OTTAWA – After being ordered by the Federal Court of Canada to re-examine its decision on increasing the rates radio stations pay for music, the Copyright Board of Canada decided today to maintain the rate increase it imposed in October 2005.
At the time of the original decision (which will see millions of dollars more in royalties going to the Society of Composers, Authors and Music Publishers of Canada [SOCAN] and to the Neighbouring Rights Collective of Canada [NRCC] for Canadian broadcasters’ use of music in 2003 to 2007) the CAB called it “egregious and flawed.”
Radio broadcasters warned of layoffs, too, because of the rate increase.
On October 14, 2005, the Copyright Board issued a first decision for these same stations and for the same period. On the first $1.25 million of annual advertising revenues of a radio station, the SOCAN rate was set at 3.2% of that amount, while a statutory rate of $100 applied for NRCC.
For the rest, the rate was set at 4.4% for SOCAN and 2.1% for NRCC. As a result, small and medium-sized stations continued to pay at the same rate as before while the rate for larger stations increased to 4.4%on yearly advertising revenues in excess of $1.25 million.
Low music-use stations paid 1.5% to SOCAN and 0.75% to NRCC.
The Board expects that the rates it sets will generate royalties in 2005 of $48.5 million for SOCAN and $15.9 million for NRCC. This is an increase of $8.8 million and $4.9 million, respectively, compared to what would have been payable pursuant to the rates that were certified for 2002. The total revenues of commercial radio stations were $1.34 billion in 2005.
On October 19, 2006, the Federal Court of Appeal set the 2005 decision aside and remitted it to the Board for a new look, saying the original decision “had inadequately explained its reasoning on arriving at royalty increases attributable to the historical undervaluation of music used on radio and the greater efficiencies achieved by the radio broadcasting industry through the use of music,” reads the decision today.
So, the parties submitted new evidence that allowed the Board to assess the value of the music to broadcasters from different viewpoints.
“Using the methodology put forward by the broadcasters, and after a number of adjustments, the Board revisited the factors it identified in 2005 to justify the royalty increase, and came to the same conclusions,” said Claude Majeau, secretary general to the Board, in a release this morning.
The Board believes, as it did in 2005, that the value of music to broadcasters “has increased significantly since 1987 (the last time royalty rates were increased).
“The three factors explaining this higher value of music remain the same as in 2005. First, broadcasters use more music. Second, music is worth more to the broadcasters than the Board previously thought. Third, commercial radio stations now use music more efficiently,” says the decision.
“As a result of today’s decision, small and medium-sized stations will continue to pay the rates they have been paying since 1978. Only larger stations will be paying the new increased rates, as initially certified in 2005,” said Majeau.
