EUROPEAN COMMISSION Internal Market and Services DG Knowledge-based Economy. By to

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1 EUROPEAN COMMISSION Internal Market and Services DG Knowledge-based Economy By to Director General DR Byen Emil Holms Kanal 20 DK-0999 København C. T Kenneth Plummer D E kp@dr.d DR s response to the Commission s call for comments in the light of the Commission Recommendation of 18 October 2005 (2005/737/EC) on Collective crossborder management of copyright and related rights for legitimate online music services OJ L 276, 21/10/2005 ("the Recommendation"). DR is Denmark s public funded (household license fee) public service broadcaster. As such DR has a.o. an obligation to provide cultural content to the Danish population through radio, TV and Internet. This includes services that are receivable outside Denmark - mainly to supply Danes living abroad. DR is grateful for this opportunity to comment on the Recommendation, since this Recommendation will end up having great negative effect on the rights acquisition necessary for the fulfilment of DR s obligations. General comments Further steps should have the form of a directive. A formal legislative procedure will give both the Member States and the EP real influence on the decisions made. The Recommendation is based on an assumption of the nature of cross border activity (country of destination) that is incoherent with existing copyright law (country of origin). The scope of the Recommendation is on line music services but the term on line rights is not a legal connotation. The effect of the Recommendation on broadcasters is legal uncertainty and higher transaction costs plus the loss of one-stop-shop.

2 The loss of one-stop-shop puts especially the Public Service Broadcaster s obligation to ensure cultural diversity under great pressure The freedom of choice of a free market for collective rights management will in effect apply only to the right holders and collective managers who are big on the market. It should be expected that the market for music rights in the EC will be dominated by a few multinational oligopolies and that the prices for the most popular repertoire will rise considerably. The Recommendation will - in time - undermine the very effective system used in the nordic countries of extended collective licensing which provides a combination of low transaction costs, one-stop-shop and legal certainty. The system is based on authorization given to each specific organization by National Authorities, e.g. the Danish Ministry of Culture, regarding the rights of each specific work/performance category - e.g. actors or painters/sculptors - provided that the organisation represents the majority of right holders whose works are used in Denmark. E.g. DR has just recently (Spring 2007) made an agreement with an organisation representing all the right holders through which DR has acquired the rights to make its Archive Production available on demand with full legal certainty towards members, non-members and orphan works. This agreement is - to the best of DR s knowledge - the first of its kind throughout the EC. If the principles laid out in the Recommendation come into full effect, the Ministry of Culture will no longer be able to point at one organisation that represent a majority of right holders and it will no longer be possible to establish extended collective licenses. It should be noted that hereby the Recommendation is counterproductive to the goals regarding the Cultural Heritage set by the EC. 1. NATURE OF THE INSTRUMENT (1) Are legally binding rules on the following issues preferable: (1) licensing; (2) transparency and governance; (3) assignment; and (4) withdrawal of online rights? DR s comments on (1): Yes - in the sense that the democratic principles of a formal procedure of legislation is preferable; and yes, as it might be necessary to secure the nordic system of extended collective licensing and one-stop-shop. So far the rules of copyright to a very large extend have been technological neutral, and the only thing new about the on line-environment is the technical form of transmission and the speed with which a service can be delivered. Thus the area is already regulated and the Recommendation has caused great confusion and frustration that calls for the formal legal remedies of the Member States and the Parliament. These remedies are not at hand because of the nature of the instrument which totally bypasses democratic control. Furthermore the nature of the instrument seems unfit for an area such as this - a highly heterogenic area with many different interests clashing between stake holders. Finally the Recommendation is working against the concerns expressly mentioned in Recital (18) of the 2001 Copyright Directive regarding the nordic system of extended collective licensing: (18) This Directive is without prejudice to the arrangements in the Member States concerning the management of rights such as ex- 2

3 tended collective licences. As described in brief herein the Recommendation is deeply affecting this very efficient tool for rights acquisition for e.g. broadcasters. To conclude, DR would prefer formal legislation in stead of an unfit recommendation that cannot be formally contradicted and therefore legally binding rules are preferable on especially the issues (2) transparency and governance; and (4) withdrawal of online rights - the latter in the sense that withdrawal of on line rights should not be permitted as it prevents one-stop-shop. Such legally binding rules should apply to rights management entities such as CELAS as well. 2. EU-WIDE LICENSING (2) What are the tenders that are underway which envisage EU-wide licensing arrangements? (3) What are the EU-wide licensing arrangements that have been set up? DR s comments on (2-3): The recommendation is based on the wrong assumption that there is an unfulfilled need for a cross-border licensing remedy in EU s copyright law. The country-of-origin principle, as stated in the Sat-cab-directive, is a well functioning remedy for broadcasting and simulcasting and webcasting should be considered as broadcasting as the only difference is the technology involved. For simulcasting, webcasting and on demand-streaming services as well mere reception does not constitute a copyright relevant act. A diffusion of this well-established principle in the copyright law is likely to provide confusion, higher transaction costs and limitation of the services provided within each Member State. Furthermore it will harm the goals of free cultural exchange between Member States set out in the Directive of Television without Frontiers, as expressed in art. 2a of the Directive: Member States shall ensure freedom of reception and shall not restrict retransmissions on their territory of television broadcasts from other Member States for reasons which fall within the fields coordinated by this Directive (It should be noted that apart from a change from television broadcasts to audiovisual media services the exact same wording is found in the latest draft for the Audiovisual Media Service Directive). (4) Which online customers music service providers benefit from EU-wide licences for their pan-european retail or other activities? DR s comments on (4): The broadcasters services will certainly not benefit from a change from the country-of-origin-principle. (5) What types of online services are most interested in obtaining EU-wide licenses? DR s comments on (5): DR s on demand-services regarding especially previously broadcasted material (including Archives) has no plans for geo-limitation. Since DR does not acknowledge any other copyright principle than the country-of-origin, an EU-wide license in the sense of the Recommendation is not sought-after. Recital 26 of the 2001 Copyright Directive should be remembered: With regard to the making available in on-demand services by broadcasters of their radio or television productions incorporating music from commercial phonograms as an integral part 3

4 thereof, collective licensing arrangements are to be encouraged in order to facilitate the clearance of the rights concerned. DR believes that the Recommendation is counter productive to this encouragement as it is likely to destroy the system of reciprocal agreements between collecting societies that are a necessity for obtaining one-stop-shop-license for the global music repertoire for broadcasters online and on demand services. (6) What legislative or other types of obstacles have been encountered in setting up EU-wide licensing arrangements? DR s comments on (6): In DR s negotiations with right holders and collecting societies the biggest obstacle has been the confusion on how to deal with the principles of the Recommendation and the legal uncertainty that it has provided regarding the possibility of rights withdrawal. It has also made it more difficult to enter into longterm agreements because nobody knows who will represent the rights in the future. 3. SCOPE OF THE RECOMMENDATION (7) Does the Recommendation correctly set out the rights of the various rightholders that are typically licensed for the provision of "online" services? (8) For the purposes of the withdrawal of rights, should "online" rights be further defined by category according to use or form of exploitation? (9) Alternatively, should rightholders be able to retain some types of use or forms of exploitation without assigning them to a collective rights manager? (10) How can the inclusion of equitable remuneration for record producers and performers be justified in contracts? DR s comments on (7-10): The Recommendation is unfit for broadcasters and broadcasters on demand services, since the ability to withdraw rights is contrary to one-stop-shop. The term on line rights is not established in Copyright law and the Recommendation is therefore breaking the tradition in Copyright law for technologically neutral descriptions of the different acts relevant under copyright law. The idea that right holders should be free to withdraw some of their rights regarding certain technologically defined distribution channels is lethal to the principle of one-stop-shop which is fundamental for broadcaster s rights acquisition. (11) Should it be mandatory to include niche repertoire in EU-wide licences? DR s comments on (11): DR s fundamental need is that the possibility to one-stopshop - to acquire rights to the global repertoire at one place - is preserved. The idea of a mandatory inclusion of niche repertoire does not present a solution to the fundamental inadequacy of the Recommendation. 4. GOVERNANCE AND TRANSPARENCY (12) Does the Recommendation bring about any changes in relation totransparency of rights management and increase the effectiveness of dispute resolution? 4

5 DR s comments on (12): DR strongly supports the idea of transparency of rights management and effective dispute resolutions. However it is hard to see that the Recommendation will bring any changes for the better on these issues. The introduction of the term on-line rights, which is unknown in copyright law, and the transactions costs that are bound to rise considerably as a result of the Recommendation and of the big music publishers withdrawal of rights from the collecting societies will reduce transparency. Furthermore the fragmentation of rights representation will make dispute resolution more difficult since the same content including various repertoire and used in different activities can involve many more different rights negotiators than today and increase the difficulties of both reaching agreements and resolving disputes. An eventual regulation should also apply to collecting rights managers such as CELAS. (13) Does the Recommendation bring about sufficient safeguards for individual right holders with respect to (1) tariffs; (2) licensing conditions; (3) entrustment; and (4) withdrawal of online rights? (14) Should the Recommendation further address right holders' participation in setting deductions for purposes other than for the management services provided (15) Does the Recommendation provide sufficient safeguards for commercial users? (16) Should applicable rules and principles in relation to dispute resolution be strengthened in the future? DR s comments on (13-16): The acquisition of rights - also music rights - is vital and of enormous economic impact on broadcasters such as DR. The Recommendation is a serious threat to the legal certainty of rights acquisition and one-stop-shop regarding broadcaster s activity in the internet environment and to the cultural diversity of public service broadcasting throughout the EC. The Recommendation does in no way make the acquisition of music rights easier or cheaper - the contrary is to be expected. Yours sincerely Kenneth Plummer Director General 5