A lack of digital harmony

Industry and the EU believe consumers would benefit from a digital single market.

Nothing illustrates more clearly the power of the consumer to shape the digital economy than the catch-up game that regulators and retailers were forced to play when people started downloading music illegally. 

Legal downloading is more commonplace now than it was in those days, more than a decade ago, but Europe is still far from having a “digital single market” in which it is easy to buy and sell products in different member states.

The creation of an online single market was one of the main recommendations of the European Commission’s review of the single market act, announced last October. The Commission believes that too many consumers are still unable to purchase products online, as companies are too uncertain about the law in other member states to be confident about selling cross-border.

The Commission’s digital agenda, launched last May, describes this as the “persistent fragmentation” of the market, which it says is stifling European competitiveness. It cites Google, eBay, Amazon and Facebook as some of the successful internet businesses that originated outside Europe.

One of the most striking examples of this “fragmentation” is online music retailing. Purchases are complicated by the absence of an EU-wide framework for copyright, so artists, authors and retailers have to cope with 27 different registration systems. It often means that consumers in some member states do not even have the opportunity to buy online music that is available in other member states, because separate rights deals have not been agreed.

Neelie Kroes, the European commissioner for the digital agenda, believes that this must change. The current copyright regime “irritates the public, who often cannot access what artists want to offer, and leaves a vacuum that is served by illegal content, depriving the artists of their well deserved remuneration”, she said last November.

Collective rights

In April, the Commission will propose a new framework for collective rights. Erkki Ormala, vice-president of Nokia and president of DigitalEurope, which represents the IT, electronics and telecommunications sectors, sees “a key opportunity to make the digital single market a reality”. He describes the creation of a digital single market as “extremely important for industry and important for Europe as a whole” and a condition for creating new growth.

The figures support this view. Europe accounts for 13% of worldwide music downloads, while the United States accounts for 43%.

A report by the European Policy Centre in April 2010 concluded that a digital single market would result in a 4% increase in gross domestic product in Europe over ten years, equivalent to €500 billion.

Currently, each member state has its own collecting society, operating on behalf of musicians in handling royalties. DigitalEurope wants the EU to make this system more efficient and transparent. The Commission has already indicated that it will soon announce proposals for users to obtain content licences that will cover the entire EU. It will also make collecting societies more open about how they obtain and distribute money.

Across borders

BEUC, the European consumers’ organisation, is also calling for a “multi-territory licensing of content” analogous to industry’s ambitions. “We’re still miles away from that,” says Kostas Rossoglou, a legal officer at BEUC. “But we believe that there should be multi-territory licensing, so that people across the EU can get access to content of their choice, irrespective of their country of residence.”

Some musicians fear that any threat to collecting societies’ control could hit the earnings of smaller artists. Others, however, feel they need a better deal.

Kelvin Smits, the director of Younison, a group of music professionals calling for more transparency in collecting societies, said: “The outdated and fragmented way collecting societies work is suffocating the European creative middle class who, without being legally empowered, cannot assume that the money collected in their name will find its way to the rightful owners, hence the huge amounts of ‘black box’ money being redistributed arbitrarily due to lack of information.”

Collecting societies will not give up without a fight. They already feel that the Commission increased the red tape that they have to deal with when, in 2005, it demanded an end to their mutual non-competition agreements. Any move to dilute their control will threaten cultural diversity, they claim.

Impala, an association representing independent music companies, says: “Thousands of small and medium-sized record companies, music publishers and artists rely in their respective territories on local collective licensing bodies to represent their interests and negotiate with powerful users of music to ensure an adequate reward for their creative activities.”

However, with so much of Europe’s growth depending on the creation of a digital single market, it seems that the voice of consumers, demanding easier access to online products, could be the one that resonates.

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