The collecting societies (CSs) have been a crucial constituent of the music industry since the second half of the nineteenth century. The economic function of the CSs (also known as the collective management organizations CMOs) is the collection and distribution of royalties as well as monitoring the use of copyrighted works on behalf of right owners and holders (authors, publishers, performers and production companies). In practice, it is very difficult for copyright owners to enforce their own right due to high transaction costs of music licensing, such as for example: costs of collecting and processing information about potential contracting partners, costs of advertising and costs of detection of illegal use of copyrighted works, costs incurred during the process of negotiation and conclusion of a contract and costs of contract enforcement and adjustment. The collective societies reduce those substantial costs by achieving economies of scale and scope in the administration, licensing and enforcement of copyrights.
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