Decisions

Statement of Royalties to be collected by SOCAN and NRCC in respect of pay audio services, 2003-2006

Reasons for decision

On May 11, 2002, the Copyright Board published in the Canada Gazette the statement of royalties proposed by the Society of Composers, Authors and Music Publishers of Canada (SOCAN) for the public performance or the communication to the public by telecommunication, in Canada, of musical or dramatico-musical works by pay audio services for 2003, and the statement of royalties proposed by the Neighbouring Rights Collective of Canada (NRCC) for the communication to the public by telecommunication, in Canada, of published sound recordings embodying musical works and performers’ performances of such works by pay audio services for 2003. Pay audio services are digital music services offered to direct-to-home satellite or digital cable broadcasting subscribers.

SOCAN proposed a rate of 12.35 per cent of affiliation payments and NRCC, a rate of 7.8 per cent. SOCAN’s rate is higher than the one certified for 1997-2002 by an amount equal to the 10 per cent discount the Board applied to account for the fact that it was a new tariff, while NRCC’s rate is higher than the non- discounted rate for 1997-2002. For small systems, both collectives proposed a 50 per cent discount.

The proposed tariffs for 2004 were published in the Canada Gazette on April 19, 2003 and May 24, 2003 respectively. SOCAN proposed a rate of 16.47 per cent while NRCC maintained its proposed rate at 7.8 per cent.

For the years 2003 and 2004, Bell ExpressVu, CBC/SRC (Galaxie), the Canadian Cable Television Association, Corus Entertainment Inc. (Max Trax) and Star Choice Communications Inc. objected to both tariffs. In addition, DMX Music Inc. objected to NRCC’s tariff for 2004.

For the years 2005 and 2006, SOCAN and NRCC filed a joint statement of proposed royalties which was published in the Canada Gazette on April 17, 2004. The two collectives proposed rates of 12.35 and 5.85 per cent respectively, rates that are higher than the ones certified by the Board for 1997-2002 by an amount equivalent to the 10 per cent discount applied by the Board at the time. The rates proposed for small systems were again half of the main rates. The proposed tariffs were not opposed.

On July 23, 2003, NRCC (followed later by SOCAN) offered to objectors for the years 2003 and 2004, rates lower than previously proposed but equal to the ones proposed for 2005 and 2006. NRCC’s offer came after the July 17, 2003 decision of the Federal Court of Appeal to dismiss NRCC’s application for judicial review which challenged the Board’s decision for the 1997-2002 tariffs on two main accounts: the allocation of royalties between SOCAN and NRCC and the certification of a joint tariff.

On January 26, 2004, NRCC informed the Board that an agreement had been reached involving SOCAN and all objectors, except for DMX Music Inc. which, according to NRCC, did not operate a pay audio service in Canada and was not part of the agreement. All objectors have withdrawn their objections, under the condition that the terms and conditions of the tariff certified for the years 2003-2006 be the same as that of the joint tariff proposed for 2005 and 2006.

The tariff the Board certifies for the period 2003 to 2006 is in accordance with the agreement and thus identical to the one proposed for 2005 and 2006. The certified rates are as follows:

12.35 per cent and 5.85 per cent of affiliation payments for SOCAN and NRCC respectively, and

6.175 per cent and 2.925 per cent of affiliation payments for SOCAN and NRCC respectively, for small systems.

The tariff includes the following changes compared to the one certified for 1997-2002:

1. The 1997-2002certifiedtariff modifiedthewordingoftheDefinitionof“SmallCableTransmissionSystem”Regulations(SOR/94-755) totake intoaccount theExemptionOrder forSmall CableUndertakings(Appendix 1, Public Notice CRTC 2001-121,December 7,2001). Asthe BoardexplainedinitsdecisionofMarch19,2004withrespecttoSOCAN’sTariffs2.Aand17,thisapproachcreateslegaldifficulties.ThetarifftheBoardnowcertifiesadoptstheapproachused for SOCAN’s Tariff 17 (CanadaGazette,March20,2004,section2):section3 ensures that systems which may have losttheir status as small cabletransmissionsystems as a result of the CRTC exemptionorderwillcontinuetopaythesameamountof royalties as small cable transmissionsystems.Thisistheapproachproposedbythe collectives for 2005and 2006.

2. AspecificreferencetoNRCC’s Tariff3,which hadnot yetbeen proposedatthe timeof thelastcertification,hasbeenaddedtosubsection 4(2)which enumeratesusescovered byothertariffsandthusnotcoveredbythis tariff.

3. Paragraph 10(2)(iii)ofthetariffprovidesthata collective society wishing to shareconfidential informationinconnectionwithproceedingsbeforetheBoardmustfirstafford the undertaking that provided theinformationtheopportunitytorequestthatitbe treatedconfidentially. Partieshave agreedtotheadditionofthisnewcondition.Asthisisconsistentwithitspastpractices,theBoard agrees toincludeit inthistariff. TheBoardtakes notehoweverthatthisisa newwordingof aparagraphincludedin manyothertariffs.Whenappropriate,theBoardwillexaminethepossibility ofmodifying theothertariffsin order to ensure consistency.

4. Thetransitionalprovisionsarenolonger relevant and are deleted.

Claude Majeau

Secretary General