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Unlike rivals, doesn’t pay a per-song royalty. Competitors suggest it is undercutting them with taxpayer money.Charla Jones/The Globe and Mail

Music publishers want more money out of the Canadian Broadcasting Corp. for the rights to play their music, after the broadcaster launched an online streaming music service that allows listeners to hear thousands of songs a day on their computers and phones for free.

The fight will be closely watched by other online music providers, who charge subscribers a fee and are operating in a new industry with few parameters in place. Popular American music sites such as Pandora and Spotify are avoiding setting up in Canada until a clearer royalty picture emerges. has attracted hundreds of thousands of listeners since it launched last month, offering dozens of channels tailored to specific tastes. Unlike its competitors, it doesn't pay a per-song royalty. Instead, it pays a flat-fee because it technically doesn't earn any profits.

That has also attracted the attention of the country's artists, who feel the broadcaster is taking advantage of its current royalty scheme by unexpectedly launching a service that plays thousands of songs a day on the site's 40 genre-based channels.

The Society of Composers, Authors and Music Publishers of Canada (SOCAN), which handles royalties for more than 100,000 music publishers in Canada, said when it set a flat fee for the broadcaster, nobody envisioned a constant stream of free music flooding the Internet.

"The CBC is licensed and we need to look at the use they are making [of content]under their new service," said Paul Spurgeon, vice-president of legal services at SOCAN. "We're looking at that right now … the key is whether CBC is paying their fair share."

Singer-songwriter Jim Cuddy, from the Canadian band Blue Rodeo, said all bands are seeing their royalties drop as music increasingly moves online.

"As there is a new format [live-streaming]and the CBC is currently paying a nominal fee, it only seems fair that a new rate be negotiated," Mr. Cuddy wrote in an e-mail to The Globe and Mail.

Younger musicians, in particular, would struggle to survive in a flat-fee, online streaming environment, he said, adding, "The CBC is a valuable ally for Canadian musicians to have, and I hope an equitable solution can be found."

The stakes are high – music sales are estimated at about $500-million a year in Canada. Digital sales account for 34 per cent of the market, and that share is growing at about 15 per cent per year, trade group Music Canada estimates.

Competitors suggest CBC is undercutting them using taxpayer money.

Listeners of the CBC site have streamed 1.6 million hours of music. At three minutes a song, that's some 32 million tunes. If it were forced to pay per song like other online services, the service could become very expensive to operate.

"What concerns private industry is that in the face of massive cutbacks CBC sees fit to launch a new service that won't generate meaningful revenue," said Rob Braide, vice-president of regulatory affairs at Stingray, which charges users $4.99 a month to use its Galaxie music app. "I'm not sure how that makes any sense."

SOCAN charges businesses tariffs to play music, and the money goes back to those who own publishing rights. It has dozens of categories – adult entertainment establishments pay 4.4 cents multiplied by their seating for the right to play music each day, for example – but the CBC has a special flat-rate deal.

Any businesses playing music must also reach a deal with the Audio-Video Licensing Agency Inc., which represents the record labels who own reproduction rights. The CBC reached a new deal with the agency earlier this year, but financial terms were not disclosed.

Jazz bassist and producer Roberto Occhipinti said he never thought of the broadcaster as a big revenue generator for artists, and doesn't think people expect to make more from the CBC playing their music than they already do.

"They have supported Canadian music, obviously, for an awful long time, to a level that no one else has, so I don't think they should be so hard on the CBC," he said.

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. In the meantime, CBC plans to sell display advertising and sponsorships to "make the service sustainable."

"We do find ourselves in a different position than a private broadcaster because the kinds of questions I'm asking don't necessarily depend on profit margins," he said. "As the same time, we need to look at building a sustainable business here. We need to look for revenue."

They aren't the only ones – companies such as Stingray Digital and Sirius Satellite Radio Canada have similar offerings that they charge customers to access. It's a tough business – Pandora Media Inc., one of the only publicly listed online music services, recently reported a 62-per-cent increase in users in the U.S. but said its content acquisition costs more than doubled as it was forced to pay more royalties because of the service's popularity.

With a report from Kim Mackrael