Digital technology has transformed the music industry in Europe, making both distribution and piracy easier than ever. But regulators are yet to catch up with the pace of change, leaving them unable to benefit from the former or tackle the latter.
Policymakers in the EU have several good reasons to target inconsistencies across member states in the digital music industry. The increased circulation of music has cultural and commercial benefits. Listeners have new ways to access songs, merchandise and albums and labels can reach customers directly or through streaming services. What’s more, cultural benefits from the consumption of music in diverse languages accrue when citizens of different nations listen to music and learn about one another’s languages, heritage and perspectives.
There are technological, structural and logistical inconsistencies in the way music is regulated that create more barriers to consumption than the fact that the music itself is recorded in different languages. Appreciation of music does not depend on the shared cultural references in the same way as film or television. It is not exclusively interesting to the market in which it is produced and is one subtle way in which we become familiar with second and third languages and improve our regional understanding.
In many ways, the digital circulation of music reflects the economic and cultural values that prompted the establishment of the EU in the first place. It might even be that resolving inconsistencies in the single music market could contribute to cohesion and unity as well as making good economic sense. There are a number of issues that need to be addressed to make this happen.
Pirates without borders
Piracy is a big problem and one which is much more prevalent in some European countries than others. Some experience an excess of illegal downloading and sharing and are less lucrative markets for publishers and streaming services as a result. Others are striking out boldly into digital music, having recognised that this is where future revenue is to be found.
But what appears to be true across nations is that users switch to legal services to access music when they work well and are affordable. The success of iTunes and Spotify and the growth of creative commons archive Free Music Archive, is proof of this. European regulators should be mindful of such cross-border success stories when they set the rules in the future. They could, for instance, promote the use of creative commons archives to encourage the legal streaming of music in European countries.
Regional royalties
Another way the marketplace for digital music functions for producers is through the collection of royalties. This is ordinarily handled by one of hundreds of collection agencies active throughout the EU, managing revenues of more than €5 billion.
Collecting societies manage the licensing of copyright-protected music tracks for online use on behalf of composers and lyricists and collect and redistribute their corresponding royalties. But some of these agencies struggle to make sense of the different requirements of different states.
In every country in the EU, the royalty agencies that collect funds for their artists have different rules and each pays artists a different rate. Sales are taxed differently in every country so it pays to hunt around to find the best country to base yourself in rather than consider yourself a truly “European” enterprise.
It is currently much more lucrative to base your distribution and sales in Luxembourg than many other countries, for example, as it applies a low VAT to digital sales. Removing the inconsistencies between collecting agencies and how they receive royalties from different countries could enable new organisations to enter the market. A more consistent VAT system would also be a significant step.
Language comes in to play here too. Given that so many different languages are used in Europe, consumers can find the process of buying and shipping music between EU nations to be frustrating, tedious or impossible. To simply access the music they want, they often have to navigate online shops that use technologically variant platforms in unfamiliar languages across uncoordinated national postal systems. While consumers appear to like listening to music from different countries, they remain less keen on buying it in a different language. The reality is that consumers are much more likely to access online music services from a storefront managed in their local tongue. That’s something for vendors to think about as they start to take a more European approach.
It’s the little things
There are obvious cultural, commercial and even political benefits to bringing greater consistency to the way music is distributed in the EU. Just as member states have sought to harmonise all kinds of other industries as part of their attempts to make the most out of a common market, so too should they look to making music a shared enterprise. These efforts would help strengthen the single market for music in the EU. But perhaps more importantly they could facilitate the process of harmonising cultural relations between EU member states by contributing to language acquisition and understanding. The listeners have caught on and so have the pirates. The industry too, in its own way is making progress. Now it’s time for the lawmakers to hit the right note.