Consolidation in the music publishing sector is set to shake up Pan-European licensing

The European Commission (EC) is planning to publish draft legislation proposals early next year that will include new rules for the cross-border licensing of digital music. For several years representatives of the EC have expressed a mixture of mild irritation and outright annoyance over the licensing process for digital-music services in Europe. The number of such services has grown rapidly in the region, but several service providers continue to bemoan the time-consuming process involved in securing rights to operate in several countries. New business models specializing in digital-music delivery have brought change to collection societies, but according to some service providers, rights remain fragmented, and some providers have questioned whether the major publishers’ Pan-European initiatives have simply added a new layer of fragmentation and complexity to the licensing process, with Europe’s largest collection societies the only ones seeing any benefit.

But while EC legislators are busy putting together new legislation that would open up Pan-European licensing, the consolidation in the music publishing sector is shifting the balance of power in cross-border digital-music licensing in favor of a select few. Smaller collection societies have already expressed concern that legislative moves by the EC to open up the licensing process would result in their having to compete with larger collection societies for authors’ and publishers’ business. A large collection society will be able to charge less to administer rights because of greater economies of scale, and it is no coincidence that the major publishers have chosen Europe’s largest collection societies to administer their rights in the region.

CELAS, which was formed by PRS for Music (UK) and GEMA (Germany), administers the digital Pan-European rights to EMI MP’s Anglo-American repertoire, and Sony/ATV created PAECOL with GEMA to administer the Pan-European licensing of the major’s Anglo-American repertoire. Sony/ATV also created the PEL initiative with SGAE (Spain) for the authors’ society to administer the Pan-European licensing of the major publisher’s Latin American repertoire. UMPG and SACEM (France) operate the licensing initiative DEAL to administer UMPG’s Anglo-American and French repertoire in the digital market, and Warner Chappell operates the Pan-European initiative PEDL and has concluded representation agreements with a number of European collection societies.

But the agreement announced earlier this month for Sony to acquire EMI MP from Citigroup could result in a consolidation of two of the major publishers’ licensing hubs and further isolation for the smaller collection societies. Sony said after the EMI deal was announced that Sony/ATV would eventually oversee the running of EMI MP. Although the acquisition must pass a number of regulatory investigations, should the deal go through there would almost certainly be a review of the dual functions provided by PAECOL and CELAS. GEMA’s involvement with PAECOL and with the licensing of EMI MP repertoire through CELAS would suggest that the German collection society is ideally placed to take over the sole Pan-European licensing of both major publishers’ Anglo-American repertoire. As a result, GEMA could wind up with exclusive Pan-European licensing rights to the repertoire of the world’s biggest music publisher. With SACEM holding the digital-licensing rights to UMPG’s Anglo-American repertoire and being involved nonexclusively in PEDL, the licensing rights to all of the major publishers’ Anglo-American repertoire could end up in the hands of just two collection societies.

Independent consolidation
Pan-European licensing initiatives have not been limited to the majors. Peermusic has a Pan-European representation deal with PRS for its Anglo-American repertoire and with SGAE for its Spanish/Latin repertoire. PRS also operates the Independent Music Publishers European Licensing (IMPEL), which administers Pan-European licensing of IMPEL members’ repertoire. PRS, along with BUMA/STEMRA, was appointed earlier this year to license and administer the Pan-European online rights of publisher IMAGEM.

Chrysalis also has a Pan-European representation deal with PRS. However, Chrysalis’ owner, BMG Rights Management, has not concluded a multiterritory deal. Music & Copyright understands that BMG is reviewing its approach for the rest of its repertoire, including that of Cherry Lane, Bug Music and Stage Three, and might conclude an overall BMG deal. PRS would seem to be the favorite should BMG follow the direction taken by Chrysalis.

With openness and competition at its heart, the forthcoming EC legislation is widely expected to put in place structures that will result in wider access to multiterritory licensing. There are, of course, Pan-European initiatives involving other collection societies in Europe aside from the big three of PRS, GEMA and SACEM. But music publishers that have concluded Pan-European licensing-administration deals seem to have decided that the bigger the collection society the better placed it is to handle their rights on a regionwide basis. There is little evidence to suggest that any new legislation will change the situation, and so for smaller collection societies, the EC might be about to signal the start of a difficult future.

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