The Value Gap
Music publishers provide consumers with access to a wide selection of music. This has hugely benefited numerous internet service providers (ISPs) by generating significant profits for ISPs (on foot of providing access to this content). Content, and generating revenue from it, is the core of the ISPs business models and music continues to dominate as the most essential form of all digital content.
These ISPs also act as a barrier to entry in the sense that licensed services are discouraged from entering the market for fear of not being able to compete with those benefiting from a free ride. The current unbalanced market has resulted in huge losses for creators and music publishers.
The Value Gap is the difference between the value that some online intermediaries extract from music, and the value that is returned to rightsholders.
It’s important to tackle the reluctance of Internet Service Providers to sufficiently remunerate rightsholders for online copyright-protected content. Acknowledged by the European Union as of grave concern, the Value Gap was included in the EU Copyright Directive. Article 17 aims to solve the problem by determining the liability of internet intermediaries.
The EU Copyright Directive was adopted in spring 2019. National EU governments have a two-year period to implement the Directive into national legislation. How it is implemented at national level remains a key concern and IMPF is actively working with members to ensure transposition is consistent and adequate across all EU countries. While the Directive is a big step in the right direction, getting the ISPs to “pay fair” for the music content they are generating big profits from, remains at the core of what music publishers and songwriters demand.
Streaming services fee model
IMPF calls for the reform of the payment models used by certain streaming platforms in favour of a model which calculates royalties on a fixed ‘per play’ rate/pay per stream. The model currently in use by some platforms involves complex algorithms that calculate royalties based on the geographic location where the streaming occurs, and royalties are then aggregated based on all streaming activity. IMPF believes that such models inherently disadvantage artists, indies and repertoire of niche genres, and particularly works, which might not be streamed very often.
Stream Ripping and Stream Manipulation
Stream ripping involves turning a music file on almost any streaming platform into one that can be downloaded and kept permanently. While individual streams may not be worth very much, the repeated listening to such streams adds up to considerable amounts of revenue for rightsholders. Stream ripping means there are sites that are extracting an audio file from a licensed streaming platform and presenting it to a user as a free, permanent download. These sites exploit high levels of traffic and profit from advertising revenues without giving anything back to rightsholders. Stream ripping, like any other form of piracy, endangers the entire music ecosystem.
Stream manipulation includes the artificial creation, by human or non-human means, of online or offline plays on audio and audio-visual streaming services i.e. where those plays do not represent genuine listening.
It has the potential to cause economic harm to streaming services providers, rightsholders, artists and advertisers, and to hurt artists by providing them with potentially misleading and artificial data, leaving them to either compete with artificially inflated stream counts or to consider engaging in these costly, unethical and improper practices themselves. In this regard, IMPF has signed a Code of Best Practice to combat stream manipulation which produces false streaming counts in relation to listening data. The coalition of signatories will strive to detect and prevent stream manipulation to protect the rights of artists and creators online.
Collective Rights Management
IMPF welcomed the adoption of the EU Collective Rights Management Directive designed to promote greater transparency and better governance of collecting societies in general. The Directive facilitates multi-territorial licensing of musical works for online use and makes it easier for service providers to obtain the relevant licences for music to be distributed online across the EU, while ensuring that revenue is fairly collected and distributed to rightsholders.
IMPF recognises that having competing licensing models is healthy and that common high standards of transparency, governance and accountability should be comparable across the board to allow for a level ground for competition. IMPF is closely monitoring the implementation of the CRM Directive and encourages its members to work with their collecting societies at national level.
Exceptions and limitations
IMPF believes that the three-step test used for exceptions and limitations to copyright protection provides sufficient flexibility to individual countries to determine their own policies, provide access solutions in the digital environment and in the case of the EU regime on exceptions and limitations, allow Member States to suitably adapt the regime to varying local and cultural traditions. The optional nature of most existing exceptions reflects the diversity and richness of Europe’s cultures and national related policies. The territoriality of exceptions and limitations does not distort or create discrepancies in the EU Single Market. We believe that the licensing market generally works well and that exceptions and limitations ultimately limit copyright and stifle and discourage creative growth. In all cases, a balance of competing rights must be achieved.
IMPF was particularly concerned about the introduction of a new mandatory exception to “illustration for teaching”, including sheet music, in the EU Copyright Directive. We however welcome the outcome of the discussions and are pleased that final wording in the Directive secures a derogation for sheet music publishers.
Private copying levies and cloud computing
IMPF believes that licensing should always be the preferred option where it is possible, practical and enforceable. The opportunities for licensing are constantly growing due to the rapid development of new online services. Nevertheless, this does not mean that levies should be abandoned as they are the optimal solution when monitoring the volume of private copying carried out is not feasible. Private copying levies aim to compensate rightsholders for losses from private copying of content. IMPF firmly believes in ensuring fair compensation for rightsholders in such situations. When determining whether certain content should be licensed or levied, critical questions need to be addressed. These include where and how data is stored and who has access to the files. It is important that the content to be distributed and stored is legal; such cloud services should not be used to “legalise” these files without due negotiation with rightsholders.
Considered by many composers, publishers and other rightsholders as a vital source of income, levies need to be set at a rate which ensures adequate compensation for rightsholders. Currently, levies do not compensate rightsholders properly in the sense that the levy payment is due on devices and equipment and not in relation to specific works being copied.
The varied interpretation of private copying as stated in EU Law has created legal uncertainty and the distinction between private and public use has become vague. For example, many cloud services allow users to store copyrighted content on protected servers, allowing access via a passcode. However, links to this content can be shared with third parties which means that this content is no longer private.
In addition, the ECJ Reprobel Ruling on Private Copying Levies brought uncertainty to publishers as it stated that Member States were not allowed to allocate half of the fair compensation due to rightsholders to the publishers of works created by authors, because publishers could not considered as “rightsholders”. IMPF welcomes the clarification of music publishers as rightsholders included in the EU Copyright Directive and calls on those Member States that questioned the legality of publishers receiving dues from levies to observe the EU Directive in this regard.
Term of protection
The current term of protection in most of the developed world stands at 70 p.m.a. for authors and 70 for performers and sound recordings. IMPF believes this term is suitable in today’s environment. Music publishers invest a lot of time and money bringing writers to the market and often significant advanced payments are provided to these artists before any profit is made. To sustain this kind of investment, publishers must be compensated. In an increasingly aging society, life plus 70 is an appropriate term of protection and anything shorter than that is insufficient to allow for an opportunity to recover on these long-term investments. Lack of consistency in the term of protection makes it difficult to effectively enforce intellectual property rights (IPRs) on an international level. International harmonisation is vital to maintain adequate protection for rightsholders, especially when considering borderless transmission of works where terms of protection vary.
IMPF flags this very important issue when negotiating international trade instruments with trading partners that have differing terms of protection and calls on their governments to increase the term of copyright to life plus 70 years, making it compatible and consistent with standards currently in place elsewhere.
Network neutrality is the principle that all internet traffic should be treated equally. ISPs should therefore help enforce copyright laws through different measures, such as traffic management systems. Indeed, net neutrality must not be used to prevent ISPs from establishing network management techniques to ensure protection against theft of creative works and other unlawful activities. Internet piracy of copyrighted works negatively impacts creativity, jobs and the economy and further blocks broadband networks. Any increase in broadband penetration could exacerbate these problems if not handled properly.
The concept of territoriality in music refers to the licensing of musical works to distributors and broadcasters based on linguistic or cultural markets. Territoriality in copyright application reflects the cultural and linguistic diversity of our world.
As music publishers, we have the incentive to licence for as broad a territory as possible to yield increased revenue for our clients: songwriters and composers. Music publishers do not impose territorial restrictions but rather respond to or take heed of any restrictions in the market and normally successfully license multi-territorially.
IMPF welcomes the outcome of the EU Satellite and Cable Directive, whose initial proposal was to completely eradicate the principle of territoriality in the name of the Digital Single Market and apply the ‘Country of Origin’ rules to all creative sectors. Fortunately, most of the EU Member States in Council took onboard the concerns and restricted the application of the ‘Country of Origin’ principle, thereby safeguarding publishers’ rights.
Broadcasters and royalty free music
IMPF questions services that offer broadcasters access to wide catalogues of royalty free music. This distorts competition, making it impossible for anyone signed with a PRO to compete.
Furthermore, in many cases these royalty free catalogues stipulate that writers cannot be a member of any PRO.
IMPF asks that a TV broadcaster should, as a priority, seek to ensure that authors are properly remunerated.
Such a focus would ensure that the market is open to competition for the best creative content for these TV broadcasting opportunities.
EU VAT for Cultural Products
Currently under the 2018 EU VAT Directive, certain cultural products benefit from a reduced rate of Value Added Tax. IMPF believes that online music and CDs should also be eligible for these reduced rates under the Directive. In this regard, it’s unfortunate that the EU VAT Directive according to which EU Member States are allowed to apply reduced rates of VAT to digital publications such as books, newspapers and periodicals, omits music products from its scope. Affording these tax benefits to online music and CDs would be consistent with EU policy which values culture, growth and innovation and recognises the vital role of the creative sector in driving employment and growth in Europe. Furthermore, encouraging legitimate music consumption, would help combat the pirate market.
Mass online theft not only diminishes the ability of songwriters and composers to earn a living, but it undermines the incentive to create new works and invest in innovation. Internet theft leads to a culture of disrespect for Intellectual Property Rights (IPRs), a culture which threatens jobs, growth and cultural diversity. Music publishers are constantly adapting to new forms of exploitation by opening new revenue streams and raising public awareness about the importance of copyright protection. Unfortunately, these efforts are redundant without effective enforcement of IPRs. IMPF calls for active cooperation from ISPs to tackle online copyright infringement and supports the idea of educating the public, particularly young people in schools, on the nature and value of copyright law.
Free Trade Agreements
IMPF supports robust IP chapters in Free Trade Agreements (FTAs). FTAs serve to reduce import tariffs, remove non-tariff barriers and give effective access to markets between the relevant partner countries. FTAs often include provisions on the protection of Intellectual Property Rights (IPRs) and through the enhanced protection of IPRs abroad, publishers and artists may have greater possibilities to market their ideas and products in third countries. Under the principle of the most favoured nation, the highest standards of IP protection are applied to all trading partners to any agreement and this is particularly relevant to rightsholders operating in countries where a weak copyright protection framework exists. In general, FTAs can encourage better global harmonisation of IPRs and this in turn can create further incentives for content creation and cross-border exchange of protected works.
Copyright in the developing world
IMPF firmly supports the WIPO Development Agenda which is committed to improving the capacity of developing countries to benefit from the knowledge economy.
A balanced and effective implementation of the “Development Agenda” will greatly contribute to recognising copyright’s vital role in pushing cultural and economic growth.
Securing effective enforcement to permit lawful access to works is one of the greatest copyright challenges today. Enforcement of IPRs is key and without this, copyright protection itself will become irrelevant, a move that could seriously undermine any incentives for content creation and innovation.
IMPF strongly supports the UN Convention on the Protection and Promotion of the Diversity of Cultural Expressions and the Convention’s recognition of the importance of IPRs in sustaining cultural creativity.
There is a long and established tradition of music publishers driving cultural diversity through incorporating traditional melodies and investing in local and national repertories. Publishers remain particularly supportive of local culture and can communicate local works to larger markets and communities via established commercial networks.
Traditional Cultural Expressions and Folklore
IMPF believes that existing intellectual property laws are sufficiently flexible to provide protection of literary and artistic traditional forms, cultural expressions and folklore. However, in cases where existing IP laws prove to be insufficient, IMPF feels that voluntary instruments such as codes of conduct and other soft law mechanisms are the most effective solution.n the nature and value of copyright law.
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