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Music industry abruptly changes tune on ringtones

Those weary of copyright tariffs — from the private copying tariff on blank CDs and DVDs to the fees associated with playing music everywhere from concert halls to dentist offices — will not like what they are about to read.


Yet another tariff is coming our way. This particular tariff promises to raise some tough questions as it targets one of the fastest growing segments of the music industry.


The sale of ringtones, those tiny recordings that sell for $2 to $3 per song programmed into millions of cellphones around the world, has blossomed into a major market segment in recent years. Buoyed by teenager interest in ringtones, global revenues topped $3.5 billion (U.S.) or roughly 10 per cent of the worldwide music market last year.


The Society of Composers, Artists, and Music Publishers, one of Canada's leading copyright collectives, has taken note of this growing revenue stream and sought to establish a new tariff, known as Tariff 24, to compensate music composers for the use of their work.


SOCAN recently asked the Canadian Copyright Board to award an escalating royalty rate, requesting that the 2004 royalty be set at 10 per cent of a ringtone supplier's revenue with a minimum royalty of 10 Canadian cents per ringtone.


Although some may object to further royalties for composers, it is tough to argue with the proposition that Canadian artists should benefit from a segment of the music market that some analysts say will account for nearly a third of global music revenue within four years. What may make this tariff particularly controversial, however, is that it directly challenges many industry claims about respect for copyright and artist compensation.


As anyone following the online music debate knows, the recording industry regularly blames teenagers for the popularity of peer-to-peer file sharing. The Canadian Recording Industry Association has often cited the need for "education" so that teenagers might buy into its vision of copyright law.


The success of the ringtone market, which undoubtedly owes much to those same teenagers, contradicts that claim, illustrating not only that teens are willing to pay for digital music, but that they are willing to overpay for such music.


To the surprise of many, teenagers will think nothing of spending $20 for a batch of ringtones featuring only a portion of songs, though they would not dream of paying 99 cents for the full version of each song on one of the fee-based music services.


The billions of dollars generated by ringtones demonstrates yet again why anyone looking for insight into selling music online is better off speaking to computer and telecommunications companies that spend their time focused on innovation, rather than dialoguing with the recording industry, which seems to focus primarily on litigation.


If the market success of ringtones comes as a surprise, the apparent source of opposition to the proposed ringtone tariff is an absolute shock. While most would have anticipated a showdown between the copyright collectives representing the creative community on the one side and the telecommunications providers selling the ringtones on the other, the Canadian creative community faces another formidable foe in their campaign for compensation. Amazingly, CRIA is siding against the creative community and is actively opposing the SOCAN tariff proposal.


Using language that it might otherwise reserve for alleged file sharers, CRIA claims that the proposed tariff is "excessive, unwarranted and unreasonable" and that the royalties are "neither fair nor equitable." In fact, CRIA, whose members represent only a fraction of Canadian recording artists, even raises doubts about whether the composers are entitled to any compensation at all, questioning whether the ringtone constitutes a communication to the public that would merit a new tariff.


CRIA's position is difficult to reconcile with its frequent attempts to align itself with the creative process and its professed concern for the livelihood of the Canadian creative community.


In opposing payments to Canadian artists, the association provides ample evidence that creativity and artists' welfare play second fiddle to its members' fiscal bottom lines.


Moreover, CRIA's opposition on the ringtone tariff may reflect a wider concern among the major foreign-owned recording labels that Canadian performers and composers are claiming excessive compensation through copyright collectives. For example, earlier this year, Graham Henderson, the senior vice president of business affairs and e-commerce for the Canadian division of Universal Music, described proposed music tariffs designed to compensate Canadian artists through SOCAN and the Canadian Musical Reproduction Rights Agency as "grossly unfair" and "nothing short of outrageous."


As policy makers and political leaders such as Industry Minister David Emerson and Canadian Heritage Minister Liza Frulla sort through copyright reform issues, they will no doubt take the time to hear from all stakeholders including artists and users. The next time the U.S. recording giants that largely comprise CRIA come calling, they might ask to hear the sound of their ringtone and ask why they can't spare a dime for the Canadian creative community.

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