Rights Owners Rack Up Victories in EU, Australia

The copyright industries haven’t fared particularly well in U.S. trade negotiations recently, missing out on a chance to extend various copyright-protection measures when the Trump administration pulled the U.S. out of the Trans-Pacific Partner, and facing push-back on efforts to incorporate those provisions into a revised NAFTA agreement with Canada and Mexico. But they’re having better luck in Europe and Australia.

Last week, the Australian government unveiled legislation to extend the current digital safe harbors there to libraries, educational institutions, organizations for the disabled, archives, and other cultural sectors. But in a reversal from a previous government position, the legislation would exclude major commercial platforms like Facebook and Google from such protection.

Under current Australian law, the safe harbors protecting networks from liability for copyright-infringing materials uploaded by their users is limited to ISPs. Earlier this year, the government floated a proposal to expand those protections to cover a wider range or networks, including commercial services like YouTube that rely heavily on user-generated content. That proposal was shelved in March, however, and the government began a series of consultations with the copyright industries leading up to last week’s announcement.

The change in course represents a major victory for copyright owners, particularly the music industry, which has lobbied heavily for steps to help close the “value gap” it claims the safe harbors have created on social media platforms. Keeping YouTube and Facebook out of those harbors will make it easier for rights owners to negotiate favorable licensing deals with the platforms.

In Europe, meanwhile, the European Parliament voted this week to reject most provisions of the European Commission’s so-called Sat-Cab proposal that would have allowed broadcasters within the European Union to include content they had licensed for broadcast in their own territory in their pan-European digital video-on-demand and over-the-top services.

The proposal by the European Commission was intended to advance the EU’s Digital Single Market initiative but was strongly opposed by the film and TV industries that have long relied on exclusive territory-by-territory licensing to maximize revenue and secure financing for production.

The vote by the European Parliament is not the final step in the EU’s complicated procedures. The proposal now goes to the Council of Ministers made up of senior officials from the member countries, where European broadcasters have vowed to continue pushing for expanded distribution. But for now, the vote in the Parliament is a major victory for the film and TV producers, who lobbied heavily against the commission’s proposal.

That win comes on the heels of a similar victory for rights owners last month, when both the European Parliament and Council agreed to exclude most copyrighted works for at least two years from another provision of the Digital Single Market rules that strictly limits the use of “geo-blocking” measures on digital goods. The elimination of geo-blocking was strongly opposed by book publishers, who feared it would allow online booksellers such as Amazon to sell ebooks throughout the EU with a single license, undercutting the industry’s practice of licensing digital rights territory-by-territory or language-by-language.

As with the Cab-Sat proposal, the agreement on geo-blocking is not the last word on the matter. But for now, at least, the regulatory tide in the EU that had been running strongly against the copyright industries’ long-standing licensing practices appears to be turning.

 

The Purr-fect Blockchain Application? Collectible Digital Assets

Many a fortune has been built on the internet, but we all know the internet’s real purpose is to share funny cat videos. So it’s perhaps no surprise that the latest iteration of a digital network — blockchain — is also being overrun with kitties.

Apart from trading Bitcoin, just about the hottest application running on a blockchain at the moment is CryptoKitties, discrete bits of digital art featuring cartoon felines that can be bought, sold, traded and even interbred with other CryptoKitties to create new, “genetically” unique pussycats. By one estimate, traffic in CryptoKitties is currently taking up 13 percent of the Ethereum networks capacity., making the application the single biggest user of that blockchain.

Apart from the internet’s natural affinity for cats the appeal of CryptoKitties lies in their collectibility. Each CryptoKitty cartoon is generated from a unique digital “genome” and is visually distinct. The application then generates a cryptographic hash of the unique image that is then registered to the Ethereum blockchain. The images therefore cannot be reproduced or forged.

Whether CryptoKitties turn out to be a passing fad, or not, they’re helping popularize the concept of blockchain-based collectible digital assets — a notion pioneered by serious-art blockchain registries like Monegraph and Ascribe. Similar efforts include Rare Pepe cards featuring the alt-right’s adopted mascot, Pepe the Frog, and Cryptopunks.

Now, digital collectibles are moving beyond the world of visual arts into music and other media sectors. Earlier this year, artist-management services provider Boogie Shack Music Group teamed with music blockchain developer Tao Network to create a new type of licensed artist merchandise in the form of blockchain-based digital tokens.

Tokens with be offered in limited editions via “initial artist offerings,” with 50 percent of the proceeds going to the artist. The tokens can be exchanged for fiat currency or Bitcoin, but since each token is cryptographically unique they can also be collected, traded, or used as currency within an artist-centric “engagement” economy, according to Tao Network founder and CEO Bryce Weiner.

“You think about a band like The Grateful Dead and there’s a whole ecosystem of collectibles among their fans,” Weiner said. “That’s an ecosystem that could be monetized with digital tokens. As the tokens increase in value it becomes like a new royalty stream for the artist. It’s an example of another right that could be monetized with blockchain.”

Tao and Boogie Shack plan to launch a token exchange to be called AltMarket in early 2018. Artists initially on board for the launch include Ol’ Dirty Bastard and Digital Underground, with more expected to be announced soon.

Weiner will be speaking a panel in the RightsTech track at the Digital Entertainment World conference in Los Angeles on February 5-6. For information on how to register for the conference click here.

Trade Deficits: U.S. Copyright Industries Could Be Losers in Trump Trade Agenda (Updated)

Whatever you may think of President Donald Trump’s overall international trade agenda, there hasn’t been a lot winning in it so far for the U.S.-based copyright industries.

The movie, music, games and publishing industries, among others, have spent decades since the passage of the WIPO Copyright Treaty working closely with both Republican and Democratic administrations, to use the leverage of U.S. trade negotiations to advance the cause of strengthening copyright protections around the world, by inserting protections into multilateral trade agreements. But the fruits of that labor are in danger of going unharvested as Trump pulls the U.S. back from global trade deals.

In one of his first acts as president, Trump pulled the U.S. out of the Trans-Pacific Parternship (TPP), the 12-nation pact  originally intended to enshrine U.S. economic influence in Asia and throughout the Pacific Basin. To the dismay of many technology companies and consumer rights groups, the treaty’s intellectual property chapter, drafted largely by U.S. negotiators working in close consultation with U.S. copyright interests (and the pharmaceutical industry), contained a number of provisions requiring other countries to adopt strong  U.S.-backed copyright protections, including anti-circumvention rules for technical protection measures, enhanced enforcement procedures and remedies, including for secondary liability, and extended terms for copyright.

Although some TPP countries have already adopted similar provisions as a result of bilateral trade agreements with the U.S., several have not. It’s hard to read the U.S. withdrawal as anything but a blow to efforts to extend enhanced protection and enforcement standards globally.

Worse for the U.S. interests, word emerged last week that the remaining 11 countries in the bloc are planning to move ahead with a revised version of TPP without the U.S. Among the key revisions to the agreement, reportedly pushed primarily by Canada, is the jettisoning of much of the intellectual property chapter, including the enhanced copyright protections.

The Trump administration says it wants to negotiate individual bilateral agreements with the other countries, but if the TPP 11 sign onto a multilateral deal that expressly rejects the U.S.-backed copyright provisions those countries likely will be less anxious to agree to them in bilateral negotiations.

Many trade experts, in fact, believe that pulling out of TPP has reduced U.S. leverage overall in trade negotiations.

History shows that “having another deal already in place or almost in place certainly strengthens your hand” in trade negotiations,  the director of the Mexico Institute at the Wilson Center, Duncan Wood, told Foreign Policy magazine last week.

One area where that reduced leverage may already be telling is the negotiations demanded by Trump to revise the North American Free Trade Agreement (NAFTA) with Canada and Mexico, both TPP countries.

As the fifth of a scheduled seven rounds of talks on NAFTA got underway in Mexico last week, Canada and Mexico reportedly are pushing back firmly against efforts by the U.S. to include U.S.-backed language from TPP into the North American deal.

NAFTA, which was ratified in 1993, was negotiated before the widespread commercial adoption of the internet, and is largely silent on issues related to cross-border data flows and copyright liability on digital platforms.

Although the talks are being held behind closed doors, one area where the U.S. is believed to be trying to insert language adopted from TPP is in the intellectual property chapter.

Last week, a group of trade associations representing major technology companies, including the Internet Association, the Consumer Technology Association, and the Information Technology Industry Council, wrote to U.S. Trade Representative Robert Lightizer to express their concern that the talks had moved away from what they called the “balanced” approach to copyright the administration had previously agreed to, in favor of rules that would benefit copyright owners over users.

“Our understanding, based on numerous conversations with people knowledgeable of each party’s undisclosed positions, is that there has been no agreement to include provisions promoting copyright user rights or the principle of balance in NAFTA,” they wrote. “Absence of such provisions would make the final agreement unacceptable.”

Whatever the case, the NAFTA negotiations are in danger of breaking down altogether over other U.S. demands, which the Trump administration has said could lead to the U.S. pulling out of the 23-year old treaty.

Should NAFTA go down, any hope U.S. copyright interests have for getting stronger protections included in trade deals with Canada and Mexico would probably go with it.

UPDATE (Nov. 20th): The office of the U.S. Trade Representative has now released a list of U.S. objectives for the latest round of NAFTA talks, including extensive intellectual property provisions. Here’s the relevant portions of the list:

Intellectual Property:

Promote adequate and effective protection of intellectual property rights, including through the following:

  • Obtain commitments to ratify or accede to international treaties reflecting best practices in intellectual property protection and enforcement.
  • Provide a framework for effective cooperation between Parties on matters related to the adequate and effective protection and enforcement of intellectual property rights.
  •  Promote transparency and efficiency in the procedures and systems that establish protection of intellectual property rights, including making more relevant information available online.
  • Seek provisions governing intellectual property rights that reflect a standard of protection similar to that found in U.S. law, including, but not limited to protections related to trademarks, patents, copyright and related rights (including, as appropriate, exceptions and limitations), undisclosed test or other data, and trade secrets.
  • Provide strong protection and enforcement for new and emerging technologies and new methods of transmitting and distributing products embodying intellectual property, including in a manner that facilitates legitimate digital trade, including, but not limited to, technological protection measures.
  • Ensure standards of protection and enforcement that keep pace with technological developments, and in particular ensure that rights holders have the legal and technological means to control the use of their works through the Internet and other global communication media, and to prevent the unauthorized use of their works…
  • Prevent the undermining of market access for U.S. products through the improper use of a country’s system for protecting or recognizing geographical indications, including such systems that fail to ensure transparency and procedural fairness, or adequately protecting generic terms for common use.
  • Provide the means for adequate and effective enforcement of intellectual property rights, including by requiring accessible, expeditious, and effective civil, administrative, and criminal enforcement mechanisms. Such mechanisms include, but are not limited to, strong protections against counterfeit and pirated goods.

 

Annual Global Royalty Collections Hit $10.8 Billion in 2016

Score one for the power of collection rights management. The International Confederation of Societies of Authors and Composers (CISAC), which represents over 230 authors societies in the music, audiovisual, literary, dramatic, and visual arts industries around the world, released its annual Global Collections Report this week which showed global royalty collections by its member organizations reaching a record €9.2 billion (US $10.8 billion) in 2016, up 6 percent from 2015.

Music royalties, which make up the bulk of CISAC-member collections, rose 7 percent for the year, to €8.0 billion (US $9.4 billion) powered by rapid growth in streaming services in several major markets. The U.S. and Canada saw the biggest increase, at 12.5 percent, followed by the Asia-Pacific region, which grew 10.3 percent.

Use of collectively managed works, primarily music, in traditional TV and radio programming accounted for the largest slice of the collections pie, at 42.8 percent, followed by live performances and background uses, at 29.6 percent. Digital uses, however, which include music and video streaming, saw the fastest year-over-year growth, surging 51.4 percent, and now account for 10.4 percent of all collections worldwide.

The reported noted that sluggish growth in collections from video streaming services in some markets prevented the digital category from growing even faster. Declines in traditional TV viewing and the loss of viewers to over-the-top services actually led to a 1.4 percent year-over-year decline in collections from the traditional TV and radio channel.

Whether the overall surge in royalty collections by CMOs is translating into higher payments to artists and creators, however, remains a matter of contention in many creative industries, particularly music. Many songwriters, for instance, have seen their incomes fall as the bulk of music industry revenue as shifted from the sale of individual recordings to collectively managed streaming licenses.

CISAC executive director Gadi Oron, however, sees the latest results as a vindication of collective management.

“This year’s report shows the system of collective management of creators’ rights is robust, successful and ready for more growth, he said in a statement. “The big traditional revenue streams, led by broadcast and live performance, remain stable and strong. Digital royalties continue to surge and in some markets already overtake other forms of income.”

CISAC president Jean-Michel Jarre, however, himself an electronic music composer, acknowledged artists’ frustrations with current revenue flows, but put the blame on digital platforms rather than on any shortcomings in the collective-management system per se.

“Despite [the sector’s]growth…collections are nowhere near the level they should be,” he said. “Large industries that use creative content are driving down the value of our works.  A simple illustration of this is the ‘transfer of value’ in the digital market where platforms such as YouTube are paying mere crumbs to authors.”

The full, 72-page report can be downloaded here.

 

 

Creative Ghosts in the Machine

One of the highlights of last month’s RightsTech Summit was the riveting debate between Ed Klaris of KlarisIP and Drew Silverstein of Amper Music over who (or what?) should own the copyright on musical works produced autonomously by a computer powered by artificial intelligence software.

Ed Klaris, left, and Drew Silverstein at the RightsTech Summit

Klaris was clear that whoever owns the rights, it’s not the machine. Even the most autonomous of A.I. agents, he argued, by definition cannot exercise the sort of creativity and originality that U.S. copyright law requires without human input. Therefore, any originality in the work, the sine qua non of copyright, comes from humans and the copyright belongs to some human entity, whether individual or corporate.

Silverstein, whose company markets an A.I.-based music composer and performer, argued for a more expansive view of machine-made music. Claims being advanced on, or on the behalf of software output are inevitable, he proposed  and it is too soon to take a categorical position on their merits.

The 30-minute debate, fascinating as it was, obviously didn’t settle the argument, which is really just getting underway. U.S. copyright law is clear on the need for a human author. It’s goal, after all, is to incentivize human creativity. But the line between man and machine is only likely to get fuzzier as technologies like artificial intelligence, machine learning, and virtual reality advance. How and where to draw that line is bound to become contentious.

The Hollywood Reporter Esq. columnist Eriq Gardner flags a fascinating case involving an infringement claim brought by the maker of MOVA, a computer-based system that captures human facial expressions and uses them to create photo-realistic graphic effects, against several Hollywood studios that used a an allegedly purloined version of MOVA to create effects in blockbuster movies, including Guardians of the GalaxyAvengers: Age of UltronDeadpool, and The Curious Case of Benjamin Button, among others.

The plaintiff in the case, MOVA inventor Rearden LLC, makes a number of patent and trademark claims related to the studios’ use of an allegedly stolen version of MOVA. But it also makes the jaw-dropping claim that any originality in the creative output of the MOVA system is the result not of any human input but to the design of the system itself, and therefore Rearden owns the copyright on that output.

Rearden was founded in 1999 by Silicon Valley inventor Steve Perlman, who claims to own the MOVA software. In 2012, Perlman transferred the MOVA assets to a second company, OnLive Inc. At that point, Perlman alleges, two of his then-employees secretly formed another company and negotiated the acquisition of OnLive and the MOVA assets. In 2013 those assets were sold to Chinese investors, who transferred them around among multiple corporate entities. At the same time, the MOVA technology was licensed in the U.S. exclusively to effects-house Digital Domain 3.0, which used the technology to produce graphics work for the studio defendants.

Rearden, meanwhile, sued the Chinese companies and last year won an injunction that bars Digital Domain from continuing to use the MOVA technology.

The studio defendants, Disney, Fox and Paramount, do not dispute that the MOVA technology may have been stolen. But they strongly reject the claim that the owner of MOVA, whether Rearden or someone else, also owns the copyright on the work it produces. What show up on the screen, they claim, is chiefly the result of human inputs, from the film’s direction, the performances of the actors, and the photography of the cinematographer. To argue that the owner of the effects software also owns its output, the studios say, makes no more sense than arguing that Microsoft owns the copyright on any work produced using Word, or Adobe any work produced in Photoshop.

Rearden is having none of it, and here is the nut of its argument as spelled out in the complaint:

[H]ere, the work at issue is the program’s output, in particular, the three-dimensional Captured Surface and Tracking Mesh. The MOVA Contour system takes two-dimensional camera captures as input, and the program then synthesizes them into three-dimensional outputs with subtlety and artistry, based on creative choices made by its programmers and embodied in its copyrighted software instructions…[D]uring MOVA Contour performance capture, the director cannot choose camera angles because the cameras are fixed in the MOVA Contour rigging; there can be no “selecting and arranging the costume, draperies, and other various accessories,” because the capture is of only the random patterns on the actor’s face and neck; and there can be no “arranging and disposing the light and shade,” because the lighting is also fixed in the rigging, and a random pattern of glowing makeup applied to the actor’s skin eliminates shadows for an evenly-lit random pattern.

Similarly, defendants’ argument that Rearden’s claim is analogous to Microsoft claiming a copyright in a book by an author who used Word to write it, or Adobe claiming a copyright in the artwork by an artist who used Photoshop to create it are equally inapt. Generally, an author writes a book by typing every word into a Word document, and an artist creates a work of art by deciding on specific treatment of every pixel in a Photoshop file. But in neither case does their work provide input to software that synthesizes an original expression that is distinct from the author’s or artist’s input. Here, neither the actor nor the director create a Captured Surface or Tracking Mesh output. The actor performs, and a director may direct the performance, and two-dimensional glowing random patterns are captured. But the works at issue here are not the two-dimensional captures; rather, the works at issue are the MOVA Contour program’s output, in particular, the three dimensional Captured Surface and Tracking Mesh created entirely by the MOVA Contour program.

It’s a bold argument, and there’s no telling at this point how a court might ultimately rule on it. The argument over whether the tool maker or the tool user is the author of what the tool helps create may be settled as a matter of law. But as the tools grow ever more sophisticated, the debate over how to tell the difference is far from over.

Featured image: Google DeepDream

Art World Looks to Blockchain to Pump Up Online Sales

Global sales of art works amount to roughly $45 billion a year, but in 2016 only $3.75 billion of that — less than 10 percent of the total — was transacted online, according to the Hiscox Online Art Report, making the art and collectibles trade a laggard in the world of e-commerce.

A big part of the reason for the lack of a more robust online marketplace is the high potential for fraud — already a $6 billion a year problem in the art world — when buying artworks sight-unseen except in digital form. Copies and knockoffs can be passed off as originals, “limited” editions can overstep their limits, certificates of authenticity can forged.

Verisart CEO Robert Norton

Several startups have have launched in recent years to tackle that problem, including Verisart, ascribe, and Tagsmart, by providing artists the means to assert their authorship and issue time-stamped, digitally signed certificates of authenticity (COAs) by registering the information on a blockchain. But online sales have yet to scale using that artist-by-artist, piece-meal approach.

Now, Burbank, Calif.-based Verisart is looking to go the wholesale route through a partner certification program and API for online sellers and galleries. Last week, it announced its first such partnership, with online gallery Avant Arte.

Under the deal, Avant Arte will apply Verisart’s certification standards across all its represented artists and sales of limited edition artworks. Each certificate will be optimized for both physical and digital use with a unique QR code, blockchain timestamp and web address.

Speaking at the RightsTech Summit in New York last week, Verisart CEO Robert Norton said, “As online retailers and galleries look to improve certification standards, we’re seeing increasing demand for blockchain enabled certificates and we’re delighted to work with Avant Arte as our first limited edition print partner.”

Added Avant Arte ATO Nico Veenman, “By partnering with Verisart, we’re applying two factor validation of ownership by combining a physical ownership certificate and a digital certificate on the blockchain including immutable and authorized information about the artwork edition.”

Avant Arte is the first company to use the Verisart’s partner API allowing bulk transfer of data and certificate customization.

(Cover image: Wikimedia Commons)

RightsTech Summit Kicks Off September 27th

The curtain will be going up next week on the second annual RightsTech Summit. Part of the two-day New York Media Festival the Summit will feature over 40 speakers from around the world and will bring together rights owners, creators, technology developers, policymakers and investors from across the full range of media sectors, for a unique, high-level discussion focused on technology innovation around the registration, management, licensing,

Jim McKelvey

and tracking of media rights and royalties on digital platforms.

Featured topics will include:

  • Machine-to-machine rights management
  • Metadata standards and repositories
  • Automated licensing platforms
  • Rights registries
  • Copyright reform
  • Blockchain and cryptocurrencies
  • Artificial intelligence and intellectual property rights
  • Mashups, re-mixes and user-generated content
  • Investing in rights and royalties

Robert Kasunic

The Summit will also feature special keynote conversations with Jim McKelvey, the artist and entrepreneur who went on to disrupt the system of credit-card payments by co-founding Square; and Robert Kasunic, Associate Register of Copyrights and Director of Registration Policy and Practice at the U.S. Copyright Office.

The full agenda for the Summit can be found here. The full list of speakers is available here.

The agendas for all four conferences that make up the New York Media Festival can be found here.

Both the Festival and the Summit will be held at the Museum of Jewish History at 36 Battery Place in Lower Manhattan.

For information on how to register click here.

See you in New York!

 

From Monkey Business to Machine-Made Music

With the long-running litigation between People for the Ethical Treatment of Animals (PETA) and photographer David Slater over the now world famous “monkey selfie” still pending before the U.S. Ninth Circuit Court of Appeals, the two sides have agreed to settle the case and have asked the court to dismiss the appeal, according to a joint statement put out by the parties.

But the settlement of the lawsuit isn’t likely to end the debate over how courts and the law should regard works created by non-human authors. In fact, the debate may only be getting started.

For one thing, as The Hollywood Reporter’s legal columnist Eriq Gardner notes, the “settlement” between PETA and Slater doesn’t fully settle the case between them. In their joint motion to the court to dismiss the appeal, the parties also ask that the original lower-court ruling that monkeys do not have standing to enforce claims under the Copyright Act. If granted, that would presumably leave the door open for PETA or someone else to bring a future claim with a different set of facts.

“PETA contends it would be just and proper to not bind Plaintiff Naruto [the monkey] by the judgment of the district court in light of the dispute concerning PETA’s status to file the complaint which resulted in that judgment,” the complaint says.

In a footnote, Slater’s side demurs, “Pursuant to the terms of the parties’ settlement agreement, Defendants also join PETA’s request for vacatur, without joining or taking any position as to the bases for that request.”

Moreover, the statement released by the parties does not say whether they have in fact agreed on who actually owns the copyright in the photographs taken by the Naruto. According to the statement, Slater has agreed to “donate 25% of future gross revenue from the Monkey Selfie photographs to charitable organizations dedicated to protecting and improving the welfare and habitat of Naruto and crested black macaques in Indonesia.”

Does that mean he has agreed to some sort of shared, or split ownership of the copyright between himself and some other entity on behalf of Naruto? Does PETA, or someone else, have the right to an accounting of Slater’s earnings from the photographs? Who will have standing to bring claims against future unlicensed uses? The statement doesn’t say.

Since the case was settled, whatever provisions the parties may have made with respect to those questions will remain private, and do not establish any sort of legal precedent. Yet, while monkeys may not be rushing to set up Instagram accounts to show off their selfies, works created through machine-learning processes and artificial intelligence are becoming more common. And the question of how (or whether) to fit works created by non-human agents into existing licensing structures is only likely to grow more urgent.

A.I. researchers researchers at Google, for instance, have taught an artificial neural network called Creatism to take aesthetically sophisticated photographs that in A/B tests many professional photographers were unable to distinguish from human-made shots.

Google arXiv

Music composed by artificial-intelligence agents is increasingly finding its way into the soundtracks of advertisements, videogames, apps, and other contexts where suitable human-authored works are either not available or too costly.

It may not be long before A.I.-composed pop tunes start turning up in Spotify playlists alongside the works of anonymous or pseudonymous artists already popping up there.

Those questions will be the focus of two special presentations at this month’s RightsTech Summit in New York.

In one, Edward Klaris, managing partner in the media and intellectual property law firm KlarisIP will offer a global perspective on artificial intelligence and copyright protections.

A second, roundtable presentation, will focus on the specific case of machine-made music. It will feature Drew Silverstein, founder and CEO of Amper Music, an A.I. composer, performer and producer for creating music for soundtracks, and Arnaud Decker of Luxembourg-based Aiva Technologies, which has developed the first A.I. agent to be registered with a collective rights management organization.

The RightsTech Summit will be held on September 27th at the Museum of Jewish Heritage in lower-Manhattan as part of the 2-day New York Media Festival.  Click here for a full list of speakers at this year’s summit. Click here for information on how to register for the RightsTech Summit and the full NY Media Festival.

 

Carrying the Flag for Collective Rights Management

In an age when new technology platforms, politics, and changing consumer behavior are posing existential challenges to the music publishing industry’s long-standing practices of collective rights management and blanket licensing, Paris-based Armonia Online is fighting to preserve the collective.

Formed in 2013 in response to the increasing fragmentation of the European licensing landscape — an unintended consequence of a European Union directive meant to encourage multi-territorial licenses — Armonia is an alliance of collective management organizations (CMOs) that offers one-stop, multi-territory licenses to digital service providers (DSPs) while preserving what it views as the important benefits to rights owners of collective management.

To achieve that goal, Armonia built a collaborative back-office technology platform that allows its member CMOs to harmonize their music-usage data processing and metadata management while preserving their own, proprietary payment arrangements with the songwriters and publishers they represent. The alliance now includes 9 CMOs and 3 mandates, representing over 13 million tracks.

In 2017, Armonia became a charter member of the RightsTech Project, and its CEO, Virginie Berger, will be speaking at the RightsTech Summit on September 27th in New York. We a recent Q&A with RightsTech, Berger discussed Armonia’s formation, its goals, and its views on the evolving role of collective rights management in a time of fragmenting markets.

RightsTech Project: What was the impetus for the formation of Armonia Online? What issue in the market are you trying to address?

Virginie Berger

Armonia Online In 2005, a Recommendation from the European Commission encouraged rights holders to grant multi-territorial licenses directly to digital service providers (DSPs) outside the scope of reciprocal agreements between author societies. This prompted many of the biggest publishers to withdraw mechanical rights from the authority of CMOs (Collective Management Organizations) on the Anglo-American works they represent (as well as some Latin-American and Asian works), in favour of direct licensing in European territories.

As a consequence of this repertoire fragmentation, the local CMOs cannot provide licenses with multi-territorial cover and the DSP has to contact the CMOs in all EU-member states as well as those rights holders that have withdrawn their rights. This poses major problems for all aspects of the licensing process such as identifying the repertoire which requires an additional license and the right holders associated with it.

Armonia Online was created to re-aggregate repertoires in Europe and to facilitate the grant of multi-territorial licenses, by acting as a one-stop shop for online music services wishing to enter Europe. Founded in 2013 by the Italian, Spanish and French collective societies (SIAE, SGAE and SACEM), the hub was joined since by SABAM (Belgium), Artisjus (Hungary), SUISA (Switzerland), SPA (Portugal) and AKM (Austria) and also represents the repertoires of three mandating entities: Universal Music Publishing International, Wixen Music, and SOCAN, for a total repertoire of 13 million musical works.

RTP: How has Armonia addressed that issue? What processes and capabilities did you have to put in place to meet your goals?

AO: The first challenge for our members was to organize themselves into a consortium at a time when the overall licensing market was getting more competitive. In the first place, the European collective societies had paradoxically to structure themselves together within a more competitive environment. In the mono-repertoire licensing system resulting from the fragmentation, smaller collective societies feared a loss of value of their repertoire as well as a leak of their members to the benefit of societies having bilateral agreements with the big publishers.

Armonia’s strength is that it maintains the value for all CMOs’ repertoires, since there is a single agreement on rates and tariffs with DSPs. This is mainly what Armonia has been working on during its first years of operation: how to streamline and harmonize processes within the member societies in order to facilitate and accelerate the granting of pan-European licenses for online services and music technologies. Thanks to these efforts, Armonia has signed deals with Deezer, YouTube, Google Play, Beatport, Guvera, or more recently with 7 Digital and Recisio.

Today Armonia is still working to de-mystify pan-European licensing, but the music rights industry is such a complex business that it takes a very long time to educate the market and the players, especially when they come from outside of the EU – and specifically from the US where the rules are completely different.

Finally, Armonia had to put in place a common initiative which resulted in the creation of a collaborative back office platform to process data and ensure a better identification of rights owners’ works.

RTP: Were you able to use existing technology to build your platform or did you need to develop new technologies/applications, etc.?

AO: To answer the challenges associated with the overwhelming volumes of data to process (around 0.5 TB of data in hundreds of files are sent every month by DSPs) and to avoid the redundancy of processes among the different societies, the Armonia members decided in the very early stages of their alliance to initiate a common back office system. In 2014, Armonia chose the Spanish start up BMAT to build this collaborative service platform for sales reports processing, acting as a trusted and neutral third-party.

The service platform built with BMAT takes the best and appropriate technologies available in the market and is fully scalable. As a first step, the technology enabled Armonia to have a common quality check of DSPs’ sales reports, a single repository with 10-year archive of sales reports as well as a mutualisation of business analysis. Then, Armonia developed metadata cleaning and enrichment to improve reports quality and automated matching, resulting in a faster and more accurate identification of works.

Today, the Armonia back office platform is processing at a speed of 2GB per minute and 72 billion of elements are transacted every month. We keep improving our technologies and developing our tools to improve the accuracy and timing of financial streams for rights-owners royalties’ payouts.

RTP: What are Armonia’s principal long-term goals, and how far along do you believe you are in reaching them? Where did you see Armonia Online ultimately fitting within the music licensing system?

AO: Armonia’s main goal is to sustain collective management of rights in an environment where its relevance tends to get undermined, despite being more crucial than ever for protecting authors’ rights.

Indeed, some entrepreneurs claim authors can bypass CMOs and have their rights managed more efficiently by some new innovative players. Yet CMOs are constantly investing in new ways and technologies to improve their processes. Often, the processing of the data for a given digital service cost more than the revenues it actually generates.

The CMOs within Armonia are not-for-profit and their one and only reason for doing business is to get more revenues to distribute to their members. SACEM for example, the French collective society, has never distributed as much money as it did in 2016. And CMOs always are at the forefront of battles with non-paying players such as piracy platforms or web and TV giants.

Armonia ultimately aims at expanding into a strong international community of societies fighting for the protection of authors’ rights and helping them to make a living from their creations. To that end, we have put in place strong licensing agreements with major DSPs to ensure maximum revenues for the authors.

RTP: How would you assess the current state of the music licensing system? Is the industry moving in fast enough to develop the capabilities needed to sustain a healthy music economy? Is if falling behind? Where are we on the learning curve?

AO: The traditional players from the music licensing system took a long time to fully embrace the new consumption habits in the digital realm and to adapt to them. It’s only very recently that we have seen technology initiatives emerge among those traditional players. However, transparency in royalty pay-outs remains a major challenge among all of those new privately-owned technology structures, whereas CMOs must comply with ever-stricter transparency guidelines.

What has been interesting lately, is how the traditional industry has begun to join forces to build common initiatives in the fields of tech and innovations: the ASCAP/BMI joint song database plan, the SACEM/PRS/ASCAP blockchain project, the R&D initiative of the Nordic music copyright societies ‘Polaris Future Lab’, ASCAP/PRS/STIM partnership with the Swedish startup Auddly… CMOs know they cannot move fast enough to adapt if they are on their own: cooperation and exchanges of expertise are keys.

Yet there is still work to be done and processes to be improved since the digital storm is far to be over. New models are emerging every year, regarding both financing structures and types of contents, that do not fit in the boxes of traditional licensing schemes. It is always about finding the right balance between what is fair for artists without asphyxiating the service: a startup still in its infancy today could be the Spotify of tomorrow, and overwhelming licensing fees or advanced payments could nip it in the bud and prevent from significant revenues in the future.

RTP: What are the main challenges the industry still needs to address with respect to licensing, and how effectively are they being addressed?

AO: The number one challenge in the licensing system today is the identification of works. Collective societies rely on metadata to identify works, but very often, the information available is not qualitative enough to properly match a work with its rights owners. Moreover, the international licensing system relies on two types of information: the sound recording data, associated with the International Standard Recording Codes (ISRCs) and the publishing data, associated with the International Standard Work Codes (ISWCs). Today, there is no industry-wide system in place to reconcile the two, and third-party tech providers often don’t have access to it.

Technologies like audio fingerprinting, metadata enrichment or blockchains have been developed to reduce, over time, the number of unidentified works. Still, thousands of new works are added every day to the thousands of music work already in databases within the publishing industry, making the task very complex.

Another very interesting challenge the music rights industry will have to tackle in the very near future is Artificial Intelligence in the many possible ways it could impact our organizations. How could machine learning change the composition of music? When an AI creates a piece of music, who owns the rights to it? And who is liable for copyright infringement in such event? These are questions the industry has to address today if it wants to remain relevant tomorrow.

 

Direct Investments in Rights-Tech Companies Hit $95 Million in First Half of 2017

RightsTech companies have raised nearly $95 million in direct investment so far in 2017, according to data compiled by the RightsTech Project, kicked off by Dubset Media’s $4 million Series A round in February.

That figure does not include outright acquisitions, such as Blackstone Capital’s acquisition of performance rights organization SESAC in January, which included the rights management technology platform Rumblefish along with the Harry Fox Agency.

The bulk of the rights-tech investments this year is accounted for by Kobalt Music’s $75 million Series D raise in May, led by Hearst Entertainment, bringing its total capitalization to more than $100 million to date. As with Blackstone’s acquisition of SESAC, much of the investment in Kobalt is premised on the perceived asset value of the rights it controls. But part of the valuation reflects Kobalt’s ability to monetize those rights using its technology platform.

Growing investor interest in the direct monetization of rights is also reflected in Royalty Exchange’s $6.4 million convertible note offering, which more than doubled the company’s original target of $3 million. Denver-based Royalty Exchange allows artists to offer interest in their future royalty stream to investors through the sale of royalty-backed assets.

Other notable raises this year include blockchain-based rights registry Binded (formerly Blockai), which raised $950,000 in June, bringing its total to date to $1.5 million, and music rights payment platform Stem, which raised $8 million.

Company Description Amount raised Investors
Kobalt Music rights and publishing platform $75 million Hearst Entertainment, Balderton Capital, MSD Capital
Dubset DJ remix rights clearance platform $  4 million Cue Ball Capital
Stem Music rights payment platform $  8 million Evolution Media, Aspect Ventures, Upfront Ventures.
Binded Blockchain-based rights registry for visual arts $950,000  Mistletoe, Asahi Shimbun, and Vectr Ventures
Royalty Exchange Music-royalty based asset exchange $ 6.4 million Convertible debt offering

Notable rights-tech direct investments in 2016, included visual arts registry and authentication platform ascribe, which raised $6 million, rights registration and marketplace platform Monegraph, which raised about $4 million, music rights management platform Revelator, which took in about $3.5 million artCOA, which raised $5 million.

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