[23] In light of the disputes referred to at the beginning of paragraph 21 NAB considered it necessary to apply to
the North Gauteng High Court for a declaratory order concerning the Tribunal's jurisdiction. Despite opposition
by SAMPRA it was successful in that endeavour. The following order was made by Claassen J:
"1.
THAT the copyright Tribunal is to determine the following:
1.1
The royalties payable in respect of sound recordings;
1.2
The date from when royalties are applicable;
1.3
Whether any escrow payments are to be made in the interim;
1.4
Whether any other royalties such as for the socalled mechanical reproduction of sound recordings in the
broadcast processes are payable, and if so, from when;
1.5
Costs relating to the application of substituted service effected in respect of this application, as
authorised by the Court on 22 October 2008 following the applicant's ex parte application under case
number 44698A/2008 be reserved for later determination;
1.6
First respondent pay the costs of this application, including the costs of two councils."
The application to the High Court and the resultant order will also be dealt with later in this judgment.
[24] Before the Tribunal, the parties followed the conventional adversarial procedure and evidence was adduced
by each. Economists testified in support of each side's proposed formula referring to economic theory and
relevant and practical factors to be taken into account in determining a royalty rate. Protagonists in both the
broadcasting and sound recording fields and other witnesses testified. SAMPRA also led evidence and
presented documents that dealt with the rate of royalties for sound recordings employed internationally by a
range of countries. I consider it necessary to set out the relevant evidence in the paragraphs that follow.
[25] Mr Louric Richardt, an attorney and consultant with the International Federation of the Phonographic Industry,
testified about his experience and exposure to processes and practices worldwide. It appears that not only
economic realities but historical factors are taken into account in other countries. The more recent trend,
however, is for economic factors to play a more prominent role. A principle that applies universally is that
broadcasters pay royalties in relation to the time that music is played on their radio stations. Put simply, the
principle is pay for play. Another rule is that rates are based on a correlation between time and revenue
generated. In some instances, countries apply rates that increase in relation to bands of increasing revenue.
[26] According to Richardt the broadcasting industry in South Africa is amongst the most profitable in the world
with profit margins reaching to between 40 and 50%. This evidence was largely supported by Mr Peter
Armitage who commented on the financial results of three entities that control most of the radio stations in
South Africa.
Page 271 of [2014] 2 All SA 263 (SCA)
[27] In some countries the royalty rate payable to owners of copyright in sound recordings is half of those payable
to composers. For many decades SAMRO has been collecting those royalties in South Africa. Richardt accepted
that in the South African context and relative to the international trend, the SAMRO rate is irrelevant. He
appears to base that conclusion on the fact that composers have resisted attempts to have the value of their
intellectual property linked to those of others. Richardt testified that other benchmarks are preferable.
[28] Mr Richard Murgatroyd, an economist, testified in support of SAMPRA's case. His evidence on a particular
pricing theory, it was agreed by the parties, can rightly be discounted. Of importance are his concessions
under crossexamination. He accepted that the SABI was extensively regulated. So, for example, they are
statutorily obliged to include local content of at least 25%. Also, the public broadcaster has language and
specific religious broadcast obligations.
[29] Insofar as revenue is concerned, Mr Murgatroyd and other witnesses agreed that the use of actual income
was better than the use of notional amounts and in this regard they accepted that the financial statements of
NAB's members ought to be employed. Although not entirely forthcoming, Mr Murgatroyd appeared to accept
that promotions by radio stations of the upcoming broadcasts, might impact beneficially on revenue and that
they should perhaps not be excluded in SAMPRA's definition of editorial content. He seemed to agree with the
proposition by Counsel on behalf of NAB that if one could link time channels to revenue generated by
advertising during those particular segments, it would be preferable to have regard to revenue in relation to
time channels. I will, in later paragraphs, deal with other evidence on this aspect.
[30] Mr Keith Lister, chairperson of the board of SAMPRA, testified that he was formerly Chief Executive Officer of
Sony Music Entertainment Africa (Proprietary) Limited. He testified about how the Minister had unsuccessfully
been lobbied to change legislation to provide for a compulsory 50/50 sharing of the royalty between
performers and record companies. As stated above, this split now appears to have been agreed between
their respective representatives. It appears from Lister's testimony that, historically, the recording industry
considered a 10% royalty for 100% of music usage by broadcasters as fair, because it was then thought that
the ten per cent should also embrace the present 3,25% royalty paid to SAMRO for composer rights. Later,
the recording industry thought that 10% ought to be shared exclusively between performers and the
recording industry, with composers being left to a separate 3,5% to be collected by SAMRO. It appears from
Mr Lister's evidence inchief that the 10% royalty claim is a rigid position driven by a "sense" that it would be
reasonable, without there being any postulated rationale.
[31] In his evidence, Lister dealt with the 15% discount referred to in SAMPRA's formula and said that a closer
examination of discounts provided in the available documentation indicates that the discounts afforded to
advertisers were closer to 18,9%. In his view, discounts should not be allowed at all because they should be
considered as the cost of doing business. In respect of the time channels and related revenue proposal by