Problems in Licensing of Music Video Clips for On-Demand Streaming

18.06.2009

Problems in Licensing of Music Video Clips for On-Demand Streaming

At first glance, the licensing situation as regards audiovisual on-demand streaming seems fairly straightforward. The performance rights society Gesellschaft für Musikalische Aufführungs- und Mechanische Vervielfältigungsrechte (GEMA) has issued Schedule VR-OD 5 which sets out the special royalty rates for the mechanical and presentation rights for the online use of works in its repertoire. This applies to all kinds of music-on-demand music video offers, including platforms with user-generated content from the Internet or similar data networks, and music-on-demand for mobile use by the end user (excluding ringtone melodies). However, close inspection of the procedures for obtaining such licences reveals that it is, in practice, impossible to do so.

Tariff Terms of Tariff

In the case of advertisement-sponsored music video services, the basic percentage royalty amounts to 22.5% of all relevant monetary advantages. However, certain minimum royalties apply for the use of each work if the percentage royalty would result in a lower royalty.

For music-on-demand offers financed wholly or in part on the basis of ultimate sale prices, subscription payments or other monetary advantages (eg, from advertising (excluding sponsoring, barter, compensation or gift transactions)), the minimum royalty for each work from GEMA’s repertoire with a playing time of up to five minutes amounts to €0.1278 for each stream.

If the offer is financed by sponsoring, barter, compensation or gift transactions or sales of services or products which are not part of the music-on-demand offer, the minimum royalty for each work with a playing time of up to five minutes from GEMA’s repertoire amounts to €0.1916 for each stream.

A comparison with the minimum royalty with respect to on-demand streaming provided by the UK Mechanical Copyright Protection Society and Performing Right Society Alliance – £0.0022 – illustrates the unreasonableness of the new GEMA tariff.

The music industry has not accepted this prohibitive royalty rate, which was published by GEMA at the beginning of 2009. As provided for in the Collective Rights Management Law, the German Association for Information Technology, Telecommunications and New Media has initiated arbitration proceedings in order to resolve the conflicts with respect to the tariffs set out by GEMA. However, these arbitration proceedings could easily last for another two years.

GEMA Repertoire

Furthermore, due to the recent developments in the field of collective rights management in Europe, GEMA – along with all of Europe’s other music rights societies – can no longer grant online licences for its entire worldwide repertoire to music exploiters. In October 2005 the European Commission issued a recommendation with respect to the future collective administration of online rights for the Anglo-American repertoire of Warner/Chappell Music Publishing, Universal Music Publishing and Peer Music. The repertoire has been withdrawn from the system of reciprocal representation agreements between the different rights societies which enabled each of them to administer rights to content from overseas. The same applies to EMI’s repertoire, which is now represented by CELAS.

Thus, in order to obtain the global repertoire for online usage, a commercial music exploiter must obtain licences not only from GEMA, but also from various other rights societies such as the Société des Auteurs, Compositeurs et Editeurs de Musique (Universal) and central licensing bodies such as Pan-European Digital Licensing (Warner/Chappell) and CELAS (EMI).

Synchronization Rights

A further problem arises because GEMA is not entitled to license the so-called ‘synchronization rights’ of its repertoire (ie, the right to combine video footage with musical works). According to the membership agreement between GEMA and its authors or copyright owners, synchronization rights are retained by the copyright owner, usually the music publisher. It has not yet been ruled out under copyright law that the secondary use of such music clips through internet platforms may require a licence for these synchronization rights, in addition to the licence required to exploit music clips by on-demand streaming. As a result, regardless of the difficulties in obtaining a licence for on-demand use, such on-demand streams are either risky (if the synchronization rights are not licensed) or extremely burdensome given that rights for each individual work would need to be cleared with the relevant copyright owner.

Comment

This complex licensing situation in Germany has meant that few music clips streamed by German internet platforms are properly licensed. The recent failure of negotiations between GEMA and YouTube is just one example of the problem.

It is doubtful that this situation will be resolved soon, since the difficulties are not confined to the fixing of an appropriate minimum charge for each single stream. The situation is comparable to that which occurred during the introduction of private radio and broadcasting in Germany in the early 1980s, when a new structure of tariffs had to be invented. On-demand streaming is the new radio product for today’s generation and the situation both for right holders and platforms will not be solved unless a new schedule of tariffs can be drawn up to reflect users’ behaviour.