Online firms attack music royalty system

Date: 16/11/00

By Peter Chapman

FEARS are growing that the fledgling EU market for online music could be hampered by existing system for ensuring that composers are paid each time their works are 'played' over the Web.

The warning from the European Digital Media Association (EDiMA) comes as the Union's institutions try to thrash out a deal on linked legislation to govern copyright in the digital age setting out the actual right of artists and creators to be paid.

The organisation's secretary-general Wes Himes claims that the online music market is being hamstrung by out-of-date, monopolistic 'collecting societies' which take money from Web-based content providers and pass it on to composers, authors or publishers.

He says online companies still have a tough time getting licences to play music over the Internet from major record labels, which fear that private copying could ruin their business. But even if licences are granted by smaller independent labels, online firms have to strike separate deals with local collecting societies on how they will compensate the owners of the 'underlying rights' each time their works are played.

"One of our members has to go to their local society to get a licence to use the repertoire of the members which that society represents. That licence is typically then valid across the whole EU. But the collecting societies are monopolistic and sometimes the offers they make are not 'market realistic'," said Himes.

Internet companies claim the collecting societies, which were set up decades ago for the offline world, do not understand the business models used by the new online firms. "It is safe to say that there needs to be improved mechanisms. There is a steep learning curve that needs to be overcome to understand how our business works," added Himes.

The issue was discussed for the first time at a special hearing of industry experts, lawyers and officials organised by the European Commission this week. But a spokeswoman for GESAC, the Union organisation which represents collecting societies, argued firm conclusions on the online rights management issue could not be drawn until the market for Internet music has had a chance to develop. "We did not take the initiative to have these hearings. We think it is a bit premature to have them so quickly," she said.

The EU has nearly completed work on its eagerly awaited copyright directive after three years of heated debate. Major record labels have fought hard for the right to thwart would-be digital copiers, while electronics manufacturers want to preserve their ability to sell duplicating equipment.

The European Parliament's legal affairs committee is currently preparing a list of fresh amendments to the draft directive, with governments and MEPs expected to agree on the final shape of the legislation in early 2001.

Fears are growing that the fledgling EU market for online music could be hampered by existing system for ensuring that composers are paid each time their works are 'played' over the Web. The warning from the European Digital Media Association (EDiMA) comes as the Union's institutions try to thrash out a deal on linked legislation to govern copyright in the digital age setting out the actual right of artis and creators to be paid.