Soundtracks and scrapers: copyright lessons and what's in store

Turning to first principles, a piece of recorded music usually has multiple copyright protections. Copyright subsists in the musical work (composition), literary work (lyrics) and the sound recording itself. In Australia, broadcast and communication rights in musical and literary works are licensed exclusively through Australasian Performing Right Association Limited (APRA), while equivalent rights in sound recordings are licensed on a non‑exclusive basis to the PPCA and music record companies.

Under the Copyright Act 1968 (Cth) (Copyright Act) a sound recording is generally protected if the ‘maker’ of the recording (typically, the person owning the record or record label) is suitably ‘qualified’ (i.e. an Australian citizen or resident or by incorporation) or the recording was made or first published in, Australia.

Copyright in sound recordings made in, or by people from, other countries, are also protected in certain circumstances, but the extent of the exclusive rights encompassed by copyright is conditional.

Sound recordings made in Berne Convention countries or by persons who are citizens of, or residents in, those countries is provided for in the Copyright (International Protection) Regulations 1969 (Cth) (Regulations). In general, subject to exceptions, copyright protection is given to works and other subject matter (i.e. sound recordings) if made or first published in certain foreign countries, which includes Berne Convention countries, or by a person who is a citizen of, or resident in, a relevant country. The extent of copyright protection is dictated by the extent of protection in the country in question. 

Specifically, the exclusive right to broadcast certain sound recordings only applies if the sound recording was made in, or its maker was (i) a citizen or national of, (ii) a resident of, or (ii) a body corporate incorporated in, a “Schedule 3 country”, being a country listed in a table of “Countries that provide rights for secondary uses of sound recordings” in Schedule 3 of the Regulations.

In the PPCA Case, recordings which have the benefit of the broadcast right in Australia (because their making or maker qualifies under Schedule 3) are referred to as “protected” sound recordings, and those which do not are referred to as “unprotected” sound recordings. The position in relation to sound recordings is different to that for musical works, which enjoy uniform protection in relation to broadcast in Australia. Unprotected sound recordings enjoy aspects of copyright protection other than the broadcast right. For example, both protected and unprotected sound recordings are accorded the balance of exclusive communication rights under s85[1][c] of the Copyright Act.

Moreover, the number of countries in Schedule 3 had increased from 46 to 119 in the period from 2000 to 2023 Although the United States is not a Schedule 3 country, this does not prevent the broadcast of US sound recordings from being ‘protected’ for example, if the US sound recording was made in, or the recording label was incorporated in, a Schedule 3 country. As the Tribunal observed, the location of the studio where the recording was made, or the location of the incorporation of the record label, is not always information that is easily accessible for the calculation of royalties. 

Importantly, simulcasting activities (i.e. broadcast of music over the internet including over mobile telecommunications networks) of traditional radio broadcasters were not the subject of this decision, as they are licensed separately (pursuant to a different licence and corresponding fee with the PPCA, as determined in the Simulcast Proceedings).

1. The function of the Copyright Tribunal, as summarised in APRA v AMCOS at [30]-[32] is to “deal with cases where a monopoly or quasi monopoly exists by reason of the role of a collecting society or equivalent licensing body”. The Copyright Tribunal is tasked with ensuring that the “mechanisms of the Copyright Act that operates as part of the balancing exercise designed to ensure dissemination and diffusion of ideas…[through] the system of compulsory licence schemes” is appropriately administered. In doing so, the Copyright Tribunal exercises statutory powers under the Copyright Act which include:

• under s 154, confirming, varying or substituting a proposed licence scheme; and
• under s 152, determining the amount payable by a broadcaster to the owner of copyright in published sound recordings in respect of the broadcast, during a period specified, of those recordings. Subsection 152(8) provides that the Copyright Tribunal must not make an order that would require a licensed broadcaster to pay an amount exceeding 1 per cent of the gross earnings of the broadcaster during the period equal to the period covered by the order ending on the 30 June that occurred before the period covered by the order.

In June 2000, the PPCA entered into an agreement with Commercial Radio & Audio Limited (CRA), the peak industry body representing Australia’s commercial radio broadcasters (PPCA CRA Agreement). Under the PPCA CRA Agreement, commercial radio broadcasters collectively paid PPCA an industry‑wide licence fee calculated as a percentage of gross industry revenue, with the rate increasing from 0.376 per cent in 1999–2000 to 0.4 per cent from 2001 onwards. This rate remained unchanged for more than 21 years and generated approximately $4 million annually by 2023. The scheme operated through a centralised collection and allocation mechanism under which stations reported gross revenue to an independent auditor, music use percentages (MUPs) were obtained from APRA AMCOS, the auditor calculated total royalties and precisely allocated fees to individual stations, and CRA collected and remitted payments to PPCA quarterly in exchange for non‑exclusive broadcast licences. 

The parties repeatedly extended the term of the PPCA CRA Agreement. The term was extended until June 2005, after which the agreement continued on a rolling monthly basis. During that period, there were efforts by the PPCA to lobby the Federal Government to remove a statutory 1 per cent cap on royalties. The PPCA terminated the PPCA CRA Agreement on 30 June 2023. 

On 17 May 2023, PPCA commenced proceedings under s 154(4) of the Copyright Act, referring a proposed voluntary licence scheme for the broadcast of sound recordings on commercial radio to the Copyright Tribunal. PPCA argued the existing arrangement was outdated, having been adopted more than 25 years ago, and was no longer fit for purpose. The new scheme proposed by the PPCA was based on a MUP‑based sliding‑scale applied to individual commercial radio broadcasters capped at 1 per cent of gross revenue for broadcasters with an MUP higher than 45 per cent (PPCA Proposed Scheme).

The PPCA Proposed Scheme was modelled on the Copyright Tribunal’s decisions in the Simulcast Proceedings, where each radio station, regardless of CRA membership, would receive a separate non‑exclusive blanket licence to broadcast sound recordings, with licence fees calculated quarterly by reference to each station’s MUP. This ranged from 0.0363 per cent of gross station revenue for low‑music‑use stations to a maximum of 1 per cent for stations with a MUP above 45 per cent, subject to the statutory cap. CRA could act as agent for participating stations, but licences would be held individually, and licensees would be required to comply with detailed reporting, inspection and reconciliation obligations, with PPCA retaining a right of termination if the 1 per cent cap were varied or removed. PPCA characterised the scheme as transparent, station‑specific and consistent with the structure of the Act, while accepting that, in practice, the statutory cap constrained any rate above 1 per cent. 

On 14 September 2023, CRA applied for a determination of an applicable royalty rate under s 152(2) of the Copyright Act and proposing an alternative licence scheme. CRA contended that the 0.4 per cent industry‑wide rate should continue and remain the valid benchmark (CRA Proposed Scheme). Under CRA’s Proposed Scheme, PPCA would grant non‑exclusive blanket licences to CRA members, with licence fees set at 0.4 per cent of gross revenue, calculated and paid quarterly, and with CRA providing PPCA with collection agreements and station‑level fee information. CRA argued that this approach simply continued the long-standing industry-wide arrangement that had operated since 2000, that the PPCA CRA Agreement was the most obvious benchmark, and that the rate’s reasonableness was supported by two decades of industry practice and earlier Copyright Tribunal authority. 

CRA argued that the PPCA Proposed Scheme disregarded decades of prior dealings and Copyright Tribunal authority, relied on an inappropriate benchmark, involved dramatic fee increases compared to the historic 0.4 per cent industry rate, adopted an impermissibly broad definition of gross revenue, and impermissibly required the Copyright Tribunal to determine rates above the statutory cap before applying it.

The key points from the Copyright Tribunal’s decision are as follows.

1. Appropriate legal framework

The Copyright Tribunal held that s 154 was the appropriate source of its power as it is directed at licensing schemes administered by a representative body such as PPCA. The Tribunal held that “the terms of s 152 are inappropriate for dealing with collective licensing schemes or proposed schemes” and that s 152 did not leave it open to the Tribunal to order payment by a representative body such as CRA on behalf of its members.

The Copyright Tribunal found that the same approaches can be used, alone or in combination, to decide as to whether a royalty is reasonable under either s 152 or s 154. They include: 

• the “Market rate: the rate actually being charged for the same licence in the same market in similar circumstances.
• the notional bargain rate: the rate on which the tribunal considers the parties would agree in a hypothetical bargain, between a willing but not anxious licensor and a willing but not anxious licensee.
• comparable bargains: the rate arrived at in a bargain not in the same market but in circumstances sufficiently similar to such a hypothetical bargain as might provide some guidance to the tribunal.
• judicial estimation: the rate determined by the tribunal after taking into account a range of matters such as previous agreements or negotiations between the parties, comparison with other jurisdictions, comparison with rates set by other licensors, capacity to pay, value of the copyright material, the general public interest and interest of consumers and administrative costs of the licensor.” 

It also held that “the amount ordered should not be greater than the amount in damages that would be awarded for copyright infringement”. The Copyright Tribunal also considered the Australian Competition and Consumer Commission Guidelines, which it is required to do under s 157A of the Copyright Act if requested to do so by a party. Those guidelines list appropriate benchmarks including the existing rate, rates paid for the same copyright material in different uses or other jurisdictions, and rates paid in comparable more competitive markets. 

2. Significance of 1 per cent statutory cap

The Copyright Tribunal held that radio broadcasters cannot be required to pay more than 1 per cent of gross revenue for broadcasting sound recordings. In doing so, the Copyright Tribunal revisited the history and operation of the 1 per cent cap, stating that while it had been widely criticised and repeatedly reviewed, it had existed since 1969, was constitutionally valid (referring to PPCA’s unsuccessful lobbying and constitutional challenge), and it remained a central constraint shaping market value and negotiations. 

The Copyright Tribunal noted that PPCA accepted that the 1 per cent cap and other restrictions in section 152 in practice, confined the Tribunal’s assessment of reasonableness under section 154: “This is on the basis that it would not be reasonable to order a broadcaster to pay more than 1 per cent of its gross earnings in circumstances where the broadcaster could otherwise broadcast protected sound recording pursuant to the compulsory licence under ss109 and 152 for payment of an amount that did not exceed that figure.” 

3. Sound recordings caught by the scheme

For the reasons explained above, the Copyright Tribunal was tasked with estimating the percentage of PPCA’s repertoire comprising protected sound recordings.

Having reviewed the evidence before it, the Copyright Tribunal held that the PPCA’s estimate of 80 per cent was too high, while the CRA’s estimate of 42-56 per cent was too low. It said that while the estimate is “not capable of mathematic precision”, a reasonable estimate is around 65 per cent of protected sound recordings in the PPCA’s repertoire. 

4. Benchmark for valuation

In determining a benchmark for valuation, the Copyright Tribunal considered the PPCA CRA Agreement benchmark (0.4 per cent of gross revenue) and the APRA AMCOS CRA Agreement (for musical works), which had much higher rates. The Tribunal rejected the latter, as it covered different rights, included simulcasting and reproduction rights (which were not subject to a statutory cap) and operated under a different regulatory structure. The PPCA CRA Agreement was held to be the best benchmark, as it covered the same parties and rights, operated under the same statutory constraints and reflected decades of industry practice.

5. Changing value of radio broadcasts 

The Copyright Tribunal accepted that the value of radio broadcasting had changed over time, observing (at [291]-[295]) that:

… Digital technology has fundamentally shifted the way music is consumed, with access to music as a service now largely replacing ownership of physical recordings, such as CDs and records.

… Consumers are no longer making a simple “buy or don’t buy” choice but can listen to music on demand as a service via a medium of their choosing. If a person wishes to listen to a particular sound recording, they can do so at any time through platforms such as YouTube Music, TikTok, or subscription services …

… the increased revenue to the record labels from streaming is irrelevant to the present task of the Tribunal. However, the advent of streaming services and the higher royalties paid by streaming services than by radio stations is relevant to the opportunity cost of the licence to radio stations to broadcast sound recordings …

While the changes justified some uplift, the Copyright Tribunal took a measured approach. It found that increased label revenues from streaming were not directly relevant to its assessment, and the use of sound recordings in short “snippets”, while increasing in number from online user generated content on social media platforms, was marginal in terms of value. 

The Copyright Tribunal accepted that there was a growth of Digital Audio Broadcast (plus) (DAB+) stations, leading to a greater total volume of music broadcast and an increase in protected sound recordings due to expanded international protection (i.e. more countries being included in Schedule 3). However, it was not persuaded by the PPCA’s claims that radio’s declining promotional role justified a large increase, or that increased repertoire size, digital music trends or international royalty comparisons warranted a major uplift. On the evidence presented, the Copyright Tribunal concluded that commercial radio still used music in broadly the same way and served other functions (such as talkback and broadcasting news and local content).

6. Outcome

The Copyright Tribunal started with the long-standing 0.4 per cent rate and allowed for increased music volume from DAB+ and removed outdated discounts that were applied in earlier cases, thereby arriving at a new licence fee of 0.55 per cent of gross revenue. The Copyright Tribunal described this as a measured and appropriate increase instead of a radical departure from the status quo. The Copyright Tribunal also favoured the CRA’s scheme structure, preserving the industry-wide standard, continuation of the established administrative model and no wholesale restructuring of how fees were calculated. Importantly, the new scheme requires greater transparency on the allocation of fees between radio stations.

The parties are required to confer and agree on next steps to finalise the licence scheme by 18 February 2026, which must reflect the 0.55 per cent rate and the above findings on structure and transparency.