Cable, Cord Cutting, Retransmssion, Costs and CDN Copyright Board: “It Was Twenty Years Ago Today” - More or Less

On Tuesday, November 24, 2015 at 10:00 a.m. in the Copyright Board's hearing room at 56 Sparks St. in Ottawa with the Board’s new Chair, the Copyright Board will hear the first contested retransmission tariff hearing in 20 years. To somewhat oversimplify, the collectives want $2.00 a month per subscriber increasing to $2.38 by 2018. The Broadcast Distribution Undertakings (i.e. “BDUs” or cable and satellite companies) want to continue at the current agreed upon amount of $0.98 per month decreasing to $0.90 by 2018.

The retransmission tariff results from Copyright Act amendments made in 1988 so that Canada could enter into the then new FTA with the USA. Along with the abolition of compulsory licenses for generic drugs, this was a very major concession to the USA in the FTA process.

Canada, unlike the USA, did not spell out a formula in the legislation for what was to be a distant signal and left the mechanics of it all to the then new Copyright Board. Distant signals were eventually defined by regulation in an ultra-complex manner potentially much more generous to copyright owners than the US mechanism. The Board’s first tariff in 1990, following an extremely long “inaugural” tariff hearing, was worth about $53 million p.a., an amount about 9 times more than anyone ever expected at the time – even including the proponents of the tariff. A rather tepid subsequent “criteria” regulation resulted in a very modest cutback of about $3 million a year in 1993. For twenty years, Canadian cable subscribers paid $0.70 per month that was included in their cable or satellite bill for access to “distant” signals. This amount was increased to $0.98 per month in 2013 and so certified by the Board pursuant to a negotiated agreement.  

Recently published estimates of the value of the tariff confirm that it is now worth more than $100 million p.a. While $0.98 or $2.00 per month would seem like a small amount compared to monthly cable charges that can range from about $40 to about $119 per month, for example, in the case of Rogers, it quickly adds up to a lot of money for the major parties concerned. To what extent this cost is passed on to consumers and to what extent it may contribute to “churn” or cord cutting are probably very interesting questions that may be addressed in this hearing.

An interesting aspect of the change in environment that does not seem to arise on a quick scan of the parties’ cases is that of the issue of vertical integration in the BDU industries. Certain BDUs are now major content owners. How does this affect the positions that they take at the Copyright Board and at the CRTC?

The economics of cable costs and the willingness of consumers to pay the cable pipers may be about to change, with the increasing rates of  “cord cutting” and reliance on over the air digital signals, Netflix, and other means of access to programming. These issues may arise to some extent during this hearing -   though it should be noted that this hearing is about 2014 – 2018 and we are almost half way through the period covered by the proposed tariff.

In the long run, however, if the “cord cutting” and other trends continue, this could be another example of a tariff that will become obsolete sooner or later, along with the private copying levy, reprography, media monitoring. Meanwhile, it seems to be worth everyone’s effort to invest in a large and no doubt expensive cast of lawyers and experts, including some of the “usual” suspects in terms of expert witnesses.

It will be especially interesting to see to what extent the Board deals with such issues as cord cutting, the recent “pick and pay” ruling by the CRTC.

In this regard, it will be interesting to see whether the Board assumes a more than usual “inquisitorial” role by asking its own questions and relying on its own research to some extent rather than relying solely on the parties.

This may be one of the most complicated, arcane and least exciting or readily understandable tariff issues that have faced the Board in recent years – but for the time being could be the most economically significant hearing to date. This seems to be the single most lucrative tariff under the Copyright Board’s jurisdiction. Although it looked for a time as if private copying or “reprography” might eventually rival the retransmission tariff, both of these tariffs are headed towards potential oblivion in the absence of some dramatic reversal of fate. This, too, could happen someday to retransmission – but not likely this time around unless the Board decides to say “a pox on both your houses”.

It is also the occasion that is expected to mark the debut of the Board’s new Chair, Justice Mr. Justice Robert A. Blair of the Ontario Court of Appeal.

In any event, here are the key documents in this file:

Collectives’ Statement of Case dated May 8 2015

Objectors’ Statement of Case dated October 22 2015

Applicants Reply Case November 15 2015

Enjoy.

HPK

Shameful Behaviour of Music Canada

Graham Henderson, President

http://musiccanada.com/contact/

It is totally inappropriate – indeed blatantly disgraceful – for Music Canada to urge an “astroturf” letter writing campaign to the new Chair of the Copyright Board regarding the Board’s Tariff 8 decision, or indeed any other issue.

Here’s Music Canada’s “campaign” pitch:

Campaigns

Send an email to the Chair of the Copyright Board of Canada re: Tariff 8

Send an email to newly-appointed Copyright Board chair Justice Robert A. Blair, urging him to facilitate the prosperity of Canadian cultural businesses rather than impede it by recognizing the value of the Canadian music industry for all Canadians.

To Justice Robert A. Blair, Chair of the Copyright Board of Canada

…

Here’s the text of the letter that Music Canada urges people to send to Justice Blair, with a convenient online “tool” to facilitate the transmission:

Dear Justice Robert A. Blair,

Congratulations on your recent appointment as the chair of the Copyright Board of Canada.  Under the previous leadership of the Copyright Board one year ago the Tariff 8 decision to provide creators with rates 90% lower than those they had negotiated commercially.

This decision discards years of agreements freely negotiated between digital music service providers and the music industry and sends a message to the world that it does not value music as a profession.  This is inconsistent with Canadian values. 

These rates were unprecedented globally – they are one of the world’s worst royalty rates for non-interactive and semi-interactive music streaming.

One year later Tariff 8 decision remains a serious setback for the music community in Canada, for artists and the music companies who invest in their careers.  This decision has created a regulatory precedent that ignores the reality of the marketplace and will continue to harm the business climate in this country and create a market uncertainty.

Today Canadian recorded music digital revenues and physical revenues combined only represent half of revenues fifteen years ago.  I urge you in your new position to make decisions that recognize the value of the Canadian music industry for all Canadians, and to create tariffs that pay creators fairly. Canadian creators should not be paid less than their contemporaries around the world.

As you begin your mandate please consider how the Copyright Board can facilitate the prosperity of Canadian cultural businesses rather than impede it. 

The Copyright Board is an independent quasi-judicial tribunal. Parties make their case. If they don’t like the result, they can seek judicial review.  It is NEVER acceptable to “lobby” such a tribunal in any way, and especially reprehensible to write lobbying letters to its Chair. This is an insult to the Board and its distinguished new Chair, Justice Robert A. Blair.

Music Canada, despite its mis-descriptive name, actually mainly represents the interests of the big three non-Canadian multinational record companies:

·         Sony Music Entertainment Canada Inc.

·         Universal Music Canada Inc.

·         Warner Music Canada Co.

Music Canada and those who oversee it should be completely ashamed. This campaign should, and no doubt will, backfire badly.

This may be a high point in hubris for Music Canada, following its windfall lobbying success for sound recording and performers' copyright term extension. But this is a low point in so-called “advocacy” in Canada.

HPK

Justice Robert A. Blair Appointed Chair of Copyright Board of Canada

Congratulations to Justice Robert A. Blair on his appointment as Chair of the Copyright Board and to the Government for making this appointment.

He is a highly regarded and very experienced Judge of the Ontario Court of Appeal and has had important judicial involvement in IP and related cases over the years, including Robertson v. Thomson.  He has also been a regular panelist in past years for the Harold G. Fox IP Moot.

His brief bio on the ONCA website indicates that:

Brief Biographical Note of Justice Robert A. Blair

Mr. Justice Blair was appointed to the Court of Appeal for Ontario in November 5, 2003. Prior to that appointment, he had been Regional Senior Justice for the Toronto Region of the Superior Court of Justice. Mr. Justice Blair received his B.A. (Hons.) from Queen’s University in 1965 and his LL.B. from University of Toronto Law School in 1968. He was called to the Bar in Ontario in 1970 and practiced primarily in the field of general civil litigation, with an emphasis on corporate/commercial litigation and administrative law, during his career at the Bar. He was appointed to the Ontario Court of Justice (General Division), now the Superior Court of Justice, in 1991. Mr. Justice Blair has been an ardent supporter of the use of alternative dispute resolution techniques both before and after his appointment to the Bench. He was a member of the Steering Committee, which oversaw the implementation of a Court-connected ADR Center in Toronto, the first of its kind in Canada, and has been closely involved with the Mandatory Mediation project in Toronto and the introduction of case management in Ontario. He was Co-Chair of the Civil Justice Review, which conducted a broad review of the civil justice system in Ontario and made extensive recommendations regarding the implementation of an integrated series of reforms to that system. The Civil Justice Review published its First Report in March 1995 and its Supplemental and Final Report in November 1996. As a judge he has presided in all areas of the work of the Superior Court, with particular emphasis on cases on the Commercial List at Toronto.

No doubt, his experience as Co-Chair of the Civil Justice Review in Ontario which produced landmark reports on institutional justice reform and with the highly regarded Commercial List will prove to be very useful in addressing the procedural issues confronting the Copyright Board.

HPK

(updated July 6, 2015)