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Royalty rates reform: Arbitration committee confirms linear approach

The arbitration committee of the German Patent and Trade Mark Office has approved the basic structure of the royalty rates reform put forward by GEMA. In its proposal, the committee evaluates the linear approach to royalty rates for music performances as being “correct and appropriate.” The Federal Association of Organizers of Musical Performances (BVMV) was not able to persuade the arbitration committee that it would be better to keep the royalty system as it has been for the past 50 years.


In April 2012, GEMA published a new royalty rates system for the event sector. The main objective of the reform is to deal with large and small event formats (with size being defined by their economic value) in the same way and to abolish royalty rate privileges. After the information on the new system had been published, GEMA launched an arbitration process, asking the German Patent and Trade Mark Office to independently assess the system’s suitability. The arbitration committee presented GEMA with a proposal for a royalty rates compromise on April 15, 2013.

Linear not degressive
By taking a linear approach to royalty rates, GEMA hopes to make the system more fairly and to take off some of the burden off smaller events. This will benefit a large number of social and civic engagement events, in particular. In its compromise proposal, the arbitration committee deemed the royalty rates reform to be “correct and appropriate.” The royalty rates are to be calculated in linear accordance with the economic value of the performance. Georg Oeller of GEMA’s executive board said: “By accepting the linear approach to royalty rates for individual events, the arbitration committee has expressed its approval for the main objective behind the royalty reform.”

Where clubs and discotheques are concerned, GEMA is of the opinion that the arbitration committee’s compromise proposal, which includes rates to be set until 2017, does not apply the linear approach entirely consistently. However, businesses will be treated more fairly, according to their economic value. For the first time, admission prices will be taken into account, as will the number of days that an establishment is open.

A differentiated system instead of standard rates
The arbitration committee expressly wishes to maintain the large number of different royalty rates for the event sector. The existing system includes eleven different rates. This system, which developed over time as the event market evolved, has received a great deal of criticism in the past. User groups and politicians have described the system as too complex and opaque. That is why GEMA felt compelled to reduce the number of different rates from eleven to two in 2012.

Georg Oeller explains: “After GEMA had received criticism for its numerous different rates in the years before 2012, we decided to make the system much simpler. The arbitration committee’s proposal provides legal clarity about the differentiated rates system, and at the same time judges that GEMA’s approach in the past was not opaque.”

As the committee’s proposal maintains the differentiated rates system and the number of rates involved in the arbitration process is therefore reduced, the proposal only applies to the following categorizations:

  • Individual “U-Musik” (“entertainment music”) events with musicians and/or music recordings (not including U-Musik concerts), e.g. balls, association celebrations, beer tents and party marquees, social afternoons and evenings, fashion shows and similar events: U-VK I or M-U I rate
  • Music pubs, lounges, etc. without space for dancing: M-U III 1b rate
  • Discotheques and clubs with space for dancing: M-U III 1c rate

GEMA acted lawfully in the way it introduced the reforms
GEMA received a great deal of criticism for its unilateral publication of the new rates system. By rejecting BVMV’s calls for placing greater restrictions on GEMA in this respect in the future, the arbitration committee has approved GEMA’s behavior as lawful. The committee has confirmed that GEMA must be able to alter royalty rates unilaterally in the interest of its members; GEMA does not have to wait for the courts to validate its decisions.  

Further steps
GEMA and BVMV have agreed to conduct a joint assessment after the compromise proposal has been issued. They agreed to start negotiations for the period after 2014 on the basis of the proposal. If these negotiations are not successful, the agreed mediation procedure proposed by GEMA will be initiated. The temporary regulations for 2013 agreed with BVMV are unaffected by this and will remain in place until the end of the year. GEMA and BVMV will also conduct meetings and information sessions with other associations affected by the reforms.

Both GEMA and BVMV may file an objection with the arbitration committee against the compromise proposal.

A PDF file of the original compromise proposal is available from:
Andrea.Schmid@dpma.de.

More information is available (currently only in German) at: www.gema.de/veranstaltungstarife.

GEMA represents in Germany the copyrights of more than 65,000 members (composers, lyricists, and music publishers), as well as over two million copyright holders all over the world. It is one of the largest societies of authors for musical works.

 

Press contact:
Ursula Goebel, Head of Marketing & Communication
E-mail: ugoebel@gema.de, Tel.: +49 89 48003-426

Katharina Reindlmeier, PR Manager
E-mail: kreindlmeier@gema.de, Tel.: +49 89 48003-583

Gaby Schilcher, Press and PR Officer
E-mail: gschilcher@gema.de, Tel.: +49 89 48003-428

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