Europe’s artists and labels could lose $137m annually to US recorded music rightsholders if EU law isn’t changed, trade groups warn

Jacob Hodgson via Unsplash

A group of organizations that represent musical artists in Europe has warned that an “anomaly” in EU law could soon result in artists losing up to 40% of the income they make from terrestrial radio broadcasts and other public performances of their music.

Because of a technicality in the EU’s law, that lost income would largely go to US-based artists, stated the artists’ groups, which include IMPALA, the trade association for European indie labels, and Adami, the French collective management organization for performers’ rights.

At the heart of the issue is a difference in how the US and the EU pay artists for terrestrial (non-satellite) radio broadcasts of music and recorded music played in bars and restaurants.

In Europe, when recorded music is played over terrestrial radio or in venues, performance rights payments must be made to the artists and labels behind the recording, as well as to the songwriters and publishers who own the composition behind the recording. However, in the US, performance rights payments are made only to the songwriters and publishers, and not to artists and labels.

As a result, European countries largely followed the “reciprocity principle” that has been written into international copyright treaties such as the WIPO Performances and Phonograms Treaty of 1996: In those countries where artists and labels are paid performance rights, there was no obligation to pay US artists and labels, since European artists didn’t receive those payments from airplay in the US.

However, in 2020 the European Court of Justice (CJEU) ruled that the “reciprocity” principle no longer applies to EU member states, even if it exists in copyright treaties and national laws.

The court ruled that the European Union’s Rental/Lending Directive of 2006 doesn’t allow EU member states to withhold payments to nationals of non-EU countries.

What the failure of the “reciprocity” principle means in practice: US-based artists whose recordings are played on the radio in the EU will be able to collect performance royalties, while EU artists will continue to get nothing from their recordings being played in the US.

Because royalties are paid from a collective pool of income, this will reduce payments to European artists by as much as 40% in some countries, the artists’ groups said, as that is the share of US music played on the radio in those countries.

IMPALA estimates that the annual loss to EU recorded music rightsholders as a result of “reciprocity” protections not applying in Europe would amount to approximately €125 million (USD $137m) – money which would instead be handed to their US counterparts.

“Unless this error is fixed, EU member states will not be able to continue applying the longstanding principle of material reciprocity in the payment of broadcast and public performance royalties on sound recordings from non-EU countries,” the artists’ groups said in a statement issued on Tuesday (November 28).

The reciprocity principle “has proven vital in raising the level of copyright protection across the globe for decades,” the statement added.

”A devastating transfer of over €125 million [USD $137 million] every year out of Europe is on the horizon,” IMPALA Executive Chair Helen Smith said this past March.

“We have been calling on the European Commission to address this since the ruling came out in September 2020, but despite some initial positive signs last year the silence in recent months has been deafening.”

“We call on the EU to act and also exert increased trade pressure on the USA to raise their level of [copyright] protection. Their stance is costing the world music economy hundreds of millions a year.”

Helen Smith, IMPALA

In its 2020 ruling, the CJEU made it clear that the EU legislature has the power to change this by rewriting the directive governing copyright payments.

“It is for the EU legislature alone, which has exclusive external competence in the matter, to decide on such a limitation,” the court stated following the ruling.

The artists’ groups noted in their statement on Tuesday that the European Commission “has on several occasions acknowledged concerns about the impact of the ruling and made clear its intention to find a balanced solution. But a solution has yet to be proposed.”

“It is the EU’s responsibility to prevent European artists and producers losing millions every year to the USA, which has chosen not to protect these rights. A proposal is needed now to restore legal certainty, safeguard cultural diversity and European sovereignty,” Smith said in the statement.

“We are seeing a clear and substantial drop in the revenue going to Dutch and other European performers and producers.”

Will Maas, Ntb/Kunstenbond

“We call on the EU to act and also exert increased trade pressure on the USA to raise their level of [copyright] protection. Their stance is costing the world music economy hundreds of millions a year.”

In the Netherlands, the first EU country to stop applying the reciprocity principle, “we are seeing a clear and substantial drop in the revenue going to Dutch and other European performers and producers,” said Will Maas, chairman of the Dutch musicians’ union Ntb/Kunstenbond.

“This is what awaits other countries if nothing is done to address this.”

Along with IMPALA, Adami and Ntb/Kunstenbond, other groups that signed on to the statement include the Swedish musicians’ union Musikerförbundet, Belgian collective management society PlayRight, the Swedish Artists’ and Musicians’ Interest Organisation (SAMI), the Swedish Union of Professional Musicians (SYMF) and unisono, the German Federation of Musicians.

The US Congress extended copyright protections to sound recordings in 1971, but those copyright protections didn’t include a public performance right that would have ensured royalty payments to artists, producers and labels.

In 1995, Congress passed the Digital Performance Right in Sound Recordings Act, which did include performance rights, but limited those rights to performances made “by means of a digital audio transmission,” which doesn’t include terrestrial radio.

As a result, the US “is the only significant music economy in the world that does not have these full rights in their domestic legislation,” the artists’ groups said.Music Business Worldwide

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