July 7, 2008

EU Plans Overhaul of Music Royalties

By James Kanter

David Ferguson once played in a seminal art-rock band in Britain, but much of the money for his house and his son's education came from writing music for a children's television program, "Moondial," which has been rebroadcast many times over.

"I guess you could say it was my equivalent of having a smash hit record," said Ferguson, who is 55. "I never knew 'Moondial' was showing in so many different countries, but still I made money."

Ferguson and thousands of composers and songwriters like him say they rely for their living on a copyright system enforced by national organizations that collect money on their behalf from a variety of outlets that play their music - from national television stations to local hair salons.

Without these "collecting societies" and the monitoring they perform in faraway locations, artists say they would be unable to keep track of when their creations are used, and might see little financial benefit from their intellectual property.

Now the system in Europe is about to undergo significant changes, as antitrust regulators prepare to require the societies, in some cases established in the 19th century, to adapt to the digital world of the 21st.

The regulators want to end the current European system, under which the collecting societies effectively have domestic monopolies. By requiring societies to compete for the right to protect an artist's copyright, the regulators say, they will drive down artificially high administrative costs and stimulate the cross- border flow of music.

In a draft decision viewed by the International Herald Tribune, the European Union competition commissioner, Neelie Kroes, has concluded that "collecting societies totally eliminate competition between each other" in "repertoires for satellite, cable and Internet broadcasting use." She said that the societies have "long- entrenched monopolistic positions" and that "creates a barrier to entry which is impossible for a newcomer to overcome."

Her decision would order the societies to "immediately bring to an end" restrictions preventing composers and songwriters in one country from joining a collecting society in another. The decision also would also end exclusive agreements between societies under which they collect royalties in other countries.

Kroes is expected to receive approval for the measures from the European Commission this month, potentially bringing some of the provisions into force immediately.

That outcome might help digital services like iTunes, the online music store established by Apple, to sell from a single Web site in Europe rather than from different sites, carrying different products, from country to country. But it could create complications for such services in the short term if the decision demolishes an existing network of agreements between the societies, without establishing new rules that allow the societies to cross-license artists' works across borders.

The planned measures have sparked fury among some prominent composers and songwriters, who say Kroes is expanding the reach of antitrust law into one area - the cultural domain - where it will do more harm than good.

"He or she who writes a piece of work should have the right to that piece of work, own it, and have control of it, and for life and for their families," said Robin Gibb, one of the brothers behind the disco-era group the Bee Gees, during a news conference last week. Music is "a very personal thing," Gibb said.

European antitrust authorities started the investigation in 2000, when RTL Group, a broadcaster with television and radio channels across Europe, complained that it was too difficult to obtain a license from a German collecting society, Gema, to broadcast across several countries.

The EU case gained additional momentum in 2003, when Music Choice, a company that buys rights for digital broadcasting and online music services, complained that it was unnecessary and administratively expensive to ask each national society for permission to transmit programming.

"Technology has reached a point where something like a single digital watchdog for artists' rights could easily replace multiple low-tech national watchdogs," said Chris Johnstone, the head lawyer at Music Choice.

There also are some artists who harbor a negative view of the societies, questioning some of their financial practices and their ability to collect revenue from new media. Kroes says in her draft decision that there are vast differences in the fees charged by the different societies and in the levels of service they provide.

"I think the EU should break up the monopolies," said Kelvin Smits, 37, a Belgian musician who has written songs for a Belgian rock group, dEUS. He receives royalties from Sabam, the Belgian collecting society, but said he was unable to understand how it made its calculations.

Smits said he wanted "the freedom to be able to go to the collecting society that is best able to gather up micropayments on my behalf from the Internet worldwide."

The societies have been the subject of investigations of possible improprieties in some countries. Sabam was charged last year by an investigating magistrate in connection with alleged financial irregularities during the 1990s. A spokesman for Sabam said the organization was cooperating with investigators and was innocent.

Another collecting society, the Sociedade Portuguesa de Autores, has been under investigation by Portuguese judicial authorities since 2003 in connection with questions over financial practices. A spokesman said that the investigation had been prompted by an anonymous complaint and that the organization "has no knowledge of any developments on this investigation for more than a year now."

Despite misgivings about the societies among some artists, prominent composers and songwriters like Gibb remain staunchly opposed to introducing cross-border competition.

They say measures ending the monopolies could leave some countries without a national society at all, or with one that is so weakened that it would be unable to represent the interests of culturally important but commercially less successful artists, or those who sing in minority languages. They also say the measures could make it more difficult for comparatively established composers and songwriters to know how widely their compositions are performed, decreasing their overall earnings.

Gibb has appealed with other composers and songwriters, including Charles Aznavour, Ennio Morricone and Paul McCartney, to try to stop Kroes's proposal from taking effect.

"Hundreds of thousands of small and medium-size businesses, both writers and publishers, are likely to be wiped away," the European Composer & Songwriter Alliance warned Jose Manuel Barroso, the president of the European Commission, in a statement last week. "We believe this will be a last disaster for all Europeans, culturally, socially and economically."

Jonathan Todd, a spokesman for Kroes, defended the planned measures, saying there would be no requirements for rights owners to license their repertoire for a lower income than they received today. Todd also said the EU decision would help composers and songwriters, by "minimizing the music rights management fees which are creamed off the money paid to the authors and composers."

Even so, Ferguson, the "Moondial" composer, is among those who see a threat to the way they make a living.

Ferguson, who acts as a spokesman for the European Composer & Songwriter Alliance, started his music career playing keyboards for a band called Random Hold. But commercial success eluded Random Hold, and by the early 1980s the band had split.

Ferguson then started writing music for film and television - with some success. But his luck really began to turn when money from the collecting societies started rolling in. He estimates that royalties for music he wrote for "Moondial" and other television and film projects have earned him about pound(s)1 million, or $2 million, over 20 years.

He said half of that amount came from the work done by European collecting societies. How such a system would work in the future was anyone's guess, Ferguson said.

"If the users of our music can get away without paying for it, they will do it," he said.

Originally published by The New York Times Media Group.

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