Collective Rights Management

© The Author(s) 2015
Cláudio LucenaCollective Rights and Digital ContentSpringerBriefs in Law10.1007/978-3-319-15910-2_4

4. Collective Rights Management

Cláudio Lucena 

Paraíba State University, Paraiba, Brazil



Cláudio Lucena

Previous chapters described networked digital and collaborative technologies, their social and economic impact, their particular projections in the creative industry, and how they irradiate effects so as to be both perceived as relevant legal circumstances and addressed by legal mechanisms. The next topics will be dedicated to understand and analyze the specificities of the activity of collective rights management, primarily from the perspective of the relationship between Collective Management Organizations (CMOs) and the authors they represent. Since it is an essentially intermediation activity, it is inevitable to touch, and at times to focus on their relationship with the publishers and the consumers who should be the final recipients and users of the service that these entities intermediate. Issues of transparency, accountability, and alternatives to multi-territorial licensing have been points of strong criticism and tension involving these undertakings, and especial attention will be devoted at the end of this section to analyze how the main controversial aspects of the new European Directive 2014/26/EU, which recently imposed significant transformations in this legal framework,1 addressed these most disputed matters.

The new Directive and the new framework for collective rights management is a concrete outcome of the course set by the European Commission in 2010, when it launched the Digital Agenda for Europe,2 a policy through which the institution expressly recognized the strategical potential of Information and Communication Technologies (ICTs) and their importance in fully implementing a Single Market. In view of the difficulties brought by the economic crisis, envisaging the overcoming of structural weaknesses and resuming the path of progress, the announced objective of the Agenda was “to deliver sustainable economic and social benefits from a digital single market based on fast and ultra fast internet and interoperable applications.”3 To achieve the proclaimed goal, a series of actions should be taken, among which the opening of access to content in the EU with the introduction of legislation that promoted simplification and enhancement of the efficiency of collective rights management, as well as facilitated multi-territorial licensing so as to permit online music services to be offered without having to negotiate with numerous rights management societies based in 27 countries.4 In the past years, European Commission Vice President and Commissioner for Digital Agenda, Neelie Kroes has demonstrated intense personal engagement in the initiatives related to the implementation of the Digital Agenda, having recently expressed that “The single market is the EU’s crown jewel, and online is its natural new home.”5

4.1 Collecting in the Name of the Artist

Before delving into more intricate legal reflections, it seems opportune to stress the rather forward thinking behind the idea of structuring an organized activity that consists in the collection and administration of revenue in the name of artists who personally hold economic rights over their creation. For a number of reasons, there undoubtedly was a refined sense of opportunity in the first place back in the days6 of the conception of the idea of establishing an intermediation business to connect authors and users who were interested in the content they created. For as much as both commercial and interpersonal relationships were at the time much different from today, it certainly took an ingenious insight to perceive the conditions that favored the launching of a business model that would thrive for decades to come, in spite of the difficulties it would have to face along the years.

It is also an interesting exercise to examine these conditions in light of the reform through which the system is going, because paradigmatic transformations are currently happening in the business and its legal model exactly because the catalyst of the changes, that is to say, digital networked technologies, have affected those original circumstances more intensely than ever before, imposing evolution and adaption to a new reality.

The basic favorable condition for the collecting activity to prosper was that the business transactions involving the use of the creative content were not the end activity of the artist. The prospection of clients or users, negotiation of contracts, and administration of revenue, not to mention all the bureaucratic burden these tasks carry along, have always being time-consuming efforts that more often than not also require particular abilities and competences which artists do not usually possess and rarely appreciate exercising. The premise that outsourcing these duties would allow the artists to devote extended time and attention to fully concentrate on the expression of their talent certainly seemed valid and attractive.

An underlying condition for the success of the newborn activity that envisaged the exploitation of immaterial assets which had just been recognized economic value not long before was the fact that individual contact between artists and each and every potential user for the purposes of reproduction, public performance, and communication of their work was then also operationally difficult, if not absolutely impracticable. It must be added that as time went by, once it had become usual for creative content to be fixed to some sort of physical support, the tasks of individually monitoring the use and enforcing authors’ rights also growingly became virtually impossible, what ended up reinforcing the convenience of a collective representation system, imperfect as it might be.

As a matter of fact these imperfections have always been there, and have always faced criticism, to some extent. Actually, the business model already carried in its very conception the seeds of the main issues that would subsequently constitute its most controversial and criticized inconveniences. Later on, these inconveniences would themselves emerge as the driving aspects of an urging reform movement to address the negative effects of the model, such as the formation of monopolies in the sector, the inaccuracy of remuneration schemes frequently based on unclear estimation of content use and lacking transparency to rightsholders, and, more recently, territorial limitations. As an underlying factor in all the reform initiative, the everlasting problem of balance between creators’ rights, the legitimate interests of the industry that explores the activity, and the various other freedoms and protected fundamental values such as access to culture and science, expression, speech, initiative and so forth, to which a specific topic of this study has been previously dedicated.

Therefore, it can be said that before stronger regulation mechanisms took the floor, original functions of collective management organizations basically consisted in the centralization of the legal and commercial representation of holders of copyrights so as to provide their proper remuneration. The intermediation would be remunerated with a fraction of the collected fees, and the activity should be conducted such as to allow transactions costs to lower, efficiency to be improved, maximization of profits to be attained, copyright claims to be avoided or controlled, and the use of protected creation to be duly monitored for the enforcement of applicable legal remedies.7

4.2 Controversial Issues in the Context of Collective Rights Management

None of the previously mentioned imperfections in the system of collective management of creators’ and artists’ rights have been properly tackled after over two centuries of its designing and adoption, even after the whole new reality of digital networked collaborative technologies hit the scene. Notwithstanding some minor adjustments and in spite of some rather isolated and insufficient attempts of the sector to assimilate the impacts of sociodigitization, all of them remain causes of tension that has been building among stakeholders in the environment, and all of them are aspects addressed by the current reform initiatives.

4.2.1 Competition Issues

One of these points of criticism has always been the fact that the exclusivity rights that collective management organizations intermediate constituted a factual, when not legal monopoly, usually exempted from antimonopoly provisions but directly affecting competition, and as such unlikely to be naturally willing to adapt, comprehend, or evolve according to market needs and demands. Apart from objective legal competition concerns of abuse and dominance, this also draws economic auspices of mid- or long-term inefficiency.

In the European Union the issue has already been the object of extensive debate. Long before the entry into force of the new Directive 2014/26/EU on Collective Rights Management, monopolistic abuse of collecting societies has been discussed before the European Court of Justice. In GVL v. Commission, the Court decided that a collecting society in a position of a de facto monopoly to provide services indistinctly but who refuses the provision of these services to those who “do not come within a certain category of persons defined by the undertaking on the basis of nationality or residence must be regarded as an abuse of a dominant position.”8 In Tournier 9 the Court held that a copyright management society that happens to be in a dominant position “imposes unfair trading conditions where the royalties which it charges to discothèques are appreciably higher than those charged in other Member States, the rates being compared on a consistent basis”, unless objective grounds of distinctions in copyright management systems between Member States are able to justify the charge differences. A Commission Recommendation on the management of online rights in musical works10 from 2005, having recognized that a monopolistic organization in the licensing market might bring certain advantages for creators, concluded supporting the introduction of competition among collecting societies, under the argument that efforts to keep “administrative costs low and the quality of the services high are objectives that can be better guaranteed by competition among several collecting societies for right holders than by a monopoly.”11 Competition implications and effects in the context of the collective administration of rights over digital creative content was, for the mentioned reasons, a recurring issue during the reform debate.12

4.2.2 Transparency and Accountability

Then, there is transparency. A governance concern that seems to haunt the inner structures of collective rights management organizations all over the world. It has always been one of the strongest points of criticism directed to collecting societies, and rightfully so. The lack of general rules and principles regarding financial and administrative internal controls, public availability of information and accountability practices are unacceptable shortcomings in a society which is connected through networked and collaborative technologies. Worse, these tools seem to be perfectly sufficient to boost the content industry’s results, but is still unable—or simply remains unemployed—to deliver the rightfully demanded level of transparency to holders of the managed revenue-generating rights. It is clear that the technological development described in earlier sections of this study impacted in the immaterial assets and interests that collecting organizations manage, but it is not less evident that this development should also reflect in the way these interests and assets themselves are managed, through established business enterprises. The first effect has been fully assimilated and the industry already uses every possible digital alternative to potentialize revenue. The associated effect in the governance of these organizations is yet to be felt.

Transparency is always a potentially positive outcome of the introduction of communication and information technologies in a given environment. The fact that data is treated electronically in the course of a certain activity means that this data is digitally stored, but also that it is subject to retrieval, when and if necessary. In other words, an adequate automation of a certain activity will allow the data that it deals with to be stored in a centralized and structured way and to be recovered automatically by individuals who wish to obtain relevant information from the stored data, efficiently, practically, and without the restrictions of old administrative controls and bureaucratic paperwork. Prompt availability of good quality information is a good business practice whose offspring is a transparent undertaking. For authors and right holders, it is everything a collecting society is not, from negotiating contracts, through collecting revenue, organizing remuneration schemes, informing authors, monitoring different uses of their repertoire, managing its own administrative costs, making relevant information public or at least available to those with legitimate interests, until distributing results—including whatever else happens in between. Many of the collective management organizations currently active in the market “operate in a way that prevents rightsholders from accessing even the simplest financial information about societies, which proves particularly problematic with cross-border flows of royalties and other types of compensations.”13

A more accountable administration of their rights has long been a fair demand from authors, creators, and other rightsholders, a worry shared by the European Court of Justice in the already mentioned Tournier 14 case, in which the ECJ held that CMOs should “undertake to increase transparency in regard to the payment charged to the users of phonograms in their repertoire, by separating the tariff that covers the royalty proper from the fee meant to cover the administration costs”15 so as to allow justification grounds for charge differentiation to be examined under more objective criteria. Internal procedures in CMOs can vary to such an extent that it may happen that an author neither has any influence nor any proper access to the distribution model of the collecting society. To observe the simplest thing as if his remuneration is regular and correct, he at times may be confronted with unbearable burdens that make it impracticable only to demonstrate “the extent of use of his work(s).”16 In extreme cases he may even see revenues that were collected not being distributed simply because CMOs did not care to search for the right holder and then redirected revenue to other authors or the CMO itself, being possible that this revenue very well be redirected even to finance events lobbying against the interests of artists’ rights.17

Nevertheless, up until the coming into force of the new Directive, stakeholders would express nothing more than a broad, general feeling that the desirable degree of transparency would be achieved through very abstract, superficial, and undefined notions of good governance culture and practices. A report commissioned by the United Kingdom Prime Minister in the name of the Intellectual Property Office Report and independently conducted by Professor Ian Hargreaves in 2011 concluded that there would be significant increase in members’ confidence in collective management organizations should there be mandatory transparency, common standards and codes of good practice requirements for them to abide by, pointing out that “the British Copyright Council has put forward a set of principles for such codes. Consumer Focus has also suggested principles which these codes should incorporate.”18 An obligation to “publish clear, comparable tariffs for rights, enabling rights owners and users to choose which society to deal with based on the terms available” has also been suggested.19 From a more concrete perspective, though, few insights and reflections.

From a technical perspective, this unclearness has always essentially been a data problem. The alternative that collecting societies have originally devised to charge for the use of the works they managed could not ignore an operational constraint of the time when the activity was put in place, namely, the fact that not every single use of every single protected work was reported, and that a widespread following of all the managed works in all possible venues where they could be used was unmanageable. Unable to count on precise information or accurate usage reports, and being impossible to follow rigorously the amount of times a certain work was used, the only way for organizations to ensure the remuneration they and their members were entitled to was to employ estimation methods. Charging, collecting and distributing revenue from the execution and broadcasting of an enormous amount of protected works are activities that have long been carried out almost exclusively admitting their use by a rough approximation, that could vary (still does) depending on each CMO’s internal policies and business practices. These practices are still, as seen, not standardized. Together with blanket licenses and sampling methods that were further adopted, an extremely simple, comfortable and lucrative system was put in place by collective management organizations to generate revenue, less to the benefit of creators and artists, and much to their own.

It is true that this was once the only alternative to collect dividends in exchange for the use of creative works, and in this sense, a practical and inventive solution back then. But it is needless to say that it was, from scratch, a distorted system, inclined to facilitate the intermediation service to the most, minimizing efforts and risks for CMOs. It is also important to point out that since the sampling methods they apply are evidently not able to measure precisely the uses of the works of all artists, sample-based estimations tend to favor best ranked artists. At the end of the day, as a result, due to the inconveniences of an old-fashioned collecting system, which in the absence of a more operational form of charging for the use of intellectual work, is still based to a great extent on estimation, the collected revenue is hardly ever distributed in a fair, efficient way.

It has always been that way, but it need not continue to be so in a digital economy. The reason is simple: in a world of networked and collaborative technologies, in the era of analytics, when content flows one way, information flows back the other way around. It is in the very nature of electronic transactions the fact that they are recordable, storable, identifiable, and traceable. And information is all that is needed to reconfigure this aspect of collecting rights so that it can respond better to the personal needs of rightholders.

Curiously, as time goes by and opportunities for new usages of creative content increase in number and scope, it does not become more difficult—in fact it becomes perfectly feasible—to track uses and put fair remuneration systems in place. The reason is exactly because the very same digital technologies covered in previous sections of this study that have contributed to the skyrocketing of the creative content market can be as well used as tools to enhance administrative controls and to automate managerial practices. De Werra20 highlights that trend in Digital Rights Management (DRM) technologies and the risk they pose to the traditional roles of CMOs, since the mentioned technical mechanisms allow creators to “negotiate directly in an automatic processing system with their users and can also be paid directly. From this perspective, collecting societies would not have as vital a function as they used to have.”21

Using technologies to address this issue can lead to redesign what artists have referred to as one of the cruelest means possible to distribute copyright revenue since technology to make it happen otherwise was available.22 Tools and data are now accessible, and together with attitude and disposition to offer services that are fairer and that better reflect individual realities, that is all it takes. Initiatives such as Soundreef,23 a service that offers remuneration based on extensive and accurate data gathering, processing, and aggregation seem to have realized that modern collecting societies are to be basically data processing societies, where technology must be at the service of efficiency for all stakeholders. There is no space whatsoever to question the evidence that the more members a collecting society gets to join it, the more bargaining power it achieves in the market, and the more it will be able to take advantage of the scale to reduce costs and maximize efficiency. But it is equally clear the demand from authors and creators that the role of their collecting intermediaries turn from simply growing, attracting more artists or just being stronger or more profitable, to effectively serving its members—and serving them accordingly.

Because of the relevance of all the aspects discussed in this section of the work, transparency and accountability of collective rights management organizations, a market whose figures can reach €6 billion every year in the European Union alone, €4.1 billion of which only in the recorded music industry,24 has been another key issue in the reform debate that led to the new Collective Rights Management Directive.

4.2.3 Multi-territorial Licensing

Finally, territorial limitations.

Multi-territorial licensing of online music is a core issue in the Digital Agenda for Europe.25 In 2009 the Commission had already pointed out efforts to create cross-border licensing for musical works that had made European licensing platforms possible, “albeit limited to the digital reproduction rights involved in online dissemination.”26 By the time of the Digital Agenda Communication barriers that still hindered the free circulation of online content and services among EU Member States in the Internet were described in the document as untenable. It is indeed impossible to have a true and full single market in place and regularly functioning while “Europe remains a patchwork of national online markets and there are cases when Europeans are unable to buy copyright protected works or services electronically across a digital single market.”27 This results in a more restrict number of online music services available to the EU user. For that reason, facilitation of cross-border licensing figured among the measures that the institution believed could better contribute to fight the “persistent fragmentation stifling Europe’s competitiveness in the digital economy.”28

Professor Ian Hargreaves’ expression of perplexity when touching the issue in the 2011 independent report already referred to in the course of this study speaks for itself when he notes that “24 years after the inauguration of the EU single market, it is surprising that a firm wishing to source or supply copyright content via a single channel across Europe is unable to do so.”29 If music is the kind of content one refers to, it is even more incomprehensible, for the simple fact that music is intrinsically multi-territorial. It has always been so. There is little point in thinking of an extensive multi-territorial legal system to discipline, for example, immovable property. It makes, however, plenty of sense to discipline immaterial creation in the current stage of technical development. Human expression is born borderless, and if for a long time this feature was not naturally highlighted it has only been because technical constraints did not render it possible. As soon as networked and collaborative technologies definitely brought economical and operational barriers down, allowing artists to produce and distribute their work at reasonably lower costs and efforts, it has been precisely music, out of all the forms of expression subject to copyright provisions, that seemed to start benefitting more broadly, more directly and much faster than any other, from the conformation of the new market alternatives and demands. Music in a digital environment can be both produced and consumed easily, anywhere, and its final outcome speaks to the public regardless of time, nationality, physical support, or language.30

This is enough reason why it never sounded logical to continue compelling operators of creative digital content services to segment them on the basis of national boundaries anywhere in the world, but principally in a European Union that puts so much effort and trust in the integration effects of a Single Market. This imposes a burden of inefficiency and even anachronism over these businesses in a moment when it is exactly the dynamism and versatility of the global phenomenon in which they conduct their activities what gives them the opportunity to explore the new, make breakthroughs and keep the path of innovation and economic growth, while preserving cultural diversity and development.

Multi-territorial licensing and the critical integration dimension it raises in the search for an effective Single Market, as stated above, has been another component driving the collective rights management reform debate.

4.3 The Legal Framework of the Collective Rights Management (CRM) Directive

This topic revisits the same controversial issues that were addressed in the previous section, only this time from a post Directive 2014/26/EU point of view. The purpose is to follow the echo of the debate that preceded the entry into force of the Directive, and to examine how the critical arguments previously presented concerning competition, transparency, and multi-territorial licensing in the context of collective management organizations, aspects regarded as the core of the instrument,31 contributed to the construction of the new framework. Directive 2014/26/EU on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market has been adopted on February 26, 2014, and published in the Official Journal of the European Union on March 20, 2014. It should be transposed in 24 months after its entry into force, according to its Article 43(1).32

The Council of the European Union considers that the main objectives pursued by the Directive present proper alternatives to tackle the controversial issues that were raised in the previous topic of this work, long-lasting complaints that are sources of recurring tension in the context of collective management organizations. These objectives are to promote greater transparency and governance efficiency in the functioning of collective management organizations and to facilitate the granting of cross-border licensing of authors’ rights in the online music market.33 Competition concerns are implicit in both main objectives, through which the European administration hopes to use copyright as a tool both to bring additional incentive to innovative ideas and to reward creativity accordingly.

Broadly speaking, the Commission expects the Directive to redesign transparency practices in collective management organizations by strengthening their reporting obligations as well as by empowering rightsholders, thus providing them the conditions to exercise better control over the societies’ activities and participating closer in their overall decision-making process. “Cases of mismanagement of rights revenue or long-delayed payments have shown that there is a need to improve the functioning of collective management organizations.”34

The attempt to boost a cross-border licensing architecture is clearly a further effort to realize the European Union’s potential in the digital market of music, though the provisions can and should also serve other segments of the industry. Subscription revenues of downloading or streaming music more than tripled to US$1.1 billion worldwide in the last 3 years,35 and while the digital share of the market corresponds to almost 50 % of total spendings in music in the United States, the average figures in the EU do not yet reach 20 %.36

A number of position papers with contributions, favorable and contrary positions,37 scholarly comments and the Commission guidelines, as well as additional documents and reports used in the process of framing the new legal infrastructure for collecting societies will aid in the task of conducting this preliminary critical analysis of the adopted text—an analysis which is obviously restricted to the issues which are in the narrow scope of this study.

4.3.1 Competition Issues

Recovering the aspects that were faced in the previous topic, where this issue was analyzed in the context prior to the entry into force of Directive 2014/26/EU, it is necessary to say that competition concerns are most probably the issues with less objective, less explicit measures in this particular instrument, which by no means imply that they are not relevant, have been set aside, overridden, or not considered. Competition issues entail a broader, sometimes even covert approach, and whenever the economic component of a collecting management organization’s activity is to raise compliance questions, like it was the case in Tournier, 38 competition fundamental principles and provisions undoubtedly apply, for they are at the base of the very concept of the internal market.

Moreover, earlier pieces of EU legislation, like the Information Society Directive,39 already worked in fine-tuning the coordination of overlapping aspects of intellectual property rights and of the competition framework in the digital environment. The Information Society Directive proclaims, for example, that harmonization in both these fields contributes to achieve the objective of preventing distortion in the internal market,40 that the investments in content provision and information technology that are sheltered by a solid system of protection of intellectual property rights lead to foster competitiveness,41 that the digital environment requires collecting societies to achieve a higher level of rationalization and transparency so as to comply with competition rules,42 whereas Article 9 determines more than the coexistence, the interaction between the system of the Directive and provisions of unfair competition.

Nevertheless, the newborn Directive 2014/26/EU reaffirms these ties, submitting agreements among collective management organizations to strict compliance with the competition rules laid down by Articles 101 and 102 TFEU,43 and stating, further on, that the provision of individualized licenses for innovative online services should also comply with competition law.

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