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Environment and Communications Legislation Committee
06/03/2018

CARTER, Mr Jonathan, Head of Legal, Corporate and Policy, APRA AMCOS

HUTLEY, Ms Vanessa, General Manager, Music Rights Australia

[10:06]

CHAIR: Welcome. I understand you've both been given the information on parliamentary privilege and the protection of witnesses. Would either of you like to make a brief opening statement before we go to questions?

Ms Hutley : I'll begin, and then Jonathan will follow. Music Rights Australia and APRA AMCOS thank the committee for the opportunity to appear today. The Music Rights Australia and APRA AMCOS submissions set out our position, and we're more than happy to answer any questions that committee members have on them and any other matters.

The Copyright Amendment (Service Providers) Bill 2017 represents a good, policy based compromise arrived at through the efforts of the Department of Communications and the Arts, which was directed by the Minister for Communications and the Arts to consult with those groups which would be directly impacted by the changes to the safe harbour scheme. The music community has always supported a policy based approach to this important issue. In particular we have advocated that the scheme change should be approached using the first principles which underpin the statutory bargain that is the safe harbour position.

The music community supports the bill, which is the product of that consultation, as it addresses the concerns that they and others in the creative content industries had about the previous draft. Of central importance to any approach to address the safe harbour scheme is to approach with the underlying principle that limited protection of safe harbour schemes should only be afforded to those entities which do not control the content which third parties have placed on their services. It is also a central principle that the services should not derive commercial benefit or advantage from the content.

We note that the statement of compatibility with human rights for this bill stated that the purpose of the existing safe harbour scheme is to provide limitations on the scope of remedies against carriage service providers for copyright infringement they do not control, initiate or direct and that take place through their systems and networks, subject to the conditions that the provider takes particular steps to deter infringement. It has always been our position that, if that approach were to be adopted in drafting amendments to the Copyright Act, schools and universities, which do not have the capacity to control when third parties place infringing content on their services and which do not derive a commercial benefit from that content, should fall within the safe harbour scheme provided they abide by the obligations set out in the safe harbour scheme.

We are pleased to support the bill because the government has chosen to approach the amendments through the first-principle lens. They have created new, discrete classes of service providers which include those educational institutions I mentioned before and also cultural institutions and organisations which support people with disabilities. The music community supports this innovative and fit-for-purpose solution.

The music community is equally pleased that the bill does not expand the safe harbour scheme to commercial entities which control or derive commercial benefit from the creative content on their services. Such commercial companies should work to agree commercial terms with copyright owners to ensure content owners are rewarded for their work.

Internationally, the misapplication of safe harbour schemes has undermined the commercial environment for online music services and has meant that creators, including songwriters, independent recording artists and labels, are not being paid for their creative output at market rates, or sometimes not at all. This is often referred to as the value gap.

A recent study by Dr Stan Liebowitz titled 'Economic analysis of safe harbor provision' states at page 3: 'The safe harbor, therefore, because it provides the basis for the bargaining advantage of user-uploaded content sites, lowers the overall price paid to copyright owners for the use of music.' It goes on to state: 'The payments made by user-uploaded content sites are considerably lower per stream than other similar non-user-uploaded content streaming sites.'

These are not trivial matters or fanciful outcomes for the many small businesses which make up the local music community. APRA AMCOS members and ARIA members should have their legitimate expectations that they will be rewarded for their work recognised and supported through the legislative framework. This bill does that, which is why the music community supports its passage as drafted. This is an innovative solution, and it reflects trends around the world. It is a mark of how innovative this is that, in other jurisdictions such as the US and the EU, they are still debating how they can ensure commercial service providers reward the creative industries for the content on their services while ensuring that the first principles of the safe harbour schemes are not undermined. Australia has struck a new and welcome statutory bargain which will support the growth of online services and encourage current and emerging business models which continue to deliver music and other creative content to consumers while also answering the concerns of the discrete classes of service providers which now can obtain the limited protection of a safe harbour scheme. The music community urges the committee to recommend the passage of the bill as currently drafted and to further recommend that its passage into law should end consultation on this issue. Thank you.

CHAIR: Thank you very much, Ms Hutley. Mr Carter?

Mr Carter : I want just to briefly emphasise the level of support that this bill has from the music community. My organisation represents over 90,000 Australian and New Zealand songwriters and music publishers, from artists who have conquered the world, like Sia and Flume and Lorde, to songwriters who are playing their own songs at your neighbourhood pub, and from multinational music publishers that control huge catalogues of works to start-up businesses, sole traders, independent music publishers who might only have one or two songwriters signed to their roster. With such a diverse membership, you could imagine it would be sometimes difficult to get alignment from that membership on a particular issue. But, in this case, they do speak with a unified voice and they are very supportive of the bill as it currently stands. Their major concern with the previous safe harbour proposal that was in the previous bill, the disability access and other measures bill, was that it was drafted in such a way that protection might be given to commercial websites that make available third-party content—our members' music—and derive a profit, and that a safe harbour would apply and protect those services rather than a licensing arrangement.

There are simple, efficient, collective licensing solutions that are available to the online platforms that we're discussing today—and I'm not just talking about the YouTubes and the Facebooks of this world; I'm talking about the smaller platforms. APRA AMCOS, for its part, has a tailored licence that is aimed at start-up organisations, with reduced licence fees, simplified reporting arrangements, phase-in rates—all for the purpose of providing a simple licensing solution, rather than those platforms getting a free kick under an exception to the Copyright Act. So that's really the position that our members have.

Further to that, we have tabled a report from Dr Liebowitz that Vanessa referred to before, which sets out in some detail using economic analysis: what happens in a market where the safe harbour is expanded to cover digital services that offer third-party content and profit from it; the disruption to the market and the change in bargaining position that arise when those safe harbours apply; and the willingness of the online platforms to pay in a market where safe harbours apply to their business. We can provide an online reference to that report, which sets out the example of what happens in a market where safe harbours are overly extended to commercial platforms offering third-party content.

Senator URQUHART: Ms Hutley, you said in your opening statement that this was a good policy compromise. That leads me to then ask your confirmation as to whether your organisation supports the bill. I think I understood what you said, but I want to clarify what you meant by the word 'compromise'.

Ms Hutley : I see compromise as a positive statement. Jonathan and I participated in extensive consultations, as did the platforms and other content owners. We see that as a good outcome. The parties have given their views and put forward their concerns to the department and the government, and this is the product of that listening and discussion. Compromise is not a negative statement.

Senator URQUHART: I wanted to clarify because you said compromise, but you fully support it. The Law Council and the Copyright Advisory Group to the COAG Education Council argued that the bill should be amended to make it clear that the safe harbour extends to activities carried out by a third party on behalf of a service provider. What's your view on that proposal?

Ms Hutley : I refer to the previous comments. It is difficult to comment on the extent of what that exception would look like. However, we have concerns, particularly within the context of this safe harbour process itself. The benefit is to the institutions and the class of institutions which are named. It is their benefit to have, and the obligation lies with them. What commercial arrangements they have with other parties to manage their services is something a rights-holder sending a notice may never know. Again, without an understanding of exactly the issue and the problem, it seems that the relationship for smooth and easy transaction is for the notices to go to the institution which is the beneficiary of the limited exception. We believe that how they manage the risk and the notices on services which they run themselves or are run by others is a contractual issue between those two parties. A copyright owner serving a notice may never know about the contractual issues and the extent of how they've managed their risk. You could potentially then find yourself being batted back and forth between the two parties, with the service provider saying, 'Sorry, these are commercial-in-confidence issues; you need to write to the institution,' and the institution saying, 'These are matters that are managed by others.' For ease of notice and takedown, which is the obligation, at a fundamental level we think there's greater clarity in dealing with the institution. We note that many of the institutions which have been given this are currently taking the appropriate steps already, so we don't see that as an additional burden on them to communicate via the notice and takedown.

Senator URQUHART: So it's something they're already doing. The submission from APRA AMCOS focuses on comments made by the minister that the bill represents the first step in an incremental expansion of the safe harbour scheme. Can you tell me why you're concerned about consideration being given to expanding the safe harbour scheme to other online service providers?

Mr Carter : I can refer to my opening statement to some extent. The US experience has shown that, where the safe harbour applies to websites that provide access to third-party content, when it comes to a licensing discussion with that service, the willingness to pay of a service which is able to make content available subject only to a notice-and-takedown regime is less than that of a service which can't avail itself of the safe harbour. There is a lot of evidence, including in the report that's being tabled, whereby the value or licence fees which flow to music rights holders from those service providers is less where the service is protected by a safe harbour than the commercial rate negotiated with a service provider that doesn't avail itself of the safe harbour.

Senator URQUHART: What's your response to the proposition put by Google and others that safe harbours are necessary to support technological innovation and a global level playing field for Australian start-ups?

Ms Hutley : From our perspective we don't believe this is a discussion between copyright owners and innovation. The music industry is at the cutting edge of innovation online. In ARIA's most recent publicly available wholesale figures for 2016, music streaming revenue has become the dominant consumption format for Australian music fans, now accounting for 38.5 per cent of overall market value. Digital sales now account for approximately 70 per cent of the total market. Digital is music, and music is digital. This isn't a question of innovation and copyright; it's a question of rewarding adequately in a digital environment and not using the safe harbour as a shield to distort commercial negotiations. The safe harbour has a very important role. We support the new classes that have been developed under the current bill, but the issue is about having commercial discussions with a variety of businesses. As Jonathan said, the music industry is small business, innovators and start-ups.

Mr Carter : The only point I'd add is that the services advocating for an expanded safe harbour regime in this territory already have access to music. APRA AMCOS is obliged to offer a blanket licence to anyone that knocks on its door. It is simply a question of price. We say this is very much not a discussion about restricting access and impeding the innovation that allows services to flourish. The music industry is not against the internet, as was suggested earlier. It is absolutely in the music industry's interest for the internet and the music on it to flourish, but we think a fair price ought to be paid for content that emerges on these services.

Senator URQUHART: Ms Hutley, in your opening statement you talked about other jurisdictions. Is there a safe harbour scheme in place in another country that your organisation considers best practice and should probably guide policy development in Australia, and if so, what are the benefits of that scheme? I am interested in your view on the approach taken to these issues in the United States or the United Kingdom.

Ms Hutley : I was referring to the US and the EU. Both jurisdictions are currently actively reviewing their safe harbour and secondary liability regimes because of the very issue which we are saying has been addressed in this bill. The DMCA, the US system, was never intended to be a shield to the commercial platforms currently reaping the benefit. Over a period of time that legislation has been read down through significant litigation in such a way that it now acts to distort the market. For example, in the US legislation there was a notion of red flags. When you sent a notice to someone, that put them on notice that this activity on their service was infringing, and therefore that material should be taken down. Unfortunately, the courts in the US read that down to be a notice per instance. When you're dealing with the vast amount of unlicensed digital material currently available, if you have to send a notice for each thing—I think one of the music industry people who gave evidence in the US referred to it as a Pez dispenser: one gets taken down; the next one takes its place. It's an activity based mechanism that is not addressing it, because of the way the red flags notion was read down.

Senator URQUHART: You're referring to the notice-and-takedown scheme?

Ms Hutley : In its first principles it was supposed to be quite dynamic, but unfortunately it is currently now very much read down and used commercially. We say the US is struggling with the very issue which we think this bill has resolved. There's a commercial environment which has a different dynamic and a different place to have discussions, which is through licensing, and then there are the passive and automatic groups, such as the classes identified here in this bill. We can't point to another solution, because we think this is pretty innovative and has grappled with some of those issues, protecting the underlying principle of the safe harbour, which is an important protection for those passive and automatic entities.

Senator URQUHART: You talked about simple licences in your opening statement. Can you provide the details of what you determine to be simple licences. I'm happy for you to take that on notice.

Mr Carter : I was discussing an APRA AMCOS licence, and I'm very happy to provide a copy to the committee upon my return to the office.

CHAIR: Thank you very much to both of you for coming along today and answering questions and for providing a copy of your submission, for which we will have an internet link.

Proceedings suspended from 10:26 to 10 : 44