International music tariffs may expand to United States

Posted: 03/08/2010 In Category: Fitness Retail

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Music downloads have lead to massive losses in revenue for the music industry. This has forced record companies and musicians to seek secondary sources of income. One of their solutions has been to push for the introduction of new fees (Tariffs) on industries that use and play music.

It has long been the belief in the United States that new performance rights cannot be implemented as the U.S. is not a signatory to the Rome Convention. There is, however, a mounting effort to implement new neighbouring rights legislation. Recently John Conyers (D-Mich) stated “The United States ignorance of intellectual property rights on this issue is a worldwide embarrassment and it must end now”. Additionally, AM and FM radios are no longer exempt from paying neighbouring rights royalties after the recent approval of Bill 21-9.

The passing of Bill 21-9 will help to pave the way for the Performance Rights Act, which was introduced into the U.S. Congress on February 4th 2009. If the Performance Rights Act passes, many believe that the fitness industry, hotels, and nightclubs will be the next target in the United States. The Neighbouring Rights Collective of Canada (NRCC) and the Phonographic Performance Company of Australia (PPCA) have already targeted these industries in Canada and Australia.

In Australia, the threat of implementation of new Tariffs was not taken seriously by the nightclub industry, resulting in debilitating tariffs being passed ($1 per seat per night – even if the seat was empty). Fitness Australia intervened in the legal process and engaged legal experts to challenge their proposed Tariff for $4.54 per member per month. A ruling is expected for the Australian fitness case this spring, 2010.

In Canada, the NRCC’s proposed Tariff would increase the cost of playing music in fitness clubs by $18.59 per member per year, retroactive to January 1, 2008. Even moderately-sized clubs could be facing bills in the tens of thousands of dollars unless the tariff is adequately defended by the Fitness Industry Council of Canada (FIC), the not for profit trade association supported by IHRSA. Precedent from the Australian case can be used in Canada to influence FIC’s fight and likewise a precedent in Canada will increase the imminent threat of increased tariffs and fees in larger markets, such as the U.S.

Implementation of the Performance Rights Act in the U.S., means industry groups will look to where royalty rates have already been established (“benchmarking”). Canadian and Australian rates will be used as reference points by the U.S. Copyright Arbitration 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 the Neighbouring Rights Collective of Canada and the Phonographic Performance Company of Australia.

By winning in Canada and Australia, the global fitness industry can be prepared for any legal challenges when they arise in the U.S. This is a global fight for the fitness industry, and all clubs in the United States and worldwide are watching closely as these battles unfold. To learn more, or help support Fitness Industry Council of Canada, please visit www.ficdn.ca or call 1.866.402.3422. 

Additional resources are available on the FIC web site at: www.ficdn.ca under the NRCC button located on the left hand side of the website.