Collecting Societies Under The Microscope

The European Commission's proposal for a Directive on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market

In a display of synchronicity, both the UK government and the European Commission are proposing legislation on the governance of collecting societies. The UK proposals go no further than legislation to allow the introduction, through Regulations, of a backstop power to apply a code of conduct setting out certain minimum standards that a collecting society must meet. In contrast, the Commission's proposal goes much further, laying down, in addition to minimum standards, an array of requirements in relation to multi-territorial licensing by collecting societies of rights in musical works for online use.

One of the drivers of these proposals for improving the governance of collecting societies is a perception that, in the information society era, the societies will have an ever-increasing role to play in facilitating the development of innovative new services. Proposals such as those in the Hargreaves report for the creation of a Digital Copyright Exchange are an example of this. Alongside that driver, though, is the view that the governance, practices and procedures of collecting societies could stand some improvement. One question in our minds is whether the draft Directive's requirements for transparency, automation and provision of data on repertoire and rights will require such a substantial investment that only the major societies will be able to meet the new standards, leading to a consolidation of collective licensing in fewer hands.

The need for legislative intervention to facilitate music rights licensing for multi-national online music services has been apparent for many years. The Commission's previous interventions – the 2005 Recommendation1 and the proceedings against CISAC and certain of its members2 – failed to produce the simplified licensing system that online music service providers need. Today, such providers can obtain pan-European licences only by engaging with a variety of licensing entities connected with certain publishers and only in respect of their particular repertoires. For the rest of the musical repertoire the operators must still obtain licences (now known as 'residual blanket' licences) from collecting societies in each country in which they wish to provide their services. As the market has evolved, the rights clearance task facing operators has become more complex year by year. While the proposed Directive will not transform this situation in the short term, it is nonetheless a step in the right direction and to be welcomed on that score. Again, the draft Directive seems to point towards a consolidation of collective licensing by including express provisions to facilitate the placing of repertoires of collecting societies which do not offer multi-territory licences into the hands of other societies (such as the PRS) which do.

We thought it would be helpful to provide an aide-memoire to the principal terms of the draft. As will be seen, the terms reflect a thorough analysis of the problems in the collective licensing market and clearly indicate that the Commission thinks a very major intervention is needed if the long-standing problems in this market are to be resolved.

Summary of the draft Directive's terms

1. Collecting Societies

   The draft Directive commences with provisions dealing with the governance and management of collecting societies.

   1. Membership: All rightholders are to have the right to authorise a collecting society of their choice to manage their rights for the Member States of their choice and to terminate this authorisation or withdraw any of the rights for the Member States of their choice.

      Collecting societies are also required to accept all rightholders as members if they fulfil their membership requirements. Furthermore, they...