Music licensor APRA forced to spill the beans on fees as watchdog pushes for transparency

music licensing

The competition watchdog has cleared the way for Australia’s dominant music licensor to continue as a middle-player between businesses and music rights holders, provided it agrees to a range of new transparency measures.

The Australian Performing Right Association (APRA) will be required to explain how it calculates music licensing fees for businesses and publish details about the distribution of royalties to its members under new conditions imposed by Australian Competition and Consumer Commission (ACCC).

The authorisation, published on Monday, ends an 18-month long battle over APRA’s role in Australia’s music licensing ecosystem, with several unplanned delays to the decision following widespread criticism from business lobbyists and musicians about licensing fees, annual plan structures and royalty distributions.

In the end, while finding APRA’s monopoly power ratchets up prices for businesses and lowers returns for members, the ACCC concluded the public benefits of collective licensing outweighed the bad, provided its conditions were adopted.

“Collective management of copyright is generally more efficient than songwriters having to independently negotiate and collect royalties directly from each business that plays their songs,” ACCC deputy chair Mick Keogh said in a statement.

How the APRA music licensing system works

APRA is a copyright collection body that licenses music to businesses on behalf of music publishers, composers and songwriters. It charges businesses that play music owned by its members under copyright laws, and has a standing joint venture with the Phonographic Performance Company of Australia (PPCA), called One Music, which was launched last year.

APRA, and by extension One Music, hold the performing rights for almost all of the commercially popular music played or performed in Australia, the ACCC says. This gives it an effective monopoly over the market for licenses, which businesses such as retail shops, dance studios and night clubs require to legally play music while operating their companies.

The ACCC’s ruling will allow APRA to continue as it has been until 2024, albeit with the imposition of extra conditions to allay the concerns raised by the likes of the Council of Small Business Organisations of Australia (COSBOA), small business ombudsman Kate Carnell, the NSW Small Business Commissioner and groups of musicians.

The ACCC will require APRA to:

  • “Take steps” to better publicise the availability of its dispute resolution scheme (which the ACCC ordered it to create in 2014);
  • Publish its methodology for calculating license rates for each license category it operates;
  • Publish an explanation of its reasoning when increasing licensing fees by more than inflation;
  • Publish accounting and distribution of license revenue, and where requested, provide information about individual payments;
  • Report on how it monitors music played and how this data is used for determining royalty distributions;
  • Report on how its is improving collection mechanisms in light of the “possibilities opened up by the growth in music recognition and other technology”;
  • Report on the distribution of royalties among its members, specifically the proportion of license revenue distributed to international affiliate societies; and
  • Report on the top 10%, 25% and 50% of APRA members in terms of revenue received from licenses.

 

APRA will be required to publish an annual transparency report covering the ACCC’s conditions, and if the regulator believes APRA is not doing a good enough job, an approved independent auditor will be appointed to do the job instead.

Will the outcome reduce music licensing fees? Time will tell

Monday’s decision was broadly expected, following a draft decision that floated increasing transparency last year, and it would have been a significant move for the regulator to withhold authorisation, given how entrenched APRA’s operations are across the music licensing market.

But, in a sign the ACCC wants to keep a closer eye on the body, it granted authorisation for four years, instead of the five APRA had asked for.

In a statement, APRA welcomed the ACCC’s decision.

“APRA appreciated the opportunity to respond to the various industry submissions made to the ACCC during the authorisation renewal process and looks forward to implementing improvements to continue to better serve its members and licensees,” the organisation said.

COSBOA chief executive Peter Strong, a longstanding critic of APRA and One Music, also welcomed the decision.

“This shadow regulator has been forced to become transparent and learn how to communicate,” Strong says.

“They’re going to have to justify to Australia why their fees are so high, and they’re going to have to tell people how much of the royalties are going overseas.”

As for whether the new measures will reduce music licensing fees, a point of contention since it arose many businesses are paying more under the One Music scheme, Strong says time will tell.

“The outcome should be quite a change in how fees are structured and how fees are charged,” Strong says.

The decision: ACCC weighs the alternative

In its decision, the ACCC noted a “large number of submissions” reflected concerns about the operation of APRA as Australia’s default music licensing body, including licensees and business advocates complaining about the level and structure of fees.

But so too on the rights holder side, with smaller APRA members complaining about lacklustre transparency in the distribution of those fees.

Criticism focused on APRA operating as a black box, with money going in and coming out without much, if any, transparency about what happened in between.

However, despite much debate focusing on music licensing fees, the ACCC doesn’t actually regulate how APRA makes these decisions, and is only concerned with whether collective licensing arrangements are resulting in “overall public benefits”.

That means the regulator was required to assess the economics of a counter-factual where APRA’s authorisation was not granted; a market where the music licensing giant would be forced to allow rights holders to negotiate freely with businesses on a non-exclusive basis.

The ACCC argued this arrangement wouldn’t be “desirable or feasible” because APRA (and by extension One Music) are already so dominant and entrenched that most businesses would be required to work with them anyway.

“The ACCC considers overall that, with these conditions, the conduct for which APRA has sought authorisation is likely to result in public benefits that would outweigh the likely public detriments, including any public detriments in respect of any lessening of competition.” the regulator said.

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