Prawo autorskie - Strona główna€¦ · Web viewInterview No 6. However, it shall be noted that...

PATRYK GAŁUSZKAINSTITUTE OF ECONOMY

UNIVERSITY OF ŁÓDŹ

Report on the functioning of the digital music content market in Poland

2013

Ministry of Cultureand National Heritage

Patryk Gałuszka, Institute of Economy, University of Łódź Report on functioning of the digital music content market in Poland 2

Information about the author

Patryk Gałuszka is an economist and media expert employed in the Institute of Economy, in the Department of Economics and Sociology of the University of Łódź. He studied business management and economic analysis of the law at the university in Bologna, Berkeley, Rotterdam and Łódź. He has done his research internship in Max Planck Institute for the Study of Societies in Cologne and Institute of Law and Economics in Hamburg.

In October 2013 he is to start his five-month postdoctoral research internship in Central European University’s Institute for Advanced Study in Budapest.

Dr Gałuszka is an author of several publications on the functioning of phonographic industry and new media. The most important are the book under title “Music business. Economic and marketing aspects of phonography” and the scientific articles published in the magazines First Monday and Virginia Sport and Entertainment Law Journal. At present dr Gałuszka is conducting research into the functioning of crowfunding service and new forms of phonographic activity organisations.

2


TABLE OF CONTENT

1. Introduction................................................................................................................................ 6

2. Habitual patterns of uisng internet in Poland ..................................................................................7

3. Models of sharing music content via internet in Poland....................................................................9

4. Market value of phonograms sold via internet in Poland ................................................................15

5. Charateristics of the entities on the market of music access services on the territory of Poland ......................................................................................................................................................... 20

6. Readiness to pay for music in electronic format.............................................................................25

7. Strucutre of a price in a given model ............................................................................................27

8. Strucutre of repretoire – what is the percentage of Polish content as compared to the foreign content……….......................................................................................................................................30

9. Impact of internet piracy on ways and trends of sale .....................................................................31

10. Characteristics of the applied forms of protection against unauthorised copying on the on-line music access services market ....................................................................................................................... 37

11. Forecast of music market and principles of access to music in the 5-year perspective ...................39

12. Ways of acquiring repertoire by internet shops .........................................................................42

13. To what extent the territorial nature of services and internet shops results from the copyrights and to what extent it is conditioned by economic factors ............................................................................50

3


14. Forecast impact of implementing the so-called European licence passport on the situation of the Polish entities operating in the field of on-line music sharing .................................................................52

15. Summary and recommendations ..............................................................................................63

16. Applied research methods and the list of respondents................................................................64

4


List of diagrams and graphs

Exhibit 4.1. Nominal value of physical audio carriers in Poland in the subsequent years expressed in

million PLN

Exhibit 4.2. Number of physical audio carriers in Poland in the subsequent years

Exhibit 4.3. Nominal value of music video market (DVD and VHS) in Poland in the subsequent years

expressed in million PLN

Exhibit 12.1. Entities involved in licence granting to the on-line music content sharing service

Exhibit 12.2. Process of acquiring repertoire by internet shops

Exhibit14.1. Three possible distributions of rights popularity

List of tables

Tab. 1.1. Digital music market in the years 2004-2012

Tab. 3.1. Models of sharing music content according to the manner of calculating fees and medium

used

Tab. 3.2. Comparing the model “pay per download” and the subscription model

Tab. 4.1. Sale of digital music in Poland broken down by format in the years 2005 and 2007

Tab. 7.1. Structure of prices in the model “pay per download”

Tab. 14.1. Summary of the forecast impact of introducing the so-called European licence passport

on the situation of the Polish entities operating in the field of on-line music sharing

The abbreviations most frequently used

Digital Rights Management (DRM) – management of digital rights – the term used for

describing different methods of protecting the content against unauthorised copying

Directive – Directive on collective management of copyrights and the related rights as well

as granting multi-territorial licences on rights to music works for the purpose of their use in

the internet exploitation field on the internal market (COM(2012) 372) in the version

proposed by the European Commission on 11.07.2012

GEMA – German collective management organisation – Gesellschaft für elektroakustische

und mechanische Apparate

5


Digital formats – all new, non-physical format of transcripts of the recording – files,

subscriptions, mobile formats and others

IFPI – International Federation of the Phonographic Industry

Internet field of exploitation – field of exploitation named as “sharing the work in such a

way so that everybody could have access to it at a place and at the time chosen by

themselves”

OZZ – collective management organisation

PRS – British collective management organisation – PRS for Music

SAWP – Association of Artists Performing Song and Text Music

STOART – Association of Performing STOART

ZAiKS – Association of Authors ZAiKS

ZPAV – Union of Audio-Video Producers

6


1. Introduction

The need for the creation of the system of on-line music content sale in digital formats

appeared just after the emergence of peer-to-peer file sharing networks, such as, e.g. Napster.

After the year 2001 when the Napster network was definitely closed, a number of attempts were

made to launch service selling music content on-line in digital formats. Majority of those initiatives,

among other, started, with the participation of the biggest music companies, shops like PressPlay

and MusicNet, failed1. The first shop with music files which gained global success – iTunes Music

Store – was created by Apple company in the year 2003. Since then the on-line music content

market is noted to be systematically growing (see table 1).

Tab. 1.1. Digital music market in the years 2004-2012

Year 2004 2005 2006 2007 2008 2009 2010 2011 2012

Revenues in bln USD 0,4 1,2 2,2 2,9 4,3 4,7 4,8 5,1 5,6

Share of revenues from sale of the new formats on the entire phonographic market

2% 5% 11% 15% 20% 27% 29% 32% 34%

Source: subsequent editions of the reports by Digital Music Report, published by IFPI, 2009-2013.

The values showed in the second line are comprised of the revenues from sale of files, subscription

and sale via cell phones, calculated at the fixed exchange rate of dollar to local currency.

Already in the year 2009 in the USA the digital format market was estimated at 40% of the

phonographic market whereas in Europe its share amounted to only 15%1. In the subsequent years

those proportions have not changed significantly. For example, in the year 2012 in the USA 1.6

billion worth of works was sold whereas in Europe only 391 million2. 1

1 IFPI Digital Music Report 2013, 35. http://www.ifpi.org/content/library/DMR2013.pdf. Data originating from various countries can be not fully comparable due to the adoption of different definitions of a file, or of a stream

7

http://www.ifpi.org/content/library/DMR2013.pdf


One of the reasons for slower development of electronic music content market in Europe is

the territorial nature of copyrights which makes it more difficult to open a shop offering the access

to on-line recordings in the whole Europe than, for example, the starting of such project in the

USA2. This report shows the root of such problem and makes analysis of the proposed solutions in

the context of recording market development in Poland.

2. Habitual patterns of using internet in Poland

The habitual manners of using internet in Poland are the subject of several analyses, among

other, Social Diagnosis 20112. They reveal the following facts that3:

in the first half of the year 2011 61.1% of the households had access to internet and in the

first half of the year 2013 66.9%;

15% of the internet users (9% of households) use cell phone for connecting with the

network (data for the year 2011);

the respondents as main reasons for the lack of access to internet mentioned that “the

internet is not needed by them” (44.0%), “lack of necessary equipment” (31.25%), “lack of

necessary skills” (25.8%) and “cost of access is to high” (22.4%);

over 35% on internet non-users have access to it at home;

the use of internet is closely collated with the age (the older age the smallest percentage of

respondents using the network) and with educational level (the higher level the bigger

percentage of respondents using network);

the use of internet is also linked with the wealth and the size of city of residence, however

this dependence is weaker than in terms of age and education;

19% of internet users are users using it for 2 hours a week, 42% of the users use it up to 7

hours a week, 22% of the users use it at least 21 hours a week, 12% of the users use it 40

and more hours a week;

persons using internet watch television more rarely than non-users;

68% of persons using internet (over 40% of Poles) have an account on one of the social

8


portals;

Internet users participate more actively in cultural and social life, although it can result

from the fact that the internet users are dominated by younger and better educated

persons, which is reflected in the above mentioned activity;

the percentage of persons downloading music and films from internet is increasing – in the

year 2009 it accounted for 20.7% and in the year 2011 - 27.4%.2

The report under title Circulations of culture. Social circulation of content2 delivers more

information on the use of music content via network. It demonstrates that the most popular

sources of music in the respondents’ opinion were radio (91%), music files and copied CD discs

(81%), internet streaming service, e.g., YouTube (71%), CD discs (55%) and concerts (30%)3. The

report focuses a lot on persons downloading content from the net. The reasons for downloading

music from internet are stated to be bigger choice than in the official distribution channels (73%),

too high a price for the original content (72%), convenience (67%), up-to-date of the content

available in the net (56%), lack of better alternative in the place of living (15%)4.

Since the issue of music content use via internet is complex and is subject to dynamic

changes, it is recommended to carry out separate research solely devoted to this issue.

3. Models of music content sharing via internet in Poland

Classification of models of sharing music content via internet in Poland can be based upon

several criteria2. In this study two criteria are applied: criterion of medium and criterion of fee

calculation. 2

It shall be remembered that the boundaries between the considerable part of the

2 See. Criteria applied by authors analysing the situation in other countries, for example, Fox. M. (2004). E-commerce Business Models for the Music Industry. Popular Music and Society, 27(2), 201-220; Vaccaro, V. L., & Cohn, D. Y. (2004). The Evolution of Business Models and Marketing Strategies in the Music Industry. International Journal on Media Management, 6(1-2), 46–58.

9


distinctive models are getting blurred and the future expectation is the far-progressing

convergence of all the models. In addition, it shall be mentioned that the classifications of the

models of content sharing presented under this point focus only on the last level of distribution

channel, this is, on the service which offers content to the end users. More profound analysis of

the entire distribution channel is made under point 5 and 12 of this study.

Applying the criterion of a medium, the following models can be distinguished:

models based upon the distribution of physical carriers;

models using mainly internet;

models using mainly mobile telephone network

Applying the criterion of fee calculation, the following models can be distinguished, in which:

consumer is given the access to recordings free of charge;

consumer pays for single works;

consumer pays for albums;

consumer is given access to recordings in exchange for subscription fee;

consumer is given access to recordings on the occasion of buying other products.

Tab. 3.1. Models of music content sharing according to the way of fee calculation and medium

used

Manner of fee calculation / medium

Physical media, traditional model

internet Mobile3

Access to recordings free of charge

Music played in media, e.g., radio

Advertising model, recordings relased under Creative Commons licences

Ringback – the listener does not pay) and the same models as in internet

Consumer pays for single works

Singles in a form of different physical media (e.g. CD single)

Model “pay per download” (e.g. iTunes, iplay.pl)

Ringtones – ring tones and the same models as in internet

3 It shall be pointed out that the distinction between internet and the mobile channels will gradually lose its importance as fast wireless internet (LTE) is widespreading. The acquisition and consumption of music will be made via internet, with the use of many devices, of which one will be telephone. The only purely mobile services will be rings and ringback tones.

10


Consumer pays for the albums

Albums in form of different physical media (e.g. album CD, vinyl)

Model “pay per download” (e.g. iTunes), sale of physical media via www pages

The same models as in internet

Access to recordings in exchange of the fee paid upfront

Records clubs (mainly in the USA in the 90s of the 20th century)

Subscription model (e.g. Deezer, Muzo, Spotify, WIMP)

Model of subscription (e.g. Muzodajnia) and use of subscription services (e.g. Muzo, WIMP) though smartphones

Access to recordings on the occasion of buying other products

Records sold as a supplement to, e.g. newspapers (the so-called “inserts”)

Access to catalogue on the occasion of buying other products (e.g. fee for access added to the bill for internet connection)

Access to catalogue on the occasion of buying other products (e.g. Nokia Comes with Music, Orange + Deezer)

Source: own study.

Focusing further analysis on only models using internet, the following types of models can

be distinguished:

pay-per-download model, giving consumers the possibility of buying individual works at the

price of about 4 PLN, 1 USD, or 1 EUR (higher prices are often charged for files of high

sound quality, e.g. in lossless formats FLAC). This model gained popularity thanks to iTunes

shop, which attracted many followers, e.g. Amazon MP3 and several smaller services4;

subscription model, giving consumers unlimited access to the catalogue of recordings in

exchange for fee paid regularly (usually once a month)5; unlimited access means that each

consumer may choose any work from the catalogue of the service; recordings are sent

through streaming and do not become the consumer’s property – the consumer loses

access to them when they stop making payments; this type of services use different kinds

of tariff plans addressed to consumers with different ability to pay; the criterion of

differentiating the consumers with different payment ability can be, e.g. displaying

advertisements (the consumers agreeing on the display of and advertisement pay less),

limiting the listening time (consumers who will agree on limiting the service, e.g. up to 20

hours monthly, pay less), mobile access to the catalogue (consumers wanting to have

mobile access pay higher subscription fee);

4 Analysis of stores operating in this model in Poland is presented in point 5.5 Fox, M. (2004), footnote12; Wikström, P. (2009). The Music Industry: Music in the Cloud. Polity.

11


advertising model, giving consumers access to recordings free of charge; the functioning of

the service is financed from the fees paid by the advertisers6, who can prepare advertising

messages having high degree of personalisation (it is possible thanks to the detailed

knowledge about the service users); this model is often linked with the subscription model,

this is, represents the cheapest (free of charge) variant;

product bundling model which offers the access to catalogue for the consumers when a

product, or a service are bought being the main part of the offer; an example of this type of

offer is „Comes With Music” of Nokia company7 and the access to Deezer service offered to

consumers signing subscription agreement with Orange company;

models based upon voluntary payments8 and independent distribution of recordings9 by

the artists; this is a group of models in which the artists are releasing records themselves,

often sharing at least part of them free of charge (e.g. using licence of Creative

Commons10), counting on popularisation11 of their creation (which will give hope for

potential revenues in future), or will encourage listeners to make voluntary payments, e.g.

in a form of gifts, or under model which enables the consumer to choose the price that the

consumer wants to pay for the recording;

crowdfunding, which can be defined as “open call, made usually via internet for the

purpose of raising funds in a form of voluntary gift, or exchange for certain values, and/or

granting the right of vote” 12; this mechanism is often used for financing the recordings13, 6 Fox, M., & Wrenn, B. (2001). A broadcasting model for the music industry. International Journal on Media

Management, 3(2), 112-119; Fox, M. (2004), footnote 12.7 Wikström, (2009), footnote 15, s. 113.8 Belsky, L., Kahr, B., Berkelhammer, M., & Benkler, Y. (2010). Everything in its right place: Social cooperation and

artist compensation. Mich. Telecomm. & Tech. L. Rev., 17, 1 and Benkler, Y. (2011). Voluntary payment models, w: Rethinking music: A briefing book. Cambridge, Mass.: Berkman Center for Internet & Society, Harvard University, http://cyber.law.harvard.edu/sites/cyber.law.harvard.edu/files/Rethinking_Music_Briefing_Book_April-25-2011.pdf

9 Belsky et al., (2010), footnote 18; Morrow, G. (2009). Radiohead's managerial creativity. Convergence: The International Journal of Research into New Media Technologies, 15(2), 161-176.

10 Bloemsaat, B., & Kleve, P. (2009). Creative Commons: A business model for products nobody wants to buy. International Review of Law, Computers & Technology, 23(3), 237-249.

11 Galuszka, P. (2012a). Netlabels and democratization of the recording industry. First Monday, 17(7) http://journals.uic.edu/ojs/index.php/fm/article/view/3770/3278 and Galuszka, P. (2012b). The Rise of the Nonprofit Popular Music Sector – The Case of Netlabels, w: Music, Business and Law. Essays on Contemporary Trends in the Music Industry, AV. Karja, L. Marshall & J. Brusila [Red.]. Helsinki: IASPM Norden & Turku: International Institute for Popular Culture, 65-90 http://ssrn.com/abstract=2194086

12 Belleflamme, P., Lambert, T., & Schwienbacher A. (2011). Crowdfunding: Tapping the Right Crowd. CORE Discussion Paper No. 2011/32, http://ssrn.com/abstract=1578175

13 Gałuszka, P. & Bystrov, V. (2012). Społecznościowe finansowanie produkcji dóbr kultury na przykładzie serwisu MegaTotal.pl. Zarządzanie w kulturze, 13(4), 329-339 oraz Gałuszka, P. & Bystrov, V. (2013). Platforma

12

http://ssrn.com/abstract=1578175


http://journals.uic.edu/ojs/index.php/fm/article/view/3770/3278

http://cyber.law.harvard.edu/sites/cyber.law.harvard.edu/files/Rethinking_Music_Briefing_Book_April-25-2011.pdf


which ususally entails their sharing in the network so that the persons who are willing to

provide financial support for the artist, could familiarise themselves with the artist’s

creations; in Poland this model is developed by, among other, MegaTotal.pl service 14.

Since the above presented models are presently dominated by models “pay per download”

and the subscription model, it is worth making further comparison between them.

Tab. 3.2. Comparing model “pay per download” and the subscription model

Model “pay per download” Subscription model

Subject of transaction Single music files, buyer “holds” files as their ownership

Access to the music catalogue, the buyer does not “hold” files – they lose access to them when they stop paying the subscription fee

Forms of payment Each time for single file (usually prices are within the range from about 1.5 PLN to 4.9 PLN), or for the whole album (prices usually start from about 20 PLN)

Monthly subscription fee for the unlimited access to the entire catalogue (currently, the fees in Poland amount to from 9.9 PLN for access via computer and from 19.99 PLN for mobile access, which represents about half of the prices paid, e.g. in Germany); there is often a possibility of buying single works as “ownership” after making a payment of fee as in model “pay per download”

Connection with internet Necessary only at the moment of purchase and downloading the work on the disc

In lower subscription plans it is necessary all the time during the work listening, in higher subscription plan (from 19.99 PLN) monthly. It is possible to listen to the works in portable players (in such a case the connection with internet is not necessary)

Possibility of copying in case of files protected by DRM technologies

Only on the limited number of computers and portable players; usually it is possible to record the purchased products on the limited number of audio CD discs; currently,

Subscriber gains access to music from each computer and in the higher subscription plan it is also possible to listen to works in portable players; subscriber loses access after stopping

finansowania społecznościowego jako nowy typ przedsiębiorstwa na rynku kultury, Studia i Prace Kolegium Zarządzania i Finansów 125, 145-162.

14 Wywiad nr 16. Lista wszystkich respondentów, z którymi przeprowadzono wywiady na potrzeby niniejszego opracowania ukazana jest w punkcie 16.

13


more and more there is a trend of departing from DRM protections in this model (see also point 10)

making the payment of the fee and cannot record the music on audio CD discs (unless the subscriber pays additionally for them the price which is similar to that offered by the shops operating in the model “pay per download”)

Source: study made on the basis of publication by Gałuszka, P. (2009). Biznes muzyczny.

Ekonomiczne i marketingowe aspekty fonografii. Placet, 228.

The above described models can be supplemented by models which are closer to the

traditional broadcasting than phonography:

webcasting which can be defined as broadcasting in “interactive networks by radio, or

television broadcasting of works” 15 works comprising lyrics, or lyrics and music; from the

perspective of the recipient webcasting in its pure form can be compared to the reception

of traditional radio programme, namely as a rule the recipient does not have an influence

on the selection of the sender’s music repertoire

interactive webcasting – kind of webcasting, in which the recipient has the possibility of

influencing the selection of the sender’s music repertoire, namely, the recipient can delete

certain works from the playlist, accelerate the playing of subsequent works (this is, to

“jump” to the next work), or in other way the recipient can influence what the recipient

hears;

podcasting – kind of internet sound, or film publication, distributed in files using RSS

technology; the user downloads podcasts to the user’s disc and can play them on the dates

chosen by the user, which makes this form of content sharing different from webcasting

and interactive webcasting

From the technological point of view there is a similarity between webcasting, interactive

webcasting and subscription services. From the user’s perspective the difference between them is

of qualitative nature – in case of webcasting the recipient plays rather passive role of the

programme recipient whereas in case of the subscription service such role is active and the listener 15 ZAiKS (2008). Table of author’s remuneration rates of the authors’ association zaiks for broadcasting works in

interactive networks (webcasting) http://www.zaiks.org.pl/pliki/256/Tabela_Stawek_WC10.pdf

14

http://www.zaiks.org.pl/pliki/256/Tabela_Stawek_WC10.pdf


holds in their hand the same set of tools as the person playing music from compact discs.

Interactive webcasting represents an intermediary variant. The differences between various types

of services are taken into account, e.g. by British collective rights management organisation - PRS

for Music – in a form of differentiating rates payable by users offering webcasting services and

interactive webcasting16.

In addition to the above described models, a separate group of products closely related to

mobile technologies can be categorised17.

These are:

ringtone – a sound which signals the incoming telephone connection; it can be fragment of

music work;

ringbacktone – a sound heard by a person calling the subscriber of a service instead of an

ordinary signal of waiting for the connection; it can be, e.g. music work; although it is

difficult to identify information given on the internet site related to one of the companies

operating on the same market, which estimates that over 50% of the digital music in Poland

sold in form of ringbacktones18, however, the information transferred by the respondents

conform that the ringbacktone market constitutes a significant part of the Polish digital

music market19.

4. Value of market for phonogram sale via internet in Poland

The analyses of the volume of sales of recordings in digital formats are difficult. It is

associated with the problems of reporting the sales of digital formats.

First of all such reporting is by nature more difficult than reporting sales of physical media

(e.g. the question arises: how to count the work which has been listened to in a form of a stream?

Does such work have to be listened to till the last second, or is enough to listen half of it?)

Secondly, the procedures of reporting sales and consumption of recordings in digital formats do

16 See also problem of institutional piracy described in point 9.17 These are the only services (unless the new will be invented), which in future will remain closely linked with

mobile technologies. See, footnote 13. 18 Quote followed the note More digital music for Wind Mobile dated 19.11.2012 r. displayed on internet site at:

http://www.windmobile.pl/aktualnosci/170-wiecej-muzyki-cyfrowej-dla-wind-mobile.html 19 Interview No 1 and 6.

15

http://www.windmobile.pl/aktualnosci/170-wiecej-muzyki-cyfrowej-dla-wind-mobile.html


not function as good as the procedures for traditional formats20. Therefore the data regarding the

sale of formats shall be carefully interpreted and in compilation with the data on the sale of

physical media. The latter is presented on the subsequent graphs.

Exhibit 4.1. Nominal value of physical audio media market in Poland in the subsequent years

expressed in million PLN21. Source: ZPAV.

20 Interview No 11.21 Notice: since the year 2005 the numerical data are given in packages (package – product counted irrespective of the

quantity of a particular component part of a set, e.g. album consisting of 2 CD discs = 1 package), hence the data for subsequent years are not comparable.

16

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

50

100

150

200

250

300

350

400

rok

PLN

(w m

ilion

ach)


Exhibit 4.2. Number of physical audio media sold in Poland in the subsequent years (in millions of

pieces). The physical media are understood as singles, LPs, cassettes, audio DVD and CD discs22.

Source: ZPAV.

22 Notice: since the year 2005 the numerical data are given in packages (package – product counted irrespective of the quantity of a particular component part of a set, e.g. album consisting of 2 CD discs = 1 package), hence the data for subsequent years are not comparable.

17

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

2

4

6

8

10

12

14

16

rok

sztu

ki (w

mili

onac

h)


Graph 4.3. Nominal value of video music market (DVD and VHS) in Poland in the subsequent years

expressed in millions of PLN. Source: ZPAV.

First publicly available information on the condition of Polish market of digital formats was

presented in the report on the Polish Music Information Centre. Music Market in Poland. Report23.

Data are presented in the table 4.1.

Fig. 4.1. Sale of digital music in Poland as per formats in the years 2006 and 2007.

Year Music files sold via Sales by the cell Subscriptions Total (in Total (in Change

23 Polish Music Information Centre. (2008). Music Market in Poland. Report. http://www.polmic.pl/images/stories/pliki/raport-rynek-muzyczny-polska.pdf

18

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

5

10

15

20

25

30

35

40

45

rok

PLN

(w m

ilion

ach)

http://www.polmic.pl/images/stories/pliki/raport-rynek-muzyczny-polska.pdf


internet (as a percentage of the total digital music market in Poland)

phone (as a percentage of the total market for digital music in Poland)

million USD) million PLN)

2007 8% 92% 0% 2,2 6,2 472,3%

2006 14% 85% 1% 0,4 1,1 -

Source: POLMIC, 2008, p. 8.

The data presented in table 4.1. are difficult to be verified now (especially, if we take into account

the above mentioned difficulties with measuring and reporting the sales of online recordings. They

confirm the prevailing opinion that the Polish market of digital music started to develop, first of all,

in mobile direction, and in the years 2006-2007 the market for files was very small.

Having regard for the advancement in reporting the data on the sale of digital formats, we

can approach with more confidence the information passed by the respondent24, which shows that

the market for digital formats in Poland accounted for 6.7% of the market for digital formats, which

would give about PLN 22 million. However, the data, for certain, are not complete, which results

from the fact that all the entities have sent to the Polish Association of the Phonographic Industry

(Pol. ZPAV) reports regarding sales and the actual value of the market for digital formats in Poland

could have been higher in the year 2011. The report comparing the the sales of digital formats in

Poland in the first quarters on the years 2012 and 2013 supplies additional information on the

value of the domestic market for digital formats. It shows that in the first quarter of the year 2013

proceeds from sales of digital formats amounted to 7 242 999 as compared to 4 729 175 in the

analogoues period of the year 2012, an increae of 53.16%.25. The revenues which showed the

biggest increase were from “websites supported by advertisements and streaming ausio-video

services” (the so-called websites which function in an advertising model, e.g. YouTube, or free

Spotify offer supported by advertisements) – from PLN 1 477 833 in the first quarter of the year

2012 up to PLN 2 840 484 in the first quarter of the year 2013, an increase by 92.21%. The

revenues from subscriptions fees made by the users of subscribed services stood for PLN 1 758 532

24 Interview No 11.25 Polish Music Information Centre (ZPAV) (2013). Over 50% increase of the market of sales of digital music in the I

quarter this year. The information published on 4.06.2013 on wbsite at http://zpav.pl/aktualnosci.php?idaktualnosci=583

19

http://zpav.pl/aktualnosci.php?idaktualnosci=583



in the first quarter 2012 to 2 840 484 in the first quarter of the year 2013, an increase by 92.21%.

The proceeds from the fees paid for the subscription by the users of subscribed services amounted

to PLN 1 758 532 in the first quarter the year 2013 (as compared to PLN 1 096 857 in the

analogoues period of the year 2012), an increase by 60.32%26. The important category is also the

income from the on-line downloads accounted to PLN 1 882 829 in the first quarter of the year

2013 (as compared to PLN 1 467 524 in the abalogous period of the year 2012), although it shall be

noted that the growth dynamics in this market segment is considerably lower and amounts to

28.3%27. The picture of situation is futher described by information passed by the respondents.

Some phonographic producers estimate that the share of digital formats in their revenues reaches

the level of about 30%28.

The estimates of the respondent who represents global music concern show that the proceeds

from the digital distribution in case of this company in Poland amount to about 25%-30% of the

physical sales revenues29. In the coming years the publication of more precise data can be

expected.

5. Subject-based-characteristics of the market of access-related-services

to music on the Polish territory30

Entities oferring access-related-services to music on the territory of Poland can be divided

into two categories: foreign and domestic websites. The origin of the website offering music

content is important from the point of view of dependancies between the costs od acquiring broad

catalogue of reordings and the revenues which could be generated from a given website on the

territory on which it provides its services. The problem faced by websites functioning only on the

Polish market results from the unfavourable proportion of expenditures which shall be incurred to

26 Id.27 Id.28 Interview No 2.29 Interview No 10.30 Analyses conducted under this point was carried out from the end user’s point of view. In consequence, it focuses

on the last level of the distribution channel of recordings distribution – a retailer. The remaining levels are described in point 12. It shall also be highlighted that the list of entities presentedunder this point is not complete, because in Poland you can use a number of relatively not very popular websites localised in different countries.

20


gain access to broad catalogue of recordings in relation to the size of the market which was

decided to be served. It is reflected in the following respondetns’ statements: “we operate on a

given territory, the territory of our country, but we have to build the same technology which

someone builds, let’s say, on the global scale31”.

In other words, each website which wants to make available a broad catalogue for the

customers, must incur significant costs of acquiring rights to the music content, regardless the size

of the served market. It promotes the global players and in the same time puts the websites

limiting their operations to the Polish market in a slightly worse position. They are confronted with

the dilemma: the smaller catalogue and hence, the lower costs and the possibility of price

competing, or broader catalogue and as a consequence, higher costs and higher prices.

Surpisingly enough, the local websites, such as Muzodajnia, or Muzo are not in a position to

obtain the same music catalogues from the music producers as global players, like iTunes, or

Spotify32. As a result of this the global players declare to have at their disposal 20-million catalogue

and the Polish websites can offer maximum 4-6 million of works33. A thesis can be put forward that

the existing situation can result from the increased activity of global websites in the field of

content soliciting. On one hand, the websites operating on global scale it is easier to finance active

adjustment to the owners of less popular content. However, on the other hand, the biggest global

players are in a position to negotiate with the owners of the most popular recordings the offering

of them from only one website (e.g. the recordings of The Beatles band in iTunes and of Metallica

in Spotify). The granting of such type od exclusivity costs a lot, which can explain why the parties to

such agreements are, first of all, the biggest entities. When discussing the difficulties experienced

by smaller websites, it is worth noticing the fact that the fees for the servers, a place for music file

storage are of significant importance. The global websites can use one site for all the countries –

Polish websites must bear the same fees, though the scale of their operations is much smaller34.

31 Interview No 4.32 Id.33 Id.34 Id.

21


The above factors put the Polish websites in less privilaged competitive situation as

compared to global companies.

The following foreign website addresses operating on the Polish market include35: iTunes

(http://www.apple.com/itunes), Deezer (http://www.deezer.com), WIMP (http://WIMP.pl), Spotify

(http://www.spotify.com) and Rara (https://www.rara.com/). Each of these websites can be

classified as a global player. Each, except for iTunes36, which can be defined as a subscribed on-line

site using streaming. The global webistes which function in Poland include YouTube

(http://www.youtube.com/), although it is not stricte a music undertaking.

In addition to the champions there is also a number of websites devoted to direct

communication between the artists and recipients, enabling to present the recording and making

money by artists who are not co-operating with the traditional music producers, or represented by

independent small producers, or so-called “netlabele”37. Such websites include, eg. Bandcamp

(http://bandcamp.com/), SoundCloud (http://soundcloud.com/) and Mixcloud

(http://www.mixcloud.com/).

Polish websites include: Muzo (http://www.muzo.pl/), Muzodajnia (http://muzodajnia.pl),

iplay (http://iplay.pl/) and Empik (http://www.empik.com/). Webiste Muzo is related to the biggest

Polish media company – Cyfrowy Polsat, which gives it opportunity to compete with the biggest

players. Website Muzodajnia created by Polkomtel is also indirectly connected with Polsat

(Zygmunt Solorz-Żak is the owner of Polkomtel I Cyfrowy Polsat). Over years Muzodajnia has built a

strong position on the Polish market of on-line recordings. The contributing factor was, among

other, was the use of the connection between the website and the mobile telecommunication

network, which enabled the use of the fee collection system of Plus network. Thanks to adding the

fee for using the website to the telephone bill it is possible to make savings of financial costs 35 Since the offers extended by all the websites regarding on-line music content in Poland change, the quoting of the

prices in case of actively operating stores due to fact that they beome outdated very quickly, does not make much sense.

36 Though, the recent news about the planned launch od iRadio website changes the situation, see ZPAV (2013). iRadio is created. Apple got on with „The Big Three” of the phonographic producers. Information published on 10.06.2013 r. on internet site at http://zpav.pl/aktualnosci.php?idaktualnosci=586

37 Galuszka, P. (2012), footnote 21.

22

http://www.empik.com/

http://iplay.pl/

http://muzodajnia.pl/

http://www.muzo.pl/

http://www.mixcloud.com/

https://soundcloud.com/

http://bandcamp.com/

http://www.youtube.com/

https://www.rara.com/

http://www.spotify.com/

http://wimp.pl/

http://www.deezer.com/pl/

http://www.apple.com/itunes



associated with buying music through internet (e.g. companies handling payments by credit cards),

which translates into lower prices paid by consumers. Moreover, iplay website shall be mentioned,

which was one of the pioneers of file sales in Poland and is the one next to Soho.pl which survived

to the present day. Iplay, in addition to the files in mp3 and wma format, offers the possibility of

subscription up to 31.08.2013, but after this date, it removes this option from its offer. Other

website with noticeable potential is Empik, which launching the sale of files as “pay per download”

completed its offer of other cultural products.

In addition to the above mentioned websites, there is a number of companies which sell

recordings in a form of files, or ring tones via network, or use music content in other way (e.g. as

suppliers of technological solutions related to music, especially in telephony sector).

They are, among other, Soho.pl (http://www.soho.pl/), Polish Sound

(http://www.polishsound.com/), NuPlays (http://nuplays.pl/), Mobila (http://www.mobila.pl/),

Papla (http://www.papla.pl/), PlayTheMusic (http://www.playthemusic.pl/), Mood

(http://www.mood.pl/), Wind Mobile (http://www.windmobile.pl). These companies usually use

music content supplied by aggregators38.

It is worth mentioning about two more websites which implemented slightly different

model, not related to acquisition of music content of the biggest labels. These are: Sound Park

(http://soundpark.pl) and 3 MegaTotal.pl (http://www.megatotal.pl). mentioned under point 3.

Sound Park which can be regarded as a Polish equivalent of Bandcamp website, addresses its offer

to, first of all, individual artists and independent labels 39. Characteristic feature of Sound Park

website is the use of widget recordings for boosting sales, which can be embedded into the artists’

websites and their profiles on social portal Facebook. In accordance with the information delivered

by the creators of the website, the majority of recordings is sold via Sound Park website and

widgets displayed on the artists’ websites. The sale by means of widgets embeded into artists’

profiles on Facebook website constitutes about 10% of the total sales of Sound Park40. Among

recordings available on the website the biggest share in the sales goes to the recordings belonging

to such genres as Metal/Punk (34,28%) as well as HipHop & Rap (30,90%)41.

38 See point 12.39 Interview No 7.40 E-mail communication with the creators of Sound Park website as at 9.07.2013 and 10.07.2013. 41 Data refer to the share of recordings which can be classified as representative for the above mentioned genres in

23

http://www.megatotal.pl/

http://soundpark.pl/

http://www.windmobile.pl/

http://www.mood.pl/

http://www.playthemusic.pl/

http://www.papla.pl/

http://www.mobila.pl/

http://nuplays.pl/

http://www.polishsound.com/

http://www.soho.pl/


The second of the above mentioned websites – MegaTotal.pl is the first Polish platform of

social financing. MegaTotal was set up in the year 2007 by the creative agency under name Sfera

from Łódź.

Over the period of five years of its activities, MegaTotal helped in raising funds for making

97 records, of which 75 have already been released and the remaining part is in the realisation

phase42. The value of the financed projects is within the range from 5000 PLN to 40 000 PLN43.

The total value of the projects which have been completed so far exceeds 765 655 PLN44.

MegaTotal.pl runs also the internet shop (http://www.megatunes.pl/), where you can buy music

files of the artitist’s works which have been released thanks to the support from the website users’

community and the records made by other artists.

This list should be completed by the websites which have ended their operations:

OnetPlejer – a shop which functioned on portal Onet.pl.Serwis, offered both the purchase

of and listening to music files (4 PLN for the purchase of 1 file, or the possibility of listening

to 400 works; the system awarded the bonus for the purchase of bigger qualtity of works).

The files were recorded in the format WMA, secured by DRM, of 128 kbps quality. Thanks

to co-operation with the British company OD2 (taken over by Nokia), the website was in a

position to offer big choice of music files45.

Melo.pl – a shop with files which functioned in the model “as per download” on interia.pl

portal. In the year 2009 the price for download of one work in majority of cases ranged

from 1.99 PLN to 3.29 PLN and the price of the whole album amounted to 29.99 PLN; the

shop oferred the files WMA, secured by DRM technologies; ended operations on

31.12.200946.

mp3.pl - – a shop with files which functioned in the model “as per download” on Wirtualna

Polska portal. The shop was served by iplay website and the prices were similar. Mp3.pl

website offered mp3 files (320 kbps) without DRM security protection47.

the total sales of the website as at 10.07.2013 r. The data originate from Sound Park. 42 As at 12.06.201343 Interview No 16.44 Id.45 Gałuszka, P. (2009). Biznes muzyczny. Economic and marketing aspects of phonography.Placet, 222.46 See http://melo.pl/ and Gałuszka, P. (2009), footnote 56, p. 223.47 Gałuszka, P. (2009), footnote 56, p. 223.

24

http://melo.pl/

http://www.megatunes.pl/


3pm.pl – small shop oferring records made by Polish artists at 1.22 – 2.44 PLN per file. It

offered the possibility of payment in two ways – via PayU intermediary and by text

message, (in case of choosing this form of payment, additionally, the buyers bore costs of

text messages, amounting to 50% - in effect, a person buying the music file at 1.22 PLN,

paid 2.44 PLN for text message).48

Niagaro – website endorsed by Eurozet Group; offered the possibility of listening to and

downloading music and social functions. According to information given by Eurozet in the

website catalogue there were over 2 million Polish and foreign works49.

6. Readiness to pay for music in electronic format

On the basis of analyses of the available sources and conducted interviews the following

factors can be identified, which could have a significant impact on consumers who decide to use

the services of the websites offering access to music content on-line50:

size and depth of the catalogue; size should be understood as the number of works placed

in the catalogue51, and the depth should be understood as the level of genre differentiation;

to a large extent both factors are interrelated because the increase of the size of the

catalogue at a certain point of time leads automatically to the increase of its depth;

the amount of fees for the access to the recordings and application of different tariif plans

adjusted to the expectations of different consumer groups;

integration with the biggest number of registering devices operating in different operating

systems (smartphones – Android, iOS, Blackberry, Windows Mobile; computers – Windows,

Mac, Linux);

free transfer of data if the access is by mobile phone (3G, LTE);

integration with stereo equipment (e.g. possibility of Spotify reception by means of Philips

set mci900 connected with Wifi, with no use of computer);

sound quality – the higher the more attractive the given website is for the most demanding

customer groups;

48 Id., 223.49 Data from the press materials of Eurozet “Niagaro – music revolution in beta format” dated 7.06.2010 r.50 The sequence of elements does not predetermine their importance. 51 Interview No 9.

25


implementation of different forms of payment corresponding with payment preferences of

different groups of users (credit card, PayPal, scratch cards, text messages and others);

active communication of the users with the website, reflected in recommending the

playlists to the users52;

user’s comfort (e.g. whether in case of music played from computer, the playing proces can

be controlled from the keyboard, with no necessity of looking at the computer screen; how

advanced are social functions embedded into a given website and integration with social

websites, such as Facebook, or Last.fm).

Some respondents remarked that if the prices of files which were sold in the model “pay

per download” have dropped, it can lead to a considerable increase of demand (“if we have a

chance to sell something at 100 PLN (…), I am convinced that the sale would increase considerably

and such websites, which are, let’s say, pirate websites would cease to exist”53).

Other respondents, however, pointed to the fact that many legal websites offer free access

to recordings, so if the price for some consumers is this factor that matters, this group of users can

find a legal offer54. It is worth remembering that the price matters not only for the market segment

which is the least prone to pay, but also for consumers paying higher prices, e.g. those who decide

to use offers of Premium type (giving, e.g. mobile access to the catalogue of recordings). The

event which testifies to the fact that the websites entering the Polish market are aware of the

price importance, is that two weeks before the start of the Polish version of Spotify, the prices on

Deezer website were lowered.

Part of the respondents pointed out that in addition to the price, a technical advancement

level available for an average consumer also plays a vital part (it is difficult to sell music by means

of smartphones, if their penetration is very low in the society) as well as the attitude of the society

towards intellectual property. Following this line of thought, to make happen the considerable

increase of the number of recipients using websites offering music content no-line, the

reorientation in mentality, the change in the level of wealthiness is necessary as well as the

strengthening of the cultural needs of the users and other changes55. It corresponds with the

52 Interview No 15.53 Interview No 1.54 Interview No 9.55 Interview No 3.

26


conclusions coming from the social opinion survey, which showed no interest in having any contact

with the culture expressed by the overwhelming part of the society56.

Since the analysis of the inclination of the consumers of recordings to pay for the music is

complex, it is recommendable to carry out a separate survey dedicated solely to this topic.

7. Price structure in a given model

The analysis of the price shall start from quite trivial observation that the prices of the files

sold as “pay for the download” is relatively low diversified. How important economy-wise it is, can

be understood by taking into account the observation of one of the respondents that 99% of the

turnover in the network is generated by 100 works and 1% of the turnover generates about 10

thousand works57. Theoretically speaking, it would be practical to have the most popular works the

dearest, but this is not what happens. This can be explained by the economic features of the

recordings, which result in the fact that the prices of different phonograms belonging to the same

price category are quite similar to one another58.

The starting point for the price analysis is the data which can be presented in the year 2005

in OECD report59. They are presented in table 7.1.

Fig. 7.1. Structure of prices in the model “pay per download”

56 For example, TNS OBOP research, commented in Handzlik T., The whole Poland (non)cultural, Gazeta Wyborcza dated 28-29.07.2007, 11.

57 Interview No 6.58 See, for example. Caves, R.E. (2000). Creative Industries: Contracts between Art & Commerce. Harvard University

Press oraz Hull, G.P. (2004). The Recording Industry. Second Edition. Routledge.59 Organisation for Economic Co-operation and Development. (2005). Digital Broadband Content: Music.

http://www.oecd.org/dataoecd/13/2/34995041.pdf

27

http://www.oecd.org/dataoecd/13/2/34995041.pdf


Who? What do they do? High costs in USD Low costs in USD

Music producer / artist Delivers the work in a

form of a “master copy”

0,67 0,40

Financial institution

clearing credit cards

Organises payment

process

0,30 0,10

Author, or owner of

copyrights to the work

Grants mechanical

licence

0,12 0,10

Shop with files

(functioning costs)

Organises trade and

advertising

0,25 0,10

In total 1,34 In total 0,70

Loss 0,35 Loss 0,29

Source: Report OECD, 2005, footnote 70, p. 54.

The respondents provided more precise information on the structure of prices. In case of the

model “pay per download” the structure of net price (after deducting VAT) is as follows:

the remuneration for the related rights (producer’s rights and performer’s rights)

represents about 60% of the price payable by consumer; this value includes the costs and

the margin of the phonographic company and potential remuneration paid to artists taking

part in the recordings (its amount depends upon terms and conditions of the phonographic

agreement signed by both parties60);

the remuneration for the copyrights is most often paid to the artists through ZAiKS (Polish

Society of Authors and Composers, represents about 10% of the price paid by consumer (if

the file costs less than 2.8 PLN, then Polish Society of Authors and Composers takes 0.28

PLN from net amount61);

the margin of internet shop, additional fees connected with the operating costs (e.g. costs

60 See, e.g. Passman, D. S. (2009). All you need to know about the music business. RosettaBooks, LLC and Gałuszka, (2009), footnote 56.

61 Interview No 1.

28


connected with the supply of music content paid via aggregator, payment for the credit

card operator), constitutes 30% of the price payable by consumer (when consumer pays for

the file by means of text message, then the price may increase even by half)62.

In case of music content supplied to the shops through aggregator63 50-60% goes to the

content owners (performers and producers), to creators through Polish Society of Authors

and Composers – about 10% and 30-40% is for the technical service, cost of payment and

the costs of the shop64. These observations are confirmed in the publications, in which it is

stated that if 0.99 USD is paid by the buyer of the file in iTunes shop, the owners of the

rights receive about 0.66 USD65.

It should be pointed out that the companies selling online music are to a certain extent

limited by the fees taken by Polish Society of Authors and Composers (ZAiKS). In the

opinion of one of the respondents, the development of websites offering the possibility of

downloading files at prices which can be treated as affordable for the wide circle of

recipients (e.g. 1 PLN for downloading one song) are blocked by minimal prices set by

collective management organisations66. To exemplify this, it can be said that in case of

downloading music files the remuneration for the copyrights payable through Polish

Society of Authors and Composers is about 10% of the price payable by consumer,

however, not less than 0.28 PLN. Hence, in case of the price for the recording amounting to

1 PLN, the royalties paid to the collective management organisations account for as much

as 28%, which makes impossible to create a business model based upon low prices67. As a

result of this, some respondents claim that it is very difficult in Poland to build a reliable

business model based upon assumption regarding rates that the collective management

organisations demand.

A price structure in websites based on subscriptions is different.

62 Intrview No 9.63 See point 12.64 Interview No 6.65 Wikström, (2009), footnote 15, p. 107.66 Interview No 1.67 Id.

29


As regards them it is difficult to generalise since the amounts which go to the content

owners are conditioned by few factors: the number of playing of a given work, the number of users

paying the subscription fee, income from the advertisers and terms and conditions negotiated

between the subscribed websites and the owner of the recording (the negotiations are only

possible in case of the biggest players, this is, global music concerns)68.

It is worth highlighting that very often it deepens the frustration of smaller players who do

not know strictly how much income a given website generates (“what I dislike in the whole system

is quite unclear picture of how much, in fact, has been sold”69). It leads to a conviction which is

expressed especially by smaller phonographic companies (the weaker party in the relation,

especially to global websites) that the rules of the game in new models of content sharing are not

clear.

8. The structure of repertoire - what is the percentage of Polish content as compared to the foreign content

The estimation of the structure of repertoire is difficult in case of websites offering music content.

These companies do not give information regarding the sale of recordings and only the sales data

can show reliably what interest in Polish content is among consumers.

It is a bit easier to make estimations in case of aggregates who supply the recordings to online

shops. As the representative of website E-muzyka pointed out, out of 4 million of works which are

in the website database, about 30 thousand70 are Polish works. There could be more of them, but,

for example, in case of older catalogues, a problem is to define who these rights to the content

belong to. To exemplify this, only 11 out of 44 thousand recordings stored in the Polish Recordings

database have clear legal and author’s status.

The estimation of the popularity of the so-called Polish catalogue without access to the confirmed

data is very difficult since the point of view demonstrated by the respondents depends upon their

68 Marshall, L. (2013). Streaming music: financial and legal implications. Referat wygłoszony 27.06.2013 r. w trakcie konferencji 17th Biennial Conference of the International Association for the Study of Popular Music “Bridge Over Troubled Waters: Challenging Orthodoxies”.

69 Wywiad nr 2.70 Interview Nos 9 and 10.

30


personal professional experience, which does not necessarily reflect the data about the sale of the

Polish recordings.

Part of the respondents claim that the foreign websites entering the Polish market are interested in

disposing the local catalogue71. This point of view was presented by the representatives of the

global music concerns, hence institutions, which by definition, have at their disposal the catalogue

of recordings recognised by the websites selling music content, as attractive. To put it in another

way when a foreign subscription service is entering the new market, it is interested in, in the first

round, the local catalogue of the biggest phonographic companies.

The same was probably true in case of Polish market, which gave the grounds for the respondents’

conviction about the high interest in the Polish catalogue. On the other hand, the acquisition of

rights to the catalogues of smaller Polish producers by the foreign services selling music content

does not have to be priority, which was reflected in the respondent’s responses72, proposing even

legislator’s intervention aiming at supporting the Polish creativity73.

Judging on the basis of different opinions and taking into account the fact that the considerable

part of the world tycoons have just entered the Polish market, it can be ventured to say that the

answers to the question about the repertoire of the services operating in Poland can be provided

from the time perspective, preferably, after obtaining the empirical data.

9. Impact of piracy on ways and trends of music sales in the net-work

Looking from historic perspective, a thesis can be hypothesised that if not for the popularisation of

the exchange of music files in P2P networks, the launch of services offering access to online music

content could not have happened in the past decade. By the time Napster service appeared in the

year 1999, CD disc – a then basic product of phonographic industry, was sold in many countries

71 Interview No 6.72 For example, as a result of the implementation of fees to the Polish content, similar to those used in radio broadcasting.

73Michel, N. J. (2006). The impact of digital file sharing on the music industry: An empirical analysis. Topics in Economic Analysis & Policy, 6(1), 11.

31


very well, so if not the objective obstacles resulting from technological changes, the music

producers would not see a reason for starting a risky process of rebuilding the business model.

The impact of piracy on the sale of recordings is difficult to measure precisely. Many a time

the results obtained thanks to the analysis of illusionary similar sets of data are contradictory,

which may result from, for example, omitting one variable.

Moreover, it should be taken into account that this is a topic arousing controversies and the

interpretation of equivocal results of analyses still depends on this whether the interpreting person

is connected with the music industry. As an example, IFPI refers to the research which concludes

that the internet piracy lowers significantly the sale of recordings.

The examples of this are:

Michel Study concluding that the exchange of files in internet “could have reduced the sale

of albums (between 1999 and 2003) and in case of some consumers by 13%74;

Peltz and Waelbroeck study showing that on the basis of data from 2000-2001 that “inter-

net piracy was a significant factor reducing the sale of music sector at an early stage of the

file exchange development”75 and Zentner study conducted within similar scope showing

that the downloading of recordings reduced the likelihood of the record purchase by 30%,

which, after taking into account that only some group of population uses P2P indicated

that if not for the exchange of files, the sale of recordings in the European countries that he

has analysed in the year 2002 would be higher by about 7.8%76;

Study conducted in Canada showing that the functioning of P2P network has a negative im-

pact on the purchase of music from the official sources, which results from the fact that the

users treat P2P as a free alternative to buying recordings77;

74 Michel, N. J. (2006). The impact of digital file sharing on the music industry: An empirical analysis. Topics in Economic Analysis & Policy, 6(1), 11. 75 Peitz, M., & Waelbroeck, P. (2004). The effect of internet piracy on CD sales: Cross-section evidence. Review of Economic Research on Copyright Issues, 1(2), 71.76 Zentner, A. (2006). Measuring the Effect of File Sharing on Music Purchases. Journal of Law and Economics, 49(1), 63-90.77 Barker, G. R. (2012). Assessing the Economic Impact of Copyright Law: Evidence of the Effect of Free Music Downloads on the Purchase of Music CDs. ANU College of Law Working Paper No. 2

32


Study conducted in Sweden which show that the implementation of the legal rules in this

country which contribute to the likelihood of detection and conviction of persons who ex-

change music content in the network led to the reduction of the traffic in internet (which

can be explained by the decrease of the number of P2P network users) and the increase of

the sale of recordings78.

The presented studies are only the examples of analysis indicating the existence of the

dependencies between the so-called internet piracy and the volume of sales of products of

phonographic sector. In reference literature, a big group is represented by articles which do not

reveal any dependence between both phenomena and show that this dependence is more

complex and the evaluation is equivocal. The examples are:

article concluding that the negative impact of the file exchange in the network reflects the

readiness of consumers to pay higher prices, which results from the possibility of better

knowing the record before the purchase, the customization of the product to the buyer’s

preferences has been improved (which means that even if fewer people buy the recordings,

those who buy spend more because the product which they have seen in internet before

the purchase rarely falls short of their expectations)79; the negative impact of file exchange

is mitigated when the consumers’ preferences are sufficiently differentiated and the variab-

ility of the available recordings is high;

the article classifying different motivations for downloading recordings from P2P network in

order to indicate those which lower, or increase the inclination to purchase phonographs;

the authors conclude that the motivations which can be defined as “unwillingness to pay”,

or “unwillingness to buy the whole album” have a negative impact on the demand for re-

cordings, but they are balanced through motivations “hear before the purchase” and “re-

cording unavailable on a disc, or in online sales”; as a result of this, the authors do not find

http://ssrn.com/abstract=1990153 78 Adrian Adermon and Che-Yuan Liang (2009). Piracy, Music, and Movies: A Natural Experiment. Working Paper 2010:18 http://ideas.repec.org/p/hhs/uunewp/2010_018.html 79 Peitz, M., & Waelbroeck, P. (2006). Why the music industry may gain from free downloading—The role of sampling. International Journal of Industrial Organization, 24(5), 907-913.

33

http://ideas.repec.org/p/hhs/uunewp/2010_018.html



a relationship between the number of files downloaded from P2P and the sale of albums in

CD format80;

econometric study of which the results have been published in one of the top business

periodicals – Journal of Political Economy; analysis of the data led the authors to the con-

clusion that the “file sharing was not the main reason for the drop of the sale of recordings

in the USA in the years 2000-2002” and that “the number of users in P2P network has not

been correlated with the sale of album”81;

the research conducted in the year 2011 in EU countries shows that the “users do not per-

ceive the illegal file downloading as a substitute for the legal music in digital formats82; the

study was strongly criticised by IFPI, which expressed its criticism in these words: “In JRC

study the data about traffic on both legal and illegal music websites were wrongly used and

interpreted. The fact which has not been taken into account was that not each user’s travel

in internet was of consumption nature. The example could be iTunes service where the fol-

lowing activities were treated the user’s activation, for example: connecting the music

device to the computer, or synchronising the device with the computer. The above referred

examples were classified as a manifestation of legal music activity, which raises doubts in

the conclusions presented by JRC (…) The examination conducted by the Commission

presents interdependence between legal and illegal music services. There are no doubts

that small percentage of pirate users makes legal purchases of music, but it does not prede-

termine the fact that majority of them have never made any music transaction. According

to the study carried out in Great Britain, 44.8% in the group of illegal sharers of Internet

music, have never made any purchase of it”83;

80 Andersen, B., & Frenz, M. (2010). Don’t blame the P2P file-sharers: the impact of free music downloads on the purchase of music CDs in Canada. Journal of Evolutionary Economics, 20(5), 715-740.81 Oberholzer-Gee, F., & Strumpf, K. (2007). The effect of file sharing on record sales: An empirical analysis. Journal of Political Economy, 115(1), 1-42.82 Aguiar, L. & Martens, B. (2013). Digital Music Consumption on the Internet: Evidence from Clickstream Data. Institute for Prospective Technological Studies, Digital Economy Working Paper 2013/04, 1 ftp://ftp.jrc.es/pub/EURdoc/EURdoc/JRC79605.pdf 83 ZPAV (2013). Response of IFPI to the study conducted by European Commission http://zpav.pl/aktualnosci.php?idaktualnosci=539; See also IFPI (2013). IFPI says Digital Music JRC study is flawed, misleading and disconnected from commercial reality http://www.ifpi.org/content/section_news/20130320.html

34

http://www.ifpi.org/content/section_news/20130320.html


ftp://ftp.jrc.es/pub/EURdoc/EURdoc/JRC79605.pdf


the research conducted in Spain which shows that the willingness to pay for music is correl-

ated with the age, which can result from both higher income of older people and also from

their perception of the values (e.g. conviction that the music downloading from P2P net-

work is illegal); persons who are less sensitive to the price of recordings download less mu-

sic from P2P network and are ready for paying higher prices for records and music files;

moreover, persons using P2P network are strongly motivated by the availability of various

works (this is, better “assortment” of records than in the traditional stores) and the com-

fortable music acquisition.84

A number of studies aimed at learning about the attitudes of music downloaders from

unauthorised sources and their reaction to anti-piracy arguments put forward by phonographic

industry. The examples of such studies are:

the analysis of data originating from 2500 French households, which showed, among other,

that the users of files exchange network are motivated to look for different music content

and the artists’ interest is very important for them85;

experiment of which the purpose was to test the reaction of 139 adults willing to use file

sharing network; experiment showed that the willingness to use file sharing platform de-

pends upon the users’ competencies, on whether a given person has already used such

networks before, attitude towards piracy and the expectations of the relatives of a person

under examination; contrary to the expectations “anti-piracy arguments did not have a cru-

cial impact on the behavioural dynamics lying at the basis of piracy”86;

analysis suggesting that the legal actions against infringers of copyrights are related to the

so-called “inability paradox” – they cannot produce the determent effect and in the same

84 Sandulli, F. D. (2007). CD music purchase behaviour of P2P users. Technovation, 27(6), 325-334.85 Rochelandet, F., & Le Guel, F. (2005). P2P music sharing networks: why the legal fight against copiers may be inefficient. Review of Economic Research on Copyright Issues, 2(2), 69-82.86 d’Astous, A., Colbert, F., & Montpetit, D. (2005). Music piracy on the web–how effective are anti-piracy arguments? Evidence from the theory of planned behaviour. Journal of Consumer Policy, 28(3), 289-310.

35


time promote the attitudes favourable for the copyrights (either the former or the latter

can be achieved); it means that bringing the so-called internet pirates to justice will pro-

duce the determent effect, but in the same time will make difficult the promotion of social

norms contributing to copyrights observance87.

It shall be pointed out that doubt-dispelling evaluation of the impact of the so-called internet

piracy on the condition of music sector as well as the manners and the trends of music selling in

the network will ever be possible. One of the factors which is not taken into account in the

majority of this type of analyses in the gradually progressing change of the way of receiving music

by the listeners. Leyshon et al. put the thesis that the role of music in the contemporary capitalist

societies is growing, but it is not translated into the increase of the significance of phonographic

sector, as it was in the second half of the 20th century88.

The authors indicate that the music for the listeners is less and less a value in itself, and more and

more it is valued as a part of bigger events or cultural products. So, the music is very important

because it gives valuable experience to the participants of club events, to film viewers and

computer game players, but does not necessarily serves these persons as an object of direct

consumption, namely, listening to the record 89. It refers mainly to youngsters who use the music

products in a completely different way than older people, e.g. they more rarely listen to all the

songs from the albums, being more inclined to listen to a single piece of music90.

Taking this into account, the best response to the so-called internet piracy seems to be the

extension of the offer to the users of such services and listeners of such music products, which will

reflect the changing role of music in the contemporary societies and also they will be practical in

use and relatively inexpensive. Legal music service shall be attractive enough and practical in use

so that persons who have been using the file exchange network, will find the shared files

impractical and unbeneficial. There is a high degree of probability that from the time perspective

87 Depoorter, B. & Vanneste, S. (2006). Norms and Enforcement: The Case Against Copyright Litigation, Oregon Law Review, 84(4), 1127-1180 and Depoorter, B., Vanneste, S., & Van Hiel, A. (2011). Copyright Backlash. Southern California Law Review, 84(6), 1051-1292.88 Leyshon, A., Webb, P., French, S., Thrift, N., & Crewe, L. (2005). On the reproduction of the musical economy after the Internet. Media, Culture & Society, 27(2), 177 –209.89 Id.90 Similar observations are made by the respondents in interview No 2 quoted under point 11.

36


the turn of 2011 and 2012 can be pointed out as a crucial momentum for the Polish music market

– momentum at which the offer of legal websites with music content converged in terms of its

attractiveness to the offer of file sharing network91.

In the course of the interviews that have been conducted, the respondents also drew attention to

the piracy problem of institutional nature.

This term can be understood as both websites making easier for the individual users to cross the

border of own personal use, or directly to infringe the copyright law (such as, e.g. hosting services

enabling the users to share the files easily), and also services taking advantage of favourable legal

interpretations to reduce the fees for content utilisation92. The example of the latter is services

with regard to which the users obtains an opportunity of far-reaching personalisation of repertoire,

which aspire for playing a role of internet radio offering webcasting service (which entails the

necessity of obtaining licence only from the organisations of collective management of copyrights

and the related rights and making the payment of the fee as per the pre-compiled tables).

In the opinion of the phonographic companies this is labelled as on-demand service (which means

the necessity of rate negotiations conducted with the rights owners, music producers). The above

mentioned services refer to the interpretation of the copyrights provision stating that “making

available a work in such a way so that everybody could have access to it a place and at a time

chosen by themselves”, in accordance with which the user chooses a work and not the artist,

which allegedly could release the obligation of negotiating the rates with the rights owners.

Summing up, it can be highlighted that the conducted interviews suggest that part of the

phonographic industry treats the file sharing by individual users as some kind of permanent

(though unchangeably negative) element of record companies’ functioning. It would lead to a

conclusion that the best method of curbing that phenomenon is the creation of legal services

distributing the content on-line in a cheap, comfortable and attractive way to the users who

because of their convenience, or laziness resign from the so-called pirate websites93. This what

worries very much the representatives of the industry is the above mentioned institutional piracy

which contrary to the unpaid file sharing in P2P networks, relates to the revenues generated at the

91 See also point 11.92 Interviews Nos 1, 6, 13.93 It was also emphasised in, e.g., interview No 4 that there was a necessity of undertaking activities of educational nature in the field of intellectual property right.

37


cost of phonographic industry and the artists’ community.

10. Characteristics of the applied forms of protection against un-authorised copying on the on-line music access services market

The protective tools securing against the unauthorised copying are defined by general term Digital

Rights Management (DRM). This term comprises technologies limiting the ways by which the

computer users create and distribute copies of the computer files, or digital carriers94. Thanks to

the application of the advanced computer technologies (e.g. resembling the encryption) the users

are subject to certain limitations referring to the ways of use, and in particular, further

dissemination of the protected content.

Piesiewicz indicates the following capabilities of DRM systems: “limiting the copying, delimiting of

reproduction, making difficult the conversion to mp3/ogg format, quantitative limiting of

reproductions/copies, making difficult the recording of TV/video/audio signal, making impossible

the rewinding the film episode, making difficult the reading by the programme which is different

than the one supplied by the producer”.95 From the individual user’s point of view this means, e.g.

the possibility of making only the limited number of copies of a given file. As an example, system

DRM FairPlay used in iTunes store limited before the year 2009 the number of computers on which

the purchased file could be reproduced to three (and after liberalising the policy, to five) copies.

From the point of view of business model applied in Apple, it was not only about preventing the

unauthorised copying of the content, but also about making the customers of iTunes Music Store

tied to the equipment produced by the store owner96. DRM safeguarding resulted in this that the

files bought at that time in iTunes Music Store could only be played on the recorders produced by

Apple. That company decided to sell unprotected files when it turned out that its market position

is strong and the competitors, taking advantage of the consumers’ reluctance to DRM, offer

unprotected files.

94 Schmidt, A., Dolfsma, W., & Keuvelaar, W. (2007). Fighting the War on File Sharing. T.M.C. Asser Press.95 Piesiewicz, P. F. (2009). Music work and its creator. Warsaw, Cracov, Publisher: Oficyna Wolters Kluwer Polska,136.96 Gałuszka, P. (2009), footnote 56, p. 206-208.

38


iTunes store’s withdrawal from DRM protection reflects a broader trend of departing by internet

services from applying protections which are burdensome for the listener. It is worth emphasising

that the stream services are still using different kinds of protection, which, among other, results

from the nature of services provided by them.

Contrary to services selling music files per item, which after selling a work do not have to monitor

the frequency of playing by the buyer, the subscription services should knowledge about each

playing of the work by the subscriber. The knowledge is necessary for the settlements with the

rights owners – the more often a given work is played and the more subscribers chooses a given

artist, the more funds a subscription service will have to deliver to the authorised entities. In

connection with the above, the subscription services monitor the consumers’ behaviour to a larger

extent than the services operating under model “pay per downloading”.97

Taking into account the fact that the consumer who decides to start using the subscription service

is not in a position to negotiate certain provisions of the agreement entered into with the service

provider, it is desirable that the bodies involved in consumer protection and the protection of

personal data will subject this type of agreements to analysis in order to protect the weaker party

to the transaction, this is, consumers.

12.Forecast of music market and principles of access to music in

5-year perspective

On the basis of interviews that have been carried out and the analysis of the global trends and

relevant literature, the conclusion can be drawn that there are serious reasons for claiming that

the Polish market for music content is a its breakthrough moment. It is proved by the following

facts:

entering the Polish market by global players, which happened in the year 2011(e.g. iTunes)

and in the year 2012 (e.g. Spotify, WIMP);

97 See, for example, Makarenko, V. (2013). Music Big Brother, this is, what Spotify knows about you and how to take advantage of that, text dated 17.07.2013 http://wyborcza.pl/1,75475,14287458,Muzyczny_Wielki_Brat__czyli_co_wie_o_tobie_Spotify.html

39

http://wyborcza.pl/1,75475,14287458,Muzyczny_Wielki_Brat__czyli_co_wie_o_tobie_Spotify.html


true financial successes reached by the Polish artists thanks to the utilisation of recordings

in the network; the example can be a song “Ona tańczy dla mnie” of Weekend group, which

only thanks to the digital channels brought the income of 100 thousand PLN to the music

group and the producer98;

the fact that the subscription services using the streaming are only at the start of their de-

velopment and in the course of time will function better and better, and in consequence

the music consumption model will be changing; as a result, the recipients will be most likely

determined to pay higher sums of money in different models and the ways of delivering

legal music will be more and more attractive and comfortable99;

the greater availability of smartphones and fast wireless internet connections will contrib-

ute to the development of the market, which, in turn, will lead to further integration of

sales of on-line recordings as well as by means of mobile communications;

the sphere of music services use for marketing purposes will be developing strongly; such

activities have always been present, but the increasing number of distribution channels of

recordings and their progressing integration with the social networks will favour the further

development of the music content exploitation zone100.

In connection with the above the statement can be risked that the subscription model101 has the

best perspectives in Poland, which could be expanded in future by the function of downloading

single works and playlists within one subscription (without paying an additional fee) 102. For some

time fierce competition between the subscription services will help to maintain the subscription

prices on a low level. It is worth remembering that it is unlikely that the price of 20 PLN for

Premium access (at present, such price is binding in Spotify, WIMP and Deezer) will be maintained

for a long time. The price can increase, in particular, when it can turn out that the battle for the

98 Interview No 1.99 Interview No 9.100 Interviews Nos 8 and 9.101 Interview No 11.102 Interview No 1.

40


market will be won by one, or two subscription services103.

It is more difficult to assess the long-term perspective of the model “pay per downloading”. There

are few arguments which are not in its favour – already mentioned costs of authors’ remuneration,

charged by ZAiKS, which make difficult the lowering of the file prices, settlements of electronic

payments (in particular, lack of advanced micropayments and the unfavourable proportion of fees

charged by the operators of credit cards to the file price)104 as well as weak penetration of credit

cards (though this problem refers also to subscription services).

On the other hand the consumers’ habit to “possess” recordings speaks in favour of this model,

which can have a crucial importance for certain groups of buyers105. Furthermore, the consumers

paying careful attention to the sound quality will also appreciate the fact that some services

functioning under model “pay per download” offer files of the quality which is comparable to the

sound of a compact disc (for example, recorded in a lossless format FLAC).

Over a number of years thanks to the success of the subscription services, the number of persons

using the pirate services will be considerably reduced.

Relatively cheap, commonly available access to the recordings in the network and the increase of

the social awareness about the advantages of the subscription services will fructify in that the

major part of the listeners will find that it is nor practical for them to waste their time for searching

the file sharing net, or the hosting services 106.

Some respondents remarked that the ways of consuming the recordings have changed, which will

fructify in further slide of sales of physical carries. It is illustrated by the following quotation: “it can

be forecast with higher degree of probability that the CD carrier is condemned to extinction. It will

be the same story as with vinyl record. Small number of people will be interested in CD, but when

103 Interview No 6.104 Id.105 Id.106 By the way, the question arises about what will the policy of content owners towards the so-called co-created content by the users (user-generated content) be like, however this is a topic going beyond the framework of this study

41


they die, nobody will come back to this (…), and how about young people? Unlike their parents,

they treat music as another entertainment. Most often <it creates a background climate>, it is

useful when they want to dance and is a good reason for meeting at a concert. And when they like

a certain song than they are downloading it and are listening to it till they get bored. It resembles

the 50s and 60s – the most important was a single, this is, a song. Nowadays, young people

download the song which they like and what about the whole record? Maybe, when an artist can

have a few songs which are liked by youngsters, they will compile themselves this artist’s biggest

hits, in e.g., their telephone”107.

This, in turn, will most likely have an impact on the gradual evolution of the publishing cycle – in

the longer time perspective, it is not certain that the recordings will be further released in

packages (as albums). It is probable that some musicians will shift to more frequent releases of

small portions of recordings, e.g. releasing one work from time to time.

A lot will depend upon the convention adopted in a given music genre108 and global trends (it shall

rather not be expected that the Polish market will significantly differ from markets of other

European countries in the long time perspective).

13.Ways of acquiring repertoire by internet shops

In order to understand how the repertoire acquisition by internet stores is like, it is necessary to

explain what rights are related to the sale of phonograms.

It is showed in diagram No 12.1., which can be explained in the following way. The entity which

plans to open a store with files, in case of each recording shall obtain a permission for its utilisation

from three entities:

107 Interview No 2.108 Interview No 6.

42


the author of the work (the author of the text and the melodic line, it can be few different

persons, who are, as a rule, represented by the collective management organisations or by

publishers109);

the producer of the recordings110 (person, or institution which holds the rights to the so-

called master copy – a carrier on which the original recording has been recorded);

performing artist (a person, or few persons who have made an artistic performance of a

given work registered on a concrete phonogram; the performing artists are often represen-

ted by the collective management organisations).

As it was mentioned each of these rights can be managed by different person, or institution, which

is showed in diagram 12.1.

109 The term publisher, or the publishing company were directly translated from English for two reasons. Firstly, these are terms commonly used by the persons form the music industry. Secondly, Polish translation – “wydawca muzyczny” – is imprecise because it is also used to define the publishing house (e.g. in a sentence “x” company is a publisher of a record of “y” artist”). See definition presented under this point 12. 110 It shall be pointed out that the term “producer” is used here in a different meaning than commonly accepted. It is not used to define a person responsible for the registration of the music in the record studio, but it is used for publisher – most often, a music publishing company.

43


Diagram 12.1. Entities involved in the granting of licence to the service which makes available the

music content on-line

Source: Own study.

The most frequent situation happening, as a rule, in case of the biggest music publishing

companies, involves the management of the right of the recordings producer and of the right of

the performing artist by the music publishing company. The entity planning to launch an internet

store will apply to this company for obtaining of two categories of rights. The offering of the music

file by internet will also require the communication with the person, or institution managing the

copyrights to the work in order to obtain the licence for its use. In such a case the situation is even

more complicated. Generalising the author can manage such rights individually, or the author can

entrust their management to the collective management organisation, or to the specialist

44

Collective managementorganisation (e.g.. ZAiKS)or/and publisher

a work

Composer of melodic line autor tekstu

most often master copy publishing company

recording

Music publishing company or/and collective management organisation (e.g.. SAWP, STOART)

Performing artist, who can transfer rights on the music publishing company

artistic performance

Music file

Most often music publishing company or other owner of the master copy (e.g. artist);in case of some exploitation fields – ZPAV

Entity capable ofgranting licence

Rights disposingentity

Category of ownership intelektualnej


institution dealing with the management of the rights to the works – to a publisher.

In practice, the collective management organisation can manage rights in some fields of

exploitation (e.g. in the field of “public reproduction”) and the publisher can make the

management in other fields (e.g. in the field of “synchronisation of sound and picture”). The

additional complications appear when a given work was written by few creators, each of which

entrusted the management to different institution operating in different country. Theoretically

speaking, the entity which wants to open a store selling files on the entire territory of the

European Union will have to explain the legal status of the work in each European Union state. The

scale of difficulties which such entity will have to face is big and it becomes even bigger due to

legal discrepancies between European Union states, due to problems with identification of the

authorised entities and in some cases, due to insufficiently precise provisions.

The analysis of the ways of acquiring the repertoire by the internet stores shall start from the

presentation of all the entities participating in the on-line distribution channel of music content.

Diagram 12.2. in a simple way shows which entities can participate in the on-line music content

distribution channel. The entities which are on the left side of the diagram control the producer’s

rights and the performance rights, which are transferred to the service selling the music content

directly on-line (it is feasible, first of all, in case of the biggest players), or via the so-called

aggregator. As it was already mentioned before, the service making available the music content on-

line needs to have the copyrights to the sold content to prepare an offer. These are acquired from

the collective management organisation operating in this area (in Poland – The Association of

Authors and Performing Artists (ZAiKS)), or/and from the music publishers.

45


Diagram 12.2. Process of repertoire acquisition by the internet stores.

Source: Own study.

Aggregators are entities operating on the B2B market as intermediaries between the publishing

companies (rarely – individual artists) and the users – mostly the companies making available the

music content to final users on-line, or by means of mobile technologies. The aggregator’s task is

to obtain the licences from the authorised entities for the use of the related rights111 in the digital

field of exploitation and to grant such licences to the interested users (distributors of on-line

content and the entities from telecommunication sector). Two companies of this kind hold strong

position on the Polish market – E-Muzyka and Independent Digital.

111 Rights to recordings, though it can also be a video content.

46

Global concern muzyczny

Publishing company niezależna

Service selling music files

or access to music content on-line

Aggregator

Individual artysta

Collective managementorganisation

or/andmusic publisher

RIGHTS

OF

AUTHORSIE

RELATED RIGHTS


The global sector baron, a company under name The Orchard can also be qualified as an aggregate

present on the Polish market, with which, as for example, an independent music publishing

company, MJM Music signed a contract112.

The service under name iplay, which delivers music content to Netia113, undertook to provide the

aggregate services.

Aggregator is an intermediary whose existence on the market bears an exceptionally significant

importance for the digital market. The companies of this type solve the following problems faced

by the phonographic companies:

problem of placing an offer in the store – in most cases big internet retailers do not want to

negotiate directly with the publishing companies, especially, if they do not have an extens-

ive catalogue; except for global music concerns (majors), which dispose so big catalogue of

recordings that they are in a position to initiate negotiations with the retailers;

problem of adjusting the formats – in order to sell the recordings on-line, the files and

metadata must be adjusted to the requirements of an internet retailer; since both the pub-

lishing companies and the stores with files use different formats of registration, an entity is

needed which will adjust (unify) the formats used by both parties to the transaction114;

moreover, this process sometimes is very time-consuming, that is why the “downloading”

of the works to all the services can take about a month;

problem of digitalisation – smaller publishing companies repeatedly did not digitalise their

catalogue at all, therefore an entity is needed which will make it for them; this task encom-

passes not only the digitalisation of recordings, but also, e.g. scanning of the covers115;

the problem of monitoring of the rights status – publishing companies can control the

rights to the recordings only for some time (e.g. in case of concluding an indefinite agree-

ment with an artist), which requires a constant monitoring of the rights status; it is espe-

cially important bearing in mind the fact that the music products have very often a short 112 Interview No 2.113 Interview No 9. See also http://e-sklep.netia.pl/muzyka-2-k-4-g-3-w.html114 Interview No 6.115 Id.

47

http://e-sklep.netia.pl/muzyka-2-k-4-g-3-w.html


life cycle and in connection with this the overlooking of the moment when the recording

became popular (this is, inability of selling it on-line due to the expiration of the rights to

the recording) van be dear116;

problem of delivering the materials of marketing nature to the internet retailers – the ag-

gregator on the basis of materials sent by the music publishing companies, prepares and

delivers promotional content to the stores with files; only the biggest phonographic com-

panies will be in a position to operate in this field fully independently; aggregators have

knowledge about how to promote the recordings in the stores with files and thanks to this,

they will not confine themselves to displaying the content in the store, but they also sup-

port the sales actively117; this also makes sense in case of internet retailers for whom the

sale of music is an additional activity118 - in such a form it is more profitable to subcontract

certain tasks from the aggregate than to hire the specialists to prepare the marketing mes-

sages which appear in the sore with the files119.

The agreements which the phonographic companies sign with the aggregators depend upon the

size of the catalogue which the publishing company disposes. As an example, global music concern

signs with the aggregator a very concrete, non-exclusive agreements for the delivery of the

selected content to the strictly defined services120. It is assumed that the global concern prefers to

reach certain services via the aggregator. In such a situation the concern grants to the chosen

aggregator a licence for the music content and then, the aggregator sublicenses it to the concrete

service121.

In case of small phonographic company the conditions for co-operation will look different. As a

rule, the agreement entered into with the aggregator will usually be of exclusive type. The

116 Id.117 Interview No 1.118 See, e.g. Netia store http://e-sklep.netia.pl/muzyka-2-k-4-g-3-w.html119 Interview No 6.120 Interview No 9.121 Id.

48

http://e-sklep.netia.pl/muzyka-2-k-4-g-3-w.html


agreement is usually entered into for the indefinite period of time and then it is prolonged for the

indefinite period of time upon few months’ termination notice122.

The detailed terms and conditions of the signed agreements are covered by the trade secrets,

however, it can be emphasised that there is a following dependency – the bigger and more

attractive catalogue a given publishing company has, the better conditions this company is able to

negotiate with the aggregator123.

There happens the co-operation between an aggregator and an individual artist who manages the

artist’s performance rights and rights to recordings independently, however, taking into account

the fact that from the aggregator’s point of view each subsequent contractor generates costs, such

artist should have a strong position on the music scene.

Another entity of which the role on the digital market calls for explanation, is a publisher (the

publisher is not mentioned in the Polish Legal Act on Copyrights and the Related Rights). The

publisher deals with the management of the proprietary copyrights (to the music and text) on the

basis of the agreement between the author and the publishing company, which is entered for the

definite period of time, or if such rights have been bought and assigned to the publisher, for the

continuance period of proprietary copyrights: from the moment of signing the agreement up to 70

years after the author’s death. The publisher has the right to manage and benefit from the

proprietary copyrights to the pieces created and delivered by the author. In some fields of

exploitation such rights are transferred to ZAiKS (within the scope of the so-called mechanical

rights, namely, the privileges resulting from the proprietary copyrights to multiply on the media

and public rights which refer to all forms of dissemination), and in other fields of exploitation they

are not (e.g. sound and picture synchronisation, reproduction in print, exercising dependent

copyrights, such as, utilisation of developments, adaptations, arrangements, translations, linking

with other music, literary or drama pieces, or adding new words to the music layer, or new music

122 Interview No 1.123 See also point 7 above.

49


to the lyrics of the piece)124.

There are four big publishers operating on the Polish market: SM Publishing (an affiliate of

Sony/ATV Music Publishing managing also catalogue of EMI Music Publishing), Universal Music

Publishing, Warner/Chappell and Schubert Music Publishing. These companies are foreign

branches of publishing companies and therefore they largely represent the catalogues of foreign

pieces of music. In addition to this, these companies manage the rights of the Polish artists and

sign agreements with the new creators.

The management of the rights to foreign catalogues by the publishers as well as their co-operation

with the collective management organisations is of complex nature125.

The example of this could be Sony/ATV, of which the English and American repertoire in case of

internet exploitation field was not entrusted to the local branch of the company because the head

office manages it directly, or e.g. via PAECOL126 (the local branch may represent the head office in

the talks with the contractors, but cannot sign the agreement regarding the English and American

repertoire itself).

Thus, the rights to the English and American repertoire on the territory of Poland were not

entrusted to ZAiKS (only the Polish repertoire was entrusted). As a result of this, the multi-

territorial licences for English and American repertoire can be obtained by the users from the

organisation indicated by Sony/ATV Europe (PAECOL), but the licences to the Polish repertoire can

be obtained from ZAiKS. However, this leads to the collision of rights127, because ZAiKS grants them

irrespectively of the repertoire to the interested customers on the Polish territory pursuant to art.

21 section 2¹ (radio and TV organisations are allowed to broadcast works only on the basis of the

agreement concluded with the collective management organisation, which is applicable to internet

124 Interview No 3.125 See point 14.126 The initiative was commenced after Recommendation of the European Commission of 2005 took effect http://eur-lex.europa.eu/LexUriServ/site/en/oj/2005/l_276/l_27620051021en00540057.pdf and also in the so-called CISAC Case, see point 14 and http://www.cisac.org/CisacPortal/miscDocs/CISAC_Case_Briefing%20paper_EN.pdf 127 Interview No 3.

50

http://www.cisac.org/CisacPortal/miscDocs/CISAC_Case_Briefing%20paper_EN.pdf

http://eur-lex.europa.eu/LexUriServ/site/en/oj/2005/l_276/l_27620051021en00540057.pdf


respectively128). Despite the lack of authorisation ZAiKS grants these licences treating section 21 as

a provision constituting the state licence allowing to use the works via the collective management

organisation129. This situation does not result from of the malevolence of a Party, but from the

complicated legal regime which came into being after the European Union Recommendation of

2005 took effect as well as from the so-called CISAC Case (see point 14 and footnote 137).

14.To which extent the territorial nature of services and internet stores results from the territorial character of the copyrights law and to what extent it is conditioned by economic factors

The reasons for the territorial limitations standing in the way of the development of electronic

market for music content in Europe are complex and are not confined to the problems arising from

the territoriality of the copyrights law. Analysing the reasons for the relatively late arrival of global

players at the Polish market, the following factors can be highlighted130:

1. Insufficient access to the broadband internet and mobile internet (3G, LTE) and other tech-

nological barriers, e.g. insufficient availability of smartphones (this situation is improving

fast)

2. Low percentage of credit cards holders in the target groups defined by the services offering

access to music content on-line (the youth). Another impacting factor is also a lack of trust

128 The literal meaning of Art, 21 of the Legal Act on Copyrights and the Related Rights is the following:”1. Radio and TV organisations are entitled to broadcast small published music pieces, words, words and music only on the basis of the agreement concluded with the collective management organisation managing the copyrights unless the right to broadcast the works ordered by the radio, or TV organisation is vested in it on the basis of a separate agreement. 2. The creator can resign from the intermediation of the collective management organisation managing the copyrights in the agreement concluded with radio, or TV organisation, which is referred to in section 1. The resignation shall be in writing under the pain of invalidity. 21. Provisions of section 1 and 2 are respectively applicable to the public dissemination of the works in such a way so that everybody could have an access to them in a place and at a time chosen by themselves”. 129 Interview No 3.130 Se also: European Commission, (2012). Commission staff working document. Impact assessment accompanying the document Proposal for a Directive of the European Parliament and of the Council on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market, http://ec.europa.eu/internal_market/copyright/docs/management/impact_assesment-com-2012-3722_en.pdf

51

http://ec.europa.eu/internal_market/copyright/docs/management/impact_assesment-com-2012-3722_en.pdf

http://ec.europa.eu/internal_market/copyright/docs/management/impact_assesment-com-2012-3722_en.pdf


on the side of the consumers to make transactions by credit cards via internet (worries re-

lated to the security of the transaction).

3. Conviction of the companies running services offering access to music content on-line

about the high level of piracy in Poland (though the fact of entering the Polish market by

such global players like iTunes, Deezer, or Spotify stands up for wrong belief).

4. Reasons purely related to business, depending on the business model adopted by a given

company. As an example, business model of Apple company is based, first of all, upon sale

of devices for playing music tracks (iPod, iPhone) and that is why this company enters in the

first instance the markets which give an opportunity to boost sales of these devices. Most

likely, Polish market has been assessed only recently by this company as prospective one.

5. Legal regulations not related to the copyrights and the related rights. The example can be

the legal rules governing the protection of personal data, or the consumers’ protection. It is

difficult to assume that the differences between the European countries can pose a serious

barrier in the long-time horizon for the companies running stores offering access to music

content on-line, nevertheless, at certain stage of the development these companies can

choose markets on which it is relatively easy to do this kind of business being in compliance

with the binding rules.

6. The success of the store offering music content in digital formats requires the launching of

widely designed promotional and information campaign aiming at persuading consumers

into using new channels of access to music. It is not only about convincing the users down-

loading files from unauthorised services that it is worth paying for the music. It is essential

to show to the less technologically advanced consumers that the use of legal stores offering

music content in digital formats is easy, comfortable and safe.

7. In connection with the above, the entities entering the Polish market are challenged by the

following dilemma: an entity which as the first one will want to attract a considerable num-

ber of customers, will have to take on their shoulders a burden of and a cost of launching

widely designed promotional and educational campaign aiming at making the consumers

52


aware of the advantages of consuming music on-line. The outcome of such campaign could

be either reaching the market leader’s position, or of a service which will do a “dirty job”

for others and as the only one will bear a tangible costs of running promotional and educa-

tional campaign and the benefits flowing from that campaign will also be appreciated by

the competitors. In this situation the companies running this type of services can tend to

adopt the waiting attitude and plan the promotional actions very carefully. As was men-

tioned in point 11 in maximum two coming years’ time it shall be expected that the situ-

ation will be subject to a rapid change in this aspect (the first symptoms of the change are

visible at the moment of report making).

15.The forecast impact of the introduction of the so-called European licence passport based upon the project of Title III of the Directive on collective management of copyrights and the related rights as well as granting the multi-territorial li-cences of rights in musical works to be used in the internet field of exploitation in the internal market on the situation of the Polish entities operating in the area of on-line music sharing

In accordance to CISAC data of 2011 the collective management organisations collected 7584

million EUR all around the world, of which 4537 million EUR in Europe alone. In the year 2011 88%

of the funds collected all around the world (about 6800 million EUR) came from the exploitation of

musical works131. For comparison, the world sale of recordings in the year 2010 was worth of

16146 million USD132. The collective management organisations are then big player in the broadly

understood music industry and Europe in their case is a key area generating considerable part of

revenues.

131 CISAC (2011). Authors' Royalties Report. http://www.cisac.org/CisacPortal/documentLink.do?id=24896&lang=en 132 RIAJ (2012). RIAJ Yearbook 2012. http://riaj.or.jp/e/issue/pdf/RIAJ2012E.pdf

53

http://riaj.or.jp/e/issue/pdf/RIAJ2012E.pdf

http://www.cisac.org/CisacPortal/documentLink.do?id=24896&lang=en

http://www.cisac.org/CisacPortal/documentLink.do?id=24896&lang=en


In addition to the purely financial dimension, the collective management organisations managing

the copyrights play a key role facilitating the development of the market for music content on-line.

From the economic perspective the activities of the collective management organisations are

characterised by few features which determine their specifics as compared to the majority of

economic entities operating on the competitive markets. The depiction of the economic

characteristics of the collective management organisations will make possible the impact

assessment of the proposed solutions in the Title III of the Directive on the operations of the Polish

entities present in the area of music sharing on-line.

Firstly, the collective management organisations are, as a rule, natural monopolies133. This means

that due to their specific structure of costs (average long-term costs are constantly decreasing) on

the market served by them (most often, on the territory of one country), the most economically

wise is one collective management organisation serving a given group of entities.

In other words, the costs of market production (in this case the costs of service provision) are the

lowest because it is concentrated in the hands of one company – two or more entities operating on

the market would generate higher costs than one enterprise.

As for the Polish music market, from among four collective management organisations, only

two, SAWP and STOART offer their services to the same group of entities (performing artists),

whereas ZAiKS and ZPAV are within the boundaries of their area, a monopolists. It is with noting

here that the efficiency of the natural monopoly in case of Polish collective management

organisations is limited on some fields of exploitation (first of all, in the field “public playing”) by

doubling the structures used for controlling whether the users have purchased licences for the use

of music content. In other words, from the economic perspective, the sending of one inspector to

an entity playing the recordings would be more efficient (e.g. discothèques), who will represent all

four organisations than as it is now done, delegating an inspector by each collective management

organisation. The conducted survey shows that the collective management organisations have

133 Directorate-General Internal Policies, Policy Department C. (2006). The Collective Management of Rights in Europe. The Quest for Efficiency. Study. http://www.keanet.eu/report/collectivemanpdffinal.pdf, 16.

54

http://www.keanet.eu/report/collectivemanpdffinal.pdf


made steps towards such solution134.

It is worth answering the question of to what extent the phenomenon of monopoly

develops in case of internet field of exploitation. On one hand internet is not subject to

geographical limitations, which could suggest that non-appearance of part of the costs related to

the control of entities using the rights (e.g. cost of travel to the service point in order to make

control). It would be an argument for the abandoning of the thesis about the natural monopoly in

case of internet fields of exploitation. On the other hand, in the present stage, the collection of

fees for the internet exploitation requires significant investments into IT systems and generates

costs related to the serving of the authorised entities (what, as was explained earlier, is time-

consuming and costly), which, in the current situation calls for the postponement of evaluation of

to what extent the problem of natural monopoly occurs in case of internet fields of exploitation. As

long as the internet fields of exploitation will not dominate the traditional fields of exploitation,

the argument about natural monopoly cannot be defended.

Secondly, the activities of the collective management organisations benefit from economy of scale

effect. In economy science, the scale effect is described as a situation in which “proportional

increase of all the outlays leads to the more than proportional increase of the production size”135.

In case of the collective management organisations, it is not the production that counts, but the

size of the catalogues of rights which are managed by a given collective management organisation.

The bigger the catalogue, the lower the costs per one work (one authorised person) are borne by a

given organisation.

Thirdly, the market on which the collective management organisations operate, can be defined as

two-sided market136. On one hand, the collective management organisations operate on the

market of rights owners (the creators, producers, performing artists), but on the other hand, on

the users’ market. As long as for each of these groups, the collective management organisation is a

134 Interview Nos 13 and 14.135 Frank, R.H. (2007). Mikroekonomia jakiej jeszcze nie było. Gdańsk: GWP, 331.136 Zob. Drexl, J., Nerisson, S., Trumpke, F., & Hilty, R.M. (2012). Comments on the Proposal for a Directive of the European Parliament and of the Council on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market, Max Planck Institute for Intellectual Property and Competition Law, http://www.ip.mpg.de/files/pdf2/Max_Planck_Comments_Collective_Rights_Management1.pdf, 5.

55

http://www.ip.mpg.de/files/pdf2/Max_Planck_Comments_Collective_Rights_Management1.pdf


monopolist, the consequences of two-sidedness of the market are not a factor which could have

an impact on the choice of a concrete collective management organisation by the rights owners, or

the users. However, if there was a competition between the collective management organisations,

then these of the collective management organisations which acquire the biggest number of

rights, would be naturally more attractive for the users wanting to obtain the content, which, in

turn, taking into account the impact of network effect would elevate the market chances for the

biggest collective management organisations.

Fourthly, the activities of the collective management organisations are conditioned by the

dependence between the transactional costs and the distribution of revenues, which is defined in

statistics as “long tail”. One of the operating goals of collective management organisations is to

reduce the transactional costs. It results from the core of the collective management organisations’

operations: thanks to the entrusting of the rights, the content owners do not have to vindicate the

fees due for them themselves, it is done for them by one organisation.

As a result, the simple dependence occurs, namely, the more rights have been entrusted to a given

collective management organisation, the more savings are generated from its activities (big

number of transactions between the dispersed rights owners and the individual users are replaced

by licences granted by the collective management organisations137. However, it is worth answering

a question of what is more profitable for the collective management organisation: to focus on

serving the rights owners, who have the content which is the most attractive for the users, ignoring

the owners whose rights are seldom used, or to serve all rights owners? The answer to this

question which option is the best is illustrated by the distribution of the popularity of given rights.

Three exemplary variants are illustrated in diagram 14.1.

Diagram 14.1. Three possible distributions of rights popularity

137 It is worth noting that in case of traditional fields of exploitation, the measurable savings can also be owed to the factors of geographic nature. As an example, it can be cheaper to collect the fees from the users in small and highly urbanised Holland than in big and poorly urbanised China.

56Long tail The entire repertoire Is equally popular

Small part of the repertoire is very popular and the rest is less popular

Popularity of a work

Number of works

popularity of a work Popularity of a work

Number of worksNumber of works


Source: Own study.

In case of distribution where each work from the catalogue is equally popular, it is equally

profitable for the collective management organisation to manage each work. In case of distribution

where small part of the repertoire is very popular and the rest of works is less popular, it is

profitable for the collective management organisation to focus on only the more popular part of

the catalogue.

The distribution of “long tail” type is an intermediate variant – the assessment of the profitability

of serving each rights owner would require in each case a detailed data (among other, the data

showing the length of a tail, this is, proportion of the popular works to the less popular ones). In

practice, it seems that the popularity of works is extremely tilted in the direction of narrow group

of very popular recordings. As the representative of E- muzyka estimates, from about 4 million of

recordings which it has in its catalogue, only about 100 thousand generated any income138.

In practice, the collective management organisations adopt solidarity strategy, this is, they

treat each rights owner equally, regardless the revenues that the entrusted works generate. The

proposals set out in the Directive evoke a question about the implementation of this strategy by

the collective management organisations granting multi-territorial licences.

138 Interview No 6. However, it shall be noted that the quoted data refer to the recordings, not the works, though the data representing the works would look similar, which is raised by, e.g. Kretschmer, M. (2005). Artists' earnings and copyright: A review of British and German music industry data in the context of digital. First Monday, 10(1).

57


Even if the Directive imposes an obligation of indiscrimination of smaller entities139 on the entities

granting multi-territorial licences (e.g. small collective management organisations which grant the

above mentioned licences), there is a risk that the weaker negotiation position of small entities

resulting from the fact that their less popular repertoire (on international scale) will be practically

only a cost for big collective management organisations and will make impossible for them a

sufficient protection of the interests of the represented creators.

Fifthly, considering the introduction of the competition between the collective management

organisations coming from different countries (one of the proposals set out in the Directive), it

shall be remembered that the repertoires which the collective management organisations possess

are not from the economical point of view the substitution goods, but complementary goods. It

means that in majority of cases the user who did not make a deal with, e.g. Czech collective

management organisation will not be interested in replacing its catalogue with the catalogue of,

e.g. Hungarian collective management organisation. To put it in other way, the catalogues of

different collective management organisations situated in different member states of the European

Union are not substitutes for one another, but they are complimentary, only being together they

create an attractive proposal for the users. The only exception is, in this case, the English and

American catalogue which because of its popularity and commercial attractiveness is capable of

meeting the users’ expectations on its own.

Sixthly, the serious economic consequences result from the fact that it is not enough that

the entity wanting to open a store offering music content was granted a licence for the use of the

rights from the collective management organisation, or from other entities representing them

(publishers).

As was mentioned in point 12, it has to also acquire a catalogue of recordings and the rights to the

artistic performances. This situation corresponds with the phenomenon defined in the economy as

anticommons (which can be translated into Polish as “a trap of reciprocal exclusion”)140. It emerges

when the fulfilment of a certain goal (e.g. the opening of a store with music content on-line)

139 It is said in art. 28 section 1. (…) „Collective management organisation which was commissioned to grant licences, manages these rights in the internet field of exploitation on indiscriminating conditions.”140 Buchanan, J. M., & Yoon, Y. J. (2000). Symmetric tragedies: Commons and anticommons. JL & Econ., 43, 1.

58


requires a consent of many entities, of which each has the right of veto, this is, can impede the

implementation of the undertaking by taking a blocking decision. Such situation leads to the

suboptimal use of resources and causes a social loss.

In case of opening a store with music content on-line operating on the territory of the whole

European Union, it is necessary not only to obtain a consent for the use of the catalogues of works

from many countries (wherein the collective management organisations, or the publishers

controlling the rights to the most attractive catalogues will have power equal to the right of veto),

but also will have to obtain approval for the use of recordings and artistic performances, which

would generate an additional risk of blocking the undertaking by the owners of the most attractive

catalogues of recordings.

The economic features of the collective management organisations presented above, set a

framework for the analysis of the proposed provisions of the Directive. Moreover, the proposal set

out in the Directive shall be interpreted in the context of the outcome of the implementation of

the Recommendation of 2005 and the so-called CISAC Case (see footnote 137). The

Recommendation of 2005 and the so-called CISAC Case contributed to the gradual disassembling

of the system of mutual representations through hampering the transfer of the rights management

from the collective management organisations to other institutions (other than collective

management organisations, or the companies managing the rights). The examples of such

institutions are:

CELAS (The Centralised European Licensing and Administrative Service) – an entity belong-

ing to the British collective management organisation PRS for Music and the German col-

lective management organisation GEMA, dealing with the granting of licences for the use of

EMI Music Publishing catalogue through internet and mobile services;

PAECOL (Pan-European Central Online Licensing) – an entity belonging in 100% to GEMA,

dealing with the use of the catalogue of Sony/ATV Music Publishing through internet and

mobile services;

59


DEAL (Direct European Administration and Licensing) – agreement signed with the French

collective management organisation, SACEM and Universal Music Publishing Group, giving

the right to the former to grant under its own name to the latter Pan-European licences for

the use of Universal Music Publishing catalogue through internet and mobile services;

PEL (Pan-European Licensing Initiative of Latin American Repertoire) – initiative of the

Spanish collective management organisation SGAE and of central and south American col-

lective management organisation as well as of Sony/ATV Music Publishing aiming at grant-

ing Pan-European licences for the use of catalogues of the entities taking part in this initiat-

ive through internet and mobile services;

PEDL (Pan-European Digital Licensing) – initiative of Warner/Chappell and six collective

management organisations (British PRS For Music, Swedish STIM, French SACEM, Spanish

SGAE, Belgian SABAM and Dutch Buma/Stemra aiming at the granting of Pan-European li-

cences for the use of the English and American catalogue of Warner/Chappell through in-

ternet ad mobile services;

IMPEL (Independent Music Publishers European Licensing) – initiative of PRS for Music giv-

ing the smaller publishers141 the possibility of granting (via PRS) of the licences for their

English and American catalogue through internet and mobile service.

As Mazziotti points out, „ contract practices and solutions worked out by the local collective

management organisations in order to protect their authors (tis is, composers and the authors of

the lyrics) in a situation when they negotiate with the publishers, grossly hampered the

implementation of the Pan-European multi-territorial licences. Such situation occurred because full

withdrawal and transfer of the mechanical rights and the right to public playing of musical works

from the traditional collective management organisations to the newly created, centralised

agencies implied the approval of the authors of all the works, of which the ownership stayed in

their hands, or was co-shared by the musical publishers”.142 Due to the differences between the 141 The so-called independent publishers. 142 Mazziotti, G. (2011). Collective Management of Copyright: Solution or Sacrifice?: New Licensing Models for Online Music Services in the European Union: From Collective to Customized Management. Colum. JL & Arts, 34,

60


law being in force in Great Britain and the law of the countries of continental Europe, the

withdrawal of the rights entrusted to the local collective management organisations without the

necessity of obtaining approval from the authors, or collective management organisations

representing the authors is limited only to the mechanical rights to the English and American

repertoire. As a result of this, the above mentioned agencies possess the full catalogue of works

(though it shall be pointed out that that that catalogue consists of the part of rights to the most

attractive, this is, the English and American repertoire).

An example of the solutions which Mazziotti writes about is, in case of the Polish market, art. 21.

Section 21 of the legal act on copyrights and the related rights (see footnote 139). In the opinion of

the publishers this article does not fully specify the point that if the publisher (publishing

company) grants a licence to the entity offering the access to the digital content on-line, will it be

questioned by ZAiKS, or not?

For this reason and also due to the small size of digital market in Poland resulting in the lack of

interest in re-negotiating the agreements about the entrusting the rights in the internet field of

exploitation, the consequences of the decision in CISAC Case and of the Recommendation of 2005

are still not that much felt by ZAiKS.

It shall be emphasised that such organisations as CELAS undertake activities aiming at the

extension of the rights which were entrusted to them to be able to offer the users a complete

package of rights to the given repertoire143. It is a slow process, which is proved by, e.g. information

on the CELAS side stating that “the users can need to obtain additional licence encompassing the

local repertoire, or the additional repertoire.144 Despite that it shall be beyond any doubts that the

agencies such as CELAS will reach a certain critical mass (the repertoire resource, which will be

sufficiently big and attractive for the users). Then, the specifics of the operating on the two-sided

market will have an impact to their benefit, which can mean that the smaller players shall have no

other way-out, but to join such initiatives. It is important to emphasise that this scenario can be

implemented even if the Directive is turned down.

757-808.143 Mazziotti, footnote 153, p. 781.144 CELAS (2013). Licensing Online and Mobile Use, http://www.celas.eu/CelasTabs/Licensing.aspx

61

http://www.celas.eu/CelasTabs/Licensing.aspx


In case of accepting the Directive in the form proposed by the European Commission, the

most viable scenario is the dominance of several collective management organisations in extreme

case, one collective management organisation), which are in a position to offer multi-territorial

licences. Not going deeply into the real preparation of particular collective management

organisations to grant multi-territorial licences, these collective management organisations will

have the biggest chance for success, which possess the most attractive catalogues – PRS for Music,

GEMA and SACEM. It is also highly probable that the main players on the rights market will be not

the collective management organisations, but publishers and the agencies established by them (in

co-operation with the collective management organisations). In case of the development of this

scenario these collective management organisations will have the biggest chance for surviving and

growth which will take part in the establishment and functioning of the above mentioned agencies

(as it was described above, these are mainly PRS for Music, GEMA, SACEM and SGAE).

The processes which may happen in case of adopting the Directive are described

extensively in the report ELIAMEP:

„In the situation when the survival of the collective management organisations will

depend upon the size of the catalogue managed by them, it can be concluded that

the collective management organisations from the Eastern Europe will disappear

as the first ones because they manage the limited local portfolio. The collective

management organisations from Western Europe functioning in the countries such

as Greece, or Portugal will follow their footsteps. Despite the fact that the size of

the local repertoire is in case of these countries is substantial, the collective

management organisations functioning there do not have the necessary know-how

to grant the multi-territorial licences. Hence, their economic strength will depend

upon their capabilities to extend the activities to other territories and to

modernise the applied licence processes. The collective management

organisations from Scandinavian countries, Holland and Belgium will occupy the

third place. Despite the capacity to grant the multi-territorial licences, their local

catalogues are not absolutely necessary for the launch of Pan-European on-line

music services145”.145 Hellenic Foundation for European and Foreign Policy (2009). Collecting societies and cultural diversity in the

62


A statement can be risked that the size of the catalogue is a factor which positively

differentiates ZAiKS among the collective management organisations from other Central

and Eastern European countries, but despite this the said organisation is threatened with

processes which are reflected in the cited fragment of ELIAMEP report. The reason for this

is first of all relatively poor technological advancement of ZAiKS146 and relatively low

interest in the catalogue outside the Polish borders. The first problem can be overcome,

but it requires the significant outlays on the building of the IT system making possible its

advancement and fast reporting.

Taking the other factor into account – the popularity of Polish catalogue, it shall be noticed

that the interest in a catalogue of a given country can increase147, however the time and

investments are needed to popularise the Polish lyrics and music creativity.

How difficult this task is indicated by, e.g. the fact that the majority of the collective

management organisations have a negative impact on the balance of sharing with the

organisations from the Anglo-Saxon countries148; it even refers to the collective management

organisations which are localised in the countries which are enjoying a relatively strong local music

market (e.g. Japan JASRAC, Italian SIAE149). The exception which can be used as an example to

follow is Sweden – in the year 2004 the commercial value of the Swedish lyrics and music creativity

amounted to 85 mln EUR150, and in the year 2008 the total export of Swedish music industry

exceeded 800 mln EUR151. The analysis of the Swedish case shall be emphasised as one of the

recommendations of this study.

music sector. http://www.uni-muenster.de/Jura.itm/hoeren/veroeffentlichungen/hoeren_veroeffentlichungen/Collecting_Societies_and_Cultural_Diversity_in_the_Music_Sector.pdf, 23.

146 This was underlined by the respondents who wanted to stay anonymous. 147 What could be inferred from the, e.g. world success of the South Korean hit “Gangam style”, though it is worth

noting that there is no information as at today speaking for the fact that the popularity of one song was translated into the interest of the whole catalogue coming from a given country. Undoubtedly enough, the success of one work can be used as a strong attribute in the process of building the country’s brand.

148 As an example, the United Kingdom in the year 2000 was an exporter of music compositions, achieving a surplus of about 321 mln EUR. The Collective Management of..., footnote 144, p. 40.

149 Page, W. & Carey, C. (2010). Economic Insight Issue 20 http://prsformusic.com/creators/news/research/Documents/Economic%20Insight%2020%20web.pdf

150 The Collective Management of..., footnote 144, s. 40.151 See The Swedish music export phenomenon http://www.sacc-sandiego.org/415/

63

http://www.sacc-sandiego.org/415/

http://prsformusic.com/creators/news/research/Documents/Economic%20Insight%2020%20web.pdf

http://www.uni-muenster.de/Jura.itm/hoeren/veroeffentlichungen/hoeren_veroeffentlichungen/Collecting_Societies_and_Cultural_Diversity_in_the_Music_Sector.pdf

http://www.uni-muenster.de/Jura.itm/hoeren/veroeffentlichungen/hoeren_veroeffentlichungen/Collecting_Societies_and_Cultural_Diversity_in_the_Music_Sector.pdf


Summing up it shall be emphasised that the development of situations depends upon the

final shape of the Directive which can be subject to changes. The essential factor having an impact

on the functioning of the smaller collective management organisations is the tempo of the

development of the on-line music market in the European Union. As long as the traditional

distribution channels for music content (not only sales of the recordings, but also, e.g. the music

broadcast by traditional radio stations) generate tangible revenues, the threats described in this

point are not conclusive for the existence of the smaller collective management organisations.

However, it can be expected in the longer time perspective that the importance of the traditional

sources of income for the collective management organisations would decrease, which will make

possible the efficient functioning in the on-line world, which is crucial for the survival of these

organisations (see Table 14.1).

Table 14.1. Summary of the forecast impact of the introduction of the so-called European licence

passport on the situation of the Polish entities operating in the area of on-line music sharing.

Category of the entity

Scenario I: ZAiKS grants the multi-territorial licences

Scenario II: ZAiKS does not grant the multi-territorial licences

Creators Preparation for granting the multi-territorial licence requires considerable investments into infrastructure and software programmes. It can be expected that if ZAiKS decides to grant the above-mentioned licences, than part of the costs which shall be borne in connection with this will be incurred by the creators.

If ZAiKS does not decide to grant multi-territorial licences and chooses the multi-territorial licence, which will do it on its behalf, then, the majority of creators most likely will not initiate action of their own behalf (this is, they will not move out the rights from ZAiKS). The exception can be the creators co-operating with big publishers who will arguably decide to manage the rights in this field of exploitation via their intermediation.

ZAiKS ZAiKS bears the costs of key investments into infrastructure and software programmes not guaranteeing that they will allow the creator to compete successfully with

In practice, ZAiKS will act exclusively in the traditional fields of exploitation. In the long-time horizon the role of ZAiKS can diminish as the internet fields of exploitation will gain in importance.

64


the barons (e.g. PRS for Music, GEMA).

Publishers They choose the entity which offers them better terms and conditions, in mid-term they can gain a dominant position in relation to the collective management organisation (providing that the copyrights law is amended).

They choose an entity which offers them the best terms, in the mid-term horizon they can take a dominant position in relation to the collective management organisation (providing that the changes will be enacted in the copyrights law).

Polish branches of global music concerns

They act in the same way as the publishes connected with them.

They act as the publishers connected with them.

Smaller Polish music publishing companies

Most likely, the changes will not affect them. These publishing companies which will also represent the creators’ rights (as independent publishers) will look for an entity which will offer better terms and conditions, but in case of smaller publishing companies this can mean not only a commission of the given collective management company, but also the minimisation of formalities (this company will win which offers all the rights “at one click”).

Most likely, the changes will not affect them. These publishing companies which will represent also the creators’ rights (as independent publishers) which will search for an entity which will offer the best terms, so in case of smaller publishing companies it can mean not only the commission for the given collective management company, but also the minimisation of formalities (this wins who offer all the rights “at one click”).

Users (e.g. internet retailers

They choose an entity which offers the best terms and conditions to them. In case of global services it is highly probable that ZAiKS even if it becomes competitive in term of price, can have a repertoire which is not attractive enough to beat the barons.

They choose an entity which offers them The best terms and conditions. The Polish internet retailers can experience difficulties in competing with the foreign giants.

Aggregators Supposing that the Directive does not include the related rights, then the position of aggregates will not change in the short-time horizon.

If the Directive does not include the related rights, then the position of the aggregators in the short-term perspective has not changed.

Individual consumers of the recordings

They will not be affected by the changes.

They will not be affected by the changes.

65


12.Summary and recommendations

In summary, it shall be emphasised that:

the Polish on-line music content will be developing in the coming years despite the turning

down, or accepting of the Directive;

in the Polish law there are few provisions requiring specification, which results from fast-

pace technological advancement resulting in outdating of the old solutions (e.g.

clarification of interactive webcasting regulations, a change of the definition of the internet

field of exploitation, provisions regarding the service provision by electronic mail);

changes in the area of Pan-European management of the rights and granting of multi-

territorial licences have already been initiated (as a result of the Recommendation of 2005

and CISAC Case); the will progress independently of the acceptance, or rejection of the

Directive and their direction is rather not positive for small collective management

organisations;

it is recommended that the Polish collective management organisations make all possible

efforts to adjust their operations to the requirements of fast changing digital market;

taking into account the interests of ZAiKS, the proposed provisions of the Title III of the

Directive shall be critically assessed; the extent to which the interest of ZAiKS is identical

with the interest of different Polish creators requires further studies;

it shall be monitored how the subscription services approach the observance of the

provisions on the protection of the personal data;

the Polish music market shall be monitored on current basis so that the administrative

bodies could assess annually the directions of the happening changes;

66


the cases of the countries shall be analysed in which the musical market is exceptionally

strong (in relation to the size of the country, as it takes place e.g. in Sweden) by formulating

conclusions which could help to undertake activities supporting the national creativity;

one of the goals which could promote the activities taken in relation to the entities on the music

market is taking care of its variety; it can mean that the regulations favouring the smaller entities

(small publishing companies, independent artists), promoting the development of the content co-

created by the users (user-generated content), supporting the development of alternative

business models built on local scale to enable the existence of the local musical scenes

independently of the condition of the global recordings market.

14.The research methods used and the list of respondents

In order to prepare the report the publications and information sent by the entities

operating on the music market were used at the request of the Ministry of Culture and National

Heritage, the responses provided by the above mentioned entities in the course of social

consultations as well as the information collected in the course of in-depth interviews conducted

with the following respondents:

1. 7.03.2013. Andrzej Dąbrowski, Independent Digital

2. 8.03.2013 Andrzej Paweł Wojciechowski and Tomasz Mosiołek, MJM Music

3. 8.03.2013 Anna Laskowska, SM Publishing (Poland) Sp. z o.o.

4. 8.03.2013 Piotr Turek, Redefine Sp. z o.o. and Jarosław Mojsiejuk, Cyfrowy Polsat

5. 8.03.2013 Piotr Kabaj, EMI Music Polska

6. 14.03.2013 Robert Knaź, E-Muzyka

7. 14.03.2013 Marcin Grabski, Asfalt Records

8. 14.03.2013 Łukasz Mielniczuk, STX Jamboree

67


9. 15.03.2013 Izabela Ciszek-Podziemska, Sony Music Entertainment Polska

10. 20.03.2013 Łukasz Grzejek, Universal Music Polska

11. 21.03.2013 Bogusław Pluta, ZPAV

12. 21.03.2013 Anna Biernacka, ZAiKS

13. 21.03.2013 Jarosław Kamiński, SAWP

14. 22.03.2013 Włodzimierz Wiśniewski, STOART

15. 23.05.2013 Adrian Ciepichał, WIMP

16. 12.06.2013 Aleksander Pawlak, MegaTotal.pl

The interviews lasted, on average, 60 minutes, each has been registered and subjected to analysis.

Moreover, the information which is crucial for the drafting of the report was obtained via

electronic mail. The information was provided by:

17.05.2013 Przemysław Pluta representing Spotify service

9 i 10 07.2013 Jacek Brzuz representing Sound Park service

68

Prawo autorskie - Strona główna€¦ · Web viewInterview No 6. However, it shall be noted that...

Documents

Transcript of Prawo autorskie - Strona główna€¦ · Web viewInterview No 6. However, it shall be noted that...