The copyright cops

When it comes to the prices they pay for copyrighted music, Australian consumers are being stung everywhere from the gym to the pub, writes Ben Eltham

15 July 2010



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Photo: Gabriel de Urioste/ Flickr

WHEN you go to the gym, are you paying to exercise, or to listen to music? The question sounds trivial, but it’s the subject of a multi-million dollar legal case currently wending its way through the Australian courts. It also illuminates the highly charged legal battleground that copyright law has become in Australia, as supposedly non-profit collection agencies sue industry after industry in an effort to increase their royalty fees.

Most of us are unaware of it, but Australian copyright law forbids all sorts of everyday uses of music that we take for granted. If you own a business and you play any sort of copyrighted music to your customers – even a CD in the waiting room – you are probably liable to pay a series of music agencies a royalty. The reason is that Australian copyright law grants a special monopoly to collection agencies when it comes to negotiating royalties on behalf of their members.

In a reflection of the labyrinthine complexity of copyright law, there are many different collection agencies and they collect different royalties for different types of copyright. The Australasian Performing Rights Association represents songwriters, the Copyright Agency Limited represents authors, Viscopy represents visual artists, Screenrights represents copyright holders in the film industry and the Phonographic Performance Company of Australia – the PPCA – represents the copyright holders of music recordings, generally large record labels.

Sound confusing? That’s because it is. Copyright law has evolved largely as a response by governments to the demands of powerful media and content industries. As new forms of recorded media have been invented, legislators have created new spheres of copyright to fence off that intellectual property from perceived threats to the earnings of artists and corporations.

The operations of Australia’s copyright collectors used to be obscure. That’s changed in the last decade, as the PPCA in particular has embarked on an ambitious and highly successful round of lawsuits. In 2007, it successfully sued the nightclub industry in the Copyright Tribunal, winning a 1500 per cent increase in royalties. In that case, the Tribunal made a controversial ruling based on comparing the bar and entry prices of public bars that don’t play music against nightclubs that do – ignoring the many other permutations of the live entertainment industry. Bars with free entry and DJs were not considered; neither were venues that played recorded music between bands. The result was a decision that many in the industry felt over-priced the contribution of copyrighted music to the revenues of licensed establishments. A decision to base fees on venue capacity rather than attendance figures was felt to be particularly unfair.

Buoyed by the windfall, the PPCA then went after the gymnasium and exercise industry, arguing gyms were also not paying enough for the use of copyrighted music played while their patrons exercised. The PPCA won that case too. In a decision handed down in May, the Copyright Tribunal ruled that gyms and fitness centres will have to pay $15 for each class, or $1 per attendee of each class, for the use of the music, up from around $1 a class previously, with a cap of $2654 a year. Representatives of the industry are now appealing that decision.

The litigious behaviour of the PPCA highlights some of the thorny public policy issues raised by copyright law in the twenty-first century. Who should set the prices for copyrighted music in Australia, for instance? Most economists would say “the market.” But in Australia, these decisions are in effect being made by a court, in a process closer to early twentieth-century wage- and price-fixing than the kind of open and free market process most Australian consumers have come to expect.

Some academics and copyright activists would go much further and question the very nature of copyright itself. In an age when music is freely and easily downloadable as a digital MP3, does it make any sense to charge royalties for the property embodied in the “mechanical” embodiment of a musical recording?

And then there are the collection agencies themselves, whose governance and operations are increasingly at odds with their nominally non-profit constitutions. The PPCA, for instance, is one of the smaller of Australia’s copyright collection bodies, but certainly one of the most aggressive litigators. Last year, it spent nearly $4 million of its $25 million in royalty revenues on legal fees. Sixteen million dollars was distributed to members, chiefly the big three major labels – all of whom have representatives on its board.

In fact, as a glance at the composition of the PPCA’s board underlines, the agency is run largely by and for the record industry. The board is stacked with record industry executives such as Warner’s Ed St John, Sony’s Denis Handlin and Universal’s George Ash, along with former Go-Betweens drummer Lindy Morrison and prominent artist manager Bill Cullen. Representing around 75 per cent of the recorded music industry by sales, the PPCA is effectively a legalised cartel. (Like APRA, it even has a special dispensation from the Australian Competition and Consumer Commission to operate as a monopolistic collection agency.)

The decision is certainly another in a series of legal wins for the big labels, which have run into serious trouble in the past decade owing to high debt loads, falling CD sales, rampant downloading and a shift in industry revenues towards touring and merchandise. But whether it makes for a sensible long-term business strategy is very much an open question.

As Fitness Australia chief executive Lauretta Stace told Fairfax’s Bellinda Kontominas, record companies have “shot themselves in the foot” by forcing gym and other businesses to royalty-free sources of music. You can see the trend reflected in some of the advertising links around the article on the smh.com.au website – for instance this link to The Groove Gallery, one of the many licence-free music services now proliferating in the wake of these decisions. “Want to play top quality music tracks in your place of business, but don’t want to pay for expensive copyright and licensing fees?” Groove Gallery’s website asks.

Perhaps most importantly, the case also highlights the increasingly skewed nature of copyright law in Australia, which is now tilted decisively towards copyright holders, including famous artists and big publishers, and away from rights users like libraries, schools and gyms. After all, there is one important interest group that is almost never consulted in decisions of the Copyright Tribunal: ordinary citizens like you and me. •

Ben Eltham is a writer, journalist and creative producer.

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8 Comments

  1. Mary Anne Reid added this comment on 16 July 2010 | Permalink

    As big fans of Inside Story, we were disappointed to read the article “Copyright Cops”. Unlike the usual reflective and well-informed pieces featured in Inside Story, “Copyright Cops” takes a small pinch of information and whips it up with liberal doses of innuendo and emotive posturing.

    We are told conspiratorially: “Copyright law has evolved largely as a response by governments to the demands of powerful media and content industries”. We are also told – again without analysis or substantiation – that copyright law in Australia is now, “tilted decisively towards copyright holders, including famous artists and big publishers, and away from rights users like libraries, schools and gyms”. Should we readers deduce that the moral of this tale is, ‘big is bad and small is good’?

    Regardless of what you think about the Copyright Tribunal’s decision in the PPCA/ Fitness First case (there are many and different perspectives on both sides), if you are going to use it as a springboard to launch an attack on collecting societies, then find out a little more about how collecting societies work (e.g. regular reporting to the ACCC) and let this produce a more enlightening story about the public benefits sought in Australia by allowing collecting societies their special operating privileges.

    In relation to the case itself, if ‘big is bad and small is good’ then perhaps we should consider that Fitness First generated revenues of $327.6 million in 2008-2009, in a fitness industry that turned over $2.5 billion in revenue in the same year. The average creative income of a composer in Australia currently stands at about $12,000 per annum. Furthermore, because it would be logistically impossible for individual composers to collect payments from users, their incomes would be much lower without collecting societies to do so on their behalf.

    Copyright ascribes a value to culture and gives those who create cultural works the right to be rewarded for their creative effort. The Universal Declaration of Human Rights enshrines both the rights of creators to such a reward and the rights of users to access cultural works. It is true that copyright law is complex area and also true that it has become more complex in the digital age. But please Inside Story, can we have a little more rigour in future articles on this subject?

    Mary Anne Reid
    Chief Executive
    Australian Copyright Council

  2. Eris Harrison AE added this comment on 19 July 2010 | Permalink

    Thanks to Mary Anne Reid for adding some balance to this story. Disappointingly fiery attack by Ben Eltham on those who are trying to ensure artists – big and small – get some small recognition for the use of their work. Where else but the Courts can they go? An appeal to gyms is not likely to be effective, as gyms are keen to make money too. Music, carefully chosen, certainly adds a vital element to exercise and fitness classes. It doesn’t come out of the ether.

  3. lindy morrison added this comment on 21 July 2010 | Permalink

    Ben Eltham is correct there has been enormous backlash by some academics and organizations like Creative Commons and Electronic Frontiers Foundation with the extension of the copyright term and stronger laws for combating piracy. They, like Ben Eltham, consider the balance shifted in favour of the copyright owner. Some believe that with strengthened rights, the public is denied exposure to creative works with a loss of learning and restrictions on cultural growth. The risk most consistently cited is that of limiting new technologies before their full uses are garnered.

    However the question that Ben cannot answer, is how do creators make a living in the neo Marxist world of free music they propose? It is necessary to introduce new laws with new inventions to protect the rights of owners and to pay remuneration for compensation for new uses. This is balanced with the need for users to have access to copyright protected material. From the infringing sale of sheet music by hawkers to the manufacture of the pianola, the first mechanical devise capable of reproducing musical notes in perforated rolls, the broadcast of music on radio and the use of photocopiers in libraries, copyright owner had to fight in the courts to receive compensation for the use of their work. Parliaments have allowed continued exploitation of technologies, with remuneration to copyright owners, through collective rights management and compulsory license fees, in other words, exchanging compensation for control. For instance a musical work can be reproduced as a cover by anyone as long as a statutory or “mechanical” compulsory royalty is paid to the owner. Manufacturers of phonographs lost sales dramatically with development of radio. Subsequently, rights for the owners of musical works were extended to cover broadcasts of musical works to compensate owners for this loss of income.

    The law doesn’t agree with this idealogy of ‘free music’ with good cause. Copyright law developed because creators require incentives to produce works. Copyright works do not have a perpetual common law right. They return to the public domain after a period in which the creator and their heirs can benefit from the time, skill and money needed to develop works.

    Copyright owners need to have collective rights management because the system would be unworkable without it. Would I expect a call from RN every time they wish to play The Go Between’s version of Streets of Your Town to negotiate a price for the use of the soundrecording because I co-own the track with the other recording artists? Would Robert Forster and the heirs of Grant McLennan have to negotiate the price with the venue owner for the use of the same song every time the sampled version found in Milky’s Just the Way You Are is played in nightclubs.

    I know what will come next, someone will write in to this site, that an artist can derive income from complements such as merchandize and touring. Artist’s manufactured product is music and they should make their living from that product and not selling t shirts and remaining on hectic tour schedules across numerous territories so that peer to peer file sharers and users can get their music for free or practically nothing. Consumers would download t-shirts for free if they could.

  4. Ben Eltham added this comment on 22 July 2010 | Permalink

    There’s been a number of comments posted here, and I’ve been busy with other commitments, so I do apologise for not responding earlier.

    I am going to address the three comments sequentially: let me begin by responding to Mary Anne Reid.

    Mary Anne – I’ll deal with your points in order.

    Firstly, you write:

    “We are told conspiratorially: ‘Copyright law has evolved largely as a response by governments to the demands of powerful media and content industries’. We are also told – again without analysis or substantiation – that copyright law in Australia is now, ‘tilted decisively towards copyright holders, including famous artists and big publishers, and away from rights users like libraries, schools and gyms’. Should we readers deduce that the moral of this tale is, ‘big is bad and small is good’?”

    I’ll leave the analysis of my writing style to you, but in terms of evidence for the evolution of copyright law, I think I need only refer you to the harmonisation of Australian copyright terms to 70 years in line with the United States’ Sony Bono Copyright Term Extension Act of 1998, as a part of the 2005 US-Australian Free Trade Agreement. Since the US copyright term extension was openly and overtly campaigned for by content industry organisations such as the MPAA and RIAA, I think we can “deduce” this as a response by government to the demands of powerful media and content industries.

    Want more substance? Let’s examine the growth of copyright law from its modest beginnings in 1710 in England to the sophisticated suite of special industry protections now in existence in the UK, US, and Australia. You don’t have to be Lawrence Lessig to spot a consistent long-term trend in favour of more restrictive copyright legislation, and more expensive licenses for rights-users.

    Mary Anne, I’m am aware of how collecting agencies work, and this article was about the actions of one such agency, the PPCA. I’ll address Lindy’s comments in a later post, but “regular reporting” to the ACCC does not address my point about the special perks enjoyed by collection agencies in terms of certain exemptions from Australian competition law.

    And then you make a particularly flimsy argument about the profits of Fitness First. Fitness First may be profitable – but so what? Some gyms are, some gyms aren’t – that’s not really the point, is it? The issue about the creeping scope of copyright alw and increasingly litigious nature of collection agencies. Surely you don’t seriously take issue with the size or level of earnings of for-profit businesses … after all, are not multinational corporations such as Universal, Sony and EMI – who enjoy representation on the PPCA Board – also for-profit businesses? But you get around that inconvenient point by instead comparing the fitness industry to impoverished composers … that seems to me like a bit of a “big is bad, small is good” argument …

    Finally, let me just point out that if you really have an issue with my lack of “rigour”, then why not produce some yourself? For instance, by not misrepresenting my arguments?

    Nowhere in my article did I argue that artists do not deserve payment for the use of their copyrights, as you suggest. Nor did I argue that “big is bad, small is good”, to use the ridiculous straw man of your misrepresentation. Finally, I too support the UN Declaration of Human Rights.

    C’mon Mary Anne. You really can do better. How about starting by at least acknowledging the concerns of those of us who think that copyright law has indeed become unbalanced in recent years? Copyright is indeed a complex area, but it deserves well-informed and transparent advocates. I hope you can rise to the challenge.

  5. Ben Eltham added this comment on 22 July 2010 | Permalink

    Lindy:

    Thanks for commenting on this piece, and for continuing our ongoing debate on this issue.

    You are correct to point out that collection agencies play an important role in representing the legal and financial interests of composers and song-writers, and I’m certainly not arguing that this role in invalid.

    Nor do I take issue with the principle of collective bargaining, as your example of negotiating royalties for Streets of our Town explains.

    And nor do I subscribe to “neo-Marxist” belief that music should be free – unless of course an artist wants it to be, for the very good reason that obscurity is a bigger threat to her career than illegal downloading.

    But I do take issue with some of the industry protections enjoyed by collection agencies, as well as many of their policies in recent years – for example, their open hostility to movements such as Creative Commons, which seek to unbundle the various rights enjoyed by composers to better facilitate the free exchange of copyrighted, but non-commercial, music and other forms of creativity.

    I think it is simply absurd that I cannot remain a member of a collection agency such as APRA and release my music with a Creative Commons license – for the reason that by joining APRA, I have in fact legally assigned my rights to the collection agency on my behalf!

    And let’s talk about the copyright term itself – 70 years after the death of the author. I’m all for the estates of famous artists being able to enjoy the fruits of their relative’s labour, but when a copyright lasts for more than a hundred years after the creation of the original work, I think this is a poor bargain for society and an irrelevant benefit for the artist herself.

    Let’s be realistic here and agree that he debates about licensing in nightclubs and gyms are not really about the rights or starving artists, but the real world politics of cold hard cash. If collection agencies really had the interests of ordinary individual artists at heart, they would be doing much more to reduce their own administration fees, which can eat up millions of dollars of royalty fees before they are ever distributed to artists.

  6. Dann added this comment on 14 August 2010 | Permalink

    At some point, people are going to get fed up with this beaurocratic garbage and start looking for music with licenses that respect their ability to use it in whichever way they want. At that point, all those collection agencies and copyright leeches will find their income drying up as there is less dependency on them. Then we’ll let the free market decide how the artists get paid, instead of large monopolies that fritter it away on million-dollar legal fees.

    I would love to produce music in my spare time, and heck, give it away for free. Same with my source code, etc.
    As long as I have enough to live semi-comfortably, hoarding my “intellectual property” will be doing no one any good.

  7. PrometheeFeu added this comment on 15 August 2010 | Permalink

    @lindy morrison:

    I find your remarks to be interesting insofar as they demonstrate what seems to be a lack of understanding:

    “However the question that Ben cannot answer, is how do creators make a living in the neo Marxist world of free music they propose?”

    First, let’s set something straight: copyright is not a property right like your right over your house, your car or your lunch. It is a government-granted monopoly over a certain activity. In effect, it acts as a government subsidy to music creators. If there is anything close to Marxism, it is in that subsidy and artificial monopoly. It is disingenuous to claim that those in favor of market pricing for music are anything-Marxist.

    On your actual question, there is actually an answer: Concerts, merchandising, commissions for advertisements, endorsements, official fan-club memberships and more generally selling things around the music. Yes, it is true that collection societies and recording studios would not make much money under such a system. It is also true that mega-stars might not make as much money. But that is not the issue. The issue is: how can creators be remunerated sufficiently that they keep on creating without copyright? You can see the answer above.

    “I know what will come next, someone will write in to this site, that an artist can derive income from complements such as merchandize and touring. Artist’s manufactured product is music and they should make their living from that product and not selling t shirts and remaining on hectic tour schedules across numerous territories so that peer to peer file sharers and users can get their music for free or practically nothing.”

    Why? I am a software engineer. As such, my “manufactured product” is well-written software. Yet, in order to make money, I have to spend countless hours in meetings, writing documentation for my software and countless other things other than making my “manufactured product.” Why? Because if I tell my boss that I won’t do documentation or attend meetings, I will not have a job. If I don’t market myself when I freelance, I won’t get contracts. Similarly, artists have to do more than just make music if they want to make a living. Just like everyone else. I don’t see why artists should get a special pass from the government to dodge the unpleasant parts of their job.

    @Mary Anne Reid:

    “Copyright ascribes a value to culture and gives those who create cultural works the right to be rewarded for their creative effort.”

    That is a common misconception. Value in culture does not depend on copyright at all. This can be shown easily by examining the Rennaissance in Europe. It created some of the works of art which are today some of the most valued both monetarily and culturally. Yet, they were developed without copyright and their value persists without any copyright at all.

  8. Tom Croner added this comment on 16 August 2010 | Permalink

    I think the core of the problem is that much of the music industry always draws the generalistic conclusion that everyone wants free music. Wile a certain percentage of people do, I’m quite sure this is in the minority, thus the emphasis should be on how to obtain these royalty payments in a more efficient fassion.

    Set “lump sum” license fees turns many businesses right off being involved with copyrighted material, because it is so expensive to make these compulsary “up front” payments. Businesses go for copyright free music, or individuals wanting to use copyrighted music for a venture may just persue another avenue. Thus this equals an overall loss of potential income for artists.

    Under a percentage system, entities would pay license / copyright fees as a percentage of an income / revenue. If an operation only makes $200 a year, then there is no point charging it $7,000 a year, because in plain english the entity does not have the cash.

    In the percentage system, the entity would pay two lots of ten percent to APRA and PPCA, meaning two lots of $20. With the entity being relieved of the huge financial outlay, the entity has a chance to grow. Down a few years, it may grow to having a revenue base of $100,000. APRA and PPCA would then get $10,000 each.

    In this case, the entity has had legal oxygen to breathe, and was able to grow without the stress of being sued by the record labels or collection societies. End result, an extra $10,000 for both APRA and PPCA. For as long as these societies and labels persue the “up front” payment model, the money noted in the above model is cash they’ll never get.

    Like anything else, the music industry is not excluded from the reality of change, which in a nature analogy goes like this. Flexibility and adaption are like the juices that keeps a leaf moistened and nurrished, while a total unwilling to change is denying the music industry of these healthy juices. The industry will dry out like a leaf, becoming brittle, weak, making the adaption to any change that much more painful. Their uncompromising push for instant financial grattification, is the very poison that’s keeping the industry from working with a more rational mind-set.

2 Trackbacks

  1. [...] ‘The Copyright Cops‘ by Ben Eltham documents some of the conflict between copyright collecting agencies and the [...]

  2. [...] people are seeing this. Glyn Moody points us to a recent article by Ben Eltham at Inside Story that highlights how collection societies in Australia are out of control. The whole article is worth reading, but here are a few snippets. First, it notes how these groups [...]

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