CBC Music ad revenues a fraction of the service’s costs, CBC says

CBC/Radio-Canada's online music service is not profitable as advertising revenues amount to about one seventh of costs, said Chris Boyce, executive director of English-language radio and audio services at CBC. “The advertising revenue covers a fraction of the expenses associated with the operation of the service,” said Boyce, who appeared as a witness at a Copyright Board hearing Thursday to consider copyright collective Re:Sound's proposed royalties on simulcasting, webcasting, and “semi-interactive” online music services. CBC Music, which has been eyed for higher music royalties and subject to a CRTC complaint by a competitor, was launched in February 2012, offering website and mobile app access to 40 streaming music channels as well as CBC Radio 1, CBC Radio 2, and independent music channel CBC Radio 3. Boyce said advertising on CBC Music is on track to reach projected revenues of $700,000 to $800,000 this year. The digital music service costs $5 million to $6 million per year to operate, he said. “The cost to run this site is significantly more than the revenue,” Boyce said, noting costs associated with hiring radio personalities and producing audio-visual recordings. The service has so far generated $250,000 in ad revenue for the first and second quarters of the year, Boyce said, adding that he expects revenues to pick up as advertisers become more familiar with the service. CBC Music's revenues come from pre-roll ads, display ads, promotions, and partnerships with other sites like Google Inc.'s YouTube, he said. Re:Sound's proposal, called Tariff 8, seeks royalties of 30 per cent of gross revenues or 0.22 cents per play of each copyrighted music file communicated in Canada, whichever is greater. This week, U.S.-based Pandora Media Inc., the world's most-listened to online radio service with more than 100 million users, told the Copyright Board it would not launch in Canada if it must pay royalties on a “per play rate” as proposed by Re:Sound. J. Aidan O'Neill, counsel with Fasken Martineau who is representing CBC in the proceeding, told the Copyright Board Thursday that CBC should receive different treatment as a public broadcaster. CBC said in a statement of case filed with the board that it “strongly objects” to Re:Sound's tariff proposals. “he CBC/SRC takes the position that the royalty rates proposed by Re:Sound are grossly excessive and bear no relationship to the value that the CBC/SRCderives from having access to Re:Sound's repertoire for the purposes of these radio services and webcasts,” CBC said in the document. Re:Sound says its tariff proposal is necessary to support the music industry as music consumption migrates from CD purchasing and downloads to online streaming services. “ew technologies have revolutionized webcasting, streaming and related technologies and the market for music streaming and webcasting has matured and business practices relating to streaming and webcasting have evolved,” Re:Sound said in its statement of case filed with the board. These changes “have been so significant” that previously relied upon royalty formulas, such as that approved in the Society of Composers, Authors and Music Publishers of Canada's (SOCAN) Tariff 22 for online music, cannot “serve as a model proxy or benchmark for either of the Proposed Tariffs,” Re:Sound said. Copyright collective SOCAN said in March it was evaluating whether its existing royalties collected from CBC are enough to cover the new CBC Music service. Paul Spurgeon, general counsel and vice-president of legal services at SOCAN, told The Wire Report that the collective was looking at whether CBC's tariff should be changed. O'Neill said Thursday that Re:Sound's new tariff would cover CBC's online simulcasts, which the Copyright Board already approved in July 2011 with a decision on Tariff 1C. “This proceeding is a regrettable and wasteful use of CBC/SRC's, not to mention the board's, limited financial resources,” O'Neill said. “This is indeed a case of déjà vu.” This year, CBC Music was the subject of a CRTC complaint from digital music provider Stingray Digital Group Inc., which argued CBC granted itself an undue competitive advantage by combining public funding and advertising revenues to support its online music service. The CRTC rejected that complaint in August, saying CBC’s public funding is “set by Parliament and is not under the CBC’s control,” and that CBC has used those funds to compete with private broadcasters “since its inception.” CBC said in April it plans to lay off 650 people to deal with cuts announced in the Conservative government's 2012 federal budget, which will reduce CBC's $1.1-billion annual parliamentary appropriations by $115 million by 2014-2015. CBC's 2015 strategic plan aims to extend its regional reach largely through radio and the Internet. Citing data from June 2012, Boyce told the Copyright Board that CBC Music receives about 200,000 unique visitors per month and total visits of about 800,000 to one million per month. Those visits generate about two million page views per month, he said. He said CBC Music represents a “fairly small slice” of the umbrella CBC.ca site, which receives about six million unique visitors per month, translating into about 34 million visits and 104 million page views. Boyce said weekday audiences for CBC's online listeners average about 7,500 throughout the day compared to an average of about 100,000 for over-the-air radio listeners to Radio 1 and between 50,000 to 100,000 for Radio 2. The Copyright Board's two weeks of hearings on the Re:Sound webcasting tariff wrap up Friday. The board tries to issue decisions within one year of the hearing. sdoyle@thewirereport.ca

CBC Music ad revenues a fraction of the service’s costs, CBC says

Broadcast | October 4, 2012

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