The remuneration caps

16.102 A related issue concerning the operation of the s 109 statutory licensing scheme for the broadcasting of published sound recordings concerns remuneration caps. Section 152 of the Copyright Act provides caps on the remuneration that may be ordered by the Copyright Tribunal for the radio broadcasting of published sound recordings.

16.103 Section 152(8) provides that, in making orders for equitable remuneration the Copyright Tribunal may not award more than one per cent of the gross earnings of a commercial or community radio broadcaster (the one per cent cap).^[82] The one per cent cap has been controversial and subject to court challenge.^[83]

16.104 The ABC is subject to a different cap under s 152(11), which provides that remuneration is limited to the sum of 0.5 cents per head of the Australian population (the ABC cap).

16.105 In 2000, the Intellectual Property and Competition Review Committee (Ergas Committee), chaired by Mr Henry Ergas, recommended that the one per cent cap be abolished ‘to achieve competitive neutrality and remove unnecessary impediments to the functioning of markets on a commercial basis’.^[84] This recommendation was supported by arguments that the one per cent cap lacks policy justification and distorts the sound recordings market.^[85] A previous review reached similar conclusions.^[86]

16.106 The Ergas Committee accepted that the cap was originally implemented, in 1969, to ease the burden imposed on the radio broadcasting industry by payments for the broadcasting of sound recordings. It noted that, since then, the economic circumstances of the commercial radio industry had evolved, and concluded:

No public policy purpose is served by this preference, which may distort competition (for example, between commercial radio and diffusion over ‘Internet radios’ of sound recordings), resource use, and income distribution.^[87]

16.107 The Ergas Committee recommended the retention of s 152(11), on the basis that the ABC is not a commercial competitor in the relevant markets, and there is a clear public interest in its operation as a budget-funded national broadcaster.^[88]

16.108 In 2001, the Government rejected the Ergas Committee’s recommendation to repeal the one per cent cap. Ricketson and Creswell state that it can be assumed that the one per cent cap issue:

became a bargaining chip in the extensive review and negotiations that the government was undertaking at the time with regard to a whole range of policy issues concerning the regulation of the broadcasting industry, including cross-media ownership, digital broadcasting and the like.^[89]

16.109 In 2006, the then Attorney-General, the Hon Philip Ruddock MP, indicated that repeal of the cap had been approved, as part of what became the Copyright Amendment Act, but this did not eventuate.^[90]

16.110 In response to this Inquiry, the PPCA submitted that both caps should be repealed because the caps:

• distort the market in various ways—including by subsidising the radio industry;

• are out of date—given that the financial and other circumstances of the radio industry are very different from the late 1960s;

• reduce economic efficiency and lack equity—including by creating non market-based incentives for broadcasters in relation to increasing music use at the expense of non-music formats;

• are not necessary—given that the Copyright Tribunal independently assesses fees for statutory licence schemes;

• are inflexible and arbitrary—as the levels at which the caps are set are not linked to an economic assessment of the value of the licence;

• are anomalous—because the Copyright Act contains no other statutory caps, other jurisdictions do not cap licence fees, and the cap is inconsistent with Australian competition policy;

• may not comply with Australia’s international treaty obligations—in particular, the requirement under the Rome Convention for equitable remuneration to be paid.^[91]

16.111 The PPCA argued that removing the caps would bring benefits to the sound recording industry and Australian recording artists, through increased income and, in turn, provide a greater economic incentive for creativity and investment and enhance cultural opportunities.^[92]

16.112 The remuneration caps are an important element of the statutory licensing scheme provided by s 109 and clearly fall within the Terms of Reference of this Inquiry. There appears to be a strong case for repeal of the one per cent cap. Further, the ABC cap may not be the most appropriate way to support the funding of the national broadcaster.

16.113 While these issues were not raised explicitly in the Issues Paper, the ALRC is interested in further comment on whether either or both of the remuneration caps in s 152 of the Copyright Act should be repealed.