PPNZ, the collecting society acting for sound recording copyright owners in New Zealand, filed an application with the Copyright Tribunal seeking approval of a new licensing scheme for the playing of sound recordings on the two major commercial radio networks in New Zealand. In its licensing scheme, covering a proposed five year period, PPNZ sought (inter alia):

• A substantial increase in royalty payments. Under the expired licensing scheme, those radio stations playing over 50% music paid a royalty of 1.75% of Broadcast Gross Income. Low use music stations paid a royalty of 0.1%. PPNZ sought increases to 6% and 1% respectively.
• Changes to the bands of music. PPNZ sought just two bands: 0-20% use of music and 20% + use of music.
• The introduction of a royalty rate where radio stations streamed sound recordings over the Internet.
• A back payment to 1 December 2007.

In relation to the increased royalty rate, the application raised a substantial range of issues including what (if any) economic models might be used to value the appropriate royalty; the value of airplay to recording companies and copyright owners; and the appropriateness of other comparators in setting the royalty rate. 

Following a 15 day hearing in 2009, the Tribunal issued a lengthy decision on 19 May 2010.

As to the royalty rate, the Tribunal ordered increases to 3% for stations playing 20% + music and to 0.75% for low use music stations. The Tribunal’s methodology involved a process of judicial estimation taking into account a number of factors:

• As to economic evidence, the Tribunal found that the Shapley model of economic game theory was useful as it showed how the parties might deal with each other in a hypothetical scenario and how a royalty rate for the sound recording licence might be reached.  
• As to the value of airplay, the Tribunal held that there was some value to sound recording companies but that this value could not be precisely quantified. 
• The APRA licence with the radio networks was also a comparator to be considered.  
• Other relevant factors were the ability of the radio stations to pay as well as past negotiations and changes that had taken place in the radio industry. 

The Tribunal endorsed a new royalty rate based on methodology used by the Canadian Copyright Tribunal where radio stations streamed sound recordings over the Internet.

Back payments were ordered to be paid to PPNZ but the absence of a specific statutory provision allowing the Tribunal to award interest prevented it from adding an interest component to that back payment. The term of the licensing scheme was also extended to June 2014.