The 2004 Communication of the European Commission regarding the management of copyright and related rights in the internal market determined the need of a legislative action aimed to harmonise certain features of collective management in order to create an internal market and a more favorable framework for right-holders and users.
Subsequently, in 2005 the European Commission adopted a Recommendation on the management of online rights in musical works aimed to improve the EU-wide licensing of copyright for online services.
Such improvements were deemed necessary in relation to a further development of internet-based services covering different territories.
The study on a community initiative on the cross-border collective management of copyright arranged by the European Commission concluded that in order to improve cross-border management of copyright the most effective option was to give right-holders the faculty to authorize a collecting society of their choice to manage their works across the entire EU.
This model assigns to the right-holders the freedom to choose a collecting society even outside the national territories for the European licensing of their works, in so creating a more competitive framework for cross-border management of copyright and enhancing the right-holders’s earning potential.
The recital 9 of the Recommendation states that “In the era of online exploitation of musical works, however, commercial users need a licensing policy that corresponds to the ubiquity of the online environment and which is multi-territorial. It is therefore appropriate to provide for multi-territorial licensing in order to enhance greater legal certainty to commercial users in relation to their activity and to foster the development of legitimate online services, increasing, in turn, the revenue stream for right-holders.”
In July 2005 the Commission consulted the stakeholders and in particular right-holders, rights management societies and commercial users on how to promote the EU-wide online licensing of music. The consultation was based on the following three options: (i) do not intervene (“Do nothing”); (ii) improve cooperation among collecting societies to grant a EU-wide license covering the other societies’ repertoires; or (iii) give right-holders the choice to appoint a collective rights manager for the online use of their musical works across the entire EU.
The first option was not considered favorably by the parties involved as they acknowledged the need of a reforming action.
The second option received the support of commercial users and the collective rights managers. The third option has been supported by the music publishers, the independent record labels and part of collective rights managers.
The analysis of the consultation results led to the recommendation to the Member States to eliminate the territorial restrictions provided in the licensing contracts and on the other hand to let the right-holders the possibility to opt for an EU-wide direct licensing of their repertoire.
Point 3 of the Recommendation underlines “Right-holders should have the right to entrust the management of any of the online rights necessary to operate legitimate online music services, on a territorial scope of their choice, to a collective rights manager of their choice, irrespective of the Member State of residence or the nationality of either the collective rights manager or the right-holder.”
The Recommendation also aimed to introduce a more transparent rights management model in order to allow the right-holders to have sufficient information on the licensing models available and a distribution of royalties based on an equitable and non discriminatory basis.
It also sets out several principles as the faculty for right-holders to choose the collecting society and the obligation to provide users with information on tariffs and repertoire in advance of the negotiations.
Being the Recommendation a non-binding instrument it has been not regularly complied.
In January 2007 the Commission called for comments – as per Point 16 of the Recommendation – the Member States and collective rights managers to report the measures concretely adopted in relation to the principles express in the Recommendation and asked the stakeholders to address their opinions on the development of the music sector.
The Commission received a total of 89 replies from the different categories of stakeholders (collective societies, publishers, users, Member States, etc.).
The replies highlighted that most of stakeholders – in particular collecting societies and music publishers – were skeptical about the use of a legislative approach. On the opposite, users and the Member States were largely supportive of the legislative solution.
It is noteworthy that the call also reported the main initiatives concerning the EU-wide licensing of music for online services. In some cases, the right-holders have tried to create entities managing licenses on a multi-territorial bases. In 2008, CELAS signed the first EU-wide licensing agreement concerning the EMI music repertoire with the mobile operator Omnifone and covering a music download service named ‘MusicStation’. In the following years, the same organization has executed several deals with other operators, including iTunes and Nokia.
The process has finally moved forward with the recent Proposal of Directive on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market.
The Proposal dated 11 July 2012 and presented in the context of the Digital Agenda for Europe has two main purposes:
i) To improve the efficiency, accuracy and transparency of collecting societies; and
ii) To create a Single Market for the intellectual property by facilitating the promotion and the development of multi-territorial licensing – i.e., licences covering the territory of more than one Member State – for the provision of online services.
With regards to the first purpose, the Proposal is aimed to ensure a higher standard of accountability of collecting societies allowing the right-holders to have more control over them.
Title II of the Proposal establishes a large number of provisions concerning the merit of the activity of the collecting societies and specifically some organizational and transparency rules (Chapter 1), guidelines on financial management (Chapter 2), general principles concerning the relation between the societies and the negotiations between collecting societies an users (Chapter 3 and 4), information to be disclosed by the collecting societies including those concerning the fee collected and paid, the organization, the governance, the financial statements, etc. (Chapter 5).
With regards to the creation of a Single Market, the Proposal intends to remove the national restrictions which constitute barriers for users to access cultural content, for providers to obtain the necessary rights in order to distribute the services and also for right owners having the right to be correctly paid for the usage of their musical compositions and recordings.
The Title III clarifies that collecting societies are free to decide whether granting multi-territorial licenses for online rights in musical works or not. For both cases, it details the minimum requirements that a collecting society must comply with.
If the collecting society intends to concede those multi-territorial rights it must (i) be able to process electronically the data needed for the administration of the licenses, (ii) be able to provide the service providers, the right-holders and the other collecting societies by electronic means, with up to date information concerning the music repertoire they are administrating, (iii) implement procedures in order to enable right-holders and other collecting societies to correct the data, (iv) monitor the use of online rights in musical works, implement electronic reporting systems and invoice accurately the online music service provider by electronic means, (v) distribute the amount due to right-holders accurately and without delay after the actual use of the work as reported by the service providers.
The Proposal also clarifies that collecting societies may outsource the services related to the management of multi-territorial licenses provided that it remains liable towards the right-holders, the service providers and the other collecting societies.
In other cases, the collecting societies may decide not to grant multi-territorial licenses. Anyway, in order to facilitate the aggregation of the repertoires for the benefit of online music service providers, the proposal sets out the rules concerning the representation agreements between collecting societies (Article 28), the obligation to represent another collecting society for multi-territorial licensing on a non-discriminatory and non-exclusive basis (Article 29) and the access to multi-territorial licensing (Article 30). According to the latter provision, the right-holders may grant licenses for their own repertoire provided that their collecting society does not grant multi-territorial licenses and it did not enter into a representation agreement with other collecting societies.
Finally, the Proposal provides that the Member States shall empower the deputed national authorities in order to let them take appropriate measures and sanctions (that shall be proportionate and dissuasive) in the event of violations of the possible Directive.
Few positive examples of cooperation among collecting societies and efforts to develop multi-territorial models already exist in the current market.
In this context, should the Directive come into force, it will help to accelerate an ongoing modernization process concerning the Pan-European licensing of rights. The simplification of copyright clearance is included among the actions aimed to realize the digital single market which constitutes the Pillar I of the Digital Agenda.
As a result, this will hopefully lead to boost the legal offer of digital music within the European market. At the same time, this should support the virtuous collecting societies to regain market’s trust. A more competitive framework will award the entities able to be efficient and to build their reliability beyond the national borders regardless of the advantageous positions acquired in the local markets.
 Commission Recommendation of 18 May 2005 on collective cross-border management of copyright and related rights for legitimate online music services (2005/737/EC) as amended by the CORRIGENDUM TO COMMISSION RECOMMENDATION 2005/737/EC of 18 May 2005 on collective cross-border management of copyright and related rights for legitimate online music services.
 The Italian Association of Phonographic Producers (AFI) observed in its contribution: “The on line market is still at an early stage and its characteristics are not yet clearly defined. Therefore the opportunity to take a legislative initiative should be taken into consideration just in case of evident market failures or clear dangers for cultural diversity.”
 CELAS (Central European Licensing and Administration Services) was created by GEMA and the MCPS-PRS Alliance. It is a legal entity set up to represent EMI Music Publishing’s Anglo-American and German repertoire for online and mobile uses in 40 European countries.
 2012/0180/(COD), Proposal for a Directive of the European Parliament and of the Council on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market, http://ec.europa.eu/internal_market/copyright/docs/management/com-2012-3722_en.pdf