CAB attacks Copyright Board over its decision to increase music tariffs

The Canadian Association of Broadcasters (CAB) is likely to appeal the Copyright Board of Canada’s decision this month to hike music tariffs for higher profit radio stations after years of no rate increases. On October 14, the Copyright Board raised the royalties that commercial radio stations pay after their first $1.25 million of annual revenues to the Society of Composers, Authors and Music Publishers of Canada (SOCAN) and to the Neighbouring Rights Collective of Canada (NRCC) for use of their music from 2003 to 2007. The SOCAN rate had remained unchanged for 25 years, and had not been reexamined for almost 50 years. The board ruled that music is worth more than what it previously thought – a decision that has the CAB up in arms. The association issued a media release several days after the decision, stating it was "astonished by the departure from well established rate-setting principles." The CAB says it is examining all venues of appeal. The most likely route is that the CAB will appeal the decision to the Federal of Court of Appeal. It has 30 days from the date the decision was gazetted on October 15 to do so. In an email to Canadian Communications Reports, the CAB claims that the Copyright Board is seeking a "cultural policy making role" and to establish its own economic order for the distribution of cultural subsidies because it did not consider payments made by private radio to the music industry. The CAB also claims that the Copyright Board is attacking its own enabling legislation by criticizing the $100 rate set by Parliament in the Copyright Act. "How can the Copyright Board question Parliament?" asks the CAB in the email. However, others disagree with the CAB. Some groups state that all the Copyright Board did was set the rates – but it raised them for higher revenues, which are not legislated by Parliament. Entertainment lawyer and producer Stephen Stohn says the CAB’s argument is a smokescreen since the Copyright Board kept the legislated rate in tact, although it did question it. "It’s a red herring. I don’t see how that goes to the value of the rate one way or the other. Basically, what the Copyright Board did is say, here is what we think is a fair and equitable rate. Parliament has decided regardless of that, on the first $1.25 million of revenue, radio stations only have to pay $100. We don’t think that’s right, or fair and equitable. But that’s what Parliament said, and that’s what the rate will be," he notes. "I was interested that they (the Copyright Board) made a comment that said they wondered at the rate set in the legislation." The NRCC said the CAB crossed the line when it classified the Copyright Board’s decision as being "renegade." "We really have issues with the way that the CAB criticized the process because we do believe that the process was reasonable, and the decision is reasonable," says NRCC executive director Diana Barry. "While we didn’t get as much as we wanted, certainly we are pleased that the Copyright Board recognized that music was undervalued." She also calls the CAB’s contention that the Copyright Board is trying to toy with cultural policy baseless. "I think it’s unjustified because the Copyright Board statements were on the basis of evidence received, and a substantial amount was based on industry revenues. It concluded that the legislation wasn’t appropriate, but it doesn’t change anything." Stohn refers to the decision as evolutionary, rather than revolutionary. Stohn, who was hired by NRCC to analyze what music was worth to radio stations, points out: "The Copyright Board has since back in the fog of history come up with a rate for SOCAN, and pretty much what they’ve done since that time is say that’s the established rate, and asked should it be higher or lower. Of course, most of the time, they kept it the same rate. And no one had ever gone back and said why is that rate the right rate? Our report was the first time that someone had tried to say what is the overall value of music to a radio station, and from there we came up with a figure. We then said, how would you divide that up?" The Copyright Board didn’t rely on the figures in that report to set the rate. If it had, the rates would have been much higher. Instead, the board seems to have agreed with the concept that music was worth more to radio stations, and then it came up with its own value. The board ruled that radio stations will continue to pay 3.2% of the first $1.25 million they make in annual revenues to SOCAN and $100 to NRCC. Above that amount, the rate increases to 4.4% from 3.2% for SOCAN and to 2.1% from 1.44% for NRCC. The rate for stations that don’t use much music increases to 1.5% from 1.4% for SOCAN and to 0.75% from 0.64% for NRCC. The new rates are expected to generate a little more than $55 million for the two collectives, about $11 million more than what would have been paid under the old rates. Royalties paid by a radio station with annual revenues of $4.5 million will jump $60,000 to about $250,000. Smaller stations will see no difference; for example, a radio station generating $400,000 would continue to pay total royalties to the two collectives of $13,000 per year, and a station with annual revenues of $925,000 will still hand over $30,000 per year. Given that the rates were increased, Stohn and others are not surprised that the CAB is disappointed. "The CAB will be looking for ways to attack this decision and we’ll see if they appeal this. I won’t be surprised if they do," he notes.

CAB attacks Copyright Board over its decision to increase music tariffs

News | 10/24/2005 4:00 am EDT

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