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A coalition of artist and label groups is calling on legislators to urgently address a 2020 court ruling that risks seeing European musicians lose out on millions of euros in royalties each year to U.S. acts.
For decades, American musicians have been denied royalties for the use of their music on broadcast radio or when it’s played in cafes, shops and bars in many overseas countries due to the lack of equivalent terrestrial radio performance and public performance rights in the United States. This practice is based on a principle known as material reciprocity, which means that broadcast and performance revenues are only paid out to countries that apply the same rights.
The longstanding practice of reciprocal treatment was, however, suspended in the European Union (EU) by a 2020 ruling from the European Court of Justice (ECJ). In that decision, the ECJ decreed that all recording artists are entitled to an equal share of the royalties generated when their music is played on radio or in public premises in the EU, regardless of their nationality — or the absence of radio and performance rights in an artist’s home country.
Brussels-based independent labels trade body IMPALA says the ECJ ruling will result in European artists and labels losing out on around 125 million euros ($137 million) in royalty income each year, with the equivalent sum instead going to U.S. musicians. Previously, these broadcast and performance royalties were mostly divided up between local labels according to their market share.
European countries that currently withhold public performance and broadcast royalty payments to U.S. artists and labels include the United Kingdom, France, Belgium, Denmark and Ireland. (Outside of Europe, three countries —Japan, Argentina and Australia — also deny royalties to U.S. musicians because of a lack of reciprocal rights).
In 2019, prior to the court ruling, SoundExchange, which issues licenses to online and satellite radio services, estimated that recording artists and rights holders in the United States lost out on an estimated $350 million in royalty payments due to what it called the “unfair treatment of music creators.”
So far, the Netherlands is the only EU country to change its legislation in line with the ECJ ruling, which has become widely known as the “RAAP” case in reference to Irish collection society Recorded Artists Actors Performers (RAAP), which initiated the reforms by taking legal action against Phonographic Performance Ireland (PPI) in 2020. In that case, RAAP challenged PPI in the Irish High Court after it reduced royalty payments to performers from a 50-50 split with labels to around 20%. The case was then referred up to the ECJ, which made the now-controversial ruling in September of that year.
U.S. repertoire represents around 40% of all public performance and broadcast income collected annually in the Netherlands, according to Dutch collecting society SENA. Until recently, this income was neither collected nor distributed. Since the change in practice, SENA has increased its tariffs on public performance royalties from 12.5% to 26%.
Will Maas, chair of the Netherlands’ musicians’ union, said in a statement that the rise in rates is not enough to make up for the additional U.S. repertoire now being collected, resulting in a “clear and substantial drop” in revenue going to Dutch and European performers. “This is what awaits other countries if nothing is done to address this,” he added.
In response, IMPALA executive chair Helen Smith wants the European courts to reverse its 2020 ruling and restore the principle of material reciprocity.
“It is the EU’s responsibility to prevent European artists and producers losing millions every year to the USA, which has chosen not to protect these rights,” said Smith in a statement. She added that the lack of terrestrial radio performance rights and public performance rights in the United States costs the world music economy “hundreds of millions, if not billions a year.”
IMPALA also supports a flexible solution that would enable EU countries to pay U.S. artists if they already did so before the ECJ judgment.
Other music groups and CMOs backing IMPALA’s call for action include Adami in France, the Swedish Musicians’ Union, Belgium’s PlayRight and the German Federation of Musicians. They argue that reciprocal treatment forces countries to raise their own levels of protection for musicians by not allowing nations to benefit from other countries’ rules unless they follow the same standards.
Not everyone in the music business is against the ECJ ruling and the push for so-called national treatment — whereby foreign recording artists and labels receive the same types of royalties as the nationals of a given country — to be standardized across the global music business. Executives who back national treatment say that any fall in label income would likely be offset by the increased set of rights and royalty collections elsewhere in Europe resulting from the ECJ decision.
That, however, is not a view shared by IMPALA or its members.
“Hundreds of thousands of artists count on the EU to do the right thing,” said Dutch musician Matthijs van Duijvenbode in a statement, “and to do it fast.”
