Copyright Amendment Bill; Performers%u2019 Protections Amendment Bill: hearings

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE AND SELECT COMMITTEE ON ECONOMIC AFFAIRS
10 October 2001
COPYRIGHT AMENDMENT BILL; PERFORMERS’ PROTECTIONS AMENDMENT BILL: PUBLIC HEARINGS

Chairperson

Submission by SABC
Joint Submission by ANC Youth League and the Progressive Artists for Change

SUMMARY
The amendments amount to the introduction of what is popularly termed ‘needletime’. Needletime refers to the payment of a royalty for the broadcast of a sound recording to a performer and the owner of copyright in a sound recording.
Primedia argued against the introduction of needletime and instead suggested that they would like to see a meeting of all stakeholders and a forum established whereby alternatives could be developed, explored and set out.
The SABC submitted that needletime would benefit only those artists who had recorded music, whose songs had then been played on the radio. It benefits only those artists who are already successful and at least have the potential to earn money from record sales.
BMG mitigated in favour of needletime and argued that it favoured the interests of the artists and the small record company.
The ANC Youth League were concerned that there should be a framework in place to see that the aims of the amendments were carried out.

Primedia
The history of poverty amongst South African musicians needs to be addressed. But Primedia believes that this problem can be solved using other means rather than needletime. They emphasised the fact that there are three players in the music industry: the musician, the music companies and the broadcasters. It is the broadcaster that is most constrained in the sense that they are highly regulated by the existing legislation (licences are not given out without careful consideration), and also they have to constantly meet the needs of their listeners in order to remain commercially viable. With these two considerations in mind it does not seem fit that the broadcasters shoulder the burden, of remedying the fact that musicians are often exploited, completely. They made a suggestion that rather than employing needletime, another mechanism should be set up where all key players contribute and which would cater more effectively for the economic needs of musicians.

Discussion
Dr Davies (Chair, ANC) asked about Primedia’s remarks on the fund, and whether or not they were saying that Primedia’s contribution was conditional on other stakeholders contributing?

Mr Rossen responded that Primedia has not taken the view that they will contribute conditionally, but it just makes it more palatable knowing that other people are contributing. He said they will see how it pans out.

Dr Davies asked them to comment on the outflow of royalty payments, and particularly on the two views that have been debated.

Mr Rossen said that there were two disparate views, but that putting money in a fund means there will have to be regulations managing this. He continued to say that the legislation as it has been drafted now will have to be changed.

Ms Ntuli (ANC) asked them to comment on the point on page five of their submission where it stated that South African music is not played in any significant amount in any countries where needletime forms part of the legislative framework. She asked if it was right for them not to promote South African music?

Mr Rossen said that it is the role of South Africa to play South African music, but you always have to have listeners in order to ensure income. He said that everyone has to make money and that is why there is the quota of 20%, as it makes both sides sustainable.

Ms Ntuli (ANC) asked whether or not they agreed that musicians need broadcasters, and broadcasters also need them?

Mr Rossen agreed with this and said that musicians are like the raw supply for broadcasters and record companies. He maintained that the problem was that record companies are not being asked to pay, while broadcasters are being asked to pay.

Ms Ntuli (ANC) responded and asked if he was implying that South African people do not want to listen to South African music? If that is the case then she believes that a campaign has to be run.

Mr Rossen explained that different formats have different requirements for their listeners. He used the example of YFM who has a listenership which wants to listen to 60% local content, while Highveld Stereo listeners will have much less. He said that it was not about prejudice towards South African music, or a disloyalty or a disregard for South African music. He said the question of why more South African music is not being produced should be put to the record companies, and they would probably answer that it is cheaper to use international artists. He said that in an ideal world Ms Ntuli’s argument would hold, but not in this world with its commercial needs.

Mr Naidoo (Primedia) then asked if he could add something in order to respond to the last question. He spoke about Highveld Stereo as an example saying that the station puts together their playlists by actually asking the listeners what they want to hear. He continues and says that it is not a subjective process as it has been historically. He emphasised that South African music has been tested and it is getting better, but you have to build your listenership.

Ms Ntuli (ANC) asked if they could clarify what they meant by a viable collection mechanism with clear guidelines?

Mr Rossen said that you have to take into account the historical nature of collection societies and first undertake a detailed examination of the already existing societies like SAMRO and SAPPRAL. He said you must then look at how the stakeholders are involved, and the society must be transparent and accountable.

Mr Bhengu (IFP/NCOP) asked how a collection society will differ from what is being proposed considering the regulations will establish it?

Mr Rossen responded that there would have to be a significant secondary process to determine who will be paying and contributing to this society, and therefore there needs to be a study first.

Ms Ntuli (ANC) said that she wanted Mr Rossen to be honest with himself and answer if he thinks it is fair that the performers should suffer and the other stakeholders should benefit. She used an analogy of a cake and said that the stakeholders and performers would have to share the benefits.

Mr Rossen said that he believed he had been honest and open. He says he is being emotionally honest and that you cannot put the blame entirely on the music industry or the broadcasters, but rather on a number of other factors (like apartheid, abuse by musicians themselves etc).

The Chair intervened and said that he did not want a general debate on the matter.

Mr Bhengu (IFP/NCOP) asked what Mr Rossen meant by musicians squandering money?

Mr Rossen answered that the debate is much broader than that.

Ms Benjamin (ANC) asked what the problem with needletime is per se?

Mr Rossen responded that his presentation had set out that needletime is not necessarily the answer. He said that there should rather be another fund set up which would have the added advantage of not differentiating between recorded and non-recorded musicians.

Ms Ntuli (ANC) asked if it looks like they need to go back to the drawing board and figure out how to share?
Mr Rossen said that he agreed.

The Chair then summarised the main argument of the broadcasters and noted that they had not dealt with how this collection society should be regulated, but this would be dealt with later.

South African Broadcasting Corporation
Mr Peter Matlare was in full agreement with the submissions made by the National Broadcasters Association made the previous day. It has taken a long time to bring the process where it currently is. The issue had not been resolved because of the number of issues and interests involved. There were also consequences that would come about whether needle time was reinstituted or not. Mr Matlare said it was for these reasons that something sustainable should be provided for.

Other questions included were who would benefit whichever way the needle-time provision went. He alluded to other stakeholders that would also need to contribute if needle-time were to be instituted. One example of these would be public broadcasters. Another of Mr Matlare’s concerns was that there were millions of people without access. By access was meant access to either radio or television. Bringing access to these people was one of the SABC’s main goals. To do this it would have to create additional infrastructure.

Mr Matlare then told the Committee that the SABC was the largest investor in local content. In the year 2000 the SABC invested over R 750 million on local content. This figure would jump to over a billion if one were to include indirect costs associated with sport. The SABC had a clear obligation to expand the scope of languages in their programming.

Mr Matlare then touched on needle-time saying that it would benefit mostly overseas artists. If the intention was to benefit local artists then the question would be to what extent.

Mr Matlare told the Committee that at present the SABC contributed R 66 million to the music industry. This amount would only go up. However, when looking at the proposed levy the SABC would have to reconsider this investment if the levy were to be implemented. The SABC was also presently intending to extend its infrastructure to bring radio and television to more people. There were therefore conflicting interests, both taxing the financial resources of the SABC.

Mr Matlare submitted that needle-time would benefit only those artists who had recorded music, whose songs had then been played on the radio. In addition to these people there were those musicians who played music for a living too. These people played live gigs and have never been recorded, yet live on the proceeds of playing music for a living. Their music does not get played on the radio, nor do they get a 5% cut of their record sales. In this way needle-time benefits only those artists who are already successful and at least have the potential to earn money from record sales. All musicians, especially the indigent ones, should benefit. Needle-time in its proposed form could not bring about this and would simply provide for those who were already successful.

Discussion
Mrs B M Ntuli (ANC) said she knew that he agreed that there was indeed a problem. However, looking at the levy Mr Matlare said that the institutions could not withstand the additional tax on resources and that performers would not really benefit. Why was he of the opinion that performers would not benefit?

Mr Matlare said it was important that performers did benefit but this would have to be carefully provided for. In the past musicians had alienated their rights to future proceeds for money that they needed immediately. Given the history of South Africa and the history of our music industry, it was important to make sure that musicians did benefit from whatever measure was put in place. This would require education, as to their legal rights, and maybe legislation to prevent unreasonable contracts or alienation of rights.

Dr Davies asked why, if Mr Matlare was agreeing with the principle that broadcasters should make contributions, the Committee could not establish the principle and then later work out the details. This course of action could then accommodate some of Mr Matlare’s concerns, such as expressly providing that there would be no payment unless there was reciprocity. In this way the Act could be structured to avoid all those unintended consequences with which Mr Matlare was so concerned.

Mr Matlare submitted that so-called unintended consequences could not be dealt with in the regulations. Before taking any steps, the impact of the legislation should be known. To this end an impact study needed to conducted before hand. If these preliminary studies were done initially then Parliament would be able to deal with the substance immediately rather than first laying the principle and then dealing with the details. Mr Matlare then added that experience has shown that the regulations are not the best way in which to deal with such matters. Once this has been done, people argue as to about whether the regulations are to be established "in consultation" or "after consultation".

Should the Committee choose to go the collecting society route, asked Ms J Benjamin (ANC), would the SABC feel that such a society should be subject to public scrutiny? A number of broadcasters had said that the collecting society should subject to public scrutiny and based on transparency and accountability.

Mr Matlare agreed that performers should benefit. In order for them to benefit there were concerns that needed to be taken into consideration. Due to the inequities of the past, South African artists had found themselves without proper education. This lack of education often resulted in the unreasonable alienation of rights by these artists. It would therefore be necessary to educate artists about their rights and the value of these rights.

Dr Davies asked if Mr Matlare would still be concerned if commercial but not non-commercial radio stations were levied. Mr Matlare said that radio stations could not be distinguished on this basis in relation to this matter. If a commercial radio station was levied and it failed to make the grade. When this radio station went under it would have far reaching effects for all radio stations as confidence in all radio stations would be negatively affected.

Mrs Ntuli asked whether Mr Matlare felt that the Bill did not deal adequately with the issue. If so, how could this be remedied? What would have to be provided for in the Bill?

Mr Matlare told the Committee this was not an easy question to answer. Since the Bill sought to protect certain rights it was important to ask what the intention behind this was. If intentions were to address the position of artists then it would be necessary to examine how this could be done given the social policy and circumstances of South Africa.

Dr Davies concluded the SABC had been the least antagonistic of all the broadcasters’ submissions towards the principle of needle-time. Instead in their presentation the SABC had enumerated a number of practical problems that would act as barriers to the implementation of needle-time.

BMG Records
BMG was represented by Mr K Luster who made a submission not principally opposed to needle-time. Instead his presentation showed that needle-time was one of the possible solutions to the problem being confronted. He also showed that the call for an impact study made by those who are against needle-time is a ploy to delay and ultimately prevent the reintroduction of needle-time. Canvassing for the reintroduction had begun many years ago and impact studies could have been done back then. However now was the time to reintroduce the right as the South African music industry would not be able to survive for much longer.

Mr Luster told the Committee that the issue was a political and economic fight. He started off saying that the artists and the small independent record companies, were just as important as BMG was in the advancement of South African music and its artists. BMG had, since starting operations in South Africa, produced 500 Compact Discs (CD’s), which constituted approximately 5000 tracks or ‘songs’. BMG was of the opinion that music represented what could be termed South Africa’s ‘miracle industry’. It was for this reason that BMG wanted to invest even more money into the local music industry. This injection of capital would in turn create jobs for many people who could sell this music or even be directly involved in the production of music.

There were two other very important issues that needed to be sorted out. These were piracy and neighbour rights. He submitted that if these areas were remedied then the industry could be turned into a miracle industry.

Mr Luster raised the issue of piracy in the context of cassettes. The problem was that in South Africa record companies made 90% of their sales in the cassette format. He then represented graphically how the advertising revenue enjoyed by radio stations increased, while the revenue from cassettes remained static. The price of a cassette had been constant from the year 1998. Some suggested that the solution to the problem was easy, namely just to increase the price of cassettes. But this could not be done as the price of cassettes had to be at such a level that they could compete with pirates. The pirating of cassette recordings was extremely easy and the only overhead cost was the price of a blank cassette. Pirates did not have to pay royalties, did not have to pay marketing or production costs or any of the other costs which a record company would have to. In this manner the price of a cassette and the thus the revenue of record companies was being limited by piracy. Mr Luster told the Committee that piracy needed to be dealt with. Then the revenue of record companies would increase, record companies and the industry as a whole would be strengthened in turn increasing the range of artists that could be recorded.

The needle-time right provided for in the original Copyright Act was based on the British model. There was thus no need for a debate or a need for impact studies, it was simply a question of being given back what had existed before. This right had been taken away in 1965 by a authoritarian and self serving government. He then showed the Committee a number of graphs that detailed the advertising revenue of radio stations. The graphs indicated that all commercial radio stations except one had shown a healthy growth in advertising revenue over the last decade. These radio stations included Radio Ukhozi/Zulu which for the year 2000 had an adverting revenue of nearly R120 million. Others were Radio Jacaranda (R110 million in advertising revenue), Highveld Radio (R120 million), KFM (R60 million) and Algoa (R22 million). These were only a few mentioned, all of which showed a marked increase in both advertising rate and advertising revenue. These radio stations all had a listenership which enabled them to earn this revenue, the people in turn listened because of the music played. The only radio station that did not show such increases in advertising revenue was Radio 702. Mr Luster submitted that this was because it was a talk-radio station.

These radio stations played music which enabled them to earn their own income, but the artist never received any remuneration for their effort and the use of their creation.

The reintroduction of needle-time was in the interest of the artists and the small record company. Mr Luster said that big record companies such as BMG, Sony, BMI and the like did not need needle-time. Instead it was the small record company, such the one run by Mr More, whom the Committee had heard from on the previous day, that needed it more. The basic consideration was whether or not artists, in terms of the legislation, would be able to convert their musicality into a form of revenue that could sustain and support themselves and a family.

Mr Luster told the Committee that those opposed to needletime had been aware of the debate for quite some time and had not taken any steps to consult with the stakeholders canvassing for needle-time. The call for an impact study could have been done years ago. The reintroduction of needle-time had been on the board for over ten years. The solution could be found by looking at other jurisdictions that had developed the recording, broadcasting and music industry. Here both best and standard practices as well as rates needed to be observed. This would need to be done so that a middle route, a compromise could be found and the matter resolved.

Mr Luster then reminded the Committee that the people who stood to benefit from these amendments not going through were firstly the broadcasters, but also the big record companies. If the amendments did not go through then recording giants such as BMG, Sony and BMI would simply continue to benefit because they would be the only ones with the capital to operate in a cut-throat industry. He illustrated his point by referring back to Mr More from whom the Committee had heard the previous day. The cost of making a record was great and seldom did records in South Africa break even. However, for a big recording company like BMG, which had foreign investment, one failed record or even two was not a serious problem. Instead BMG would simply try a few more times. This was because they were making money from their foreign repertoire which they used to subsidise local music productions. Mr More on the other hand, owner of a small record company called Melody Music, viewed every potential record with great scepticism. This is because for Mr More one failed record spells disaster and means the end of his business. As a result only big companies can afford to operate in an industry that is fraught with danger. Mr Luster told the Committee this is precisely what BMG did not want. Instead, when they came to South Africa their intention was to promote and cultivate a local music industry and not to take it away or to reappropriate it overseas.

Discussion
Mrs Ntuli reminded Mr Luster that he had said that the primary source of investment in South African music comes from overseas. The big companies have to use money they make from selling overseas music in South Africa to promote and subsidize South African music. Mrs Ntuli wanted to know if she was correct in assuming that South African music was not making any money and wanted to know if this was the problem then was the problem not that record companies were not promoting local music enough.
Mr Luster first told the Committee that he was in a business where his, and his shareholders, had the intention of making money. Some of this money could be used to alleviate the plight of artists. However, he had to invest money in an economically viable way where it would generate returns. If this was not done then investors would invest elsewhere. As a result the problem could not be solved by throwing more money at it.

Dr Davies told Mr Luster that he was of the impression that there was a conflictual relationship between artists and recording companies. He asked whether this was true and if so what could be done to remedy the problem.
Mr Luster said that there was indeed a conflictual relationship between the two. This relationship was however no more conflictual than the ordinary employer employee relationship. This was because the employee and employer were always trying to get as much for themselves as they could. However he added that if recording companies did not give artists what they wanted then those artists could just leave.

Mr Luster also told the Committee that in 1999 the Department of Arts and Culture had asked the music industry to come together and produce a document detailing what the problems within the industry were and what interventions were required to remedy them. Recording companies got together to discuss what they felt were the problems as did artists. The documents that these two groups produced were identical, with both groups identifying the same problems and calling for the same interventions.
In most the world the split between record companies and artists was a fifty-fifty split. South Africa would have to follow suite or run the risk of not getting any reciprocal agreements with other member states.

Mr Luster explained that early in the twentieth century the Berne Convention countries realised that there was a new form of copyright that was going to subsists in music and film. This culminated in the Rome Convention which included the notion of neighboring rights. South Africa enacted in its first Copyright Act in 1916 which it adopted straight from the British example. This Act also contained the notion of neighboring rights. The SABC then objected to these neighboring rights, especially in relation to non-commercial content.
In addition to all this, the Minister at the time felt that no skill was required to record and produce a record. Instead all this was, was a mechanical process.

It was then decided that these rights were not needed. Mr Luster said that they did not need these rights because they were not exporting anything and instead all media was locally produced. As a result the SABC did not want to have to pay for media coming in from overseas.

This resulted in the loss of these neighboring rights and more importantly for present purposes, the loss of the needle-time right. While this was transpiring in South Africa the rest of the world had identified the demise of the cassette and the need to therefore move to a position where performers rights are better protected. Mr Luster told the Committee that in this way it could be seen that the needle-time right had been taken away by the self-serving government of the past. The absence of the right was an inequity to South African artists and to the rest of the world that applies these types of neighboring rights.

Mr S M Rasmeni (ANC) asked whether in Mr Luster’s opinion there was a relationship between the SABC of the past and that of today.
Mr Luster said there was and added that there was most definitely a transference of attitudes towards needle-time. He told the Committee that today was the first time in eight years that the SABC had participated publicly in this debate. He reminded the Committee that earlier they had seen Mr Matlare from the SABC ask for an impact study. However, in 1993 the Government approved needle-time. The way the NAB was presently handling the situation was the same as the way in which the NAB in the United States has handled the issue of needle-time. Mr Luster told the Committee that in places like America, Canada and Australia the respective broadcasting bodies had used these delay tactics to see that needle-time was not instituted. This process had been going on the United States for 66 years.

Mr N S Bruce (NP) asked whether Mr Luster felt that needle-time would not be needed if piracy was effectively controlled.
Mr Luster said that the major cause of piracy was the ease with which it could be done. Mr Luster told the Committee that in the early eighties a band called the Soul Brothers were very popular and used to sell 500 000 records with ease. However, after the advent of cassette, an easily pirated format, the Soul Brothers struggled to sell over 100 000 copies. Effectively controlling piracy would be an extremely hard job. Even if it could be done, Mr Luster could not say that needle-time would definitely not be needed. If piracy were stemmed, this would mean more revenue for artists, but more importantly for record companies. This would result in a stronger industry as a whole. In turn this would lead to a wider range of artists being recorded.

Mr Luster submitted that to cure the piracy problem South Africa needed to implement a banderole system. This was a system employed widely elsewhere in the world. A mark or stamp of authenticity is attached to a product. Any policeperson walking on the street who encounters a product which does not bear an authentication mark can immediately be confiscated and destroyed. This would deter would be vendors, because their stock could be taken away, as well as would be purchasers, because their recently acquired item could be taken away.
Mr Luster told the Committee that the matter had been discussed within the industry for quite some time, and the recording industry was prepared to bear the cost of providing authentication marks. They are prepared to do this because they will be able to recoup the cost from the additional sales that would result.

Spoor and Fischer for Business Software Alliance (BSA)
Ms Adheera Bodasing came before the Committee to represent BSA. Her presentation concerned a number of amendments that were contained in the original Copyright Amendment Bill. These amendment dealt with the criminalisation of end user piracy and other matters also related to piracy.

However, despite the impressive and convincing nature of Ms Bodasing’s presentation the Committee could not consider the amendments, nor include them in the present Bill because the matters fell outside the short title of the Bill. Dr Davies expressed his regrets and told Ms Bodasing that when the amendments she had spoken on came before the Committee her submissions would be taken into account.

Ms Bodasing was not happy with this and she told the Committee that the amendments were needed as South Africa was losing a lot of money. The problem of piracy was a serious one that if at least slowed would result in substantial additional revenue for the State and those companies who own the software. Ms Bodasing objected to the manner in which amendments which had been agreed upon had been put on the back-burner while particularly contentious matters such as needle-time get debated. She stressed that the amendments were necessary immediately as their prolonged absence caused job loss, loss of foreign investment and left the door open to blatant theft.
Dr Davies appreciated Ms Bodasing’s concerns but could do nothing to accommodate them.

SARRAL represented by Le Roux, Mathews and Du Plessis Attorneys
Mr Ladanyi said that South Africa needed to learn to appreciate what it had. He referred to choral music, an area where his own interests lay. He told the Committee that above the Limpopo River, South African choral music was well appreciated. However, at home in South Africa this form of music received very little recognition.

Mr Ladanyi objected to the way South African music was referred to as local music and submitted that instead it should be referred to as national music, or even something else. A related point was instead of referring to it as local content, it should be referred to as ‘music composed by a South African composer’.

On the collecting society Mr Ladanyi said that it should be an independent body supported, not controlled, by Government. Mr Ladanyi said he had witnessed situations above the Limpopo River where the Government controlled such a collecting society. In these examples the State made a really big mess of the situation. He also added that once established, the society’s processes should involve the members thereof.

Mr Matlare said this was important because performers were vulnerable and because of their positions had little bargaining power. As a result performers often became victims of advance payments with conditions, effectively signing away their intellectual property. For this reason there would have to be an educational campaign to educate performers about their rights.

Mr Ladanyi then said that the present royalty of 5% of record sales which performers receive was a poor position far from the more reasonable 9% which performers received in Europe.

Mr Du Plessis then spoke for SARRAL, outlining two main concerns. The first was contractual enslavement. This was the same issue raised by Mr Ladanyi where artists assigned their rights and alienated them forever. This position often resulted because record companies told artists that they were assuming all the risks.

Mr Du Plessis’s second point, related to the first, was that artists should be empowered. This could be done in a number of ways. Two such ways would be to increase the royalty they receive on record sales or through needle-time.

Mr Du Plessis then reminded the Committee that the period for which a copyright in an artistic work subsisted after the death of the artist, was fifty years. He submitted that this period should be increased to a period of 70 years.

Dr Davies asked how a collecting society would guard against the total alienation of performers rights. Mr Du Plessis told the Committee that in working for SARRAL he often encountered people who had alienated their rights completely. In such circumstances a collecting society would not be able to do anything. Instead legislation should be formulated to prohibit the total alienation of such rights. This was the model followed in Spain.

Mr Rasmeni reminded SARRAL that they had claimed to help previously disadvantaged artists. Mr Rasmeni wanted them to elaborate on this. Mr Du Plessis told the Committee that SARRAL had been actively involved in development programs. SARRAL also actively canvassed for members who did not know their rights. In this way they were able to actively go out and educate people.

ANC Youth League and the Progressive Artists for Change
The ANC Youth league and the Progressive Artists for Change were in favour of the general thrust of the Bill. Their concern however was that a framework should be put in place to see that what was intended was actually carried out.

Ms Ntuli asked for clarity on the statutory body that they suggested be formed to collect money. Se asked whether it was their intention for everyone, including artists, recording companies and composers, to belong to this body. Dr Davies had a similar concern and backed Ms Ntuli’s questions. Did they intend instituting another process other that the one followed by the NAB? Why would it be necessary to provide that this body should be more than a voluntary body?

Mr Masekwa said that a statutory body would fairer and serve the justice better in terms of the laws of the Government. A statutory body would also be transparent and would represent the interests of all and not just the interests of those with capital. He agreed that there was a need to educate artists as to their rights so that they could protect and manage their rights better.

The meeting was adjourned.

Appendix 1

PRIMEDIA BROADCASTING (PTY) LTD-WRITTEN REPRESENTATIONS TO THE PORTFOLIO COMMITTEE ON NEEDLETIME.

1. INTRODUCTION

    

    

    

2. While this Committee has probably been inundated with explanations regarding the nature of the industry, Primedia feels that it is important to set out the scenario in which we currently operate.

    

    

3. The South African private broadcasting environment is one of the most competitive in the developing world. Furthermore, having experienced deregulation fairly recently, the industry is still battling to find its feet in respect of local content, an area in which we are highly regulated, and achieving bottom line returns for our investors, which, given the number of players in the industry is becoming increasingly competitive and difficult.

    

    

4. Each year, over and above our normal taxes paid to government, we pay a tax on our broadcasting licences to ICASA, we will imminently be paying a contribution to the Media Development Diversity Agency ("MDDA") which is in effect an indirect form of taxation. We also have to pay for the rights to use the musical compositions embodied on sound recordings, on all works we play, a portion of our advertising revenue to the South African Music Rights Organisation ("SAMRO"). The payments of operating expenses, salaries and technical matters make the broadcasting industry a difficult and challenging environment. As you know, it is highly regulated, significantly monitored and a close watch is kept on the scarce resource which is the frequency allocation given to broadcasters in respect of a scarce public asset.

    

    

5. On the other hand, the record companies, who are responsible for the recording, manufacture, distribution and marketing of sound recordings recorded by our local musicians are not regulated, operate in a completely free enterprise economy, are predominantly owned by multinational corporations and are answerable to no one internally other than in respect of the normal requirements of having to pay income tax. They operate with free reign. They have no requirement to record a specific amount of local content, there is no commitment to minimum budgets, there is no medical aid, pension, provident fund or any other benefit scheme for musicians. To the extent that, for example, funeral schemes exist, they exist to a very limited degree and generally, if a musician requires money, he or she must either sell records or take an advance against future royalties, which is not always permissible.

    

    

6. Against this background, it is of significance that the music industry has sought to rely on the needletime payments as the "fix" or repair an untenable and problematic situation.

    

    

7. There is no doubt for Primedia that we are on the side of local musicians. They support us in our drives to promote local music, to promote our stations, to promote art and culture in South Africa. However, it is not our role to ensure single-handedly that those musicians are looked after. In many instances they rely on the sale of their music, to a smaller extent, on the sale of their merchandise and more significantly, on income earned from live performances to earn a living, realise a profit and hopefully put something away for their old age. There are no initiatives which have been introduced by the record companies that we know of, which seek to put together the two main stakeholders, the record companies and the artists, to try to determine the best way forward for remedying the problem. Rather, that onus has fallen on the broadcasters with the proposed introduction of "needletime".

    

    

8. It is important to note the international flow of income to the local record companies. The international music industry is dominated by multinationals such as Sony, BMG, EMI, Universal and Warners. Of those, all of the companies other than Warners have affiliates in South Africa. We understand that Warners is imminently to return to South Africa as a fully fledged record company. It is simple for South African record companies to use the international product which they receive from their parent companies. It arrives finished, with promotional video and all promotional material to generate a more significant portion of sales in South Africa. To this end, we understand that about 77% of the South African music industry revenues by value are earned from international product and only 23% of value from local product (KPMG – The South African Music Industry 2001). On this basis, the music majors in South Africa see to it that significant outflows of funds from South Africa in a totally unregulated environment takes place to parent companies abroad in vast sums. There is no quota on how much local music should be recorded, no minimum number of South African acts which must be broken each year, and no requirement that any money earned from revenue such as needletime will and should be used to promote local music. It is therefore entirely possible that that portion of royalties which might accrue to record companies in the event of needletime payments will, to a great extent, be expatriated abroad.

    

    

9. Until these hearings, the relationship between record companies and musicians has been seen as inherently conflictual. Record companies want to pay lower royalties to artists and artists want them to pay more. Artists require tour support for their live work and record companies do not believe it is their business. Record companies want to save money on music videos while artists require that good quality is achieved with more money spent. Record companies limit recording budgets while artists wish to create product which is aesthetically more pleasing and produced with greater production values. Artists require that their music be marketed more strongly than the record companies believe is necessary. Of course this is nothing different to any free enterprise economy. However, our economy, that is that of the broadcasters is highly regulated, controlled and transparent, while that of the record companies is quite the opposite. But yet, the inherently conflictual relationship between record companies and artists which has formed the basis of the struggle between these two entities historically, is now conveniently forgotten as they form an alliance to try to extract from the broadcasters significant revenues which the broadcasters cannot afford and which the broadcasters are loath to pay, particularly in the absence of any support from any of the other stakeholders in the industry.

    

    

10. Primedia already pays a huge amount each year for its rights to play music.

     

     

11. Of our three broadcasting services, only one can be regarded as highly successful from a commercial perspective. The other two are marginal businesses which we hope to grow and, nuture into a clear profit situation in future. However, the more that we have to pay, the more difficult it will be to reach our targets.

     

12. THE ENVIRONMENT

     

     

     

     

13. Much has been made in the debates leading up to these hearings of South African’s participation or non-participation in respect of the various organisations which have something to do with the concept of needletime.

     

     

14. South Africa has not acceded to the Rome Convention which is designed to deal specifically with the rights of performers, broadcasters and producers of sound recordings. It is this convention primarily which deals the concept of needletime but South Africa is not party to it.

     

     

     

15. The Performance and Phonograms Treaty (WPPT of the World Intellectual Property Organisations) ("WIPO"), provides basic levels of protection for audio performers and producers of records. It is limited to sound recordings and does not include audio visual ones. This is the first international treaty which recognises performers’ rights and has led to the broadening of legislation to include concepts of needletime and other neighbouring rights. The particular clause relative to the "right of remuneration" for the use of sound recordings is not a mandatory provision.

     

     

16. Finally, South Africa is party to the TRIPS Agreement which is the agreement on trade related aspects of intellectual property rights. However, this agreement provides very low levels of protection for rights holders particularly, performers in the needletime environment. To a certain extent, it provides significantly lower rights and protections to those provided by the Rome Convention.

     

     

17. In South Africa, the Copyright Act and the Performers’ Protection Act are the primary pieces of legislation which govern the performances of artists and actors in South Africa. Significantly, the Copyright Act in respect of music, has always been limited to the extent of broadcasting payments to that of the use of the musical compositions and has always excluded the sound recordings. The Copyright Amendment Act seeks to change that by making broadcasters pay a royalty to, at this point, an undertermined society for the playing of sound recordings on air. No impact study has been undertaken to assess what this will do to our viability.

     

     

18. It is not feasible to impose this type of royalty on the broadcasting industry. Even a further 1% or 2% onto the amounts now paid will have such a significant impact, particularly in respect of marginal services, that the upshot of needletime may well be to wreck the broadcasting industry. Without a significant impact study, Primedia is most concerned that this legislation has got to the stage that it has, without any regard to those who will be paying the money and those who are already so significantly taxed and regulated, in a manner so much more onerous than that which applies to the music industry.

     

     

19. At Primedia we realise the need to adhere to intellectual property norms which are observed throughout the world. However, the history of neighbouring rights, of which needletime is a part, has never been a piece of legislation uniformly adapted throughout the world. Other developing economies like the Indian economy have never acceded to needletime. Even the United States, the largest music market in the world, does not have needletime. Europe, on the other hand, embraces the notion of needletime on the basis that the performer collaborates with the author of the musical work. The converse position (and the common thinking in America) is that the performer adapts rather than creates the original musical work and should not receive the copyright royalties. In short, the position is arguable and is certainly not as clear as has been made out in our understanding, in a first briefing to this committee and in documentation put up by the music industry to support its implementation.

     

20. LEGAL MATTERS

     

     

     

     

21. In short, the amendments to the Bills will provide that royalties will be required to be paid to broadcast a sound recording.

     

     

22. The amount of the royalty will be determined by the broadcaster or user of the sound recording and the owner of the sound recording (almost always the record companies) by agreement or by a collecting society to established either in terms of the Copyright Act of the Performers’ Protection Act.

     

     

23. The owner of the sound recording (usually the record company) will be required to share the royalty with the performer. The participation in respect of that royalty by each part is not stipulated and the basis in this regard, will be determined again by the broadcaster and the owner. It appears therefore that implementation will be key to this.

     

     

24. Should the parties fail to agree the rates, sharing ratios, fees and so on, then either party may invoke the provisions of the Copyright Act and request the establishment of a copyright tribunal.

     

     

25. The payment of needletime royalties will represent and additional payment by us as broadcasters for conducting our already competitive and in many instances, marginal businesses. It will require personnel, infrastructure and significant costs of set up.

     

     

26. In respect of the recording industry, while it may be the policy objective of needletime to support local artists, it is our view that significantly, the record companies and particularly multinational record companies, and consequently international artists, will profit from the introduction of needletime as currently conceptualised. This is because needletime will be paid in respect of all music broadcast on radio stations and not only South African music. As the local content quota is currently set at 20%, it is obvious that most of the benefits of needletime will flow to those who produce and sell international music, the major record companies and artists.

     

     

27. It is our view that the flow of revenues to countries outside of South Africa will not have an appropriate counterweight in respect of an equal inflow of royalties from other territories. This is because South Africa forms a marginal part of the international market (we are about only 1% of the value internationally) and South African music is not played in any significant amount in any countries where needletime forms part of the legislative framework.

     

     

28. In almost total measure, we associate ourselves with the comments and representations made by the National Association of Broadcasters ("the NAB") which is the umbrella body which looks after the interests of broadcasters as a group and represents all television broadcasters, the SABC, all commercial services and many community services.

     

     

29. The draft amendments contain numerous drafting inaccuracies, errors and inconsistencies. For example:

     

     

    1. Section 9(E) should read "playing the sound recording in public".

        

        

    2. Clause 9(A) uses the word "play" rather than "perform".

        

        

    3. Clause 9(A)(1)(c) does not include the number "1" before "(b)".

        

        

    4. It is interesting that in respect of Section 9A(2)(b), that the performers’ share of royalties will be determined between the broadcaster and the owner of the work. Given that this legislation has so much to do with musicians, it is interesting that performers and musicians will have no say in the determination of the performers’ share, nor what the record company’s share will be used for.

        

     

30. It is clear that there are a number of policy and drafting issues which need to be addressed in respect of the legislation and now seems as good a time as any, than rather simply to address those, than to take a long clear look at the situation generally and see whether or not it is not possible to try to remedy the situation using some other mechanism.

     

     

31. At this point there seems to be very little clarity in respect of the implementation phase of this legislation. It seems clear to Primedia that wide-ranging consultation, debate and development in terms of impact and implementation needs to be undertaken before making a recommendation to proceed with this legislation is given.

     

32. THE EFFECT OF THE PROPOSED AMENDMENTS

     

     

     

     

33. Without all the necessary studies having been undertaken and particularly, the impact of needletime on our industry, we suggest that the legislation be put on hold until such time as all of these studies and undertakings have been completed. We should not be required as broadcasters to pay any further royalties until a viable collection mechanism and clear guidelines in respect of implementation have been developed and clearly delineated. Furthermore, all costs of implementation should be covered by the royalties collected.

     

     

34. It is also our recommendation that prior to any such legislation being introduced, if at all, clear guidelines are established as to the South African nature of the participation in the income. We would like to see limitations on musicians being able to alienate certain of their performing rights, and strict guidelines implemented in respect of how much of the revenues collected at any point would have to be used by the music industry. We would also like to see a significant contribution from the music industry itself.

     

     

35. It would therefore seem appropriate that until such time as all of this work has been undertaken that neither this legislation or any alternative should be implemented. Rather, we would like to see a meeting of all stakeholders and a forum established whereby alternatives could be developed, explored and set out. While no payment is preferable to us, some contribution would be more palatable if we knew that the other stakeholders were contributing as well. It may well be that a fund of some sort could be set up to help assist musicians. Alternatively, some sort of provident or pension fund, medical aid benefits and other such benefits could be set up. However it is too premature to try to give full meaning and realisation to this without a proper forum being established for all stake holders. While Primedia is happy to contribute to the plight of South African musicians, it does not believe that the enactment of this legislation is the answer. It believes that all stakeholders should get together, set out the agendas and try to find a mechanism of implementation which would assist musicians rather than passing the legislation now and then trying to make it work later.

     

36. CONCLUSION

     

 

37. There is no doubt that the history of poverty among a sector of South African musicians requires attention and needs to be addressed. It has been complained of for decades. However, the music industry, generally criticised without fail for being responsible this state of poverty amongst a sector of musicians has sought, rather than by addressing the problem internally, to use "neighbouring rights", or more particularly, needletime, as the key area of activity to try to secure for musicians, a brighter future and a life free from poverty.

     

     

38. This Committee should not misconstrue these introductory comments as in any way diluting the call by musicians for the need to have their situation addressed. We are deeply aware of the important role that South African musicians play in our industry, particularly given the local content quotas and it is particularly important that these musicians are provided for.

     

     

39. However, Primedia’s objection is that notwithstanding the role of the music industry in the well-being or otherwise of South African musicians, the task of setting the situation right has fallen squarely on the shoulders of broadcasters with the proposed introduction of the Copyright Amendment Bill and the Performers’ Protection Amendment Bill.

     

     

40. While Primedia is committed to seeing an improvement in the conditions of South African musicians, it is not convinced that this load should be borne by broadcasters, and we believe that needletime is not the solution to the problem. Our comments in this regard are contained in this document.