OTTAWA – The Canadian Copyright Board has ruled that 8.8% of the price of a song that is permanently downloaded must go back to the copyright holders. It also set a minimum fee of 4.5 cents per file in a bundle and 5.9 cents per permanent music download in all other cases.
In its March 16 decision on royalties for online music services for the years 2005 to 2007 (to be paid retroactively), the board set rates of 5.9% of the month’s subscription price for limited music downloads that require an online subscription and 4.6% for on-demand streaming music.
The ruling falls short of tariffs proposed by the CMRRA/SODRAC Inc. (CSI) last year. In its ruling the Copyright Board rejected the CSI’s contention that the tariff rate should be based on the mastertone market because “it is not mature enough, and its future too uncertain, for it to serve as a reliable proxy.”
Instead the Copyright Board used the amount paid to reproduce a musical work onto a prerecorded CD as the starting point for determining the rate. The CD rate has been set at 7.7 cents per track, plus $.154 per minute or fraction thereof over five minutes, since 2002. The board noted that although the rate expired in June 2006, it continues to be used until a new agreement is negotiated.
But in the online music proceeding, all parties involved requested the rate be expressed as a percentage, as is the case in most other countries, rather than on a per track basis. The Copyright Board set 7.8 cents as the rate, and came up with its percentage rate based on the average retail price of a downloadable song, which it determined was about 99 cents per single track.
The CSI was looking for a tariff of the higher of either 15% of gross revenues or 10 cents per permanent download of a single music work for online musical services offering permanent downloads, as reported last year by cartt.ca. The tariff it proposed for online music services offering limited on-demand streams was 5.8% or a minimum of 45 cents per subscriber per month, and for limited downloads, with or without on-demand streams, 8% of gross revenues or a minimum of 60 cents per subscriber per month.
CSI is a joint entity incorporated in 2002 by Montreal-based Society for the Reproduction Rights of Authors Composers and Publishers in Canada (SODRAC) and Toronto-based Canadian Musical Reproduction Rights Agency Ltd. (CMRRA). It represents more than 80% of music publishers based in Canada.
Opposition to CSI’s proposed rate came from the Canadian Recording Industry Association Inc., Apple Canada, Napster, Bell Canada, the Canadian Association of Broadcasters, and Rogers. This consortium proposed a royalty rate of 5.3% for permanent downloads, 3.5% for limited downloads and 0.5% for on-demand streaming.
“The online music industry is in its infancy. It is small by any standard, with relatively low profit margins and long payouts,” states the Copyright Board in its tariff ruling. “Still, we believe that online services can absorb the royalties we set without raising the prices while at the same time remaining able to meet their mid- and long-term business objectives.”
The ruling ends several years of debate over what is fair compensation for the online sale of music. Internet services in Canada, which have been operating for about four years, have been paying advances to the publishers through CSI at a rate that was not disclosed.
