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SWD Impact assessment on the modernisation of EU copyright rules – impacts of second option for the use of protected content by online services

An obligation on online services which store and give access to large amounts of protected content uploaded by their users to put in place appropriate and proportionate technologies and to increase transparency vis-a-vis rights holders

Against the backdrop of the role of user uploaded content services in the communication to the public of protected content, the establishment of an obligation to deploy technical means will have a positive impact on right holders.

As the services will be obliged to cooperate with rightholders and provide them adequate information with regard to the technologies to be deployed, it is expected that the efficiency of the technologies will grow and thereby enable rightholders to have a better control over the content that is available on user uploaded services. This will improve their possibilities to conclude agreements and increase revenues.

This is notably the case for the music sector where, as explained above, some agreements are already in place and there is an overall readiness from rightholders to conclude agreements with the services. In the case of AV content, this option may increase the willingness of rightholders to allow more of their content to be available on user uploaded content services while continuing to take down premium content.

While the ability for rightholders to decide on the availability of their content is expected to increase their possibilities to obtain fair remuneration, it is not possible to quantify the concrete impact of this option in terms of revenues, as this would also depend on the outcome of commercial negotiations, including the size of the service as well as possible developments in their business models.

There have been indications from some rightholders in the music sector that the expected remuneration should be similar to the revenues generated by the free tiers of other content services (to the extent it is possible to differentiate free tier revenues from premium service ones).

The deployment of technologies that are necessary to identify content and make the conclusion of agreements possible will imply some costs for rightholders. These costs will arise where they provide data (e.g. contents or fingerprints depending on the technology used) necessary for the content identification technologies to work. When rightholders already provide such data to major online services, the impact is expected to be limited and outweighed by the positive impacts of this option.

The need to put in place measures, such as content identification technologies, will involve costs which will depend on the quantity and the type of content to be identified, but also on whether online services already use technologies or not. This option does not impose any specific technology to be used. An online service can choose between appropriate technology solutions taking into account the specificities and needs of its service as well as its size.

Different technologies and related services are available on the market. The prices offered by the technology providers vary with the scale and types of services provided. In practice, technologies with basic functionalities, allowing one to one recognition of content (such as music recordings) would be the least costly, whereas more elaborate technologies that could be required to identify certain types of works (e.g. the underlying composition of a recording) would be more costly.

Some costs may also arise from the need to put in place procedures to enable users to contest situations where the application of technology would limit, in an unjustified manner, their possibility to upload content. These costs are however expected to be limited as procedures with the similar purpose are in practice in many cases already in place, including in the context of notice and take down mechanisms for hosting service providers.

Due to the improved control for rightholders over the presence of their content on user uploaded content services, the services are expected to negotiate agreements with more rightholders to be able to keep their content available to the end users. In such cases, costs would arise for service providers that have so far refused to enter into negotiations or for those that may need to renegotiate their existing agreements at the request of rightholders.

Currently, the major user uploaded content services tend to be enterprises of a large size for which these costs are expected to be reasonable. The costs related to the negotiation of agreements will be higher for SMEs but they should remain reasonable as the obligation to use technologies is limited to those service providers giving access to large amounts of content. New entrants which start their business with a small quantity of user uploaded content would not be impacted.

The impact on consumers will depend on the possible changes made by the services to the way they function as a result of the deployment of technologies and of possible agreements with rightholders, which could reduce the content freely available on the service. However, as indicated in option 1, negotiations are likely to take into account the popularity of the current user uploaded content models among consumers.

On the other hand, consumers may in the long term have an increased choice of content due to more incentives for rightholders to create new content. This would result from the increased possibility for rightholders to determine the conditions for the use of their contents and therefore to negotiate agreements and be remunerated for such use.

Option 2 is expected to have a positive impact on cultural diversity as it would lead to better control over the use of and remuneration for copyright protected content. This should bring more certainty and incentives to rightholders to create new content. As a result, the access to a culturally diverse content is expected to be positively impacted.

Option 2 would have a positive impact on copyright since rightholders will benefit from an improved framework that allows them to have a better control over the availability of their content on user uploaded content services and to negotiate better the conditions for the use of their content by such services. The freedom of expression and information may be affected negatively in cases where the services limit user uploaded content in an unjustified manner (for example when an exception or a limitation to copyright applies or the content is in public domain) or when the technologies fail to identify the content correctly.

This negative impact should be mitigated by the fact that the services would be obliged to put in place the necessary procedural safeguards for the users which in the majority of cases already exist in the related context of notice and take down requests. In all, as content recognition technologies are already applied by the major user uploaded content services, it is likely that this option would not lead to significant increases in unjustified cases of prevented uploads compared to the current situation.

Furthermore, the cooperation with rightholders and the evolution of technology are likely to improve on an on-going basis the accuracy of content identification. Additionally, as the limited liability regime for hosting service providers is not changed, there is no risk of increase in removals of content due to the fear of liability by such services. At the same time there is likely to be a positive impact on users who in the long term should have access to an enhanced range of creative content and services as incentives to invest will improve.

The impact on the freedom to conduct a business could be negative due to the costs to implement the technologies. At the same time, the level of this impact is expected to be limited due to the fact that the obligation is imposed on services giving access to large amounts of protected content only, that the option builds on existing voluntary practices and that technologies are increasingly available in the market which makes the implementation of the technology obligation easier for the services.

This impact is further limited by the fact that the proportionality in the choice and in the deployment of effective content identification technologies will allow to take into account the size and the nature of the individual services. Overall, this option is considered to strike the necessary balance between copyright and other fundamental freedoms.

Option 2 is the preferred option. The deployment of appropriate technologies would increase the capacity of rightholders to control better the presence of their content on user uploaded content services and give them a better position to negotiate agreements for the use of their content. By contrast, Option 1 could only result in best practices, which would not be binding for service providers and would therefore not be sufficient to lead to improvements on market practices.

The compliance costs of Option 2 for service providers are limited by the fact that the technologies to be put in place need to be proportionate, and that a majority of the services covered already deploy some content identification technologies. Option 2 is the best option to reach the policy objectives while maintaining a balance between the relevant fundamental rights.

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