More than a dozen U.S. music industry groups are asking for the federal government’s help fighting a European Union policy proposal that could erase nearly $300 million in annual royalties for American artists and labels.
The Recording Academy, SoundExchange, the American Association of Independent Music (A2IM), ASCAP, BMI and eight other organizations sent a letter on Wednesday (July 8) to Jamieson Greer, the U.S. Trade Representative, urging him to stop Europe from changing its rules around recorded royalties for terrestrial radio plays and public performances at commercial establishments.
The European Commission (EC), the main executive body for the European Union (EU), announced in May that it was considering legislation to overturn a 2020 court ruling that required member states to pay public performance royalties to all sound recording rightsholders, regardless of nationality. Before then, EU countries operated under a principle of “material reciprocity” — that is, only giving such royalties to international artists and labels whose home countries offer the same. This effectively excluded Americans, since U.S. law sets forth a public performance royalty for publishing, but not for recorded music (with the exception of digital streams).
The EC is now thinking about reinstating material reciprocity in order “to make the European music market more competitive and prevent royalties from being diverted away from European music producers and performers,” per the May announcement. On Wednesday, the U.S. organizations said that would “mark a dramatic policy reversal and codify discrimination against American creators into EU law.”
“If adopted, this change would put at risk nearly $300 million in annual royalties that American artists and rights owners currently receive from Europe,” wrote the groups. “We urge USTR to take immediate and decisive action to oppose this proposal.”
The coalition argued that the U.S. government should oppose the EC by “fully leveraging available trade tools — including sustained bilateral engagement, coordinated multilateral pressure, and, if necessary, targeted enforcement measures.”
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The EC’s legislation proposal has also drawn pushback from Warner Music Group (WMG), which wrote in a June 25 comment to the commission that “protection of foreign copyrights is essential to investment in EU copyright industries.”
“The application of material reciprocity would have a significant detrimental impact on the European music industry,” argued WMG. “Removing protections from [non- qualifying] catalogue creates an unfair market in which music users are incentivized to use unprotected music to avoid having to pay for the use of music. Put simply, material reciprocity will mean less money flowing to artists, those who invest in new music, artists and writers, and through the relevant collective management entities.”
On the other hand, many European rightsholder groups have long lobbied the EC to overturn the 2020 ruling and make material reciprocity the law of the land, citing concerns that their artists and labels would have their long-standing royalties siphoned off by U.S. rightsholders. IMPALA, the European indie artist advocacy group, wrote in its own comment to the EC on June 25, “We welcome the EC’s confirmation that it is considering to clarify the EU rules on the application of material reciprocity.”
“Without EC action… the [2020] judgement will result in future outflows of money to the U.S. and other countries which currently do not, or might decide not to in the future, protect their recordings in the same way as the EU does,” wrote the group. “IMPALA calculated that in the absence of EU intervention, the transfer of revenues out of Europe to the U.S. alone resulting from the absence of material reciprocity would be more than €125m per annum, or €1.25bn over a period of 10 years.”
