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Internet Radio May Stream North to Canada

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Monday April 09, 2007
My weekly Law Bytes column (Toronto Star version, homepage version) focuses on the legal rules surrounding Internet radio. Internet radio consists of several types of "stations" including conventional radio stations that simulcast their signal on the Internet, community and college radio stations that use the Internet to extend their signals from small communities to the entire world, and Internet-only stations that broadcast exclusively online.  The Internet-only services are particularly intriguing as they include niche webcasters focused on content not found on mainstream AM/FM stations as well as customizable services such as Pandora and Last.fm, which help users identify new music personalized to their tastes.

Despite their popularity, there is growing fear that a recent U.S. royalty decision could effectively shut down thousands of webcasting services.  The U.S. Copyright Royalty Board recently established a new royalty scheme that dramatically increases the fees that webcasters will be required to pay to stream music online. 

Given the concern about the future viability of Internet radio in the U.S., there has been mounting speculation that some webcasters may consider setting up shop in Canada, where the U.S. rates do not apply.  For example, Mercora, a service that allows individuals to launch their own webcasts, has established a Canadian site that falls outside U.S. regulatory and royalty rules.

Webcasters considering a move to Canada will find that the legal framework for Internet radio trades costs for complexity.  There are two main areas of concern from a Canadian perspective - broadcast regulation and copyright fees.
Those expecting strict broadcast regulation from the Canadian Radio-television and Telecommunications Commission will be pleasantly surprised to learn that webcasters operate outside of conventional broadcast regulation in Canada.  The 1999 CRTC New Media Decision exempts webcasters, thereby relieving them of the need to obtain licenses or meet Canadian content requirements.

The copyright concerns associated with webcasting are far more challenging.  While there are options that allow non-commercial webcasters to stream music without paying significant royalties - Soundclick lists more than 350,000 songs that are freely available under Creative Commons licenses - streaming commercial music will require royalty and license payments.

The Canadian fee structure is still under development with webcasters likely to face several charges.  Next week, the Copyright Board of Canada begins hearings on Tariff 22, a tariff proposed by SOCAN to cover the performance of music online.  The tariff actually dates back to 1995, when SOCAN endeavoured to hold Internet service providers accountable for the music available on their networks.  The ISPs challenged the tariff, leading to nine years of litigation that culminated with a Supreme Court of Canada decision that exempted Internet intermediaries from liability.

Undeterred by the decision, SOCAN restructured the tariff by identifying an extensive list of online uses of music, including on-demand streaming, webcasting, music streaming on gaming sites, and other services that potentially include podcasting.  SOCAN has asked the Copyright Board to grant a tariff that features a minimum monthly fee of $200 and establishes a royalty rate that runs as high as 16.7 percent of gross revenues (or gross operating expenses if those are higher) for on-demand streaming.  The webcast rates vary from three to nine percent of gross revenues, depending on the type of webcaster.  Several groups are challenging the SOCAN tariff request and a final decision from the Copyright Board is not expected for months.

In addition to the Tariff 22 royalties, there are at least two other potential licenses.  The Canadian Musical Reproduction Rights Agency Ltd. (CMRRA) licenses the music reproduction right.  CMRRA proposed a webcasting tariff in 2005 that sought five percent of gross operating revenue (or expenses if greater) with a minimum monthly payment of $200.  CMRRA voluntarily withdrew its tariff application last year and is now negotiating individual licenses for Internet-only radio stations.

The Audio-Visual Licensing Agency (AVLA), which licenses the duplication of master sound recordings, has also created a license for webcasters that copy music onto Canadian servers for webcasting to Canadians.  The agreement establishes transmission and subscriber fees as well as sets limits on the number of songs that can be webcast for any individual artists (no more than four in a three hour period) and prescribes the quality of the transmission (no greater than 96 KPBS).

The net effect of these tariffs and licenses is that webcasting in Canada can get expensive, particularly for non-commercial and niche webcasters.  By wisely focusing on a percentage of revenue model rather than the U.S. per-stream approach, the Canadian framework may enable webcasters to get off the ground, yet a streamlined system for streaming will be needed before Canada develops into a genuine Internet radio haven.
Comments (10)add comment

Walter Dnes said:

...
Canada should be great for streaming older music. Unlike the US, our copyrights expire on Jan 1st following the 50th anniversary of a recording/broadcast/whatever. So right now, a station should be able to stream ragtime, big band, and early 50's pop and rock royalty free. Everything released to the end of 1956 is now public domain. January 1st, 2008, everything released in 1957 goes public domain. This should present a golden (oldies) opportunity for Canadian webcasting.
April 10, 2007

John Erle Mundle said:

Tariff 22 - Higher Rates Than Stated?
As a budding internet radio DJ, I thank you for drawing attention to Tariff 22, but I believe you’ve made an error regarding the rates webcasters will be required to pay if this tariff is approved. Unless I’m reading the pdf you linked to incorrectly, the rates for internet radio webcasters are between 7.5 and 15 percent of revenue or operating expenses, not 3 to 9 percent as your article states. These proposed rates are 3 to 4 times higher than what is paid by terrestrial radio stations, and I find this unfair and unnecessary.

And since you mention that “The Internet-only services are particularly intriguing as they include niche webcasters focused on content not found on mainstream AM/FM stations” I would like to point out that the minimum $200 per month royalty rate would kill off many of the niche webcasters you find so intriguing. One of the great things about internet radio in Canada today is that if you’re an enthusiastic hobbyist who wants to broadcast nothing but Cape Breton fiddle music 24/7 to an audience of twenty people, you can do so with minimal costs. But will those DJs be able to justify a sudden $200 per month increase in their expenses? For many, the answer will be no. Unless those hobbyists (and small business owners) have deep pockets, the diversity of internet radio in Canada will be severely damaged by the current wording of Tariff 22, and that ultimately hurts the Canadian artists who SOCAN is supposed to be trying to protect.

If you take away the minimum monthly fee and impose rates equal to or similar to what terrestrial broadcasters pay, Tariff 22 would strike a much better balance between the needs of artists, webcasters, and internet radio listeners alike.

www.dynamicrangeradio.ca
April 10, 2007

Davis Bacon said:

...
Any future royalty and regulation should be considered a protection for current and futures taxes by the government. I think that small broadcasters are a torn in backside of government as they cannot generate very much in the way of royalties. Government might see small broadcasters as a threat to the current and future tax revenues.
April 11, 2007

Michael Geist said:

SOCAN rates
In response to John Erle Mundle, thanks for pointing out the difference between my column and the initial Tariff 22 request. SOCAN has reduced its requested royalties in the current Tariff 22 case before the Copyright Board.
April 11, 2007

a guest said:

Mark Boudreau
I am always unclear where this leaves my podcast that I am starting where the bands and their labels and/or management have given me the right to include their songs in my podcast. I am assuming I am clear of this hurdle am I not?
April 11, 2007

John Erle Mundle said:

SOCAN Rates
Mr. Geist:

Thank you for the clarification on the apparent discrepancy regarding royalty rates.

I searched for the latest SOCAN proposal but couldn't track it down. Is it available online?

In my search I did find a harshly-worded statement of case from the Canadian Association of Broadcasters regarding the previous proposal for Tariff 22. I was encouraged to see that they came out against the $200 per month minimum fee which would cripple independent startups like mine. Hopefully the CRB will institute the much more reasonable $60 per year minimum fee the CAB has proposed.

www.dynamicrangeradio.ca
April 11, 2007

Alex said:

Internet Laws Suck
All of These Laws Suck I'm Unable To Even Get Started Due To The HIGH Price Of Licensing..... Any Way To Get Around It? I'm Unable To Generate Any Kind Of Revenue Of Any Kind. I Previously Had Google Ads... But They Disabled My Account Due To "Invalid Clicks" Which Is Crap...In 8 Months I Only Generated $28.04. I Did Nothing To Cause It To Be Disabled. I Have No Dj's, No Employee's, No Management,And NO Money LOL. It Sucks... Definetly Since The Genre Of My Station Is HipHop/Rap/R&b... Hard To Genre A Station These Days, Also Because The Main Feature Of My Site Is Not The Radio. That Is Just A Bonus. I Aim To Make A Record Company,A Clothing Line, And Sell Custom Instrumentals. Any Recomendations??
April 17, 2007

Naive Listener said:

Radio, Internet, Satellite
Perhaps I’m naive, but it seems that the radio, Internet, and satellite broadcasters are all paying different fee for the same track. Shouldn’t Celine Dion “I will always love you” (BTW, thanks CANCON) cost the same regardless of the delivery mechanism.
April 18, 2007

Luk said:

Streaming Audio
I don't understand at all how the tarif 22 works. I'm trying to start a nonprofit, noncommercial internet radio station. I have the software to broadcast live and the listener can not download or listen later the song. Plus how about if the music that I play is bands that they not have a label (noncommercial, underground music)? Do I need a license for it? And also because the software that I have I can not have more than 5 listeners at the time. And if I need a license where am I supposed to get it?
If somebody can help me I will really apreciate
Luk
June 26, 2007

james said:

do i need to pay any fees
do i need to pay any fees to broadcast my music on the internet in canada
July 12, 2007

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