EUROPEAN COMMISSION

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?

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?

Baseline

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).

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.

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.

Discarded options

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

Baseline

Impacts on stakeholders

Broadcasters

Other service providers 

Rightholders

Consumers

Social impacts 

Impacts on fundamental rights

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

Impacts on stakeholders 

Broadcasters

Other service providers

Rightholders

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

Social impacts

Impacts on fundamental rights

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

Other service providers 

Rightholders

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.

Consumers

Social impacts

Impacts on fundamental rights

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)

Impacts on stakeholders 

Broadcasters

Webcasters

Other service providers 

Rightholders

Consumers

Social impacts

Impacts on fundamental rights

3.2.2.4.    How do the options compare?

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

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.

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?

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.

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.

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).

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

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 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?

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.

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.

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.

Discarded options

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

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 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?

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.

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.

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.

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

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 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  

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?

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.

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.

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.

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).

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

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 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  

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?

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). 

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.

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

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.

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

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).

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.

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

Baseline

Impacts on stakeholders

Researchers 

Rightholders 

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

Rightholders

Social impacts

Impacts on Fundamental rights

Impacts on stakeholders

Researchers