Change to rules for music royalties

The record industry has cleared away regulatory snags before moving ahead with a review of royalty charges for background music.

The review includes royalties for music at cafes, fitness centres and shops and is expected to lead to an escalation of some fees in June.

Last week, the Big Four record companies - Sony, EMI, Warners and Universal - reached an agreement with collections body Phonographic Performances New Zealand (PPNZ) on introducing competition into charging royalty fees.

Music industry lawyer Chris Hocquard said the rules would allow users of music to negotiate directly with record companies rather than exclusively through PPNZ.

The big record companies dominated PPNZ and held about 85-90 per cent of the music that was available, Hocquard said.

A Commerce Commission investigation into potential cartel behaviour led to the changes.

The commission began an investigation in 2009, following a complaint about royalty agreements between owners of music copyright and PPNZ.

Royalty deals were expressed as "exclusive agreements" with licences for copyrighted music issued through PPNZ only, preventing potential purchasers from negotiating on price directly with the owners of the copyrighted music, the Commerce Commission said.

"As a result of the investigation, PPNZ and the four New Zealand major recording companies (Sony, Warner, EMI and Universal) have agreed to express their royalty agreements as being non-exclusive."

PPNZ managing director Kristin Bowman played down the impact of the deal, saying PPNZ was an efficient and simple way for media to get licences to broadcast recorded music.

The system had worked successfully in New Zealand for many years as well as in many other similar jurisdictions overseas.

She said copyright owners had always been able to opt out of the PPNZ scheme if they wished to deal directly with copyright users. "PPNZ has now amended its agreements with the four major copyright owners to make them non-exclusive."