitored locally by local societies. But this is no longer the only or even most important way the Europeans consume music.

The internet does not recognise borders. As the old ad used to say, music is now available to consumers ‘anytime, anyplace, anywhere’. The internet makes it possible to offer them a wider range of music than every before. It can reach the mass market, it can serve the specialist. It is ubiquitous.

While technology has advanced, the way we license music has not kept pace.

In recent years, online piracy has been a real problem for the music industry - though it is fighting back strongly and recent case law has given additional weight to its case. But if the illegal downloading of music is to be stamped out, we must make it easier – more practical and cost-efficient – to provide and receive legitimate online services.

Making it easier to clear copyright and to secure Europe-wide licences is an essential part of this approach. We need a new a new generation of copyright licensing models more in tune with the Internet-age.

This is in the interests of all stakeholders. Commercial users need to be able to secure a licence for more than one territory which gives legal certainty for all territories. They should not be restricted by residence or nationality in this regard.

Equally, holders of copyright and related rights, want a system that maintains and supports the value of their work. They too, should not be discriminated against or treated less favourably because of where they operate or where they come from.

All concerned also have a vested interest in a system that works openly and transparently.

The Commission, therefore, has examined how to remove the main obstacles holding back the market 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.

We have also considered carefully how to go about effecting this change. In all areas of my work, I have made it clear that I will always choose the lightest possible touch that can secure the goal being sought. This is, in my view, the best way to ensure a partnership approach.

I have promised to keep legislative and regulatory burdens to the minimum necessary to secure a properly functioning market. But this cannot be a one sided deal. Industry players must also be prepared to play their part.

I have, therefore, decided that, in the first instance, the market should be given a chance to develop in the right direction. I have proposed to my colleagues in the College, a recommendation which will set out a set of ground rules by which we believe the system should operate. I hope that this soft-law instrument will be adopted in the next few days and that it will deliver results.

If it does not, and I will be monitoring matters very carefully indeed, we will have to consider whether a more binding legislative approach might be called for.

The recommendation will be addressed to our Member States but, and this is a relative novelty, it will also be addressed to all economic operators that involved in the clearance of copyright across the European Union.

It is based on the premise that territory-by-territory management of copyright clearance is too cumbersome and too costly. It is not efficient for content users and it does not serve the interests of right-holders who want their content disseminated as widely as possible. In a territory-by-territory model, the weakest link in the chain will hold up the quick and effective roll-out of their latest creative content.

Our proposal sets forth a credible system to achieve an EU-wide license in line with the ubiquity of the Internet.

It provides that rights-holders should have the right to entrust the management of their online rights to a rights manager of their choice, irrespective of the Member State of residence or the nationality of the manager or the rights-holder. Equally, users should have the right to equality of treatment. Managers should grant commercial licences on the basis of objective criteria and without discrimination among users.

We have also included in the recommendation provisions aimed at ensuring equitable distribution of royalties; non-discrimination of representation; accountability; and effective dispute resolution.

The way I see it, the obvious way forward is that rights are gathered into attractive packages - repertoire - and then licensed to online service providers on an EU-wide basis in a single transaction. There is a single contract, easy accessibility of attractive repertoire, and little overhead.

We did not have to look far to find this model.

When SACEM, the French society representing authors, composers and editors of musical works was set up in 1851, it did not limit its licensing and enforcement action to the French territory. After adoption of the Berne Convention for the international protection of literary and artistic works in 1886, French agents collected royalties and other fees for the performance of French repertoire in the UK. Direct collection of royalties for your own repertoire only ceased when the UK established its own collecting society and when this society entered into an agreement with SACEM that it would collect on behalf of the French repertoire in the UK.

Our preferred model, therefore, is nothing else than the original idea that was behind SACEM monitoring the use of French repertoire in the UK. This practice of “direct” monitoring and licensing was only replaced by bilateral agreements between societies once all jurisdictions started creating such societies, and only on the grounds that local monitoring and collection was too costly to be done directly.

But the Internet has changed all that. Local monitoring is no longer necessary and electronic monitoring across national border is no longer costly. Our policy therefore rests on the principle of direct licensing and monitoring of all online form of exploitation of musical works.

It has been suggested that what we are proposing – the possibility of direct licensing across EU borders – is a revolution in European copyright management. I would call it going back to collective management’s historical roots. Licensing repertoire directly to all interested Internet users appears to me the simplest and most logical business model.

And as it is a simple model, it is also the cheapest model. And the cheapest model creates the least overhead and thus creates the most value for the right-holders.

I am therefore not surprised that major segments of the creative community have embraced our proposed business approach. Publishers, be they major, mid-sized or small have embraced the model, and so have the independents grouped together as IMPALA.

Different collecting societies have taken different views as to the merit of direct licensing of their won repertoire across the EU, but I am heartened to see that those societies that have confidence in their repertoire and their ability to compete to acquire additional attractive repertoire have stepped forward to say so.

And as you may see on our DG MARKT website, those who support the direct approach are not only major societies, but also societies with smaller repertoire that see this option as an attractive niche product they wish to capitalise on.

And this brings me to cultural diversity. What better way to foster cultural diversity than to allow all societies, big and small to capitalise on their repertoire on an EU-wide basis. All the royalties generated go right back to the creators with no other intermediaries taking a cut.

This is why I believe the possibility of direct online licensing should create incentives for all sorts of rights managers -- be they collecting societies or other economic operators providing copyright-clearance services – to step forward and offer EU-wide clearance services for the Internet.

Such licenses will make it easier for new European-based online services to take off.

The fine balance we struck between ease of licensing and maintaining the value of copyright protected works will ensure that content is not available on the cheap. All of our recommendations are tailored to ensure that Europe’s creative community will get its share in revenues achieved online.

But direct licensing will not be introduced from today to tomorrow. It will have to be phased in gradually and without destroying existing structures based on bilateral agreements. In order to facilitate an orderly transition process, as I have said, our recommendation includes provisions on governance, transparency, dispute settlement and accountability of collective rights managers.

Governance rules setting out the duties that collective rights managers owe to both right-holders and commercial users should introduce a culture of transparency and good governance enabling all right-holders to make an informed decision as to the licensing model best suited to their needs.

Taken together, our package should stimulate EU-wide licensing and promote the growth of legitimate online music services.

Finally, let me come to the issues you debated at the “Creative Economy” conference today. If you wonder how the creative community can make a contribution toward growth and prosperity of the EU, our recommendation reflects a policy choice.

Yes, we have to foster the Internet and the panoply of services that it has created by streamlining the process of copyright licensing. The current unsatisfactory arrangement of having to clear online rights in musical works on a territory-by-territory basis is too costly and complex and needs to be remedied.

But this remedy should not erode the intrinsic value of copyright. EU-wide licensing will reduce the number of national licenses an internet operator needs to take out before launching a service.

An operator will thus be able to save considerable cost in negotiating licenses or hiring expensive experts for doing so. It will not mean that copyright–protected works can be obtained on the cheap, but will result in a situation where value of creation is enhanced and where the creative industries are best prepared to flourish and to meet the challenges of the future.

Thank you.

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