style fair use doctrine, so the package is completely counter-productive for the creative
industries / right holders.
•
Apart from the slides, please find attached our draft comments on the performers’ bill as agreed
by IFPI with RISA. These are the arguments that our industry is putting out locally in the
discussions.
Please feel free to share the above with the Delegation, but please note that only the ppt slides have
been presented in public.
Best wishes,
Art. 4(1)(b)
THE SOUTH AFRICAN DIGITAL MUSIC INDUSTRY NEEDS A FAIR LEGAL FRAMEWORK
The music industry is increasingly a digital business, with 50 percent of revenues globally
coming from digital uses of music. In South Africa, that percentage was 49 percent in 2017 (and
far higher is performance rights are not included), up from 33 percent in 2016, showing the
enormous potential for growth. However, to provide a healthy internet environment for legal
digital music services to launch and grow, to the benefit of producers, artist and users alike, it is
crucial to ensure that the law reflects the provisions of the WPPT accurately. Revenues from
licensing the rights in WPPT, and most specifically, the making available to the public right,
enable record companies to be the largest investors in artists, investing some 27 percent of
revenues back into artists and repertoire and marketing.
The proposed treatment of sound recording producers’ making available right in the Bill risks destroying
the South African digital music market, and thereby substantially reducing investments in South African
artists, as we explain below.
1. Harmful And Unjustified Downgrading Of The Making Available To The Public Right
The Bill introduces a new Section 9A(1)(a)(iv), which would subject the exclusive right of making
available to the public in section 9(f) to the section 9A statutory licence.
The effect of this section would be to downgrade the right of making available to a mere
remuneration right. This risks rendering the economics of a digital music market in South Africa
wholly unfeasible. The problem is compounded by the proposed equal sharing of revenues from
the making available right between producers and performers. We explain below the harmful
effects of:
1. Downgrading the right of making available to the public to a mere remuneration
right.
2. Subjecting the making available right to the sweeping statutory licence regime in
section 9A.
3. Mandating the equal sharing of revenues from making available to the public
between performers and producers.
1.1 WPPT Does Not Permit Downgrading Of The Exclusive Right Of Making Available To The Public To
A Mere Remuneration Right
The making available to the public right is derived from Article 14 WPPT and underpins the licensing
of digital music distribution services such as Apple Music, Deezer etc that offer any “interactive”
uses of music. Under Article 14 WPPT, the making available right is exclusive, and does not provide
any option for contracting parties to provider lesser protection, including by downgrading the right
to a mere remuneration right as proposed by Section 9A(1)(a)(iv). By contrast, both the broadcast
and communication to the public rights are provided a minimum level of protection as
remuneration rights under Article 15 of WPPT. This option is not available to contracting parties in
respect of Articles 14 of WPPT.
As explained in our previous submission on the Copyright Amendment Bill in July 2017, we
commend the South African Government for seeking to further the interests of those involved in
making recorded music in South Africa, including by the planned ratification of the WPPT. However,
the insertion of Section 9A(1)(a)(iv) under Section 11 of the Bill would render South African
copyright law incompatible with Article 14 of the WPPT.
1.2 The Sweeping Statutory Licence Scheme In Section 9A Would Wholly Undermine The South African
Digital Music Industry And Would Violate The Requirements Of WPPT
The effect of section 9A would be to entirely remove right holders’ control over how to license the
right of making available (as well as the other rights covered by the section). Most concerning, it
would enable interactive digital services to make available recordings even without a licence, with
licensing terms to be negotiated subsequently or adjudicated by the Tribunal. This would result in a
race to the bottom, not only substantially reducing the revenues for performers and producers that
can be derived from digital uses of works, but also thereby reducing the available revenues to re-
invest in South African artists.
The proposed power for the Tribunal to set the terms of licence agreements between an individual
right holder and a user amounts to an intervention into private contract law and constitutes a
serious limitation on individual record companies’ and other right holders’ ability to authorise or
prohibit the use of their sound recordings. Such an expansive limitation on the rights would be
contrary to the WCT and WPPT treaties, which the Bill is otherwise seeking alignment with.
It is submitted that oversight of collective licensing arrangements by a copyright tribunal can be
appropriate in relation to collective (but not individual) licensing schemes, such as those currently
in operated in South Africa by SAMPRA in respect of public performance and “needletime” rights.
However, the best international practice is to put in place a tribunal as a highly specialised neutral
dispute resolution mechanism, with authority to adjudicate over disputes concerning collective
licensing, but certainly not a body regulating individual private contracts.
2. Equal Sharing Of Revenues From The Making Available Right Would Render The
South African Digital Music Market Unviable
The provision in section 9A(2)(a) requires that revenues derived from the licensing of the making
available right be shared equally between producers and performers. Regrettably, the provision has
not been drafted with due consideration for the practical realities of the licensing structure of the
recorded music industry or of its economics.
To be clear, revenues from public performance and “needletime” rights are already shared equally
between producers and performers, and we do not object to a confirmation of that arrangement in
the Bill.
However, requiring that revenues from exploitations of the making available right be shared equally
between record producers and the performers would be economically unfeasible, considering
factors including that record companies cover all the costs and carry the risk of bringing new artists
to market. Compulsory equal sharing of all revenues from making available to the public would
remove all profit from record companies, making it unviable to continue to produce new
recordings, and thereby breaking the cycle of re-investment of revenues.
Revenues from digital services, which are licensed under the making available right, comprise an
increasingly large proportion of record industry revenues internationally and are vital to the
sustainable future of the record industry and the performers with whom they partner. In other
words, these revenues are replacing the revenues generated by sales of physical products,
principally CDs. At the same time, research conducted by IFPI shows that across 18 territories local
performers’ share of industry revenues from digital services increased by 20 percent between 2009
and 2015 relative to record producers share, despite overall industry revenues decreasing. This
shows that the economics of the digital music market work for performers. Although the policy
motivation behind this proposed section of the Bill is not articulated in the Analysis section of the
Bill, to the extent that it is to increase performers’ share of revenues from digital services (which
our research shows is already happening), it is likely to have the opposite effect. The actual effect of
this provision would be to drastically reduce producers’ and performers’ revenues, thereby
removing the ability and incentive for record companies to invest by making the licensing of certain
digital services entirely uneconomical. While certain revenue streams may be appropriate for such
sharing arrangements (as stated, this is already the case in respect of traditional broadcasting and
public performance rights when collectively administered), it would be a market killer if equal
sharing was applied to interactive uses of recordings, which are covered by the making available
right.
We are not aware of a law in any other country in the world where the making available right is
subject to statutory licensing or compulsory revenue sharing in this way, and we strongly urge the
South African Government to remove the proposed making available right from the ambit of
section 9A.
3. Technological Protection Measures (TPMs) And Related Provisions Need To Be
Revised To Ensure Meaningful Protection
Further, we would like to highlight the inadequate implementation of, and the specific issues with,
the technological protection measures (TPMs) introduced in the Copyright Amendment Bill. Article
18 of WPPT requires that contracting parties provide “
adequate legal protection and effective legal
remedies against the circumvention of effective technological measures”. At present, the proposed
provisions in the Bill are not compatible with that requirement, as we explain below.
This issue is of paramount importance when considering the central role of digital distribution to
the current and future economics of the music industry. While the recorded music industry in South
Africa is now predominantly a digital industry, piracy remains a serious obstacle to continued
growth in this area. The introduction of adequate provisions on technical protection measures is
therefore essential to protect against piracy and thereby enable the development of new business
models. We welcome the inclusion of the provisions on TPMs in the Bill, but make the following
recommendations to ensure that the provisions will be able to serve their intended purpose.
First, the definition of “technological protection measure” in Section 1(h) is problematic because it
refers to technologies that prevent or restrict infringement, as opposed to being designed to have
that effect. The plain reading of this definition would be that a TPM that is circumvented is
therefore not one that prevents or restricts infringement (because it has not achieved that aim),
and therefore the circumvention of it is not an infringement. This would defeat the purpose of the
provisions prohibiting the circumvention of TPMs. We therefore recommend that, in line with
Article 6 of the EU Copyright Directive (Directive 2001/29/EC), the following amendment be made
to the definition in
section 1(h) of the Bill:
‘technological protection measure’
(a) means any process, treatment, mechanism, technology, device, system or component that in
the normal course of its operation is designed to prevents or restricts infringement of copyright
in a work; and
We also propose the deletion of paragraph (b) in the definition. That a TPM may prevent access
to a work for non-infringing purposes should not have the effect of removing its status as a TPM.
Rather, the provision of section 28P(2)(a) would apply to enable the user to seek assistance from
the right holder in gaining access to the work in question. As it stands, paragraph (b) of the
definition is open to abuse and would provide a charter for hacking TPMs. In this respect, see
also our comments below in respect of section 28P(1)(a).
Second, we also recommend that the definition of ‘
technological protection measure
circumvention device’ be amended also to include devices that (a) are promoted, advertised or
marketed for the purpose of circumvention of, or (b) have only a limited commercially
significant purpose or use other than to circumvent TPMs. This would ensure that the definition
is adequately scoped to encompass all TPM circumvention devices, which would also be
consistent with Article 6(2) of the EU Copyright Directive.
Finally, the exceptions in
section 28P in relation to prohibited conduct in respect of
-6-
TPMs (in
section 28O) are inadequately defined, therefore rendering them incompatible with
the three-step-test and substantially reducing the effectiveness of the protections afforded by
section 28O, because:
under section
28P(1)(a) it would be extremely burdensome, if not impossible,
for right holders to establish that the use of a TPM circumvention device by a
user was to benefit from an exception; and
a provider of an unlawful circumvention technology could rely on section
28P(1)(b) to claim they are acting lawfully merely by showing that the