COPYRIGHT TRIBUNAL OF AUSTRALIA

 

Reference by Australasian Performing Right Association Ltd [2006] ACopyT 3

INTELLECTUAL PROPERTY - copyright – proposed licensing scheme, prepared by collecting society, for licensing of performance of background music to be heard by the public in retail and other premises – reference of scheme to Tribunal for its approval under s 154(1) of the Copyright Act 1968 (Cth) – nature of régime established by ss 154-159 of that Act – evidence showing more sophisticated use made by businesses of background music Act – evidence of comparable overseas rates – substantial increases called for. Held: proposed licensing scheme confirmed.

Copyright Act 1968 (Cth) ss 154-159

Audio Visual Copyright Society Ltd v Foxtel Management Pty Ltd (No 4) [2006] ACopyT 2 cited

Fair Fitness Music Association v Australasian Performing Right Association Ltd (1998) 43 IPR 67 cited

Reference by Australasian Performing Right Association Ltd; re Australian Broadcasting Corporation (1985) 5 IPR 449 cited

REFERENCE BY AUSTRALASIAN PERFORMING RIGHT ASSOCIATION LIMITED (ABN 42 000 016 099) UNDER S 154 OF THE COPYRIGHT ACT 1968

CT 5 OF 2003

 

 

LINDGREN P

29 SEPTEMBER 2006

SYDNEY

IN THE COPYRIGHT TRIBUNAL

CT 5 OF 2003

 

REFERENCE BY:	AUSTRALASIAN PERFORMING RIGHT ASSOCIATION LIMITED (ABN 42 000 016 099) UNDER S 154 OF THE COPYRIGHT ACT 1968
TRIBUNAL:	LINDGREN P
DATE OF ORDER:	29 SEPTEMBER 2006
WHERE MADE:	SYDNEY

 

 

THE TRIBUNAL DIRECTS THAT:

 

1.         The Australasian Performing Right Association Ltd bring in short minutes of a determination to give effect to the Tribunal’s reasons, serve a copy on the National Retail Association Ltd, and contact the Associate to Lindgren P to obtain a date for the making of the determination.

IN THE COPYRIGHT TRIBUNAL

CT 5 OF 2003

 

 

REFERENCE BY:	AUSTRALASIAN PERFORMING RIGHT ASSOCIATION LIMITED (ABN 42 000 016 099) UNDER S 154 OF THE COPYRIGHT ACT 1968
TRIBUNAL:	LINDGREN P
DATE:	29 SEPTEMBER 2006
PLACE:	SYDNEY

 

 

REASONS ON THE REFERENCE

INTRODUCTION

1                     The Australasian Performing Right Association Ltd (‘APRA’) is a well-known copyright collecting society.  It is a non-profit company limited by guarantee, incorporated on 4 January 1926.  APRA is concerned, relevantly and subject to exceptions, with the rights to the public performance and  communication of copyrighted musical works.

2                     APRA owns, or represents the owners of, copyright in respect of the public performance of practically all musical and associated literary works (“music”) in Australia.  APRA’s members comprise approximately 38,000 Australian and New Zealand composers, authors and publishers of music.  Members assign to APRA the rights to perform in public and to communicate to the public, music in which they own the copyright.

3                     APRA has reciprocal agreements with performing right collecting societies throughout the world, under which APRA represents more than a further 1,000,000 writers and publishers.

4                     The music to which the assignments to APRA or the reciprocal agreements relate, are APRA’s repertoire (‘Repertoire’).

5                     APRA proposes to bring into operation a new licence scheme, which it has referred to the Tribunal under s 154(1) of the Copyright Act 1968 (Cth) (‘the Act’ – unless otherwise indicated, references to sections are references to sections of the Act).

6                     Subsection 154(4) requires the Tribunal to consider the proposed scheme, and, after giving the parties to the reference an opportunity of presenting their cases, to make such order, ‘either confirming or varying the scheme, as the Tribunal considers reasonable in the circumstances’.

THE ACT

7                     The expressions ‘licence’, ‘licence scheme’ and ‘licensor’ are defined in s 136, which is the first section within Part VI of the Act, headed ‘The Copyright Tribunal’.  Relevantly, a ‘licence’ is defined to mean a licence granted by or on behalf of the owner or prospective owner of the copyright in a musical work, to perform the work in public.  A ‘licence scheme’ is defined to mean, relevantly, a scheme formulated by a licensor setting out the classes of case in which the licensor is willing to grant licences, and the charges (if any), subject to payment of which, and the conditions subject to which, licences will be granted in those classes of case.  Section 136 defines ‘licensor’ to mean, in relation to licences in respect of a musical work, the owner or prospective owner of the copyright in the work, or any entity acting as agent for the owner or prospective owner in relation to the negotiation or granting of such licences.  APRA is a licensor in relation to licences in respect of the musical works in the Repertoire.

8                     The main features of the régime established by ss 154–159 of the Act within the scope of an operative licence scheme confirmed or varied by the Tribunal are as follows:

·        a person requiring a licence to which the scheme applies, who complies with the conditions of the scheme, is to be treated as if the person had such a licence (s 159(1));

·        if a person claims that he or she requires such a licence, but the licensor operating the scheme refuses or fails to grant the person a licence, the person may apply to the Tribunal (s 157(1));

·        while the scheme binds the licensor, a person claiming to require a licence to which the scheme applies is not bound by the scheme and may apply to the Tribunal for an order requiring the licensor to grant the person a licence on terms other than those of the scheme (s 157(2));

·        the Act does not prohibit the licensor and a person requiring such a licence from granting and taking a licence outside of the scheme.

9                     There are advantages to both licensor and would-be licensee in the approval of a scheme by the Tribunal.  The licensor can inform those who need a licence (in order not to infringe copyright) that its scheme has been considered by the Tribunal and, in general, found to be reasonable in the circumstances to which it applies.  The would-be licensee has the benefit of that assurance, but still has the option, instead of taking a licence in accordance with the scheme, of applying to the Tribunal for an order that the licensor grant the person a licence on different terms (such an application was made, albeit unsuccessfully, in Fair Fitness Music Association v Australasian Performing Right Association Ltd (1998) 43 IPR 67).  The provision that if the person requiring the licence complies with the conditions of the scheme, the person is to be in the same position in any proceeding for infringement of copyright as if he or she had, at the material time, been the holder of a licence (subs 159(1)), may be seen rather to assimilate, at least in this respect, the position under a Tribunal-confirmed scheme to that under the statutory licences provided for in Parts VA, VB and VC and Div 2 of Pt VII of the Act.

10                  I turn now to the specific provisions.  Section 154(2) provides that the parties to a reference under s 154 are the licensor who has referred a scheme to the Tribunal, and such organisations or persons (if any) as apply to the Tribunal to be made parties to the reference, and, in accordance with s 154(3), are made parties to it.  Section 154(3) provides, relevantly, that where an organisation applies to be made a party to a reference, and the Tribunal is satisfied that the organisation has a substantial interest in the operation of the scheme to which the reference relates, the Tribunal may, if it thinks fit, make it a party.

11                  The following organisations were made, and have remained, parties to the reference (certain further organisations were made parties, but, at their own request, ceased to be parties):

On the hearing, only NRA appeared (through its Director of Public Affairs, Mr Allan Pidgeon).

12                  Subsection 154(4) provides as follows:

“The tribunal shall consider a scheme referred under this section and, after giving to the parties to the reference an opportunity of presenting their cases, shall make such order, either confirming or varying the scheme, as the tribunal considers reasonable in the circumstances.”

13                  As a matter of language, it is the order that the word “reasonable” in s 154(4) qualifies.  However, when asking itself whether an order confirming or varying the scheme would be reasonable, the Tribunal must have regard to the reasonableness of the content of the scheme and the reasonableness of the effect the scheme would have, if confirmed, under the statutory régime described above.

14                  In Reference by Australasian Performing Right Association Ltd; re Australian Broadcasting Corporation (1985) 5 IPR 449, the Tribunal treated s 154 as requiring the Tribunal to consider whether the formula contained in a scheme referred to it provided for “reasonable remuneration” or “equitable remuneration” (at 477).  The Tribunal made it clear, however, that it must consider whether the licence scheme itself is reasonable, or would become reasonable if certain variations to it were made.

15                  The apparent simplicity of such a test is deceptive.  APRA’s proposed scheme has different impacts according to the many different factual situations to which it must apply,  as discussed below.  The remuneration for which a scheme provides in one factual situation may be equitable, while in another it may not be.  The overall operation of the proposed scheme must be considered, and the Tribunal must be satisfied that it is reasonable for the scheme to be confirmed, or varied, taking into account the possibility that a particular person who claims to require a licence in a case to which the scheme applies, will be entitled to apply to the Tribunal if that person claims that the scheme does not operate reasonably in the special circumstances of the particular case.

16                  An order, other than an interim order, may be made so as to be in force either indefinitely or for such period as the Tribunal thinks fit.  In the present case, the hearing has proceeded on the basis that any order will be made so as to be in force indefinitely.  Where, as in the present case, the scheme is not brought into operation before an order is made in pursuance of the reference, the scheme as confirmed or varied by the order comes into operation upon the making of the order: s 154(7).

17                  Section 157(1) provides that a person who has unsuccessfully sought the grant of a licence in accordance with a licence scheme (the provision is not limited to Tribunal-confirmed licence schemes) may apply to the Tribunal.  Section 157(2) addresses the different situation where a person contends that a licence in accordance with a licence scheme would, in the circumstances of the particular case, be subject to the payment of charges or to conditions that are not reasonable.  Sections 157(3) and (4) provide for other kinds of application to the Tribunal in relation to licences, including (subs (3)) an application by a person who requires a licence to which a licence scheme does not apply, as where a licence scheme has not been formulated or is not in operation.

18                  In the various situations mentioned, the Tribunal is empowered by s 157(6) to make relevant orders.  For example, where s 157(1) applies, the Tribunal may make an order specifying the charges, if any, and the conditions that the Tribunal considers to be applicable in accordance with the licence scheme in relation to the applicant.  In the case of applications under ss 157(2) and (3), the Tribunal may specify the charges, if any, and the conditions, that the Tribunal considers reasonable in the circumstances in relation to the particular applicant. 

19                  In substance then, (and APRA has emphasised the point) confirmation of the proposed scheme, while an indication of the Tribunal’s view of its reasonableness in general, does not preclude a particular person or company for whose circumstances a licence under the licence scheme would not be reasonable, from applying to the Tribunal for an order that APRA grant a special licence outside the scheme.  Of course, the making of such an application would entail inconvenience and cost.  This consideration suggests that the Tribunal should seek to ensure that a licence scheme will be reasonable in as many commonly occurring sets of circumstances as practicable.

THE EVIDENCE

 

APRA’s existing Background Music scheme and its proposed Background Music scheme

20                  At present, APRA operates a ‘Background Music’ licence scheme, which has not been the subject of a reference to the Tribunal.  The terms of it are found in a printed form of ‘APRA Licence Application Background Music/Music on Hold’.  This document provides for two licences, a Background Music licence (covering public performance) and a Music on Hold licence (covering music that is played  (communicated) to telephone callers on hold).  Apparently, business enterprises commonly require both kinds of licence.  The ‘Music on Hold’ part of the document is therefore not the subject of the present reference.

21                  I should say at once, however, that if the proposed Background Music licence scheme is to be confirmed, the document should be split into two documents, one being the application (and resulting licence agreement) in relation to Background Music, and the other in relation to Music on Hold.  The reason is that if the Tribunal confirms the Background Music scheme, there will be a danger that people who are told that it has done so will think that the Music on Hold licence scheme, being in the same document, has also been confirmed.  Moreover, so long as the two forms of licence are provided for in the same document, it may be difficult to discern which of the printed terms and conditions apply to which licence.

22                  The licence fees stipulated in the Background Music part of the existing APRA Licence Application form are as follows:

23                  The licence, like that under the proposed scheme, is on a year-to-year basis.  The existing scheme was brought into operation in the mid 1970s and the monetary amounts have been increased over the years in accordance with the Consumer Price Index (‘CPI’).  It follows that by now, the rates have risen slightly above the figures set out above.

24                  It will be noted that the starting point for identification of the licence fee under the existing scheme is the kind of device used, eg radio or TV set (which attract the lowest charge), or CD player, record player, tape player or background music service (which attract the next lowest charge).  Apparently this latter class of device is the one most commonly used.

25                  The other factor determining the amount of the licence fee is the number of additional speakers.  The difference between a very small shop and a large shopping mall or a sports stadium, for example, both using the same performance device, is provided for by the small charge per additional speaker.  One deficiency which APRA identifies in its existing scheme is that the fee payable by the operator of large premises, is too low relative to their much greater use of the music.  For example, such an operator using a Background Music System and 100 additional speakers, pays an annual licence fee of only $182.31 ($68.31 + [100 x $1.14]).  I agree that this amount is far too low, having regard also to the evidence as to the importance of background music, and international comparisons, both discussed below.

26                  Like the existing scheme, the proposed one would also involve charges dependent on kind and number of devices used.  It is said that these measures are significant as they indicate the importance that the particular business owner attributes to background music.  But the proposed scheme adds a new variable - the floor area where the music is audible - so as to provide a measure of the number of hearers.

27                  Again, the proposed Background Music scheme is contained within a proposed printed form of ‘APRA Licence Application – general – Background/Music on Hold’.  The proposed rates for Background Music are set out in the proposed form in the following matrix, in which licence fee is a function of (1) the kind and number of devices, and (2) the area (in square metres) of the floor space where the music is audible:

		‘Size (m2)
		Up to 150	150–499	500–999	1000–1999	2000–4999	+1000m2
Tier 1	1 device–radio/TV	$66	$77	$110	$165	$308	$110
Tier 2	1 device –CD/DVD/Video	$110	$132	$198	$330	$550	$132
Tier 3	1–4 devices and/or multi channel device of up to 4 streams and/or jukebox	$176	$253	$374	$572	$935	$176
Tier 4	5 or more devices and/or multi-channel device of 5 or more streams and/or jukebox	$330	$495	$726	$1,100	$1,760	$330’

28                  The licence is a licence to perform in public, works within the Repertoire, within the ‘Licensed Area’, in the circumstances and by the methods described in the matrix.

29                  There is again a provision for annual CPI increases.

30                  The licence is expressed so as not to include or authorize the following:

‘(a)      the public reception of any performance beyond the precincts of the Premises;

(b)        the performance or communication of Grand Right Works in their entirety;

(c)        the performance in whole or in part of any musical work in a Dramatic Context;

(d)        the performance in whole or in part of any music and associated words composed or used for a ballet if accompanied by a visual representation of that ballet;

(e)        the performance or communication of any choral work of more than 20 minutes’ duration in its entirety;

(f)        the performance or communication of any music and associated words so as to burlesque or parody the work;

(g)        the performance or communication of any musical work with new or substituted lyrics, or any lyrics which have been notified by APRA as prohibited;

(h)        the performance or communication of any sound recording (this permission is obtained from the Phonographic Performance Company of Australia Limited); or

(i)         any other right not expressly granted under this agreement.’

31                  The expression ‘Premises’ is not defined, but apparently means the premises of the business and which contains the ‘Licensed Area’ (defined to mean that part of the Premises where the music is audible).  The expression ‘Grand Right Work’ is defined, for the purposes of the licence, to mean ‘an opera, operetta, musical play, revue or pantomime insofar as it consists of words and music written expressly for it’.  The expression ‘Dramatic Context’ is defined to mean ‘in conjunction with acting, costumes, scenic accessories, scripted dialogue or other dramatic effects, or as a ballet’.

Advertisement and notification

32                  APRA’s reference of its proposed Background Music scheme to the Tribunal has been advertised in the press and notified to around 97 local government advisory bodies and industry associations.  The hearing was also advertised in the press, and APRA has consulted widely.  I am satisfied that APRA has taken all reasonable steps available to be taken to ensure that anyone wishing to object to the proposed licence scheme has had an opportunity to do so.

The evidence of Mr Ormston

33                  Dean Andrew Ormston is APRA’s Director of Corporate Affairs and Communications.  He joined APRA in April 1995, and was APRA’s Director of General Performance Licensing immediately before being recently promoted to his present position.

34                  Mr Ormston graduated with a Bachelor of Education (Secondary Music) from the Canberra University in 1987.  From 1988 he taught music history, theory and practice to secondary school students in Australia and the United Kingdom.  As well, he taught music performance to student concert and jazz bands, orchestras and various chamber ensembles.  He also developed, and had accredited by the ACT Department of Education, curricula in music education.  In 1997 he obtained a Post Graduate Diploma in Marketing from Monash University.

35                  Mr Ormston’s first affidavit (sworn 13 October 2004) goes to his experience in various major research projects investigating the importance and value of background music.

36                  Mr Ormston provided lengthy written and oral evidence on the background of APRA and the purpose of its work; on the role of ‘background music’; on APRA’s current Background Music scheme; on APRA’s proposed Background Music scheme; and on APRA’s consultations with background music users in relation to the proposed scheme.

a. Background information on APRA

37                  Mr Ormston describes APRA as existing fundamentally for the purpose of (par 14):

‘(a)      enabling writers, publishers, and other copyright owners to license the public performance and communication of their works as widely as possible and to obtain royalty income in a way which as nearly as possible reflects the usage of those works;

(b)       enabling music users to obtain comprehensive licences in a way that is as convenient and certain as possible; and

(c)        minimising the costs for both copyright owners and users in reducing the number of transactions that would otherwise be involved for thousands of copyright users in dealing with a multiplicity of copyright owners located around the world.’

38                  APRA administers in Australia and New Zealand the performing right (by which Mr Ormston means the right - set out in s 31(1)(a)(iii) of the Act - ‘to perform the work in public’ and the right – set out in s 31(1)(a)(iv) of the Act - ‘to communicate the work to the public’) in music on behalf of copyright owners, including composers, songwriters, publishers and others.

39                  The notion of ‘performance’ is given the following inclusory definition in s 27(1) of the Act:

‘1.        Subject to this section, a reference in this Act to performance shall:

(a)               be read as including a reference to any mode of visual or aural presentation, whether the presentation is by the use of reception equipment, by the exhibition of a cinematograph film, by the use of a record or by any other means;

…

and a reference in this Act to performing a work or an adaptation of a work has a corresponding meaning.’

40                  Subsection 27(2) provides that for the purposes of the Act, the ‘communication’ of a work or other subject matter to the public does not constitute a performance.  The word ‘communicate’ is defined in s 10 to mean to make available online or electronically transmit a work or other subject matter.  The proposed licence scheme does not define ‘performance’ or state that the word, where used in the form of APRA Licence Application, bears the meaning given to it for the purposes of the Act by s 27(1).  The definition of ‘Licensed Area’ as ‘that part of the Premises where Works within APRA’s repertoire performed under this licence are audible’ suggests ‘aural presentation’ and the definition of ‘performance’ in s 27(1).  It is desirable, however, that ‘performance’ be defined by, if appropriate, making it clear that it bears the same meaning as it does in the Act.

41                  Under the terms of its assignments, APRA obtains the copyright in the performing right in musical works, at the time when the works are created (not at the time of notification of them to APRA).  Accordingly, since musical works are continually being created, on any particular day, copyright owned or controlled by APRA comes into being, of which APRA will be unaware.  APRA can become aware of those musical works only upon notification by its members and affiliates.  The works most likely to be notified to APRA are those which have already, or which will shortly, become active in Australia or New Zealand, in the sense that there is a probability of their being publicly performed or communicated to the public.

42                  APRA’s affiliated societies maintain records generally similar to those of APRA.  All would have difficulty in defining precisely the size of their individual repertoires.  Mr Ormston estimates that the international repertoire of musical works under the control of all affiliated performing right societies comprises many millions of works.

43                  The overwhelming majority of musical works communicated to the public over Australian radio or television or publicly performed in Australia are in the Repertoire.

44                  According to Mr Ormston, the portion of performing rights not assigned to APRA, but retained by its members or their assignees, are known as ‘grand rights’.  These include the rights to authorise the public performance and communication of the following (unless performed by means of a cinematograph film):

(a)        dramatico-musical works performed in their entirety;

(b)        in the case only of a public performance, any works or excerpts from such works performed in a dramatic context;

(c)        oratorios and large choral works written to exceed 20 minutes in duration, performed in their entirety; and

(d)        the whole or any part of any music and of associated words, composed for a ballet, if accompanied by a visual representation of the ballet.

See, too, the definition of ‘Grand Right work’ in the proposed form of licence, set out at [31] above.

45                  APRA generally grants licences on a ‘blanket’ basis, that is, on the basis that the licensee will have a licence to perform all the works in the Repertoire.  In APRA’s experience, this is the kind of licence that almost all users require.  The overwhelming majority of APRA’s licensees use music on an ongoing basis and cannot predict precisely which musical works they will be using and when or how often each will be performed.  Even if they were able to predict what works would be performed a month, a week or a day in advance, they would not wish to have to apply periodically for licences.  In Mr Ormston’s experience, licensees desire that APRA be able to ‘cover the field’, that is, that APRA be able to guarantee to them that, once they have a licence from APRA, they will not infringe the performing right in any copyright musical work.

46                  The fact that APRA’s licence is comprehensive carries a value independently of the actual usage made of a work.  A business proprietor may have little choice in the musical works performed, because the decision is that of a third party, such as a radio or television station, or a background music supplier.  Even where the proprietor controls what music is played, for example, by selecting CDs to play, the precise choice of music is rarely the main focus of the business, and it would be onerous for the proprietor to have to obtain a licence on a work by work basis.

47                   Mr Ormston states that, where possible, APRA seeks to value the use of the Repertoire by applying the ‘box office’ principle, that is, as a percentage of the revenue derived from the use of the copyright material.  However, the box office principle can only be applied only if two conditions are met:  first, there must be identifiable ‘box office’ revenue; and, secondly, the use of copyright music must be an important element in the entertainment or service for which the box office revenue is received.  In the case of public performances at discotheques and by live artists, APRA’s licence fees are charged in accordance with the box office principle.  In the case of public performance licence schemes for background music, however, the two conditions are not satisfied.

48                  APRA has affiliation agreements with 68 collecting societies in 61 countries.  APRA and its affiliated societies agree to abide by the decisions, resolutions and rules of the International Confederation of Societies of Authors and Composers (‘CISAC’).  Most of the affiliation agreements between APRA and its affiliates follow a CISAC model.  As a result of the agreements, each collecting society either assigns or licenses to the others the performing rights in respect of its national repertoire;  each undertakes to license as effectively and efficiently as it can, all the works in the affiliated society’s repertoire, within its national boundaries;  each undertakes to apply the same standards, rules and conditions to the members of the affiliated society as it does to its own members; and each undertakes to account to its affiliate in a proper and timely way for royalties due in respect of the works within the national repertoire of the affiliate.

49                  The effect of these many reciprocal agreements is that for any given country, the local performing right society will control, for the purposes of issuing licences and collecting royalties, virtually the world’s repertoire of musical works.  Accordingly, in practice, anyone wishing to perform a copyright musical work in Australia may, regardless of its country of origin, rely on a licence granted by APRA.

50                  As of October 2004, APRA had a total of 55,240 licences in place covering public performance of music at 79,942 premises throughout Australia.  Total revenue from the licences in 2003/04 was $19,676,436.

b. Background music

51                  Mr Ormston states that from working with international affiliates, he knows that it is generally agreed that there are three main categories of music use for profit (par  61):

‘(a)      essential or indispensable music: where the performance of music is closely linked to the generation of revenue. The licence fee is typically calculated as either a percentage of the admission receipts or is based on the number of admissions. This ‘featured’ type of performance is licensed under APRA’s schemes for Live Performers, Concert Promoters, Recorded Music for Dancing and Featured Recorded Music;

(b)       ambience music: where music is necessary and plays an important role in the generation of revenue. Examples of this type of use include bars and restaurants where music is used in a featured manner. For such users of music, the music is not so critical that the business could not operate without it, but if the music was not used there would be likely to be a decrease in business. For these establishments, the licence fee is typically calculated as either a percentage of the admission receipts or is based on the number of admissions, or occasionally is a lump-sum payment; and

(c)        background music: where music plays a secondary role, and is desirable but not necessary. There is no direct link between playing music and the earning of revenue. In this case, licence fees are expressed as a lump-sum payment.’

52                  In line with the above, Mr Ormston states that APRA regards as ‘background music’ the use of music in premises where the music is not the primary reason why most people visit the premises, and gives as examples music performed in retail premises, hotels, restaurants and cafés, hairdressing salons, professional suites (such as those occupied by dentists and doctors) and fitness centres.  In contrast, APRA does not regard as background music: live performances;  recorded music to accompany dancing (as in discotheques and night clubs);  featured recorded music (including in discotheques, night clubs, hotels and bars);  music to accompany aerobics and other exercise classes; music performed in cinematograph films;  music on hold;  music used to demonstrate sound and audio-visual equipment; and karaoke music.

53                  Mr Ormston acknowledges that it is difficult to quantify the value of background music, but says that there are formal and informal measures of its value, as perceived by both the business proprietor and customers, clients or patrons.

54                  By reference to his experience as a music teacher in Canberra for four years and in London for three years, Mr Ormston states that he understands the potential impact of music on the listener, whether positive or negative.  He states that as a result of working with background music suppliers, he holds the view that more sophisticated users of background music consider the music’s tempo, key (major/minor), and sequence of tracks, in order to match the music with the target client and with the time of day.

55                  In 2000, APRA engaged Dr Stephanie Wilson to conduct research in relation to the benefits which background music provides to a business.  Her report, ‘The Effect of Music on Perceived Atmosphere and Purchase Intentions in a Restaurant’, was provided to APRA in June 2000.  I refer to that report below.  I accept that such research demonstrates (par 83):

‘[t]hat music had an impact on the perception of atmosphere and image, could impact customer mix, attract customers, influence customer behaviour, entertain employees and increase turnover.’

56                  Mr Ormston’s affidavit includes the following paragraphs, the thrust of which I accept: (paras 87 to 91)

‘87       The results of these studies [by Dr Stephanie Wilson in Australia and research conducted in the United Kingdom] and others have been made available by APRA to all major industry associations nationally, presented at major hospitality conferences nationally and published in overseas publications including the Journal of Psychology, London.

 

88        Background music can be an important part of a customer’s experience. It is my experience that people use music for many reasons, ranging from using music in preference to silence, through to using music to create, reinforce and project a brand, image or atmosphere. It is my observation as a consumer of entertainment services that music is a very powerful tool in a background context. It can be used to create mood, to pass time and to manipulate behaviour. It is also my view that music played for the benefit of employees of a commercial organisation has a value to the proprietors of the organization. I am of the firm opinion that a person who chooses to use music in their business recognises that the music has a value, even if they cannot or do not articulate the nature of that value.

89        I have spoken to many licensees who use a radio, television or CD player in their retail premises. Often their first reaction to finding out about APRA and a public performance licence is that they see no benefit to using music in their business, but when asked why it is they have purchased a radio or CD player they clearly articulate reasons. These reasons include, for example, that people do not like to work or shop in silence, people feel more comfortable when they are not the focus of attention, and employees complain if they don’t have music.

90        My observations of retail premises confirm research findings that businesses also use music volume and genre to distinguish themselves from other similar businesses.

91                 In my experience, the ability and inclination to articulate reasons for using music become more sophisticated commensurate with the user’s investment in music….’

57                  Based on his review of the industries in which APRA grants licences for background music, other available research, and is own experience, Mr Ormston has established the following general hierarchy of the way in which business use background music (par 95):

 

c. APRA’s current Background Music scheme

58                  Mr Ormston has summarised the broad business areas licensed by APRA for background music as follows:

‘Retail General

Retail

Hair/Beauty Salon

Supermarkets

Shopping Centres

Clothing retail

Electrical

Newsagents

Video Stores

Real Estate Agents

Travel Agents

Motor Dealers

Optometrists

Hospital/Medical Centres

Doctor/Dental Surgery

Pharmacy

Ancillary Practitioners

Veterinary Surgery

Background Music Suppliers

Fitness

Fitness & Aerobic Centres/Gyms

Hospitality

Nightclubs

Hotels

Clubs

Bars

Restaurants

Cafes’

59                  According to Mr Ormston, APRA’s current background music scheme evolved from an original tariff for ‘mechanical devices’ which was introduced in the 1930s, to authorise the public performance of musical works by means of radio.  The part of the licence scheme relating to television dates from the 1960s.  By resolution of APRA’s Board on 17 April 1969, television receivers were licensed at the rate of $8.00 per annum, with an additional charge per annum for each speaker installed at each premises.  From the early 1970s, the tariff was increased to $10.00 per annum.  By a Board resolution of 28 August 1975, all tariffs, including the mechanical tariff, were amended to provide for increases in accordance with CPI increases.  There has been no other amendment to the amounts since 1975.

60                  Mr Ormston expresses the opinion that APRA’s background music rates are extremely low.  He states (par 44):

‘In my opinion these tariffs do not adequately reflect the value of background music and are in urgent need of review.’

61                  Mr Ormston has been working on the development of the proposed scheme since November 2001.  He formed the view that the tariff needed to be ‘fundamentally reconsidered, rather than merely increased’ (par 52).  He says that, in summary, APRA’s present background music scheme needs urgent review because (par 56): 

‘(a)      it does not reflect the current value of background music;

(b)       it does not distinguish the value of the music according to different industries;

(c )       it does not differentiate value amongst music users within particular industries;

(d)       the value of music in the business context is now better understood by users and is supported by research that did not exist when the tariffs were initially formulated;

(e)        the storage, manipulation and exploitation of music has become easier with the development of new technologies;

(f)        the parameters of the scheme should be considered in relation to those used by APRA’s international affiliates; and

(g)       the rates of the scheme should be considered in relation to those of APRA’s international affiliates.’

62                  As noted earlier, APRA’s existing Background Music scheme is a device-based scheme with a flat fee per device, such as a television set, radio or CD player.  APRA has considered it inappropriate to value the use of background music according to a direct ‘box-office’ measure, because background music is not typically essential in the business in question, and so a calculation based on turnover, or on the number of people admitted to the premises, is not, in Mr Ormston’s view, the most relevant measure of value.  However, Mr Ormston suggests that, broadly speaking, the number and kinds of devices used do give some indication of the importance of music in the business or its potential audience.

63                  Mr Ormston states (par 65):

‘perhaps the least sophisticated means of performing background music is to play a radio at the relevant premises. A single radio with few speakers is unlikely to reach a large number of people, and does not allow the user a great level of choice in the music played. At the other end of the scale, some business proprietors invest large sums of money in background music suppliers who tailor music to the intended clientele of the business, and in background music systems with a high level of sound quality to reach a larger number of people.’

64                  Mr Ormston further states that, as a result of his experience while working for APRA, it became apparent to him that APRA’s existing Background Music scheme was clumsy to administer because, among other reasons, it failed to distinguish between the kinds of business in which the music was used, such as retail, hospitality, fitness and general commercial premises despite the fact that music is used differently in each type.  In addition, a licensee may have to complete several forms of licence applications covering the various forms of music performance or communication occurring at the premises.  For example, a hotelier may have to complete an application in relation to Background Music/Music on Hold, Live Artist Performers, Featured Recorded Music and Karaoke.

65                  Mr Ormston states that, based on his work with APRA’s international affiliates, the rates charged for the use of background music overseas are, generally speaking, calculated by reference to the size of the place where the music is audible, and take into account these considerations (par 73):

‘(a)      the larger the capacity or size of the premises, the larger the potential audience;

(b)       a fixed fee per establishment, which does not take size into account, might be too simple and might give rise to inequalities; and

(c)        the reference either to the floor area, or the number of seats/customers is widely considered the most practical measure for a licence fee.’

66                  However, under the existing Background Music scheme, the potential reach of public performance is measured only by a consideration of the number of additional speakers.  Mr Ormston considers this measure inadequate because it does not, for example, differentiate between the sophisticated use of music by a department store and the use of a small device by a small retailer.

67                  According to Mr Ormston, feedback from licensees, industry associations and background music suppliers, both formally and informally, shows that the concept of counting the number of speakers as a measure of performance reach is unfounded.  Small retailers argue that the number of speakers does not adequately reflect the difference between them and a department store.  Hoteliers, restaurateurs and retailers say that they find counting speakers a burdensome and inflexible measure (par 69).

68                  APRA’s current rate for a background music system is $68.31 per annum, which equates to $1.31 per week or less than 20 cents per day for most small businesses.  A small retailer would pay $68.31 annually for the use of a CD player.  A large department store with music played by a CD player and an additional 100 speakers would pay only $182.31 ($68.31 plus $1.14 per additional speaker – due to CPI increases, it has since increased).  In Mr Ormston’s view, the difference does not adequately reflect the scale of difference, potential audience and the ability to exploit music for commercial benefit.

d. APRA’s proposed Background Music scheme

69                  The essence of the proposed Background Music scheme is that payment would be based on two factors: the nature of the background music system (device or devices) and the floor area where the music will be audible.

70                  An early version of the proposed Background Music scheme was ‘road-tested’ by APRA licensing staff in August 2002.  The scheme was revised and a second pilot study was conducted in October 2002.  Subsequently, there were further amendments to pricing points and consideration was given to specific industry anomalies.

71                  Mr Ormston’s affidavit satisfies me that APRA has consulted widely with peak industry associations in the period from November 2002 to November 2003 in relation to its proposed Background Music Scheme.  In addition, APRA met with the two largest background music suppliers.  As a result it has significantly amended the original draft of its proposed scheme.

72                  APRA considered the types and number of devices as indicative of the degree to which music was of value (par 106):

‘(a)      Tier 1 - a single radio or television reflects minimum music usage;

(b)       Tier 2 - A CD or DVD indicates a greater investment in the ability to select, programme and manage background music;

(c)        Tier 3 – Up to 4 devices and including a jukebox or multi-channel device able to deliver different music to different sections of the premises;

(d)       Tier 4 – 5 or more devices of any type, being a considerable investment in the ability to publicly perform music.’

73                  In arriving at the proposed tariffs, APRA took into account:

·        the value of music to specific business types and sizes;

·        the fact that there are businesses which are minimal music users and for which music is not integral;

·        existing APRA public performance rates; and

·        the rates and other licence terms employed by APRA’s international affiliates.

According to Mr Ormston, in arriving at pricing points, APRA took care to ensure that the increase was commensurate with the importance of music to the business.  Accordingly, so he says, it kept as low as practicable the increase to those small businesses that use a single device.  The proposed charge for a single radio or television of $66.00 (while an increase from the current tariff of $45.48) is commensurate with the current tariff of $68.31 for a single background music device (a CD or tape player) (compare [22] and Tier 1 in [27] above).  The proposed benchmark for a background music system is $110.00 per annum (see [27] Tier 2 above), which is commensurate with the current tariff for APRA’s minimum ‘Music on Hold’ scheme.

74                  Mr Ormston’s first affidavit concludes (par 116):

‘A fee based on the type of device and size of the premises is reasonable because:

(a)       the type of device used by a business is an indicator of the importance of background music to the relevant business;

(b)       the size of the premises is an indicator of the potential size of the audience that will be exposed to the background music;

(c)        a fee based on the type of device and size of premises is accepted in many comparable jurisdictions as being reasonable; and

(d)       the fee more appropriately distinguishes between different types of users of the background music.’

e. APRA’s dealings with users of background music

75                  In his second affidavit, sworn 2 November 2005, Mr Ormston states that since the reference to the Tribunal was made, APRA has reached agreement with representatives of several major sectors that use background music, namely, ‘Fitness Australia’, Clubs Australia & New Zealand, Clubs NSW, the Australian Hotels Association, and the Restaurant and Catering Association of Australia.  APRA is in the process of re-licensing all fitness and hospitality venues under the terms of the new agreed schemes.  There are in evidence copies of two ‘Background Music – Hospitality’ APRA Licence Application forms (one for ‘Hotel, Club, Motel, Tavern, Bar’, and the other for ‘Restaurant, Café’), and a copy of the application form in respect of ‘Background Music – Fitness Centres’.  However, no agreement has been reached with any organisation of retailers, or with any individual retailer.

76                  Mr Ormston gives evidence of discussions he had over a period with the Australian Retailers Association (‘ARA’) and with individual substantial retailers, David Jones Ltd, Woolworths Ltd, Just Group, and Coles Myer Limited.

77                  On 25 May 2004, ARA filed a ‘statement of points in support of [its] case’ stating, relevantly:

‘5.        ARA opposes the proposed scheme in which licence fees will be charged based on the floor size of the premises.

6.         The proposed scheme will result in ARA members paying a substantially increased amount of licence fees to APRA.

7.         In some cases, the projected increase in licence fees under the proposed scheme is in the range of 85% to 170%, with at least one member projected to pay an increase of approximately 1,750%, when compared to the present scheme.

8.         This will result in increased costs to ARA members who are licensees without any corresponding benefit or efficiencies.

9.         ARA believes that the proposed scheme will simply provide increased fees to APRA.

10.       ARA therefore submits that the proposed scheme is unreasonable and inequitable.

11.       ARA will give evidence in support of its listed points.

12.       Further, as the licence fees collected under the present scheme is indexed annually to movements in the Consumer Price Index, there is no real loss or decrease in licence fees paid to APRA.

13.       As an alternative to the APRA proposed scheme, ARA would consider supporting any change to the present scheme on efficiency grounds provided that these grounds will benefit its members who are licensees.

14.       ARA respectfully submits that the Tribunal decline to make an order confirming the proposed scheme.’

78                  On 29 August 2005, Julie Owen, the Acting Executive Director of ARA, New South Wales Division (‘ARA (NSW)’), wrote to Mr Ormston advising that ‘owing to internal issues at ARA National, the membership of the ARA consist[ed] mainly of small retailers, most of the large national retailers [were] not current members’.  Despite this, the letter advised that ARA had invested significant time and effort in an attempt to ascertain the views of the larger retailers, but that this had ‘met with minimal success’, and ha[d] led to significant time delays’.

79                  ARA (NSW) expressed opposition to the proposed scheme for reasons to which I will refer later.

80                  In meetings with representatives of David Jones Limited, Woolworths Ltd, Just Group and Coles Myer Limited, Mr Ormston stated that he knew the matter was being dealt with by ARA, but was concerned that it did not represent the larger department stores, which might not be aware of the possible ramifications of the present reference to the Tribunal.  Mr Ormston’s approach to these large retailers did not, however, result in meaningful negotiations.

81                  On 24 October 2005, Mr Ormston sent an e-mail to ARA (NSW) offering to meet with mid-size retailers, of which he forwarded a list of 15.  Ms Owen replied, indicating that only two on the list were current financial members of ARA, and that it probably made more sense for Mr Ormston himself to organise the meeting, as they were ‘even more likely to ignore correspondence from [Ms Owen] than ... from [Mr Ormston]’.

82                  It is noteworthy that in January and February 2004, bulletins notifying the first and second directions hearings before the Tribunal on the present reference were placed on APRA’s website, and any individual or organisation wishing to become a party was invited to contact the Secretary to the Tribunal.  As well, the two bulletins were emailed to numerous industry associations.

83                  On 26 October 2005, Mr Ormston visited a number of retail premises for the purpose of observing their use of music.  In his affidavit, he recounts his experience at David Jones, Elizabeth Street, Sydney; Shoe Box in the Imperial Arcade, Sydney; Jay Jays in the Imperial Arcade, Sydney; General Pants in Pitt Street Mall, Sydney; the Body Shop in Pitt Street Mall, Sydney; and Lifeglo, a supermarket in Pitt Street Mall, Sydney.

84                  On 30 October 2005, he visited Freedom Furniture, Prince’s Highway, St Leonards; Sofa Smart, Prince’s Highway, St Leonards; Macro Supermarket, Willoughby Road, Crows Nest; Coles, The Forum, St Leonards; and Bunnings Hardware, Artarmon.  The concluding paragraph in Mr Ormston’s second affidavit is as follows (par 19):

‘It is my experience that the vast majority of retailers use music in some capacity, including to ensure that there is not an uncomfortable silence when there may be few customers – such as in furniture stores, but also where there seems to have been careful consideration of the likely impact of the music on a particular demographic.’

85                  In his third affidavit (sworn 9 February 2006) Mr Ormston gives evidence of communications that he had with Mr Allan Pidgeon, the Director of Public Affairs, National Retail Association Ltd (‘NRA’), and relates developments in his dealings with ARA.

86                  Apparently NRA was formerly the Retailers Association of Queensland.  In a written submission to the Tribunal after the hearing, Mr Gary Black, the Director of Corporate Affairs of NRA, stated that members of NRA:

‘range from sole operator enterprises to national, chain, and franchise stores of all types and size throughout Australia [of which] currently some two-thirds ... are located outside Queensland.’

87                  In ‘The Retail Trader’ of November/December 2005, published by ARA, there was an article headed ‘Music madness – [APRA] seeks rate increases’, in which the author set out the present and proposed fee structure and sought ‘member input’ to enable ARA to oppose APRA’s proposed fee increases for background music.  The article referred to the change from the number of in-store devices being used to ‘customer floor space’ as the basis of licence fee calculation, and expressed opposition to the change because it did not ‘correlate to customer count or sales volume’.

88                  On 9 January 2006, Mr Ormston wrote to Ms Owen at ARA (NSW), protesting over the heading ‘Music madness – APRA seeks rate increase’.  He described the headline as ‘inflammatory’, and as not reflecting the fact that APRA had been trying to negotiate, discuss and elicit a response from the retail sector for the previous four years.  Mr Ormston referred to matters that demonstrated that in the past, negotiation had been impossible.  As well, he indicated that he would bring the article and his letter to Ms Owen to the attention of the Tribunal on the hearing.

89                  According to Mr Ormston’s letter, it was ARA, not APRA, that had first proposed premises size as a simpler measure.  In her letter of 29 August 2005 to Mr Ormiston, Ms Owen of ARA (NSW) had said that ARA was ‘committed to achieving a negotiated outcome on behalf of our current membership’.  She had complained that the new scheme would involve a fairly complex calculation, resulting in an increase in costs, which would affect smaller retailers in particular.  She had also stated that floor area did not correlate to number of listeners.  In his letter of 9 January 2006 Mr Ormston said that he presumed that most retailers would prefer not to have a licence fee based on their turnover.

90                  Later in January 2006, Mr Ormston communicated with Ms Tara Allsop, the In Store Media Manager for Coles Myer Supermarkets, a subsidiary of Coles Myer Limited, and on 17 January 2006, he met with the Coles Myer Brand Managers in Melbourne and explained to them the proposed Background Music scheme. 

91                  Mr Ormston also communicated with Mr Pidgeon of NRA, who took the position that ‘such a large increase in rates’ was not warranted by the evidence, that the proposed fee structure was ‘unnecessarily complex’, and that any increase should be phased in over three years.

92                  NRA’s final position was put to APRA in an e-mail memo from Mr Pidgeon dated 8 February 2006 (Mr Ormston’s 3^rd afft, ‘J’ p7), to which I will refer below.

93                  It should be noted that ARA ceased to take any part in the proceeding, and did not appear on the hearing, notwithstanding that it had filed its ‘statement of points’ document referred to at [77] above, and notwithstanding the course of correspondence between Mr Ormston and Ms Owen of ARA (NSW).

The evidence of Mr Morrison

94                  Richard Scott Morrison, a senior communications engineer employed by Norman Disney & Young (‘NDY’), provided affidavit evidence as to the nature and significance of audio systems in commercial buildings.  He states that sound systems range in price from about $5000 for the most basic system, with amplification, speakers and source equipment only.  Such a system would be appropriate for a small retail shop.  Large scale systems for shopping centres and airports, which incorporate digital signal processing and rerouting equipment, typically cost hundreds of thousands of dollars, and are generally installed by dedicated audio systems contractors.  The upper range of audio systems can cost ‘anywhere up to about $4 million for sound reinforcement and background music in stadiums’ (par 8).  Mr Morrison states that in a typical office fit out with an overall construction budget of $15 million to $30 million, about three per cent would usually be allocated to audio systems. 

95                  Mr Morrison gave evidence of audio systems in which the output can be controlled in separate rooms, such as a casino or large club with a gaming room, a nightclub, restaurants and public areas.

96                  Mr Morrison described an audio system which he designed for a shopping centre, and which required background music coverage, public address, wireless microphones, and the ability to incorporate ‘spruiking’.  The system was based on a digital audio platform, typical of modern shopping centres, allowing paging, music and spruiking to be controlled in numerous different zones.  The system was designed with audio level compensation for background noise, to ensure that the audio dynamically adjusted to the correct level.  The system was capable of delivering background music from CD, audio, satellite radio, and digital hard disk.  Automated announcements were provided through a digital system.

97                  Mr Morrison said that audio systems have increased dramatically in quality and flexibility over the past ten years, during which period novel methods have been invented to allow digital distribution of audio over networks and long distances without loss of quality.

98                  He stated that in retail premises such as major shopping centres, clients typically require an audio system that allows music and announcements to be communicated at different levels according to the noise levels occurring at any given time of the day, and in particular areas.  For example, a retail shopping centre may have a food court that is consistently busy throughout the average day, while in other areas the population may vary throughout the day. 

99                  According to Mr Morrison, while the cost of installing an audio system in a commercial building varies greatly, commercial clients are usually willing to spend anywhere from tens of thousands of dollars up to hundreds of thousands of dollars installing audio systems that fit their needs.  The greatest amount spent on an audio system in Australia of which Mr Morrison is aware is $3.5 million.

100               Mr Morrison stated that in his experience, most, if not all, commercial buildings constructed these days, including hotels, restaurants, commercial office fit outs and retail premises, contain an audio system of one kind or another.  

The evidence of Mr Morris

101               Scott Neil Stewart Morris, APRA’s Director of International Relations, has been employed by APRA since September 1994 and has held his present position since about July 1996.  He is the holder of several university qualifications including a Master of Laws in Information Technology, Communications and Media Law from the University of New South Wales, a Master of International Business from the University of Sydney and a Graduate Diploma in EU, UK and US Law of Copyright and Related Rights from King’s College, London.  His responsibilities at APRA include many functions in relation to APRA’s 68 international affiliate performing right societies.

102               On or about 6 July 2004 Mr Morris wrote to 17 of these societies, of which 13 responded.  The letter requested the societies to provide information in relation to the tariffs charged by those societies.  The information he received from them is exhibited to his affidavit.  Based on the information he received, Mr Morris caused a table to be created setting out, as far as is possible, a comparative analysis of the overseas tariffs for background music in the hospitality and retail industries.

103               In addition to setting out the relevant figures in the table, Mr Morris describes and analyses the tariffs charged in the following 17 countries: The United States of America; Austria; The Netherlands; Hong Kong; Singapore; Germany; India; Japan; Denmark; The United Kingdom; Belgium; France; South Africa; Canada; Sweden; Switzerland; and Norway.  What emerges is that the rates charged by APRA are very low when compared with rates being charged by affiliate oversees societies.  See the discussion of “Overseas comparisons” at [125]-[196] below.

104               Mr Morris also makes observations on the licensing of music use internationally.  In the 1990s, CISAC convened a meeting of a technical committee known as ‘Licensing and Repertoire Promotion’, which, among other things, discussed and compared parameters for setting the value of the use of music in the context of general licensing.  In a report to that committee in 1995, a group of societies operating in the European Free Trade Area (‘the EFTA Group’) observed that, in general, European tariffs for background music were calculated as flat fees and according to the size, type or seating capacity of the premises.  The basis of the assessment related to the nature of the audience, the type of use of music, and the size of audience.  Generally speaking, there were three main categories of exploitation: essential music (music used to generate revenue); ambient music (music which has an important but not an essential role in revenue generation); and background music (music which plays a secondary role and lacks a direct link to the earning of revenue). 

105               In relation to size of audience, the EFTA Group recommended calculation by reference to the place where the music is audible.  The EFTA Group proceeded on the principles that:

(a)        the larger the capacity or size of the premises, the larger the potential audience;

(b)        a fixed fee per establishment, which does not take size into account, might be too simple and give rise to inequalities; and

(c)        a reference either to the floor area or number of seats/customers is the most practical, acceptable and readily understood measure of the number of hearers of the music.

The evidence of Ms Garlin

106               Francine Virginia Garlin, a Lecturer in the School of Marketing at the University of Technology, Sydney, has sworn an affidavit in response to a retainer by APRA to identify the ‘impact and value of background music in retail and hospitality environments to businesses and their customers’.  She collaborated with Dr Kate Owen, of the same School of Marketing. They provided a report on 7 October 2004. 

107               Ms. Garlin states that consumer behaviour occurs within a context, including that of the physical environment.  The ‘physical environment’ refers to those elements that can be perceived by the individual, specifically the various concrete and spatial aspects of one’s surroundings, including background music.  Dr Garlin states that research has provided evidence that in-store music has an impact on the following variables (par 18): 

‘(a) amount and rate of spending;  (b) quantity purchased;  (c) patronage frequency;  (d)  store choice;  (e) brand loyalty;  (f) price sensitivity;  (g) purchase intentions;  (h) buyer-seller interaction/affiliation;  (i) repeat purchase;  (j) sales;  (k) quality perceptions;  (l) product evaluation;  (m) experience satisfaction;  (n) number of items examined/handled;  (o) impulse behaviour;  (p) types of items purchased;  (q) recommendation of service;  (r) time to serve customers;  (s) gross margin; and (t) service quality perceptions.’

Professor Areni’s evidence

108               Professor Charles Areni, Professor of Marketing in the School of Business at the University of Sydney, provided affidavit evidence in response to a retainer by APRA to express an opinion ‘on the use by businesses of atmospheric music to achieve commercial objectives’.  He expressed his opinion in paras 5-8 of his affidavit, and states that his opinion is based on the 35 papers, some of which were written by him, comprising Exhibit CA1 to his affidavit.  Paragraphs 5-8 are as follows:

‘5         Experimental research has demonstrated that atmospheric music affects customers’ experiences in a variety of retail and service contexts, including supermarkets, restaurants, department stores, bottle shops, telephone on-hold settings, banks, gift shops, health and fitness centres, shopping malls, health care facilities, and psychiatric care.

6          In these and other contexts, atmospheric music has been shown to influence customers’ impressions and experiences in a variety of ways.  Experimental research has demonstrated that atmospheric music influences the subjective evaluation of a business as being good or bad, specific perceptions of an establishment (whether it is up market, affordable, and has a good selection of merchandise), sales and gross margins, the amount of time customers spend shopping or waiting, estimated shopping and/or waiting time, dining speed and table turnover, customer-staff interaction, employee productivity, and perceptions of the music itself.

7          Many of these effects have been shown to affect the bottom line financial performance of the businesses tested.  For example, I conducted studies that showed in one instance that changing the format of atmospheric music in a bottle shop increased sales by 241%.  For a medium-sized bottle shop generating monthly revenues of $30,000, this would translate to an annual difference in revenues of $723,000.  For a large, national or international chain, the financial implications are quite substantial.  Milliman (1982), for instance, reported a 38.2% increase in gross margin when a supermarket changed its atmospheric music.

8          Importantly, many of the effects of atmospheric music have been linked to specific, objective characteristics of the music like volume, tempo, key, texture, style or format, familiarity …  likeableness, arousal, and complexity.  Given recent increases in the electronic availability of academic research, data storage efficiency for audio files, and the power and speed of search engines, businesses like Satellite Music Australia can sort through hundreds of thousands of songs using these variables and other search parameters to select music that fits the client’s objectives with respect to customer perception and behaviour.  In other words, using atmospheric music to achieve concrete commercial objectives is big business in Australia and around the world.  More importantly, given the recent availability of digital audio files, and software that sorts and catalogues these files on many of the aforementioned music dimensions, virtually anybody can apply the principles of academic research to various commercial environments.  In short, the systematic use of atmospheric music for commercial gain may spread to medium and small businesses in the future.’

Letters from persons affected

109               In the course of its consultations, APRA received letters from various entities commenting on the proposed licence scheme, namely, the Australian Booksellers Association, the Motor Traders Association of Australia, the Australian Dental Association Inc, the Australian Medical Association, the National Association of Retail Grocers of Australia Pty Ltd, ARA (NSW), NRA, and Coles Myer Limited.  I take into account their comments under ‘Consideration’ below.

consideration

General

110               It is important that I make some general observations at the outset.

111               (1)   No evidence has been led in opposition to the evidence adduced by APRA.  Mr Pidgeon, and, later, Mr Black of NRA, have made oral and written submissions respectively, and I have found them helpful.  Likewise, APRA has placed before the Tribunal correspondence raising objections to its proposal, and I have read all of that correspondence.  But submissions are not evidence, and correspondence is not evidence of the facts asserted in it.  By “evidence” I am referring to the “reading” of an affidavit, the deponent of which has made himself or herself available on the hearing for cross-examination, so that the effect of his or her testimony can be tested, properly understood and weighed.  Notwithstanding the widespread advertisement and notification of the present application, no one has taken the trouble to place evidence before the Tribunal in opposition to APRA’s application and to counter the evidence adduced by it.  The Tribunal must, therefore, proceed on the basis of the uncontradicted evidence led by APRA.

112               (2)   At the time of making the present reference to the Tribunal, APRA also referred to the Tribunal proposed licence schemes relating to the performance of featured recorded music and background music in the hospitality industry (CT4 of 2003), the performance of featured recorded music generally (CT7 of 2003), and the performance of background music in fitness centres (CT6 of 2003).  Two of the references were settled in late 2005 as a result of negotiations between APRA and industry representatives, namely the Australian Hotels Association, Clubs Australia and New Zealand, Clubs New South Wales, and Restaurant & Catering Australia in respect of CT4 of 2003; and Fitness Australia Incorporated in respect of CT6 of 2003.  APRA withdrew the reference in CT7 of 2003. 

113               The use to which the present proposed licence scheme relates is more diverse than that which occurs in hotels and bars or fitness centres.  The uses include small shops, doctors’ and dentists’ waiting rooms, supermarkets, shopping malls, sports stadiums and so on.  The interests of their owners vary (some owners are interested only in the rates proposed for small premises and inexpensive, simple, devices, while others may be interested only in large premises and expensive, sophisticated devices), and there is no single organisation to represent them.  This may explain why no organisation has been prepared to go to the trouble and expense of being legally represented and placing evidence before the Tribunal.

114               (3)        It is not possible to devise a scheme that will be so finely attuned to the multitude of different circumstances in which background music is performed, that ‘perfect justice’ will be achieved in all cases.  For example, there may be two retail establishments using identical devices and with identical floor areas, but one may accommodate large, expensive, space-occupying stock and few prospective customers at any one time, while the other accommodates numerous smaller, less expensive items and many prospective customers at any one time.  A motor vehicle showroom is an illustration of the former and a typical supermarket is an illustration of the latter.  While the number of hearers of background music is one important indication of a business’s exploitation of background music, and therefore suggestive of an appropriate level of licence fee, in the example just given, the number of hearers would not be exposed by a matrix structured around only kind of device and licence area.  Yet to return to the example, the profit made from the sale of one motor vehicle will exceed the profit made from the sale of many supermarket items to numerous customers.  Again, floor area does not take into account the amount of time spent by the same number of customers in different kinds of retail establishment (compare a takeaway food outlet with a dental surgery).

115               (4)   Related to (3) is the fact that confirmation of a proposed licence scheme does not indicate that the scheme is binding on proposed licensees.  As noted at [17], where a person contends that a licence in accordance with a licence scheme would, in the circumstances of the particular case, be subject to the payment of charges or to conditions that are not reasonable, the person may apply to the Tribunal, as a result of which the licensor may be required to grant a licence subject to payment of a different charge or to different conditions.

116               (5)   The written submission by Mr Black of NRA dated 30 March 2006 asserts that the proposed scheme would result in a 125 percent increase in licence fees paid by retailers, and that APRA must demonstrate a corresponding increase in the intrinsic value of music in retail premises.  More modestly and specifically, an email dated 8 February 2006 from Mr Pidgeon, also of NRA, to Mr Ormston, had stated (par 30):

‘The proposed APRA scheme for retail represents an apparent increase for the “base” (minimum) licence fee of some 65% (for a multi-channel device), 52% (for background music) and 37% for radio/TV.’

 

There have been other complaints about the amount or percentage of the increase being sought by APRA.  Coles Myer Ltd complained that ‘the proposed fee schedule would translate into a 500 percent increase over existing arrangements’, without indicating how this percentage was arrived at, or the precise class, number or proportion of users to whom it applies.

117               Annexed to an affidavit of APRA’s solicitor is a table she caused to be prepared ‘estimating to the best of APRA’s ability the percentage increase to the retail industry’ if the licence scheme were to be implemented.  That table is ‘Annexure 1’ to these reasons.  It shows the “split” as between the various floor areas within each device category.  It also shows that the current total amount of licence fees is $3,196,215 and that the amount under the proposed APRA scheme would be $7,204,175 – an increase of $4,007,960, or approximately 125%.

118               I have not found the complaints made particularly persuasive for two reasons.  Generally speaking, the complaints that have been made have been based on particular categories, but it does not assist the Tribunal if a complainant does not identify the category and attempt to show why the percentage increase for that category should be regarded as typical across the board.

119               In order to understand in detail the financial impact of the proposed scheme, it is necessary to determine its effect on each of the respective ‘device/floor area’ categories, and to know how many businesses fall within those various categories.  The exercise would be a large and complex one, but Annexure 1 at least shows the extent of the overall increase and the number of premises within the various device categories.

120               The second and more important reason to which I referred is that, while a high percentage increase might prompt questions, the possibility that the existing rates are unduly low must not be overlooked.  I do not accept that an increase can be justified only if an additional benefit is shown to be conferred on business.  I would accept that proposition only if it were first established that the existing licence scheme and licence fees reflect the true value of background music to business.  In fact, the very case APRA seeks to make is that the existing rates do not do so, and are, moreover, very low by international standards.  APRA’s case is either substantiated or it is not, but it is no answer to it simply to point to the fact that the proposed scheme would involve a substantial increase (as it in fact would).

121               Similarly, I am not assisted by a comparison between the percentage increases in the general background music rates proposed and the percentage increases that have been agreed between APRA and representatives of the hospitality and fitness industries.

122               (6)   Both NRA and Coles Myer Ltd urged that the proposed division of ‘Licensed Area’ into six categories is excessive.  Coles Myer Ltd suggested three categories.  Apparently, Mr Pidgeon of NRA raised with APRA the possibility of four categories.  APRA prepared a table illustrating a possible division into four categories.  That table is Annexure 2 to these reasons.  Mr Pidgeon reminded me that he did not prepare the table, and I do not suggest that it reflects his position.  It will be noted from Annexure 2 that some retailers would have to pay more under Annexure 2 than they would under APRA’s proposal.  I have the impression that the gravamen of Mr Pidgeon’s complaint concerned the extent of the rate increases sought by APRA, rather than the number of categories.

123               While a division into fewer categories is obviously simpler, I do not think that most proposed licensees would have any greater difficulty in perceiving which of six categories they fall within than they would have in understanding which of three or four categories they fall within.  Any difficulty would relate to ascertainment of their Licensed Area and would apply no matter how many categories were used.

124               (7)   NRA submits that overseas comparisons are unreliable, because the local circumstances are not known to be the same as those in Australia.  Often overseas comparisons are unreliable for the reason mentioned: see the recent decision of the Full Tribunal in Audio Visual Copyright Society Ltd v Foxtel Management Pty Ltd (No 4) [2006] ACopyT 2 at [144 ]–[145].  However, in the present case, I think the circumstances in which background music is performed can be taken to be generally similar to those in which it is performed in Australia.  A supermarket, shopping centre or hairdressing salon in Canada, the United States of America, the United Kingdom, France or Germany, would be generally similar, in terms of their use of background music, to such establishments in Australia.

Overseas comparisons

125               As noted at [102], Mr Morris wrote to 17 of the 68 collecting societies with which APRA has affiliation agreements.  He states that he contacted (2^nd afft par 8):

“major societies in developed countries and in countries operating under common law jurisdictions, and any of APRA’s major trading partners not included in those two categories.”

He expressed the opinion that the tariffs of such societies would provide the best comparison with APRA’s existing and proposed Background Music tariffs.  That opinion was based on his experience in working for APRA since 1996.  I have no reason to doubt his opinion.

126               Mr Morris also explained that there are many collecting societies operating in developing countries, where tariffs are “not sophisticated” and resources are limited.  He said that, in his experience, such societies have difficulty in responding to requests from larger societies for assistance with documents for litigation, and that even if documents can be produced in a timely fashion, they often do not provide a useful comparison with the tariffs in developed countries.

127               In his evidence, Mr Morris discusses the position in 17 countries.  Omitted is Italy, which was one of the 13 countries that replied to APRA, but included are Hong Kong, India, Denmark, Canada and Norway – five countries to which APRA’s letter of inquiry was not sent.  The omission of Italy and the inclusion of these five further countries brought the number of countries back to 17.  It should be noted that in the United States of America, there are three relevant collecting societies.

128               The position may be illustrated in the following table:

129               Three countries call for special mention: Italy, Spain and Switzerland. 

130               APRA received from the Italian collecting society a bundle of untranslated documentary information giving rates for various kinds of background music.  However, it did not receive English versions or a copy of a “head agreement” that was referred to in the information supplied.  Mr Morris said that as a result it was difficult to determine the bases of the licences and repertoires included.

131               Mr Morris downloaded from the websites mentioned by the Spanish collecting society 21 tariffs that he thought might be relevant, but did not have them translated.  I do not think it necessary that they be translated in view of the clear position revealed by the other evidence to which I refer below.

132               The rates for Switzerland are not reproduced in the table of rates annexed to Mr Morris’s affidavit (see below), although they are contained in the exhibit to the affidavit, and are discussed in the text of the affidavit.  In the discussion below, I have omitted Switzerland because of lack of data and because it is not clear that the information relating to it can be satisfactorily compared with APRA’s proposed scheme.  Mr Morris states that the Swiss and Spanish collecting societies control repertoires of works other than musical works that are licensed together, so that the same single tariff might be in respect of performance of both musical works and audio visual works, and sometimes, the mechanical reproduction of such works.

133               The omission of Switzerland from the 17 countries referred to above reduces the number to 16. 

134               Annexure 3 to these reasons is a copy of a table, caused to be produced by Mr Morris, of the tariffs charged in the 16 countries, converted into Australian dollars (as at 13 August 2004).

135               Most of the international rates referred to in the table were last negotiated in 2004.  Some were last negotiated in 2003 and some even in 2002 (India).  One (Canada) was last negotiated in 2004/2005.

136               I set out below a summary analysis of the overseas rates followed by individual comparisons between the proposed APRA scheme and the overseas schemes.  For convenience, I will henceforth refer to the proposed APRA scheme simply as “the APRA scheme”.

Summary of analysis of overseas comparisons

1.         The APRA scheme would still be far less costly to licensees than the overseas schemes

137               The APRA scheme is generally less expensive for licensees than its 16 international counterparts.

138               Ten of the schemes surveyed are more expensive across the board, namely, those in the USA, Austria, the Netherlands, Hong Kong, Singapore, Denmark, the UK, Belgium, Norway and Sweden.  This is also true of the French and Canadian schemes, with one qualification: the rates for their 50 sqm category are lower than the comparable rates in the APRA scheme.  Accordingly, it can be said that in 12 of the 16 overseas countries (including France and Canada) the rates charged are higher than those of the APRA scheme.

139               The disparity between the APRA scheme and each of these 12 schemes is, in many cases, substantial.  For example, at the 1500 sqm mark, the US and Danish rates are about 7.5 times higher than the APRA rate.

140               The schemes in Germany and India are neither more nor less costly than the APRA scheme, but the rates differ in relation to the category of floor area concerned.

141               Only two of the 16 schemes are less expensive than the APRA scheme: those in Japan and South Africa.  The South African rates are remarkably low, the 50 sqm rate being not quite half of the equivalent rate under the existing APRA scheme and a little less than one third of the rate under the APRA scheme.  However, these two schemes are atypical.

2.         The disparity between the APRA scheme and the overseas schemes generally increases as the floor area increases, but dips slightly at the 2000 sqm mark

142               Generally speaking, the APRA rates most closely resemble the overseas rates in relation to smaller floor areas, that is, the difference between the APRA and the overseas rates is smaller at that level. However, for middle-sized areas, the APRA rates are (in many cases) much lower.  The largest floor areas fall somewhere in between.

143               For most schemes, the disparity between the APRA and the overseas rates increases as floor area increases, with the exception of the final category of 2000 sqm, where the gap between APRA and the international schemes narrows slightly.

144               Of course there are exceptions.  For instance, as mentioned above, the French and the Canadian schemes are less expensive than the APRA scheme in respect of the rates for 50 sqm floor areas, but are more expensive at all other levels.

3.         The difference between the highest and lowest rates under the APRA scheme is relatively small

145               Under the APRA scheme, the rate for a 2000 sqm floor area is five times that for a 50 sqm area. This margin is small in comparison to most of the overseas schemes.  Indeed, only the schemes operative in the USA, the Netherlands, Germany and Japan have a smaller margin between their highest and lowest rates.

146               Under some schemes the margin is far greater than that under the APRA scheme. For instance, in France the rate for the largest area is 22.75 times greater than that for the smallest area, and in Canada the 2000 sqm rate is 26.03 times the 50 sqm rate.

147               This aspect of the APRA scheme suggests that perhaps the APRA scheme is more favourable to big businesses than to smaller businesses.

148               Along the same lines, these figures (in combination with the conclusions drawn above as to the floor areas in respect of which the greatest disparity exists between the APRA rates and the international rates) may suggest that, if anything, the 50 sqm rate is comparatively high compared to APRA’s other rates.  This is not to say, however, that the 50 sqm rate is high compared to the 50 sqm rate in schemes in other countries: indeed, the APRA rate at 50 sqm is still generally lower than the equivalent rate in the overseas schemes under consideration.

Individual comparisons between the APRA scheme and the overseas schemes

1.  ASCAP, BMI and SESAC (USA)

149               There is no single “USA scheme”.  Mr Morris says that, to provide an accurate comparison with the APRA scheme, the rates for the three USA schemes must be tallied.

150               As under the proposed Australian scheme, the rate for floor areas of 50 sqm and 100 sqm are the same. These rates in the USA are, however, 6.4 times greater than those under the APRA scheme.  This disparity remains substantial as floor size increases: at 200 sqm, the US rates are 5.98 times greater; at 500 sqm, 6.14 times greater; at 1500 sqm, 7.46 times greater; and at 2000 sqm, 4.79 times greater.

151               Interestingly, the disparity is greatest where the floor area is 1500 sqm, but is at its smallest in relation to the 2000 sqm rate (the largest floor area provided for). At either end of the scale, however, the difference is unquestionably large.

152               It is noteworthy that the rate payable at 2000 sqm under the APRA scheme is five times that at 50 sqm, whereas under the US scheme(s), the rate at 2000 sqm is only 3.74 times that at 50 sqm.  As mentioned above, the USA scheme is one of only a few that are, in this respect, more favourable to large businesses than small ones.

2.  AKM (Austria)

153               The disparity between the rates payable under the Austrian scheme and the APRA scheme is not great in relation to smaller floor areas but increases as floor area increases, until the 1500 sqm rate is reached, when the disparity begins to decrease. At 50 sqm, the rate under the Austrian scheme is 1.28 times greater, at 100 sqm the Austrian rate is 2.56 times greater; at 200 sqm, 3.2 times greater; at 500 sqm 4.98 times greater; at 1500 sqm 4.69 times greater; and at 2000 sqm it is 3.93 times greater.

154               There is a significant difference between the rates payable in Austria for large and small floor areas (the rate payable for 2000 sqm is 15.34 times the rate at 50 sqm).  3.  BUMA (The Netherlands)

155               The Netherlands scheme, like the Austrian scheme, is one in which the rates are substantially greater than those under the proposed APRA scheme.  However the difference between the two schemes is more marked in relation to the middle-sized floor areas. The difference is least obvious in relation to the largest floor areas.

156               At 50 sqm and 100 sqm, the BUMA rate is 2.81 times the APRA rate; at 200 sqm, 3.52 times the APRA rate; at 500 sqm, 3.91 times the APRA rate; at 1500 sqm, 2.81 times the APRA rate; and at 2000 sqm, 1.97 times the APRA rate.

157               The rate in relation to the largest area is only 3.5 times the rate applicable in relation to the smallest area.

4.  CASH (Hong Kong)

158               The Hong Kong rates are higher than the APRA rates, but the difference between the two schemes is most obvious at the higher levels (particularly, the middle-sized  floor areas), and least obvious at the lower levels.

159               At 50 sqm, the Hong Kong rate is 2.12 times the APRA rate; at 100 sqm, 2.63 times the APRA rate; at 200 sqm, 4.18 times the APRA rate; at 500 sqm, 5.85 times the APRA rate; at 1500 sqm, 7.09 times the APRA rate; and at 2000 sqm, 5.03 times the APRA rate.

160               The rate for the largest floor area in Hong Kong is 11.87 times the rate for the smallest floor area, which is substantially greater than the difference between the rates for the largest and smallest floor area under the APRA scheme.

5.  COMPASS (Singapore)

161               Again, the Singaporean rates are higher than the APRA rates, and the disparity is most marked in relation to the larger floor areas, with the exception of the rate for the largest floor area given.

162               At 50 and 100 sqm, the Singaporean rate is 1.44 times the APRA rate; at 200 sqm, 1.26 times the APRA rate; at 500 sqm, 1.82 times the APRA rate; at 1500 sqm, 3.05 times the APRA rate; and at 2000 sqm, 2.42 times the APRA rate.

163               The rate for the largest floor area under the Singaporean scheme is 8.42 times the rate for the smallest floor area.

6.  GEMA (Germany)

164               The German scheme is less expensive than the APRA scheme in relation to some floor areas, but more expensive in relation to others.  The rates are lower in Germany for the smallest and largest floor areas, but higher for the middle-sized areas.

165               At 50 and 100 sqm, the German rate is 95.51% of the APRA rate; at 200 sqm, 1.44 times the APRA rate; at 500 sqm, 1.28 times the APRA rate; at 1500 sqm, 1.12 times the APRA rate; however, at 2000 sqm, the German rate is only 77% of the APRA rate.

166               The rate for the largest floor area under the German scheme is 4.01 times the rate for the smallest floor area under that scheme.

7.  IPRS (India)

167               As with the German scheme, it is difficult to say whether the Indian scheme is more or less expensive than the APRA scheme – it depends on the floor area being compared. The Indian scheme is much less expensive than the APRA scheme for the four smallest floor areas, but more expensive than the APRA scheme in relation to the larger floor areas. The gap between the cost of the two schemes decreases as the area increases, until the Indian rates overtake the APRA rates.

168               At 50 sqm, the Indian rate is only 26.36% of the APRA rate; at 100 sqm, 41.53% of the APRA rate; at 200 sqm, 54.38% of the APRA rate; and at 500 sqm, 79.1% of the APRA rate. However, at 1500 sqm, the Indian rate is 1.32 times the APRA rate; and at 2000 sqm, it is 1.06 times the APRA rate.

169               The rate for the largest floor area in India is twenty times the rate for the smallest floor area – although this would appear to have more to do with the very low rate for the smallest floor area than the rate in relation to the largest floor area.

8.  JASRAC (Japan)

170               Unusually, the rates under the Japanese scheme are standard across the four smallest floor areas, and for the largest two floor areas. The Japanese rates are much lower across the board than the APRA rates, and very much lower in relation to the middle-sized floor areas.  This is unusual as these are the floor areas in relation to which the APRA rates are generally at their lowest in comparison to overseas rates.  The anomaly seems to be due to the fact that the Japanese rates do not rise in as many increments as the APRA rates do. That is, the same rate is payable under the JASRAC scheme for all floor areas up to and including 500 sqm, whereas the APRA rates increase at 200 sqm and again at 500 sqm.

171               At 50 sqm and 100 sqm, the Japanese rate is 65.45%% of the APRA rate; at 200 sqm, 54.55% of the APRA rate; and at 500 sqm, only 36.36% of the APRA rate. At 1500 sqm, the difference narrows slightly, the Japanese rate being 72.73% of the APRA rate; but at 2000 sqm, the Japanese rate is only 43.64% of the APRA rate.

172               The rate for the largest floor area in Japan is 3.33 times the rate for the smallest floor area.

9.  KODA (Denmark)

173               The rates under the Danish scheme are standard across the three smallest floor areas. At 50 sqm and 100 sqm, the Danish rate is 3.62 times that proposed by APRA; at 200 sqm, 3.02 times the APRA rate; at 500 sqm, 4.17 times the APRA rate; at 1500 sqm, 7.51 times the APRA rate; and at 2000 sqm, six times the APRA rate.

174               The disparity here is clear, and, again, the disparity in rates increases as the floor size does, except so far as the rate for the largest floor area is concerned – the gap decreases slightly at this level.

175               The rate for the largest floor area in Denmark is 8.3 times the rate for the smallest floor area.

10.  PRS (UK)

176               Again the UK rates are far higher than the APRA rates, with the gap between schemes greater as floor size increases, except for the last category of floor space.

177               At 50 sqm and 100 sqm, the UK rate is 2.33 times the APRA rate; at 200 sqm, 2.92 times the APRA rate; at 500 sqm, 3.24 times the APRA rate; at 1500 sqm, 3.5 times the APRA rate; and at 2000 sqm, 2.57 times the APRA rate.

178               The rate for the largest floor area in the UK is 5.5 times the rate for the smallest floor area.

11.  SABAM (Belgium)

179               As with the previous two schemes, the Belgian rates are far higher than the APRA rates, the more so as floor size increases, with the exception of the 2000 sqm rate, which marks a slight drop.

180               At 50 sqm and 100 sqm, the Belgian rate is 2.63 times the APRA rate; at 200 sqm, 3.42 times the APRA rate; at 500 sqm, 4.27 times the APRA rate; at 1500 sqm, 4.79 times the APRA rate; and at 2000 sqm, 3.32 times the APRA rate.

181               The rate for the largest floor area in Belgium is 6.32 times the rate for the smallest floor area.

12.  SACEM (France)

182               With one exception, the rate for the smallest floor area, 50 sqm, the French rate exceeds the APRA rates, but by a smaller percentage than do most of the other overseas rates.

183               At 50 sqm, the French rate is 52.8% of the APRA rate, however, at 100 sqm, the French rate is 1.06 times the APRA rate; at 200 sqm, 1.76 times the APRA rate; at 500 sqm, 1.67 times the APRA rate; at 1500 sqm, three times the APRA rate; and at 2000 sqm, 2.4 times the APRA rate.

184               The rate for the largest floor area in France is 22.75 times the rate for the smallest floor area, which is unsurprising given the low the starting rate of $58.08.

13.  SAMRO (South Africa)

185               The South African scheme is the only other scheme that is less costly than the APRA scheme at every level. The gap between the two schemes narrows as floor size increases, except at 2000 sqm, at which the APRA rate is almost double the South African rate.

186               At 50 sqm, the South African rate is 30.42% of the APRA rate; at 100 sqm, 37.08% of the APRA rate; at 200 sqm, 68.81% of the APRA rate; at 500 sqm, 66.95% of the APRA rate; at 1500 sqm, 71.07% of the APRA rate, and at 2000 sqm, 51.91% of the APRA rate.

187               The rate for the largest floor area in South Africa is 8.53 times the rate for the smallest floor area

14.  SOCAN (Canada)

188               As with the French scheme, the Canadian scheme is more expensive than the APRA scheme except at the 50 sqm level.  The same pattern of increasing disparity up to, but not including, the 2000 sqm category applies.

189               At 50 sqm, the Canadian rate is 93.31% of the APRA rate; at 100 sqm, 1.21 times the APRA rate; at 200 sqm, 2.02 times the APRA rate; at 500 sqm, 3.37 times greater than the APRA rate; at 1500 sqm, 6.07 times the APRA rate; and at 2000 sqm, 4.86 times the APRA rate.

190               The rate for the largest floor area in Canada is 26.03 times the rate for the smallest floor area.

15.  STIM (Sweden)

191               As with most other schemes, the Swedish rates exceed the APRA rates, increasingly as floor size goes up, except at the 2000 sqm level, where there is a slight drop. Unusually, there is also a slight narrowing of the gap at 200 sqm.

192               At 50 and 100 sqm, the Swedish rate is 1.86 times the APRA rate; at 200 sqm, 1.55 times the APRA rate; at 500 sqm, 3.18 times the APRA rate; at 1500 sqm, 5.1 times the APRA rate; and at 2000 sqm, 4.02 times the APRA rate.

193               The rate for the largest floor area in Sweden is 10.82 times the rate for the smallest floor area.

16.  TONO (Norway)

194               The Norwegian scheme is also more expensive than the APRA scheme, increasingly as floor size increases, except at the 2000 sqm rate.

195               At 50 and 100 sqm, the Norwegian rate is 1.1 times the APRA rate; at 200 sqm, 1.88 times the APRA rate; at 500 sqm, 3.18 times the APRA rate; at 1500 sqm, 5.77 times the APRA rate; and at 2000 sqm, 4.62 times the APRA rate.

196               The rate for the largest floor area in Norway is 20.98 times the rate for the smallest floor area.

RESULT

197               No evidence has been led in contradiction of the evidence adduced by APRA.

198               On the evidence over all, the rates provided for in the proposed APRA scheme are much lower than comparable rates charged in respect of the performance of background music overseas in similar circumstances and establishments.

199               This fact, and the more sophisticated use made of background music today, at least by larger businesses, establishes a case for a substantial increase in rates above those being charged under the existing APRA scheme.

200               I am satisfied that the “device/floor area” measure is a generally, though not universally, appropriate measure of the benefit of the licence to licensees.  By providing an approximate indication of the significance of background music for the particular business, the ‘kind of device’ parameter can be expected also to reflect, appropriately, the uses made of background music by large and small businesses.

201               The division of floor area into six categories is also appropriate.  The greater the number of categories, the more finely tuned and “just” the regime is likely to be for licensees.  In terms of administrative convenience for intending licensees, the difference between six categories and three or four is virtually nil.

202               The new licensing scheme should be phased in.  Although four years was suggested by NRA, I think three years is appropriate, but beginning not before 1 January 2007.

203               The only question that has concerned me is whether the rates for the smaller areas should be lower and those for the larger areas higher; that is to say, whether the “spread” of rates should be greater.  However, on careful consideration, I do not think the rates proposed should be disturbed.  As has been demonstrated, the rates applicable in relation to small businesses (namely, the 50 sqm rate) are still inexpensive as compared to the 16 of APRA’s affiliate societies surveyed above.  Further, although the margin between the rates payable by the largest (2000 sqm and above) and smallest (50 sqm and below) businesses is comparatively low, there is an even smaller margin in respect of the rates of one-quarter of the international societies referred to above.

CONCLUSION

204               There will be directions for APRA to bring in draft short minutes of orders to give effect to the foregoing reasons.

I certify that the preceding two hundred and four (204) numbered paragraphs are a true copy of the Reasons for Decision herein of the Copyright Tribunal constituted by Lindgren P.

 

 

Associate to the President:

 

Dated:                                                                                      29 September 2006

 

 

 

Counsel for the Applicant:

(Australasian Performing Right Association Ltd)                        Mr D K Catterns QC

Solicitors for the Applicant:                                                       Banki Haddock Fiora

Director of Public Affairs of National Retail

Association Ltd:  (written submissions by Gary Black,

Director of Corporate Affairs)                                       Mr Allan Pidgeon

Date of Hearings:                                                                      10 February, 30 August and

22 September 2006

Date of Judgment:                                                                     29 September 2006

ANNEXURE 1

APRA’s estimate of percent increase to the retail industry

Background Retail	Current Total Licence Value	Approx. Number of Premises**	Proposed Categories	Device Parameters	Number^	Tier Split %	Parameters Size m2					Size Split % (#)					Proposed Licence Value	Licence Value Variance $	Licence Value Variance %
							<150	150-499	500-999	1000-1999	2000-4999	<150	150-499	500-999	1000-1999	2000-4999
General Retail *	$3,196,215	34,000	Tier 1	1 device – Radio or TV	8,500	25%	$66	$77	$110	$165	$308	50%	20%	15%	10%	5%	$822,800
			Tier 2	1 device – Background Music System	17,000	50%	$110	$132	$198	$330	$550	50%	20%	15%	19%	5%	$2,917,200
			Tier 3	1-4 devices and/or multi channel device of up to 4 streams and/or audio/video jukebox/large audio screen	5,100	15%	$176	$253	$374	$572	$935	50%	20%	15%	10%	5%	$1,523,115
			Tier 4	5 or more devices and/or multi channel device of up to 4 streams and/or audio/video jukebox/large video screen	3,400	10%	$330	$495	$726	$1,100	$1,760	50%	20%	15%	10%	5%	$1,941,060
Sub-totals	$3,196,215	34,000				100%											$7,204,175	$4,007,960	125%

 

 

Notes:                           *       General Retail includes: all forms of retail, hair/beauty, background music suppliers, professional services, supermarkets, shopping centres

      **     Some licensees hold multiple premises and APRA’s current system is unable to report on the exact number   of premises covered by a licence

 

Assumptions:              ^       Number of premises in each tier is approximate

                                      (#)     The number of businesses within each size tier is approximated.  There is no estimate for the number of businesses greater than 4999m².

 

ANNEXURE 2

Possible four categories (rather than six)

RETAIL AND GENERAL
	Size (m2)
DEVICE	Less than 300m²	300-1999m²	2000-4999	5000+	Licensable Area (m²)	Total $
1 Device – Radio or TV (TVs used to show video/DVD, free to air TV, and subscription TV)	$88	$165	$330	$550
1 Device – Background Music System (CD players, tape players ...)	$110	$330	$550	$1,100
1–4 Devices (including multi channel devices of up to 4 streams and/or jukebox)	$250	$450	$900	$1,400
5 or more Devices (including multi channel devices of 5 or more streams and/or jukebox)	$550	$1,800	$3,600	$4,500
					TOTAL	$

ANNEXURE 3

General Performance Tariffs Comparison – Converted to AUD$ (as at 13 August 2004)

TARIFF	APRA (current)	APRA (proposed)	ASCAP (USA)	BMI (USA)	SESAC (USA)	USA TOTAL	AKM (Austria)	BUMA (Netherlands)	CASH (Hong Kong)	COMPASS (Singapore)
1.    EATING & DRINKING        ESTABLISHMENTS	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
1.1  Cafe/Restaurant 50 sqm 100 sqm 200 sqm 500 sqm 1,500 sqm 2,000 sqm	$68.31 68.31 68.31 68.31 68.31 68.31	$132.00 132.00 154.00       -       -            -	$421.21 421.21 610.47 977.60 2,084.70 2,276.80	$377.83 377.83 377.83 807.22 2,421.65 3,228.86	$182.78 182.78 182.78 237.34 673.82 830.68	$981.81 981.81 1,171.07 2,022.15 5,180.16 6,336.34	$78.03 78.03 78.03 328.54 896.05 1,123.05	$729.12 729.12 1,038.46 1,966.49 5,059.89 6,606.59	$123.29 260.72 521.44 1,084.93 2,699.70 3,498.68	$158.15 221.65 320.17 504.88 1,120.59 1,428.45
1.2  Bar 50 sqm 100 sqm 200 sqm 500 sqm 1,500 sqm 2,000 sqm	$68.31 68.31 68.31 68.31 68.31 68.31	$132.00 132.00 154.00       -       -            -	$421.21 421.21 610.47 977.60 2,084.70 2,276.80	$377.83 377.83 377.83 807.22 2,421.65 3,228.86	$182.78 182.78 182.78 237.34 673.82 830.68	$981.81 981.81 1,171.07 2,022.15 5,180.16 6,336.34	$78.03 78.03 78.03 328.54 896.05 1,123.05	$729.12 729.12 1,038.46 1,966.49 5,059.89 6,606.59	$123.29 260.72 521.44 1,084.93 2,699.70 3,498.68	$184.71 357.10 640.33 1,379.24 3,891.50 5,467.83
1.3  Pub 50 sqm 100 sqm 200 sqm 500 sqm 1,500 sqm 2,000 sqm	$68.31 68.31 68.31 68.31 68.31 68.31	$132.00 132.00 154.00       -       -            -	$421.21 421.21 610.47 977.60 2,084.70 2,276.80	$377.83 377.83 377.83 807.22 2,421.65 3,228.86	$182.78 182.78 182.78 237.34 673.82 830.68	$981.81 981.81 1,171.07 2,022.15 5,180.16 6,336.34	$78.03 78.03 78.03 328.54 896.05 1,123.05	$729.12 729.12 1,038.46 1,966.49 5,059.89 6,606.59	$123.29 260.72 521.44 1,084.93 2,699.70 3,498.68	$184.71 357.10 640.33 1,379.24 3,891.50 5,467.83
1.4  Jukeboxes         Tariff	$127.70	$220.00	$375.67	$377.83	$150.04	$903.54	$327.53	$729.12	$277.37	$337.38
Tariff last negotiated			2004	2004	2004	2004	2004	2004	2003	2003
2.  RETAIL 50 sqm 100 sqm 200 sqm 500 sqm 1,500 sqm 2,000 sqm	$68.31 68.31 68.31 68.31 68.31 68.31	$110.00 110.00 132.00 198.00 330.00 550.00	$261.83 261.83 261.83 261.83 261.83 261.83	$241.41 241.41 326.62 752.64 1,888.70 2,059.12	$200.51 200.51 200.51 200.51 310.99 310.99	$703.75 703.75 788.96 1,214.98 2,461.53 2,631.95	$140.86 281.52 422.39 985.84 1,549.29 2,161.38	$309.34 309.34 464.02 773.38 928.05 1,082.73	$233.13 288.81 551.88 1,158.77 2,338.06 2,768.33	$158.15 158.15 165.99 360.32 1,008.08 1,331.96
Tariff last negotiated			2004	2004	2004	2004	2004	2004	2003	2003

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