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SOCAN Demands Millions from YouTube, Netflix and Friends

The Society of Music Authors, Composers, and Publishers of Canada (SOCAN) announced that it is seeking an interim tariff (2007-2012) to collect millions of dollars in royalties from commercial and user generated content streaming media websites and services including YouTube, Netflix, iTunes, Crackle, Qriocity and Vimeo.

For more information visit: www.socan.ca ; www.cb-cda.gc.ca


Unedited press release

SOCAN Files for Interim Tariff to Licence Music Used by Online Broadcasting Services

TORONTO, June 14, 2011 – Eric Baptiste, CEO of SOCAN, today announced that SOCAN has filed an application on behalf of its members to the Copyright Board of Canada for an interim tariff to enable it to licence the use of music on websites that profit from audiovisual webcasting and user-generated content services. While tariffs applying to the use of music in this manner are currently being considered by the Copyright Board, the interim tariff would accelerate the compensation to music creators and publishers for the use of their work and would give businesses some assessment of the royalty payments necessary to run their operations.

“Like many other small businesses in Canada, music creators and publishers have suffered financial losses associated with the current economic climate, as well as uncompensated music file sharing over the past decade,” said Mr. Baptiste. “In addition to this, compensation for the use of their works by for-profit online broadcasting services has been delayed for years. Further delays in compensation would create further, undue financial difficulties for them.”

A key objective of Tariff 22D (audiovisual webcasting) and Tariff 22G (user-generated content services) is to provide businesses offering online broadcasting services with comparable licensing opportunities to those used by traditional broadcasters. The interim tariff would contribute to establishing a more level playing field between these two significant groups of music users. Through the interim tariffs, SOCAN aims to enable online businesses that earn revenues from content that includes SOCAN’s repertoire to use that content legally and to compensate its members accordingly.

SOCAN, the Society of Music Authors, Composers, and Publishers of Canada, represents the Canadian performing rights of over three million international music creators and publishers. SOCAN is proud to play a leading role in supporting the long-term success of its more than 100,000 Canadian members, as well as the Canadian music industry. Its role is to administer the performance of music in Canada by collecting licence fees and distributing royalties to its members and peer organizations around the world. SOCAN also distributes royalties to its members that it receives from its peer organizations for the use of Canadian music around the world. www.socan.ca

SOCAN’s proposed interim tariffs are as follows:

43.    For both audiovisual webcasts and user generated content sites, SOCAN has proposed, in the tariffs published in the Canada Gazette, a rate of 15% of the Gross Revenues earned by the Site or Service, subject to a minimum monthly fee of $200.00.

44.    For the purposes of this application for the approval of interim tariffs, and without prejudice to any position that SOCAN may choose to advance in the upcoming hearings for the determination of final tariffs, SOCAN proposes the tariff provisions set out below.

Proposed Interim Tariff D.1( Other Audiovisual Webcasts)
The royalties payable by a site or service that communicates audiovisual programming similar to that of a broadcaster that is subject to Tariff 2.A (Commercial Television Stations) and Tariff 17 (Transmission of Pay, Specialty and Other Television Services by Distribution Undertakings), for each of the years 2007 to 2011, are as follows:

(a)    For a site with revenues from subscriptions: 1.9% of the gross amounts paid to the site by Canadian subscribers during the year;

(b)    For a site with revenues on a per program basis, 1.9% of the gross amounts paid to the site by Canadian users, excluding programs that do not contain musical works from SOCAN’s repertoire.

(c)    For a site with revenues from the sale of advertising:
A x B x (1 – C), where:

(A)    is 1.9%;

(B)    is the total advertising revenues generated by the site from advertisements associated with the site’s programs, excluding programs that do not contain musical works from SOCAN’s repertoire; and

(C)    is (i) the ratio of non-Canadian page impressions to all page impressions, if that ratio is provided to SOCAN; and (ii) if not, 0 for a Canadian site and 0.9 for any other site.

In the event that a site receives revenues from more than one of the sources described in the above paragraphs, the additional paragraphs shall apply accordingly.

45.    For the following reasons, SOCAN submits that the above proposal is fair and equitable, especially for the purposes of an interim tariff:

a.    The interim tariff would apply only to audiovisual webcasting sites that generate revenues for their communication of audiovisual programming.

b.    Non-Commercial sites (i.e., those that do not generate any revenues) would not be subject to the interim tariff, and there is no minimum fee.

c.    Generally, the tariff reflects the rate (1.9%) and tariff structure (a percentage applied to a site or service’s revenues) adopted by the Board and presently applicable to similar services to which Approved SOCAN Tariff 22.D applies – i.e., websites operated by conventional television stations and pay/specialty services for the very same type of programming.

d.    Similarly, SOCAN’s proposal is consistent with the principle adopted by the Board in its Tariff 22.B-G decision, i.e., that the tariffs for music uses on the Internet should reflect tariffs for similar uses by conventional services (in this case, Tariff 2 and 17 services).

e.    Proposed Tariff 22.D.1(a) and (b) are limited to revenues received for communications to Canadian customers (as opposed to “all Internet related revenues”), while item (c) accounts for non-Canadian traffic in the same manner as the Board contemplated in its Tariff 22.B-G decision.

f.    Given that pay-per-use programming (for which customers pay a flat fee per downloaded or streamed program) is provided on an individual program transaction basis, the applicable formula allows a site to exclude titles that contain no SOCAN music (although SOCAN expects such instances to be very rare given the nature of the programming in question).

g.    Similarly, in the case of advertising-based programming services, the interim tariff would allow these sites to exclude from the advertising revenue base any revenues that are not associated with programs that do not include SOCAN music.

46.    In the case of User Generated Content sites, SOCAN proposes the following tariff provisions:
Proposed Interim Tariff G.1 (User Generated Content)

The royalties payable by a user generated content site, including but not limited to, YouTube, Facebook, MySpace and Vimeo, for each of the years 2007 to 2012, shall be as follows:

A x [1 – (B x C)], where

(A)     is (i) in the case of music videos: 6.8 percent; and (ii) in the case of other audiovisual content: 1.9 percent; of all revenues from advertisements associated with the site’s music videos and other audiovisual content, respectively, but excluding any content that does not contain musical works from SOCAN’s repertoire;

(B)    is 0.95 for a Canadian site and 1 for any other site, and

(C)    is (i) the ratio of non-Canadian page impressions to all page impressions, if that ratio is provided to SOCAN; and (ii) if not, 0 for a Canadian site and 0.9 for any other site.

47.    For the following reasons, SOCAN submits that the above proposal is fair and equitable, especially for the purposes of an interim tariff:

a.    The 6.8% rate for music videos reflects the rate approved by the Board for Tariff 22.A in the case of on-demand streams of musical works, which is a very similar use;

b.    The 1.9% rate is consistent with the rate for similar audiovisual content in the case of Proposed Tariff 22.D, discussed above.

c.    Generally, the rates and tariff structure reflect the principles adopted by the Board in its certification of Approved Tariffs 22.B-G.

d.    The revenue base captures only a part of “all Internet related revenues” (i.e., advertising revenues) and the tariff is therefore conservative.

e.    The revenue base is limited to revenues generated by advertisements associated with material containing SOCAN music and there is thus no need to calculate the ratio of audio page impressions to all page impressions.

48.    SOCAN proposes these interim tariffs with the benefit of the Board’s decisions and deliberations during past hearings and general publicly available information concerning Tariff 22.D/G sites and services. However, SOCAN is not yet privy to the specific business methods, advertising structures, revenue streams, costs and other relevant information of the proposed licensees under Tariffs 22.D and 22.G.

49.    Accordingly, SOCAN’s proposals for these interim tariffs should not be deemed as an admission by SOCAN that the proposed rates and tariff structures are appropriate for the final determination of these tariffs, without the benefit of a detailed consideration of those businesses before the Board at the June 2012 hearings. Instead, SOCAN considers these proposals as a starting point in the process leading to the determination of final tariffs.

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