Owners of sound recording copyrights will see an increase in royalties coming from Australia, following a Copyright Tribunal ruling that increased the royalty rates paid by broadcasters by 38%.
However, Australia’s recorded music industry says the increase is just a start, and it would like to see an end to the royalty cap that exists under the country’s copyright law.
The Tribunal’s ruling raises the royalties paid by broadcasters from 0.4% of the broadcast radio industry’s gross revenue to 0.55%. The new rate is retroactive to July 2023.
In 2023, the 0.4% cap yielded around AUD $4 million (USD $2.7 million) in revenue for recorded music rights holders. At the new 0.55% rate, it would have yielded AUD $5.5 million (USD $3.7 million).
Among the tribunal’s reasons for the rate increase was the argument that radio is no longer the driver of music sales that it once was.
“It is clear that promotional value and new music discovery have diminished with the advent of streaming and social media,” stated the tribunal’s ruling, which can be read in full here.
While in the past record companies were willing to accept a discounted rate because of radio’s promotional value, today “there is no longer a direct correlation between radio promotional effect and sales,” the ruling stated.
“Historically, the promotional effect of radio resulted in a direct physical sale; whereas today, whilst a listener may subsequently stream a song that they have heard on radio, this will only lead to an increase in total collective revenue for rights holders… in very limited circumstances.”
In assessing the rate, the Tribunal found that Australia’s rates were at the lower end compared to other countries. As countries where rates are lower, the Tribunal singled out Japan, as well as the US – where the royalty rate is effectively zero. In the US, terrestrial broadcasters pay publishers and songwriters for the use of songs, but not labels or artists for the use of recordings. (However, an effort currently before the US Congress aims to change that.)
In a response to the ruling issued on Wednesday (January 14), Australia’s recorded music industry group PPCA said the ruling reinforced its concerns about the 1% cap on radio royalty rates under Australian law. It said the Tribunal was unable to make sufficiently useful comparisons with royalty rates in other countries because those other countries don’t have a cap on what broadcasters may pay.
“The Tribunal’s reasoning makes it clear, in no uncertain terms, that the 1% cap was a decisive factor throughout the decision and has constricted Australian artists’ ability to receive sound recording broadcast royalties comparable to other markets,” PPCA Chief Executive Officer Annabelle Herd said.
“While the Tribunal accepted a number of PPCA’s arguments, including that commercial radio’s promotional value has materially declined and that the use of recorded music by the sector has expanded, the existence of the cap necessarily limited how far the rate could move.”
“The 1% cap was a decisive factor throughout the decision and has constricted Australian artists’ ability to receive sound recording broadcast royalties comparable to other markets.”
Annabelle Herd, PPCA
The ruling marks the first time in a quarter century that a new deal has been forged between Australia’s broadcasters and recording companies.
PPCA’s last agreement with Commercial Radio & Audio (CRA), the broadcaster industry group, was inked in 1999 and expired in 2003. In the following years, the royalty deal was extended on a month-to-month basis until 2022, when PPCA notified CRA that it would terminate the agreement as of June 2023.
In the tribunal talks, PPCA had proposed a sliding-scale royalty rate for radio stations based on what share of their content is music. The rate would max out at 1% of gross revenue for radio stations whose content is more than 45% music.
However, the Tribunal rejected that approach, opting instead to maintain the arrangement under which a percentage of the entire broadcast radio industry’s revenue would be paid in royalties to recording rights holders.
In its statement, PPCA said it would continue to push for a removal of the 1% cap.Music Business Worldwide
