SOCAN has filed an application with the Copyright Board of Canada for interim tariff to cover royalties for the communication to the public by telecommunication of musical works in connection with movie/tv streaming and user generated content sites. The obvious targets of the interim tariff are some of the biggest names on the Internet – YouTube, Netflix, Apple, Sony, Vimeo and any other commercial site offering movies, television shows or audiovisual content that contains music.
The SOCAN interim tariff application covers the years 2007 – 2012 so the dollar value will run into the millions (reminiscent of its 2009 attempt to keep its copyright consultation submission secret, SOCAN refused my request for a copy yesterday after it issued a press release on the filing. The Copyright Board sent one along immediately upon request). There are two interim tariffs at issue. The first (Tariff 22D) applies to services that offer streaming or downloadable movies or television programs. It cites Netflix, Apple TV, as well as Sony’s Crackle and Qriocity as examples. The proposal raises payment schemes for subscription sites, pay-per-view sites, and ad-supported sites, all of which come in around 1.9% of gross revenues (there is a more complex model for ad-supported sites). This could lead to significant money as Netflix alone appears headed to generate at least $50 million in revenues in Canada this year, resulting in a SOCAN payment of nearly $1 million/year.
The second tariff (Tariff 22G) covers user generated content sites, but might as well be called the YouTube tariff since it is the obvious target (Facebook is a close second). SOCAN establishes a formula for payment that starts at 6.8 percent of ad revenue for music videos and 1.9 percent of ad revenues for other audiovisual content with music. How much is at stake? Given that some estimates put YouTube revenues in the billions, the Canadian slice could be significant.
While the claims for an interim tariff are weak – there is no emergency here and no suggestion that the SOCAN won’t be paid in full (with interest) once the legal proceedings conclude – the application signals that the Copyright Board’s decision to award Access Copyright an interim tariff has opened the door to a steady stream of similar requests for payment months or years in advance of the conclusion of the legal process to determine what, if anything, should be payable. SOCAN’s latest move means new legal and administrative costs to deal with the Copyright Board for many companies. For services thinking about the Canadian market, it may provide yet another reason to think again.