Satellite radio on air without royalty scheme in place

Satellite radio services may have received their licences to operate in Canada six months ago, but the copyright collectives representing Canadian artistic talent and businesses are still waiting for their proposed tariffs on such services to be approved. One organization, the Canadian Musical Reproduction Rights Agency Ltd. (CMRRA), already has a tariff in place governing most commercial radio services. But, as CMRRA president David Basskin notes, "the present tariff doesn’t cover satellite radio." However, he hastens to add, "It’s not our position to say that we don’t want to licence it." In June 2005, the CRTC licensed three subscription radio services, two from US-backed providers: Sirius Canada, a consortium made up of the Canadian Broadcasting Corp. (CBC), Toronto’s Standard Broadcasting Inc., and Sirius Satellite Radio Inc. of New York; and Canadian Satellite Radio, owned by Canadian entrepreneur John Bitove and partnered with XM Satellite Radio Inc. of Washington, DC. As a representative of songwriters and music publishers in Canada, CMRRA and its Quebec counterpart, the Société du droit de reproduction des auteurs, compositeurs et éditeurs au Canada (SODRAC), collect a tariff every time a radio station makes an ephemeral copy or temporary broadcasting reproduction of a recording for the purpose of slotting it into a playlist. In March last year, CMRRA and SODRAC – operating under the name CSI Inc. – filed a joint statement of proposed royalties for the reproduction of musical works in Canada during the 2006-2009 period with the Copyright Board of Canada. In it, they made specific reference to "Multi-Channel Subscription Radio Services," suggesting that a tariff on such services be paid monthly, and also that the tariff be based on gross revenue from the second month preceding the month for which the tariffs are being paid. The CSI Inc. tariff proposal filed with the Copyright Board then goes on to propose a formula for calculating the tariff: "The royalties shall be the greater of 5% of the gross revenue for the reference month or 50 cents per subscriber to such service on the last day of the reference month." Meanwhile, other rightsholder groups are also looking for tariffs of their own. The Society of Composers, Authors and Music Publishers of Canada (SOCAN) represents the same constituency as the CMRRA, but collects a tariff for the public performance of works, not their copying for internal use by radio stations. SOCAN and the Neighboring Rights Collective of Canada (NRCC), which collects royalties for performers and owners of master recordings when their work is broadcast, filed their own tariff for "Direct Multi-Channel Subscription Audio Services" for the years 2006-2008 last May. In it, they asked for 25% of gross income "for the second month before the month for which the licence is issued." Since both Canadian Satellite Radio and Sirius Canada received their licences in June last year – a few months after both the CMRRA/SODRAC and SOCAN/NRCC submissions were filed – April would be the reference month for both groups’ proposals. Since the Canadian operations of both satellite radio services were nonexistent at that point and not generating any revenue, the tariff will presumably be based on the gross incomes of their much larger US affiliate companies. In October last year, the Copyright Board ruled that SOCAN and NRCC are entitled to equal shares of any royalty payments for commercial radio stations, but has not yet approved an actual tariff for pay, subscription or satellite radio. Aside from the rights that must be cleared to operate the broadcasting service, there may be a different application of copyright in play with satellite radio. While normal radio receivers don’t have an inherent ability to copy music, the embedded memory – often referred to as a "replay function" – in many satellite radio receivers sold by Canadian retailers makes satellite radio hardware, if not the service itself, of paramount interest to other rightsholder groups. "Unlike traditional radio, which does not involve receivers that have the capability to make copies, these people are selling receivers that have the capability to make copies," says Graham Henderson, president of the Canadian Recording Industry Association (CRIA), explaining the rationale for a possible surcharge on satellite radio hardware. And, adds Henderson, with near-CD quality sound and static-free reception, satellite radio is a far cry from traditional audio broadcasting over the public airwaves. "There is a grand difference between this type of activity that are permitting, in fact encouraging, and what we used to do in the old days, laboriously hooking our FM tuner up to our reel-to-reel tape deck, and then making analog copies at real-time of radio signals with interference and static and interruption of disc jockeys and you name it," he says. A surcharge for the personal copying of musical works and other copyrighted material – better known as the private copying levy – exists on blank media such as CD-Rs, cassette tapes and Minidiscs that could allow consumers to create copies of the music they own for personal use. A group called the Canadian Private Copying Collective (CPCC), which counts CMRRA, SODRAC, SOCAN, NRCC and CRIA among its members, collects the levy and distributes it to its constituents. With as much as five hours of blank memory embedded in the replay functions of satellite receivers sold to subscribers of the CSR and Sirius Canada services, an argument could be made that such hardware itself constitutes "blank media" and should be subject to the private copying levy. "It is reasonable that digital audio recorders should fall within the scope of the private copying provisions," CPCC chair Claudette Fortier wrote in a letter to CCR sister publication Canadian NEW MEDIA last August. CMRRA president Basskin agrees. "We believe the same rationale that lay behind the private copying levy on cassettes and blank CDs and minidisks…to be applicable to digital audio recording devices as well," he says, pointing to the Copyright Act’s wording of a recording medium as something "onto which a sound recording may be reproduced, and that is of a kind ordinarily used by individual consumers for that purpose." Given the accelerating pace of technological change, Basskin believes the scope of what constitutes recording media should be expanded. "Whether that is a spinning magnetic platter driven by a motor enclosed inside a box, or a spinning sheet of Mylar encoded with magnetic particles, or a spinning optical disk, or a piece of software upon which songs can be recorded, it is a form of medium," he says. However, having the distinction recognized and accounted for is a road the music industry has been down before with a similar technology, that of MP3 players and other digital music players with non-removable memory. In August last year, the Supreme Court of Canada upheld an earlier ruling that struck down the private copying levy on such digital devices. Previously, with the court case pending, the CPCC had been collecting the levy – as much as $25 on devices with 10 GB or more of memory. While a levy on satellite radio receivers might be out of the question, CRIA and its US analog, the Recording Industry Association of America (RIAA), have approached the satellite radio providers about placing digital copy-protection measures on the digital signals they broadcast. So far, however, those talks have yielded little fruit. "These companies have shown no real inclination to either encrypt their signals or to put digital rights management systems on them that would really prevent that ," Henderson says. In the video broadcast world, devices capable of receiving and recording transmissions – such as digital personal video recorders – work with technological copy-protection measures. "If you listen to what the satellite radio guys say, this is going to be the most popular medium in the history of Canadian media," Henderson says. "Well, if that’s the case, then it’s qualitatively different from regular radio." At its worst, he adds, satellite radio has the potential to become a "peer-to-peer service on steroids," with users using a combination of the replay and search functions on receivers to create music libraries of "digitally perfect, crisp copies with all the metadata that they need" then porting them to their computers. However, Henderson is philosophical about the finality of the decision to licence satellite radio services and allow their receivers to be sold in Canada with embedded digital memory. "These are licensed services – that’s not going to change," he says. "What we need to do is, the cat is out of the bag, so now we’ve got to live with the cat. Are we going to allow a cat with claws that scratches things in our house, or are we going to try to work with the cat to get rid of the claws?" Richard Rotman of Toronto’s Wilcox Group, which handles investor relations for Canadian Satellite Radio, says the firm does not comment on negotiations with rightsholder groups. A spokesperson for Sirius Canada was not available for comment before press time.

Satellite radio on air without royalty scheme in place

Broadcast | January 27, 2006

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