Music industry grappling with steep new tariffs proposed for digital downloads

A fight before the Copyright Board of Canada over royalties for online music downloads appears set to become even more contentious as another group of copyright owners seeks to add as much as an additional 25% of gross revenues to the 15% of gross revenues that has already been proposed on digital download services. Neither Canada’s homegrown music service, Puretracks.ca, or the Canadian Recording Industry Association (CRIA) have accepted invitations to comment on the steep new tariff proposed by the Society of Composers, Authors and Music Publishers of Canada (SOCAN) on digital downloads late last month. On March 31, SOCAN filed its re-worked controversial Tariff 22 with the board, seeking 25% of gross revenues for web sites and services such as iTunes.ca and Puretracks.ca that permit users to listen to on-demand music, download it, or both, for the right to communicate musical works via telecommunications. Last year, reaction to a surprise Canadian Mechanical Reproduction Rights Association (CMRRA) proposal to collect 15% of gross revenues or $0.10 per track, whichever is higher, on services such as Puretracks and iTunes.ca (CNM, May 14/04) was immediately decried as being unfairly higher than that charged in the rest of the world, and a vociferous fight between online music sellers and SOCAN is no doubt brewing despite the public silence. SOCAN has also proposed several other tariffs for music and audio-visual content (see below), but it’s likely the royalties being proposed for downloads will be the most contentious. Hammered by file-sharing, the recording industry in Canada has turned to online music stores to help stem some of the tide of lost sales. Just late last month, CRIA president Graham Henderson told Canadian NEW MEDIA that he was hopeful of finding an accommodation with CMRRA on its download tariff. "I think it is a transient problem while tariffs get set, while brothers and sisters figure out which piece of the pie they’re going to get," he said. "It’s going to get sorted out. Licensing is going to become increasingly easy and in a year and a half from now we’re going to look back and think: ‘why were we worried about this? Because, actually, it’s easier than it’s ever been.’ (CNM, April 1/05)" That optimistic outlook, however, may prove to have been premature as any protracted Copyright Board and court battle over the new Tariff 22 will likely take several years to conclude. The filing by SOCAN comes on the heels of last summer’s Tariff 22 decision by the Supreme Court of Canada that ruled Internet service providers aren’t liable for music communicated online (CNM, July 13/04). With that decision, a protracted battle over ISP liability was finally put to rest, which was the first phase of the Tariff 22 process. Now, say observers, another lengthy court fight likely lies ahead as online music sellers seek to minimize the number of parties they have to pay for a single sale. At the same time as the SOCAN tariff was filed, CMRRA/SODRAC Inc. (CSI) filed a tariff for 2006-2009 for webcasting, seeking the greater of 6.5% of the gross revenue attributable to the service; 6.5% of the gross operating costs attributable to the service; or, $250 per month. For non-interactive webcasting, CSI is seeking the greater of 5% of the gross revenue attributable to the service; 5% of the gross operating costs of the service; or, $200 per month. The proposed tariffs don’t apply to services subject to the earlier CSI online music services tariff, simulcasting by licensed radio stations, or pay audio services and multi-channel subscription radio services. CMRRA head David Basskin clarifies to CNM that the new proposed tariff is only for those services that offer the listener no control over what they hear or when they hear it. New SOCAN proposed Tariff 22 For a licence to communicate to the public by telecommunication musical works forming part of SOCAN’s repertoire, as often as desired in 2006, by means of Internet transmissions or similar transmission facilities, a monthly fee is payable as follows: 1. Music Sites: For communications from Sites or Services that permit a User to select and listen to, reproduce for later listening, or both listen to and reproduce for later listening, a musical work or part of a musical work, the greater of 25% of the Gross Revenues earned by the Site or Service or 25% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00. 2. Audio Webcasts (a) For communications from Sites or Services whose content is similar to that of a pay audio service subject to the SOCAN-NRCC Pay Audio Services Tariff, the greater of 20% of the Gross Revenues earned by the Site or Service or 20% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00. (b) For communications from Sites or Services whose content is similar to that of a conventional radio station subject to Tariff 1.A, the greater of 15% of the Gross Revenues earned by the Site or Service or 15% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00. (c) For communications from Sites or Services whose content is similar to that of a conventional CBC radio station subject to Tariff 1.C, the greater of 15% of the Gross Revenues earned by the Site or Service or 15% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00. (d) For communications from Sites or Services whose content is similar to that of a conventional radio station subject to Tariff 1.B, the greater of 7.5% of the Gross Revenues earned by the Site or Service or 7.5% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00. 3. Webcasts of Radio Station Signals (a) For communications of musical works as part of the signal of a conventional radio station that is otherwise subject to Tariff 1.A, the greater of 15% of the Gross Revenues earned by the Site or Service or 15% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00. (b) For communications of musical works as part of the signal of a conventional CBC radio station that is otherwise subject to Tariff 1.C, the greater of 15% of the Gross Revenues earned by the Site or Service or 15% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00. (c) For communications of musical works as part of the signal of a conventional radio station that is otherwise subject to Tariff 1.B, the greater of 7.5% of the Gross Revenues earned by the Site or Service or 7.5% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00. 4. Audiovisual Webcasts: For communications of musical works as part of audiovisual works from Sites or Services whose content is similar to that of a conventional television station subject to Tariff 2 or a programming undertaking subject to Tariff 17, the greater of 15% of the Gross Revenues earned by the Site or Service or 15% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00. 5. Webcasts of Television Station Signals: For communications of musical works as part of the signal of a conventional television station that is otherwise subject to Tariff 2 or a programming undertaking otherwise subject to Tariff 17, the greater of 15% of the Gross Revenues earned by the Site or Service or 15% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00. 6. Game Sites: For communications of musical works as part of games, including gambling, from Sites or Services that consist predominantly of games, the greater of 10% of the Gross Revenues earned by the Site or Service or 10% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00. 7. Other Sites: For communications of musical works from a Site or Service other than one mentioned in items 1 through 6 above, the greater of 10% of the Gross Revenues earned by the Site or Service or 10% of the Gross Operating Expenses of the Site or Service, with a minimum monthly fee of $200.00.

Music industry grappling with steep new tariffs proposed for digital downloads

Broadcast | April 15, 2005

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