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Performance Rights in Sound Recordings: The Canadian Experience is Instructive
Myth: Canada has a radio broadcasting industry that is similar to the United States.
Fact: The commercial radio broadcasting model adopted by the United States is vastly different from Canada's where public broadcasting, which is heavily subsidized, is more dominant; even the commercial radio industry in Canada is heavily regulated with respect to content and advertising and is viewed as a "public service essential to the maintenance and enhancement of national identity and cultural sovereignty." As a result, the commercial radio industry in Canada is neither as strong nor as diverse and the U.S. radio industry, and its rules and regulations should not be a model for our system.
Myth: The Canadian performance right in sound recordings adopted in 1997 protected small radio stations and provides a good model for the United States to follow.
Fact: The short history of the performance tax in Canada shows precisely why the United States SHOULD NOT adopt the Canadian model. When the performance right was passed in 1997, an estimated 65 percent of Canadian radio stations fell within the partial exemption from the tariff adopted by the legislature. Only five years later - at the very first rate review - the Canadian Copyright Board, at the urging of the record industry, ignored the legislatively- adopted preferential rate for small stations. In addition, it applied what was the initial "large station" rate to the first $1.25 million in revenue for all radio stations while increasing the "large station" tariff on revenues of more than $1.25 million by nearly 50 percent, percent, to 2.1 percent of revenues.
That decision spurred a court challenge by broadcasters and a final resolution is still unclear. Meanwhile, a new tariff has been filed by the Canadian Recording Industry with even greater proposed rate increases - a tariff of 2 percent to 6 percent of station advertising revenues.
Myth: Even if the Canadian model does not protect small radio stations, Congress can pass a performance tax that does not impact small, minority and niche broadcasters.
Fact: Similar to Canada, Congress only sets the initial standard for performance taxes. The implementation of the performance tax and the setting of future rates would be set by the Copyright Board, not Congress. Even if Congress adopted preferential rates for small stations, the Copyright Board provides a sympathetic venue for the recording industry to continuously petition for higher copyright tariffs. The large digital streaming performance fee hike approved by the Copyright Board this year is a current example of a very large and disruptive rate hike, which threatens the future of many digitally-streamed radio stations, occurring in the U.S.
Myth: American artists are being denied compensation by other countries that have performance tariffs, like Canada and European Union countries, because the United States has not imposed a similar performance tax.
Fact: There is no automatic extension of reciprocity between the United States and other countries with performance royalties. In fact, it should be expected that countries that play large amounts of U.S.-origin music would resist diverting royalty money to the U.S. by using various loopholes in the Rome Convention and other international treaties.
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