Rethink Cancon regs, copyright tariffs, radio broadcasters urge regulator

With the public hearings on the Commercial Radio Policy still two months away, comments have come at a steady pace from all players in the broadcast radio industry. Among the submissions by copyright collectives, artists groups and other music industry bodies, radio broadcasters themselves warn the CRTC that Canadian consumers are increasingly able to enjoy music and other content without a broadcast intermediary through podcasting, music downloads, file-sharing, streaming video and audio on the Internet, as well as other new technologies. "The ultimate reality…is that there are other avenues out there and other options out there which…are increasingly being made available and easier to use to access music," Alain Strati, VP of business and regulatory affairs at Rogers Media Inc., tells Canadian Communications Reports. "There are opportunities to tune out not only of radio, but of the Canadian system." "It’s almost like radio is a device, like the cell phone the MP3 player satellite radio is a device, where clearly we now compete on our content," Strati says. "Radio content has to be better, because the distribution advantage is quite frankly diminishing." In a far-ranging 159-page document, the national group representing the broadcast industry directs the commission’s attention to the looming impact of such technology on radio broadcasters in their efforts to remain profitable and attract new listeners. While Canadian commercial radio broadcasters clearly face some uncertainly in the years to come, Canadian Association of Broadcasters (CAB) president and CEO Glenn O’Farrell notes they have managed to overcome other obstacles in the past – most notably when television broadcasting began on a mass scale in the first half of the 20th Century. However, he adds, there is a key difference between then and now: "The changes that occurred over the past 80 years in radio broadcasting were changes that occurred within a regulated system, where government played a key role through its licensing and supervisory agencies, awarding licences, permitting market access and entry under certain conditions, and so on and so forth. is not sustainable." However, groups representing the music production industry argue they’re facing the same challenges as broadcasters, but have even more at stake. In her submission, Canadian Independent Record Production Association (CIRPA) president Cori Ferguson says her organization "does not believe that technological and societal changes will have the negative impact on the radio industry that they have had on the music industry to date." Ferguson, who was unavailable to comment before press time, went on to state that "Radio is well poised to take advantage of changes in the marketplace by using cross-platform branding to reinforce its local community ties, as many broadcasters are already discovering." Broadcasters and the music industry are mostly at odds on another issue: Canadian content requirements, including the payments radio broadcasters make to artist development funds. "Cancon is at the heart of this, of course," O’Farrell says. "The reason why we proposed incentives as a balance to the current 35% Cancon level is because we think without incentives the status quo doesn’t work, to put it very bluntly." The incentives the CAB and others propose would see stations rewarded with an extra 25% credit for every song they play by an emerging Canadian artist, allowing English-language stations to reach their 35% daily Canadian content minimum more quickly. In Francophone markets, where radio stations face a tougher Cancon minimum of 65% French vocal music in a 24-hour period, with 55% being aired during daytime hours (6 a.m. to 6 p.m.), the CAB proposed an even more generous additional credit of 50% for playing a new selection by an emerging artist. "The only way that we could continue, at least for the foreseeable future, with the Cancon 35% is by suggesting the kinds of incentives that we did," he says. However, groups such as CIRPA and the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA) would like the CRTC to increase the 35% minimum Cancon requirement for English-language stations to 40% or even 45%. During the last radio policy review in 1999, the commission mandated a hike from 30% to 35%, and hinted that future reviews might include additional increases. But Rogers’ Strati says that the existence of any kind of Cancon commitment means that licensed radio undertakings are already doing more for Canada’s music industry than their newly arrived high-tech competitors, and that should count for something. "The promotion elements of radio are not there in some of these other avenues where, quite frankly, Canadian content is out there with the rest of the world’s content, and Canadian music is not promoted and marketed the way it is on radio," he says. The CAB also suggests that radio broadcasters be allowed to direct the 5% of advertising revenues they now split between four funds – the Radio Starmaker Fund, Fonds Radio Star, the Foundation Assisting Canadian Talent on Record (FACTOR), and MusicAction – toward just the Radio Starmaker and Fonds Radio Star initiatives. O’Farrell says the reasons are purely economic: thanks in part to their funding from the Department of Canadian Heritage, FACTOR and MusicAction often work with artists who have niche appeal instead of broader commercial potential. "That’s absolutely appropriate for a government to make those kinds of cultural policy decisions," he says. "But private radio is in the business of commercial music for commercial audiences, and that’s why we feel it’s preferable to focus on Starmaker Fund and Fonds Radio Star as commercial music funding agencies." The tariffs commercial radio stations pay to use copyrighted music are also a point of contention for broadcasters. After a 25-year period of a fixed rate payable to only one copyright collective, the Society of Composers, Authors and Music Publishers of Canada (SOCAN), the Copyright Board of Canada approved the tariff application of the Neighboring Rights Coalition of Canada (NRCC) in 1999 and, in 2004, a similar application from SOCAN’s Quebec analog, the Société du droit de reproduction des auteurs, compositeurs et editeurs au Canada (SODRAC). The result, Strati says, is a near-tripling of the royalty payments radio stations must make, from 3.2% in 1998 to "roughly between 7% and 8%" today (see chart, p.1). Although copyright is the domain of the Copyright Board, Strati says that the tariff payments should be taken into account by the CRTC when it weighs commercial radio’s contribution to arts funding in Canada. "The same way we make Canadian Talent Development initiatives and payments to funding sources, we have also become very significant and very major royalty payment as users of copyright to Canadian artists for Canadian music," he says. While Rogers Media’s many talk radio stations get a break on the tariffs because music makes up less than 20% of their programming, their payments should be further relaxed in recognition of their contributions to local coverage and their higher production budgets. "It is quite costly to produce spoken-word and news programming as compared to playing music," Strati says. Another concern examined by both the CRTC and respondents is the issue of local marketing agreements (LMAs), where two or more radio stations in a given market share their back-end personnel in a bid to lower costs. At the time of issuing its policy on LMAs in 1999 (Broadcasting Notice 1999-176), the commission voiced concerns about the potential impact on competition within a market represented by LMAs, and mandated that future licensees looking to enter into an LMA would have to apply for permission from the CRTC. The application would also be subject to a public proceeding. The Competition Bureau of Canada weighed in on this aspect of the policy review. "LMAs have the same competitive effects on advertising markets as a consolidation in ownership and should be subject to the same competitive analysis," commissioner Sheridan Scott notes in her March 15 submission, adding that the CRTC should offer a public explanation as to how it’s balancing various interests when it approves an LMA. Finally, the broader issue of inter-market competition is addressed in the radio policy review. While recording and music industry groups note that the general trend in the radio industry as a whole is increasing revenue, O’Farrell says the picture looks less rosy up close. "Overall it’s healthy, in fact when you look at the profitability of private radio on a per-unit basis…it’s actually down," he says. "That is largely attributable to the fact that yes, there has been consolidation across the industry across the country, but there have also been a hundred new licences awarded since the last policy review." The CAB notes that while new entrants in a radio market increase programming diversity and consumer choice, they also fragment the audience and advertising revenues, making it harder for the incumbent stations to simultaneously adhere to the conditions of their licences and remain profitable. "Before licensing new services I think we have to keep an eye on the financial capabilities of the incumbents in the marketplace to maintain and to satisfy their regulatory obligations," O’Farrell says. "We should also be looking at a period where, if new licences are awarded, we give the marketplace an opportunity to absorb those changes before charging ahead with more licensing."

Rethink Cancon regs, copyright tariffs, radio broadcasters urge regulator

News | 03/24/2006 5:00 am EST

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