Ad-based revenue model from Universal not included in current CSI tariff

Hearings got underway this week at the Copyright Board of Canada dealing with an Online Music Services Tariff (2005-2007) proposed by the Canadian Music Reproduction Rights Agency Ltd. (CMRRA) and La Société du droit de reproduction des auteurs, compositeurs et éditeurs au Canada (SODRAC), collectively known as CSI. But just as CSI is getting a chance to take back money it says it’s lost to illegal downloading, Universal Music Group announced that it will allow consumers to download songs for free though an advertising-supported model. "Our present tariff doesn’t represent ," says David Basskin, president of CMRRA and VP of CSI. "We can’t anticipate every possible business model so we will continue to develop our tariffs and our contracts to meet the business circumstances." Basskin wouldn’t specify whether CMRRA would seek a portion of the advertising revenues from Universal’s new model by way of another tariff or other means in the future. Through the new service, known as SpiralFrog, consumers in Canada and in the United States will be able to download an unlimited number of songs from the Universal record label, as long as they consent to watch advertisements while doing so. Spiralfrog.com is set to launch later this year and the company has already had talks with other major record labels, including EMI Group PLC and Warner Music Group Corp., about including their catalogues. The motive behind the move by Universal is to recoup some of the money that record labels are losing due to websites and online services that provide downloadable music free of charge. "I think it’s a fantastic new way of finding new business delivery models and it’s only made possible by digital rights management technology," says Richard Pfohl, general counsel, Canadian Recording Industry Association (CRIA). Indeed, digital rights management technology will limit users to downloading songs to their computer and one other device, and will also prevent them from transferring the music to recordable CDs. "I’m delighted that...Canada’s going to be participating as well," continues Pfohl. "It’s something we need to reform our copyright laws in order to encourage more of." Although CSI’s Basskin says its tariff before the board doesn’t cover ad-supported revenue models like Universal’s, CSI does note in its supplementary statement of case to the Copyright Board that many online music services are moving to ad-based models and music publishers and record labels should receive a portion of this advertising revenue. In the current tariff proceeding, CSI and the songwriters and publishers it represents are seeking royalties applicable to the reproduction of musical works in the CSI repertoire by online music services in 2005 through 2007. Specifically, the collective wants 15% of the gross revenue from permanent downloads, with a minimum of 10 cents per track, and 8% of the gross revenue from limited downloads. Like Universal, CSI is also looking to recover some of the revenue being lost as a result of new delivery methods. "The number of pre-recorded albums sold declined by 25% between 1998 and 2003, with the resulting revenue declining by 24%, without taking into account inflation," reads CSI’s statement of case. "This decline has a corresponding impact on the revenues of songwriters and publishers of their works. In this context there is an increasing need to ensure that fair is received from the expanding number of new distribution models through which consumers have access to recorded music."

Ad-based revenue model from Universal not included in current CSI tariff

Broadcast | September 7, 2006

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