Adriano Marconetto, Vice President at an Italian online music company called Vitaminic, acknowledges the head start enjoyed by U.S. counterparts to his firm and other European companies that provide music over the Internet.
Europe has been struggling to catch up to the U.S. lead in utilizing and developing the Internet for the past few years. And online music is no exception.
"For companies like Vitaminic that tend to do a pan-European business, things are much more complicated than operating in one single big market" like the U.S., Marconetto says. "We have to face different mentalities and different local regulations. This means we spend more time facing these types of problems."
Despite the European Unions efforts to harmonize national laws in order to create a unified market, local traditions, lower Internet penetration rates and other issues have created obstacles for European companies such as Vitaminic that are trying to meet Internet users increasing demand for online music.
European countries have generally provided strong protection for intellectual property like music. Companies must deal with more than a dozen entities that collect royalty fees for creators of music, which often involves getting permission from at least one collector per country. That factor, Marconetto says, has made it more difficult for European online companies to offer customers copyrighted music.
At the same time, the EU has delayed the passage of a directive aimed at updating copyright laws for the digital era. Also, the major labels have been reluctant to provide their music over the Internet, and have in many cases been testing the waters in the U.S. before turning to European outlets, according to industry representatives.
But Tim Grimsditch, an analyst at Forrester Researchs U.K. office, says that while Europes online music industry has followed other online ventures by being a year to 18 months behind, he predicts the industry will catch up quickly.
Industry officials argue that collection societies, which help music artists and publishers ensure compensation for performance of copyrighted material, have yet to adapt to the digital era in Europe. Collection societies in some cases are unsure of whether the current rights they provide for access to copyrighted music can be extended to new services such as music sites, according Wes Himes, director of EDiMA, a European association of technology companies and online music providers.
In some cases, music sites have been forced to negotiate with collection societies across Europe for rights they thought they had obtained from their local collection society, says Thomas Vinje, a Brussels, Belgium, lawyer who represents Vitaminic.
U.S. online music companies benefit from the fact that they have fewer collection organizations — primarily Broadcast Music Inc. and the American Society of Composers, Authors and Publishers — to negotiate with, says Sean Leonard, senior director of creative business development at EMusic.com.
European music sites can try to obtain licensing rights directly from a publisher or writer, but this can be an onerous task. And given that most of the major record labels have been reluctant to grant online distribution rights, some European sites, like Vitaminic, have had to focus primarily on providing music by artists who are not signed by major record companies.
"The collection societies need to get up to speed with digital media and the business models we are operating . . . and they havent been doing that," Himes says.
Eamon Shackleton, director of services at the Irish Music Rights Organisation, acknowledges "there is a certain amount of truth" to Himes and others complaints. Given the strong protection for intellectual property that many European countries have provided, he says it is not surprising that "Europeans would tend to be more cautious in how intellectual property rights would be exploited in a very uncertain environment."
Still another obstacle is the level of Internet use in Europe, according to Grimsditch. Many Europeans still pay metered rates for Internet access, and may be reluctant to download music, given the time and cost it takes to do so.
Another advantage U.S. sites may have over their European counterparts is a more certain legal environment. More than two years after the U.S. enacted legislation aimed at enhancing copyright protection for content provided over the Net, the EU has yet to adopt a similar measure.
The EUs copyright directive, which would harmonize copyright laws among its 15 member states, is expected to be taken up by the European Parliament in February. If the Parliament makes no major changes, it will likely gain quick final approval from EU member state ministers. But it may take more than two years for implementation.
Also, copyright holders say they still have major concerns with regard to the measure, and they plan to push the Parliament for changes. Patrick Grueter, legal adviser at the International Federation of the Phonographic Industry, an association of record labels, says an exception in the measure for private copying is still too broad.
"I think it has been a great advantage for the U.S. entertainment industry to have a [legal] framework" in place for a longer amount of time, Grueter says. "That to us seems undoubtedly clear."