EU Private Copying: Situation Report - Spain

30 Apr 2015

The issue of fair compensation for rightsholders in the right-to-copy debate may take a pivotal turn, pending the high court appeal brought by UK Music, the Musicians Union and BASCA, this week (week: April 27th).

Ahead of a forthcoming MusicTank debate on the topic of who pays for the right to copy (details here), beginning with a look at Spain, Arya Rinaldo kick-starts an analysis of the European Copyright Directive regarding the different approaches individual EU member states bring to the issue of rightsholder compensation for private copying.


Background

The marriage between commercial and creative pursuit lies at the heart of copyright law in music, amongst other things enabling artists to derive a living from producing creative works.  Thus copyright infrastructures are established to ensure that artists and rightsholders receive appropriate payment whenever their work is consumed.

Adapting to the challenge of change in a rapidly changing digital environment is not a simple feat and the issue of private copying in particular, is a complex one.

In the lead-up to Sam Rudy’s keynote presentation of his paper – Private Copying of Music: A New Model For Artist Compensation – we will be looking at various compensation systems in different European Union member states, throughout which there is no uniform private copying compensation system.

The European Parliament Copyright Directive grants individual member states freedom to establish their own distinct compensation systems and even allows exemption for private copying provided that ‘fair compensation’ be provided to rights holders.  Consumption behaviour, bureaucratic processes and cultural factors are just some of the many challenges to establishing a single uniform system.  However, as Rudy states in his thesis, there is a need for the harmonisation of the fundamentals of compensation systems throughout EU states in order to stimulate growth and innovation.

Fundamentally, rightsholder compensation for private copying is established because of the apparent harm caused by the manufacturers of devices that enable private copying, by not sharing with rightsholders the profits from sales of their products.

Many EU states have adopted a blank media levy, which adds a compensation fee onto the sales of devices that enable private copying.

Spain is of particular interest because they abandoned the blank media levy in favour of what some might consider an even more controversial system – one in which the State estimates the economic harm to rightsholders, and compensates directly, via representative collecting socities.


Situation in Spain

Spain’s recorded music industry was ranked 13th biggest in the world in 2013 and in 2014, the recorded music market experienced a 21.2% growth after more than a decade of steady decline.  According to Promusicae, the Spanish arm of the IFPI, physical sales still account for 58% of Spain’s recording industry income.  So how has Spain dealt with the issue of private copying?

On September 10th 2014, the Spanish Supreme Court raised two questions to the Court of Justice of the European Union (CJEU) asking whether their compensation system using the State Budget is compliant with Article 5(2)(b) of The Copyright Directive.  The questions were raised following an appeal raised by the Spanish collection societies VEGAP, EGEDA and BAMA.

This Article [5(2)(b)] states that member states may allow exception or limitations for private copying ‘in respect of reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation which takes account of the application or non-application of technological measures referred to in Article 6 to the work or subject matter concerned’.

Spain’s compensatory system became questionable because it cannot ensure whether consumers (‘natural person’) become the payer of the levy.  Indeed, whether consumers should bear the burden remains a key issue.

Spain’s compensation system doesn’t harm consumers because it removes this liability from them, which to some is a perceived advantage of the system.  In his thesis, Rudy (2015) argues that consumers benefit only from the ability to format-shift music and that they do not economically benefit at all from private copying.  Instead, he proposes that device manufacturers themselves pay a private copying right, since they are the ones who benefit economically.  However, the Spanish State Budget system completely disregards manufacturers’ arguably undeserved additional profits from enabling and facilitating private copying.

Another issue with Spain’s system is that it is based on an estimation of the harm caused by private copying.  It is unlike a blank media levy that takes the sales of devices into calculation consideration.  As intellectual property blogger Eleonora Rosati stated, the system made it difficult to determine how a calculation can be made at all.

The European Parliament is concerned with transparency in the way remuneration is collection and distributed to rightsholders.  Clearly a system such as Spain’s that is based on an estimation of the economic harm caused by private copying, challenges this.

It is also interesting to note that the Spanish government imposes 21% VAT for arts and entertainment, the highest in the EU.  It was increased from 8% in 2012, although some exceptions have been made for certain cultural commodities.  Since this rate hike, the Spanish government has raised an extra €13.3 million in revenue, which increased their capacity to compensate music rights holders.  However, it remains unclear whether rightsholders receive increased benefit from the compensation in comparison to the harm caused by the rise in VAT.

Comparison With The UK

Much like Spain, the UK has recently addressed the issue of private copying, adopting the EU’s directive on copyright exception on 1st October 2014, which includes private copying, on the basis that the harm caused by private copying is minimal, thus denying rightsholders of any compensation.

As it currently stands, both Spain and the UK are counter to the Copyright Directive and further distance themselves from the harmonisation of an EU-wide compensation system.  The UK recorded music industry is the second largest in Europe, meaning that its decision not to fairly compensate rights holders may be more likely to be used as a benchmark by other EU member states with similar consumption behaviour to the UK.

By not adopting fair compensation, given the value and importance of the UK recording industry, this represents significant lost revenue for rightsholders.  UK Music has since conducted research to estimate the harm caused to rightsholders from the lack of a compensation system, concluding that consumers are willing to spend more for music CDs from which they can make unlimited licensed copies and that a private copying exemption without a compensation system will generate a potential revenue loss of £58 million for the UK recording industry.  It is argued that the UK is not in the same position as Spain to adopt a stance counter to the Copyright Directive, due to its position as a leading producer of music, globally.

What we can learn from Spain and the UK about copyright exemption is the importance of understanding the condition of each state’s music industry.  Each member state perceives and consumes music differently.  Member states with a strong pool of creative workers that drive significant growth to the economy should adopt measures to protect them.  It would seem that harmonisation of the fundamentals of compensation system for private copying is still a distant goal.


Arya Rinaldo
, MusicTank Intern 

[Edited by Jonathan Robinson, Programme Director, MusicTank]

 

ADDITIONAL READING:

EU Private Copying: Situation Report

EVENT – JOIN THE DEBATE: June 25th: Private Copy Exemption: Rightsholders And Remuneration

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