Licences for Europe Structured stakeholder dialogue 2013 - Europa EU

1 . Licences for Europe Stakeholder dialogue 2013 Cross-border Access and the Portability of Services (WG1) Subgroup Music, March 1, 2013 Views of SIAE and European Authors’ Societies 

2 . Definitions DSP: Digital Service Provider offering to the public music works by any on line channel CMO: collective music rights management organization multi-territorial licence or MT: licence granted by a CMO for online uses, which covers musical works in more than one Member State Rights: authors’ exclusive rights of reproduction and communication to the public, including making available March 1, 2013 GESAC - SIAE 

3 . Questions raised by L4E WG 1 exercise 1. What are you doing to improve cross-border access to content and content portability? 2.  What are the main problems or obstacles you are facing? 3. What contractual or technological solutions could improve the situation? March 1, 2013 GESAC - SIAE 

4 . 2007 – Transformation begins  After 2007, authors’ on-line rights collective management moves from national blanket licenses to new options for multi territorial DSPs  All representation contracts between music collecting societies are revised  Major publishers withdraw their mandates for on line rights and confer them on specially mandated entities  It becomes possible to have paneuropean mono-repertoire licenses March 1, 2013 GESAC - SIAE 

5 . 2012 – New Landscape for Transborder Licenses  More than 250 Digital Music Service in EU and growing (source: Online Music Market in Europe, GESAC-IFPI-ICMP)  National blanket licenses from CMOs to DSPs and web sites for their geo-localized services (small scale users)  MT licenses per repertoire from CMOs  Pan-European schemes of several Direct Licensors: ARESA (Bmg)- CELAS (Emi) – PAECOL (Sony) – IMPEL (PRSformusic) – DEAL (Umpi)- STAR (Kobalt) – PEDL (Wcm), etc.  Hubs: e.g. Armonia (SACEM, SIAE, SGAE, SPA, DEAL, Peer Music) March 1, 2013 GESAC - SIAE 

6 . Authorized usages in multi territorial licenses  Download on demand  Listening/streaming on demand  Pre listening/preview on demand  User(s) are the natural person(s) using the Service via Internet or mobile site/s exclusively for private use.  The Territories where usage takes place are determined by the users billing addresses and/or IP addresses March 1, 2013 GESAC - SIAE 

7 . Territories of MT Licenses  Example: SIAE (Società Italiana Autori ed Editori) Home Territory: Italy, Vatican City and San Marino Countries of the EUROPEAN ECONOMIC AREA  Switzerland  March 1, 2013 GESAC - SIAE 

8 . Portability of Services Service providers providing services to consumers across the EU need to ensure that they have secured all the necessary rights in the Member State in which they operate. Content distribution limitations can depend on:  Service providers (online platforms) geo-localising  Single Rights Holders limiting the authorization  Different Rights Holders in countries served by DSP None of these applies to Music MTL Collective solution provided by CMSs for music do not create obstacles to the portability of services. March 1, 2013 GESAC - SIAE 

9 . Collective licences facilitate cross-border access to cloud-stored content Non-exclusive multiterritorial authorizations for the exploitation of Music in Cloud Services already in place Amazon, Google Cloud, iCloud, Xbox…  The Agreements are of an experimental, temporary nature, and will not constitute a precedent for any new agreement which could possibly replace each of them once the Parties have a better knowledge of the exploitation concerned. March 1, 2013 GESAC - SIAE 

10 . CLOUD TECHNICAL MEASURES CMO licenses cover the use of technical measures generally acknowledged to be reliable to prevent use not authorized in the usage rules of the Service The Licensee DSP undertakes - to notify the Licensor of any widespread, unauthorized material acts of use that come to its attention - to cooperate with the Licensor’s commercially reasonable requests, strictly within the confines of the law - to assist with licensors’ reasonable requests for actions to obtain compensation for losses suffered in connection to abuses. March 1, 2013 GESAC - SIAE 

11 . Possible Obstacles to mul territory availability  Commercial policies of DSPs  Investment recovery  Unfair competition with illegal services  Lack of transparency in the chain of rights  Complexity of negotiations with certain right holders  Fragmentation of repertoires  National Tax Regulations on royalty transfers March 1, 2013 GESAC - SIAE 

12 . Taxation v. EU Single Market  Member States continue to operate different processes, rates and systems for income tax on royalties withheld at source.  Conventions against double taxation do not work uniformly and smoothly.  Withholding tax can be a barrier to pan- European licensing.  Harmonized withholding tax system for royalty transfers can support re-aggregation of repertoires March 1, 2013 GESAC - SIAE 

13 . Licensed Repertoires  Licensing requests often follow a “priority” order dictated by the market share in the territory where the service is launched. DSPs use just repertoires DSPs use repertoires considered more ignoring the Authors’ attractive: cultural Society actually diversity endangered administering them: market distortion  DSPs policies in the launch of their services can increase marginalization risks for “small” repertoires. March 1, 2013 GESAC - SIAE 

14 . Proposed Directive on Collective Management of Rights To grant MT licenses CMOs must comply with minimum quality standards in electronic data handling in order to:  accurately identify CMO’s licensed music repertoire  rapidly invoice online service providers  pay the amounts due to each right-holder on time. On a per-work basis Only compliant CMOs will be allowed to grant multi- territorial licences of authors' rights in musical works for online uses. CMO can outsource services related to MT Licenses http://ec.europa.eu/internal_market/copyright/manageme March 1, 2013 GESAC - SIAE 

15 .Data Source: KEA "Licensing music works and transaction costs in Europe", 2012 March 1, 2013 GESAC - SIAE 

16 . . Fewer Licences . More Territories . Faster Procedures Re-aggregation facilitates the mass use of music in several territories with a single licence and helps avoiding incorrect invoicing or double invoicing. CMOs granting multi-territorial multi-repertoire licences must accept to represent the repertoire of other CMOs for the purpose of multi-territorial licensing (obligation to tag on) Benefits: Consumers get a wider choice, right holders see their content used more often; DSPs have their administrative activity facilitated. March 1, 2013 GESAC - SIAE 

17 . The Administrative Process  DSPs deliver Usage reports per country per month to all Licensors (iTunes 3 reports x month x 29 territories/Beatport 2 reports x quarter x 42 terr.s)  Each Licensor  processes all reports (Ex. 2,34 M records in iTunes report FR Dec. 2011)  identifies works in its repertoire  delivers claim files and invoices Double claims must be detected – conflicts must be reconciled – 100% claims must be realized March 1, 2013 GESAC - SIAE 

18 . Simplifying the rights administration process  Licensing Hub: (www.armoniaonline.eu) partners: SACEM-SIAE- SGAE + UMPI +SPA + Peer and SONY  Joint back office: (www.iceservices.eu) PRSformusic, STIM, GEMA  Transparent legal status of works/chain of rights: ( www.globalrepertoiredatabase.com) ECSA, ICMP, CISAC, Sony, EMI, UMPI, Warner/Chappell, APRA, GEMA, PRS for Music, SACEM, SIAE, SGAE, STIM, Apple, Google, March 1, 2013 GESAC - SIAE 

19 . Automated global transaction processing infrastructure  Standards can:  deliver the crucial operating efficiency required for MT licensing  lower transaction and communications costs  increase revenues for all sectors involved  Automation of transactions across the value chain is made possible by the Use of interoperable identifiers, formats and processes. March 1, 2013 GESAC - SIAE 

20 . Digital Data Exchange  DDEX Consortium is a standards-setting organisation of media companies, music CMOs, DSP and technical intermediaries.  DDEX was formed to:  Design standardised XML message formats for the exchange of metadata across the digital content value chain  Develop common protocols for the automated communication and management of messages  Exchange huge volume of data  Process analytical claims per transaction  Signatories to DDEX MoU (APRA , ARESA, ASCAP, BMI, CELAS, GEMA, KODA, NCB, PAECOL,PRS for Music, SABAM,SACEM, SGAE, March 1, 2013 SIAE, STIM,SUISA) are GESAC - SIAE 

21 . Claim Confirmation & Invoice Details CCID CCID is the standard format for work claim files and invoices that improves communication between licensors and licensees It contains standardised dispute reporting facility It increases transparency in individual invoices March 1, 2013 GESAC - SIAE 

22 . Technological Solutions: Tests in progress New conflict reconciliation tools for multiple multi territory licenses are a remedy to:  Avoid double payments  Make Licensor’s warranty effective  Solve conflicts among direct licensors  Avoid unlicensed/unpaid exploitation for copyright works  Introduce residual blanket licenses for unclaimed exploitation  Remunerate “marginal” repertoires March 1, 2013 GESAC - SIAE 

23 . Claims Reconciliation  Scope “Claims Reconciliation” gives licensors an overall view of disputes and unclaimed works, respecting confidentiality of data  Functionality  Provides an overview of invoices issued by licensors for a given DSP, territory and period. Loading the sales report and invoices is also a starting point to get information upon disputed and unclaimed works.  Provides general statistics as well as work by work details on disputes. Both statistics and detailed information are needed to support the bilateral discussions with other licensors.  Shows statistics on unclaimed usages as well as related details. This is needed for ensuring legality of exploitation and correctness, accuracy and completeness of collections  Checks Work Documentation available on the Fast Track documentation data base CIS-Net to support detailed analysis and fixing disputes. March 1, 2013 GESAC - SIAE 

24 . The Way Forward  Collective licensing delivers an effective solution for MT availability and portability of services.  CMOs plan initiative to achieve more aggregation.  Technological solutions used and that are underway for identification, reporting, invoicing, etc. are key for the success of MTL.  EC needs to develop policy on competition and cultural diversity in order to ensure effective and inclusive re- aggregation.  Tax regime needs to be revised at EU level in order to ease the operation of MTLs and to boost more innovative services. March 1, 2013