Music Licensing Mayhem: How Will Fees Affect YOU?

By Alexandra Williams, MA on Jan 31, 2011

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
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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

Alexandra Williams has taught fitness for 17 years and has a master’s degree in agency counseling, with an emphasis on marriage and family. Her professional training has forced her to scrutinize her own value system, especially as she attempts to raise ethical children. The author wishes to thank Jack Raglin and Jim Gavin for their helpful insights and suggestions.

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