A report commissioned by the EU, The Recasting of Copyright & Related Rights for the Knowledge Economy, rejected the music industry's call for an extension of the term of copyright on sound recordings. The Executive Summary of the report is actually pretty blunt and very convincing (I haven't read the whole thing yet, despite it being published in November):
"Chapter 3: Extending the term of protection for related (neighbouring) rights
Holders of neighbouring rights in performances and phonograms have expressed concern that the existing term of protection of 50 years puts them and the European creative industries, in particular the music industry, at a disadvantage, as compared to the longer protection provided for in the United States. Chapter 3 examines these concerns, first by describing and comparing the terms in the EU in the light of the existing international framework and existing terms in countries outside the EU, secondly by examining the rationales underlying related (neighbouring) rights protection and finally by applying economic analysis.
The authors of this study are not convinced by the arguments made in favour of a term extension. The term of protection currently laid down in the Term Directive (50 years from fixation or other triggering event) is already well above the minimum standard of the Rome Convention (20 years), and substantially longer than the terms that previously existed in many Member States. Stakeholders have based their claim mainly on a comparison with the law of the United States, where sound recordings are protected under copyright law for exceptionally long terms (life plus 70 years or, in case of works for hire, 95 years from publication or 120 years from creation). Perceived from an international perspective the American terms are anomalous and cannot serve as a legal justification for extending the terms of related rights in the EU.
An examination of the underpinnings of existing neighbouring rights regimes does not lend support to claims for term extension. Whereas copyright (author’s right) protects creative authorship, the rights of phonogram producers are meant to protect economic investment in producing sound recordings. The related rights of phonogram producers have thus more in common with rights of industrial property, such as design rights, semiconductor topography rights, plant variety rights and the sui generis database right. Whereas all these rights share the same ‘investment’ rationale, their terms are considerably shorter, while setting higher threshold requirements. For example, whereas the database right requires ‘substantial investment’ in a database, the phonographic right requires no more than the making of a sound recording, be it a complex studio production or simply a matter of ‘pushing a button’ on a recording device. Indeed, a good argument could be made for shortening the term of protection for phonogram producers.
Given that the legal protection of phonogram producers is based on an investment rationale, it is important to note that the costs of owning and operating professional recording equipment has substantially decreased in recent years due to digitalisation. On the other hand, the costs of marketing recordings has apparently gone up. These costs now make up the largest part of the total investment in producing a phonogram. However, it is doubtful whether these costs may be taken into account as investment justifying legal protection of phonogram producers. Insofar as marketing costs accrue in the goodwill of trademarks or trade names, phonogram producers or performing artists may already derive perpetual protection therefore under the law of trademarks.
For the large majority of sound recordings the producers are likely to either recoup their investment within the first years, if not months, following their release, or never...
As the rights expire, recordings falling into the public domain will become subject to competition and falling prices, which will lead to a loss of income for the former right holders. Stakeholders argue that this will negatively affect future investment in A&R. However, it appears that onlylimited shares of phonogram producers’ overall revenues are currently invested in A&R, so the predicted negative effect on investment in new talent is likely to be limited.
Another argument that stakeholders have advanced in favour of term extension refers to the so-called ‘long tail’ (i.e. the reduced costs of digital distribution has created new markets for lowselling content). A term extension might indeed inspire phonogram producers to revitalise their back catalogues recordings, and make them available to a variety of digital distribution channels. On the other hand, the immense market potential of digital business models should already today have provided ample incentive to phonogram producers to exploit their back catalogues in new media. The recent history of the internet, however, indicates that these opportunities have not always been seized by those stakeholders now asking for a term extension.
Stakeholders have also posited that not granting a term extension would distort competition between right holders based in the EU and their competitors in non-EU countries, where right holders may enjoy longer terms. It has been argued that foreign countries would apply a ‘comparison of terms’ to the detriment of EU right holders. This argument is wholly unconvincing...
Another argument advanced by stakeholders is that a failure to bring the term of protection in the EU in line with the US will negatively affect the competitiveness of the European music industry. However, the competitiveness of phonogram producers is based on a wide variety of factors, intellectual property protection in general and the term of protection in particular being just one of them. Moreover, the worldwide music market is dominated by only four multinational companies (the so-called ‘majors’), that can not be characterised as either ‘European’ or ‘American’. Juxtaposing the interests of the European and the American music industries, therefore, would be wholly artificial. Even so, the market dominance of the ‘majors’ is an economic factor to be taken into consideration. A term extension would in all likelihood strengthen and prolong this market dominance to the detriment of free competition.
A final argument sometimes advanced in favour of term extension comes from the world of accountancy. It assumes that a longer term of protection would increase the value of ‘intangible assets’ in the balance sheets of European record companies. Granting a shorter term of protection to record companies in the EU than their competitors in the US already receive, would arguably result in a comparatively lower valuation of assets of European companies. This argument, however, is largely without merit. The value of a record company’s own recordings is not regularly recognised as intangible assets by the record labels, and not capitalised in the balance sheets. Acquired catalogues of recordings are usually capitalised, but routinely written off well before the existing terms of related rights protection expire. A term extension will perhaps play a minor role only in the valuation of the goodwill of a record company in the context of a merger or acquisition. Even then, its effect will be minimal.
The fact that some recordings still have economic value as rights therein expire, cannot in itself provide a justification for extending the term of protection. Related rights were designed as incentives to invest, without unduly restricting competition, not as full-fledged property rights aimed at preserving ‘value’ in perpetuity. The term of related rights must reflect a balance between incentive and market freedom. This balance will be upset when terms are extended for the mere reason that content subject to expiration still has market value. The public domain is not merely a graveyard of recordings that have lost all value in the market place. It is also an essential source of inspiration to subsequent creators, innovators and distributors. Without
content that still triggers the public imagination a robust public domain cannot exist.
Admittedly, an argument could be made in favour of extending the term of protection of performing artists, since the reasons for protecting artists are comparable to those underlying author’s rights. However, in the light of existing contractual practices, it is unlikely that performers would actually fully benefit from a term extension, since record companies routinely require a broad assignment of the rights of the performing artists. Therefore, extending the term of protection of performing artists should be considered only in connection with the harmonisation of statutory measures that protect the artists against overbroad transfers of rights. Obviously, a term extension would benefit only those artists that are still popular after 50 years and continue to receive payments from collecting societies and phonogram producers. This however concerns only a small number of performing artists."
Thanks to Ian Brown for the pointer via the ORG list.