Creative Content in a European Digital Single Market: Challenges for the Future

5 January 2010 – CREATIVE CONTENT IN A EUROPEAN DIGITAL SINGLE MARKET: CHALLENGES FOR THE FUTURE –
AER COMMENTS

The Association of European Radios (AER) is a Europe-wide trade body representing the interests of over 4,500 commercially-funded radio stations across the EU27 and in Switzerland.

AER is located at:
Association Européenne des Radios
76, av. d’Auderghem,
1040 Brussels,
Belgium

AER’s Interest Representative Register ID Number is 6822083232-32.

On October 22nd, 2009, the “Reflection Document of DG INFSO and DG MARKT – Creative Content in a European Digital Single Market: Challenges for the Future” (hereinafter the “Reflection Document”) was published. The Reflection Document follows the public consultation on creative content online of 2008, and the subsequent meetings held within the Content Online Platform.

AER supports the European Commission’s objective of “creating in Europe a modern, pro-competitive, and consumer-friendly legal framework for a genuine Single Market for Creative Content Online”. The Reflection Document appears to be a positive assessment of the copyright state of play and a well written and comprehensive document regarding creative content , online. However, radio’s business model in Europe is based, now and for the foreseeable future, mainly on FM broadcasting of free-to-air programmes. Digital technology (be it online or on-air) is radio’s future. It should therefore first be underlined that any framework for copyrights, related to radio, should encompass both online and offline rights, in order to tackle radios’ current and forthcoming needs.

Radio is a constitutive element of the “creative content sector”. Indeed, radios are both copyright holders and important copyright users: one of AER’s members’ primary expenses, with respect to both time and money, remains that of copyright clearance. Radio broadcasters across Europe pay over €2.6 billion per year for content, mostly music rights , and payment for these rights is negotiated on a regular basis. Therefore, AER is constantly striving to ensure the best possible copyright regulatory framework to enable its members creating the best “professionally produced content” for their listeners.

Indeed, and as rightly highlighted in the Reflection Document: “Making professionally produced creative content available online is proving to be a high-risk business, because of market fragmentation, high development and production costs and the need to fund as yet unprofitable new services form the declining revenue streams of ‘traditional’ analogue […] distribution” . This sentence can be seen as gathering many issues faced by commercially-funded radios, now and in the near future. Besides, many of the “possible EU actions for a Single Market for Creative Content Online” are perceived positively by AER, as long as their implementation does not lead to further differentiation of offline and online, as outlined in this position paper. For both online and offline, the major developing problem for copyright users, and especially for commercially-funded radios, remains market fragmentation: fragmentation of payments per use, territorial fragmentation and fragmentation of the repertoire (II). However, radios are facing two new major blocking factors in the online world only, which are furthermore believed to be radio-only issues, related to the international nature of internet and to its “novelty” (I).

To sum up radios’ main current needs, AER would like first to recall that commercially-funded radio broadcasters should be able to clear the usage of rights through one-stop-shops, delivering access to worldwide repertoire, for online and offline use: a user should be allowed to purchase whatever rights he requires for whatever purpose wherever he wishes to exercise them from any collective rights’ management organisation in the EU against clear, published, comparable tariffs. The latter should fulfill similar transparency requirements; i.e., any organisation providing access to music rights should publish its tariffs (including split costs of both rights usage and administration fees), the licensing conditions, administrative requirements and the destination of the monies received. Finally, dispute resolution mechanisms should be enabled as appropriate in every Member State in order to prevent abuse of a dominant position by any organisation providing access to music rights.

These needs could be immediately addressed by:
Extending “the scope of the Satellite and Cable Directive of 1993 to online delivery of [sound] content”. In other words, clearing rights in the EU Member State of origin should enable use in all, at least online.
Imposing licencing of accessory music in time-shifted / on-demand programmes through mandatory collective management of rights.
Carrying out online and offline fees under a single blanket licence fee, in a transparent manner (to ensure fairness and clarity)
Facilitating flexible multi-territorial licences: Commercially-funded radios are targeted at local audience, and would consequently make use only of this kind of licences
– Finally one should not forget the primary and essential need to ensure that collecting societies are able to licence access to the global repertoire

I. Radio on the internet: adapting to a “new” environment

Radio is the most intimate medium: it is ubiquitous, mobile, simple-to-use and free-to-air. All these features enable our audience to cultivate a personal relationship with our programmes, our DJs, our hosts, and our brands. To maintain this unique tie, our members have to be available on all transmission platforms. The internet has become an important platform for listeners to access our programmes. Therefore, it is both business and consumer critical for AER’s members to have a full presence in the online world in order to maintain listener reach. This raises concerns related to the nature of internet and to the fact that internet is a new transmission platform.

A. A local medium confronted to a worldwide platform

European commercial radio is mostly targeted at local, regional or national audiences; language barriers mean that demand is primarily limited to national, and often regional, boundaries. Moreover, in most cases, due to the traditional radio business model, the majority of AER members’ audiences are most likely limited to town and city boundaries. At the same time, by its nature, the internet gives worldwide access. As explained, the current business model for ‘traditional’ radio stations, especially commercially-funded stations, does not support worldwide audiences: our programmes – be it news or music, would have little, if any, interest for listeners (or indeed advertisers) located outside a certain territorial range. Therefore, there is currently no significant financial benefit to being heard on a global scale. It follows that there is little imperative to incur the costs and time involved in securing rights for international simulcasting .

However, those stations that do wish to operate outside their national boundaries, or that perhaps unintentionally have listeners (e.g. ex-patriots, foreign fans) accessing their online broadcasts from outside their territory, are faced with significant territorial difficulties associated with the different rules and tariffs applying to other Member States. A radio station transmitting its programmes on the internet potentially has to contact 27 different bodies to clear the copyrights used, and due to time and financial constraints, this is simply not possible. As a result, those stations concerned with incurring unwanted international copyright liabilities must install systems that block the transmission of their programmes outside of their home territory.

These territorial restrictions and the subsequent blocking of programmes cannot be an appropriate market solution. These conditions are prohibitive for those AER members wanting to expand across borders. AER members need legal certainty. This is why AER supports the European Commission’s proposal to extend “the scope of the Satellite and Cable Directive of 1993 to online delivery of [sound] content”. In other words, clearing rights in the EU Member State of origin should enable use in all, at least online.

B. Issues related to the novelty of Internet

The role of collecting societies is extremely important, and AER does not debate this. For instance, one important element for radio’s development on the internet is the ability to provide listeners with time-shifted / on-demand programmes. However, many among these programmes feature accessory music: e.g., background music in a café where an interview is being run. This accessory music is protected by copyrights and thus entails clearance of copyrights. The multiple rightholders have to be identified and remunerated. This is a task that cannot practically be undertaken by radios. Collecting societies have the expertise to fulfill this task. They already do so in the offline world for other uses. But for the time being the clearance of accessory music in time-shifted / on-demand programmes is not managed collectively.

Hence, AER’s proposal to impose licencing of accessory music in time-shifted / on-demand programmes through mandatory collective management of rights.

Nonetheless, in each Member State, collecting societies are still in incredibly strong positions when it comes to the offering of rights that are critical to AER’s member stations’ day to day operation. The internet is a new platform, to which existing rules are being applied. AER has repeatedly supported better implementation of these rules in the offline world, through enhanced and more competitive collecting societies. This implementation should be streamlined, online and offline.

II. Radio in the age of Internet: old problems to be solved?
As Internet develops, the offline world is being extended online. While this appears to create immense opportunities for new programming and attractive content, it often equates to duplication of costs for certain creative industries: commercially-funded radios are SMEs and need presence in both offline and online worlds, but certainly cannot sustain the multiplication of costs involved in copyright clearance: the market is fragmented in use, territories and content. AER therefore supports the creation of one-stop-shops delivering access to the global repertoire, both online and offline, on a flexible multi-territorial basis “through a single transaction” .

A. Commercially-funded radios need access to blanket licences

One of the main problems faced by radios across Europe is the fragmentation of payments per use of the same content. First, one should consider that a single programme could be transmitted through analogue terrestrial, digital terrestrial, analogue cable, digital cable, digital satellite, digital online, etc. This same programme can be simulcast, i.e. transmitted at the same time on all these platforms. As mentioned, this phenomenon follows citizens’ changing listening consuming patterns, while audience remains the same. Online radio is just the most recent of these vectors. It is also the most favoured by youth. In order to maintain its unique tie with all its listeners, radios should simulcast on the internet. This does not generate a new share of listeners, it merely prevents from losing existing ones.

Having said that, it is important to recall that there is only one effective universal business-model for commercially-funded radio: Free-To-Air / Free-To-Access . This is only possible thanks to advertising funding, which represents 100% of AER members’ revenues. However, these revenues are dropping all across Europe, for two main reasons: the current global economic situation and the ongoing shifting trend towards advertising on the internet. This reinforces the need for commercially-funded radios to diversify their offer.

In addition, with the development of digital technology (be it online or on-air), a wide array of offers is possible: new programmes can be webcast, streamed or podcast. For each new concept, an additional layer of fee appears. This adds to the complexity of the copyright payments AER members dutifully abide by every year, and can possibly lead to different interpretation of the rights licenced. Finally, additional administrative costs seem to be added for each new additional layer of fee even if dealt with by the same body. To ensure clarity and fairness, online and offline fees should be carried out under a single blanket licence fee, in a transparent manner.

B. Commercially-funded radios need flexible multi-territorial licences

AER considers that multi-territorial licences should be seen as a very positive step towards a true EU internal market and fair competition amongst collecting societies, and, in that sense, welcomes the CISAC decision. This will foster better conditions for both copyright holders and users. This should enable radios to choose the proper offer from any collecting society. Fair competition could indeed only take place if copyright users can get a licence for the use of copyright on the territory needed: commercially-funded radios are targeted at local audience, and would consequently make use only of flexible multi-territorial licences. The current situation should not lead to a market where collecting societies offer access to copyright only on a fixed multi-territorial basis: the choice between mono-territorial or pan-European licences would not ensure fair competition amongst collecting societies, and might even equate to additional unsustainable costs.

AER welcomes the recognition that “[c]ommercial users’ access to diverse creative content on a multi-territory basis with legal certainty and fair tariffs” is essential. However, one should not forget that, on the one hand, the content of the offer of these collecting societies should be comprehensive, and, on the other hand, the territorial offer should be flexible.

C. Commercially-funded radios need access to the global repertoire

Traditionally, national or local broadcasters would only have to refer to their domestic collecting society to access the global repertoire . This is increasingly less the case, as important parts of the global repertoire are being withdrawn from collecting societies’ offer across Europe. Initiatives such as CELAS are leading to dangerous fragmentation of the copyright market: to provide its audience with a full range of music styles, commercially-funded radios should now address many different entities, even for their own local position. This entails higher costs, more complexity and, possibly, inability to play certain music. Thus, with the creation of CELAS, and other similar entities, the copyright offer is being divided per publishers. Therefore, AER recalls the primary and essential need to ensure that collecting societies are able to licence access to the global repertoire.

Furthermore, and equally important, one should not forget that, in order to ensure fair competition amongst collecting societies, the latter should all be given the ability to licence access to the global repertoire. If only certain collecting societies are able to do so, the market is likely to soon become an oligopoly.

The idea mentioned in the Reflection Document of an online database gathering information on rights ownership and the bodies in charge of their management is seen as a valuable tool to address part of the problems related to the fragmentation of the repertoire. While the implementation of such a proposal should be further explained, this could help for dispute resolutions. Moreover, AER supports any move towards more transparency of collective rights’ management organizations, and certainly “the publication of the list of their repertoire” ; this should be accompanied, at least on an individual basis, by the publication of their tariffs (including split costs of both rights usage and administration fees), the licencing conditions, administrative requirements and the destination of the monies received. Nonetheless, this should not lead to a situation where radios should pay online copyright fees per track played: radios could simply not exist online.

Moreover, it is very hard to foresee what form the harmonisation of copyright laws at EU level / European Copyright Law would take. AER recommends first to extend some existing rules (such as the Cable and Satellite rule as mentioned above, and the mandatory collective management of accessory music to online), and correctly implement, offline and online, existing rules, enhancing thereby transparency and competition.

To sum up, AER would like to recall that commercially-funded radio broadcasters should be able to clear the usage of rights through one-stop-shops, delivering access to worldwide repertoire, for online and offline use: a user should be allowed to purchase whatever rights he requires for whatever purpose wherever he wishes to exercise them from any collective rights’ management organisation in the EU against clear, published, comparable tariffs. The latter should fulfill similar transparency requirements; i.e., any organisation providing access to music rights should publish its tariffs (including split costs of both rights usage and administration fees), the licensing conditions, administrative requirements and the destination of the monies received. Finally, dispute resolution mechanisms should be enabled as appropriate in every Member State in order to prevent abuse of a dominant position by any organisation providing access to music rights.

AER remains available to explain this position in further details, should this be helpful to the European Commission.

ENDS
05/01/2010

Contact details:
Frederik Stucki
AER Secretary General
76, av. d’Auderghem,
B-1040 Brussels,
Belgium
Tel: +32 2 736 9131
Fax : +32 2 732 8990
aer(Replace this parenthesis with the @ sign)aereurope.org
www.aereurope.org

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