MUMBAI: PRS for Music (UK), STIM (Sweden) and GEMA (Germany) - the Collective Rights Management Organisations’ (CMO) joint venture is being investigated by the European Commission. The Commission is assessing whether the multi-territory licensing and processing hub for online licensing is in line with EU Merger Regulation.

A preliminary investigation pointed out that the joint venture could result in higher prices and worsened commercial conditions for digital service providers (DSPs) in the European Economic Area (EEA).

Subsequently, this would lead to higher rates and less choice for digital consumers in Europe because the aggregation of the repertoires of CMOs, could lead to increased bargaining power for the joint venture. Yet another concern raised by the EU Commission was that it would reduce competition. Explaining further, the Commission stated that the joint venture would grant licences valid in several countries (multi-national licences) for the online music rights held by its parent companies or by other CMOs or right holders that would mandate the joint venture with the licensing of their rights. It can also lead to less innovation for digital music end users in the EU.

Another area of concern is that CMOs will concentrate in the joint venture and might no longer compete separately. This could have a negative impact on the quality and commercial terms of those services, claimed the preliminary report by the EU Commission.

The CMOs claim that the aim of the hub is to create easier access for digital music services to clear music rights and faster and more precise payments of royalties to rights holders. PRS for Music on its note stated that the collective organisations had planned to begin the services in early 2015 but were subjected to competition clearance. It also stated that despite this delay, the partners remain committed to bringing their new service offerings to the market as soon as possible, once the approval of the European Commission has been obtained.

In the statement issued by the three CMOs, they have tried justifying their venture, “The collective rights management organisations behind the venture are confident that their vision for a new licensing and processing hub will benefit the market and look forward to providing the European Commission with further analysis and market data.” It also elaborated the benefits of the proposed hubs like solving the problem of split-copyright invoicing; providing an unprecedented level of accuracy; encouraging the aggregation of repertoires for pan-European licences resulting in simplified licensing for DSPs; and enabling partners and rights holder customers to benefit from the economies of scale.

Commenting on the news from the European Commission, Robert Ashcroft, chief executive of PRS for Music said, "Given the complexity of the multi-territory digital market place and the scale and scope of the ground breaking solution that we are bringing to the table, it is understandable that our joint venture is subject to an in-depth assessment. We will continue to co-operate fully with the European Commission and look forward to a successful resolution of the process."

STIM CEO Karsten Dyhrberg Nielsen added, "This hub allows us to share infrastructure costs and encourages us to invest jointly in systems able to support better efficiencies, accuracy and speed. Our objective is to benefit all who enjoy what is the core of our industry - the creation of music."

The Commission has now 90 working days, until 29 May 2015, to take a final decision on the proposed hub.