Licensing in a Changing TV Market

ADMINISTRATION REPORT

Description of Operations

Copyswede is a cooperative economic association owned by fourteen member organisations, representing Swedish authors and performing artists. Copyswede’s task is to coordinate negotiations and establish agreements in certain areas of copyright, primarily the retransmission of TV and radio. Via mandates from Copyswede’s member organisations and Copyswede’s cooperation agreements with broadcasting companies and organisations for film and phonogram producers, we are able to sign comprehensive agreements concerning the use of copyrighted work and performances. Copyswede licenses a hundred TV and radio channels for retransmission and associated on demand use via cable TV and IP TV networks, amongst others, the majority being public service channels from the Nordic countries and the rest of Europe. The Copyright Act contains provisions which allow the scope of the agreements which Copyswede reaches with operators concerning the retransmission of TV channels to be expanded so that the agreements cover not only right holders who are directly represented by Copyswede, but also Swedish and foreign right holders who are not. For the agreements to acquire this extended coverage, Copyswede must represent a number of right holders within the sector. The provisions concerning extended collective licences are also covered by certain protective regulations with the aim of ensuring that right holders lacking representation and right holders covered by direct representation are treated equally. Copyswede's agreements which are established under the extended collective licence provision concerning the retransmission of TV and radio channels are technology-neutral, creating opportunities for operators to establish agreements when new means of distribution are developed. The extended collective licence can be used by all operators wishing to retransmit TV channels, which means that Copyswede can also issue licences for retransmissions in hotels and similar establishments, as well as for internal use by companies, public authorities and organisations. Regarding a number of the licensed channels, the licences which Copyswede provides can also include provision to utilise all or some of the programme content on demand directly linked to the retransmission. Copyswede also administrates the Swedish system for the private copying levy, which compensates authors and performers when their works are copied for private use as regulated in the Swedish legislation and underlying EU Directives. Similar systems exist in most countries within the EU. A prerequisite for Member States to permit private copying without a licence from right holders is the existence of a scheme which compensates right holders. In Sweden, it is the importers and manufacturers that are obliged by law to pay the private copying levy for their imports of products which can be used for private copying. Copyswede’s remit also includes distributing copyright revenues that are collected for various uses between different categories of right holder. On behalf of a number of member organisations, Copyswede is also responsible for individually distributing revenues to certain categories of right holders.

Significant Events During the Year

The COVID-19 pandemic has left its mark on Copyswede's operations during 2020. Since March, all employees have predominantly worked from home. There has been a strong focus on ensuring that employees also have a good working environment when they work from home. It soon became clear that the pandemic would have a major impact on the cultural sector and the scope of cultural innovators to practise their profession. In spring 2020, Copyswede therefore decided to reorganise its operations in order to bring forward payments of copyright revenues which were scheduled to take place later during 2020 and 2021. During 2020, Copyswede distributed approximately SEK 281 million to Swedish and foreign cultural innovators and other right holders via member organisations, partners and directly from Copyswede. During the year, new distribution agreements were established for revenues which were collected before 2019. Just over half of the revenues to be distributed concerned revenues collected during 2019. The remainder concerns revenues collected in previous years, as well as a smaller amount which concerns revenues collected during the current financial year. After four years of negotiations, Copyswede and industry organisation Elektronikbranschen (EB) reached agreement in October 2020 concerning the regulation of conditions and levels of remuneration for the private copying levy. Through the industry agreement, the parties have agreed that a levy must be paid for mobile phones resold in Sweden since 1 January 2009, and that a levy must be paid for computers, tablets, internal hard drives and games consoles resold since 1 September 2013. There had previously been disagreement as to whether or not these products were covered by the levy scheme. The industry agreement means that importers and manufacturers of products which can be used for private

ANNUAL REPORT

copying must enter into an individual agreement with Copyswede which includes the provisions of the industry agreement. Retailers have also been able to join the negotiated scheme by agreement with Copyswede. Companies which have imported and resold mobile phones, computers, tablets, internal hard drives and games consoles during the historical period covered by the agreement must report their historical sales to Copyswede by 31 January 2021. Revenues for the historical period must be paid to Copyswede by 31 March 2021. The agreement also contains provisions concerning conditions and levy levels for the period after 1 November 2020. With the establishment of the industry agreement, the legal processes which were under way at the start of 2020 could be concluded through agreements between the parties involved in the various cases. The dispute between Copyswede and Dustin before the Swedish Patent and Market Court could be concluded through the establishment of an agreement with Copyswede in October in accordance with the industry agreement. The case between Telia and Copyswede concerning the private copying levy for mobile phones could also be concluded through Telia reaching agreement with Copyswede and entering into an agreement in accordance with the provisions of the industry agreement. In June 2020, Hewlett Packard (HP) applied for a summons against Copyswede through the Swedish Patent and Market Court. HP wanted the court to establish that a number of types of computer and specific models were not covered by the levy scheme. Following the exchange of written correspondence between the parties and an oral preparatory hearing, the parties succeeded, in early 2021, to reach agreement, which enabled the case before the courts to be concluded and HP to enter into an agreement with Copyswede in accordance with the provisions of the industry agreement. After the conclusion of the legal proceedings against HP in January 2021, Copyswede no longer has any ongoing legal proceedings regarding the private copying levy. During the year, the Swedish Government appointed a special investigator to review the current compensation scheme for private copying. According to the remit for the investigation, the aim of the review is to establish a modern and effective levy scheme. The investigation will conduct a full review of the regulations and, amongst other things, evaluate the scope of the private copying that takes place and, on the basis of this, estimate the damage that right holders suffer as a result of the restriction and assess what can be considered to constitute reasonable compensation to the right holders. As part of the assignment the investigator must evaluate whether the provisions should be amended regarding the circle of right holders that are eligible for remuneration. The remit also includes an analysis of the prerequisites for replacing the current system with a government-funded levy scheme. An expert group has been appointed on which Copyswede is represented. The report on the investigation will be submitted on 21 February 2022. As regards the private copying levy, the revenue collected up to and including October 2020 amounted to just under SEK 32 million, compared with SEK 41 million for the whole of 2019. The revenues, which are low from a historical perspective, can be explained by the fact that the figures do not include revenues for mobile phones, tablets and computers. These revenues will instead be recognised during 2021 and included in the accounting for the entire historical period through to 31 October 2020, which means that revenue for 2021 will be significantly higher than for 2020. However, from November 2020 onwards, revenue for the products which were previously disputed between the parties will also be recognised. If these products are also recognised under the period November - December 2020, revenue for this period amounts to just over SEK 50 million. Copyswede's licensing work has to some extent been affected by the pandemic. A new tariff model for the tourist industry was to be launched during the first quarter of 2020, but the launch has been delayed because hotels had very low occupancy rates throughout much of 2020. Copyswede has therefore also offered the tourist industry concessions regarding reporting and payments. The efforts being made to include more TV channels in Copyswede's tariff model for the retransmission of TV channels via the open internet (OTT) have continued. The current agreements with operators facilitate the OTT of SVT's channels, a number of TV4's channels and many foreign channels licensed by Copyswede. A further aim of the new tariff model is to offer licences for more channels, particularly channels from Nent and Discovery. Copyswede's licences for OTT retransmission currently include provision to restart programmes while they are being transmitted, and a seven-day catch up service offered by the operators directly linked to the transmission of the programmes. Although most major operators on the market have an agreement regarding OTT retransmission and associated catch up services, there remain differing opinions between Copyswede and many of the market's leading operators regarding the conditions that should apply to the services, particularly as regards SVT's channels. Throughout the whole of 2020, the mediation process which began back in 2014 continued between Copyswede and many of the largest operators on the market. During the ongoing mediation process concerning the OTT retransmission of SVT's channels, the operators are reporting and making payments in accordance with the relevant established agreements. The issue of the conditions for catch up services in relation to OTT retransmission is also being discussed within the framework of the mediation process. During the year, a new agreement was signed with TV4 concerning the operators' retransmission of TV4's channels for 2021.