EC balks at planned joint venture from large music licensing companies

But the 'collecting societies' of the U.K., Sweden and Germany are defending their plan, unveiled in 2013

Online music could become more expensive in the European Union (EU) if a joint venture of licensing companies gets the green light, according to the European Commission, which started an in-depth investigation into the planned collaboration on Wednesday.

The Swedish, British and German music copyright collecting societies unveiled their plan to work together on the online licensing of musical works in 2013. The joint venture, which aims to create easier access for digital music services to clear music rights as well as faster and more precise payments of royalties to rights holders, was set to start offering services in 2015.

However, that will have to wait. The Commission's preliminary investigation indicated that the combination of the music repertoires currently controlled by each of the societies "could result in higher prices and worsened commercial conditions for digital service providers" such as streaming music services like Spotify or Deezer. "This could lead, ultimately, to higher prices and less choice for European consumers of digital music," it said.

The companies involved are the U.K.'s PRS for Music Limited (PRSfM), Sweden's STIM and Germany's GEMA, which manage the copyrights of performers and creators of musical works. They also grant licences on their behalf and collect royalties.

The EC is concerned the joint venture may reduce competition, arguing that its creation would trim the number of meaningful market players and consequently could violate the EU Merger Regulation.

The aggregation of repertoires of the most important collecting societies in Europe could lead to increased bargaining power for the joint venture. "This may enable the joint venture to charge higher prices and to grant worse commercial terms and conditions," which in turn, could lead to higher prices, less choice and less innovation for digital music end users in the EU, it said.

However, that doesn't necessarily have to be the case. The Commission emphasized that its investigation must determine whether the competition concerns are confirmed.

Meanwhile, the rights management organizations behind the venture said they want to continue with their plans as they are convinced that their vision for a new licensing and processing hub will benefit the market.

The joint venture has been developed in order to reduce licensing and distribution challenges currently inherent to the digital marketplace, they said in a response to the investigation, adding that they look forward to providing the Commission with further analysis and market data.

Instead of harming the market, the aggregation of repertoires for pan-European licences is meant to result in simplified licensing for online music companies. In particular, it will be able to assist smaller players, helping them start operating on a pan-European basis more quickly and efficiently.

What's more, it also aims to solve the problem of split-copyright invoicing ensuring that the systems will record copyrighted works accurately, reducing the possibility of licensees receiving incorrect invoices and eliminating hold ups and disputes, the societies said.

Interested parties will now be asked for more detailed input. The vast majority of notified mergers do not pose competition problems and are cleared after a routine review, said the Commission.

Loek is Amsterdam Correspondent and covers online privacy, intellectual property, online payment issues as well as EU technology policy and regulation for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to loek_essers@idg.com

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