announcements and trade exchanges."
[15] The major differences between the respective formulas can be seen from what is set out in this and the four
paragraphs that follow. SAMPRA takes into account the total amount of time used by radio stations in any
period during which sound recordings are broadcast, to which SAMPRA can lay claim, against the total amount
of time used by a radio station in that period to broadcast editorial content, which is defined to exclude the
broadcast of specified items. SAMPRA brings those two items into the reckoning against the radio station's
total revenue during the same period. The factor of ten employed in SAMPRA's formula is based on its
unflinching attitude that a broadcaster that chooses to use sound recordings for 100% of its broadcast
editorial content time should pay a royalty equal to 10% of the revenue that it derives from airtime. So, if
sound recordings constitute 58% of the broadcaster's editorial content, the royalty is 5,8%, and so on. What
this means is that, as a broadcaster's use of music as a percentage of its total broadcast editorial content
declines, so the royalty percentage declines proportionally.
[16] The exclusion of certain items from editorial content has, as a result, that the proportion of music will
necessarily be higher than if the editorial content were to be broadened, so as to avoid the exclusions
contended for by SAMPRA. In simple mathematics, the smaller the denominator, the larger the result of the
fraction. In short, it increases the royalty rate. SAMPRA's rate, as can be seen from what is set out above, can
notionally be from 10% downwards.
[17] NAB, on the other hand, contends that the rate should be determined by reference to the use of copyright
protected sound recordings per time channel, distinguishing between peak broadcasting times and times
during which most people are asleep, and that revenue generated should be considered in relation to each
time channel. That, according to NAB, should then be brought into reckoning against the total broadcast time
of the radio station per time channel, without any deduction, as envisaged by SAMPRA's exclusions in its
definition of editorial time.
[18] Furthermore, NAB brings profit into its formula, based on the industry average, whereas SAMPRA's proposal
has regard to an individual
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broadcasting station's total net revenue, without reference to profit or NAB's proposed time channels. NAB's
formula also takes into consideration audiencereach, which SAMPRA's formula disregards. There is also
disagreement about SAMPRA's use of the published rate card less a 15% discount to determine revenue. It
was contended on behalf of NAB that discounts sometimes exceed 15% and that it would be better to have
regard to the revenue reflected in a radio station's financial statements.
[19] NAB's less restrictive approach to editorial content has as a concomitant a reduced percentage use of musical
content. It is the antithesis of what is set out in paragraph 16. All the factors referred to in the preceding two
paragraphs have the effect of a restricted royalty rate which, it appears, equates to a little over 1% of a
broadcaster's net income.
[20] The merits of the relevant constituent parts of each formula will be dealt with in due course after an
assessment of the evidence and the contentions in relation thereto.
[21] It is necessary to record that subsequent to the referral and the crossreferral, the parties were at odds
about the extent of the Tribunal's jurisdiction, including the question whether it had the power to determine
the date from which royalties were payable. In the latter regard the following facts are relevant. Even though
Parliament amended the Act and the PPA in 2002 to provide for needletime royalties, it was not until 1 June
2006 that the Minister published Regulations that provided for accreditation of collecting societies and the
conclusion of framework agreements between such collecting societies on the one hand, and trade
associations and representative bodies of potential users of sound recordings, on the other. 8 There was a
dispute between the parties about whether the royalties became due when the amendments were effected
or whether they were only due when the mechanisms for collections were put in place legislatively. In respect
of the intervening period questions arise about whether performers and producers of sound recordings could
otherwise sue for copyright infringement. Issues such as prescription also intrude.
[22] There was uncertainty about the procedure to be adopted by the Tribunal, in fulfilling its statutory function to
determine the royalty rate. In this regard, it is important to note that there are no regulations prescribing the
procedure. After the present matter was ripe for hearing before the Tribunal, and after representations in this
regard, the Minister of Trade and Industry (the "Minister"), recognising various lacunae in the legislation,
established the Copyright Review Commission to assess concerns and allegations about the Collecting
Society's model for the distribution of royalties to musicians and composers of music. The Commission
completed a report in 2011 in which it said the following concerning the procedure to be followed by the
Tribunal:
"It also became apparent to the [Copyright Review Commission] that the present statutory provisions dealing with the
Copyright Tribunal requires substantial amendment to enable the Tribunal to perform effectively in the various
matters that may come before it. . . .
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In a memorandum submitted to the [Copyright Review Commission] the Registrar of Copyright stated that the delays
in finalising the two matters before it relating to needletime royalties were 'the result of unclear and vague regulations
which do not prescribe the procedure to be followed.'" (My emphasis.)
These are aspects on which I will comment further later in this judgment.