Out-Law / Your Daily Need-To-Know

Out-Law News 2 min. read

European Commission to investigate proposed online music licensing venture


The European Commission is opening an in-depth investigation into whether the proposed creation of a joint venture between three collective rights management organisations (CMOs) for the online licensing of musical works is in line with the EU Merger Regulation .

The Commission said on 14 January that a preliminary investigation indicated that the combination of the music repertoires currently controlled by CMOs involved “could result in higher prices and worsened commercial conditions for digital service providers (DSPs) in the European Economic Area”.

CMOs contributing to the joint venture are PRS for Music Limited (PRSfM) of the UK, Sweden’s Foreningen Svenska Tonsattares Internationella Musikbyra upa (STIM) and Germany’s Gesellschaft fur musikalische Auffuhrungs- und mechanische Vervielfaltigungsrechte (GEMA).

CMOs manage the rights of authors, performers and writers of musical works. They also grant licences on their behalf and redistribute the royalties collected from the exploitation of their copyrighted work.

The Commission said DSPs provide online services to final customers, such as music downloading or streaming and to operate on the market they need licences delivered by CMOs. “The Commission has concerns that the transaction may reduce competition in the EEA for copyright administration services provided to certain publishers since the proposed transaction would essentially reduce the number of meaningful market players from four to two.”

The Commission said its preliminary investigation “revealed that the proposed transaction may raise competition concerns in the EEA market for online music licensing”. This is because the joint venture would grant licences valid in several countries (multi-national licences) for the online music rights held by its parent companies or by other CMOs or right holders that would mandate the joint venture with the licensing of their rights, the Commission said.

“In order to lawfully operate in the market for online music services, DSPs need to secure a licence from each of the CMOs managing the relevant copyrights in the music works that such DSPs would like to offer on the market,” the Commission said. Such licences can cover one or several countries.

However, under the proposed joint venture, PRSfM, STIM and GEMA “would not offer multi-national licences for their repertoire individually and DSPs could obtain those only from the joint venture”, the Commission said.

The combined repertoires of PRSfM, STIM and GEMA, “currently among the most important in the EEA, could lead to increased bargaining power for the joint venture”, the Commission said.

In addition, the Commission said its preliminary investigation raised competition concerns over the EEA-wide market for copyright administration services to so-called ‘option 3 publishers’. These are major publishers who, following a Commission recommendation on the cross-border collective management of copyright for online use, “have withdrawn the mechanical rights related to their Anglo-American repertoire from the CMO system and have started to license these rights directly, relying on CMOs only for administrative services”.

If the joint venture goes ahead, it would “reduce the number of entities capable of credibly bidding for option 3 mandates from four to two”, the Commission said.

The Commission said the opening of an in-depth investigation does not prejudge the outcome. The Commission now has until 29 May 2015 to take a final decision on whether the proposed transaction would significantly impede effective competition in the EEA.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.