article | 01 Jun 2014

Artists’ remuneration from on demand streaming – a system that needs to be reviewed

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The European Commission is currently reviewing the EU copyright framework in order to ensure that it is suitable for the digital environment, which has reshaped the ways content is created, distributed and accessed. One part of the review is an open consultation on the content in the digital single market. In this part, one of the topics that has been brought to attention, is the artists’ remuneration for on-demand streaming.

According to the Act on Copyright in Literary and Artistic Works (1960:729) (“Copyright Act”) performing artists have the exclusive right to exploit their performances by making the performance or a fixation of it available to the public. An exception to this exclusive right is the compulsory license. Based on this license, anyone may use a sound recording of an artist for a public performance or for a communication to the public. An example of such communication is when a song is played on the radio or on TV. When a performance is used based on the compulsory license, the neighboring rights holders remuneration is statutory and gathered by the collecting societies, in Sweden SAMI. Neighboring rights holders generally include the record label, the featured artist and non-featured artists such as a guitarist or a background singer.

In the Infosoc Directive (2001/29/EC), on-demand streaming was excluded from the compulsory license with the intention that the right holders should keep the control of where and to whom their performances were spread through on demand streaming services. Hence, an ondemand streaming service, such as Spotify, can only use a record with a license from the individual right holders.

Thus, streaming services may only exploit the song with a license from the right holders. The remuneration is negotiated individually between the on-demand streaming service and the right holders.

In practice, a performing artist will enter into an agreement with a record label and transfer his or her exclusive right to exploit the performance. The record label then enters into a license agreement with the on-demand streaming service, which includes the right to receive remuneration for the use of the recording and the artist’s performance.

The intention that the artists should keep the control over their performances regarding on-demand streaming is somewhat undermined since generally all exclusive rights are transferred to the record label. Furthermore, artists are normally in a weak bargaining position when entering the agreements with the record label. This is especially true for the non-featured artists, who are often left with only a lump sum for their rights regardless of the future exploitations and the number and frequency of streams.

Hence, in reality the current copyright framework puts performing artists in a worse position when their performances are distributed through on-demand streaming than e.g. by radio with the compulsory license. A statutory right to remuneration managed by collecting societies makes the process transparent and the artists have a greater opportunity of getting fair remuneration.

In the consultation to the Commission, SAMI proposed that artists should enjoy an unwaivable right to equitable remuneration for on-demand streaming and that it should be managed by performers’ collective management organizations. This system would put especially non-featured artists in a better position since remuneration for their performances would be guaranteed. For instance, Spain has a system similar to the proposal, where the collecting society has forced remuneration rights through courts and entered remuneration agreements with the key users of on-demand services in Spain. However, in order for artists to be guaranteed remuneration regardless of where in Europe their performance is streamed, their right must be statutory on an EU level and not just in the individual member state.

One can argue that this solution is insufficient and that in order to strengthen the economic position of the artists, a statutory remuneration level for streams must be implemented as well. The remunerations paid for streams are very low in comparison to the physical sales of CD’s which is an increasing problem since streaming services are taking market shares from physical sales. The position of the streaming services is generally that levels of payment will rise as the number of paying subscribers increase globally, but this remains to be seen.

The consultation period of the Copyright framework is now over and the Commission has received a large amount of input from the stakeholders. Over 55 000 submissions have been made by interested parties, so the attention is huge. The new Commission, which is to be elected later this year, will have a dire job to continue going through and concluding the opinions of right holders, collecting societies and other interested parties. It remains to be seen if the consultation will result in artists being able to enjoy a remuneration right better suited to today’s music distribution and whether this is sufficient to strengthen their economic position.

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