Ruling on Tariff 24 should amount to millions for SOCAN

Much to the dismay of Canada’s wireless carriers, the Copyright Board of Canada ruled on August 18 that the Society of Composers, Authors and Music Publishers of Canada (SOCAN) will receive a royalty rate of 6% on revenue from ringtone downloads, for which a SOCAN licence is required, between 2003 and 2005. "We’re disappointed with that ruling mostly for the fact that we didn’t feel that the tariff should be applied at all," says Mark Choma, director of communications for the Canadian Wireless Telecommunications Association (CWTA). The fallout from the decision will amount to about $2,845,000 in ringtone revenues from the past three years being paid to SOCAN by the wireless carriers. Under Tariff 24, SOCAN collects the royalty for the communication to the public by telecommunication of musical or dramatico-musical works. The CWTA, however, disagreed that ringtone downloads are in fact a communication "to the public," and these three words proved to be the biggest sticking point for the Copyright Board as it made its decision. The Board’s determination relied heavily on its decision from Tariff 22, which in 1999 dealt with what constitutes a communication to the public by telecommunication in the context of the Internet. In the Tariff 22 decision the Board "found that such a communication was ‘to the public’ because the music files are made available on the Internet openly and without concealment." The CWTA, which filed its Tariff 24 objection jointly with Bell Mobility, Telus Mobility and the Canadian Recording Industry Association, felt the Tariff 22 ruling did not apply in this case because it didn’t distinguish between a download and other forms of Internet music use, such as streaming or webcasting. The fact that a ringtone download is a one-to-one engagement can change the situation, they say. "While members of the public are free to engage in these transactions, that does not make each transaction a communication ‘to the public,’" read the CWTA’s submission. Ultimately, the Copyright Board didn’t agree with the carriers’ argument. "Wireless carriers offer to sell a musical ringtone to all their subscribers, not to one individual and the fact that a member of the public receives the work in a private setting does not turn what would otherwise be a communication to the public into an individual transaction," wrote the Copyright Board in its decision. Although the 6% tariff is less than the 10% SOCAN requested (RoW, July 15/04), it is still substantial and should become more so as the ringtone market grows. During the Tariff 24 hearing, Michael Sone, president and owner of telecommunications research and consulting firm NBI/Michael Sone Associates Inc., estimated revenues generated by ringtone retail sales in Canada were more than $15 million in 2004 and could reach $30 million in 2006. Sone tells Report on Wireless that in the absence of any other data his numbers are still correct. Going forward, Tariff 24 should result in increasing royalties for SOCAN. The organization had filed 2006 and 2007 versions of the tariff with the Copyright Board prior to its August 18 ruling. For 2007 SOCAN is again requesting at 10% royalty for ringtones, as well as a 15% royalty for ringbacks. While the CWTA objects to SOCAN’s latest tariff filings as well, it is simply resubmitting its statement of case from the 2003-2005 tariff filing and is not as yet investing any more effort in fighting the case. "Whether the Board has another hearing for the 2006 and 2007 , that’s something we’ll have to wait and see," says Choma. "But our objection still stands."

Ruling on Tariff 24 should amount to millions for SOCAN

News | August 25, 2006

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