Game Changer: New EU Copyright Laws Could Lead to Music Royalty Revenue in Online Gaming

May 9, 2019

3 min read

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What's going on here?

New copyright laws mean that music used in online gaming could now be a significant new source of royalties for songwriters and composers.

What does this mean?

The new EU Copyright Directive that was passed last month (for a refresher on the directive and some of its major effects, check out our interview with an EU law expert) has the potential to open up a royalty revenue stream from music used within multiplayer online games. One such game (which has already been involved in intellectual property claims over its unique in-game dances) is the online game Fortnite. Robert Ashcroft, the Chief Executive of PRS for Music (the body which collects royalties), has discussed the changes that could result from the legislation.

Ashcroft highlighted that the EU Directive “clarifies the liability of key technology platforms to pay for their use of copyright material.” This means that games that use unlicensed music could potentially be held accountable following this Directive.

PRS for Music’s revenues have increased by 70% since 2017 due to the increase in royalties from streaming and downloads. It cannot be denied that increased digital music consumption has helped ensure this growth. Therefore, it’s clear that gaining royalties from the gaming industry has the ability to further increase the success of this revenue stream.

What's the big picture effect?

Although the Directive only clarifies that companies have a duty to pay for music used, in practicality it can be argued that this amounts to a new law. If a law exists but is not enforceable, it is useless in the real world. But the Directive gives a route for copyright owners to exercise their rights. Indeed, Ashcroft says that “last month’s vote to approve the biggest change to European copyright law in nearly two decades has potentially opened the door for online gaming to be a source of music royalty revenue for the first time”. Allowing companies to claim royalties from online gaming exposes the music industry to millions of potential clients. Considering Fortnite and its user-base alone, the music industry stands to gain from its 250 million users. Almost 11 million of these users attended popular American DJ Marshmello’s virtual concert earlier this year. This law is therefore clearly expansive and can become a large portion of the revenue stream for PRS.

This will also further the aim to have a “level playing field” in copyright law, as Ashcroft puts it. He notes that they already license YouTube music, therefore it should surely follow that licensing in online gaming is adopted too. By licensing these various uses of music, the industry becomes a fairer place and shows greater respect to songwriters and composers.

However, there is a potential limitation to this. As it is an EU Directive, it may not have as much of an impact in the rest of the world. There could also be complications in calculating the royalties from a game. Inevitably, with the arrival of Brexit, there is ambiguity around how this will affect the UK and whether it will be implemented into the UK’s laws. Needless to say, this EU Directive provides for a potential landmark reform in copyright law and the distribution of royalties.

Report written by Harina C

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