A number of Canadian media companies have joined forces to try to shut down a free music website recently launched by the Canadian Broadcasting Corp., claiming it threatens to ruin the music business for all of them.
The group, which includes Quebecor Inc. , Stingray Digital, Cogeco Cable Inc. , the Jim Pattison Group and Golden West Radio, believes that CBCmusic.ca will siphon away listeners from their own services, including private radio stations and competing websites that sell streaming music for a fee.
The coalition is expected to expand soon to include Rogers Communications Inc. and Corus Entertainment Inc. , two of the largest owners of radio stations in Canada. It intends to file a formal complaint with the CRTC, arguing that the broadcaster has no right under its mandate to compete with the private broadcasters in the online music space.
The fight is part of a broader dispute about the role of the CBC, whose federal funding was slashed in Finance Minister Jim Flaherty's recent budget, and about how online music services should compensate rights holders for music played online.
The stakes are high. Music sales are estimated at about $500-million a year in Canada and digital sales account for 34 per cent of the market, while companies such as Corus earn hundreds of millions in revenue from radio advertising on music stations.
Dozens of competing online services are trying to sign up customers to their apps and websites, with most offering streaming music that has been selected to suit their tastes, in exchange for monthly fees that can be as high as $20.
"The only music that you can hear for free is when the birds sing," said Stingray CEO Eric Boyko, whose company runs the Galaxie music app that charges users $4.99 a month for unlimited listening. "There is a cost to everything, yet CBC does not seem to think that is true."
The CBC would not comment yesterday, saying it had just been made aware of the complaint.
The companies argue they must charge customers to offset royalty costs which are triggered every time a song is played, while the CBC gets around the pay-per-click problem because it is considered a non-profit corporation.
They want Ottawa to intervene and they've offered Federal Heritage Minister James Moore some alternatives: Shut the site down, force it to play only Canadian music, or insist that it charge for access in the same way private broadcasters do. Mr. Moore said he could not comment until he receives the letter.
"The CBC is using the preferential royalty rates it receives from the various collective societies because of its status as a non-profit public broadcaster to make the service viable in the long term," the group wrote in a letter to be delivered to the minister today.
"We asked that the CBC be compelled to justify its actions and explain how the launch of the CBC Music service is not competitive with existing services offered by private broadcasters and how it is not damaging to the industry."
Media executives aren't the only ones who have expressed concern. When the CBC service was launched in February, the Society of Composers, Authors and Music Publishers said that when it set a flat fees for the more than 100,000 music publishers it represents, it never envisioned a constant stream of free music flooding the Internet.
It plans to revisit the royalty scheme in light of the CBC service, which has proven exceedingly popular. As of last week, listeners had streamed 4.2 million hours of music.
The broadcasters pointed out that because of the CBC's recent budget cuts, which amount to about $115-million over the next three years, the corporation will record fewer live music broadcasts and introduce advertising on its Radio 2 network. They worry that the music service foreshadows broader CBC ambitions to cut into their profits.
"These actions further distances the corporation from its mandate, while placing it directly on a collision course with private broadcasters who can only rely on advertising and subscription revenues to sustain their services," the broadcasters warned.