Music Licensing Mayhem: How Will Fees Affect YOU?

Recent rulings and hearings about the cost of playing music in fitness facilities could have worldwide implications.

In May 2010, the Copyright Tribunal of Australia handed down a ruling regarding the use of original-artist music in group exercise classes. This ruling raises the license fee from just under a dollar per class to approximately $15 per class--a 1,500% increase (FIC 2010).

What is the meaning of the ruling? Who's affected by it? What are the implications for music use in classes in other parts of the world?

Australia: The Ruling

In a legal struggle that pitted the fitness industry against the music industry, the tribunal awarded significant fee increases to the Phonographic Performance Company of Australia (PPCA). This means that clubs must pay higher rates to play music in group fitness classes. According to the tribunal's ruling, "Without (recorded music) the classes would not function in the manner in which . . . attendees have come to expect. In the Tribunal's view, the amount currently being paid (96.8 cents per class) does not reflect this essential nature of music in classes. The Tribunal believes that it is appropriate that users of recordings in fitness classes should pay an amount that reflects the value of music to such classes" (Copyright Tribunal of Australia 2010).

In a phase-in schedule put out by the PPCA, fitness facilities will pay $5 per class in January 2011; $7.50 per class in July 2013; $10 per class in July 2014; $12.50 per class in July 2015; and finally $15 per class beginning in July 2016 (Fitness Australia 2010).

Until the outcome of an appeal filed by Fitness Australia is known, these fees will be collected and held in a “suspense” account, to be paid to the PPCA or refunded to the fitness facilities accordingly (Fitness Australia 2010).

While this may appear to be a large jump in fees, Lindy Morrison, a drummer and PPCA Board member, says it “demonstrates that the license fees paid for the use of recorded music in gyms were inadequate and did not reflect the value of the music.” In contrast, Ryan Hogan, membership and sales manager for the Australian Fitness Network in Sydney, says that “for most facilities the new cost is simply not possible to absorb. Anecdotally, 85% of health clubs have moved over, or are in the process of moving over, to using license-free music. Club owners have so far been happy to transition over to license-free music, as it actually saves them money. Instructors are obviously the ones most attached to their music, as it tends to have emotional [hooks] for them.”

Implications. Instructors in Australia may no longer use the music they have collected over the years, if the original artists perform that music. For other countries, that sets a precedent. “In future cases around the world,” suggests Hogan, “lawyers can point to the Australian ruling and state that it sets precedent for what health clubs should pay."

New Zealand: The Negotiation

In New Zealand, there are two licensing bodies (one for composers, one for performers) that collect license fees for music played in public performances: Phono graphic Performances New Zealand (PPNZ), operating on behalf of artists in New Zealand; and the Australasian Performing Right Assoc - iation Limited (APRA), operating on behalf of composers in both New Zealand and Australia. At the time of this writing, Fitness New Zealand, the “voice of the fitness industry,” was negotiating with PPNZ for tariffs (fees) for 2010 and beyond.

Although Fitness New Zealand is supporting the appeal in Australia (including financially) and has a stake in the outcome, it is not a party to any lawsuits regarding tariffs. According to Richard Beddie, Christchurch-based chief executive officer of Fitness New Zealand, “The Australian ruling will likely flow on to APRA quickly and PPNZ eventually. We are hopeful that the new tariff/license will be set at a rate that [will allow] the vast majority of clubs to continue to use original music. The rates that are likely to be set will be significantly lower than [those set in] Australia; however, the threat of massive increases in fees has not gone away for us, or the rest of the world.”

Implications. A July 2010 position paper put out by Beddie states, “APRA have agreed with both Fitness Australia and Fitness New Zealand to hold off any tariff increases until after the appeal has been heard. While playing certain nonoriginal music (i.e., covers) avoids PPNZ fees, APRA fees are payable in every case, even for background (music). It is therefore of much concern if APRA sets its fees even close to those of PPCA.” In other words, what started in Australia will have a ripple effect in other countries.

Canada: The New Tariff Decision

In June 2007, Re:Sound, which licenses recorded music for public performance, broadcast and new media in Canada, filed a proposed inaugural tariff with the Copyright Board of Canada, requesting payment of fees by fitness venues to compensate artists and record companies for use of their recorded music. The proposed tariff (Tariff 6) would apply to the period January 1, 2008, through January 1, 2012 (Re:Sound 2010).

According to Maureen Hagan, vice president of operations for GoodLife Fitness How Will Fees Affect YOU? by Alexandra Williams, MA music licensing mini feature_Idea Template Columns 1/4/11 11:31 AM Page 61 62 February 2011 IDEA Fitness Journal Clubs, London, Ontario, this tariff would apply to all music performed in a fitness facility, both in group fitness classes and in the gym area.

“The initial published tariff was $3 per class and 5% of gross receipts, says Hagan. “However, prior to the hearing (which took place in May 2010), Re:Sound put forward a revised proposed tariff calculated at $18.59 per member per annum. GoodLife Fitness and Fitness Industry Council of Canada (FIC) actively intervened in the proceedings before the Copyright Board of Canada.”

The decision is expected to be made in the first quarter of 2011 (as of publication there were no new developments) but could take as long as 12 months from the May 2010 hearing date. If the Copyright Board certifies Tariff 6, the board will determine the rate structure based on its assessment of the evidence presented at trial by GoodLife/FIC and Re:Sound. In its explanation of Tariff 6, Re:Sound put forth two arguments in favor of the fees: “it is only fair that artists are equitably remunerated for the public performance of their music and the value it provides” and “currently, fitness venues pay nothing to [performers] for the recorded music they play, even though the use of music provides significant value to these businesses” (Re:Sound 2010).

GoodLife and FIC were granted permission by the Copyright Board to be an “intervenor” in the evaluation and approval process, which gave them the right to file evidence and pose questions regarding Tariff 6. “We don’t want a tariff that will bankrupt our industry,” emphasizes Brian Gilbank, executive director of FIC in Edmonton, Alberta. “We support SOCAN’s Tariff 19 [currently, an annual fee for each room in which performances take place of $2.14 multiplied by the average number of participants per week in the room, with a minimal annual fee of $64, levied on behalf of composers and music publishers, not performers], and we have made a counterproposal regarding the Re:Sound Tariff 6 as to what we feel is a fair amount. They (Re:Sound) just want to make up the revenue that’s been lost over the past few years (i.e., CD or download sales) by going after any industry that plays music in public,” says Gilbank. If Tariff 6 (for artists and record companies) is implemented, Tariff 19 (For composers and music publishers) will remain in place.

Although the FIC is awaiting the ruling on Tariff 6 with optimism, they are closely monitoring it and considering alternatives. States Gilbank: “If necessary, we’ll appeal the ruling or go forward with alternatives such as royalty-free music. We support a fair tariff.”

Implications. David Hardy, founder and president of FIC and an International Health, Racquet & Sportsclub Assoc - iation board member, wrote his opinion in July 2009: “The proposed tariff could increase the cost of playing music in fitness clubs by over 3,000%, retroactive to January 1, 2008. Even moderately sized clubs could be facing bills in the tens of thousands of dollars.”

Europe: Neighboring Rights

Raymond Muylle of Antwerp, Belgium, former owner of Multitrax Music (fitness music), has this to say: “In Europe, if you perform music publicly, you need to have a license, although you are not obliged to have it from the music society in your country of residence. The fees vary from country to country. So you can shop around within the European Economic Union (EEU) and find the least expensive one. In the EEU, neighboring rights were agreed to in the Maastricht Treaty in the 1990s (although some countries had a law already in place prior to the treaty). For example, if a facility in France does not like the fees they are paying to the French music society, they can apply for a Belgian license and cannot legally be refused.”

Implications. Muylle believes the “European music societies are watching the situation in Australia closely in the hope of being able to increase their income.”

United States: The Future Is Coming

Muscle Mixes Music of Orlando, Florida, has been a fitness music business since 1988, run by president and founder Denise Imbesi. “The United States is one of just a few countries in the world that is not part of the Rome Convention, a treaty that passed regulations requiring that music fees be paid to the performing artist when music is played in a public place. In the U.S., only the composer of the work receives ‘public performance fees,’ while in countries such as Australia, both the artist and the composer are paid. Therefore, the recent increase in these fees in Australia has so far not legally affected us at all.”

Implications. Jan Schroeder, PhD, a professor in the kinesiology department at California State University, Long Beach, has conducted numerous industry surveys. “The fees that may be imposed on the industry could radically change the use of music in fitness facilities. Clubs may choose to use cover versions of songs, as opposed to original artists, to avoid paying fees. The sole use of cover versions would have the greatest impact on instructors who have spent a great deal of money building their music libraries with original artists. The effect on members’ exercise motivation or enjoyment remains unclear: while research has shown that music lowers a person’s rating of perceived exertion and may improve performance, little research has been conducted on the comparison of original-artist to cover versions. Current results show that the type of music (motivational or oudeterous [music that is neutral; neither motivating nor demotivating]; preselected or self-selected) has little bearing on enjoyment and performance.

Companies like Muscle Mixes that specialize in cover versions of songs have seen sales affected. “As soon as the ruling came out,” explains Imbesi, “our sales increased by 300% overnight in Australia. We are currently developing an ‘Aussie’ CD series to accommodate the specific needs of that region.”

Although the Australian ruling has so far not had a legal impact in the U.S., Imbesi sees the potential for that to occur. “It’s possible that within the next 5 years, the U.S. may sign the Rome Convention as a way to earn more money, since the record industry has financially suffered so much over the last years with the popularity of digital downloads and lower album sales.”

Hardy is emphatic in his concerns about the Implications of the rulings abroad. “If passed, the Performance Rights Act will mean U.S. industry groups will look to where royalty rates have already been established. And we can be sure that Canadian and Australian rates will be used as reference points by the U.S. Copyright Arbitration Royalty Panel and U.S. industry groups during any negotiations. U.S. performance artists do not currently receive royalties; therefore they are eager to support organizations like Re:Sound and Australia’s PPCA. This is a global fight for fitness.”

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Alexandra Williams, MA

IDEA Author/Presenter
Alexandra Williams, MA, is a contributing editor for IDEA Fitness Journal.
References
Beddie, R. 2010. Important industry update—music licensing.

Fitness New Zealand. http://cms.ihrsa.org/index.cfm?fuseaction=Page.viewPage&pageId=18809; retrieved

Oct. 15, 2010.

Copyright Tribunal of Australia. 2010. www.copyrighttribunal.gov.au/decisions/index.html; retrieved Oct. 15,

2010.

Fitness Australia. 2010. New start date for PPCA tariff.

www.fitness.org.au/553279_30213012.html; retrieved Nov. 17, 2010.

Fitness Industry Council of Canada (FIC). 2010. Copyright

Tribunal out of tune, says Fitness Australia. Fitness

Industry Times (July).

Fitness New Zealand. 2010. Important industry update:

Music licensing. www.fitnessnz.co.nz.

Phonographic Performance Company of Australia (PPCA). 2010.

Austrailian artists awarded better deal for

fitness class music. Press release, May 17.

Re:Sound. 2010. Tariffs: Re:Sound tariffs. www.resound.ca/en/resources/tariffs.htm; retrieved Nov. 18, 2010.
February 2011

© 2011 by IDEA Health & Fitness Inc. All rights reserved. Reproduction without permission is strictly prohibited.

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Article Comments

Julie Toyama
On Feb 12, 2011
Alexandra it will be worth re-investigating the post court ruling events that have occurred in Australia and how it has impacted on Group Fitness Instructors in particular. On further investigation you will discover that the ruling has since been thrown out of court, but the fitness industry/facilities and PPCA have yet to reach agreement on what next? Group Fitness Instructors are generally uninformed, not included nor consulted with in regards to decisions made, but are the one's most affected by these rulings. Until agreement is reached gyms etc continue to enforce the PPCA free policy. The first court ruling introducing increased fees, prompted virtually all gyms to adopt the new PPCA free music policy and have happily shifted the financial burden of this ruling to instructors, which is unsustainable and has generally, literally taken the heart and soul out of group fitness. So who benefits? I can't see how the original artist can benefit from a situation where their music is no longer played and the vast amount of members no longer exposed to 'great new music'. Instructors for a very long time have done great justice to playing original music by promoting and exposing it to large populations of people. Gym owners may think they are in fact saving money, but at what cost? Many cases of instructors 'quitting' because of the financial burden is becoming more common place. Members are affected, based on regular comments and feedback related to uninspiring music. For instructors, the additional cost, the lack of choice, the time involved in sourcing PPCA free music and most importantly not being able to use and be inspired and motivated by using original music, or access personal music libraries. It would be wrong for anyone to assume this situation does not effect Group Fitness Instructors, it's having a profound effect. This ultimately transfers to members enjoyment and motivation in choosing whether to come to class or not and or renew gym memberships. An extreme short-sighted approach has occurred to address the rights of original music artists and royalties etc, but at what cost and who wins?

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