Late in the evening of Feb. 13, European Union policymakers hammered out the final version of the new Copyright Directive -- the subject of a fierce four-year battle between media businesses and tech giants like Google over how creators will be compensated in the digital age.
At stake are billions of dollars in potential revenue for the music industry, as well as the future of the online media business in the world’s largest market. By early April, European Parliament will vote on whether the Directive on Copyright in the Digital Single Market will take effect -- after which it would then be transposed into law in member states.
The most important provision to the music business -- and the most controversial generally -- is Article 13, which would essentially end the legal "safe harbor" from copyright infringement that sites that rely on user-uploaded content now have in Europe. Those companies, including YouTube, would become legally responsible for infringement that takes place on their platforms, and be required to sign deals that provide rights holders with "fair remuneration." In business terms, that means YouTube would have to pay royalties closer to those of Spotify and Apple.
But the legislation's final wording has left some music executives so unhappy with what they see as a weakened Article 13 that they don't favor it.
"The final version has the potential to leave music worse off than we are now," says one senior music executive. "This is about future-proofing the legislation so that it remains effective as technology changes -- and sadly, this version doesn’t achieve that."
The final text of Article 13 gives platforms that rely on user-uploaded content some mitigations of liability for hosting infringing music or videos in cases where a license hasn’t been granted, such as a leak. In those cases, platforms would have to make "best efforts" to get a license and "ensure the unavailability of specific works."
When unlicensed content is uploaded, platforms have to act "expeditiously" to remove it and make "best efforts" to prevent its future upload. That means YouTube will be required to implement "notice and staydown," as opposed to the current regime of "notice and takedown" -- or "Whac-A-Mole," as some call it.
The majority of rightsholders see notice-and-staydown legislation, and the placing of primary liability on user-uploaded content (UUC) services, as a significant win for the music industry. However, some fear that that ambiguities in the final text could be undermined or loosely interpreted when the directive is transposed into law by EU member states, indirectly creating new loopholes and safe harbors for platforms to exploit.
There are also concerns over "lighter touch" exceptions that Article 13 grants to small and start-up UUC platforms that have been operating for less than three years, have annual revenues of less than 10 million Euros and less than 5 million unique users per month. In those instances, platforms will still be required to agree licences with labels and publishers, but will only be required to operate notice-and-takedown measures, not notice-and-staydown – effectively placing the burden of responsibility back onto rights holders.
Article 13, paragraph 5 additionally establishes what amounts to a mandatory parody law across the European Union, protecting users’ right to freely parody copyright protected video, film and TV works without fear of reprisal or legal challenge. Such laws are already in place in a number of EU countries, such as France, Germany and the U.K., but not all 28 member states.
At present, in markets where parody exceptions do not exist, rights holders are able to monetize music parody videos. If passed, Article 13 potentially shuts down that source of revenue.
"I don’t think you’ll find many rights holders who will come out and say they like [Article] 13.5. In territories where they don’t currently have these exceptions, you are potentially reducing revenues for a particular use of content," says one exec.
Of the three major labels, industry sources say Universal is the most opposed to the final version; Warner largely favors it, though executives think the text contains flaws; and Sony Music is between the two. YouTube declined to comment, but still said in a statement that it is determining its next steps.
"It would be naïve to expect that this directive would be the end of all debate or litigation as regards to copyright in the online world," Helen Smith, CEO of indie label group IMPALA, tells Billboard.
"The big picture remains that this is the first time anywhere in the world that platforms offering user-upload services are ruled to be communicating to the public, that they need a license, they are not allowed to post unauthorized content and they are under an obligation to keep it off the service," she says. "This is far more than what we originally asked for, and it is very much a piece of legislation that will move us forward as a sector."
"Is what we’re giving away something we can live with? The general reaction among rights holders, labels and publishers is yes," agrees John Phelan, director general of international music publishing trade association ICMP, which had previously joined IFPI and IMPALA in opposing an earlier, weaker version of the directive. He says the final text fixed many of those issues. A key revision was the removal of language that suggested platforms would not require licences or be liable for user-generated content that fell under the categories of caricature, parody or pastiche.
Meanwhile, Articles 14, 15 and 16 of the Copyright Directive contain some important provisions for performers, songwriters and artists, including requirements for regular and transparent reporting from rights holders on revenues generated from their works and remuneration due.
In instances where that level of remuneration turns out to be "disproportionately low," creators and performers are entitled to claim "additional, appropriate and fair remuneration" from rights holders, the directive states. It also says that when an author or performer has exclusively assigned their rights to a music company that fails to release or exploit their music, they "may revoke in whole or in part the licence or the transfer of rights."
"Those provisions could be really valuable to artists and songwriters who might be on outdated contracts," says Annabella Coldrick, chief executive of U.K.-based Music Managers' Forum (MMF). "Potentially, there’s some really good measures here to ensure that the people who made the music in the first place see a share of all this growth. This is not just about rights-holders getting more from YouTube. It’s about making sure that all the money is shared proportionately and fairly."
"The problems with the text are less about substance and much more about ambiguity," says one exec, also supportive of the directive. "Is what it contains clear enough for us to be able to do something with today? Or are we going to have to rely on someone clarifying it in case law later on?"