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Reframing the Economic Rationale of Music Publishers’ Relationships with Rights Management Entities – Shifting to a Systematic Approach

Mihail Miller

Mihail Miller

Institute for Applied Informatics e.V. (InfAI), University of Leipzig's Computing Centre (URZ)Leipzig, Germany
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Miller, Mihail
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Stephan Klingner

Stephan Klingner

Institute for Applied Informatics e.V. (InfAI), University of Leipzig's Computing Centre (URZ)Leipzig, Germany
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05. Aug. 2022
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Artikel-Kategorie: Research Article
Online veröffentlicht: 05. Aug. 2022
Seitenbereich: 59 - 76
Eingereicht: 21. Dez. 2021
Akzeptiert: 21. Juni 2022
DOI: https://doi.org/10.2478/ijmbr-2022-0007
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© 2022 Mihail Miller et al., published by Sciendo
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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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