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PRS for Music’s decision to launch legal action against SoundCloud has implications which could reach far beyond those two organisations, David Balfour comments.

PRS for Music on Thursday announced in a letter to its members that it is commencing legal proceedings against SoundCloud. This didn’t come as a complete surprise - rumblings from artists over unexpected content takedowns over the last few weeks could not adequately be answered through an explanation of label actions – there was obviously something else going on. It’s pretty clear now what’s happening however: PRS and SoundCloud are taking their licensing dispute to court.

PRS announced to members that it is launching its legal action following “five years of unsuccessful negotiations” with SoundCloud. It states that despite all its attempts to agree on license terms with SoundCloud, “the organisation continues to deny it needs a PRS for Music licence for its existing service available in the UK and Europe”. After such a lengthy period of attempted negotiation, it’s hard to know what was the straw that broke the camel’s back. The importance of this decision for SoundCloud, PRS members and the wider industry however could hardly be underestimated.

Why has SoundCloud not paid UK-based writers and publishers to date? To the best of our understanding, its centres on the fact that most content on the platform is user-uploaded. Users take responsibility for the legal status of their uploads via the terms and conditions and SoundCloud is then protected by the Safe Harbour provisions granted under the US Digital Millennium Copyright Act and also in European law through the E-Commerce Directive 2000. Whilst a number of tech companies have successfully defended such a position in the US courts, PRS has never accepted that this defence should work in Europe. The question which will now come under deep legal examination is whether the Safe Harbour aspects of European law justify SoundCloud’s claim that it doesn’t need a license from PRS.

PRS is clear about its aim with the legal action, which is to “establish the principle that a licence is required when services make available music to users.” It will argue its stated position that “an intermediary should only benefit from a safe harbour defence if they are truly providing only a technical, automatic and passive service” and that SoundCloud’s business does not fall into that category. 

We would not attempt to predict the course that this legal action will take, or what the end result will be. The principle at test however is hugely important not just for the parties involved, but for the whole development of the digital music space in Europe. If this principle mentioned above does get established by the courts, it could deal a death blow to the argument that UGC services doing business in Europe can absolve themselves of responsibility for licensing music content.

Perhaps the most surprising aspect of this legal action is that it’s been so long in coming. It’s not only writers and publishers who have been deeply unsatisfied with the idea that services can launch and build hugely-invested businesses whilst shirking responsibility for the licensing of the content at their core. That’s not to say however that SoundCloud hasn’t attempted to find solutions to its complex licensing situation. It has already struck licensing deals with Warner Music and Merlin, whilst recent rumours have suggested that Universal music was also close to agreeing terms that would have legally legitimised SoundCloud’s use of its content. Why it was not able to reach a similar arrangement with PRS is unclear, though PRS’s statement would apparently suggest that SoundCloud felt legally justified in choosing not to license publishers and writers’ content.

This legal dispute has echoes of an ongoing legal battle between (German PRS equivalent) GEMA and YouTube which has been underway in courts in that country for years now. There are few signs of a forthcoming resolution in that dispute – which means the majority of music content is still not available on YouTube in Germany. There appear to be some important differences between the two cases however. In the case of GEMA vs YouTube, the issue is not so much whether a license is required but how much should be paid for it. In PRS vs SoundCloud, whether a license is required at all is the question which will be under examination.

What does this mean for SoundCloud and its users? For SoundCloud itself the stakes could hardly be higher: the case calls into question core aspects of its European business model. For users, this action will also likely mean that significant amounts – if not all - of PRS for Music-represented repertoire could become unavailable on the service for the immediate future. We expect that many individual SoundCloud users will rail against PRS’s action, though it’s the reaction that the artists themselves will demonstrate which interests us most.

Some artists may feel displeased about PRS’s position, especially perhaps those that don’t control their own publishing rights and would prefer for their recordings to stay live on the platform. Now that the basis for the recent removals of content from SoundCloud is clearer however, artists will have to speak for themselves about whether they support PRS for Music’s action, or not. With PRS’s position only just having been revealed at the time of writing, it’s currently impossible to take an accurate measure of the climate of reaction. It is notable however that some artists have already delivered a firm endorsement to PRS’s stance via their social media channels.

This potential impact of this case could hardly be more wide-reaching. It calls into question the established business strategy of many tech companies, not just SoundCloud. It also tests the ability of rightsholders to control the use of their content online. It also potentially raises questions around the role which collecting societies play in today’s markets. Needless to say, we’ll be following closely.

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