Big differences in splits for digital-music performance and mechanical rights in EU-27

As the issue of multiterritory licensing comes under the spotlight in Europe, differences in rates charged and rights splits will become more evident. Will an EU directive that breaks down national borders be followed by a bigger push for deeper collection-society harmonization across the region?

With publication of the European Commission’s new multiterritory licensing proposals, Brussels’ efforts to harmonize the EU’s digital-music landscape are looking to build on legislation harmonizing authors’ and publishers’ rights that are managed by collection societies.

According to the Commission, the management of those rights in the EU’s internal market should take place in a comparable, effective and transparent manner across national borders. The Commission says the objectives of the draft directive cannot be achieved adequately by member states. Rather, the issue is more an EU-level one because of the transnational nature of the problems.

The rollout of digital-music services in Europe and their rate of take-up differ considerably from country to country. There are often significant variations in download and streaming royalty rates set by national collection societies. But the contrast in the performance and mechanical splits paid to authors and publishers from digital-music sales perhaps best illustrates the differences between European countries, as well as the size of the Commission’s task in truly harmonizing Europe’s digital-music sector.

For a-la-carte downloads, the splits between performance and mechanical rights in the 27 EU member states vary from 75% mechanical right and 25% performance right to a straight 50/50 split. Similarly, with on-demand streams, the shares range from performance rights constituting 75% of the author/publisher share and 25% for the mechanical right to 50/50.

The Nordic countries, whose licensing is administered by Pan-Nordic mechanical-rights-collection society Nordisk Copyright Bureau, mostly have a 70/30 mechanical/performance split for downloads and 30/70 for streams. Europe’s biggest music market, Germany, has a 67/33 mechanical/performance split for downloads and 33/67 for streams. Outside the EU27, Switzerland is the only European country with a 100% mechanical share of downloads and a 100% performance share for on-demand streams.

The process of setting rates goes back several years, to when download services were first rolled out in the region. At the time, global authors’ society CISAC produced a set of guidelines for its members on the performance and mechanical splits. But CISAC left the final decision to each national society. Most societies set up a distribution committee that included author and publisher members, which assessed each digital business model and set the splits based on the consensus regarding the emphasis of each right.

New business models, new complexities
With new business models emerging, the issue of performance and mechanical splits became more complex. Tethered downloads is one digital business model that has divided collection societies. Moreover, the type of tethering can result in different rates.

For example, UK authors’ society PRS for Music set the rate for cached downloads, such as those available from subscription streaming service Spotify for offline access, to 50/50. But for downloads tethered to a device, such as those offered by the now-defunct download service Beyond Oblivion, the split is 75% mechanical and 25% performance. Beyond Oblivion sold downloads protected by DRM, which could be played only on Beyond-enabled devices. In the 27 EU member states, nine national collection societies operate on a 50/50-split basis for Spotify-style tethered downloads. Most of the others use the same rate as for a-la-carte downloads.

Artists and publishers seem unconcerned by the different rates across Europe. Any digital-music-service complaints about collection societies have focused on the monetary rates charged, such as the minimum fee per stream. GEMA of Germany has come in for particular criticism for its comparatively high streaming rates. The collection society introduced new rates at the beginning of this year, and most international streaming services now have a presence in Germany.

With the Commission looking to break down national borders for digital-music services, it can only be a matter of time until download and streaming rates come under the spotlight. Much has been made of the differences in the price consumers pay for downloads and subscription streaming services in eurozone and non-eurozone countries. Similarly, there can be little justification in authors and publishers receiving different amounts for the stream of the same track in the UK than in Germany or France. Splits between performance and mechanical rights are equally questionable.

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