1. Music Rights and the Inflight Entertainment Industry Iain Kemplay – Head of International Licensing, PRS for Music, UK Mark Isherwood – Rightscom Limited, UK Frankfurt – Wednesday 12 th May 2010

2. Presentation outline General principles of copyright Copyright in music Administration of music rights Music rights organisations What does this all mean for IFE So, what’s changing? Why is the topic important today? The value of music

3. General principles of copyright Copyright one of a range of concepts that are protected under IP legislation Others include patents, trade marks, trade secrets, designs Two main treaties which govern copyright: - Berne Convention of 1886 - Rome Convention of 1961

4. General principles of copyright World Intellectual Property Organisation focused on internet and new technologies 1996 treaties –Copyright Treaty –Performers and Phonograms Treaty Spawned –Digital Millennium Copyright Act (US) –European Copyright Directive

5. Copyright in music What is protected? For how long? Musical works Sound recordings (separate from the musical work(s) on them) Performers Published editions From creation to 70 years from the death of the last creator 50 years – USA 90 – after year of release 50 years after year of performance 25 years after year of publication

6. What are the restricted acts? The owner of the copyright in a work has the exclusive right…. To copy the work To issue copies of the work to the public To rent or lend the work to the public To perform, show or play the work in public To communicate the work to the public (includes broadcasting and electronic transmission) To make an adaptation of a work or do any of the above in relation to an adaptation Copyright in a work is infringed by a person who without the licence of the copyright owner does, or authorises another to do, any of the acts restricted by copyright These apply to musical works and sound recordings:

7. What does this mean to IFE? Almost always all movies, videos, TV programmes and games will come to IFE producers “all rights cleared” Means all contributors (including performers) have given permission for inclusion of their “contribution” and its playback by passengers This usually includes copying of musical works and sound recordings into the movie, video, TV programme or games

8. What does this mean to IFE? IT DOES NOT cover the public performance of copyright musical works and sound recordings included in the movie, video, TV programme or game!!! The permission of the owner(s) of the musical work(s) and sound recording(s) is required for this public performance

9. What does this mean to IFE? All audio-only programming including CD selections need the permission of the copyright owners for The copying of the musical work and sound recording AND The public performance of the musical work and sound recording

10. Administration of musical works In droite d’auteurs territories composers assign performing and reproduction rights to –Musical work rights societies who carry out performing and reproduction right licensing Prevalent in Continental Europe, Japan and Latin America Rights society actually owns the rights

11. Administration of musical works In copyright territories composers assign performing rights to –Musical work rights societies who carry out performing right licensing And reproduction rights to music publishers who (as far as IFE is concerned) –Authorise a music rights society to licence reproduction of the musical works Broadly applies to Anglo-American works

12. Administration of musical works Music rights societies enter into reciprocal agreements with other such societies around the world in respect of each set of rights This creates a network of rights flowing from around the world into each territory So a performing rights society based in Europe can –Issue a performing right licence for its territory in respect of the worldwide repertoire

13. Administration of musical works Not all copying rights are passed to societies IFE usage is generally included in most society authorisations –So a society can issue copying licence for worldwide repertoire for its territory Not in the US, Canada, most of Asia and some others –Licences have to be obtained from publishers

14. Musical Work Performing Right: Europe PRS GEMASACEM John Hill Franz Schmit Francois Dupont Assignment Reciprocal Agreements Membership EMI Music Publishing Ltd. EMI Music Publishing Gmbh EMI Music Publishing SA Representation Sub-publishing Agreements

15. PRS GEMA SACEM Worldwide Repertoire From Worldwide Societies

16. Musical Work Copying Rights: Europe MCPS PRS GEMASACEM Franz Schmit Francois Dupont SDRM Assignment John Hill EMI Music Publishing Ltd. Assignment Reciprocal Agreements Representation Membership EMI Music Publishing Gmbh EMI Music Publishing SA Representation Sub-publishing Agreements

17. GEMA MCPS EMI Music Publishing Ltd. Anglo-American Repertoire Repertoire of Droit D’Auteurs Societies Anglo- American Repertoire EMI Music Publishing SA

18. Administration of sound recordings Record companies authorise sound recording societies –To administer their performing rights Record companies usually authorise sound recording societies –To administer their reproduction rights –Major exceptions Not for all types of usage although IFE usage is generally included in society authorisations Not in the US (and some other territories) except for digital performance or broadcast

19. Administration of performers’ rights In droite d’auteurs territories performers assign performing and reproduction rights to –Performers’ rights societies In copyright territories performers assign performing rights to –Performers’ rights societies And usually performers assign reproduction rights to –Record companies

20. Administration of sound recording and performers performing rights PPLGRAMEX Simply Red AcquaSmurfs Universal Music Group Ltd SENA Assignment Representation Reciprocal Agreements Membership Representation Universal Music Group ApS Universal Music Group N.V. Distributions Agreements Membership

21. PPL GRAMEX SENA Worldwide Repertoire From Worldwide Societies

22. Reproduction of Sound Recordings and Performances Reproduction of sound recordings and performances are usually licensed together Sound recording societies in Europe enter into reciprocal agreements with other such societies around the world in respect of the reproduction right Performers’ rights societies in Europe do likewise This creates a network of rights flowing from around the world into Europe

23. The exceptions In Australasia, Japan and some other parts of Asia and in parts of Latin America it generally works the same way as in Europe In the US and Canada licences may be direct with individual publishers or through a society representing some publishers In the rest of Asia, the rest of Latin America and Africa licences will generally be direct from individual publishers or a collective trade association (e.g. Hong Kong, Singapore)

24. The exceptions In the US no performance right for sound recordings or performers except when the performance is digital (e.g. internet radio) The sound recording society network of reciprocal agreements is not as advanced as for musical works In some territories no societies exist even though copyright legislation does –Middle East, parts of Africa Means all licensing done direct!!!

25. The exceptions This means there may be repertoire gaps in licences –Generally not a problem with any Anglo- American repertoire –Nor the local repertoire of operation –But some problems with some Asian, Latin American and African repertoire

26. Music rights organisations PRS for Music –PRS and MCPS – 1914 and 1911 –65,000 publisher, composer and author members –Access to over 10m works –International affiliates in 170 territories –2009 processed over 1bn bits of data PPL –Created in 1934 by EMI and Decca –Now 3,000 record companies –Stephen Carwardine & Co. case –2006 saw merger of PAMRA and AURA – 42,000 performer member In the UK, there are separate organisations to represent the interests of the owners of the musical works and the sound recordings

27. Benefits & challenges So, collectively we represent and can provide licences for the use of the vast majority of music available There are similar organisations in most other territories in the world and of comparable size Via representation agreements with each other, any of us can provide access to the worlds favourite music

28. Benefits & challenges Benefits –To our members – in a world where their music is used in various ways by many businesses –To licensees – the time, cost and resource needed to individually licence –We can provide blanket access on standard terms via one trusted party on a multi-service, multi-territory basis –BBC – premium value to collective licensing of rights Challenges –But this is not quite true – situation in USA –Interests of major members –Challenges of technology –Uneven copyright legislation –RTL vs. GEMA

29. Copyright Tribunals These exist in some form in most legislations Designed to resolve disputes on terms and fees between licensors and licensees So if any licensee is being “unreasonable” you have CT to fall back on However –Frequently expensive –Slow!

30. Approaches to licensing Not surprisingly, different societies in different territories take different approaches and put different values on licensing For example –PRS: pence rate per passenger –BUMA: square metres –STIM: rate per aircraft –GEMA: annual rate

31. So what’s changing? This is compounded by the development in technology and the application and interpretation of rights Which rights apply, what restricted acts are being undertaken, in what territory and who is liable These are challenged both in acceptance and interpretation by licensees

32. So what’s changing? This could be a cost issue, a liability issue or even a lack of awareness issue But in an age when production of in flight content has broadened to reflect the territorial capability of the marketplace, this makes music rights licensing even more complex and challenging

33. Let’s use other music The thought which must pass through many content producers’ minds is –If it is this difficult, why don’t we use some other music? There is some validity to this argument; let’s look briefly at the options: –Specially commissioned –Out of copyright music –Unsigned artists/bands –Buy-out music –Creative Commons

34. Let’s use other music These are increasingly used as an alternative source of music –Cheaper and fully rights cleared But if you want to enjoy the use of the worlds best loved music……….

35. Why are music rights important to you today? ‘…the increasingly relevant world of music licensing for airlines’ This is a really interesting topic – the value of music to airlines and the value of music itself We are discussing this today, not just because it is complex but principally because it is highly relevant and important to the IFEC content provision airlines are increasingly providing

36. Why are music rights important to you today? There is no obvious side step around music rights if airlines want to use the worlds best music – and you do! Thought it would be interesting to explore this further

37. Growth of inflight entertainment 1921 Aeromarine Airways - ‘Howdy Chicago’ 1936 Hindenberg – provision of a piano 1962 PAN AM – first airline to use tv monitors 1975 Braniff International Airways – first Atari video games –and now the acronym has moved to IFEC

38. Growth of inflight entertainment Emirates – ICE system provides –Access to plane’s external cameras –Live business, news and sport headlines –Phone, SMS and email –1200 channels of premium entertainment And the importance of music to these services –It is a key part of or can be integrated into all of them Example – US Airways Airbus A320 trial

39. Airline investment I had not appreciated the investment that airlines make in their inflight entertainment provision The following are thought provoking –Systems safety and regulation –‘The vast majority of airlines that we talk to look at IFEC as an investment rather than a cost’ Neil James, Executive Director at Panasonic Avionics

40. Airline investment Installing IFEC systems ranks second in cost behind aircraft engines Recognised as an ancillary revenue stream but most importantly of building customer loyalty ‘Today (2005) Emirates’ typical investment in inflight entertainment systems equates to nearly US$10m per aircraft’ Patrick Brannelly, Emirates British Airways invested £80m in 30,000 seatbacks in September 2009

41. Value of music to airlines No empirical evidence to qualify but the message appears to be: –Music helps relax people and make them more comfortable –It’s a key part of keeping them entertained and of communicating with them –This is important to a customer service business – aerophobia is believed to effect 1 in 5 people ‘A happy passenger is a repeat passenger’ (Avionics magazine 02/10)

42. Value of music in itself Music production and consumption makes up a significant part of the World’s creative economy –In the UK alone this figure is £6bn (2008) Research by Will Page, Chief Economist for PRS for Music, shows that –In 2009 the UK bucked the perceived downward and fatal trend in music royalties –Value from traditional retail sales was collapsing but music in business was growing by a far greater degree

43. Value of music in itself The substantial development of IFEC systems and their capacity for content is reflective of this Alfred Hitchcock – ‘If the music and the visuals say the same thing, then the music is not working’ Let’s remember the extraordinary lengths that performers, songwriters and musicians can go to record their songs and the powerful effect music has on each of us

44. Myths! If you only use 30” of a work you don’t need a licence –Not true Using music helps promote it –Maybe, but not relevant to licensing If a record label sends me a CD I can use it without licence –Not true a licence will still be required

45. Summary Music rights are complex and particularly so in today’s worldwide businesses The complexities reflect –The structure of copyright –It’s provision under law –The continually developing technological environment and changing basis under which rights owners want to be represented But – it is clearly necessary and worth it.

46. One take away Performing Right Society (e.g. PRS, GEMA, ASCAP, CASH, APRA etc.) Phonographic/Performer Society (e.g. PPL, GVL, PPCA, CPRA, ABRAMUS etc.) Mechanical Right Society (e.g. MCPS, SDRM, AMCOS, HFA etc.) OR Music Publishers Phonographic/Performer Society (e.g. PPL, GVL, PPCA, CPRA, ABRAMUS etc.) OR Record Companies Public Performance Copying Musical Works Sound Recordings/ Performers

47. Final observations Along with many businesses, airlines play an increasingly important role to provide access to an audience –To be seen to support and respect intellectual property –Participate in providing new revenues for creators to create Aircraft provide a captured audience of millions per day There is an interesting dialogue to continue….

48. Questions!!!!

49. Music Rights and the Inflight Entertainment Industry Iain Kemplay – Head of International Licensing, PRS for Music, UK Mark Isherwood – Rightscom Limited, UK Frankfurt – Wednesday 12 th May 2010