News

Copyright Board Issues Online Music Decision

The Copyright Board of Canada this afternoon issued its much-anticipated decision involving online music services.  The decision sets a tariff for the online music services to be paid for the reproduction of music.  I blogged about the hearings in the fall, which pitted the CMRRA against CRIA and the online music services. 

The Copyright Board was asked to choose between two benchmarks in establishing the tariff.  CMRRA wanted to use the recent ringtone decision as the starting point, while CRIA argued that traditional CDs served as the more appropriate starting point.  The Board sided with CRIA, ultimately arriving at a tariff of 7.9 percent of the retail price per "permanent" download (ie. a download from Apple iTunes) with a minimum payment of 5.3 cents per download. Note that CRIA also sought to become a sub-licensee of the CMRRA repertiore, but the Board rejected that request.

The decision also includes some important language with respect to private copying and DRM. 
On private copying, there was some discussion about authorized vs. unauthorized copying.  The Board rejected the distinction, noting that "a private copy is a private copy, whether or not is was authorized."  This statement is important as provides support for the view that peer-to-peer downloading may in some circumstances be covered by private copying, since the issue of authorization is not relevant.

The Board also rejected an initial attempt to mandate DRM for online music services.  As my colleague Jeremy deBeer pointed out, the initial wording of the tariff appeared to require the use of DRM.  The Board dropped that requirement – it does not specify any use of DRM – picking up on the recent Puretracks decision to offer DRM-free downloads.

While both sides will find things to criticize in the decision (with the online music services likely the happiest of the bunch), the bigger question is why this tariff exists in the first place.  Not only are many of the same parties preparing for a second tariff for the same services but a different right next month (Tariff 22), but many might well ask why the parties simply could not have negotiated a similar agreement.  The need for Board-mandated tariffs may make sense for efficiency sake or where a market-based solution is unlikely.  That is not the case here – the parties reached an interim agreement years ago and there was seemingly no need to have an expensive, government-funded system to sort things out.

18 Comments

  1. Dorkmaster Flek says:

    So exactly who gets this tariff? If I buy a track from eMusic of a Canadian artist, how do I know that they get the money? I want to know that my money doesn’t just end up in the hands of the Canadian arm of the RIAA.

  2. Dwight Williams says:

    A fair question
    The artist who created the work should get the bulk of the cash in question.

  3. What does this mean
    … can someone go out and setup an online music store so long as they pay 7.9% of their gross price per download?

    Seeing as there’s negligible cost for delivery of music whats stopping someone from setting up say a 10cent/song store and remitting .79 cents per download? If so, I know what the next dot-com I’m making is ūüôā

  4. Apparantly I can’t read. 5.3 cents. Got it. Sorry =P

  5. A tariff on the what-now?
    I don’t exactly understand this. I buy a song from iTunes, the record companies get pretty much all of the fee, and yet the record companies also get a tariff? Goodness, if I frequented online music stores with their poxy DRM, I’d certainly stop now. Figures, just as some have gotten wise and started offering non-DRM-crippled music. Oh well, I’ll just stick to CDs for the ‘must haves’ until they too are cripped somehow. By then I’ll have plenty of music to last me until the industry crashes under its own weight and paranoia.

    I won’t be treated as a thief when I buy a product fair and square.

  6. Permission to copy?
    Rick, isn’t the purpose of a tariff, such that they don’t need to get the rights. IE the tariff is for the right to distribute music online by making a copy of it.

    From the way this is framed it sounds like a big win for the online music stores.

    But stranger things have happened in this space.

    Anyone know exactly what an online music store has to do to get going. Ie can someone just go down to futureshop, buy a couple cds and put em online so long as they can pay the 5.3 cents per d/l and meet the reporting requirements? Or is this just one of a long line of licenses they’d need?

  7. Follow the money
    This topic seems a little confusing. Is the purpose of the tariff to put more money in the artist’s pocket? How exactly will that work?

    First, the cost of music downloads goes up by at least 5.3 cents. With on-line markups, that could be 7 cents. I thought consumers were looking for lower prices. What impact will this have on sales levels and how does it improve the artist’s income when the price increase drives more people to peer to peer downloads.

    Second, once the 5.3 cents are collected, how is the money distributed and how much sticks to the various organizations that touch it? CRIA is in there somewhere and they will take a “management fee”. I hope this doesn’t end up looking like those charity organizations where the charity only gets 10% of the take. The artist should be getting 90% of the fee, or it’s a sham.

    The image that comes to mind is the commercial with the jingle “hands in my pocket”

  8. Russell McOrmond says:

    Making sense out of the music industry a
    I wrote a BLOG article to help clarify things for some of the people who commented.

    [ link ]

    “To make sense of any discussion about music you need to start from an understanding that there are two, sometimes competing, branches of the music industry: the music publishing branch, and the recording branch.

    The short-form is that at the moment if you want to distribute recorded music online in Canada you need to both get permission (and make payments) to a record label, as well as pay a fee to a collective society that represents the composer/publisher of the music.”

  9. jeremy
    Good clarification Russell. Don’t forget though that in addition to multiple players, each player has multiple different rights. I’ve elaborated a bit on that point at

    [ link ]

  10. You know, ideally all I want to be able to do is go straight to the bands website, download their songs for $1 each or whatever the band is selling for, and know that 100% of that goes to them.

    After that, they they can decide how much their income goes to paying off the loans gotten from their publishers. Instead, we get levels of levels of administration, and tariffs and levy’s on all of those already jacked up prices.

    But, then it would be simple.

  11. John Erle Mundle says:

    How About Tariff 22?
    Mr. Geist:

    I hope you’ll be speaking out against Tariff 22 when it goes before the Copyright Board in April.

    The fact that the proposed royalties for internet radio stations are roughly three times what they are for terrerstial radio is bad enough, but the minimum $200 per month fee seems designed to force hobbyists and micro-broadcasters to shut down and prevent anyone but the major players from being able to afford to operate internet radio in Canada.

    I’ve been broadcasting as a hobbyist for nearly a year now, and I’m seriously trying to parlay that into a small business, but these new rates would make it nearly impossible for my station or any others like mine to survive.

    Too few media conglomerates owning too many stations has already destroyed terrestrial radio for serious, adventurous music lovers, leaving internet radio as the last place to find radio programmed by people who actually care about music. Small independent webcasters are the long tail of the music industry, giving important exposure to artists who wouldn’t get any airplay otherwise.

    The RIAA is on the verge of destroying internet radio in the US and I’d hate to see SOCAN allowed to follow their lead.

    http://www.dynamicrangeradio.ca

  12. I have one simple question that I’m finding very difficult to answer. Is it illegal to download music or videos for personal use via p2p software? This is something that seems very difficult to answer when searching the web. I’ve found articles and discussions that seem to say “yes it is” and “no it isn’t”. Does anyone know the actual answer and where we can actually read some government document that clearly states the answer?

  13. Mike Williams says:

    Songwriter
    Media company wants to use a song of mine on their web site to promote a series their producing. What should I charge for use (or is this regulated?) and what sort of royalties should I expect? Where do I start?

  14. Anonymous says:

    have you people got nothing better to do with you time i mean come on put my balls in you mouth. dont

  15. Anonymous says:

    newkon
    Good clarification Russell. Don’t forget though that in addition to multiple players, each player has multiple different rights. I’ve elaborated a bit on that point at
    [url=][ link ]]

  16. steve erckel
    ya i mean come on u guys havwe no time u suck

  17. steve erckel
    ya i mean come on u guys havwe no time u suck

  18. wats up
    this is a really good statement about copyright laws it really makes me have a different point of view about pirating music and videos for free