It is a common misconception that owning a copy of a music recording –digital media, CDs or, for the purist, vinyl – gives you the right to broadcast them to the public at your place of business. In fact, because the vast majority of recorded music is sold under a licence stating that the music is only for private use, this generally constitutes copyright infringement.
Many businesses are unaware that a scheme exists in New Zealand to deal with this issue. Although penalties at the higher end of the scale are rare, particularly for first-time offenders, without a licence from the appropriate body businesses and individuals are risking a fine of up to $150,000 and/or up to 5 years imprisonment.
Background and current approach
There are a number of separate copyright works in a song including the sound recording, which is usually owned by a record company, and the underlying musical work, which is usually owned by the composer. It is an infringement of the record company’s rights in the sound recording and the composer’s rights to the musical work for an end user to play music in public or to copy music without a suitable licence from the copyright owner.
A licence is required where music is being played in public, whether or not it is merely part of the ambience or an integral part of the atmosphere of a business. Just because a performance is given for free, the audience is small or the performance is confined to a small area, it does not mean the music is not being played in public. As mentioned earlier, it is immaterial that you own a copy of the recording. Without an appropriate licence, you only have the right to use these things privately or domestically.
Obtaining a licence from each individual record company and each individual composer would be difficult for smaller businesses, and Phonographic Performance NZ Limited (PPNZ), the Australasian Performing Right Association (APRA) and the Australasian Mechanical Copyright Owners Society (AMCOS) exist to make things easier in this regard. These organizations centrally administer copyright owners’ rights in music. They do this by obtaining licences from copyright holders in sound recordings (PPNZ) and musical works (APRA) and for reproducing musical works (AMCOS) and granting end users such as cafés, bars, and gyms blanket licences to play the music licensed at their premises in consideration for payment of a licence fee.
Recent proposals to increase the fees charged by PPNZ, APRA and AMCOS have prompted businesses which use copyright music to question whether this centralised model is the most appropriate way of licensing music for public performance. Given PPNZ, APRA, and AMCOS are essentially monopolies for music copyright licensing, opponents to the system argue that the fees charged by these bodies are set arbitrarily and excessively high. The alternative to this system is for businesses to negotiate directly with copyright owners. Although this alternative increases the time and effort required to obtain licences, it could result in lower fees due to increased competition and avoiding intermediary bodies clipping the ticket. The Commerce Commission has recently considered this issue.
A different approach?
The Commerce Commission began an investigation in 2009 after owners of copyright in sound recordings expressed concern that their licence agreements with PPNZ prevented end users negotiating directly with copyright owners for licence fees. The essence of this complaint was that PPNZ had a monopoly in licence fees for the public performance of sound recordings and that this was lessening competition in the market, and could result in end users paying higher fees or paying for much more than what they needed.
After investigating these concerns the Commission concluded that allowing end users to negotiate directly with record companies as well as PPNZ would have a positive impact on competition. As a result PPNZ and the four major recording companies (Sony, Warner, EMI and Universal) have agreed to allow end users to negotiate with either PPNZ or copyright owners in order to obtain licences.
Because of the administrative costs and effort involved, direct negotiation may not be an option for smaller businesses and the existing licensing organisations may continue to offer a valuable service. However, for larger businesses the ability to negotiate directly could be a viable alternative to obtaining a licence, or a valuable bargaining chip when dealing with PPNZ.
Readers may be aware that Mediaworks launched its music channel C42 on 1 May (just in time for NZ Music Month). Mediaworks has negotiated a licence with PPNZ which will result in artists represented by IMNZ (the industry body for independent New Zealand record labels) making up 60% of C42’s playlist, and IMNZ receiving a share of advertising revenue for distribution to its artists rather than licence fees. This arrangement may not have been possible without the Commerce Commission’s recent change to the centralised licensing model.
In addition, certain industry bodies have negotiated a group discount for certain licences. By way of example, the New Zealand Retailers Association has negotiated a 10% discount on APRA (but not PPNZ) licences. If you are a member of NZRA or a similar industry body it would pay to check whether discounts are available.
The lesson for businesses
At present, enforcement actions by PPNZ, APRA and AMCOS are rare and usually follow an approach by the relevant body outlining the legal position and inviting people playing music publically to purchase the relevant licences. However, defending enforcement actions can be expensive and the potential fines are far higher than the licence fees sought. Businesses playing music in public are recommended to pay licence fees to the copyright owners in musical works to avoid this risk.
However, following the recent Commerce Commission investigation larger businesses should consider negotiating directly with record companies. Although businesses will need to know which music is released by which record company to know who to negotiate with and which music they can play, this could prove a worthwhile exercise for larger businesses which rely heavily on the ability to play music in public such as large retail chains.
For smaller businesses, the current system of centralised licensing is likely to continue. Therefore, small businesses in particular should be aware of it, and the consequences of ignoring it.
Radio and television broadcasts
The copyright rules which apply to recorded music also apply in respect of music included in radio and television broadcasts. At present, licences for radio and television broadcasts for use in public places can be obtained from APRA. If your business charges a fee for entry or uses any broadcast for hold music, a licence from PPNZ is also required.
Given that radio and television broadcasters themselves require licences to broadcast music, and assuming the broadcaster has negotiated directly with a copyright owner instead of APRA, negotiating directly with a broadcaster would only work if that broadcaster had negotiated licences allowing the granting of sub-licences for public performance.
The Radio Broadcasters Association is currently involved in Copyright Tribunal proceedings to challenge rises in licence fees payable to PPNZ. The RBA has recently indicated a possible move to direct negotiation with labels if that challenge is unsuccessful. Accordingly, businesses playing radio or television in public are encouraged to monitor developments in this area.
At present, if businesses play radio or television in public a licence from APRA (and, if required, PPNZ) will continue to be the most appropriate option.