International

How a European Court Decision Could Lead to a Pay Day for U.S. Artists

The European Court of Justice
Arne Immanuel Bänsch/picture alliance via Getty Images

The European Court of Justice in Luxembourg.

The push for "national treatment" is gaining momentum after a ruling from the European Court of Justice.

LONDON — For decades, U.S. musicians have been denied royalties for the use of their music overseas.

While other, international acts get paid, a complex web of reciprocal agreements between countries has historically punished American artists for the lack of terrestrial radio performance rights and public performance rights in the U.S. As a result, recording artists and rights holders in the U.S. lost out on an estimated $350 million in royalty payments in 2019 from “unfair treatment of music creators,” according to SoundExchange, which licenses online and satellite radio services.

But a European court ruling earlier this month could have profound implications for leveling the playing field for music creators around the world — with artists and record labels in the U.S. set to benefit the most.

The ruling stems from legal action taken by Irish collection society Recorded Artists Actors Performers (RAAP), representing performers, against Phonographic Performance Ireland (PPI), which collects public performance and broadcast royalties on behalf of record labels.

Earlier this year, RAAP, which distributes royalties to P!nk, among others, challenged PPI in the Irish High Court after it reduced royalty payments to performers from a 50-50 split with labels to around 20%.

The case was referred up to the European Court of Justice (ECJ) — which oversees the implementation of EU law – and the court decreed on Sept. 8 that all recording artists are entitled to an equal share of the royalties generated when their music is played on radio or in public premises in the EU, regardless of their nationality.

“This is a major win for American artists, in particular, who were previously missing out on that revenue, despite high consumption of U.S. music in Europe,” says Sophie Goossens, from global law firm Reed Smith.

Among the artists that are also part of a bilateral agreement between SoundExchange and RAAP are Barbra Streisand, Beastie Boys, The Chicks, DJ Khaled, Garth Brooks, Kendrick Lamar, Luther Vandross and Yo-Yo Ma.

European countries that currently withhold public performance and broadcast royalty payments to U.S. artists and labels include the United Kingdom, France, the Netherlands, Belgium, Denmark and Ireland.

Outside of Europe, Japan, Argentina and Australia also deny royalties to U.S. musicians on the basis that they don’t receive royalties for their music from U.S. FM or AM radio play, nor from U.S. businesses playing their songs in public.

With the ECJ’s ruling, the push for so-called national treatment to be standardized across the global music business is gaining momentum. Under national treatment, foreign recording artists and labels receive the same types of royalties as the nationals of a given country.

Andrew MacPherson
P!NK

Campaign Gaining Support On Both Sides Of The Atlantic

In June, SoundExchange joined forces with several industry partners, including the American Association of Independent Music (A2IM), American Federation of Musicians and the Recording Academy to launch the Fair Trade of Music advocacy campaign.

The campaign has now received the backing of U.K. and European trade bodies, such as the Musicians' Union, Featured Artists Coalition, the International Federation of Musicians and the Music Managers Forum, as well as music company Kobalt.

The next step is for the governments of individual EU member countries —not including the U.K., which formally left the EU on Jan. 31 – to adapt their laws in response to the court’s decision.

In practical terms, that’s likely to mean collecting societies in EU countries like France, the Netherlands and Belgium will have to adjust their distribution rules to accommodate the new rights. In some European markets, it would mean significant changes to how the previously undistributed payments are allocated. At present, these royalties are divided up between local labels according to their market share.

Jérôme Roger, director general of French collection society SPPF, says the court’s decision will “dramatically affect" France's independent sector, which is already suffering from the financial impact of Covid-19. He says the ruling, if applied in France, will result in SPPF income being reduced by more than 4 million Euros ($4.7 million) a year. He is calling on the French government to oppose the European court.

“Why should we remunerate American artists when the U.S.A. never recognized the Rome Convention?” says Roger, pointing to the 1961 treaty governing remuneration for music performers from broadcasting organizations.

Still, for U.S. performers and record companies the ECJ decision "will mean there will be a whole range of new rights across Europe that they didn’t used to get that will be very beneficial for them,” says Peter Leathem, CEO of U.K. collection society PPL, which licenses the use of recorded music to British radio stations and TV broadcasters, as well as to bars, businesses and restaurants.

In line with U.K. law, PPL doesn’t pay out public performance or radio broadcast royalties collected in the U.K. directly to U.S. artists with a few notable exceptions, such as when they have recorded music in a British studio, or a musician holds dual British-U.S. citizenship.

In instances where U.S. performers do not qualify for compensation in the U.K. when their recordings are played in public, PPL collects and pays performance and broadcast royalties from the use of their music to the label which owns the recording (often a U.S. label).

Leathem describes PPL’s position on the issue of national treatment as “neutral,” but notes that if the British government does adopt national treatment into U.K. law, there would be no increase in the non-profit organization’s tariffs; there would simply be a change to how existing monies are shared, with more cash going to U.S. performers and less to labels.

Any fall in label income would likely be offset by the increased set of rights and royalty collections elsewhere in Europe resulting from the court ruling, says Leathem.

Some U.K. recording studios see a downside to the ruling. They’re concerned that any change in the law could lead to a reduction in visits from U.S. artists, who will no longer need to record their music in the U.K. to qualify for these royalties.

Nevertheless, trade representatives for the U.S. music industry are busy lobbying policy makers for national treatment to be included in any post-Brexit U.S./U.K. trade deal.

“We have sent a clear message to the U.S. trade representative that this is an industry priority,” says Julia Massimino, senior vp global public policy at SoundExchange. “The question is what happens on the other side of the table.”

Meanwhile, the U.K. music industry is pushing for its own concessions in any Anglo-American trade deal, most notably improved U.S. rights protection for performers as well as for sound recordings.

Tom Kiehl, acting CEO of umbrella organization UK Music, says that any free trade agreement between the U.K and U.S. must include a terrestrial broadcast and public performance right for sound recordings in the U.S. to address the “existing discrimination” for U.K. right holders.

“We want to get a sensible and consistent royalty regime all over the world and not this patchwork quilt of systems that don’t really align,” says Richard J. Burgess,” the British-born (and PPL registered) CEO of A2IM, a long-term campaigner for the introduction of AM/FM radio royalties in the U.S.

“Now, you’re not going to get that all out of one little trade agreement,” he says, “but national treatment is a step in the right direction.”