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What are Radio Caps?
The Copyright Act 1968 (Cth) imposes limitations upon the amount that radio broadcasters are required to pay for the broadcast of sound recordings on their stations. This statutory cap is often referred to as the “1% cap” or the “radio caps”.
The 1% cap was first imposed in 1969. Section 152(8) of the Copyright Act 1968 (Cth) limits the amount that Australian radio broadcasters can be required to pay to artists and labels to no more than 1% of the station’s gross annual revenue.
Section 152(11) of the Copyright Act 1968 (Cth) provides that the Australian Broadcasting Corporation (the ABC) cannot be required to pay more than half a cent per head of population (i.e. $0.005 per head) for the broadcast of sound recordings across its radio network. Since the imposition of the radio caps in 1969, the amount payable by the ABC has not been adjusted to reflect any movements in the cost of living or the expansion of the ABC radio networks (e.g. the introduction of the Triple J network and the roll out of the ABC digital radio network).
These radio caps are well below the rates applicable in other similar territories around the world (including the UK and NZ) and unfairly limit the amounts paid to artists by radio broadcasters. Further facts about these caps and its effect and key arguments about why the caps should be removed are set out below.
The caps have been in place for fifty years. PPCA believes that the caps undervalue the use of sound recordings so that artists are effectively subsidising the provision of content to the highly profitable commercial radio sector.
In 2011, PPCA challenged the Constitutional validity of the 1% cap in the High Court of Australia. The Australian Constitution requires that any law effecting the acquisition of property, such as a licence of copyright – must be on just terms. PPCA initiated the High Court challenge on the basis that the 1% cap failed to meet the “just terms” test. The High Court left the 1% cap in place but it ruled on a narrow constitutional point, and did not address the issue of whether the 1% cap is fair or just.
Let's Remove the Radio Caps
The Federal Government has previously recommended the repeal of the 1% cap. In 2006, the then Attorney-General, the Hon Philip Ruddock MP, stated that repeal of the 1% cap had been approved as part of 2006 legislation. Unfortunately the legislation did not transpire. The caps have also been examined by various independent reviews over the years, in particular:
- Review of Australian Copyright Collecting Societies: A Report to the Minister for Communications and the Arts and the Minister for Justice, Department of Communications and the Arts, July 1995 (the Simpson Review)
- Review of intellectual property legislation under the Competition Principles Agreement: Final report to the Minister for Industry, Science and Resources and Attorney-General, IP Australia, September 2000 (the Ergas Review)
- Australian Law Reform Commission, Copyright and the Digital Economy: Final Report, November 2013 (the ALRC Review)
In each of these reviews, the commonly held view was the 1% cap should be repealed. In the most recent inquiry conducted by the Federal Government - the Inquiry into the Australian music industry, House of Representatives Standing Committee on Communications and the Arts, March 2019 (the House of Representatives Review), it was noted at page 18 that:
“The findings of the Simpson Review, Ergas Review, and Australian Law Reform Commission are compelling. The committee sees no reason why copyright owners of sound recordings should be limited in their ability to negotiate license fees when the copyright owners for the composition and lyrics of the same music are not”.
Recommendation 1 of the House of Representatives Review was that the Australian Government should amend s. 152(8) of the Copyright Act 1968 to remove the 1% cap on licence fees for sound recordings.
However, despite a commonly held view across a number of inquiries and reviews that the caps should in fact be repealed, no action as of yet has taken place, leaving thousands of Australian artists and record labels under-compensated for the use of their sound recordings.
PPCA will continue to focus its efforts on lobbying politicians to change the legislation. If you are passionate about this issue and would like to help – there are ways that you can do this.
Some Facts About the Caps
In Australia, rates paid by users of copyright material are set by agreement with copyright owners, or the Copyright Tribunal if the parties cannot agree, on a fair market basis without any statutory caps. The sole exception is the broadcast licence fee paid by radio stationsfor use of sound recordings. Section 152 of the Copyright Act provides that the Copyright Tribunal may not fix an annual licence fee (i) in excess of 1% of gross revenue of a radio broadcaster for that broadcaster’s use of published sound recordings, or (ii) in excess of half a cent (ie $0.005) per head of population in respect of ABC radio broadcasts.
The present rate of the commercial broadcast licence fee is about 0.4%of gross revenue of the commercial radio industry. This has been the product of industry negotiation over the last 25 years and has been wholly framed by the existence of the legislative price cap. This means that commercial radio across Australia pays approximately $4 million/year for its use of sound recordings on over 260 commercial radio stations. For many stations, the sound recordings drive their businesses. The current industry agreement has been extended on an interim basis several times by PPCA to allow the Government to consider removal of the cap.
Even if we assume that the cap in place for the ABC was appropriate in 1969, by 2022 cost of living increases alone (CPI) would have increased the half cent rate to around 7.26 cents per person – more than a fourteen fold increase further demonstrating the extent to which recording artists continue to subsidise broadcasters. (It is also important to note that PPCA only receives around $125,000 per year from ABC radio to distribute to its registered artists and record labels, despite the extensive use of sound recordings by the network).
PPCA only receives about one tenth of the radio broadcast revenue paid to APRA for use of the musical work, which is not constrained by any cap. The issue affects artists and record labels across Australia.
If the commercial broadcasting industry is so fragile that it needs price protection on its inputs why are the creators of recordings singled out to provide such a subsidy? Why aren’t other suppliers to the industry (eg suppliers of power or premises, or the workers providing their labour) also forced to supply their products at less than market rates?
Our efforts to remove the price cap rest on the following key arguments:
Unique in Australian copyright:
There is no other copyright in Australia, relating to music or other copyright material, that is the subject of a statutory price cap.
Across countries like the UK, Japan, New Zealand, Canada and France, a fair market rate is negotiated between the parties or determined by an independent specialist copyright body. Actual rates around the world vary from about 1.5% to 4%.
No economic justification:
Australian artists should be fairly rewarded for their contribution to commercial radio profitability, which has continued to rise steeply on an annual basis.
When introduced in 1969, the cap was justified on the basis of the “special circumstances” then existing in relation to commercial radio. Whatever these circumstances were 50 years ago no longer exist – commercial radio is a highly profitable industry with annual revenues in excess of $1 billion (the FM sector, as key beneficiary of the price cap, represents over 75% of the industry’s total revenue and around 85% of its profit).
In PPCA’s view, the effect of the cap is to impose a substantial penalty on record labels and Australian recording artists by effectively requiring them to provide a significant annual subsidy to the commercial radio industry, particularly the FM sector.
Competitive impact on AM radio
Within the commercial radio industry, additional distortions are created with high music-use (typically FM) stations being subsidised in relation to one of their key input costs (i.e. sound recordings) whereas talk-format (typically AM) stations pay market rates for their key input costs.
In contrast, businesses that solely stream sound recordings via the internet are not subject to any such limitation on the licence fees that they might be required to pay. The holders of radio broadcasting licences therefore enjoy an anomalous and privileged position over other users of internet transmissions. Providing favoured terms to a sub-category of participants (i.e. those who also engage in terrestrial broadcasting) disadvantages new services entering the market and stifles competition. This may impede the development of innovative services.
What We Hope to Achieve
Should PPCA be successful in getting these unfair provisions set aside it will simply mean that the parties can then negotiate appropriate licence fees without the constraint of these artificial restrictions. If the parties are unable to agree the specialist independent body specifically established for this purpose (ie the Copyright Tribunal) will be able to make a determination, also unconstrained by the caps.
We feel there are two logical scenarios:
- If the licence fees are currently at a fair market rate, then the cap should be removed because it is irrelevant and unnecessary.
- If licence fees are below a fair market rate then the cap should be removed because it creates an unjustified subsidy by one industry to another.
How You Can Help
If you are passionate about music and feel that recording artists have been getting a rough deal in terms of the 1% cap on radio royalties for too long, then tell your friends, other musicians, next-door neighbours, in fact, tell anyone that will listen…we need your support. We also suggest that, whenever the opportunity arises, you take this up with your local member.
For all of the latest news and updates, check our website regularly, follow us on Facebook and Twitter or read one of the many passionate blogs on this very important issue impacting the future of our industry. Or you can contact us directly to talk about ways that you can help.
Blogs about the Caps
A ‘Fair Go’ for Australian Artists
By Graeme Connors, 17th June 2011
The right to a ‘fair go’ is reportedly what most Australians put at the top of their values list. It is celebrated and appealed to by politicians and commentators as one of our finest collective qualities. In fact a 2006 Morgan Survey showed 91% of Australians believe a ‘fair go’ is the backbone of our society - but is this simply ‘lip service’ - or is it a genuinely held belief?
While you contemplate that question let me put another to you - How many Australian occupations or industries can you identify where the value of an individual’s labour and services or a company’s right to trade their products at market value is restricted by a 42 year old piece of Government legislation placing a ceiling on their earnings?
Let me help you out
The answer is: The Australian Recording Artist and The Australian Recorded Music Industry - particularly in relation to the Broadcast of Copyrighted Australian recordings by Commercial Radio and ABC Radio.
Since 1968 a restrictive cap of 1% of the advertising revenue of commercial radio and half of 1 cent per head of population for ABC radio has been enforced by consecutive Governments. The Attorney-Generals speech during the passage of the 1967 Bill establishing the cap read “These limits have been set to allay fears expressed by both the commercial broadcasting stations and the Australian Broadcasting Commission that the payment of royalties for the broadcasting of records could impose a substantial financial burden on them.” From the very outset the legislation was introduced to benefit radio - against the interests of Artists and Recording Companies.
The current High Court challenge brought by the PPCA against CRA and the ABC - like so many legal battles is being fought on technical rather than ethical issues - discussions centre on ‘acquisition of property’ and ‘just terms’ - never a mention of the real elephant in the room – ‘protection of and unfair advantage to’ a $647million+ per annum Commercial Radio Business against a $384million per annum Recorded Music Industry - for anyone without vested interest in maintaining the status quo the inequity is blindingly obvious.
By the way - so you are aware - due to various discounts the current ‘paid through’ rate by commercial broadcasting stations is more like 0.4% of advertising revenue. Add this to shrinking CD sales globally and unprecedented piracy and you have an Australian Recording Industry well and truly in need of a ‘fair go’.
All sorts of threats have been made by spokespersons for CRA regarding possible ramifications should the cap be lifted - personally I’m at the point of – ‘Don’t pay – Don’t play’. Rather than accept this unjust situation why not withhold the right to broadcast Australian music until equitable terms are reached - ‘let commercial radio and the ABC pump out as much music that is not protected by Australian copyright law as they like until the 91% of Australians who do believe in a ‘fair go’ turn off their radios. As a society we get what we deserve – both with our Governments and our Artistic community.
I don’t believe in handouts - I don’t believe in protection - I do believe that a ‘fair go’ is still at the top of the list of Australian values and in time this issue will be resolved in a mutually beneficial way. What I propose is certainly radical but wouldn’t it be good to see it happen sooner rather than later.
Former PPCA Board member, Australian Singer-Songwriter
Cap and Rough Trade - Australian Recording Artists are the One per Centers of the Music Business.
by Greg Macainsh, 11 May 2011
Imagine if the government passed a law that stated that Australian cinemas were not required to pay more than 1% of their annual box office receipts to the makers of Australian films. I think most people would immediately understand the manifest unfairness of this. Investment in local productions would plummet and even the producers of the most spectacularly successful movies would find their returns to be far below those in other countries.
Not that people would stop writing scripts or making low budget opuses –that’s what the creative psyche is born to do. However the drop in level of excellence and quality that comes from inadequate rewards in return for the risk involved would be obvious. In a free market based economy the inhibition on return and the absence of a level playing field when it comes to negotiating such would be laughable in 21st century Australia.
However the above scenario is not some imaginary hypothesis. Australian recording companies and artists have been living with this draconian inhibition on their creative capital since 1969 in regard to royalties for airplay in this country. Under this, still current law, Australian radio does not have to pay Australian recording artists or their record companies more than 1% of their revenue. The actual figure paid, after discounting, is far less at approximately 0.4%. This is pretty close to world’s worst practice. Songwriters on the other hand don’t have to suffer this indignity when negotiating for their airplay royalties.
Bean counters no doubt salivate at such a one-sided income versus expenses ratio. One of the key ingredients of music radio i.e. Australian recordings, can be obtained at a government regulated, discounted market price – fantastic! A text book buyers’ market. Furthermore it is not as if the creators of Australian music can go anywhere else in their home country to get their works heard on radio at a fair price. The current law covers the whole playing field when it comes to commercial broadcasting and artists and their companies legally cannot withhold their work from broadcast.
Somehow the radio lobby has convinced some politicians that their electorates will be devoid of a local radio station if commercial broadcasters have to pay one cent more for the use of local music on their playlists. For this they should be applauded for achieving what Socrates was executed for: making the weaker argument appear the stronger. All this against a backdrop of continued profit increases for commercial radio. You just know that if Lachlan Murdoch is buying a 50% stake in dmg Radio Australia he’s not backing a sinking ship.
As one former cabinet member confided to me while I was engaged in lobbying in Canberra on the issue: “The music industry has the economically moral high ground on this”. Undoubtedly, but whether any side of politics has the courage and common sense to put principles ahead of petty horse trading of issues and vote to repeal the offending section of the Copyright Act remains to be seen.
I fantasize that one of the independents that currently holds the balance of power at present might refuse to pass any other piece of legislation until section 152(8) was repealed. But then again I’m probably living in the 1970s when conviction and principle were slightly more valued perhaps.
Of course the Australian music business has produced some great successes despite having one hand tied behind it’s back by this inequitable state of affairs. However one wonders just how much more flourishing it could have been if recording companies and artists had been able to invest more in their acts and careers. Undoubtedly there were some great local talents who never made it to Obama’s IPod because the investment returns to justify the R&D just wasn’t there.
I’ve scoured the web looking for a blog where Australian recording artists actually support their right not be able to negotiate freely for the value of their work but haven’t been able to find it. If you do then let me know.
Former PPCA Board member, former APRA Board member and former member of Skyhooks.
“Tell them they’re dreaming!”
by Simon Whipp, 10th May 2011
The rights holders in records (performers and producers) have a right to be compensated fairly for the exploitation of their work.
The caps on compensation imposed forty years ago were probably not fair at the time, but are certainly not fair forty years down the track. The bodies who pay the compensation for the use of the performers and producers rights are not small struggling businesses, they are profitable radio stations and national radio networks who rely on these records for their businesses to work.
Rights holders have sought to focus the attention of Federal Governments of both political persuasions to this issue for the last ten years to no avail.
All we are seeking, as is the case with all other copyright owners such as composers and film producers, is that where no agreement can be reached about the value of the rights, then an appropriate value will be determined independently by the Copyright Tribunal.
It is only fair that the true value of the use of the records by these radio stations is acknowledged in the payments made to performers and producers. Radio stations and networks have a right to be profitable and they are. But these profits should not be at the expense of fair compensation to producers and performers for the use of their work.
In the movie, The Castle, the immortal line “Tell them they’re dreaming!” was used with respect to sellers who sought prices too high for what they were selling. Performers and producers have a dream too. That they can be compensated fairly for their work. Radio stations’ fears of increases not warranted by the value of the rights they use are not justified. In the event that rights holders are unreasonable, radio broadcasters have the protection of the Copyright Tribunal to value the rights fairly.
Former Head of Equity Section and Assistant Federal Secretary,
We Need Change
by Lindy Morrison, 6th May 2011
I have written many pieces over the years about the inequity imposed on musicians by legislation existing in the Copyright Act 1968 which places a cap on fees paid by commercial radio broadcasters for the use of our recordings.
I have lobbied a variety of politicians across all parties in Canberra over many years, as it makes me furious that musicians most of whom earn so little through their business of producing recordings are subsidising radio.
In 2000, there was a Federal review of intellectual property legislation by what is known as the Ergas committee. They recommended the removal of the cap "to achieve competitive neutrality and remove unnecessary impediments to the functioning of markets on a commercial basis." Basically the legislation disrupts the performance of market mechanisms and allows radio to make profits on a false economy. If left to the market to determine, as happens with the value of songs (not subject to the cap), musicians would be paid commensurate with the real value their recordings give to radio.
Radio has many arguments against the removal of the cap and I won’t go into depth about all of these right now. Crying poor when they achieve substantial profits every year wears thin.
Commercial radio has always railed quietly behind the scenes about local content required by the voluntary code of conduct. Believe me commercial radio would dump the local content requirements given half the chance. As it is, the Australian Communications and Media Authority (ACMA) registered a new code last year, which exempts digital commercial radio stations from local music quotas for three years. Australian songwriters are paid for the use of their songs by radio without a cap placed on the value of the song so why are Australian recording artists singled out for discrimination and why is this allowed by law?
Former National Welfare Coordinator Support Act Ltd
Former Artist Representative PPCA Board
Let's Remove the Radio Cap
by Dan Rosen, 2nd May 2011
When I joined the PPCA and was given a background on the challenges we face in representing recordings artists and labels, the issue that stood out for me was the 1% legislative cap placed on royalties paid by commercial radio for recorded music. For the life of me I could not understand why a billion dollar industry like commercial radio needed Government protection from negotiating a fair and commercial royalty rate with Australian artists for the use of their sound recordings. The cap seemed grossly unfair when I thought about how much commercial radio relies on recorded music to generate revenue for its business. Just think about how long you would listen to your favourite radio station if they were not playing any music!
I can proudly say that PPCA is doing everything we can to change this ongoing injustice on behalf of Australian artists and record labels. In fact, we feel so strongly about this issue, that we are taking our fight to the High Court of Australia on May 10th. The current cap states that radio stations need not pay more than 1% of their gross income to artists and labels. Their annual gross income now totals almost $1 billion. The artificial cap means Australian artists and record labels are missing out on millions of dollars each year despite the use of their recorded work driving record revenue and profits for the radio sector. The cap is a historical anachronism. It was passed into law in 1969 to protect what was then a still developing radio sector. Over 40 years later and this is clearly no longer the case, as commercial radio is now a mature and thriving industry. There remains no current economic, social or legal justification to maintain this artificial cap.
If we look to other industries, there is no basis for this cap. There is no other copyright in Australia that is the subject of an artificial statutory price. No such limit applies to composers, leaving APRA free to directly negotiate licence fees with commercial radio without any constraints. The 1% cap is also significantly below the rate applicable in other similar territories around the world including the UK and NZ, which receive up to 4% of radio revenue for the use of their work.
After 40 years of protection, all we ask is for the chance to negotiate a commercial rate with the radio sector, so that Australian artists and labels are finally fairly rewarded for their music - because at the end of the day, what would commercial radio be without the music of our great Australian artists?