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MusicBiz virtual conference assesses the impact of Article 17 on the music biz

Article 17 of the European Union's Directive on Copyright in the Single Digital Market has the potential to be a game changer and has become the symbol of a new era for the creative sector – one where online platforms can be regulated and content protected, licensed and monetised.

Although the Directive, adopted in 2018, has not been transposed yet into the legislation of EU member states, stakeholders in the creative sector put much into the potential changes ahead, once the Directive is fully implemented. Article 17, among other things, is an invitation for platforms, in particular those relying on user generated content (UGC), to license creative content.

The interest in Article 17 goes well beyond the borders of EU's 27 members (the UK has already announced that it won't transpose the Directive) and the whole world is waiting to see what will happen in Europe and what will be the impact of the legislation. Article 17 requires online platforms to make "best efforts" to identify the owners of unlicensed content and license the content. The European Commission still has to publish its guidelines on how Article has to be interpreted, and the guidelines are expected to be unveiled in the New Year.

Reforming copyright in a balanced way

As a testimony of the interest in Article 17 outside of the EU, several hundred people had registered to a two-day virtual seminar organised by US trade body MusicBiz. "Article 17: Are We Ready?" explored the potential impact of the legislation not just in the EU but also outside the EU.

For Jake Beaumont-Nesbitt, VP of Innovation and Education at theInternational Music Managers Forum, Article 17 is a "box-set," to use a music analogy, which contains a lot of provisions and layers, and the seminar aimed at covering as much ground as possible on the topic (and it did).

Helen Smith, Executive Chair of indie labels' trade body IMPALA, recalled that the Copyright Directive was "one of the most debated piece of legislation to come from EU in past 20 years," and that the Commission and legislators were seeking to reform copyright "in very balanced way." Smith said the onus is now on member states to "box the Directive in their own national legislation." "Until that's done, it does not have any effect," she said.

Different approaches to implementation

At the moment, no country has fully implemented the Directive but countries like the Netherlands, France and Portugal have made head ways. All EU countries need to have transposed the Directive by June 2021. Not all the countries are expected to transpose the Directive word for word. Some countries like Germany have taken an approach that could expand the exceptions to the scope of Article 17.

For Martin Hapl, General Manager for Europe at content identification company Pex, France has decided to stay "close" to Article 17 while Germany tried "to be creative, and make Article 17 more acceptable for people in Germany, but at the risk of being non compliant with the Directive."

Others like Poland have gone to the European Court of Justice, arguing that parts of Article 17 infringed the right of freedom of expression. "Poland is an interesting country to bring a question about fundamental rights," mused Ted Shapiro, a Partner at law firm Wiggin in Brussels.

A sausage factory!

Shapiro warned US audiences that Europe does not have "safe harbours" provision as defined by section 512 of the Digital Millennium Copyright Act (DMCA) in the US, but European law provides for exceptions. What Article 17 does is to clarify these exceptions and introduces the notion that when platforms like YouTube allow UGC to be uploaded, they engage in a communication to public, which comes with its own requirements. "They need a license or if they don't have it, they need to take measures to take down content," said Shapiro.

With Article 17, some content that could benefit from an exception won't benefit from it in the first place, said Shapiro, which will require platforms to take down content or at least filter content. "The Commission came with a middle ground, and if it is an exception, we should let it up, but if it is infringing, we will take it down," he explained, joking that the legislative process in Europe is a "sausage factory where member states try to figure out what is in the sausage"...

"The Commission has packed in so many different pieces [in Article 17] and hopefully will take into account all the points of views before it publishes its final guidelines," agreed Beaumont-Nesbitt. For several participants, the real challenge with Article 17 is to identify content that infringes copyright, in particular UGC. Abby North, a Principal at North Music Group and Co-Founder of Unchained Melody Publishing, rights holders "need a globally identifier for UGC."

Blind spots in music licensing

Her view was echoed by other speakers like Ilie Ardelean, CPO at Exactuals, who noted that "UGC, that's all new" and that stakeholders have to work together to develop tech solutions to "make sure we all work out from the same format."

Jeff Liebenson, President of the International Association of Entertainment Lawyers (IAEL), explained that with UGC, rights holders are dealing with an alteration of a song, a clip, a remix and all this means that labels or publishers have to check if they can grant the rights. He noted that "a lot of times people don't have the time or the staff to deal with licensing problems." For platforms, it is also sometimes difficult to identify the rights owners and there is no centralised database that could help them, he added.

Then there's the issue of licensing, which will be at the heart of Article 17 implementation. Vickie Nauman, Principal & Owner at CrossBorderWorks, noted that "all companies of all sizes have blind spots in music licensing and music rights. There's so many facets that you can't possibly see them all at one time. And very few people can understand all of this."

A profound change in the landscape

For Nauman, legally licensing music has its perks. "Done right, it brings huge value," she said. And for those who prefer to act first and ask forgiveness after, she had this message: "Asking for forgiveness rarely ends well. Some companies have done well, but the number of companies that get into trouble and that we never hear from again is staggering."

Reflecting on the possible effects of Article 17, Nauman said she believed that Article 17 "will have a profound change in the landscape." For her, it is impossible to limit the impact of Article 17 to the EU, since the legislation will introduce changes "in UGC in general, in the system's architecture and in the relation and expectation between rights holders and platforms."

For IMMF's Beaumont-Nesbitt, Article 17 will provide "a massive opportunity for creators and investors in music and platforms to come together and create a fantastic business model."

Better monetise content

Larry Mills, CEO and Co-Founder of We Are The Hits, picked up on the same topic. For him, Article 17 will introduce a dialogue between rights holders and platforms and he is convinced that both parties have already integrated the advent of Article 17 and "behaviours have already changed."

For Mills, Article 17 has "created a scenario where places can get monetised" more than before, with rights holder and platforms working jointly on the monetisation of content "thanks to Article 17." He added: "It will be good for everyone and if it works in a couple of countries in Europe, there will be an explosion elsewhere too."

Rasty Turek, Founder and CEO of Pex, explained that the benefit of the Directive is that it tries to bring a balance in market that had "disproportionately moved towards platforms." What the Commission did, he said, was to discuss with everyone involved, and try to figure out a balance.

A new era for innovation

"No legislation is perfect but we are heading in a nice direction and we will see significant changes," Turek said. He is convinced it will in particular open a new era for innovation, with more and more platforms like TikTok that "will be monetised."

Turek added: "What is challenging for US-based companies is understanding how the process works in Europe. A lot of people are confused by that. And as things come closer, people start panicking. Right now most platforms are in the understand mode and a lot of small platforms look at it as a form of opportunity. If you comply first, do you get some sort of edge in the marketplace?"

For Turek, the US will eventually follow suit, in the very same way the EU's General Data Protection Regulation (GDPR) had an impact outside of Europe and platforms around the world had to adapt to the legislation. "The Directive talks about best efforts to license and the DMCA is at odds with that, so the US will have to make adjustments to that," said Turek. He said he was convinced that "once dust settles, everybody will be better off and benefit equally from it. This is a new form of legislation where people have to find a way to work together."

Grow the market

IMPALA's Smith said Article 17 could transform the notice and takedown system, which she described as "a crazy whack-a-mole system" that smaller music companies had problems dealing with. "No one wants to be a takedown machine," she said. "It is not good for the music sector." She added: "Hopefully that tension will be replaced by something positive with licenses and also about how to generate more revenues for creators."

For Smith the mindset of the platforms has already switched. For platforms, it is now "more a compliance issue for them and looking at how they are going to make it work. The question of adoption is more a commercial and a technical issue than a legal issue."

And for Smith, "the big question is how we, as a sector work with platforms to create amazing new opportunities. We have already seen changes with the short clips and it's big business. Not long ago, some in the legislative process thought it could be exempted. Look at how platforms came with ways to connect and there are many ways that we have not thought of yet."

She continued: "A lot of members believe they can already see the impact, and platforms are already planning, they know what they have to do. For them it is fantastic that there are test efforts and that we can go to the next phase which is how we can grow the market. That's what makes it exciting and our members are motivated by that. It is now a question of growing the business."