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Music and the European Commission’s proposed pan-EU cloud

At the end of September 2012, the European Commission announced a new strategy for "unleashing the potential of cloud computing in Europe" and to "raise the digital single market to a new level". 

November 2012

The Commission recognised the power of the cloud to enable people to access their content when and where they need it.  This strategy is therefore naturally of interest to the creative industries, especially in the music industry where use of cloud services is already starting to take-off (see, for example, the Amazon Cloud Player, which has recently been licensed by PRS for Music).  A pan-EU cloud would produce new ways to distribute content, which could lead to new revenue streams, and new business models could develop to take advantage of those opportunities.  It could also provide better services for consumers who, for example, could consume content away from home across the EU.  However, substantial copyright challenges stand in the way of distributing content across a pan-EU cloud, some of which we discuss here.

Private copy levies

Given that one of the aims of the EU cloud would be to allow storage in the cloudremote storage and multi-device synchronisation of music by its users, this possibility raises questions about how private copying levies would apply to cloud storage. The European Copyright Directive  allows EU Member States to provide for lawful reproduction of audio material for private use, provided that Member States couple this with a remuneration scheme to compensate for the prejudice unused to rights holders. The remuneration schemes are the levy systems that have long since been adopted in some EU Member States in respect of blank media. Collected levies are then distributed to rights owners to compensate them for the loss of royalties that the availability and use of blank media causes them. Private copying levies can be an important source of revenue for creators, performers and other rights holders (see, for example, the Declaration on Private Copying Remuneration).  

However, the need for and imposition of levies poses challenges, even without considering the pan-EU cloud.  The legislation across Europe which imposes private copying levies is not harmonised and can be uncertain, as the number of referrals to the European Court of Justice on these points demonstrates.  A levy system can also be practically difficult to implement when the ways in which consumers use, copy and access content changes, as the recent adoption of cloud storage services shows.

Private copy levies in the cloud

magnifiedThe challenges posed by a levy system are magnified when levies are applied to cloud storage and it is therefore welcome that the European Commission has acknowledged that "questions arise" in this context. The potential harm to rights holders is higher when cloud storage is used, rather than traditional forms of "blank media". Many more people can potentially have access to cloud stored content, particularly if there is sharing functionality, and the number of devices on which content can be accessed significantly increases.

Additional challenges to levies are posed by the European Commission's desire to create a digital single market in the cloud and to enable consumers to access content from the cloud regardless of which member state they are in. If clouds are established in countries that impose a private copying levy, they could be at a competitive disadvantage to those who are established in countries with no such levy. Further, rights holders could be disadvantaged if it was easily possible for cloud services to avoid paying levies e.g. by basing pan-EU cloud services in non-levy paying countries. It is therefore no surprise that the European Commission is investigating how to apply levies to a pan-EU cloud.

Levies are only needed in countries which permit private copying. The UK, for example, does not. The UK government has, however, recently consulted on whether to introduce a limited private copying exception but there is no consensus on whether copying to the cloud would be within the exception nor whether a levy would be required in light of the limited application of the exception. For cloud storage to operate consistently across national EU borders and for cloud storage providers to be on a level copyright playing field across the EU, the Commission may have to consider how to deal with the lack of a harmonised private copying exception.

Licensing in the cloud

Another challenge is that, as things stand, unless appropriate licences have been granted, it would not be possible for a user of a pan-EU Member Statescloud in Member State A to access works made available only in Member State B, without there being a substantial copyright infringement risk.  DRM such as geo-blocking and contractual restrictions seek to support the application of copyright by preventing actions which would otherwise infringe copyright.  Services that provided unauthorised cross-border access to music in the cloud would likely face criticism from rights holders. 

The best way to deal with these challenges would be to ensure that pan-EU licensing of content works appropriately and adequately in the cloud.  The Commission recognised that "For the cloud to work well as a platform for digital content services, including mobile services, there is a need for content distribution models that enhance access to and use of all sorts of content across different devices and in different territories." To deliver a digital single market in the EU powered by the cloud, where consumers can access their content on any device in any country, requires appropriate licences to be granted by rights holders.  The Commission has already proposed legislation to improve pan-EU licensing of music, namely the Directive on Collective Rights Management (see our eAlert here).  Among the specific objectives of this proposal are to set minimum standards for the multi-territorial licensing by authors' collecting societies of rights in musical works for the provision of online services and to create conditions that can expand the legal offer of online music.  An "Audiovisual Green Paper" has also encouraged the Commission to review how to promote and facilitate across border licensing of online audiovisual works.

If the technical and legal standards can be established to create a pan-EU cloud, it will be interesting to see how the opportunity can be harnessed by the creative industries and whether it can be realised without substantial legislative initiatives.

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Music and the European Commission’s proposed pan-EU cloud
Adam Rendle

Adam Rendle considers the challenges in the way of delivering content across a pan-EU cloud.

"The best way to deal with these challenges would be to ensure that pan-EU licensing of content works appropriately and adequately in the cloud."