provide great range, and pulls music from all over the world instead of pushing a steady diet of
The CBC Music service puts at risk business models that have been developed by privatebroadcasters.
The most common business models consist of:
Subscription based services;
Advertising funded services;Because of the unique royalty structure of most on-line music services, which is based on afee paid each time a song is streamed, it is very difficult to generate any profits fromadvertising-based business models for standalone music services. Popular services likePandora in the United States for example have been losing money since they launched. It istherefore difficult to understand how the CBC intends on financing this service, without considering the possibility that it is funding it through the annual appropriation it receivesfrom the Federal Government. In a March 12
article of the Globe and Mail, Chris Boyce,
Executive Director for radio and audio at CBC was quoted saying “
We do find ourselves in adifferent position than a private broadca
ster because the kinds of questions I’m asking don’t
necessarily depend on profit margins, at the same time, we need to look at building asustainable business here. We need to look for revenue
If companies like Pandora, with 100million users, have not been able to break even since their launch over a decade ago, how
does the CBC intend to do so in the much smaller market that is Canada? Mr. Boyce’s
comment also raises very serious questions as to the level of planning that went intolaunching this service in the first place. One would assume that any reasonable managerwould know exactly what the business plan anticipates in terms of costs and revenuesBEFORE launching a service that can have such a negative impact in the market place.It could be argued that the CBC is using the preferential royalty rates it receives from thevarious collective societies because of its status as a non-profit public broadcaster to makethe service viable in the long term. This argument has two main flaws;1.
Assuming the CBC is indeed leveraging lower royalty rate structures to launch aservice that competes directly against private broadcasters, it would be subjectingthese private broadcasters to an undue disadvantage under regulatoryconsiderations;2.
If the premise of making the service viable is indeed that the CBC benefits from alower cost model, it appears that they may not benefit from these lower rates forvery long since societies, such as Socan, have already expressed concerns publicallyaround the new service
Chris Boyce, CBC’s executive director for radio and audio,said “
SOCAN’s move isn’t unexpected, and the CBC acknowledges it will need to revisit
its arrangements at some point
“We currently have a tariff that applies to CBC’s online delivery of their [broadcast] signals,” he said. “And this [CBC Music] isa new thing they’ve got. We have to look and see how the new facts apply to the tariff, and that’s what we’re considering.”