New tariff on webcasting services necessary to offset ‘cannibalization’: Re:Sound

Copyright collective Re:Sound is pushing for a new proposed royalty on online music services to offset streaming music businesses' inevitable cannibalization of CD and download sales, said Ian MacKay, president of the collective. MacKay, who appeared as a witness at a Copyright Board hearing in Ottawa Tuesday, said popular streaming music services like those offered by Swedish company Spotify AB or Oakland, Calif.-based Pandora Media Inc., allow users to “rent music as opposed to own music” and have evolved to become a form of “core” music consumption. “There is no question that experience and that ability to customize and have portability is leading to consumers choosing to stream their music rather than download or buy it in other ways. As streaming gets more and more popular, it's going to inevitably have a substitution effect for sales of CDs and downloads and cannibalize those other forms of core music consumption,” MacKay said. The Copyright Board is holding a hearing this week and next to hear from witnesses about a new Re:Sound proposal, called Tariff 8, to collect royalties from simulcasting, webcasting, and “semi-interactive” webcasting music services in Canada. Semi-interactive services are those in which users can influence or control the music played. Re:Sound proposes the payment of royalties amounting to 30 per cent of gross revenues or 0.22 cents for the communication of each copyrighted music file in Canada. The group would collect whichever amount is greater, with a minimum annual fee of $30,000, and distribute the funds to its member record companies and rights holders. Pandora and Spotify are not currently available in Canada, but Spotify intends to bring its popular music service to Canada, The Wall Street Journal reported in August. Other streaming services are available in Canada from CBC/Radio-Canada, Rdio, AOL Inc., Quebecor Media Inc., Research in Motion Ltd., and others. The Wall Street Journal also reported this month that Apple Inc., operator of the popular iTunes store and app, plans to enter the streaming music business with a service similar to Pandora's. MacKay told the Copyright Board the fact that Apple, “the 800-pound gorilla of this industry,” has plans for a streaming service is evidence of where music distribution and sales are headed. “The fact that Apple now is looking at the download market and seeing that it seems to be maturing, that the future of this consumption is in streaming, and that they're going into that business, is a strong indicator,” MacKay said. The Canadian Association of Broadcasters (CAB) said in a document filed with the Copyright Board that Re:Sound's Tariff 8 proposal is “unreasonable and unfair.” The CAB said a “page view impression method,” which the Copyright Board approved in the Society of Composers, Authors and Music Publishers of Canada's (SOCAN) Tariff 22 for online music, is a better royalty calculation. “Re:Sound, for its part, has proposed royalty rates and structures for the Proposed Tariff that are based on fundamental misunderstandings of how radio station websites operate, misconceptions as to how music contributes to those operations, and deeply flawed economic analysis which is built on valuations inferred from private agreements that purport to grant a large suite of rights that extend far beyond the scope of Re:Sound’s jurisdiction,” the CAB said. “Re:Sound’s proposed approach is incapable of leading to an appropriate royalty.” MacKay said that, under the CAB's tariff proposal, the impact on music rights holders “would be devastating, and those rates do not take into account that streaming services have become core recorded music consumption along with CDs and downloads.” Pandora said in a statement filed with the board that the company's “ability to successfully re-enter the Canadian market depends on the establishment of appropriate Re:Sound royalties.” The company initially launched a service in Canada but withdrew it in May 2007 “due to uncertainty as to the royalties that would be payable,” Pandora said in its statement of case to the board. The company takes a similar position as that of the CAB, saying the Copyright Board should fix Tariff 8 at the same rate “as the analogous” Tariff 22 for SOCAN. “Re:Sound’s excessive proposal bears no relationship to the value of sound recordings to webcasters or to any royalty ever established by the Board,” Pandora said. “t is the product of Re:Sound’s reliance on inapt proxies and on foreign rates reflecting analysis long repudiated in Canada. Moreover, it reflects Re:Sound’s simple refusal to acknowledge years of Board jurisprudence and its willingness to turn a blind eye to the untenable results that its proposal would generate.” Pandora CEO Joseph Kennedy is scheduled to appear as a witness before the board on Oct. 1. Other witnesses for the hearings include officials from Warner Music Group, the National Campus and Community Radio Association, the CAB, CBC, and experts. sdoyle@thewirereport.ca

New tariff on webcasting services necessary to offset ‘cannibalization’: Re:Sound

Broadcast | September 26, 2012

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