CMU Trends Legal

Trends: Why ‘making available’ is now on the European Commission’s copyright agenda

By | Published on Wednesday 23 December 2015

European Commission

Earlier this month the European Commission published more information about its Digital Single Market initiative, and the areas of copyright law that will be reviewed as part of the project.

The music industry – and in particular the labels, publishers, collecting societies and their respective lobbyists – have been pushing hard for a review of the so called ‘safe harbours’ provided by European law to tech firms.

These have been used by the likes of YouTube and SoundCloud to enable ‘opt-out’ rather than ‘opt-in’ streaming services, where anyone can upload content to the platform, and it’s then the responsibility of rights owners to request their content be removed, if they don’t see the marketing and/or revenue benefits of being featured on such a service.

Rights owners have become frustrated with opt-out services, and the obligation safe harbours put on them to police the platforms of tech firms which build businesses around the content uploaded to their servers, much of it unlicensed. The existence of such services has – says the music industry – resulted in a ‘value gap’ in the wider digital music market as it continues to emerge and evolve.

The responsibilities of technology companies in monitoring and regulating the unlicensed distribution of copyright works across the internet will be part of the review, the EC confirmed in this month’s DSM update, which is a slightly ambiguous way of putting safe harbours on the agenda.

Though the Commission was much more explicit about its intent to review an area of copyright law that is of particular interest to recording artists, but less so to publishers and their societies, while the labels would probably rather it not be on the agenda at all: the ‘making available right’. That it is very much on the EC’s radar is a testament to the recent lobbying efforts of the artist community, and especially the UK’s Featured Artists Coalition and its affiliate the International Artist Organisation.

First, a little bit of copyright law that you need to understand for any of the ‘making available’ debate to make sense.

Copyright Controls
Copyright law provides copyright owners with a number of ‘controls’ over the content in which they own the rights. Although the precise list of controls, and accompanying terminology, varies from country to country, these controls commonly include the exclusive right to reproduce, distribute, rent out, adapt, perform or communicate the work. If anyone else wants to exploit one of these controls, they must seek the copyright owner’s permission. The copyright owner sells their permission, which is how copyright makes money.

Performer Rights
Copyright law also often provides so called ‘performer rights’. These apply to sound recordings, and benefit recording artists (featured artists and session musicians) who – by convention – often do not own the copyright in recordings on which they appear and, in the case of session musicians, are often not even beneficiaries of those rights.

This is because labels commonly own the sound recording copyrights, and while they will usually be contractually obliged to share subsequent revenues with featured artists (once initial costs have been recouped), session musicians are often paid a one-off fee and get no future royalties.

There are two main sets of performer rights: approvals and ‘equitable remuneration’. The former says that no one can record an artist’s performance, or exploit the resulting recording, without said artist’s permission.

All and any artists who appear on any one recording must give their permission for their performance to be recorded, and for the subsequent reproduction, distribution, rental, adaptation, performance and communication of the recording – basically the exploitation of each of the controls enjoyed by the copyright owner. A label will usually secure all these approvals in a featured artist’s record contract and each session musician’s individual session agreement.

The ‘equitable remuneration’ rule says that all performers who appear on a recording have a right to be ‘equitably remunerated’ – along with the copyright owner – whenever monies are generated by exploiting some but not all of the controls of the copyright. Performer ER commonly applies when the ‘performance’ or ‘communication’ controls are exploited – what are often collectively referred to as the ‘performing’ or ‘neighbouring’ rights – which basically means the public performance and broadcast of recordings.

Although copyright law doesn’t define ‘equitable’, usually monies are split 50/50 between the copyright owner (normally a label) and the performers, including all the featured artists and any session musicians. When it comes to the artists’ share, the featured artists usually get a bigger cut than the session musicians.

In most countries performers set up their own collecting society or societies to collect their ER, though in the UK PPL – which collects monies for labels whenever their performing rights are exploited – also collects for artists (and in the US, SoundExchange also pays featured artists their ER directly).

Adding a new control for digital: Making Available
Whereas the manufacture of CDs exploited just the ‘reproduction’ element of the copyright, and radio exploited just the ‘communication’ control, it is generally agreed that when music is distributed digitally both the ‘reproduction’ and ‘communication’ controls are being utilised at the same time.

However, the ‘communication’ control, where it is specifically defined in copyright law (which it is in the UK), traditionally related to conventional broadcasting. So whereas with simple webcasting services it seemed logical that this should extend online, there was some confusion over whether or not it would or should apply to downloads and on-demand streaming services (the former was the main concern when this was first being discussed in the mid-1990s).

To ensure digital communication of this kind would still be restricted by copyright, and perhaps to distinguish it from the existing controls that covered broadcasting, back in the early days of the web some rights owners – and especially the major record labels – lobbied to have a separate control added to copyright law called ‘making available’.

The ‘making available right’ was formally introduced in the World Intellectual Property Organisation treaties of 1996, and then in the European Union in 2001.

This control has two distinct features to it, firstly that the transmission of the copyright work is ‘electronic’, and secondly that members of the public “may access it from a place and at a time individually chosen by them”. Although now often referred to as a standalone and separate control, in many ways ‘making available’ is actually a sub-set of the existing ‘communication’ control, and UK law formally defines it as such.

The new control also had an impact on performer rights. First, as ‘making available’ was added to the list of controls enjoyed by the copyright owner, it was also added to the list of controls enjoyed by the performer, so that labels needed approval to exploit this control like all the others. Second, there was the tricky question as to whether or not Performer ER should apply, given ‘making available’ was basically a sub-set of ‘communication’, where Performer ER was paid. But the labels, unsurprisingly, reckoned “no, it does not apply”, and in the UK copyright law was written as such.

We are now nearly two decades on from the introduction of the ‘making available’ control at a global level, but this element of copyright law is probably a bigger talking point now than at any point previously, especially in the artist and management communities. This mainly relates to the performer right elements of ‘making available’, and a belief in the artist community that the labels got to shape this newish element of copyright to their advantage whilst most artists weren’t really looking.

Because ‘making available’ was added to the list of controls enjoyed by performers as well as copyright owners, labels need to secure the approval of artists who feature on a recording before exploiting this element of the copyright. For new recordings this is no problem, because labels will secure this approval in any new artist contract as a matter of course, for both featured artists and session musicians.

What about legacy contracts that were written before the ‘making available’ element of the copyright even existed? Do labels need to go back to every artist who appeared on every recording released pre-2000 and request permission to exploit the new ‘making available’ element of the copyright, which applies on every download and on-demand stream remember?

If they did, legacy artists still being paid tiny royalties from 1960s and 1970s record contracts – or artists with contracts that pay a 50% split on ‘licensing income’ who are angry that labels have not treated download and streaming revenues as falling under this category, despite their ‘licensing deals’ with iTunes and Spotify – could negotiate new terms around digital income. Or, at least, they could if their catalogue generated enough revenue that it would hurt the label if it couldn’t service that music to the download stores and streaming platforms.

Unsurprisingly, most labels have decided that specific approval isn’t required to exploit the ‘making available’ element of the recording copyrights they own. Either because ‘making available’ is a sub-set of the ‘communication’ control, approval for which was provided in old contracts, or more commonly by citing a catch-all clause in old agreements that talked about the label getting all and any approvals that may be required now or at anytime in the future.

Many artists think that is unfair, and possibly illegal, in that some artist lawyers have questioned whether the vague catch-all clauses many labels are relying on here would really stand up in court. “How could artists give up a right that didn’t even exist at the time they signed their contract?” the argument goes.

This has all been rumbling on for some time, but it was only this year that we started to see some test cases, first in Finland with the rock band Hurriganes and then in Sweden with musician Johan Johansson. In both cases, the artist side prevailed, though in the first case there was an added complication in that neither artist nor label could actually put their hands on a copy of the contract being disputed.

Nevertheless, both these cases were very interesting developments, and a move in the right direction for the artist community. It is still early days. Appeals may follow, and it’s not clear yet if a precedent has been set in Finland or Sweden, or beyond; in other countries it may depend on the whims of local copyright and contract laws, and in the EU on whether European harmonisation rules apply.

Still, momentum could now build around this across Europe and worldwide. In the Scandinavian cases the local musicians’ unions provided legal support on the condition artists didn’t settle out of court, and the UK’s MU is priming itself to do the same with a test case over here. So watch this space.

The other issue around ‘making available’ – and the point that affects all artists, not just heritage acts – is that key question: should Performer ER apply? The record industry has generally assumed that Performer ER does not apply to ‘making available’, and in some countries – such as the UK – the labels successfully lobbied for copyright law to explicitly say so.

Many artist managers and lawyers argue that if ‘making available’ was intended as a sub-set of the ‘communication’ control – where Performer ER does apply – then the same should be true of the new control as well. Even more so with streaming, as opposed to downloads, because there are more parallels between streaming and the radio experience that is covered by the ‘communication’ element of the copyright.

Indeed, there’s an alternative form of this argument that stems from that point: if Performer ER doesn’t apply to ‘making available’, well, who decided that it was the ‘making available’ control – rather than the conventional ‘communication’ control – that is being exploited by the streaming music platforms anyway? Certainly statute doesn’t define which elements of the copyright are in play in a stream.

Straight online radio services are assumed to be exploiting the conventional ‘communication’ control (and often only the ‘communication’ control, even though technically a reproduction is also occurring in a webcast) and therefore Performer ER is paid. That sometimes applies to personalised radio services like Pandora as well, partly because in the US a compulsory licence says that [a] personalised radio can be licensed via the SoundExchange collective licensing system and [b] when that happens Performer ER should be paid.

However, with Spotify-type services – where the really significant streaming revenues are being generated – the labels insist it’s all about ‘making available’. There is a certain logic to this argument, in that ‘making available’ – remember – applies when a user can access music “from a place and at a time individually chosen by them”. The labels argue that the extra functionality a Spotify-type service offers over a Pandora-type service – or a straight online radio station for that matter – is what moves it from ‘communication’ to ‘making available’.

Though you could argue that “from a place and at a time individually chosen by the user” is really talking about downloads not streams. After all, with a streaming service the user must be in a place connected to the internet and at a time when their subscription to said service is still valid, so there is only limited choice (though Spotify’s off-line listening and freemium level make things less straightforward).

Whatever, the question remains: should performer ER be paid on ‘making available’, and should ‘making available’ apply to streams? In the survey of artist managers we conducted for the UK’s Music Managers Forum earlier this year, 78% of respondents said they thought Performer ER should be paid on digital income.

Which isn’t surprising. It’s no secret that artists and their representatives are angling for a bigger slice of the digital pie, and a clarification on ‘making available’ in their favour could achieve just that. But having an obvious agenda doesn’t mean the management community – and the artist community they work for – haven’t got a strong case here.

Especially as, at a global level, performer rights are usually very popular amongst political decision makers. Those rights are often watered down when treaties are written, and even more so when those treaties are implemented at an EU and national level, mainly because traditionally the labels have led on the music industry’s lobbying efforts.

But, as we said, artists are now lobbying on their own, and especially on this issue. And having got ‘making available’ back on the agenda, this time any reforms at an EU level (and subsequently through to WIPO) could be implemented in a more artist-friendly way by individual states.

That’s not to say there isn’t wiggle room for the labels, even if ‘making available’ was reformed in the artists’ favour, so that Performer ER was indisputably due on streaming income. First, as we said, the law doesn’t actually define what ‘equitable remuneration’ means, it is simply an industry convention that monies are split 50/50 between labels and artists. Secondly, a stream is only partly ‘making available’ – what portion of income should be allocated to that control and what portion to ‘reproduction’?

Regarding that latter question, again statute doesn’t tell us. Though the ‘making available’/‘reproduction’ allocation has already been considered on the publishing side of the music industry, because publishing contract conventions and collective licensing rules means the split has always been an issue with digital income. In publishing, the splits vary from country to country. It may be a simple 50/50. Or sometimes it’s deemed that a download is more ‘reproduction’ than ‘making available’, but a stream more ‘making available’ that ‘reproduction’.

Whatever, if Performer ER was applied to ‘making available’ so that artists received 50% of the money, and it was deemed that the exploitation of the ‘making available’ control constituted half the licence and so half the revenue, then artists would automatically receive 25% of the record industry’s streaming income, oblivious of record contract. Though that would then be shared with session musicians as well as featured artists, remember.

Which would actually mean that a featured artist already on a standard 15-20% split of streaming income might not be any better off.

Though there are some caveats: [a] they would also likely have a claim to a contractual share of the income allocated to the ‘reproduction’ control; [b] it would prevent labels making deductions from their ‘making available’ income; and [c] Performer ER payments are not subject to recoupment, so new artists would see this revenue from day one, rather than waiting for the day they pay off any debts related to their original record contract.

So there are benefits. Though it would be session musicians, and legacy artists on contractual splits way below 15%, who would really benefit. Many of those artists already rely heavily on the Performer ER that comes in from broadcast and public performance, and some have pointed out that – as streaming goes mainstream and starts to compete with radio – that vital income stream will likely go into decline.

Which means that, for those artists, this is not just about providing session musicians and legacy talent with an income boost, it’s as much about ensuring said acts don’t lose a current revenue stream that is essential to make ends meet.

This makes the ‘making available’ debate all the more important and urgent; and that debate will now be had in Europe. It will be fascinating to see how discussions develop in 2016. For many artists, this could prove to be the most important development in digital music in the years to come.