ECAD sets royalties at 7.5% for public performance of music online

The Central Collection and Distribution Agency (ECAD) has announced that copyright royalties must now be paid for the public performance of music via the Internet. Terms for the authorization of this type of online performance are set out in a standard agreement, which users must execute with ECAD.

The agreement only covers ‘public performances’, which are defined as:

"any act by the user by which musical, dramatic-musical compositions or phonograms are made accessible to the public by any means or process that does not consist of the distribution of copies, [and] by means of the dissemination of sounds or sounds and images by radio waves or satellite signals, by wire, cable or other conductor, by optical means or by any other electromagnetic process."

Thus, simulcasting and webcasting require authorization by ECAD. However, distribution by physical or electronic means that involve processes such as downloading and "music on demand" are expressly excluded from the agreement. Management of this type of distribution will depend instead on direct negotiations with the rights holders.

Under the agreement a user must pay a monthly rate of 7.5% of its gross revenue, with a minimum payment of approximately $500. Gross revenue includes all revenue related to public performances, plus any subscriptions and advertising fees. Internet ventures struggling to attract consumers who are used to free music may consider this rate too high and its definition too broad. This may lead to legislative and judicial action, as occurred following the announcement of the royalty rate applicable to film soundtracks (see Cinema owners welcome proposed royalties exemption).

In addition, there is uncertainty regarding the scope of the public performance right. ECAD is only authorized to collect royalties derived from public performance, and there is some doubt as to whether webcasting, especially in its more interactive form, is covered by the definition of ‘public performance’ contained in the Copyright Law. It remains to be seen how or even if these areas of concern will be addressed.