Even if you live in Germany and you know all about GEMA, you might have been surprised at the intensity of the anti-GEMA protest movement as it coalesced over the summer of 2012. Nobody took to the streets when similar changes in fee structure were introduced for live concerts a year ago. And there was only a mild media buzz two years ago when clubs across Berlin ran into trouble with Berlin's tax authorities. What made the GEMA-Tarifreform such an emotional issue? Throughout 2012 and early 2013, there was a lot of confusion, distortion, misinformation and partisan rhetoric surrounding GEMA and its new licensing fees. And so, it seems like the time is right to look back and set the record straight.
What is GEMA?
The Gesellschaft für musikalische Aufführungs- und mechanische Vervielfältigungsrechte (Society for Musical Performing and Mechanical Reproduction Rights) is a collecting society for music licensing—that is, it collects fees for the use of copyrighted music and then redistributes those fees to the music's authors. It's in the business of "collective rights management," representing the intellectual-property rights of its members in national and international markets. In Germany, if you're running any sort of business that uses music—whether it's a nightclub, a dance school or a supermarket—you're legally required to pay licensing fees to GEMA. The organization currently represents approximately 64,000 composers, lyricists and music publishers in Germany as well as approximately 2,000,000 international rights-holders.
Despite being for-profit and representing private interests, the German government granted GEMA the ability to use legal force to manage the music-use rights of its members. This also means that it has an effective monopoly position in the national market: no other competing collecting society currently exists in Germany. As a result, German case law has established the GEMA-Vermutung (GEMA assumption), which means that all musical works are assumed to be managed by GEMA unless the music-user can prove that the work is "GEMA-free" or in the public domain.
While GEMA can be compared to other national collecting societies, such as PRS for Music (UK) or ASCAP & BMI (USA), this organization is based on "authors' rights" rather than copyright law. This means that music-makers don't sign over ownership of their music upon joining GEMA, they sign over their usage rights—the right to legally manage and collect licensing fees for playback, reproduction and broadcast of their music. This is a convenient arrangement when you're a small-time musician who doesn't have the time or money to manage your catalogue; but these management decisions are taken out of your hands. If you want to grant a free license to a charity event or offer a reduced fee for a career-advancing event, you'll find that decision isn't yours to make.
But the lack of direct control over the use of your own music isn't the only reason for dissatisfaction among GEMA members: all of the important decisions about the musical rights of the entire society's members are made by a small minority of high-earning (i.e. mostly mainstream and commercial) members. Membership is organized into a hierarchy of "full members," "extraordinary members" and "associated members." Only the tiny minority of full members (3,323) can vote directly on decisions and hold positions of power within the organization. Full member status currently requires that you earn more than 30,000€ in fee-revenues from GEMA over five years, which places it out of the reach of most underground music-makers. This mainstream-elite effectively determines the music-licensing fees and revenue sharing for all of its members—and, not surprisingly, these power brokers often do so in ways that benefit full members at the expense of extraordinary and associated members.
"The main problem I see with GEMA is the very confusing distribution system of the money they collect on flat rates," says producer and Raster-Noton boss Carsten Nicolai, AKA Alva Noto. "I believe that, in this digital age, it would be ideal if the tracks that get played get paid." The distribution of royalties is a real sore point, because it's often impossible to keep an accurate record of which tracks are played where and when. GEMA currently determines who gets how much of the royalties from un-programmed music events by using an extrapolation-algorithm that primarily measures mainstream market sales and "airplay."
You can see how this pisses off promoters and smaller producers/labels: thanks to the GEMA-Vermutung, GEMA assumes that everything played at a music event is subject to licensing fees, but then it uses its own nebulous algorithm to decide who those fees are paid to. For underground music venues that mainly feature non-mainstream and independent artists—like many dance music clubs—this means that a portion of the fees collected for these events will likely find their way into the bank accounts of mainstream artists and advertising jingle writers, whose music was never played during the event, while some artists will never see a single cent for their music, however popular it may be.
GEMA also has some strange historical-cultural baggage. It classifies music into three categories: entertainment [Unterhaltungsmusik], serious music [Ernste Musik] and functional music [Funktionsmusik]. It then subjects these categories to different fee rates, membership requirements and weighting in the points system they use to calculate royalties. Unsurprisingly, U-Musik gets the worst of this arrangement, having the highest membership requirements, the highest fee rates and the lowest values for royalty calculations. "I was working for a radio station some years back," says producer and former Panorama Bar resident Prosumer, "and I was shocked by how GEMA works… To make a distinction between Unterhaltungsmusik and Ernste Musik seems absurd to me. Who is allowed to make such decisions?"
The Tarifreform controversy
The message that most of the music-event industry in Germany took was something like, "Here are your new rates for next year. If you don't like it, too bad. Cough up the money." They were not happy.
Of course, there is always more to the story. In December 2007, a government inquiry entitled "Culture in Germany," confirmed GEMA's legal legitimacy as a nationally recognized collecting society, but also criticized the organization's over-complicated and unbalanced tariff structure. Shortly afterwards, GEMA announced that it would begin work on revising its licensing fees, with the goal of being more transparent, simplified and proportionate. GEMA is legally required to negotiate with associations that represent music-users (like clubs), and so it initiated a negotiation process with the Bundesvereinigung der Musikveranstalter (BVMV, National Association of Music Event Organizers).
Negotiations broke down sometime in late 2011, however, and an attempt to initiate legal arbitration failed as well. GEMA therefore decided to go ahead without the negotiations or arbitration and published a new tariff structure in the Bundesanzeiger (Federal Gazette) in April 2012, which effectively made the new tariffs legally-binding.
This set off a cascade of reactions, protests, petitions and grassroots organizing that kept the topic of GEMA tariffs ablaze for the rest of the year. Music promoters, venue owners and DJs started making their opinions known, which quickly generated momentum on social media sites. In late April, event promoter Matthias Rauh of giga-event launched an online petition, entitled "Against the 2013 Tariff Reform—GEMA Loses Its Sense of Proportion." Critics of GEMA quickly circulated the link, and it soon began to appear on social media. Nonetheless, the media coverage didn't go far outside of Germany at that point, and only "industry insiders" seem to be panicking.
It wasn't until early June that a public, bodies-in-the-streets, anti-GEMA movement began to take shape. On June 25th, several newly formed nightlife associations organized a protest in front of Berlin's Kulturbrauerei, where the GEMA membership was holding its summer party. On June 30th, clubs and discos all over Germany turned off the music for five minutes at 23:55, in order to make partygoers aware of the potential impact of the GEMA tariff reforms.
The Tarifreform debates became an international topic in early July, when the rumor started to circulate that Berghain would close on January 1, 2013 due to the high cost of the new GEMA tariff system. Similar reports surfaced naming Watergate, Schwuz and Weekend as clubs that were in danger of closing. Despite being unsubstantiated rumors, this was the news that seized the attention of international techno fans and the general German public. Berghain's supposed closure became a headline all over Germany, and even English-language newspapers like the Guardian gave it coverage. The news went explosively viral on social media sites like Facebook and Twitter.
The rest of the summer was filled with online petitions, on-the-street protests and angry/panicked Facebook statuses. This culminated in the September 6th "day of action" organized by FAIRplay, a network of Berlin nightclubs, promoters and music fans. The protest march took place in front of GEMA's Berlin headquarters in Schöneberg. Turnout was massive and included participation from many music scenes beyond house and techno. Parallel protest marches were held in Frankfurt, Munich, Hamburg and several other cities across Germany. The protests garnered substantial media attention.
Inside the reforms
What kind of tariff reform could set off this sort of response? GEMA claimed that the reforms would make music licensing simpler and fairer for event organizers. Firstly, the previous eleven tariff rates would be simplified down to two. Secondly, the licensing fees would be calculated for each event individually (rather than as a flat-rate for all the events in a year), using only the size of the venue and the cost of entry. This was supposed to generate a more balanced scale of fees between small and large promoters, with GEMA predicting that 60% of event organizers would see a reduction in their licensing fees.
But it's not that simple. Marcel Dettman, Berghain resident DJ and Ostgut Ton producer, described it in a press release as, "a heavily simplified, clearly unbalanced and downright unjust body of rules, which massively threatens the whole event-scene in Germany." GEMA calibrated the new rate for dance clubs (Tarif M-V) with the goal of charging approximately 10% of the gross income for a music event. Of course, they don't trust organizers to self-report their revenues accurately, so they estimate the gross income based on venue size and price of entry, and then charge 10% of that.
This estimation is based on three assumptions: 1) the capacity of a venue is one person per square-meter, measured wall-to-wall (i.e. beyond the dance floor and ignoring solid objects like furniture); 2) the event is full to capacity; 3) everyone is paying full price for entry.
If you made these assumptions as a promoter you wouldn't survive past your first event. Nevertheless, GEMA estimates that a 500 m2 club charging 10€ at the door is bringing in 5000€ per event, and thus owes them 500€ in fees. If that club opens three times a week, it will owe 78,000€ a year in fees. But under the previous tariff scheme, discos and dance clubs paid a deeply discounted flat-rate if they paid a lump sum for the whole year (Tarif M-U IIIc, Diskotheken). The same 500 m2 club would've paid 7,849€ a year under the old system, so the new rates represent an increase of 894%. Even a 100 m2 club charging 5€ would still see a 200% yearly increase in fees.
In answer to complaints about these distorted results, GEMA later introduced the Angemessenheitsregel (appropriateness rule), which allows promoters to apply for a partial refund if GEMA fees are well over 10% of actual gross income or if the venue's capacity is well under GEMA's one person / m2 ratio. But, as Wintergarten Varieté manager Georg Strecker complained at a press conference later in the year, "How appropriate are the licensing rates when I have to submit a special request to get an 'appropriate' rate?" And, since you have to pay the fees first and then apply for the refund afterwards, how viable is this for small promoters and clubs?
But perhaps the biggest surprise for clubs and discos was the surcharge based on the duration of the party. A small paragraph in the new tariff scheme states that all events that last longer than five hours incur an automatic fee increase of 50%, with an additional 50% for every three additional hours. German nightclubs, of course, stay open for more than five hours, and those in Berlin often run well over ten hours. For venues that stay open for more than 24 hours (like Berghain, Kater Holzig, Sisyphos and many open-air events during the summer), this compound surcharge can generate absurd numbers. In response to criticism, GEMA later revised this surcharge down to 25% for every two hours over an eight-hour minimum, which is still painfully expensive for Berlin-style parties.
Just in case the tariff debates lost momentum, in late November GEMA announced another tariff, VR-Ö, which became known as the "laptop surcharge." It applied to all music performances that use blank media such as CDs, tapes, USB sticks and hard-drives. This already existed in the past as an automatic 30% surcharge on the entirety of GEMA music licensing fees if any of the DJs used mp3s or burned CDs. Now, the surcharge would no longer be a percentage of the fees, but would instead be calculated at 0.13€ for every mp3 file on the DJ's computer. Every song over five minutes costs an extra 20% per minute. Performers and promoters all over Germany were not pleased, especially since the rate appears to charge all files on a DJ's performing device, regardless of how many songs they actually play.
Throughout 2012, music venues and event promoters were calculating and re-calculating their new GEMA rates and making their dissatisfaction felt. Venues, promoters and DJs used press releases and social media to publicize their own estimated licensing costs based on the new tariffs. These calculations were mostly "worst case scenario" estimates that didn't take into account the "hardship provisions" that are also included in the new tariff scheme. They also rarely took into account the revisions GEMA made to the tariffs over the summer. GEMA slammed its critics for publishing estimates that it considered exaggerated and misleading—but it didn't deny that the new tariff structure would create sharp increases for a few large-scale clubs. Regardless, phrases like "1,400% increase for Berghain" gained a lot of traction in the music and entertainment press.
The PR battle
From the first publication of GEMA's new tariffs (if not before), public opinion and public relations have been central to how these debates unfolded. Throughout the controversy, GEMA has always stated that its motivation for the tariff reforms was fairness. It was accused of unfairness in the 2007 parliamentary inquiry; in response to these criticisms, it developed a new, simplified, "fairer" tariff system; and, when criticism began to rise against the tariff reforms, GEMA representatives argued that a 10% charge on ticket sales was only fair, considering that the collecting societies of other European nations already levy a similar fee. But GEMA quickly found themselves on the defensive, repeatedly refuting charges of monopoly-exploitation and "GEMAinheiten" ("GEMA dirty tricks") while struggling to depict Germany's music event organizers as selfish freeloaders.
The summer's anti-GEMA demonstrations provide a good example of how its opponents got their act together. The first major demonstration in Berlin on June 25, in front of GEMA's summer party, was an underwhelming affair. The event was announced only a few days in advance, and only a few local promoters advertised it in their newsletters. One stage was set up in front of the Kulturbrauerei, where a series of prominent figures gave lengthy speeches. At the same time, nearly a block away, a second stage was blaring tech house, drawing many of the protesters away from where they needed to be visible.
On August 26, another demonstration at Boxhagener Platz was widely advertised with a party-style poster featuring well-known DJs and the endorsement of high-profile clubs like Kater Holzig. Music and speeches took place on the same stage, with 90 minutes of dance music alternating with 10-minute speeches. In fact, it seemed to the police that there was too much party and not enough protest: they threatened to shut down the demonstration if the organizers didn't feature more political talk. So, every half an hour or so, some random DJ or promoter or bartender or bouncer was dragged on stage and forced to ad-lib some fiery political rhetoric. Boxhagener Platz was packed with people.
On September 6, FAIRplay organized a Germany-wide "day of action." It was planned week in advance, advertised across all available media channels and in collaboration with other anti-GEMA organizations. Once a Facebook event was created, clubs and promoters blasted their mailing lists with links to the event. The organizers reached out to music scenes beyond techno. Clubs and promoters organized floats with music and catchy slogans. According to the organizers, over 10,000 people turned out in Berlin, and 25,000 over all of Germany. The protest march made headlines around the nation.
Regardless of its dubious veracity, rumors of Berghain's potential closure in 2013 was a turning point in the awareness-raising campaign of GEMA's opponents. It garnered attention and concern from a wide audience that didn't understand (or care much about) the fine details of collective rights management and intellectual property law…but they did recognize Berghain as a prominent music venue that mattered to a lot of people. As more clubs and promoters claimed that their continued existence was under threat, a wider and wider audience began to take notice. This drew more attention than probably would've been generated for a handful of medium-sized clubs, but it also drew attention away from them. "They're all worried that Berghain's going to close," Panorama Bar resident and Ostgut artist Steffi said in an interview with Little White Earbuds, "They don't understand the concept of GEMA ruining the whole industry, even the small little bar that has fantastic live music."
As for GEMA's PR strategy, it misplayed its hand from early on. Sources both inside and outside GEMA suggested that the unilateral publication of the new tariffs in April 2012 was a sort of publicity stunt: the idea was that the press coverage would shed light on the BVMV's allegedly obstructive negotiating tactics and pressure them into returning to negotiations with GEMA. If that was the case, however, the plan backfired. The press mostly ignored the earlier negotiations, and instead the leading story became one of GEMA dictating exorbitant new fees without concern for the most vulnerable. The BVMV disappeared from the media's radar and in its place appeared Germany's many small, underground and precarious nightlife establishments; taking over the role of main opponent to GEMA, they created a David-and-Goliath scenario that generated public resentment for GEMA.
The organization's main failure in the PR battle was that it lost control of its own narrative. At the time of its first public announcement about the tariff reforms, GEMA was trying to cast itself and its new tariffs as fair and reasonable—and its opponents as stubborn and selfish. Instead, Germany's nightlife scenes quickly set the story, painting GEMA as exploitative, parasitic and willing to drive music scenes into financial ruin for their own profit. GEMA found itself not only having to defend its tariff system, but also its legitimacy as a collecting society.
Regardless of who has won the media war, it is clear that all of this fuss about clubs closing has distracted public attention away from other, less sexy but nonetheless important problems with GEMA. A lot of these are internal issues, such as the inequalities of its membership structure, the distribution of its fee revenues and the inflexibility of the contracts that artists must sign with GEMA. Ostgut Ton manager Nick Höppner said as much in an interview with Polish music magazine Glissando, where he confirmed that Berlin's biggest clubs, like Berghain, would probably survive the 2013 tariff hikes. "It's manageable," he said. "What's important right now is the reformation of the system of the money distribution. That can only be achieved only from the inside of GEMA."
There are a lot of lessons to be learned from the GEMA Tarifreform debates of 2012, such as the heated nature of the public debate. Sure, industry professionals can dismiss music fans as under informed and overdramatic, but the intensity of their reaction speaks to how important underground music scenes are to those who participate in them. This should serve as a warning to GEMA, politicians, law enforcement and even property owners in Germany, all of whom tend to underestimate the importance of nightclubs and club music to the lives of many German residents.
There are lessons here for Germany's nightlife scenes, too. These scenes are fragile communities that gather in hidden spaces, party on borrowed time and survive on thin margins. If they are going to withstand the economic changes taking place in the international music industry and urban property markets, they will need more cooperation, clever political strategy and skillful public relations. It took months of publicity and cajoling to finally get Germany's clubbers out onto the streets to protest, but they will certainly have to repeat this feat more and more in the future. For Steffi, "It's a wake-up call for people that if they want to maintain a certain kind of liberty—because there's a lot of liberty in Berlin, there's a lot of freedom—they have to fight for that."
The end of 2012 still leaves a lot of questions unanswered. GEMA claims to have been engaged in a good-faith attempt to address the criticisms of an earlier government commission—but why do the new tariffs assume the most expensive conditions (i.e. full capacity and full ticket sales), and then leave the promoter to request to reduce their burden only after the event? Considering the exponential increases in fees this new tariff scheme is likely to produce, it's hard to refute the charge that these reforms are also an opportunistic cash-grab. GEMA currently enjoys a monopoly position, but is this situation inevitable and necessary? If nothing else, GEMA's initial tariffs and its public statements afterwards exposed a profound lack of understanding about how small, independent music scenes work in Germany; there's a real "culture gap" that needs to be addressed, both within the organization itself and in relation to non-mainstream music scenes. As one techno promoter quipped while waiting for the toilets in Berghain: "We need an organization like GEMA, but we don't need an organization like GEMA." In fact, musicians and music users seem more motivated than ever to explore alternatives to GEMA, such as C3S (Cultural Commons Collecting Society).
And recent developments in 2013 haven't given music users much hope that GEMA is operating in good faith. In mid-March, GEMA published a "registration form" as part of the "laptop surcharge" for DJs using digital music formats. Presumably, the idea is that DJs will line up to voluntarily self-report that they're using digital copies and then ask to be charged for it. GEMA's critics in the dance music scene were quick to jump on this registration form. Some pointed out that their "flat rate" offer (a fee of 50€ to license 500 tracks), was just a way for GEMA to make quick money out of digital-format licensing without doing the work of actually figuring out a fair and detailed way to manage digital rights. The form doesn't ask for a list of names for the tracks you're licensing, so obviously the 50€ will just go into a collective pot of royalties.
Also, some critics have suggested that this sign-up form is just a push to get DJs to self-report and sign off on binding contracts with GEMA, so that they can track them down and charge them much higher prices in a year or two. Is this really a bait-and-switch trick? Time will tell, but GEMA's ham-fisted PR antics mean that everyone is ready to assume the worst.
On April 18th—well before the June 2013 deadline—the arbitration process between GEMA and BVMV came to a conclusion. The full text of the decision and settlement are not public yet, and German commentators are still making sense of what information is available, but we already know a few things. Both GEMA and BVMV have released press statements claiming that the decision confirmed their claims, but there are no clear winners here. On the one hand, the decision appears to confirm a lot of GEMA's industry-cartel powers, including the right to unilaterally set tariff rates. On the other hand, it also confirms that GEMA's streamlined” tariff system is inappropriate, and that the older system with multiple tariffs was more suited to the diversity of actually-happening music events. It also urgently called for lawmakers to write up stricter and clearer rules for monopolistic collection societies like GEMA.
So what's the result of this decision? The original 2012 Tarifreforms have been thrown out, and the pre-2012 GEMA tariffs remain in place—along with the negotiated 5-15% increases that were adopted in 2013. The arbitration board has offered a compromise settlement that reflects its decisions, and this will form the basis for negotiations for 2014. So, it's back to the negotiating table with GEMA and BVMV. We don't know when the next major development on this issue will be, but you can expect some public announcement before the end of this year.