The Commission has compared the online music market in the US and the EU and found out that, in spite of the larger number of internet users in the EU, the online music market in the US was eight times as big in the US and will still be five times as big as in the EU.
Commission analyses said that the music industry's argument that illegal downloading is to blame for the EU lagging behind the US cannot be true, because there is more of this activity in the US than in the EU. While the reasons may be more complex, calculations by the Commission came to the conclusion that the EU's fragmented market for online licenses is one big obstacle for those willing to set up online download services. In order to do so, one has to apply for a license for each song with a collecting society in each of the EU's 25 member states. The costs can amount to up to 19,000 euro per song or 475,000 euro for any 50 songs. At an estimated gain of 0.10 euro per downloaded song, a service offering only 50 songs would have to have 4.75 million paid downloads just to pay royalties, or 4.75 billion downloads for a service offering the more realistic number of 50,000 songs. This number is currently not achievable.
In order to solve this dilemma, the Commission is proposing a pan-European licence, in the first instance only for music, and only for online usage. Under the proposal, holders of copyright in music could sign off the management of online usage rights to any collective rights management bodies in the EU. Operators of legal downloading services anywhere in the EU could select from which rights management body to license the music they are offering for download.
