The shut down of 73,000 blogs certainly had a lot of people talking. The story made international headlines and, as a result, we here at ZeroPaid had the opportunity to talk to Australias radio show, "The Fourth Estate"

After 5 parts, we begin to near the end of our look at Bill C-32, Canada's copyright reform bill. While we may have covered a large number of broad topics, there are still some interesting topics left in the bill to discuss.

43.1 (1) Subject to subsection (2), a court may award a remedy for any act or omission that has been done contrary to this Act only if (a) the proceedings for the act or omission giving rise to a remedy are commenced within three years after it occurred, in the case where the plaintiff knew, or could reasonably have been expected to know, of the act or omission at the time it occurred; or (b) the proceedings for the act or omission giving rise to a remedy are commenced within three years after the time when the plaintiff first knew of it, or could reasonably have been expected to know of it, in the case where the plaintiff did not know, and could not reasonably have been expected to know, of the act or omission at the time it occurred.

(2) The court shall apply the limitation or prescription period set out in paragraph (1)(a) or (b) only in respect of a party who pleads a limitation period.

56. (1) Subsection 76(2) of the Act is replaced by the following: (2) An owner of copyright who does not authorize a collective society to collect, for that person’s benefit, royalties referred to in subsection 29.7(2) or (3) is, if such royalties are payable during a period when an approved tariff that is applicable to that kind of work or other subject-matter is effective, entitled to be paid those royalties by the collective society that is designated by the Board, of its own motion or on application, subject to the same conditions as those to which a person who has so authorized that collective society is subject.

58. Section 92 of the Act is replaced by the following: 92. Five years after the day on which this section comes into force and at the end of each subsequent period of five years, a committee of the Senate, of the House of Commons or of both Houses of Parliament is to be designated or established for the purpose of reviewing this Act.

63. The provisions of this Act come into force on a day or days to be fixed by order of the Governor in Council.

During an event on Capitol Hill, the AFL-CIO hailed the radio tax as fair pay for a hard days work.

But is the issue alone one of resolution and visual quality?  If there had been a pristine version of Star Trek available at the same time, or even prior to its official theatrical release, would that have appreciably decreased box office revenue?  I spoke with someone affiliated with the X-Men Origins: Wolverine movie that “suffered” from the leak of an almost finished work print just prior to theatrical release and he was adamant that the leak had had a profoundly negative impact on the film’s box office (although personally I would ascribe that more to negative word of mouth about a pretty crappy movie than to the specific effects of piracy).

Nonetheless, there are cases where the theatrical release of a film has to “compete with free” in the form of a high quality, even high definition copy of the film being available online.  Numerous foreign films are released into theaters, and even as DVD’s or Blu -Rays around the world prior to their official appearance in the U.S.  Are these films, admittedly not on the same scale expectations wise from blockbusters like Star Trek or Wolverine, yet still able to perform reasonably well financially?  Are they able to attract movie-goers when those same consumers could so easily obtain a copy of the film via Bittorrent, Usenet or Direct Download, even at full 1080p resolution?

This past Friday saw the U.S. release of the film Pirate Radio, also known as The Boat That Rocked when it first came out in its native Great Britain earlier in the year.  During the seven month delay in its arrival on these shores both DVD and Blu -Ray versions of the film came out in non-American markets, ensuring that even U.S. viewers would have access via the Internet to copies.  In fact, a cam version debuted on Piratebay soon after theatrical release, with DVD and Blu-Ray rips appearing in mid-August, eminently available to anybody around the world with an Internet connection.

Given all these “free” alternatives, how did Pirate Radio do in its first weekend in the U.S. market?  While its gross intake was relatively modest, at just under $3 million for an 11th place finish, more importantly, Pirate Radio did very well on a per-theater average, taking in $3,293 per theater, which actually puts it in third place among films in wide-release for the weekend.  While it is impossible to know with any real certainty what impact downloads of the DVD or Blu -Ray rips may have had on Pirate Radio’s box office, the film appears to have done pretty well, especially considering its foreign origin, subject matter and rather middling reviews (57% on the Rotten Tomato scale).

Somehow the forces behind the movie found a way to “compete with free” and position it to be profitable in the U.S., even before its inevitable DVD andBlu -Ray releases here.  Maybe the existence of free versions on the Internet did less to drive down demand for the film, but instead fostered awareness and interest in the movie above and beyond what the producers were able to do via PR and advertising.

It’s not hard to see why the RIAA (Recording Industry Association of America) wants this bill passed. Just read this part of a PC Mag article:

Stations with annual revenues of less than $100,000 would pay a flat fee of $500 each year. Stations with revenues between $100,000 and $500,000 would pay $2,500, and those earning between $500,000 and $1.25 million would pay $5,000 annually.

Stations making any more than that each year would have to negotiate royalty payments with the Copyright Royalty Board (CRB), a government body that sets royalty rates.

Stations that gross less than $5 million per year would not be subject to these fees for three years, and stations making more than $5 million would not have to pay for one year.

Essentially, it would mean a brand new stream of revenue. The bill cleared committee with a 21 to 9 vote and is now moving to the House for a full vote.

Of course, the National Association of Broadcasters isn’t amused. There’s some history between radio broadcasters and the record industry. In a previous incident where the record industry demanded additional royalty payments from radio broadcasters, the provision was that every time radios played their music, the radio stations would have to pay royalties to the labels. Once that became the case, then the radio broadcasters boycotted the major record labels and played independent music. Once the major record labels saw their music sales tank, they had to renegotiate with the broadcasters again and were forced to back down on the royalty demands.

So what’s the difference between then and now? According to a summary from Open Congress, the Performance Rights Act, or H.R. 4789, the bill would “establish a flat annual fee in lieu of payment of royalties for individual terrestrial broadcast stations with gross revenues of less than $1.25 million and for non-commercial, public broadcast stations”. Clearly, the record labels have learned from history and the broadcasters are not amused. Judging by the summary, you could play nothing but public domain Beethoven music all day long and still have to pay royalties to the record labels. Not hard to see why the National Association of Broadcasters are furious over this – it almost appears to be an existence tax.

As Techdirt notes, the history goes beyond just a royalty dispute. Techdirt’s article says, “of course, the most damning argument against the recording industry’s demand for money here is the fact that, for decades, the industry has (illegally) had the money go in the other direction. The system of payola has shown, quite clearly, how much the recording industry values airtime, in that it’s willing to pay radio stations to play its music.

So, can anyone explain why it’s illegal for record labels to pay radio stations to play music, but it’s okay for Congress to force radio stations to pay the record labels for playing their music? It defies common sense.”

Techdirt goes as far as calling this an RIAA bailout, but other bloggers go so far as to calling this a Britney bailout.

As we’ve alluded to throughout the article, the National Association of Broadcasters aren’t entirely amused by the whole idea. They even started a website at noperformancetax.org which has this to say:

In recent years, the record labels have seen sales of albums decline as more listeners opt for digital downloads. However, radio remains the number one promotional vehicle for music – it’s not responsible for the label’s resistance to the digital age, and it shouldn’t be on the hook to fix it. Radio already provides between $1.5 to $2.4 billion dollars annually in music sales for artists and record labels. By pushing a tax on local radio, record labels are biting the hand that feeds them.

Where does the money go?
In short, the money would flow out of your community and into the pockets of the record labels – the great majority of which are foreign-owned. The record labels would like for you to think this is all about compensating the artists, but in truth the record labels would get at least 50% of the proceeds from a tax on local radio.

How does this affect me?
If you’re one of the 235 million people who listen to radio each week, a tax could reduce the variety of music radio stations play, and all but eliminate the possibility of new artists breaking onto the scene. The tax could particularly affect smaller, minority-owned stations, some of which may have to switch to a talk-only format or shut down entirely.

It also affects your community. Radio stations are major contributors to public service – generating $6 billion in public service annually and providing vital news and community information and free airtime to help local charities. If a tax were imposed, stations’ critical public and community service efforts could be reduced.

And worst of all, if you’re one of the 106,000 Americans employed by local radio your job could be in jeopardy. In these troubling economic times, the last thing local radio needs is to be hit with a tax that some analysts estimate could be $2-7 billion annually.

It’s hard to say where this is going to go, but one thing is for sure, any movement on this legislation is bound to create some fireworks given that there are two huge US associations butting heads over this.

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There was some considerable debate over rules being put in place for radio last year. Many say that the per song license fees, among other things, would force many US web radio stations offline. Another controversial aspect was the idea that royalties would have to be payed, even if the artists being played was not a member of SoundExchange and actually gave permission to air their music.

Now, Billboard Magazine is reporting that Royalty Logic is challenging the constitutionality of the CRB. Royalty Logic was a part of the net radio rate trials wanting authority to compete with SoundExchange. The Copyright Royalty Board denied Royalty Logic.

The report continues:

The deadline for filing legal briefs with the Appeals Court has passed. Therefore, Royalty Logic is asking the court to permit the filing of additional arguments for consideration.

If permitted to file the brief, Royalty Logic will argue that the law creating the CRB violates the appointments clause of the U.S. Constitution. In other words, Congress improperly permitted the Librarian of Congress, which controls the Copyright Office, to appoint the three Copyright Royalty Judges.

If a court held that the law is unconstitutional, it is conceivable that decisions made by the CRB would be null and void.

About Royalty Logic:

Royalty Logic is a private copyright management organization, founded and managed by experienced industry professionals and authorized by the Librarian of Congress to negotiate, license, collect and distribute royalties generated from the digital delivery of sound recordings.

Pandora, a website known for taking popular music and finding similar lesser-known artists with a similar style for internet users, was dealt with another blow recently. Its services helped millions of users find their own musical taste with artists they may have not otherwise found out about. It was barely a full year ago when people discovered it and considered it a major innovation in online music.

Its customers in the UK were informed that due to copyright issues and a lack of a legal framework, their services might begin blocking people within the UK. A similar move was made last year when Pandora announced it would block Canadian IP addresses. Not surprisingly, the move sparked controversy, causing many to point to how organizations like the RIAA (Recording Industry Association of America) refuses to invest or even support in new initiatives and innovations by others online.

Pandora also faces similar pressure in their own country – the United States. Many point out that royalty hikes would effectively kill off internet radio. An innitiative was started to fight such moves called Save Internet radio.

“It continues to astound me and the rest of the team here that the industry is not working more constructively to support the growth of services that introduce listeners to new music and that are totally supportive of paying fair royalties to the creators of music.” Tim Westergren commented back in July, “I don’t often say such things, but the course being charted by the labels and publishers and their representative organizations is nothing short of disastrous for artists whom they purport to represent – and by that I mean both well known and indie artists.”

While there is no word yet if the web service has blocked British users yet, history has shown that it may be a likely outcome eventually.

The ruling is a huge blow to online broadcasters, and the new royalty structure could knock a large number of them off the ‘Net entirely. Under the previous setup, radio stations would have to pay an annual fee plus 12 percent of their profits to the music industry’s royalty collection organization, SoundExchange. It was a good setup for the webcasters, most of whom are either nonprofits or very small organizations.

National Public Radio spearheaded the appeal, arguing that the CRB’s decision was an “abuse of discretion” and saying that the judges did not consider the ramifications of a new royalty structure. Under the new royalty schedule, NPR will see its costs skyrocket.

The judges were unmoved by the webcasters’ arguments. “None of the moving parties have made a sufficient showing of new evidence or clear error or manifest injustice that would warrant rehearing,” wrote the CRB in its decision. “To the contrary… most of the parties’ arguments in support of a rehearing or reconsideration merely restate arguments that were made or evidence that was presented during the proceeding.”