The European Parliament today voted for binding legislation on the online music market, but warned that collective online licensing should be opened-up gradually.

The European members of parliament said that a "big bang" opening of online licensing would hurt the wider European music sector, as it would lead to market domination by just a handful of major rights holders.

"A 'big bang'-style introduction should not be pursued because of the risk of irreversible damage to cultural diversity in Europe. Rather, competition should be introduced in a way which ensures a level playing field at the outset so that all CRMs have the opportunity to compete on an equal footing," the report said.

The Parliament report, drafted by Hungarian socialist Katalin Levai, called on the European Commission to revise its plans to open up the market or risk wiping out dozens of collective rights managers (CRMs), as well as less profitable local and minority repertoires.

Rights bodies immediately expressed concern at the Parliament vote. In a joint-statement issued at midday, U.K. trade association British Music Rights, the umbrella body which represents the interests of British music writers and publishers, suggested the adopted report was confused and contradictory.

The European Parliament's document, says BMR's London-based CEO Emma Pike, represented a "hotchpotch of conflicting provisions that will neither help nor hinder market developments in online music licensing."

Her concerns were echoed by representatives from the U.K.'s MCPS-PRS Alliance, the British Academy of Composers and Songwriters and the Music Publishers Association. "We welcome certain aspects of the Parliament's report - particularly where it stresses the need to sustain the value of music in a digital world," added Stephen Navin, CEO of the MPA. "However, the report in parts suggests that both commercial users of music and rights owners should be able to choose the vehicle through which music licensing occurs. This is akin to asking two engineers to start building a bridge from opposite sides of troubled waters on the off chance that they might link up. It is unworkable."

The International Federation of Music Publishers (ICMP/CIEM) was equally cautious about the vote. "It seems questionable that all the solutions proposed are broadcast and user solutions rather than ones aimed at writers," said ICMP/CIEM CEO Jenny Vacher-Desvernais. "It's gone through a democratic process, and it recognizes that rightholders have a right of choice. But although the report has many ideas, it does not have the clarity of vision of the Commission Recommendation."

The Parliament, in Strasbourg, France, was responding to the Commission's October 2005 recommendation on collective licensing for online music services. The parliamentarians also today criticized the Commission's methods in pushing the legislation through the unusual form of a recommendation, which bypasses the European Parliament.

The controversial measure meant artists and groups would require just one license to sell their music online in the EU's member countries, as it confirmed a policy giving right-holders and commercial users of copyright-protected material a choice of their preferred means of licensing. It aimed to create a system ensuring musical rights can be cleared efficiently on an EU-wide basis so the European online market could catch up with that in the United States.

But European members of parliament said that, instead of promoting fair competition, the Commission's plans were likely to lead to a de facto oligopoly, with market power concentrated in the hands of a few major rightsholders and a similar number of big collecting societies.

The document instead proposed introducing "fair and controlled competition" to encourage modernization and competitiveness in the online music market, while protecting cultural diversity and creativity. The best guarantee, it said, is a system in which authors' revenues are determined by the rates of the country in which the consumer buys or downloads a particular piece of music.

The tariff of the "country of destination" would lead to competition based on efficiency of the services offered by the CRMs rather than competition based on squeezing the royalties paid to rightsholders, the report said.

The Euro-MPs asked the Commission to ensure the protection of local and niche repertoires by asking CRMs to provide consumers with a diversified range of music products. The report also called for measures to avoid strengthening the position of most profitable artists at detriment of lower-earning ones and to assure that all right-holders, irrespective of their nationality, receive a fair share of royalties.