NEW BLOW TO ONLINE SONG SELLERS Grant Robertson – Globe and Mail Musicians and songwriters in Canada have won a fight to keep a few cents for themselves from each downloaded song sold, a move that will add a little more pressure on online retailers whose profit margins are already being squeezed by intense competition and price wars.
In a long-awaited decision, the Copyright Board of Canada ruled Thursday it will allow the Society of Composers, Authors and Music Publishers of Canada (SOCAN) to collect 3.1 per cent on the sale of a downloadable song.
While that only amounts to about 3 cents on a 99-cent song bought from Apple Inc.'s iTunes service, or from Canadian-based Puretracks Inc., it gets them in the door of a fast-evolving industry expected to grow 50 per cent this year.
“We're pleased. … It's been a long time coming and we're just thrilled that we actually have a rate,” said Anne Godbout, director of legal services for SOCAN, which represents more than 85,0000 music industry members. The decision is retroactive to the launch of the services and will set the rate for the next few years until future copyright hearings are held.
The payout won't be huge, equalling roughly $7,000 on the 225,000 or more songs that are projected to be downloaded legally in Canada this year, based on data from Nielsen SoundScan Canada. But the ruling will squeeze digital music retailers, which are already battling thinning margins as they undercut each other for market share. All this, while costs are also creeping up.
Apple, with the biggest slice of the market, sells most songs for 99 cents.
But companies are taking steps to erode that position and have started undercutting the iPod giant on price. Puretracks has offered some of its catalogue for 79 cents, while Amazon.com Inc. launched a U.S. service last month that sells many titles for 89 cents.
At the same time, however, industry sources say profit margins sit at 10 per cent or less on most song sales.
In Canada, the 3.1-per-cent SOCAN tariff will be collected along with a 7.9-per-cent rate collected by music publishers and reproducers.
Those are small-ticket items though. While costs vary between companies, the record labels command the biggest slice of the revenue, at 60 per cent or more on some deals, while e-commerce costs – collected by credit card services – can run between 10 and 20 per cent of the sale price, or more, depending on how many songs are purchased in a transaction.
A variety of other items, from bandwidth to customer support, can push costs up to 90 per cent of a song's sale price.
Puretracks chief executive officer Alistair Mitchell declined to give specific numbers for his company, but said he has expected the copyright decision to be made for some time and Puretracks has been setting funds aside. “Everybody's entitled to their fair share,” he said in an interview.
But as the pie continues to be divided up among various groups in a relatively young industry, the 99-cent price of a song, which has become a mainstay of the industry through iTunes, may be in danger. “There's been this 99-cent ceiling,” Mr. Mitchell said. “But at some point everybody may have to make room for each other.”
Already, the industry is moving in that direction. Puretracks, Apple and other services have been offering songs at a higher price, up to $1.29, for versions that come without restrictions on copying and are a better quality download. |