Music Licensing Proposed Tariff Update - Final Case is Filed by NRCC
by David Hardy
The Neighbouring Rights Collective of Canada (NRCC) has filed its case with the Copyright Board of Canada that outlines the argument behind its request for a new music tariff for the Canadian fitness industry.
The proposed tariff has been amended to $18.59 per member per year (from 5% of gross revenue and $3 per group fitness class).
Here is a summary update of the latest information:
• The NRCC contends that fitness clubs put considerable value on the use of music and that our members are prepared to pay a significant premium to have music in their clubs.
• Section 19(1) of the Copyright Act of Canada established the right of performers to be paid equitable remuneration for the public performance of their recordings.
• Only 17 of the 43 financially-contributing clubs and 5,000 total Canadian fitness clubs actually provided answers to the NRCC questions. The ability to address certain issues may now be curtailed.
The NRCC appears to have expended considerable resources to hire expert witness who provided the following opinions:
• Recorded music used by fitness clubs drives revenue and profit.
• If fitness clubs were to stop using music in classes and in their clubs, membership prices would have to be lowered by 32%.
• Using an extremely conservative estimate for the price elasticity of demand, the equitable tariff for the use of music in our clubs is 5.33% of gross revenue.
The NRCC also argued that:
• The Society of Composers, Authors and Music Publishers of Canada (SOCAN) tariffs should not be used as a benchmark. They are not based on any economic foundation and are based on historic arbitrary decisions that have been marginalized through neglect.
• In 2006, SOCAN collected only $692,848 from 3,634 fitness club licensees under tariff 19 (a paltry $190.66 per licensee) compared to $650.99 per licensee for clubs/bars and $1,498.77 per licensee for adult entertainment licensees.
The NRCC plans to present expert testimony to demonstrate how it arrived at the proposal’s current calculations.
The testimony will reinforce the following information:
• An equitable rate for all right holders (NRCC and SOCAN) would be 16% of each fitness club’s total revenues.
• On a discounted basis to reflect the NRCC’s limited repertoire, the NRCC should receive 1.41% to 4.2% of gross revenue (varying by expert witness).
• Using gross revenue in the calculation will cause a significant administrative challenge. As such, a tariff rate of $1.55 per member per month ($18.59/member/year) is requested to be paid monthly.
• For a small club with 1,000 members, this rate equates to over $18,500 per year. A larger club with 4,000 members would pay almost $75,000 per year.
There is however a bigger issue to consider.
If the NRCC’s proposed tariff is approved as is, SOCAN will likely raise its tariff rates as well. Since both organizations deal with similar legal issues regarding music tariffs, a decision in favour of the NRCC would provide the legal precedent for SOCAN to increase its music tariff fees up to an equivalent of the NRCC fee.
Fitness Industry Canada (FIC) has raised over $300,000 to fight this proposed tariff. We expect to need another $200,000 to hire the necessary expert witnesses and to prepare for the two- to three-week hearing (similar to a trial) in Ottawa starting in late April 2010.
We have sufficient funds to hire the expert witnesses immediately (estimated at $100,000+), but we do not have the funds to pay for the lawyers to attend the hearings or file our case, which is due April 2.
You can contribute a little today to fight to reduce this attack on our industry or pay NRCC and SOCAN many times more each year, retroactive to January 2008.
To make a donation or provide suggestions or assistance in any way, contact FIC Association Manager Brian Gilbank at 1-866-402-3422 ext. 2 or bgilbank@ficdn.ca.
Thank you for your continued support.
David Hardy is president of Fitness Industry Council of Canada. Contact him at 780-953-4273 or dhardy@ficdn.ca.
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