Amend copyright bill to end radio 'subsidy,' groups urge

Musicians and record labels want the federal government to amend its copyright reform act to end a break for commercial radio stations that reduces royalty payments to artists.
Win Butler, right, and Regine Chassagne of Arcade Fire perform in Montreal last September. Groups representing Canadian performers and music labels want the federal government to amend its copyright act to end a break on royalties paid by commercial radio stations. (Graham Hughes/Canadian Pess)

Groups representing musicians and their industry want the federal government to amend its copyright reform act to give performers and record labels a fair shake when it comes to royalties paid by radio stations.

The Canadian Independent Music Association, the Canadian Federation of Musicians, the Canadian Council of Music Industry Associations and Re:Sound, a non-profit licensing company, are lobbying Ottawa to cancel what they say is a 15-year-old "subsidy" for more than 600 commercial radio stations.

Existing copyright law, last reformed in 1997, allows commercial radio stations to pay a flat royalty fee to Re:Sound of $100 on their first $1.25 million in advertising revenue, rather than the regular commercial radio tariff. For revenues above $1.25 million, that rate is set at 2.1 per cent by the Copyright Right Board of Canada, meaning a savings of thousands on the first $1.25 million.

How the commercial radio tariff is applied

A radio station with advertising revenues of $3.8 million pays $100 on the first $1.25 million, then 2.1 per cent on the balance of $2.75 million. That works out to $100 + $57,750 for a grand total of $57,850.

A low-music-use station (less than 20 per cent of air time is music) would pay a rate of 0.75 per cent instead of 2.1 per cent.

Source: Copyright Board of Canada

Royalties are an important revenue stream for artists, the groups say, particularly when other streams have been declining because of illegal downloading and other factors.

The groups are trying to get this issue on the government's radar as it prepares to make amendments to Bill C-11 at the committee stage, as early as this week.

They launched a print ad campaign and have sent a letter to Conservative MPs asking them to push for an amendment that would lift the exemption.

"This subsidy has absolutely no positive impact on consumers, denies fair market compensation to Canadian music creators and discourages investment and job creation in Canada’s creative sector," MPs were told, according to a copy of the letter obtained by CBC News.

$8 million annual 'subsidy'

Re:Sound is one of six organizations that collects royalties in Canada and it does so on behalf of artists and record labels. (SOCAN, for example, collects royalties for composers and publishers.) Only the tariff collected by Re:Sound is limited by the $100 exemption in the Copyright Act.

The artist and label groups say the people they represent are losing out on at least $8 million per year because of this provision.

"If you just erase that exemption the world doesn’t change, except that they're paying [royalties starting at] zero dollars upwards instead of $1.25 million," said Stuart Johnston, president of the Canadian Independent Music Association.

"This is just putting that revenue back in the revenue stream that will then flow to the copyright holders," he said in an interview.

The $100 tariff was originally intended to help smaller radio stations navigate through a period of lower profits, but it applies to all commercial radio stations regardless of size and profits.

Now "it's a completely different world," said Johnston, who argues that radio stations are pulling in record profits. According to statistics from the Canadian Radio-television Telecommunications Commission, the industry made $272 million in profit in 2009, an 18 per cent profit margin.

The break on royalties can no longer be justified, and further, the groups say, media consolidation over the years means a handful of large companies are the ones cashing in on the exemption, not small, independent radio companies.

"It was supposed to give the small guy a break. It wasn't supposed to be this huge levy-dodge for everybody. They ruined it right from the beginning," said Alan Willaert, executive director of the Canadian Federation of Musicians.

"There's no similar exemption for anyone else under the act. There's no similar exemption in any other country. It just doesn't need to be there anymore," he said.

The letter sent to MPs puts it bluntly:

"The government is pursuing copyright modernization as an economic and job creation initiative, and an amendment that sends millions of dollars a year to small business at no cost to taxpayers or consumers deserves consideration."

Broadcasters call demand unfair

But the government has said it is only going to make technical amendments to Bill C-11, tweaking language for example, and this kind of amendment isn’t on the table, according to the Canadian Association of Broadcasters, which represents many of Canada’s radio stations.

Gabriel Van Loon, legal counsel for the CAB, called the groups' campaign  "inflammatory" and said the issue isn't being fairly represented.

Broadcasters pay a number of royalties, not just the commercial radio tariff, which support music labels and artists, and some of those rates have gone up over the years, Van Loon said, adding that radio stations already hand over too much of their revenue because of the royalty regime.

"It's unfair to point out one area where smaller stations who generally don't make much money got a break and highlight that, while ignoring that copyright tariff payments have grown at a far greater rate than revenue in the same time period," he said.

He acknowledged that bigger stations are getting a "slight" break too, but that the $100 rate needs to be kept to help smaller stations. Many of them are still losing money, he said.

"They're trying to make it seem like we’re getting away with something, when we pay too much," said Van Loon.

He noted that radio stations are also required to contribute to Canadian Content Development, various funds that help create and promote Canadian content. To maintain their licences they have to pay CCD fees on an annual basis.

The groups representing the music industry say they’re not trying to make this an "us versus them" issue and say they enjoy a symbiotic relationship with the radio industry.

But they say lifting the exemption is a matter of fairness and the government should be on board.

A spokesman for Heritage Minister James Moore, one of the lead ministers on the copyright reform bill, said the government believes the bill is "balanced."

"But we look forward to discussing these issues at committee where we expect these organizations will express those concerns," Sebastien Gariepy said in an email.