Licence terms for online advertising campaigns

Why have the licence terms for online advertising campaigns been introduced?

The terms ensure appropriate licensing of copyrighted music used in online advertising campaigns. An online advertising campaign is defined as the publication of ads primarily on third-party websites (e.g. news portals), on webpages created specifically for this purpose (landing pages or microsites, e.g. for competitions) and/or on social media platforms.At the start of 2016, SUISA published its licence terms for the use of copyrighted music in online advertising campaigns on behalf of the music authors (composers, lyricists and publishers) whose rights it represents. At the request of ASA and other associations, SUISA agreed to negotiate these terms. It should be noted that online licensing is not subject to federal supervision and thus does not form part of SUISA's monopoly. The licence terms may be freely negotiated and are not subject to tariff monitoring by the Federal Arbitration Commission (FACO). This means that SUISA is under no obligation to negotiate the terms with a body such as the Association of Swiss Advertisers (ASA). However, SUISA was keen to find a solution that was suitable for all parties.

Why do fees now have to be paid for online advertising campaigns?

Although a tariff for the production of advertisements has existed for some time now (SUISA Tariff VN), it does not cover making music available in online advertising campaigns. Advertising clients and online platforms do not hold the necessary rights to use music in online campaigns. Although authors and publishers of advertising music are appropriately compensated if their work is used in TV campaigns (SUISA Tariff A, GT S), they receive no compensation for online use. TV advertising has increasingly lost ground to its online counterpart in recent years. As a result, the composers, lyricists and publishers of advertising music who are members of SUISA are seeking a solution that will ensure they are fairly compensated when their work is used online. The licensing of online advertising campaigns therefore reflects real-world developments.

Why do the advertising clients have to pay for the licences, not the online platforms that earn revenue by distributing the ad?

In Switzerland, both the online platform and the advertising client are responsible for ensuring that copyrighted music is used legitimately. After all, they both earn revenue from their advertising. This mainly relates to the use of music in ad clips, for which the authors want to be fairly compensated.From a legal point of view, the advertising clients and online platforms are jointly liable. In the case of online campaigns, the platforms play the role of an intermediary by making online advertising space available. However, the terms and conditions of the platforms usually state that advertising clients are solely liable for ensuring appropriate licensing of the music used in the ads. Furthermore, most platforms do not have all the information needed to acquire the rights to use the music.

The SUISA fee currently amounts to 3.3%. How is this percentage calculated?

One of the main things to consider is that online use is not subject to federal supervision, which means that the maximum statutory tariffs do not apply here. However, SUISA has calculated the fee for online advertising campaigns on the basis of existing tariffs that have been approved by the Federal Arbitration Commission (FACO). The 3.3% fee is based on tariffs for the use of music in audiovisual works. The law sets the maximum percentage for the use of music at 10% – the fee for the use of music in audiovisual works amounts to a third of this figure. The calculation is based on the online media budget, which includes all expenses associated with distributing the campaign via the Internet, such as the cost of placing the advertisement on various third-party websites and Internet services (e.g. banner ads, pre-roll ads), as well as that of bartering. The cost of producing the ad does not form part of the online media budget.The online media budget forms the basis of the calculation because it represents the value of the online campaign to the advertising client. The music author should receive a fair share of this value.

In the past, a flat fee of between 100 and 200 Swiss francs applied to Tariff VN music copyrights. Why is this fee being changed?

The flat fees in Tariff VN have never applied for online advertising campaigns. Both now and in the past, they have applied, for example, if a film producer publishes one of their films on their website for reference purposes, as a way to exhibit their work. It was made clear that the Tariff VN which came into effect at the start of this year would not apply for online advertising campaigns.

Advertising clients already pay the composers and performers of ad music when the advert is created. Why do they also have to pay for the right to use it in online campaigns?

When the ad is created, a fee is paid for the reproduction and synchronisation rights. The former concern the right to record the music on a storage medium. The latter are derived from the author’s right to determine the purpose for which their music may be combined (synchronised) with images. These rights of the author are governed according to Tariff VN.

If the ad is then used in an online campaign, this affects the author’s right to decide how their work is made available. The client and, to some extent, the platform operator will earn additional revenue from the campaign. The author should also receive a fair share of this.

If only a one-off fee is paid when the ad is created, this can put the composers of film or advertising music at a disadvantage. In many cases, it is not possible to predict how long such a campaign will run for, or how often and in which channels the music will be used. With the right to make work available, copyright law ensures that the author and publisher are compensated if the music is distributed online.

What is the situation abroad? Do such licence terms also exist in other countries, and how much are the fees there?

Yes, such licence terms exist in other countries, too. In Germany, for example, the advertising client also pays for the licence to use music in online campaigns. However, in contrast to the situation in Switzerland, a flat fee is often charged abroad. This can be very high in certain cases. Those who suffer the most from such a flat fee are the companies that commission smaller advertising campaigns and have to pay disproportionately high licence fees. SUISA therefore believes that a percentage fee based on the online media budget is the fairest solution.

Generally speaking, there is no standard practice internationally. Many rights holders abroad, especially those of popular musical works, choose to assert their copyrights themselves, which does not result in more favourable or simpler licence terms for advertising clients.

Discussions were held with the Association of Swiss Advertisers (ASA), but were then aborted. Why did the negotiations break down?

ASA does not agree with the licence terms proposed by SUISA. However, the advertising clients simply criticised SUISA's approach rather than contributing their own suggestions to the negotiations. Under such conditions, the negotiations were not be constructive and therefore broke down.

More information about online (advertising) campaigns can be found on the SUISA website.