Copyright Tribunal asked to look again at VPL rates

September 2010

Broadcasting, internet

The High Court has decided that the Copyright Tribunal did not have a sound basis for the royalty rate it set in a dispute between rights holder VPL and a music TV broadcaster CSC . Mr Justice Floyd said that the Tribunal set a new rate on spurious grounds and misunderstood evidence in the dispute between Video Performance Ltd (VPL) and CSC Media Group about how much in royalties CSC’s seven pop video TV stations should pay VPL. At the heart of the case was a disagreement over thae rates the broadcaster pay – CSC said that the 20% of revenues it paid to VPL was too high, whereas VPL argued that it was fair and was the basis of other licensing deals. CSC wanted to pay 8.5% and claimed that a fair comparison was with the radio industry, where the highest rates were 5%. The percentages were pro-rated, meaning that they applied to a proportion of income equal to the proportion of broadcast material that was licensed through VPL and the method of pr0-rating formed a second part of the appeal, brought by VPL after the Tribunal set the rate at 12.5% of attributable revenues for stations including The Chart Show TV, The Vault, Flava and NME TV.

The Copyright Tribunal has a wide discretion to consider such cases based on the evidence it hears and on market practice. It is charged with finding a ‘reasonable’ settlement but the High Court said that the Tribunal failed to take proper account of other deals in the market and that the Tribunal only looked at comparators after it had already restricted the rate it would set to a ‘window’ of 10-15% and importantly that the Tribunal didn’t take account of the agreement between VPL and BSkyB which should have formed the basis for a comparison. The Court said that the Tribunal should also have taken more account of the ‘available profits’ approach, which showed that CSC would be left with very little in earnings if it paid the 20% royalty rate. Mr Justice Floyd said that the Tribunal did not follow the correct procedure in setting a rate of 12.5% saying “It seems to me that it is wrong in principle to relegate the single most significant comparable to the role of fine tuning a royalty rate which has already been decided to lie in a range considerably below the rate appearing in that licence. That is particularly so where the diminished window has itself been fixed by reference to a comparable (radio) which the Tribunal considered less relevant,” saying “The Tribunal has fallen into error here. The case has now been sent back to the Copyright Tribunal for a new Tribunal to reconsider the matter. 
CSC Media Group Ltd v Video Performance Ltd [2010] EWHC 2094 (Ch),

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