CMU Trends Labels & Publishers Legal

Trends: Music rights and the European Copyright Directive

By | Published on Monday 19 September 2016

European Commission

As the European Commission publishes its draft new copyright directive, we review the key issues that the music community hopes might be addressed by the latest review of copyright law in Europe, and what the directive says about each of them.

Although each country has its own copyright system, copyright operates on a worldwide basis, and to that end most copyright systems are linked through global treaties. Those treaties seek to ensure that each country protects works that enjoy direct protection under other countries’ copyright regimes, and that there are certain common standards across all bodies of copyright law.

Meanwhile, within the European Union, there have been further efforts to harmonise the copyright regimes of member states. This can be tricky at times, because copyright is traditionally treated quite differently in common law jurisdictions like the UK compared to civil law jurisdictions like France. Though nevertheless, major developments in copyright law within the EU tend to occur at a European rather than national level.

Which meant that, when the European Commission announced that its Digital Single Market initiative would include a review of copyright laws, the music community saw this as a great opportunity to put on the agenda certain issues it has faced as music consumption has continued to shift online, and more recently from downloads to streams. As did other copyright owners like the newspaper and magazine publishers, and users of copyright, including tech firms and consumer rights groups.

After more than a year of being lobbied by all those interested parties, last week the EC published a draft new copyright directive which sets out in black and white which areas of copyright the Commission seeks to revise, and what changes it is proposing be considered. Although only step one in the legislative process, it provided a useful summary of what issues European lawmakers have chosen to tackle, and how they might go about tackling them.

For the record companies and music publishers, the single biggest copyright issue of the last two years has been safe harbours, with press statements from trade groups representing the music rights business no longer concluding with the customary paragraph about piracy, and instead featuring a standard statement about how the digital music market is being hindered by safe harbours and the ‘value gap’.

The safe harbours about which the music industry has become so concerned exist to protect internet companies from liability for copyright infringement.

They originate from the 1990s, when internet use was starting to go mainstream, and were introduced to overcome the fears of internet service providers and server hosting companies – and similar businesses – which wanted to know what would happen if one of their customers used the internet access or server space they provided to infringe copyright.

If they could be held liable for that infringement, such companies argued, then that would greatly limit the potential growth of internet service businesses.

So the safe harbours were introduced, which say that such companies cannot be held liable if and when their customers use their servers to distribute copyright material without licence, providing they are not actively aware of the infringement, and that they have a system in place via which rights owners, once aware of any infringing content, can request it be removed.

The music industry doesn’t have a problem with the basic principle of the safe harbour, just with the kinds of companies which now claim protection. In particular, it argues that user-upload websites should not be covered by the safe harbour. And while there are lots of sites of that kind, the real concern is YouTube.

It is because of the safe harbour that YouTube – and sites like SoundCloud and Daily Motion – can operate an opt-out rather than opt-in streaming service. Which is to say, whereas with Spotify and Apple Music, a label’s content will only ever appear if it chooses to opt-in and provides its music, on YouTube anyone can upload content into the system, and it’s for a label to then request that its music not appear.

YouTube, of course, has licensing agreements in place with most music rights owners, and makes available its Content ID platform via which labels and publishers can choose to either block or monetise their songs and recordings whenever they are uploaded to a YouTube channel, whether by an official or unofficial source.

And YouTube and its owner Google frequently like to remind us all just how much money has now been paid via those licensing agreements to the music industry, which receives the majority of the ad revenue YouTube generates from music content.

However, the record companies and music publishers argue that, while they may have done licensing agreements with YouTube, they have done so reluctantly, at least in more recent years, because the terms offered by the Google site are nowhere near as good as the terms Spotify and Apple Music have agreed to (the big sticking point being the minimum guarantees Spotify and Apple pay, and which YouTube does not, meaning that with the latter, if no ads are sold or played, no one earns any money).

The music rights owners reluctantly agree to those less good terms because – as a result of safe harbours – labels and publishers cannot simply demand that all their content be removed from YouTube’s platform until a more favourable deal is offered.

This is because individual users will continue to upload the rights owners’ music anew and YouTube is only obliged to remove those videos when told to do so by the label or publisher. Which means, deal or no deal, the music company is obliged to constantly monitor the Google site at its expense. Of course, YouTube would argue Content ID does a chunk of that work for the label or publisher, but the music companies counter that Content ID is far from perfect.

However, if YouTube was no longer protected by the safe harbour, once a record company refused to do a deal, the Google company would have to ensure that none of its users were uploading videos containing that label’s music, otherwise simply having that content on its site could result in a copyright infringement action. Which would mean that YouTube would either have to seriously ramp up its monitoring of uploads, or agree to more favourable terms with the label so that that content was there legitimately.

In Europe, the safe harbour that YouTube utilises comes from European law – actually an e-commerce rather than copyright directive – so once the European Commission announced a review of copyright matters, it was obvious that the record companies and music publishers would put this issue at the top of their agenda.

While the US Copyright Office subsequently announced a specific review of the American safe harbour, which stems from the Digital Millennium Copyright Act – kicking off a high profile lobbying campaign on the issue Stateside – off the record the music industry’s lobbyists have always expressed more confidence in getting the reforms they want in Brussels than in Washington.

So how did they do? Well, while initial papers on the Digital Single Market project and the accompanying copyright review tended to downgrade safe harbours a little, in last week’s directive a draft article was included that specifically deals with user-upload platforms, and which could possibly extend the liabilities of services like YouTube to an extent.

Though, as is often the way, there is plenty of ambiguity in the wording of that article that could provide a service like YouTube with a get out, especially if a couple of words could be amended as the draft directive works its way through the law-making process.

The draft article says: “Information society service providers that store and provide to the public access to large amounts of works or other subject-matter uploaded by their users shall, in co-operation with rightholders, take measures to ensure the functioning of agreements concluded with rightholders for the use of their works or other subject-matter or to prevent the availability on their services of works or other subject-matter identified by rightholders through the co-operation with the service providers”.

One of the challenges with the kind of safe harbour reform that the music industry wants is how you word any new law so that the likes of YouTube lose protection, but other websites with whom the music industry has no current beef are not likewise affected. In the directive, the EC has seemingly decided that “public access”, “large amounts” and “uploaded by users” are all key features of the sites that may have their liabilities increased.

But what are those new liabilities? Because while the draft article talks about such services concluding agreements with rightsholders and ensuring the functioning of those agreements, and – where no such agreements exist – preventing the availability of copyright works, that latter obligation applies to “works identified by rightsholders”. Which sounds like labels and publishers still monitoring the user-upload platforms for unlicensed material, and removing content through something like Content ID.

Nevertheless, some of those lobbying on this issue for the music industry cautiously welcomed the directive last week, perhaps because it has at least secured a section in the copyright reforming document for safe harbours. And perhaps wording more aligned to the music industry’s objectives can now be honed during the next stage of the legislative process. Though even those welcoming the directive talked about it being a “first step”, and some music industry groups were outwardly critical, saying that much more needed to be done.

Though Google – which is lobbying hard for the status quo – wasn’t declaring a victory either last week. Its spokesperson said: “We believe there’s a better way. For both European creators and consumers, it’s vital to preserve the principles of linking, sharing and creativity on which so much of the web’s success is built. The appropriate balance has not yet been struck, and Google is committed to playing its part in the discussions”.

While the music industry at large has focused on safe harbours when lobbying European law-makers, the artist community has also spoken up in the last year – and arguably more vocally than in the past – on issues specific to performers and creators, where often it is the record companies and music publishers who are on the other side of the debate, rather than big tech.

Many of these issues stem from a belief in the artist community that the new digital music economy – and especially streaming business and licensing models – have been set up to the advantage of labels and publishers over artists and songwriters, or perhaps to the advantage of big rights owners over smaller companies and individual creators.

Specific issues raised during the European Commission’s copyright review include:

• The way digital income is shared between different stakeholders.

• A belief heritage artists on old low-royalty record deals have been particularly unfairly treated by the labels.

• Which copyright controls a stream actually exploits, which can have an impact on how artists are paid.

• The lack of transparency over the way rights owners do deals with the streaming services, and the way digital royalties are processed and paid.

Some, though not all, of these issues are dealt with in three articles of the directive, which are worded as follows:

• Member States shall ensure that authors and performers receive on a regular basis and taking into account the specificities of each sector, timely, adequate and sufficient information on the exploitation of their works and performances from those to whom they have licensed or transferred their rights, notably as regards modes of exploitation, revenues generated and remuneration due.

• Member States shall ensure that authors and performers are entitled to request additional, appropriate remuneration from the party with whom they entered into a contract for the exploitation of the rights when the remuneration originally agreed is disproportionately low compared to the subsequent relevant revenues and benefits derived from the exploitation of the works or performances.

• Member States shall provide that disputes concerning the transparency obligation and the contract adjustment mechanism may be submitted to a voluntary, alternative dispute resolution procedure.

It was these three articles that the UK’s Music Managers Forum particularly welcomed after the directive was published last week. Though again, there are potential get outs, this time for the labels rather than YouTube.

In particular, on the transparency point, extra bullet points say that the new obligation on labels must be “proportionate” and might be dependent on the “significance” of a performer’s contribution. And while the article on remuneration is a significant step forward for heritage artists, again in its current wording there is room for manoeuvre on the label side.

But still, as with safe harbours, the performer community has got itself a section in the directive to play with as things now go through the motions. And with many copyright reforms in recent years having been driven by corporate rights owners more than creators and performers, that in itself is an achievement.

So what next? Well, the draft directive now goes to the European Parliament and the Council Of The European Union for input and amendment. It’s during this process that the sections on safe harbours, transparency and remuneration can all be tweaked and changed, to one or another stakeholder’s advantage. Ultimately the Commission, Parliament and Council all need to agree on a final wording.

That process could take just over a year, or up to three years. Then, once passed, each member state of the European Union will have a set time to ensure their local copyright systems are compliant with the directive.

Different countries will do this in different ways – some formally amending copyright law, others deciding current laws are basically compliant anyway, and others a combination of the two. The directive will set a deadline for that work to be completed. It is currently set at a year after the directive being passed, though that timescale could as yet be increased.

All of which means that nothing is going to happen overnight, and it will likely be a few years before individual European copyright systems are amended on any of these issues. And, of course, from a UK perspective, there is a chance European law will no longer apply here by the time this directive goes into force, depending on the timeline for and nature of Brexit.

Though, as PRS boss Robert Ashcroft pointed out last week, “Europe is our largest export market and, even outside of the European Union, its copyright framework will directly impact UK creator’s earnings”. Therefore the evolution of the new copyright directive will remain of interest to UK labels, publishers, artists and songwriters throughout the entire process.