191_org_ Music Rights Australia
Music Rights Australia
Music Rights Australia Pty Limited (Music Rights Australia) wishes to thank the Australian Law Reform Commission (the ALRC) for the opportunity to comment on the Copyright and the Digital Economy Issues Paper (the Issues Paper).  Music Rights Australia welcomes the opportunity to look at the vital role which copyright plays in the digital economy and how the local and international music industries have used innovation to develop new business models to continue to meet consumer needs. The music industry and its stakeholders are well placed to illustrate the central role which copyright licensing plays in the development of these new business models.  
Music Rights Australia supports the principle of promoting the digital economy and encouraging competition.  As Placido Domingo, Chairman of IFPI said, in his introduction to the Digital Music Report 2012: 
“Thanks to the amazing technology of the internet, the audience for recorded music is fast expanding across the world. Artists who might not otherwise find a way to make their music available can take advantage of new ways to distribute music the internet offers. 
 At the same time policy makers better understand the internet does not make music “free”. There is a greater acceptance of the need for good and fair copyright laws to stop infringement of artists’ and producers’ rights.”  
Music Rights Australia will focus on how the present copyright laws affect the ability of creators to earn a living and participate in the digital economy (Question 1) with a particular focus on how the lack of effective protection impacts the development and viability of online business models and artists’ expectations that they can control and protect their creative content online. Further detailed responses to the other specific questions in the Issues Paper can be found in the ARIA and APRA|AMCOS submissions. Music Rights Australia supports the submissions made separately by ARIA and APRA| AMCOS. 
Who we are 
Music Rights Australia is a joint venture between the Australian recorded music sector ( represented by the Australian Recording Industry Association – ARIA ) and the Australian songwriters, composers and music publishers ( represented by the Australasian Performing Right Association  Ltd  - APRA and the Australasian Mechanical Copyright Owners’ Society Limited – AMCOS ) representing  more than 70,000 songwriters, composers music publishers and record labels. Music Rights Australia aims to ensure that the works created by its music industry stakeholders are respected, appropriately rewarded and protected. It also seeks to improve the awareness of intellectual property rights among music fans and the wider Australian community.  
1.	Executive Summary 
Music Rights Australia and its stakeholders believe copyright is the currency of creativity. Copyright plays a vital role in the local and international cultural landscape. It enables creators and their businesses to monetise demand for their creations and secure returns that can be reinvested into new projects and new talent, to benefit Australian artists, international artists and those who invest in them. 
The music sector has not only embraced digital technologies and the opportunities they offer it to reach new and wider audiences, but it has also embraced the flexibility these technologies give consumers to access the music they want. There are 39  licensed music services available to Australian consumers and the  variety of digital  services is more compelling than ever before.   We believe that due consideration of these models and a full understanding of how they are currently meeting consumers’ legitimate needs will show that there is no need for the introduction of blanket exceptions and such an approach may inadvertently impact the development of current and future business models. We urge the ALRC to consider the potential negative impact which wide ranging blanket exceptions will have on current commercial models when making its recommendations. For explanations of the services currently operating in Australia and internationally we refer the ALRC to the ARIA and APRA|AMCOS submissions. 
The Attorney General’s reference to the ALRC requires it to consider Australia’s international obligations and Principle 3 of the Issues Paper states that reforms should recognise the interests of rights holders and be consistent with Australia’s international obligations. In addition to an appreciation of the legitimate market and how it is progressing, Music Rights Australia urges the ALRC to consider any new or expanded exception in light of Australia’s obligations under the Berne Convention and in particular Article 9(2), commonly referred to as the Three Step Test, when making its recommendations.
Additionally, we believe that the proponents of any new or expanded exceptions should be required to present cogent, relevant and current evidence to support their proposals and such evidence should be examined against the backdrop of the legitimate expectations of music industry rights holders and their business practices. Each element of the Three Step Test must be satisfied before the ALRC makes any recommendations for new exceptions and  any suggested changes  must satisfy  the requirement  that “they do not conflict with a normal exploitation of the work and do[es] not unreasonably prejudice the legitimate interests of the author. “   
Protection 
Music Rights Australia believes that the ongoing growth of digital music services can be accelerated if more positive steps are taken to implement effective efficient protection measures for content owners and legitimate digital content providers. Despite the strong growth in digital sales in Australia in 2012, the market is still performing below its potential. The Australian recorded music market peaked in 2003, when it was worth US$ 709 million. Since then, sales have declined by 33% to US$ 475 million (2003-2011).   
ARIA Wholesale Figures 2005 to 2011 – Total Dollar Value

We note that the terms of reference exclude the issues of “unauthorised distribution of copyright material using peer to peer networks. “ However, the issue of unauthorised use of copyright material online has a significant impact on Australian creators’ ability to earn a living and is wider than the narrow scope of the ongoing discussions referred to in the terms of reference.
Music Rights Australia does not believe the ALRC can review the issues it raises in Question 1 of the Issues Paper or have regard to the objective of copyright law in providing an incentive to create and disseminate original copyright materials  without taking submissions on the impact which unlicensed use of copyright material online has on rights holders, creators and their willingness to invest in new models for legitimate online distribution. 
Music Rights Australia believes that any further discussion paper or recommendations for change need to include consideration of these issues.  We urge the ALRC to take submissions on the damaging impact which unchecked unauthorised use online has on content owners and its impact on the growth of the digital economy. We ask the ALRC to take submissions on the steps which content owners believe should be taken to secure the ongoing investment in digital services and in new music to meet legitimate consumer needs and to protect content owners’ revenues in the digital economy.  
The International Federation of Phonographic Industries (IFPI) estimates that 25 per cent – one in four –  Internet users in Australia access unauthorised services on a monthly basis  and over half (57%) of these users are using P2P networks, with BitTorrent sites leading the field.  Use of unauthorised services continues to rise in Australia despite the growing number of legitimate services that the industry has licensed. This growth is also above and beyond the increase in internet users. Piracy remains the biggest competitor to legitimate services such as iTunes and Spotify. 
Fair Use and free use exceptions considered by the ALRC
Music Rights Australia is concerned about the ALRC’s consideration to include a general exception for fair use and to implement new or restructure existing free-use exceptions. 
In 2006, the House of Representatives Standing Committee considered and rejected a general fair use defense. Since 2006, there does not appear to be any additional factor or pressing need on the part of users which would warrant the introduction of a general fair use defense.  This matter was recently considered in the United Kingdom during the Hargreaves Review of Intellectual Property and Growth and the Government rejected a broad fair use defense.  The recent review in Canada also considered the fair use issue and similarly declined to introduce a broad fair use exception.  
Additionally, Music Rights Australia asks that the ALRC take into consideration the examples of the misuse of the fair use defense in copyright infringement cases and the burden this has placed on rights holders and the courts in the protection of their interests.
Request:
Music Rights Australia asks the ALRC to:
I.	Consider the negative impact unchecked unauthorised use of creative content online has on content owners and the new digital business models when making it recommendations.  
II.	Take submissions on possible solutions which could be implemented to address unauthorised use of creative content online.  
III.	Adopt the Three Step Test as one of its guiding principles in this review process.    

Question 1:  The ALRC is interested in evidence of how Australia’s copyright law 
(a)	affects the ability of creators to earn a living through access to new revenue streams and new digital goods and services 
A recent Price Waterhouse Cooper report (the PWC Report) found that in the year 2010-11 Australian copyright industries employed 906,591 people or 8 % of the Australian workforce. This means that “1 in 12 employed Australians works in an industry reliant on copyright.” Compared with other countries, Australia has a higher percentage of the workforce employed in copyright industries and in 2010-11 copyright industries generated over $7 billion or 2.9% of exports. 
The report found that copyright industries comprised $93.2 billion or 6.6% of GDP. This was a decrease from $100.2 billion or 7.8% in 2007-8. The report attributes this decrease to a number of factors including the increased risk of unauthorised copying. 
Despite the current inadequacies of the legislative framework to address the serious problem of unauthorised use online, the international and local music industries have continued to find ways to bring music to consumers.
IFPI’s Investing in Music highlights that labels invest about 26 per cent of their revenues in developing and marketing new artists.  Of this, an estimated 16 per cent was spent on artist and repertoire work (A&R) in 2011.  This far exceeds the research and development investment of many other industries. Record companies have defied the global economic downturn to invest US$4.5 billion annually in A&R and marketing. They remain the primary investors in artists, maintaining A&R spend despite declining overall revenues in recent years.  As a result, Australia has a vibrant and diverse music scene, with many of our artists being recognised internationally. 
Innovative business models have transformed the music industry enabling it to operate in the digital economy, to deliver diversified products to Australian consumers and to enter new online markets.  The recent IFPI Recording Industry in Numbers report illustrates that while global recorded music revenues declined in the past six years, digital sales grew strongly in many territories including Australia, with digital channels now accounting for 31 per cent of all trade revenues to record companies worldwide. In 2011 Australia ranked sixth in both digital and physical sales worldwide. 
However, the industry continues to struggle against ineffective laws to protect online content. Examples around the world show that the introduction of effective protection for creative content online can revitalise local investment and increase export of local content.   (See Korean example below) 
The cycle of investment can only be achieved through robust protection of creators’ rights. Presently, the Copyright Act 1968 (the Act) does not have an adequate system to protect copyright owners’ rights online.  Inadequate protection for rights holders impacts the music industry stakeholders, who invest in established and emerging talent. Inadequate protection can devastate a local music industry. On the other hand effective protection designed to address unauthorised use can support the creative industries and examples can be found in many countries around the world. This has resulted in positive benefits to the content industries and consumers though the growth in online services which deliver the content they want. 
Digital Services 
At the start of 2011, the largest international digital services were present in 23 countries. By the start of 2012, they were present in 58 countries. Leading services such as Deezer, iTunes, 7digital and Spotify are engaging in expansion programs across Africa, Asia and Latin America. The Australian music industry has also licensed a large number of legal services. As of November 2012, there were 39 legal services. In 2012 revenues from digital recorded music sales (including streaming services) amount up to 50 per cent of total revenues, compared to   32% in 2011.    
There are now more legitimate options available to music lovers than ever before:
Subscription services allow users to access to a vast library of music for a low monthly fee and usually to listen to these services on multiple devices (PC, mobile phone, tablet). Most of these services are streaming services and some of them have begun to link with new partners, such as social networks (e.g. Spotify with Facebook). Subscription services grew by 67% globally with 13.4m paying subscribers (Spotify accounted for 3 million of those). 
Advertising-supported services enable consumers to legally listen to large catalogues of music for free, while artists and record labels receive income from the advertising placed on them. These services are similar to listening to commercial radio, except that the consumer has control of the playlist. Some of these services also offer subscription packages that enable consumers to drop the advertising, for instance Spotify.
Digital downloads Download stores account for a large proportion of digital revenues and account for most of the 500 legitimate services worldwide, offering libraries of up to 20 million tracks. The iTunes stores are probably the best known of these types of stores and in 2011 Google launched a service for its Android platform. 
Streaming Services from the Cloud - The Apple iTunes Match service was launched in November 2011 in the US. This service allows users to access their music libraries across the full range of devices they own for a set fee per year. 
CDs, DVDs and vinyl can be purchased through traditional bricks and mortar stores as well as through online stores. 
The ProMusic site (www.promusic.org) sets out country by country the various licensed online sites which are making music available to fans around the world.  Annexure A sets out a summary of local digital services. 
Despite the long list of services which continue to make genuine music available to fans, these models continue to struggle in the face of ongoing intellectual property infringements and protection is needed to put an end to this unfair competitive environment.

Case Study: Spotify
Spotify expanded into Australia in May 2012 with the aim of offering a powerful  music  experience within a  100 per cent  legal  framework.  We’ve  built  up  a  catalogue  of  more  than  16  million  tracks  from both major and independent labels, and combined this library with a service that makes  it easier than ever before to search for and share music. 
The  success  of  Spotify  in  Australia and other countries  has  been  driven  by  the  ‘freemium’  business  model.  Users  can register either for free accounts supported by adverts, or upgrade paid subscriptions without ads and  with  a  range  of  extra  features  such  as  portability,  higher  quality  streams  and  offline  music access.  Our  users  tell  us  the  biggest  reason  they  subscribe  to  Spotify  is  to  take  their  music  with them, which is possible on a range of mobile devices.   
It’s  fantastic  to  see  so  many  people  in  Australia  enjoying  Spotify.  As  we  continue  to develop  the service, we’re also proving to be a major international source of revenue for artists and labels.   
Piracy continues to be the music industry’s biggest challenge. Look at it this way – in the physical world,  an  enormous  supermarket  giving  away  entertainment  illegally  and  for  free  would  be  a serious deterrent to setting up and running a shop where you charge for the same products. 
Online,  we  continue  to  face  a  comparable  challenge  where  our  ability  to  convert  people  to paying  for  music  subscriptions,  or  attract  advertising  for  our  service,  will  be  challenged  by  the continual availability of the same music on illegal services. 
Spotify has invested in and developed a service that people are moving to in their millions, and is playing  an  increasingly  important  role  in  attracting  people  away  from  unlicensed file-sharing  and  illegal streaming.  As ever, a level, legal playing field remains vital for any business looking to flourish in the digital age. 
Kate Vale
Managing Director Spotify Australia & New Zealand 

Protection 
According to the IFPI Digital Music Report 2012 the biggest factor undermining the growth of digital music businesses is widespread piracy. Without a comprehensive platform for rights protection, it is extremely difficult for any business model to compete and for new models to emerge. The widespread availability of unlicensed content has greatly damaged the   ability of authorised services   to compete and grow audiences. The Arts Council of Australia study titled Do You Really Expect to Get Paid? , (an economic study of professional artists, including musicians and composers) found that sixty per cent of all artists believe new technologies are likely or very likely to improve their income with the ability to reach new audiences (26 %) and to promote their work (20%) being the most common new opportunities cited. 
The study also noted that artists had increased their understanding of how intellectual property could be a means of providing remuneration to creators and stated: 
“From the viewpoint of individual artists, if they are to gain full economic benefit to which their creative endeavour entitles them, their intellectual property in their work must be adequately protected against unauthorised exploitation and appropriation.”  
The study also looked at the role played by collection agencies in assisting artists in the protection of their intellectual property and found that composers traditionally collect their primary royalties via collecting societies such APRA or AMCOS.
As we have already stated the music industry has embraced the digital economy. However, the industry continues to be negatively impacted, locally and globally, by unauthorised use of its creative content through P2P technologies, unauthorised streaming sites and rogue sites which offer only pirated material. 
The music industry has partnered with other industries through the Australian Content Industry Group (ACIG is made up of representatives of the music, books, games, software and visual arts industries) to try to achieve a solution to address the present and emerging issues online. 
Over the last two years, ACIG members have engaged in discussions with the Attorney General’s Department, ISPs and consumer groups to try to address the unauthorised use of creative content on line. 
ACIG’s goal continues to be the development of an efficient, equitable and proportionate system through cooperation with ISPs, Government and consumer groups. However, since the High Court’s decision in the iiNet case, it is apparent that this goal can only be achieved through amendments to the legislation.  
The High Court found that iiNet had not authorised the copyright infringement of its customers who used the BitTorrent peer- to-peer (P2P) file sharing software to download copyright material, and was not required to take action to stop its customers using P2P technologies to access infringing content . As the law stands today, the only solution content owners have to protect their rights is to sue consumers who use BitTorrent technologies to access unauthorised content. 
Music Rights Australia does not believe this is an adequate solution and  Australian music copyright owners have been reluctant to take that option and have, through their participation in the ACIG and other industry groups, continued to seek a collaborative solution which addresses the significant losses they face from  unlicensed use of content online.       
Music Rights Australia asks the ALRC to take submissions on solutions to address these issues as they have a significant negative impact on creators and their ability to earn a living in the digital economy and the introduction of new and innovative business models which give consumers access to creative content.   
In his speech at the launch of the PWC report on 15 August 2012, The Honorable Mark Dreyfus QC MP spoke of the challenges in the digital economy and said: 
“The responsibility for generating polices is now shared among us all … the future will be collaboration across industry, government, institutions and users.” 
Music Rights Australia believes a code, implemented through legislation and binding all ISPs, which   requires them to take meaningful steps to address unauthorised use on their networks, will go some way to address these issues. The code will also create a new flexible model which takes into consideration the needs of rights holders, ISPs and consumers. Additionally, it will avoid unnecessary and costly litigation against ISPs and consumers and mean the court system will not be burdened by increasing numbers of cases.  
It is evident from international examples that programs which have a combination of education, consumer notices and effective sanctions, work effectively and have a positive impact on consumer behaviour and the uptake of legitimate sources of content. Music Rights Australia does not necessarily advocate one international example over another.  However, we do believe that any solution designed to address this serious problem should include the following minimum and reasonable elements:  
•	Coordinated consumer education campaigns designed to raise awareness of the  sources of genuine and authorised  content; 
•	a series of education notices which ISPs send  to their customers to alert them to the consequences of their use of P2P  technologies  to access unauthorised content;
•	 sanctions designed to deter the infringing behaviour of those who continue to ignore their legal obligations after several notices. However in the case of P2P technologies, we do not advocate disconnection from the internet; 
•	a right of  appeal for those consumers who believe they have received notices incorrectly; 
•	legislation to ensure  all ISPs are required to participate in the code ; and  
•	legislation to assist rights holders to obtain orders against rogue sites and unauthorised  streaming of creative content.  

Music Rights Australia urges the ALRC to review the international evidence when making its recommendations. For instance, measures like graduated response to address P2P piracy are operating in many countries, like France, New Zealand, Ireland, South Korea, Chile and soon in the US (end of 2012), and the UK (March 2014) and initial studies have shown a positive  impact  on consumer behavior and  sales (see Evidence from  France below). 
Evidence from France
In France, a graduated response system operates under the administrative authority HADOPI. It started in October 2010 and since then the authority has issued more than 1,150,000 first warnings, 100,000 second warnings and 340 notification letters at the third stage. Out of these third stage files, 14 have been submitted to the judiciary prosecutors who can impose fines of up to 1,500 Euros or the suspension of internet access for up to one month. In September 2012, a tribunal ruled that an account holder pay a fine of 150 Euros for negligently allowing his account to be used for infringing activity.  
The law has not only had an impact on P2P piracy but also on sales. An independent academic study which analysed the impact of the HADOPI law in France and its impact on consumer behaviour found that public awareness of the HADOPI law caused iTunes song sales in France to increase by 22.5% above the sales increase of a control group of five European countries. In addition, there was a 25% increase in iTunes album unit sales above the change in the control group. The study found that effect of HADOPI was larger for more heavily pirated genres like Rap and smaller for less pirated genres like Jazz, suggesting that the increase in sales was likely to have been caused by a reduction in piracy. 
The increase in sales was observed even before the law’s final passage. This is consistent with the idea that increasing the public knowledge of the law, the illegality of piracy, and the potential penalties are important elements in changing consumer behaviour.

Korea – A Market Revived
Korea’s recorded music market has attracted attention because of its return to growth at a time when the industry globally is still in decline. Sales in Korea increased in value by 6% in 2011, following 12% growth in 2010. This increase can be attributed to Korea’s anti-piracy laws that include a graduated response scheme which can apply to cyberlockers and also website blocking measures. 
Government officials reported in 2011 that 70 % of infringing users stop their activity on receipt of a first notice. A similar pattern has been found after users receive a second notice, with 70% ceasing to use their account to infringe.  In 2011 the Korean market, driven by a surge in sales of K-Pop artists, had its fourth year of consecutive growth. The market has moved up the international rankings in recent years, rising from Number 23 in 2007 to Number 11 in 2011.
Korea is proof that effective Government policies and action can make a difference to the environment in which record companies and other music industry stakeholders operate.
Actions against LimeWire
The music industry has also benefited from legal actions against major infringing services like LimeWire. LimeWire was one of the most popular P2P services in the world. Research by The NPD Group in the US found that the percentage of the internet population using a  P2P file sharing service to download music fell from a high of 16% in 2007 to just 9% in 2010, when LimeWire ceased its operation. 
Addressing Rogue Sites 
We also know that limiting access to rogue sites can also be effective to protect rights holders’ interests and to assist in consumer protection. The Pirate Bay and other rogue sites have been blocked by ISPs in several countries including the United Kingdom and in other non EU jurisdictions.
Recital 59 of the EU Copyright Directive 2001/29/EC recognises that in the digital environment, the services of online intermediaries, such as ISPs, may be used by third parties to carry out copyright infringing activities, and that in many cases those intermediaries are best placed to bring such infringing activities to an end. Accordingly, and without prejudice to any other sanctions and remedies available to copyright owners, article 8(3) of the Copyright Directive provides that the courts in EU member states should have the power to grant injunctions against intermediaries, to require them to stop or prevent an infringement.
Rights owners have now obtained a number of court decisions in EU member states and other jurisdictions requiring ISPs to block their customers’ access to websites that offer infringing material Annexure B sets out summaries of some of these cases.
Evidence shows that these blocks have had an impact on piracy as usage of the blocked sites has decreased after implementation of the blocks.  The courts in each case assessed the harm to copyright owners and any impact on the ISP in implementing the blocks, and concluded that blocking the site was a reasonable and proportionate response. 
Australia does not currently have a process which would allow rights holders to obtain similar orders. We submit that this needs to be addressed so rights holders can ensure their Intellectual Property  is adequately protected and also to ensure that consumers are not taken advantage of by the broad range of online rogue groups involved in the distribution or making available of infringing materials.  We urge the ALRC to take submissions on steps which can be taken to ensure that these sites are not permitted to undermine the development of legitimate online services.

Evidence of damage to content owners from unauthorized use on line 
A snap shot of the current Australian piracy situation is outlined in Annexure C.  It is clear from the evidence in Annexure C and other material referred to in the Music Rights submission that online copyright infringement is a serious issue in Australia and internationally. The situation was also addressed recently in the CCi  Digital Futures Report-  The Internet in Australia  2012  which found that  44.33% of users  said  the main reason  they used  file sharing  services  was because they were free and  when asked if the ability to download music from the internet influenced their purchase of music, 24.3% said the they bought less music as a result of this.

In addition to that study, the majority of academic and empirical studies show that the level of piracy negatively impacts the demand for legitimate content:
•	A recent study titled Assessing the Academic Literature Regarding the Impact of Media Piracy on Sales found that the majority of the literature which studied the music industry showed that piracy harmed media sales. For motion picture sales the peer-reviewed literature, which focused on recently released titles, strongly suggested that digital piracy resulted in a decrease in sales of motion picture content. Generally the study found that all papers in peer reviewed journals (bar one), spanning both music and motion picture sales, found evidence of statistically significant harm to sales of recently released content as a result of unauthorised file sharing.
•	A comprehensive study in this area, which was included in the review of academic literature referred to above, was undertaken by Jupiter Research in 2009.   Based on consumer research in the top 5 EU markets, Jupiter Research established that most illegal file-sharers “do not buy music and are nearly half as likely as music buyers to buy CDs in a high street shop or from an online store”.  The study also found that the net effect of illegal file-sharing was negative.  “Although it is possible that file-sharing functions as some sort of discovery tool for those digital music buyers that also file-share, it is reasonable to assume that their spend would be higher if they were not file-sharing.”  Only a third of music buyers were also file shares. 

The Jupiter Research’s conclusion was confirmed by a more recent research conducted by the NPD Group in the US during 2010 which found that just 35 per cent of P2P down loaders also pay for music downloads.  P2P users spent US$42 per year on music on average, compared with US$76 among those that pay to download and US$126 among those that pay to subscribe to a music service.   While some P2P users also pay for music, and some are serious music fans who spend a lot, they are far outnumbered by the greater number of P2P users who spend little or nothing.  
•	Tera Consultancy’s March 2010 study Building a Digital Economy: The Importance of Saving Jobs in the EU’s Creative Industries, found that in 2008 the EU’s creative industries contributed 6.9 per cent, or approximately €860 billion, to total European GDP, and represented 6.5 per cent of the total workforce, or approximately 14 million workers. That same year the EU’s creative industries most impacted by piracy (film, TV series, recorded music and software) experienced retail revenue losses of €10 billion and losses of more than 185,000 jobs due to piracy, largely digital piracy. Based on projections and assuming no significant policy changes, the EU’s creative industries could expect to see cumulative retail revenue losses of as much as €240 billion by 2015, resulting in 1.2 million jobs lost by 2015. To estimate the impact of piracy, the study reviewed country and industry-specific third party surveys on the number of infringements in Europe’s five largest markets (UK, France, Germany, Italy and Spain), together representing 75 per cent of European GDP, and used those to extrapolate the results to a EU-wide measurement. To estimate the future effects of digital piracy in Europe, the study reviewed industry forecasts of broadband penetration and Cisco’s forecasts of internet traffic in Europe. To estimate losses, the authors of this report did not assume that every infringement results in a lost sale. Instead, they reviewed a range of third party academic studies in the music sector, suggesting ratios of 10-30 per cent. The lower, more conservative rate of 10 per cent was used. Their estimate of losses therefore rests on the very conservative assumption that in the absence of piracy, only one legitimate recording would be sold for every 10 that had been illegally downloaded. The study also excludes losses from other creative sectors such as book publishing, sports interests and video games.

Question 52 and Question 53 of the Issues Paper 
Music Rights Australia does not believe that the Act should be amended to include a broad flexible exception.  In 2006 the House of Representatives Standing Committee considered and rejected a general fair use defense. Extensive analysis took place during the review and the Government determined that the Australian context did not warrant a fair use exception and Music Rights Australia has not seen any evidence that would justify a change.
The fair use doctrine under the US Copyright Act is stated in the form of factors allowing courts to assess on a case by case basis whether an activity infringes copyright or not. It does not exempt whole sets of activities but requires consideration of activities on a case by case basis, including the effects and implications of the activity. There is a body of US case law that has been developed over several years and this further defines the boundaries of fair use.  The well- developed case law means there is a degree of legal certainty for rights holders and others, which would not exist if a broad exception were introduced in Australia.
Music Rights Australia believes the existing set of defined fair dealing exceptions gives certainty and  guidance to users and minimises the need to litigate, and so does not advocate changes to the Act.
In his article, which forms an appendix to the British Recorded Music Industries submission to the Hargreaves review, Professor Graeme Austin stated: “Business growth is helped by legal certainty. Fair use does not provide it.” 
In addition he states: 
” In file sharing cases for example, sometimes involving significant volumes of unlicensed music files , defendants have argued that their actions are excused  by the fair use defense. [BMG Music v Gonzales] While , in the file sharing context , the fair use arguments have not  prevailed , copyright owners have been put to significant expense of  responding to them [ Sony BMG Music Entrainment v Tenenbaum].  If fair use were introduced into UK law, copyright owners might be required to litigate these very same issues.  …. This would create significant risk for copyright industries. For all concerned litigating these kinds of cases would also be a wasteful expenditure of resources. “ 
Music Rights Australia believes that the risks which Professor Austin outlines above would exist in the Australian context and in light of the uncertainty such a broad exception would create for rights holders and consumers and the potential misuse of the fair use defense and the additional burden this will place on right holders to protect their creative content, we ask the ALRC make recommendations against its introduction. We refer to the ARIA and APRA|AMCOS submissions in this regard and also in connection with other free use exceptions considered by the ALRC. 

International Obligations 
In its consideration of any proposals to either expand or to create new exceptions, Music Rights Australia asks the ALRC to refer to the Australian Government’s obligations and specifically the elements of the Three Step Test. The three criteria as reflected in the Berne Convention Article 9(2), TRIPS article 13 and the WIPO Treaty article 10 are in summary:

that exceptions or limitations must extend only: 
•	to certain special cases;
•	that do not conflict with normal exploitation of the work;  and
•	that do not unreasonably prejudice the legitimate interests of the author.
The property rights embodied in copyright, not the exceptions to those rights, facilitate the access to content by providing a basis on which to license the use of content. The commercial licensing of exclusive rights underpins the capacity of innovative business models to deliver content to consumers in the digital environment.  The returns from licensing of content on new platforms support both further investment in the creation of new content and provide a revenue stream for delivery platforms to continue and grow.
 Exceptions by their nature should be limited, be specific in their purpose and only be granted when there is a clear demonstrated need over the long term.  

Education  
The ALRC states at Principle 7 that reform should promote clarity and certainty for creators, rights holders and users.
Music Rights Australia believes that one way this goal could be achieved is through  education programs. 
The music industry and others   continue to invest heavily in education through website development, seminars and events designed to improve industry and consumer understanding of copyright and licensing practices. 
 We urge the ALRC to review the many education programs which content industries and other groups participate in and to make recommendations that Government increase its consultation and support to industry in the development of education resources to assist consumers to understand Copyright and its essential role in the development of the local digital economy.  
By way of example, Music Rights Australia maintains a website which includes links to other sources of information on Copyright and intellectual property protection issues. Music Rights Australia has developed a set of fact sheets to assist with questions consumers may have about copyright and licensing in specific situations. The fact sheets direct consumers to other industry groups and institutions so that they can obtain specific and detailed information on their  licensing questions.
Music Rights Australia is also an active participant in the Music Matters ANZ campaign which was launched in September 2011, (a link to the Music Matters ANZ campaign can be found on our website). Music Matters is essentially a collective of people across the music community, including artists, songwriters, managers, labels, publishers and stores formed to remind listeners of the value and significance of music and to assist members of the public to identify and obtain music from legitimate sources.  
The investment in these educational resources, in addition to a program of engagement with  educational institutions including TAFEs and universities around the country, are vital to ensuring consumers are given information on the importance of copyright protection to  the long term health of the local music industry.  

Below is a short list of some of the sites which industry groups have developed.
www.air.org.au
www.apra-amcos.com.au
www.aria.com.au
www.australiacouncil.gov.au
www.copyrightcouncil.org.au
www.mca.org.au
www.ppca.com.au
www.musicrights.com.au
Education plays a vital role in increasing understanding. We urge the ALRC to consider the role of education  in assisting consumers to understand the importance of  copyright in protecting artists’ and creators’ rights and its role in the development of Australia’s content industries and a vibrant Australian digital economy.  

Vanessa Hutley 
General Manager
Music Rights Australia Pty Limited