The European Union is promising its citizens better access to online music thanks to a new directive focusing on “the collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market” (theDirective). The Directive, which was adopted by the European Council on 20 February, aims to simplify and facilitate cross-border music licensing for online service providers. This is good news for Irish consumers who are typically kept waiting for innovative new music streaming services to hit Irish shores. Irish artists will also benefit from quicker, more transparent payments of performing rights royalties.

The Directive has two principle aims:

  1. To facilitate cross-border licensing of authors’ rights in online music; and
  2. To make copyright collective management organisations (CMOs) (also known as collecting societies) more transparent and effective.​

Collective Management Explained

Online streaming of music counts as a “public performance” of music and as such it requires the permission of the rightsholder. It would be unwieldy for artists to negotiate these permissions on an individual basis which is where CMOs step in.

CMOs perform an essential role by clearing rights to commercial users on a large scale and administering the resultant royalty payments to artists. However, these rights are typically administered on a territorial basis, a system which does not fit easily with  the borderless nature of the internet.

In Ireland alone, there are three CMOs which administer rights in relation to the public performance of music. The Irish Music Rights Organisation (IMRO) represents the interests of the composer and lyricist; the Phonographic Performance Ireland (PPI) those of the record company and the Recorded Artists and Performers (RAAP) those of the actual performers on the recording. Multiply this on a European scale and the result is a bewildering number of rightsholders for new online music service providers to negotiate with. According to the EU Commission, there are more than 250 CMOs in the EU. Between them, these societies collect over 60% of the worldwide total rightholders’ remuneration collected by CMOs (an estimated €4.6 billion).

Key Directive Provisions

The idea behind the Directive is that CMOs should be able to grant multi-territorial licences, either alone (if they can meet the quality standards set out in the Directive) or by aggregating their repertoires with other CMOs in the EU. Artists should be free to choose a CMO of their choice, regardless of their country of establishment.

As a result, the Directive ensures that:

  • If a CMO does not offer multi-territorial licensing, a rightsholder may offer their online rights to another CMO for these purposes (without losing their original CMO membership);
  • CMOs that are unable or unwilling to provide multi-territorial licences are encouraged, on a voluntary basis, to negotiate deals to aggregate repertoires with other CMOs that offer multi-territorial licences;
  • CMOs which already aggregate repertoire and offer multi-territorial licences will be required, upon request, to represent the repertoire of any CMO unable or unwilling to grant such licences itself (provided that the request relates to the type of online rights that the aggregating CMO represents); and
  • Agreements between CMOs on multi-territorial licences should be conducted on a non-exclusive basis to ensure greater competition.

The Directive represents the long fall-out from a 2008 decision of the Commission which held that certain aspects of the membership and territorial restrictions of reciprocal representation agreements amongst European CMOs were contrary to EU competition law. These aspects of the Commission decision were upheld by the General Court in April 2013 (Case T-442/08) (the CISAC Decision).

The Directive also sets out minimum corporate governance and transparency standards for CMOs. Royalties must be paid to rightsholders within nine months, and royalties which cannot be distributed should be kept separate from general CMO accounts.

The Directive will come into force twenty days after its publication in the Official Journal of the European Union. Member States will have up to 24 months to implement its provisions once in force.

For more background information see our blog post on the previous draft.

The full text of the Directive is available here.