Backgrounder: The Copyright Board’s Tariff 8 Decision

On May 16, 2014, the Copyright Board of Canada issued its decision setting rates for Re:Sound’s Tariff 8 – Non-Interactive & Semi-Interactive Webcasts, 2009-2012.

What is the Copyright Board?

The Copyright Board of Canada is an economic regulatory body empowered to establish, either mandatorily or at the request of an interested party, the royalties to be paid for the use of copyrighted works, when the administration of such copyright is entrusted to a collective-administration society. The Board also has the right to supervise agreements between users and licensing bodies and issues licences when the copyright owner cannot be located.

What is Re:Sound?

Re:Sound is the collective that collects royalties on behalf of music companies (producers) and performers for certain rights, such as the communication right, by filing tariffs before the Canadian Copyright Board. The Board either accepts tariffs proposed by Re:Sound or modifies them. Re:Sound then distributes royalties collected under tariffs certified by the Board directly to performers and to music companies, who in turn may distribute them to artists under royalty agreements.

What is a “Non-Interactive Webcast”?

A Non-Interactive Webcast is an online music streaming service that does not allow the user to control the content or timing of the webcast e.g. no skipping or customizing the stream by genre or artist. Examples of non-interactive music streaming services include Slacker and CBC Music.

What is a “Semi-Interactive Webcast”?

A Semi-Interactive Webcast is a service that allows the user some level of control over the content or timing of the webcast such as skipping or pausing the stream or customizing the content by genre or artist. An example of a semi-interactive service is Pandora Internet Radio.

The Copyright Board’s decision follows a lengthy rate-setting process that started in 2008. Re:Sound proposed rates based on marketplace agreements negotiated directly between webcasting services operating in Canada and both Re:Sound and music companies. These proposed rates were also consistent with US rates, reflecting the marketplace acceptance of North American rates. Re:Sound spent years negotiating deals with digital service providers at market rates, which it presented in evidence to the Board. The Board rejected those agreements and set royalty rates for webcasting in Canada that do not reflect market rates and are a small fraction of the rates payable by the same services in the U.S.

The webcasting rates certified by the Board are based on the rates payable to music publishers by commercial radio stations for their over-the-air broadcasts, and as a result, are a small fraction (less than 10%) of the rates the same services pay in the United States. In the U.S., the Copyright Royalty Board is legislatively required to set webcasting rates based on market rates. In Canada, the Copyright Board sets rates that it considers to be fair as opposed to market rates.

The Re:Sound tariff in this case was for webcasting music, including non-interactive webcasting services and semi-interactive services, but not on-demand services such as Rdio (which are licensed directly by music companies).

Tariff 8 does not apply to podcasts, fully interactive services such as downloads or on-demand streaming, or simulcasts by Canadian commercial radio broadcasters, CBC, pay audio or satellite radio services. Other simulcasters, such as international radio stations streaming into Canada, are subject to the applicable webcasting royalties under Tariff 8.

Key Points

The rates set by the Copyright Board are approximately 10% of the rates negotiated by Re:Sound in its direct agreements with digital services, and less than 10% of the comparable U.S. rates.

The Board rejected Re:Sound’s market rate-based benchmarks and held that marketplace-negotiated rates and North American rates are irrelevant in Canada.

The Board instead set the rates based on the music publishers’ Commercial Radio Tariff, ignoring the key differences between webcasting and terrestrial radio, as demonstrated by Re:Sound’s evidence.

Resources:

On May 16, 2014, the Copyright Board of Canada issued its decision setting rates for Re:Sound’s Tariff 8 – Non-Interactive & Semi-Interactive Webcasts, 2009-2012. (Government Fact Sheet)

On June 16, 2014, Re:Sound filed an application for Judicial Review of the Board’s decision. (Re:Sound News Release)

In response, a coalition consisting of more than 70 music organizations released a joint statement in support of Re:Sound’s Application for Judicial Review of the Copyright Board’s Tariff 8 decision setting royalty rates for webcasting services in Canada. (Joint Statement)