Phonographic Performance Company of Australia Limited under s 154(1) of the Copyright Act 1968 (Cth) (No 3)

[2017] ACopyT 2

COPYRIGHT TRIBUNAL OF AUSTRALIA

Phonographic Performance Company of Australia Limited under s 154(1) of the Copyright Act 1968 (Cth) (No 3) [2017] ACopyT 2

File number:

CT 1 of 2012

The Tribunal:

PERRAM J (DEPUTY PRESIDENT) 

PROFESSOR MCMILLAN (MEMBER)

Date of decision:

22 November 2017

Legislation:

Copyright Act 1968 (Cth) ss 154, 159

Registry:

New South Wales

Date of hearing:

Determined on the papers

Date of last submissions:

29 September 2017

Category:

No Catchwords

Number of paragraphs:

13

Solicitor for the Applicant:

Gilbert + Tobin

Solicitor for Foxtel Management Pty Ltd:

Minter Ellison

COMMONWEALTH OF AUSTRALIA
Copyright Act 1968

IN THE COPYRIGHT TRIBUNAL

CT 1 of 2012

REFERENCE BY:

PHONOGRAPHIC PERFORMANCE COMPANY OF AUSTRALIA LIMITED UNDER SECTION 154(1) OF THE COPYRIGHT ACT 1968 (CTH)

Applicant

TRIBUNAL:

PERRAM J (DEPUTY PRESIDENT) 

PROFESSOR MCMILLAN (MEMBER)

DATE OF ORDER:

22 NOVEMBER 2017

THE TRIBUNAL DIRECTS THAT:

1.The parties are to provide the Tribunal with a final form of the scheme within 14 days.

REASONS FOR DETERMINATION

THE TRIBUNAL:

1. Three matters remain.  First, the parties have reached agreement on the process by which the increase is to be applied where there is a switch from PSPM to a revenue model.  The parties provided this to the Tribunal for its consideration.  The Tribunal notes the agreement of the parties and is satisfied with what is proposed.

2. Secondly, the parties remain at issue as to whether the sublicensing multiplier should be 1.1 (Foxtel) or 1.33 (PPCA).  Where Foxtel sublicenses to a third party the stream it receives will be wholesale in nature.  By contrast, where it provides the services itself, it charges retail rates.  Since PPCA’s fee will be collected on Foxtel’s revenues that fee will plausibly be reduced when Foxtel collects sublicensing revenue. The purpose of the uplift factor is to adjust for this effect.

3. PPCA’s 1.33 uplift factor derives from the Productivity Commission’s Report in December 2011 entitled ‘Report on the Economic Structure and Performance of the Australian Retail Industry’.  It suggested that, across the board for retail sales, the average gross margin was 25%, meaning that wholesale prices were 75% of retail prices achieved.  This suggested a gross margin of ⅓ and hence an adjustment figure of 1.33.

4. By contrast, Foxtel advanced its 1.1 figure by dividing Foxtel’s average retail revenue per residential subscriber by its average wholesale revenue per Telstra customer.

5. The Tribunal prefers Foxtel’s methodology which has the advantage of being based on Foxtel’s actual position rather than a national average for retailers.

6. The third and, hopefully, final issue concerns the implication of the Tribunal’s determination in its second decision that PPCA cannot control the terms of a licensing scheme through the device of the input agreement it has with its own members.

7. In its second decision, the Tribunal rejected PPCA’s submission that the Tribunal had no power to approve a scheme which provided for the licensing of rights from a collecting society which the collecting society had itself not obtained from its members. The Tribunal’s conclusion was that the submission was inconsistent with ss 154 and 159 of the Copyright Act 1968 (Cth). It also felt that if the submission were correct it would emasculate the function of the Tribunal, since it would allow a collecting society to dictate what the Tribunal could do by manipulating the input agreements it had with its members.

8. The parties are now in dispute about the drafting consequences of this conclusion for the proposed scheme.  For its part, PPCA seeks to have it made clear by a proposed clause 2.2 that it is not authorised to grant some of the rights but that such a licence is granted by reason only of the Tribunal’s decision.  PPCA’s proposed clauses 2.1 and 2.2 provide (only clause 2.2 is in dispute):

   ‘2.1In consideration of the payment by the subscription Television Provider of the Licence Fee in accordance with clause 5, and subject to the terms and conditions of this Agreement, PPCA grants Subscription Television Providers a non-exclusive licence under the Subscription Television Broadcast Licence Scheme within Australia which:

   (a) permits the exercise of the Broadcast Rights, for the Broadcast of PPCA Sound Recordings via Subscription Television Services to Residential Subscribers and Commercial Subscribers (Broadcast Rights Licence);

   (b) (on request) permits the exercise of the New Media Rights, for the Communication of PPCA Sound Recordings to Subscribers (New Media Rights Licence);

   (c) permits the exercise of the rights granted under the Broadcast Rights Licence and the New Media Rights Licence by way of Enhanced Content; and

   (d)       permits the exercise of the Technical Copying Rights.

   2.2     The parties acknowledge and agree that:

   (a) PPCA is not authorised under its input agreement with PPCA Licensors to grant licences of the following rights included in the definitions of certain of the New Media Rights, and accordingly does not grant a  licence of such rights under clause 2.1:

   (i) the Audiovisual Streaming Rights, to the extent that those rights include the right to permit users to make and store copies of the Audiovisual Content for later viewing on a one-off basis;

   (ii)the Digital Content Rental Rights, to the extent that those rights apply to Programs that have not been Broadcast; and

   (iii) the On-demand Offering Rights, to the extent that those rights apply to Programs or feature films that have not previously been Broadcast or will not in the next 30 days be Broadcast by the Subscription Television Provider, (collectively, the Non-PPCA Rights); and

   (b) the Copyright Tribunal of Australia has determined that the Subscription Television Broadcast Scheme should nevertheless include a licence of the Non-PPCA Rights subject to the terms and conditions of this Agreement.’

9. It will be seen that the Non-PPCA Rights are defined negatively and in a complex way.  The detail of that complexity is unimportant for present purposes and it is convenient to use the expression ‘Non-PPCA Rights’.

10. Dispute also exists about clause 9 which has PPCA provide a warranty and indemnity in respect of claims arising out of defects in PPCA’s title.  PPCA says it should not have to give either an indemnity or warranty in relation to the Non-PPCA Rights (since it says it has no title to them).  Foxtel accepts that PPCA should not have to warrant its title but says nevertheless that it should be required to provide an indemnity.

11. The Tribunal has determined that a range of rights should be licensed by PPCA including the Non-PPCA Rights which it presently does not have.  The Tribunal’s conclusion in its second determination was that the approval of the scheme would bring about a licensing of those rights whether PPCA held them or not.  On that view of affairs, clause 2.2 is an accurate statement of the situation as it presently stands.  Clause 2.1 grants the licence and clause 2.2 records PPCA’s inability to do so but the Tribunal’s determination that it must.  Since that it is what the Tribunal has concluded there can be no real complaint about what clause 2.2 does.  It should be included.

12. Insofar as the indemnity is concerned, it is difficult to see that PPCA should be required to indemnify subscription television providers for defects in PPCA’s title when the Tribunal has determined that its title is irrelevant to the efficacy of the licence which it has ordered to be granted.  In that circumstance, the indemnity should not be included.

13. The parties should now bring in the scheme.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Determination herein of the Honourable Justice Perram (Deputy President) and Professor McMillan (member).

Associate: 

Dated:  22 November 2017