IMAGINE OWNING A BUSINESS and being able to access a product that was essential to your success, that makes up the bulk of the service you provide, and that you use more of in more effective ways over a period of 25 years with no annual percentage increase on the rate you pay for that product.
In a recent decision by the Copyright Board of Canada, which increased SOCAN licence fees for the use of music 2003-2007 for commercial radio stations, the board acknowledged that the current rate had not been changed for over 25 years; furthermore, they stated that the rate undervalues the role music contributes to the radio industry. Two reasons why music was undervalued are that there is now more music used than was previously determined and it is used in different ways (i.e. more efficiently), which now allows the radio industry to maximize its revenue.
All businesses must pay fair value for the use of products and services that are essential to their business, and for over 25 years commercial radio has been gaining inexpensive, high-quality music programming by Canadian and international songwriters, lyricists, composers and their publishers at a low cost. At the same time, most commercial radio revenues have been robust, increasing year over year.
Some broadcasters are suggesting undue hardship if they are forced to pay these fees. Says SOCAN CEO André LeBel: “Commercial radio has been getting an easy ride for a quarter of a century. Music is a very valuable commodity, and is at the core of commercial radio’s success. After years of working hard and creating and publishing memorable music, our members are finally being paid more fairly for their labour.”
Here are some key facts that put the increased music licence fees in perspective:
• Music formatted radio stations are primarily dependent on music for their programming. Music makes up approximately 70% of programming (air time) and delivers the quality and quantity of content they need to succeed, but represents less than one fifth of their programming costs
• Up until now radio has paid only 3.2% of ad revenues for music licence fees, a ridiculously low rate for the primary source of their programming
• The 4.4% is a more equitable reflection of music’s value
• It’s disingenuous for commercial radio operators to blame SOCAN for layoffs/loss of revenue
• The fees are not prohibitive and small stations continue to pay the same rate of only 3.2%
• Larger, very profitable commercial radio stations are now required to pay 4.4% on revenues over $1.25 million
• To put that figure in perspective, AM/FM radio total revenues in 2004 were $1.22 billion (as stated in the CRTC Commercial Private Radio stats and financial summaries 2000 – 2004 report), while SOCAN licence fees collected from radio during the same period were only $36.3 million.
Corus Radio recently reported a growth of 12% or $65.3 million for its fourth quarter, which begs the ultimate question – why shouldn’t radio stations have to pay a more fair market value for the music they play? In a recent Corus news release announcing fourth quarter and end-of-the-year results, Corus CEO John Cassaday said, “This was a very satisfying year for Corus. Our broadcasting business results were strong.”
As to the increases in licence fees hurting broadcasters’ share prices, RBC Capital Markets stated in a recent report that, “although negative, the change is not expected to materially impact our estimates for the broadcast names we cover (i.e. including Corus). Furthermore, a recent BMO Nesbitt Burns report debunks that myth: “Corus reported a decent quarter to close out the year. Operating earnings were in line with expectations, but Earnings Per Share (EPS) were dragged down due mainly to a retroactive charge reflecting increased radio tariffs. Radio operations continue to exceed robust industry growth rates, while television remains strong. The pace of each into Q1/06 and Q2/06 looks impressive. We expect a 10% increase in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for 2006. We reiterate our Outperform rating on Corus.”
This commentary piece was submitted to www.cartt.ca by SOCAN (the Society of Composers, Authors and Music Publishers of Canada ) in response to the Canadian Association of Broadcasters’ and other private broadcasters’ recent published complaints on the October 28th Copyright Board ruling.
SOCAN is the Canadian copyright collective for the communication and performance of musical works. It administers these rights on behalf of its members (composers, lyricists, songwriters and their publishers) and those of affiliated international organizations by licensing this use of their music in Canada. The fees collected are distributed as royalties to members and to affiliated organizations throughout the world. SOCAN also distributes royalties received from those organizations to members for the use of their music worldwide. SOCAN has offices in Toronto, Montreal, Vancouver, Edmonton and Dartmouth.
