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COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT on the modernisation of EU copyright rules Accompanying the document Proposal for a Directive of the European Parliament and of the Council on copyright in the Digital Single Market and Proposal for a Regulation of the European Parliament and of the Council laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes

SWD/2016/0301 final - 2016/0284 (COD)
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Brussels, 14.9.2016

SWD(2016) 301 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

on the modernisation of EU copyright rules

Accompanying the document

Proposal for a

Directive of the European Parliament and of the Council
on copyright in the Digital Single Market

and

Proposal for a

Regulation of the European Parliament and of the Council
laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes

{COM(2016) 593}
{COM(2016) 594}
{SWD(2016) 302}


1.Introduction

1.1.EU copyright rules

1.2.Policy context

2.Objectives and scope of the initiative

2.1.Objectives

2.2.Scope

3.Ensuring wider access to content

3.1.Introduction

3.1.1.Background

3.1.2.Why should the EU act?

3.1.3.What should be achieved?

3.1.4.Methodology

3.2.Online transmissions and retransmissions of TV/radio programmes

3.2.1.Background data on the TV and radio sector

3.2.2.Online transmissions of broadcasting organisations

3.2.3.Digital retransmissions of TV and radio programmes

3.3.Access to and availability of EU audiovisual works on VoD platforms

3.3.1.What is the problem and why is it a problem?

3.3.2.What are the various options to achieve the objectives?

3.3.3.What are the impacts of the different policy options and who will be affected?

3.3.4.How do the options compare?

3.4.Out-of-commerce works in the collections of cultural heritage institutions

3.4.1.What is the problem and why is it a problem?

3.4.2.What are the various options to achieve the objectives?

3.4.3.What are the impacts of the different policy options and who will be affected?

3.4.4.How do the options compare?

4.Adapting exceptions to digital and cross-border environment

4.1.Introduction

4.1.1.Background

4.1.2.Why should the EU act?

4.1.3.What should be achieved?

4.1.4.Methodology

4.2.Use of protected content in digital and cross-border teaching activities

4.2.1.What is the problem and why is it a problem?

4.2.2.What are the various options to achieve the objectives?

4.2.3.What are the impacts of the different policy options and who will be affected?

4.2.4.How do the options compare?

4.3.Text and data mining

4.3.1.What is the problem and why is it a problem?

4.3.2.What are the various options to achieve the objectives?

4.3.3.What are the impacts of the different policy options and who will be affected?

4.3.1.How do the options compare?

4.4.Preservation of cultural heritage

4.4.1.What is the problem and why is it a problem?

4.4.2.What are the various options to achieve the objectives?

4.4.3.What are the impacts of the different policy options and who will be affected?

4.4.4.How do the options compare?

5.Achieving a well-functioning market place for copyright

5.1.Introduction

5.1.1.Background

5.1.2.Why should the EU act?

5.1.3.What should be achieved?

5.1.4.Methodology

5.2.Use of protected content by online services storing and giving access to user uploaded content

5.2.1.What is the problem and why is it a problem?

5.2.2.What are the various options to achieve the objectives?

5.2.3.What are the impacts of the different policy options and who will be affected?

5.2.4.How do the options compare?

5.3.Rights in publications

5.3.1.What is the problem and why is it a problem?

5.3.2.What are the various options to achieve the objectives?

5.3.3.What are the impacts of the different policy options and who will be affected?

5.3.4.How do the options compare?

5.4.Fair remuneration in contracts of authors and performers

5.4.1.What is the problem and why is it a problem?

5.4.2.What are the various options to achieve the objectives?

5.4.3.What are the impacts of the different policy options and who will be affected?

5.4.4.How do the options compare?

6.Overall conclusions

6.1.Summary of preferred options

6.2.Analysis of the combined application of the preferred options

6.2.1.Impact on stakeholders

6.2.2.Subsidiarity and proportionality

6.2.3.Choice of instrument

6.3.Monitoring and evaluation

6.3.1.Monitoring and evaluation plan

6.3.2.Operational objectives and monitoring indicators

Acronym list

AV            Audiovisual

CHI            Cultural Heritage Institution

CMO            Collective Management Organisation

CoO            Country of Origin

DSM            Digital Single Market 

ECJ / CJEU        European Court of Justice / Court of Justice of the European Union

ECL            Extended Collective Licensing

EP            European Parliament

IA            Impact Assessment

IPTV            TV/radio over closed circuit IP-based networks

MOOCs        Massive Open Online Courses

MS            Member State

OER            Open Educational Resources

OoC            Out-of-commerce (works)

OTT            Over The Top

PPPS            Public-Private Partnerships    

SME            Small and Medium-sized Enterprise

STM            Scientific, Technical and Medical (Publishers)

SVoD            Subscription Video on Demand

TDM            Text and Data Mining

TV            Traditional Television

TVoD            Transactional Video on Demand

VoD            Video on Demand

WIPO            World Intellectual Property Organisation

1.Introduction

1.1.EU copyright rules

Copyright and related rights are rights granted to authors (copyright) and to performers, producers and broadcasters (related or neighbouring rights 1 ). They include so-called "economic rights" which enable rightholders to control (license) the use of their works (e.g. a novel) and other protected material (such as a record or a broadcast), and be remunerated for their use. These rights are limited in time (in Europe, between 50 and 70 years). Economic rights (and their term of protection) are, to a large extent, harmonised at EU level. Authors are also granted so-called "moral rights" (notably the right to claim authorship and the right to object to any derogatory action in relation to the work). Moral rights are not harmonised at EU level.

Copyright systems balance the recognition of rights with exceptions in order to facilitate the use of protected content in specific circumstances, notably to facilitate the achievement of specific public policy objectives such as education or access to information. Exceptions provide a “legal authorisation” to beneficiaries to use protected material without needing to seek authorisation from the rightholders. The EU copyright rules set out an exhaustive list of exceptions to rights across various copyright directives. The harmonisation achieved is however limited: most of the exceptions are optional (Member States may decide to implement them or not), and broadly formulated, leaving Member States (MS) a relatively wide margin of manoeuvre when implementing them.

Copyright systems also provide for procedures and remedies against infringements of copyright (enforcement). These have been partly harmonised at EU level (e.g. evidence-gathering powers for judicial authorities, powers to force parties commercially involved in an infringement to provide information on the origin of the infringing goods, provisions on the payment of damages).

Directive 2001/29/EC 2   (the "InfoSoc Directive") was designed to update copyright rules to the (then nascent) digital networks and to implement the two 1996 WIPO 3 Internet Treaties - the WIPO Copyright Treaty 4 and the WIPO Performances and Phonograms Treaty 5 . It harmonises several exclusive rights that are essential to the online dissemination of works and other protected subject-matter, notably the right of reproduction, i.e. the right to prevent the unauthorised copying of protected content and the right of making available, i.e. the right to prevent unauthorised dissemination of protected content online, as well as exceptions to exclusive rights.

Licensing is the main mechanism for the exercise of copyright and related rights. Depending on the relevant right, the type of use and the sector, licences are most often granted directly by the right holder (e.g. film producer, software producer) or via collective management organisations (CMOs), representing normally a category of rightholders (e.g. authors) and of rights (e.g. rights in musical works). Collective management of exclusive rights (these are typically the most important rights for economic exploitation, e.g. distribution in the physical world and making available in the online world) is voluntary, except in certain specific cases allowed by law and copyright international treaties. For example, Directive 93/83/EC 6 (the "Satellite and Cable Directive") imposes mandatory collective management of cable retransmission rights in order to facilitate the clearance of rights by cable operators. 7  The EU has recently adopted legislation to improve the functioning of CMOs, including in order to facilitate the provision of multi-territorial licences (Directive 2014/26/EU 8 - the "CRM Directive").

Copyright is territorial (referring to national territories) in the sense that the rights granted under copyright are provided for in national law, and not in the form of unitary rights at EU level. For example, the author of a book has not a single EU-wide right of reproduction but 28 different national rights of reproduction. The geographical scope of these 28 rights is limited to the territory of the MS that grants the right in question.

1.2.Policy context

Digital technologies are changing the ways creative content is produced, distributed and accessed. They create opportunities as well as new challenges for the creative industries 9 , authors and artists, the education and research communities, online service providers including search engines and content distributors, telecommunication operators, cultural heritage institutions, individual users and other players in the digital economy. These new uses and opportunities, together with the cross-border nature of digital networks, have brought to the fore questions related to the degree of harmonisation achieved by the EU copyright rules.

The Digital Single Market (DSM) Strategy 10 adopted in May 2015 called for addressing in the EU copyright framework a set of key obstacles to the functioning of the DSM and announced legislation "to reduce the differences between national copyright regimes and allow for wider online access to works by users across the EU", notably as regards portability and cross-border access to copyright-protected content services; exceptions, in particular in the area of education and research; and the role of intermediaries in the distribution of copyright protected content. It also indicated that the Commission would review the Satellite and Cable Directive to assess whether it has facilitated consumers' access to satellite broadcasting services across borders, as well as the possible extension of some of the Directive principles/mechanisms to the licensing of rights required for certain broadcasters' online service.

As a first step to implement the DSM strategy in the area of copyright, the Commission adopted a proposal for a regulation on the cross-border portability of online content services 11 in December 2015, in order to in order to allow EU residents to travel with the digital content they have purchased or subscribed to at home.

At the same time, it adopted a Communication "Towards a modern, more European copyright framework" 12 in which it presented a plan including targeted actions and a long-term vision to modernise EU copyright rules. The Communication highlighted the need to inject more single market into the current EU copyright rules and to adapt them to new technological realities. This Impact Assessment (IA) on the modernisation of EU copyright rules supports the targeted initiatives presented in this Communication, as a second step in the implementation of the DSM strategy on copyright.

EU action in the area of copyright complements other EU initiatives recently adopted in the context of the Digital Single Market Strategy, notably on the revision 13 of the Audiovisual Media Services Directive (" the AVMS Directive") 14 , on measures addressing unjustified geo-blocking 15 and on online platforms. 16  

The analysis presented in this IA strongly relies on the preliminary work conducted by the Commission on the review of EU copyright rules between 2013 and 2016. 17  The review process covered a broader set of matters than those presented in this IA. Such a broad exercise was necessary for the Commission to gain an understanding of the full range of questions being discussed in the context of copyright policy and digital networks.

However, not all those questions relate to matters requiring legislative intervention or, most importantly, requiring legislative intervention at this stage. There are issues where the Court of Justice of the European Union (CJEU) may have provided sufficient clarity to the existing rules or where cases are pending. There are also issues where the necessity to intervene has not been established or where there is not the required degree of maturity in terms of evidence of a problem and/or of the effects of intervention. This is notably the case for the issue of remote consultation of works held in libraries and other relevant institutions and for the issue of "freedom of panorama", which were both mentioned in the Communication of December 2015. The consultation exception (authorising libraries and other institutions to allow on-screen consultation of works for research and private study on their premises) has not been addressed in the context of the IA as the issue needs to be reconsidered in light of the outcome of a pending case before the CJEU on electronic lending. 18 On the panorama exception, the first results of the public consultation do not indicate a need to address problems at EU level, notably because most MS have incorporated such exception in their national legislation. Concerning private copying, the Commission will continue assessing the need for action to ensure that the different levies' systems in place in MS do not raise obstacles in the single market, as announced in the Communication of December 2015. This assessment needs to take into account recent and pending cases before the CJEU. 

The IA also takes into account the conclusions of the ex-post evaluation of the Satellite and Cable Directive. 19  

2.Objectives and scope of the initiative

2.1.Objectives

The key policy objective of this initiative is to ensure a smooth functioning of EU copyright rules in the Digital Single Market (DSM). This IA covers a number of different areas within the EU copyright framework that are all relevant for the completion of the DSM.

Three general objectives have been identified: (i) allow for wider online access to protected content across the EU, focusing on TV and radio programmes, European audiovisual (AV) works and cultural heritage; (ii) facilitate digital uses of protected content for education, research and preservation in the single market and (iii) achieving a well-functioning market place for copyright where rightholders can set licensing terms and negotiate on a fair basis with those distributing their content (notably as regards new forms of content distribution).

The initiative aims at addressing copyright-related obstacles to meet those general objectives. The specific objectives of the initiative are described within each section of the IA.

2.2.Scope

This IA considers adjusting existing rules or introducing new rules in three distinct areas:

(i) access to content online;

(ii) the functioning of key exceptions in the digital and cross-border environment; and

(iii) the functioning of the copyright marketplace.

These three areas have been identified in the Communication of December 2015, together with actions on the enforcement of IP rights, which are not part of the initiatives considered on this IA but for which specific initiatives are being considered separately. This IA focuses on the targeted actions identified in the Communication within these three areas:

On access to content, the Commission proposed in the above mentioned Communication "a gradual approach to removing obstacles to cross-border access to content and to the circulation of works". The proposal for a regulation on portability constituted a first important step in this direction. This IA concentrates on further actions in relation to the cross-border distribution of TV (Traditional Television) and radio programmes online, the licensing of European AV works and the digitisation and making available of out-of-commerce works. As indicated in the Communication of December 2015, accompanying measures aimed at ensuring a wider access to creative content online will be proposed in the context of the 'Creative Europe' programme and are therefore not covered by this IA.

In relation to exceptions, this IA looks into the exceptions which are relevant for access to knowledge, education and research, which have been substantially affected by technological developments and have a cross-border dimension. It examines whether new exceptions are required in EU rules to cover digital uses in teaching activities, text and data mining and preservation activities by cultural heritage institutions (i.e. publicly accessible libraries, educational establishments and museums, as well as archives and film or audio heritage institutions). Legislative measures are also being considered to introduce a new exception allowing people with print disabilities to access books and other print material in formats that are accessible to them. They are not considered in this IA as they relate to the implementation of EU international obligations (Marrakesh Treaty 20 ).

On the functioning copyright market place, the IA concentrates on issues related to the distribution of value in the online copyright value chain, thus responding to the objective stated in section 4 "achieving a well-functioning market place for copyright" of the Communication of December 2015. The IA addresses problems faced "upstream" by rightholders when trying to license their content to online service providers (use of protected content by online service providers storing and giving access to user uploaded content and rights in publications) and those faced "downstream" by creators when negotiating contracts for the exploitation of their works (fair remuneration in contracts of authors and performers).

3.Ensuring wider access to content

3.1.Introduction

3.1.1.Background

Digital technologies have facilitated the distribution of and access to copyright-protected content, with 49 % of EU citizens accessing music or AV content online. 21  The Internet has favoured the entry of new market players and the development of new services (e.g. music streaming services, Video on Demand – VoD - platforms, etc.) providing access to a large quantity and variety of content online. It has also provided a growth opportunity for traditional players. TV still remains the most important channel to access AV content, 22  but both broadcasters and retransmission 23 service providers (e.g. cable operators) are increasingly investing in the development of digital and online services in order to improve consumers' experience and offer more flexibility. Digital technologies also offer new opportunities to cultural heritage institutions (CHIs) willing to digitise and disseminate parts of their collections that would otherwise remain confined to their premises with limited access to the public.

Despite the rapidly growing variety of online services available to citizens, cross-border access to and availability of digital content (both in terms of content provided by online services in other MS and of content produced in other MS) vary. While broadcasters play an important role in informing, entertaining and educating the general public, their programmes often remain unavailable online to European citizens living in other MS. In addition, the variety of TV / radio channels from other MS provided by retransmission services differs across the EU. 24  Also, European films, documentaries and series are often under-represented in the catalogues of VoD platforms. Finally, only a limited part of the collections of CHIs are available online and across borders.   

The existence of barriers to the portability and cross-border access to content was highlighted in the Digital Single Market (DSM) Strategy. 25  The Commission presented a legislative proposal on portability in December 2015 26 and proposed a "gradual approach to removing obstacles to cross-border access to content and to the circulation of works" in the Communication "Towards a modern, more European copyright framework" adopted at the same time. 27  In this context, three fields of possible EU legislative intervention were identified: improving cross-border distribution of TV and radio programmes online; facilitation of licensing agreements for the online availability of European AV works and digitisation and making available of out-of-commerce (OoC) works across the EU. 28  The present section of the IA refers to these fields.

The Commission has carried out an evaluation of the Satellite and Cable Directive 29 and in particular of the effectiveness and relevance of the principle of "country of origin" applicable to satellite transmissions and of the mandatory collective management applicable to cable retransmissions. Even though this evaluation, being limited to particular technologies of transmission (satellite an cable), is not directly relevant for the measures considered in this IA (online transmissions), 30  its main findings have been taken into acccount where meaningful parallels could be drawn.

In the online environment, players engaged in the distribution and dissemination of content (notably broadcasters, retransmission service providers, VoD platforms, but also CHIs as far as the access to the heritage is concerned) may face significant difficulties when trying to clear the rights for the online exploitation of protected works across the EU. 31  Also, VoD platforms willing to enrich their catalogue with European AV works often face problems to acquire online rights. Finally, OoC works held in the collections of CHIs often remain unavailable online, due, in part, to significant difficulties in the clearance of rights.

This section of the IA examines how the clearance of rights can be facilitated to improve the online availability of content across the EU.

3.1.2.Why should the EU act?

Legal basis

The EU's right to act follows from Article 114 of the Treaty on the Functioning of the European Union (TFEU), which confers on the EU the power to adopt measures for the establishment and functioning of the internal market and has provided a legal basis for a wide range of EU instruments in the area of copyright.

The rights relevant for online dissemination of content (notably the reproduction and making available rights) have been harmonised in the InfoSoc Directive. 32  

The definition of harmonised rules simplifying, where appropriate, the licensing of rights for online transmissions and retransmissions of TV and radio programmes, and for the dissemination of OoC works by CHIs, would contribute to improving the functioning of the Digital Single Market, and in particular the distribution of and access to digital content. The same applies as regards the facilitation of negotiations to acquire online rights for AV content notably as regards rights for the exploitation in different territories.

Furthermore, Article 167(4) TFEU provides that the EU shall take cultural aspects into account in its action under other provisions of the Treaties, in particular in order to respect and to promote the diversity of its cultures. All proposed options take into account the implications of EU action for cultural diversity.

Subsidiarity and added value

The problems identified in this section of the IA have an important cross-border dimension: broadcasters face difficulties in particular when clearing rights for making their content available online across borders; similarly, the acquisition of rights can be complex for retransmission services other than cable operators when they offer channels from other MS. MS cannot intervene by legislation in order to establish a uniform regime applicable to the licensing of rights (which have been harmonised at EU level) for cross-border transmissions of TV and radio programmes. Concerning the exercise of retransmission rights, national solutions may generate further fragmentation in the Digital Single Market. Only intervention at EU level can ensure legal certainty for all retransmission operators and rightholders.

As regards the online availability of European AV works, MS' action may not be sufficient to improve the online availability of European (including non-national) AV works. The dialogue between the relevant stakeholders and negotiations for the licensing of online rights need to be encouraged at EU level in order to have an impact on the diversity of the content offered by online services, and in particular on the presence of European works in catalogues of these services. 33

Regarding OoC works, EU action responds to the need to facilitate the making available to the public of the heritage held in CHIs, including across borders. Without EU intervention, such actions would be limited by national borders (and would happen only in some MS, or at a varying pace). CHIs pointed to the importance to solve the cross-border aspect of this problem, as also did right holder signatories to the Memorandum of Understanding on Key Principles on the Digitisation and Making Available of Out-of-Commerce Works, signed on 20 September 2011.

3.1.3.What should be achieved?

The general objective of EU intervention is to allow for wider online access to protected content by users across the EU, in particular in the following areas: transmissions and retransmissions of TV and radio programmes; European AV works and cultural heritage.

EU action aims at removing the copyright-related obstacles and at creating the conditions allowing broadcasters, service providers and CHIs to offer wider online access to content across the EU. The specific objectives are therefore defined in terms of facilitating clearance of rights (and negotiation) between the relevant parties.

3.1.4.Methodology

Problem definition

As illustrated in the problem tree presented below, the problems reported in this section of the IA are all directly related to difficulties encountered with the clearance of rights: broadcasters when acquiring the rights for their online services available across borders; retransmissions services (different from but functioning like cable operators) for the clearance of rights for retransmissions of TV and radio programmes from other MS; VoD platforms in obtaining online rights of European AV works; CHIs clearing the rights for digitisation and dissemination of OoC works in their collections.

The specific drivers and consequences are explained in the following sub-sections. However certain overarching elements are presented here as they apply to different contexts.

The territoriality of copyright 34 and the specific licensing practices existing for certain types of works are one of the drivers contributing to the complexity of rights clearance in cross-border contexts. A service provider that is making the content available online in more than one MS must have the relevant rights to use such content for the relevant territories.  Where the relevant rights for all the relevant territories are held by one single right holder/distributor, the service provider can obtain a multi-territorial licence covering all territories. As regards the online rights in musical works, some CMOs license rights on a territorial basis, 35 while a number of music publishers and CMOs grant multi-territorial licences. 36 The multi-territorial licensing of these rights is facilitated by the CRM Directive. 37 Multi-territorial licensing is widely used for the rights held by record producers. AV content is mainly licensed and distributed on a territorial basis. AV producers of premium content 38  often grant an exclusive licence to a single distributor/broadcaster/service provider in each MS. This form of licensing is considered important by the AV industry for the financing of AV works, with rights being often pre-sold at the pre-production stage. In exchange for an upfront payment to the film producers, distributors and/or broadcasters often obtain exclusive exploitation rights in a specific territory for a defined period of time. As regards OoC works in heritage collections, existing solutions, 39 where available, are also territorially confined.

Beyond licensing issues, the limited availability of content online across borders is also the result of decisions taken by service providers (which may be related to commercial strategies, regulatory requirements, technological or financial constraints, etc.). As a result, there are instances where even if multi-territorial licences are granted by rightholders or even if agreements between rightholders and service providers do not include limitations on territorial exploitation, cross-border access remains a problem. This is however not a problem that can be addressed by copyright specific legislation. 40 This section of the IA does not directly address these issues.

Difficulties in clearing rights for online exploitation, including across borders, often result in less varied content being available online and in consumers facing restrictions when trying to access content online. There is however consumer interest for content from other MS:

In the Eurobarometer survey carried out in 2011 on cross-border demand for content services, 41 19 % of Europeans indicated they were interested in receiving content from another EU country, with 15 % interested in TV programmes, 3 % in on-demand services and 2 % in other types of content;

In the Eurobarometer survey carried out in 2015 on "Cross-border access to online content", 42   almost one in ten Internet users (8 %) indicated they have tried to access content from an online service meant for users in another MS, while 50% of respondents who have not tried indicated they would be interested to do so (the most popular type of content being AV - 29 % of respondents); 

In the 2014 public consultation on the review of the EU copyright rules and in the 2015 public consultation on the review of the Satellite and Cable Directive, the vast majority of consumers argued in favour of cross-border access to online content; 43

In the public consultation on the AVMS Directive, 82 % of the respondents who expressed an opinion on the issue of "Promotion of European works" indicated being interested in watching more content produced in another MS.

Identification of policy options

The policy options have been developed in relation to the specific issues at stake in each area. Different licensing regimes, considered as enabling mechanisms to facilitate the clearance of rights, are examined in the legislative options.

Views from stakeholders, European Parliament and Member States

The views from the different stakeholders are reported after the description of each policy option.

In its resolution of 9 July 2015 44 , the European Parliament (EP) urged the Commission “to propose adequate solutions for better cross-border accessibility of services and copyright content for consumers” while acknowledging the importance of territoriality.

A number of MS 45 support the objective of enabling more cross-border access to online transmissions of TV and radio programmes but call for caution, as in their view a possible intervention should not undermine contractual freedom, a high level of protection of intellectual property and the exclusivity of rights.

Concerning retransmissions of TV and radio programmes, a number of MS are in favour of simplifying rights clearance for services comparable to cable, though some have concerns and in particular underline the necessity to ensure fair competition.

On out-of-commerce works, only a few MS provided views on the need of EU action in this area, 46 generally to explain national systems and favouring contractual mechanisms. In recent Council Conclusions, 47 they have simply taken note of the Commission’s intention 48 to assess options and consider legislative initiatives in this area.



Impacts of policy options

Stakeholders affected

The policy options related to online transmissions and retransmissions of TV and radio programmes would affect, on the one hand, broadcasters (TV and radio), retransmission service providers and other online service providers, and on the other hand, all rightholders whose works are used in TV and radio programmes (mainly in the AV, music and visual art sectors).

Regarding the availability of works in VoD platforms, the policy options examined in the IA would affect all types of stakeholders in the AV sector (authors, producers, distributors, broadcasters, VoD platforms, etc.).

The policy options considered in relation to OoC works would have an impact on CHIs such as libraries, archives, museums and film heritage institutions, and on rightholders in all sectors (the collections of CHIs contain OoC which can be books, phonograms, AV works, photographs, etc.).

Impacts on consumers/users are assessed for each policy options, mostly in terms of access to and availability of online content.

Obligations and costs for MS resulting from the preferred policy options are presented in Annex 3.

Type of impacts and availability of data

Only the most significant and likely impacts are reported in this IA. The impacts are assessed by group of stakeholders (e.g. broadcasters, service providers, rightholders), focusing mainly on economic impacts, notably transaction costs and licensing revenues. In addition, broad social impacts (e.g. impacts on cultural diversity) and impacts on fundamental rights are assessed separately. All policy options considered in this section of the IA may have an impact on copyright as a property right (Article 17(2) of the Charter of Fundamental Rights of the European Union – "The Charter") 49 and on the freedom to conduct a business (Article 16). In addition, impacts on freedom of information (Article 11), freedom of the arts and sciences (Article 13), and right to education (Article 14) are examined where appropriate. Impacts on third countries or on the environment are not elaborated upon as the policy options presented in this section of the IA are considered not to have any substantial impact on them. No significant impacts on employment have been identified.

Whereas general market data is widely available on the different sectors and distribution channels examined in this section of the IA (TV market, VoD market 50 ), specific data related to transaction costs and licensing revenues is not publicly available. Other than in a few cases, this data could not be obtained from stakeholders despite repeated attempts (through direct requests to stakeholders or dedicated studies 51 ).



Impacts on SMEs

The policy options considered in this IA do not target SMEs but may have an impact on them, as the large majority of companies that may be affected are SMEs. In the sector of programming and broadcasting activities, 98.9 % of companies are SMEs (85 % micro-companies) generating 17.9 % of the value added. 52  In the sector of film and music production, 99.9 % of companies are SMEs (96 % micro-companies) generating 85 % of the value added (32 % by micro-companies). 53  

The policy options examined in this section of the IA are expected to reduce the administrative burden faced by TV and radio broadcasters as well as service providers willing to obtain rights for the online and/or cross-border exploitation of works and would therefore be positive for SMEs active in this area. Most rightholders may also benefit from the licensing or negotiation mechanisms examined in the different policy options, in particular individual rightholders or micro-companies that do not have the capacity to manage individual licensing deals with a high number of service providers and have a limited market power. Furthermore, the policy options examined in the different areas covered by this section of the IA could generate new licensing opportunities for rightholders and possibly additional licensing revenues. Therefore, mitigating measures in favour of SMEs have not been deemed necessary.

Comparison of policy options

The policy options are compared against the criteria of effectiveness (i.e. to what extent they fulfil the specific objective), efficiency (i.e. at what cost they do so), impact on the different groups of stakeholders and coherence with regard to cultural diversity, fundamental rights and/or other EU policies. Each option is rated between "--" (very negative), "-" (negative), 0 (neutral), "+" (positive) and "++" (very positive).

3.2.Online transmissions and retransmissions of TV/radio programmes

3.2.1.Background data on the TV and radio sector 54  

Despite the way TV has been transformed by the emergence of digital technologies and the internet, 55 traditional TV remains relevant both economically and as the source of information and entertainment for viewers. In 2014, the EU-28 TV market was worth around €86 billion. 56  In the same year, TV content (linear and time-shifted viewing) equated to 96 % of all video consumption in six countries (FR, ES, DE, IT, UK and US). 57  

96 % of Europeans watch television at least once a week, predominantly on a TV set but increasingly online (in 2014, 20 % of Europeans – but 40 % of those aged 15-24- watched TV online at least once a week, representing a 3 % increase compared to 2012). 58 The average TV viewing time for the whole EU population in 2013 was 223 minutes per day. 59  While viewing patterns are changing, particularly among younger viewers, TV programming still represents an important part of their video viewing. 60

TV and radio remain the main source of news for a large majority of Europeans, compared to other sources (notably print and online). For example, 72 % of consumers in FR, 69 % in DE, 63 % in DK and 59 % in the UK indicated TV or radio as their main source of news. 61  80 % of the EU population listens to radio for at least 2 to 3 hours a day – and mostly to local or regional programmes. On average, 6 to 8 % of total listening of radio is done online in Europe. 62

A broadcaster may make a TV or radio channel available directly through a traditional terrestrial transmission, 63 or via a satellite, 64 cable 65 or other telecommunications network. 66  TV and radio channels can also be offered online over the open internet. Many satellite, cable and IPTV operators offer such services to their subscribers. There are also some online services of this type provided by entities that do not offer satellite, cable or IPTV transmissions. 67  The following diagram illustrates the functioning of direct, including online, transmissions of TV and radio programmes (section 3.2.2) and of retransmissions of TV and radio programmes (section 3.2.3). The problems addressed by this IA concern the transmissions and retransmissions marked by dotted lines below.

3.2.2.Online transmissions of broadcasting organisations

3.2.2.1.    What is the problem and why is it a problem?

Problem: Broadcasting organisations face practical difficulties with the acquisition of rights for their online services when they are offered across borders

Description of the problem: As viewing habits of consumers are changing and demand for access to TV and radio online grows, broadcasters have responded by expanding their services online and allowing consumers' access through screens such as tablets and smartphones. The online offerings of broadcasters include simulcasting services (TV/radio channels which are transmitted online alongside traditional broadcasting by satellite, cable, terrestrial), webcasting services (online only linear channels 68 ), TV catch-up services 69  and podcasts, i.e. radio programmes that can be streamed or downloaded as well as other on-demand services (e.g. VoD). Simulcasting and catch-up services are often monetised through advertising (although some broadcasters charge for access to these services).

In order to make their online services available across borders, broadcasters need to have the required rights for the relevant territories. This may require engaging in a complex process for obtaining online rights, generating high transaction costs, and may reduce broadcaster's incentives to provide cross-border services. Despite requests to the relevant stakeholders, no data could be obtained on transaction costs related to clearing online rights on a cross-border basis. 70  For satellite broadcasting the clearance of rights has been facilitated by the application of the country of origin principle enshrined in the Satellite and Cable Directive 71 according to which the act of communication to the public by satellite takes place solely in the MS where, under the control and responsibility of the broadcaster, the programme-carrying signal is introduced into an uninterrupted chain of communication leading to the satellite and down towards the earth. Therefore the rights for such satellite transmission must only be cleared for one MS. This same principle does not apply when a broadcaster clears rights for its online services.

The need to facilitate the clearance of rights for broadcast-related online services has been recognised by stakeholders in the music sector 72 and in the acquis. Article 32 of the CRM Directive introduces a derogation from the rules on the multi-territorial licensing of rights in musical works for the clearance of rights required by broadcasters for simulcasting and other online transmissions which are ancillary to the initial broadcast of radio or television programmes. The rationale behind this derogation, as explained in recital 48 of the CRM Directive, was to leave the required flexibility for the licensing of online rights in musical works for such transmissions to be licensed via local CMOs (rather than by other EU CMOs or "hubs" aggregating rights which may not necessarily be in the same MS as the broadcaster seeking the licence). 

Drivers: [High number of works and short timeframe] In addition to content such as films, TV series or music produced by other parties (for which rights have to be cleared with the relevant rightholders), broadcasters on a daily basis transmit a very high number of hours of original TV and radio programmes 73 such as news, cultural, political, documentary or entertainment programmes that they produce themselves, which use variety of content protected by copyright 74 the rights to which have to be cleared. This results in a complex clearance of rights with a variety of rightholders, including authors (of music, of scripts, of images, of texts), directors, film producers, performers, record producers. The overall number of transactions is much higher than for an online content service offering a catalogue of films or music on demand. Major public service broadcasters conclude more than 70,000 contracts with rightholders per year. 75 For example, one episode of series produced by a broadcaster may include up to 100 underlying rights. 76  Often the rights need to be cleared in a short time-frame, in particular when preparing programmes such as news or current affairs which represent an important part of broadcasters' transmissions. 77 The relevant rights may be held by CMOs (e.g. rights in musical works) or by individual rightholders such as producers (e.g. rights in AV works). With regard to some other works, e.g. pictures and photographs the situation is mixed as some rights are represented by CMOs and some by individual rightholders. There can be also situations where one work is embedded in another e.g. music in an AV work or a picture in a text which further complicates the rights clearance. This means that in their daily operations TV broadcasters face significant transaction costs related to the clearance of underlying rights for their programmes. The transaction costs for radio broadcasters are less significant, since (i) radio broadcasts contain fewer types of works protected by copyright (notably, no images or AV works) and (ii) there are well-established collective management structures for the main type of copyright-protected work used in radio broadcasts, i.e. music, which makes it easier for radio broadcasts to clear rights. 78

[Need to clear rights on a territorial basis] These costs and the complexity of the task increase significantly if broadcasters want to make their online services available across borders. As described in section 3.1.4 , in some cases multi-territorial licences are available but often broadcasters must clear rights for certain works territory by territory. As regards radio broadcasting, according to the information provided in meetings with the stakeholders, agreements between radio broadcasters and local CMOs may allow cross-border transmissions up to certain % of audience (e.g. 5 or 7.5 %) which could explain why there is a broad offer of online radio services.

Beyond the complexity of rights clearance other factors influence to a different extent the cross-border accessibility of TV and radio programmes. They are presented below but this IA is not addressing these particular issues, as they are mostly linked to business models and commercial strategies. [Territorial exclusivity] Another factor strongly influencing the access to TV and radio programmes across borders is the fact that the rights in premium content (e.g. films and TV series of particular interest for the audience), as explained in section 3.1.4 , are generally licensed on the basis of territorial exclusivity. The important role this licensing plays for the AV industry is also explained in section 3.1.4 . Broadcasters willing to serve audiences across borders may not be able to acquire the relevant rights if the rights in other territories are granted, on an exclusive basis, to another service provider(s). At the same time, they may enter into contracts under which they agree to limit or block cross-border access to premium content to which they have acquired the rights for territories in which they operate. This is confirmed by initial findings of the Commission’s e-commerce sector inquiry. 79  

[Remit of public service broadcasters] Some public service broadcasters may be limited in their possibility of offering certain content in their online services by their national public service remit. For example in Germany public service broadcasters are not allowed to place TV-feature films and series purchased from third parties online. 80  By contrast, the remit of other public broadcasters may allow them to serve audiences outside the MS. 81  

[Commercial decisions of broadcasters] Finally, in some cases, broadcaster’s themselves may take decision to focus on a specific territory and to tailor their offerings to the specific audience due to a variety of factors. For example, broadcasters may decide to geo-block access to their own programming where they see possibilities of licensing it in other territories. According to the feedback received from stakeholders, other considerations such as the demand for the services, language spoken by consumers, the complexity of the legal framework as well as the viability of revenues may result in broadcasters deciding not to enter certain markets at all. 82  

Consequences: In consequence of the combination of the drivers described above, TV broadcasters often make their online services available only in a territory of one MS and put in place measures which prevent cross-border access to these services such as geo-blocking of IP addresses from other territories. 83  According to the initial findings of the Commission’s e-commerce sector inquiry published on 18 March 2016, 84 82 % of the public service TV broadcasters and 62 % of commercial TV broadcasters who responded to the inquiry implemented at least one type of geo-blocking to their online services. As illustrated in Annex 6B, data provided by the European Broadcasting Union (EBU) as well as data collected in the SatCab study 85 on cross-border availability of online services of TV broadcasters indicates that international content such as sports, fiction, documentaries and entertainment, as well as content based on foreign formats is in principle geo-blocked. The situation with the original content produced by TV broadcasters is mixed but often broadcasters also block access to their own content. 86 In the case of radio broadcasting both online live streaming and podcasts are usually not geo-blocked.

How the problem would evolve: Without intervention at EU level addressing the particular complexity of the clearance of rights this problem would persist as broadcasters would face the same practical difficulties in clearing rights for cross-border transmissions. EU consumers would remain limited in their cross-border access to TV programmes such as news, cultural or political programmes, documentaries or entertainment programmes which due to their national specificities often cannot be easily replaced by programmes offered in other MS.

3.2.2.2.    What are the various options to achieve the objectives?

This IA assesses the baseline scenario, one non-legislative and two legislative options to facilitate licensing in order to enhance cross-border transmissions of TV and radio programmes online. The options considered in this IA are enabling options aiming to facilitate licensing of rights, in order to allow the market to respond gradually to legal and policy changes.

Baseline

No policy intervention. This option would consist in relying on market players to progressively offer cross-border access to TV and radio programmes distributed online as well as on the courts, and notably the CJEU, to clarify the application of the Treaty and of provisions of EU secondary law relevant to the free movement of services. It would also mean continuing to rely on the application of competition law to agreements including limitations on territorial exploitation of content. .

Stakeholders' views 87

All public service broadcasters, commercial radios and certain other service providers consider that the baseline option cannot solve the identified problems. They consider that a heavy administrative task and transaction costs linked to licensing rights across borders would remain. Rightholders, CMOs and the majority of commercial broadcasters 88 support this option, arguing that the current framework already offers possibilities to license rights on a multi-territorial basis and that the limited cross-border supply is driven by a limited consumer demand and language barriers. Consumers' representatives consider that the current regulatory framework does not sufficiently ensure access to TV/radio programmes available online in other MS and that market-driven solutions would not be sufficient to solve this problem.

Option 1 – Voluntary agreements to facilitate the clearing of rights for broadcasters' online services ancillary to their broadcasts

This option would promote maximising a voluntary aggregation of the rights necessary to provide multi-territorial licences for broadcasters' online services. It would build on the voluntary agreements between rightholders and broadcasters which already exist in the music sector 89 and would aim to introduce them in other content sectors important for broadcasting (such as AV and visual arts) and also with regard to commercial broadcasters who are not party to the arrangements with authors' CMOs. Based on such arrangements, broadcasters would be able to acquire from CMOs multi-territorial licences to aggregated repertoires.

It would focus on online services of broadcasting organisations which are ancillary to the initial broadcast, i.e. simulcasting (linear simultaneous transmission of a broadcast by the broadcaster), catch-up TV/radio services (on-demand transmission of a broadcast available for a limited period of time after it has been broadcast in a linear manner) and material related to the broadcast (e.g. previews). 90  

In order to facilitate the clearing of the rights for cross-border transmissions of broadcasters' online services ancillary to their broadcast, the Commission would assess the functioning of the existing voluntary agreements in the music sector and foster a dialogue between the parties (rightholders, CMOs and broadcasters) if there is a need to improve their functioning. It would also promote similar agreements at EU level for the AV sector and other content sectors important for broadcasting services (such as visual arts).

Stakeholders' views

Public service broadcasters are likely to consider that this option is not sufficient to achieve the identified objective. Commercial broadcasters and some other service providers may favour this option as it would rely on industry-based solutions. Rightholders and CMOs are likely to support such option. However, in the case of AV stakeholders, the usual practice for licensing is individual agreements thus it is less likely that they would support voluntary aggregation of repertoires by CMOs, especially for the premium AV content. Consumers' representatives consider that market-driven solutions would not be sufficient to solve the identified issues.

Option 2 - Application of country of origin to the clearing of rights for broadcasters' online services ancillary to their initial broadcast

Introduce a rule providing that as concerns the licensing of rights for certain online transmissions by broadcasting organisations, the copyright relevant act takes place solely in the MS where the broadcasting organisation is established. As a result, in order to provide certain services in the Union, rights would only need to be cleared for the "country of origin" (CoO) of the broadcasting organisation (and not for the countries of reception). 91  

This option would cover the same online services of broadcasting organisations as under Option 1. 92  

The CoO rule would enable broadcasters to provide services across borders but it would not oblige them to do so (Option 2 would not entail any rules limiting the contractual freedom of broadcasters and rightholders). The application of the CoO rule and the contractual freedom of broadcasters and rightholders would be subject to the application of the Treaty as well as to the applicable secondary law (notably, as regards the freedom to provide services).

The licence fee payable to rightholders would have to take into account all aspects of the online transmission of the broadcast, including the audience, unless agreed otherwise with rightholders. 93

The Commission would put in place a monitoring mechanism to assess the cross-border availability of broadcasters' online services covered under this option.

Stakeholders' views

All public service broadcasters and commercial radios support this option. Commercial TV broadcasters are generally against this option due to the fear that, considered together with the application of the free movement of services principle and competition law, it may lead to the weakening of territorial licensing or even to mandatory pan-European licences. They argue that this, in turn, would limit possibilities for smaller broadcasters/ broadcasters operating in smaller markets to obtain licences in premium AV content, as rightholders, without exclusivity guarantees, would focus on the largest/most lucrative markets. Other service providers than broadcasters call for a cautious and well-measured approach, ensuring a level playing field. Rightholders and CMOs are against such option for similar reasons as commercial TV broadcasters, underlining that this may undermine incentives to invest in AV production. They also raise a possible risk of establishment shopping and of disaggregation of repertoire. Consumers' representatives support the application of the CoO rule to broadcasters' online transmissions.

Option 3 – Application of country of origin to the clearing of rights for the services covered by Option 2 and for TV and radio-like linear online transmissions (and services ancillary to such transmissions)

This option would cover, in addition to the services covered under Option 2, TV and radio-like linear online transmissions which are not linked to a broadcast but are online only transmissions (webcasting) and services ancillary to the webcast (such as catch-up and previews of the webcasts). The "country of origin" (CoO) rule would apply to such services.

TV and radio-like linear online transmissions would be defined as (i) linear services; (ii) which are provided on the basis of a schedule; (iii) and under the editorial responsibility of the service provider.

The other main elements of this option would be the same as under Option 2.

Stakeholders' views

Public service broadcasters support the CoO rule for broadcasters' transmissions however do not ask for the application of the CoO rule beyond that, underlying a special situation of broadcasters. Commercial TV broadcasters do not support this option for the same reasons as Option 2. Majority of service providers other than broadcasters underline the importance of a level playing field and some of them call for a technology-neutral approach. Rightholders and CMOs would oppose this option for similar reasons as commercial TV broadcasters and underline that, as a result, this option may decrease incentives to invest into AV content. Also, they are concerned that extending the CoO rule to webcasting services would entail an even higher risk of establishment shopping by online service providers and encourage "race to the bottom": search of the lowest copyright fees. This, in turn, may lead to disaggregation of repertoires licensed by CMOs. Consumer representatives support the application of the CoO rule to all online transmissions.

Discarded options

Overarching CoO rule: The identified objectives could be achieved also by applying the "country of origin" rule to all communication to the public and making available acts online in which case the rule would apply also to services such as VoD services, 94 on demand music streaming services, etc. However, such option is not considered in this IA as its scope is broader than the targeted objective raised in the DSM Strategy : "to tackle […] measures to ensure enhanced cross-border access to broadcasters' services in Europe". The Copyright Communication acknowledges the necessity of a gradual approach, in order to allow the market to adapt to policy and legal changes. As a first step, the initiative will focus on TV and radio programmes which are a main way to access content in the EU, in particular as regards news and cultural programmes. Linear transmissions offer to consumers the ability to consume content as it happens which is extremely important for event driven programming. 95 The Commission will continue monitoring the situation in the market, following its long-term vision. 96

Restrictions to contractual freedom: Options which, in addition to establishing the CoO rule, would prohibit contractual arrangements concerning territorial exploitation of content were discarded. Such options could de facto result in pan-European licences. Many operators, including SMEs, may not have financial means to acquire pan-European licences. If the market does not have a possibility to adapt to changes gradually such options could push smaller operators out of this segment of the market. Also, such options may impact the way how the creative, especially AV, content is financed and distributed. 97  

3.2.2.3.    What are the impacts of the different policy options and who will be affected?

Approach

The above options would affect broadcasters, webcasters and other online service providers as well as rightholders whose works are used in TV and radio programmes. They would also affect consumers. The impacts affecting these groups of stakeholders are presented separately.

For broadcasters, the following economic impacts have been considered: impacts on transaction costs linked to clearing rights, on possibilities to offer services across borders and, where relevant, impacts on licensing costs (licence fees paid by broadcasters to rightholders directly or through CMOs).

The same types of impacts have been examined for webcasters in Option 2.

In addition, the impacts on the competitive situation with other service providers (not covered by the options) were considered.

For rightholders, the main economic impacts are on licensing models (in particular, a possibility to exploit rights on an exclusive territorial basis) and on licensing revenues. The impacts would vary depending on the sector: the AV works are more often distributed on the basis of territorial exclusivity as compared to other works used in TV and radio programmes (such as music, literary works, artistic works, e.g. photographs). Therefore, impacts are assessed separately for AV, music and visual arts sectors.

For consumers, the impacts on access to online transmission services across borders have been considered, as well as impacts on prices (where relevant).

The majority of commercial broadcasters as well as Rightholders and CMOs are concerned that the intervention may oblige broadcasters to provide consumers with cross-border access to their online services. 98 As explained above, the options considered in this IA would not oblige broadcasters to provide services across borders and would not entail any rules limiting the contractual freedom of broadcasters and Rightholders. The same stakeholders also underline a risk that introducing the CoO rule for online transmissions will weaken territorial licensing of rights (or even lead to mandatory pan-European licensing). They argue that the establishment of the CoO rule in combination with the application of the free movement of services principle and competition law would have a detrimental effect on territorial licensing. As it is not possible to predict the future effects that the application of the free movement of services principle and competition law may have on the territorial licensing of rights, this IA does not attempt to assess impacts that the proposed intervention may have in combination with these rules.

The assessment below is mainly qualitative, as the publicly available data or data that could be obtained from stakeholders on licensing revenues and transaction costs is limited.

Baseline

Impacts on stakeholders

Broadcasters

Impacts on transaction costs: Under the baseline scenario, broadcasters would continue facing high transaction costs linked to licensing of rights for cross-border online transmissions, including for their own programmes. Existing voluntary initiatives aimed at promoting the aggregation of rights and the granting of multi-territorial licences, as mentioned in section 3.2.2.1, could nevertheless contribute to facilitating the clearance of rights for musical works and phonograms used in in radio and TV broadcasts.

Impacts on possibilities to offer services across borders: Due to persisting difficulties in acquiring underlying rights for online cross-border transmissions, broadcasters are likely to continue geo-blocking access to their own programmes. 

AV premium content is likely to continue being licensed on a territorial basis and with either the entire programme being geo-blocked or certain parts of the programme being blacked-out. These agreements based on territorial exclusivity would be subject to the application of EU law, notably as regards the application of the free movement of services principle and competition law. 99  However, it is not possible to predict the future effects that developments in these areas of law may have on the licensing of rights and the cross-border access to online TV and radio programmes. 

As concerns music, availability of multi-territorial licences is expected to increase due to the implementation of the CRM Directive. As for visual arts, no significant changes to the current licensing practices are expected.

Other service providers 

The baseline option would not have any impacts on the competitive situation between broadcasters and service providers other than broadcasters.

Rightholders

Impacts on licensing models and revenues: The baseline option would not have any impact on licensing models applied by rightholders or on the licensing revenues received from broadcasters or webcasters. In particular, the AV sector would continue to be able to collect revenues based on the territorial licensing of rights (subject to EU rules). However, other rightholders whose content is distributed in limited geographic areas by broadcasters may lose opportunities to have their content reaching audiences across borders. The potential of the Digital Single Market for some creative content may remain underexploited, especially for content which does not rely on exclusive territorial licensing.

Consumers

Impacts on access to online transmission services: Consumers are likely to continue facing restrictions to cross-border online access to TV and radio programmes. This is in contrast with consumers' demand for cultural, information and entertainment content from other MS. 100  

Social impacts 

The baseline scenario would not affect the production of new cultural content. However, access to cultural diversity may remain limited under this option, as consumers would continue facing restrictions to access TV and radio programmes online from other MS (including as regards access to content such as news, current events or other non-fiction TV, which represent a significant proportion of broadcaster's programming 101 ). This situation would affect the role of broadcasters as key players for linear transmissions of current events and of cultural programmes.

Impacts on fundamental rights

The baseline scenario would not have any impact on copyright as property right or on the freedom to conduct a business, as recognised in the Charter (Articles 16 and 17). It may have an indirect impact on the freedom of information enshrined in the Charter (Article 11), to the extent that this option would not facilitate further development of access to information.

Option 1 – Voluntary agreements to facilitate the clearing of rights for broadcasters' online services ancillary to their broadcasts

Impacts on stakeholders 

Broadcasters

Impacts on transaction costs: Option 1 could facilitate the clearance of rights and reduce transaction costs for cross-border online transmissions only on the basis of voluntary agreements concluded between rightholders, CMOs and broadcasters. The effectiveness of such agreements would depend on the sectors' willingness to license rights collectively (which may be limited in the case of AV works).

As mentioned above, voluntary initiatives have already been developed in the music sector to facilitate licensing of broadcasters' online services. A recommendation, signed by music composers and songwriters, music publishers, authors' CMOs and public broadcasters, provides guidelines for the aggregation of rights in CMOs. 102  The CMOs representing major and independent record producers have set up a network of reciprocal representation agreements that allows for the granting of multi-territorial licences for broadcasters online related activities by a single CMO. The first of such agreements covered only simulcasting and was cleared by the Commission in 2002. 103 Subsequently further agreements have been concluded to cover other online related services such as some forms of webcasting and catch-up services. 104 Option 1 would allow to assess the functioning of these practical tools developed by the industry, resolve possible blockages and identify ways in which they could be further used. An increased use of such voluntary agreements could reduce transaction costs for the clearance of underlying rights in radio and TV programmes (e.g. broadcasters could clear online music rights with one single CMO instead of negotiating with CMOs and rightholders in each territory). This would be particularly relevant for broadcasters' original productions but in some cases could be also important for third-party content.

The dialogue foreseen under Option 1 could allow exploring the need for and feasibility of similar agreements for other types of works, notably AV content and visual art works and, as regards authors' rights in musical works, also for commercial broadcasters. However, this would mainly depend on the willingness of rightholders to enter such dialogue. As explained below, rightholders in the AV sector are likely to be reluctant to engage into such agreements.

Impacts on possibilities to offer services across borders: By facilitating the clearance of underlying rights, the voluntary agreements fostered under Option 1 could help broadcasters to make part of their own programmes available online and across borders. The type of programmes and the availability of different services (simulcasting, previews, catch-up) would depend on the feasibility and functioning of such voluntary agreements as well as the conditions foreseen in them. The cross-border availability of programmes, in particular through catch-up services, is likely to remain limited. Option 1 is not expected to have any impact on the possibility to offer premium content across borders.

Impacts on licensing costs: Option 1 is not expected to have any direct impact on licensing costs for broadcasters. To the extent that voluntary agreements could lead to multi-territorial licences, licence fees would be adjusted taking account of the audience in different territories.

Other service providers

Impacts on the competitive situation: Option 1 would encourage and facilitate discussions between broadcasters, rightholders and CMOs for the licensing of certain online rights, but it would not grant a special licensing regime to broadcasters. Therefore, it would not have any impact on the competitive situation between broadcasters and other service providers (who would be in a position to negotiate similar licensing schemes with CMOs and rightholders).

Rightholders

Impacts on licensing models and revenues: Option 1 would encourage rightholders to aggregate their rights with CMOs for the purpose of licensing broadcasters' online ancillary services; however it would not impose any licensing regime (e.g. mandatory collective management) and would not affect their contractual freedom.

Rightholders in the music sector are expected to support a further development of voluntary agreements with CMOs and broadcasters. It is not excluded, however, that rightholders may be reluctant to aggregate at CMOs certain rights (e.g. for catch-up services or music channels) in order to protect their revenues in the on-demand market.

Producers of AV works which are not distributed on the basis of exclusivity may see an interest in such agreements, as it could increase the exposure of their works and generate additional revenues. They could for example decide to transfer their online rights, for the purpose of licensing broadcasters' online ancillary services, to CMOs which currently manage their cable retransmission rights. Such arrangements based on collective management of rights are more likely to be developed for simulcasting than for catch-up services (rightholders may be more reluctant to license rights for catch-up through CMOs in order to optimise licensing of their on-demand rights).

Rightholders in the AV sector who rely on territorially based licensing models are likely to be very reluctant to engage in licensing practices based on aggregation of rights or multi-territorial licensing.

This option could encourage visual arts industry to enter into agreements with broadcasters based on the aggregation of their rights with CMOs, in particular those who already rely on the collective management of rights.

Consumers

Impacts on access to online transmission services: Depending on the feasibility and effective implementation of the voluntary agreements signed between rightholders and broadcasters, Option 1 could result in consumers having access across borders to more content through broadcasters' online ancillary services (in particular broadcasters' own productions ). Access to premium content through simulcasting or catch-up services would most likely remain geo-blocked.



Social impacts

Option 1 would not affect the production of new cultural content. It may have a limited positive impact on access to cultural diversity, if more TV and radio programmes from other MS are made available online.

Impacts on fundamental rights

Option 1 would not have any impact on copyright as property right. It may have a slight positive impact on the freedom of information, to the extent that it could facilitate cross-border access to information.

Option 2 – Application of country of origin to the clearing of rights for broadcasters' online services ancillary to their initial broadcast

Impacts on stakeholders 

Broadcasters

Impacts on transaction costs: This option would simplify the clearance of rights needed for cross-border online transmissions: broadcasters would only need to clear the rights for the country of origin while they would be able to offer their services in the entire EU. It would lead to important savings in transaction costs 105 and would also enable broadcasters to clear rights more swiftly, which is in particular important for time-sensitive programming. Such savings in transaction costs would be beneficial to both large broadcasters with large number of licensing contracts and to smaller broadcasters whose resources to carry out the administrative task associated with obtaining licences covering multiple territories are limited. However, Option 2 entails a limited risk of disaggregation of repertoire currently managed by CMOs (see below under 'impacts on rightholders'), which would have a negative effect on transaction costs (broadcasters would have to negotiate with individual rightholders instead of CMOs).

Impacts on possibilities to offer services across borders: While this option would facilitate clearance of rights, the ultimate outcome in terms of offering programmes across borders would depend on the business decisions by broadcasters and rightholders. Option 2 does not entail any obligation on broadcasters to provide services across borders (broadcasters could still decide to restrict the provision of the service to a particular MS), but it would open new opportunities for them to do so, in particular as concerns content which does not rely on territorial exclusivity. This in particular covers original productions of broadcasters for which they clear underlying rights. 106  Thanks to reduced transaction costs, broadcasters would be enabled to target new markets and enlarge their audiences. Such opportunities would in particular apply to broadcasters who transmit TV and radio programmes in languages which are widely understood in other MS. 37 % of Europeans say that they regularly use foreign languages when watching films/television or listening to the radio. 107 Also other broadcasters could expand their audiences, for example, by serving linguistic minorities in other MS or offering services to Europeans who live in other EU MS than their MS of origin. About 4 million EU citizens are members of linguistic minorities. 108 13.6 million EU citizens live in an EU MS other than their country of citizenship. 109  These people may have an interest to keep up with the developments in their linguistic/home country as well as maintain cultural links with that country and therefore would constitute a potential audience for broadcasters. By enlarging their audience across borders broadcasters would be able to collect additional revenues. 110  

As concerns premium AV content, it is not expected that Option 2 would change its cross-border distribution by broadcasters in a short or medium term. Rightholders and broadcasters are likely to continue relying on territorially based exploitation of this content (see below). Also, broadcasters may continue to geo-block premium AV content across borders. However, such agreements between rightholders and broadcasters would be subject to the application of EU and national law.

Impacts on licensing costs: Licence fees are expected to be an important element in broadcasters' decisions to make their programmes available across borders and in rightholders' decisions to grant licences. 111  If broadcaster's audience would grow due to cross-border transmission facilitated by the CoO rule, licence fees are expected to be adjusted (to reflect the larger audience). In accordance with this option licence fees should be set taking into account all aspects of the broadcast, including the actual audience, the potential audience and the language version. The feedback collected during the public consultation shows that setting licence fees for satellite transmissions under the CoO rule available across borders has not caused any substantial practical problems. Some respondents to the consultation pointed to difficulties with measuring the audience, a task which is significantly easier for online services.

Other service providers 

Impacts on the competitive situation: Option 2 would not significantly affect the on-demand services market because it would not apply to broadcasters' on-demand services, which are not ancillary to the initial broadcast. For example, if a broadcaster creates a VoD library, it would need to acquire rights according to the same rules as VoD service providers. Therefore, on-demand service providers would continue competing on an equal footing with broadcasters offering such services.

Yet, there may be a partial overlap between on-demand services (such as VoD) and broadcasters' online catch-up services, which in fact are on-demand services for a limited duration. 112 However, catch-up services do not constitute a complete substitute to VoD services as they are limited in time and are linked to the initial broadcast transmitted according to a schedule. Moreover, rightholders would be able to address this issue by negotiating with broadcasters limitations to catch-up services.

Other service providers than broadcasters, which transmit linear TV or radio-like channels only online (operators of webcasting services) would not benefit from Option 2. However neither would a broadcaster offering an online-only channel (webcast) and therefore such broadcasters would compete with such service providers on an equal basis.

Rightholders

Impacts on licensing models and revenues: The introduction of the country of origin would constitute a new constraint for rightholders when licensing their content to broadcasters for online transmissions. However, considering its scope of application (limited to online services by broadcasting organisations which are ancillary to the broadcast) and the fact that it does not restrict the contractual freedom of the parties, Option 2 is not expected to fundamentally disrupt the existing licensing models and the distribution of revenues between rightholders and broadcasters. Rightholders would remain free to determine whether granting a licence to broadcasters for online services such as simulcasting and catch-up services and could adapt the conditions of the licence in view of the application of the country of origin (e.g. for instance by defining the time in which the content may be available through catch-up services) as well as the licence fees. Furthermore, the introduction of the country of origin principle would on its own not affect the possibility for rightholders to agree with broadcasters on territorial limitations concerning the exploitation of their rights.

The impacts would vary by type of content, depending on the existing licensing practices:

Option 2 is not expected to impact the licensing of premium AV content (rightholders would be able to continue licensing their rights on a territorial basis, subject to the requirements of EU and national law). However, it could be beneficial to those AV rightholders whose productions attract smaller audiences and who do not rely on territorial exclusivity: the CoO rule would facilitate the possibility for broadcasters to make such content available across borders and could result in additional revenues for rightholders.

Option 2 is likely to have a concrete effect on how rights are licensed by rightholders who do not rely on a geographic distribution of their content, such as music and visual arts. This option may have a positive impact on their revenues thanks to a larger audience facilitated by the CoO rule. Rightholders are likely to adapt the licensing mechanisms to ensure that the revenues match the exploitation of their content (if this leads to a measureable increase in audience/revenues of that broadcaster). However, where the tariffs are already calculated on the basis of usage or the volume of audience, for example a percentage of broadcaster's revenues, no change to the contractual arrangements may be necessary. Moreover, in contrast with the "traditional" broadcasting, online distribution can offer accurate measurement of actual usage.

As regards the rights managed by CMOs, there is a risk that rightholders would like to exercise more control over the licensing of rights under the CoO rule and would decide to withdraw rights from CMOs. This could cause disaggregation of repertoires currently managed by CMOs. However, this risk is limited under Option 2, as the online services covered only concern ancillary services to the initial broadcast. Furthermore, the feedback received during the public consultation have not identified any concrete substantial risk that broadcasters would relocate their place of establishment due to the reasons linked to licensing of copyright and related rights. This is mainly due to the fact that broadcasters are generally established in the country where their main audience is located and rely on infrastructures which cannot be easily relocated. Therefore, this option would not create any substantial risks that the revenues of rightholders would suffer due to "establishment shopping" by broadcasters.

Consumers

Impacts on access to online transmission services: Option 2 is expected to result in consumers having access to more broadcasters' programmes across borders, especially to content which is distributed without territorial exclusivity. However, as this option would not oblige broadcasters to transmit TV and radio programmes across borders, the availability of their programmes to consumers would depend on a number of factors including agreements between broadcasters and rightholders (subject to applicable laws) and broadcasters' commercial decisions. As concerns premium AV content, restrictions to cross-border access may continue to apply, as explained above.

Impacts on consumer prices: The impact on prices would depend on broadcasters' business models and on their decision to make their online transmissions accessible on a cross-border basis for free (or on ad-financed basis) or for payment. The increased cross-border availability of broadcasters' online services could have an impact on consumers' decisions related to their consumption of TV programmes, e.g. on whether to take a package service (retransmission services) or not. As consumers would have more choice in terms of available programmes across borders, they may better structure their consumption depending on their needs.

Social impacts

Benefits may be expected in terms of enhanced access to information and cultural content, in particular news, current events and cultural programmes. As a result, consumers would be able to better satisfy their diversified interests for programmes originating from other MS, including cultural, educational (e.g. learning languages) and entertainment. This is in particular relevant for non-fiction content, which is less available to consumers through means other than broadcasters' programmes.

Impacts on fundamental rights

By establishing the licensing regime applicable to certain types of cross-border online transmissions, Option 2 would have a slightly negative impact on copyright as property right, limited by the targeted scope of the proposed intervention (broadcasters' online ancillary services). It would have a positive impact on the freedom of information, to the extent that this option would facilitate access to information.



Option 3 – Application of country of origin to the clearing of rights for the services covered by Option 2 and for TV and radio-like linear online transmissions (and services ancillary to such transmissions)

The core difference between Options 2 and 3 is that Option 3 also covers online linear TV and radio-like transmissions (webcasting services) 113  and online services ancillary to webcasting. The impacts discussed below are linked to these additional services. One general challenge in assessing impacts of this option is the fact that webcasting market (in the sense of online-only, linear TV or radio-like services) is at a development stage and not yet fully formed. As opposed to settled rules pertaining to broadcasting organisations, the acquis and national regulatory frameworks regarding webcasting services are only developing, including the very definition of these services.

Impacts on stakeholders 

Broadcasters

The impacts of Option 3 on broadcasters could in principle be comparable to the ones described under Option 2. In addition, broadcasters would be able to rely on the CoO rule for their webcasts. However, the higher risk of content disaggregation identified under Option 3 (see 'impacts on rightholders' below) is likely to have a negative impact on transaction costs (even if licensing would be required only for one territory, the number of individual transactions may increase) and undermine the effectiveness of Option 3 in terms of facilitation of licensing.

Webcasters

Option 3 would align webcasters' licensing regime to that of broadcasters. Webcasters could in principle save transaction costs for their online transmissions and have better possibilities to offer their services across borders in the same way as in the case of broadcasters described under Option 2. However, they may also be negatively affected by the risk of disaggregation of repertoire brought about by this option (see 'impacts on rightholders' below).

Other service providers 

Impacts on the competitive situation: Option 3 could substantially impact the competitive situation between service providers offering on-demand services (VoD, music on demand, which would not be covered under this option) and service providers offering webcasting services. Increasingly, webcasting services can directly compete with on-demand services. Especially over time, the boundary between on-demand services and online linear transmissions may be even more blurred. Services offered to consumers by new entrants have evolved: service providers such as Spotify and Deezer do not only offer on-demand services on the basis of catalogues but also online radio-like services, offering to consumers special programming (e.g. 'artist radio' or 'channels') which are often partly interactive (e.g. the subscriber may influence the transmission by indicating his or her preferences and dislikes). Similar services are being developed by platforms such as YouTube. With these new models emerging, it becomes more difficult to distinguish what constitutes an online linear transmission and an on-demand service. Therefore, Option 3 could create a grey area, where it would not be clear whether certain online services would be covered by the legal intervention or not. As a result, it would not provide to the market players the necessary legal certainty nor would it ensure an even competitive situation.

Furthermore, online service providers can relocate their services more easily than traditional broadcasters and therefore they can gain a competitive advantage over broadcasters by relocating their establishment to a jurisdiction with lower copyright fees.

Rightholders

Impacts on licensing models and revenues: Under Option 3, the application of the CoO rule to webcasters could lead to new forms of content exploitation (e.g. similar to near on-demand services) which would be fundamentally different from broadcasters' online ancillary services. For example, it is possible to imagine linear streaming services providing access to a limited range of content (one or several films, one or several recordings) in a near on-demand manner over certain period of time - such services would be competing with on-demand services (where the latter would not be able to rely on the CoO rule).

Option 3 would generate market uncertainty for rightholders and significantly increase the risk of content disaggregation of rights currently held by CMOs. As mentioned above, it is easy for online operators to relocate their establishment in the EU, for instance in order to lower fees paid to rightholders or for reasons not related to copyright (e.g. taxes or the regulatory regime). The risk of "establishment shopping" would in particular apply when rights are managed by CMOs (especially music). As rightholders cannot directly control the tariffs fixed by CMOs for the licensing of rights, there is a risk that service providers, who heavily rely on music content, would establish in territories with lower tariffs. 114   Thus it could encourage "race to the bottom" in terms of copyright fees. This would be detrimental to rightholders and could trigger withdrawal of their rights from local CMOs in order to protect their revenues. Also, as the application of the CoO principle to a market which is not yet fully formed and where boundaries with on-demand (such as VoD) services are not clearly delineated would be likely to drive rightholders to withdraw rights from CMOs in order to exercise more control over the licensing. 115  As a result, this could lead to disaggregation of repertoires managed by CMOs, contrary to the objective of the CRM Directive. 

Consumers

Impacts on access to online transmission services: Impacts on consumers would depend on the effects that this option would have in the effective facilitation of licensing. In addition to the positive impacts mentioned under Option 2, consumers could benefit from cross-border access to webcasting services, notably with regard to content distributed without territorial exclusivity. However, due to a risk of negative impact on broadcasters' transaction costs explained above, there is a risk that the impact on consumers may be negative.

Impacts on consumer prices: would be similar to the impacts described under Option 2, as long as this option leads to more availability of cross-border services.

Social impacts

The risks associated with Option 3 may result in this option, as explained above, having a neutral or even negative impact on the distribution of and access to cultural content.

Impacts on fundamental rights

Because it would impose a licensing regime for cross-border transmissions to a wider range of services (compared to Option 2), Option 3 would negatively affect copyright as property right. Its impact on the freedom of information would depend on the extent to which this option would facilitate access to information.

3.2.2.4.    How do the options compare?

Option

Effectiveness

Efficiency

Impact on stakeholders

Social impacts and fundamental rights

Baseline

(0) Limited availability of TV and radio programmes across borders would persist

(0) No direct costs associated with the baseline option

(0) Impacts on stakeholders would depend on developments in the licensing market

(0) No direct impact on cultural diversity

(0) No direct impact on fundamental rights

Option 1 – Voluntary agreements to facilitate the clearing of rights for broadcasters' online services ancillary to their broadcasts

(0/+) Would enhance access to broadcasters online transmissions across borders to a limited extent

(0/-) Possible one-off costs linked to negotiation of voluntary agreements but expected to be limited

(0/+) Limited reduction of transaction costs for broadcasters due to the possibilities of aggregation of rights; better opportunities to offer their online services across borders

(0) Neutral impact on other service providers

(0/+) Impacts on revenues of rightholders expected to be neutral or adjusted according to the usage

(0/+) Limited improvement to cross-border availability of content for consumers

(0/+) Limited positive impact on cultural diversity

(0) Neutral impact on the right of property

(0/+) Limited positive impact on the freedom to information

Option 2 – Application of country of origin to the clearing of rights for broadcasters' online services ancillary to their initial broadcast

(+) Would enhance access to broadcasters online transmissions across borders

(0/-) Possible one-off costs linked to renegotiation of contracts

(+) Reduced transaction costs for broadcasters due to simplified clearance of rights; wider opportunities to offer their online services across borders

(0/-) Neutral or marginal negative impact on other service providers

(0/+) Impacts on revenues of rightholders expected to be neutral or adjusted according to the usage

(+) Improved cross-border availability of content for consumers

(+) Positive impact on access to information and cultural content

(-/0) Limited negative impact on the right of property

(+) Positive impact on the freedom of information

Option 3 – Application of country of origin to the clearing of rights for the services covered by Option 2 and for TV and radio-like linear online transmissions (and services ancillary to such transmissions)

(-) Market uncertainty and risk of disaggregation of repertoire may hamper the effectiveness of the Option

(-) Possible high compliance costs linked to the risk of disaggregation of repertoire

(+/-) Simplified clearance of rights applying to webcasts but risk of negative impact on transaction costs

(-) Legal uncertainty on the application of the CoO rule to certain online services

(-) Impacts on protection of rightholders interests expected to be negative due to the risks of "establishment shopping"

(0/-) Risk of no effect (or negative effect) on cross-border availability of content for consumers

(0/-) Risk of negative impact on access to cultural content

(-) Negative impact on the right of property

(0/-) Risk of negative impact on the freedom of information

Option 2 is the preferred option, as it facilitates cross-border transmission of broadcasters' TV and radio programmes online, while preserving a balanced landscape taking into account the interests of rightholders. The baseline option would not allow reaching the objectives identified in this IA. Option 1 could enhance online and cross-border access to some of the broadcasters' programmes but its outcome would be more uncertain than the one of Option 2. While Option 3 seems more 'technologically neutral' than Option 2, it is likely to create legal uncertainty as it would be very difficult to draw the boundary between services covered by the intervention and not (i.e. on-demand services), in particular in a future-proof manner. It also entails risks of establishment shopping and may lead to a fragmentation of rights (notably those managed by CMOs).

Option 2 will not impose any administrative burden on MS; it will require the application in the MS copyright system of specific rules for the licensing of rights for the services covered by this option.

3.2.3.Digital retransmissions of TV and radio programmes

3.2.3.1.    What is the problem and why is it a problem?

Problem: Providers of retransmission services face practical difficulties with the acquisition of rights for retransmission of TV and radio channels from other Member States by means other than cable

Description of the problem: Nowadays TV and radio channels reach viewers and listeners through several types of retransmission service providers: cable TV/radio providers, satellite TV/radio (package) providers, IPTV (TV/radio over closed circuit IP-based networks) providers, digital terrestrial TV (DTT) providers and also the emerging over-the-top (OTT) TV/radio service providers. 117 The core business activity of retransmission service providers is to aggregate TV and radio channels into packages (basic, premium, thematic, etc.) and to provide them to consumers simultaneously to their initial transmission, unaltered and unabridged, typically against payment.

Retransmission of TV and radio channels has proved to be a highly successful means to enable Europeans to access broadcasts from other MS: e.g. 177 "foreign" TV channels are available to cable subscribers in DE, 150 in FR, 158 in NL, 143 in PT, 163 in DK, 159 in PL, 168 in IE and 232 in HU. 118

IPTV and OTT have been developing at a fast pace recently, which is explained by several technological and business factors: (i) IPTV and OTT have superior retransmission capacity; (ii) they are more attractive to consumers due to built-in interactivity of services and can be enjoyed (in the case of OTT) without the need for a dedicated hardware (such as a set-top-box and/or a satellite antenna); (iii) they are well promoted by numerous operators and major Internet platforms.

When distributing TV and radio channels and programmes running on them, retransmission service providers routinely engage in a copyright-relevant act of communication to the public.

The Satellite and Cable Directive provides for a system of mandatory collective management for retransmissions by cable of TV and radio broadcasts from another MS. This means that the right of cable retransmission with regard to TV / radio broadcasts from other MS cannot be exercised by rightholders individually but may only be exercised by a collective CMO 119 . The only exception is made for the rights exercised by broadcasting organisations in respect of their own transmissions.

The rationale behind this system is to ensure that cable operators are in a position to acquire all rights necessary for retransmission of TV and radio channels and that there are no black-outs in the retransmitted channels or programmes. At the time of adoption of the Directive it was considered that individual licensing was impractical in the case of retransmission, while voluntary collective management would not guarantee the absence of black-outs. 120 The system provided for in the Satellite and Cable Directive is limited to retransmissions by cable and therefore does not extend to retransmissions by other means such as IPTV or OTT. This means that, depending on the MS (see below), providers of retransmission services by means other than cable cannot benefit from the system facilitating the clearance of relevant rights.  121 Such providers therefore face a heavy rights clearing burden in order to be able to provide their services.

Drivers: [Complex clearance of rights] Taking into account that each channel delivers numerous programmes composed of a multitude of copyright-protected works, that a typical retransmission service provider offers multiple channels, that the retransmission service provider has no control over the use of works in particular channels and no time to obtain licences for those works, the potential copyright clearing burden for retransmission service providers is important.

Example:

Belgian IPTV provider Proximus offers around 100 TV channels in its basic package, among them a channel of ZDF, German broadcaster. ZDF handles approximately 70,000 contracts with rightholders each year. 122 Since ZDF has 9 generalist and thematic channels in total, 123 each channel can be said to represent (approximately) the "copyright clearing burden" of 7,700 contracts. Extrapolating this "copyright clearing burden" to 100 TV channels offered by Proximus and considering that 15 of these channels are retransmitted in both standard and high-definition quality, the potential copyright clearing burden for Proximus can be estimated at approximately 650,000 contracts per year ((100-15)x7,700).

In other words, providers of retransmission services offered on satellite, IPTV, mobile, DTT or OTT platforms face the same problems the cable operators once faced, in particular when they retransmit TV and radio broadcasts from other MS.

The problems are mitigated (but not solved) by the practice of some broadcasters whereby they aggregate retransmission rights from other rights holders (e.g. AV producers) and grant the "all-rights-included" licences 124 to retransmission service providers.

The licensing problems described above mainly concern TV. They affect radio retransmission to a much lesser extent, since (i) radio broadcasts contain fewer types of works protected by copyright (notably, no images or AV works) and (ii) there are well established collective management structures for the main type of copyright-protected work used in radio broadcasts, i.e. music, which makes it easier for the retransmission services other than cable to obtain the required retransmission licences.

[Legal or practical solutions available only in certain MS] Legislation in some MS have considered retransmissions over "closed" 125 electronic communications networks (e.g. Slovakia, Austria) or over a particular network (e.g. DTT in IE) as equivalent to cable (and hence under the mandatory collective management system).

In some MS, in addition to the mandatory collective management implemented for cable retransmission, voluntary collective licensing schemes are in place to license other retransmission services: e.g. IPTV in IE, NL, FR, PL, BE, DE and ES or satellite in FR and PL. Certain MS (DK, FI, SE) have in place extended collective licensing systems for retransmissions by all technical means (cable, satellite, DTT, IPTV, mobile or OTT). Annex 7A provides a full overview of the licensing facilitation regimes available in MS for retransmissions by means other than cable.

Finally, in some MS (e.g. EL, EE, HR, LV, LU, RO) there are neither legal nor practical solutions facilitating licensing of retransmission of TV and radio broadcasts by means other than cable. In these MS the providers of such other retransmission services have to rely on multiple licensing tools: the "all-rights-included" licences from broadcasters, collective licensing (only in the content sectors where it is available, mainly music) and individual licensing (notably by rightholders of AV works).

[Commercial decisions] Apart from the licensing difficulties, the choices of digital retransmission service providers when it comes to including or not TV / radio channels into the packages provided to consumers are driven by these two factors: (i) the perceived demand by a typical audience in a particular territory (in practice IPTV services often follow the patterns established by cable TV) and (ii) the fees charged by the respective broadcasters.

Consequence: The lack of mechanisms facilitating the licensing of rights for retransmission services using means other than cable leads to a limited access to TV and radio channels from other MS (as the offer of such channels is limited). A comparison of the total number of TV channels (from other MS) available through cable retransmission with the total number of TV channels (from other MS) available through IPTV retransmission in 10 EU MS (DE, HU, IE, PL, NL, DK, SE, UK, ES and FR) 126 has shown that there are more TV channels (from other MS) on cable TV than IPTV in all but 1 MS (FR).

How the problem would evolve: The fragmentation of rules applying to the clearance of rights for retransmissions by means other than cable is likely to become more problematic with the uptake of IPTV retransmission services in the coming years, expected to account for 16% of EU 28 TV households in 2020 (up from 13 % in 2015). 127 The extent of use of cable retransmission services and satellite transmission / retransmission services is forecast to decline or remain stable.



Pay TV subscriptions for EU28 to 2020

Source: Digital TV Research , Global Pay TV Operator Forecasts 2015, October 2015
*Data not available for Cyprus and Luxembourg

3.2.3.2.    What are the various options to achieve the objectives?

Non-regulatory options are not considered because they would not be sufficient to achieve the objectives. Their effectiveness would be similar to the baseline scenario, and they would not provide the necessary degree of legal certainty.

Baseline

No policy intervention. This option would mean relying on the market players - rightholders, including CMOs, and retransmission service providers - to work out and agree on the appropriate licensing arrangements and/or relying on the MS to establish the appropriate licensing facilitation mechanisms.

Stakeholders' views 128

While most of individual rightholders and commercial broadcasters support this option, consumer representatives, CMOs, public service broadcasters, 129 cable and telecoms operators consider that it cannot solve the identified problems as only legislative intervention can ensure that retransmission service providers are in a position to acquire all necessary rights.

Option 1 - Mandatory collective management of rights to retransmission of TV / radio broadcasts by means of IPTV and other retransmission services provided over "closed" electronic communications networks

Option 1 would introduce mandatory collective management for simultaneous, unaltered and unabridged retransmission of TV / radio broadcasts by IPTV retransmission services and other retransmission services provided over "closed" electronic communications networks. 130

As a result, Option 1 would concern IPTV 131 and other retransmission services (satellite, mobile, DTT) that can only be accessed by a consumer through an electronic communications network, dedicated fully or partially to the retransmission service (as opposed to access through "open" Internet / any electronic communications network giving access to the Internet).

Option 1 would concern retransmission of TV / radio broadcasts originating in other MS.

Just as in the case of the cable retransmission regime, broadcasters would be able to directly license to the retransmission service providers concerned the rights exercised by them in respect of their own broadcasts, irrespective of whether the rights concerned are broadcasters' own or have been transferred to them by other copyright owners and/or holders of related rights.

As a result, the retransmission service providers concerned would have to obtain licences only from two categories of rightholders - broadcasters and CMOs.

Stakeholders' views

Most rightholders - phonogram producers, music publishers and many AV producers – as well as commercial broadcasters are against this option due to the potential disruptive effect on the markets, which, according to them, function well. Cable and telecoms operators, consumer representatives, CMOs and public service broadcasters tend to be in favour of the possible application of the mandatory collective management regime to IPTV / other retransmission services provided over "closed" electronic communications networks and consider that it could improve the availability of TV / radio broadcasts across Europe.

Option 2 – Mandatory collective management of rights to retransmission of TV / radio broadcasts by means of any retransmission services, irrespective of the retransmission technology or network used, as long as they are provided to a defined number of users (subscribers, registered users)

The main elements of Option 2 are the same as those of Option 1 except that Option 2 would introduce mandatory collective management for a wider range of retransmission services.

In particular, Option 2 would also apply to OTT retransmission services, as long as they are provided to a defined number of users (subscribers, registered users). It would not cover the OTT retransmission services which do not require subscription or registration (and typically rely on business models, e.g. advertising-based, that are different from most other retransmission services).

Stakeholders' views

They are the same as on Option 1, though many supporters of the application of the mandatory collective management regime to the retransmission services other than cable (most of CMOs and public service broadcasters, some cable / telecoms operators) emphasise that such application should be limited to the retransmission services provided over closed networks / in closed environments and/or functioning in a territorially-limited way.

3.2.3.3    What are the impacts of the different policy options and who will be affected?

Approach

The options described above would affect retransmission service providers, consumers and rightholders - individual rightholders whose works are used in TV and radio broadcasts, CMOs and broadcasters. The impacts affecting these groups of stakeholders are presented separately.

For retransmission service providers, the following economic impacts have been considered: impacts on the variety and quality of TV / radio retransmission services, on costs (transaction costs linked to clearing of rights and licensing costs linked to fees paid to rightholders) and on competitiveness.

For rightholders, the main economic impacts considered are on the management of rights and on licensing revenues (with a particular focus on the impacts in the AV industry, given the specificity of this industry - its reliance on the business / distribution models based on territorial exclusivity).

For consumers, the main impact areas considered are the choice of retransmission services and prices of services.

The assessment below is mainly qualitative, as the publicly available data or data that could be obtained from stakeholders on the licensing practices and transaction / licensing costs is limited.

Baseline

Impacts on stakeholders

Retransmission service providers

Impacts on the variety and quality of TV / radio retransmission services: The legal uncertainty as to whether all rights relevant for the retransmission have been cleared faced by the retransmission service providers other than cable is expected to persist under the baseline option. As a result, those service providers can be expected to continue limiting their retransmission offers. Moreover, in view of the legal uncertainty, some market players might hesitate to launch innovative retransmission services or delay the launch in order to deal with licensing.

Impacts on costs of retransmission service providers: The baseline option would not have any direct impacts on costs. But neither would it alleviate the additional transaction cost burden for the retransmission service providers other than cable, resulting from the fact that they have to obtain licences not only from broadcasters and CMOs (like cable operators), but also from all the rightholders who have chosen to exercise their rights individually rather than transferring them to a broadcaster or mandating a CMO.

The impacts described above could be eliminated or mitigated in some MS, notably those in which the collective management regime already applies, as a result of national law (mandatory / extended collective management) or practical arrangements by the market players (voluntary collective management), to retransmission services other than cable or might become applicable to them in the future. 132

However, these solutions have led and are likely to continue leading to (i) lack of legal certainty in the market; (ii) fragmentation across the EU (different retransmission services falling within the scope of different licensing facilitation solutions in different MS) and (iii) significant time gaps between the emergence of an innovative retransmission service and the application of licensing facilitation mechanisms to it, if at all.

Rightholders

Impacts on licensing revenues: Under the baseline option, the ability of rightholders to generate revenues from the retransmission services other than cable would continue to vary depending on several factors: (i) whether a particular type of retransmission service falls within the scope of (mandatory or voluntary) collective management arrangements in a particular MS; (ii) the relative size of the right holder and his capacity to manage a network of licensing deals with numerous foreign retransmission service providers as well as the extent to which the right holder transfers his retransmission rights to broadcasters; (iii) the extent to which the providers of retransmission services other than cable actually enter into licensing deals with those rightholders who choose to exercise their rights individually or, on the contrary, rely on the "all-rights-included" licences granted by broadcasters.

Consumers

Impacts on the choice and prices of retransmission services: In the scenario of no policy intervention, consumers could continue facing a sub-optimal market offer of TV / radio retransmission services. In particular, as explained above, the choice of channels is expected to be more limited than it could be if a clear legal framework facilitating licensing was in place for the different retransmission services. Consumers could be paying a higher subscription price due to a lesser choice of retransmission services than the one resulting from the situation of effective competition between a variety of existing market players and new entrants. However, as there are more elements that affect prices (e.g. whether premium or non-premium content is included, whether the service is bundled with other services), the concrete impact on the prices is difficult to predict.

Social impacts 

The access to a wide range of TV / radio channels is an important element to promote cultural diversity, media pluralism and to respond to social and cultural needs of EU citizens. The baseline option is not expected to contribute to these objectives.

Impacts on fundamental rights

This option would not have any impact on copyright as a property right (Article 17 of the Charter) or the freedom to conduct a business (Article 16), as it would not expand the scope of the mandatory collective management.

Option 1 – Mandatory collective management of rights to retransmission of TV / radio broadcasts by means of IPTV and other retransmission services provided over "closed" electronic communications networks

Impacts on stakeholders

Retransmission service providers

Impacts on the variety and quality of TV / radio retransmission services: Option 1 would enhance the level of legal certainty for the benefit of a specific category of retransmission services - those provided over "closed" electronic communications networks - and can be expected to contribute to a better offer of such services, depending on market situations in particular MS. It could also be an incentive for the retransmission service providers concerned to expand the range of TV / radio channels offered to their subscribers. The actual impact of Option 1 in the different MS would depend on whether collective management regime already applies to IPTV and other similar services as a result of national law or practical arrangements by the market players.

Impacts on costs of retransmission service providers:

Transaction costs: this option is expected to reduce the transaction costs linked to the clearance of rights for the retransmission services provided over "closed" electronic communications networks, in particular in MS where the collective management of right does not apply to this type of retransmission services. Providers of the services concerned would only need to deal with two licensing "sources" - broadcasters and CMOs.

The extent of reduction would depend on the market practices prevailing currently in the different MS, in particular: (i) whether different categories of individual rightholders usually transfer retransmission rights to producers and/or broadcasters and whether broadcasters grant the service providers concerned the "all-rights-included" licences; (ii) the set up and practices of collective management organisations (e.g. even without a mandatory collective management regime applying to them, IPTV providers are usually licensed by the music sector CMOs; it is not excluded that, upon the introduction of mandatory collective management, they might need to obtain licences from additional CMOs, e.g. those representing film producers, notably in the scenario where film producers' retransmission rights cannot be cleared with broadcasters as part of the "all-rights-included" licences).

Licensing costs: due to the confidentiality of information concerning specific licence fees it is not possible to draw conclusions regarding the impacts of Option 1 in this regard.

Impacts on competitiveness: It could be argued that Option 1 would benefit a specific category of retransmission services - those provided over "closed" electronic communications networks - and that other retransmission services (OTT) would be subject to a less favourable licensing regime, resulting potentially in a competitive disadvantage for them. However, due to the experimental / niche nature of OTT retransmission services, it is questionable whether they are equivalent to retransmissions over "closed" electronic communications networks.

Rightholders

Impacts on the management of rights: Option 1 would imply a shift from individual licensing to collective management of rights for retransmissions over IPTV and closed networks. Considering that mandatory collective management already applies to cable retransmissions, Option 1 would mainly constitute an incremental change for rightholders. Furthermore, as explained above, the collective management of rights for these types of retransmissions is already in place in a number of MS (on the basis of legal mechanisms or market practices). In other MS, the shift to mandatory collective management may limit the rightholders' ability to determine licensing conditions and fees (see below).

The compliance costs would be marginal as the same network of CMOs which is used to license rights to cable retransmissions could be used (and actually is already used in some MS) to license rights to retransmissions by means other than cable.

Impacts on licensing revenues: Overall, since Option 1 is expected to help increase the number of the retransmission services provided over "closed" electronic communications networks as well as the number of TV / radio channels they offer, it is likely to generate additional licensing opportunities for the rightholders and have a positive impact on their licensing revenues.

As regards individual rightholders, Option 1 would have no direct impact on the licensing revenues of those individual rightholders whose retransmission rights are already managed by CMOs as a result of national law or practical arrangements by the market players (voluntary collective licensing). In particular, when collective management is a standard practice in the music sector (for authors' rights and, often, producers' rights), Option 1 is not expected to lead to a change in licence fees and, consequently, licensing revenues.

Option 1 may have an impact on the licensing revenues of the individual rightholders (e.g. AV producers) whose retransmission rights are not currently managed by CMOs and this impact may differ depending on the relative size of the right holder and his capacity to manage a network of licensing deals with numerous foreign retransmission service providers. On the one hand, a relatively big right holder (e.g. a major US film studio, a large record label) with resources to manage numerous licensing deals might be able to earn more from direct licensing of retransmission rights to retransmission service providers compared to the revenues stemming from the mandatory collective management. Such rightholders may prefer to retain control over licence fees and other licence terms. Due to the confidentiality of information concerning specific licence fees it is not possible to draw concrete conclusions regarding the extent of a change between individual licensing and collective management in licensing revenues. On the other hand, a relatively small right holder (e.g. AV script writer) might not be getting revenue from the retransmission rights at all and, therefore, would benefit from the introduction of mandatory collective management. Despite these benefits, especially for smaller rightholders, most of rightholders who responded to the public consultation indicate that they are against this option due to the potential disruptive effect on the markets.

Option 1 is also expected to have a positive impact on the licensing revenues of broadcasters: even if their rights would be excluded from the mandatory collective management regime, just as in the case of cable retransmission, it would be easier for broadcasters to have their programmes exploited abroad without having to clear themselves the underlying rights of other rightholders for the countries concerned.

Option 1 is not expected to affect the territory-by-territory content financing and distribution models of AV rightholders, notably because most of the retransmission services provided over "closed" electronic communications networks rely on the infrastructures located in the territory of a particular MS.

As regards CMOs, Option 1 would have a positive impact on them (e.g. on CMOs representing AV producers for the purpose of cable retransmission), as it would allow them to grant retransmission licences to and obtain licensing revenue from additional types of retransmission service providers – IPTV, mobile, satellite and DTT. The extent of the impact would depend on the number of licences granted to such providers and the licence fees paid by them, but a positive factor in this respect is that CMOs could extend their licensing activities at a low cost by applying the existing cable licensing arrangements. One-off compliance costs linked to extending these licensing agreements to new retransmission service providers could occur but they are expected to be limited.

Consumers

Impacts on the choice and prices of retransmission services: Option 1 is expected to play an important role in facilitating the launch of new services, and thus enabling consumers to have a better choice of different retransmission services (these include IPTV which is predicted to grow, but also e.g. satellite retransmission services). Easier copyright clearing mechanism could also result in consumers being able to watch / listen to a greater variety of TV / radio channels from other MS, e.g. those tailored to specific preferences of particular groups of consumers. This, in turn, could lead to more intense competition between different retransmission services and, potentially, lower prices for consumers. However, as there are more elements that affect the decision by operators to launch new services and their prices (e.g. whether premium or non-premium content is included, whether the service is bundled with other services), the concrete impact on the prices is difficult to predict.



Social impacts

Option 1 is expected to contribute to promoting cultural diversity, media pluralism and to respond to social and cultural needs of EU citizens by putting in place a legal framework enabling access to a wider range of TV / radio channels. 

Impacts on fundamental rights

Since Option 1 would expand the scope of the mandatory collective management and, therefore, limit the licensing choices of the rightholders, it would have an impact (a limited one, due to its scope of application) on copyright as a property right (Article 17 of the Charter) and on the freedom to conduct a business (Article 16). However, Option 1 would have a positive impact on the freedom of information (Article 11 of the Charter).

Option 2 – Mandatory collective management of rights to retransmission of TV / radio broadcasts by means of any retransmission services, irrespective of the retransmission technology or network used, as long as they are provided to a defined number of users (subscribers, registered users)

Impacts on stakeholders

Retransmission service providers

Impacts on the variety and quality of TV / radio retransmission services: Option 2 would enhance the level of legal certainty for the benefit of a wide range of retransmission services - IPTV, OTT, satellite, DTT, mobile - and can be expected to both (i) contribute to a greater variety of such services and (ii) provide an incentive to the retransmission service providers to expand the range of TV / radio channels offered to their subscribers.

Impacts on costs of retransmission service providers:

Transaction costs: this option is expected to reduce the transaction costs linked to the clearance of retransmission rights in the same way as Option 1.

Licensing costs: As in Option 1.

Impacts on competitiveness: Option 2 would benefit different types of retransmission services but could be seen as creating a competitive distortion between OTT services, depending on their business models (OTT retransmission services which do not have subscribers or registered users and rely on advertising would not benefit from the facilitation of rights clearance).

Rightholders

Impacts on the management of rights: The effects of the wider scope of Option 2 compared to Option 1 (OTT retransmission services covered) are difficult to assess due to the experimental / niche nature of those retransmission services. However, Option 2 may negatively affect rightholders that rely on individual or voluntary collective management of their rights and for which it is important to control the online retransmission of their content (notably, but not only, the AV industry). As explained in Option 1, big rightholders may prefer to retain control over licence fees and other licence terms. Given the importance, the experimental/niche nature of the OTT market and its potential large scale, the preference for control over the licensing of rights to OTT retransmission is stronger than in the case of retransmissions over "closed" networks.

The OTT retransmission services are by their very nature not firmly linked to a particular territory, and their ability to ensure a controlled environment is limited if compared e.g. to cable or IPTV (which are normally limited to national or regional territories). Also, content delivered over the open internet can be more easily intercepted than content delivered over "closed" networks such as IPTV. 133 Finally, as such services are not linked to any particular infrastructure, their number can potentially be very high.

Impacts on licensing revenues: As Option 2 would extend to a wide variety of retransmission services (notably OTT) it could pose a risk that rightholders would not always be able to choose the optimum business strategies in order to obtain the return on investment made. This risk is especially relevant for retransmissions via OTT services. In particular, the same content could be made available in a territory at the same time through different services, as a result of right holder's exclusive distribution deals as well as retransmission of foreign TV channels (for example, a premium TV series being available at the same time through a Subscription VoD (SVoD) service and through an online service retransmitting foreign channels). This in principle is not different from Option 1 but the impact of such cases could be much greater given the cross-border nature of OTT services, their potential big scale (as they are not linked to any particular infrastructure), the fact that they have a more limited ability to ensure that consumers from other territories will not be able to access the service and the fact that OTT services are more prone to illegal interception. This could reduce the value of exclusive distribution deals based on different windows of exploitation and undermine the territory-by-territory distribution strategies. Due to the possible overlap between different windows (pay TV, VoD, SVoD and free TV) rightholders may become reluctant to license their content for the free window, since such content could be retransmitted online in other MS through mandatory collective management.

As regards CMOs, Option 2 is likely to have a positive impact on them (e.g. on CMOs representing AV producers for the purpose of cable retransmission), as it would allow them to grant retransmission licences to and obtain licensing revenue from a wider range and greater number of retransmission service providers (at a low cost - by applying the cable licensing arrangements).

Consumers

Impacts on the choice and prices of retransmission services: Just as Option 1, this option is expected to contribute to more intense competition between different retransmission services and a greater choice of TV / radio channels from other MS and hence, potentially, to lower prices for consumers. However, the risk of overlap between different windows of exploitation mentioned above may result in less premium content being available through free-to-air TV.

Social impacts

Option 2 is expected to promote cultural diversity, media pluralism and to respond to social and cultural needs of EU citizens by putting in place a legal framework enabling access to a wider range of TV / radio channels. The possible impact in terms of licensing of premium content to free-to-air broadcasters may nevertheless negatively affect the access to cultural diversity and in turn have a negative effect regarding addressing social and cultural needs of EU citizens.

Impacts on fundamental rights

Since Option 2 would expand the scope of the mandatory collective management and, therefore, limit the licensing choices of the rightholders, it would have a significant impact on copyright as a property right (Article 17 of the Charter) and on the freedom to conduct a business (Article 16). However, Option 2 could have a positive impact on the freedom of information (Article 11 of the Charter) depending on the willingness of rightholders to license their content for the free window.

3.2.3.4.    How do the options compare?

Option

Effectiveness

Efficiency

Impact on stakeholders

Social impacts and fundamental rights

Baseline

(0/-) Sub-optimal availability of TV and radio broadcasts from other MS on different retransmission services

(0) No direct costs

(0) Impacts on stakeholders would depend on market developments

(0) No direct impact on cultural diversity

(0) No direct impact on fundamental rights

Option 1 – Mandatory collective management of rights to retransmission of TV / radio broadcasts by means of IPTV and other retransmission services provided over "closed" electronic communications networks

(+) Would enhance the availability of different retransmission services and TV / radio broadcasts from other MS

(0/-) Possible one-off costs linked to concluding licensing agreements between retransmission service providers and CMOs, but expected to be limited

(+) Reduced transaction costs for retransmission service providers

(0/+) More licensing revenue for those individual rightholders that do not have the possibility to license rights individually (especially small) and CMOs

(+) Better choice of different retransmission services and TV / radio broadcasts from other MS for consumers

(+) Positive impact on cultural diversity

(0/-) Limited negative impact on the property right

(+) Positive impact on the freedom of information

Option 2 – Mandatory collective management of rights to retransmission of TV / radio broadcasts by means of any retransmission services, irrespective of the retransmission technology or network used, as long as they are provided to a defined number of users (subscribers, registered users

(+) Would enhance the availability of different retransmission services and TV / radio broadcasts from other MS

(0/-) Possible one-off costs linked to concluding licensing agreements between retransmission service providers and CMOs, but expected to be limited

(+) Reduced transaction costs for retransmission service providers, including certain types of OTT

(-) Risk of undermining rightholders' exclusive online rights and distribution strategies, leading to a reduction of licensing revenue

(+/-) Better choice of different retransmission services and TV / radio broadcasts from other MS for consumers, but risk of limited availability of premium content through free-to-air TV

(+/-) Positive impact in terms of access to a variety of channels may be undermined by the reduced availability of premium content on free-to-air TV

(-) Negative impact on the property right

(0/+)Moderately positive impact on the freedom of information

Option 1 is the preferred option, as it would enhance the availability of different retransmission services and TV / radio broadcasts from other MS, while limiting the impacts on rightholders. By contrast, the baseline option would not allow reaching the objectives identified in this IA and Option 2 entails risks for rightholders in terms of distribution strategies and licensing revenues, which may affect the availability of content for consumers.

Proportionality of the preferred option and impacts in MS: Option 1 is a proportionate intervention to the objective of enhancing access to retransmission services and to TV and radio programmes from other MS. It affects the licensing choices of rightholders in a limited manner, by extending the mandatory collective management of rights only to certain types of retransmission services provided over closed networks. The impacts of Option 1 on copyright as a property right would be justified in view of the Treaty fundamental freedom to provide and receive services.

Option 1 would require limited changes in a number of MS, where legal or practical solutions are already in place to facilitate licensing of retransmission of TV and radio broadcasts by means other than cable. The impact of Option 1 would be stronger in other MS, where such solutions do not yet exist.

3.3.Access to and availability of EU audiovisual works on VoD platforms

3.3.1.What is the problem and why is it a problem?

Problem: Access to and availability of EU audiovisual works on VoD platforms is still limited.

Description of the problem: The on-demand market of audiovisual works 134 is becoming increasingly important. Consumers' spending on digital video increased by 42.8 % in 2013 and reached a total of 1.97 billion. 135 The SvoD market evolves more rapidly than other VoD markets. The revenues of the SVoD market have grown from 40.7 million to 844 million between 2011 and 2014. 136  The number of VoD services in Europe is also increasing, with around 2,000 services in Europe. 137 It is expected that the VoD market will continue to increase significantly in the 5-10 next years. 138  However, access and availability of EU AV works on VoD platforms remain limited. At EU level, only 47 % of EU films released in cinemas between 2005 and 2014 are available on at least one VoD service. 139  All works are not equally affected by the limited online availability: small productions are more affected than big productions that benefited a theatrical release and promotion efforts. Apart from classical works, old works are less available than new ones. 140 The type of VoD also has an influence on the availability of works: works are more often and quickly available on TVoD (in particular EST), than on SVoD. This is generally due to the release windows system, in which SVoD comes last. 141  Finally, the offer on VoD platforms greatly varies from one MS to another and European AV works are not often available on platforms outside their home country. For instance, a recent study shows that EU films are in average available on VoD in only 2.8 countries. 142

VoD platforms are likely to become essential in terms of access to AV works. 143 Therefore it is necessary that EU AV works benefit from this new channel of distribution. Moreover, this also constitutes an opportunity to develop legal offer that could help fighting piracy. 144

Several reasons related to the licensing of online rights contribute to limit availability of European AV works on VoD platforms.

Drivers: 

145 146 147 148 [Difficulties in the acquisition of rights] A first important difficulty derives from, contractual blockages generally linked to licensing practices based on exclusivity of exploitation rights and on the release windows system. They limit the online availability of AV works on VoD platforms. A typical situation is where all the rights (including VoD rights) to a specific work have been granted on an exclusive basis to an entity who is not interested in the online exploitation of the work (e.g. a broadcaster to whom exclusivity was granted as a counterpart for the financing of the work). Another situation is when a right holder decides to hold back online rights as long as the rights for a theatrical release have not been licensed, in order to keep open its chances to get the highest revenues. Some rightholders want indeed to keep maximum flexibility as regards exploitation rights, even if this leads to no exploitation on VoD platforms. In those cases, the online exploitation of the work remains blocked for an indefinite time. When digital exploitation occurs, rightholders often decide to enter the VoD exploitation only when revenues from other windows have been secured. For instance, broadcasters often insist upon full or partial holdbacks against either TVoD or SVoD exploitation during the period covered by their licence. In those cases, the online exploitation of a work occurs at the very end of the release windows. This may negatively impact the attractiveness of VoD offers. 

149 [Complex clearance of rights] Secondly, clearance of rights for VoD exploitation can be complex. It is not always easy to determine who owns the digital rights (e.g. lack of any licence from the initial author or succession issues) or whether all the rights for the VoD exploitation have been cleared. For instance, it has been reported that the rights to music included in a film had not been cleared for SVoD exploitation, leading to the impossibility for a VoD platform to include this work in its SVoD catalogue. 

[Lack of efficient licensing model] A third and more significant obstacle is the lack of efficient licensing model for online exploitation rights. This mainly derives from the poor return on investment linked to making the works available on VoD platforms.

As regards the rightholders and distributors, the exploitation on VoD platforms is still an emerging market 150 and, at least for SVoD, it comes at the end of the release windows. Therefore the remuneration that is collected for this mode of exploitation remains limited. 151 The revenues will depend on the sales models and the VoD type. For instance, SVoD is generally remunerated via a flat fee (around 3,000-10,000 for 18 months) when TVoD will be remunerated by a percentage of the sale price. 152 A study 153 shows that a right holder received approximately €1.5 from each VoD rental, but a sale of the same film on DVD or Blu-ray came with at least three times higher revenues. 154 Currently, revenues from theatrical exploitation largely outweigh VoD revenues. 155 This low remuneration could by itself prevent rightholders and distributors from exploiting VoD rights, in particular if there is a risk that the availability of works on VoD platforms undermines revenues from more profitable distribution channels (e.g. DVD, Blu-ray).

In view of the low revenues, transaction and technical costs 156 can be too heavy, in particular for small productions, old works or in the absence of traditional commercial distribution of a work in a given territory. 157  Rightholders therefore need a highly efficient licensing model (i.e. easy contact, negotiations kept to a minimum and standard contracts) to limit the costs. In this respect, big studios (mainly American studios) are better equipped than small or even medium producers. This could explain why only 27 % of films available on VoD and 30 % on SVoD in the EU are European. 158  

As regards VoD platforms and aggregators, several costs affect their ability to include more works in their catalogue. Firstly, the price of the works can prevent them from including these works in their catalogue. With limited budgets, VoD platforms have to make choices and would only pay high licence fees for highly valuable works. 159 Secondly, transaction costs can be important, in particular when contracting with small or medium producers. Except for highly valuable works, VoD platforms generally prefer to conduct negotiations with big studios covering a whole catalogue than individual negotiations with small or medium producers covering only few titles. With multiple individual negotiations come diverse and multiple demands from rightholders. Aggregators, acting as intermediaries, facilitate contacts and agreements between rightholders, their representatives and VoD platforms. 160 However, aggregators face similar issues: a burdensome licensing process and title-by-title negotiation. 161  To some extent, technical costs 162 can also affect VoD platforms and aggregators negatively.

Consequences: All above-mentioned obstacles, either by themselves (e.g. a contractual blockage) or as a combination (contractual blockage reinforced by a poor return on investment) can explain why some European AV works, in particular small productions, are not available on VoD platforms. Only half of European AV works released in cinemas are indeed available on VoD platforms and VoD platforms' catalogue do generally not include more than 30 % of European works.

How the problem would evolve: In conclusion, despite the growing number of online content services, many AV works (and among them, many European works) would not find their way to online exploitation. Evolution of the market could improve the availability of these works on VoD platforms, however obstacles, including related to the licensing of rights, are likely to persist.

3.3.2.What are the various options to achieve the objectives?

The options below focus specifically on the licensing problems and the difficulties of acquisition of rights limiting the availability of European AV works on VoD platforms, described above. The rest of the issues will be addressed in parallel by the accompanying measures as described in the Communication "Towards a modern, more European copyright framework" 163 and in the framework of the 'Creative Europe' programme.

Baseline

No policy intervention. This option would rely on the natural evolution of the VoD market. As VoD will become an increasingly important way to access AV works in the coming years, it is likely to gain in financial attractiveness for rightholders.

Stakeholders' views

Following discussions and meetings with stakeholders' representatives, it appears that producers and distributors (and to a certain extent, aggregators) would in general support this option since most of them consider that the VoD market is still emerging and can regulate itself. Nevertheless, as it appears from meetings with some stakeholders' representatives, authors, some producers and VoD platforms generally consider that this option would not be sufficient to solve the obstacles leading to the limited availability of AV works on VoD platforms. This view is likely to be shared by consumers since they will continue to face limited availability of EU AV works on VoD platforms.



Option 1 – Stakeholders' dialogue focusing on licensing issues and aiming at improving the proportion of EU audiovisual works available on VoD platforms

Under this option, a stakeholders' dialogue would be put in place with the following elements:

A multi-party stakeholders dialogue aimed at exploring ways to improve the availability of EU AV works on VoD platforms.

The dialogue would take place at European level.

This stakeholder dialogue would focus only on licensing issues and related legal and contractual difficulties (e.g. unblocking of VoD rights). The main participants will therefore be authors, producers, sales agents, distributors, broadcasters, aggregators, VoD platforms (including telecom operators offering VoD services), with the underlying idea to gather together parties that do not enter directly into commercial agreements with each other.

This dialogue would be part of the accompanying measures announced in the Communication "Towards a modern, more European copyright framework" to ensure a wider access to content across the EU and, more particularly, to intensify the dialogue with the AV industry to find ways for a more sustained exploitation of existing European films. These measures will address consumers' expectations, including by encouraging MS to promote legal offer and to develop search tools to make EU AV works more findable and prominent.

The result could be the adoption of self-regulatory measures for improving the availability (for a more sustained exploitation) of EU AV works, including on VoD platforms.

Stakeholders' views

It is likely that stakeholders would support this option, as some individual initiatives from different stakeholders are already trying to address ways to improve availability of AV works (specifically European). This option would bring all stakeholders, at European level, around the table with that same objective. If successful, the stakeholder dialogue would help streamlining licensing practices as regards digital exploitation. Following meetings with stakeholders' representatives, it appears that authors and VoD platforms in particular would support this measure but could consider it insufficient as it does not give a tool to solve individual difficulties (including contractual blockages). Consumers would support an option aiming at enlarging the catalogue of EU AV works on VoD platforms.

Option 2 – Stakeholders' dialogue (Option 1) + Obligation for Member States to establish a negotiation mechanism to overcome obstacles to the availability of audiovisual works on VoD

This option would maintain the European-level dialogue from Option 1 and will add the obligation for MS to introduce in their legislation a mechanism/process to facilitate negotiations aimed at facilitating the exploitation of EU AV works on VoD platforms, with the following elements:

The negotiation mechanism put in place by MS will help addressing individual cases. The stakeholders' dialogue will address problems of availability in a general framework and try to find solutions agreed by a multiplicity of parties.

The negotiation mechanism will aim at helping solving specific cases where licensing obstacles limit and/or block the availability and exploitation of an (or several) AV work(s) on VoD platforms (e.g. a producer whose work is not exploited on VoD platforms; a VoD platform that wants to make available a particular AV work).

The parties who can resort to negotiation will be those wishing to exploit VoD rights and those holding the rights.

MS will have to create a negotiation mechanism with the following essential elements: MS will identify an impartial instance that will facilitate negotiations between parties (without prejudice of the possibility to go to Court). The negotiation mechanism (i) will be determined by each MS after having consulted with the relevant stakeholders (practical issues such as the bearing of costs and timeline will therefore be left to MS); (ii) will be on a voluntary basis; and (iii) will require the parties' commitment to negotiate in good faith. The selected impartial party will (i) actively work towards reaching an agreement and facilitate negotiations; (ii) bring professional experience that can contribute to the conclusion of more commercial agreements.

The expected outcome would be commercial agreements leading to an increase of EU AV works being available on VoD platforms. There is no obligation for the parties to reach an agreement.

Stakeholders' views

Authors, aggregators and platforms would support this mechanism, as they generally favour measures addressed to unblock contractual blockages and/or solve disputes leading to the unavailability of works. Following meetings and discussions with stakeholders' representatives, it appears that producers, distributors, sales agents would support this option as well because it respects their contractual freedom while providing a framework to help solving individual cases. Consumers would support an option aiming at enlarging the catalogue of EU AV works on VoD platforms.

Discarded options

Restrictions to contractual freedom: Options imposing obligations that would restrict the stakeholders' contractual freedom were discarded. Such options would be more constraining on the parties since parties would have no choice but to start negotiations or to allow the exploitation of the works. However, their practical implementation and real impact on the market remain unclear. It is for instance unclear whether forced negotiations (even in good faith) could reach more agreements than negotiations on a voluntary basis. As regards any obligation to exploit, it would have been very difficult to determine the conditions under which such obligation could take place without expropriating the concerned person's rights. These options would heavily hinder the contractual freedom of the parties, which now freely negotiate and agree on the different types of exploitation that rightholders want to license, e.g. theatres, pay and free broadcasting, DVD, VoD.

3.3.3.What are the impacts of the different policy options and who will be affected?

Approach

The options presented above would affect all stakeholders in the VoD exploitation chain of EU AV works. Theses stakeholders include:

Rightholders and distributors: This category includes rightholders (director of a movie, screenwriter, producers -to whom the rights to a work are generally assigned- and other possible rightholders), and broadcasters. This category also includes distributors and sales agents. For them, the following impacts have been considered: (i) impacts on the incentives for the exploitation of online rights (ii) impacts on costs.

VoD platforms and aggregators: The following impacts have been considered: (i) impacts on availability of works in their catalogue; (ii) impacts on costs.

Consumers: The impact on the availability of EU AV works on VoD platforms has been considered.

Only the most significant and likely impacts are reported in this IA. The assessment is mainly qualitative, as the data available is very limited because of confidentiality issues.

The assessment of Option 2 also includes an analysis of the impacts on Member States, in terms of implementation costs.

Baseline

Impacts on stakeholders

The limited availability of EU AV works on VoD platforms is expected to persist under the baseline option. 164 The maturity of the VoD market in terms of revenues has not been reached yet. In the absence of any intervention at EU level, contractual blockages are likely to persist. In many cases, the licensing process for EU AV works would remain burdensome.

Rightholders and distributors

Impacts on the incentives for the exploitation of online rights: Most successful/mainstream works would find their way to VoD platforms. For other AV works (including numerous European works), low revenues and high costs would in many cases continue to prevent any online exploitation. The rightholders' business model based on exclusivity deals and release windows would not be affected under this option. Rightholders would only have limited incentive to intensify the online exploitation of their works. Apart from increased revenues, a possible incentive could be if the VoD market grows to the point that it becomes essential from the rightholders' point of view (e.g. as a marketing tool or as the main distribution channel). However, this is not likely to happen in the short term.

Impacts on costs: The development of intermediaries (such as aggregators) in the VoD market could have a positive outcome on transactions costs for rightholders. Aggregators could help rightholders concluding agreements on the digital exploitation of their works. This would particularly be true for small producers and distributors who do not always have the resources to start direct negotiations with VoD platforms. However, this positive impact would be limited as intermediaries would continue to face high transaction costs, which could prevent their development.

VoD platforms and aggregators

Impacts on the availability of works in their catalogues: VoD platforms and aggregators would have no leverage under this option to unblock contractual blockages except for the growing importance of the VoD market (and revenues linked to it). Upstream, VoD platforms and aggregators are likely to face less clearance of rights issues. To facilitate clearance of rights, initiatives as the ones already launched in some countries could be launched in other countries. However, this would rely on individual initiatives, at national level. Downstream, even if reduced, costs would continue to be important (see infra). It would therefore still be difficult and expensive for VoD platforms and aggregators to conclude agreements with small and medium producers (and by consequence include their works in their catalogue).

Impacts on costs: With the development of the VoD market, VoD platforms and aggregators could gain in bargaining power and bring forward in the negotiation standard contractual practices (such as "block-agreements" 165 ). This could lead to some reduction of transaction costs. For some categories of works, VoD platforms and aggregators would also be able to better bargain the licence cost as VoD market gains in importance. Development of the VoD market could also lead to an increase of the licences prices but in proportion with an increase of the revenues. Under this option, VoD platforms would still face technical costs (when not borne by rightholders).

Consumers

Impact on the availability of EU AV works on VoD platforms: As the VoD market evolves, consumers would be offered a larger choice of AV works. However, this choice would be limited to some extent as access to some categories of works would remain limited: (i) works whose rights are blocked by rightholders; (ii) works (mainly small productions) for which transaction costs would be too high) and (iii) works that VoD platforms are not willing to include in their catalogue. Costs for consumers to access catalogues of VoD platforms would remain unchanged.

Social impacts

The baseline option will not sufficiently contribute to increase the availability of European AV works on VoD platforms, which participate in the cultural diversity. As a consequence, the visibility and circulation of European AV culture across the European Union would remain limited. This would constitute a lost opportunity for European AV works to reach a larger public.

Impacts on fundamental rights

The baseline scenario would not have any impact on copyright as property right (Article 17(2) Charter) or on the freedom to conduct a business (Article 16), as it would not alter the current licensing system.

Option 1 – Stakeholders' dialogue focusing on licensing issues and aiming at improving the proportion of EU audiovisual works available on VoD platforms

Impacts on stakeholders

Having a platform to meet and discuss licensing issues preventing availability of EU AV works on VoD platforms (e.g. exclusivity issues; release windows), at European level, could contribute to reach agreements (self-regulatory measures) for a more sustained exploitation of EU works, which would benefit all stakeholders involved. In particular, by setting the dialogue at European level, participation of representative European organisations will be secured and will produce a European effect of the potential self-regulatory measures that they will adopt. However, chances of reaching concrete agreements would depend on the willingness of the stakeholders to engage in constructive discussions and to take commitments.

Rightholders and distributors

Impacts on the incentives for the exploitation of online rights: The rightholders' business model based e.g. on exclusivity deals and release windows would not be affected under this option. The stakeholders' dialogue could lead to some agreement as regards the streamlining of licensing practices (for instance, development of standard clauses that could easily be included in contracts). This could encourage rightholders intensifying digital exploitation of their works. The stakeholder dialogue could also raise awareness as to the importance of clearing the rights for the producers. This could have a positive impact on distributors and other intermediaries down the contractual chain, and ultimately, on the availability of works on VoD platforms.

Impacts on costs: The stakeholder dialogue could contribute to reduce costs linked to VoD exploitation (e.g. if the stakeholder dialogue help defining contractual standards that would streamline the licensing process and reduce transaction costs).



VoD platforms and aggregators

Impacts on the availability of works in their catalogues: As mentioned above ('rightholders and distributors'), the stakeholder dialogue could have a positive impact on the streamlining of the licensing process and the clearance of rights. 166 This could help increasing the number of works available in the VoD catalogues, in particular European works. However, by its nature, the stakeholder dialogue would only concern collective solutions and could not solve individual issues. Therefore, the impact of this option on works blocked in exclusivity deals are expected to be limited. It would indeed be necessary to start individual negotiations to obtain from a right holder that it renounces to its exclusivity. As regards release windows, this option could have a positive impact by bringing more flexibility. For instance, stakeholders could discuss under what conditions an earlier availability on SVoD platforms would be possible (for instance, stakeholders could discuss the possibility for rightholders to stop – even temporarily – the exploitation on SVoD in case of another, more valuable, distribution opportunity). Finally, the stakeholder dialogue could facilitate contacts between small and medium rightholders (or their representatives) and aggregators/VoD platforms. They could work together on ways to improve the inclusion of their works in an aggregator's or VoD platform's catalogue.

Impacts on costs: The stakeholder dialogue could help reducing transaction costs. If successful, the stakeholder dialogue could lead to an agreement on new contractual standards. This could facilitate licences negotiation.

Consumers

Impact on the availability of EU audiovisual works on VoD platforms: Under this option, if the stakeholder dialogue helps reducing transactions costs and facilitating contacts between on the one hand, VoD platforms and aggregators, and on the other hand, rightholders (in particular producers), consumers would be able to enjoy a larger choice of works, including small productions (which are typically European works, as described in Section 3.3.1). They could also benefit from earlier access to some works on VoD platforms. It is likely that costs for consumers to access VoD services would remain unchanged or would only slightly increase in cases where SVoD platforms offer a substantially larger catalogue.

Social impacts

Option 1 is expected to contribute to the objective by enabling a dialogue that could facilitate access to a wider range of European AV works. This would in the medium/long term increase the number of works available on VoD platforms. This would positively affect the visibility and circulation of European AV works across the European Union.

Impacts on fundamental rights

The Option 1 scenario would not have any impact on the property right or on the freedom to conduct a business.

Option 2 – Stakeholders' dialogue (Option 1) + Obligation for Member States to establish a negotiation mechanism to overcome obstacles to the availability of audiovisual works on VoD

Impacts of the stakeholder dialogue, which is also part of Option 2, have been assessed under Option 1. The impacts assessed below concern only the negotiation mechanism. The negotiation mechanism would exclusively address copyright-related issues and would complement measures provided for in the AVMS Directive review for the promotion of European works. 167  Successful negotiations unblocking licensing difficulties would contribute to reach or to go beyond the 20% minimum share of European works in catalogues of VoD platforms. 168 Moreover, the negotiation mechanism would also have a beneficial effect on the type and variety of works making their way to VoD platforms.

Impacts on stakeholders

The negotiation mechanism would address individual cases of lack of availability and complements the general approach pursued by the stakeholder dialogue. Due to the specific nature of the European AV market (mainly composed of small and medium film producers and a number of small VoD platforms operating at national level), Option 2 would particularly benefit European stakeholders, as the difficulties in the acquisition of the necessary rights are more acute in their case. 169 The intervention of an impartial instance is likely to facilitate negotiations in general and, as regards negotiations with major producers and VoD platforms, contribute to equilibrate their bargaining power. The nature of the negotiation process could lead to flexible solutions. Any potential guidelines or standards decided following the stakeholder dialogue could also be helpful to reach solutions.

Rightholders and distributors

Impacts on the incentives for the exploitation of online rights: Under Option 2, the rightholders' business model based on exclusivity deals and release windows would not be affected. However, online exploitation of a work could be discussed in the framework of the negotiation mechanism. Since the negotiation mechanism would work on a voluntary basis, this would prevent possible abusive demands from VoD platforms and aggregators. This negotiation body could also benefit rightholders. For instance, a producer having assigned rights to a broadcaster not willing to exploit the work on VoD could rely on the negotiation mechanism to try unblocking the situation. Rightholders could also use the negotiation mechanism to try unblocking situations of systematic refusals from VoD platforms or aggregators to include their works in the VoD catalogues. The intervention of an impartial instance/moderator could facilitate discussions and help finding solutions. The moderator could help unblocking the situation by providing objective and professional input. He could also submit proposals. More generally, the moderator would help rationalise discussions. The obligation of negotiation in good faith would also play a role. In view of the voluntary basis and the necessity to negotiate in good faith, parties would refrain from entering into negotiations unless there is a strong will to reach an agreement. This also means that the negotiation mechanism would not provide a solution to all cases and obviously will not lead to more availability of all films. In some cases, VoD platforms may be reluctant to start negotiations. Indeed, VoD platforms are not willing to include all and any AV work in their catalogue. They carefully select the works that will be part of their catalogue and find the right balance between costs and benefits. Even when costs are not particularly high, they would still need to be recovered by means of a minimum amount of viewers. Some works would never achieve this threshold and VoD platforms would therefore not include them in their catalogue. Even for works that could achieve this threshold, some platforms, in particular those investing in original content such as Netflix, generally wish to limit the size of their catalogue to avoid any 'cannibalisation risk'. 170

Impacts on costs: The participation in the negotiation mechanism may entail some limited costs for rightholders and distributors (depending on how MS decide to finance operational costs). These costs may however be offset by the efficiency gains deriving from the negotiation mechanism (it is expected to speed up the negotiation process and therefore reduce transaction costs) and by the possible additional licensing revenues linked to the exploitation of online rights. The negotiation mechanism could also contribute to develop more efficient licensing practices in the long term.

VoD platforms and aggregators

Impacts on the availability of works in their catalogues: This option is likely to have a positive impact on the possibility for VoD platforms and aggregators to overcome obstacles linked to exclusivity rights and exploitation rights, release windows and clearance of rights. The flexibility of the negotiation mechanism, the participation of different parties and the intervention of a moderator could help parties finding suitable solutions (see supra 'Rightholders and distributors'). The obligation to negotiate in good faith would prevent any obstruction from rightholders (or other stakeholders). The experience gained from the negotiation mechanism could be reused in other negotiations. VoD platforms would for instance be able to conclude other agreements with stakeholders, based on the previous agreements obtained via the negotiation mechanism. Since the negotiation mechanism would entail some costs (i.e. costs linked to the involvement of parties negotiating), it would mainly be used in cases where there is a common will to make the works available online but where negotiations are difficult. This negotiation mechanism is likely to be used to unblock the rights to a catalogue of works or to facilitate contractual collaboration between parties. In view of the voluntary basis of the mechanism, the positive impact on VoD platforms and aggregators would materialise where rightholders are willing to negotiate.

Impacts on costs: As this is the case for rightholders and distributors, VoD platforms and aggregators may have to bear some limited costs linked to the participation in the negotiation mechanism. However, they would also benefit from easier and quicker negotiation with rightholders or distributors, which could allow them to enrich their catalogue and attract more viewers. Since the negotiation mechanism would be used to address individual licensing blockages cases, it would not have an impact on technical costs.

Consumers

Impact on the availability of EU audiovisual works on VoD platforms: If the negotiation mechanism achieves unblocking some situations and facilitating collaboration between some parties, consumers could benefit from a larger catalogue of works, in particular European, on VoD platforms. Impact on the costs for consumers would be similar as the one under Option 1.

Impacts on Member States

Impacts on implementation costs: MS would need to set up the negotiation mechanism, which would entail some one-off costs. However, MS already have different bodies 171 with expertise and experience in the AV sector, on which they could rely to implement the negotiation mechanism. The costs would therefore vary according to the scope of existing structures, but are expected to be relatively low. For example, when the implementation of dispute resolution mechanisms aimed at solving disputes arising between CMOs and their members was assessed, it was reported that the costs of establishing such mechanisms would be in the range of €35,000. 172

The operating costs linked to the functioning of the negotiation mechanism would vary depending on the structure of the negotiation body, on the choices made by each MS on whether these costs should be born – partially or totally – by the parties resorting to the negotiation mechanism and on the number of cases submitted. The limited scope of the negotiation mechanism (aimed at addressing individual blockages), the voluntary nature of the process and the necessity to negotiate in good faith would limit the number of cases and make sure that the mechanism is used by stakeholders only where there is a strong will to reach an agreement. Examples of existing arbitration or mediation mechanisms help to estimate the range of operating costs involved. On a low end estimate, CMOs that operate alternative dispute resolutions report that the operating costs would be in the range of €11,000 per year. At the other end of the scale, the operating costs of the French cinema mediator (le Mediateur du cinema) amounted to 217,526 euros in 2014. 173  However, the scope of activity this body is different from the negotiation mechanism envisaged here.

Social impacts

Option 2 would have a positive impact on cultural diversity, as resolution of individual cases would contribute to enriching the catalogues of European works available to consumers (including the ones for which the rights were blocked). This would in the medium/long term increase the visibility and circulation of European AV works across the European Union.

Impacts on fundamental rights

Option 2 scenario would not have any impact on the property right or on the freedom to conduct a business since the participation in the negotiation mechanism would be on a voluntary basis.



3.3.4.How do the options compare?

Option

Effectiveness

Efficiency

Impact on stakeholders

Social impacts and fundamental rights

Baseline

(0) Contractual blockages, clearance issues, issues linked to strict release windows and burdensome licensing processes would persist.

(0) No direct costs associated with the baseline option.

(0) Impacts on stakeholders would depend on the evolution of the VoD market.

(0) No direct impact on fundamental rights.

(0)No direct impact on cultural diversity and the visibility and circulation of EU AV works.

Option 1 –Stakeholders' dialogue

(0/+) Could result in some improvements as regards the clearance of rights, and the streamlining of the licensing process. To some extent, it could provide some flexibility as regards release windows. Contractual blockages linked to exclusivity deals would persist.

(0/-) Limited costs linked to the organisation of the stakeholders' dialogue.

(0/+) Main impacts on stakeholders would depend on the possible changes introduced by the stakeholders' dialogue. If the stakeholders' dialogue leads to the adoption of some standards and practices (e.g. contractual clauses) and more flexibility, there would be a possible reduction of licensing and clearance costs.

(0) No direct impact on fundamental rights.

(0/+) Positive impact on cultural diversity and the visibility and circulation of EU AV works provided that the stakeholder dialogue leads to more works available on VoD platforms.

Option 2 – Stakeholders' dialogue and negotiation mechanism

(+) In addition to collective solutions that could be brought by the stakeholders' dialogue, individual cases could also be addressed. This would provide a framework for stakeholders to solve contractual blockages and other licensing individual issues.

(0/-)Limited costs linked to the organisation of the stakeholders' dialogue and possible participation in the negotiation mechanism.

(0/+) Possible reduction of transaction costs by speeding up the negotiation process.

(0/+) Possible reduction of licensing and clearance costs (cf. supra).

(+) Possibility to use the negotiation mechanism to unblock individual cases (e.g. contractual blockages) and to facilitate contractual collaboration between stakeholders.

(0) No direct impact on fundamental rights.

(+) Positive impact on cultural diversity and the visibility and circulation of EU AV works thanks to the greater availability of EU AV works on VoD platforms (which would also include AV works for which the rights were blocked).

Option 2 is the preferred option, as it would allow reaching the objective of improving the availability of EU audiovisual works on VoD platforms. Under this option, solutions to both collective and individual cases are envisaged. The stakeholders' dialogue, if successful, could lead to the adoption of some contractual standards that could benefit all stakeholders in the AV sector. This would have a positive impact on the licensing process. The stakeholders' dialogue could also increase flexibility in licensing VoD rights and facilitate to some extent contacts between small and medium rightholders (or their representatives) and aggregators/VoD platforms. As regards individual cases, the negotiation mechanism could help parties finding suitable solutions to allow the licensing of VoD rights. In contrast, Option 1 would not address these individual situations and would therefore be less effective. Since the negotiation mechanism would be on a voluntary basis, this solution would heavily rely on the will of parties to reach agreement. All blockages could therefore not be solved under this solution. The compliance costs related to Option 2 are expected to be compensated by the benefits it would generate for the parties, e.g. by speeding up the negotiation process. This is all the more the case since the participation in the negotiation mechanism would be on a voluntary basis, stakeholders would be protected against abusive demands from other stakeholders. Finally, Option 2 has no impact on the rightholders' business model based on exclusivity deals and release windows. The impact on the right to property is therefore neutral.

Proportionality and impacts on MS: Option 2 allows reaching the policy objective in a proportionate manner, focusing on facilitating contacts and negotiations between stakeholders without interfering with their contractual freedom.

Depending on the approach adopted, MS may have to introduce the negotiation mechanism in their legislation and set up the related body, which would entail some limited costs, as explained above.

3.4.Out-of-commerce works in the collections of cultural heritage institutions

3.4.1.What is the problem and why is it a problem?

Problem: Digitisation and dissemination of out-of-commerce works held by cultural heritage institutions, including across borders, in 'mass digitisation' projects, is adversely affected by difficulties in clearing rights

Description of the problem: As part of their dissemination missions, cultural heritage institutions (CHIs) are willing to digitise works held in their collections and disseminate them to the public, notably online, including across borders. 174 This activity is particularly relevant when collections are out-of-commerce (OoC), 175 as OoC works are not available via any other channel but can still hold great cultural, scientific, educational, historical and entertainment value. 176

The digitisation and dissemination of in-copyright OoC works as part of 'mass digitisation' 177 efforts is however faced by distinct difficulties and high transaction costs for clearing the relevant rights. 178 This problem contrasts with the inherently low current commercial value of the works at stake. CHIs have generally reported problems with mass digitisation projects despite the large demand for online access to all types of works in their collection. 179

The collections of European CHIs are very large: for example, a 2010 study estimated that archives held 26.98 billion pages of archival records and that there were 10.81 million hours of audio materials in European CHIs. 180 It is very difficult to give an estimation of the number of works that remain locked within the walls of CHIs as a direct consequence of copyright-related issues, as the feasibility of mass digitisation projects depends on a variety of factors. 181  In a recent survey of cultural institutions carried out in the context of the Europana project, respondents estimated that only 55 % of their digital collections 182  are available on their institutional website, 28 % in a national online aggregator 183  and 22 % on Europeana. 184  These data do not distinguish between in-copyright and public domain works and among the different possible causes. It is however reasonable to expect that if only copyright-protected works were considered, the level of works available online would be lower. Furthermore, practitioners in this field say that the relative underrepresentation of works from the 20th century (known as the '20th century black hole'), particularly its second half, and, generally speaking, of sound recordings and AV works 185  in online collections is an illustration of the correlation between the copyright status of works in CHIs collections and their availability online. For example, only 10.93 % of works in a recent sampling made by the Europeana Foundation of works showing up in the Europeana portal belong to the second half of the 20th century. 186  

Drivers: [Size of OoC collections, age and type of works] Difficulties in rights clearance and transaction costs affecting mass digitisation are mainly related to the nature of the works involved:

The size of OoC collections that CHIs wish to digitise and further disseminate is often large, 187 multiplying the resources that are required for rights clearance. 188 For example, in a project on the history of genetics carried out in the UK on a collection of books from the 20th century, 5,459 individual authors were identified for 1,620 works, with 5 % of the works having more than 10 authors. 189

Works are often old 190 and have been, by definition, out of circulation. This means rightholders (or those who can clear the rights on their behalf) may be difficult to find and that the chain of title can be considerably long, complex and subject to uncertainty. 191

The type of many of the works that are important from a heritage perspective – for example newsreels, photos, unpublished materials, or works that have never been intended for commercial circulation, such as political leaflets or trench journals 192 – means that rights may have never been managed in any way.

Time-demanding rights clearance means high transaction costs for CHIs: attempts to quantify such costs in a general way are difficult as each collection and process is different. Quantifications can however be based on individual case studies; available ones, mainly provided by CHIs, suggest figures varying between approximately 50 and 100 for a single book, between 5.70 and 50 for a single poster, between 0.70 and 1.70 for a single photograph, around 27 for a short amateur film, and 10 for mixed collections. 193   

[Suitable licensing mechanisms only available in some MS and for some types of works] Collective licensing, whereby single contracts are concluded with a CMO for entire collections of works, can be an evident answer to the transaction costs problem mentioned above. Yet, collective management of rights is not available for all types of works 194 and CMOs may only grant licences for the rights mandated to them by the rightholders that they represent. Given the nature of the works at stake, however, it is quite common that part of their rightholders are not represented in the relevant CMOs. This makes it impossible for the latter to issue a licence that also comprises the rights of such 'outsider' rightholders. This situation undermines the usefulness of collective licensing in many of the cases at hand, leaving, again, individual rights clearance as the only solution for many works.

Some MS have addressed the latter problem by establishing in national law, for example through extended collective licensing (ECL) or presumptions of representation, that licences issued by a CMO can apply to works of outsiders, under certain conditions, including the possibility for individual rightholders to 'opt out' their works from these licences. 195  Under such legislation, CMOs can issue licences that cover entire collections, including works of outsiders, in full legal certainty. This means, for example, that if a CHI wishes to digitise and make available a collection of OoC books and part of the rightholders in the collection is not represented in the relevant CMO, that CMO will be allowed by the law, under certain conditions, to grant a licence to the CHI covering the full collection, except for rightholders that express their opposition to their works to be used. These mechanisms are however not available in all MS for the uses in questions and for all kinds of works. 196  

[Lack of cross-border effect of national solutions] Where licensing mechanisms exist, they only apply within the MS that has enacted them, in practice limiting access to works licensed under this type of mechanisms to one national territory.

Some of such national developments follow a 2011 Memorandum of Understanding 197  (hereafter: 'the 2011 MoU') agreed between right holder and library representatives under the auspices of the European Commission to facilitate the clearance of rights in OoC books and learned journals. 198  The 2011 MoU however only applies to some categories of works. 199 Successful national legislative and contractual solutions have also been preceded by stakeholder consultation processes, sometimes reflected in model contracts. 200 Such experiences point to the important role played by stakeholder cooperation and engagement with public authorities on the field in the achievement of practical solutions, but this has occurred in some specific areas and MS only. 201

Consequences: CHIs regularly report that difficulties in clearing rights can be, and often are, a defining barrier for proceeding with a project at all, or in selecting the works that will be included in one. This causes projects to be skewed toward public domain and pre-20th century works, or newer collections) or OoC collections remaining simply unavailable beyond CHI's premises, and not accessible across borders. 202  More broadly, this situation means that the societal and economic benefits of the digitisation and dissemination of digitised cultural heritage are missed, 203 including for certain rightholders in terms of better discoverability of 'dormant' works that can lead to further exploitation and therefore revenue possibilities.

How the problem would evolve: The difficulties and costs of clearing rights in this area are influenced by various factors, but they are likely to persist for the foreseeable future. Although in the wake of the 2011 MoU and of EU recommendations 204 the number of MS has increased that have national provisions allowing for collective licences also covering the right of 'outsiders', these solutions are not expected to develop across the EU in a uniform way. The main observed trend is for them to cover literary works only. Furthermore, cross-border barriers will remain as those solutions only have national application.

3.4.2.What are the various options to achieve the objectives?

Baseline

No policy intervention. CHIs would continue to rely mainly on individual licensing, or collective licensing where possible. Collective licensing would be supported by national legal mechanisms to cover the rights of outsiders only in a limited number of MS. 205 Licences resulting from these mechanisms would be limited to one national territory. The 2011 MoU would continue to call on MS to adopt such mechanisms for books and learned journals, and to provide a basis for further collective licences for this category of works.

Stakeholder views

CHIs consider the status quo insufficient and would not support lack of policy action, as wouldn't individual end users/consumers. Within the cultural industries, views would be more mixed with some players, for example among film producers and commercial broadcasters, supporting no intervention at EU level, while others, such as authors and CMOs, favourable to EU intervention to varying degrees (at least to address uncertainty in cross-border contexts). 206



Option 1 – EU legislative intervention (i) requiring MS to put in place legal mechanisms to facilitate collective licensing agreements for OoC books and learned journals 207 and to foster national stakeholder frameworks, and (ii) giving cross-border effect to such legal mechanisms.

Type of mechanisms: MS would be required to provide for adequate mechanisms in their legal system ensuring that voluntary collective licensing agreements between CHIs (i.e. publicly accessible libraries and museums, as well as archives and film or audio heritage institutions) and CMOs for the digitisation and dissemination of OoC books and learned journals (including embedded images) in their collections can also apply to the works of outsiders.

Scope of the mechanisms: (i) OoC books and learned journals first published in the MS where the licence is sought, (ii) the rights of reproduction, communication to the public (including making available) and distribution, and (iii) non-commercial uses. 208  Books and learned journals would be considered OoC as defined in the 2011 MoU. 209 MS would have the possibility to establish further national-specific criteria for works to be eligible for the mechanisms in question, 210  which will have to be done in consultation with concerned rightholders and users.

Safeguards for rightholders: these mechanisms would have to reflect a set of features established at EU level to provide for adequate safeguards for rightholders, notably outsiders, as regards: (i) sufficient representativeness of the licensor CMO of rightholders in the relevant category of works, rights and uses in the MS where the licence is sought, (ii) the possibility for outsiders to opt out of licences prior and during licence terms, (iii) equal treatment of CMO members and outsiders, and (iv) transparency/publicity obligations. MS would otherwise remain free to choose the suitable mechanism according to their legal traditions, practices or circumstances. 211

Cross-border effect: the legal possibility for the part of the licences that relates to outsiders to apply across borders in the EU would be established by EU law. Such cross-border effect would kick in after adequate information on the collections of works covered by the licence has appeared on a publicly accessible European transparency web portal for a sufficient period of time, except for works of authors that might have opted out during that period.

Stakeholder frameworks: MS would also be required to foster national stakeholder frameworks and dialogue at national level with a view to facilitate the practical implementation of the licensing mechanisms deriving from the obligation defined above, beyond purely legal aspects, and to achieve similar outcomes as the 2011 MoU in other sectors.

Stakeholder views

Most CHIs would consider this option not satisfactory because it covers books and learned journals only (as would individual users/consumers), 212 even if they would welcome legal certainty as regards the cross-border effect. 213 Views within the right holder constituencies would vary. Some, like certain authors and CMOs, would welcome the option as it ensures cross-border effect to the licensing mechanisms foreseen by the 2011 MoU. Others, especially outside of the books and journals sector, would consider it irrelevant or oppose this approach. Some right holder sectors might be willing to engage in stakeholder dialogues with a view to voluntary solutions. 214

Option 2 – EU legislative intervention (i) requiring MS to put in place legal mechanisms to facilitate collective licensing agreements for all types of OoC works and to foster national stakeholder frameworks, and (ii) giving cross-border effect to such legal mechanisms.

Same as Option 1, but:

Covering all types of OoC works, with a similar attachment to a single MS as in Option 1. Licences would have to be sought in the MS of first publication or, in the absence of publication, first broadcast, or – in the case of cinematographic or AV works – the MS where the headquarters or habitual residence of the producer is located. 215  In cases where attachment to a MS (or to a third country, in which case the mechanism could not be used) cannot be established with certainty after reasonable efforts, the licence would have to be sought in the MS where the CHI is established.

A work would be considered OoC when the whole work is, in all its translations, versions and manifestations, not being communicated, made available or distributed to the public through customary channels of access, and cannot be reasonably expected to become so. MS would have the same possibility as in Option 1 to establish further national-specific criteria.

Stakeholder views

A number of CHIs and CHI professionals, notably national librarians, would be positive about this option as the intervention covers all categories of works and is in line with certain national experiences that they consider successful. Others would still not find it satisfactory, given their preference for an exception. 216 Some rightholders, for instance among authors and CMOs would also find the large scope of the option satisfactory, and engage in the stakeholder processes that the option foresees. Other segments of the industry, for example newspaper publishers, commercial broadcasters and film and record producers, would not support this option, also in view of its reliance on collective management. 217



3.4.3.What are the impacts of the different policy options and who will be affected?

Approach

The options presented above would mainly affect institutional users (CHIs) (and by extension people with an interest in accessing digitised cultural heritage through them, i.e. end-users), as well as rightholders in OoC works held by CHIs (and, by extension, CMOs). The impacts affecting these two groups are presented separately.

For CHIs, the impact on lower transaction costs and the possibility to carry out-cross-border uses was assessed, with reference to the possibility for CHIs to obtain collective licences with that effect. These effects are both economic and social in nature, as they influence the availability of digitised cultural heritage in the EU.

For rightholders, the following impacts, economic in nature, were assessed: impacts (i) on revenues, (ii) on the exercise of rights (in other words, on their freedom not to have their works exploited or to exploit them directly and in ways other than by CHIs), and (iii) on possible administrative burden.

The policy options are also assessed in relation to their general social impacts (cultural diversity, the possibility for end users to have access to digitised cultural heritage, and influence on the general societal impacts of digitisation) 218 and as to the impacts on fundamental rights (property right, freedom of the arts and sciences, and right to education).

The assessment below is mainly qualitative, as suitable data was not available to produce quantitative assessments. Quantitative examples of the transaction costs that the considered options aim to reduce are included in Annex 9D. Practical impacts are also illustrated in a dedicated case study under each of the three options, which can be found in Annex 9H.

Baseline

Impacts on stakeholders

CHIs

Transaction costs and cross-border uses: This option would not have any direct impact on rights clearance and transaction costs and would entirely depend on the solutions available at national level. CHIs in MS whose legal frameworks already allow for licences also covering the rights of outsiders for the digitisation and dissemination of OoC works 219  would already benefit from the possibility of substantially lower transaction costs. The issues described in the description of the problem above would persist in the majority of MS, as that possibility is present in only a few MS, and mainly for books and other literary works (there are legal frameworks which could also be used for other types of OoC works in an even smaller group of MS). 220 In the absence of EU intervention, licences concluded via these mechanisms covering outsiders, be them specific to certain types of works or not, would be valid for a single MS territory (at least as regards the rights of outsiders). Opportunities would be larger for literary works than in other sectors also because suitable licensing structures are widespread in this area and much less in others, like for film and audio-visual works. 221 Irrespective of the broader category of works, possibilities to obtain suitable collective licences could be limited for works that CMOs do not traditionally license, for example because they have never been intended for commercial use, 222 due for example to lack of familiarity of CMOs with them and their rightholders.  

Other MS might decide in the future to adapt their legal frameworks. Such evolution is however entirely dependent on the will of individual MS, and would probably not take place in a systematic manner, particularly beyond books and learned journals (where the 2011 MoU has generated momentum). Resulting licences would still be limited territorially.

Rightholders

Revenues: Possibilities for rightholders, including outsiders, to receive new or extra revenue from collective licences for OoC works which already exist in MS can take the form of payments generated by the initial licences with CHIs, and from subsequent licensing opportunities stemming from the exposure of works that are otherwise not easily visible. Under the baseline scenario, these opportunities would not increase and be subject to the same limitations as regards MS territories and categories of works as discussed under "CHIs".

Impact on the exercise of rights: There would be no change for rightholders. In those MS and for those categories of works for which mechanisms exist through which licences between CMOs and CHIs can also cover the rights of outsiders and suitable licensing structures are in place, rightholders should still retain the freedom to decide on the exploitation of their works through the opt-out possibilities that such schemes normally foresee. 223  

Possible administrative burden: Existing licensing mechanisms in some MS for the digitisation and dissemination of OoC works may result in costs for rightholders in relation to the exercise of their opt-out possibility. Licensor CMOs can also incur specific costs related to the use of the existing mechanisms, for example related to publicity/transparency, the handling of opt-outs and the distribution of remuneration to outsiders. 224 The baseline scenario would have no impact as such in this area either, as these costs are only relevant where the mechanisms referred to in the previous paragraph already exist today.

Social impacts

No impact on cultural diversity in terms of access by people to a larger and more diverse set of works held in CHIs and of incentives for creators to keep creating works.

Additional opportunities for end-users to access their cultural heritage would be limited, as regards MS and types of works, as outlined under "CHIs" above. The same limitations would more broadly apply to the social and economic impacts associated to digitisation. 225  

No specific contribution to the EU's policy on digitisation and online accessibility of cultural heritage.

Impacts on Fundamental rights

No impact on copyright as a property right, as recognised by Article 17(2) of the Charter, nor any substantial impact on the arts and scientific research, relevant for the freedom of the arts and sciences (Article 13), and on education, protected under Article 14.

Option 1 – EU legislative intervention (i) requiring MS to put in place legal mechanisms to facilitate collective licensing agreements for OoC books and learned journals 226 and to foster national stakeholder frameworks for these and other works, and (ii) giving cross-border effect to such legal mechanisms.

Impacts on stakeholders

CHIs

Transaction costs and cross-border uses: Option 1 would deliver solutions in all MS for books and learned journals. These could take the form of ECLs, presumptions of representations or similar systems, depending on national circumstances. Combined with the large availability of collective licensing practices and CMOs in this sector, this would mean that the possibility for CHIs to benefit from lower transaction costs to obtain comprehensive licences for OoC books and learned journals would exist largely across Europe for this category of works. For example, the transaction costs emerged in the digitisation project on the history of genetics mentioned in section 3.4.1, estimated at approximately GBP 45,000 for 987 works made available, could be reduced to the costs of negotiating one licence with the relevant CMO, 227 and this would be legally possible everywhere in the EU. 

The possibility to actually use those legal frameworks would be accelerated by the stakeholder frameworks that MS would have to put in place, helping to address practical issues, like for example the absence of suitable licensing structures in certain MS, CMOs' lack of familiarity with types of works that they do not traditionally license, the need for literary and visual works CMOs to work jointly (for embedded visual works), and other licensing aspects. Given the current estimations concerning individual rights clearance for books, 228 savings in transaction costs that this option would entail for CHIs across the EU are expected to be meaningful.

The above impacts would however only materialise in a substantial way for books and learned journals. For other works, the situation would be similar to the baseline scenario in the short term. 229  In the long term, the stakeholder frameworks that the MS would have to foster could improve the situation to some extent, through processes similar to the 2011 MoU. These developments, which are difficult to predict precisely, could in turn, but only in the even longer term, induce MS to adapt their legal frameworks at national level. The resulting licences would however still be limited territorially as this option would only give cross-border applicability to licences for books and learned journals.

Rightholders

Revenues: New revenue opportunities for rightholders as described under the baseline scenario would potentially emerge in all MS for books and learned journals. Such opportunities would however not increase for rightholders in other types of works, or only in the long term as a consequence of the stakeholder frameworks which MS would have to foster.

Impact on the exercise of rights: Option 1 would increase the scope for collective licensing, as opposed to individual licensing, for the digitisation and dissemination of OoC books and learned journals by CHIs. However, the mechanism introduced by this option would remain of voluntary use and rightholders in books and learned journals would retain the possibility to prevent the dissemination of their works by a CHI. While members of licensor CMOs would do so by the normal management of their mandates to the CMO, outsiders would rely on the opt-out possibilities that licensing mechanisms foreseen by this option would have to ensure. These would be compounded by adequate transparency/publicity measures on relevant licences and opt-out possibilities, which MS would also be obliged to ensure. Foreign rightholders would not be at a substantial disadvantage as only rights in books and learned journals first published in the country where the licence is sought could be licensed under such mechanisms. Apart from strengthening the representativeness of the respective CMO, this requirement serves as a safeguard to ensure that the mechanisms are not applied to works from third countries. The obligation to publish adequate information on the collections of works to be used in a publicly accessible European transparency web portal for an appropriate period of time would mitigate the risk of licensing works against the will of individual rightholders, including foreign ones, or of works that are OoC in a MS but still in commerce in another MS.

Possible administrative burden: Given the widespread use of collective management for the type of works covered by this option (books and learned journals), costs for rightholders and CMOs related to the development of collective licensing schemes for the digitisation and dissemination of OoC books and learned journals by CHIs (such as costs related to opt-out and transparency mechanisms and the administration of the licence, including the distribution of remuneration to outsiders) would be limited. The transparency/publicity obligations foreseen by this option would however help keeping burden to a reasonable level for rightholders. The number of opt-outs that is reported from current experiences with extended collective licences, presumptions of representations or similar mechanisms at national level suggests that costs would overall be limited. For example, the German CMO that licences OoC books as part of the DE system based on a presumption of representation has not received any objection to the licensing from any right holder, 230   and only about 1.8% of the total book titles digitised and made available by the National Library of Norway as a result of an ECL licence (in a project that also covers books in commerce) were opted out. 231  

The effects described above for books and learned journals would extend to other types of works at the same pace and to the same extent as described under "CHIs" and not be present as regards the cross-border effect of licences. 232

The European transparency web portal of OoC works would be built on the existing Orphan Works Database infrastructure, which is run by the European Union Intellectual Property Office (hereafter: 'EUIPO'). Thanks to the use of existing infrastructure and resources, it is estimated that the building cost of the portal infrastructure could range between 500,000 and 700,000, with its annual maintenance amounting to approximately 15 % of the building cost (i.e. in the range of 75,000-105,000). 233 This cost would be covered by the budget of EUIPO. 234  

Social impacts

Positive impact on cultural diversity, as a larger set of books and learned journals that would otherwise remain confined to the premises of CHIs is expected to become available to the public, while incentives for authors to create new works would not be substantially affected. 

Opportunities for end-users to have access to cultural heritage would increase, but mainly as regards OoC books and learned journals and not for other types of works. The same limitation would apply to the broader social and economic impacts of digitisation. 235

Positive contribution of this option to the objectives of EU's policy on digitisation and online accessibility of cultural heritage, as it increases the possibilities for OoC works to become available for end-users. These benefits will mainly concern literary works in the short term, with a possible positive impact for other works but only in the longer term.

Impacts on Fundamental rights

There would be a limited impact on copyright as a property right, as recognised by Article 17(2) of the Charter. Possible positive impact on the arts and scientific research, relevant for the freedom of the arts and sciences (Article 13) and on education (right to education protected by Article 14), as more creative and learned material will be accessible.

Option 2 – EU legislative intervention (i) requiring MS to put in place legal mechanisms to facilitate collective licensing agreements for all types of OoC works and to foster national stakeholder frameworks, and (ii) giving cross-border effect to such legal mechanisms.

Impacts on stakeholders

CHIs

Transaction costs and cross-border uses: Under Option 2, the presence of legal frameworks everywhere in the EU that allow for licences issued by CMOs to also cover the rights of outsiders would give CHIs the possibility to see their related transaction costs diminish considerably everywhere in the EU for the digitisation and dissemination of works. This would apply to all types of works, like photographs, for which, for example, an available case study 236 calculated individual rights clearing costs to be incurred for a collection of about 27,800 items by a CHI at approximately 15,000. Under this option, it would be possible for the CHI to reduce that cost to the one of negotiating a single licence with a CMO. Licences concluded on the basis of such legal frameworks could have cross-border effect for all works too.

The stakeholder processes that MS would have to put in place would have the same purpose as in Option 1, i.e. lay the ground for a conducive environment, in practical and organisational terms, for such legal mechanisms to be used in practice. These would be particularly relevant in those MS and for those sectors where licensing structures are not widely available and collective management not widespread. In some sectors (e.g. audio-visual), without proper stakeholder engagement convened by public authorities, the practical effects of this option would not easily materialise, at least in the short term. It is expected that the presence in all MS and for all types of works of adapted legal frameworks would provide momentum for such stakeholder frameworks to produce results, especially when combined with the consultation with rightholders and uses that MS would have to organise if they decide to introduce national-specific criteria for works to be eligible for the envisaged schemes.

Rightholders

Impacts on rightholders would be the same in nature as in Option 1, but would extend to a higher number of rightholders because all types of works would be covered in all MS.

Revenues: Opportunities are expected to arise concretely at different paces for different categories of works depending on the availability of suitable licensing structures as explained under "CHIs".

Impact on the exercise of rights: The adaptations in rights management systems that this Option might entail will depend on the extent to which collective management is already a widespread practice in different sector. 237 The use of the mechanisms introduced by this Option would in any event remain voluntary. The safeguards for rightholders, including from other MS and from outside of the EU, foreseen in Option 1 would also, mutatis mutandis, be present under this option, for works other than books and learned journals. The freedom to decide on the type of exploitation of works that may be held by CHIs is for example important in the cinema sector, where old films considered part of cultural heritage can attract renewed commercial interest and new commercial exploitation. 238 The systems envisaged under this option would not affect those possibilities because of the opt-out and the fact that works re-entering commercial channels would not be eligible anymore (as not OoC anymore).

Possible administrative burden: The use of the mechanisms introduced by Option 2 would require to rely on collective licensing structures, which would need to be developed or consolidated in certain sectors, e.g. the AV sector (see Annex 9F on collective management in different sectors). This would entail some one-off costs for rights holders and CMOs, but could result in the long term in more efficiency in the management of rights for the purpose of licensing OoC works. The impact for individual rightholders and CMOs would be the same in nature as in Option 1, but apply to all types of works.

The costs described under Option 1 for the setting up and management of the European transparency web portal of OoC by the EUIPO would apply under this option too. The use of the portal for all types of works could also lead to efficiency gains in the long term.

Social impacts

Positive impact on cultural diversity as it would facilitate access to all types of OoC works, while not substantially affecting incentives for authors to create new works.

Opportunities for access to digitised cultural heritage by end-users would increase and extend to all types of works. This would, accordingly, have a broader influence on the social and economic benefits associated to the digitisation of cultural heritage. 239

Very positive contribution to the objectives of the EU's policy on digitisation and online accessibility of cultural heritage.

Impacts on Fundamental rights

The limited impact on copyright as a property right mentioned in Option 1 would affect more rightholders. Impact on the arts and scientific research, as well as education could be even more positive as all types of OoC works could become available.

3.4.4.How do the options compare?

Option

Effectiveness

Efficiency

Impact on stakeholders

Social impacts and fundamental rights

Baseline

(0) relevant licensing opportunities only present in some MS and for books and literary works principally, with no multi-territorial applicability.

(0) No direct costs.

(0) Impacts on stakeholders would depend on developments at national level but not address territoriality issues.

(0) No impact on cultural diversity. No substantial impact on the possibility to access cultural heritage by end-users. No contribution to EU policy objectives on digitisation and online accessibility of cultural heritage. No impact on fundamental rights.

Option 1 – Mechanisms to facilitate collective licensing agreements for OoC books and learned journals; cross-border effect of such mechanisms; stakeholder frameworks.

(+) Relevant licensing mechanisms, with multi-territorial application, in place everywhere in the EU for books and learned journals (not for other works).

(-) Costs related to the set-up and management of the European transparency web portal.

 

(+) Opportunities for reduced transaction costs for CHIs and more OoC books and learned journals becoming available to the public.

(0/+) Potential revenue opportunities for rightholders while retaining their freedom to exploit their works otherwise.

(0/-) Some costs related to the management of opt-out costs, expected to be limited.

(+) Positive impact on cultural diversity and on the possibility for people to access cultural heritage as more OoC books and learned journals can become available. Positive contribution to EU policy objectives on digitisation and online accessibility of cultural heritage.

(-) Limited negative impact on fundamental rights.

Option 2 – Mechanisms to facilitate collective licensing agreements for all OoC works; cross-border effect of such mechanisms; stakeholder frameworks.

(++) Relevant licensing mechanisms, with multi-territorial application, in place everywhere in the EU for all types of works.

(-) Costs related to the set-up and management of the European transparency web portal.

(++) Opportunities for reduced transaction costs for CHIs and more works becoming available to the public.

(0/+) potential revenue opportunities for rightholders while retaining their freedom to exploit their works otherwise.

(0/-) Some costs related to the management of opt-out costs, expected to be limited.

(++) Positive impact on cultural diversity as more works are likely to be made accessible and therefore on the possibility for people to access cultural heritage.

(++) Very positive contribution to the EU policy objectives on digitisation and online accessibility of cultural heritage.

(-) Limited negative impact on fundamental rights.

Option 2 is the preferred option is as it would, on the one hand, put in place legal frameworks conducive to a reduction of transaction costs and make possible the specific licences required for the digitisation and dissemination of OoC works, for all types of works and in all MS, including across borders. On the other hand, it would not affect the interests of rightholders to any tangible extent, or imply additional costs for them, for example in terms of missed revenues or licensing opportunities (it creates on the contrary potential opportunities for new revenue and exposure). The baseline option would not be effective and Option 1 would be effective only for certain types of works. As applying to all types of works, Option 2 is the most effective and efficient.

Proportionality and impacts on MS: Option 2 is proportionate, including its impacts on fundamental rights, in that it addresses the underlying problem without generating particular compliance costs (the mechanisms introduced would be an enabling element which remains subject to voluntary use) or putting disproportionate obligations on stakeholders.

Option 2 would require some adjustments in the MS that already have national legislation in place allowing for licences issued by CMOs to also apply to the rights of unrepresented rightholders (a list of examples is available in Annex 9E), notably as regards the scope of their legislation (for example, when it only covers certain types of OoC works). Where national legislation already covers a broader scope than what is foreseen by Option 2 (for example in the cases of general ECL), the need for adjusting national legislation will be more limited. MS that do not already have national law supporting mechanisms like those foreseen by the preferred option will be required to introduce them. In all cases, however, MS will retain flexibility in the way they comply with the EU obligation introduced by Option 2 in the choice of the kind of mechanism (for example ECL or presumption of representation) and by establishing additional national criteria for different categories of works to be considered OoC for the purposes of the mechanisms.



4.Adapting exceptions to digital and cross-border environment

4.1.Introduction

4.1.1.Background

The EU copyright legal framework harmonises rights of authors and neighbouring rightholders and seeks to harmonise “exceptions and limitations”  240 to these rights, although most of them are optional for the MS to implement. An “exception” 241 to an exclusive right means that a right holder is no longer in a position to authorise or prohibit the use of a work or other protected subject matter 242 : the beneficiary of the exception is already authorised by law to do so. Exceptions are provided for in order to facilitate the use of protected content in specific circumstances (for example where the transaction costs involved in acquiring authorisation outweigh the economic benefits of doing so) and/or to facilitate the achievement of specific public policy objectives such as education and research. Beneficiaries of the exceptions may be individuals or institutions.

This section of the IA focuses on exceptions that play a central role to achieve important public policy objectives at EU level but that at the same time are not fully adapted to the current digital and cross-border environment. While no formal evaluation of the EU legal framework for copyright exceptions has been conducted, the review process carried out between 2013 and 2016 allowed to gather information and evidence on the implementation of exceptions in MS and their functioning in the digital environment. 243

The need to facilitate use of copyright-protected material for specific purposes in this context has been acknowledged in the Digital Single Market Strategy. 244 Further to the review process and the Communication "Towards a modern, more European copyright framework" of December 2015 245 , three possible areas of intervention have been identified: education, research and preservation of cultural heritage. Specific copyright exceptions, optional for MS, exist in EU law for "specific acts of reproduction" 246 (often used for preservation) and "illustration for teaching or scientific research". 247 In these areas, digital technologies have allowed to explore new types of uses (e.g. digital preservation, digital and online educational activities, text and data mining (TDM)) which are not always clearly allowed under the current copyright rules. This legal uncertainty negatively affects the functioning of these exceptions in the digital environment and the way in which users can benefit from the potential of these technologies. Furthermore, while cross-border activities are increasingly important for the activities of libraries, education establishments and research institutions, the current EU legal framework does not allow users to benefit from the exceptions on a cross-border basis. In the Communication of December 2015, the Commission also highlighted the exception authorising libraries and other institutions to allow on-screen consultation of works for research and private study on their premises and the need to assess its functioning in the digital environment. This assessment would need to take into account the outcome of a CJEU case on the closely inter-twined issue of electronic lending by libraries which is currently pending; 248  it is therefore not part of this IA.

4.1.2.Why should the EU act?

Legal basis

The EU's right to act follows from Article 114 of the TFEU, which confers on the EU the power to adopt measures for the establishment and functioning of the internal market and has provided legal basis for a wide range of EU instruments in the area of copyright.

In the InfoSoc Directive, the EU exercised its competence as regards the rights which are relevant for online dissemination (notably the reproduction and making available rights) and the exceptions applicable to such rights. Article 5 provided for an exhaustive list of exceptions, including the exception for preservation, teaching and research mentioned above. Any change in the harmonised framework concerning the scope of exceptions or the introduction of their cross-border effect would need to rely on the same legal bases.

Finally, Article 167(4) TFEU provides that the EU shall take cultural aspects into account in its action under other provisions of the Treaties, in particular in order to respect and to promote the diversity of its cultures. All proposed options take into account the implications of EU action for cultural diversity.

Subsidiarity and added value

The existing level of harmonisation limits the possibility for MS to act in the area of copyright as they cannot unilaterally alter the scope of the harmonised rights and exceptions. Therefore, the need to update some of the existing exceptions or to introduce new exceptions, in particular to reflect new digital uses, makes the amendment of EU legislation inevitable.

Moreover, EU intervention is indispensable to achieve one key objective of the copyright modernisation, which is to guarantee legal certainty in cross-border situations. This can only be achieved by making the relevant exceptions mandatory for MS to implement, increasing their level of harmonisation, and, when relevant, recognising their cross-border effect. None of this can be achieved by MS legislation. Without intervention in EU law, beneficiaries of the exception would face legal uncertainty and may not be able to rely on the exception in cross-border situations (for example teachers in distance learning programmes making content available under the teaching exception in one MS would need to verify whether the same acts are allowed under the exceptions in MS where the students are located, and if not, may have to obtain authorisation from rightholders). Therefore, MS acting alone could not sufficiently address these problems and the objectives can be only achieved by EU action.

4.1.3.What should be achieved?

The general objective of EU intervention is to facilitate digital uses of protected content for education, research and preservation in the Single Market. Through this objective, EU intervention should contribute to promote digital innovation in education and research, foster the international competitiveness of European research and encourage the preservation of cultural heritage.

Achieving this general objective requires adapting the relevant copyright exceptions to enable digital and cross-border uses, while maintaining a high level of protection of rights. Changes to existing rules should aim at providing legal certainty for the use of protected content in digitally-supported teaching activities, for text and data mining in the context of scientific research and for digital preservation by cultural heritage institutions.

4.1.4.Methodology

Problem definition

The problems described in this section of the IA are closely linked to the specificities of the EU legal framework for exceptions described above. As illustrated in the problem tree below, legal uncertainty on the acts allowed under the existing copyright exceptions, in particular in relation to digital and cross-border uses, has been identified as a major issue in several areas.

This legal uncertainty is often the result of a restrictive implementation of copyright exceptions for "specific acts of reproduction" and "illustration for teaching and research" in certain MS and/or of the fragmentation of copyright rules and licensing conditions. It can result in a suboptimal use of protected content in the digital environment. The table below illustrates the main differences in the implementation of the exceptions in MS. 249  

Exception

Implementation in
Member States

Main differences in the implementation in Member States

Teaching

Exception implemented in all MS

Implemented through extended collective licensing in DK, FI, SE

Exception subject to the availability of licences in UK, IE

Application of the exception to digital uses

Categories of beneficiaries (public or private education bodies, teachers and students, etc.)

Exclusion of certain types of works (e.g. sheet music or cinematographic works)

Exclusion of textbooks or other works made explicitly for educational purposes

Extent of works that can be used under the exception (fragments, extracts, specific limitation, etc.)

Payment of a compensation or remuneration under ECL/licence (required – at least partially – in 16 MS)

TDM

A specific TDM exception only in the UK (FR has a legislative draft at advance stage)

Research exception implemented in most but not all MS (notably not in ES, NL).

The national implementations of the research exceptions across MS do not specifically take into account/mention TDM.

Specific acts of reproduction by libraries and similar institutions (preservation)

Exception implemented in all MS

Purpose of the exception (preservation, conservation, archiving, other non-preservation related etc.)

Exclusion of certain beneficiary institutions (e.g. archives only)

Exclusion of certain types of works (e.g. print works, videograms or phonograms etc.)

Limits to the number of copies allowed

Exclusion or unclear status of certain types of acts (e.g. format shifting, digital copies)

Conditions (e.g. restoration or repairing damage only).

Identification of policy options

The policy options examined in each of the three areas include the baseline option, a non-legislative option (in the form of Commission's guidance, peer review mechanism and/or stakeholders’ dialogue) and one or several legislative options. Non-legislative options have been developed taking into account the specificities of each exception (implementation in MS, relation with licences, stakeholders concerned). Legislative options are designed to complement the existing exceptions (in the case of preservation and teaching), or to introduce a new exception (in the case of TDM, supplementing the existing research exception).

Views from stakeholders, European Parliament and Member States

The views from the different stakeholders are reported after the description of each policy option.

In its resolution of 9 July 2015, 250  the EP called on the Commission "to examine the possibility of reviewing a number of the existing exceptions and limitations in order to better adapt them to the digital environment”. In particular, the EP favours an exception for research and education purposes, covering online and cross-border activities, provided that a fair balance between the different categories of rightholders and users of protected content is maintained The recommendation also stressed the need to "assess the enablement of (…) text and data mining techniques for research purposes, provided that permission to read the work has been acquired". Finally, it asked the Commission to "assess the adoption of an exception allowing libraries to digitalise content for the purposes of consultation, cataloguing and archiving" and indicated that the exceptions for the benefit of libraries, museums and archives should be strengthened in order to facilitate access to cultural heritage.

MS are generally in favour of adapting exceptions in order to facilitate digital and cross-border uses of protected content for the purposes of education, research and preservation. They would support further harmonisation of existing exceptions where the uses have a clear cross-border dimension, but are likely to require some flexibility for implementation at national level. Their support to the different policy options will also depend on the balance ensured between the interests of users and rightholders. 251

In the 2014 public consultation on the review of EU copyright rules, 252  several MS suggested to clarify the scope of the teaching exception, in particular in relation to online uses, and some other MS favoured a greater harmonisation which would require making the teaching exception mandatory across the EU. Certain MS however indicated that there is no need to further harmonise or extend the scope of the existing teaching exception.

On TDM, MS are expected to be overall supportive of an intervention at EU level, as some of them have tried to address this issue at national level but can only do it within the boundaries of the current research exception.

In relation to preservation, some MS explained in the 2014 public consultation that there is no need to alter the current legal framework, while others did not express themselves against changing the status quo, with some emphasising the need to consider technological neutrality as regards the exception.

Impacts of policy options

The revision of existing exceptions or the introduction of new exceptions need to be assessed in relation to, one the one hand, how they facilitate the access to and use of protected works by certain specific categories of users (educational establishments, research institutions, cultural heritage institutions); on the other hand, how they affect rightholders' revenues and incentives to create or to invest in the creation of new works. More generally, it is important to highlight that exceptions need to comply with the 'three-step test', enshrined in the main international treaties on copyright, 253 which provides that exceptions may only be applied (i) in certain special cases, (ii) which do not conflict with a normal exploitation of a work or other subject matter, and (iii) do not unreasonably prejudice the legitimate interests of the right holder. The three-step test is also established in Article 5(5) of the InfoSoc Directive.

Preferred options would be those bringing social gains without reducing incentives to create. A thorough understanding of the licensing market and a precise definition of the scope and conditions of application of the exceptions is necessary to achieve this balance.

Stakeholders affected

The main stakeholders affected by the different policy options are certain users and institutional users (teachers, researchers, educational establishments, research institutions, cultural heritage institutions) and rightholders. The analysis presented in this IA focuses mainly on the impact on rightholders in the print sector (authors and publishers), as text documents (books, newspapers, scientific journals) and images are the type of documents mostly used in education and research and are an essential part of the collections of cultural heritage institutions. Impacts on rightholders in other sectors (music, AV) are mentioned where relevant.

Impacts on MS, notably in terms of obligations deriving from the preferred policy options and related costs, are presented in Annex 3.

Type of impacts and availability of data

Only the most significant and likely impacts are reported in this IA. The impacts are assessed by group of stakeholders (users and rightholders). In addition, broad social impacts (impacts on education, research, preservation of cultural heritage and cultural diversity; no significant impacts on employment have been identified) and impacts on fundamental rights are assessed separately.

Economic impacts are examined for each group of stakeholders, including impacts on transaction costs, in particular costs related to the clearance of rights where a given use requires the authorisation of rightholders; as well as impacts on licences' costs (for users) and on licensing revenues or licensing opportunities (for rightholders). In this regard, it is important to note that the policy options developed in the area of exceptions should not have a direct impact on rightholders' primary market (e.g. acquisition of books by educational establishments or libraries, subscriptions to scientific journals), but on the licensing of further uses of their content for specific purposes (e.g. digital copying for preservation, scanning, text and data mining). Therefore, the analysis focuses mainly on assessing the impacts on this type of licensing. Possible indirect impacts on rightholders' primary market are mentioned where relevant.

The data available on transaction costs linked to right clearance is limited, since education, research and cultural heritage institutions generally do not engage in a systematic evaluation of these costs in relation to their uses of copyright protected content. In addition, these costs are highly variable depending on the type and number of works and the MS concerned.

Data on licences' costs and licensing revenues are provided where available. This type of data is generally not publicly available but has been provided by stakeholders (notably rightholders) for the purpose of this IA, sometimes on a confidential basis. The available data does not always exactly correspond to the uses contemplated in this IA. For instance, digital uses for illustrating teaching or text and data mining are generally part of wider licences acquired by education or research institutions. It can therefore be very difficult to assess the costs related to these specific uses and the corresponding revenues for the rightholders.

The social and economic impacts of the different policy options strongly depend on the scope and conditions of application of the exceptions. In this context, one important element is the relation between exceptions and licences. In certain cases, it may be necessary to prevent contractual override of the exception in order to achieve the desired social objectives. In other cases, making an exception subject to the availability of licences may be required to mitigate the economic impact of an exception or to avoid eroding well-functioning national systems.

All policy options considered in the area of exceptions may have an impact on fundamental rights, in particular on copyright as a property right (Article 17(2) of the Charter). In addition, impacts on scientific research and academic freedom (Article 13) and on the right to education (Article 14) are considered where appropriate. Impacts on other fundamental rights are not mentioned as there is either no or insignificant impact on them.

Impacts on third countries or on the environment are not elaborated upon as the policy options presented in this section of the IA are considered not to have any substantial impact on them.

Impacts on SMEs

SMEs are the backbone of Europe's economy. They represent 99 % of all business in the EU. In the past five years they have created around 85 % of new jobs and provided two-third of the total private sector employment in the EU. The exceptions analysed in this section of the IA are exceptions to the rights hold by natural persons or legal entities, including SMEs and micro-enterprises. The policy options considered in this IA do not target these entities but may have an impact on them, notably as the large majority of rightholders affected by the exceptions are SMEs.

99.4% of European companies active in the book publishing sector (books, newspapers, journals) are SMEs, of which 90 % are micro-companies (0-9 employees). SMEs generate 49% of the value added of the sector (including 10% from micro-companies). 254  In the sector of film and music production, 99.9 % of companies are SMEs (96 % micro-companies) generating 85% of the value added of the sector (32 % by micro-companies). 255  

Therefore, the impacts of the different policy options on rightholders are assessed taking account of the high number of SMEs. The impacts on the licensing market and on licensing revenues are for example key criteria when comparing the options. Micro, small and medium-sized companies may be proportionately more strongly affected by a reduction of licensing revenue than large companies with a more varied range of products. 

Excluding micro-companies would not be appropriate, considering the purpose of the initiative. By defining the scope of copyright exceptions, the legislative options in this initiative would contribute to define the scope of copyright as a property right, which cannot vary according to the size of the entity holding this right. None of the existing exceptions in the EU legal framework differentiates its scope of application according to this criterion. In addition, excluding micro-companies would make it impossible to achieve the objectives defined in section 4.1.3, since the exceptions considered in this IA would not apply to all relevant content but only to the fraction which is not held by micro-enterprises. This would create major legal uncertainty for users and would not allow ensuring a consistent implementation of rights and exceptions, regardless of the type of works and/or rightholders.

Since none of the policy options would result in administrative obligations for SME, mitigating measures for SMEs have not been proposed. Certain options may generate one-off compliance costs related to the need to adapt existing licences, however these costs are expected to be marginal.

Comparison of policy options

The policy options are compared against the criteria of effectiveness (i.e. to what extent they fulfil the specific objective), efficiency (i.e. at what cost they do so), impact on the different groups of stakeholders (users and rightholders) and coherence with regard to cultural diversity, fundamental rights and/or other EU policies. Each option is rated between "--" (very negative), "-" (negative), 0 (neutral), "+" (positive) and "++" (very positive).

4.2.Use of protected content in digital and cross-border teaching activities

4.2.1.What is the problem and why is it a problem?

Problem: Teachers and students face legal uncertainty when using content in digitally-supported teaching practices, in particular across borders

Description of the problem: A huge variety of content (text, images, music, video), often protected by copyright, is used in teaching activities. While reference textbooks or academic books are usually bought by educational establishments or directly by students, other materials used to illustrate or complement teaching are generally shown in the classroom by teachers, copied or distributed to students. Digital technologies are offering new opportunities to use a wide range of media and content in order to enrich teaching activities. However, many users in the education field consider that the conditions for using protected content in digital or online teaching activities are unclear. According to a recent survey, only 34 % of educators and 26 % of learners declared that the conditions under which copyrighted works can be used for learning/teaching purposes are very clear to them. Furthermore, 24 % of educators indicated they come across copyright-related restrictions in their digital teaching activities at least once a week. 256  Teachers and students facing legal uncertainty or specific restrictions frequently refrain from using protected content, in particular when this content has to be accessed by students through online means and from different MS. 257  In some cases legal uncertainty may result in unauthorised uses. Many respondents to the 2013-2014 public consultation brought forward difficulties in cross-border uses. 258

Drivers: [Restrictive implementation of the exception] The use of protected works for the purpose of illustration for teaching is covered by exceptions in the InfoSoc Directive 259 and the Directive 96/9/EC 260  (the "Database Directive"). The notion of "illustration for teaching" can be understood as allowing a teacher to use a work to give examples, to explain or support his/her course. 261 The illustration for teaching exception ("the teaching exception") has been implemented in all MS, with significant differences as to the type of works covered and the type of educational uses allowed. 262  The legal uncertainty faced by teachers in the digital environment may arise from the restrictive implementation of the teaching exception in certain MS, where the exception does not clearly allow digital uses (e.g. by allowing only reproduction on paper or distribution of physical copies 263 ) or where strict conditions apply to these uses (e.g. imposing a low resolution for the making available of images 264 ). 265 Feedback from educational users also highlights the concrete obstacles faced in certain MS in digital education practices. 266  

[Heterogeneous implementation and lack of cross-border effect] The uncertainty is reinforced in a cross-border context by the diversity of the conditions established in national laws combined with the lack of cross-border effect of the exception. Teachers who use protected materials for the purpose of illustration under the terms of an exception in one MS may run the risk of infringing copyright in another MS when they make material available to students across borders. When asked about the type of copyright-related problems encountered in cross-border education, educators point out the lack of information on copyright rules in other MS, the differences in the application of the exception and the national scope of the licences. 267  

The practical implementation of the teaching exception differs from a country to another. 268 In certain MS (notably FR, DE, ES, NL), collective agreements are in place to organise the compensation of rightholders that may be required in national laws for uses under the teaching exception. In other MS (UK, IE), licensing schemes for uses of protected content in teaching activities prevail over the exception. Finally, educational uses are allowed under extended collective licensing (ECL) in DK, FI and SE. 269  

[Insufficient licensing mechanisms] These different types of licensing schemes are very common in the print sector 270 and usually define authorised uses precisely; however, the type of digital uses covered may vary 271  and cross-border uses are not always allowed. 272 Collective licensing schemes for educational uses are less widespread in other sectors (e.g. AV) or for certain types of works (e.g. digital educational resources). In such cases, educational establishments need to negotiate and obtain a licence directly with the rightholders, generating significant transaction costs. 

Consequences: The legal uncertainty on digital uses of protected content in teaching activities may, on the one hand, negatively impact the further development of digitally-supported educational practices in primary and secondary education, where digital resources are mainly used to complement face-to-face teaching. 273 On the other hand, it is likely to affect higher education institutions more strongly, due to a more pervasive use of digital resources in this context 274  (e.g. use of digital course packs, access to resources through the university's intranet, etc.) and to the rapid development of cross-border and online education. An increasing number of universities are proposing distance learning modules online or delivering Joint Degrees, while many others collaborate on developing shared curricula using online content. The number of individuals taking online courses has doubled between 2007 and 2013, reaching more than 10 % in certain MS. 275  The ability for teachers and students to use and access material online from any MS – through the university's intranet or virtual learning environment – is essential in this context.

How the problem would evolve: Without intervention at EU level, educational establishments and teachers in a number of MS would continue to face legal uncertainty when using protected content to support digital teaching and learning activities, unless these MS unilaterally decide to amend their legislation to allow such uses. The scope of existing collective licences may be widened in order to cover digital uses. However, obstacles to cross-border uses of content are likely to remain, and distance and online students would continue to be disadvantaged as regards the access to teaching materials.

4.2.2.What are the various options to achieve the objectives?

The general and specific objectives are described in section 4.1.3.

Baseline

No policy intervention. In MS where digital uses are not clearly allowed under the national teaching exception, this option would consist in relying on market developments (e.g. further development of collective licensing schemes, publishers' digital offers) to offer solutions that allow teachers and students to use protected content in teaching activities supported by digital tools or taking place online. At the same time, certain MS could decide to amend their national exceptions – based on the optional teaching exception in Article 5(3)a of the InfoSoc Directive, which allows digital uses– to clarify the extent to which certain digital uses are covered in their MS.

Stakeholders' views

Rightholders are likely to support the baseline option. Institutional users in the education area (educational establishments, teachers) would consider that this option cannot solve the identified problems.

Option 1 – Guidance to MS and stakeholders' dialogue on raising awareness in the education community on the use of protected works for teaching purposes

Under this option, the Commission would issue guidance to MS as to the extent to which protected content can be used in the digital environment under the existing teaching exception, in line with the three-step test. Such guidance would encourage MS to make sure, when required, that their national exception applies to digital resources used for teaching purposes and to online activities undertaken by educational establishments or teachers.

In addition, the Commission would encourage discussions between rightholders and educational establishments to explore ways to raise awareness in the education community on the uses allowed under the exception or under specific licences.

Stakeholders' views

Rightholders are expected to be rather supportive of this option, as it would not imply any further harmonisation of the existing teaching exception; would leave sufficient space for licensing mechanisms and could contribute to a better understanding of copyright rules among teachers and students. 276 While certain institutional users may support Option 1 as an intermediate solution, 277 most of them would consider that it does not sufficiently address the practical problems encountered when using protected works in distance or cross-border education. 

Option 2 – Mandatory exception with a cross-border effect covering digital uses in the context of illustration for teaching

This option would make mandatory for MS the implementation of an exception to the rights of reproduction and making available to the public, with the following elements:

Beneficiaries: educational establishments.

Subject-matter covered: all types of works or other protected subject-matter, including resources produced specifically for education (e.g. textbooks, academic books, educational documentaries).

Permitted uses: teachers and students affiliated to educational establishments would be allowed to use protected works for non-commercial purpose to illustrate teaching through digital means in the classroom (e.g. whiteboards) or online under the educational establishment's secure electronic network (e.g. virtual learning environment, intranet). Digital uses which would result in making protected content available on the open internet (e.g. uses beyond quotation of protected content in Open Educational Resources - OERs 278 or in Massive Open Online Courses - MOOCs 279 ) would not be covered under this option. 280

Relationship with the licensing market: the uses allowed under the exception would not be subject to the availability of licences.

Compensation: MS would remain free to determine whether they require compensation for the uses under the exception. In MS opting for compensation, it would be applied to the uses undertaken by educational institutions (and their affiliated teachers and students) established in that MS, irrespective of where such uses actually would take place.

Interaction with the current exception: outside the scope of this mandatory exception, the existing (optional) teaching and research exception under Article 5(3)a of the InfoSoc Directive would continue to apply. For teaching, this would be relevant mainly for analogue uses.

Cross-border uses: The cross-border effect of the exception would be ensured through a legal fiction which would provide that the uses made under the conditions of the exception are deemed to take place only in the MS where the educational body is established. Such provision would make sure that the content made available under the exception by beneficiary institutions can be lawfully accessible to affiliated teachers and students located in other MS.

Stakeholders' views

This option is expected to be supported by institutional users in the education area, which are generally in favour of a broad mandatory teaching exception for digital uses. 281 It would be strongly opposed by rightholders whose works are used in the teaching context (in particular educational publishers, considering the impact that this exception would have on their primary market) and by certain MS using licences-based systems, including ECL, for authorising educational uses. 

Option 3 – Mandatory exception with a cross-border effect covering digital uses in the context of illustration for teaching, with the option for MS to make it (partially or totally) subject to the availability of licences

This option would be similar to Option 2 but would leave MS the possibility to decide that the exception would come into play only if licences covering the same uses are not available in the market.

In order to reduce the administrative burden for educational establishments related to the need to check the availability of licences, MS opting for this approach would have to take measures to ensure that licences covering relevant uses are available, sufficiently visible and easy to use for educational establishments. 282 They would be required to notify to the Commission the measures taken in this respect.

Cross-border uses: the legal mechanism described under Option 2 would also apply to equivalent licences (the uses carried out under these licences would be deemed to occur only in the MS where the educational body is established).

Stakeholders' views

Rightholders and CMOs are expected to favour this option, as it would allow MS to keep or to introduce the possibility of licences for educational uses. On the other hand, the education community may find it insufficient to create full legal certainty for teachers and students. 283

4.2.3.What are the impacts of the different policy options and who will be affected?

Approach

The options presented above would affect institutional users (educational establishments) and users in the education area (teachers, students) as well as rightholders whose works are used as illustration in teaching activities. The impacts affecting these two groups are presented separately.

For users, the following social impacts have been considered: impacts on legal certainty for digital and cross-border teaching activities. Economic impacts are examined in terms of transaction costs (related to the negotiation and management of licences) and licensing costs (licence fees paid to rightholders or CMOs) for educational establishments.

For rightholders, the most relevant impacts are economic impacts related to licensing revenues. Since educational publishers play a particular role in the production of educational content (including content developed and distributed in a digital form), specific impacts on the educational publishing market are considered where relevant. 284  

The policy options are also assessed in relation to their social impacts on cultural diversity, digital education and digital skills, as well as to their impacts on fundamental rights (property right and right to education).

The assessment below is mainly qualitative, as the data publicly available or that could be obtained from stakeholders on compensation or licensing of educational uses is limited. Quantitative estimates are elaborated where possible, on the basis of available data. 

Baseline

Impacts on stakeholders

Institutional users and other related users (educational establishments, teachers, students)

Impacts on legal certainty for digital and cross-border education: The legal uncertainty faced by educational establishments and teachers in certain MS for digital uses is expected to persist under the baseline option. Only reforms at national level or developments in the licensing market could contribute to reduce it. A certain number of MS (e.g. ES, UK) have recently amended their legislation to clarify that the teaching exception applies to content used in secure electronic environments. Other MS may follow, however it is unlikely that all MS would engage in similar reforms and in any event such reforms would not result in an exception applicable across borders. In MS where specific educational licensing schemes are in place, CMOs may propose to review the scope of the licences to better respond to the needs of educational establishments, for example as regards digital and online uses. However they may not always be able to licence cross-border uses (if they don't have the rightholders' mandate for all EU territories). Furthermore, solutions based on collective licensing may not be fit for all types of works (e.g. AV works). In the MS where the uncertainty would persist, teachers would be deterred from using protected content in digital teaching activities, beyond what is allowed for under existing licences. They may instead increasingly use OERs available under open licences, which however may not fully cover their needs, in terms of quality and variety of educational materials. 285  

Under this option, cross-border uses of protected content would remain subject to legal uncertainty. This aspect would constitute a significant obstacle for higher education institutions proposing distance learning programmes followed by students located in other MS. 286  Enrolled students may be disadvantaged by having a limited access to teaching materials.

Impacts on costs for educational establishments: The baseline option would not have any direct impacts on costs. Where digital and cross-border uses are not allowed under the teaching exception or under specific licensing schemes, educational establishments would continue facing transaction costs to obtain the necessary authorisations.

Rightholders

Impacts on licensing revenues: Under the baseline option, the ability of rightholders to generate revenues from educational uses would continue to vary from a MS to another, depending on the scope of the teaching exception, the mechanisms foreseen for the compensation of rightholders for uses under the exception, and the licences covering additional uses.

Social impacts

The legal uncertainty on the use of protected content could contribute to slow down the development of digital and cross-border education and indirectly the acquisition of digital skills, which are essential in the information society; however many other factors may more strongly influence such development (e.g. availability of broadband connections in schools, IT equipment, teachers' digital skills, etc.).

The access to a wide range of cultural materials to illustrate or complement teaching is an important element to promote cultural diversity. The baseline option may, to a minor extent, negatively affect cultural diversity as it could limit the ability of teachers to use such illustrative content in digital teaching practices.

Impacts on fundamental rights

This option would not have any impact on copyright as a property right (Article 17 of the Charter), as it would not expand the scope of the existing teaching exception. It may have an impact on the right to education, as enshrined in Article 14 of the Charter, only to the extent that the legal uncertainty faced by educational establishments would constitute an obstacle to the further development of distance learning. Distance learning plays a role in facilitating access to education, for example for people with disabilities that cannot be present on the premises of educational establishments or people pursuing further education while working. 287  

Option 1 – Guidance to MS and stakeholders' dialogue on raising awareness in the education community on the use of protected works for teaching purposes

Impacts on stakeholders

Institutional users and other related users (educational establishments, teachers, students)

Impacts on legal certainty for digital and cross-border education: Option 1 would allow reducing, to a certain extent, the current legal uncertainty faced by educational establishments and teachers in the digital environment. The actual impact would depend on actions taken by MS following the guidance provided by the Commission. In the best-case scenario, Option 1 could result in digital uses being allowed under the national implementations of the teaching exception; however this would not be sufficient to provide cross-border effect for the use of protected content under the exception.

Efforts to raise awareness among teachers and students on the scope of the exception and the uses allowed under licences could bring positive results and are likely to be well accepted. In fact, teachers are often not aware of the licences purchased by their educational establishment. 288 Measures aimed at raising awareness on copyright rules were the type of solutions that gathered strongest support both from users and copy rightholders in a recent survey. 289  

Impacts on costs for educational establishments: the transaction costs described in the baseline option could only be reduced if MS clarify the application of the exception to digital uses on the basis of the Commission's guidance.

Rightholders

Impacts on licensing revenues: The impacts of this option on rightholders are expected to be rather limited and would mainly depend on the possible changes introduced in MS legislation. On the one hand, this option may limit the rightholders' ability to license certain types of educational uses (e.g. digital copying, scanning, posting on the school's intranet - if digital uses become covered by national exceptions). On the other hand, the dialogue with users in the education community may bring positive results in the medium to long term by reducing the cases of unauthorised uses.

Social impacts

Option 1 could have a positive impact on the further development of digitally-supported education practices and indirectly on the acquisition of digital skills. The obstacles to cross-border education would nevertheless persist. There may be some positive impacts in terms of wider access to cultural works as a result of teachers' extended ability to use protected content in digital teaching practices (depending on the extent to which MS follow the guidance and/or the success of stakeholders' discussions).

Impacts on fundamental rights

Option 1 would have no direct impact on the right of property, as it would not expand the scope of the existing teaching exception but provide guidance on the conditions of use of protected content under the existing exception. The impact on the right to education would be similar to the baseline option.

Option 2 – Mandatory exception for digital uses for the purpose of illustration for teaching, including across borders

Impacts on stakeholders

Institutional users and other related users (educational establishments, teachers, students)

Impacts on legal certainty for digital and cross-border education: Option 2 would bring a high degree of legal certainty to educational establishments and teachers across all MS. This could lead in the short term to an increased use of illustrative resources and an enriched learning environment for students. The actual impacts on education institutions would vary between MS, depending on how the optional teaching exception has been implemented so far and on the licensing mechanisms in place. The impact of Option 2 would be stronger in MS where the scope of the existing teaching exception is currently limited or unclear (e.g. where the teaching exception does not clearly apply to digital uses or where it applies only to certain types of works and media). Importantly, Option 2 would allow in particular higher education institutions to gain legal certainty for cross-border uses. Distance and online students, including those located in other MS, would be able to access the materials used and made available by teachers under the same conditions as on-site students.

However, the legal certainty offered by Option 2 to educational establishments and teachers may be undermined in the long term by a reduced quality and variety of educational resources, which could result from the application of the exception to textbooks and other resources produced specifically for education (see 'impact on rightholders' below). In a recent survey, a majority (54.6 %) of educational users reported that they used licensed works more because they offer better quality and/or variety than open licence alternatives. 290

Impacts on costs for educational establishments:

Transaction costs: Option 2 would significantly reduce the transaction costs supported by educational establishments when digital and cross-border uses are not allowed under the national teaching exception or under a collective licensing agreement. These transaction costs include staff costs for providing guidance to teachers on the use of specific resources, identifying rightholders and obtaining the necessary authorisations; they may be particularly high when authorisation need to be obtained on a work-by-work basis (which may often be the case for using AV works). No evidence could be found to quantify these costs.

Licensing costs (licence fees paid by educational establishments): Option 2 could result in a reduction of licensing costs in MS where secondary uses 291 of protected content in education are currently allowed under collective licensing schemes (including ECL). Part of the uses (digital uses for illustrating teaching) would become covered by the new EU exception. Educational establishments would therefore be in a position to renegotiate their agreements with CMOs which may be constrained to review the scope of their licences and reduce licence fees. 292  Data collected for a few MS on the cost of licensing for educational establishments (where educational uses are allowed under a licence or an ECL) tend to show that these costs are relatively low: in the UK, according to a report prepared for Copyright Licensing Agency, copyright licensing payments (covering analogue and digital uses) make up less than 0.1 % of an educational establishment’s expenditure; 293  in Denmark they amount to less than 1 %. 294 The reduction of licensing costs under this Option would therefore be limited, in particular if MS introduce an obligation to compensate rightholders for the uses under the new exception.

Option 2 would also significantly reduce opportunity costs associated to materials not being used due to legal uncertainty or budgetary constraints on educational establishments.

Rightholders

Impacts on licensing revenues: the impact of Option 2 would vary between MS, depending on how the optional teaching exception has been implemented so far and on MS decision to require compensation for the uses under the new EU exception or not.

In MS where the current teaching exception already encompasses digital uses for all types of works (e.g. BE and NL), 295 no impact is expected on rightholders' revenues. The authorisation of cross-border uses, in the conditions foreseen under Option 2, is not expected to prejudice the rightholders' interests, as it would not result in the uncontrolled dissemination of content online (cross-border uses under the exception would be limited to distance students enrolled with a specific educational establishment and accessing through a secure network). Therefore, it is not expected to affect the amount of the compensation required in certain MS.

In MS where the current teaching exception is limited to analogue uses or does not clearly allow digital uses (notably HR, IT, PL), rightholders may be negatively affected only to the extent their current revenues rely on the licensing of digital educational uses. This may be the cases in certain countries, where digital uses are subject to voluntary collective licensing agreements. 296 However, it seems that in the past the restrictive implementation of the exception did not favour the development of licences. 297 Therefore, in this case the impact of Option 2 is expected to be limited. It could nevertheless reduce licensing opportunities in the medium term.

Significant impact is expected in MS where digital secondary uses of content for teaching activities currently require a licence., i.e. MS using ECL (DK, FI, SE) and MS where the exception is subject to the availability of licences (UK, IE). In these cases, rightholders would not be able anymore to exercise their exclusive rights to authorise or prohibit digital uses of their works for illustrating teaching. They would be able to continue offering licences only for print copies and digital uses which would go beyond the scope of the new exception (e.g. in terms of extent of copying). This would imply a significant loss of secondary licensing income. 298  One can reasonably assume than Option 2 would affect at least half of the secondary licensing revenue currently stemming from digital uses. 299 Estimates established on this basis and considering the relative importance of digital uses in several MS 300 show that Option 2 would lead to a reduction of 14 % to 25 % of the total revenues currently collected by CMOs (in the print sector) from educational establishments. 301 This proportion is likely to increase over the next years, with the uptake of digital teaching practices at all education levels.

In those MS, rightholders would be differently affected depending on how much their works are used in the teaching context. Considering that text documents and images are the types of content currently most widely used in education, rightholders in the print sector (writers, visual artists, publishers) are likely to be more affected than others. The strongest impacts would be felt by educational and academic authors and publishers, whose works are intensively used by educational establishments. A large part of the volume of copies made in the context of teaching (analogue and digital copies) is based on copies from textbooks or other educational resources: 90 % in IE, 80 % in FR, 67 % in DE. 302 Such impact would also be felt by educational publishers in MS where textbooks and other educational resources are excluded from the scope of the national teaching exception (notably FR, DE, AT, ES). 303 Data collected for FR, DE, UK and SE indicates that secondary uses of textbooks account for 1 to 4 % of the educational publishers' turnover in those countries. 304 A reduction of 14 to 25 % of this source of revenue would therefore have a non-negligible impact on the industry. Academic and Scientific, Technical and Medical Publishers ("STM publishers") would also be strongly impacted by the reduction of licensing income from higher education institutions. 305 Furthermore, the negative impact would extend to educational authors for whom this source of income constitutes a constant revenue stream compared to more variable revenues from primary sales. A study carried out in the UK in 2011 reported that for UK educational authors a 20 % reduction of the secondary licensing income would result in a 29 % decline in output (which would mean 2,870 less new works being created annually). 306  The possible compensation that may be imposed at national level would not ensure the level of revenues that rightholders can obtain when exercising their exclusive rights on the market. 307  

Impacts on competitiveness and innovation in the educational publishing industry: The reduction of secondary licensing revenue is expected to have a direct impact on educational publishers' incentive to invest in new content. 308 It is likely to hit first digital educational resources, whose market is not profitable yet, notably because of the high fixed costs associated to the development of digital products and educational resources platforms. 309 Evidence collected in the UK from a sample of educational publishers indicated that revenues from secondary licensing equate to 19 % of their investment in content development. 310 In the long term, the lack of sufficient investment in digital products could affect the competitiveness of the European educational publishing industry, including at international level. International sales of textbooks and academic books are important notably for the UK and French educational publishing industries (sales in English/French-language markets).

Social impacts

The legal certainty provided by Option 2 would result in a positive impact on the further development of digital and cross-border education and indirectly on the acquisition of digital skills. Option 2 would allow a wider and more flexible use of protected content in education, which may contribute to promote cultural diversity among students. However, the impact of this option on rightholders in certain MS could affect the incentive to invest in the production of new content, in particular resources produced specifically for the educational market. If investment in new content decreases, the quality and variety of educational resources used to illustrate and complement teaching may decline.

Impacts on fundamental rights

Option 2 would affect the right of property, with some uses which currently require the authorisation of rightholders in certain MS being covered by a mandatory exception. On the other hand, it would have some positive impacts on the right to education as it will support the further development of distance education.

Option 3 – Mandatory exception with a cross-border effect covering digital uses in the context of illustration for teaching, with the option for MS to make it (partially or totally) subject to the availability of licences

Impacts on stakeholders

Institutional users and other related users (educational establishments, teachers, students)

Impacts on digital and cross-border education: Option 3 would have the same positive effects as Option 2 in terms of possibility of use of protected content digitally and online for illustrating teaching, including across borders. Legal certainty for such uses would be ensured either via the mandatory exception, or via licences providing for at least equivalent conditions of use (in practice, licences would probably cover uses tailored to the needs of different types of educational establishments, including uses which would go beyond the exception). For most teachers it is irrelevant to know whether the uses are allowed under an exception or under a licence, as long as the conditions for use are equivalent. 311  

Impacts on costs for educational establishments:

Licensing costs: In MS deciding to use the possibility offered under this Option to make the application of the exception subject to the availability of licences, 312 educational establishments would have to pay licence fees for digital uses of protected content (where such licences are available). However, as illustrated under Option 2, data collected from certain MS where educational uses are allowed under a licence or an ECL show that these costs are rather limited if compared to establishments' overall costs. Furthermore, licences covering cross-border uses are not expected to be more costly, as they would not extend the number of users (licence fees are generally defined according to the number of students).

In MS opting for implementing the new exception with an obligation of compensation, educational establishments may incur some costs related to compensation. Considering the current level of compensation in certain MS, these costs are expected to be marginal. For example, the compensation required in FR for digital uses of print works is €1.7 million by year, for 14.7 million pupils/students. The recently negotiated compensation in ES amounts to €3.2 million for digital uses of print works in higher education (covering about 1.2 million students). 313  

Transaction costs: The possible transaction costs for educational establishments related to the need to check the availability of licences are expected to be reduced by the measures MS would have to take to ensure the availability, visibility and user-friendliness of licences covering secondary uses of protected content in education. The development of specific educational licensing schemes 314 could for example contribute to significantly reduce transaction costs, even if different schemes may coexist for different types of works. Since these schemes may not fully remove the need for educational establishments to take up individual licences, 315 it may also be necessary for MS to develop online tools allowing to check the licences available for a given work. Option 3 may also generate administration costs for educational establishments, linked to the negotiation and management of licences. Such costs could be reduced if MS decide to centralise, at national or regional level, the acquisition of licences for educational establishments. 316  

Rightholders

Impacts on licensing revenues: Option 3 would have the same effects on rightholders as Option 2 if all MS decide to implement the EU exception as such. However, the possibility to make the exception subject to the availability of licences is very likely to be used by MS to maintain the mechanisms in place (e.g. ECL in DK, FI, SE and exception subject to licences in UK and IE). It could also be introduced in other MS for certain types of works (e.g. textbooks and educational resources), notably in countries where they are currently excluded from the teaching exception (AT, DE, FR, ES). Such mechanism would allow to favour licensing for resources which are primarily intended for the educational market, but would nevertheless offer the necessary legal certainty where licences are not available. Under this scenario, the negative impacts described under Option 2 would not materialise under Option 3.

In MS using ECL or making the exception subject to the availability of licences, rightholders would need to give sufficient visibility to their licensing offers 317 if they want to be remunerated for the uses of their works in the teaching context. This may generate some costs, in particular for SMEs, which are however expected to be compensated by licensing revenues. The need to make licensing solutions widely available and adapted to the needs of educational establishments could encourage rightholders to sign up into specific educational licensing schemes that may be developed by MS. Other rightholders may prefer developing their own licensing solutions online, in particular for digital resources. 318  

The legal mechanism allowing cross-border uses is not expected to have any impact on rightholders' licensing revenues (as explained under Option 2, licence fees are generally defined according to the number of students, which will remain unchanged) nor to reduce their possibility to licence their works to educational establishments in other MS.

Impacts on competitiveness and innovation in the educational publishing industry: this option is likely to have a limited impact on the competitiveness of the publishing industry, as it leaves to MS the possibility to favour the use of licences over the exception for digital uses in education. MS where the current exception does not apply to textbooks and other educational resources are expected to use the flexibility of Option 3 to make this type of works subject to the availability of licences. This would allow educational publishers to continue investing in the development of digital resources.

Social impacts

Option 3 would have a positive impact on the further development of digital and cross-border education and indirectly on the acquisition of digital skills. It would allow to promote cultural diversity through wider and more flexible uses of protected content in education. In addition, to the extent MS use the flexibility foreseen under this Option to make the resources developed specifically for education subject to the availability of licences, the impact of this option on rightholders is not expected to affect the production of new content.

Impacts on fundamental rights

The impact of Option 3 on the right of property would be mitigated by the possibility for MS to decide that licences prevail over the application of the exception. Option 3 will have positive impacts on the right to education as it will support the further development of distance education.

4.2.4.How do the options compare?

Option

Effectiveness

Efficiency

Impact on stakeholders

Social impacts and fundamental rights

Baseline

(0) Legal uncertainty for digital/online and cross-border uses would persist

(0) No direct costs associated with the baseline option

(0) Impacts on stakeholders would depend on reforms at national level or developments in the licensing market

(0) No direct impact on cultural diversity and on the development of digital and cross-border education

(0) No direct impact on fundamental rights

Option 1 – Guidance and stakeholders' dialogue

(0/+) Could result in some improvements in certain MS but would not allow to ensure legal certainty across the EU

(0/-) Limited costs linked to the organisation of the stakeholders' dialogue

(0/+) Main impacts on stakeholders would depend on the possible changes introduced in MS legislation

(0/+) Possible positive impact on cultural diversity and the development of digital and cross-border education, depending on MS action

(0) No direct impact on fundamental rights

Option 2 – Mandatory exception for digital for the purpose of illustration for teaching, including across borders

(++) Would ensure legal certainty for digital uses, including across borders

(-) High compliance costs in MS using licence-based mechanisms for educational uses (need to review the functioning and scope of these mechanisms in view of the introduction of a mandatory exception)

(+) Full legal certainty and possible reduction of licensing costs for educational establishments

(-) Possible reduction of the quality and variety of educational resources in the medium/long term

(--) Significant loss of licensing income for rightholders in certain MS

(+/-) Positive impact on cultural diversity in the short term; in the medium/long term, could negatively affect the production of educational resources

(+/-) Positive impact on digital and cross-border education may be undermined by lower quality and variety of educational resources in the medium/long term

(-) Negative impact on the right of property

(+) Positive impact on the right to education

Option 3 – Mandatory exception with option for MS to make it subject to licences

(++) Would ensure legal certainty for digital uses, including across borders

(0/-) Compliance costs for certain MS related to the need to take measures to ensure the availability and visibility of licences.

(+) Full legal certainty for educational establishments if MS take the appropriate measures to ensure the availability and visibility of licences

(-/0) Depending on the choice made by MS, possible licensing and transaction costs for educational establishments, but expected to be limited

(0) Impacts on rightholders expected to be neutral

(+) Positive impact on cultural diversity

(+) Positive impact on the development of digital and cross-border education

(-/0) Limited negative impact on the right of property, depending on the choice made by MS

(+) Positive impact on the right to education

Option 3 is the preferred option, as it would allow reaching the objective of full legal certainty for digital and cross-border uses in education for the benefit of educational establishments, teachers and students, while limiting negative impacts on rightholders. In contrast, Option 1 would not be sufficiently effective and Option 2 would entail significant foregone costs for rightholders in several MS, with a possible negative impact on the quality and variety of educational resources in the long term. Option 3 could imply some compliance costs for MS deciding to make the exception subject to the availability of licences, because of the requirement to ensure availability and visibility of such licences. However, these costs are expected to be lower than the compliance costs associated with Option 2 (need for certain MS to thoroughly review the way in which educational establishments make use of protected content in order to implement the exception). Also, such compliance costs from MS would allow to significantly reduce administrative burdens and related transaction costs for educational establishments. Finally, the impacts on cultural diversity and fundamental rights are more balanced under Option 3 compared to Option 2.

Proportionality and impacts on MS: Option 3 responds to the policy objective in a proportionate manner, by focusing on uses which have a cross-border dimension (digital uses) and leaving sufficient flexibility for MS to choose the most suitable mechanism (exception or licensing).

The implementation of Option 3 will require certain MS to adapt their national legislation in order to clarify that the exception covers digital uses carried out in the context of illustration for teaching. Other MS, where such uses are already allowed under their national teaching exception, will only need to make more limited amendments to reflect the specific conditions defined under Option 3 (e.g. uses under secure electronic networks, all types of works covered). All MS would need to amend their national laws in order to allow for cross-border uses. The flexibility foreseen for the implementation of the exception will allow MS to maintain to a large extent the existing arrangements (e.g. ECL or exception subject to the availability of licences).

4.3.Text and data mining

4.3.1.What is the problem and why is it a problem?

Description of the problem: Text and Data Mining (TDM) is a term commonly used to describe the automated processing ("machine reading") of large volumes of text and data to uncover new knowledge or insights. 319 TDM can be a powerful scientific research tool to analyse big corpuses of text and data such as scientific publications or research datasets. 320

The current level of TDM in the EU is difficult to quantify. 321  Attempts have been made by some studies on the basis of proxies, 322 in particular the number of journals publications on TDM which suggest a slow but constant increase over the years (around 10 % per annum worldwide in 2010-2014 and similar trends in EU MS) 323 with the EU MS covering 28,2 % of worldwide publications on TDM, Asia 32,4 % and Northern America 20,9 %. 324  All stakeholders generally agree that TDM is still a nascent tool, in particular in the non-business sector, i.e. for research carried out by organisations such as universities or research institutes (generally referred in this IA as "public interest research organisations"). Researchers are generally convinced of the potential of TDM but they put forward legal uncertainty, caused by the current copyright rules, as one of the reasons for the slow development of TDM in the EU (in addition to aspects unrelated to copyright, such as lack of awareness and skills, infrastructural challenges, etc.). A recent survey reported that less than 20 % of researchers had used TDM techniques to analyse journal literature in a sample of EU MS (24 % worldwide). 325  Rightholders – notably scientific publishers - report from their side a relatively limited number of TDM requests from universities and other public interest research organisations (around 15 % of publishers in the UK had received TDM requests in 2014 to mid-2015 according to one survey). 326  

Drivers: [Current research exceptions in EU law not fully adapted to TDM] Together with the above mentioned non-copyright related drivers, which are not addressed in this IA, copyright issues contribute to the slow development of TDM in EU research. Copyright is relevant in this context as TDM may often involve copying (e.g. downloading) of the content to be analysed, which can be protected by the "right of reproduction" under copyright law. 327 The current EU copyright rules lay down exceptions permitting the use of content for the purposes of non-commercial scientific research. 328 However, a considerable level of legal uncertainty exists in practice. Research organisations do not always know whether TDM is copyright-relevant at all, whether it may be covered by an exception or whether a specific rightholders' authorisation is required. 

[Diversity of licensing practices generating transaction costs]: Researchers consider this situation to be particularly problematic as regards protected content to which they already have lawful access to on the basis of a subscription purchased by their library or institution. Subscriptions to scientific publications may currently include or not the authorisation to perform TDM, prohibit it altogether, or leave it unclear. As a result of the commitments taken in the 2013 "Licences for Europe" dialogue 329  STM publishers have gradually started to include TDM for non-commercial purposes in their subscription licences for academic institutions and to develop common infrastructures to facilitate access to the content to be mined (notably in the framework of the "Cross Ref" mining service – See Annex 11B). 330 However, researchers have generally not received favourably these developments (their representatives left "Licences for Europe" considering that only legislative changes, as opposed to a voluntary approach, would allow to fully address their problems) and generally point out that making TDM subject to specific authorisation in addition to the subscription risk to always make them subject, at least potentially, to different conditions and policies of different publishers, something which they see as particularly problematic in view of the large scale of material which has to be mined in the context of scientific research. 331 These different conditions may give rise to transaction costs for research organisations having to clarify to what extent they are allowed to perform TDM on the basis of their subscriptions and possibly to renegotiate them to make sure they can do so in full legal certainty. In some cases, individual researchers may need to take up licences for TDM if their organisation's subscriptions do not cover it. 332  Before the adoption of a TDM exception in the UK, a large research university indicated that the costs for them to check the compliance of their TDM activities with the different applicable licences could amount to up to GBP 500,000 per year. 333  

[Fragmentation of rules in the single market]: Fragmentation in the single market is also an emerging problem as MS have started to adopt national TDM exceptions referring to the research exceptions in the current EU rules. The UK adopted a specific TDM exception in 2014 334 and some other MS are currently discussing possible national solutions. 335  

Consequences: The above factors together have led to a situation where in practice, whether a prior authorisation for TDM in addition to the authorisation to access the content is required or not depends on the factual circumstances of each case and on the copyright legal framework in the MS where the research activity takes place. Together with other non-copyright related issues such as skills, technology and infrastructure which also play a significant role, lack of certainty in the current copyright framework contributes to the current situation of slow development of TDM in European research.

How the problem would evolve: TDM is likely to become an increasingly important research tool over time, as technology improves and becomes more widespread, researchers acquire new skills and digital research sources increase. Almost all scientific journals are already available online, and a total of around 2.5 million scientific articles are published every year. 336  It has been calculated that the overall amount of scientific papers published worldwide may be increasing by 8 to 9 % every year and doubling every 9 years. 337  In some instances, more than 90 % of research libraries' collections in the EU are composed of digital content. 338  While this trend is bound to continue, without intervention at EU level, the legal uncertainty and fragmentation surrounding the use of TDM, notably by research organisations, will persist. Market developments, in particular the fact that publishers may increasingly include TDM in subscription licences as a result of the commitments taken in the above mentioned 2013 Licences for Europe dialogue to may partly mitigate the problem. However, fragmentation of the Single Market is likely to increase over time as a result of MS adopting TDM exceptions at national level which could be based on different conditions, which is likely to happen in the absence of intervention at EU level.



4.3.2.What are the various options to achieve the objectives?

The general and specific objectives are described in section 4.1.3.

Baseline

Without EU intervention, TDM will continue to be based on rightholders' prior authorisation and its development would depend on the development of market-based initiatives to facilitate TDM licensing, including following the already mentioned commitment of STM publishers in the 2013 "Licences for Europe" process. At the same time an increasing number of MS could decide to adopt national TDM exceptions in the context of the current research exceptions (Article 5(3)(a) of the InfoSoc Directive and Articles 6(2)(b) and 9(b) of the Database Directive). 

Stakeholders' views

Rightholders would support the baseline option as they are generally opposed to an intervention in this area. Researchers consider that legislative intervention is needed and would therefore strongly criticise a lack of EU action (See the report on the results of the 2013/14 public consultation on the review of the EU copyright rules in Annex 2B)

Option 1 – Fostering industry self-regulation initiatives without changes to the EU legal framework

Non-legislative option. The Commission would encourage stakeholders, notably publishers and researchers, to identify collaborative solutions to facilitate TDM, in particular for content subscribed to by research organisations.

Structured dialogues between researchers and publishers would be organised to allow both sides to express their views, notably with regard to researchers' needs and the technical safeguards publishers could use to ensure the protection of their content without creating unnecessary or disproportionate burden for researchers. Building on existing initiatives such as "Cross Ref" (see above: problem definition), this option could also support and promote further technical solutions, such as platforms facilitating TDM in practice to allow researchers to access publishers' data at one go, promoting common standards for data formats or the creation of trusted intermediaries ensuring a safe environment for the mining of content.

The Commission would monitor the implementation of the commitments made by publishers to allow TDM for scientific purposes and to amend their licences respectively. If no substantial improvements are achieved in the mid-term, the Commission would consider proposing legislative changes as described in Options 2 to 4.

Stakeholders' views

Rightholders would support this non-legislative option. STM publishers in particular have asked the Commission to pursue a self or co-regulatory approach on TDM following up on the Licences for Europe dialogue. They consider that collaborative solutions identified together with non-commercial researchers would be a balanced way forward and could yield concrete results more quickly. On the other hand, researchers are not in favour of additional stakeholder dialogues if not accompanied by legislative changes (researchers' representatives left the dialogue considering that licences-based solutions were not an appropriate way to fully solve the problems and foster the development of TDM).  339


Option 2 – Mandatory exception covering text and data mining for non-commercial scientific research purposes.

This option would make mandatory for MS the implementation of an exception to the rights of reproduction and of database extraction, 340 with the following elements:

Beneficiaries: any user who has lawful access to content protected by copyright or by the sui generis database right (e.g. a subscription to a scientific journal). Lawful access would cover access to content through authorisation by content owners (e.g. subscriptions to scientific journals) as well as access to publicly available content (e.g. open access content).

Permitted uses: lawful users would be permitted to carry out the reproductions which are necessary for the TDM process, as long as the TDM is carried out for non-commercial scientific research purposes (within the meaning of the current research exceptions in the EU copyright rules which are subject to the "non-commercial purposes" condition). 341 The exception would not permit any communication to the public of the content being mined.

Relationship with the licensing market: given that lawful access will often be granted through contracts, 342  legislative intervention would also make clear that contractual terms that prevent or restrict uses permitted under the exception are null and void. At the same time, rightholders would be allowed to apply proportionate measures which are necessary to guarantee the security of the content as long as this does not unduly hamper uses covered by the exception. Additionally, the legislative instrument would encourage stakeholder dialogues aiming at setting up best practices and mutually agreed technical solutions with regard to security aspects.

Compensation: the exception would not be subject to the payment of fair compensation to rightholders as its specific features, notably the lawful access condition, allow rightholders to keep generating revenues from the access to their content, notably through subscription licences.

Interaction with the current exceptions: the current research exceptions in the InfoSoc and Database directives would remain untouched and continue to apply outside the scope of the new TDM exception. The exception under this option would also be without prejudice to the transient copies exception under Article 5(1) of the InfoSoc Directive.

Stakeholders' views

Rightholders, publishers in particular, are strongly opposed to a legislative intervention introducing a TDM exception at EU level. Their main concern is an exception would facilitate the misuse and piracy of their content and make them lose business opportunities in future. This option would be the least opposed by rightholders among the legislative options as it is clearly limited to TDM carried out for non-commercial research purposes. While it would go some way in addressing the problem (and to pursue their the "right to mine is the right to read" objective) researchers are likely to consider it insufficient to provide full legal certainty for TDM because of the "non-commercial" condition, in particular when research projects are carried out by public interest research organisations in partnerships with commercial operators. 343  

Option 3Mandatory exception applicable to public interest research organisations covering text and data mining for the purposes of both non-commercial and commercial scientific research

As Option 2 for all the points 344 except for the beneficiaries of the exception and the purpose of the scientific research which would be as follows:

The exception would only apply to research organisations carrying out research in the public interest as opposed to commercial companies that would not be beneficiaries of the exception under this option. The concept of research organisations would be defined in the legal instrument to encompass different organisations across MS which have as their primary goal to conduct scientific research either on a non-for profit basis or pursuant to a public interest mission. This will cover for example universities, research institutes and similar research organisations.

At the same time, the exception would go beyond Option 2 in the sense that it would permit research organisations as defined above to carry out TDM on content they have lawful access to irrespective from the non-commercial or commercial purpose of their scientific research. This would cover notably research projects carried out in the framework of Public-Private Partnerships (PPPs, which may have an ultimate commercial outcome).

Stakeholders' views

Researchers generally consider this option favourably as it would increase legal certainty for their organisations to perform TDM, including in the context of PPPs. At the same time part of the research community has expressed the concern that the concept of public interest organisation could be difficult to define and, more generally that a TDM exception should be extended to anybody who has lawful access and covering both non-commercial and commercial research. Rightholders are against any legal intervention, but they may favour this option as compared to a broader exception as the intervention would be limited to public interest research organisations.

Option 4 – Mandatory exception applicable to anybody who has lawful access (including both public interest research organisations and businesses) covering text and data mining for any scientific research purposes.

Main elements:

As Option 2 but under this option the exception would permit any user who has lawful access to carry out TDM for the purposes of both non-commercial and commercial scientific research. Differently from the other legislative options, the exception would not be limited to non-commercial use (Option 2) nor to specific beneficiaries (Option 3). In practice this intervention would cover TDM for scientific research beyond public research area, notably when carried out by commercial operators such as life science companies.

Stakeholders' views

The research community supports this option as it would fully pursue their objective that anybody who has lawful access should be entitled to mine the content without additional authorisation or conditions. This option would be strongly opposed by rightholders. Publishers in particular take the view that such a large exception would significantly interfere with the TDM licensing market in the commercial sector, mainly in the area of life science. Commercial companies carrying out scientific research have generally not raised problems with commercial TDM licences, nor have generally requested the Commission to take action in this area.



4.3.3.What are the impacts of the different policy options and who will be affected?

Approach

The assessment below is mainly qualitative. Quantitative market data have been provided by stakeholders with regard in particular to costs for researchers arising from legal uncertainty and current licensing practices of rightholders (in particular scientific and press publishers). The options are assessed both as regards their economic and social impacts. They are expected to mainly affect two majors groups of stakeholders - researchers seeking to carry out TDM and rightholders whose content is analysed through TDM. The impacts affecting these two groups are presented separately and focusing on most significant and likely impacts for each category. The impacts on technology companies (data analytics service providers) are not specifically described below as these services are deemed not to be directly affected by the options proposed. Indirectly, intervention on TDM is expected to have a positive impact on technology service providers, including SMEs and start-ups, notably as the proposed intervention aims at creating a better legal framework for TDM in the EU which in turns should increase the market opportunities for these players as technology partners or service providers of research organisations performing TDM. SMEs performing research activities will also indirectly benefit from the intervention as private partners in PPPs with "public interest" research organisations.

For researchers, the impacts assessed relate to the legal uncertainty around the use of TDM for scientific research purposes and the related transaction costs, notably finding out what is permissible under existing licences or under national law, including the laws of different MS for cross-border projects. The assessment mainly covers researchers in "public interest" research organisations which have been identified as those for whom there is the strongest evidence of a problem. 345 The impacts on the usage of TDM for in-house scientific research by commercial companies such as life science or technology ones are described only for the option that affects them indirectly (Option 3) or directly (Option 4).

For rightholders, the impacts assessed are mainly on their licensing revenues and on the security and protection of their content. The impacts on the licensing revenues comprise TDM licences, both for commercial and non-commercial use, as well as impact on revenues from the subscriptions market. Impacts are mainly assessed as regards rightholders in the publishing sector, since this is currently by far the main area for TDM carried out for scientific research purposes. This includes in particular scientific publishers, who largely generate revenues from access to their content via subscriptions agreements which may allow or not TDM 346 . Other relevant rightholders include news publishers who possess important databases, notably archives, which may be of importance for certain areas of research (notably languages and humanities). However, the commercial value of the press archives and other news content is expected to remain untouched due to the "lawful access" condition and the fact that none of the options considered in the IA allows the communication to the public of the mined content. TDM-based research may in some cases be carried out also on copyright protected content other than text-based publications (i.e. AV and music 347 ) However, we have not yet found evidence of significant impact in these areas, which are therefore not specifically analysed in the IA. Open access publications are an increasingly important channel of scholarly publications. Since open access licences generally do not limit TDM, the impact on "pure" open access publishers is not discussed in detail either (see below on the coherence of the options with EU open access policy). Finally, TDM could be used by researchers on copyright protected content publicly accessible on the internet. The impact on rightholders in content freely available online is not discussed as it is considered to be marginal since all the options relate to content to which the user has lawful access.

Social impacts are examined in relation to the benefits of European research for society and to the EU attractiveness as a research area. The policy options presented are coherent with and support another important area of EU policy, i.e. open access policy that aims at greater sharing of public-funded research results and thereby improve scientific research, as well as the European Open Science Cloud and Innovation Union. 348  The options all concern scientific research and are not expected to affect cultural diversity. Impact on fundamental rights is explained for relevant options and with regard to fundamental freedoms which would be impacted. 349

Baseline

Impacts on stakeholders

Researchers 

Impact on legal certainty and transaction costs: problems faced by public interest research organisations are likely to remain largely unsolved under this option. Publishers' market driven initiatives aiming at facilitating mining for non-commercial purposes on the basis of licences will continue to be developed. 350 Over time more publishers are likely to include TDM clauses in their subscriptions or provide open access solutions. 351 This would improve legal certainty for researchers to some extent. However different licensing terms and conditions would stay at least in part. 352 Researchers' resistance to TDM offers based on licences is likely to continue for the reasons mentioned above (see problem definition): Fragmentation in the single market as a result of different TDM laws across MS would also remain unsolved and is likely to worsen as more MS are likely to adopting national TDM exceptions in the absence of EU intervention. Overall, the objective of ensuring full legal certainty for researchers seeking to mine the copyright-protected content they have lawful access to would not be achieved.

Rightholders 

Impact on TDM licensing market and the revenues thereof: TDM may increasingly be included in subscription licences that scientific publishers conclude with public interest organisations such as universities and licensing-based tools may be developed further (see above). However, these developments are not likely to result in substantial increase in revenues for publishers, given on the one hand the resistance of researchers to these offers and on the other hand the unlikely increase of licensing fees due to the inclusion of TDM in subscription licences. 353 The adoption of national TDM exceptions by an increasing number of MS could progressively erode publishers' ability to licence TDM across the EU. However national exceptions would have to be limited by the "non-commercial" condition set out in the current EU rules and, if drafted along the lines of the 2014 UK precedent ("lawful access" condition, exception limited to the reproduction right) they would not directly affect the publishers' subscription market. Under the baseline scenario, scientific publishers are likely to continue to expand the TDM licensing offers for the commercial market (e.g. pharmaceutical and life-science companies) – often in the context of added value packages including not only TDM as such but also providing additional facilities (e.g. pre-formatting of data, direct injections into existing databases etc.). Revenues from commercial licences are likely to increase substantially over time (see Option 4). 

Impact on the protection of content: publishers would continue to be able to use licences as a mean to impose technical and contractual means to protect their content (ensure that only authorised users can access and carry out TDM and protect their databases from massive downloads).

Social impacts

The persisting copyright related problem slowing down the development of TDM in European research would, at least in part, remain unsolved. This could contribute to Europe losing attractiveness as a research area on a worldwide scale, for example as regards EU universities' ability to attract and retain top quality scientists.

Impacts on fundamental rights

The baseline would have no impact resulting from EU action on copyright as a fundamental right and on research, protected under the fundamental right of freedom of art and science under Article 13 of the Charter.

Option 1 – Fostering industry self-regulation initiatives without changes to EU legal framework

Impacts on stakeholders

Researchers

Impact on legal certainty and transaction costs: Public interest research organisations could potentially benefit from more legal certainty as a result of a convergent industry approach to TDM fostered by the Commission through structured stakeholder dialogues. This could also limit to some extent the right-clearance costs. However, the effectiveness of this option is largely dependent on the willingness of the different parties to reach mutually satisfactory solutions. A voluntary approach to TDM was already tried at the time of "Licences for Europe" without achieving satisfactory results for researchers as explained in the problem definition. Despite market-related progresses following the commitments taken by STM publishers as a result of Licences for Europe there is no indication that a voluntary approach would be more successful now, given the substantial reluctance of researchers' representatives to engage in discussions based on a licences-based approach to TDM for the reasons explained above (potential persistence of different TDM conditions required by different publishers in the face of the large scale of content which has to be mined in the context of research)In addition, problems related to the risk of increasing fragmentation in the single market as a consequence of MS adoption TDM exceptions, under different conditions, at national level cannot be solved by a voluntary approach and require, by definition, legislative intervention at EU level.

Rightholders

Impact on TDM licensing market and the revenues thereof: this option is likely to result in some increase in costs for rightholders (notably publishers) because of the additional efforts they would have to undertake under a structured self-regulatory approach to develop mining infrastructures (notably "Cross Ref") and licensing offers. However, since public interest research organisations are not likely to react favourably to these efforts (see above), this option is not likely to bring about additional licensing opportunities for publishers. The commercial market would not be addressed by stakeholder dialogues and therefore the impact on publishers as regards commercial revenues would remain the same as for the baseline.

Impact on the protection of content: Cooperation with researchers in the context of structured stakeholder dialogues may improve to some extent the convergence and users' acceptance of technical safeguards applied by publishers in the context of licences. As above, publishers may incur additional costs arising from the technical safeguards acceptable to the researchers. However, given the fact that the voluntary approach is not likely to result in commonly agreed solutions as explained above, the overall impact of this option on the protection of content is likely to be similar to the baseline.

Social impacts

Similar to the baseline as measures under this option have a voluntary character and are therefore not expected to fully solve the legal uncertainty faced by researchers as regards TDM.

Impacts on Fundamental rights

Impact on copyright is the same as for the baseline. The impact on the right of freedom of art and science would be only slightly positive.

Option 2 Mandatory exception covering text and data mining for non-commercial scientific research purposes 

Impacts on stakeholders

Researchers

Impact on legal certainty and transaction costs: positive impact on researchers as legislative intervention introducing a harmonised exception would increase legal certainty and reduce rights clearance costs. Researchers would be able to mine scientific publications subscribed to by their institution in full legal certainty as long as this is done for non-commercial scientific research. In addition, transaction costs for public interest research organisations could be considerably reduced. Comprehensive quantitative data on the transaction costs incurred by research organisations seeking authorisation for TDM are not available. However, some quantitative estimation of the costs saving can be generated on the basis of case-studies provided by researchers' representatives. 354  These examples point to costs ranging between 3,399 and 18,630 GBP for a research project based on mining 3,000 articles published in 187 journals by 75 different publishers. 355  On a yearly basis, these transaction costs (and the related savings) have been estimated to go up to 500,000 GBP for a large research university. 356 There is also some first indication of a positive impact on scientific research projects based on TDM of the exception for non-commercial TDM introduced in the UK in 2014, 357 which has comparable features to the exception considered under this option. Quantitative data on the impact of the UK law are not available yet.

In spite of the positive impact of this option for public interest research organisations, some legal uncertainty could remain because of the "non-commercial scientific research purposes" condition. Researchers have raised the concern that a significant grey area would remain as regards research projects carried out by public interest research organisations which may eventually have a commercial outcome (as a result of a transfer of technology agreement or other). This grey area may cast doubts in particular on research organisations' partnerships with private operators (PPPs) which represent a large part of publicly funded (at EU or national level) research projects. 358

This option may in theory lead to an increase in subscription fees for public interest research organisations if publishers raise the subscription fees to compensate for possible losses caused by the exception (i.e. publishers may try to absorb the value of TDM in the subscription fee). However, there is no evidence of any significant rise in the fees of subscription licences which have included TDM over the last few years. 359  

Rightholders

Impact on TDM licensing market and the revenues thereof: Under this option rightholders, notably scientific publishers would no longer be able to authorise or prohibit TDM of the content they give researchers access to (as long as this is done for non-commercial scientific purposes). However, this impact would largely be reduced by the "lawful access" condition, 360 i.e. by the fact that the exception would not affect publishers' ability to continue to authorise or prohibit access to their content and to generate revenues from selling subscriptions to universities and other research organisations. 361  As a consequence this option is not likely to result in substantial changes to the publishers' business model, in particular as regards their subscriptions market. Publishers would in principle lose the ability to licence TDM as a self-standing use; however there is currently no evidence of a specific TDM market separate from the subscription market in the academic/non-commercial context. 362 The trend over the last few years has been for STM publishers to gradually include TDM in the subscription licences without significant increase of licences fees (as mentioned above). This seems to confirm the absence of a significant extra value of TDM in the context of current subscription licences. Similarly to STM publishers, the "lawful access" condition would substantially mitigate the impact on other rightholders whose content could be relevant for mining purposes. Press publishers have brought forward some examples of licences with research organisations permitting TDM in addition to access to their content. 363  In some fields, such as linguistic research, newspapers may be an important source for analysis, and TDM may be the main feature of licences (i.e. users primarily want to mine the content rather than to read it). In these cases newspaper publishers (and other rightholders that may be in a comparable situation) would in any case be able to factor in the value of TDM in the licence fee, given that they would remain in control of the decision whether authorise or prohibit access to the content.

Impact on the protection of content: Today rightholders may impose on users, through TDM licences clauses, technical conditions which they consider important, among other things, to prevent unauthorised uses of the content being mined and protect the technical stability of their databases. As described in Annex 11B, these measures are, for example, APIs for automated downloading, access limited to a determined range of IP addresses or other user authentication measures, limits on the speed or number of downloads, etc. In view of the current limited self-standing economic value of TDM in licences with universities/public research organisations (see above), the possibility for STM publishers to impose such conditions is often invoked as a key reason for them to retain the ability to licence TDM.

These rightholders' concerns would be mitigated by the introduction in legislation of a provision allowing content owners to apply proportionate measures necessary to guarantee the security of their systems without unduly hampering TDM. Additionally, stakeholder dialogues would encourage the identification of mutually agreed technical solutions and best practices (see the description of the option above).

Social impacts

Positive impact as the harmonisation of the EU legal framework for researchers carrying out TDM is expected to contribute to improving Europe's potential as a research area on the worldwide scale, including its ability to retain and attract top quality researchers, with the ensuing positive consequences in terms of scientific and societal progress. The research productivity gains which could be triggered by a clarification of the EU rules applicable to TDM have been estimated by some at 2 % and the impact on GDP growth at 0.26 %. 364  

Impacts on fundamental rights

There would be an impact on copyright as a fundamental right but the current balance between rights and exceptions will not be substantially altered by this option, as EU law already contains exceptions allowing uses of IP protected content for the purposes of non-commercial scientific research. The impact on freedom of art and science would be positive.



Option 3 – Mandatory exception applicable to public interest research organisations covering text and data mining for the purposes of both non-commercial and commercial scientific research

Impacts on stakeholders

Researchers

Impact on legal certainty and transaction costs: Similar positive impact as under Option 2 as regards both legal certainty and reduction of transaction costs, as a result of the introduction of an exception harmonised at EU level. Additional positive impact as this option would remove the legal uncertainty and the grey area as regards the research projects carried out by public organisations with a possible commercial outcome, including in cooperation of these organisations with private partners (PPPs).

Corporate research users

Commercial companies are not among the beneficiaries of the exception under this option. They have generally not asked EU intervention in this area as a B2B licensing market exists (see Option 4). This option is not expected to have a significant indirect impact on these players as their needs in relation to TDM are generally different than those of universities and other public interest research organisations (see Option 4).

Rightholders

Impact on TDM licensing market and the revenues thereof: The legal technique to define the scope of the exception is different, however this option is not expected to have a substantially different impact on rightholders than Option 2. In particular, the fact that the exception would not be subject to the "non-commercial purposes" condition is compensated by the application of the exception only to research organisations. The mitigating effect of "lawful access" condition would apply also under this option (see above) and as a result the intervention is not expected to result in significant changes to the publishers' business models, in particular as regards their subscription market. Like Option 2, this option would leave untouched the purely commercial TDM market which constitutes an important source of licensing revenues for STM publishers (e.g. licences with life science companies- see Option 4).

Impact on the protection of their content: Similar to Option 2.

Social impacts

Similar or larger positive impacts than under Option 2 because of increased legal certainty for researchers under this option.

Impacts on fundamental rights

Increased impact on copyright since the present option is not limited to non-commercial purposes. However, the impact is mitigated by the “lawful access” condition and the fact that the beneficiaries would not include commercial operators. In all the current balance between rights and exceptions in the area of research is only going to be altered in the margins by this option. On the other hand this option would have an incremental positive impact on the freedom of art and science.


Option 4 – Mandatory exception covering applicable to anybody who has lawful access (including both public interest research organisations and businesses) covering text and data mining for non-commercial and commercial scientific research purposes.

Impacts on stakeholders

Researchers

Impact on legal certainty and transaction costs: The impact of Option 4 on research organisations is similar to Option 3.

Corporate research users

Differently from the other options, because of the broader scope of application of the exception, Option 4 would specifically benefit researchers in commercial companies as they would no longer need a specific licence to mine content to which they have lawful access to. However, corporate users, notably life-science companies, benefit today from a functioning licensing market for TDM of scientific publications and they have not requested any intervention at EU level. TDM is often licensed to these users as part of a wider licensing agreement with rightholders including several uses and services that go well beyond what the exception would allow them to get for TDM purposes (notably in terms of formats, structured data, getting direct feeds into their own databases etc.). Therefore corporate users are likely to continue to purchase value added services from content owners. This option also entails a risk that publishers may increase the subscription fees for commercial users to compensate for the loss of TDM related revenues (this is more likely to happen with corporate users than with universities because of the different purchasing power, at least as regards larger commercial operators). 365

Rightholders

Impact on TDM licensing market and the revenues thereof: This option would have a more significant negative impact on rightholders. As a consequence of the broad scope of the exception, STM publishers would no longer be able to licence TDM for scientific research purposes to commercial players, which represent an essential market for them, notably in areas such as life science and pharmaceutical. 366  Industry estimates the value of the commercial TDM market (in Europe) to be worth more than 56 million euros by 2019. 367 Two major STM publishers alone currently have 302 existing TDM licences with life science companies, which is a significant figure given the characteristics of the market. 368 Publishers indicate that the use of TDM is also increasing outside the life science and pharmaceutical industry, including in sectors such as financial services and chemical manufacturing. 369  Similarly to the other legislative options, this option would in principle not remove rightholders' ability to generate revenues from selling access to their content. However, deals between STM publishers and corporate users usually include TDM as part of comprehensive agreements covering a whole series of usage rights and added value services mentioned above. The introduction of an exception would lower the value of these agreements, since TDM rights as such can no longer be subject to licence. Rightholders may try to compensate the value lost as a consequence of the legislative intervention by raising licences fees for access and other uses/value added services. However, it is not clear whether and to what extent they would manage to do so. Therefore this option is likely to bring about compliance costs and more significant changes to rightholders' business models than under the previous legislative options. The impact is likely to be all the more significant given the TDM commercial market's growth potential.

Impact on the protection of their content: Similar as Option 2 but the level of the impact would be higher due to a wider range of users potentially covered by this option.

Social impacts

Similar to Option 3.

Impacts on fundamental rights

There would be a more negative impact on copyright as a fundamental right as the current balance between rights and exceptions in the area of research set by the current EU legal framework would be altered more substantially. The impact on freedom of research would be positive.

4.3.1.How do the options compare?

Option

Effectiveness

Efficiency

Impact on stakeholders

Social Impact/Impact on Fundamental Rights

Baseline

(0) Legal uncertainty for digital/online and cross-border uses would persist

(0) No direct costs associated with the baseline option

(0) Impacts on stakeholders would depend on reforms at national level or developments in the licensing market

(0) No direct social impact or or impacts on fundamental rights as a consequence of EU action.

Option 1 – Fostering industry self-regulation initiatives without changes to the EU legal framework

(0/+) Not likely to be effective due to unwillingness of the parties to find mutually satisfactory solutions on the basis of the current legal framework.

(0/-) Limited costs

for rightholders who take commitments (need to change existing licensing to allow TDM for scientific research purposes).

(0/+) Main impacts on stakeholders would depend on commitments taken by industry.

(0/+) Problems which contribute to slow down Europe as a research area likely to remain largely unsolved

(0) No impact on copyright.

(0/+) Slightly positive impact on the right of freedom of art and science.

Option 2 – Mandatory exception covering text and data mining for non-commercial scientific research

(+) Would ensure increased legal certainty for researchers carrying out TDM for non-commercial purposes

(-) Limited compliance costs for rightholders because of the need to adapt licences with public interest research organisations following the introduction of the exception.

(+) Increase in legal certainty and reduction of transaction costs for researchers carrying out TDM for non-commercial purpose. Some legal uncertainty persists for PPP research projects.

(-) Limited negative effect on publishers' TDM licensing market

(+) Positive social impact on Europe's attractiveness as a research area.

(-) Limited negative impact on the right of property

(+) Positive impact on the right of freedom of art and science.

Option 3 – Mandatory exception applicable to public interest research organisations covering text and data mining for the purposes of both non-commercial and commercial scientific research

(++) Would ensure legal certainty for public interest research organisations carrying out TDM both for commercial and non-commercial purposes

(-)Limited compliance costs for rightholders because of the need to adapt licences with public interest research organisations following the introduction of the exception

(++) Increase in legal certainty and reduction of transaction costs for researchers, including for research carried out via PPPs

(-) Limited negative effect on publishers' TDM licensing market.

(+) Positive social impact on Europe's attractiveness as a research area

(-) Limited negative impact on the right of property

(+) Positive impact on the right of freedom of art and science.

Option 4 – Mandatory exception applicable to anybody who has lawful access (both public interest organisations and businesses) covering text and data mining for any scientific research purposes of both non-commercial and commercial scientific research.

(++) Would ensure legal certainty for researchers, including researches in commercial entities, carrying out TDM both for commercial and non-commercial purposes

(--) High compliance costs for publishers who may need to renegotiate a significant number of business agreements with their commercial customers

(++) Increase in legal certainty and reduction of transaction costs for researchers carrying out TDM both for commercial and non-commercial purposes

(--) As the exception would cover all researchers, including commercial customers, this option would have a considerable negative effect on publisher's TDM licensing market

(+) Positive social impact on Europe's attractiveness as a research area

(--) Negative impact on the right of property

(+) Positive impact on the right of freedom of art and science.

Option 3 is the preferred option. This option would create a high level of legal certainty and reduce transaction costs for researchers with a limited impact on rightholders' licensing market and limited compliance costs. In comparison, Option 1 would be significantly less effective and Option 2 would not achieve sufficient legal certainty for researchers, in particular as regards PPPs.

4.4.Preservation of cultural heritage

4.4.1.What is the problem and why is it a problem?

Problem: Preservation by cultural heritage institutions (CHIs) faces legal uncertainty in the new technological environment

Description of the problem: An important function of libraries, archives, museums and other institutions is to preserve cultural heritage: 90 % of cultural heritage institutions (CHIs) responding to a recent survey carried out on behalf of Europeana declared that they have collections that need to be preserved for future generations. 370 As in many cases preserving works requires copying them, the societal importance of preservation 371 is reflected in national exceptions to the reproduction right for preservation purposes, which implement an optional EU exception for "specific acts of reproduction" by certain institutional users. 372  The space allowed for preservation activities under national exceptions is however sometimes narrow, unclear, not adapted or explicit enough to cover preservation in digital environments and of works in digital form. It varies from MS to MS. This creates legal uncertainty for CHIs and can lead to desirable preservation activities not taking place. CHIs have generally reported problems with this situation. 373

Preservation copying addresses for example the degradation of the original material and the disappearance of the technologies and devices underpinning its readability. The British Library, for instance, estimates that many of the 6,500 items that make up its sound collection, which come in 42 different physical formats, will become unreadable within 15 years in the absence of action. 374 Technology allows for 'digitisation', i.e. the creation of digital equivalents or so-called 'surrogates' of works originally on analogue supports (for example paper), which is also done for preservation purposes. 375  Furthermore, 'digital preservation', i.e. the preservation of works in digital form, both resulting from digitisation and 'born-digital' works, 376  raises specific issues. Those works can be subject to quicker degradation than content in analogue form, often with no notice to the human eye, and to quick technological obsolescence. 377 Digital content can then require media migration and 'format-shifting', i.e. copying content onto more adequate media or formats. 378 It can also warrant proactive preservation from the day works are acquired into a collection. Digital preservation is also seen as a continual process, rather than a series of discrete and occasional interventions. More generally, digitisation and digital preservation confront CHIs with complex, open technical questions and can imply considerable costs. 379 CHIs indicate that a number of these challenges cannot be addressed by individual institutions, many of which will not have the resources to undertake digital preservation on their own. This is reflected in ongoing collaborative R&D and standardisation efforts, and an increasing interest in sharing infrastructure and work in networks, including across MS. 380  

The holdings of CHIs in the EU are vast: it was estimated that, for example, European libraries hold between 59 and 95 million individual book titles and museums almost 75,43 million works of art. 381  Data on the copyright-protected portion of these is difficult to obtain, especially at aggregate level, but it is expected to be substantial, particularly for certain types of works: a study 382 estimated the amount of public domain works, (i.e. those that are not protected by copyright) in CHI collections at only 12 % for books (in general in the EU), at 18 % for the British Library Sound Archive and at 30 % for musical compositions in the Cambridge University Library. It can therefore be expected that the problems described above potentially concern a large number of works in Europe.

Drivers: [Variable, unclear and narrow implementation of the preservation exception in MS] The implementation in national laws of the current, optional EU exception applicable to preservation varies and can be limited and/or unclear in scope. 383 This can be the case for the categories of beneficiary institutions: for example the exception only refers to archives in DE. Certain categories of works can also be excluded from the scope of the national exception, like in IT where record and film archives can only reproduce phonograms and videograms. The specific purposes and uses allowed and other applicable conditions also change: the possibility of making digital copies, like in EE, or format shifting, like in NL, is rarely explicitly covered in other MS. This can for example prevent a library from creating a digital equivalent of a sound recording from an analogue support. The number of copies that may be made can be limited to one, like in IT, contrasting with the need of multiple copies that is often inherent to digital preservation.

[Disproportionate transaction costs] Where an exception is not applicable, the potential transaction costs implied by the need for CHIs to obtain authorisation from rightholders can be disproportionate: if on the one hand the time and resources required to establish the copyright status of works, find and contact rightholders and obtain their authorisation can be considerable, 384 on the other hand the likelihood that rightholders refuse authorisations or seek remuneration is low as suggested by relevant case studies. 385  The economic value of a possible licence only covering this use is likely to be insignificant, considering the limited economic interest for rightholders of copies that are made for no other purpose than preservation of works that CHIs already have. 

The authorisation of rightholders for preservation copying is in some particular cases explicitly foreseen. However, this normally occurs as part of broader licences or agreements that are first and foremost concerned with access to works by CHIs (and its final users) and/or their acquisition of permanent copies (which they can then permanently host, e.g. on their servers, for subsequent preservation). These licences do not have as their primary focus the conditions of preservation (the problem addressed here), and exist in some specific contexts only, notably in instruments on voluntary deposit of works 386 concluded between certain categories of rightholders and CHIs, and in scientific publishing licences. The latter can alternatively also refer preservation to well-established third-party specialised organisations. 387  Rightholders often referred to these solutions as responding well to the current preservation needs. 388

Consequences: The lack of timely preservation of works is first and foremost a cultural and social concern, and the extent of the problem is difficult to quantify. Variations in the scope of national preservation exceptions are also an obstacle to cooperation possibilities and efficiency gains that can be achieved in the single market. For example, a frequent practice in digital preservation is to store different digital copies of the same work in a minimum number of separate locations, each requiring dedicated infrastructure. Divergent legal frameworks can be a barrier to the possibility to share such infrastructure among CHIs located in different MS, and therefore have an impact on the broader problem of high technical costs associated to digital preservation.

How the problem would evolve: The future evolution of the problem is difficult to predict, but its general magnitude is likely to increase over time, given the gradual shift to digital in the production, dissemination and preservation of works, as shown by the fact that already today on average 60 % of CHIs collect born-digital material. 389 This trend is clear in the individual institution examples like the British Library, which estimated the digital content stored in its long-term digital library system to amount to 280 terabytes and 11,500,000 items in 2013, with an expected increase to approximately 5 petabytes by 2020. 390 Some MS have recently modified their national exceptions, for example the UK, but such evolution cannot be expected to take place spontaneously in a coordinated manner across the EU.

4.4.2.What are the various options to achieve the objectives?

The general and specific objectives are described in section 4.1.3.

Baseline

No policy intervention. Reproduction of works for preservation purposes by CHIs would continue to take place only as permitted under the different conditions and the varying space provided by the national implementation of the existing EU exception for 'specific acts of reproduction', or after the reproduction right has been cleared with rightholders if CHIs consider that the transaction costs involved is for them worth and possible to incur. In voluntary legal deposit contexts and for parts of scientific publications that libraries have access to remotely, preservation could continue to take place within broader agreement-based systems. 391

Stakeholders' views

CHIs consider that the identified problems would not be solved in the absence of policy action. Rightholders, on the contrary, overall maintain that the current legal framework for preservation by CHIs is adequate and would be in favour of no intervention. 392  

Option 1 - Guidance to MS and peer review mechanism on the implementation of the EU exception on 'specific acts of reproduction' for preservation purposes

The Commission would provide guidance on the maximum scope of the current exception on 'specific acts of reproduction' as applicable to preservation purposes (categories of works, including those born-digital, beneficiaries and uses), while ensuring compliance with the three-step test.

In addition, it would also initiate a 'peer review' among MS aimed to the comparison of national implementations of the EU exception and mutual learning as to the maximum space that it allows.

Stakeholders' views

Some CHIs would see some value in this option as possibly leading to a more shared understanding of the challenges of preservation in the digital age and to legislative change in individual MS. They would however consider it also insufficient, notably with regard to collaboration in cross-border contexts. Rightholders would consider this option unnecessary for the same reasons as outlined under the baseline scenario.

Option 2 - Mandatory harmonised exception for preservation purposes by cultural heritage institutions

This option would require MS to implement a mandatory exception to the reproduction right with the following elements:

Beneficiaries: CHIs engaged in preservation activities, i.e. publicly accessible libraries, museums, as well as archives and film or audio heritage institutions. Beneficiaries would be allowed to outsource activities covered by the exception, for example to technical service suppliers.

Subject-matter covered: all types of works and other protected subject matter in the permanent collection of the beneficiaries, intended as works on carriers (e.g. books, minidisc, tapes) that they own or are permanently deposited with them, or embodied in files that they already own or host on a permanent basis (for example as a result of a contractual agreement allowing for the downloading or transfer of archival copies for permanent hosting, or of legal deposit legislation).

Permitted uses: beneficiary institutions would be able to perform all acts of reproduction and make as many copies as necessary for preservation purposes, into any format and media, irrespective of the technique used and of the state of a given work (for example, even before degradation has started). The exception would only cover the reproduction right (and the database extraction right in the case of the protection of non-original datasets). It would as such not permit further distribution or uses of the content, for example its making available.

Relationship with the licensing market: as applicable to permanent collections as described above, the exception would per se have no bearing on the ability of rightholders to authorise or prohibit the acquisition of permanent copies by CHIs, and more generally on the licensing market, and their ability to take measures to preserve the stability and security of their systems through which access to electronic resources is provided.

Compensation: for the reasons explained in the previous point, MS may not subject the exception to fair compensation.

Interaction with the current exception: outside of the scope of this mandatory exception, the existing (optional) exception for 'specific acts of reproduction' under Article 5(2)c of the InfoSoc Directive would continue to apply, as relevant in uses other than preservation.

Stakeholders' views

CHIs would favour this option as the one that best addresses the problems they raise with the current situation. 393  Rightholders would, on the contrary, consider it unnecessary and/or excessive.

4.4.3.What are the impacts of the different policy options and who will be affected?

Approach

The options presented above would mainly affect institutional users (CHIs) and rightholders whose works are copied to be preserved. The impacts affecting these two groups are presented separately.

For CHIs, the social impact in terms of legal certainty in the preservation of copyright-protected cultural heritage has been considered. Economic impacts in terms of potential transaction costs are also referred to in this context as relevant.

For rightholders, the main impacts are economic and related to revenues and to the licensing market for access to electronic resources. These impacts are relevant for all types of rightholders, with the latter being of particular concern for those primarily engaged in licensing for access to electronic resources with CHIs (notably publishers and producers).

The policy options are also assessed in relation to their general social impacts (on cultural diversity and the preservation of cultural heritage more broadly) and impacts on fundamental rights (property right, freedom of the arts and sciences, and right to education).

The assessment below is mainly qualitative, as the relevant data that are publicly available or that could be obtained from stakeholders is limited. 

Baseline

Impacts on stakeholders

CHIs

Impacts on legal certainty for preservation of cultural heritage: In the short term, the situation would not substantially change for CHIs. They would enjoy a narrow or larger space for preservation depending on the MS in which they carry out their preservation activities. Except in cases where MS may update their implementation of the current EU exception for 'specific acts of reproduction' to exploit its full space for preservation purposes, legal uncertainty and barriers to preservation will persist to varying degrees in the long term too. Furthermore, due to different national laws, legal uncertainty for CHIs wishing to perform preservation of works abroad, for example through shared infrastructure, will remain, therefore hampering the ability to take advantage of economies of scale.

Preservation of certain types of electronic content, mainly a number of scientific publications that CHIs access remotely from publisher or other platforms' servers, or those that they receive on the basis of voluntary deposit agreements, will continue to take place on the basis of authorisations that are included in agreements with a broader scope. 394

Rightholders

Impact on revenues: Rightholders could in theory obtain extra revenues in those cases where CHIs, in order to make preservation copies that are not covered by a national exception or the agreements mentioned above, decide to ask for a specific authorisation. Given the negligible economic significance of preservation copying of works that have already been permanently acquired by a CHI, it is unlikely that rightholders would ask, and that CHIs would be ready to pay, significant fees.

Impacts on licensing market for electronic resources: There would be no specific impact on the licensing market for access to electronic resources. Rightholders would still be in the position to negotiate the transfer of permanent copies to CHIs as part of licences. 395  

Social impacts

Incentives for creators to produce more and diverse content would not change, but some of this content could go lost for lack of preservation in the long term, with a possible negative impact on cultural diversity.

Persisting legal uncertainty and national variations might limit or reduce the rates of works in CHIs that are preserved, with possible negative effects on the ability of society at large to see their heritage preserved as a public good in the long term, and therefore on the development of the arts, science, education and social development more broadly.

This option also has no specific contribution to the objectives of EU's policy on digital cultural heritage preservation.

Impacts on fundamental rights

No impact on copyright as a property right, as recognised by Article 17(2) of the Charter of. No tangible impact on the arts and scientific research, relevant for the freedom of the arts and sciences (Article 13), nor on education, protected under Article 14.

Option 1 – Guidance to MS and peer review mechanism on the implementation of the EU exception on 'specific acts of reproduction' for preservation purposes

Impacts on stakeholders

CHIs

Impacts on legal certainty for the preservation of cultural heritage: Individual MS may decide to update their national legislation. This would result in a variably improved environment for CHIs to make preservation copies at national level. On the one hand, this effect could be felt earlier than a legislative option. Given the non-binding nature of this option, it is unlikely that the scope of national exceptions is brought up to speed with the needs of digital preservation in all MS and that discrepancies disappear. As a result, the option would not substantially facilitate preservation acts carried out in MS other than the one in which a given CHI is established. The impact on the environment for preservation, notably in terms of legal certainty would be limited, depending on the decisions of individual MS.

A Recommendation of the European Parliament and Council, a Commission Recommendation, and EU Council Conclusions already made a number of recommendations to MS for a more conducive legal environment regarding reproductions for preservation purposes. 396 Relevant implementation reporting 397 indicates however that, despite a slight increase in time in the number of MS reporting explicit provisions for multiple copying and format-shifting, national variations continue to exist in this area, as regards the scope of exceptions.

As in the baseline scenario, under this option the preservation of certain works, mainly in the area of scientific publishing or voluntary legal deposit practices, could continue to take place based on authorisations from rightholders as part of broader agreements. A possible larger scope of national preservation exceptions is unlikely to affect such arrangements, as they are also required for the acquisition/delivery of permanent copies to the CHIs in the first place and can also cover access to works (not only their preservation).

Rightholders

Impacts on revenues: Missed revenue opportunities for rightholders due to the possible expansion of the scope of national exceptions under this option are expected to be minimal, given that they would still regard reproductions for preservation purposes only. The possible increase in preservation copies, as a result of a larger space under national exceptions, can have a slight downward impact on the number of copies that CHIs might have purchased on the market with preservation purposes in mind, in those cases where the national exception previously did not allow them to make copies.

Impacts on licensing market for electronic resources: The impact would be similar as in the baseline scenario.

Social impacts

Similar impact to the baseline scenario on cultural diversity in the short term, with some possible positive impact in the long term deriving from higher preservation rates.

Positive impact also on society at large in the long term, in terms of heritage, as a public good, being preserved in the long term.

Such impact, as well as the contribution to the objectives of the EU's policy on digital cultural heritage preservation, would be subject to the same limitations described under "Impacts on legal certainty for the preservation of cultural heritage" above, as they are dependent on the will of the MS to expand the scope of their relevant exceptions.



Impacts on fundamental rights

See baseline scenario.

Option 2 – Mandatory harmonised exception for preservation purposes by cultural heritage institutions

Impacts on stakeholders

CHIs

Impacts on legal certainty for preservation of cultural heritage: This option would be effective for CHIs as all of them (including for example museums and film heritage institutions in all EU MS) would be in the position to carry out preservation reproductions of works in their permanent collections with legal certainty and with digital technologies. This option would in practice cover preservation in digital environments, extend the range of beneficiaries in those MS where the current national exception excludes certain types of CHIs, and the range of works in those national cases where some categories are not currently contemplated. This would reflect the current reality of a wide variety of different types of works present in the collections of most individual institutions: for example, estimates suggest that 80 % of museums also have text-based materials in their collections, while 74 % and 54 % of libraries also hold visual and audio/video materials respectively. 398 The same scope of the national exception across the EU would also lift uncertainty regarding preservation reproductions done in MS other than the one where CHIs are established. This would benefit economies of scale and collaboration.

The option would also eliminate the potential transaction costs related to clearing rights for preservation copies, as clearly illustrated by an estimation by the UK government that put at GBP 25.9 million per year (of which 15.5 for institutional users and 10.4 million for rightholders) the savings in reduced administrative costs at national level deriving from extending the national preservation exception to extra categories of users and to all works. 399  

Whereas a solid estimation of the increase of the preservation rates of works held by CHIs is not possible, the effect of this option can be expected to be substantial as it removes the key copyright obstacle to preservation activities.

As in the previous options, preservation copying of certain works (part of scientific publishing, works covered by voluntary deposit arrangements) could still be contemplated as part of agreements with rightholders. The same exception across the EU is not likely to affect these practices for the same reasons explained under Option 1.

Rightholders

Impacts on revenues: While this option implies the introduction of a new harmonised exception, the impact in terms of missed revenue is likely to be minimal for the same reasons as per Option 1, as this exception would only apply to works that CHIs already have in their permanent collections and have no bearing on the acquisition of permanent copies into a collection. Rightholders could lose some revenue from replacement copies that could have been bought on the market in the absence of an exception, but that effect is expected to be negligible. Works enjoying a longer life thanks to preservation has a potential positive effect on the revenues of rightholders in terms of possible future uses of the works and therefore licensing revenue.

Impacts on licensing market for electronic resources: As the exception only applies to works that are already in the permanent collection of a CHI, the option would have a similar impact as in the baseline scenario and Option 1, including as regards the ability of rightholders to take measures to preserve the stability and security of the systems through which they deliver electronic content.

Social impacts

Positive effect on cultural diversity as this option is liable to increase preservation rates to a significant extent while not substantially affecting incentives to create for rightholders.

This would have a positive effect on society at large in the long term, with positive spill-over effects on the arts, science, education and social development. This option would not only benefit citizens of MS where a preservation exception is currently missing, or restricted or unclear in scope, but also those of MS where it is already present. This is because European cultural heritage is often dispersed across different MS: 400 parts of the cultural heritage of a MS that currently has a broad preservation exception might be held by CHIs in MS where there is currently a narrower exception.

The contribution of this option to the objectives of the EU's policy on digital cultural heritage preservation would be substantial, as it would take away key obstacles (copyright clearance and uncertainty) that CHIs are faced with today when they want to make preservation copies in their collections.

Impacts on fundamental rights

The introduction of an EU-level compulsory exception to the reproduction right for preservation purposes would have a marginal impact on copyright as property right, as recognised by Article 17(2) of the Charter, as it would only apply to authorisations for preservation copies by CHIs. By supporting more preservation of works and their longer term availability, it can also have a positive impact on the arts and scientific research, relevant for the freedom of the arts and sciences (Article 13), and on education, protected under Article 14.

4.4.4.How do the options compare?

Option

Effectiveness

Efficiency

Impact on stakeholders

Social impacts and fundamental rights

Baseline

(0) Legal framework and space for preservation (esp. digital) will still be unclear or restrictive, and fragmented.

(0) No costs associated to the baseline option.

(0) No impact on stakeholders.

(0) No positive impact on cultural diversity and the preservation of cultural heritage as a public good. No contribution to EU policy objectives on cultural heritage preservation. No sensible impact on fundamental rights.

Option 1 – Guidance and 'peer review'

(0/+) Could result in some improvements in certain MS but would not bring about legal certainty and a better space for preservation across the EU and in cross-border settings.

(0/-) Limited costs linked to the organisation of the 'peer review'.

 

(0/+) Main impacts on stakeholders would depend on actions taken at national level.

(0/+) Some possible positive impact on cultural diversity and the preservation of cultural heritage as a public good, depending on action taken at national level. Contribution to EU policy objectives on cultural heritage preservation would also depend on actions taken at national level. No sensible impact on fundamental rights.

Option 2 – Mandatory harmonised exception for preservation purposes by cultural heritage institutions

(++) Would provide legal certainty and a clear and updated space for preservation across the EU, including in cross-border settings.

(0) No particular compliance costs.

(++) Legal certainty and increased space to preserve for CHIs.

(-/+) possible minimal loss of revenue for rightholders from replacement copies bought on the market but more works preserved. No impact on licensing of electronic resources and security and stability of systems.

(+) Positive impact on cultural diversity and the preservation of cultural heritage as a public good, as more works are likely to be preserved.

(+) Positive contribution to the EU policy objectives on cultural heritage preservation.

(0) No tangible impact on fundamental rights.

Option 2 is the preferred option is as it would provide the best environment and the largest space for preservation, including in digital environments, for CHIs while not generating particular compliance costs, or affecting the interests of rightholders to any meaningful extent. This option would reduce costs for CHIs related to legal uncertainty, and for both CHIs and rightholders in terms of potential transaction costs related to requests for authorisations and their handling, to a larger extent than Option 1. At the same time, given the use at stake and the conditions attached to the exception foreseen by Option 2, it would not imply foregone costs for rightholders (related to missed revenues or licensing opportunities) to any meaningful degree. Furthermore, Option 1 might imply some compliance costs for MS that are not present in Option 2. Positive impacts on cultural diversity and, ultimately, the ability of people to engage with cultural heritage would be higher in Option 2 than in Option 1, with similar impacts on fundamental rights. As such Option 2 is the most effective and efficient.

Proportionality and impacts on MS: Option 2 is also proportionate in that it addresses the underlying problem without generating particular costs or putting special obligations on stakeholders.

Option 2 will require an adaptation of national legal frameworks to different degrees, depending on the level of clarity and the scope of the current national exceptions applicable to preservation by CHIs (a table with a list of examples of the way it is currently implemented in MS is available in Annex 4). National preservation exceptions will have to be clear about the possibility for CHIs to make copies in any format and support (i.e. allow for format and media-shifting) and be adapted if and when restrictions to the use of digital methods to conduct preservation can be hampered by their current formulation.

5.Achieving a well-functioning market place for copyright

5.1.Introduction

5.1.1.Background

In the recent years, the internet has become the main marketplace for the distribution of and access to copyright protected content, involving a high number of market players and a diversity of business models. While online content services have become essential for the generation of revenues, rightholders face difficulties when seeking to monetise and control the distribution of their content online. There is a growing concern about the sharing of the value generated by some of the new forms of online content distribution.

This section of the IA examines issues related to the distribution of value in the online environment, taking into account the initial investments in creative content and the new business models and licensing practices. It concentrates on difficulties faced by rightholders in negotiating with online services involved in the commercial reuse of copyright-protected content, in particular online services distributing content uploaded by end-users and news aggregators, social media and other online services providing access to publications. Problems related to the contractual relationships between authors and performers on the one hand and those to which they assign the rights for the exploitation of their works and performances, including online, on the other, are also considered in this section of the IA.

The need to address issues related to the sharing of value in the online environment and the remuneration of creators was highlighted in the Copyright Communication of December 2015, which reminded the "digital single market’s ambition to deliver opportunities for all and to recognise the value of content and of the investment that goes into it." The Commission's intention to take measures in this area was confirmed in the Communication on online platforms of May 2016. 401

5.1.2.Why should the EU act?

Legal basis

As indicated in the previous sections of the IA, the EU's right to act follows from Article 114 of the TFEU, which confers on the EU the power to adopt measures for the establishment and functioning of the internal market. It is also strongly linked to the harmonisation of the rights relevant for online dissemination achieved in the InfoSoc Directive.

The measures envisaged in this section of the IA would allow rightholders to better exercise their rights in the online environment and would therefore contribute to improve the functioning of the Digital Single Market, as the main marketplace for the distribution of and access to copyright-protected content.

Article 167(4) TFEU related to cultural diversity has been taken into account in the design and analysis of policy options presented in this section of the IA.



Subsidiarity and added value

In the areas covered by this section of the IA, the rationale for EU action stems both from the harmonisation already in place (notably in terms of rights) and the cross-border nature of the distribution of content online. Intervention at national level would not be sufficiently efficient to ensure a well-functioning digital single market for the distribution of copyright protected content and could create new obstacles.

The issues faced by Rightholders with regard to services that store and give access to large amounts of protected content uploaded by their users need to be addressed at EU level given the general cross-border nature of those services which are used by the public to consume content online. EU level action is needed in order to avoid possible fragmentation that could be generated by initiatives from MS establishing obligations on such services, and to ensure more level playing field for services involved in content distribution.

The problems faced today by news publishers have been identified by several EU MS. Some of them, notably DE and ES, have adopted different legislative solutions at national level to address them. However, national solutions lack scale and may give rise to market fragmentation in the news publishing sector. Intervention at the EU level is therefore needed to address effectively the problems faced by the publishing industry. Moreover, recent case-law has sparked off uncertainty in some MS concerning the possibility to keep long-existing national systems allowing publishers to have a share of the compensation stemming from exceptions and limitations to copyright and MS whose national compensation schemes are more directly impacted have started considering passing national legislation but it is not clear to what extent they can do so under the current EU rules. The necessary certainty in this regard can only be achieved by legislative intervention at EU level.

Although national rules may govern the contractual relationships between creators and those exploiting their works, the lack of transparency in this area constitutes an obstacle to the correct functioning of the single market for creators. EU action is therefore necessary to determine the required level of transparency. Specific elements may nevertheless be left at the discretion of MS, in order to take account of the existing national rules and the specificities of each sector. It should be noted that European legislation has already intervened in the contractual relationships between authors and performers on the one hand and those commercially exploiting their works and performances on the other, notably in Directive 2006/115/EC 402 (presumptions of transfers of rights, unviable right of equitable remuneration - the "Rental and Lending right Directive") and in Directive 2011/77/EU 403 amending Directive 2006/116/EC (establishing a supplementary remuneration for certain performers linked to the extension of the term of protection for phonograms – "The term of protection Directive").

5.1.3.What should be achieved?

The general objective is to achieve a copyright marketplace and value chain that works efficiently for all players and gives the right incentives for investment in and dissemination of creative content.

Specific objectives have been identified in each of the area covered: (i) ensure that rightholders benefit from a legal framework allowing them to negotiate and be remunerated for the online exploitation of their content by online services storing and giving access to large amounts of content uploaded by their users; and that there is a fair environment for all types of online content services; (ii) ensure a fair share of revenues stemming from the use of publications among the different players of the publishing value chain and (iii) increase legal certainty, transparency and balance in the system that governs the remuneration of creators.

5.1.4.Methodology

Problem definition

Two types of problems are described in this section of the IA, reflecting two aspects of the value chain: those faced 'upstream' by rightholders when trying to license their content to certain online content services (difficulties to negotiate on a fair basis and to obtain remuneration) and those faced 'downstream' by creators when negotiating contracts for the exploitation of their works (lack of transparency on the exploitation of the works). The latter are not specific to the online environment but have been exacerbated by the multiple forms of exploitation existing online. The specific drivers and consequences are illustrated in the problem tree below and further explained in the following sub-sections.

Identification of policy options

The policy options examined in each of the three areas include the baseline option, a non-legislative option, and one or several legislative options. The legislative options have been designed taking account of the existing legal framework and the different forms of distribution of content online. In view of the differences between the upstream and downstream problems and the diverse situation of stakeholders, no common solution could be envisaged to address in a general manner the concern about the sharing of value in the online environment.

Views from stakeholders, European Parliament and Member States

The views from the different stakeholders are reported after the description of each policy option.

In its resolution of July 2015, the EP highlighted the need to "consider solutions for the displacement of value from content to services". The resolution also "recognises the role of producers and publishers in bringing works to the market, and the need for fair and appropriate remuneration for all categories of rightholders". Finally, the EP would strongly support solutions aimed at strengthening the contractual position of authors and performers. The recommendation stresses "that authors and performers must receive fair remuneration in the digital environment and in the analogue world alike".

While acknowledging the growing importance of online services in content distribution, MS have in general been cautious on issues related to the sharing of value in the online environment, waiting for the exact policy option that the Commission would bring forward.

MS have equally been cautious as regards the possible introduction of a related right for news publishers, although most of them generally recognise the seriousness of the problems faced by this industry in the digital environment 404 and are likely to support a targeted intervention in this area, including as regard publishers' claim for compensation.

MS are expected to support the objective of increasing transparency in the system governing the remuneration of authors and creators, but are likely to favour non-legislative options at EU level. In the 2014 public consultation, several MS highlighted the importance of appropriate and fair remuneration for authors and performers but considered that it was for MS to decide whether or not to intervene in this matter by legislative means.

Impacts of policy options

Stakeholders affected

The policy options considered in this section of the IA would directly affect certain types of online content services (in particular, those storing and giving access to content uploaded by users and those giving access to news content) and would also have an impact of the competitive situation of other types of online content services.

The options envisaged to address the difficulties faced with online services distributing content uploaded by end-users would affect all types of rightholders whose content is used by these services (in the music, AV and print sectors).

For the use of publications online, the options envisaged would have an impact on publishers (press and book publishers), as well as on authors and other creators of the individual contributions which compose a publication.

The options envisaged in the area of remuneration would affect more strongly authors and performers and all types of parties they contract with (which could be producers, publishers, broadcasters but also online content services in some cases).

The impacts on consumers are examined in the three areas covered by this section, notably in terms of access to content.

Type of impacts and availability of data

Only the most significant and likely impacts are reported in this IA. The impacts are assessed by group of stakeholders (e.g. online services, rightholders, consumers), focusing mainly on economic impacts, for example in terms of exploitation of content, revenues, business models, competitive situation, compliance costs. These economic impacts are mostly assessed from a qualitative point of view, considering how the different policy options would affect the negotiations between those creating or investing in the creation of content and those distributing such content online. The limited availability of data in this area (beyond market data or specific examples provided by stakeholders which are presented in the problem definition where available) did not allow to elaborate a quantitative analysis of the impacts of the different policy options.

In addition to the impacts on the different groups of stakeholders, broad social impacts (e.g. impacts on cultural diversity) and impacts on fundamental rights are assessed separately. All policy options considered in this section of the IA may have an impact on copyright as a property right (Article 17(2) of the Charter), on the freedom to conduct a business (Article 16) and on freedom of information (Article 11). Impacts on third countries or on the environment are not elaborated upon as the policy options presented in this section of the IA are considered not to have any substantial impact on them.

Impacts on SMEs

The large majority of companies that would be affected (as rightholders, publishers, authors/performers or their contractual counterparties, but also certain types of online services) by the options considered in this section of the IA are SMEs, and more particularly micro-companies (90 % of companies in the publishing of books, newspapers and journals and 96 % of companies in the film and music production and 95 % of companies involved in data processing, hosting and related activities or web portals) 405 .

The policy options examined in relation to the use of content uploaded by users or the use of publications through online services would contribute to support SMEs and micro-companies in their negotiation with online content services. Certain options would however generate obligations for SMEs active as online services. Also, some of the policy options considered in the area of remuneration of authors and performers would create compliance costs for SMEs and micro-companies (notably producers or publishers) contracting with authors and performers. These costs are analysed in section 5.3.3 and in Annex 14.

Considering the high number of SMEs and micro-companies in the creative industries and in the distribution of content online, exemptions or mitigating measures have not been deemed appropriate as they may create possibilities for businesses to circumvent the obligations and would not allow to reach the objectives defined above.

Comparison of policy options

The policy options are compared against the criteria of effectiveness (i.e. to what extent they fulfil the specific objective), efficiency (i.e. at what cost they do so), impact on the different groups of stakeholders and coherence with regard to cultural diversity, fundamental rights and/or other EU policies. Each option is rated between "--" (very negative), "-" (negative), 0 (neutral), "+" (positive) and "++" (very positive).

5.2.Use of protected content by online services storing and giving access to user uploaded content

5.2.1.What is the problem and why is it a problem?

Problem: Rightholders have no or limited control over the use and the remuneration for the use of their content by services storing and giving access to large amounts of protected content uploaded by their users.

Description of the problem: The functioning of the online content market place is complex. There has been a progressive shift from ownership to access-based models. Today, copyright protected content is no longer only distributed directly by a digital service provider to end users. Instead, access to online content often takes place at the end of a process in which several parties participate. As a result, rightholders do not always have control over the way their content is distributed online.

With the rise of Web 2.0 technologies, interactive services including participatory networks have emerged and increasing amounts of content is accessed through content sharing platforms that make available protected content uploaded by their users without any involvement of rights holders.

Such user uploaded content services often provide the public with large amounts of protected content. In addition to giving access to the content, these platforms provide functionalities such as categorization, recommendations, playlists, or the ability to share content. These services use copyright protected content in order to attract and retain users to their websites thereby increasing the value of their services. Access to such content is generally "free" for users and the service draws its revenues, directly or indirectly, from advertising and user data.

While some of the providers of these services have de facto become major actors of online content distribution 406 and have substantial number of users 407 and significant market valuations 408  rightholders are not necessarily able to enter into agreements with them for the use of their content. This affects rightholders' possibility to determine whether, and under which conditions, their content is made available on the services and to get an appropriate remuneration for it. 409  

Some online service providers refuse to negotiate any agreement, which means that despite the availability of copyright protected content on these platforms no revenues are generated for rightholders for the use of their content. Refusals of agreements have above all been reported by rightholders in the music and images sectors. 410 At the same time, some online service providers have argued that rightholders have requested terms that they considered unreasonable for the type of service they provide. 411

In some cases, platforms have offered rightholders agreements for a share of the revenue generated by advertising placed around their content. 412 However, these agreements have been reported by some rightholders to be different from copyright licensing agreements as the platforms argue that they are not under a legal requirement to negotiate with rightholders and that they enter into such "monetisation agreements" on a purely voluntary basis. 413  Rightholders argue that this alleged absence of legal requirement impedes fair negotiations. An example provided by the music industry shows that, in 2015, pure advertising-supported online services storing and giving access to content uploaded by end users which have an estimated user base of more than 900 million generated revenues amounting to US$634 million, which is (approximately) four per cent of global music revenues. 414 Given the significant user base, rightholders argue that such revenues are insignificant compared to what other service providers 415 are generating for rightholders. At the same time, there is publicly available information about the payments made by a major service provider to rightholders for the use of their music. 416

The negotiation position of rightholders is affected by the fact that they are not in a position to keep their content away from these platforms. When uploaded content is infringing, they can only ask the platforms to take down the content, in each individual case, which leads to significant costs for them and appears insufficient to them given the large scale of uploads. 417 At the same time, some platforms have voluntarily taken measures to help rightholders in identifying and monetising the use of content on their services, in particular through content identification technologies. Solutions have been developed both by user uploaded content platforms and technology providers and are based on different types of technologies, providing for different functionalities or levels of services and identifying different types of content (e.g. music, images, audiovisual). 418 They can be applied at the time of upload of the content or later on to verify through an automated procedure whether the content uploaded by users is authorized or not, based on data provided by rightholders. 419  

While some services have claimed high rates of successful content identification 420 , the identification of some types of content, such as bootleg remixes and DJ sets, or more generally of content that has been transformed or differs significantly from the original content, may be very challenging. 421   Also, it has been reported by rightholders that the functioning and efficiency of the technologies remains generally opaque for them (for instance with regard to changes implemented by the service or reasons why some content has not been identified). In parallel, it has been argued that content identification technologies may lead to "false positives" (i.e. situations where content is wrongly identified and removed). 422 At this stage, it seems also clear that cooperation with rightholders is required (notably to provide data such as fingerprints) for the efficient functioning of these technologies. 423

The situation described is also said to result in a decrease of the value of copyright protected content. Several broadcasters for example have started legal actions against different online platforms that disseminate their programs online claiming that these platforms are actively exploiting the content and benefitting financially from it. 424 They consider that these services limit their ability to monetize certain types of content on other services. 425

Besides rightholders, other online content service providers (those that acquire a licence from rightholders and distribute protected content directly to end users) are affected by this situation. They find themselves at a competitive disadvantage - they negotiate and conclude licences with rightholders in order to operate their services 426 while online platforms distributing user uploaded content have no or very limited content acquisition costs. 427 This is particularly relevant as both online content distribution services and user uploaded platforms may be seen by consumers as equivalent sources for content consumption. 428 This is notably the case in the music sector where platforms are largely used by consumers to access music online. In this context, a Eurobarometer on users’ preferences for accessing content online conducted in March 2016 shows that 31 % of respondents use most often video or music-sharing websites to access music online. 429  

Drivers:

[Presence of large amounts of protected content which is uploaded by users] Given the fact that content is uploaded by users, it is in practice difficult for rightholders to determine the availability of protected content on user uploaded platforms. In the case of platforms which services (or one of their services) result in the provision of access to significant amounts of, e.g. videos or other AV works, music or pictures, rightholders face particular difficulties when wanting to negotiate licences or reach agreements. Rightholders have described their negotiation relationship with certain of these platforms as a "take it or leave it" situation: they must either accept the terms offered by the service or continue to send notifications for each individual content which can be infringed thousands of times. 430 Such a situation is further exacerbated in certain cases by the difference in bargaining power between rightholders and some of user uploaded services which have gained an important position on the market. 431 Even if major user uploaded content services have put in place measures such as content identification technologies, 432 their deployment remains voluntary and is subject to the conditions set by the services. 

[Legal uncertainty hampering the possible negotiation of agreements with services storing and giving access to protected content uploaded by their users] Under copyright law, rightholders can exercise their right to authorize and exploit commercially the communication to the public of their works or other protected subject-matter, by the conclusion of licences in return for payment of remuneration, 433 if they so choose. 434 When content is disseminated online, an act of communication to the public takes place which may, depending on the circumstances, involve more than one actor. The CJEU has not addressed the specific case of online services giving access to content uploaded by their users. 435 With some exceptions, 436 national case law is not very clear either as to who engages into an act of communication to the public when content is uploaded on a sharing website.  

Additional uncertainty arises from the question of whether specific service providers that store and give access to content uploaded by a third party can benefit from the hosting service provider status provided under the Directive 2000/31/EC 437  (E-Commerce Directive-"ECD"). 438 It is up to the courts to assess on a case by case basis whether a given service qualifies as a mere technical, automatic and passive hosting service provider. National courts have often found that user uploaded content services were covered by Article 14 ECD. 439 However, in a number of recent cases, national courts have deemed such services to go beyond Article 14 ECD, highlighting the importance of protected content for the business models and the revenues of user uploaded content services. 440

Consequences: The situation above has led to the situation where rightholders are confronted with large use of their content on user uploaded content services, have no or limited control over the use of their content, and fail (or have difficulties) to enter into agreements for the use of their content and obtain a remuneration.

How would the problem evolve?: If no action is taken at EU level, the described situation is likely to remain and affect negatively rightholders' possibilities to negotiate agreements and the level playing field on the online content market. This in turn risks constraining the sustainable growth of digital content markets and future investment in content creation and production. The general trend in content consumption, which is moving away from physical media towards the digital services, may further exacerbate the current problem, as seems to be indicated by the fact that the increase in consumption has not been accompanied by a proportionate increase in payments to rightholders 441 .

At the same time the market has been undergoing certain changes with technologies being more generally available and deployed and licensing and partnership agreements being struck between rightholders and online services that had so far refused to conclude agreements 442 . This trend may continue but it may still follow the pattern whereby services operate without the rightholders' agreement and build an audience before agreements are concluded. 443 Moreover, whereas it is possible that the CJEU will bring clarity to the question of whether an uploaded content service is responsible for acts of communication to the public and/or can benefit from the hosting provider status under the ECD, this cannot be predicted as it is entirely dependent on referrals by national courts.  Under such circumstances, rights holders will continue to have limited possibilities to determine the conditions of and the remuneration for the exploitation of their works and other protected subject matter by user uploaded content service providers. The situation will continue to have a negative effect on the functioning of the online market place.

5.2.2.What are the various options to achieve the objectives?

Baseline

No policy intervention. This option would rely on the voluntary deployment of technologies by user uploaded content services, which will continue to apply their own terms and level of transparency as to the functioning of the technologies.

Stakeholders' views

Rightholders will not support this option as they consider that the current legal framework needs to be clarified and that players on the market will generally not improve the efficiency and transparency of technical measures when used. Online service providers storing and giving access to user uploaded content will support this option as they consider that the legal framework is clear and that they are already taking voluntary measures. 444 Other content service providers are likely not to be in favour of this option as it maintains the imbalance on the market. Consumers will be in favour of this option as they do not see the need for a change to the status quo and will fear that any intervention may have a negative impact on the freedom of information/expression. 445

Option 1 – Stakeholder dialogues between rightholders and online services which store and give access to large amounts of content uploaded by their users

Main elements:

The Commission would launch stakeholder dialogues that would bring together rightholders and providers of user uploaded content services to encourage them to define best practices for the use of technologies such as content recognition technologies and to promote their use. It would aim at improving the capacity of rightholders to determine the conditions for the use of and remuneration for their content.

The dialogues would focus on service providers which store and provide access to large amounts of copyright protected content uploaded by their users as, in view of the amount of content available and the size of their audience, they have an important impact on the online content market.

Technology providers would be involved in the dialogue. Account would be taken of existing technologies, their availability, efficiency and costs for each contracting party in order to find a balanced approach. The best practices could also focus on the ways to ensure that the services (i) obtain the necessary data from rightholders to make the technologies work and (ii) are transparent towards rightholders in terms of the operation, characteristics and efficiency of the technologies used.

Given the different dynamics in each sector (music, audiovisual, images), the dialogues would be conducted on a sector by sector basis

Stakeholders' views

Due to the non-binding nature of this option, rights holders will oppose it as they will consider it would not improve the current situation to a sufficient degree. Online service providers giving access to user uploaded content may support it while arguing that they already implement on a voluntary basis the necessary technologies that allow rightholders to decide on the use of their content. 446 Other content service providers are likely to find this option insufficient. Consumers are likely to view the possible stakeholders' dialogues as impacting negatively their freedom of expression (as it could result in a wider and more efficient deployment of content recognition technologies on the basis of industry agreements). 447

Option 2 – An obligation on online services which store and give access to large amounts of content uploaded by their users to put in place appropriate technologies and to increase transparency vis-a-vis rightholders

Main elements:

This option would establish an obligation on service providers which store and provide access to large amounts of copyright protected content to put in place measures, such as content identification technologies, to allow rightholders to determine better the conditions for the use of their content. The determination of what constitutes "large amounts of content" will need to be made on the basis of a combination of factors including the number of users and visitors and the amount of content uploaded over a certain period of time. 448 These factors are independent from the size of the service provider itself, which can also be an SME. It is clear that online service providers may have very different services (a user uploaded content platform, their own channels, third party channels). This obligation would only apply to the user uploaded content services to the extent that the content is copyright protected.

These services will be targeted because they have become important sources of access to content online and also in view of their role in giving access to the public to works and other protected subject matter, requiring the conclusion of licensing agreements with rightholders.

Cooperation with rightholders will be required for the functioning of the measures, such as content identification technologies. Rightholders should provide the data that are necessary for the services to identify the content whereas the services would be obliged to provide adequate information to rightholders on the deployment and functioning of the technologies. This could, for instance, include information on the type of technologies used, periods of unavailability (e.g. due to maintenance), plans for further improvements, success rates of the technologies deployed for identifying content and information on possible reasons for failures of identification.

In order to safeguard end users' rights, the services will be required to provide for procedures that enable users to contest situations where the application of the technology would limit the uploads of content in an unjustified manner.

The above obligations will be without prejudice to liability regimes applicable to copyright infringements and the application of Article 14 ECD. In particular, with regard to services that are covered by Article 14 ECD, the obligation to put in place content identification technologies would not take away the safe harbour provided that the conditions of Article 14 are fulfilled. The notice and takedown regime will continue to apply for hosting service providers covered by Article 14 with respect to content not covered by agreements or in cases where the content is not properly identified.

Member States would be required to facilitate cooperation between service providers and rightholders where appropriate, notably in cases where no individual agreement is reached between the parties on appropriate measures to be put in place by the services.

Stakeholders' views

Rightholders may support this option if it establishes an obligation on service providers to take effective measures that improve the current situation, 449  and provided there is sufficient clarity as regards the notion of communication to the public. Online service providers storing and giving access to large amounts of user uploaded content are likely to oppose this option, including those that already use the technologies - as they would want their initiatives to remain voluntary. They will also argue that the intervention would counter the freedom of expression and freedom to conduct business. 450 Other content service providers are likely to support this option if it improves the level playing field on the online content market. Consumers are likely to argue that this option will have a negative impact on their freedom of expression/information. 451  

5.2.3.What are the impacts of the different policy options and who will be affected?

Approach

The options presented above would have an impact on rightholders across all sectors, on online services that store and give access to the public to large amounts of content uploaded by their users, as well as on online content services that distribute content provided directly by rightholders and that can be perceived, from a user perspective, as equivalent sources for content consumption. The options also affect consumers. The likely impacts on each stakeholder group are presented separately.

For rightholders: the impacts assessed are those on their capacity to control better the availability of their content on user uploaded content services and thereby be in a better position to negotiate with the services the conditions of such use

For online services that store and give access to large amounts of user uploaded content: the most important impacts described relate to the implementation of technologies and the negotiation with rightholders in case they want to keep the content on their services

For other online content service providers distributing content: the main impacts relate to the level playing field in the market and to their business model.

For consumers/end users: the impact is assessed on the content consumption possibilities and the possibility for them to upload content.

The policy options are also assessed in relation to their social impact, with focus on cultural diversity.

For fundamental freedoms, the impact is assessed on copyright as a property right, freedom of expression and information, as well as the freedom to conduct a business as recognised respectively by Articles 17, 11 and 16 of the Charter.

The assessment below is mainly qualitative, based on the data publicly available, replies submitted via the public consultation on online platforms 452 , or provided by relevant stakeholders, as well as a Flash Eurobarometer survey on users' preferences in accessing content online conducted in March 2016.

Baseline

Impacts on stakeholders

Creative industries/Rightholders: 

Impact on their capacity to control better the availability of their content on user uploaded content services and thereby negotiate with the services the conditions of such use: as the implementation by the services of technologies, such as content identification technologies, will remain voluntary and based on the terms set by the services, it is likely that the baseline scenario will not lead to improvements for rightholders who are likely to continue having difficulties to enter into negotiations and/or negotiate fair terms for the use of their content. 453  While some of the service providers may voluntarily or under pressure from artists 454 and from major rightholders (including risks of litigation) 455 decide to seek agreements for the use of copyright protected content, this is unlikely to become a general trend in the short to mid-term. It can be expected that the ability to negotiate agreements will also depend on the market position of rightholders, with small rightholders likely to continue to face more difficulties than major ones 456 .

Online services that store and give access to large amounts of user uploaded content:

Compliance costs/ investments needed for putting in place appropriate measures and negotiating with rightholders the use of their content: no impact. The services are likely to continue to use technologies on a voluntary basis and subject to their own terms. 457 An evolution could result from case law in some MS 458 but it would however remain subject to national courts and may lead to diverging obligations for the services in different Member States. Given the importance of protected content for the business models of user uploaded content services, a certain evolution can be expected in the mid to long term with regard to agreements with rightholders for content that the services would want to have on their websites. This trend is confirmed by agreements that have already been concluded (not only in the music sector 459   but also in the AV and in the images sector where a few partnerships are being concluded). 460  

Other content service providers:

Impact on the level playing field: no impact. They will continue to face an uneven playing field. This uncertain environment and diverging legal and financial obligations will put new entrants under unfair competitive pressure from incumbent services that do not play by the same rules. This may constitute a deterrent for new services to enter the market.

Impact on their business model: The pressure to compete with user uploaded services which face lower operating costs will continue to make it more difficult for these other online content services to have or build a sustainable business model. 461  

Consumers: no impact in the short to mid-term as the user uploaded content services will in the majority of cases continue to operate in the same manner. In the long term, there could be a risk of reducing consumer choice if the current situation affects fair competition in the market and the availability of content.

Social impacts

There could be an indirect negative impact on cultural diversity in the long term if the revenues generated for the commercial use of copyright protected content cannot sustain the production of new (and diverse) content.

Impacts on fundamental rights

This option has no direct impact on copyright as a property right, nor on the freedom of expression and information or the freedom to conduct a business.

Option 1 – Stakeholder dialogues between rightholders and services which store and give access to large amounts of content uploaded by their users

Impacts on stakeholders

Creative industries/Rightholders

Impact on their capacity to control better the availability of their content on user uploaded content services and thereby negotiate with the services the conditions of such use: due to its voluntary nature, it seems unlikely that stakeholder dialogues will result in sufficient improvements in the take up, efficiency and transparency of technologies in comparison to the possible evolution of the market. The voluntary nature of the dialogues is likely not to change the behaviour patterns of services which have not deployed any technologies so far or for those which have been using these technologies on a voluntary basis for several years, but under their own terms. Rightholders will remain in a weak bargaining position for the use of their content by the services. Moreover, stakeholder dialogues in a context where some of the user uploaded content services have already been imposed higher responsibilities with regard to protected content could be viewed as a step back in some MS, in comparison to existing obligations. 462  

Online services that store and give access to large amounts of user uploaded content:

Compliance costs/ investments needed for putting in place appropriate measures and negotiating with rightholders the use of their content: limited impact due to the voluntary nature of the stakeholder dialogues and the limited likelihood of an agreement on best practices.

Other content service providers:

Impact on the level playing field: unlikely to have any effect as, for the reasons explained above, different content service providers are likely to continue playing by different rules.

Impact on their business model: an impact similar to the one under the baseline scenario can be expected.

Consumers: no direct impact on consumers. They could be impacted if online services giving access to user uploaded content agreed to take steps which led to a change in their services. This is however unlikely given that agreements, if they are reached, are likely to take into account the popularity of the current services (and the important role they play for the overall business models of certain platforms). 463

Social impacts

This option might have a slight positive impact on cultural diversity if the stakeholder dialogues were to result in a further use of technologies, thereby increasing the possibility for rightholders to decide on the use of their content.

Impacts on fundamental rights

This option is likely to have no impact or a very limited positive impact on copyright as a property right. It may have a limited negative impact on the freedom of expression and information (if, following the stakeholder dialogues, services implemented technologies limiting the upload of content for unjustified reasons, for example when an exception or a limitation to copyright applies). In such an unlikely case there would also be a limited negative impact on the freedom to conduct a business of service providers covered by this IA due to the costs they may need to incur as a result of the stakeholder dialogues.

Option 2 – An obligation on online services which store and give access to large amounts of protected content uploaded by their users to put in place appropriate and proportionate technologies and to increase transparency vis a vis rights holders

Impacts on stakeholders

Creative industries/Rightholders

Impact on their capacity to control better the availability of their content on user uploaded content services and thereby negotiate with the services the conditions of such use: against the backdrop of the role of these services in the communication to the public of protected content, the establishment of an obligation to deploy technical means will have a positive impact on rightholders. As the services will be obliged to cooperate with rightholders and provide them adequate information with regard to the technologies to be deployed, it is expected that the efficiency of the technologies will grow and thereby enable rightholders to have a better control over the content that is available on user uploaded services. This will improve their possibilities to conclude agreements and increase revenues. This is notably the case for the music sector where, as explained above, some agreements are already in place and there is an overall readiness from rightholders to conclude agreements with the services. In the case of AV content, this option may increase the willingness of rightholders to allow more of their content to be available on user uploaded content services while continuing to take down premium content.

While the ability for rightholders to decide on the availability of their content is expected to increase their possibilities to obtain fair remuneration, it is not possible to quantify the concrete impact of this option in terms of revenues, as this would also depend on the outcome of commercial negotiations, including the size of the service as well as possible developments in their business models. There have been indications from some rightholders in the music sector that the expected remuneration should be similar to the revenues generated by the free tiers of other content services (to the extent it is possible to differentiate free tier revenues from premium service ones). 464  

The deployment of technologies that are necessary to identify content and make the conclusion of agreements possible will imply some costs for rightholders. These costs will arise where they provide data (e.g. contents or fingerprints depending on the technology used 465 ) necessary for the content identification technologies to work. When rightholders already provide such data to major online services, the impact is expected to be limited and outweighed by the positive impacts of this option.

Online services that store and give access to large amounts of protected content uploaded by their users 466

Compliance costs/ investments needed for putting in place appropriate measures and negotiating with rightholders the use of their content: The need to put in place measures, such as content identification technologies, will involve costs which will depend on the quantity and the type of content to be identified, but also on whether online services already use technologies or not. This option does not impose any specific technology to be used. An online service can choose between appropriate technology solutions taking into account the specificities and needs of its service as well as its size.

Different technologies and related services are available on the market. The prices offered by the technology providers vary with the scale and types of services provided. 467 In practice, technologies with basic functionalities, allowing one to one recognition of content (such as music recordings) would be the least costly, whereas more elaborate technologies that could be required to identify certain types of works (e.g. the underlying composition of a recording) would be more costly. Many of the online intermediaries replying to the public consultation on platforms indicated that it is very difficult to provide an estimation of the financial costs of running such technologies. 468 For example, on the basis of the information available, it is estimated that a small scale online service provider with a relatively low number of monthly transactions can obtain such services as from 900 a month. 469  For online services hosting large amounts of different works, the cost can be significantly higher. At the same time, the major online user uploaded content services have already put in place content identification technologies 470 and therefore the costs for them are likely to be limited and would above all relate to the need to cooperate with rightholders on the functioning and efficiency of the technologies used and to provide greater transparency. Some costs may also arise from the need to put in place procedures to enable users to contest situations where the application of technology would limit, in an unjustified manner, their possibility to upload content. These costs are however expected to be limited as procedures with the similar purpose are in practice in many cases already in place, including in the context of notice and take down mechanisms for hosting service providers. 471

Due to the improved control for rightholders over the presence of their content on user uploaded content services, the services are expected to negotiate agreements with more rightholders to be able to keep their content available to the end users. In such cases, costs would arise for service providers that have so far refused to enter into negotiations or for those that may need to renegotiate their existing agreements at the request of rightholders. Currently, the major user uploaded content services tend to be enterprises of a large size for which these costs are expected to be reasonable. The costs related to the negotiation of agreements will be higher for SMEs but they should remain reasonable as the obligation to use technologies is limited to those service providers giving access to large amounts of content. New entrants which start their business with a small quantity of user uploaded content would not be impacted.

Other content service providers:

Impact on the level playing field: this option is likely to have a positive impact on content service providers which would not have to incur any additional costs and can only benefit from a market where providers compete on more equal grounds.

Impact on their business model: given the expected improvement of the level playing field, it would help the services to sustain or strengthen their business model.

Consumers: the impact on consumers will depend on the possible changes made by the services to the way they function as a result of the deployment of technologies and of possible agreements with rightholders, which could reduce the content freely available on the service. However, as indicated in option 1, negotiations are likely to take into account the popularity of the current user uploaded content models among consumers. On the other hand, consumers may in the long term have an increased choice of content due to more incentives for rightholders to create new content. This would result from the increased possibility for rightholders to determine the conditions for the use of their contents and therefore to negotiate agreements and be remunerated for such use.

Social impacts 

Option 2 is expected to have a positive impact on cultural diversity as it would lead to better control over the use of and remuneration for copyright protected content. This should bring more certainty and incentives to rightholders to create new content. As a result, the access to a culturally diverse content is expected to be positively impacted.

Impacts on fundamental rights

Option 2 would have a positive impact on copyright since rightholders will benefit from an improved framework that allows them to have a better control over the availability of their content on user uploaded content services and to negotiate better the conditions for the use of their content by such services. The freedom of expression and information may be affected negatively in cases where the services limit user uploaded content in an unjustified manner (for example when an exception or a limitation to copyright applies or the content is in public domain) or when the technologies fail to identify the content correctly. 472 This negative impact should be mitigated by the fact that the services would be obliged to put in place the necessary procedural safeguards for the users which in the majority of cases already exist in the related context of notice and take down requests. In all, as content recognition technologies are already applied by the major user uploaded content services, it is likely that this option would not lead to significant increases in unjustified cases of prevented uploads compared to the current situation. Furthermore, the cooperation with rightholders and the evolution of technology are likely to improve on an on-going basis the accuracy of content identification. Additionally, as the limited liability regime for hosting service providers is not changed, there is no risk of increase in removals of content due to the fear of liability by such services. At the same time there is likely to be a positive impact on users who in the long term should have access to an enhanced range of creative content and services as incentives to invest will improve. The impact on the freedom to conduct a business could be negative due to the costs to implement the technologies. At the same time, the level of this impact is expected to be limited due to the fact that the obligation is imposed on services giving access to large amounts of protected content only, that the option builds on existing voluntary practices and that technologies are increasingly available in the market which makes the implementation of the technology obligation easier for the services. This impact is further limited by the fact that the proportionality in the choice and in the deployment of effective content identification technologies will allow to take into account the size and the nature of the individual services. Overall, this option is considered to strike the necessary balance between copyright and other fundamental freedoms.

5.2.4.How do the options compare?

Option

Effectiveness

Efficiency

Impact on stakeholders

Coherence

Baseline

(0) No impact – absence or limited possibility for rightholders to determine the conditions of use of their content by the services will persist

 

(0) No direct costs associated with this option

(0) No direct impacts on stakeholders

(0) No direct impact on cultural diversity

(0) No impact on other fundamental rights

Option 1 – Stakeholder dialogues between rightholders and services which store and give access to large amounts of content uploaded by their users 

(0/+) Limited impact on rightholders' possibility to determine the conditions of use of their content by the services

(0/-) Limited compliance costs for user uploaded content services which implement the best practices (to the extent the stakeholder dialogues result in best practices)

(0/-) Limited compliance costs for rightholders

(0/+) Limited positive impact on rights holders' possibility to reduce use of content not covered by agreements and to negotiate such agreements

(0/-) Limited negative impact on user uploaded content services which implement the best practices

(0/+) Limited positive impact on other content services

(0) No direct impact on consumers

(0/+) Limited positive impact on cultural diversity and on the property right.

(0) Neutral impact on freedom of expression and information in cases where best practices are implemented

0/-) Limited negative impact

on freedom to conduct business

in cases where best practices are implemented

Option 2: An obligation on services which store and give access to large amounts of content uploaded by their users to put in place appropriate technologies together with more transparency

(++) Positive impact on rightholders' possibility to determine the conditions of use of their content by the services

(-) Compliance costs for user uploaded content services

(0/-) Limited compliance costs for rightholders

(++) Positive impact on rightholders' possibility to reduce the use of content not covered by agreements and to negotiate agreements

(-) Limited negative impact on user uploaded content services

(+) Positive impact on other content services

(0) No direct impact on consumers

(++) Positive impact on impact on cultural diversity and on property right.

(0) Neutral impact on freedom of expression and information.

(0/-) Limited negative impact on freedom to conduct business

Option 2 is the preferred option. The deployment of appropriate technologies would increase the capacity of rightholders to control better the presence of their content on user uploaded content services and give them a better position to negotiate agreements for the use of their content. By contrast, Option 1 could only result in best practices, which would not be binding for service providers and would therefore not be sufficient to lead to improvements on market practices. The compliance costs of Option 2 for service providers are limited by the fact that the technologies to be put in place need to be proportionate, and that a majority of the services covered already deploy some content identification technologies. Option 2 is the best option to reach the policy objectives while maintaining a balance between the relevant fundamental rights.

Proportionality and impacts on Member States: The measures foreseen under Option 2 are proportionate to the nature of the services covered. Because of the presence of large amounts of protected content on their websites, these services have a significant impact on the online content market and may therefore be expected to put in place certain measures to protect the content in cooperation with rightholders. MS would need to adapt the legislation to establish the obligation imposed by Option 2.

5.3.Rights in publications

5.3.1.What is the problem and why is it a problem?

Problem: The shift from print to digital has enlarged the audience of press publications but made the exploitation and enforcement of the rights in publications increasingly difficult. In addition, publishers face difficulties as regards compensation for uses under exceptions.

Description of the problem: Publishers are increasingly facing difficulties in relation to the digital exploitation of, and the enforcement of rights in, press publications such as newspapers and magazines. The changes to the way copyright-protected content is distributed and consumed in the digital environment have affected press publications in a specific way. The publishing industry is in the middle of a shift from print to digital. Print circulation of daily newspapers has been constantly declining for years (by 17 % in the period 2010-2014 in 8 EU MS), 473 a trend that is expected to continue. In all MS sampled by a recent survey, the proportion of consumers who indicated that the internet was their main source to access news largely outweighed those for whom the favourite source was printed newspapers (e.g. 29 % to 3 % in FR; 23 % to 7 % in DE, 34 % to 8 % in IT; 38 % to 10 % in the UK). 474 Digital audiences of newspapers and magazines have been growing exponentially: web traffic has doubled over the last five years (from 248.4 to 503.4 million unique users between 2011 and 2015). 475 Today, newspapers and magazines' websites and apps are the main services used to access news for 42 % of users in the EU. 476  

Despite the growing success of publishers' content online, the increase of publishers' digital revenues has not made up for the decline of print. Between 2010 and 2014, news publishers' total print revenues decreased by €13.45 billion 477 and digital revenues rose by €3.98 billion: a net revenue loss of €9.47 billion (-13 %). 478 In addition, news publishers report that the current decline of the industry has already led to closing down or reducing their editorial teams, in particular in the case of smaller and regional newspapers.  479  

Several factors may explain this situation. On the one hand, press publishers have traditionally made available online large proportions of their content for free, since the early days of the internet. This business model was sustainable when print revenues ensured sufficient returns of investments and the internet was an additional source of brand exposure and advertising revenues. With the decline of print, publishers have become increasingly dependent on the monetisation of their digital content, but they manage to do so today only to a limited extent. Paywalls and B2C digital-subscription offers are being increasingly proposed, in particular by the main newspaper and magazine brands, but today they only account for around 10 % of news publishers' online revenues. 480 Freely-available content remains crucial as it attracts advertising revenues, which are today still the main contributor to press publishers' digital revenues. However, the large proportion of press publishers' content available online has also favoured, over time, the emergence of online service providers, such as social media and news aggregators, which base in full or in part their business models on reusing or providing access to such content.

In 2016, social media (22 %), news aggregators (14 %) and search engines (21 %) are, taken together, the main way to read news online for 57 % of users in the EU. 481 The relation between these online services and press publishers is complex. On the one hand, they increase the visibility of press content and bring new traffic –and thus advertising revenues– to newspaper websites. 482 According to a recent study covering FR, DE, UK and ES, 66 % of visits to newspapers' websites consist in referral traffic, i.e. traffic channelled by other online services, the total value of which has been estimated to be €746 million in the 4 MS considered. 483 On the other hand, 47 % of consumers browse and read news extracts on these websites without clicking on links to access the whole article in the newspaper page, which erodes advertising revenues from the newspaper webpages. 484  

Press publishers have attempted to conclude licences with online service providers for uses of their content online, and sought to participate in the advertising revenues generated by their content on third parties' websites. However, they have generally not managed to do so, despite the fact that these services often engage in copyright-relevant acts. 485 More generally, the opportunity offered by the digital environment has not translated into the emergence of a solid B2B licensing market for online uses of press publications. Press publishers generally point out that B2B-licence revenues are a very low proportion of their online revenues and that they face considerable difficulties in concluding licences with online service providers. 486 Services distributing digital press publishers' content to consumers based on licensing agreements are just beginning to be tested now. 487 Cooperation agreements between major online service providers and publishers, which aim at supporting technological solutions to improve readers' experience (in particular on smartphones) and generate higher advertising revenues, are beginning to emerge. 488 However, these agreements generally do not specifically target the use of content by online service providers.

The problem described above does not affect publishers other than press publishers to the same extent, due to the different nature of their products and business models. Book publishers generally do not make their content freely accessible online in the same way press publishers do. As a consequence, online services such as news aggregators and social media hardly play a role as distributors of book content at the moment. The online distribution of ebooks generally follows a more traditional linear model, based on copyright licences between publishers and online distributors (with or without the intervention of intermediaries), in many cases large multimedia online service providers. Scientific publishers generate revenues either through subscription licences with universities and similar establishments or, when they make available their content online under the open access model, by charging authors for the publication. Because of the specific nature of the scientific publications, advertising revenues as well as traffic generated by online service providers hardly play a role in this market.

An additional, more specific problem which affects all publishers, in particular book and scientific publishers, relates to their ability to receive compensation for uses of their publications under exceptions. Publishers bear the economic risks linked to the exploitation of the works contained in their publications and may suffer losses when such works are used under exceptions or limitations to copyright. However, they currently face legal uncertainty as regards their ability to receive compensation for such uses. This issue has come to the fore following a recent decision of the CJEU where, stressing the fact that publishers are not rightholders under the current EU rules, the Court has questioned the lawfulness of mechanisms existing in a number of MS under which publishers have traditionally received compensation for uses of their publications under exceptions or limitations.  489  This case-law concerns predominantly the private copying and reprography exceptions, but extends potentially to uses under other exceptions that are subject to compensation. As illustrated in the table below, publishers currently receive compensation in at least 18 MS, under different national arrangements. Detailed quantitative information was available concerning 12 of these MS and is presented in Annex 13D.

National situation

Member State 490

Compensation paid to both authors and publishers for uses under one or both of the private copying / reprography exceptions

AT, BE, BG, CZ, DE, EE, ES, EL, FR, HU, HR, LT, LV, NL 491 , PL, PT, RO, SI, SK

Compensation paid only to authors for uses under private copying / reprography exception

DK, FI, IT, SE

No compensation for uses under private copying / reprography exception

CY, LU, MT

No private copying / reprography exception

IE, UK

Some of these MS 492 are currently considering introducing national legislation to take into account the case-law of the CJEU and keep in place compensation schemes benefiting publishers. Others could follow if no action is taken at EU level. However, under the current EU rules it is not fully clear to what extent MS are allowed to do it.

The economic implications of this problem are illustrated by the fact that in the 12 MS for which data were available, an aggregated total amount of €40 million was distributed to publishers over the course of the respective last financial year, as indicated in Annex 13D. 493  It is important to note that for publishers these revenues are not associated with any marginal costs and therefore represent a significant source of income, in particular for smaller publishers. 

Drivers: [Incomplete protection of publishers' contribution and investments in publications at the EU level] EU copyright law recognises and incentivises the economic and creative contribution of film producers, phonogram producers and broadcasting organisations by granting them related rights. Publishers across different sectors also play an important role in assembling, editing and investing in content. However, today, despite playing a comparable role in terms of investments and contribution to the creative process to film and phonogram producers in their respective industries, 494 publishers are not identified as rightholders under EU copyright rules. 495 They generally exploit and enforce their content on the basis of the rights transferred to them by authors (writers, journalists, photographers, etc.). 496 Some MS grant a specific additional protection to publishers as authors of collective works (e.g. PT). In addition, other MS (notably DE and ES) have recently adopted national measures (generally referred to as ancillary rights) to grant publishers specific protection as regards uses of their content online largely as an attempt to address the above described problems related to the exploitation and enforcement of rights in press publications in the digital environment. The DE law grants an exclusive right covering specifically the making available of press products to the public, which has been implemented by the main press publishers under collective management schemes. 497 The ES law establishes an obligation for online service providers to pay compensation to publishers (which cannot be waived) for uses of their content online. 498 None of these two recent ‘ancillary rights’ solutions at national level have proven effective to address publishers' problems so far, in particular as they have not resulted in increased revenues for publishers from the major online service providers. This incomplete protection in the EU causes legal uncertainty, notably as regards exploitation of press publications through B2B licences, and makes enforcement complex and sometimes inefficient (e.g. proving the chain of title of all rights related to a publication). 499  Moreover, different approaches to the protection of publishers at national level result in fragmentation in the single market.

The fact that publishers are not protected as rightholders at the level of EU law but rely on the rights of the authors transferred to them has furthermore contributed to the situation of legal uncertainty concerning their ability to receive compensation under exceptions as described above.

[Differences in bargaining power] The gap in the current EU rules further weakens the bargaining power of publishers in relation to large online service providers and contributes to aggravate the problems faced by press publishers as regards the online exploitation of, and enforcement of rights in, their content. Online service providers often have a strong bargaining position and receive the majority of advertising revenues generated online (e.g. 40 % of total advertising investments in BE, according to publishers). 500 This makes it difficult for press publishers to negotiate with them on an equal footing, including regarding the share of revenues related to the use of their content.

Consequences: The works and other protected subject-matter published by different publishing industries (e.g. newspapers and magazines, books and scientific journals) are essential in a democratic society, as they play an important role in citizens' access to knowledge and good quality information, including on issues related to democracy and democratic decision making. The problems described above contribute to a situation of general decline of publishers' revenue streams in the press sector and to potential substantial loss of revenues linked to compensation for uses under copyright exceptions across the entire publishing industry. If the investments and contribution of publishers increase the value of publications but are not backed by appropriate revenues, the sustainability of publishing industries in the EU may be at stake, with the risk of negative consequences on media pluralism, democratic debate, quality of information and cultural diversity in the European society.

How the problem would evolve: In the near future, the production and distribution of digital content, notably on online service providers (both websites and apps) will continue to require growing investments from press publishers.

Without intervention at EU level, press publishers will continue licensing the use of their publications mainly on the basis of the rights transferred to them by the content creators. In a constantly-evolving market, with more and more players and means of content distribution, this is likely to increase legal uncertainty, weaken the position of press publishers, accentuate their loss of revenues, complicate enforcement of rights and eventually affect the number and quality of print media. This would be prejudicial for the media pluralism, good quality information and the role they play in democratic societies. MS may decide to address these problems at national level, as DE and ES have recently done, but this is likely to be ineffective, due to the lack of scale of national solutions. Furthermore, it would only increase fragmentation of the legal framework on the online uses of press publications in the EU. In addition, in the absence of EU intervention, the decreasing share of the compensation due for uses under exceptions resulting from the current situation following the recent case-law of the CJEU would put at risk in particular the smaller players throughout the whole publishing industry (news, books and scientific publishers), who are currently relying on this compensation and are essential for the cultural diversity and media pluralism in this sector.

5.3.2.What are the various options to achieve the objectives?

The general and specific objectives are described in section 5.1.3.

Baseline

No policy intervention. Under this option, the use of publications would remain governed by the rules applicable to the rights transferred to press publishers by authors and other rightholders. Issues related to the different bargaining position of press publishers and online service providers would not be addressed, without prejudice to the possible application of competition law. This option would rely on market developments and stakeholders reaching voluntary agreements to cooperate and find win-win solutions concerning the online dissemination of publishers' content, notably as regards newspaper and magazine online content. 501 At the same time, certain MS could decide to amend their national legislation to introduce rights for press publishers at national level, which is likely to be ineffective and increase fragmentation of copyright rules in the single market.

Some MS may try to address the problem of legal uncertainty as regards publishers' (across different sectors) ability to receive compensation for uses under private copying, reprography and other exceptions through national law within the boundaries of the current EU rules, including the case law of the CJEU. Other MS may hesitate to do so in the absence of EU intervention because of the situation of legal uncertainty described above.

Stakeholders' views

Most online service providers, such as content aggregators and social networks, oppose legislative intervention and support the status quo, as they consider that the relationships between them and press publishers should be left to the market. Most publishers consider that the status quo cannot solve the identified problems.

Option 1 – Encouraging stakeholders' dialogue and cooperation to find solutions concerning the dissemination of press publishers' contents

Under this option, the Commission would encourage stakeholders, namely press publishers and online service providers, to identify collaborative solutions to facilitate the conclusion of agreements for the online use of press publishers' contents. Notably, the Commission would:

(i) launch a structured dialogue between press publishers and online service providers which would take stock of existing market initiatives 502 and foster discussions to identify common solutions which would facilitate the emergence of cooperation agreements between the two categories of stakeholders; and

(ii) monitor the implementation of any resulting initiative and assess its effectiveness to ensure a fair distribution of revenues generated by the reuse of press publishers' contents, in particular to assess whether specific EU legislative intervention at a later stage is warranted.

Stakeholders' views

Services providing access to publications could be supportive of this option, as it would not imply creation of any further rights at EU level. Most publishers consider that such a non-legislative approach would not be sufficient to tackle the challenges they currently face. 

Option 2 – Introduction in EU law of a related right covering digital uses of press publications

This option would ensure that the creative and economic contribution of press publishers (such as newspaper and magazine publishers) is recognised and incentivised in EU law, as it is today the case for other creative sectors (film and phonogram producers, broadcasters). The creation of a new category of rightholders (press publishers) would not affect the scope of the exclusive rights granted to them, notably the rights of making available to the public and of reproduction, which are harmonised under current EU copyright rules. This means, in particular, that this intervention would not change the legal status of hyperlinks in EU law as it follows from the case-law of the CJEU according to which the provision on a website of clickable links to works freely available on another website does not constitute a copyright relevant act. 503  The legal intervention would be as follows:

Protected subject-matter: The protection would benefit publishers of press publications such as newspapers and magazines according to the definition provided for in the legal instrument.

Rights covered: press publishers would be granted the exclusive rights of making available to the public and reproduction to the extent needed for digital uses.

Exceptions: exceptions and limitations laid down in EU copyright law, including new ones introduced by this legislative intervention, would apply.

Protection of TPMs and Rights-Management Information and enforcement: Articles 6, 7 and 8 of the InfoSoc Directive, as well as Directive 2004/48 504 (the "Enforcement Directive"), would apply.

Relationship with authors' rights: Publishers' rights would apply without prejudice to authors and other creators' rights on their individual contributions (news or magazine articles, photographs, videos) which compose the protected subject-matter (the final press product).

Term of protection: The term of protection of other related rights such as those granted to film and phonogram producers is usually 50 years. A shorter term of protection should be proposed in this case, taking into account the shorter economic cycle of the exploitation of press content (a relatively short period after publication). This is consistent with the situation in the MS where publishers are granted self-standing protection in copyright law (see Annex 13B) and in which the term of protection is usually shorter than for other related rights. Three scenarios are considered in this IA:

oA) Medium term of protection (between 10 and 50 years).

oB) Short term of protection (between 5 and 10 years).

oC) Very short term of protection (between 1 and 5 years).

Stakeholders' views 

Most press publishers, in particular the main newspaper and magazine organisations which replied to the public consultation, support the introduction of a new related right at EU level. Authors in the press sector (notably journalists) have expressed mixed reactions when replying to the public consultation. They generally consider that the bargaining power of the publishing industry in relation to online service providers should be strengthened but they express some concerns as to the possible negative impact that new rights granted to publishers could have on them. Service providers, such as news aggregators and media monitoring services, are generally opposed to granting a new related right to press publishers as they claim that this would disincentive investments in innovative online services and create barriers for small businesses. Consumer organisations have expressed reservations as regards the possible introduction of a related right and the concern that this could make it more difficult for consumers to access existing press content online. At the same time, some consumer organisations recognise that a related right could have a positive impact on the quality of news content.

Option 3 – As Option 2 plus introduction, in EU law, of the possibility for MS to provide that publishers may claim compensation for uses under an exception

In addition to the introduction of the new related right for online uses of press publications described under Option 2, this option would introduce a specific provision in EU law clarifying that MS may choose to establish in their legislation that where an author has transferred or licensed a right to a publisher, such a transfer constitutes a sufficient legal basis for the publisher to claim compensation for the uses made under an exception to the transferred or licensed right.

Stakeholders' views (In addition to position as regards Option 2).

In the replies to the public consultation, publishers other than press publishers (book and scientific publishers) have mainly pointed to problems different from those raised by press publishers, notably the legal uncertainty as regards compensation for uses under exceptions. Therefore, publishers across different sectors are expected to be supportive of this option, as it establishes a margin of manoeuvre for MS to introduce national laws that foresee the distribution of compensation to publishers as derived rightholders, thus in principle allowing the existing systems in many MS to endure, although there may be adaptations necessary. In the public consultation some authors have expressed support for such national arrangements, whereas others are sceptical regarding the extent to which they benefit from them. Consumers are expected to take a neutral view as regards the additional elements in Option 3, as this intervention in the area of compensation for exceptions should not increase the overall level of compensation due and hence of levies charged to final consumers.

Discarded option

Introduction in EU law of a related right covering all publications, including publications other than press: The identified objectives could be achieved also by introducing in EU law a related right covering all publishers in all sectors (press, book, scientific publishers, etc.). However, such an option is not considered in this IA as it would not be a proportionate way to address the problems faced by the publishing industry and described in Section 5.3.1. The problem related to press publishers' difficulties to reach agreements and monetise use of their content by online service providers can be addressed by a related right applicable to press publications only (Options 2 and 3). The situation as regards publishers' ability to receive compensation for uses under exceptions, which affect publishers across all sectors (news, book, scientific publications) can be addressed in a proportionate way by the introduction of the clarification concerning publishers' claim for compensation (Option 3).

5.3.3.What are the impacts of the different policy options and who will be affected?

Approach

The options presented above would primarily affect publishers and authors whose works are part of publications (in particular journalists, writers, photographers, etc.) as well as online services providing access to or using publications, and consumers. The impacts affecting these four groups are presented separately:

For publishers, the main impacts are related to legal certainty and their ability to obtain revenues (including from compensation) for the use of their publications and to enforce their rights.

For authors and other creators of the individual contributions which compose a publication, the impacts on their current revenues and their ability to exploit their individual rights independently from publishers' rights are considered.

For service providers, impacts on legal certainty in their relations with publishers and economic impacts in their business models (licensing and transaction costs) are considered.

For consumers, impacts related to the conditions to access content are considered.

The policy options are also assessed in relation to their general social impacts (on cultural diversity and the availability and findability of content) and impacts on fundamental rights (property right and freedom of information).

Baseline

Impacts on stakeholders

Publishers

Without intervention at EU level, legal uncertainty in this sector is expected to increase and publishers' bargaining position would further weaken. Print circulation of daily newspapers in Europe is expected to decline by 19 % between 2014 and 2019. 505 In terms of revenues, the number of people who pay for news is projected to grow in the future between 7 % and 23 % in the UK, ES, IT and other MS. 506 However, the loss of print revenues is not expected to be compensated by the increase of online revenues. Online revenue streams feature smaller margins, as the competition for digital advertisement revenues is tough and free-access press items are widely available. Moreover, access to news through smartphones is increasing every year (e.g. in the UK, of those who use a device to access digital news, those who say it is now their main device have risen from 15 % to 27 % since 2013 – this figure has risen to 47 % of those aged 25-34). 507 As advertising revenues linked to access through smartphones are lower than through computers, this evolution of news consumption would make overall revenues decrease. PwC estimates that Europe's newspaper and magazine revenues will decrease, under this option, by 7.34 % in the period 2014-2019. 508

In this scenario, service providers may be willing to agree on the use of publishers' content in a satisfactory way for both publishers and themselves, as some of them do today. 509 However, it is difficult to envisage whether these agreements will be kept or extended in the long term if there are no external incentives, particularly as this market is constantly evolving.

Publishers would still face difficulties to license their publications or prevent unauthorised uses thereof. In the long term, the quality of their content and the reputation of their brands may be affected. Legal uncertainty as regards publishers' ability to receive compensation for uses under exceptions would persist.

Authors

A decline in the publishing industry would have a negative impact on rightholders who depend on this sector. Journalists, photographers and other authors would continue to see their contributions to publications being reused by services other than the publishers they have transferred their rights to, without getting any appropriate income in return. As a result, the quality of journalism may be negatively affected in the medium term.

Service providers

Under this scenario, some online service providers would continue negotiating the use of publications with publishers on the basis of the transferred rights as it is the case, for instance, of some media monitoring and analysis organisations which already pay licence fees to publishers. 510 Others would continue to use the publications without licence or other commercial agreement. Finally, it should be noted that a decrease of the number or quality of press publications could be generally negative for service providers, as they would have less content to base their business models on.

Consumers

This option would be neutral regarding economic impacts on consumers.

Social impacts 

Under the baseline scenario, incentives to create and invest in publications would largely remain the same, which may negatively affect the number of publications in the medium term. This would entail negative social impacts, including regarding cultural diversity, media pluralism and the availability and findability of a wide variety of publications for consumers.

Impacts on fundamental rights

This option would have no impact on copyright as property right (Article 17 of the Charter), since there will be no change to current copyright rules. The right to freedom of expression and information (Article 11 of the Charter), which includes the pluralism of the media, may be negatively affected in the long run if the sustainability of the press industry is at stake.

Option 1 – Encouraging stakeholders' dialogue and cooperation on finding solutions concerning the dissemination of press publishers' contents

Impacts on stakeholders

Publishers

The non-binding nature of the stakeholders' dialogue would make the impacts of this option and its effectiveness to solve the problems raised by publishers mainly depend on the willingness of the stakeholders to participate in it and to take commitments. The complexity of the market and the variety of players and business models, as well as their unequal bargaining power and the opposed views of the relevant stakeholders as to how the reuse of press content benefits the other party, are all factors which may limit the effectiveness of this option. As a result, the impacts of this option are expected to be rather limited and only slightly better than the baseline scenario.

This option would not solve the specific problem concerning publishers' ability to receive compensation from uses of their publications under exceptions (which can only be addressed through legislation). In all, these limited impacts may not make up for the costs related to the participation in the dialogue, considering in particular that many publishers are SMEs.

Services providers

Neutral impacts are expected, or slightly positive if they manage to reach long-lasting favourable agreements with press publishers, when they see a business opportunity to do so.



Impacts on authors and consumers

Like baseline.

Social impacts

Like baseline.

Impacts on fundamental rights

Like baseline.

Option 2 – Introduction in EU law of a related right covering digital uses of press publications

Impacts on stakeholders

Publishers

Under this option, press publishers would still need to acquire authors' authorisation to publish their contributions in a newspaper or a magazine, as they do today. 511 Therefore, the relationship authors-publishers would remain untouched.

In contrast, this option would provide these publishers with a substantial added value when it comes to licensing out their publications for online uses by third parties, something that, as explained in Section 5.3.1, is increasingly important for them in the digital environment. Being able to authorise the use of their press publications on the basis of an own self-standing right would place press publishers in a comparable situation to the one of other related rightholders in EU law, such as film and phonogram producers, thus recognising their role in terms of investments and overall contribution to the creative process and allowing them to benefit from:

1. More efficient licensing mechanisms. While a self-standing related right would not remove the need from publishers to acquire authors' rights also for the purposes of further licences with third parties, it would nevertheless provide them with a clearer position in the context of negotiations with them as they will be able to rely on their own right. Harmonised protection at EU level would further increase the legal certainty to the benefit of press publishers.

2. More efficient enforcement of rights. Enforcing transferred rights is burdensome and time-consuming if the number of content contributors is very high, as it is typically the case with press content. As set out in Section 5.3.1, a court may ask a publisher, as licensee or transferee, to prove that it owns all the allegedly infringed rights (e.g. in one case reported by the publishing industry up to 22,000 contracts with journalists in order to file a lawsuit for the mass infringement of publishers' rights in DE). In contrast, under this option publishers would enforce their own rights. They would be treated by the national courts as original rightholders, not as licensees. As a result, publishers would be able to fully benefit from the remedies provided for under the Enforcement Directive and the related national laws. 512  Consequently, getting injunctive relief or instituting infringement proceedings before the court would be swifter.

3. Stronger incentives on online services to seek licences for the reuse of press publishers' content. Today, some online service providers take advantage of the inefficiencies in the enforcement of large numbers of transferred authors' rights, knowing that they would not face any significant opposition due to the burdensome processes press publishers would have to go through to enforce those rights. More efficient enforcement is therefore likely to result in increased licensing opportunities for publishers as it would discourage online service providers from infringing publishers' rights and incentivise them to seek the required licences.

As a combined effect of the above mentioned factors, this option would increase press publishers' bargaining power vis-à-vis third parties, thus creating new licensing opportunities in the digital environment. The expected reduction of piracy in this sector is likely to increase revenues related to the legal exploitation of press publications (i.e. the reduction of piracy would redirect readers to legal sources). Moreover, some of the online service providers which reuse press publications without the required authorisation may seek licences or monetisation agreements with press publishers, thus raising revenues stemming from licences. While it is difficult to quantify these benefits, it is important to note that losses for news publishers related to piracy have been estimated to be around €10.76 million per year in BE, and the industry estimates €27.59 million annually on increased licensing revenues if piracy decreased 513 . News publishers have also estimated that piracy causes 30 % loss of digital transaction volume and a potential 10-20 % of turnover in DE, while the introduction of a new related right could lead to a 10 % increase in revenues or between 1015 % in publishers' operating profit margin 514 . Similar potential revenues have been estimated to amount to €31 million in FR 515 .

The positive impacts on publishers of the protection granted under this option would be reinforced by its EU scale, thus providing a more effective protection than under different national laws. 516 In particular, intervention at EU level is expected to strengthen publishers bargaining powers in a more effective way than it has happened under national measures such as the ancillary rights adopted in DE and ES (see Annex 13B), where major online service providers either closed down their news aggregation services (ES) or concluded free licences for the use of publishers' content (DE) which has not generated any remuneration for publishers so far. Moreover, the related right granted to press publishers under this option would be different from the DE law, which can only be exercised against specific categories of online service providers, and from the ES law, as it would be an exclusive right and not an unwaivable compensation. Accordingly, the related right recognised to publishers at EU level would leave press publishers a greater margin of manoeuvre to negotiate different types of agreements with service providers than it has been the case in DE and ES and is therefore expected to be more effective for them in the long run (notably as it will allow press publishers to develop new business models in a flexible way).

The effects on press publishers described above would materialise in all the three scenarios considered as regards the term of protection. Scenario A (10 to 50 years) would place press publishers in a situation comparable to that of other related rightholders. Scenario B (5 to 10 years) would address the problem of press publishers as regards the use of their content by online service providers such as news aggregators and social media, and would also provide publishers with a clearer legal framework when concluding licensing agreements with service providers having a different business model (e.g. distributors of multi-publishers content, services providing access to news archives). Scenario C (1 to 5 years) would address specifically the situation concerning online service providers such as news aggregators and social media but may not be fully future-proof as regards exploitation of press content by other businesses.

Under this option, publishers other than press publishers would not be affected, as per the baseline scenario. Therefore, problems faced by these publishers as regards claims for compensation would not be addressed.

Authors

Improvements to the press publishers' bargaining position under this option could indirectly have a positive impact on authors and other rightholders working in this sector insofar as publishers transfer part of these benefits to the authors in terms of job creation or better salaries/remuneration (which would vary on a case-by-case basis).

Authors, journalists in particular, have expressed concerns, in the context of the public consultation, that a publishers' right could make it more difficult for them to exploit their works separately from the publisher. The related right under this option would protect the value added by the publisher, which in a print product is not always easily separable from the author's work (in contrast with, for instance, a cinematographic work, where the subject-matter of protection of the producer, the film, is clearly different from the script, which is a text-based work). Today, when a journalist grants a publisher a non-exclusive authorisation to use an article, 517 he generally remains entitled (as the author of the work) to further use it (e.g. to authorise the use by a third party or to publish it himself in a collection or anthology). This is common industry practice even when the author's original manuscript has been subject to amendments during the editing process carried out by the publisher. Intervention in EU law under this option will clarify that the introduction of a related right for press publishers does not affect authors' ability to exploit their works independently. Provisions to this effect exist in MS laws granting self-standing protection to publishers. 518

The three scenarios (A, B, C) as regards the term of protection should be generally neutral on authors considering that the related right granted to publishers will not affect authors' rights.

Service providers

The impact of this option on service providers would depend on the size, bargaining power and business model of the different players.

The clear identification of press publishers as rightholders is likely to prompt more online service providers to conclude agreements with publishers for the use of their content online, thus accelerating the cooperation which is starting to emerge between larger online service providers and the publishing sector (see Section 5.3.1 and baseline). The introduction of a new right is not likely to substantially affect the ongoing initiatives and would probably foster the conclusion of more agreements between the major internet players and the publishing industry in the medium to long term.

Some service providers which already conclude licences covering specifically the use of digital press content, such as the media monitoring services, have expressed the concern that licence fees may increase as a result of the introduction of a new publishers' right. 519 In practice, licence fees would depend on specific negotiations and business models and not on the legal basis on which agreements are concluded (transferred authors' rights today, press publishers' rights under this option). Therefore, publishers may not have an interest in raising licence fees in licensing markets which already function today.

In summary, the main impacts of this option would affect those online services providers which are not concluding licences for the reuse of publishers' content today when they should in principle do so, pursuant to copyright law. Therefore, neither the services which today have agreements with publishers nor new entrants in this market would be negatively affected in terms of additional costs or fees. As indicated in the description of the options, the introduction of a new related right for press publishers would not alter the scope of the right of making available to the public. Therefore, the question whether certain uses, including hyperlinking and browsing, are today copyright relevant under EU law, would not be affected by this option.

Finally, the introduction of uniform rules at EU level under this option would have the positive effect for service providers to reduce fragmentation of the rules protecting publishers across MS, making it easier for them to conclude licences for multi-territorial uses of publishers' content. This aspect, together with better market conditions supporting the emergence of new B2B licence opportunities for press products, could foster innovation and facilitate the emergence of new and diverse business models of digital press content distribution (such as streaming, access to broad multi-brand catalogues of different newspapers and magazines, etc). 520

Service providers could in principle be affected by the three term of protection scenarios (A, B, C) to a varying extent, depending on their business models (i.e. whether they target the distribution of daily news, as it is generally the case of online service providers such as news aggregators and social media, or rather longer term uses, such as access to newspaper archives). However, in practice, the impact of a press publishers' right on these stakeholders may not substantially change under the three scenarios. This is due to the fact that service providers would have in any event to seek authorisation for the use of press content even after the expiry of the publishers' right because they would still need to clear – as it is already the case today – the rights of the authors in press publications (which have a longer term of protection: i.e. life of the author plus 70 years).

Consumers

Consumers reap considerable benefits from news aggregators and social media. At the same time they also benefit from high quality newspaper content feeding these channels of consumption. By fostering the production of high quality press content, this option is expected to have a positive impact on consumers. Better market conditions for the press publishing industry could give rise to the development of innovative offers for the digital distribution of press content, with larger catalogues and more choice.

Consumer organisations have raised concerns that granting additional protection to publishers could negatively affect consumers as a result of the consequences that they believe this intervention could have on online services providing access to press content online. The extent to which this may happen in practice depends at least in part on the impact of the option on service providers (see above), including as regards the different scenarios for the term of protection (scenarios A, B and C, above). However, problems experienced by consumers in ES – which are often quoted as a source of concern in relation to a possible intervention on publishers at EU level (given that a major news aggregators decided to discontinue its service in ES) – are not expected to arise under this option since the related right proposed is different from the unwaivable compensation measure under the ES ‘ancillary rights’ law (see above: impact on publishers).

Social impacts 

By improving the sustainability of the press publishing sector, this option would have a very positive impact on the number and quality of press publications. European society would benefit from media pluralism and enhanced participation in the democratic debate.

Impacts on fundamental rights

Positive impacts on copyright as property right and the right to freedom of information, resulting from the fact that this option is expected to increase the level of protection of press publications and to foster the quality of journalistic content.

Option 3 – As Option 2 plus introduction, in EU law, of the possibility for MS to provide that publishers may claim compensation for uses under an exception

Impacts on stakeholders

In addition to the impacts of Option 2, Option 3 would have the following impacts:

Publishers

This option would have a positive impact on all publishers, in particular book and scientific publishers but also on press publishers regarding their ability to receive compensation for uses under exceptions (notably the reprography exception). 521 For example, in DE, the reprography compensation distributed to press publishers has numbered in recent years around €1.5 million per year and has been used exclusively for the education and training of journalists. 522  

For other publishers, in particular book and scientific publishers, Option 3 is highly significant, as their publications are often used under an exception such as private copying. For instance, in DE in 2013 over €20 million have been distributed to scientific publishers (books and journals) alone and an additional €3 million to other book publishers. 523 In 2012 the sum that scientific publishers received amounted even to over €30 million and to €2.3 million to other book publishers. 524  

Until now, publishers in 18 MS have received (part of the) compensation for uses of their publications under an exception. 525 The basis and the details of the respective arrangements in place differ, but in many MS there are joint authors/publishers collecting societies in place that are in charge of negotiating tariffs and collecting the compensation, e.g. in the form of a levy, and distributing it to authors and publishers. In their replies to the public consultation these collecting societies have expressed the concern that their very existence could be put in danger by the current situation of legal uncertainty. In the 12 MS for which detailed data was available, the compensation to publishers amounted to an aggregated sum of €40 million in the respective last financial year. 526 Figures differ greatly from MS to MS and range from €24 million in DE to €7,000 in LT for reprography. Option 3 would not change this situation but allow MS to keep the existing systems and provide a clear legal basis for them. More precisely, Option 3 leaves it to MS to decide if they want to put publishers in a position to receive compensation for uses of publications under an exception on condition that the original rightholders benefit in an adequate manner, directly or indirectly, from the compensation due. It also remains neutral regarding the issue of levies as such and aims merely at giving MS discretion regarding the recipients of compensation for uses under an exception or limitation under certain conditions. Thus, depending on the concrete legislative measures passed by the MS, the existing schemes providing for a split of the compensation between authors and publishers as well as the established practise of joint collecting societies could be maintained, so long as it is ensured that authors benefit adequately from the compensation due.

Authors

The impact on authors (journalists, writers, photographers) would vary across MS, depending on their choices to make use of this option and on the starting situation in the respective MS. Authors have regarded positively, in those MS where they exist, compensation schemes encompassing both authors and publishers. They have traditionally been considered as instrumental to the good functioning of collecting societies and of the print publishing market overall. Therefore the intervention under this option aiming at providing MS with the legal space to keep these systems in place is likely to ultimately benefit authors as well.

Accordingly, this option would benefit authors by enhancing transparency regarding the economic value of the compensation due for uses under an exception and the way in which they benefit from it, after transferring or licensing their rights to a publisher.

Service providers

The additional elements under Option 3 should have no impact on online service providers.

Consumers

The additional elements under Option 3 should have no additional impact on consumers, as the overall level of compensation would stay the same. This is the case because the optional mechanism proposed additionally under Option 3 would be neutral as to the overall level of harm caused by uses under the exception.

Social impacts 

Additional positive impacts on cultural diversity are expected under this option, because of the added value that it would bring to publishers across all sectors, in particular smaller book publishers.

Impacts on fundamental rights

No additional impact on fundamental rights.    

5.3.4.How do the options compare?

Option

Effectiveness

Efficiency

Impact on stakeholders

Social impacts and fundamental rights

Baseline

(0) Publishers would continue to face difficulties to license their publications or to get enough revenues (including compensation) for the reuse of their content.

(0) No direct costs associated with the baseline option.

(0) Impacts would depend on the evolution of the market. This uncertainty would prejudice publishers.

(0) No direct impact on fundamental rights. Cultural diversity may be negatively affected in the long term.

Option 1 –Stake-holders' dialogue

(0/+) It could foster new agreements but depending mainly on the willingness of the parties to participate. (0) Legal certainty (including on the claims to receive compensation) across the EU would not be achieved.

(-) Costs linked to the organisation of the stakeholders' dialogue.

(0) Main impacts on stakeholders would depend on the uneven willingness of the parties to participate in the dialogue and reach agreements.

(0) No direct impact on fundamental rights. Cultural diversity may be negatively affected in the long term.

Option 2 – Introduction in EU law of a related right covering digital uses of press publica-tions

(++) The EU-scale of the recognition of a related right for press publications would provide more effective protection than provisions in national law.

(+) As a result, legal certainty and stronger bargaining powers would foster the conclusion of B2B licences for online uses of news. The positive impact on publishers would remain but decrease under the three scenarios (A, B, C) concerning the term of protection.

(-) It would not solve the unclear situation regarding publishers' possibility to claim compensation for uses made under an exception.

(0) No direct costs associated with this option.

 

(++) More efficient licensing mechanisms and enforcement measures would help press publishers to conclude digital licences and monetise the reuse of their content.

(0/+) Authors to benefit indirectly from positive impact on press publishers.

(-/+) It will be clearer that some online service providers that today do not do so (even if they may already be legally required) have to acquire prior licences from press publishers. At the same time, new innovative business models for the distribution of press could emerge.

(0/+) Positive impact on consumers as regards the enhanced availability of quality content in the long term.

(+) Positive impact on copyright as property right.

(+) It would help secure the quality and plurality of journalism.

Option 3 – As Option 2 plus EU law possibility for claims for compen-sation

Same impacts as Option 2, and additional impacts as follows:

(+) It would effectively solve the unclear situation regarding publishers' possibility to claim compensation for uses made under an exception.

(+) If provided by national law, publishers would be entitled to get compensation from exceptions in most MS.

(+) Specific positive impacts on small book publishers would be positive for the cultural diversity.

Option 3 is the preferred option. This IA does not take a decision as to whether the term of protection of the related right for press publishers should be as under scenario A, B or C (at this stage this is left for political decisions). Option 1 would not solve the problems effectively, as self-regulatory solutions alone, which depend on the willingness of the different market players to reach agreements, cannot fully address the identified problems. Both Options 2 and 3 would strengthen the bargaining position of press publishers and foster the conclusion of licences. Option 3 would have in addition positive impacts on all publishers in relation to their possibility to claim compensation for uses under an exception, without giving rise to any negative impact on other stakeholders.

Proportionality of the preferred option and impacts on MS: Option 3 is the most proportionate option as it allows addressing in a targeted way and in their own merits the specific problems faced by different categories of publishers, without going beyond what is needed to achieve this objective.

All MS will have to reflect in their legislation the new related right granted to press publishers at EU level. This is not expected to directly affect the existing provisions in MS laws which are broader (e.g. protection of collective works, presumptions of transfer of rights) or have a totally different subject-matter of protection (typographical arrangements) but may require adapting national laws which have a similar subject-matter of protection to bring them fully in line with the scope of the right granted at EU level. The complementary element introduced in Option 3 (possibility for MS to provide that publishers may claim compensation for uses under an exception) is an enabling provision that does not require MS to change their existing laws, but should they wish to do so, provides them with a clear margin of manoeuvre to allow for the sharing of compensation for exceptions between authors and publishers.

5.4.Fair remuneration in contracts of authors and performers

5.4.1.What is the problem and why is it a problem?

Problem: Authors and performers face a lack of transparency in their contractual relationships as to the exploitation of their works and their performances and as to what remuneration is owed for the exploitation.

Description of the problem: Economic rights granted to authors and performers (hereafter: 'creators') over the use of their works and performances (hereafter: 'works') have been harmonised at EU level by several directives, in particular by the Infosoc Directive. In the case of creators, these directives provide a framework wherein the exploitation of the content protected by those rights can take place. Works are not generally exploited by the creators themselves; commercial exploitation is often arranged through the grant of licences or the transfer of rights e.g. to a publisher, producer, or a broadcaster (hereafter collectively: 'contractual counterparties'). These contractual relationships constitute the exercise of the economic rights and govern the exploitation of works and the remuneration owed to creators. Creators should be able to license or transfer their rights in return for payment of appropriate remuneration, 527 which is a prerequisite for a sustainable and functioning marketplace of content creation, exploitation and consumption. 528  The determination of what constitutes appropriate remuneration depends on factors such as the nature and scope of the use of the works. However, there is sufficient evidence of creators lacking access to such information, and calling for legislative intervention by the EU. 529  For example, creators point to the poor quality and/or lack of accounts and reporting by publishers and producers with regards to the use of the rights they have transferred. 530  The information received from creators and some recent studies 531 indicate that the lack of transparency in the creators' contractual relationships concerns:

the possible exploitation, i.e. how the work may be used;

the actual exploitation, i.e. how the work is used and with what commercial result; and

the remuneration that is owed for the exploitation.

There may be uncertainty about possible exploitation because licence and transfer agreements do not always specify the obtained rights while modes of exploitation and supply chains have become very diverse and complex. Concerning actual exploitation, on the basis of the information available there seems to be many instances when creators do not receive satisfactory or any information from their contractual counterparty on the modes and extent of use and on the revenues generated from the exploitation, 532 which may lead to uncertainty about owed remuneration.

This situation can be described as an information asymmetry because the information that would be required to ensure transparency may, in fact, be available to the contractual counterparties but it is not shared with creators. 533

Transparency is also affected by the increasing complexity of new modes of online distribution, the variety of intermediaries and the difficulties for the individual creator to measure the actual online exploitation, notably due to the evolution of consumption patterns in some sectors, for instance from ownership to access/streaming modes of consumption. Online distribution is expected to become the main form of exploitation in many content sectors. Transparency is, therefore, even more essential in the online environment to enable creators to assess and better exploit these new opportunities.

The situation of creators varies to some extent depending on MS or the sector and seems to be better where collective bargaining is allowed and efficient 534 but problems related to lack of transparency and information asymmetry seem to arise in most creative sectors. 535  

The problem has a significant European dimension. Cross-border exploitation and production of content is a reality in Europe. For instance, in the music sector the share of non-local EU repertoire consumed in MS ranges between 20 and 40 % in radio and between 15 and 32 % in digital downloads; in the AV sector co-productions account for an average of 25 % of total productions. 536 In this context, it is important to ensure that authors and performers enjoy in practice the high level of protection established by EU legislation (including as regards the digital dissemination of their works and performances) and do so disregarding where in the EU they assign or transfer their rights and where their works and performances are exploited. Tools to effectively exercise rights are as important as the recognition of such rights at EU level.

Drivers: [Weaker bargaining power of authors and performers in contractual negotiations] The main underlying cause of this problem is related to a market failure: there is a natural imbalance in bargaining power in the contractual relationships, 537 favouring the counterparty of the creator, partly due to the existing information asymmetry. The difference in bargaining power can also create a "take it or leave it" situation for creators and therefore full “buy-outs” using catch-all language that covers any mode of exploitation without any obligation to report to the creator. 538

[Weaker bargaining power of authors and performers in contract enforcement] Another driver of the issue, also related to the difference in bargaining power, is that often creators depend on their contractual counterparties and are unwilling to challenge them or to request further information for fear of possible consequences. 539

[Legislative solutions ensuring transparency in MS are not sufficient] A regulatory aspect of the problem is that most MS impose either too generic transparency or reporting obligations, or transparency obligations only applicable to certain sectors (without the necessary mechanisms to ensure enforcement). The fact that some MS, notably FR and DE, have recently introduced or are currently planning to introduce or to strengthen such measures 540 also confirms the existence of the problem.

Book / Press Sector

Music Sector

Audiovisual Sector

Number of MS with legislative reporting/transparency obligations

14

6

14

Consequences: As a consequence, creators are confronted with instances where they are unable to effectively monitor the use, measure the commercial success and assess the economic value of their works. Because of this, there is a risk that creators are unable to negotiate an appropriate remuneration in exchange for their rights, to verify that they are receiving the agreed amounts or to enforce their claims for remuneration effectively. 541 This situation has been reflected in statements on lack of fair remuneration from stakeholders 542 and, in recent studies conducted in the UK and France, for example. 543

Lack of transparency has effects on the internal market as well. Firstly, creators are, in the absence of transparency, unable to effectively compare deals and offers, including across borders. This undermines their ability to exercise their freedom of movement 544 and to enter into contractual agreements with economic partners from different MS. 545 Secondly, contractual counterparties face a fragmented situation between the different MS 546 as regards transparency which prejudices a level playing field in the Internal Market. Companies established in different MS and in competition for the same online market have to comply with different transparency obligations, resulting in a competitive advantage for those under a lighter transparency regime. Furthermore, differences between MS may create legal uncertainty for both creators and contractual counterparties, and lead to greater transaction costs and "jurisdiction shopping" by transferees.

How the problem would evolve: All things being equal, this situation is not likely to improve to a sufficient extent, notably as there are no indications that the current bargaining positions will become more balanced. It is not clear either whether the information asymmetry would improve. In fact, as exploitation is getting more complex and more intermediaries join the value chain there is a risk of less transparency. On the other hand, the constantly improving information technology should allow providing for more efficient, more accurate and more economic reporting mechanisms. 547 Without EU intervention, these technologies are not likely to be used to their full potential. Creators will not be able to force transparency on their contractual counterparties since they are in a weaker bargaining position and, in many instances, have few alternatives. Some MS may follow the example of recent initiatives to legislate to introduce transparency measures but such interventions are not likely to happen in all MS or sectors and could risk further fragmenting the Internal Market.

Some stakeholders and studies 548 argue that ex-ante intervention (i.e. at the stage when a contract is being defined) via options such as prohibition of certain contractual clauses, would be more effective. However, EU intervention on copyright contract law concerning fair and unfair clauses raises questions at this stage in terms not only of proportionality and contractual freedom but also of its articulation with the very different approaches in MS and differences between the creative sectors. Therefore, the scope of this IA covers ex-post aspects linked with lack of transparency and unbalanced bargaining positions.

5.4.2.What are the various options to achieve the objectives?

The general and specific objectives are described in section 5.1.3.

Baseline

No policy intervention. This option would rely on MS or self-regulation by industries at national level to impose transparency obligations on the contractual counterparties, or on industry specific agreements (resulting from collective bargaining for example) and other market developments to improve transparency.

Stakeholders' views

Creators would consider that this option cannot solve the identified problems as they believe that, for a large number of them, due to the natural imbalance between the parties, problems with lack of transparency in the internal market can only be remedied by imposing transparency obligations through EU legislative intervention. Contractual counterparties are of the opinion that creators are appropriately remunerated thanks to existing law and practice in different sectors of the creative industries. They would support the baseline option and consider that the existing competition and market developments/industry practices are the best way to address transparency problems if they exist. They would also argue that an intervention in this area would affect their contractual freedom. Consumers would deem that this option is not satisfactory since they consider that there is a need for EU intervention in this area in order to ensure adequate remuneration for creators.

Option 1 – Recommendation to MS and stakeholders' dialogue on improving transparency in the contractual relationships of creators

Under this option, the Commission would issue a recommendation to MS to adapt their national laws to ensure greater transparency in contracts between authors and performers on the one hand and those to which they transfer or assign rights on the other.

In addition, the Commission would recommend to MS to put in place stakeholder dialogues between representatives of authors and performers on the one hand, and producers, publishers, distributors on the other, to explore ways of improving transparency and develop collective or model agreements and best practices for reporting. These dialogues would have to be sector specific due to the different dynamics of different content sectors. 549

Stakeholders' views

Views are different among creators as to whether a recommendation can address the identified problems but most creators are likely to consider that this option is still insufficient to solve them because the recommendation would be followed by MS to a different extent and may be disregarded. Equally, creators will consider that stakeholders' dialogues are not likely to produce concrete results (notably if not linked to legislation). Contractual counterparties would favour this option over a legislative intervention but would still oppose it, notably if it is seen as likely to lead to legislative intervention at national level. Consumers who underlined the need for EU intervention would consider this option to be insufficient.

Option 2 – Imposing transparency obligations on the contractual counterparties of creators

This option would oblige MS to lay down some basic obligations to improve transparency. Thus, MS should establish a minimum reporting obligation 550 on the contractual counterparty of a creator, with the following elements:

The obligation would lie with the first licensee/transferee. In case the contractual counterparty is replaced entirely (by way of legal succession or right transfer, for example), the obligation shall lie with the new right holder.

The reporting would be done on a regular basis without having to be requested by the creator. 551 The reporting should occur with reasonable periodicity. 552

The minimum content of reporting - including information about the modes of exploitation and corresponding revenues - would be set out by EU legislation in a general manner while sector specific details should be defined for different sectors 553 at MS level in consultation with the relevant stakeholders. This is necessary in order to reflect the large variety of contracts and remuneration arrangements across sectors as well as the differences between the relevant information required for transparency.

Proportionality test: In order to make the obligation proportionate, in cases where the contribution of the creator is not significant to the overall work, reporting obligation would not be mandatory. Subject to the proportionality test (i.e. provided that the contribution of the creator is significant), lump-sum remuneration arrangements would also be covered by the reporting obligation. 554 In the cases where the administrative burden of reporting would be disproportionate to the generated revenues, the obligations on contractual counterparties could be limited. 555 Agreements concluded with collective management organisations would be exempted as these are covered by the CRM Directive's reporting obligations. 556

The reporting obligation would only have an ex-post effect on contracts which means that parties would still be free to negotiate the commercial terms. Transparency would not mean redistribution of revenues or change in remuneration on its own: it would be a tool to increase bargaining and enforcement power of creators and to reveal whether their remuneration is appropriate or not.

Stakeholders' views

Creators would strongly support such transparency obligations leading to appropriate solutions per sector. Some would however claim that transparency obligations on their own are not sufficient and would call for further intervention on unfair contracts or the introduction of an unwaivable remuneration right. 557 Contractual counterparties would object to this option. They would argue that compliance would be too burdensome and the intervention would limit their contractual freedom. 558  Consumers would be supportive of this option. In the Public Consultation, they expressed their concerns about the remuneration of creators and claimed that they would be more willing to pay for protected content if the appropriate remuneration was ensured. 

Option 3 – Imposing transparency obligations on the contractual counterparty of creators supported by a contract adjustment right and a dispute resolution mechanism

This option would oblige MS to introduce the reporting obligation as described under Option 2, with the following additional elements:

A contract adjustment mechanism

The mechanism would ensure a right to request the adjustment of the contract, ultimately by a court or other competent authority, in case the remuneration originally agreed is disproportionate to the relevant revenues and benefits derived from the exploitation of the work. 559 This option would help restoring the relation between the remuneration and the success of the work and would ensure appropriate remuneration when the agreement of the parties is unbalanced.

A dispute resolution mechanism

The dispute resolution mechanism would help ensuring effective enforcement of the reporting obligation and the contract adjustment mechanism. This will be a voluntary dispute resolution mechanism 560 competent for (i) adjusting disproportionate remuneration arrangements deriving from unfair agreements or changed circumstances (e.g. unexpected success, new modes of exploitation), and (ii) settling contractual disputes about transparency.

It would address the problems identified since disputes that may arise in relation with new transparency obligations may be resolved faster and with adequate expertise. It should help creators, who are usually reluctant to go to court against their contractual counterparties, to enforce their rights to transparency or contract adjustment. This option would of course not deprive creators of the possible use of other existing means notably a court or other competent authority to seek to adjust the remuneration. 561

Stakeholders' views

Creators would clearly support a contract adjustment mechanism. 562 They would also welcome an alternative dispute resolution mechanism because they are usually reluctant to bring their contractual counterparty to court. As with Option 2, some of these stakeholders would consider that these mechanisms would only partially addresses their concerns about remuneration. Contractual counterparties would oppose these additional mechanisms on the basis of contractual freedom and the re-negotiation cost of contract adjustment. Consumers would welcome transparency obligations supported by these mechanisms.

5.4.3.What are the impacts of the different policy options and who will be affected?

Approach

The options presented above would mainly affect the two parties of a licence or right transfer agreement: creators on the one hand, and their direct contractual counterparties 563 on the other. Following some general impacts under each option, the impacts affecting these two groups are presented separately. Only the most significant and likely impacts are reported in this IA.

For creators, the following impacts have been considered: (i) impacts on transparency of contracts; and (ii) impacts on the capability to receive appropriate remuneration (even retroactively).

For the contractual counterparties, the main impacts are economic and are related to (i) compliance costs and (ii) competition. As most of the European companies active in the creative sectors are SMEs, all impacts are examined in this context.

The assessment of Option 3 also includes an analysis of the impacts on Member States, in terms of implementation costs.

The assessment below is mainly qualitative, with some limited quantitative evidence, as the data publicly available or that could be obtained from stakeholders on the lack of transparency is limited.

Baseline

Impacts on stakeholders

Creators

Impacts on transparency of contracts: Considering recent and upcoming initiatives some development may be expected 564 but the problem of information asymmetry is not likely to be resolved by market developments, including self-regulation, or MS legislation. Problems for creators as regards lack of information on the exploitation and revenues generated by their works will continue in a number of MS and the cross-border aspects of the problem will not be addressed. At the same time exploitation – particularly online exploitation – is expected to become more complex and varied, involving new intermediaries and forms of use. 565 This risks making it even more difficult for creators to understand and monitor the exploitation and the revenue flow, resulting in an increased information asymmetry.

Impacts on the capability to receive appropriate remuneration: Under the baseline scenario the weaker bargaining position of authors and performers is not likely to improve overall which entails a risk of non-appropriate remuneration.

Contractual counterparties

Impacts on compliance cost: This option would not generate any direct compliance costs for contractual counterparties, unless such costs arise from self-regulation or individual MS intervention. The costs linked to the differences between transparency requirements in MS relevant for those parties active in several MS will remain.

Impacts on competition: Without any EU intervention, the contractual counterparties of creators would benefit from the information asymmetry, especially in MS and sectors where there are no transparency obligations at all. The fragmentation of the internal market would continue. 566  

Social impacts 

In a market where conditions for fair remuneration are not optimal, creators may dedicate less time to content creation and creative professions would become altogether less attractive which is detrimental to cultural diversity. 567

Impacts on fundamental rights

This option will not have a direct impact on copyright as a property right (although problems for the effective exercise of this right by creators will continue and therefore there would be an indirect impact on the medium to long term). Weak bargaining position of creators may also prejudice their freedom of expression through artistic creation. This option would have no impact on the freedom to conduct a business of contractual counterparties.

Option 1 – Recommendation for MS and stakeholders' dialogue on improving transparency in the contractual relationships of creators

Impacts on stakeholders

A recommendation would act as guidance to those MS which plan to take steps towards ensuring more transparency. This option could result in positive developments, even though it would not ensure a similar level of transparency in all MS and in all sectors. Those MS that take action are not likely to do so consistently, but this option could provide more flexibility to MS to adapt their legislation.

Creators

Impacts on transparency of contracts and on the capability to receive appropriate remuneration: The effects of a recommendation will depend on the extent to which it is followed by MS. It will also provide an opportunity for creators to push for changes at national level through the stakeholder dialogue. In fact, according to the available information, a sector specific dialogue seems to be an essential element in implementing transparency efficiently, as evidenced by examples in different MS and sectors (see Annex 14A). Thus, a recommendation may have positive impacts on transparency in certain MS.

Contractual counterparties

Impacts on compliance costs: The effects on compliance costs will depend on the extent to which the recommendation is followed in MS. Contractual counterparties are likely to face different costs in different MS.

Impacts on competition: A recommendation may reduce the fragmentation between different national legislations to some extent but still would not create a level playing field for businesses in the EU.

Social impacts 

Depending on the MS, there might be positive social impacts (compared to the baseline option) but not across the whole EU.

Impacts on fundamental rights

The impact of this option on fundamental rights would depend on the take-up of the recommendation by the MS. Impacts on copyright as a property right and on the freedom of expression may range from neutral to positive (e.g. if MS action result in a better bargaining position of creators and an more efficient enforcement of their rights). At the same time, there may be some limited negative impacts on the freedom to conduct a business, depending on the obligations imposed at national level.

Option 2 – Imposing transparency obligations on the contractual counterparty of creators

Impacts on stakeholders

Creators

Impacts on transparency of contracts: The reporting obligation would greatly decrease the information asymmetry as creators would receive the relevant information on the uses of their works and the corresponding revenues. As a direct impact, the enforcement of contracts would become much easier and effective, particularly in the case of royalty-based remuneration arrangements because the correct payment of remuneration could be verified. Having information on the specific modes of use would ultimately bring transparency to the scope of the contracts and would highlight the difference between different rights and modes of exploitation which may be taken into account by creators for future negotiations. 568 This option would therefore have a significant indirect impact without a disproportionate intervention in the contractual freedom of the parties. It is important to note that the implementation of the reporting obligation may lead to disagreements between the parties as to the revenues and remuneration. In view of this the possibility to resort to a dispute settlement mechanism such as the one described under Option 3 could be important.

Impacts on the capability to receive appropriate remuneration: As a major impact, creators would be able to effectively assess the commercial value of their works which would greatly improve their bargaining position in future deals.

Contractual counterparties

Impacts on compliance cost: The main impact would be the administrative burden of compliance. 569  The stakeholder dialogue included in this option is intended to establish feasible and proportionate transparency obligations tailored to the needs and practices of different sectors. It is also to note that transparency requirements have already been imposed on other important players in the value chain such as CMOs. 570  

Annex 14C provides for an economic assessment of the possible specific impacts by sector. Costs would depend on a large number of factors, such as the number of creators and works, the complexity of exploitation, the quality of the data received from intermediaries, the frequency of reporting and, perhaps most importantly, the already existing reporting practices:

­Some contractual counterparties already report to creators on the basis of contractual clauses, royalty-deals or statutory provisions. 571 In such cases the intervention would have practically no impact or only a limited impact in adapting reporting to the new requirements, for example, by broadening the scope of reporting or providing more regular information to creators.

­For those who do not report to creators yet, the incurred expenses would include the one-off cost of developing reporting processes and the recurring cost of actual reporting. However, even in these cases contractual counterparties would have to report on information that is already available as it should have been previously gathered and processed for intellectual property management and accounting purposes. 572 Therefore, following the one-off investment, complying with the reporting obligation would mainly consist of taking the effort to extract the relevant information and to share it with the creator in a structured, comprehensible way. It is also to note that transparency requirements have also been imposed on other important players in the value chain such as CMOs. 573

In order to produce reporting statements, contractual counterparties would use different types of electronic tools going from widely available spreadsheets to complex reporting software specifically designed for companies' reporting needs. 574 Limited information allowing only anecdotal estimation of the potential costs related to these reporting tools is available. The extent of costs would depend on whether and what reporting tools are already used by affected companies and which type of use. The costs would further vary depending on the type of information required for each creative sector. However, costs linked to the utilisation of a reporting electronic tool are not expected to be significant for a large majority of SMEs since they would likely use commonly deployed spreadsheets. In most cases, costs could be absorbed in the routine software maintenance costs of those companies.

Furthermore, labour-related costs linked to reporting are very difficult to estimate as they would, among other things, depend on the type and the number of works, the complexity of the authorship and on the number of actors from which the information has to be gathered. As an example, book publishing stakeholders informed us that reporting can be dealt with on simpler cases within 2-3 minutes while the more difficult ones require 10 to 15 minutes. Audiovisual stakeholders stated that time allocated to reporting to all creators of a movie could range between one or two hours for simpler cases to ten hours for the most intricate ones. On the basis of the limited information on reporting mechanisms we received from contractual counterparties, the following examples of cost estimations could be made for different sectors as guidance to illustrate the potential impacts, assuming that there is currently no reporting in place at all by a given contractual counterparty (see more information on these examples and calculations in Annex 14C).



Examples

A) According to a medium-sized book publisher, reporting on 600 titles on the basis of spreadsheets takes 80 man-hours per year, and the average time required for compiling and sending a report on a title is 8 minutes (simpler cases can be dealt with in 2-3 minutes while the more difficult ones can take 10-15 minutes). To make reporting even more efficient, they are now investing in an accounting and reporting software, the one-off cost of which is approximately €10,000.

B) In the music sector, where regular reporting is well established, the information received from independent record labels shows how the cost of reporting differs according to, amongst others, the size of the catalogue, the number of titles released per year and the staff involved in the reporting activities (frequency of reporting being twice a year in all cases for which the information has been shared). In one medium-sized label (105 employees in the EU), which holds a total catalogue of over 3000 titles and releases 50 titles per year, 3 employees deal with reporting full time, which costs the label €198'000 per year. Together with the software maintenance it amounts to €103 per title. A small label employing 36 staff of which 2 full time equivalent work on reporting (total catalogue: 50,000 tracks) incur similar total cost of reporting annually €200,000, or €64 per title. According to the information received on nine micro labels, the cost per title of reporting done by three of them (holding 60, 62 and 250 title catalogues) is comparable to the one incurred by small and medium but in several other cases, where catalogues range from 150 to 400 titles, it is much lower per title (between €7 and €12). This may stem from the fact that, having smaller catalogues to deal with, micro labels can do without specialised accounting software and/ or employ free-lance staff or external bookkeepers to deal with the reporting twice per year when it is due.

C) On the basis of the collected information from the AV sector, assuming that a producer wants to report on a film that has 8 creators entitled to reporting and reporting occurs annually; reporting would take 4-6 hours in the first year and 2-3 hours in subsequent years. As for external service providers, prices would be expected to be in the range of €1,000 per movie per year and would not surpass the cost of €4,000 + 0.5-1 % of revenues in total. 575

According to the estimations presented in Annex 14C, the costs of reporting in the book publishing sector range from 0.02% of the turnover for large and medium-sized companies to 0.39% for micro companies. In the AV sector, depending on a scenario assumed (reporting done internally or involving a collection agency or other external provider) the share of these costs in the turnover situates between 0.1 % and 2.3 % for micro companies, 0.01 % and 0.2 % for small and are around 0.1 % for medium and large. Time spent on reporting annually accounts on average for around 1 % of the total working time for micro book publishers and between 0.1 % and 0.2 % for the other size categories.

The administrative burden would decrease with time as it would become part of the "business as usual" process. From MS where similar transparency obligations are already in place, no disruptive effect of such measures has been reported. In addition, evolving technologies will continue to reduce the costs of collecting and processing the relevant data and therefore reduce the administrative burden.

Thanks to the proportionality provisions built in Option 2, contractual counterparties may not be obliged to provide information to minor contributors to a work, thus reducing the number of reports. In addition, in the case of works generating little to no revenues, the proportionality provision would allow MS to adjust the obligation in a manner that ensures a proportionate burden for contractual counterparties.

Impacts on SMEs including micro enterprises: The reporting obligation could be more burdensome for smaller companies (e.g. a small publisher or record label) as they have fewer resources. At the same time, they also manage less works and they would need to provide a smaller number of reports to fewer creators. In addition, specifications of obligations per sector and stakeholders' dialogues at MS level would help ensuring that reporting obligations and their related compliance costs are proportionate for SMEs as they represent the vast majority of contractual counterparties. Transparency remains however essential for creators who assign their rights to SMEs. The possible administrative costs are justified in view of the fact that the business of these companies is based on the exploitation of the copyright of the individual creators. The possibility of providing an exemption for micro enterprises was considered, however, taking into account the predominance of micro enterprises in the creative industries (above 90 % in some sectors), establishing such an exemption would result in the transparency obligation applying to a very limited number of contractual counterparties which would defeat the purpose of the intervention. 576 It is to note that the majority of existing national provisions on transparency do not provide for an exemption or a lighter regime for SMEs.

Impacts on competition: A general, mandatory reporting obligation with a set of common minimum content requirements would reduce fragmentation of the single market and would create a level playing field for businesses across Europe by eliminating the commercial disadvantage of players located in MS that already have transparency obligations. 577 The use of effective reporting as a tool to compete for creators is already becoming clear in some sectors, particularly in the music industry. 578  Due to the fact that the proportionality of the reporting obligation would be ensured, this option is not expected to have a disruptive effect on existing business models.

Social impacts 

Better transparency and bargaining position for creators would help reaching the goal of appropriate remuneration thereby making creative careers more attractive, which would result in a greater number of professional creators and more creative output altogether. Transparency would give a powerful message to consumers as they indicate to be more willing to pay for copyright protected works if they know that a fair remuneration would reach the original creators. 579  No negative indirect impacts on consumers are expected, for example due to compliance costs passed on to them.

Impacts on fundamental rights

This option would positively affect copyright as a property right by improving the creators' bargaining position and contributing to a better enforcement of their rights. This in turn would support their freedom of expression through artistic creation. Transparency would make any offers within and between MS comparable and creators would exercise their freedom of movement between MS more easily. On the other hand, Option 2 would introduce constraints on the right to conduct a business of contractual counterparties insofar as the production of reporting statements would constitute an additional administrative burden. The reporting obligation introduced by Option 2 would only have a limited and proportionate impact on contractual freedom as this ex-post instrument would not affect formulation of the terms of the contracts.

Option 3 – Imposing transparency obligations on the contractual counterparty of creators supported by a contract adjustment right and a dispute resolution mechanism

In addition to the impacts of the reporting obligation as presented above, the mechanisms under this option would have the following impacts:

I. Contract adjustment mechanism

Impacts on stakeholders

Creators

Impacts on transparency of contracts: This mechanism would improve the effectiveness of the reporting obligation under Option 2 since it would provide creators with legal means to request adjustment of the remuneration on the basis of the information received in reporting statements.

Impacts on the capability to receive appropriate remuneration: This option would have a positive impact on the capability of creators to renegotiate contracts, particularly in extraordinary circumstances. 580 The contract adjustment mechanism could remedy those cases in which a lump-sum/buy-out deal turns out to be unfair, and it also addresses outright unbalanced deals as well as changed circumstances. 581 The mechanism would reinforce creators' bargaining position. In MS where such a mechanism already exists (including DE, FR or HU), the related case-law 582 and information received from stakeholders is extremely limited suggesting that contract adjustment rights are mainly used as leverage in negotiations before and after signing the contract. Nevertheless, creators would be more likely to invoke such a right if they received more information on revenues because of the reporting obligation.

Contractual counterparties

Impacts on compliance cost: Contractual counterparty would incur a renegotiation cost when adjusting the contract. Such cost includes the renegotiation cost itself and the cost related to the increase of the remuneration owed to the creator. Costs associated to the renegotiation of contracts are very difficult to estimate as they would depend on various factors as the number of relevant works, the scope of the assigned rights, the extent of changes that parties want to introduce and the current practices of remuneration negotiation. The Commission has not been able to obtain any estimation of such costs. However, in light of the bargaining position of the majority of creators, the long-term duration of many contracts and the unpredictability of the commercial success of works in many sectors, the possible cost of compliance with a contract adjustment right seems justified on fairness grounds and proportionate. In case of unsuccessful negotiations, if the contractual counterparties and creators choose to use the dispute resolution mechanism, they would face alternative dispute resolution costs, as the ones described below. Costs related to the increase of the remuneration owed cannot be considered as an additional financial impact since they would constitute an eventual rebalancing of the share of value between creators and their contractual counterparties.

Even though such measures would be very important for the affected individual creator, the direct impact on contractual counterparties would be limited since it would affect a limited number of contracts. Such cases will arise only when a significant disproportion between the agreed remuneration and the revenues yielded from the exploitation of the work occurs. In addition, in countries where legislation already provides for an adjustment mechanism, it is recognised that this clause is rarely enforced before the courts. 583

II. Dispute resolution mechanism

The implementation of dispute resolution mechanisms will have impacts both on MS which will have to set up such mechanisms and on creators and their contractual counterparties which will initiate dispute settlement proceedings.

Impacts on Member States

Impacts on implementation costs: MS would incur some cost for setting up the dispute resolution mechanism. These costs would depend on the system of dispute resolution chosen by a MS. They are expected to remain reasonable for the majority of MS which already have dispute resolution mechanisms for CMOs and commercial users in place and could therefore build on the existing structures. As a matter of comparison, when the implementation of dispute resolution mechanisms aimed at solving disputes arising between CMOs and their members was assessed, it was reported that the costs of establishing such mechanisms would be in the range of €35,000, and the operating costs in the range of €11,000 per year. 584  Given the similarities between the envisaged dispute mechanism and the one assessed for CMOs, MS will arguably bear similar costs to the ones reported above. Finally, as alternative dispute resolution mechanisms tend to be cheaper than judicial proceedings, in the long term the cost of setting-up such a mechanism could be offset by savings made due to a lower number of court cases.

Impacts on stakeholders

Creators and contractual counterparties

Impacts on transparency of contracts: The dispute mechanism will enable creators to enforce more efficiently transparency obligations and the possibilities offered by the adjustment mechanism. Since dispute settlement proceedings will be less costly and faster that court proceedings, creators will be more incentivised to seek enforcement of their rights.

Impacts on the capability to receive appropriate remuneration: Thanks to a more effective implementation of transparency obligations and a better enforcement of the contract adjustment mechanism, creators will be able to seek more appropriate remuneration without risking their professional relationships as much as they would by going directly to court.

Impacts on cost of proceedings: The operating costs would be borne by the creators and their contractual counterparties. Costs are expected to be relatively similar to the fees set for already existing alternative dispute resolution mechanisms. As an example, the British Publishers Association set up an Informal Dispute Settlements mechanism whose fees incurred by parties include the referee's fee (£400 for half-day hearing, £650 for full-day hearing), the referee's expenses (travel, telephone, copying), and the Association's fees (without charge for members of the Association, non-member publishers: £250, other parties: £100). 585 WIPO estimates fees for a mediation proceeding at $250 (administration fee) + mediator's fees calculated on the basis on the amount in dispute (amount in dispute up to $250,000: $2,500. Amount in dispute over $250,000: $300-600 per hour / $1,500-3,500 per day). 586 As this would be a completely voluntary procedure it would have no economic impact on stakeholders that do not participate, and those who agree to it would be doing so for their own benefit.

Social impacts 

The contract adjustment mechanism and the dispute resolution mechanism would encourage contractual relationships between creators and contractual counterparties to become fairer and more balanced. This would improve collaboration between creative stakeholders and incentivise a more conductive environment for creation. These mechanisms would also highlight the protection of creators to everyone in the value chain, including consumers.

Impacts on fundamental rights

Option 3 would further strengthen copyright as a property right since it would provide creators with legal remedies to claim for additional remuneration in the case where the information received would reveal that the agreed remuneration is disproportionally low compared to the revenues derived from the exploitation of the work. The negative impact of the contract adjustment mechanism on the right to conduct a business would be offset by the implementation of the dispute resolution mechanism which would provide a non-binding opportunity for contractual counterparties to find an agreement on the remuneration owed to the creators.

5.4.4.How do the options compare?

Option

Effectiveness

Efficiency

Impact on stakeholders

Social impacts and fundamental rights

Baseline

(0) Lack of transparency in the contractual relationships between creators and their contractual counterparties would remain

(0) No direct costs associated with the baseline option

(0) Impacts on stakeholders in particular the difference in bargaining powers would depend on reforms at national level and/or on commitments taken by the industry

(0) No direct impact on cultural diversity and fundamental rights

Option 1 – Recommendation and stakeholders' dialogue

(0/+) Could result in some improvements in certain MS but would not allow to ensure increased transparency across the EU

(0/-) Limited costs linked to the organisation of the stakeholders' dialogue

(0/+) Main impacts on stakeholders would depend on the possible changes introduced in MS legislation

(0/-) Compliance costs depending on the outcome at MS level

(0/+) No direct impact on cultural diversity and fundamental rights but MS developments may have positive impacts

Option 2 – Imposing transparency obligations on the contractual counterparty of authors and performers

(++) Would increase transparency in the contractual relationships between creators and their contractual counterparties

(-) MS level costs linked to the organisation of the stakeholders' dialogue to determine reporting obligations

(+) For authors and performers it would decrease information asymmetry, improve enforcement and bargaining position, and bring transparency to the scope of contracts

(-) Administrative burden and costs for the creators' contractual counterparties

(+) Positive impact on creation and cultural diversity

(+) Positive impact on right to property, and freedom of movement and expression

(-) Negative impact on the freedom to conduct a business

Option 3 – Imposing transparency obligations to contractual counterparty of authors and performers supported by a contract adjustment right and a dispute resolution mechanism

(++)Would increase transparency in the contractual relationships between creators and their contractual counterparties, improve contract

(+) improved enforcement and means for some creators to renegotiate agreements

(-) MS level costs linked to the organisation of the stakeholders' dialogue to determine reporting obligations

(-) Costs of setting up and administering dispute resolution mechanisms within MS

(+) Increase of transparency and the certainty for creators to benefit from an appropriate remuneration

(-) Administrative burden and costs for the creators' contractual counterparties

(-) Renegotiation costs for creators and their contractual counterparties

(+) Positive impact on creation and cultural diversity

(+) Positive impact on right to property, and freedom of movement and expression

(--) Negative impact on the freedom to conduct a business

Option 3 is the preferred option. Transparency measures would rebalance contractual relationships between creators and their contractual counterparties by providing the creators with the information necessary to assess whether their remuneration is appropriate in relation to the economic value of their works and if the remuneration is deemed inappropriate, a legal mechanism in order to seek out a renegotiation of their contracts. In contrast, Option 1 may not be sufficiently effective and Option 2 would only provide transparency measures without instruments to counter the effects of lack of transparency. In comparison to Option 2, Option 3 has a more positive impact on creators who would have tools to take action for requesting a fairer share of value on the basis on the information provided on reporting statements but would have a higher impact on the contractual freedom of the parties. The additional costs entailed by the dispute resolution mechanism would be justified by the need to provide remedies to the lack of transparency in the contractual relationships between creators and their contractual counterparties. Option 3 would help achieving a level playing field for creators and their contractual counterparties by providing incentives for an increased transparency and enhanced collaboration.

Proportionality and impacts on MS: Option 3 is composed of a set of measures which are all necessary to achieve increased transparency and balance in the contractual relationships between creators and those to which they assign or transfer their rights. The combination of the different measures ensures the effectiveness of the intervention, by providing creators with practical tools allowing them to obtain information on the exploitation of their works, and, when the agreed remuneration is disproportionate to the revenues generated by the exploitation of the work, to negotiate a further appropriate remuneration. Moreover, this Option includes provisions to ensure that the transparency obligations do not become unnecessarily burdensome for contractual counterparties. Option 3 is therefore proportionate to the policy objective. It introduces a common approach of transparency requirements across the EU while allowing MS to take account of the specificities of each sector.

Beyond the impacts on costs which are presented under Option 3 (costs related to the setting up of the dispute resolution mechanism), Option 3 would entail some changes in MS legislations. Several of them already have legislative transparency obligations which are often sector specific (14 MS have them for the book sector, 6 for the music sector and 14 for the AV sector) and in these cases the proposed measures would only represent incremental policy changes. The preferred option would require MS to review these obligations in consultation with stakeholders to make sure that they comply with the minimum requirements set out by the legal instrument. In MS and sectors where contractual counterparties do not have to comply with transparency obligations and that do not have contract adjustment and dispute resolution mechanisms yet, these would have to be introduced.



6.Overall conclusions

6.1.Summary of preferred options

The following table sets out the preferred options:

Area

Preferred policy option

Ensuring wider access to content

Online transmissions of broadcasting organisations

Option 2 - Application of country of origin to the clearing of rights for broadcasters' online services ancillary to their initial broadcast

Digital retransmissions of TV and radio programmes

Option 1 - Mandatory collective management of rights to retransmission of TV / radio broadcasts by means of IPTV and other retransmission services provided over "closed" electronic communications networks

Access to and availability of EU audiovisual works on VoD platforms

Option 2 – Stakeholders' dialogue + Obligation for Member States to establish a negotiation mechanism to overcome obstacles to the availability of audiovisual works on VoD

Out-of-commerce works in the collections of Cultural Heritage Institutions

Option 2 - EU legislative intervention (i) requiring MS to put in place legal mechanisms to facilitate collective licensing agreements for all types of OoC works and to foster national stakeholder frameworks, and (ii) giving cross-border effect to such legal mechanisms.

Adapting exceptions to digital and cross-border environment

Use of protected content in digital and cross-border teaching activities

Option 3 - Mandatory exception with a cross-border effect covering digital uses in the context of illustration for teaching, with the option for MS to make it (partially or totally) subject to the availability of licences

Text and data mining

Option 3 - Mandatory exception applicable to public interest research organisations covering text and data mining for the purposes of both non-commercial and commercial scientific research

Preservation of cultural heritage

Option 2 - Mandatory harmonised exception for preservation purposes by cultural heritage institutions

Achieving a well-functioning market place for copyright

Use of protected content by online services storing and giving access to user uploaded content

Option 2 - An obligation on online services which store and give access to large amounts of content uploaded by their users to put in place appropriate and proportionate technologies and to increase transparency vis a vis rights holders 

Rights in publications

Option 3 - Introduction in EU law of a related right covering digital uses of news publications + introduction, in EU law, of the possibility for MS to provide that publishers may claim compensation for uses under an exception

Fair remuneration in contracts of authors and performers

Option 3 - Transparency obligations supported by a contract adjustment right and a dispute resolution mechanism



6.2.Analysis of the combined application of the preferred options

6.2.1.Impact on stakeholders

The combined application of the preferred options would affect all types of stakeholders differently, but is not expected to result in any disproportionate impact on a specific category of stakeholders. All the options and their impacts have been analysed and compared in the preceding sections against a set of policy objectives originally outlined in the Communication from the Commission on "Towards a modern, more European copyright framework" from December 2015. 587  As a result of an in-depth analysis based on the existing evidence and stakeholder consultation, a package of options has been chosen. The wide scope of the package aims to provide clear benefits to consumers / users (measures related to wider access to content and to exceptions) and rightholders (measures related to the better functioning of the online copyright marketplace); in addition the balance between the interests of consumers / users and rightholders has been taken into account in determining the preferred policy option for each topic.

The impacts on the different types of stakeholders and possible synergies arising from the set of preferred options are presented below.

Rightholders – As a result of the preferred options for "Ensuring wider access to content" (section 3), rightholders would face new conditions for the licensing of rights to broadcasters for their ancillary online services (country of origin) and for the licensing of rights to certain retransmission services (mandatory collective management). The targeted nature of the measures proposed would mitigate potential negative impacts for rightholders. Rightholders would benefit from the licensing mechanisms to facilitate the clearing of rights in EU AV works for use on VoD platforms and for the digitisation and dissemination of out-of-commerce works in cultural heritage collections for the purpose of better dissemination of their works and revenue opportunities. Following the intervention for "Adapting exceptions to digital and cross-border environments" (section 4), rightholders would need to take account of the scope of the new exceptions on teaching, TDM and preservation when licensing their content to institutional users. Potential negative impacts would be mitigated by several relevant factors (e.g. the TDM option being based on the lawful access condition and allowing rightholders to take proportionate technical measures to ensure the security of their content, the teaching option allowing flexibility for MS to take account of the existing licensing arrangements, the preservation exception applying only to the works already in the collections of CHIs). The intervention for "Achieving a well-functioning market place for copyright" (section 5) would have as a consequence the possibility for rightholders to better control the presence of their content on user uploaded content services. The solution envisaged for publishers would give press publishers legal certainty and additional bargaining power in relation to online services, and would enable MS to allow all publishers to claim compensation for uses under exceptions of rights transferred by authors. Authors and performers would benefit from increased transparency on the exploitation of their works and performances and from improved capability to receive appropriate remuneration, while their contractual counterparts (notably producers and publishers) would have to comply with the new reporting obligations. Overall, the proposed measures are expected to strengthen the competitiveness of European creative industries, notably in the online environment.

Broadcasters and retransmission services – Pursuant to the intervention on "Ensuring wider access to content" (section 3), broadcasters (as far as their online transmissions ancillary to the initial broadcasts are concerned) - and retransmission services operating by certain means other than cable – would benefit from simpler and faster clearance of rights. The reduction of transaction costs resulting from the proposed intervention would encourage broadcasters and retransmission services to better exploit the opportunities of the Digital Single Market. As rightholders themselves, broadcasters would be subject to the same impacts as other rightholders (see above).

Online service providers would be differently affected depending on their business models and on the type of content they distribute. VoD platforms would be able to submit contractual blockages for obtaining online rights to the negotiation forum proposed as part of the preferred options under "Ensuring wider access to content" (section 3). As a result of the intervention for "Achieving a well-functioning market place for copyright" (section 5), online services storing and giving access to large amounts of content uploaded by users would have to use the necessary means to identify protected content and provide more transparency. This would help creating a level-playing field with other online content service providers. Online services such as news aggregators or social media services would need to secure the agreement of press publishers to use their content.

Consumers are expected to benefit from wider access to TV and radio programmes online, when broadcasters and retransmission services make use of the licensing arrangements as per the preferred options of the "Ensuring wider access to content" part of this IA (section 3). Consumers are also expected to benefit from a greater availability of EU AV works on VoD platforms across MS, when the negotiating mechanisms proposed under the same section help rights' negotiations. Also as part of "Ensuring wider access to content" (section 3), the measures to facilitate the dissemination of out-of-commerce works would provide consumers with access to content that would otherwise be unavailable to them, nationally and across borders. Consumers would also benefit, directly or indirectly, from the improved possibilities for use of content and increased legal certainty as regards notably education and preservation activities stemming from the preferred options under "Adapting exceptions to digital and cross-border environment" (section 4). The measures proposed to "Achieving a well-functioning market place for copyright" (section 5) are likely to have in the medium term a positive impact on the production and availability of culturally diverse content and on media pluralism, for the benefit of consumers.

Institutional users (cultural heritage institutions, research institutions and educational establishments) would benefit from higher legal certainty when using protected content for specific purposes (respectively, preservation, TDM and illustration for teaching), as a result of intervention under "Adapting exceptions to digital and cross-border environment" (section 4). Cultural heritage institutions would benefit from easier licensing solutions for the digitisation and dissemination of out-of-commerce works in their permanent collections, as outlined under "Ensuring wider access to content" (section 3). This would reduce their rights clearance transaction costs and support them in making out-of-commerce works available across borders.

6.2.2.Subsidiarity and proportionality

The problems identified in this IA have an important cross-border dimension stemming from the harmonisation which is already in place as a result of existing EU copyright rules (notably in terms of rights) and the cross-border nature inherent in the distribution of content online. The solutions designed to address these problems and selected as preferred policy options on the basis of their effectiveness and efficiency have all been scrutinised from the subsidiarity and proportionality angle in each thematic section. The results of this analysis show that the options chosen are proportionate to the objectives in that they address the underlying problems without generating unjustified costs. On the basis of this IA it also appears that a common approach should be provided at EU level as relying on national solutions for the problems identified would generate further fragmentation in the functioning of the Single Market. Finally, EU intervention is indispensable to achieve one of the key objectives of the copyright modernisation, which is to guarantee legal certainty in cross-border situations.

6.2.3.Choice of instrument

The preferred policy options identified in section 3.2 of this IA (online transmissions and retransmissions of TV and radio programmes) would be best implemented through a regulation. This instrument would ensure that the new rules are applicable in all MS at the same time. It would also allow a uniform application of the rules in the EU, which is particularly important to guarantee legal certainty to service providers operating in different territories. The direct applicability of the provisions would prevent legal fragmentation and provide a harmonised set of rules to facilitate online access to TV and radio programmes across borders or originating from other MS.

For the other topics covered by this IA, a directive is a more suitable instrument as it would allow MS to determine the technical or practical aspects complementing the EU harmonised rules and to take into account the existing national legislative frameworks.

6.3.Monitoring and evaluation

6.3.1.Monitoring and evaluation plan

The Commission will ensure that the actions selected in the course of this IA contribute to the achievement of the policy objectives defined in sections 3.1.3, 4.1.3 and 5.1.3. The monitoring process would partly depend on the type of legal instrument that will be chosen to implement the preferred policy options.

For the topics covered by the regulation, the first data collection should take place when the regulation enters into force in order to establish the baseline for future evaluations. The monitoring process would then focus on progress made in relation to the cross-border availability of TV and radio programmes, with data collection taking place every 2-3 years. The main indicators are presented in the table in section 6.2.2.

For the directive, the monitoring process could consist of two phases:

­The first phase would concentrate on the short-term, starting right after the adoption of the legislative proposal, and would focus on the correct transposition of the directive in MS. Before the transposition deadline, the Commission would organise transposition workshops and meetings with MS' representatives (e.g. group of experts) to assist them in the transposition process and to facilitate the mutual exchange of information. After the transposition deadline, the Commission would verify the timely adoption and correctness of the transposition measures.

­The second phase would be mid to long-term and would focus on direct effects of the rules contained in the directive. The table in section 6.2.2 below presents the main indicators that will be used to monitor progress towards meeting the objectives pursued in the modernisation of EU copyright rules, as well as the possible sources of information. Depending on the data needs, information would be gathered from MS, creative industries or institutional users. Where needed, the Commission would send questionnaires to MS or stakeholders or organise specific surveys. The first data collection should take place before the end of the transposition period in order to establish the baseline. The information-gathering should then take place every 2-3 years after the transposition deadline in order to monitor progress in the achievement of the objectives.

A comprehensive evaluation could take place at the latest 10 years after the adoption of the directive and 5 years after the adoption of the regulation, in order to measure their effectiveness, efficiency, relevance, coherence and added value, in accordance with the Commission's Better Regulation principles.

 



6.3.2.Operational objectives and monitoring indicators

Objectives

Indicators

Source of information

ENSURING WIDER ACCESS TO CONTENT

Facilitate the clearance of rights for transmissions of TV and radio programmes online

Operational objective: Increase the number of TV and radio programmes accessible online across borders

1.Number of simulcasting services available across borders in the EU and percentage of geo-blocked content

[Benchmark: see table 1.4 in Annex 6B covering a sample of broadcasters in 11 MS]

2.Number of catch-up services available across borders in the EU and percentage of geo-blocked content

[Benchmark: see table 1.5 in Annex 6B covering a sample of broadcasters in 11 MS]

3.Online cross-border availability of radio and TV programmes, by type of content (news, shows, cultural programmes, films, series, etc)

4.Audience of online radio and TV programmes

[Benchmark 2014 data: 20 % of Europeans watch television online at least once a week; 6 to 8 % of total listening of radio is done online in Europe. 588 ]

This information would be obtained from publicly available data sources (European Audiovisual Observatory) or directly from broadcasters (through bilateral contacts or questionnaires).

Facilitate the clearance of rights for retransmissions services by means other than cable

Operational objective: Increase the number of TV/radio channels offered by retransmission services provided over closed electronic communications networks

1.Number of retransmission services provided over closed electronic communications networks

2.Number of foreign TV / radio channels available in each MS through those retransmission services

[Benchmark: for IPTV services see table presented in Annex 7B covering a sample of 11 MS; 2015 data]

3.Share of IPTV retransmission or retransmission over closed electronic communications networks in the EU television market (in comparison to cable and satellite)

[Benchmark 2015 data: IPTV service providers account for 14 % of EU28 subscription revenues; cable 36 % and satellite 50 %. 589 ]

This information would be obtained from publicly available data sources (European Audiovisual Observatory) or from business intelligence services (e.g. IHS, Digital TV research)

Facilitate the negotiation and dialogue between relevant parties for the exploitation of European audiovisual works on VoD platforms

Operational objective: Increase the number of European audiovisual works available through VoD platforms

1.Number and type of self-regulatory measures adopted following the stakeholders' dialogue

2.Number of cases submitted to the negotiation mechanism in each MS and identification of the type of stakeholder resorting to this mechanism (VoD platforms, aggregators, rightholders)

3.Number of successful negotiations through the negotiation mechanism in each MS

4.Costs related to the set-up and functioning of the negotiation mechanism in each MS

5.Number of (or percentage of) European audiovisual works available on VoD / SVoD platforms

[Benchmark 2015 data (sample analysis): European non-national films accounted for 14.7% of the films available in the VoD catalogues and 22.8% of the SVoD catalogues. 590 ]

6.Share of VoD / SVoD revenues in total revenues

[Benchmark 2013 data: VoD revenues amounted to €1,526 million, which represents approximatively 1/4 of cinema gross box-office over the same period. 591 ]

This information would be gathered directly from MS (in particular for indicators n°2 to 4), from the European Audiovisual Observatory (for indicators n°5 and 6) or from VoD platforms (through bilateral contacts or questionnaires).

 

Facilitate the clearance of rights for digitisation and making available of out-of-commerce works in the collections of CHIs

Operational objective: Increase the number of OoC works in the collections of CHIs made available to the public, incl. across borders

1.Number of institutions engaging in digitisation and dissemination projects of OoC works, by type of works

2.Number of licences for OoC works issued to cultural heritage institutions based on ECL, PoR or similar systems;

3.Number of in-copyright OoC works made available online by beneficiary institutions (by type of work);

4.Number of in-copyright OoC works made available online by beneficiary institutions (by type of work) – across borders;

5.Number of users accessing digitised OoC works online, including across borders

6.Revenues for rightholders stemming from collective licensing in this area.

This information would be gathered from beneficiary institutions (for indicators n°1, 3, 4, 5) and collecting societies (for indicators n°2, 6), through bilateral contacts or questionnaires.

The European transparency web portal would allow to monitor the number of OoC works made available by CHIs.

ADAPTING EXCEPTIONS TO DIGITAL AND CROSS-BORDER ENVIRONMENT

Make sure that teachers/students can use protected content in full legal certainty in their digital teaching activities, including across borders

Operational objective: Increase the use of protected content in digitally-supported teaching activities, including across border

1.Number of educational establishments offering online courses / cross-border or distance education programmes

[Benchmark 2013 data for higher education (sample analysis): 82 % of higher education institutions offered online courses. 592 ]

2.Number of students involved in cross-border or distance education programmes

3.Frequency of use of different types of protected content (print, images, films, etc) in digital / online and cross-border education;

4.Number of MS making the exception subject to the availability of licences and in these countries, number of collective licensing schemes for educational uses

5.Types of initiatives implemented to promote the availability and visibility of licences

6.Number of MS requiring compensation of the exception and amount of the compensation;

7.Licensing costs for educational establishments;

8.Rightholders' revenues deriving from educational uses (through compensation and/or secondary licensing) and part of the revenues stemming from digital uses

[Benchmark: see data on the revenues stemming from digital uses provided in Annex 10D for several MS.]

This information would be gathered through educational authorities in each MS and through surveys among teachers and students. In addition, data could be obtained from publishers and collecting societies.

Make sure that researchers can carry out text and data mining of content they have lawful access to in full legal certainty, including across borders

Operational objective: Make sure that researchers can text and data mine content they have lawful access to in full legal certainty

1.Number of (cross-border) research and innovation projects using text and data mining;

2.Number of text and data mining services;

3.Number of text and data mining related scientific publications.

[Benchmark: 303 articles published on TDM in the EU from 2011 to 2016. 593 ]

This information would be gathered through the H2020 participants, the H2020 statistics Unit in the Commission, statistics from OpenAire Data Platform or data provided directly by stakeholders (publishers, institutional users, etc).

Make sure that cultural heritage institutions can make preservation copies of protected works in their permanent collections in full legal certainty, taking into account digital technology

Operational objective: Increase the number of CHIs engaged in digital preservation and of works that are preserved by CHIs

1.Number of CHIs engaging in digital preservation

2.Number of CHIs sharing digital preservation infrastructure

3.Number of digital preservation projects

4.Number of works undergoing digital preservation

This information would be gathered from beneficiary institutions and MS, mainly through surveys, including building on existing frameworks (e.g. the Enumerate project, reporting on EU Recommendations).

ACHIEVING A WELL-FUNCTIONING MARKET PLACE FOR COPYRIGHT

Ensure that rightholders benefit from a legal framework allowing them to better control and be remunerated for the use of their content vis-à-vis online services storing and giving access to large amounts of content uploaded by their users

Operational objective: Reduce unauthorised content on the services and increase the number of agreements between online services storing and giving access to large amounts of content uploaded by their users and rightholders for the use of copyright protected content

1.Take-up of efficient content identification technologies

2.Number of agreements concluded between the user uploaded content services and rightholders for the use of content

This information would be gathered from rightholders and services covered by the intervention, mainly by technology providers and through surveys and reports

Ensure a fair share of revenues stemming from the use of publications among the different players of the publishing value chain

Operational objective:

Ensure that the increase in the consumption of publications is reflected in a return on the required investments

1.Number of users who have access to news content (directly through publishers' websites and apps or indirectly through online service providers)

[Benchmark 2016 data: 42 % of users have access to news online directly via the website or app of newspapers and magazines and 57% indirectly via online social media, search engines and news aggregators. 594 ]

2.Online revenues obtained by press publishers (licences, subscriptions or advertising revenues)

[Benchmark 2015 data: digital revenue of European newspaper and magazine: €7.12 billion. 595 ]

3.Revenues obtained by publishers on the basis of compensation stemming from exceptions to copyright

[Benchmark 2014/205 data In the 12 MS which operate a levy-scheme and foresee an author-publisher split and for which there was data available, an aggregated total amount of €40 million was distributed to publishers. 596 ]

This information would be gathered from periodically-published reports on the publishing industry (Reuters News Report, PwC Global entertainment and media outlook, etc.) or directly through questionnaires/surveys to publishers. Figures to measure indicator 3 will be obtained from collective management organisations.

Increase legal certainty, transparency and balance in the system that governs the remuneration of creators

Operational objectives: Facilitate contract enforcement in relation to transparency and remuneration

Increase the number of reporting (where missing),

Increase the quality (where the quality is not sufficient).

1.Number of creators receiving reporting statements

2.Of which: number of those who receive satisfactory reporting (to have an indication on quality of reporting)

3.Number of companies producing reporting statements

4.Number of cases brought before the alternative dispute resolution bodies

5.Number of cases of use of contract adjustment mechanism

6.Satisfaction of creators: perception of impact of reporting obligation on remuneration

This information would be gathered on the basis of surveys among creators (authors and performers associations) and surveys of the contractual counterparties (depending on the sector – publishers, producers, broadcasters).

(1)  Related rights (also referred to as neighbouring rights) are rights similar to copyright but do not reward an author's original creation (a work). They reward either the performance of a work (e.g. by a musician, a singer, an actor) or an organisational or financial effort (e.g. by phonogram or film producers and broadcasters), which may also include a participation in the creative process.
(2)  Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (OJ L 167, 22.6.2001, p. 10–19)
(3)  World Intellectual Property Organization, http://www.wipo.int  
(4) http://www.wipo.int/treaties/en/ip/wct/  
(5) http://www.wipo.int/treaties/en/ip/wppt/  
(6)  Council Directive 93/83/EEC of 27 September 1993 on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission (OJ L 248, 6.10.93, p.15-21)
(7)  See section 3.2.3.
(8)  Directive 2014/26/EU of the European Parliament and of the Council of 26 February 2014 on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market (OJ L 84, 20.3.2014, p. 72–98).
(9)  See Annex 5 for background information on creative industries in the EU economy.
(10)  Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions "A digital single market strategy for Europe", (COM(2015) 192 final) of 6 May 2015. http://ec.europa.eu/priorities/digital-single-market/docs/dsm-communication_en.pdf
(11)  Proposal for a regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market (COM(2015) 627 final) of , 9 December 2015.
(12)  Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions "Towards a modern, more European copyright framework" (COM(2015) 626 final) of 9 December 2015
(13)  Proposal for an updated Audiovisual Media Services Directive: https://ec.europa.eu/digital-single-market/en/news/proposal-updated-audiovisual-media-services-directive . The revised AVMS Directive updates the rules applicable to all types of audiovisual media, notably in terms of promotion of European works, protection of minors, showing of advertisements; it however does not cover the rules applicable to the licensing of copyright-protected content. 
(14)  Directive 2010/13/EU of the European Parliament and of the Council of 10 March 2010 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (OJ L 95, 15.4.2010, p. 1–24).
(15)  Proposal for a Regulation on addressing geo-blocking and other forms of discrimination based on customers' nationality, place of residence or place of establishment within the internal market:  http://ec.europa.eu/DocsRoom/documents/16742 . The proposal does not cover audiovisual services.
(16)  Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions "Online Platforms and the Digital Single Market Opportunities and Challenges for Europe", (COM(2016) 288/2) https://ec.europa.eu/digital-single-market/en/news/communication-online-platforms-and-digital-single-market-opportunities-and-challenges-europe . The Communication outlines the key issues identified in relation to online platforms and presents the Commission’s position on both the innovation opportunities and the regulatory challenges presented by them. 
(17)  See Annex 4.
(18)  Case C-174/15, Vereniging Openbare Bibliotheken v Stichting Leenrecht 
(19)  See "Ex-post (REFIT) Evaluation of the Satellite and Cable Directive (93/83/EEC)".
(20)  The Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or otherwise Print Disabled, signed on behalf of the EU on 30 April 2014.
(21)  Source: Flash Eurobarometer 411. 82 % of respondents indicated using the Internet and 60 % of Internet users indicated having accessed or downloaded music and 59 % AV content at least once in the last twelve months.
(22)  In terms of consumers' viewing time. Source: IHS Technology, "Current market and Technology Trends in the Broadcasting Sector", May 2015.
(23)  "Retransmission" is used in the meaning of Directive 93/83/EEC to denote simultaneous, unaltered and unabridged retransmission for reception by the public of an initial transmission from another Member State, by wire or over the air, including that by satellite, of television or radio programmes intended for reception by the public.
(24)  See Annex 6B.
(25)  COM(2015) 192 final.
(26)  COM(2015) 627 final.
(27)  COM(2015) 626 final.
(28)  The present section of the IA focuses on issues related to the making available of out-of-commerce works in the collections of CHIs. Specific issues linked to the preservation (including digital preservation) of cultural heritage are presented in section 4.4 of this IA.
(29)  Directive 93/83/EEC, see "Ex-post (REFIT) Evaluation of the Satellite and Cable Directive (93/83/EEC)".
(30)  The EU harmonised rules facilitating the acquisition of rights for satellite broadcasting and cable retransmissions of TV and radio programmes from other MS do not apply to online distribution activities of broadcasters and to retransmissions by means other than cable.
(31)  "Works" is used in this IA to encompass works protected under EU copyright acquis and other protected subject matter.
(32)  Directive 2001/29/EC.
(33)  In the framework of the current reform of the Audiovisual Media Services Directive (Directive 2010/13/EU), an obligation for on-demand audiovisual media services to include in their catalogue at least 20% of European works has been introduced (see Article 13.1 of the proposal). The present initiative aims at solving copyright-related contractual blockages preventing a larger availability of EU audiovisual works on VoD platforms. The present initiative could help on-demand players to achieve the 20% threshold provided for in the AVMS Directive reform, but remains independent from the AVMS Directive reform. 
(34)  Territoriality of copyright means that rights under copyright are granted by national laws and not as a unitary title at EU level. The geographical scope of each right is limited to the territory of the MS which has granted it.
(35)  Rightholders usually transfer their rights for all EU territories to a single CMO and/or a publisher, who in turn enters into agreements with other CMOs and sub-publishers for representation in separate MS. See Charles Rivers Associates Study Economic Analysis of the Territoriality of the Making Available Right in the EU , March 2014 pages 41-42.
(36)  In June 2015, the CMOs PRS (UK), GEMA (Germany) and STIM (Sweden) received the clearance of their deal by the Commission with a view to establishing a multi-territorial licensing hub in Europe. EC press release: http://europa.eu/rapid/press-release_IP-15-5204_en.htm
(37)  Directive 2014/26/EU
(38)  AV content which is considered as a vital input because it attracts substantial audiences and thus generate substantial revenues for rightholders.
(39)  For example based on extended collective licensing or presumptions of representation by CMOs. See Annex 9E for more information on these mechanisms and national examples.
(40)  Some of these issues are addressed by accompanying measures announced in the Commission Communication (COM(2015) 626 final) of 9 December 2015.
(41)  Special Eurobarometer 366 : Building the Digital Single Market - Cross Border Demand for Content Services
(42)  Flash Eurobarometer 411; http://ec.europa.eu/COMMFrontOffice/PublicOpinion/index.cfm/Survey/getSurveyDetail/instruments/FLASH/surveyKy/2059
(43)  "Report on the responses to the Public Consultation on the Review of the EU Copyright Rules": http://ec.europa.eu/internal_market/consultations/2013/copyright-rules/docs/contributions/consultation-report_en.pdf . See relevant extracts in Annex 2B. https://ec.europa.eu/digital-single-market/en/news/full-report-public-consultation-review-eu-satellite-and-cable-directive "Full report on the public consultation on the review of the EU Satellite and Cable Directive": . See Annex 2C. 
(44)  European Parliament resolution of 9 July 2015 on the implementation of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society.
(45)  The views of MS are based on the results of the public consultation on the review of the EU Satellite and Cable Directive, to which 11 MS replied (DE, EE, ES, FI, FR, HU, IE, NL, PL, SK, UK). See Annex 2C.
(46)  Notably during the 2014 public consultation on the review of the EU copyright rules. See Annex 2B.
(47)  Council Conclusions on the role of Europeana for the digital access, visibility and use of European cultural heritage, 31 May 2016.
(48)  As outlined in the Commission Communication (COM(2015) 626 final) of 9 December 2015.
(49)  Charter of Fundamental Rights of the European Union, OJ C 326, 26.10.2012, p. 391–407.
(50)  See Annex 8.
(51)

     The "Survey and data gathering to support the evaluation of the Satellite and Cable Directive 93/83/EEC and assessment of its possible extension" ("SatCab Study") specifically analysed differences in obtaining remuneration by CMOs and individual licensors for retransmission of TV and radio programmes over various platforms. However, the findings are rather limited due to limited information which was made available to the contractor.

(52)  Source: Eurostat Structural Business Statistics, 2012 data for radio broadcasting, television programming and broadcasting activities.
(53)  Source: Eurostat, Structural Business Statistics, 2013 data for motion picture, video and television programme production, sound recording and music publishing activities.
(54)  See Annex 6 for further details.
(55)  Annex 6A.
(56)  This comprises direct revenues from three main sources: pay-television subscriptions (37 %), followed by advertisement (34 %) and public funding (29 %). Source: European Audiovisual Observatory Yearbook, 2015. Television maintains the highest share of advertising revenue across all media: global total TV advertising revenue’s share of global total advertising revenue was 31.5% in 2014, see PWC the Global entertainment and media outlook 2015 –2019, http://www.pwc.com/gx/en/industries/entertainment-media/outlook/segment-insights/tv-advertising.html .
(57)  According to IHS which tracks the total viewing of France, Spain, Germany, Italy, the United Kingdom and the United States by combining viewing time data from linear televisions, PVR (personal video recorder), time-shifting, pay TV video-on-demand services and over-the-top (OTT) content- Source: IHS Technology, "Current market and Technology Trends in the Broadcasting Sector", May 2015, p. 27.
(58)  Standard Eurobarometer 82, Media Use in the EU, Autumn 2014: http://ec.europa.eu/COMMFrontOffice/PublicOpinion/index.cfm/Survey/getSurveyDetail/yearFrom/1973/yearTo/2014/surveyKy/2041  
(59)  The figure includes linear TV as well as short term catch-up. Source: "The development of the European market for on-demand audiovisual services", European Audiovisual Observatory, March 2015.
(60)  In the UK, TV programming accounts for 65 % of video viewing among individuals aged 16 to 24. http://informitv.com/2015/06/18/young-people-still-watch-television/ Truth About Youth, Thinkbox, June 2015
(61)

     FR: TV 61 % radio 11 %; DE: TV 56 % radio 13 %; DK: TV 54 % radio 9 %; UK: TV 51 % radio 8 %. See Hermes study on the future of European audiovisual regulation 2015 , based on Reuters Digital News Survey 2014 / Hans-Bredow-Institute.

(62) Source: AER reply to the public consultation on the SatCab review, 2015. 
(63)  Terrestrial radio and TV services are broadcast from transmission towers and received through an antenna. Terrestrial channels are generally free to view, although some are available as part of subscription services (normally as part of a package of channels linked to the basic level of subscription).
(64)  Direct to home satellite television and radio channels are uplinked from an earth station or teleport either directly by a broadcaster, by a third-party facility or by a satellite operator. Some satellite services are free to air. However, many satellite services are encrypted and therefore users are also required to pay for a subscription in order to access the content. In most cases these encrypted pay channels are offered as part of package of channels offered by satellite package providers.
(65)  Cable television and radio services are generally carried over a co-axial cable. Signals are received at a cable head end, either via terrestrial or satellite transmissions, and retransmitted via cable to customer homes. Some channels may be provided free of charge, or as part of a basic cable service tier. Other channels may be encrypted and are offered on a subscription basis, typically in various bundled packages.
(66)  It is now possible for telecommunications companies (which may be either incumbent telephone companies or competing providers of communications services) to distribute radio and television channels and other AV services over fixed or wireless broadband data networks using internet protocols. Such services are sometimes referred to as internet protocol television, or IPTV.
(67)  For example, YouTube live channels.
(68)  For example, YouTube live channels which cover live streams such as gaming, music, sports, news, technology, nature; iTunes "Beats" radio which offers linear music streaming. Traditional broadcasters have also started to offer online-only linear TV-like channels: as of February 2016, BBC 3 channel is available only online; on 31 May 2016, RTL II (DE) launched its online channel RTL II You, which combines linear services with video-on-demand.
(69)  The concept of ‘catch-up’ television, enabling consumers to view programmes at the own choice of timing, is generally based on clearance of the rights for programming within a limited window, typically 7 to 30 days after transmission.
(70) European Broadcasting Union (EBU) members' experience with archives rights clearance for online transmissions shows that administrative costs can be 15,000-20,000 in a standard case, while a difficult case could amount to 60,000-80,000 (EBU reply to the SatCab public consultation). (Note: this example concerns transaction costs to clear online rights for archive content nationally, to which the broadcaster previously acquired a licence for broadcasting). EBU explained that these examples of the clearance costs figures come from the BBC in 2005, adapted to the inflation. In general, “standard” cases are typically documentaries, current affairs and non-fiction programmes, as they involve less different rightholders, whereas "difficult" cases are typically dramas, comedy series and other fiction programmes. The standard/difficult borderline is also determined by the age of the programme (the older it is, the more difficult it is to clear the rights). See for further information http://webarchive.nationalarchives.gov.uk/20140603093549/http://www.ipo.gov.uk/ipreview-c4e-sub-bbc.pdf . However, despite requests, neither EBU nor the Association of Commercial Television in Europe (ACT) provided data on cross-border transaction costs for clearing online rights, as compared to transaction costs in one jurisdiction.
(71)  See section 6.1 of the ex-post (REFIT) Evaluation of the Satellite and Cable Directive (93/83/EEC).
(72)

     The EBU, the European Composers and Songwriters Alliance (ECSA), the International Confederation of Music Publishers (ICMP) and the European Grouping of Societies of Authors and Composers (GESAC) have signed on 4 April 2014 a Recommendation for the licensing of broadcast-related online activities ( http://www.ebu.ch/files/live/sites/ebu/files/News/2014/04/Recommendation%20for%20the%20Licensing%20of%20Broadcast-related%20online%20activities.pdf ). This Recommendation sets the principles which encourage the aggregation of rights for the licensing on a cross-border basis of broadcast-related online services provided by and under the control and responsibility of a broadcaster which services have a clear relationship with the broadcaster’s linear offline broadcast services, in particular material with a thematic relationship with the offline broadcast content. In 2002, the Commission cleared an agreement between CMOs of record producers concerning one-stop licensing of rights for simulcasting services of TV and radio broadcasters. Under this agreement, broadcasters can get a multi-territorial licence from a CMO of their choice for simulcasting services in the EEA rather than secure a licence from each national CMO (Case No COMP/C2/38.014 — IFPI ‘Simulcasting’). Subsequently further agreements have been concluded to cover other online related services such as some forms of webcasting (2005) and catch-up services (2015).

(73)  For example, EBU members in the EU aggregate up to 10 million broadcast hours per day (Source: EBU).
(74)  Such programmes include news, current events, political debates; own documentary/entertainment productions; culture, science, arts programmes; lifestyle programmes, etc. See examples provided in Annex 6A.
(75)  Source: EBU. In Germany, ARD and ZDF conclude at least 150 000 contracts each year.
(76)  Source: EBU. An example of BBC TV series Doctor Who shows that more than 80 contributions per episode needed to be cleared, see  http://webarchive.nationalarchives.gov.uk/20140603093549/http://www.ipo.gov.uk/ipreview-c4e-sub-bbc.pdf ; for ZDF (Germany), a single 30 minutes episode of a TV series can generally involve up to 100 contributions and rightholders (actors, musicians, composer, phonogram industry etc.); for the documentary “Künstlerportait”, ORF (Austria) needed to clear 32 rights (13 clips) and, in addition, music rights are cleared with CMOs. (Source: EBU). See for further details Annex 6A.
(77)  On average, news and current affairs programmes represent 25.9 % of EBU members' programmes (source: EBU/MIS – on the basis of aggregated data from 2014 concerning 35 broadcasters in 27 EU countries). 58% of programming of German broadcaster ZDF is dedicated to information.
(78)  Despite requests addressed to the relevant stakeholders we were not able to obtain more specific information on potential problems in licensing rights for cross-border online transmissions of radio broadcasters.
(79)  Respondents have stated that some rightholders make the licensing of their content conditional upon the fact that the service provider undertakes to apply geo-blocking, or that the cost of making some content available without geo-blocking would be higher/too high. Licensing agreements for TV drama and TV series, and films and sports events, appear to include requirements to geo-block more often than licensing agreements for other digital content categories. 59 % of respondents state that they are contractually required by rightholders to geo-block. 66 % of all agreements with suppliers of film content that were referred to by respondents require digital content service providers to geo-block.
(80)  Capello M. (ed.), "Online activities of public service media: remit and financing", IRIS Special 2105-1, European Audiovisual Observatory, Strasbourg, 2015, p. 61.
(81)  For example, according to Article 5(13) of Law No I-1571 of 8 October 1996, the Lithuanian public broadcaster LRT can broadcast abroad. The Charter of the Irish public broadcaster RTÉ states that "RTÉ recognises the importance of news and information about Ireland for the Irish abroad in maintaining contact with Ireland and preserving an Irish dimension to their identity".
(82)  See Synopsis Report in Annex 2C and also "Survey and data gathering to support the evaluation of the Satellite and Cable Directive 93/83/EEC and assessment of its possible extension" (the "SatCab Study"), sections 3 and 4. 
(83)  See Annex 6B and SatCab Study, section 3.
(84)  The initial findings from the Commission's e-commerce sector inquiry published on 18 March 2016.
(85)  EBU data covers public broadcasters from 14 EEA countries; the SatCab Study covers data from 11 MS (three commercial/public broadcasters' channels from each covered MS).
(86)  A few examples concerning public broadcasters: LTV (LT) in principle does not geo-block own produced content while CT1 (CZ), a general channel is fully geo-blocked and CT24, a news and current affairs channel, geo-blocks sports news; the livestream channel of ZDF (DE), Mediathek, is geo-blocked and cross-border access is allowed only to selected programmes. A few examples concerning commercial broadcasters: TV4 Play (SE), geo-blocks all online TV simulcasting services except news, TV3 (LT) makes available across borders news and own production while international entertainment programmes are geo-blocked; RTL TV Now (DE) makes simulcasting services available only locally while live TV News are available internationally (paid services). See also Annex 6B.
(87)  In this section, the summaries of stakeholders' views are based on the results of the public consultation on the review of the EU Satellite and Cable Directive, see Annex 2C.  
(88)  The difference in the opinion between commercial and public service broadcasters may stem from the fact that the former typically produce more content which is licensed to third parties.
(89)  See section 3.2.2.1 above.
(90)  Access to and availability of European audiovisual works on VoD platforms are addressed in section 3.3 of this IA. 
(91)  The CoO rule discussed in this IA should be distinguished from the country of origin principle (CoO) applicable under the AVMS Directive. The CoO under the AVMS Directive establishes the jurisdiction in terms of the regulatory framework harmonised under the AVMS Directive: providers only need to abide by the rules of a Member State which is their 'country of origin' as defined in that Directive. Also, if any Member State adopts national rules that are stricter than the AVMS Directive, these can only be applied to providers falling under that jurisdiction. The CoO rule discussed in this IA covers licencing of copyright and related rights and does not concern the matters harmonised under the AVMS Directive.
(92)  This approach is aligned with Article 32 of the CRM Directive, see above. Access to and availability of European audiovisual works on VoD platforms are addressed in section 3.3 of this IA. 
(93)  An equivalent principle is established in recital 17 of the Satellite and Cable Directive for communication to the public by satellite.
(94)  VoD services have different characteristics than broadcasting services, described in Annex 8. Access to and availability of EU audiovisual works on VoD platforms is covered under section 3.3 of this IA.
(95)  See p. 29 of the IHS Technology report Current Market and Technology Trends in the Broadcasting Sector, 2015. 
(96)  See the Commission Communication (COM(2015) 626 final) of 9 December 2015.
(97)  See section 3.1.
(98)  See for example "The Impact of cross-border access to audiovisual content on EU consumers" (May 2016), a report by Oxera and O&O, prepared for a group of international audiovisual industry members, analysing the effects of the full cross-border access.
(99)  In the Premier League ruling (Judgment of 4 October 2011, C403/08 and C429/08, EU:C:2011:631) concerning satellite broadcasting services, the CJEU concluded that, in view of the specific facts in the case, licensing agreements between rightholders and service providers may include provisions on territorial exclusivity, but cannot establish absolute territorial exclusivity; that would be in breach of competition law and the freedom to provide services in the Internal Market. Following this judgment; on 13 January 2014, the Commission initiated formal proceedings on territorial licensing restrictions for pay-TV content, see http://ec.europa.eu/competition/antitrust/cases/dec_docs/40023/40023_842_3.pdf .
(100)  See indications of consumer interest for content from other MS in section 3.1.4 According to a study carried out in 2012 ( The economic potential of cross-border pay-to-view and listen audiovisual media services ), the number of hours of non-national EU fiction as a proportion of total fiction hours in the schedules of a sample of broadcasters varies from 2 % to 35 % in the countries for which data is available.
(101)  News and current affairs represent 25.9 % of public broadcasters' programming while programmes on arts, culture, education and science account for 14 % of their programming. (Source: EBU – on the basis of aggregated data from 2014 concerning 35 broadcasters in 27 EU countries). According to the initial findings from the Commission's e-commerce sector inquiry , 23 % of agreements require providers to geo-block news (including current events) and 50 % to geo-block other non-fiction TV. See also Annex 6B (Availability of broadcasters' online services across borders).  
(102)  Recommendation for the licensing of broadcast-related online activities of 4 April 2014. The Recommendation's objective is to ensure, by way of voluntary aggregation of rights and reciprocal representation agreements among CMOs, that CMOs can license the broadcaster not only the rights relevant for broadcasts but also all the rights it needs for its online broadcast-related activities including across borders.
(103)  Case No COMP/C2/38.014 — IFPI ‘Simulcasting’.
(104)  The reciprocal agreements have currently 21 EU based signatory CMOs. 17 CMOs have reported they have licensed broadcasters' Catch-up' services either for multi-territory or for mono-territory reception.
(105)  It is not possible, however, in this IA to quantify such savings in transaction costs. As explained above, despite requests, neither EBU nor ACT provided data on cross-border transaction costs for clearing online rights, as compared to transaction costs in one jurisdiction.
(106)  Such programmes in particular include news, current events, political debates; own documentary/entertainment productions; culture, science, arts programmes; lifestyle programmes, etc. Out of 5720 EU TV channels listed in MAVISE database, 243 channels are listed as "general", 226 channels as "documentary", 188 as "lifestyle/specific leisure", 156 channels as "news", see SatCab study, table 2.17. 
(107)  Most widely spoken foreign EU languages are English (38 %), French (12 %), German (11 %), and Spanish (7%). See  Special Eurobarometer 386 (2012)   http://ec.europa.eu/public_opinion/archives/ebs/ebs_386_en.pdf
(108)  For example, in SK 8.8 % of the population has Hungarian as the mother longue; in LT - 5.3 % Polish; in FI - 5.1 % Swedish. Source: study on The economic potential of cross-border pay-to-view and listen audiovisual media services (2012).
(109)  Eurostat data from April 2013, http://ec.europa.eu/eurostat/statistics-explained/index.php/EU_citizenship_-_statistics_on_cross-border_activities
(110)  In the study The economic potential of cross-border pay-to-view and listen audiovisual media services , it was estimated that in 2009 potential willingness to pay for subscription based cross-border AVMS among intra-EU migrants was between €760 million and €1,610 million annually in the EU based on the proportion of online survey respondents who were “very likely” and “fairly likely” to pay respectively (the total EU pay-TV market size was 28.6 billion). NB: this survey concerned all subscription-based cross-border AV media services.
(111)  For example, according to the initial findings from the Commission's e-commerce sector inquiry published on 18 March 2016, 68.9 % of digital content providers replied that costs of purchasing content for territories other than those in which the provider operates is the most important factor for not making the service available across borders. In addition, broadcasters may need to take into account other possible costs: with online distribution, there are variable costs for the service provider that increase with usage, see further the SatCab study.
(112)  Currently, the standard duration of broadcaster's catch-up services varies between 7 and 30 days.
(113)  For example, webcasting services include YouTube live channels or iTunes "Beats" radio-like linear services.
(114)  E.g., according to the available examples, for commercial radios copyright fees in various MS may vary between 9 % of broadcaster's revenues in NL to 2.2 % in EL; for related rights: from 7 % in FI to 1 % in IT. Note: this information represents an average in each country and was updated last in 2012/2014 (Source: AER).
(115)  Such risk was raised by certain CMOs in response to the SatCab public consultation. E.g. GESAC submitted that an extension of the CoO rule to VoD services could discourage the re-aggregation of repertoires promoted by the CRM Directive and even cause further fragmentation of repertoires in the market.
(116)  Article 52(1) of the Charter allows for restrictions interfering with the exercise of the freedoms of the Charter: those restrictions (i) must be provided for by law and (ii) respect the essence of those rights and freedoms. In addition, the limitations are (iii) “subject to the principle of proportionality” and “may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others”. 
(117)  Such OTT retransmission services are a relatively recent phenomenon. "Zattoo", based in the US and Switzerland, is the pioneer of this type of retransmission services – was launched in 2006 and is now available in six countries: DE, CH, ES, DK, LU and the UK. Swedish provider "Magine" launched its service in 2013 and is currently available in Sweden, Germany and the UK. Telecom operators are exploring this market too: Dutch KPN launched an OTT service called "Play" in November 2015, and Telekom Austria launched an OTT service "A1 Now" in March 2016.
(118)  Data from the European Audiovisual Observatory.
(119)  Under collective management, authors and other rights owners mandate an entity (e.g. a CMO) to act on their behalf to grant authorisations, to collect and distribute remuneration, to prevent and detect infringement of rights, and to seek remedies for infringement. The collective management of rights allows commercial users to clear rights for a large number of works, in circumstances where individual negotiations with individual creators would be impractical. As far as exclusive rights are concerned, collective management is normally voluntary (i.e. based on the mandate voluntarily granted by rightholders). In limited cases, legislation allows for mandatory collective management.
(120)  The system of mandatory collective management of rights to retransmission of broadcasts is compatible with Article 11bis(2) of the Berne Convention which allows compulsory licences for such retransmissions.
(121)  As indicated in the Ex-post Evaluation of the Satellite and Cable Directive (93/83/EEC), the system provided by the Satellite and Cable Directive for cable retransmissions has proven to be generally effective. At the same time, it was observed that other technological means of retransmission have emerged for which the Satellite and Cable Directive is not relevant due to its technology-specific provisions.
(122)  EBU contribution to the public consultation.
(123)  Data from the European Audiovisual Observatory.
(124)  Such licences protect retransmission service providers against potential claims by 3rd party rightholders concerning the use of works included in the broadcast.
(125)  Meaning that a retransmission service can only be accessed by a consumer through an electronic communications network, dedicated fully or partially to the retransmission service (as opposed to access through "open" Internet / any electronic communications network giving access to the Internet).
(126)  See Annex 7B.
(127)  The projections for the Western European markets show very similar trends (e.g. the growth of IPTV from 15% of TV households in 2015 to almost 19% in 2021): http://www.broadbandtvnews.com/2016/04/12/iptv-overtakes-pay-satellite-tv-in-western-europe/
(128)  In this section, the summaries of stakeholders' views are based on the results of the public consultation on the review of the EU Satellite and Cable Directive published online attached hereto as Annex 2C.
(129)  The difference in the opinion between commercial and public service broadcasters may stem from the fact that the former typically produce more content which is licensed to third parties.
(130)

     Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (the Framework Directive) (OJ L 108, 24.4.2002, p. 33–50) : 'electronic communications network' means transmission systems and, where applicable, switching or routing equipment and other resources, including network elements which are not active, which permit the conveyance of signals by wire, radio, optical or other electromagnetic means, including satellite networks, fixed (circuit- and packet-switched, including Internet) and mobile terrestrial networks, electricity cable systems, to the extent that they are used for the purpose of transmitting signals, networks used for radio and television broadcasting, and cable television networks, irrespective of the type of information conveyed.

(131)  ITU’s definition of IPTV refers to “multimedia services such as television/video/audio/text/graphics/data delivered over IP based networks managed to provide the required level of quality of service and experience, security, interactivity and reliability”.
(132)  See Annex 7A for the overview of the current state of play.
(133)  Source: IHS Technology, "Current market and Technology Trends in the Broadcasting Sector", May 2015, p.19.