Regulaton & Policy
Proposed Merger Could Affect Procurement of Online Music Rights – EC Opens Investigation

Every business, whether public sector or private, must have a licence to use copyrighted music in public: whether that be played in public, broadcast on radio or TV, used on the internet or copied onto CDs or DVDs. Even places of collective worship can require a licence, dependent on the country, to print hymns or play music. Some exceptions do apply, again, depending on the country, for example in educational use in schools or public libraries, the use of limited extracts for private research or study, copying paid-for content for personal use or for use in public local authority premises like hospitals. The licence in many cases comes from a licensing authority – usually the local council body – for public entertainment. Other agencies exist to provide licences for commercial use.

Internationally, the World Intellectual Property Organization (WIPO) is the agency that administers the Berne Convention, which provides international copyright protection and to which 164 countries have signed up. The EU Copyright Directive is a directive of the European Union to implement the Berne Convention and copyright law in Europe. It aims to ensure that competition is not one-sided within the single market.

Recently a joint venture has been proposed between three CMOs (collective rights management organisations). It is these who manage the copyrights of authors, performers and writers of musical works and grant licences on their behalf (and distribute loyalty payments). In its role to oversee merger control in Europe, and to preserve effective competition in the internal market, the European Commission has opened an in-depth investigation to assess whether the joint venture adheres to the EU Merger Regulation.

The three bodies involved are: PRS for Music Limited (PRSfM) of the United Kingdom, Föreningen Svenska Tonsättares Internationella Musikbyrå u.p.a. (STIM) of Sweden and Gesellschaft für musikalische Aufführungs- und mechanische Vervielfältigungsrechte (GEMA) of Germany. An article in New Europe has picked up the story and reports that “The Commission’s preliminary investigation indicated that the combination of the music repertoires currently controlled by each of PRSfM, STIM and GEMA could result in higher prices and worsened commercial conditions for digital service providers (DSPs) in the European Economic Area (EEA). This could lead, ultimately, to higher prices and less choice for European consumers of digital music.”

The digital service providers of music downloading or streaming need licences delivered by CMOs to operate lawfully in the market. The licences can cover one or several countries. This venture essentially reduces the number of CMO market players from four to two, so the concern is that competition will be reduced and that PRSfM, STIM and GEMA will not offer multi-national licences individually, allowing them to be procured only from the joint venture.

“The Commission’s investigation indicated that the aggregation of the repertoires of PRSfM, STIM and GEMA, currently among the most important in the EEA, could lead to increased bargaining power for the joint venture … This may enable the joint venture to charge higher prices and to grant worse commercial terms and conditions to DSPs. This, in turn, could lead to higher prices, less choice and less innovation for digital music end users in the EU.”

Copyright protects creativity, and, as we have reported many times, the EU wants to encourage more innovation in all public deliverables and services. So it will be interesting to see what the final findings are and the decision of the European Commission on May 29th.

We have also published numerous articles on the procurement of music licencing on our UK site, written by an industry expert, so if you are interested in the more in-depth aspects of buying music rights, do visit:

Three Strikes and You’re Out — Music Rights Owners Have the Power

A guide to buying music for marketing procurement executives

Songs vs Recordings, The Rise and Rise of Sync and Unlicensed and Licensed Use