Is NCB the model for future Pan-European licensing?

Last month the Pan-Nordic mechanical-rights-collection society Nordisk Copyright Bureau (NCB) reported a fall in the total amounts collected and distributed to its owner societies for last year. Despite the decline, NCB described 2010 as an important year and one that removed much of the uncertainty over the collection society’s future. Perhaps more important though, is the fact that NCB and its owner societies have shown that collection societies, if left to their own devices, can develop a very workable multiterritory online licensing system.

NCB is a Nordic collection society owned by authors’ societies KODA (Denmark), STEF (Iceland), STIM (Sweden), TEOSTO (Finland) and TONO (Norway). It also has cooperation agreements with Baltic authors’ societies LATGA-A (Lithuania), AKKA/LAA (Latvia) and EAU (Estonia). It collects mechanical-rights income for the Nordic and Baltic countries and distributes it to each society, which in turn distributes it to their members.

As NCB collects mechanical rights, the fall in recorded-music sales has ultimately led to a fall in collections. NCB’s revenue was down 5.4% last year, to DKK367.7 million (US$65.6 million), from DKK388.5 million in 2009. NCB reported a fall in revenue in every country it covers except Lithuania.

With mechanical royalties likely to decline for a few more years, some of NCB’s owner societies have questioned what role NCB should play in the future. STIM and TEOSTO had previously issued notice that they would withdraw their rights from NCB, but the termination notices were retracted last spring. In its annual report, NCB said that the owner societies’ decisions to retract the notices enabled “the continued transfer of rights from these two societies to NCB and removed some of the uncertainty that had affected the relations between NCB’s owners during a period of more than three years.” NCB added that the move increased stability and enabled NCB to “realize its vision through increased collaboration with other European societies.”

Big success in multi-territory licensing
The European Commission is expected to unveil legislation later this year to advance its goal of streamlining Pan-European licensing, but NCB and its owner societies have already made significant progress with regards to multiterritory licensing. The moves seem to have gone unnoticed at the European level but could be presented as a positive example of how multiterritory licensing could be made to work.

Since early 2009, the eight Nordic and Baltic collection societies, with NCB acting as a facilitator, have offered the Joint Nordic/Baltic Online License (JOL), which combines NCB’s mechanical rights with the local societies’ performance rights. Digital-music companies that are looking to enter two or more Nordic/Baltic territories have the option of taking a single license that covers all eight countries. Tariffs contained in the JOL are based on the “territory of destination” principle, which means local national tariffs are applied. This guarantees there is no price difference or advantage gained should a digital-music service choose to pursue individual national licenses.

NCB acts as the facilitator in licensing negotiations, and taking a JOL is voluntary. Digital-music services can, if they choose, negotiate with one or more local societies. Local collection societies also have the choice to opt out of negotiations. One or more local agreements plus a “residual” JOL is also an option. But according to NCB, of the nine JOLs already in place and the nine that are under negotiation, no digital-music service or local society has opted out.

In its annual report, NCB describes 2010 as “a year of change” and one where its vision of becoming a European hub for mechanical licensing moved a few steps closer. It added that the most significant event in 2010 was the collaboration with the UK mechanical society MCPS, which is part of PRS for Music, to establish a joint venture for processing recorded-media royalties. Under the arrangement, MCPS will move its recorded-media-royalty-processing functions to an NCB system that – based on NCB’s “Bifrost” system – will be developed to cater to MCPS’ requirements. The system is expected to be ready ahead of schedule in the final quarter of this year. A board of representatives from NCB and MCPS is in place to oversee delivery of the program, which is expected to become operational before the end of this year.

Both NCB and MCPS expect that once the collaboration up and running, other societies will be invited to join. This joint venture, like PRS for Music’s and STIM’s International Copyright Enterprise partnership, is an excellent example of how future European consolidation of society activities can be structured. It is also good to see that collection societies, which have come in for criticism recently for holding back the digital music sector, can put in place the infrastructure required for digital growth without the need for legislation.

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