COPYRIGHT BOARD CANADA

Re: SOCAN Proposed Tariffs 22.D and 22.G for the Years 2007 to 2012 Application for an Interim Tariff pursuant to Section 66.15 of the Copyright Act

APPLICATION BY SOCAN FOR AN INTERIM TARIFF FOR INTERNET USES OF MUSIC COVERED BY SOCAN PROPOSED TARIFFS 22.D AND 22.G FOR THE YEARS 2007-2012

Gowling Lafleur Henderson LLP Barristers & Solicitors Suite 2600, 160 Elgin Street Ottawa, Ontario K1P 1C3 Gilles M. Daigle (613) 786-0217 D. Lynne Watt (613) 786-8695 Counsel for SOCAN

Introduction and Summary of Application SOCAN hereby files an application for an interim tariff, pursuant to section 66.15 of the Copyright Act (the “Act”), for the years 2007 to 2012 for the royalties to be paid for the communication to the public by telecommunication of musical works in SOCAN’s repertoire, in connection with audiovisual webcasts (Tariff 22.D) and user generated content websites (Tariff 22.G).1 In the case of both proposed tariffs, the targeted use is the Internet transmission of movies, television programs and other audiovisual content containing SOCAN’s musical works. As of this writing, SOCAN’s understanding is that the principal users engaged in proposed Tariff 22.D activities include Netflix, Apple TV and Sony2. For Tariff 22.G, YouTube is by far the primary and predominant site offering user generated content in the form of audiovisual material containing SOCAN musical works; another, smaller, example is Vimeo. SOCAN and its members have been without a certified tariff for these increasingly popular uses of its repertoire since their inception. Moreover, with Tariff 22.D/G hearings scheduled to commence on June 19, 2012, it would not be reasonable to expect a decision of the Board and certified tariffs until early to mid-year in 2013, depending on the Board’s other exigencies. In the circumstances, it would be unfair and prejudicial to SOCAN and its members to allow large and sophisticated entities such as Netflix, Apple
1

The specific tariffs proposed by SOCAN for these uses of music during the period 2006 to 2012 are as follows: SOCAN Tariffs 22.4 (2007-2008) and 22.D (2009-2012) - Audiovisual Webcasts; SOCAN Tariffs 22.7 (2007-2008) and 22.G (2009-2012) - User Generated Content. 2 Approved SOCAN Tariff 22.D is in effect and applies to the use of audiovisual programming, but only in the case of Canadian conventional television broadcasting and distribution undertakings. The television stations and services falling under Approved SOCAN Tariff 22.D and 22.E will not be subject to the interim tariff, if approved by the Board, or the final tariff. In the case of Canadian broadcasting distribution undertakings offering video-on-demand or pay-per-view programming, it is not clear if they are paying royalties for the music in those programs pursuant to Approved Tariff 22.D or Tariff 17. SOCAN will seek clarification of that issue during the interrogatory process leading to the 2012 hearings.

-2and YouTube, among others, to continue their significant use of SOCAN’s musical works without the payment of any compensation whatsoever for such long periods of time in the past, present and future. Accordingly, SOCAN requests that the Board immediately commence a process for determining the present application and approving the proposed interim tariffs on the basis requested. Background As the Board is aware, SOCAN is a collective society as defined in section 2 of the Act. It administers the public performance and communication rights in the musical works of its Canadian member composers, authors and music publishers, as well as the rights of foreign composers, authors and publishers. Essentially, SOCAN administers in Canada the performance and communication rights in the world repertoire of copyright protected music. SOCAN first filed a tariff for the use of musical works on the Internet sixteen years ago, for the year 1996. The Board conducted the hearing of SOCAN Tariff 22 for the years 1996-2006 in two phases. The first phase dealt with several broad legal issues, a number of which were ultimately appealed to the Federal Court of Appeal and to the Supreme Court of Canada, which determined those issues in 2004.3 The second phase dealt primarily with valuation issues for the years 1996 to 2006. On October 18, 2007, the Board issued the first of two Tariff 22 decisions, this one dealing with the use of musical works by Online Music Services (the “22.A Decision”).4 On October 24, 2008, the Board released the second decision concerning other Internet uses of SOCAN’s repertoire
3

Society of Composers, Authors and Music Publishers of Canada v Canadian Assn of Internet Providers, 2004 SCC 45 [2004], 2 SCR 427. 4 Statement of Royalties to be Collected by SOCAN for the Communication to the Public by Telecommunication, in Canada, of Musical or Dramatico-musical Works [Tariff No. 22.A (Internet – Online Music Services) 1996-2006], Dated October 18, 2007.

-3(the “22.B-G Decision”).5 Certain aspects of both Decisions were appealed to the Federal Court of Appeal6 and there are currently three appeals pending before the Supreme Court of Canada. Since 2006, SOCAN has filed proposed tariff items 22.A and 22.B-G (now 22.BH) for the years 2007 to 2012, as published in the Supplement to the Canada Gazette for each of those years.7 A Tariff 22.A hearing for the years 2007 to 2011 took place before the Board in June 2010, a decision on which is pending. In January 2011, SOCAN contacted the Objectors to propose a hearing on Tariffs 22.D/G for the years 2007-2011, to be held in December 2011. The Objectors to these tariffs opposed SOCAN’s request and, after a series of procedural wranglings between the parties, the Board approved a schedule of proceedings leading to the commencement of Tariff 22.D/G hearings on June 19, 2012. Subject to the Board’s other hearing and decision-making exigencies, it is not likely that a decision on the matter will be rendered until the beginning or middle of 2013. In the absence of an approved tariff, the uncompensated use of SOCAN’s musical works by Tariff 22.D/G users will continue throughout that period. If that is the result, some of these users’ services will have been operating in Canada for more than six years without paying any royalties to SOCAN. Nature of the Tariff 22.D/G Music Uses SOCAN’s proposed tariffs correspond to two broad categories of online audiovisual services: Tariff 22.D is intended to cover services that communicate (by way of streams or downloads) movies and television
5

Statement of Royalties to be Collected by SOCAN for the Communication to the Public by Telecommunication, in Canada, of Musical or Dramatico-musical Works [Tariffs nos. 22.B to 22.G (Internet – Other Uses of Music) 1996-2006], Dated October 24, 2008. 6 2010 FCA 122; 2010 FCA 220, 2010 FCA 221. 7 Copies of proposed Tariff 22 for each of the years 2007 to 2012 are appended as Appendix B.

-4programs similar to those offered by the conventional broadcasting services that are subject to SOCAN Tariffs 2 (Television Stations) and 17 (Pay and Specialty Services). SOCAN has referred to these Internet uses as “Audiovisual Webcasts”. Tariff 22.G is intended to apply to services that offer user-generated audiovisual content. In some cases, that content is produced by amateurs. But in many other cases, it consists of professionally-produced music videos and other audiovisual content similar or identical to that offered by Tariff 22.D services, i.e., film and television studio programming that contains SOCAN musical works. SOCAN refers to that material as “User Generated Content”. Audiovisual Webcasting Sites Audiovisual webcasting sites communicate movies and television programming to their customers over the Internet, either through a web browser, a mobile device, a set-top box, a web-enabled television set or a gaming console. Each service offers one or more of these delivery options. For example, Netflix allows its subscribers to watch video on-demand on their computer or other devices such as Wii, Playstation and X-Box video game consoles, as well as Apple devices (iPhone, iPad and AppleTV). The content for these audiovisual webcasting services is provided by traditional content providers such as film and television studios and distribution companies. It is SOCAN’s understanding that some of these services also produce their own programming for distribution to their customers. One of the most popular Tariff 22.D services to become available in Canada is Netflix, which offers unlimited streaming of full-length movies and television programs for a monthly subscription fee. Netflix began as a mail-order DVD rental service, but has since shifted its focus to become a video-on-demand streaming service. On September 22, 2010, Netflix became available in Canada on a subscription basis for $7.99/month, but with a rather limited content selection due to licensing restrictions.

-5However, since the initial launch in Canada, Netflix has since enlarged its movie database and continues to add titles on an ongoing basis. Netflix reports that, as of March 31, 2011, it has 803,000 subscribers in Canada and hopes to reach one million subscribers by the summer of 2011. 8 Netflix also reports Canadian revenues of $12M in the three months ending March 31, 2011 and US revenues of $706M in the same period. 9 Netflix operates an “all-you-can-eat” content streaming service, i.e., subscribers can stream as much programming as they desire for the monthly subscription price. Netflix’s library includes both movies and television shows and Netflix uses a subscriber’s viewing habits to recommend content that may be of interest to that subscriber. There are no advertisements on Netflix. Apple operates the other major audiovisual webcasting service in Canada. Through its iTunes software (on computers and mobile devices) and through its dedicated video-streaming hardware (Apple TV), Apple offers streams, limited downloads and permanent downloads of movies, television shows and music videos. Apple charges on a per-use basis. The AppleTV hardware also allows users to access content from Netflix and YouTube. Apple's iTunes store launched in Canada on December 3, 2004 and the first generation AppleTV hardware started shipping on March 21, 2007. The second generation of the hardware started shipping on September 1, 2010. Sony operates two audiovisual webcasting services: Crackle and Qriocity. The service “Crackle” is primarily a web-based audiovisual webcasting service, but it has recently released an application for iPhone and iPad. Crackle offers streams of movies and television programs distributed by Sony.
8 9

Netflix Q1 11 Financial Statements [Appendix C]. ibid.

-6Crackle also produces its own programs for exclusive release on Crackle.com. Internet users can access and view the programming on Crackle.com free of charge, as the service’s revenues are based on the sale of advertising. Crackle.com features video advertisements that run before programs and banner ads on the webpage where that audiovisual content is displayed. Qriocity is an video and audio on-demand service which Sony makes available to subscribers through various Sony hardware platforms, such as Bravia televisions, certain Blu-Ray players and PS3 game consoles. Qriocity features premium audiovisual content. As noted above, the programming communicated by these audiovisual webcasters is very similar (and in some cases identical) to the programming communicated by the stations and services covered by SOCAN Tariffs 2 and 17. Accordingly, there is no reason to believe that the SOCAN music use for these Internet webcasters is any different from similar conventional programming services, especially those that communicate a large amount of movies, sit-coms and other general entertainment programming. User Generated Content Sites User Generated Content services allow their users to upload video and audiovisual content and to view the content uploaded by others. For most UGC services, all visitors to the site are free to view the streamed content without opening an account or otherwise registering with the site, but in order to upload content, the user must log in and, in doing so, provide certain required information (email address, etc.). In most cases, opening a user account in this manner is free of charge. The leading UGC service in the world is YouTube. Another popular example is Vimeo.

-7YouTube is owned by Google and is, by far, the dominant UGC service in Canada and in the world. Google acquired YouTube in October 2006 for US$1.65B. YouTube.com is the 4th most-visited site in Canada.10 YouTube reports that, in 2009, it had 16.9 million unique Canadian visitors per month.11 YouTube also reports that the average user spends 3 hours and 45 minutes on YouTube.com per month. Vimeo was launched in 2004 and has over 3 million subscribers. Vimeo reports that it received 60 million unique visitors globally in April, 2011. 12 Vimeo does not report its Canadian usage statistics. Both YouTube and Vimeo generate advertising revenues, as discussed in greater detail further below. UGC Services and Use of SOCAN Repertoire Because much of the content on UGC sites is generated by amateurs, these sites communicate unprecedented amounts of content. YouTube reports that its users upload over 35 hours of content every minute. Billions of hours of video are currently available on YouTube. Vimeo reports that 16,000 new videos are uploaded on its site daily. Content on YouTube is divided into “channels” and categorized by keyword, which enables YouTube to recommend content to a user based on that user’s viewing history. However, YouTube’s content is not limited to that provided by amateurs. YouTube also streams “partner content”, which is added to the site by major content providers such as record labels and television and movie studios. For example, YouTube has arrangements with Warner Brothers Music and Warner Brothers Pictures, each of which has a “channel” on
10 11

http://www.alexa.com/topsites/countries/CA [Appendix D]. http://google.com/youtube/advertisecanada/YouTubeCanadaAudience.pdf [Appendix E]. 12 http://vimeo.com/advertisers [Appendix F].

-8YouTube from which music videos, music trailers and other promotional content is communicated. In addition to being found on these channels, that content is widespread throughout the site and intertwined with amateur content as a result of postings by non-partners. Like most UGC services, both YouTube and Vimeo support “embedding”, which allows anyone to post a link to content from the UGC service directly on one’s own web page. The linked content still streams from the servers of the UGC service and any related advertising remains intact. Embedding allows for widespread distribution of content, but both YouTube and Vimeo allow users to prohibit embedding for the content they place on the site. Music plays a significant role in large amounts of programming communicated by UGC services, in the case of both partner and amateur content. Some of this content is in the form of music videos created specifically to market musical works and sound recordings, which can be purchased as downloads on major online music sites such as Apple’s iTunes (YouTube provides a link to the Apple iTunes service), or streamed by music streaming sites such as Rdio. Music also forms part of the film and television programming found on UGC sites (often as excerpts) as well as other types of audiovisual content, in connection with both partner and amateur content. Of the top 20 most-viewed videos of all time on YouTube, 16 contain music for the entire duration of the video. The most-viewed video on YouTube, “Justin Bieber - Baby ft. Ludacris” had been viewed 533 million times as of May 5, 2011. Often, amateur-generated content draws as many viewers as partner content. For example, the official music video for the Chris Brown song, “Forever” has been viewed 69 million times in partner format. However, a nonpartner version involving a wedding party entering a church to the same

-9song has been viewed 65 million times. In addition, there are at least seven other non-partner videos with over 1 million views each that feature the song in the form of a cover, parody or tribute. Through YouTube’s content identification system, discussed further below, some rightsholders have the ability to recover advertising revenues generated by these amateur-submitted videos that contain copyright-protected musical works. Although it caters to more “artistic” creators, Vimeo’s model is similar to that of YouTube in that it allows anyone to upload content for free. Vimeo places certain bandwidth and storage limits on free subscribers and increases these limits for subscribers who pay a monthly fee. Many of the programs on Vimeo use music to enhance the action of the visual component. UGC Services and Monetization of the Use of Music The content on UGC services is monetized in much the same way as conventional television services: through advertising. The advantage of online video, however, is the greater ability to reach precisely-targeted audiences. Sites such as YouTube can use visitor data to allow advertisers to target advertisements based on search queries, demographic data, viewing patterns and geographical location of the user (i.e., for the purpose of selling local advertising). Advertisers can also link their ads to specific partner content. This increased precision is highly valuable to advertisers. Nielsen reports that brand recall increases by 15% for online advertising.13 Ads on YouTube are shown either before the program (pre-roll), after the program (post-roll), superimposed on the program (overlay), or beside the program on the same webpage (sidebar). Coordinated advertising campaigns may use a combination of these techniques to increase the
13

Nielsen, “The Global Online Media Landscape”, April 2009 at p. 8 [Appendix G].

- 10 impact of the advertisement. Advertisers pay either on a cost-per-click basis or on a cost-per-thousand-impressions basis (views). Advertising is shown on both partner and amateur-generated content. Where a video contains content that is owned by another user, YouTube allows some copyright owners to allow the video to remain on the site and share any related advertising revenue with YouTube. In 2007, YouTube introduced ContentID (formerly known as Video Identification), a technology that identifies specific content within uploaded videos. For example, if the ContentID system finds that an amateur has uploaded a fan video for a copyright-protected song, YouTube will notify the record company, which then has the option of having the infringing material removed or to share the ad revenue generated by the video.14 The ContentID system has allowed some rightsholders to generate significant revenues from videos that they would have otherwise had removed for copyright infringement. This revenue can be significant if the usercontributed video “goes viral.”15 Vimeo sells advertising space that can be viewed before certain programs and also generates revenue by selling premium subscriptions for $9.95 per month that enable content creators to upload full-length high-definition videos.16 It is thus clear from all of the above that sites and services offering audiovisual webcasting and user generated content are earning revenues from the communication of the content on their sites, including musical works within the repertoire of SOCAN.

14

YouTube, “ContendID Turns Three”, December 2, 2010, online: <http://youtubeglobal.blogspot.com/2010/12/content-id-turns-three.html> [Appendix H]. 15 Billboard, “YouTube: Growth in User-Generated Content is Outpacing Official Videos”, April 14, 2011, online: <http://www.billboard.biz/bbbiz/industry/digital-and-mobile/youtube-growth-in-usergenerated-content-1005135032.story> [Appendix I]. 16 http://vimeo.com/join [Appendix J].

- 11 SOCAN’s Proposed Interim Tariffs For both audiovisual webcasts and user generated content sites, SOCAN has proposed, in the tariffs published in the Canada Gazette, a rate of 15% of the Gross Revenues earned by the Site or Service, subject to a minimum monthly fee of $200.00. For the purposes of this application for the approval of interim tariffs, and without prejudice to any position that SOCAN may choose to advance in the upcoming hearings for the determination of final tariffs, SOCAN proposes the tariff provisions set out below.17 Proposed Interim Tariff D.1( Other Audiovisual Webcasts) The royalties payable by a site or service that communicates audiovisual programming similar to that of a broadcaster that is subject to Tariff 2.A (Commercial Television Stations) and Tariff 17 (Transmission of Pay, Specialty and Other Television Services by Distribution Undertakings), for each of the years 2007 to 2011, are as follows: (a) For a site with revenues from subscriptions: 1.9% of the gross amounts paid to the site by Canadian subscribers during the year; (b) For a site with revenues on a per program basis, 1.9% of the gross amounts paid to the site by Canadian users, excluding programs that do not contain musical works from SOCAN’s repertoire. (c) For a site with revenues from the sale of advertising: A x B x (1 - C), where: (A) is 1.9%;

(B) is the total advertising revenues generated by the site from advertisements associated with the site’s programs, excluding programs that do not contain musical works from SOCAN’s repertoire; and (C) is (i) the ratio of non-Canadian page impressions to all page impressions, if that ratio is provided to SOCAN; and (ii) if not, 0 for a Canadian site and 0.9 for any other site.
17

The full text of SOCAN’s proposed interim tariffs is appended as Appendix A.

- 12 In the event that a site receives revenues from more than one of the sources described in the above paragraphs, the additional paragraphs shall apply accordingly. For the following reasons, SOCAN submits that the above proposal is fair and equitable, especially for the purposes of an interim tariff: a. The interim tariff would apply only to audiovisual webcasting sites that generate revenues for their communication of audiovisual programming. b. Non-Commercial sites (i.e., those that do not generate any revenues) would not be subject to the interim tariff, and there is no minimum fee. c. Generally, the tariff reflects the rate (1.9%) and tariff structure (a percentage applied to a site or service’s revenues) adopted by the Board and presently applicable to similar services to which Approved SOCAN Tariff 22.D applies - i.e., websites operated by conventional television stations and pay/specialty services for the very same type of programming. d. Similarly, SOCAN’s proposal is consistent with the principle adopted by the Board in its Tariff 22.B-G decision, i.e., that the tariffs for music uses on the Internet should reflect tariffs for similar uses by conventional services (in this case, Tariff 2 and 17 services). e. Proposed Tariff 22.D.1(a) and (b) are limited to revenues received for communications to Canadian customers (as opposed to “all Internet related revenues”), while item (c) accounts for non-Canadian traffic in the same manner as the Board contemplated in its Tariff 22.B-G decision.

- 13 f. Given that pay-per-use programming (for which customers pay a flat fee per downloaded or streamed program) is provided on an individual program transaction basis, the applicable formula allows a site to exclude titles that contain no SOCAN music (although SOCAN expects such instances to be very rare given the nature of the programming in question). g. Similarly, in the case of advertising-based programming services, the interim tariff would allow these sites to exclude from the advertising revenue base any revenues that are not associated with programs that do not include SOCAN music. In the case of User Generated Content sites, SOCAN proposes the following tariff provisions: Proposed Interim Tariff G.1 (User Generated Content) The royalties payable by a user generated content site, including but not limited to, YouTube, Facebook, MySpace and Vimeo, for each of the years 2007 to 2012, shall be as follows: A x [1 – (B x C)], where (A) is (i) in the case of music videos: 6.8 percent; and (ii) in the case of other audiovisual content: 1.9 percent; of all revenues from advertisements associated with the site’s music videos and other audiovisual content, respectively, but excluding any content that does not contain musical works from SOCAN’s repertoire; (B) is 0.95 for a Canadian site and 1 for any other site, and

(C) is (i) the ratio of non-Canadian page impressions to all page impressions, if that ratio is provided to SOCAN; and (ii) if not, 0 for a Canadian site and 0.9 for any other site. For the following reasons, SOCAN submits that the above proposal is fair and equitable, especially for the purposes of an interim tariff:

- 14 h. The 6.8% rate for music videos reflects the rate approved by the Board for Tariff 22.A in the case of on-demand streams of musical works, which is a very similar use; i. The 1.9% rate is consistent with the rate for similar audiovisual content in the case of Proposed Tariff 22.D, discussed above. j. Generally, the rates and tariff structure reflect the principles adopted by the Board in its certification of Approved Tariffs 22.B-G. k. The revenue base captures only a part of “all Internet related revenues” (i.e., advertising revenues) and the tariff is therefore conservative. l. The revenue base is limited to revenues generated by advertisements associated with material containing SOCAN music and there is thus no need to calculate the ratio of audio page impressions to all page impressions. SOCAN proposes these interim tariffs with the benefit of the Board’s decisions and deliberations during past hearings and general publicly available information concerning Tariff 22.D/G sites and services. However, SOCAN is not yet privy to the specific business methods, advertising structures, revenue streams, costs and other relevant information of the proposed licensees under Tariffs 22.D and 22.G. Accordingly, SOCAN’s proposals for these interim tariffs should not be deemed as an admission by SOCAN that the proposed rates and tariff structures are appropriate for the final determination of these tariffs, without the benefit of a detailed consideration of those businesses before the Board at the June 2012 hearings. Instead, SOCAN considers these proposals as a starting point in the process leading to the determination of final tariffs.

- 15 SOCAN’s Request Meets the Test for an Interim Tariff Negative Consequences Caused by the Length of the Proceedings As set out in detail above, the last (and to date only) tariff certified by the Board for Internet – Other Uses of Music was the 2008 22.B-G Decision, covering the years 1996 to 2006. Many Internet uses of music for the years 2007 and onwards are being licensed in connection with a tariff based on 2005 economic data and evidence. Many of the uses, including the uses for which SOCAN seeks an interim tariff in this application, are not licensed at all. SOCAN submits that the current tariff approval process can and should be modified in the particular circumstances at hand to ensure that SOCAN and its members receive some form of compensation while their property is being used by others to generate revenues. The approval of interim tariffs would serve this purpose by adapting the process to the reality of rapid technological change and growth of new services in connection with the use of music on the Internet. The passage of six years, from 2005 to 2011, (not to mention several more years until a new tariff might reasonably be certified) is an extremely long period of time in the context of the development, growth and monetization of the use of music on the Internet. When SOCAN filed the versions of Tariff 22 that were certified by the Board in 2007 and 2008, YouTube had not been created; Netflix and Apple TV did not exist; and even Apple iTunes was in its infancy. By the time the Board holds the next Tariff 22.D/G hearing in June 2012, and then renders a decision, several more years will likely have passed. Such a significant delay prejudices SOCAN’s members and creates great uncertainty as to royalty payments that they can reasonably expect to

- 16 collect. It also causes great uncertainty to licensees and potential licensees with respect to their accruing liability for future licence fees. One of the allegations that is frequently made about the copyright regime in Canada by potential entrants to the Canadian marketplace is that the process for certifying tariffs takes too long and the uncertainty with respect to fees introduces an intolerable business risk. While the approval of interim tariffs does not create finality in terms of royalty payments, it at least ensures a revenue stream for present (and in this case past) uses of music. Interim tariffs would also ensure that any ultimate transitional period is less abrupt for the users, whether the final tariffs require them to pay additional royalties to SOCAN, or lesser amounts. In response to this application, SOCAN expects the Objectors to argue that there is no need for interim tariffs because the final tariffs will be retroactive and bear interest, as has been the case in the past. SOCAN submits that this position should no longer be given any regard by the Board. The reality of the situation is that, for some time now, interest rates have been at all time lows and cannot even begin to fairly compensate SOCAN for the important uses of its repertoire over long periods of time. Moreover, many objectors have publicly stated their frustration with the retroactive nature of the Board’s decisions and their obligation to pay interest for past periods. More importantly, SOCAN is not a bank. If the Objectors require loans to finance royalty obligations associated with their past, current or future uses of SOCAN’s music, they should contact financial institutions and negotiate the best possible rates. SOCAN is a service provider and should be treated like any other service provider, i.e., it should be entitled to receive payment immediately upon the provision of its services. To hold otherwise, in effect, would make SOCAN’s members the involuntary financiers of the users’ business ventures, which would be most unfair, especially when the

- 17 business operations in question belong to large and sophisticated entities such as Apple Inc. and Netflix. SOCAN's members do not have unlimited resources. Like many other individuals and businesses, they have been hit hard by the recent recession and losses associated with music file sharing issues, which have been felt for almost ten years now. As one would expect from the other service providers engaged by the Tariff 22.D/G users (studios, programmers, website designers, etc.), SOCAN’s members need and should receive their compensation immediately - not two, three or even more years after the uses of their property have taken place. A legal (and licensing) vacuum exists A legal vacuum currently exists with respect to the use of SOCAN’s repertoire for Proposed Tariffs 22.D/G. Tariff 22, as proposed by SOCAN, targeted the use of music on the Internet according to the type of music use. For example, Section 3 of the tariff addressed the Internet simulcast of radio station signals. Section 4 would have covered audiovisual webcasts, which among other content, would have applied to audiovisual sites such as YouTube. Section 6 would have applied to game activities, etc. However, in the 2008 Decision, the Board certified the tariff in a different form, i.e., a user-based tariff with different categories for specific users. For example, Item B of the tariff applies to commercial radio stations (whether they engage in simulcasting, webcasting, games and/or other uses); Item D of the tariff applies to commercial television, non-broadcast television and pay audio services (again for simulcasting, webcasting, or whatever uses of music this user group makes on the Internet). In its 2008 22.B-G Decision, the Board refused to certify any tariff for “Other” uses of music. As a result (and not surprisingly), some users with uses of

- 18 music that do not fall squarely within one of the approved tariff categories have taken the position that they are free to use SOCAN’s music without compensation or any other restriction. This, of course, is inconsistent with the principle that the unauthorized use of a protected work constitutes copyright infringement under the Act. The certification of an interim tariff would remedy the legal uncertainties created by this situation. The main application (i.e., the tariff filings) has merit Given that the Board has already certified a tariff for the communication of musical works as part of audiovisual webcasting by Canadian commercial television stations and other Canadian conventional services, there would seem to be no issue that a tariff will be certifiable for the similar use of SOCAN’s repertoire by other sites and services offering downloads of movies, television programs and other audiovisual works, whether or not they are Canadian. The Balance of Convenience Favours Certifying an Interim Tariff It has become quite clear that, in the absence of the Board’s intervention in this matter, the unauthorized and uncompensated use of SOCAN’s repertoire will continue in audiovisual webcasts and in user generated content sites that are not covered by currently approved tariffs. Such a situation would continue to deprive copyright owners of compensation and maintain the current uncertainty in the marketplace. Moreover, new or “start-up” businesses and business models do not have any benchmarks by which to assess their potential liability. The Board can and should intervene to remedy this situation to the greatest extent possible, by certifying the interim tariffs proposed above on an urgent basis, pending the ultimate conclusion to the hearing that it has recently ordered. The Board has full jurisdiction to do so and on that front

- 19 SOCAN relies on the principles discussed by the Board in its recent decision approving an interim tariff for Access Copyright. SOCAN would expect the Board to provide the Objectors with a reasonable period of time to respond to the present application and for SOCAN to reply their submissions.

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All of which is respectfully submitted this 13th day of June, 2011

Gowling Lafleur Henderson LLP Barristers & Solicitors Suite 2600, 160 Elgin Street Ottawa, Ontario K1P 1C3 Gilles M. Daigle (613) 786-0217 D. Lynne Watt (613) 786-8695 Counsel for SOCAN