The National Association of Broadcasters (NAB) is appealing a decision by the commissioner of copyright at the Copyright Tribunal over the issue of how much should be paid in royalties to artists and record companies for radio ‘needletime’.
The judgment in its current form, says executive director of the NAB, Johann Koster, “could have a serious financial impact on the radio industry, especially new and/or struggling radio stations”.
Needletime, according to the NAB definition, is payable by a broadcaster to the owner of copyright in any sound recording broadcast by the broadcaster. The owner of the copyright in the sound recording (i.e. the record label) must share the royalty with the performer(s) featured in the particular sound recording.
The South African Performance Rights Association (Sampra) and the NAB cannot agree on the amount of royalties that should be paid. The NAB believes Sampra is demanding an ‘excessive’ amount. Both Sampra and the NAB put forward formulas they thought should be used to determine the amount to the Copyright Tribunal for a decision.
The commissioner chose neither. “A rate of 7% net income, representing in approximate terms, twice the rate applicable using the South African Music Rights Organisation (Samro) formula, appears to be reasonable. This assessment is made on the limited information available, but will result in an equitable reward to the referrer’s (Sampra) clients, while not imposing an unaffordable burden on the broadcasters,” the commissioner wrote in the judgment.
The decision, in a nutshell, is that if you are a music station with average music usage of 70%, then you must pay 5% of ad revenue calculated at 85% of rate card rate.
“This is a crazy judgment that seems to have ignored the radio broadcasting industry. It applies across the board, even to SABC. Potentially, there are huge ramifications for radio and massive amount of this royalty will flow to foreign music companies,” says an industry insider who wanted to stay anonymous.
“The rates will basically have to be calculated on a monthly basis because there are so many variables in the formula – for example, music usage and revenue changes on a daily basis,” says Koster. “It will affect all copyright holders and performers/artist in music recordings that are administered by Sampra.”
Koster believes the commissioner basically accepted the Sampra formula “almost in its entirety” and simply changed Sampra’s 10% base to 7%. (Artists and record companies would get 3.5% each.) “We’re very disappointed. He disregarded the broadcasters’ evidence almost completely. Sampra’s 10% formula is out of whack with trends and standards internationally.”
Koster says the figure is “right at the top end of the rates set internationally”. The NAB holds the view that a local solution should be found, which draws on the best of international practice and has regard to the unique circumstances of South Africa and the rationale for the government’s decision to re-introduce needletime royalties, which are intended, primarily, to benefit performers.
The situation is complicated further by the fact that the commissioner did not rule from when the levy should be applicable, and if it would be retrospective.
“We asked the judge to rule on the date from when this levy would be applicable but he refused. This was despite us having obtained a High Court ruling mandating him to rule on the date. So, for now it is applicable from 30 May 2012,” Koster says.
Neither party is happy with the outcome. “We lodged our application for leave to appeal on 19 June. Sampra is opposing the application on condition that should we be granted leave to appeal, they would also appeal certain elements of the ruling,” Koster says.
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