The European Commission has presented a proposal for a Directive on Collective Rights Management.
The proposal has two main objectives:
- to make sure that artists and authors get paid in a proper and timely manner by the collecting societies, and
- to make it easier for commercial actors (like Spotify, iTunes, or whatever) to get the licenses they need to offer music services across borders and all over Europe.
Both objectives are good and sensible, and the Commission’s proposal is very welcome, as there are serious problems in both these areas today.
To achieve the first objective, the proposal sets out minimum rules for the collecting societies when it comes to transparency, democratic governance, and accountability towards the members (i.e.: the artists and authors), and towards the general public. These rules will apply to all collecting societies, both those that handle musical works and other types of works, like pictures, text, or audiovisual works.
These new rules are badly needed, as there have been and are serious problems in many (though not all) collecting societies in the EU. For example, after the conference ‘Towards the reform of collective rights management: Time for a fair remuneration of artists‘ that the Green group here in the European Parliament organized in April, Saskia Walzel from the British NGO Consumer Focus wrote:
Kelvin Smits from Younison, a pressure group of artists from across Europe, recounted the recent scandals that have rocked collective rights management across Europe: in February this year SABAM, the Belgian music collecting society, was charged with falsifying accounts and fraud; and in July last year police raided the Spanish music collecting society SGAE to arrest and charged eight employees for embezzling millions. Edouard Barreiro from the French consumer group UFC Que Choisir pointed out persistent problems with French collecting societies, which like their Belgian and Spanish counterparts are subject to regulation. Both Kelvin and Edouard forcefully rejected the argument by a French collecting society in response to their criticism that ‘corruption happens everywhere’.
The Commission’s proposals for basic transparency, democratic governance, and accountability are set out in Title II of the directive (page 24 to 33). They are fairly detailed, but not overly so, and the provisions as such are all completely reasonable. I find it difficult to see how anybody could argue against an obligation to have proper accounting and transparency standards when they are handling other people’s money (so it has so far been rather amusing to meet with the lobbyists from certain collecting societies and hear them try ;) ).
The rules need to be concrete, and not just nice fuzzy words with general principles, if the directive is to have any harmonizing effect on the single market. At the same time, the directive is written with the knowledge that there are different traditions in different member states. I think the Commission has done a good job in finding the right balance in this respect.
As an example to illustrate: Article 8 prescribes that the collecting societies must have a ”supervisory function” with certain responsibilities, but leaves it open exactly how this should be organized. In member states where the board of a collecting society is running the daily business the supervisory function can be exercised by a separate body elected by the members. In member states where the board traditionally has a supervisory function and the daily business is run by managing directors they can continue to do it in that way. And in the UK, where (as I understand it) the current tradition is to have a board containing both executive and non-executive members, with the latter having a supervisory function over the former, they can continue to do it in that way as well.
I have two amendments in particular that I will want to make to this part of the directive, both of them to Article 12, which deals with the distribution of money to rightholders.
Article 12.1 says that collecting societies should make the payments to the artists or authors no later than 12 months from the end of the financial year in which the revenue was collected. This means that if a collecting society collects money in January one year, they don’t have to pay the artist or author until December the following year, 23 months later. This seems highly unfair to me.
In another (unrelated) dossier that we adopted in the legal affairs committee JURI a year or so ago, we said that payments in other contexts should be done within 90 days. I see no reason why we couldn’t apply the same time limit here. If there are collecting societies that would find it difficult to comply with this (still quite long) time limit, I would see that as an indication that those collecting societies need to improve their administrative routines, and need to do it urgently.
Article 12.2 says that if a collecting society is unable to find the artist or author that they should pay money to, they are allowed to keep the money after five years. This is something I feel very, very unhappy about, since it will provide a direct incentive to the collecting societies not to be overly diligent when they are looking for rightholders. This sends completely the wrong signal. I can imagine various different solutions to the problem of what to do with money that has been collected but cannot be distributed, but under no circumstances should the collecting society be allowed to keep it.
One possible solution would be to say that each member state should set up a fund to be used for the purposes that the member state decides, such as for instance digitizing our cultural heritage, and/or paying reappearing rightholders that want to claim money in accordance with the Orphan Works Directive that we adopted in September 2012. If it turns out to be possible to do this, it would help alleviate one of the big problems in that directive.
The second objective of the Collective Rights Management directive is to facilitate cross-border licensing of musical works within the EU. This is in Title III of the directive (page 34 to 38).
Today, any entrepreneur that wants to put up a pan-European service for selling music has to carry out separate negotiations with in each of the 27 member states, often with more than one collecting society in each member state. If the digital single market is ever to become a reality, we have to get away from this situation.
Really big companies, like Google or Apple, may have the capacity to carry out simultaneous negotiations in 27 countries. But for a small or medium sized entrepreneur, this is simply impossible. This is very serious for the European digital economy as a whole, since we know from experience that much of the innovation tends to come from small and new actors. The current situation is holding these entrepreneurs back, while giving an unfair comparative advantage to the mega-corporations that already have a strong market position.
The Commission’s proposal does not try to impose a completely new structure for musical licensing from the top down, but rather to introduce mechanisms that will hopefully allow the collecting societies to gradually sort out the problem themselves, by encouraging them to enter into representation agreements with each other that will reduce the number of separate negotiations a would-be entrepreneur will have to enter into.
This is particularly good for songwriters in the smaller member states, who may not have the same commercial weight as the mainstream pop music, but who represent much of the cultural diversity that is one of Europe’s strengths.
A commercial actor planning to launch a pan-European music service may feel that it would not be worth the effort to secure the rights to, say, the Finnish or Maltese repertoire if she has to conduct separate negotiations to get them, since these are small countries. But if she can get them as part of a bigger parcel without any extra negotiation effort, they will of course be welcome additions.
To solve the problem of multi-territorial licensing within the single market is definitely something that is can only be done on the EU level, and not by the member states themselves. When the Commission presented its proposal, three member states (Sweden, Poland, and France) made subsidiarity protests, claiming that they could solve this problem themselves on the member state level.
These objections are plainly ridiculous. None of the protests contained any actual arguments as to why this would be better handled by the individual member states. This is unsurprising, since I cannot imagine how you would invent arguments to claim that the Swedish government (for example) would be in a better position than the EU to ensure that Spotify has an easy way of getting licenses for the other 26 member states.
For once, this is an issue that quite obviously belongs on the EU level. That three member states tried to claim the opposite is just an indication of how strongly the collecting society lobbyists have managed to influence the governments of many member states.
All in all, this is a good proposal from the Commission, and I hope that the parliament will be able to unite in strong support for it. At the moment, the situation regarding multi-territorial licensing is a mess. This is hurting both cultural workers and would-be entrepreneurs that want to offer innovative services across the borders within the EU.
If we can get a digital single market within the EU, this will be a great boon for both the European economy and for the cultural diversity that is one of Europe’s unique advantages. Moving in that direction may mean that collecting societies that are badly run, and currently do not live up to even minimum standards on transparency and accountability will have to change the way they operate and shape up. But this is not a problem, it is one of the primary purposes of the directive.
Will this directive solve all problems and make the digital single market a reality? To be perfectly honest, I don’t know. Maybe it’s unrealistic to hope that the (actually quite moderate) new rules that the Commission is suggesting will be such a perfect silver bullet.
But I do know that the status quo is unacceptable, and that we have to do something, and do it without further delay. This is a constructive proposal to at least take a first step towards a digital single market that will benefit cultural workers and consumers alike. Perhaps the proposal does not go far enough, and we will need further measures to be taken in the future. Only time will tell.
But at the very least the Collective Rights Management directive has a good chance to set the ball rolling in the right direction.