21 June 2004 - AER SUBMISSION TO THE COMMUNICATION FROM THE COMMISSION ON THE MANAGEMENT OF COPYRIGHT AND RELATED RIGHTS IN THE INTERNAL MARKET

The Association of European Radios (AER) is a Europe-wide trade-body of private and commercial radio broadcasters in France, Germany, Italy, the UK, Greece, Spain, Portugal, the Netherlands, Denmark, Finland, Sweden, Switzerland and Romania. As such, AER represents the interests of over 4.500 radio operators broadcasting to millions of listeners across Europe every day.

Summary of recommendations

• Competition in the sale of collective rights can only be truly enhanced by allowing a user to purchase whatever rights he requires for whatever purpose wherever he wishes to exercise them from any Collecting Society in the Community against clear, published tariffs.
• Failing this, statutory licensing and a means of appeal that can be cost-effectively exercised by both Collecting Societies and users should be introduced in every Member State.
• Our sector pays over € 323 million per year for copyright and neighbouring rights and therefore feels entitled to call for transparency and fairness in the management of copyright and neighbouring rights by the collecting bodies.
• No attempt should be made to harmonise or impose minimum, standard or maximum rates.
• Digital simulcasting of analogue broadcasts should not attract any form of extra or additional payment to rights holders.
• Digital rights should not be more expensive that analogue rights.

1. Background: AER and collective rights

AER welcomes the publication of this Communication which covers both individual and collective management of rights and considers whether current methods of rights management are hindering the functioning of the Internal Market, especially with the advent of the Information Society. The Communication represents the conclusions of a consultation process which “have confirmed the need for complementary action on those aspects of collective management which affect cross-border trade and have been identified as impeding the full potential of the Internal Market” (3.6). It seems to us that the Commission is asking two principal questions.

1. Should it be left to the market to develop Community-wide licensing further while respecting the basic rules of intellectual property protection including its territorial nature?
2. What sort of Community legislation might facilitate greater Community-wide licensing?

Before we provide answers to these questions, we wish to make the following points.

• European radio stations play a crucial, cultural role as intermediaries between music copyright owners and the public. Radio stations add value to musical works and performances, by broadcasting and thus promoting them and therefore increasing rights holders’ income from sales and royalties. This additional income stimulates the creation of new works. Of course, radio stations also benefit from being able to broadcast the creative works of producers, performance artists, arrangers and composers and should pay appropriate amounts to them for the privilege. The relationship between creators, producers and artists on the one hand and radio broadcasters on the other is a virtuous circle.
• AER has often pointed out the lack of competition that exists in rights provision in the Internal Market and the resulting inequities faced by private and commercially funded broadcasters across the EU. These inequities concern rates, administrative processes, control mechanisms, arbitration and the existence of de facto national monopolies.
• At present, radio is migrating towards new technologies such as Internet streaming and digital terrestrial and satellite transmission. It is crucial that a proper balance is struck between the interests of copyright owners, copyright users, consumers and listeners. This is not the time to seek to impose additional or undue costs on radio broadcasters.
• Payment of copyright and neighbouring rights are an important part of our costs and our sector therefore feels entitled to call for transparency and fairness in the management of copyright and neighbouring rights by the Collecting Societies.

 2. Community-wide licensing

AER supports easing the process of Community-wide licensing.

a. AER commends the Commission for a brave and useful call to action which seeks to achieve “Community-wide licensing” defined as an “umbrella term to describe the granting of a licence by a single collecting society in a single transaction for exploitation throughout the Community”. (1.2.4).

b. The Communication is at some pains to uphold “the territorial nature of copyright and the ability of rights holders to exercise their rights territorially” (1.2.1). However, it points out (1.2.3) that this increases the difficulty of licensing across borders. AER contends that it also substantially reduces the likelihood of any genuine competition between Collecting Societies in the Community. In the Internal Market, Collecting Societies should be free to trade across borders and copyright users should be free to purchase rights in the same way.

c. AER calls for the freedom to buy the use of protected music rights across borders. Community-wide licensing could then be left to the market because music copyright Collecting Societies would compete in the provision to users of broadcasting rights of all kinds, whether designed for cross-border, national or regional services. A Finnish broadcaster, for example, would be able to agree a copyright licence for exercise in Finland with the record producers’ French collecting society - if he so wished. The competition in rights provision in the Internal Market that would follow such a development would lead to Collecting Societies with more transparent costs for the rights owners they represent and better offers to radio broadcasters and thus to listeners.

d. Whether this proposal is taken up or not, it is important that copyright blanket agreements or licences, wherever and with whoever they are negotiated, should cover only the needs of the applicant broadcaster and nothing beyond that. In other words, the broadcaster should be able to buy the content he needs and not be obliged to buy more.

e. In addition, if the purpose of any legislative instrument that emerges from this exercise is to be confined to easing the process whereby a Member State’s rights user seeks to exploit rights in another Member State, then the arrangement should adhere to the country of origin principle.


3. Rates and tariffs

There are a wide range of rates and tariffs imposed on broadcasters across the EU. The validity of these rates can best be tested by enabling users to buy what they need wherever they want as already described. It would be enormously difficult to harmonise and/or set minimum, maximum, average or universal rates.

a. As indicated in the Communication, one of the important issues faced by radio broadcasters is the fact that rates as well as the Collecting Societies’ administration charges and expenses vary widely throughout the EU. Copyright payments to Collecting Societies in some Member States, especially in the Nordic countries, represent an unduly large and unfair financial burden for commercial radio stations. This weakens the financial situation of stations that nowadays face large investments in new technologies as well as lower advertising revenues.

b. In addition, the way the Collecting Societies currently calculate copyright payments gives some broadcasters in some countries a competitive disadvantage both in their home territory and in comparison with broadcasters in other European countries. This is the case in Denmark where copyright fees – which presently represent approximately 20% of total turnover - are charged according to advertising revenue which cuts in at a high level before which an exorbitant minimum rate is charged. In some cases, in particular for smaller radios, these minimum rates represent a substantially higher fee than if the payment were calculated solely on advertising revenue. There are a number of ways whereby this situation might be eased but AER contends that the current Danish situation is taking too much resource out of the Danish radio industry at a time when it is needed for digital and other developments.


4. Transparency and efficiency of Collecting Societies

AER calls for transparency on the part of the Collecting Societies, clearer procedures and a minimization of costly administrative burdens imposed on users and members.

a. As pointed out in the Commission Communication, Collecting Societies occupy a key position in the licensing of rights in so far as they provide sole access to a catalogue of rights and thus function as a national “one-stop shop”. Nevertheless, significant and frequently unexplained differences exist with respect to legislation and practice and have led to a widespread call for a higher degree of convergence of the conditions under which they operate, in particular in terms of efficiency and transparency.

b. Although understandable from a historical and cultural point of view, the disparity of rules regarding the governance of Collecting Societies is detrimental to users as it leads to different conditions being applied to different users throughout the EU and thus to a lack of transparency as well as legal uncertainty. Furthermore, the level of the amounts demanded by the Collecting Societies has been increasing across the EU in spite of their alleged technological and organizational improvements.

c. AER therefore believes that there should be similar transparency and organizational levels required from Collecting Societies across the EU and that common rules could be a means to achieving this. Collecting Societies should be obliged to publish their tariffs and the licensing conditions they apply. They should grant licenses on reasonable conditions, simplify their administrative requirements and provide clear information regarding the destination of the received amounts. Users need to know that their payments have reached the correct owners: so do the owners.


5. Arbitration

AER seeks dispute settlement systems which are easy, speedy and affordable by radio broadcasters.

a. AER holds that a proper balance needs to be struck between the interests of copyright owners, copyright users, consumers and listeners. For most European radio broadcasters that balance is attempted in negotiation between Collecting Societies and broadcasters. Although in a fair number of countries, the relations between Collecting Societies are good-humoured and productive, this relationship can also be a very one-sided negotiation because Collecting Societies represent a monopoly within each Member State able to dictate terms to those who wish to broadcast music because there is nowhere else for them to go.

b. AER recommends that some form of “statutory licences” should be enabled in every Member State. In our view the fees charged by a monopoly supplier of rights can only be justified or challenged if the rights user is able to purchase the rights he requires elsewhere. Member States may be reluctant to open Collecting Societies within their jurisdiction to competition from societies in other Member States. If this is the case, then the risk of abuse of a dominant position by a Collecting Society can best be prevented by enabling a producer to take out some form of statutory licence to use the material concerned, declaring the price he believes he should pay and proceeding to pay it. If the copyright agency disagrees with the proposed fee, it can then appeal to a court or independent tribunal that can award costs and confirm fees that seem equitable.

6. New technologies

AER opposes the creation of new categories of copyright fees for “simulcasting” analogue on-air content for which stations have already paid via the Internet or any other means. Price band exclusions of this kind undermine the concept of the Information Society for all.

a. AER opposes the creation of new categories of copyright fees for digitally “simulcasting” on a digital platform analogue on-air content, for which stations have already paid. We believe the only thing that changes is the distribution channel. The content remains the same. In any case, any substantial increase in copyright royalty payments should be first subject to a realistic assessment of the economic implications. It is important to allow radio stations to embark on new technological experiences by keeping early royalties to a minimum. Many European commercial radio stations are already closing down their Internet simulcasts because prices are too high (Finland for example).

b. It seems to AER that rights fees for digital output should be subject to the same percentage of revenue as that applied to analogue output. There is no case for extra money or a higher price because the output is digital. It is important, however, that, if the output is made available in other Member States (via the Internet for example), then proper arrangements should be made to ensure that the monies raised by the Collecting Societies should find their way back to the rights holders responsible for the broadcast work.


7. Digital radio

AER opposes the introduction of additional fees for a so-called “right of digital diffusion” especially during the transition period from analogue to digital radio.

a. For some time, radio broadcasters have been under increasing pressure to “go digital”. As already pointed out in our response to the Green paper on Copyright in the Information Society of 1995, broadcasters have a positive attitude to the possibilities offered by digital radio. However, much depends on the arrangements which have to be made for the transition from analogue to digital radio broadcasting.

b. During the transition period, which may last for anything from five to fifteen years, broadcasters will need to make broadcasts in both analogue and digital forms. Investment alone in introducing digital broadcasting will be expensive enough; operating the two systems simultaneously for a number of years will be a heavy burden. It is an investment which many broadcasters will think it worth making, if other expenses are kept within reasonable bounds. One such expense, which could change the whole nature of the investment, would be the liability to pay additional royalties arising from a new and exclusive right of "digital diffusion". Such a right would discourage many radio broadcasters from investing in digital broadcasting at all. AER thus strongly disagrees with the statement made on the subject of copyright in the Commission’s Communication on Digital Switchover (September 2003) in which the Commission says that “digital simulcast of a copyright protected service results in a right to additional copyright payments even though few or no additional viewers are involved”.

c. At present, the balance between the interests of the recording industry and the interests of broadcasters, other copyright users, consumers and listeners, is not being evenly maintained. Demands by the recording industry, backed by many small but vociferous copyright protection societies, are winning one concession after another, from the extension of the period of copyright protection to the reinforcement of customs controls over goods infringing copyright. Measures designed to combat piracy are demonstrably in the public interest, many other protective measures are not; and they do not pass the test which needs to be applied to all legislation in this area: that they must be economically sound.

d. There is a promising and economically viable future for new audio-visual technology if the European Commission is really committed to ensuring that the views of rights users are fairly taken into account by curbing legislation which at present tilts the balance still further in favour of the copyright owners generally and the recording industry in particular. If a fair balance is maintained, radio stands a better chance of succeeding and flourishing in its present as well as it technological future.

ENDS
21/06/2004

NOTES: Brussels-based AER (the Association of European Radios) represents the interests of 14 national private and commercial radio associations in 11 EU Member States, Switzerland and Romania. The combined membership is of over 4,500 private/commercial radio stations broadcasting to millions of daily listeners across Europe. The AER web site provides further information at www.aereurope.org