September 2010

On July 24, 2010, the Copyright Board published the most recent tariff proposals of Re:Sound in the Canada Gazette.  These relate to: the use of background music for the years 2011 and 2012; satellite radio services for 2011; and semi-interactive webcasting for the years 2011 and 2012.

Re:Sound is the collective agency that manages the licences of performing artists and record companies. It licenses recorded music for public performance and broadcast - and for these uses in new media - for thousands of performing artists and record companies in Canada. Re:Sound is also a member of the Canadian Private Copying Collective that manages the tariffs on private copying media in Canada. Before March 1, 2010 Re:Sound was known as the Neighbouring Rights Collective of Canada ("NRCC").

The Objection Period 

Now that the proposed tariffs for 2011 have been published in the Canada Gazette, in accordance with section 70.14 of the Copyright Act, any person who wishes to object to any of them has 60 days in which to file written objections with the Copyright Board.  This means that any objections must be received by the Copyright Board by no later than Wednesday, September 22, 2010.

1. Re:Sound Tariff No. 3 on the Use and Supply of Background Music, 2011

Scope of the tariff

This tariff is entitled the Re:Sound Background Music Tariff 2011. Exclusive of other Re:Sound tariffs, this tariff applies to background music performed in public or communicated to the public by telecommunication. This does not include the public performances on a radio set in a theatre where admission is charged for entertainment, as per the exception in section 69(2) of the Copyright Act. There are two royalty rates proposed in the tariff; one rate for "background music suppliers" and the other for establishments that provide their own background music. The tariff defines "establishment" as a place to which the public (including employees) has access and gives some examples such as hotels, bars, and the 'workplace.' The tariff also covers background music provided for telephones "on hold."

Previous Tariff Proposals

Previously, the NRCC submitted a tariff proposal for the use and supply of background music. The Board certified it on October 20, 2006 ("Tariff No. 3"). It also features a two tiered-rate system. The rates of the previous tariff proposals vary significantly from the current proposed tariff, as shown in greater detail below.

Proposed Rate

Exclusive of federal, provincial or other governmental taxes, the rates are as follows:

	Background Music Suppliers	Other Users	Telephone on Hold
Rate	Quarterly payments of 16.36 per cent of the supplier's gross revenue from the supply of music   Gross revenue includes, but is not limited to, the subscription fees and advertising revenue	There are 3 possible annual  rates: a) 0.294¢ per number of admissions per day/event music was played if the number of admissions can be determined with certainty. b) if the above does not apply, 0.92¢ per square foot of establishment multiplied by operating days music was played. c) if a) and b) do not apply, then $98.84 per year.	Where the music is not supplied by a background music supplier, the rate is an annual $98.84 for the first trunk line then $27.00 for each additional line
Minimum fee	Quarterly fee of $20.61 per establishment	Annual fee of 98.84 per establishment
Application to:	Businesses that commercially supply background music	Establishments that provide their own background music	Establishments that provide their own background music
Comparison to "Tariff No.3'	Quarter payments of 3.2 per cent of the subscription amount for the background music service, net of any amounts the subscriber paid for the equipment.	a) 0.08¢ in 2003 to 2005; 0.0831¢ in 2006 b) 0.25¢ (0.023¢) in 2003 to 2005; 0.2597¢ (0.0239¢) in 2006 c) $26.88 in 2003 to 2005; $27.92 in 2006.	Annual payment of $26.88 in 2003 to 2005, and $27.92 in 2006.

All royalties owing are subject to annual inflation adjustments in January of each year, upon notice from Re:Sound. If more than $350.00 is owing in a year, quarterly payments are required

Reporting and Payment Requirements

Reports on calculations and payments are due within 60 days of the relevant quarter (or year, as applicable). Accounts should be kept of the gross revenues for the quarter/year and other information such as lists of subscribers and a schedule of the days on which a sound recording was played.

Enforcement

Users must keep records going back 6 years as Re:Sound reserves the right to audit suppliers or establishments' accounts and logs at any time during the 6 year period from a relevant year. Re:Sound will give reasonable notice, during business hours, of its intention to audit. The supplier/establishment will receive a copy of the audit report and be liable for any underreporting found. If the underreporting is of more than 10 per cent, the user will bear the costs of the audit. Users must remit any necessary adjustments within 30 days of the demand (with interest).

Re:Sound will keep a suppliers/establishments' information and reports confidential, unless it consents to disclosure. However, even without such consent, Re:Sound reserves the right to share the information internally; with other collective societies who can be compensated for the same music under another tariff; with the Copyright Board; in connection with proceedings before the Board; in accordance with the distribution of royalties; and by court order or other law.

2. Re:Sound Tariff No. 4: Satellite Radio Services Tariff, 2011

Scope of the tariff

This tariff sets the royalty rates for satellite radio services who communicate sound recordings of musical works and performers' performances in Re:Sound's repertoire directly to private subscribers. This tariff does not apply to commercial subscribers. The tariff also does not apply to the uses of Re:Sound's repertoire that are covered by other Re:Sound tariffs such as the Pay Audio Services Tariff, or Tariffs 1.A, 1.C, 3, 5, or 6.

Previous Tariff Proposals

On April 11, 2009, the Copyright Board previously certified a satellite radio services tariff for the NRCC (2007 – 2010) as well as SOCAN (2005 – 2009) and CSI (2006 – 2009). The royalty rate for the NRCC was 1.18 per cent of total revenues for the communication to the public of sound recordings. Satellite services paid to the three collective agencies a total of 6.2 per cent of total revenues, subject to a discount of 0.6 per cent since satellite services were new entrants in the market at that point. The royalty rate proposed in the current tariff represents a significant increase from the former.

Proposed Rate

Re:Sound proposes that the royalty rate be monthly payments of 17 per cent of satellite services' service revenue, subject to a minimum fee of $1.50 per subscriber.

Reporting and Payment Requirements

By the first day of every relevant month, satellite services shall remit the owing royalties, along with a report of the calculation of the amount owed (i.e. disclose the number of subscribers, and service revenues divided into subscriber, advertising, sponsorship and other revenues).

The satellite service must also supply to Re:Sound a report containing information on the sound recordings used. This information should note, for each sound recording: date and time of use; title of the sound recording; name of the author and composer of the musical work; names of all performers; running time (minutes and seconds); title of the album; record label; and the UPC and ISRC. 

Satellite services shall keep the sound recording reports for at least 6 months after the end of each relevant month. Annual records of the owing royalties must be kept for at least six years.

Enforcement

Re:Sound reserves the right to audit the satellite services on reasonable notice and in business hours. Re:Sound will give the satellite service a copy of the audit report, and the satellite service will have to pay the costs of the audit if it reveals 10 per cent or over underreporting. If either the satellite service or Re:Sound notices an error in the royalty payments, necessary adjustments, with interest, will be reflected in the following royalty payment. Over-reporting can only be adjusted within the twelve months following the payment in question. 

Except upon the satellite service's consent, Re:Sound will maintain all confidentiality. Re:Sound may only disclose information to: another collective society; with the Copyright Board; in connection with Board proceedings; to facilitate royalty distribution; and, as required by court order or other law.

3. Re:Sound Tariff 8.B: Semi-Interactive Webcasting Tariff, 2011 – 2012

Scope of the tariff

This tariff would compensate Re:Sound artists and record companies for the communication, via semi-interactive webcasts, of published sound recordings of musical works. These types of sites and services are emerging in Canada, and are relatively well established in the USA. Prominent examples of semi-interactive webcasters are the US-based Pandora and Slacker services, along with the UK-based Last.fm. These sites/services allow individual users to interact with a sound recording provider by selecting types of music to listen to. However, users are precluded from picking particular songs, and are limited from controlling the playlist except by skipping to the next song.

This tariff excludes the uses of Re:Sound works that are either: covered under other Re:Sound tariffs; interactive webcasting services; or, are non-interactive services or simulcasts but also do not offer semi-interactive services. Under the term 'webcasting,' Re:Sound  encompasses four types of webcast uses:

(a) Interactive services: specialized transmissions that are created for or requested by the customer for their use, and not for the customer to present the work to others.

(b) Semi-interactive communications: real-time transmissions of sound recordings as requested by the users, where the users can control aspects of the transmission, such as the musical genre or artist but not others, such as when choices are played or affecting the time of the transmission (either by skipping back, repeating, rewinding, or fast forwarding, or other manipulation of the transmission).

(c) Simulcast: radio signal transmissions online

(d) Non-interactive webcast: digital audio transmission of web files, excluding interactive services and simulcasts.

Previous Tariff Proposals

On May 31, 2008, the NRCC proposed Tariff 8, Simulcasting and Webcasting, 2009 – 2012. It has yet to be certified. It applied to non-interactive webcasts and simulcasting.

Proposed Rate

There are varying rates, depending on the type of webcasting. All rates, however, are subject to a minimum annual payment of $720 and should be paid quarterly. For each type of webcast, site/services must pay the greater of one of two rate calculations:

Type of Webcast	Percentage of Revenue Payment	Payment Per Use
Semi-interactive communication to cell-phones, and no simulcasts or non-interactive webcasts	45 per cent of gross revenues earned by the owner and operator of site/service	$0.0075 per-track, per-stream
All other semi-interactive communications as above, other than to cell-phones	30 per cent of gross revenues earned by the owner and operator of site/service	$0.005 per-track, per-stream
Semi-interactive communications to cell phones, plus one or all of non-interactive webcasts or simulcasts	45 per cent of gross revenues from operations	$0.0075 per-track, per-stream of the semi-interactive communications
All other semi-interactive communications, other than to cell-phones, plus one or all of non-interactive webcasts or simulcasts	30 per cent of gross revenues from operations	$0.005 per-track, per-stream of the semi-interactive communications

There is a special rate for not-for-profit sites/services that offer semi-interactive communications. These services must pay only $60 per month, and are not subject to a minimum payment requirement.

Other requirements

Re:Sound proposes two additional requirements on licences for semi-interactive webcasting. First, the site or service must implement technological protection measures in order prevent stream ripping. Second, the site/service must employ crossfading between songs that limits the gap of time between songs to 0 – 0.25 seconds.

Reporting and Payment Requirements

A site/service should submit royalties within 60 days of the end of each quarter. Records of each payment should be kept for six years after payments.  Along with payments, the site/service should provide to Re:Sound a report detailing information relevant to the royalty calculations. This includes identifying information about the songs played in that quarter, the number of users, the subscriber revenues and advertising revenues.

Enforcement

Re:Sound reserves the right to audit the site/service, on reasonable notice and during business hours. Re:Sound will give the audit report to the site/service, and the site/service is liable to pay the costs of the audit if it reveals 10 per cent or more underreporting. If a site/service or Re:Sound notices an error in the royalty payments, necessary adjustments, with interest, will be reflected in the following royalty payment. Over-reporting can only be adjusted within the twelve months following the payment in question. 

Except upon the site/service's consent, Re:Sound will maintain all confidentiality. Re:Sound may disclose information to: another collective society; with the Copyright Board; in connection with Board proceedings; to facilitate royalty distribution; and, as required by court order or other law.