Opinion from Peter Saxon

To PPCA boss Dan Rosen’s credit he was quick to accept radioinfo’s request for an interview, despite the risk that like a Labor politician on the Alan Jones show, he could be on a hiding to nothing.

He needn’t have worried, we weren’t out to “get him.” We just wanted to find out whether he had any understanding or even sympathy for the commercial radio industry’s position in the current dispute and whether there might be some common ground.

The conversation started well enough. If there was one thing with which we were able to agree, it’s that radio and records have ‘enjoyed’ a symbiotic relationship (some would say co-dependency) for about a hundred years.

That relationship has been sorely tested at times. None more so than during the great dispute of 1970 when commercial radio stopped playing Australian and British music altogether rather than cave in to the royalty demands from the major record labels. That dispute went on for six months before the music industry, starved of radio promotion (particularly for home grown product) capitulated. 

While Mr Rosen may not have even been born then, he should be well aware of the genesis of that dispute which remains at the heart of today’s unrest. The 1970 dispute came about because the music industry was not satisfied with the royalty rate, based on a cap of 1 % of commercial station revenue, that was handed down by the Copyright Tribunal two years earlier. They wanted to override the Tribunal and demanded that stations pay more.

44 years on and little has changed. The music industry is still unhappy, Mr Rosen telling radioinfo, “The percentage of revenue is an uncommercial rate that was set in 1968.”

He went on to say, “A government in 1968 could not possibly work out what a rate should be between two commercial parties in 2014.”

Perhaps not, but the PPCA has argued their case before the Copyright Tribunal many times since – most recently in 2012, when once again, they were rebuffed.

People in commercial radio will tell you that their industry paid out close to $30 million last year or about 3 to 4 per cent  of gross revenue. Of course, that includes payment to APRA which collects royalties on behalf of composers and publishers. The PPCA swears that it’s share of radio’s gross is just 0.4 per cent.

Wherever the truth lies, the new royalty scheme that the PPCA is proposing for online simulcasts is more a ‘pay for each play’ model which is designed to raise significantly more dollars from radio and, according to CRA CEO, Joan Warner, would require local radio businesses to incur significant financial costs to put in place the sophisticated system needed to perform complex calculations to report on PPCA’s proposed scheme.”

Whether or not the High Court sees online as a different medium to terrestrial broadcasting or not, is beside the point. In my view, the issue is simply that the PPCA sees the internet as an opportunity to get around the current royalty system.

 
radioinfo asked Mr Rosen what he saw as the major sticking point in current negotiations, “ I think the sticking point is coming up with a commercial negotiation for what the rate should be for simulcast. The law is settled [that online is a different medium to radio] as per the full federal court and the high court and really now it’s just sitting across the table and working out a deal. And if we are not able to do that, then the copyright tribunal is the independent umpire that takes our arguments into account – commercial radio’s arguments into account and comes up with a fee.”

Whether or not the High Court sees online as a different medium to terrestrial broadcasting or not, is beside the point. In my view, the issue is simply that the PPCA sees the internet as an opportunity to get around the current royalty system. If it can’t get the Copyright Tribunal to lift the percentage that’s been in place since 1968 they’ll argue that because the internet is new and different, because it is delivered via optic fibre or copper wire, rather than AM or FM, it requires a new and different royalty regime to go with it. It’s a spurious argument. There is no reason for the royalty regime to change for exact simulcasts.

The problem for radio is that not only could those high returns proposed by PPCA (pending ratification by the Copyright Tribunal) make internet streaming unviable today, but if a significant proportion of listeners migrate from traditional radio to the net, as many pundits believe they will, it will have the effect of shifting radio’s revenue base from the current environment, with it’s flat percentage rate, onto a platform where they will be forced to pay unrealistic royalties for no extra benefit.

An exact simulcast does not bring much in the way of incremental audience or profit. But even if it did, there’s already a percentage deal in place from which PPCA members would automatically benefit.

radioinfo also asked Mr Rosen what he perceives the radio industry’s position to be.

He told us, “I recognise that commercial businesses want to keep their costs down. We live in a  capitalist market economy and any business will want to increase their profits by keeping their costs down.”

Who could argue with that? It’s business 101. Keep your revenue up and your costs down. Buy low, sell high, and all that. But it doesn’t address the real question.

Mr Rosen added, “They [radio] also have to realise that this is a key input in their business and they pay for all other inputs in their business and they need to pay for music and I’m hopeful that we can still come to a resolution and I am willing to do that on behalf of our members.”

Mr Rosen’s answer was certainly on message, consistent with PPCA’s position but it didn’t really tell us that he had much understanding of the radio industry’s position. So we thought we’d help him out.

radioinfo: I think that the radio industry’s position is that while the internet may be seen as a new and different platform, an exact simulcast does not bring much in the way of incremental audience or profit. But even if it did, there’s already a percentage deal in place from which your members would automatically benefit. Is that not an argument that you could countenance?

Mr Rosen replies, “This is a separate right and all other content industries have a separate broadcast and simulcast right so there is no reason why Australian recording artists should be different where they should subsidise a commercial business like radio whereas every other content industry has those two separate rights and it is opening up new markets and new revenue possibilities.”

When pressed to explain what other content industries have a separate broadcast and simulcast right Mr Rosen doesn’t confine his argument to his own industry but prefers to equate it to Sports Rights.

Indeed, sports rights, are micro-marketed with exclusive or near-exclusive rights granted to media on different platforms. That’s because each game, which is usually broadcast live, attracts it’s own audience and generates it’s own revenue from which yield can be directly calculated. Sport is a perishable product that reaches its use-by date the minute the final whistle blows. This means that sporting rights can be effectively sold to the highest bidder.

On the other hand, the music industry does not grant exclusivity to radio or any other business that uses its product. And there’s no use-by date. Classical stations play music that’s hundreds of years old.

No, the PPCA will take money from anyone, anywhere. Gyms, shops, supermarkets or club DJ’s can play whatever they like, anytime, provided they pay the appropriate fee. Nothing wrong with that as a business model, but then, please Mr Rosen, don’t try to equate it to the very different model under which sports rights are sold.

Mr Rosen also argues that the internet is opening up new markets and new opportunities.

Yes, for new businesses, like Spotify that compete with radio without having to burden themselves with a broadcast licence and all the costs and obligations that entails. Of course, these new businesses should pay a royalty given that the internet is their only platform and music represents pretty much their entire content.

The radio networks that are involved with their own internet music streamers such as iHeart, Rdio and Songl are happy for those services to pay a separate royalty that has nothing to do with broadcast rights. That’s because these are genuinely new and different revenue sources and not merely an exact simulcast of what’s on the radio for which a royalty is already being paid.

Sadly, despite our cordial conversation, Mr Rosen could not be persuaded to address any of these arguments and others directly. Perhaps we were a little naïve to think that he would. After all, his job is to deliver his own organisation’s message and not accept the opposition’s. Thus he remained deaf to anything other than his own organisation’s view.

In 1970, the music industry’s bid to force commercial radio to pay more than was decided by the Copyright Tribunal of the day failed because they needed radio more than it needed them. Or, at least, radio managed to hold out a little longer before having to blink. This time, Mr Rosen no doubt hopes the shoe will be on the other foot. As he pointed out, ‘Radio needs music and it needs an online presence in the face of new competition.’
 
That’s very true.

But if after carefully calculating a cost-benefit analysis, SCA could let Kyle and Jackie O go when the cost to keep them became untenable, and 200 regional stations could bring their online presence to a streaming halt, then the PPCA should not assume that commercial radio will be easily bluffed or bullied into paying more for an exact simulcast on the internet unless it is justified by incremental revenue. Not when there’s already a perfectly good royalty mechanism in place to deal with that.

 Peter Saxon