Criteria for the Determination of the Tariffs Victoriano Darias

Determination of Tariffs in the Draft Directive on Collective Management  Licensing terms should be based on objective criteria, in particular in relations to tariffs (Art. 15.2);  Tariffs for exclusive rights should reflect the economic value of the rights in trade and the service provided by the CMO (Art. 15.2);  Amounts in respect to a right to remuneration or compensation should also reflect the economic value of those rights in trade (Art. 15.2);  A collecting society providing multi-territorial licences for online rights in musical works shall not be required to use as a precedent for other types of services licensing terms agreed with an online music service provider, when the online music service provider is providing a new type of service which has been available to the public for less than three years (Art. 32).

Determination of Tariffs in the ECJ Case-Law  CMOs may not apply dissimilar conditions to equivalent services and if it places them as a result at a competitive disadvantage, unless such a practice may be objectively justified (Kanal 5);  Tariffs should identify precisely the use of the works and the audience, to the extent that this does not result in disproportionate costs for the management of the rights (Kanal 5);  Tariffs should be proportionate overall to the quantity of works used or likely to be used (Kanal 5);  Tariffs can be calculated on the basis of a user’s turnover (Basset);

Determination of Tariffs in the ECJ Case-Law  Flat rates are also permitted, unless there are other methods, which do not increase the costs of managing contracts and monitoring the use of protected musical works (Tournier);  Tariffs cannot be appreciably higher than those charged in other Member States, unless the differences are justified by relevant objective reasons (Tournier).  CMOs should grant licences limited only to part of the represented, unless this would not fully safeguard the interests of authors, composers and publishers of music and would increase the costs of managing contracts and monitoring the use of protected musical works (Tournier);  Tariffs and royalties charged by collecting societies may be subject to control by competition authorities (Lucazeau).

Determination of Tariffs in EU Countries  Provisions on criteria to determine tariffs are not found in the laws of many EU countries;  Curiously, some laws only include criteria as regards compensation for private copying;  In those laws that include criteria, these are not necessarily very precise.

Determination of Tariffs in EU Countries: Germany  General criteria to be found in Art of the Law on the Administration of Copyright and Related Rights:  The general rule is the financial benefits that are generated by the use. A different basis can be applied, if it provides indications to the benefits;  The share of the exploitation of the protected work in relation to the entire act of use should be taken into account;  The tariff should take due account of the religious, cultural and social interests of users, including aspects of the promotion of young people (reductions of the tariff).

Determination of Tariffs in EU Countries: Spain (Bill)  CMO’s tariffs have to take into account the economic value of the work or subject matter in relation to the user’s activity, with a view to achieve a fair balance between both sides;  At least the following criteria shall be taken into account:  The degree of effective use of the repertoire in relation of the user’s activity;  The intensity and relevance of the repertoire’s use in relation to the user’s activity;  The amplitude of the repertoire;  The economic benefit derived from the commercial exploitation of the repertoire;  The tariffs established by the CMO with other users for the same form of exploitation;  The tariffs established by equivalent CMOs of the EU for the same form of exploitation.  Reductions should be foreseen for cultural entities with no economic purpose.

Determination of Tariffs under Self-Regulation  Australian Code of Conduct for Copyright Collecting Societies:  Licence fees for the use of copyright material will be fair and reasonable. In setting or negotiating such licence fees, a Collecting Society may have regard to the following matters:  The value of the copyright material;  The purpose for which, and the context in which, the copyright material is used;  The manner or kind of use of the Copyright Material;  Any relevant decisions of the Copyright Tribunal; and  Any other relevant matters.

Determination of Tariffs under Self-Regulation  CISAC Professional Rules for Musical Societies:  CMOs shall:  Use its reasonable endeavours to license all uses of its repertoire;  Grant licences on the basis of objective criteria, provided that a CMO shall not be obliged to grant licences to users who have previously failed to comply with such CMO’s licensing terms and conditions;  Not unjustifiably discriminate between users.

Analysis of Some of the Criteria  Obligation to take into account the interests of certain users (cultural, social or religious purposes, promotion of the use);  Implies reductions to the use of copyright material;  Similar provisions appear in the Macedonian Law (Art. 138);  These types of provisions may have some merit. If so, why are there not similar provisions for all kinds of provisions of goods and services?;  If that is not reasonable, why are right holders the only ones obliged to provide their works and other subject matter at discounted prices?

Analysis of Some of the Criteria  Obligation to take into account the economic benefit associated with the use (or be based on a user’s turnover), the tariffs set in other Member States, or the tariffs established with other users for the same form of exploitation:  Reasonable criteria, but they have a problem. They are based on an existing reference point;  If that reference point does not exist, the criteria are of little use;  Regarding the last point, which is included in the Spanish bill, it aims at avoiding discrimination between members and non-members of an association of users that has signed a general agreement with a CMO.  On the other hand, sometimes, the obligation to take into account existing references might be an obstacle for the development of new licensing models. Art. 32 of the Draft Directive addresses this issue.

Analysis of Some of the Criteria  Obligation to take into account the economic value of the service provided by the CMO (Art. 15 of the Draft Directive) and the management and/or monitoring costs associated with possible provision of certain options (providing for options other than flat rates, access to part of the repertoire (Tournier), precise identification of the use of works (Kanal 5)):  It must be born in mind that the provision of certain options imply costs, which may affect the remuneration of right holders, the administrative fees and/or the rate of the tariff;  E.g.: n the US, the provision of per-program licenses instead of blanket licenses is subject to a 7% increment to compensate CMOs for teh additional inefficiencies and administrative costs of inherent in this option.

Analysis of Some of the Criteria  Obligation to take into account how the works and other subject matter are used:  Quantity of works used;  Financial benefits generated by the use of the protected work;  Share of the exploitation of the protected work in relation to the entire act of use;  Degree of effective use of the repertoire in relation to user’s activity;  Intensity and relevance of the repertoire’s use in relation to the user’s activity;  Economic value of rights in trade.

Analysis of Some of the Criteria Elements that may determine the value: Degree of Interactivity: TV, Radio Station or Webcasting On-Demand Music Service Low Degree of Interactivity High Degree of Interactivity Catch-Up TV or Radio Podcast

Analysis of Some of the Criteria Elements that may determine the value: Degree of Relevance: Hotel or Restaurant Discotheque or Nightclub Hair Salon Low Degree Of Relevance High Degree of Relevance Pub

Analysis of Some of the Criteria Elements that may determine the value: Degree of Use: TV, Radio Station or Webcasting (non-Music) Music TV or Radio Station (or Webcasting) News only Network Low Degree Of Use High Degree of Use

Analysis of Some of the Criteria Elements that may determine the value: Degree of Use:

Analysis of Some of the Criteria  Economic Value of Rights in Trade:  Could be read as to establish a prohibition for tariffs to be trifling;  Beyond this, it is of little help apart from the obvious.  Similar expressions can be found in US case-law regarding CMOs tariffs:  ASCAP v. Showtime: A reasonable rate must reflect the “fair market value” of the blanket license;  “Fair market value” is defined as “the price that a willing seller and a willing buyer would agree to in an arm’s length transaction” (Equal bargaining power and equal information);  A reasonable blanket fee is the price that would be charged in a competitive market for blanket licences;  However, such a market does not exist.