Fees That Could Spoil the Party in Berlin

http://www.nytimes.com/2012/09/24/business/media/fees-that-could-spoil-berlin-party.html

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BERLIN — With 12 percent unemployment and a staggering municipal debt, Germany’s poor but sexy capital city has little going for itself economically, except a thriving tourism business and reliably relentless nightlife.

But even that fragile engine of growth is under threat. The German music copyright collection agency, GEMA, plans in April to raise exponentially the fees that some hotels, clubs, bars and discos pay to play recorded or live music, potentially leading many venues to shut their doors.

“That would be a death sentence for Berlin’s cultural scene, and we’d have to close,” said Birte Nickel, co-manager of Yaam, a sprawling African and Caribbean-theme reggae club that opened in 1994 on the banks of the Spree River. “No one can pay that kind of fee here, and frankly, no one should have to.”

GEMA proposed changing the fees after bar, club and hotel owners criticized the existing system, which divides copyrighted music into 11 categories and levies fees based on those groupings. The critics called that system confusing and repetitive. Under those rules, larger clubs were able to pay a flat fee, usually less than 5 percent of ticket revenue.

The new system would divide music into two categories — live and recorded — and require club owners for the first time to pay fees based on actual attendance, which GEMA is proposing to calculate in increments of 100 people per 100 square meters, or close to 1,100 square feet, of space. GEMA says the calculated fees would be reconciled with actual gate receipts to determine the charges.

Club owners say that attendance is influenced by many factors, not just available space, and that the paperwork to document actual attendance each night would increase their costs significantly.

The looming increases have prompted protests by partygoers across Germany and revived debate in Brussels about the unchecked power of the 250 European copyright collection societies, the semiautonomous associations that typically refuse to disclose how they distribute the €6 billion, or nearly $8 billion, they collect each year in fees across the European Union.

The European commissioner for digital issues, Neelie Kroes, criticized collection societies in May at a conference in Brussels sponsored by Bertelsmann, Vivendi and NBC Universal.

“If I have enemies — and I assure you it is a long list — on that list are collecting societies,” Ms. Kroes said. “And I can’t care less. They are monopolists. That is not about protecting the artist, or creator, it is about protection of that system. Perhaps it made sense a long time ago, but it doesn’t make sense at this moment.”

The German Patent and Trademark Office in Munich is reviewing GEMA’s proposed fee increases for “appropriateness” and may not make a decision until the middle of next year, after the new fees are to take effect. Under the German law that created GEMA in 1903, only the patent office can influence the fees charged; elected lawmakers cannot directly veto its actions.

At Yaam, in the Friedrichshain district of Berlin, the new fees would probably mean the end of a hip club that has struggled financially to offer music, food and cultural events to young Berliners. The proposed structure would increase Yaam’s annual fees sixfold, from €800 a year currently to €4,800, and fees would be charged in part because of its size — the club is spread across six hectares, or 15 acres, of shoreline. Ms. Nickel, the co-manager, said GEMA’s proposals failed to take into account actual attendance, which varies according to music selection, weather and competing events.

Nearby, at Cassiopeia, a music club, organizers are contemplating raising cover charges and drink prices to pay GEMA’s higher fees. “We’d probably have to close the dance floor on Tuesdays, because it wouldn’t be worth it,” said Iana Oswald, the manager of Cassiopeia.

Ms. Oswald said she anticipated having to pay “significantly” more money to GEMA under the new rules, but she declined to put a figure on the increase.

Martin Schweda, director of the Berlin office of GEMA, said that the proposed fee increases were justified and that most smaller clubs and bars would either not be affected or would see their payments decline. He acknowledged that the fees some larger clubs and discos paid would rise sharply but said that it would depend on the size of the club, attendance and the length of an establishment’s opening hours.

Berghain, one of the biggest and most successful dance clubs in Berlin, would be among those hit hardest. The fee increases would represent an increase of 1,400 percent in annual payouts for larger clubs, according to a statement on Berghain’s Web site. Such a rise, the club said, “would threaten the existence of many clubs.”

Mr. Schweda said GEMA had promulgated its proposal after failing to reach an agreement with Dehoga, the umbrella group representing clubs, bars, hotels and discos, during negotiations that began in 2007. “There’s been a lot of controversy about this, but what we are trying to do is make the system fairer,” Mr. Schweda said.

Two spokesmen for Dehoga did not return several phone calls requesting interviews. On its Web site, Dehoga says that the new fees would raise the average amount paid by clubs and discos 400 percent to 600 percent and that the amount for smaller music bars would rise as much as 3,500 percent.

“Under the pretext of making everything more simple and fairer, GEMA is apparently abusing its monopolistic and dominant market position in an arbitrary manner to push through exorbitant and potentially fatal fee increases,” the Dehoga statement reads.

According to the Berlin Club Commission, a private group representing club owners, entry ticket revenue typically generates only 20 percent of most clubs’ income. Most profit is generated by sales of beverages and food and the rental of space for special events.

Mr. Schweda of GEMA said some bigger dance clubs took in more than €100,000 a night in cover charges, which figure into the new calculations. Under old GEMA rules, these clubs paid 1 percent to 5 percent of the door receipts to copyright holders.

“We are only asking for 10 percent of the door, on a very small portion of their revenue,” Mr. Schweda said.

European lawmakers have struggled to change the system and rein in the copyright agencies, which have effective lobbies in Brussels and, in the case of countries like France, are viewed as protectors of national culture. Financial disclosure by most of the agencies is only superficial: In Germany, GEMA breaks out payments only in broad categories of domestic and foreign members, or music rights categories.

GEMA collected €825 million in fees in 2011, according to its annual report. Of that, €313.2 million was distributed to GEMA members, who are German composers, songwriters, publishers and copyright holders; €123 million covered GEMA’s overhead costs; and €389 million was paid to foreign songwriters and music publishers, principally American ones.

Most of the 64,700 GEMA members receive only token payments each year from the agency, Ms. Kroes said in May, often as much as two years after the fact.

“In Germany, 94 to 95 percent of artists are only getting €1,000 for copyright on an annual basis,” she said at the conference. “If you are aware of that, you know there is something rotten in the state of things. It can’t be the real world.”

In July, Michel Barnier, the European commissioner for internal markets, announced a plan to impose standards on E.U. collection societies for distributing payments and to allow for the cross-border licensing of online music, which has been slowed by Europe’s balkanized system of collection agencies.

In the meantime, negotiations involving GEMA, Dehoga and other groups over the fees continue, Mr. Schweda said. GEMA recently struck a separate agreement covering the fees paid at the annual Fasching carnival celebrations in Germany, and separate talks are taking place with societies representing local village festivals and other gatherings.

But on the graffiti-scarred streets of central Berlin, grass-roots opposition is building. On Sept. 6, a few hundred people gathered outside GEMA’s regional office at a square in central Berlin to protest the new fees. An online petition demanding a stop to the fees had attracted almost 300,000 signatures by Friday.

Ms. Nickel, the club manager, was one of the protesters Sept. 6. She says she thinks GEMA will back down on its demands, though the agency rejects that idea. In the clubs along Mehringdamm, the entertainment strip in the Kreuzberg neighborhood, placards pillorying GEMA are plentiful. The agency is often depicted as a vampire.