Copyright Enforcement in the Dutch Digital Music Industry Copyright Enforcement in the Dutch Digital Music Industry

There is a lack of interest and empirical analysis in the existing literature on composers’ relations with their publishers and the role of Collective Management Organizations (CMOs) within the system of music copyright. The purpose of this paper is to explore and understand the influence of digitization within the music industry on the copyright enforcement in the Netherlands and on rights holders and the CMOs. Also to explore and understand how their mutual relationships are affected by digitization of the music industry. A qualitative analysis was done by reviewing scientific literature, performing a documents analysis and doing open interviews. In the existing economics of copyright literature, the main focus is set on transaction costs, efficiency and welfare topics. The findings can be used to understand and model how rights holders and CMOs cope with the digitization and contribute to the policy makers and economic actor’s discussion about future improvement of the copyright enforcement system.


Introduction
The advent of technologies, such as music streaming, poses a significant challenge to repertoire management and has led to failures regarding the compensation of rights holders in the music industry (Handke, 2010). According to Silver (2013) and Towse (2017) copyright law is becoming more complex in the attempt to keep up with each technological advance, especially where consumers and markets are in the lead. The impact of technological innovation on the music industry has stimulated research in economics of copyright and sparked the interest of policy makers (Belleflamme, 2016). The music industry is considered a forerunner in technological change and there are many lessons that can be learned from the music industry for the benefit of the entire Creative Industry (Lyons, Sun, Collopy, Curran & Ohagan, 2019). However, the focus of the economic copyright analysis has been on broader structures, leaving a need for structured knowledge building on the economic rationales and consequences at a micro level (The Allan Consulting Group, 2003). Bargfredde & Panay's (2015) make clear that one of the problems on micro level is that a significant part of the copyright fees are improperly distributed by the Collecting Management Organizations (CMOs) 1 . The unjust distribution of copyright money harms creators, is costly to the economy and has a negative impact on our society (Mahoney, 2015).
Recent discussions (Department for Digital, Culture, Media & Sport, 2017; Music Business Worldwide, 2018) on rates paid by Big Tech companies, such as Spotify, Apple, Amazon, Google and Facebook, to the Collective Management Organizations (CMOs) suggest that issues such as accountability and transparency regarding music use have not been completely resolved. For example, the CMOs collect the money but do not receive the usage data and thus cannot distribute the money to the rightful rights holders. While music is increasingly being consumed through digital channels (Williamson & Cloonan, 2012;Wikström, 2013;Samuel, 2014;Ingham, 2015) the number of empirical studies, particularly in the field of music copyright, is limited (Schlesinger & Waelde, 2012;Williamson & Cloonan, 2012;Phillips & Street, 2015;Towse, 2017), especially for the research on the impact of digitization on the rights holders of popular music. Hitherto, there are little empirical studies available that involve rights holders and their mutual formal and informal relationships. This research aims to fill that gap. Hence, the objective of this paper is twofold, first to explore and understand the influence of digitization within the music industry on the copyright enforcement in the Netherlands and on rights holders and the CMOs. Also to explore and understand how their mutual relationships are affected by digitization of the music industry.
Within the scope of this research, which focuses on the Netherlands, rights holders refer to music composers, lyricists and music publishers of popular music. CMOs in the Dutch context refers only to Buma/Stemra, the Dutch CMO appointed by the Dutch Government to collect the money for use of music and distribute the collected money to the rights holders. Buma/Stemra also has the responsibility to negotiate the tariffs for the use of music with different parties (users of music).

Theoretical Foundation
The economics of copyright literature beholds copyright as a theoretical economic stage where all the players are homogenous and rational. Also a stage where enforcement of copyright is perfect and where the relationships between practitioners are well defined and rational (Atkinson, 2012;Handke, 2012;Towse, 2017). Copyright research can be examined from multiple perspectives and includes law, technology, philosophy and economics (Handke, 2010;Wu, 2018;Lyons et al., 2019). Since much of copyright policy is about economics, it is important to understand the differences among different economic perspectives (Atkinson, 2012). Atkinson (2012) and Handke (2012) summarized key results in the empirical literature on copyright, put them into context and highlighted noteworthy gaps and contradictions in the literature. According to Atkinson (2012) the focus on transaction costs, efficiency and society welfare topics revolves around three 'classic' economic doctrines: conservative neoclassical; liberal neoclassical and neo-Keynesian. In the recent two decades a new economic doctrine has emerged, Innovation Economics, also referred to as neo-Schumpeterian or evolutionary economics. Innovation economics postulates that innovation (the development and adoption of new products, processes, and/or business models) drives growth (Atkinson, 2012). For studies of technological change in existing markets the neo-Schumpeterian or evolutionary economic literature provides a coherent and evidence-based foundation (Handtke, 2010). Technological change causes the spread of new products and production processes. Disruptive innovation is an DIGITAL SUPPORT FROM CRISIS TO PROGRESSIVE CHANGE innovation that creates a new market and value network and thereby ultimately disrupts existing markets and value network (Ab Rahman et al., 2017). The products or services perceived as disruptive innovations tend to skip stages in the traditional product design and development process to quickly gain market traction and competitive advantage (Reyes-Mercado & Rajagopal, 2017). The actors are generally perceived as being different, for example with regard to their access to information, their ability to handle information, their capital and knowledge base (asymmetric information) or their routines (Nelson & Winter, 1982;Lipsey et al., 2005). These differences also apply to institutions designed to remain stable over time (Lundvall & Archibugi, 2001), but as the speed of technological change varies and is not always predictable, formal and informal institutions, technology and markets are 'out of sync'.
The music industry has rapidly digitized over the past 20 years. Legislation, institutions and CMOs are lagging behind these developments as there is a nonsynchronous situation within the music industry (Lyons et al., 2019). Mostly national institutions (such as CMOs) deal with international 'Big Tech'-organizations from a skewed balance of power position. This is caused by the information asymmetry as Big Tech companies do not share available data with the CMOs and therefore have a much stronger negotiating position vis-à-vis CMOs and rights holders (Spoerri, 2019). Furthermore, the CMOs are not equipped to deal with the large amounts of data and the systems to convert this data into reliable information (Roberts, 2021). There is little empirical analysis on composers' relations with their publishers (contracting) (Towse, 2017) and the role of CMOs within the system of music copyright (Philips & Street, 20015;Watt, 2015), for example how the collected copyright revenue has been distributed amongst creators and other intermediaries (Towse, 2006).

Methodology
We believe that a better understanding of the phenomenon of digitization of music industry would allow the stakeholders to proceed from a more informed perspective in terms of designing, implementing and applying the future copyright enforcement system.
Qualitative research is grounded in an essentially constructivist philosophical position and its intent is to examine a social situation or interaction by allowing, us, the researchers, to enter the world of others and attempt to achieve a holistic understanding (Bogdan & Biklen, 2007;Locke et al., 2013;Maxwell, 2012;Merriam et al., 2015). In our view, considering the complex nature of the economics of copyright and the different economic doctrines outlined in section two, these grounds of qualitative research fit well with this study because its objective is to achieve a holistic and better understanding about the contemporary effects of digitization on copyright enforcement but also on the interactions between the stakeholders.
In order to select the sample for this study, a purposeful sampling procedure was used. Since one of us has been working in the Dutch music industry for over two decades, we started within our own network of possible participants. Also, a snowball sampling strategy was employed (Patton, 2015). The participants were selected using the following selection criteria: 1) composers and lyricists have had at least five songs released in the last 4 years, 2) they are registered members of Buma/Stemra and 3) either own their own publishing company or are represented by an official registered publisher in The Netherlands or elsewhere. Criteria in selecting publishers are that 1) they have a relevant repertoire of professional authors they represent, 2) they are professionally active in the copyright music industry for at least ten years. Finally, regarding CMO, the individual participants should have a management position within their organization with at least 5 years of relevant working experience. The delimiting time frames of 4, 10 and 5 years were decided to insure adequate working experience in the music industry. The research sample consists of six individuals included: two composer/lyricist with a broad repertoire of internationally successful songs who now own their own publishing companies (first one Grand Mono and the second one The Unexpected); a formal member of the Council of Rights Owners of Buma/Stemra (The Dutch CMO); the Dutch CEO of one of the biggest Global Independent Publishing companies (wishes to stay anonymous), a Buma/Stemra manager responsible for Business Development and a lobbyist of Buma/Stemra who operates on national and EU-level.
The following steps were used to carry out this research: 1) available literature and peer reviewed articles were searched, selected and analyzed, 2) collection and analysis of copyright-related documents (e.g. law and regulations) and 3) interviews with DIGITAL SUPPORT FROM CRISIS TO PROGRESSIVE CHANGE participants. In relation to step 1, ongoing and selective review of literature was conducted. The main focus of the review was to acquire knowledge and gain understanding of the legal framework of copyright law, what the economics of copyrights are, how the enforcement system of copyright is designed and implemented and who the key stakeholders are within this system. In step 2 the associated activities were to name, collect, categorize and systematically analyze the relevant and available documents regarding the enforcement of copyright in The Netherlands. The collected documents were categorized in public and non-public documents. Besides literature this concerns at least the following documents: "income statements" from CMOs to rights holders; annual reports of CMOs (all public); the reports of the Supervisory Board for Collective Management Organizations for Copyright and Related Rights and available agreements (contracts) between publishers and composers and lyricists (non-public). Also, copyright law documents were considered. Although the legal framework of copyright lays outside the scope of this research, it can still provide important insights in the rationale and justification of copyright law from the legal perspective. The main focus of the document analysis was to gain a deeper understanding of the enforcement system of copyright law on meso and micro economical level. In step 3 six in-depth open interviews were conducted with participants who work in the Dutch copyright industry. This was the primary data collection method in this research because of its potential to elicit thick descriptions and enable us to search for additional information. A major benefit of individual in-depth interviews is that it also offers the potential to capture a person's perspective of an event or experience (Marshall & Rossman, 2014). In the case of this research our reason for choosing this method was that it is a good way to generate data through interaction with people and capture the meaning of their experience in their own words (Bloomberg & Volpe, 2019).
Regarding the process of the interviews, we send emails and/or LinkedIn direct messages to prospective participants describing the purpose of the research with a request for a convenient date and time for an online interview. The interviews were conducted between December 2020 and February 2021. All the interviews were audio recorded and afterwards manually transcribed verbatim and with full permission of the participants. The interviews lasted between 45 minutes and 2.5 hours and covered different themes depending on the role and interests of the participants. Appendix 1 provides an overview of theme's and questions asked dependent on the type of interviewee. At the end of each interview the participants were asked if they could recommend a next potential participant. The data analysis and data collection activities were done simultaneously in order to avoid the risk of repetitious, unfocused and overwhelming data (Merriam et al., 2015). The documents and transcripts were first coded with open coding for identifying and naming the data and developing major categories of information (Bloomberg & Volpe, 2019). In the next phase the categories were connected and we searched for relationships among them (Birks & Mills, 2015;Corbin & Strauss, 2014;Holton & Walsh, 2016), where we compared threads and patterns within categories. In the last phase of the synthesizing process, we situated the current work to prior research and compered and contrasted it with issues found in the broader literature (Bloomberg & Volpe, 2019). Credibility, dependability and confirmability of the research are ensured by triangulating sources (Patton, 2015) and member checks (Bloomberg & Volpe, 2019); transferability by purposeful sampling and thick descriptions (Gay et al., 2019;Merriam et al., 2015;Patton, 2015). For this process Atlas.ti software is used.
Although generalizability was not a goal of this study, through detailed description of the background and context, this study could be assessed for its applicability in other similar contexts. The findings are discussed below in section 4 of this article.

Findings
The major findings of this research are: 1. The literature study and document analyses contributed to the understanding on the practical application of the enforcement of copyright in The Netherlands; 2. All the participants indicated that the digitization affected the mutual relationships amongst creators, creators and publishers (rights holders) and CMOs. The relationships are now more complex and dynamic which results in different types of possible contracts between creators and publishers; 3. All participants acknowledged the effects of digitization on music copyright, complexity of contemporary system and existence of the 'old' legacy software used for the enforcement of copyright in The Netherlands; 4. All participants indicated that digitization of the music industry contributed to the existence of black boxes in the copyright processes and expressed the need for an appropriate solution; DIGITAL SUPPORT FROM CRISIS TO PROGRESSIVE CHANGE

Figure 1: The black Box of the Music Copyright
Based on the document analysis the enforcement system of music copyright in the Netherlands is modeled (figure 1), including the stakeholders (players), their mandates and their relationships as formally described. According to literature and the analyzed documents, the 'users of music' pay for the use of music by annual or monthly contribution to the CMOs. The Dutch CMO, Buma/Stemra, is appointed by the Dutch Government to collect money from users of music and distribute the collected money to the rights holders. Buma/Stemra is also responsible for and given the mandate to negotiate the tariffs for use of music with different parties. The rights holders in the Netherlands are the composers, lyricists and the music publishers. The split of the copyright is divided equally by those three, each owns 33,33% of the copyright. In case of a composition without lyrics, this split is equal to 50%. The publishers are, depending on the signed agreements with the creators of music, responsible for the exploitation and administration of created musical works. There are different kinds of agreements between publishers and creators and the publishing share of 33,33% can (partly) flow back to the creators, depending on the type of contract (see table 1). When a musical work is created, the role of the creators is to register their work with the CMO, in order to receive the revenue they are entitled to for the use of their work. Buma/Stemra is responsible for collection and distribution of performance rights and of mechanical reproductions rights. The latter is only relevant when a song or a composition is recorded by performers or artists and released (distributed) by, for example, a record label and reproduced on content carriers or digitally on for example Spotify or comparable online services. Registering a composition or lyrics for the rights holders is not experienced as convenient. As one of the interviewees stated:

"Imagine you write a song, you don't have a recording and someone else is performing it. What then happens is that you have to trust that there is always someone sitting there who writes down the title and the authors neatly and that that is copied well at Buma/Stemra, so that will be a bit of manual work. Nowadays there is also a lot of automation in it, but there is more margin of error in it." [Participant 1]
All the participants indicated that the mutual relationships amongst creators, creators and publishers (rights holders) and rights holders and CMOs are affected by digitization of the music and that these relationships are complex and dynamic. This results in different sort of agreements between creators and publishers. According to the participant who now owns his own publishing company: "I worked with a publisher. I worked with them from 2013 to 2018. I felt that they were not doing enough and that they were not active enough with my music to justify getting such a share in my music." [Participant 5] Based on the interviews we found that there are four possible contracts (table 1) between the creators of music (composers and lyricists) and publishers. DIGITAL SUPPORT FROM CRISIS TO PROGRESSIVE CHANGE

Song / Title Agreement
This type of music publishing contract is an agreement between the writer and the music publisher in which the writer grants certain rights to a publisher for one or more songs. In a single song publishing contracts, the writer is sometimes paid a one-time recoupable advance.
Exclusive Songwriter Agreement ("ESWA") Under the ESWA or "staff writer" contract, the songwriter generally grants all of the publishers share of the income to the music publisher. The writers' services are exclusive to the music publishers for a specified period of time. Thus, any compositions written within that period belong to the music publisher. These publishing contracts are usually offered to writers with some degree of commercial success.

Copublishing Agreement ("Co-pub")
Under this deal, the songwriter and the music publisher are "co-owners" of the copyrights in the musical compositions. The writer becomes the "co-publisher" (i.e. co-owner) with the music publisher, based on an agreed split of the royalties (or kickback). Administrati on Agreement ("Admin / Sub Publishing"): Under this music publishing contract, the music publisher simply administers the copyrights for another publisher/copyright owner 2 . Under this coveted arrangement, ownership of the copyright is usually not transferred to the administrator. Instead, the music publisher usually gets 10-20% of the gross royalties received from administering the songs for a certain period of time and for a certain territory.
All participants acknowledged the effects of digitization on music copyright, complexity of the current system and existence of 'old' legacy software used for the enforcement of copyright in The Netherlands. During the times that music publishing was only based on exploitation of sheet music, the implementation of the system was uncluttered and relatively controllable. The contemporary and digitized music industry of today has become much more complex and intricate and there are now many more stakeholders in the music "ecosystem" than ever before.
"Enforcement and legislation lag behind technological developments, so once a law has been passed, after three years or so, the technology has already been developed in such a way that you can actually start working on a new law right away." [Participant 5] It has become almost impossible for the CMOs to collect and process all of the available data in order to collect and distribute the copyright money in the most fair and just way (figure 1). According to an interviewee who is both a composer and publisher: "Buma / Stemra has to deal with hundreds of thousands of parties. That can often go wrong so in itself that is inherent to the system and there is nothing wrong with that. If your song is played on many thousands of TV and internet channels you cannot expect that everything will go smoothly. For authors, if you want to get what you are entitled to, you have to be on top of it." [Participant 1] And according to the interviewed manager of the Dutch CMO Buma/Stemra, there are more problems:

"We are still working with what is then called a monolithic system, so one large system that contains everything and that will at some point have reached the end of its life. Then you have to look for something new and a project has now started, which will of course take a few years before it is finished and rolled out, a new IT environment is developed and rolled out."[Participant 2]
The Netherlands is a relatively 'small player' compared to countries like Japan, USA, Germany, UK and France. Collecting and analyzing music using data from these countries (and many others) is almost impossible and very complicated.
"Of course we live in a digital age but a lot of that software is written by people so there are a lot of mistakes in it. That's just year after year, you know how it works, uh, IT is terribly difficult to get right year after year, patch after patch. Such a software system does not always improve…" [Participant 1] And according to the interviewed international publisher: The fact is that you do not know what happens to your copyright and that the person who uses your copyright is actually not in breach at all. [Participant 3] Another phenomenon of the music copyright industry has been discussed frequently in the recent global media: the black box of copyright (figure 1) (Bargfredde & Panay, 2015;Music Business Worldwide, 2018). All the participants indicated the effects of DIGITAL SUPPORT FROM CRISIS TO PROGRESSIVE CHANGE digitization on existence of such black box of copyright and expressed the need for an appropriate solution. The black box is an 'umbrella' term used with different meanings. The most used definition is that these are unclaimed royalties collected by the CMOs. Basically, CMOs have collected the money but do not know who to give the collected money to. The reasons for the existence of such black boxes vary; from makers and publishers not registering their work, to labels releasing and reproducing the songs digitally without reporting the rightful owners and to unmatched databases or music users not correctly reporting the use of music (Music Business Worldwide, 2018). Also the digital data exchange between CMOs in different countries is a major reason for their existence. In words of the board member of Buma/Stemra:

"The black box within the copyright world means the following: money comes in and it is not clear how it is distributed. The black box is actually more of a collective name for various problems within the music copyright industry." [Participant 4]
"That black box is of course glued to everything they don't see…" [Participant 2]

Discussion, Conclusions and Recommendations
The purpose of this study was to explore the influence of digitization within the music industry on the copyright enforcement in the Netherlands and on creators of music, their publishers and the CMOs. Also to explore how their mutual relationships are affected by digitization. Following is the discussion of the findings and the conclusions drawn from this research.

The practical application of the enforcement of copyright in The Netherlands and the effects of digitization on music copyright
The first major finding of this research is that the design of the copyright enforcement system is well documented, transparent and institutionalized in the Dutch and European legal framework. The mandates and responsibilities are well defined and experienced as such by all the participants. However, there is a difference between the design of the system 'on paper' and practical application of the system. A conclusion to be drawn from this finding is that the designed system and the legal framework are rigid and not agile to adjust to the fast exogenous innovation. The digitization of the music industry started a tsunami of Big Data and the key actors of the copyright enforcement, the CMOs, with the mandate to collect and distribute money from user to the rights holders are not ready to cope with the fast changing environment, are not equipped with the right software tools and their bargaining power towards the 'Big Tech' companies and the new major users of music, like Spotify, has diminished due to asymmetrical information. A further conclusion that can be drawn is that, although the justification of copyright in a broader sense is well-argued by scholars and policy makers, the implementation and the policy are not perfectly aligned, as one would expect from the findings in the literature covering the economics of copyright.

The mutual relationships are affected by the digitization
The second major finding is that all the participants have emphasized the existence of rather complex relationships between creators (composers and lyricist) and their publishers. For the legislation, the rights holders, creators and publishers, are homogeneous and enjoy the same rights. However, these two groups have different interests and their views on the distribution of income differ: "Artist versus the businessmen". In practice, these different views have led to the emergence of different forms of collaborations and different types of contracts between the two. One example is that on one hit song, there are sometimes more than 10 creators and more than 10 (sub)publishers involved, thus many contracts and splits between all parties involved exist. A related conclusion is that the digitization of the music industry enlarged the gap between the enforcement of copyright and the legal framework.

The existence of the black box of copyright
The last finding of this study are the effects of digitization of the music industry on the black box of copyright. All the participants were aware of the existence of the black box and indicated that it is a term used for not one, but many problems of the copyright enforcement. The overarching view of the participants is that the black box is an "umbrella term" used to describe the inability of the CMOs to distribute the collected funds to the correct rights holders. As stated before, the reasons for its existence vary, from outdated legacy software to data exchange problems between countries and the big tech companies withholding the data about the use of music DIGITAL SUPPORT FROM CRISIS TO PROGRESSIVE CHANGE but also the efficiency reasons related to the transaction costs of the distribution to the somewhat smaller rights holders.
One of the limitations of this study is potential bias and subjectivity regarding one of the researchers own participation as a professional in the Dutch music industry and his personal experience with the enforcement of copyright in The Netherlands. The second limitation is that the research sample was restricted to six individuals, which could limit the knowledge produced by this study to be applied in other countries and similar contexts. We took the following measures once the possible limitations were recognized. First, a broad literature review and document analysis were inducted in order to recognize the research agenda and state the assumptions prior to the interviews. Secondly, the collection of data, analysis and findings were reviewed by faculty colleagues and advisors of this research. Although generalizability was not a goal of this study, through detailed description of the background and context, this study could be assessed for its applicability in other similar context.
Based on this research we find that further research should be conducted to gain more understanding about the current system of copyright enforcement and its complexities. As the number of participants to this research is limited, interviewing a larger number of active composers, lyricists, publishers, CMO-representatives and others involved, would contribute to the following objectives: 1) create more insights, 2) assess the extent to which the same or comparable findings can be found but also to uncover the similarities and differences in perspectives of the participants based on their role and position, 3) understand and model how creators, publishers and CMOs cope with the exogenous technological innovation in the music industry and 4) contribute to the policy makers and economic actors discussion about future improvement of the copyright enforcement system.