EU Formalizes Music Licensing System

If you want to see in real life how a single, Europe-wide software patent authority might work, keep your eyes on the new Central Licensing Agreement for music copyright, formalized in the EU on Wednesday.

Thirteen agencies that competitively offer royalties packages to licensees such as broadcasters, along with the five leading music copyright holders worldwide -- BMG, EMI, Sony, Universal, and Warner -- have agreed to manage a Pan-European copyright system that EU member companies will recognize and uphold.

Beginning now, all of these agencies -- which in the EU are called "collecting societies" -- whose purview used to be limited usually to within their own countries, may compete with one another across Europe in an open royalties market, with the expectation of driving fees down. Any royalty package purchased by a licensee through one of these societies will now consist of the combined repertoires of all 13 societies.

This is a big deal, especially for terrestrial broadcasters, not only because they may be paying less to play music. Up to this point, broadcasters may have been licensed to play music in their home countries, although their licenses might not have extend to neighboring countries just a few kilometers on the other side of the hill.

But the Central Licensing Agreement could also greatly benefit digital music service providers such as Apple. In October 2005, when the EU first took up the cause of reforming music copyright, estimates said that if Apple's unpaid royalties per iTunes song were actually to be collected by the various collecting societies, it could find itself paying over a half-million US dollars per song.

Where would all of this money have gone? Not to artists and performers such as the wildly popular Arctic Monkeys, whose sudden fame came almost entirely through distribution of both their music and their brand through the Web.

Under the old royalties system, such artists were paying up to EUR19,000 per song to all the collecting societies in all the EU countries, just so a single broadcaster in a single country could play that song over the airwaves. The existing system was clearly too incompatible with the digital age.

Yet there were opponents to the CLA measure, including from within the music rights holding community, arguing that collecting societies could conceivably have come together on their own to negotiate a workable scheme without the intervention of a collective government.

But the most vocal advocates against a collective patent system for the EU -- among them, the Socialist and Green Parties -- found themselves keeping silent on this particular issue, since their usual arguments against government intervention could have been taken to mean implicit support for the collusion of private industries, royalty societies, and the status quo.

"I readily admit that becoming Commissioner responsible for copyright, including for music, has opened up a whole new world for me," admitted Charlie McCreevy, EU Commissioner for Internal Market and Services, in a candid speech before the Music Publishers' Congress in Brussels, on the eve of the adoption of the Central Licensing Agreement he championed. "Gordon Brown told the Labour Party Conference last week that he was more concerned about the future of the Arctic Circle than of the Arctic Monkeys. I share a certain fellow-feeling."

Commissioner McCreevy is also responsible for stewarding the development of a unified software patent system in Europe, which has garnered him the opposition of elements in both left and right wings of European politics. If McCreevy's plan for a European Patent Authority is to succeed, he needs to quickly make friends and influence people.

This may be why McCreevy's language is becoming noticeably more populist with the passing months. The fact that the Arctic Monkeys are arguably Britain's hottest group, he said, is a testament to the fact that the new music distribution model is not only viable but already powerful.

"Now, I am certainly not proposing that everyone should start giving music away for free," he added. "I know all too well the serious damage that the music sector has suffered as a result of wholesale piracy and theft. Music has a value, reflected in its copyright, and that value has to be respected. But I am saying, and saying clearly, that new situations demand new approaches. And new technologies offer new opportunities from which everyone stands to gain."

"Change in the music business is a way of life," Comm. McCreevy pronounced. "More than most, you will appreciate that you can embrace change, or you can resist it. And I know which is easier. But you certainly can't make it go away."

When McCreevy first tackled the problem of reworking the copyright system, he said, he quickly learned the problems before him were something less than legal ones. "The licensing of music, territory-by-territory, Member-State by Member-State, is the result of custom and practice, rather than law. It made perfect sense in a world of concert-halls and discos, but it is a serious impediment to the rollout of new services online."

It will be more difficult now, in the wake of what will, at least in the near term, be trumpeted as McCreevy's success, for opponents of the single patent system in Europe to associate him with big business and special interests. And if opening up the online distribution system makes him a few million fast friends throughout the Internet, where opposition to software patents generally runs highest, then both the right and the left may need to scramble for a new strategy.