A trade and industry commission report proposes that mobile operators and wireless application service providers (WASPs) that distribute creative content without paying royalties be barred from the industry association.
The far-reaching report's proposal could see WASPs being forced out of business, because Vodacom, MTN and Cell C require service providers to be Wireless Application Service Providers' Association (WASPA) members to have access to their networks.
The Copyright Review Commission's recently-released report calls for WASPA to change its code of conduct so that members that distribute creative content without a licence, or without paying royalties, are suspended.
Trade and industry minister Rob Davies appointed the six-member commission in November 2010, to review concerns raised by the music industry around the collection and distribution of royalties to artists. Its report was recently released by Davies as a precursor to a meeting president Jacob Zuma will hold with the creative industry in November.
Breaking the law
In general, WASPs offer subscription and limited download or on-demand services, but some do offer permanent downloads of sound recordings, says the report.
According to evidence provided to the commission, only 14% of WASPs are licensed by National Organisation for Reproduction Rights in Music in Southern Africa (NORM) to provide downloads of sound recordings and ringtones to consumers.
It adds that only Vodacom has concluded a mechanical rights licence with the Southern African Music Rights Organisation (Samro). Royalties are currently collected by Samro and NORM.
The percentage of WASPs that have agreements with Samro is significantly smaller than those who are licensed by NORM, notes the report. Janine Hollesen, an attorney representing NORM, told the commission there are WASPA members who are unenthusiastic about giving composers their due.
According to the Recording Industry of SA's Digital Music Statistics report, cited by the commission, around 3.6 million songs are illegally downloaded in SA every month, costing the sector R432 million a year.
The document also quotes PricewaterhouseCoopers' Entertainment and Media Outlook Report from 2010, which estimates that, if the current trend continues, by 2014 the potential revenue loss due to copyright infringement will be more than R500 million a year.
“The majority of mobile providers (and, by implication, consumers) are dealing in infringing sound recordings and may be held criminally liable for copyright infringement.” The report adds that SA's copyright and performers' protection legislation is outdated and does not provide for all forms of digital exploitation.
Reluctant
The report also notes there is reluctance from WASPA to play a proactive role in ensuring all content providers pay the necessary royalties.
However, it quotes an unnamed WASPA representative as saying the organisation had made “huge” efforts to educate WASPs and encouraged licensing at every opportunity. The representative argued it was not its role to make sure licence agreements were inked.
WASPA representatives have argued that the main issue in the collection of the royalties is that collecting societies lack processes to identify who they represent, making it difficult to send invoices timeously, says the report.
The report notes there was an argument that collecting societies have not been proactive in exploiting and enforcing their members' rights in the digital market.
However, CellFind - a Blue Label subsidiary that is licensed and pays royalties monthly - notes WASPA's code of conduct prohibits transmission of illegal conduct, which would include distributing unlicensed content.
Current sanctions range from monetary fines to suspension of membership, says MD Jacques Swanepoel. The only consideration from WASPA would be what is illegal and evidentiary proof to work out if members are in breach, he adds.
Cell C notes that it does not distribute music content, and Vodacom says, although it has not read the full report, it has a licence agreement with Samro and is about to start negotiations around the next round of licences.
Samro says seven out of more than 100 WASPs are signed up with it, although this number is deceptive as not all members of WASPA provide services that include music. Although low, the number “covers a decent portion of the industry”.
However, rights holders are not getting what is due to them in both performing rights and mechanical rights. The collecting agency says there are ongoing negotiations with the other WASPA members, which means royalties are held until future payments can be made.
None of the other WASPs that provide content responded to ITWeb, and neither did MTN, or WASPA.
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