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Forums - Music techology
Subject: excessive online pub' royalties says BPI
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Original Message 1/1 29-Jun-05 @ 05:43 PM - excessive online pub' royalties says BPI
The UKs leading online music services and the BPI, representing more than 300 UK record labels, are mounting a legal challenge to the licence terms demanded by music publishers and composers for the use of their compositions on the internet and on mobile devices.
The seven online services AOL, Apple iTunes, MusicNet, Napster, RealNetworks, Sony Connect and Yahoo! are filing references to the Copyright Tribunal, alongside the BPI, challenging the tariff set by the MCPS-PRS Alliance for the use of musical works on the internet and on wireless devices.
The MCPS-PRS Alliance is a joint venture between the MCPS and PRS, the collection societies that fix and collect royalties on behalf of music publishers and composers. These filings follow several years of negotiations with the Alliance by the BPI and online music services to try to achieve acceptable terms.
Geoff Taylor, BPI General Counsel said: The licence that the Alliance is trying to impose for online music is unreasonable and unsustainable. It is charging a royalty rate on a download that is double the rate it charges for a song on a CD. It applies this excessive rate to a whole range of online music services, without taking into account their different characteristics. The Alliances tariff threatens to seriously harm the development of the legal online and mobile music markets.
Publishing royalties on physical products, such as CDs, stand at 6.5% of retail price (or 8.5% of the published wholesale price). Broadcast radio rates range from 3% - 5.25% of net advertising revenues. But the Alliances online tariff proposals would impose a rate of 12% of gross retail revenues on nearly all online music offerings (subject to a temporary discount to 8%).
The online music services and the BPI argue that the terms set by the MCPS-PRS Alliance are unreasonable for (amongst others) the following reasons:
> A change in the technical means of delivering music to the consumer does not warrant a sudden increase in royalties for using compositions - particularly since the Alliance and its members, unlike the online music services and record labels, have not had to invest heavily in creating new legal online services and fighting internet piracy;
> Imposing higher royalties on online services than on their offline equivalents puts online services at an unfair commercial disadvantage;
> The Alliance applies a single rate, without taking into account the nature and features of the service, to all the revenues of the licensee (less VAT), even where music is delivered as part of a broader array of products and services (and therefore a substantial part of the licensees total revenue is unrelated to the use or distribution of music). This is like charging a royalty on a department stores total revenues, instead of on just its music sales;
> The non-returnable quarterly fee demanded by the Alliance will unfairly disadvantage independent record companies and small online music services.
The online music services and the BPI argue that the royalties to be paid to the Alliance should reflect the specific nature of the service concerned (e.g. permanent downloads, webcasting, etc.) and the level of royalties paid for similar uses of musical works offline. They should also take into account the massive investments made by online music services and record labels in developing legal online music services and fighting the unauthorised distribution of music online.
Kenneth Steinthal of law firm Weil,Gotshal & Manges LLP, representing a consortium of online services, said: We are taking this step in an attempt to establish a licensing structure for publishing rights that can allow our companies to stream internet radio programming and otherwise distribute online music lawfully in the UK, while paying fairly for publishing without being placed at a severe competitive disadvantage relative to offline distribution of music and radio.
For webcasters, the rates sought by the Alliance are more than double what radio broadcasters pay when they engage in essentially the same activity - simulcasting their signal on the internet. Coupled with the Alliance's effort to include in the MSPs' revenue base -- against which its rate would be applied -- revenues of our companies that have no connection at all to our music-based products, we had little choice but to initiate this proceeding.
BPI General Counsel Taylor added, Record labels and legal online music services absolutely accept that composers should be fairly paid for their work and their creativity. Our highly-publicised campaign against illegal filesharing is based on the premise that music is something that has to be paid for.
However, online music is ultimately just another music format like a CD, a DVD or a 12 inch vinyl record. It doesnt make sense that, because downloads and other online music services have come along, royalties to publishers and songwriters should suddenly double. Reluctantly, therefore, we have had to ask the Copyright Tribunal to set reasonable royalty terms that will allow the legal online and mobile music markets to continue to grow on a basis that is sustainable in the long term.
BPI chairman Peter Jamieson commented, We are very disappointed that we have been forced to resort to the Tribunal on a matter that we hoped would be settled by negotiation. However, we are confident that the Tribunal will find that the Alliances tariff is unreasonable.
< ENDS >
Notes to editors
The BPI is the UK record companies trade association representing companies responsible for around 90% of recorded music sales in the UK. It has taken a leading role in encouraging new online business models, championing the introduction of an Official Download Chart and the recent introduction of downloads into the Official UK Singles Chart. It is also leading the record industrys fight against illegal filesharing.
The MCPS (Mechanical-Copyright Protection Society) collects and distributes 'mechanical' royalties generated from the recording of music on to many different formats. This income is distributed to its members - writers and publishers of music. The PRS (Performing Right Society) collects licence fees for the public performance and broadcast of musical works. The MCPS-PRS Alliance manages common activities, services both societies and is jointly owned by them.
The Copyright Tribunal is a statutory body governed by the Copyright, Designs & Patents Act 1988, responsible for ensuring that the terms issued by licensing bodies for the use of copyright works are reasonable.
The seven online services AOL, Apple iTunes, MusicNet, Napster, RealNetworks, Sony Connect and Yahoo! are filing references to the Copyright Tribunal, alongside the BPI, challenging the tariff set by the MCPS-PRS Alliance for the use of musical works on the internet and on wireless devices.
The MCPS-PRS Alliance is a joint venture between the MCPS and PRS, the collection societies that fix and collect royalties on behalf of music publishers and composers. These filings follow several years of negotiations with the Alliance by the BPI and online music services to try to achieve acceptable terms.
Geoff Taylor, BPI General Counsel said: The licence that the Alliance is trying to impose for online music is unreasonable and unsustainable. It is charging a royalty rate on a download that is double the rate it charges for a song on a CD. It applies this excessive rate to a whole range of online music services, without taking into account their different characteristics. The Alliances tariff threatens to seriously harm the development of the legal online and mobile music markets.
Publishing royalties on physical products, such as CDs, stand at 6.5% of retail price (or 8.5% of the published wholesale price). Broadcast radio rates range from 3% - 5.25% of net advertising revenues. But the Alliances online tariff proposals would impose a rate of 12% of gross retail revenues on nearly all online music offerings (subject to a temporary discount to 8%).
The online music services and the BPI argue that the terms set by the MCPS-PRS Alliance are unreasonable for (amongst others) the following reasons:
> A change in the technical means of delivering music to the consumer does not warrant a sudden increase in royalties for using compositions - particularly since the Alliance and its members, unlike the online music services and record labels, have not had to invest heavily in creating new legal online services and fighting internet piracy;
> Imposing higher royalties on online services than on their offline equivalents puts online services at an unfair commercial disadvantage;
> The Alliance applies a single rate, without taking into account the nature and features of the service, to all the revenues of the licensee (less VAT), even where music is delivered as part of a broader array of products and services (and therefore a substantial part of the licensees total revenue is unrelated to the use or distribution of music). This is like charging a royalty on a department stores total revenues, instead of on just its music sales;
> The non-returnable quarterly fee demanded by the Alliance will unfairly disadvantage independent record companies and small online music services.
The online music services and the BPI argue that the royalties to be paid to the Alliance should reflect the specific nature of the service concerned (e.g. permanent downloads, webcasting, etc.) and the level of royalties paid for similar uses of musical works offline. They should also take into account the massive investments made by online music services and record labels in developing legal online music services and fighting the unauthorised distribution of music online.
Kenneth Steinthal of law firm Weil,Gotshal & Manges LLP, representing a consortium of online services, said: We are taking this step in an attempt to establish a licensing structure for publishing rights that can allow our companies to stream internet radio programming and otherwise distribute online music lawfully in the UK, while paying fairly for publishing without being placed at a severe competitive disadvantage relative to offline distribution of music and radio.
For webcasters, the rates sought by the Alliance are more than double what radio broadcasters pay when they engage in essentially the same activity - simulcasting their signal on the internet. Coupled with the Alliance's effort to include in the MSPs' revenue base -- against which its rate would be applied -- revenues of our companies that have no connection at all to our music-based products, we had little choice but to initiate this proceeding.
BPI General Counsel Taylor added, Record labels and legal online music services absolutely accept that composers should be fairly paid for their work and their creativity. Our highly-publicised campaign against illegal filesharing is based on the premise that music is something that has to be paid for.
However, online music is ultimately just another music format like a CD, a DVD or a 12 inch vinyl record. It doesnt make sense that, because downloads and other online music services have come along, royalties to publishers and songwriters should suddenly double. Reluctantly, therefore, we have had to ask the Copyright Tribunal to set reasonable royalty terms that will allow the legal online and mobile music markets to continue to grow on a basis that is sustainable in the long term.
BPI chairman Peter Jamieson commented, We are very disappointed that we have been forced to resort to the Tribunal on a matter that we hoped would be settled by negotiation. However, we are confident that the Tribunal will find that the Alliances tariff is unreasonable.
< ENDS >
Notes to editors
The BPI is the UK record companies trade association representing companies responsible for around 90% of recorded music sales in the UK. It has taken a leading role in encouraging new online business models, championing the introduction of an Official Download Chart and the recent introduction of downloads into the Official UK Singles Chart. It is also leading the record industrys fight against illegal filesharing.
The MCPS (Mechanical-Copyright Protection Society) collects and distributes 'mechanical' royalties generated from the recording of music on to many different formats. This income is distributed to its members - writers and publishers of music. The PRS (Performing Right Society) collects licence fees for the public performance and broadcast of musical works. The MCPS-PRS Alliance manages common activities, services both societies and is jointly owned by them.
The Copyright Tribunal is a statutory body governed by the Copyright, Designs & Patents Act 1988, responsible for ensuring that the terms issued by licensing bodies for the use of copyright works are reasonable.
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