1. bookVolumen 11 (2022): Heft 2 (October 2022)
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Reframing the Economic Rationale of Music Publishers’ Relationships with Rights Management Entities – Shifting to a Systematic Approach

Online veröffentlicht: 05 Aug 2022
Volumen & Heft: Volumen 11 (2022) - Heft 2 (October 2022)
Seitenbereich: 59 - 76
Eingereicht: 21 Dec 2021
Akzeptiert: 21 Jun 2022
Zeitschriftendaten
License
Format
Zeitschrift
eISSN
2227-5789
Erstveröffentlichung
20 Apr 2021
Erscheinungsweise
2 Hefte pro Jahr
Sprachen
Englisch
Introduction

In the preceding decades, the collective rights management (CRM) market has transformed significantly. Collective management organisations (CMOs) have been increasingly challenged by licensees, legislation and profit-driven rights management entities (RMEs) to reinvent their traditional business models to meet the demands of the digital world (Drexl 2013; Oron 2019). Given the scope and complexity of the new CRM options now available, the purpose of this paper is to provide a consistent framework to guide music publishers in assessing, approving and managing their relationships with RMEs in an economically sound way. In doing so, we present the options for the international management of copyrights that arose from the legislative establishment and liberalisation of new opportunities for CRM in the EU (Section 2). We then discuss the actual market conditions for music publishers in Section 3. This market-wide abstraction is followed by a focussed analysis of medium-sized publishers and their utilisation of these opportunities. Since our goal was to create a generic model for managing the various exploitation channels, and the publishing business is gradually becoming service-oriented and digital, we built on the best practices for supplier management of the established Information Technology Infrastructure Library (ITIL)® 4 and applied the findings to the RME relationship management (RMERM) framework. Within this framework, we analyse the relevant business processes of the domain, structure them according to the ITIL supplier management lifecycle and illustrate the respective phases with empirical findings from interviews with nine German music publishers. We evaluate the statements from the interviews, and highlight perspectives and their implications for methods to be applied and data sources to be tapped (Section 4). While a systematic approach allows for a greater utilisation of RMERM, it is also subject to a set of limitations that need to be taken into account. Therefore, a critical assessment of the proposed framework is provided in Section 5. Section 6 outlines possible future development perspectives for RMERM.

The Reconfiguration of the CRM Market

Due to economies of scale,

While the fixed costs of CRM are high, marginal costs decrease as the number of works managed increases (Besen et al. 1992).

CRM has always had strong monopolistic tendencies, which in the past have led to market domination by single CMOs with exclusive management mandates per category of rights in a given jurisdiction

A notable exception to this rule is the US market, where three societies are competing for CRM of musical works: the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music Inc. (BMI) and the Society of European Stage Writers and Composers (SESAC) (Drexl 2013: 216–217).

(Guibault & Gompel 2016). While copyright law was never truly compatible across jurisdictions, the way in which copyrighted works were used was. For almost a century, CMOs have cooperated on a global level to meet the demands of international copyright management. Traditionally, this has been achieved through reciprocal representation agreements (RRAs). By giving the exclusive permission to manage the other's repertoire within their own jurisdiction, the CMOs consolidated their territorial monopolies (Schwemer 2019: 54–56).

For a long time, the tendency towards quasi-monopolies in the CRM market through these agreed horizontal splits of responsibilities were reasonable exceptions to competition law because they were perceived as beneficial for the interests of all parties involved: licensees were offered one-stop-shops for copyrights, while the rights of rightholders were enforced at lower costs.

However, digitalisation had a major impact on the market, as data became more accessible and easier to process. Online music service providers (OMSPs) began to exploit copyrights across multiple jurisdictions, which was not compatible with the CMOs’ RRA model. With the high licensing costs, resistance arose to the geographically restrictive approach of the CMO market. The problem was clear: a multi-territorial licensing (MTL) model had to be established that would be centrally managed (Drexl 2013: 262–270).

The EU-Recommendation of 18 May 2005 was the most influential soft law document addressing the need for MTL of online music rights (European Commission 2005). It emphasised that rightholders are free to withdraw their online rights and transfer them to RMEs of their choice for the purpose of MTL. Following this proposal, a number of major music publishers withdrew their rights, and either closed direct deals with individual large-scale OMSPs, or set up RMEs together with CMOs dedicated to their own catalogues (Klobučník 2021). It is argued that such economic decisions benefit large publishers, while remaining rightholders face higher administrative costs for CRM. This is a massive break with the original CRM philosophy, which is based on collective wealth and solidarity (Wallis et al. 1999). At the same time, the needs of the licensees are not sufficiently taken into account: the resulting fragmentation of rights led to higher licensing costs for the less popular repertoire (KEA European Affairs 2006: 47).

Today, the market is even more complex as Directive 2014/26/EU, while retaining the ideas of the above Recommendation, has opened the door to additional forms of CRM organisation such as for-profit independent management entities (IMEs) and CMO licensing hubs. In a recent report assessing the current state of the CRM market, the EC commits that new RME types in the CRM market got unfair advantages due to lower regulation levels than the traditional CMOs – a situation that does not appear to be a fair, level playing field. Reviewing the MTL aspects, the main findings were that OMSPs have to meet more requirements, and have lower bargaining power and higher transaction costs than before (European Commission et al. 2021: 110–113). On the side of the rightholders, however, the picture was more positive: MTL services have not become cheaper for them, but in their view the service quality seems to have improved (European Commission et al. 2021: 109–120). So, while licensees now face a wider range of licensors, this also means that rightholders now face a wider range of CRM options (see Table 1).

The existing CRM options can be summarised by differentiating between the management of one (uni) or more (multi) CMO-repertoires and/or territories (Riis 2016: 91; Schwemer 2019; Klobučník 2021).

UR MR
UT Direct memberships in traditional CMOs (Klingner et al. 2021): Most frequently, traditional CMOs handle international royalties on a UT-MR basis through representation agreements with other CMOs.Nevertheless, rightholders in the EU are allowed to register, authorise and withdraw management rights from CMOs under Directive 2014/26/EU. PAs such as Songtrust or Kobalt maintain relationships with CMOs worldwide. As a result, uses are processed faster and more accurately, as CMOs can directly identify their own repertoire. CMO representation agreements: Traditionally, CMOs license the repertoire of other CMOs based on representation agreements. This is the default case when rightholders authorise a single CMO. In this case, licensees are bound to exploit in the acting territory of the licensing CMO.

- Unilateral outsourcing (Directive 2014/26/EU: Recital 43): A CMO can outsource the management of certain categories of rights (online) to another CMO, e.g. in order to focus on the analogue world.

- Bilateral reciprocity (Guibault & Gompel 2016): This is the predominant way of international CRM. These reciprocal agreements were negotiated uniformly within the umbrella organisations of the CMOs (CISAC, BIEM). In the EU this uniformity has led to several anti-trust lawsuits.

UR MR
MT Single RME-management (Directive 2014/26/EU: Recital 37): Under current EU law, rightholders are allowed to manage their rights or certain delimitations thereof themselves, through a CMO, or any other RME.Some of these RMEs, having their own online repertoire, are listed to the right.

- Natural MT-UR by CMOs: Some CMOs manage rights in more than one territory by nature. This is the case with PRS, a CMO based in the UK but operating in Malta, the Bahamas, Bermuda, Cyprus, Gibraltar and the Gulf. (PRS for Music 2022)

- Dependent management entities (Directive 2014/26/EU: Recital 17): The catalogue of a few publishers is managed by a subsidiary RME of a CMO; publishers usually need to have a profitable catalogue in order to set up a dependent RME together with a CMO (e.g. SOLAR).

- IMEs under Directive 2014/26/EU: Article 3.b: IMEs are for-profit RMEs based in the EU that must meet certain requirements and are regulated by a competent national authority (e.g. Soundreef).

- OLEs: RMEs that are located and regulated outside the EU may offer global licences for OMSPs (e.g. AMRA).

Cross-licensing: In this case, several CMOs concluded an agreement, to give each other the right to license online rights on a MT-MR basis.

- Location-based (illegal in the EU): The responsibilities of the CMOs depend on the economic location of the requesting licensee. However, location-based cross-licensing has been explicitly prohibited by EU law (e.g. Santiago Agreement).

- Free choice: Licensing bodies not have a common database for online rights licensing. Instead, they allow licensees to cross-license with any member of the agreed parties across the EU (e.g. Armonia).

One-stop-shops (Article 32): Although strictly speaking it is an MT-MR licence, the CMOs have voluntarily decided to pool their repertoires in some way. While the cooperating CMOs own the rights to their repertoire individually, they share a common database and may have a common front, middle and back office, resulting in a homogeneous representation of the repertoire. However, as with each of the above options, licensees are still constrained by the repertoires of the CMOs involved (e.g. ICE).

AMRA, American Music Rights Association, Inc; BIEM, Bureau International de l’Edition Mecanique; CISAC, Confédération Internationale des Sociétés d’Auteurs et Compositeurs; CRM, collective rights management; MR, multi-repertoire; MT, multi-territorial; MT-MR, multi-territorial and multi-repertoire; MT-UR, multi territorial uni-repertoire; OLEs, other licensing entities; OMSPs, online music service providers; PAs, publishing administrator; PRS, Performing Right Society Ltd; RMEs, rights management entities; UR, uni-repertoire; UT, uni-territorial; UT-MR, uni-territorial and multi-repertoire.

Conditions of the Music Publishing Market

New CRM options have clearly affected the music publishing market. While the trend towards the withdrawal of rights is mainly observed among large publishers, it is partially also perceived to be spreading to smaller publishers (European Commission et al. 2021: 97).

Since right withdrawals are followed by either self-management or reallocation of rights to other RMEs, these claims can be supported by market observations: For example, while some publishers have stayed with their RMEs, such as Sony/ATV

Associated Television

with SOLAR and BMG

Bertelsmann Music Group

with ARESA

Anglo-American Rights European Service Agency

– both subsidiary RMEs of GEMA

Gesellschaft für musikalische Aufführungs- und mechanische Vervielfältigungsrechte

– Concord Music, after its acquisition of IMAGEM, disintermediated and signed a direct contract in 2018 with ICE

International Copyright Enterprise

Services, which is a joint venture of GEMA, PRS for Music and STIM

Performing Right Society Ltd

. In doing so, it joined the ranks of peermusic and Downtown (European Commission et al. 2021: 33). Mid-scale publishers may not meet the requirements to compete with such players on their own. For some, however, the next stage is to pool interests outside the traditional CMO market in licensing bodies such as IMPEL (European Commission et al. 2021: 101).

Yet, all of the above initiatives have economic thresholds that may not be met by most independent music publishers, i.e. small and medium-sized enterprises (SMEs) with market shares below 5% (IMPF

Independent Music Publishers International Forum

2021; Tschmuck 2021). To arrange such agreements, enterprises must be capable of producing a sufficient turnover – otherwise, RMEs would have to increase their commission fees, which in turn would make them unattractive for majors. Similar arguments would apply to direct deals with OMSPs. Nevertheless, recent democratisations of technological tools and the harmonised governance rules in the CRM market have facilitated the establishment of direct relationships with RMEs.

The most obvious and straightforward use case would be direct memberships in foreign CMOs: these offer several advantages to music publishers. By reducing the number of touch points in the copyright management chain, direct memberships reduce transaction costs and processing times for publisher royalties in uni-territorial (UT) scenarios (Klingner et al. 2021). This potential should not be underestimated, as revenues from the digital market are, despite its increasing importance (especially during the pandemic), still lower than traditional, UT licensing revenues. In 2021, the digital licensing revenue accounted for 21.8% of the total European market share (CISAC 2021: 31).

The common denominator among music publishers is therefore the desire to gain more control over CRM activities (IMPF 2021: 13). For this, a systematic view of RME relationships is critical. It might well be the case that large-scale publishers already implement a strictly rational approach to RMERM. However, precise empirical findings on the practices of large-scale publishers are not available. To unlock aspects of this field for SMEs, we propose an approach derived from general supplier management best practices and findings of a qualitative study.

RME Relationship Management

As peermusic stated upon entering into a direct contract with ICE services: “we continue to evaluate our [digital] strategy and review our service providers around the world to ensure that our songwriters and composers receive the best service and achieve the most competitive rates possible.” (Awbi 2018) – finding a structured way to do so is exactly the question RMERM is aimed at addressing.

With the aim of developing a unified reference model, the forthcoming sections analyse the issues that SME publishers face in managing relationships with multiple RMEs. For this purpose, we conducted a qualitative study and analysed semi-structured interviews with nine German music publishers in terms of RMERM questions (Klingner et al. 2021). This method was chosen to ensure comparability, but also to limit distractions and potential for prejudgements by asking open questions. This approach matched the chosen research context and goals, as to our knowledge no comparable studies exist and a qualitative-explorative method would provide a starting point for further analyses. The interviews were conducted as part of a research project on the internationalisation of publishers’ copyright management. The questions covered several topics, including economic key figures of the publisher, its focus in terms of genre, core competences and cross-sectional areas, relationships with other publishers, publishing administrators and CMOs – which we subsume as RMEs in this paper. Although the spectrum of companies surveyed covers a wide range both in terms of genre and business focus (see Table 2), the results cannot be regarded as representative without restrictions. Nevertheless, they help to develop a basic understanding, enable theory building and provide an illustrative practical reference using quotations.

Demographics of survey participants (Klingner et al. 2021).

P1 P2 P3 P4 P5 P6 P7 P8 P9
Business Role Label, Publisher Publisher Label, Publisher Publisher Label, Publisher Label, Publisher Label, Publisher, Studio Label, Publisher Label, Publisher
Genre Popular Music; no specific genre Classical music Popular music; Jazz Popular music; no specific genre Popular music; Pop Popular music; Production music TV Popular music; Pop Popular music; Illustration music TV Popular music; Compositions TV
Role of interviewee Managing Director Wide range of tasks Wide range of tasks Managing Director Contracts, A&R, Copyrights Managing Director International Copyrights Wide range of tasks Managing Director, Royalties, Administration
Employees 7 + 4 freelancer 20 9 4 10 2 15 6 9
Sales Revenue (€) 100.000–2 Mio. 10–50 Mio. 100.000–2 Mio. 100.000–2 Mio. 100.000–2 Mio. 2–10 Mio. 100.000–2 Mio. 2–10 Mio. 100.000–2 Mio.

The RMEs referred to in the interviews were mostly CMOs and sub-publishers (SPs). We assume that the results are also applicable to other RME types addressed in Sections 2 and 3, such as CMO-subsidiaries, IMEs and OLEs. Due the volatility of the market and the generic approach of this paper, we only address the specifics of RME types where differentiation is strictly needed. Yet, our aim is to construct a minimal reference model from which specific cases can be deduced.

We classify and interpret the findings within the framework of established supplier management principles. To facilitate the integration of the findings into existing business structures, we base our model on ITIL®, a standard for IT service management. According to the ITIL® 4 Foundation publication (AXELOS 2019), the actions of each management practice, such as supplier management, are embedded in a service value chain, which consists of six activities: “Plan”, “Improve”, “Engage”, “Design and transition”, “Obtain/build” and “Deliver and support” (Figure 1). In the following sections, these activities will be adapted for RMERM and contextualised with the empirical findings from the interviews.

Figure 1

Phases of RMERM. RMERM, RME relationship management; RMEs, rights management entities.

Plan: Sourcing Strategy

In general, a sourcing strategy describes the options, decisions and measures in sourcing internal (make) or external (buy) goods/services – determining the boundaries of a firm. The foundation for questions of this type is seen in the transaction costs theory. Williamson (1991) theorised the transfer of goods and services across interfaces as transactions. He distinguished between market-based transfer (external procurement) and transfer within internal corporate hierarchies. Moreover, he characterised transactions in terms of three cost-determining dimensions: asset specificity, frequency and uncertainty. McIvor (2000) developed a practical framework for strategic outsourcing that highlights three aspects influencing the sourcing strategy: the company's value chain, its core competencies and its supply base. We will focus our elaboration on these.

The core competencies of music publishers depend largely on the rights assigned to them by the authors they represent. Traditionally, publishers conclude contracts with authors for royalty shares. In return, the management activities undertaken by the publisher on behalf of the author range from its historical task – the printing of sheet music – over the licensing of music rights for recordings to the adaptation of the works into film or commercials (Tschmuck 2009); the latter of these are also referred to as synchronisation rights.

For example, if the core competencies of a publisher lie in acquiring and arranging synchronisation deals, the publisher focuses on front office activities, which consist of direct contact with potential licensees and negotiation efforts (Friedrich & Klingner 2017). On the other hand, depending on the scope of the repertoire represented, the publisher might focus on back office activities with direct interface to regular licensees – for the most part OMSPs (Towse 2020) – and achieve economies of scale in this area. On the bridge between the economies of scales achieved with OMSPs and individual synchronisation deals, micro-synch deals in the social media area gain traction.

Our interviewees perceived the following as the most market-defining trends:

“[…] the transition to the digital and streaming age and the breakaway of mechanical and physical rights.“

(P5: 109)

“[…] the area of mechanical rights

The interviewee speaks of the decrease in royalty payments resulting from the mechanical rights in the field of physical sound carriers.

breaks away and you have to replace it now. […] the whole synch area is […] an expansion topic and […] the area of social media.“

(P3: 90)

As the interviewees pointed out, the most important innovation accelerator for music publishers in recent decades has been the decline of the physical recording market. Music publishers have been forced to reinvent their value chains to make up for the losses.

While shifting efforts to other traditional licensing channels was certainly a valid option, today music publishers need to think outside the box. Some of them sought cross-sector roles (recording, distribution, etc.) to achieve economies of vertical integration (Mol et al. 2005).

However, once all internal management areas have been analysed, opportunities in RME relationships (supply base) can be explored. In 2020, more than half of the music publishing royalties of German publishers were administered by CMOs, which indicates that this is a high value segment (DIW Econ GmbH et al. 2020: 47). With regard to outsourcing to other RMEs, a heterogeneous picture appears, between positive and negative valuation, trust and the desire for more control. Four of the respondents answered that they execute rights management outside their area of economic residence through SPs – a fairly traditional practice (Towse 2017). Others have diversified the management of their catalogues in hybrid ways, combining sub-publishing with direct memberships in various CMOs. One interviewee used SPs in core regions as well as publishing administrators. Direct relationships with CMOs were utilised as well, although to a lesser extent. Depending on the RME, the relationships were set at a tactical/operational level, e.g. to receive royalty payments more efficiently, or at a strategic level, e.g. in the expectation of creative services for the publisher's catalogue:

“[…] we are represented in certain territories by foreign publishers […] in Austria and Switzerland via direct memberships in the collecting society […] in the other regions of the world via publishing administrators […] They have the same tasks […] only without the creative tasks […] provided by a sub-publisher […]”

(P1: 42–54)

“We have sub-publishing partners in the core markets […] otherwise we exercise the rights via GEMA. […] in the USA we are SESAC members.”

(P3: 30)
Excursus: Outsourcing business models

Evaluating sourcing strategies is a challenging task – one with many parameters. Although models are far from being able to represent reality completely, they can be helpful in building a better understanding of the complexity of reality. For example, Kulembayeva et al. (2022) proposed a form of study in which outsourcing business models were represented as graphs. To apply this idea for RMERM, we conceptualise RMEs as vertices and relationships between them as edges. In doing so, we can assign weights to the edges as either costs or profits. For illustration purposes, we introduce the following subset of RMEs that were considered in the business models of our interview partners:

{SP: sub-publisher, PA: publishing administrator, C: CMO}

For simplicity, we take a cost-based view and assume that all of the above RMEs manage the categories of rights in an equivalent way from which they deduct different shares or fees. We model a possible case based on the sourcing models described by our interviewees (see Figure 2). Note that RMEs with uni-territorial mandates are coloured, while multi-territorial RMEs are bordered and white.

Figure 2

Example of an outsourcing business model for RMERM. PA, publishing administrator; RMERM, RME relationship management; SP, sub-publisher.

Given that the fixed costs f (infrastructure, staff, etc.) are spread over each managed RME relationship, assuming that each of n relationships that a music publisher P manages on its own has the same administrative overhead and considering ν to be the shares or management fees that an RME k deducts from the royalty stream, then we can calculate the total royalty loss for P as follows: k=0nvk+fn \sum\nolimits_{k = 0}^n {{v_k} + {f \over n}}

Note that each RME has its own RMERM system. Thus, vk must be calculated recursively to determine the total royalty loss: vk=w+lmvk,l {v_k} = w + \sum\nolimits_l^m {{v_{k,l}}} where m is the number of RMEs {l,…,m} managed by k, and w is ks own share/commission fee deducted from the royalty stream.

Assuming the above, disintermediation through an additional direct relationship (make or buy

The “make” is establishing a direct relationship, the “buy” (or more likely “keep”) is relying on an intermediary to manage it.

) becomes profitable for a music publisher if:

k=0n+1(w+lm1vk,l)+f+αn+1<k=0nvk+fn \sum\nolimits_{k = 0}^{n + 1} {\left({w + \sum\nolimits_l^{m - 1} {{v_{k,l}}}} \right) + {{f + \alpha} \over {n + 1}} < \sum\nolimits_{k = 0}^n {{v_k} + {f \over n}}}

Notice that we have adjusted the recursive formula for vk so that m − 1 is the number of RME relationships managed by k, reduced by one for P. This is the case as CRM mandates are usually exclusive. Also consider that α denotes all additional fixed costs recurring for P after it expands to meet the requirements of an additional RME relationship. Please note that these formulas ignore market entry costs, as they can be considered marginal in the long run. Instead, it is assumed that recurring fixed and variable costs have a greater impact on the publishing business.

Clearly, the model presented here is limited in many respects. However, this formal introduction may illustrate that this is a non-trivial issue from an economic optimisation perspective. It could also serve as a good introduction to more complex considerations, such as those following in the next section.

Improve: Evaluation/Selection

Relationships with RMEs should be regularly reviewed for profitability. This question goes beyond the comparison of alternative RME services. Rather, it is about the impact of alternative outsourcing constellations on the costs of business networks, as shown in the previous section. However, the model in the previous section ignores a range of factors with additional influence.

Table 2 highlights two core questions, each with aspects to be considered in three dimensions. The decision-influencing factors presented in the table are based on the empirical results derived from the interviews (see also Klingner et al. 2021). These can be posed in connection with the evaluation of RME relationships by music publishers. For existing relationships with RMEs, publishers can access historical data and thus review the royalty payments of the RMEs for amounts, and time and cost efficiency (hard facts). A prerequisite for checking this data is, of course, its availability and cross-compatibility – key aspects for the success of the service activities “Service Control” (Section 3.5) and “Performance Control” (Section 3.6).

Other factors that should also be included in the analysis of the current status are more difficult to quantify, but are also of central importance to promote publisher loyalty (soft facts), e.g. the experience in communicating with the RME, or the transparency and service portfolio it provides. Progressive RMEs may provide additional services that support publishers in covering other parts of the cultural value chain, allowing for economies of scope/vertical integration. Other soft facts may be the support of certain industry standards, or binding inter-RME dependencies. This review can be carried out at different levels of granularity, e.g. to determine for which territories or categories of rights the representation by an RME is particularly profitable or inefficient.

However, some CRM options are only accessible for music publishers under certain market conditions (see Section 3). Since there are few restrictions on who can become a member or principal, CMOs and IMEs are arguably the most democratised options.

In evaluating and selecting RMEs as new providers for a particular combination of selected territories and categories of rights, reviewing publicly available data for analysis would be practical. Among other things, this can help determine whether external coordination by an intermediary RME is truly deficient, or whether the weaknesses lie deeper in the copyright management chain (see Section 4.1). Since direct relationships add fixed costs, this should be considered when deciding whether direct relationship efforts are truly worthwhile. If competing RME options exist for a defined combination of categories of rights and territories, the options can be weighed against each other.

Several KPIs can be used for the analyses. To explain this in more detail, we will look at the use case of assessing external CMO data. As outlined in Section 2, CMOs still often hold historically induced monopolies for territories and categories of rights. Rochelandet (2003) examined the efficiency of CMOs by quantifying the performance (Table 3) of three European CMOs between 1991 and 1998 using several metrics. Rochelandet (2003) also reviewed the relevance of these metrics. The performance metrics with the highest relevance are listed in Table 4:

Factors for improvement of the copyright management chain for a target area

Publisher Publisher, RME RME

Internal, high influence Interfacial, medium influence External, low influence
A. Should I invest in restructuring my current copyright management chain, e.g. by establishing a direct relationship with an RME for certain territories/rights categories?

Entry costs:

(a) Market research

(b) Negotiation

(c) Business process reengineering

Available resources:

(a) Human resources

(b) Technology

(c) Financial, time budget

Weaknesses/strengths of the current solution:

(a) Hard facts:

(aa) Amount of the royalty payments

(ab) Timeliness of the royalty payments

(ac) Deductions from the royalty payments

(ad) Complaint rates

(b) Soft facts:

(ba) Communication

(bb) Transparency

(bc) Service portfolio

Market accessibility:

(a) Language

(b) Culture

(c) Competition

(d) Legislation


B. Which factors do I need to review for the evaluation and selection of the best fitting RME-solution for certain territories/right categories?

Competencies:

(a) Managed right types

(b) Managed territories

Sourcing strategy

Compatibility of:

(a) Processes

(b) Data formats

(c) Technologies

Creative services:

(a) Promotional services (e.g. distribution engine)

(b) Technological services (e.g. monitoring)

Competencies:

(a) Managed right types

(b) Managed territories

Sourcing strategy and inter-RME network

Distribution policy

Membership requirements

KPIs

KPIs, key performance indicators; RME, rights management entities.

CMO performance indicators adapted from (adopted from Rochelandet 2003)

OPTIC: Management ratio P/C P = Collected sum
NDRAT: Net distribution ratio (R + F)/P E = No. of employees
COPE: Collected sums per employee P/E C = Costs sum
COPM: Collected sums per member P/M M = No. of members
DIPM: Distributable sums per member R/M R = Distribution sum
NONR: Non-distributed copyrights Rpot/Reff-1 F = Funds sum

To obtain an aggregated KPI, Rochelandet (2003) proposed three different combinations of KPIs using data envelopment analysis (DEA), each tested once with the functional objective of output maximisation and once with input minimisation.

While Rochelandet (2003) analysed the performance for entire repertoires managed by the CMOs, a narrow analysis may be of interest for publishers’ concerns – i.e. depending on the category of rights or managed territories. From a practical point of view, however, it should be noted that not all data are publicly available in order to even enable carrying out such a specific analysis. As our research focuses the European Union, for which the 2014/26 EU Directive defines a harmonised legal environment and where CMOs are obliged to publish transparency reports, the public availability of certain key figures and ratios is mandatory. This applies to:

The revenues per category of rights (Article 22 (2) Annex 2. (a); Px)

The costs per category of rights (Article 22 (2) Annex 2. (b,i); Cx)

The effective allocation amounts per category of rights in the financial year, regardless of the revenue period (Article 22 (2) Annex 2. (c,i); Rx); and

The amount of distribution sum not yet distributed to rightholders (Article 22 (2) Annex 2. (c,v); R - Reff)

That said, for a market-wide analysis, the relevant factors include not only the availability of data but also the comparability and the clarity of the information; however, the latter of these features are often not to be found in the data made available (Reguera et al. 2016). These are requirements for the technical controllability and connectivity of the data. While prototypes for an aggregated and interactive assessment of the CMO market exist, these can only be drawn up for a limited sample period and range of CMOs, and thus only show a snapshot of the zeitgeist under investigation (Klingner et al. 2021).

With our interview partners, we found the evaluation of existing and potential cooperation with alternative RME options to be based primarily on their own or other publishers’ experience from working with RMEs. A purely external evaluation of the RMEs, as just described in more detail for CMOs, was rather absent. Possible reasons for this are the associated aggregation effort of the data and the lack of assessability due to the quantity of parameters.

Engage: Negotiation

In the preceding section, we outlined the aspects to be considered when publishers take an aggregated look at RME relationships. In this way, publishers can identify current RMERM weaknesses from internal, interfacial and external perspectives. However, trust and effective communication are key interfacial aspects with RMEs, too. This is an area that the publishers interviewed had a good sense of. In particular, openness, friendliness and promptness were cited as predictors of high engagement in RME relationships:

“[…] If there are problems, they react relatively quickly […] I had very nice conversations […] at MIDEM with the people at KODA, Denmark, who go through a lot of trouble to process the data transparently.”

(P7: 57)

“[…] Switzerland is not even a tenth of the turnover. But we still find it interesting how they take care […]”

(P6: 82)

However, when it comes to initialising a new RME relationship, it can be difficult to estimate these factors. Requests for information

Article 20 of Directive 2014/26/EU requires CMOs to provide, upon duly justified request, information on the subject-matter they represent and on where they can and cannot determine the uses of that subject-matter.

(RFI) may allow to predict poor communication patterns early on. It is not uncommon for CMOs to respond in half-hearted fashion to such requests, for instance by referring to their public website, thus leaving the unravelling of the relevant information to the publishers (Reguera et al. 2016).

RME relationships must be clearly defined in the design of any underpinning agreement that a publisher negotiates with an RME. Depending on the RME, this is done on a bilateral basis or within the limits set by the other contracting party.

When RMEs share risks and meet as equals, such as with co-publishers, there is more room for individual approaches to the design of the underlying contracts, e.g. in the services to be provided or the data formats to be used. However, RMEs handling large repertoires, such as CMOs, are in a different position, since they can’t achieve economies of scale without standardising their services and thus their contracts.

Should a publisher decide to apply for a direct relationship with a CMO or revise an existing one – by expanding or narrowing the subject matter to be managed – several process steps need to be initiated. In a previous study (Klingner et al. 2021), we analysed these process steps. This involved modelling the user journey of rightholders interested in direct membership with five European CMOs. We found that the steps, data and documents required for membership application and works registration are very different, resulting in a very cumbersome process with a lot of manual work and little generalisability.

It is hard to imagine, as manual as the procedures for applying for membership are, that adjustment to the management of categories of rights and territories could be less complex. While we do not have specific evidence on the admissions and withdrawals of this matter, we expect similar results. However, different observations might apply to negotiations with more technology-driven RMEs.

Design and Transition: Service Alignment
Design

According to the ITIL® 4 framework, during the design phase of the supplier management practice implicated changes need to be implemented to the service requirements and contracts between the company under consideration and its stakeholders. If one considers authors and licensees as the main stakeholders of publishing companies, the change in the copyright management chain can have effects on both groups, which would have to be implemented in accordance with the adjustments of the publisher's service portfolio. For example, the fact that the publisher has access to RME member services – which was previously not possible in indirect management – can also have an impact on its relationships with licensees and open up new market opportunities. The changes to the publisher–author relationship may range from a change in the billing cycle for certain territories to new management channels that have opened up due to the switch to a direct relationship with an RME. This can result in a corresponding increase in the publisher's attractiveness for new authors.

Transition

After setting the requirements for the new services in line with the initiated change in the copyright management chain, the implementation of the new aspects into the publishers’ business has to take place. At the heart of the service transition for the new relationship between the publisher and the RME is the initial migration, where publishers register their author contracts and catalogues.

In order to register the relevant data with the RME, publishers need to become familiar with the respective interfaces of the RME and integrate them into their own processes. The integration of processes at the publishers’ interface with the various RMEs can be supported by common data formats. Examples of such data formats at the interface to the RMEs are the CISAC specifications Common Work Registration (CWR) and Common Royalty Distribution (CRD). If RMEs support standard formats such as CWR or CRD, the registration of works and the processing of royalty distributions for collecting the rights administered by the RMEs can be handled in a uniform manner, which would drastically reduce the process costs for these aspects (Klingner et al. 2021). However, the formats are adopted differently.

“[…] CWR […] even though it is actually a standardised procedure, everyone still has their own version”

(P1: 78)

This makes it difficult to maintain efficient relationships with multiple RMEs. The longevity of the implemented interfaces is also exposed to the constant risk that RMEs are only subject to their own constraints when defining their data format specifications.

“[…] different systems have to be puzzled together. […] There is no way to […] establish a connection there either. I think that's a great pity.”

(P8: 80)

In addition to the registration of works, there are further process steps that are necessary for the proper supply of the services by RMEs: e.g. the transmission of audio files for monitoring services.

“[…] That means that after every release, […] you have to upload this metadata to various platforms […] with audios. […]”

(P6: 68)

In this specific use case, a relationship between the publishing and label businesses is implied, which illustrates that connectivity in RME business networks goes beyond single domains (e.g. copyrights).

“[…] for us, as a publisher who is also a label, it's not so incredibly problematic. But it is very problematic for publishers who are not connected to a label.”

(P3: 102)
Obtain/build: Service Control

“At the end of the day, it's a members’ association and if the members’ rights are not exercised effectively, then the members would have to complain to the association's management until something happens.”

(P4: 107)

At first sight, it might seem contradictory for the need to arise to formulate and institute a mechanism of control to evaluate whether RMEs are properly licensing, registering and accounting for exploitations of music works, given that these tasks constitute their essential job. However, this is indeed the biggest challenge that rightholders and publishers face: RMEs cannot monitor every use and unambiguously map the usages to musical works (Lyons et al. 2019: 67). In CMOs, members can exercise direct influence to improve the services by using their voting rights. However, even if CMOs are aware of the problems, they have to make compromises in order to keep administrative costs within tolerable limits. Thus, certain licensees, especially those with low turnover, cannot be monitored directly by the CMOs (Butler 2020). Therefore, provided this is done responsibly, it is a great relief for CMOs if part of the monitoring is carried out directly by the respective rightholders or licensees. As a result, they are often closely involved in the reporting process.

If publishers are involved in the monitoring activities, it is sensible for them to cross-check the royalty statements from the CMOs with their internally recorded usage data. Since publishers as well cannot record every use of the repertoire they manage by themselves, they rely in part on sources of information they deem trustworthy.

“Q: […] in the UK […] do you also check the accounting there […]?

A: That's what the sub-publisher does. […] theoretically they should do that.”

(P2: 60–64)

However, it seems that in some cases more control is desired and carried out:

“[…] we also have the data where we can see that a film was broadcasted […], or also when we have the information about cinema films or festivals. […] we also tell our sub-publisher, or rather, we also control it, if we are a direct member […]”

(P9: 54)

“[…] I also question the sub-publishers’ accounts […] I don’t just accept it and believe that it's all correct, […] I also look at it again and check the most important authors for completeness and plausibility and then, in case of doubt, I also ask for proof […]”

(P3: 62)

The sources of usage data used for comparison with the royalty statements are diverse. A good start for cross-validation may be provided by so-called inquiry lists, published by CMOs when certain uses could not be matched to the managed repertoire due to incomplete data:

“[…] at PRS – I imagine that's very nice – they have these inquiry lists that GEMA has for synch and TV, PRS even has for live. These are things that I imagine are very attractive.”

(P5: 61)

In the preceding section, the transfer of audio files from the publisher to the RME was discussed. In this case, the monitoring service was contracted on the RME's side. Professionalised monitoring services using audio fingerprinting, however, work for CMOs as well as for single rightholders and licensees. Due to high administration costs on the RME's side, it is not uncommon for publishers to commission monitoring services themselves.

“[…] When I started the business at that time, it was in fact the case that there was no monitoring yet. […] Today it's different, today it's done via Tunesat […] we’ve […] lost 40% […] and now we’re missing […] 1–2% […]”

(P6: 68)

Just as the use of monitoring providers requires collaboration between labels supplying recordings of the creative works, working with performing artists, organisers or booking agencies brings its own business challenges: dealing with different channels of communication, digital and analogue, structured and unstructured, as well as their sensitivities and subtleties.

“We […] keep in touch with all the artists […] to collect the data. […] it's such a high logistical effort. And with some constellations of authors, it's not even possible.”

(P1: 112)

Especially in the area of live performances, some publishers become proactive and create or submit usage reports themselves. However, this is only possible in the constellation that the publisher represents an author of the works who is also the performing artist or if the publisher has a close relationship with the artist's label or booking agency. This is therefore an edge case, which is, however, associated with a high administrative effort on the part of the reporting publishers. In addition, this practice lies in a legal grey area and is not unconditionally accepted by the CMOs.

The AKM obliges event organisers to ensure that the performers at their events submit the setlists. The submission of usage reports by third parties, such as publishers, is only accepted under certain conditions and requires consultation with the competent AKM department [see AKM (2021)].

CMOs have to weigh the benefits of a higher report coverage rate against the potential for abuse associated with publisher-side reporting.

“[…] we get the information from the artists before the tour about what they are likely to play, then we prepare these […] lists […] so that they can put them on the organiser's table […] and still report them online after the concert.”

(P3: 70)

“[…] set lists, which promoters don’t do, that is also a separate department for us. We don’t do that for all artists, but for many. Simply for the reason of double security […]”

(P5: 69)

The information on the work usages varies largely in transparency and form depending on the communicating parties. The same applies to royalty statements. This is making validation, consolidation and cross-checking of data more difficult.

“[…] it took me a lot of time and phone calls […] before I found out how to account for it correctly […], what the numbers mean that they give you […]”

(P2: 70)

“[…] we get them electronically and […] we might have to edit and convert them slightly […] and then we can also upload them.”

(P4: 95–96)

“[…] analyses, unfortunately […] these possibilities are […] limited […]”

(P6: 94)

Complaints are also handled in different formats and procedures. For example, the lists generated by monitoring service suppliers may be sufficient for some RMEs. Other RMEs require the submission of the complaints in their own specified formats. The most structured procedure would be to cross-check the usage data and the royalty statements and create a complaint on that basis.

“Because there Tunesat is accepted. In France it is not accepted. […] it's just a list that you can follow, but […] they don’t implement it, if you were to submit a complaint to them now, like we do in Germany, then they wouldn’t accept it.”

(P6: 72)

“[…] You take the excel lists, you know where your artists have played and then you check if what's written there is in there. […] as long as there is no reasonable, reliable program for that, we have to do it that way.”

(P4: 85–86)

“[…] there are still a few automation stories […] with the complaints and then there are a few other things that are digital but not yet automatic”

(P2: 96)

The degree of automation involved in matching the usage data with the royalty statement data, as well as the subsequent complaint generation and submission, depends on whether a mapping of the data formats is possible. However, as the data formats differ significantly, the design of new interfaces is always laborious and long-term success cannot be guaranteed, e.g. if RMEs decide to change their accepted data formats. Thus, technical tools are not available for every data format.

Deliver and Support: Performance Control

The question of whether RMEs provide the agreed services was addressed in the previous section. When it comes to how RMEs deliver their services, publishers can use the agreed-upon service levels and expectations as a review reference. Performance monitoring can be done using a variety of indicators. These were discussed in Table 2, can include both value-based and cost-based metrics, and can initiate a new Improve phase (Section 3.2). Among the interviewees, the value-based view dominated:

“SUISA is more effective, more modern, faster, friendlier. That was also a main reason.”

(P4: 78)

If there were considerations with regard to the cost-based view, then these tended to be on the publishing side, i.e. whether the administrative effort is worthwhile or whether it is better to save process costs, e.g. by implementing a minimum threshold for complaints:

“[…] the most time-consuming thing is […] the complaints system.”

(P3: 68)

“Basically, I think we complain too much […] we will certainly have to […] reduce it to an economically sensible level, but at the moment we […] like to work like that. And sometimes you have the feeling that you can […] initiate meaningful changes.”

(P5: 57–59)

While the influence of publishers on the activities of RMEs is limited, especially if they do not have voting rights, they can exert pressure in indirect ways. This is where, as shown in the foregoing interview response, the value-based perspective comes into play. For example, complaints can initiate a reform process within the RMEs’ organisation.

Although the publishers had some intuition of performance control in their relationships with RMEs, a systematic approach for continuous monitoring has not been described. Still, there is potential here, e.g. by setting up KPIs and integrating them into a system of goals and measures in a balanced scorecard (Kaplan & Norton 1992; Weinstein & Bukovinsky 2020).

Discussion

Similar to every mental model, the one presented has its constraints, which complicates its transfer into application. These constraints exist in three dimensions: the technical, the economic and the ideological.

Technical Constraints

Publishers are limited at several stages in their dealings with RMEs. For example, different RMEs set different interfaces, making the transition to a direct relationship unnecessarily complicated. Surely it is reasonable for commercial RMEs to create lock-in effects. However, in the case of CMOs, where reciprocal networking is the main focus, all efforts should be exerted in terms of full harmonisation of activities. Indeed, there are harmonisation efforts – there are data standards such as CWR or CRD, and there are common databases – but there is still a lot to be desired in the implementation by the CMOs. The Music Data Dilemma 2025 report, a study commissioned by the U.K. Intellectual Property Office (IPO), finds that the problems of data inconsistency in the music sector can be addressed through education, interoperability, governance and collaboration (Lyons et al. 2019).

In particular, with respect to the final point, regulation should establish more stringent rules for the implementation of common practices among RMEs. To enable such rigorous improvement practices as described in Section 4.2, data must be regularly updated and historicised, either by professional analytics providers, the umbrella organisations for RMEs (e.g. CISAC, BIEM), or in a decentralised manner by enforcing a standard for structured reporting by RMEs and offering technical tools for automatic consolidation and analysis of data.

However, as long as data is not equally available for all rightholders, publishers who gain a clear picture of the CRM system will leverage their competitive advantages and provide the highly demanded transparency to their rightholders. To do this in an economically viable way, these publishers focus on technology-enabled orchestration of data flows in the management of RME relationships. In this context we find three scenarios for the use of technology:

Use of an RME's proprietary software through a contractual relationship with it;

Not committing to an RME, but using commercial tools on a flat rate basis (e.g. cloud solution software such as Counterpoint

https://www.vistex.com/product-suites/counterpoint-suite/

and ALV

Abrechnungssoftware für Labels und Verlage, https://www.alv-software.de/

);

Using individual free or open source tools.

Examples available at: https://matijakolaric.com or https://creativeartefact.org

As a result of the above options, publishers may position themselves more as providers of RME services or more as procurers of RME services. Thus, RMERM can be considered as a service integration and management (SIAM) problem (Goldberg et al. 2015). Since even the largest CMOs are only able to manage all relevant categories of rights and territories of the mandating rights owners in networks, they naturally have their own RMERM. However, comprehensive RME networks are no longer managed only by CMOs. Publishers implement SIAM functions to suit their needs and capabilities.

Economic Constraints

However, a thorough introduction of RMERM is only possible for those publishers who have the appropriate capabilities, especially financial resources. Thus, larger publishers take advantage of RMERM far ahead of SMEs.

Although this paper cannot address the inequality caused by economic constraints, this is a point that should be given more consideration in regulation: If dominant CRM options are to prevail solely on price and quality, information asymmetries and market entry barriers should be eliminated as best as possible to prevent unfair competitive advantages. Otherwise, large publishers or mergers will use their resources to rationally manage their RMERM, and SMEs will inevitably have to live with the most affordable, but not necessarily best, options. This means that competition and thus incentives for innovation in the CRM market will inevitably be set only by the former, and predictably for their own benefit maximisation rather than that of all rightholders.

Ideological Constraints

Why should a publisher give up the opportunity to enter into direct relationships if they offer him attractive conditions? Why should he care about the CMO, which will have to operate at higher costs after he withdraws lucrative repertoire? Why should he act in the interest of solidarity with low-income rightholders and promote cultural diversity?

If maximising one's private property is the key to success in the current economic system, all the above questions are negligible. In fact, they are ideological issues. That being said, Rochelandet (2003) points out that a self-centred approach to reviewing the performance of CMOs may not do justice to them: it is not the purpose of a CMO to differentiate services for delimited scopes of repertoire to maximise profits for certain groups of rightholders – as it may be the case with certain RMEs. It may also be seen as “socially inefficient”. Or as Adam Smith said: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” (Smith 1827: 33)

Watt (2016) introduced the concept of optimal collective size, arguing that average profit per member decreases with additional members above a certain threshold. While the average profit optimum is at the point where there is the largest gap between the price the marginal licensee is willing to pay and the cost per work, the “social optimum” is at the point where the marginal costs equal the price.

The above arguments are diluted if the assumption that quality, price and marginal demand per work are the same, does not hold. Licensee demand varies greatly depending on the repertoire managed by an RME. Competition in the CRM market is highly dependent on the managed repertoire. This can be to the detriment of low-income rightholders and cultural diversity.

Another point that reinforces this tendency is that most regulatory incentives have been set for the MTL market, which is heavily dominated by large-scale businesses. If infrastructure in traditional CRM markets is increasingly neglected, traditional CMOs will eventually be unable to offer attractive prices to licensees and viable administrative costs to rightholders. In both cases, cultural diversity would increasingly suffer: Either licensees would turn away all the more from the economically unattractive repertoire offered by traditional exploitation options, or niche authors would no longer have the financial incentives they need for their creative activities.

And this is where the “direct membership” system might have a knock-on effect: in the short term, it leads to increasing administrative costs for CMOs, but in the long term, it could boost their business when they provide competitive services. Greater attractiveness to authors can lead to an increase in members, which can bring positive effects for a CMO, such as greater visibility and market power. The challenge is that the CMOs would need to find measures to reduce their administrative costs through innovation.

Conclusion and Future Perspectives

In this paper, we discussed the concept of RMERM, the phases that publishers need to consider in implementing it, and the implications for their business processes. Although the rule of thumb is that with longer copyright management chains, the chances of losing royalties increase, dealing with direct RME relationships requires a coordination effort that publishers can only provide to a limited extent, depending on their strategic orientation, economic constraints and digital maturity.

Overall, we have conceptualised a rationalised and commercially oriented approach. The framework synthesised in the present study, which is based on empirical results obtained through interactions with nine German music publishers, as well as analysis of best practices on supplier management from ITIL® 4, is not a prescriptive ideal-type procedure. To sharpen the understanding of RMERM, subsequent case studies can be conducted to analyse specific publishers’ supply bases (cf. McIvor 2003). This evaluation could include aspects such as RME network modelling, economic indicators and satisfaction.

The adjustments resulting from the widespread use of individual, modular authorisations of many CMOs and other RMEs could have a huge impact on the business structure of CMOs. CMOs, similar to commercial RMEs, could also begin to introduce constraints based on an assessment of the appropriate cost rates for licensing the rightholders they represent, depending on the amount of royalties they generate. At this point, CMOs would begin to ask questions similar to those insurance companies ask when evaluating their clients, calculating value-at-risk and similar KPIs. Obviously, they may not do this within their governance framework. However, with all the CRM options now available, the role of traditional CMOs is getting thinner. Additionally, the further question of whether this discrimination against rightholders based on earnings happens within the governance of an individual CMO or at a higher level of abstraction, e.g. through subsidiary RMEs, has similar implications.

A major challenge in the new CRM market resulting from this anti-trust trend is copyright fragmentation, which leads to a lack of manageability of CRM as a whole (Klobučník 2021). The horizontal splitting model of RRAs has been crumbling for some time, and publishers with strong RMERMs are leveraging their competitive advantages in the marketplace. The information asymmetries and lock-in effects that CMOs used to protect their dominant position are gradually becoming less important in the highly contested CRM market. Strengthening their business networks and public transparency could strengthen their dominance in the CRM market and thus safeguard values such as solidarity. However, opinions differ widely on the further development of the CRM market. With regard to MTL hubs, there is a dichotomy between the difficulties in dealing with the diversity of new licensors and the possibility of antitrust collusion between established licensors (European Commission et al. 2021).

From this point of view, it is debatable whether market concentration leads to its better functioning or whether copyright fragmentation is an evil per se: In an anonymous note of the Harvard Law Review, it is argued that the optimal exploitation of copyrights is limited by frustration and measurement costs (Anonymous 2011). Frustration costs arise from acquiring inefficient bundles of rights, while measurement costs arise from figuring out the legal relationships in copyrighted works. Later, it is hypothesised that these costs are acceptable and two perspectives are chosen to argue for and against this position: legal uncertainty and usage diversity. Legal uncertainty can be limited by large bundles of rights, but it is argued that the exploitation of many rights requires expert knowledge and thus a fine-grained bundle of rights is preferable. He presents the usage perspective in a particularly illustrative way:

“Imagine that an owner fragments her property into five packages, but the property would have been best divided into three packages […] The chosen pattern could still be better than no fragmentation […] [it] created finer-grained packages that might target buyers’ preferences more precisely”.

In this respect, a (vertical) specialisation movement in the CRM market is also plausible.

Figure 1

Phases of RMERM. RMERM, RME relationship management; RMEs, rights management entities.
Phases of RMERM. RMERM, RME relationship management; RMEs, rights management entities.

Figure 2

Example of an outsourcing business model for RMERM. PA, publishing administrator; RMERM, RME relationship management; SP, sub-publisher.
Example of an outsourcing business model for RMERM. PA, publishing administrator; RMERM, RME relationship management; SP, sub-publisher.

The existing CRM options can be summarised by differentiating between the management of one (uni) or more (multi) CMO-repertoires and/or territories (Riis 2016: 91; Schwemer 2019; Klobučník 2021).

UR MR
UT Direct memberships in traditional CMOs (Klingner et al. 2021): Most frequently, traditional CMOs handle international royalties on a UT-MR basis through representation agreements with other CMOs.Nevertheless, rightholders in the EU are allowed to register, authorise and withdraw management rights from CMOs under Directive 2014/26/EU. PAs such as Songtrust or Kobalt maintain relationships with CMOs worldwide. As a result, uses are processed faster and more accurately, as CMOs can directly identify their own repertoire. CMO representation agreements: Traditionally, CMOs license the repertoire of other CMOs based on representation agreements. This is the default case when rightholders authorise a single CMO. In this case, licensees are bound to exploit in the acting territory of the licensing CMO.

- Unilateral outsourcing (Directive 2014/26/EU: Recital 43): A CMO can outsource the management of certain categories of rights (online) to another CMO, e.g. in order to focus on the analogue world.

- Bilateral reciprocity (Guibault & Gompel 2016): This is the predominant way of international CRM. These reciprocal agreements were negotiated uniformly within the umbrella organisations of the CMOs (CISAC, BIEM). In the EU this uniformity has led to several anti-trust lawsuits.

UR MR
MT Single RME-management (Directive 2014/26/EU: Recital 37): Under current EU law, rightholders are allowed to manage their rights or certain delimitations thereof themselves, through a CMO, or any other RME.Some of these RMEs, having their own online repertoire, are listed to the right.

- Natural MT-UR by CMOs: Some CMOs manage rights in more than one territory by nature. This is the case with PRS, a CMO based in the UK but operating in Malta, the Bahamas, Bermuda, Cyprus, Gibraltar and the Gulf. (PRS for Music 2022)

- Dependent management entities (Directive 2014/26/EU: Recital 17): The catalogue of a few publishers is managed by a subsidiary RME of a CMO; publishers usually need to have a profitable catalogue in order to set up a dependent RME together with a CMO (e.g. SOLAR).

- IMEs under Directive 2014/26/EU: Article 3.b: IMEs are for-profit RMEs based in the EU that must meet certain requirements and are regulated by a competent national authority (e.g. Soundreef).

- OLEs: RMEs that are located and regulated outside the EU may offer global licences for OMSPs (e.g. AMRA).

Cross-licensing: In this case, several CMOs concluded an agreement, to give each other the right to license online rights on a MT-MR basis.

- Location-based (illegal in the EU): The responsibilities of the CMOs depend on the economic location of the requesting licensee. However, location-based cross-licensing has been explicitly prohibited by EU law (e.g. Santiago Agreement).

- Free choice: Licensing bodies not have a common database for online rights licensing. Instead, they allow licensees to cross-license with any member of the agreed parties across the EU (e.g. Armonia).

One-stop-shops (Article 32): Although strictly speaking it is an MT-MR licence, the CMOs have voluntarily decided to pool their repertoires in some way. While the cooperating CMOs own the rights to their repertoire individually, they share a common database and may have a common front, middle and back office, resulting in a homogeneous representation of the repertoire. However, as with each of the above options, licensees are still constrained by the repertoires of the CMOs involved (e.g. ICE).

Factors for improvement of the copyright management chain for a target area

Publisher Publisher, RME RME

Internal, high influence Interfacial, medium influence External, low influence
A. Should I invest in restructuring my current copyright management chain, e.g. by establishing a direct relationship with an RME for certain territories/rights categories?

Entry costs:

(a) Market research

(b) Negotiation

(c) Business process reengineering

Available resources:

(a) Human resources

(b) Technology

(c) Financial, time budget

Weaknesses/strengths of the current solution:

(a) Hard facts:

(aa) Amount of the royalty payments

(ab) Timeliness of the royalty payments

(ac) Deductions from the royalty payments

(ad) Complaint rates

(b) Soft facts:

(ba) Communication

(bb) Transparency

(bc) Service portfolio

Market accessibility:

(a) Language

(b) Culture

(c) Competition

(d) Legislation


B. Which factors do I need to review for the evaluation and selection of the best fitting RME-solution for certain territories/right categories?

Competencies:

(a) Managed right types

(b) Managed territories

Sourcing strategy

Compatibility of:

(a) Processes

(b) Data formats

(c) Technologies

Creative services:

(a) Promotional services (e.g. distribution engine)

(b) Technological services (e.g. monitoring)

Competencies:

(a) Managed right types

(b) Managed territories

Sourcing strategy and inter-RME network

Distribution policy

Membership requirements

KPIs

Demographics of survey participants (Klingner et al. 2021).

P1 P2 P3 P4 P5 P6 P7 P8 P9
Business Role Label, Publisher Publisher Label, Publisher Publisher Label, Publisher Label, Publisher Label, Publisher, Studio Label, Publisher Label, Publisher
Genre Popular Music; no specific genre Classical music Popular music; Jazz Popular music; no specific genre Popular music; Pop Popular music; Production music TV Popular music; Pop Popular music; Illustration music TV Popular music; Compositions TV
Role of interviewee Managing Director Wide range of tasks Wide range of tasks Managing Director Contracts, A&R, Copyrights Managing Director International Copyrights Wide range of tasks Managing Director, Royalties, Administration
Employees 7 + 4 freelancer 20 9 4 10 2 15 6 9
Sales Revenue (€) 100.000–2 Mio. 10–50 Mio. 100.000–2 Mio. 100.000–2 Mio. 100.000–2 Mio. 2–10 Mio. 100.000–2 Mio. 2–10 Mio. 100.000–2 Mio.

CMO performance indicators adapted from (adopted from Rochelandet 2003)

OPTIC: Management ratio P/C P = Collected sum
NDRAT: Net distribution ratio (R + F)/P E = No. of employees
COPE: Collected sums per employee P/E C = Costs sum
COPM: Collected sums per member P/M M = No. of members
DIPM: Distributable sums per member R/M R = Distribution sum
NONR: Non-distributed copyrights Rpot/Reff-1 F = Funds sum

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