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17 November 2016

German ruling sends shocks through music streaming industry

Two German musicians have driven a knife into the back of the GEMA, the German licensing body tasked with distributing music royalties, as a Berlin court has ruled that publishers will have to cough up payments from the last six years – which could run up a bill stretching into the millions.

The German performing rights organization GEMA represents more than 70,000 composers, lyricists and music publishers who hold copyrights in Germany, and has the role of ensuring that payments are received for commercial uses of an author’s song and distributed out to the composers. The GEMA ensures that its publishers also receive a share of the author’s royalties, which is typically around 40% to publishers and 60% to the artists, but the ruling means this will become 0% to 100% in the author’s favor, unless “the authors have made concrete payment instructions for the publishers or have made claims to them.”

The GEMA is considered rather draconian in the way it distributes royalties and is also notorious for pocketing a substantial amount of cash right out of the hands of hard working musicians and composers.

It might seem like fair game considering the rise of music streaming services has devastated musicians worldwide, not to mention the high street retailers, while big businesses have continued to profit, so we believe the rest of the world should take note here, as publishers have been known to take advantage of young musicians entering the industry and profit hugely from this. However, this court ruling will undoubtedly result in company closures and job losses, particularly for independent publishing labels and stage productions.

The German Music Publishers’ Association (DMV) has expressed its “naked horror” that an estimated 80% of publishers’ sales revenues will be cut off following the ruling.

The GEMA only recently reached a deal with YouTube after a seven-year long court battle, so if global publishers such as Sony Music Entertainment have had their royalties stripped for publishing music to millions around the world on streaming platforms such as YouTube, then why would it continue to do so? YouTube itself is at the height of controversy in the music industry, having faced legal claims by performance rights organizations around the globe for over 10 years now – claiming that it enables wholesale copyright infringement.

On a local level, Munich-based indie music publisher Trikont has expressed its shock but remains optimistic that the ruling is “not concrete,” according to Trikont managing director Eva Maier-Holmes.

Mobile devices and laptops in Germany have a surcharge due to being classified as TV screens, so streaming music for commercial uses on mobile devices would previously get a tidy royalty sum for publishers – but the issue of royalties for video is a whole different kettle of fish.

For these reasons, the likelihood that a similar ruling could take off in the US or UK is unlikely, but if it did, the repayments would turn into billions of dollars, and musicians around the world will be taking note. To our knowledge, no country other than Germany has passed a ruling of this type.

The case was filed by a duo of displeased musicians who are also GEMA members, Bruno Kramm and Stefan Ackermann, who decided they were not receiving an adequate share of royalties and wanted the publishing share as well as the author share.

A German court then discovered that the publishing contracts did not in fact detail any clear entitlement on the publisher’s royalty share – meaning that publishers cannot claim a share under the copyrights of the artist.

Earlier this month, a seven-year long case between YouTube and GEMA was resolved, with the two parties agreeing to allow the 70,000 artists, authors and publishers which the GEMA represents to appear on the video sharing platform. GEMA was unhappy with the low royalty fees being paid as well as safe harbor issues – with the European Union (EU) banning the transfer of its citizens’ data outside EU borders.

In June last year, a Munich court rejected GEMA’s demand that YouTube was to pay €0.375 per view of specific videos. In its claim, GEMA had selected 1,000 videos which it said would cost YouTube around €1.6 million.

YouTube says it is able to block illegal video clips by using a digital fingerprint technology. However, for the technology to work, copyright holders must provide Google with a list of illegal clips, something that Google says GEMA has failed to do.

The President of the German Music Publishers Association (DMV), Professor Doctor Rolf Budde, told Billboard, “German music publishers are shocked by the judgment and are highly alarmed and fear for their own survival. Because this case involves an agreement between the copyright holders and the music publishers, the judges should have interpreted the contracts in accordance with the general rules and identified the parties’ true intentions.”

GEMA CEO Dr. Harald Heker said, “we consider this decision to be wrong. Regrettably, the court only focused on the party contributing the rights. However, depending on the wording of the publishing contract, this may also place the copyright holder at a disadvantage. What is more crucial, however, is the fact that there has been an agreement between the authors and the publishers for decades that both parties should benefit economically from income arising from the grant of rights. If the copyright holder wishes to recompense the publisher for its publishing activities, this share is legitimate.”

Professor Monika Grütters, the German federal government’s officer for culture and media, said in a statement: “It is now a question of averting harm from cultural diversity and creativity in Germany. The successful and mutually accepted partnership between authors and publishers in joint collection societies is one of the proven constants of cultural policy in Germany. I hope that we can quickly come to an agreement at the EU level.”

“The established system and partnership that has been in the interests of copyright holders, music publishers and GEMA alike for decades must be preserved. GEMA does not generally distribute any contribution to the music publishers but only when the copyright holder and the publisher provide for this in the publishing contract,” added Budde.