The European Commission has launched an in-depth investigation into the proposed creation of an EU-wide digital rights alliance between PRS (UK), GEMA (Germany) and STIM (Sweden) – after it found serious initial concerns over the plan.
The proposed JV would use copyright and online processing services from ICE – which is co-owned by the trio of PROs.
But the EC’s preliminary investigation into the proposed hub concluded that the strength of PRS, GEMA and STIM’s combined repertoire could result in higher prices and worsened commercial conditions for digital service providers (DSPs) in Europe.
The Commission has raised further concerns that the move will reduce competition in Europe for copyright administration services provided to the major publishers.
It said ‘the proposed transaction would essentially reduce the number of meaningful market players from four to two’.
The EC’s in-depth investigation will now assess whether the creation of the joint venture is in line with the EU Merger Regulation.
The Commission has now 90 working days, until 29 May 2015, to take a final decision on whether the proposed alliance will significantly impede effective competition in the EU.
In depth: what’s the EC’s problem?
In order to lawfully operate in the market for online music services, DSPs like Spotify and YouTube currently need to secure a licence from each of the collection societies managing the relevant copyrights.
Such licences can cover one or several countries.
If the PRS/STIM/GEMA proposal was approved, these PROs would not offer multi-national licences for their repertoire individually – DSPs could obtain those only from the joint venture.
This triggers competition concerns around online music licensing: the joint venture would grant licences valid in several countries (multi-national licences) for the online music rights held by its parent companies – or by publishers that mandate the joint venture with the licensing of their rights.
The Commission is also worried that the combined repertoires of PRS, STIM and GEMA could lead to increased bargaining power for the joint venture – allowing it to charge higher prices and grant worse commercial terms and conditions to DSPs.
In addition, the EC notes that some major publishers – those which it calls ‘option 3’ companies – have have withdrawn the mechanical rights related to their Anglo-American repertoire from the PROs in Europea and are now licensing these rights directly with DSPs.
However, they rely on the likes of PRS/GEMA/STIM for administrative services – and the EC fears that competition in this field would instantly be reduced should PRS, GEMA and STIM pool their resources.Music Business Worldwide