C.D. Howe: Copyright Board undercompensating artists and depriving rights holders of royalties

Shortly after the Copyright Board certified Tariff 8 setting royalty rates for webcasting services in Canada, 70 music organizations publicly denounced it. They called it “a serious setback for the music community in Canada” and “for artists and the music companies who invest in their careers”. A core criticism was the Board’s refusal to use freely negotiated market-based agreements as the proxy to set the rates and to certify the tariff at 10% of the rates that the same services pay in the U.S.

Yesterday, the C.D. Howe Institute released a report, The Value of Copyrights in Recorded Music: Terrestrial Radio and Beyond. The report, written by Prof. Marcel Boyer, Professor Emeritus of Economics, Université de Montréal, concluded that the value of recorded music is about 2.5 times greater than the level of copyright royalties certified by the Copyright Board. He estimates that in 2012, this would have meant that royalty payments should have been about $440 million compared to the estimated $178 million.

His main finding are:

  • The approach followed by the Copyright Board to determine the competitive value of copyrights in the commercial terrestrial radio industry has deprived rights holders of significant royalty payments.
  • Such undercompensation is carried over to Internet radio webcasting since royalty payments in new broadcasting technologies are based in part on the royalty regimes in terrestrial radio broadcasting.
  • Failing to take into account the major differences between new broadcasting technologies and over-the-air broadcasting is detrimental to rights holders as well as to the Internet radio industry itself.
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