COPYRIGHT
Internet, music publishing

The UK Copyright Tribunal has returned its decision in relation to the rate paid to songwriters and composers when their music is used in online music services. The Tribunal has endorsed a settlement agreement negotiated in September 2006 between the MCPS-PRS Alliance and the majority of the online music industry. The Tribunal concluded that this agreement should be the basis for the template for online licensing in the future.

The royalty rate to composers, songwriters and music publishers when their works are exploited for online and mobile in the UK has been under scrutiny for the last two years. In June 2005, the MCPS-PRS Alliance was referred to the UK Copyright Tribunal by a consortium of music users. This was made up of: The BPI (representing over 300 record companies), The Digital Service Providers (AOL, Apple iTunes, MusicNet, Napster, RealNetworks, SonyCONNECT and Yahoo), and The Mobile Network Operators (O2, Orange, T-Mobile and Vodafone). In September 2006, the BPI withdrew from the Tribunal process by signing a settlement agreement with the Alliance which sees composers, songwriters and publishers receiving 8% of gross revenue (excluding VAT) when their music is made available for download, limited download or by on-demand streaming. A rate of 6.5% was negotiated for webcast services. Importantly the concept of minimum royalties was agreed for all services. This ensures that music creators receive payment for their work when it is used online in all cases, for example, where music is bundled with other products and services, offered free as an attraction for other products, or as a loss leader.

Four of the Digital Service Providers (iTunes, MusicNet, Napster and SonyCONNECT) and four UK mobile network operators (O2, Orange, T-Mobile and Vodafone) also agreed these rates. The Mobile Network Operators and iTunes sought additional clarity from the Tribunal on two discrete issues relating to how revenue is defined. However the Alliance was not able to reach a settlement with the remaining Digital Service Providers (AOL, Real and Yahoo) who continued with their reference to the Copyright Tribunal. Between September 2006 and January 2007, the Tribunal sat to hear the case brought by AOL, Real and Yahoo and to determine the remaining issues on the revenue definition brought by iTunes and the four mobile network operators

The Tribunal decision confirms that songwriters, composers and their publishers should receive 8% of gross revenuesfrom online music service providers for on-demand services including downloads and subscription streaming services, 6.5% of revenues for interactive webcasting services and 5.75% for non-interactive webcasting. The difficult in finding a ‘royalty base’ (ie what actually constituted “Gross Revenues”) was also considered (with digital service providers keen to exclude revenue sources not directly linked with music content and the Tribunal decided that “no definition of Gross Revenue will perfectly balance the interests of all concerned” and therefore an “Independent Online Adjudicator” was recommended as a mechanism to resolve future disputes of what is and isn’t a revenue stream that can be levied. However the Tribunal decided revenues which attract the royalty should   include at least: “in-stream advertising” and where “music actually offered” forms the sole content or predominant part (75%) of a page with advertising. In certain situations, small specific deductions from the Gross Revenue base (e.g. for the costs of obtaining the advertising) would be considered reasonable.

British Phonographic Industry Limited (and various online and mobile providers) v MCPS and PRS [CT84-90/05]

http://www.ipo.gov.uk/ctribunaldownloadingdecision.pdf

www.mcps-prs-alliance.co.uk

http://www.clintons.co.uk/news.php?NewsID=36.

for an analysis of this decision and the position the USA with web radio see the excellent article athttp://technology.guardian.co.uk/weekly/story/0,,2129109,00.html#article_continue