Contested Collective Administration of

Intellectual Property Rights in Music

The Challenge to the Principles of Reciprocity and Solidarity
j Roger Wallis, Charles Baden-Fuller, Martin Kretschmer and George
Michael Klimis

A B S T R A C T

j Individual intellectual property right holders in music cannot easily

enforce their statutory claims to exclusive usage and remuneration. Since
the middle of the 19th century, composers and publishers have responded
by creating collective bodies, so-called collecting societies which monitor
musical activity in a given territory, and collect and distribute fees
accordingly. These societies, first established in Western Europe, operate
on two principles: the principle of reciprocity, linking monopolistic national
societies and the principle of solidarity, making a collecting service
available to all right holders at roughly the same rate. The rise of the
global media corporation combined with new digital production and
distribution technologies has seriously undermined these principles. The
article reports recent trends drawing on over 30 interviews with executives
of the five largest multinational music firms and the major copyright
institutions in Germany, Japan, Sweden and the UK, including the
European Commission, the World Intellectual Property Organization and
national and international trade bodies. We conclude that the present
structure of music copyright is likely to collapse, skewing the distribution of revenues in favour of big corporate players and global musical

Roger Wallis is Director of the Multimedia Research Group, Charles BadenFuller is Professor of Strategy, Martin Kretschmer is ESRC Research Fellow and
George Michael Klimis is Research Associate, all at the City University Business
School, Frobisher Crescent, Barbican Centre, London EC2Y 8HB, UK. email:
r.a.wallis@city.ac.uk
European Journal of Communication Copyright 1999 SAGE Publications
(London, Thousand Oaks, CA and New Delhi), Vol 14(1): 535.
[02673231 14603705(199903)14:1;535;007238]

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

products if there is no institutional intervention. Policy implications are

discussed. j
Key Words collecting societies, copyright, globalization, information
society, music

Introduction
Authors in the fields of mass communications, sociology and business
studies have identified a set of general trends as regards the economic,
cultural and technological structures of the music industry. They widely
agree that there is an increasing concentration of ownership of
manufacturing and distribution on an international level, leading to a
small number of global media conglomerates (Wallis, 1990; Malm and
Wallis, 1992; Hirsch, 1992; Frith, 1993; Choi and Hilton, 1995;
Burnett, 1996). In addition, there is an increased degree of both formal
and informal integration within and between different sectors of the
media industries, including significantly the amalgamation of organizations which produce recorded music (record or phonogram companies)
and organizations (the music publishers) which own the copyrights to
the music which is recorded (Wallis and Malm, 1984; Wallis, 1994).1
These trends have shaped an increasingly consolidated industrial
landscape: after a wave of mergers and takeovers during the 1980s and
early 1990s, a few multinational media corporations now own most of
the superstars as well as a very large repertoire of music copyrights.
Together, Polygram (Netherlands), Sony (Japan), Warner (US), EMI
(UK) and BMG (Germany) account consistently for 7080 percent of
global music sales. Recent developments under the General Agreement
on Tariffs and Trade (GATT), the North American Free Trade
Agreement (NAFTA) and the European Union, extending the term of
copyright protection to a minimum of 50 years (EU, 70 years) after an
authors death, have made such rights even more attractive as long-term
investments (Chaudhry and Walsh, 1995).2
In parallel to these trends of concentration and integration, there
has been a dramatic change in the channels which convey music. During
the 1980s, many Western governments have sought to deregulate the
media, allowing a proliferation of new local radio channels, new
television channels, including cable and satellite broadcasting.
At the same time the Internet, initially a US government
sponsored network of servers (first designed in 1963), started to expand
rapidly as a communication medium. The Internet, by its nature, is
6

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

largely unregulated there is no Internet Company to turn to when

seeking redress. This raises a number of, largely unresolved, issues
regarding responsibilities in cyber space including privacy, security
and copyright (Hugenholtz, 1996; Hulsink and Tang, 1997).
Deregulation has fostered and been fostered by changes in
technology. At one time, television and radio transmission required
large up-front investments in capital equipment. Now, a local radio
station can be set up for as little as US$50,000; a cable television
station need not cost much more, if the delivery infrastructure is
available; and distribution on the Internet is virtually free. Similarly,
new technology has emerged to make it easy to produce CDs and tapes,
affecting both legitimate and illegitimate users: unlike analogue
recordings, material in digital form can be copied time and time again
without any loss of quality.
These developments are significant in the context of the changing
ways in which music and culture is distributed. One of the most
important trends concerns the structure of intellectual property right
(IPR) revenues. Not only is there a general growth in the revenue
stream, but there is a shift from revenues based on the physical
distribution of tangible carriers such as CDs and tapes to income from
the use of music in media channels. The main factors here are the
growth of music television, the proliferation of private radio stations and
the use of music in advertising and games products. Thus, there is an
increased dependence by actors in the global media arena on immaterial
rights as sources of revenue (Qualen, 1985; Roe and Wallis, 1989;
Rutten, 1991).3 The expanding electronic media are more difficult to
monitor than sales of tangible items, and this means that the structure
and collection of intellectual property rights has become a more pressing
issue than ever before.
Officials of the collecting societies, which represent copyright
holders and collect and distribute revenues generated, are the first to
admit the challenges ahead (Petri [managing director, Swedish Performing Rights Society; STIM], 1997):
Appropriate copyright laws to give us the same rights to control electronic
distribution that we have to control physical distribution, are not in
themselves sufficient if the public have unlimited access to our product.
The problem is, how do you know, in a world where there are no physical
copies, whether our music has been used, let alone who has used it?

This article does not question the fundamental premises of intellectual

property. That has been done by others elsewhere (Vaver, 1990; Thurow,
7

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

1997; Laddie, 1997; Towse, 1997). We are concerned with the ability of
the existing copyright legislation, suitably adapted to new technologies,
to provide for the mix of intellectual property protection and remuneration systems necessary for encouraging and sustaining creativity in the
music industry. This can also be interpreted in terms of the conditions
for the copyright institutions (the collecting societies and the legislation
upon which their activities are based) to be generally accepted as
performing a useful, necessary and fair activity in society. What we
investigate, in other words, is whether the current collection agencies
can stand the strains to which they are being subjected, from within and
without, by the forces of global concentration, corporate integration and
technological change.
We show that the institutional structure under which copyright
revenues are collected and distributed has become destabilized. Our
arguments are based on a careful economic and strategic analysis of
events in the market, and draw on over 30 interviews with senior
executives of the five largest multinational music firms and the major
copyright institutions in Germany, Japan, Sweden and the UK,
including the European Commission, the World Intellectual Property
Organization, and national and international trade bodies (conducted
between 1996 and 1998). We suggest that:
1. There is a danger that the current institutional structure of
music copyright might collapse altogether.
2. There is a danger that the system will tilt away from the
preservation of national culture and tastes in favour of more
global cultures (particularly the Anglo-American).
3. There is a danger that the revenue distribution of IPRs will
only be safe for the most successful artists and largest record
companies, and that barriers to entry will be erected against
smaller companies and less known entrepreneurs.
There are a range of remedies open to public policy-makers, some of
which are far reaching and fundamental.
The distribution of property rights in music and media
The music and media industries have a complex provision of IPRs
which cover both the input and output stages. The structure of these
rights have important economic and cultural consequences. A writer of
a piece of music and in most cases a publisher to whom the author
8

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

has assigned certain administrative rights are protected by a variety

of international conventions (such as the landmark Berne Convention of
1886) with some national variants. These copyright holders (composers/
lyricists, publishers and sometimes musical arrangers) are entitled to a
fee when a piece of music is recorded on a carrier such as a CD (the
mechanical copyright). If the same piece of music is performed in
public, either via a live performance, or via the playing of a recording
on, say, a radio station, then the same copyright holders are entitled to
a performance fee.
Following the lead of authors, performers have more recently been
gaining a measure of rights when recordings have been performed in
public.4 Such incomes, based on the Rome Convention of 1961, are
usually divided between the performers and the owners of the recordings
(the record companies). These so-called neighbouring rights are not as
strong in legal terms as the primary rights enjoyed by authors. Fewer
countries subscribe to this convention, with the US being a notable
non-signatory. This means in practice that it becomes cheaper for radio
stations in many European countries to play recordings originally made
in the USA than in their own or other European countries, thus
providing owners of and performers on US-made recordings what can be
described as a dual unfair advantage they are eligible to less
copyright revenue, but they can enjoy cheaper marketing exposure as
radio stations distinguish between Rome and non-Rome recordings to
save copyright dues.
The complexity of rights means that there are considerable
opportunities for popular artists and the companies which represent
them (e.g. record companies, managers, publishers) to discriminate
among users and to raise their revenues accordingly. If these income
streams are to be collected and distributed to the artists, then it is
critical that they and the firms associated with them are able to identify
usage, collect fees, audit enforcement and, not least, to distribute
income fairly.
Figure 1 shows in diagrammatic form how the ultimate user
interacts in many ways with the various components of the value chain
and illustrates the complexity of rights which have to be accounted for.
It represents a system which has evolved from earlier times when music
publishers were intermediaries linking composers to record companies
(and generating much income from printing and selling sheet music). In
recent decades, two important trends have affected the operations of
publishers:
9

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

Record buyers

Artists

(music)

Record companies

Publishers

Radio/TV

s
right
nce
a
m
or
ts
Perf
igh
r
ce
an
m
r
rfo
Pe

Composers

Figure 1 The origins of mechanical and performing rights

1. Sheet music is a minor source of income compared to

publishers shares of performance and mechanical copyrights.5
2. Many publishers have been incorporated into larger media
corporations owning record companies as well as broadcasting
and film/video interests.6
In recent years, there has been a considerable increase in the potential
extra revenue which can be earned from the rights, even beyond the
system illustrated in Figure 1. For example, the sales of related
merchandise such a T-shirts, memorabilia and themed entertainment
(such as parks or restaurants) have become important. Equally, there are
potential revenues which can be earned from interactive multimedia
applications, involving a whole host of creators whose rights have been
strengthened or extended in recent decades (authors, photographers,
performers, translators, directors, etc.).
The collecting societies

Music copyright was first formally established in England, following a

court case in 1777. Johann Christian Bach (the youngest son of J.S.
Bach, and Londons leading composer of the day) had applied for an
injunction against the unauthorized publication of one of his pieces. It
was judged that music indeed fell under the copyright act of 1709
which protected books and other writings. In Paris, a bureau for
collecting performance royalties for writers and composers of dramatic
work was instigated by Pierre-Augustin Beaumarchais in 1791. However, there was no generally practicable way to turn the legal right to
public performance into economic benefit until a further court case in
10

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

1847. Ernest Bourget, a composer of popular chansons, refused to pay

his bill at the fashionable Paris cafe Ambassadeur where one of his
pieces was being played. You consume my music, I consume your
beverages, he argued. Though the Tribunal de Commerce de la Seine
found in favour of the composer, Bourget realized that, as an individual,
he would never be able to monitor general usage of his music. With the
help of a publisher, a collective body was set up which, in 1851, became
the Societe des auteurs, compositeurs et e diteurs de musique (SACEM),
the first modern collecting society (Kretschmer, forthcoming).
The ambition of modern collecting societies is to enforce a
comprehensive pay-for-play principle, that is to monitor each and every
usage of music in a given territory and collect and distribute fees
accordingly. Most societies operate as de facto national monopolies. The
argument is one of convenience and practicality. It is hard for an
individual copyright holder to monitor usage of a work. Conversely, any
user of music (e.g. a radio station or a restaurant) obviously finds it
more convenient to have one agreement covering all repertoire, rather
than several with different competing organizations representing different catalogues of works.
One exception is the USA where a competitor to ASCAP, the
original national society founded in 1914, was set up during a dispute
with the radio industry in 1940. Members of the National Association
of Broadcasters decided to boycott ASCAP music by using material out
of copyright and commissioning new music specifically for broadcasting
which would not be assigned to ASCAP but Broadcast Music Inc.
(BMI), a new collective body. By a strange anomaly, BMI today is still
owned by the US radio industry, and a third, private licensing company
(SESAC, founded in 1930) has sought to take an increasing slice of the
US royalty cake.7 The difficulties this presents for users is illustrated by
the recent case of a restaurant owner in Jackson Village, New
Hampshire, USA, who only had a contract with BMI following a
contractual dispute with ASCAP. The establishments bar pianist
responded to a guest request for the song Zip-a-Dee-Doo-Da,
composed by an ASCAP member. An ASCAP controller was in the
audience and registered the incident an initial bill for $75,000 ended
with an out-of-court settlement for $4,000 (Restaurants and Institutions,
15 April, 1997).
Collecting societies vary in their construction. NCB (Nordic
Copyright Bureau) in Copenhagen collects mechanical copyrights for the
five Nordic national collection societies, and is owned jointly by four of
them. The UK mechanical copyright society, MCPS, was started by
11

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

music publishers in 1924, who have a majority on the board. In 1997,

a Music Alliance joint venture was formed with the older performing
rights society, PRS (founded in 1914), giving publishers a de facto
overall control over both performance and mechanical rights collection
(and distribution) in the UK. Germanys GEMA, Frances SACEM and
Japans JASRAC collect both mechanical and performance royalties, and
are regarded as author dominated (with composers, lyricists and
publishers each accounting for one-third of executive votes).
The monopoly status of many collecting societies has been
contested under competition law since the early 1970s, particularly in
Europe. In 1971, the European Commission ruled that some of GEMAs
practices violated the anti-trust provisions of the Treaty of Rome. A
recent investigation by the UK Monopolies and Mergers Commission
only conditionally accepted the monopoly status of the PRS. A 1997
working paper from the European Commissions competition directorate
describes the collecting societies as large (and, it must be said,
dictatorial). After reviewing a number of previous cases regarding the
balance between the freedom of individual creators to exploit their
rights and the effective management of societies they cannot avoid
joining, this paper concludes that performance rights societies would
be wise to set up Community antitrust compliance programmes. The
Copyright Unit of the European Commissions internal market and
financial services directorate is now contemplating a directive on the
individual and collective licensing of rights.8
This current scrutiny is indicative of a fundamental dilemma
facing collecting societies: in order to fulfil a practical function in
society, they need to represent a wide range of repertoire. Yet, monopoly
or near-monopoly status leads to accusations of abuse of a dominant
position in the market. The societies prime rationale is to help register
and protect authors rights. Authors, as we have noted, often work with
publishers, who represent them in the market, in return for a percentage
of incomes generated ranging from 33 percent to 50 percent. Publishers
official function is to act as brokers, helping composers get their works
recorded by negotiating with performers or record companies. Thus, the
collecting societies they formed together unite conflicting purposes
under one institutional roof. As de facto monopolies, author-dominated
societies took upon themselves some element of cultural and social
responsibility, often encouraged by the state for example in Germany,
France, Japan and Sweden.
Germanys GEMA defines itself as a Schutzorganisation fur
den
schopferischen Menschen, literally an organization for the protection of
12

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

creative men, funding education, pensions and commissioning serious

contemporary music. Similarly, Swedens STIM uses cultural funds to
promote local composers, run a Swedish MIC (Music Information
Centre) and give stipends. An international agreement between collecting societies, under the umbrella of the Confederation Internationale des
Societes dAuteurs et Compositeurs (CISAC) situated in Paris, allows for
the deduction of social and cultural funds, amounting to a maximum
of 10 percent of incomes generated in the home territory (i.e. excluding
revenues transferred from other collecting societies for performances in
other territories). Local societies can also apply their own brand of
cultural policy by introducing some subsidies into the way income is
distributed, e.g. by paying more for some form of music when
performed. The distribution formula tends to favour serious music over
popular songs (even if performances of the latter generate most income
for the societies).
With an ever increasing amount of music performance, the task of
identifying usage and providing a correct distribution has to be operated
at a reasonable level of expenses. The imbalances which selective
cultural funds and distribution policies introduce are partly designed to
offset the natural bias of sampling methods towards works and
copyright holders which enjoy the heaviest usage. In many cases, the
state guards against a misuse of the collecting societies monopoly
position. The Swedish collecting society, STIM, for instance, has board
members appointed by the government; in Germany, GEMA is audited
by the patent office and the competition authority, Kartellamt.
Enforcing intellectual property rights: the principles of
reciprocity and solidarity
Two principles have been critical to the operation of the current
institutional regime organized along national copyright boundaries.
They are the principles of reciprocity and solidarity.
Reciprocity as a principle was first established by the Statute of
Anne, worldwide the first copyright legislation, enacted by the English
parliament in 1709. The Statute of Anne afforded to foreign residents
and their works the same protection as to English nationals, i.e. the sole
right and liberty of printing for 14 years upon registration of a book at
Stationers Hall, London renewable once. From Berne (1886)
onwards, the international copyright conventions were built on the
principle of reciprocity. Rather than fully harmonizing national legislations, they required that each member country give the same protection
13

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

to works created by nationals of (or published in) member countries as

is afforded to works created by nationals of the country where protection
is sought.
Within the collecting society system, the principle of reciprocity
became the cornerstone of international collaboration. Since each society
operates in a limited geographic location, it requires the services of
others to collect fees outside its boundary, whenever there is a
performance by one of its artists in anothers territory. Between
collecting societies, reciprocity came to mean: we collect and pay if
your works are performed here, and vice versa if our works are
performed in your territory. This has the important consequence that
any sole, national collecting society can issue licences for the world
repertoire it controls via reciprocal agreements with affiliated societies.
A piece by a minor English song-writer might be used in a Japanese
advertising campaign and, within a year, the original composer and
publisher can receive a sizeable remuneration for a usage they could
never have anticipated when the song first was published. Senior
collecting society executives have described the system as a miracle.
Figure 2 shows how the system operates in theory in the case of
mechanical copyright collection and distribution. It shows how the
mechanical copyright societies have to deal simultaneously with
different record companies, composers and publishers, as well as with
other societies.
It is international convention that the charges levied on collecting
revenues are not levied according to cost, but rather at a common rate.
Record
Record
company 1 company 2

Record
Record
company 1 company 2

Record
Record
company 1 company 2

Mechanical
copyright soc. 1
(e.g. MCPS)

Mechanical
copyright soc. 2
(e.g. NCB)

Mechanical
copyright soc. 3
(e.g. STEMRA)

Publishers

Composers

Publishers

Composers

Publishers

Composers

Figure 2 Mechanical copyright and the principles of reciprocity and solidarity

14

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

This leads us to consider the second principle of solidarity. Solidarity

can apply in two senses: solidarity between copyright holders and
solidarity between collecting societies. Agreements linking collecting
societies assume that no society may collect upon the territory of a
foreign society to which it is affiliated. This principle was challenged by
the European Commission in 1971 in a case against the then West
German collecting society GEMA (see note 13). The ruling has led to a
degree of competition between national societies with regard to central
licensing deals (so-called CEL [Central European Licensing] agreements).
Under CEL, individual mechanical copyright societies compete for deals
with specific multinational record companies to collect revenues for sales
in all European territories in return for rebates on rates.
A second version of the principle of solidarity applies between
copyright holders. Collecting societies treat all copyright holders
(roughly) alike: that is, they charge for their services to the artists
typically a flat rate percentage of revenues collected regardless of the
quantity. Charging a flat rate percentage purposely does not reflect cost
differences of collection, for it is far cheaper to collect fees for wellknown artists than for the lesser known. There are fixed costs in setting
up the accounts; equally, the costs of identifying revenue streams from
record sales and performances are not in proportion to popularity.
Famous artists are more likely to have bigger audiences and higher
revenues than their lesser known brethren. Popular works are more
likely to be performed on popular radio stations with a limited range of
output, where the monitoring process is consequently much easier and
cheaper for the society to perform.
Within the constraints of the solidarity principle, however, most
societies have made efforts to balance income and distribution within
different areas of activity monies from radio or television are
distributed to those who are performed on radio or television (as far as
identification allows). Where documentation of music performance is
lacking (e.g. in the case of, say, a hairdressing saloon, which pays an
annual music licence), then distribution is by analogy. Assumptions are
made regarding the type of music source this then decides the sector
from which such incomes are redistributed.
The principles of solidarity and reciprocity used by the societies are
akin to the principles of universal supply well known to economists
involved in public policy analysis. The principle of universal supply is
evident in public monopolies such as letter post, electricity supply,
telephones, water and transportation. It is simplest to explain it in
terms of letter post. The current system in all European countries is that
15

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

there is a single charge for letters which varies by weight and class of
service, but not by destination. This system ensures that all users have
access to the system. Letters posted in a town to be delivered to a
nearby address are charged the same fee as those posted in a remote spot
to be delivered to another far away destination. It is quite apparent that
the letter post system is biased in favour of the light users and those
requiring non-standard treatment, and is biased against the heavy users.
The system has important consequences for social structures. For
example, those in rural communities are favoured and subsidized. In
addition, the current EU system ensures that international users are
subsidized by national ones. The arguments which favour universal
supply provisions and uniform tariff systems include lowering of
perceived transactions costs (that is the costs of organizing multi-tariff
systems may not be worth the benefit), the prevention of exploitation of
minority groups (rural users are unlikely to have effective competitive
markets) and perceived social justice (the feeling that country dwellers
ought to be subsidized as their incomes are lower and they are part of
our heritage). Arguments in favour of these principles have recently
been extended to electronic networks. Public policy debate has stressed
the need for a new communication policy model based on freedom,
access and control. Thus, the US government and the European
Commission argue for the need to provide equal access to the Internet,
not only to the better-off, but also in both rural and innercity areas.9
During the 20th century, the principles of reciprocity and
solidarity in the collection and distribution of IPR revenue were widely
accepted as long as several conditions held. First, publishers had to be
seen to be independent representatives for the composers who could
genuinely negotiate with those who exploited their works (record
companies, broadcasters). Second, the copyright societies exercised
monopoly power in a reasonable way, delivering an efficient service. A
third factor related to the distribution of copyright revenues. If benefits
generally were seen to be distributed equitably, then some distortions
would be accepted as tolerable.
Critics would argue that this state of relative stability led to
complacency, and in some cases, a self-serving bureaucracy. The
collecting societies of continental Europe have come under fire for
charging high commission rates and cultural deductions. On a per
capita measure, however, it can be seen that the European societies are
much more effective in extracting revenues from music users than their
leaner Anglo-American cousins (see Maps 1 and 2, Appendix).10
16

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

Collecting societies represent copyright owners against users, even

though record companies or broadcasters (i.e. users) may be part of the
same media group as the publisher. A once common rule that publishers
have to make printed copies of a work commercially available before
they can collect their share of rights revenue is no longer enforced in
practice by most societies. The institutional system based on solidarity
and reciprocal collection is suffering pressures from within the population of societies, from certain copyright holders (particularly leading
popular composers and publishers), from the authorities and some legal
commentators and, as might be expected, from those who exploit music
and are required to pay for the use. We now outline these pressures.
The rise of the global firm
The weakening of the principles of reciprocity and solidarity on which
the collecting society system was built has followed a number of clearly
identifiable phases, driven in part by the rise of the global music firm.
In Table 1, we give some estimates of the market share of the five
largest music recording companies, and the approximate value of their
sales of physical carriers. It can be seen that the market is large, and
that the total revenues, including immaterial rights, must be significantly higher. The issues at stake are enormous.11
Table 1 Value of world music market and shares of major players

USA
Japan
Germany
UK
France
Canada
Netherlands
Australia
Italy
Korea
Swedena
Taiwan
World

Polygram
% share

Sony
% share

Warner
% share

EMI
% share

BMG
% share

Market value
US$ billions

13
13
23
22
32
20
23
13
19
10
20
17
13

14
18
12
13
25
13
14
27
16
5
19
5
13

22
7
13
11
13
24
8
18
17
4
13
14
14

10
14
22
22
19
10
15
18
15
5
26
6
16

12
8
15
9
11
8
13
6
24
5
22
5
14

12.1
7.6
3.3
2.6
2.4
1.1
0.7
0.7
0.6
0.5
0.3
0.3
35.5

Figures for Sweden are for 1994.

Source: Music Business International (1996) and Music and Copyright (1996).
17

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

The arrival of mass culture on a global scale has altered the

incentive structures of the players in the global music industry. There is
evidence that many buyers, especially youth, favour the global brands
and artists. Stores such as GAP and Benetton cater to global youth
culture. Music by artists such as Madonna is globally appreciated and
commands a disproportionate share of the overall sales. Moreover, while
some of the names are very transient, others last for a long time. Elvis
Presley is more profitable today than he was when he died in 1977; the
three Beatles anthologies still scored as Nos 8, 39 and 159 in the
Billboard list of Top 200 albums for 1996.
Cultural goods can become subject to increasing returns in
economic models of disproportionate competition. In these models, the
drivers of success are not just underlying attractions of artists to
consumers, but curious effects under which success becomes selfenforcing. As Frank and Cook (1995: 115, 24) argue:
In some arenas absolute quality is all that buyers really care about. The
buyer of a machine tool, for example, is willing to pay 10 percent more
for a machine that yields 10 percent more profit than competing
machines. In many arenas, however, relative performance is what matters
to the buyer. . . . In tennis, for instance, how much a player earns depends
much less on how well she plays in absolute terms than how well she
performs relative to other players.

Models of disproportionate competition appear to favour the diffusion of

goods which already have become known in some way. If a song reaches
the Top 10, it becomes even more attractive by the epidemic effects of
word-of-mouth and other publicity. An artist such as Madonna is a very
big seller though she is (arguably) not disproportionately better than
anybody else. It is well known that in most cultural markets, 10 percent
of goods account for 90 percent of sales a fact borne out by the
distribution of copyright societies under which 10 percent of writer
members typically receive 90 percent of revenues (Monopolies and
Mergers Commission, 1996: 657).
Cultural firms have learned to live with these curious competitive
dynamics, long before they became fashionable in the analysis of high
technology markets (Arthur, 1996; Kretschmer et al., 1998). Usually,
they offer a much larger number of candidates to the market than they
expect to succeed. In recent years, many firms have a adopted a much
more active role in controlling the process of diffusion. On the one
hand, they increasingly promote sequels to already well-known products; on the other hand, they make use of global economies of scale.
18

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

The concentration and vertical integration of music firms is both a

response to this emerging economics, and an attempt at driving the
phenomenon. The global firm (or alliances of firms) is able to promote
music on a bigger scale, which in turn helps to maximize the sales of
the most popular pieces and assures success to those which are marginally doubtful. By buying up publishing rights, successful recordings
owned by the same company generate even more income via both
mechanical and performance revenue streams. It has been estimated that
some 80 percent of cash flowing through the collecting societies comes
from and goes to the five major music multinationals, even though their
publishing, recording and broadcasting arms might behave as independent entities in the market, using copyright societies as negotiating
intermediaries.
Not all firms, of course, want to play the same game. Some would
like to dominate a regional sphere, believing that their skills lie in this
direction. Moreover, there is frequent new entry by smaller firms
looking for new trends. If successful, they grow rapidly. Yet once music
firms reach a critical size, they are inevitably taken over by the bigger
players. When Thorn-EMI bought Virgin Records in 1992 for close to
$1 billion, it was termed the end of the independents as a force in
music business (Breen, 1995). By 1997, a demerged EMI had itself
become a takeover target for larger media conglomerates. In May 1998,
potential EMI suitor Seagram (who owns the worlds No. 6 music firm,
Universal) announced the surprise acquisition of Polygram in a $10.6
billion cash-and-stock deal with parent Philips Electronics.
Concentration and integration, however, is not a one-way success
story. The most successful artists are holding out for ever higher shares
of revenues, and individual deals with special terms favourable to artists
are becoming common; this is reflected in the common practice of
paying out large advance sums to secure signatures on lock-in
contracts. In addition, there is intense competition among the global
players for a share of the lucrative but limited market.
The threat to the collecting societies
Multinational music firms operate across international boundaries, and
so have as clear an interest in exploiting favourable legal developments
in one country or region, as they do in avoiding getting embroiled in
anti-trust accusations. In the following, we list seven threats to the
current institutional structure of music copyright, emanating from
multinational companies.
19

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

Mechanical Central European Licensing (CEL)

The European Commissions views on competition (and the GEMA

ruling of 1971) paved the way for CEL of mechanical copyright
payments (Montgomery, 1994; Wallis, 1994). Under the principle of
the Single European Market, dues paid anywhere in the Union apply
everywhere in the same trade area. In 1987, Polygram used this
principle to negotiate a special deal with the Dutch mechanical
copyright society, STEMRA. Polygram Records (i.e. the record company) agreed to pay in all mechanical rights dues to STEMRA for
phonograms manufactured by Polygram anywhere in Europe in return
for an administrative rebate. Before this deal, Polygram paid dues in
each European country separately (or in the case of Scandinavia and
Finland directly to NCB in Copenhagen, Denmark). The new deal was
highly favourable to Polygram. It was also favourable to STEMRA,
which benefited from reciprocity with other countries and so had
guaranteed revenues. However, the other societies lost out. They still
distributed these incomes locally, but could only levy a small administrative charge. With STEMRA breaking ranks, perfectly legally in
accordance with EU intentions, the effect was a fall in the margins of all
the other collecting societies who lost the Polygram incoming revenue,
but had to pay out to relevant composers and publishers. Figure 3 shows
UK record
companies

Multinational record
company

(other
local/international
recordings)

Mechanical
copyright
society 3 (e.g.
MCPS, UK)

Dues for
records sold
in UK area
less admin.
%

UK
composers
publishers/
sub-publishers
in UK

Nordic record
companies

(all recordings of
repertoire in EU
countries less rebate)

Mechanical
copyright
society (e.g.
STEMRA,
Holland)

Dues for
records sold
in Nordic
area less
admin. %

Dutch
composers
publishers/
sub-publishers
in Holland

(other local
recordings)

Mechanical
copyright
society 2 (e.g.
NCB, Nordic
area)

Nordic
composers
publishers/
sub-publishers
in Nordic area

Figure 3 Central European licensing and the effect on reciprocity and

solidarity
20

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

how the flows of revenues work. The STEMRA deal was followed by
others in the late 1980s now every major record company has a
CEL.
Central European publishers societies

The publishing arms of the multinational companies have shown some

interest in experimenting with similar deals deals which would allow
them to demand pecuniary favours in return for concentrating their
business to a particular collecting society. In 1995, EMI Publishing
proposed a deal whereby mechanical copyright incomes for songs EMI
controlled should all be paid out via NCB in Denmark, in return for a
cut in commission (administration) fees. No deal was struck. EMIs next
move was to propose organizing its own licensing organization, Music
Rights Society Europe (MRSE), to collect copyright monies collected by
European mechanical collection societies, using Simply Reds album Life
as a test case. After prolonged negotiations with the major collecting
societies, EMI Publishing agreed to abandon plans for its independent
agent MRSE, during a period of good faith co-operation between the
Centralising Mechanical Collection Societies and EMI Music Publishing.12 An indication of the negotiating power of EMI Publishing over
the collecting societies is the fact that EMI demanded a contribution to
its own costs for setting up MRSE. The collecting societies proposed
that this contribution should be paid out via a drop in commission fees
from 8 percent to 3.6 percent for the Simply Red works in question on
the album Life.
Withdrawal of multinationals repertoire

A third threat to the stability of the collecting societies arises from the
possible, extensive withdrawal by the majors from the whole system.
The commercial logic for this move appears irresistible when a global
music firm owns both the recording and the publishing rights, for as
many works it releases as possible. The multinationals vary in the extent
to which their recording and publishing arms are interlocked through
such integrated control of rights. Polygram is thought to boast the
highest percentage of recordings where publishing is controlled by the
publishing subsidiary (in this case Polygram Music Publishing).13 There
is a natural temptation for such a global media company to try to
bypass the system altogether, and thereby achieve considerable administrative savings. This would allow the firm to avoid paying a
21

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

considerable sum in royalties to a society for rights which another part

of the same organization owned with much of the revenues being
subsequently repaid with a deduction for an administrative charge. The
threat of withdrawal from this system materialized in 1996 when
Polygram Records achieved an agreement with the UK mechanical
copyright society, MCPS. This agreement would have allowed copyright
monies from Polygram songs, recorded on Polygram Records to flow
with the minimum administrative costs, speedily through the MCPS
and back into the publishing arm of the corporation, achieving much
lower deductions. Double commissions could be avoided and money
would have circulated within the copyright system for a much shorter
time. Polygram reported potential savings in the region of $2.5 million
per year. The consequence was to shift the burden of MCPSs costs onto
minor, independent companies and the artists they had signed. We show
these revised flows in Figure 4.

Ownership strains within the collecting societies

The structure of the ownership of some of the collecting societies is

highly problematic. With publishers (who are legally represented by the
collecting societies) being tied closer and closer to recording companies,
the system has become threatened from within. After all, it is hard for
the board of a collecting society which is planning a negotiating
strategy against, say, the record industry as regards mechanical
Polygram Records

influence

(Dues for all recordings.

Anglo-American
repertoire in EU countries
less 2.5% rebate)

Mechanical
copyright
society 2

publishers/
sub-publishers

Dues for nonAnglo-American

repertoire

PMP (Polygram
Music
Publishing)

MCPS
mechanical
copyright
society, UK

UK composers

Contracted
composers

Dues for
Anglo-American PMP owned/other
sub-publishers
repertoire
in other EU
countries

PMP (other songs) publishers/

sub-publishers

Figure 4 Authors interpretation of proposed MCPS/Polygram deal 1996 (later

aborted by the Cannes Agreement, 1997)
22

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

copyright rates, to have a smooth and open discussion if some of its

members are from publishers who are owned by the same conglomerates
which control the recording industry. EMI Music Publishing, for
example, is on the board of both STIM (in Sweden) and PRS/MCPS (in
the UK).
Some copyright societies are now publicly attacking each other, nor
are all the major publishing arms of the global music corporations
happy with the development EMI Music Publishing, despite the
aborted MRSE initiative in 1996, is said to have voted against the
MCPSPolygram deal when it was presented at the board of the MCPS
(Music and Copyright, 1996). (The managing director of the MCPS
resigned shortly afterwards.) As with the EMISimply Red proposal, so
did the PolygramMCPS deal disappear from the agenda after a series of
negotiations with the European collecting societies in which a compromise deal was agreed which provided better and faster payments to
publishers of CEL material, but also involved a further departure from
the principles of solidarity.
At the annual international music trade fair, Midem, at Cannes in
February 1997, Polygram Music and the other multinational publishers
struck a deal with the MCPS and major European collecting societies,
originally known as the Casino agreement (named after the room where
the negotiations took place). Later rechristened the Cannes Agreement,
it guarantees in effect that collecting societies will cut administrative
charges for handling incomes from CEL from 8 percent to 6 percent by
the year 2000. In order to achieve this over the short term, some
societies have increased commission on incomes from songs recorded by
smaller record producers almost two-fold, from 8 percent to 15 percent.
This will have a negative effect on any copyright holder whose works
are released on smaller record labels in particular individual singersongwriters who own their own record companies. In defence, the
collection societies have pointed out that collection from such small
companies is a risky business and costs much more than CEL. The
departure from the letter post principle of universal supply, however, is
clear, as is the way in which it was achieved: through the muscle of the
largest players in the music arena.
Memorandum of understanding (MoU) in South-East Asia

While CEL has been a major feature of the debate and activities in
Europe, the major music firms have taken a different approach in Asia.
Here, the approach has been to sign a memorandum of understanding
23

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

(MoU) between record company and music publisher. This in effect

allows the major players to collect royalties themselves without having
to support the establishment of mechanical collection societies along
European lines. It seems likely that the principles of western anti-trust
legislation would hinder the use of a similar approach in Europe and the
Americas.
Transnational broadcasters

Broadcasters have complained for a long time that the societies are
abusing their monopoly powers in demanding excessive licence fees.
Multinational users of copyrighted materials now try to exploit
coordination weaknesses between national collecting societies. Satellite
companies which have links in one country and distribute over cable
networks in another country have been known to negotiate with
societies in both countries separately to see who will give the best
rates.
The entry of new players into the deregulated broadcasting and
cable markets has placed a number of strains on the system. In Sweden,
the relatively new commercial television and satellite companies have
been refusing to pay considerable sums of money claimed by STIM,
maintaining that they were getting a worse deal than that offered to
public broadcasters. The Swedish competition authorities became
heavily involved. After crawling along a slow, winding route through
various courts and national authorities, the matter was suddenly resolved
in 1997, after a controlling stake in the national commercial channel
(TV4) was taken over by Scandinavias leading media conglomerate,
Bonnier Media. Perhaps significantly, Bonnier Media own no record or
music publishing company, but the chief executive is a keen jazz
enthusiast.
Cultural deductions

The concern for efficiency, initially driven by pressures from multinational companies and competition authorities, has led to a number of
internal squabbles and disagreements between national collecting
societies. For instance, members of the PRS have been urging their
organization to lobby against CISACs 10 percent rule for legitimate
cultural deductions (as discussed earlier) individualistic British
writers would rather decide themselves how to spend revenues generated
in part by their copyrights. They suspect that continental European
24

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

societies are using the money for convenient hand-outs, such as

comfortable pensions to former collecting society employees. Similar
concerns have been voiced by the American societies.
By exploiting the link between music publishing and record
production too actively, multinational companies can awaken the wrath
of anti-trust bodies forced divestment of one or other part of their
music activities could well be the result (Kretschmer, 1997). In 1996, a
case was brought to the Finnish Competition Authority by the Finnish
Association of Composers of Popular Music (with the appropriate
abbreviation, ELVIS) concerning record companies which require singersongwriters to sign away their publishing rights to the record companys
own publisher as an obligatory prerequisite for a recording contract. The
Finnish authorities found that this was an unacceptable practice since it
puts the author/artist at a disadvantage in the market (seen as an
entrepreneur). A number of other pending legal cases in Scandinavia and
Finland are questioning the validity of standard publishing contracts
which automatically extend to the so-called life of copyright, i.e. the
length of life of a composer plus 70 years thereafter.
Threats to national culture and the minorities
The threats we outlined earlier, namely the CEL system, the threat of
disintermediation, the refusal of some broadcasters to participate, are all
breaking down the barriers of the current order. The system is under
attack from so many quarters that those who rely on IPR revenues from
the collecting societies would do well to look to their survival.
The threats are greatest to those who earn modest royalties,
especially from companies not linked with the majors. These artists
(performers and authors) will find themselves squeezed twice. First the
collecting agencies may ignore them, as their needs are costly to service.
Second, the companies which represent them will have to be more
aggressive if they are to survive.
How does this affect national cultures? Most of the international
artists and superstars follow global trends. In music, these typically
represent Anglo-American ideas and cultural biases. Global artists are
the real money spinners for the major companies, even though the
artists earn high fees. In contrast, artists with only a national following
are less attractive. As national societies are squeezed, the national figures
will find life more difficult. Local levies which support them may be
cut, the charges levied for collecting IPRs may rise and their incomes
may fall. National artists with some international following may do
25

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

even worse, especially if national societies are forced to be selective

about reciprocity.
Paradoxically, very local interest groups may be winners. Very local
groups have never relied heavily on national collecting societies. Local
radio and television stations, local halls and clubs are the main source of
their income. Often these artists work in tight local communities, where
social ties and bonds ensure that revenues are fed back in a relatively
efficient manner. An emerging international communication infrastructure, the Internet, can provide a vehicle for promoting events and
activities which provide efficient sources of revenue (e.g. local concerts).
Thus local artists may find themselves better off, as national figures have
to retreat. The new forces of global concentration, corporate integration
and technological change may polarize competition, defeating the middle
ground.

Possible responses and remedies

There are three generic responses to the crisis, which are not wholly
exclusive, and these responses are outlined in only the broadest of
terms.

Market forces

The first response is for outsiders to ignore the crisis which threatens the
societies. The old system was one that distorted the playing field against
the multinationals and superstars, and in the eyes of many the new
regime will right that wrong. If a few societies collapse due to
inefficiency, then free marketeers will argue that we are merely seeing the
process of competition. The liberalization of many industries such as
telecoms, water and gas may serve as a guide. New competition has not
resulted in services disappearing, but rather new levels of charges. As in
most cases of deregulation, competition in this sector will bring new
charging structures typically favouring heavy users, making light users
and marginal users worse off. In the cultural industries of music and
media, such reordering of charges and revenues will have very significant
adverse implications for many artists and communities. This may well
effect the ballot box, and cause politicians to take notice. Those who wish
to preserve the status quo may have a powerful political lobby. Of course,
for every loser there are winners. Many are only interested in mass culture
and they are likely to approve the changes, especially as it will not affect
26

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

their favourite offerings. Moreover, to the patriotic British or American

citizen, the emerging system can be seen as promoting Anglo-American
culture. Our interviews suggest that political forces in continental Europe
are likely to move the opposite way from those in the UK and the
USA.
Whether the new order will be drastically different will depend on
many factors. While some national agencies may go out of business, most
will be forced to retrench, merge and focus on efficiency. Many have
argued that the agencies should do this anyway. In all industries,
organizations can be made more efficient. The critical question is whether
efficiency gains in this sector can be made fast enough and large enough
to offset the threats. It is likely that the collecting societies cannot roll
back the tide. They will no longer be able to offer a general service to all
parties, but will have to be selective, perhaps levying higher charges on
some copyright holders.
It is important, however, to note that the collection societies are
intermediaries they can survive if society, on balance, sees them as
performing useful and necessary tasks. Even though the larger players in
the market have squeezed the copyright societies to attain advantages,
they have not bypassed them totally, and would probably face anti-trust
recriminations if they did. Indeed, the prospects of decades of copyright
incomes from owning publishing shares in works suggests that the
presence of some form of efficiently functioning intermediary is essential.
Even the largest players can hardly afford to totally ignore the warning
from one collecting society that:
Those who join a collective system, enjoying the accrued benefits of that
system, cannot then undermine it by demanding different arrangements for
handling parts of the activity where the transaction cost is low. (Petri,
1997)

An even more vital prerequisite for survival is the maintaining of their

credibility capital (Wallis et al., 1998). To function efficiently, as we
have seen, collecting societies must be able to represent a large body of
repertoire long term, this entails the continued, wide-ranging support
of the copyright-holder population. Without this, composers will
eventually cease to sign over the protection of their works to such
societies. A condition for this, related to this same notion of credibility,
is the perception of the fairness with which collected revenues are
distributed. Probably the most significant group of rights owners, as
regards the weight of their opinions, is the small to medium category,
27

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

who are not supported by giant multinationals, but who enjoy strong
local or national support. By constantly being embroiled in different
disputes with the larger players (some of whom are even members of their
own boards) collecting societies run the risk of ignoring this very critical
group.
Maintaining and growing credibility capital, as the term suggests,
involves constant monitoring of the overall fairness of operations, both on
the revenue generating and on the distribution side. The greatest risk in
this context is that the pressure to cut transaction costs by and for the
major players will lead collecting societies to concentrate solely on the 20
percent at the top, and ignore the interests of the following 40 percent or
so below them in the income tables. This will be a recipe for disaster.

Technology

There is a much heralded shining hope for the future of the collecting
societies, and that is digital tagging. Digital tagging, along with
international databases, offers a long-term prospect that the complex,
labour-intensive system of collection (often relying on someone actually
listening to the music of radio stations) will be substituted with a totally
electronic system. The recording industry is introducing the International
Standard Recording Code or ISRC system. The international association
of performance rights collecting societies, CISAC, is attempting to
implement a universal virtual database, covering all recorded or
registered music works, the Common Information System (CIS). Such
systems, however, rely on universal support and acceptance, similar to
that required for the success of bar-coding systems in the retail trade.
There are a number of barriers to the success of these initiatives.
First there is a large body of existing recorded music which is not
tagged. Unless someone is willing to pay all the radio and television
stations to replace their existing stocks of music and film with tagged
media, it will take years, if not decades, for the various media to have upto-date stocks allowing an efficient system. A half-effective system will
probably not take off. A second difficulty is if every new disc or tape is
to be tagged, who is to bear the costs of tagging?
With bar-coding, the situation was somewhat different. It took
many years of negotiation to resolve the difficulties, but the users the
supermarkets had a vested interest to pay. Here the problems are
worse. It is obvious that there are only modest incentives for record
28

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

companies and television stations to pay for the tagging as it is authors

not record companies which are the primary recipient of the bulk of the
IPRs. The incentive, however, is not zero; the Rome Convention does
give record companies (as producers) fees when discs are performed in
Rome countries, and some record companies and stations are owned by
conglomerates which want to collect the royalties for other parts of their
groups. Tagging could well be the only way owners of recordings can
defend their interests when music is distributed digitally over networks
such as the Internet.
A third hurdle to be overcome is transparency in the system. The
music industry might not wish all its contractual details to be stored in
one large global database so that income can be divided and paid speedily
in accordance with all existing contracts for a start it would become
easier for some authorities to trace royalty payments to a variety of tax
havens. In a rivalrous oligopoly, information is power. No doubt these
difficulties can be resolved eventually, but new technology is rarely the
panacea to any ill, and this technology is unlikely to deliver speedy
solutions.

Regulation

This leads us to be forced to consider a more drastic solution, that of

regulation. The post office letter system, introduced by Peel in Britain in
Victorian times, is seen to be an integral part of our societies. Nearly
everyone accepts that its prices are formally regulated. So it may be that
pressure will rise on governmental bodies, such as the European
Commission, to propose statutory provisions for uniform access to a
system of royalty collection. Such a system would perhaps demand that
the major firms who did not use the system would still have to contribute
to its cost. This form of novel taxation, if set on the same principle as
regulated industries, could set levels of efficiency among the agencies
and levels of service for the artists. Few executives in the music industry
would enjoy such forms of legislation but it may come. There is plenty of
precedent among recently privatized utilities that the industry has to
swallow uncomfortable rulings.
If companies which dominate this industry do not like what they
hear and see, there is a simple response. They can stop trying to
undermine the national collecting agencies, and work with them to
ensure that they do the job they are supposed to do, more fairly, more
29

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

equitably and more efficiently. This may require a small measure of pain,
but it could be much less than the costs of some of the alternatives.

Appendix
Map 1 Performance revenue per capita for 1995 selected world societies
World Countries
7.0 ECUs
3.5 ECUs
0.7 ECUs
General performance revenue per capita
Broadcasting revenue per capita

Source: Irish Music Rights Organisation (IMRO) Licensing Survey.

George Michael Klimis

30

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

Map 2 Performance revenue per capita for 1995 selected European

societies
Europe Countries
7.0 ECUs
3.5 ECUs
0.7 ECUs
General performance revenue per capita
Broadcasting revenue per capita

Source: Irish Music Rights Organisation (IMRO) Licensing Survey.

George Michael Klimis

Notes
A preliminary version of this article was presented in November 1996 at the
second Intellectual Property Forum in London. Since then there have been a
series of critical incidents within the area of music and copyright which have
enforced our beliefs. This published version reflects the structural status in early
1998. We acknowledge the helpful comments of Chong Ju Choi, Robert Grant
and Simon Frith. We also acknowledge financial assistance from the Economic
and Social Research Council, grant nos. L126251003 (Globalisation, Technology
and Creativity) and L325253009 (Intellectual Property and Knowledge
Transfer).
31

EUROPEAN JOURNAL OF COMMUNICATION 14(1)

1. Formal integration refers to the process of both horizontal and vertical

integration where typically larger record companies buy smaller record
companies, or record companies buy manufacturing or distribution companies. Informal integration refers to informal or formal agreements of
mutual dependency between actors in the market. An example would be the
informal relationships which exist between record companies and radio
stations now that radio stations have gradually given up recording their own
live music and come to rely more on recorded music from the industry to fill
air time.
2. Whether this has served to give further incentives to creativity is open to
debate (Vaver, 1990). A curious counter-trend to the forces of concentration
and integration can be observed in a new financial instrument, developed by
absolute superstars such as David Bowie and Rod Stewart. In 1997, Bowie
raised $55 million against future royalties in order to buy back part of his
catalogue of rights. (On Bowie and Stewart, see Financial Times, 7 February,
1998.)
3. Current copyright society accounts show that, in most western countries,
revenues are roughly equally divided between income from mechanical
carriers and immaterial performance royalties.
4. In the case of singer-songwriters (e.g. David Bowie, Paul McCartney),
authors and performers are the same person.
5. In his autobiography, the English publisher William Boosey describes
how he gradually became aware that eventually a composers performing
rights might be even more valuable than his publishing rights (Boosey,
1931).
6. Defining vertical transactions include: in 1987, Warner took over the
worlds biggest music publisher, Warner Chappell, and merged with Time
Inc; in 1986, German media group Bertelsmann bought the US record
company RCA, followed by the acquisition of Italian publisher Ricordi in
1994; in 1987, Sony acquired Columbia/CBS.
7. In 1952, ASCAP collected over $17 million, BMI over $5 million and
SESAC about $1 million. By 1963, ASCAPs income had risen to $38
million, BMIs to about $15 million, while SESACs income was still $1
million. In 1996, ASCAP collected nearly $500 million, BMI about $400
million, SESAC claims income exceeding $20 million. The worlds largest
copyright society, Germanys GEMA collected nearly $1 billion in 1996.
Comparative international figures can be found in annual special reports,
The Collecting Societies, issued by the trade publication Music Business
International (MBI) (London: Miller Freeman).
8. GEMA decision: O.J. Na L 134/15, 20 June 1971; Monopolies and Mergers
Commission (1988); Monopolies and Mergers Commission (1996); Temple
Lang (1997); EC Internal Market and Financial Services Directorate (DG
XV), pers. comm.
32

WALLIS ET AL.: CONTESTED COLLECTIVE ADMINISTRATION

9. The US government report The Emerging Digital Economy is available on

www.ecommerce.gov (April 1998); see also Van Cuilenburg and Verhoest
(1998).
10. Hugh Duffy, head of the Irish collecting society, IMRO, has sharply
criticized the use of cost/revenue ratios as a measure of efficiency (Duffy,
1998: 1): I had some bizarre conversations with both creators and
publishers, including members of other collecting societies, where they
pointed out, in response to the fact that IMRO was doubling its
distributable revenue every couple of years, that we were still not reducing
our cost/revenue ratio.
11. It has been estimated that the global value of the music industry now
exceeds the film industry. According to media and entertainment industry
analyst Vogel (1994: 128), the music industry may be considered as the
most fundamental of the entertainment businesses . . . because it is the most
easily personalized form of entertainment, it readily pervades virtually every
culture and every level of society.
12. Press release by EMI Music Publishing, 10 April 1996.
13. Music and Copyright (1996) estimates that over 50 percent of Polygram
Music Publishings revenues come from Polygram Records.

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Burnett, Robert (1996) The Global Jukebox: The International Music Industry.
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