Collection Societies: ‘Gamekeepers or Poachers?Posted by John-Paul Greenock

Music 4.5: The Death of Collective Licensing?

The simple rule is that if you have a monopoly situation you cannot, by default, have competition, and, by little or no competition in the marketplace, the creators and end users (and everyone else in between) can possibly lose out in terms of anti-competitiveness. With Collective Licensing, we indeed have close to a monopoly situation in each country of the globe via the various collection societies, and the stakes are high for all concerned in the midst of an ongoing digital revolution where the rules are constantly in flux, and goalposts constantly changing. Therefore, the key two-part question is whether collection societies are effectively maximising revenues for their members, and at the same time if they are fully protecting their members’ interests from those that would wish to take more of the economic ‘pie’.

Panelists L-R: Clive Gardiner, Jez Bell, Chair Pete Jenner, Frances Lowe, Gregor Pryor

This mini-conference, set up by the excellent Music 4.5 event conference team, was attended by many of the big industry players including the legendary Peter Jenner (President Emeritus, IMMF) who chaired the proceedings with seamless authority and a good measure of humour, Will Page (Chief Economist, PRS for Music), Frances Lowe (Regulatory and Corporate Affairs Director, PRS for Music and Chair at BASCA Trust), Paul Keller (International Co-ordinator, Creative Commons), Patrick Rackow (CEO, BASCA), Mars Mertens (Our Music, and formerly of BUMA/STERMA), Jez Bell (Head of Global Licensing, Omnifone), Tom Frederikse (Solicitor/Attorney in Digital Media, Clintons), Gregor Pryor (Lawyer and Partner, Reed Smith), Michael Breidenbrucker (CEO, RjDj), Clive Gardiner (VP Digital Content, We7), and Helienne Lindvall (The Guardian).

These kind of events are often, as we know, a ‘same old, same old’ talking shop with brands trying to sell their wares, and no-one really wanting to say too much with the global beady eye of the media and business world watching every move. This looked like it was going to be no different so a few curve balls needed thrown into the mix.

As we see it, the main questions centre around how revenues are collected at present, how difficult it is to collect those revenues in the digital era, and how the industry is changing to accommodate the new digital landscape (and therefore maximise revenue streams for creators/owners of copyright, big and small). Importantly, do the old ways of territorial licensing have their place in the future, and at present are we in Europe moving further towards a US model of statutory transparent rates? This ‘transparency’ is a key word, and for the event it was a clear objective to delve further into this for some form of answer from industry personnel. The question at least could be put to the PRS – who were invited panelists – as to why recent deals, with the likes of Spotify and YouTube, had been shrouded in mystery by the ever-growing use of the non-disclosure agreement. As a members organisation, it seems those members of the PRS are still not privy to whether these important deals were for example, a reduced rate deal to the much quoted £0.085 per stream, whether a fixed price/one-off fee deal had been brokered, and, in terms of the bigger picture, exactly what is being discussed in terms of further rights. Why?

Frances Lowe (PRS for Music) advised, “Collective online licensing is working, and it’s incredibly important that it is transparent, effective and efficient”. She further stressed it needs to be based on good infrastructure, pointing towards heavy investment in the quirkily titled I.C.E back office database, selected to tie in to the Global Repertoire Database project. Now there are two points here: first, how can the likes of the PRS do deals behind closed doors with huge global players in the digital world, hiding behind an NDA so that members are kept in the dark? Second, how can this type of database system with significant attached costs be utilised within an effective and efficient global business model to further protect and maximise revenues for all parties? These questions were asked directly to Lowe, who chose not to comment. I’m sure we all wonder exactly what that means, and this is hardly transparent in anyone’s eyes! After all, according to various industry sources (and The Guardian), Lowe was the key individual who directly made the deal with YouTube under the NDA (and this was pointed out). What have they got to protect or lose?

We should not forget that collection societies all earn very good income (even as not-for-profits) from what they do, and are an intrinsic part of the entertainment industry employing many thousands of staff. So there is a lot to protect from their side, but we rely on these societies as an industry to take care of members needs in their monopoly position, and be entirely transparent. On that point it is clearly obvious by bodies such as the MMF (from the recent submission to the Hargreaves Report) that they are not happy with transparency by collection societies and indeed are hiding behind NDA’s in order not to disclose vital details of these major ongoing digital deals. Pete Jenner advised concern about NDA-protected deals going on behind closed doors, declaring that artists and writers so affected should be “going to court to get a declaratory injunction” to render these NDA’s unenforceable.

Tom Frederikse, Solicitor/Attorney, Clintons

Will Page was quick to point out (in a fairly animated fashion) with respect to the direct questions to his colleague Lowe, that collecting societies currently spend “98% of our time talking about 2% of our revenues” – by which he meant digital services, as opposed to the other revenue streams from performance royalties. However Tom Frederikse advised that “we were misled by Page – it’s not about revenue, it’s about usage! We need to maximise licensing to the uses that are already there”. So why are we not focussing on the large percentage of digital users that do not pay for their use? Page reckons that 60% of the digital users in the UK do not pay anything for their consumption of music online. So what have collection societies got to hide if only 2% of revenues are at stake?

It could be seen that certain ISP’s, large tech companies, and mobile operators have got very fat and rich on ‘free content’ or simply ‘bad deals’ and lack of joined-up thinking from the music industry for far too long. They seem to have allowed these companies to dictate and control the goalposts. We also have never globally legislated on any kind of levy on digital equipment, or taken a share from the revenue of communications companies at the point of use or sale by consumers, potentially losing billions in revenue streams (in my humble opinion). This we continue to do, coupled with further alienation of our customers, in terms of recent court cases and legislation such as the Digital Economy Bill. Following from this, the MMF advised in a recent submission to the Hargreaves Report that they looked for faster, easier licensing (preferably at set rates) and fair compensation for artists and investors, within an efficient, effective structure for all parties. They also importantly look to monetise all unauthorised consumer activity and not see them as ‘pirates’. The MMF suggests a global database from which all user activity can be monitored and monetised, and which collection societies can access to pay fair remuneration to their members. So maybe CMO’s such as the PRS are at on the right track at least in part.

Bringing all of this together, TMV asked the esteemed panel for their views on a Sky TV type ‘all you can eat model’. This is where customers pay a standard subscription to the ISP/mobile phone provider, just as David Bowie foresaw in 2002 with his ‘music like water’ analogy, a percentage of the tariff going straight into a central pot of global revenues. This would be supplemented by an additional charge/levy on all digital equipment. At this point a global database would identify exactly who had used what, when, and how via some form of API ‘key’ to track the data, and the income could then be divided amongst artists and investors in a fair, proportionate and transparent manner based on globally set rates (if all the rates were equitable, fair and transparent that is). (MMF Chairman Brian Message said in a recent members meeting that royalty statements detailing digital revenues are almost impossible to understand even with the input of the best accountants and auditors. Of course ‘bundling’ of product could still be sold at a premium.)

At this point there was comparative silence from the room, although a large grin from Pete Jenner. ‘Blue sky’ thinking seemed simply lacking from this cohort of ‘experts’.

Jez Bell, Omnifone; Pete Jenner, President Emeritus, IMMF

Michael Breidenbrucker, from RJDJ, a digital application design company, advised that this ‘utility type’ model could definitely work technically, and in the digital age all we need is a “simple standardised way to access content and one body for collecting the data”, going on to say that it is “easy to set up API’s”. This seems a no-brainer on everyone’s part, but has this been a trick missed by initially demonising the technology behind Napster, Grokster, Limewire, Pirate Bay, etc and not setting up an effective model earlier? Has the industry simply lost control? The technology has always worked, we just needed to harness it as an industry, with a user-friendly way of accessing content, coupled with an effective means of collecting those revenues at the source (the customer). Indeed it could be seen that Apple/iTunes has made a lot of money in the market place via ease of legal use and ‘coolness’ of product. However if models such as the one discussed above are so simple to put into practice, in order to monetise both legal and ‘illegal’ usage to maximise revenues, what is stopping everyone? As Pete Jenner summarised, “I don’t feel an awful lot has changed in 10 years”. Has it?

Maybe it’s because each CMO and set of master rights holders look to protect their own sizeable pots of money at all costs, but at the same time hopefully protect their members and clients. However with a lack of transparency with the use of NDA’s, and deals being done behind closed doors, we are all being kept in the dark and for all the wrong reasons. In the audience were also senior representatives from ISP’s, mobile providers, publishers, and the other collection societies, but all kept very quiet during each stage of the discussion. The names will not be mentioned to spare their blushes, but it did not look good as far as this kind of event is concerned. Surely they all need to wake up, smell the coffee, and sort this mess out, before it’s too late.

If we are potentially losing over 60% of revenues in just the UK alone according to Will Page to consumers that contribute absolutely nothing, then something is far wrong for CMO’s. On the other hand, if we do not know exactly what collection societies and master rights holders are doing to protect members’ interests and maximise revenue streams, then that poses an important dilemma as well.

Are the collection societies effective gamekeepers, or could the question be put that in terms of members’ interests (big and small) that some societies could be seen as ineffective poachers simply being bullied by big tech companies? Feel free to discuss.

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