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COMMONWEALTH OF AUSTRALIA

SENATE

Official Committee Hansard

LEGAL AND CONSTITUTIONAL LEGISLATIONCOMMITTEE

Reference: Copyright Amendment Bill (No. 2) 1997

WEDNESDAY, 4 FEBRUARY 1998

CANBERRA

by authority of the Senate

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SENATE

WEDNESDAY, 4 FEBRUARY 1998

LEGAL AND CONSTITUTIONAL LEGISLATION COMMITTEE

Members: Senator Abetz(Chair), Senator McKiernan(Deputy Chair), Senators Bolkus,Coonan, Murray and O’Chee

Participating members: Senators Bartlett, Brown, Bob Collins, Colston, Cooney, Ferris,Gibbs, Harradine, Lundy, Mackay, Margetts, McGauran, Murphy and Neal

Senators in attendance:Senators Abetz, Bartlett, Cooney and McKiernan

Matter referred by the Senate for inquiry into and report on:Copyright Amendment Bill (No.2) 1997

WITNESSES

BLUNDY, Mr Brett, Managing Director, Sanity Music, 36 Ashford Avenue, Milperra,New South Wales 2214 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

CORBETT, Mr Roger, Managing Director, Retail, Woolworths Ltd, Level 5, 540George Street, Sydney, New South Wales. . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

ELDER, Mr Bruce Douglas, 11 Pacific Street, Kiama, New South Wales 2533 . . . 74

COTTLE, Mr Brett, Chief Executive, Australasian Performing Rights Association, 16Atchison Street, St Leonards, New South Wales. . . . . . . . . . . . . . . . . . . . . . . . 79

FAULKNER, Mr David Jonathan, Member, Australasian Performing RightsAssociation, 16 Atchison Street, St Leonards, New South Wales. . . . . . . . . . . . 79

McCUSKER, Mr Eric Maltby, Director, Australasian Performing Rights Association,16 Atchison Street, St Leonards, New South Wales. . . . . . . . . . . . . . . . . . . . . 79

BAULCH, Ms Elizabeth Mary, Executive Officer, Australian Copyright Council, 3/245Chalmers Street, Redfern, New South Wales 2016. . . . . . . . . . . . . . . . . . . . . . 89

CASWELL, Mr David Allan, Member, Media, Entertainment and Arts Alliance, CnrChalmers and Redfern Streets, Redfern, New South Wales. . . . . . . . . . . . . . . 97

HRYCE, Ms Michel Maree, New South Wales Branch Secretary, Media, Entertainmentand Arts Alliance, 245 Chalmers Street, Redfern, New South Wales . . . . . . . . 97

ROWE, Mr Norman John, AM, Member, Media, Entertainment and Arts Alliance, CnrChalmers and Redfern Streets, Redfern, New South Wales. . . . . . . . . . . . . . . 97

FABINYI, Mr Jeremy Rohan, Chief Executive, Australian Music Publishers AssociationLtd and Australian Mechanical Copyright Owners Society Ltd, 6-12 Atchison Street,St Leonards, New South Wales 2065. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

RICCOBONO, Ms Fifa, Deputy Chair, Australian Music Publishers Association Ltdand Australian Mechanical Copyright Owners Society Ltd, and General Manager,J. Albert and Son Pty Ltd, 6-12 Atchison Street, St Leonards, New South Wales2065 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

SPECK, Mr Jorg Michael, Manager, Investigations, Music Industry Piracy Investigat-ions, 8th Floor, 263 Clarence Street, Sydney, New South Wales. . . . . . . . . . . . 125

Wednesday, 4 February 1998 SENATE—Legislation L&C 73

Committee met at 8.46 a.m.CHAIR —At the meeting of the Senate Legal and Constitutional Legislation Committee on

2 December 1997, the Selection of Bills Committee recommended that Copyright AmendmentBill (No. 2) 1997 be referred to this committee for inquiry and report by 23 March 1998. TheSenate agreed with this recommendation. The committee has so far received 172 submissionson the bill and held a public hearing yesterday in Canberra. Further public hearings have beenscheduled throughout this month and March.

A detailed list of witnesses for today’s hearing has been circulated and is available fromthe secretariat. Lists for later hearings will be prepared and circulated as required. It shouldbe noted that these proceedings and submissions given as evidence are protected byparliamentary privilege. It should also be noted that the committee prefers all evidence to begiven in public. However, should a witness at any stage wish to give evidence or a part oftheir evidence in camera or in private, they may make an application to do so and thecommittee will consider that request.BLUNDY, Mr Brett, Managing Director, Sanity Music, 36 Ashford Avenue, Milperra,New South Wales 2214CORBETT, Mr Roger, Managing Director, Retail, Woolworths Ltd, Level 5, 540 GeorgeStreet, Sydney, New South Wales

CHAIR —The committee has received submissions from both of you which you have askedbe kept confidential for commercial reasons. The committee has granted this request, bearingin mind the committee’s preference that, wherever possible, evidence be given in public. I nowinvite you to make any opening remarks you may wish to prior to your application to be heardin private or in camera. If there are no comments that you wish to put on the public record,then I suggest that we deal with your request to move into private session.

Mr Corbett —I am happy to put something on the public record. Australia has tradepractices legislation which ensures that the Australian marketplace is competitive, and theAustralian retail market would be amongst the most competitive in the world. There are areaswhere, because of the law associated with the matters that we are talking about this morning,the Australian public pays significantly more. Even taking into account currency adjustments,sales tax and other variables, the Australian public pays very much more than theircounterparts around the world for equivalent merchandise. We would strongly submit that, ifthe trade practices legislation applies to make Australia a competitive marketplace, why arethere laws and rules that prevent that competitive marketplace being available to the Australianpublic? The area of CD music is, I think, one of the dramatic examples of that differential.

Mr Blundy —Except for thanking you for the opportunity to appear, I would like to makemy statements and take any questions in private.

CHAIR —I understand that. The committee has had a request for evidence to be taken incamera. Are there any questions about that request?

Senator McKIERNAN —I understand that Mr Alan Jones, a radio commentator on one ofthe commercial stations in Sydney, made reference in his program this morning to the factthat Woolworths would be saying certain things before the committee. There is mention intheAustralian Financial Reviewthat Woolworths will be appearing before this committee thismorning. In regard to that, what is the point of going in camera and making confidentialsubmissions if the submissions you have already made to the committee may be out in thepublic arena already? Is that the case? Are they in the public arena?

LEGAL AND CONSTITUTIONAL

L&C 74 SENATE—Legislation Wednesday, 4 February 1998

Mr Corbett —As they refer to Woolworths, I will respond to that. The answer is that thesubmissions that I have made on behalf of Woolworths to this committee are in confidence.Firstly, I do not think the article actually reveals what is in those letters. Secondly, I do notknow where Mr Jones gets his information from, but it certainly was not from any sourcewithin Woolworths, so therefore it must be a high level of conjecture on Mr Jones’s part.

Senator COONEY—I am only a participating member of this particular committee.

CHAIR —You are a distinguished former chair of this committee, Senator Cooney.

Senator COONEY—Thank you. I will just say that I prefer that evidence not be given incamera. We are going to try to come to some conclusion about this legislation, and if evidenceis given in camera the inference is that we should not use it. I can understand the position youare taking in that you want to inform the committee and help the committee by giving it abackground briefing, but there are two things about that.

Firstly, you might give us some quite vital evidence that we cannot use directly and,secondly, even though the evidence is taken in camera, the committee is able—and I thinkthis will be confirmed by the chair—to use that evidence if it is so inclined. We might takethe evidence in camera, giving you the impression that it will be treated confidentially, butwhen the committee looks at it, it might well say, ‘Look, our responsibility really is to makethis public.’

CHAIR —I was going to explain that.

Senator COONEY—Good. For those two reasons, I think it is not a good idea to takeevidence in camera, even though there is provision for it.

Mr Blundy —Mr Chairman, I am at your mercy. I am here to do the best I can for yourinformation, but the industry does have a monopoly—there is only one place that I can sourceindividual titles. That is sometimes a dangerous situation for a retailer to be in. Some of thethings that I might say might not be agreed with by the supply side of the industry. However,I have requested it.

CHAIR —The members of the committee have agreed to let you give in camera evidence.

Evidence was then taken in camera, but later resumed in public—

[9.32 a.m.]

ELDER, Mr Bruce Douglas, 11 Pacific Street, Kiama, New South Wales 2533

CHAIR —Welcome, Mr Elder. Would you like to make an opening statement?

Mr Elder —I am a senior music critic for theSydney Morning Heraldand have been a musiccritic in both Australia and the UK for the last 25 years. The reason that I come before youis basically to present a series of viewpoints that will perhaps run counter to those beingpresented by the lobby groups for the copyright council, composers, the record industry, etcetera. Basically, I want to try to do two things. I want to speak very briefly about my viewson what needs to be done and then allow the committee to ask me as many questions aspossible.

Apart from being a record reviewer, I also lecture at university and in business organisationsabout change. It seems to me that one of the fundamental problems that we are dealing withat the moment is the record industry’s inability to accept that there has been such a dramaticchange over the last five years that really everything has to go back to zero; everythingfundamentally has to start again.



This is widely accepted as a proposition as far as change is concerned. I suppose the bestexample of it is the Swiss watch industry. When digital watches came in that industry suddenlydisappeared out the back door. As far as the record industry in Australia is concerned, it hasadopted, I believe, a policy that says that parallel importing is somehow or other an evil thatshould not under any circumstances be sustained. They have argued this really on a series ofhypothetical cases.

The biggest single problem that I think the committee is going to face is that what you aredealing with is not so much hard-edged reality but people presenting to you a worst casescenario or a best case scenario. I think that what will happen is that over and over again youwill get presented with a worst case scenario. This worst case scenario is basically: what wouldhappen if a record company decided to try to launch an Australian act in the Philippines orin Afghanistan and for some reason the local area produced 10,000 copies of that act, let ussay, Crowded House, and only two of them sold in Afghanistan? If parallel importing wereallowed would we not experience the arrival of 9,998 copies from Afghanistan, all of whichwould be sold for a dollar in Australia?

That is a purely hypothetical situation. It is not a reality. The truth of the matter is that wedo not know what is actually going to happen if we get rid of parallel importing. We haveno idea whatsoever. Those sorts of negative scenarios are there, but I do not think that theyare realistic.

The positive scenario is: if we open the market up completely, then almost for sure the priceof records will decline fairly dramatically. If this occurs and the laws of supply and demandoperate, then we can reasonably assume that teenagers who, in the last decade, have chosena lot of other alternatives will return to the record industry in a major kind of way and buyvery substantial numbers of records, albeit ones that have been imported.

The only other thing that I want to say is that the problem should not be a problem for thegovernment or for the consumer. This essentially is a problem between musicians, theirmanagement, the various organisations who represent them and the large multinationalcompanies, most of whom they are signed to.

As a writer, I receive a smaller royalty rate when my books are published overseas. We livenow in a global economy. All I am saying is that musicians should go back to their recordcompanies and they should say to their record companies, ‘I want a standard royalty ratethroughout the world. I don’t want to receive favourable treatment in Australia and receivevirtually nothing for what is released overseas, even though what is being released overseasis being released by the same multinational company.’

That takes me back to the beginning. This is a change that the record companies and themusicians need to recognise because we live in a global market. It is something that I do notbelieve that the consumer should be paying for and I certainly do not believe the governmenthas really got anything particularly to contribute to that process.

Senator McKIERNAN —It seems to me that your presentation this morning, Mr Elder, hasmore to do with the royalties that artists receive rather than what consumers pay for the endproduct in the stores throughout Australia. Would I be right in that assertion?

Mr Elder —Up to a point. All I was trying to do was present it in that kind of light. If weremove parallel importing it seems to me that what the person actually pays in the store willalmost certainly come down. I know that there is some evidence which suggests that this willnot actually happen. There can be a certain amount of sophistry in attempting to prove that.If records are coming into the country very cheaply, then presumably the retailers will be



trying to sell them more cheaply. As far as royalty rates are concerned, I was just raising thatbecause I think it is an issue of some concern.

Senator McKIERNAN —In one of the articles you copied for the committee you use theinstance of Midnight Oil where a $3 royalty would be payable from a sale within Australiawhere that royalty decreases to 75c if it is sold overseas. It would seem to me that it is a veryuseful tool available to retailers to further reduce the price of CDs for sale to the Australianconsumer if they could reduce that overhead by that degree. It would be an enormous incentiveon its own to source CDs from overseas, would it not?

Mr Elder —I think that you will experience an enormous amount of evidence, particularlyfrom the larger retailers, that will suggest that that is precisely what they want to do. Largeorganisations like the HMV group, the Brashs group—what I sometimes cynically refer to asthe whitegoods industry—which usually only keep maybe the top 20, 30 or 50 albums, wouldbe very eager to say, ‘Well, Madonna is No. 1 this week. Let’s not buy it from the local recordcompany. Let’s ship in 10,000 copies from the Philippines.’ That is the most obvious thing.

Senator McKIERNAN —Why would you bother? Yesterday it was the Spice Girls.

Mr Elder —But you see the point. If there is a large demand for a CD, a large organisationcan buy in very substantial quantities of it. It would not operate for a small retailer, and it islikely that it would probably produce a fairly negative effect for small retailers. The smallretailer is not going to go through the rigmarole of, say, importing 10, 15 or 20 copies, butwhen you are an organisation like Brashs it will be very much within their interests to say,‘Oh good. This is a No. 1 album in America. It is probably going to be a No. 1 in Australia.Let’s import 10,000 copies.’ And doing that, I would think that, behaving as those kinds oforganisations do, they will probably run advertising campaigns telling everybody that the newMadonna CD which you buy in your record shop for $29.95 is now available at Brashs for$7.95.

Senator McKIERNAN —The argument is used that the volume of imports to Australia isnot going to increase on passage of this bill. Opponents on one side of the argument say thatthe distributors here in Australia will reduce their price accordingly and, therefore, the CDswill continue to be brought from the Australian producers. We are told that 95 per cent ofthose CDs sold in Australia are currently produced in Australia. When you take that royaltyargument on top of the earlier arguments about tax, about the distributors’ margin and so forth,it seems to me that it is going to be very difficult to continue to source CDs from withinAustralia.

Mr Elder —As I said in my opening remarks, this is going to be one of the eternal problemsthat this committee is going to have to deal with. For the moment we deal with hypotheticals.We simply do not know the answers to those kinds of questions. I think that people can sithere and say, ‘Ninety-five per cent of CDs will continue to be manufactured and distributedin Australia by Australian organisations,’ and somebody can put up an equally plausiblescenario saying, ‘It will absolutely emasculate the industry; there will only be five per cent.We will be buying everything from Taiwan and the Philippines.’ We just do not know. Oneof the points that I feel is very important the committee register is that these hypotheticalscenarios, at this stage, in a way have to be discarded because we do not know what thoseoutcomes will be.

Senator COONEY—It seems to me that what you are saying is, ‘We don’t know; thereforewe should change.’ Why shouldn’t the argument be, ‘Look, we ought to know before we dochange.’



Mr Elder —That is a fair point. I think one of the central problems here is that in the nextthree to five years—and I think I can say that I do know this—the Internet will growexponentially. Already there is a pile of evidence that people are individually purchasing CDs,mainly from an organisation called CD Now in the United States, although whether they arecontinuing to do it with a change in the exchange rate might be an interesting point.

What we can say is that we are now dealing with a global economy. That global economyis a reality; it is not some kind of fiction. If the record industry in Australia is somehow orother protected from the ruthlessness of that global economy, then the industry will be livingin a fool’s paradise and, sooner or later, it will have to deal with it. It may well find that itends up having to deal with it simply because, as vast numbers of people get on the Internetand the speed with which they start purchasing records from overseas becomes a reality, theywill simply stop purchasing from their local shop. Jon Casimir, who was to have been heretoday—unfortunately, his wife is ill—can give you examples of ordering CDs from CD Nowin the United States on a Thursday and having them delivered to his house the followingTuesday.

Senator COONEY—I do not want to interrupt, but I have one other question, if you havetime. Can you develop that by further written submission? You have come along and madea most convincing argument that we ought to change. Later today we will get some otherpeople who are just as convincing and we will swing back.

Copyright protects intellectual property. If you look at the ability of Australia to make a lotout of intellectual property, Australia does not compare well with overseas, as far as I can see.We have had evidence put forward—a lot of it is opinion evidence, the same as yours—whichsays the present system has produced a lot of artists. I do not need to go through that becauseyou know the arguments. I must confess that we are relying on opinion evidence and veryimpressive witnesses. There is an inclination, at least on my part, to say, ‘Look, the systemhas produced these artists.’ It would be a tragedy, I think, for Australia’s cultural standing,for its own sense of identity—you would know all these arguments, so there is no need forme to develop them—if that were to disappear. On the evidence that has come up so far, Imust confess I am declined to say that, until there is a lot more material that indicates we canpreserve the present situation where we have a lot of great artists who vindicate the Australianspirit and sense of identity, we should not change. Could you give us some comments on thatissue, either now or later on?

Mr Elder —I will make this brief because I know you are running behind time. There area number of things. Firstly, when theSundayprogram did a report on the issue of parallelimporting, the lawyer from Victoria made the very simple point which is absolutelyunambiguously correct that, if he walked into any record company tomorrow with amonstrously successful act, they would be beating down his door to try to sign it. Of all theorganisations and industries that I have worked in over the years—and I have worked in alarge number because I work as a training officer—I do not think I have ever seen anywherewhere the principle of laissez-faire economics works as aggressively as it does in the recordindustry. If you are good, you succeed; if you are bad, you do not succeed.

The most recent figure that I have, which is very old and is not from Australia, is that inthe UK in the 1970s you only needed a five per cent success rate on singles to end up witha balance sheet that was in the black, that is, if one in 20 singles released became a hit, thenyou were successful. Those factors have changed considerably, but that is a very good exampleof laissez-faire economics.



I do not believe that any decision, whether it is positive or negative, that is made by thiscommittee will fundamentally alter the proposition that there will always be young people whowant to be musicians. There will always be entrepreneurs out there who are keen to sign themup and try to sell them to the rest of the world. Whether you decide to embrace parallelimporting or not to embrace parallel importing, the record industry will still continue becauseit is a creative activity.

It is a bit like saying, ‘If we change the ball game people will stop making art.’ They willnot, and they will not stop making music. I see it as then becoming a decision as to who youare fundamentally concerned about, and my argument for parallel importing is the absoluteprimacy of the consumer in this particular instance. The consumer should have the right tobuy as cheaply as they possibly can and from wherever they can. What I really also amsaying—

Senator COONEY—Why do you say that?CHAIR —Can we wind up? Ask that question, but after that one we should wind up.Senator COONEY—Could you give us an answer?Mr Elder —Absolutely not a problem. My only problem was I was far too busy before.Senator COONEY—If you cannot, do not, but it would be good if you could.CHAIR —Senator Bartlett, do you have any questions?Senator BARTLETT —I will just ask one question which goes to the heart, I guess, of what

you are talking about—the primacy of the consumer. Obviously they are important, but I amfairly concerned—when I am looking at all the pros and cons of this issue—about the impacton the artist, the performer and writers, et cetera, who tend to be at the bottom of the foodchain somewhat in the whole industry. They are obviously pretty central to it all, given thatthey actually produce the stuff in the first place. Assuming that prices do come down, and thatis obviously a benefit for the consumer, but if that happens at the cost of lower income orworse conditions for performers—and there is a similar parallel to wage rates or other workers’conditions if the price of cheaper goods means worse conditions for your worker or artist—isthat such a good thing?

Mr Elder —I guess there are really two simple answers to that. One is that if the price ofthe goods comes down and the sales increase, then the rewards for the musician could in factbe greater. Better to make 1c and sell a million copies than to make $5 and sell one copy. Thatreally lies at the heart of that particular proposition, and that is something we cannot prove.We just do not know, if CDs suddenly tomorrow dropped to $19.95, whether the increase insales would be doubled, trebled, or whether there would not be any increase in sales at all.

Senator BARTLETT —Just touching on something I think you said earlier on about artiststrying to get together or get a common royalty rate around the globe to remove some of thatproblem of getting less payment for something that is sourced from another country—whichis moving into another hypothetical, I guess—how probable is that? How achievable is that?

Mr Elder —People in the record industry say, ‘No, it is not going to happen’, but, for God’ssake, it is a relationship between a musician and a company, and 90 per cent of the world’srecord industry is now controlled by five companies. It really is simply an agreement betweenthe multinationals and the musicians. If you have an immensely talented musician who simplysays, ‘I want X rate regardless of whether you are selling it in Thailand, the United States orwherever’, then that should be perfectly feasible. I know, and I have heard from the peoplesitting behind me, numerous arguments against this particular proposition, but it seems to me



that that is a relationship between the manager, the musician and the record company. I amnot sure that in a global economy governments really are going to have much impact on thatanyway.

CHAIR —Mr Elder, thank you very much.[9.55 a.m.]COTTLE, Mr Brett, Chief Executive, Australasian Performing Rights Association, 16Atchison Street, St Leonards, New South WalesFAULKNER, Mr David Jonathan, Member, Australasian Performing Rights Association,16 Atchison Street, St Leonards, New South WalesMcCUSKER, Mr Eric Maltby, Director, Australasian Performing Rights Association, 16Atchison Street, St Leonards, New South Wales

CHAIR —Welcome. Do you have anything to add to the capacity in which you areappearing before the committee?

Mr McCusker —I am a songwriter, artist, composer and musician.Mr Faulkner —I am a writer.CHAIR —We have received APRA’s submission, which is No. 145, as well as a letter from

Mr McCusker, which is submission No. 133. Would you like to make an opening statement?Mr Cottle —I would like to speak to the submission from APRA, and I think Mr McCusker

would also like to speak to his individual submission. You will have seen from our writtensubmission that the perspective that we bring is that of the songwriter or composer. The reasonfor that is that the bill purports to remove not only the parallel importation rights in soundrecordings but also the parallel importation rights in underlying musical works. The creatorsof those underlying musical works and the first owners of copyright in those works aresongwriters. Without the song there is no CD.

As I have mentioned in our submission, APRA itself is not involved in the exercise of themechanical reproduction right or the importation right, but it does represent in fairly broadterms the interests of more than 20,000 songwriters and composers throughout Australia.

APRA operates an interactive Web site for its members and is constantly in contact withmany thousands of those members through seminars, workshops and get-togethers around thecountry. It is absolutely plain to me that no issue has aroused quite the passion, frustrationor anger as this bill amongst songwriters throughout this country.

Before talking about the impact of the bill on songwriters and composers, I want to bringyou to the two concluding comments in our written submission. I want to deal firstly with thesecond of those concluding comments, which are on page 5 of our submission. What I havesaid is that if the bill is enacted there will be no less than three discrete regimes of treatmentof importation under the Copyright Act: one for books, one for recorded music, and one forother forms of intellectual property, including software.

There seems to be a prevailing philosophy running through those who support the contentsof the bill that the existing importation rights are some form of special treatment or specialsubsidy for the music industry in this country. Nothing could be further from the truth. Thisis a right which is granted in relation to all forms of copyright material.

It is a right which is granted in relation to films. It is granted in relation to software. It isgranted in relation to all forms of literature, including books and printed materials. It is grantedin relation to videos. It is not a special subsidy for the music industry at all. It is considered



to be a core right in relation to intellectual property, and certainly in relation to rights ofcopyright. It is also considered to be a core right around the world. Very few countries in theworld have dismantled this right.

Our point about it is twofold. Firstly, it must be bad public policy to have different statutoryregimes as complicated as these are for what are different species of the same property. Thatmust be bad public policy in terms of the public’s understanding of what copyright is about.It does not make any sense from the point of view of rationality. If it is good policy to removethis right in relation to music, it must be good policy to remove it in relation to other formsof copyright.

What is more important to the Australian economy in terms of structure? Is it music? Is itsoftware? Is it information in the form of literature or other forms? It seems to me that musicmust rank very highly culturally, but in terms of structural economic considerations, it cannotbe treated at the same level as software or information.

Our point is that, if it is good policy for one, why is it not good policy across the board?The answer is that it is not good policy at all. The reason it is not good policy essentiallyrelates to the unique and special nature of copyright material and the unique vulnerability thatcopyright material has to unauthorised copying and duplication.

The second point we make in our concluding remarks is the regard in which this move willbe held throughout the Asian region in relation to the protection of property rights generally.I am fortunate enough to chair the Asia-Pacific Committee of the Worldwide Council ofAuthors and Composers Collecting Societies. There was a meeting in New Delhi two weeksago where this issue was considered. There is no question that this is considered throughoutthe region and further afield as an overall diminution in the level of property protectionaccorded to intellectual property in this country. It comes at a time when I have receivedcorrespondence from the government urging me to participate in APEC talks, discussions andworkshops to raise the level of intellectual property throughout the region. The two issues areabsolutely inconsistent.

Now I come back to the particular issue that we wanted to talk to the committee about—thatis, the position of composers and songwriters. We have outlined in fairly simple terms thatthe current situation is that the parallel importation rights in musical works, sections 37 and38, at the moment permit the owner of copyright for a song released to the public for sale inAustralia to be paid a royalty in Australia according to Australian conditions and standards.It is a very simple situation.

The removal of the right will simply mean that, in relation to any CDs that are imported,regardless of what country they are imported from, there will not be a royalty paid in Australiain relation to product released to be enjoyed by Australian consumers. We believe that isabsolutely wrong in principle. Australian composers and foreign composers ought to be entitledto share in the proceeds generated from sales in Australia of product enjoyed by Australianconsumers. That will be directly repudiated by the effect of the bill.

One of the glaring omissions we think in the explanatory memorandum accompanying thebill is the complete absence of any reference to imports from many Asian countries. I havehad a fair amount of experience with royalty collections in many of those countries. As a resultof this legislation, if CDs are imported into this country from countries such as Taiwan, thePhilippines, Thailand or, closer to home, Papua New Guinea, there will be no royalty paid tothe composer anywhere.



It will not be a case of the Australian composer or songwriter receiving a lower royalty—theexplanatory memorandum glibly refers to the royalty rate in America—or the American royaltyrate being paid; it will be a case of no royalty being paid. The reasons for that are many andcomplex. They are not simplistic as outlined by the previous witness. In those countries thereare no royalty collection mechanisms in place because many of these countries have no historyof respect for intellectual property—and any legal practitioner in that field will give you thesame information—and there is no court or administrative infrastructure to ensure that royaltiesare paid at a reasonable rate in accordance with normal commercial conditions.

If you try to sue to protect intellectual property in a court in the Philippines or in Thailand,good luck. I can tell you that you will not be able to do it and successfully and honesty protectyour intellectual property. I have referred to it as disingenuous on the part of the drafters ofthe explanatory memorandum. I suspect it is worse than that. I suspect it is an intentionalomission, but at the very least it is naive in the extreme. May I, at this stage, pass on to mycolleagues to make some introductory remarks as well.

Mr McCusker —I would just like to refer to matters raised in the letter I wrote and removesome of the discussion from the theoretical realm into the real world. I am a songwriter andI have written songs for a band I was in called Mondo Rock. I have also had songs recordedby other artists. So sometimes I am the artist and the composer; other times I am the composerbut not the artist.

I recently bought a CD of Rick Springfield’s greatest hits on which he recorded a song ofmine called ‘State of the Heart’. I bought this at my local supermarket. It is on CamdenRecords, which is a budget line for BMG records. It was discounted in the shop to $9.95 withsome 19 tracks, of which one is mine. All things considered with publishers taking acommission, for a $10 CD I would probably end up making one cent. The chain of the moneywould go from the retailer, to the record company, to my publisher and then to me, as thingsstand. I think that would be over two accounting periods if you take into account six-monthlyaccounting periods, which is the way the industry works. That may not be a sensible way towork but that is the way the industry works and it would be very hard to change.

If the bill goes through as proposed and this record was released around the world, peoplewould be able to source that record from any number of territories. In my letter I explainedwhat would happen if it was sourced from Brazil and Brazil is not a worst case or extremescenario. Brazil has quite a healthy respect for copyright. They have reasonable mechanisms,although there is some dispute about the mechanical copyright rate in Brazil at the moment.

This is what would happen to my royalty from the sale of the Rick Springfield CD if thatrecord was then imported from Brazil: the money would go from the record store at thesupermarket, which is a kilometre away from where I live, and it would go, I presume, to theimporter. It would then go from the importer to a wholesaler in Brazil and then from themto a Brazilian record company or a Brazilian branch of BMG. Then from there to a Brazilianmechanical collection agency; from there to a Brazilian publisher; from the Brazilian publisherto the Australian publisher in a branch of the same company; and then to me.

So it will go from basically two steps to six steps and with each of those steps, there isusually a delay with a six- month accounting period. Also in several of the steps commissionsare taken out. I calculated that, even from a fairly reliable copyright country like Brazil, myone cent would be down to 0.3 or 0.2 of a cent.

If I get a royalty statement now and I say, ‘This doesn’t seem right. I thought I had soldmore records than that,’ then I can ring up my publisher here, my record company here, and



get to the bottom of it reasonably easily. I have a legal right to audit them and find out. Ifthere is a mistake, I can audit them. If this was going to Brazil—and, as I say, Brazil is notan extreme scenario; it is equivalent to the US—I would be trying to verify all of these stepsin a foreign country where I do not have the legal right to audit.

If I did find a mistake, I would be trying to conduct a court case in Sao Paulo or something;I would be on the phone trying to work out where my money has gone. You must understandthat, from my viewpoint, this legislation is a vast impediment to my ability to fairly dobusiness. It seems like instead of it being a simple series of steps to collect the money—ona song that I wrote in North Carlton, Melbourne—from a record that is sold in a supermarketin Brunswick up the road, it is suddenly flying around the world to this other territory. It willmake it very difficult to chase my money.

It could be several territories. I could be chasing dribs and drabs of this money all aroundthe world. This is the soft case; this is things straight ahead. As Brett says, those records canbe sourced from many territories in Asia where the copyright regime is not happening. Ireferred to the dispute in South Korea where no mechanical royalties will be coming out ofSouth Korea for probably two or three years because they are in dispute about how it willwork. That is basically a source of my income pretty well obliterated. If my local record storesources Rick Springfield’s greatest hits from a territory in Asia like Malaysia or thePhilippines, I will not see any money for that basically. That is what will happen. Now surelyyou can understand why I am somewhat annoyed at this prospect.

Mr Faulkner —I do not have any particular extra viewpoint to add other than just in answerto the previous speaker when he was mentioning a ratio of one single in 20 in the UK beingthe industry standard. I believe that would still be pretty much the case. It is probably aboutone in 10 records which make the money for the rest of the catalogue in any company. If youtake out the high earning albums like Madonna or whoever, there will only be left the losersto keep the catalogue going for people like the new artists and so forth. You are going tobasically remove any recoupment for the label. That is a fairly obvious answer to the question:what would happen if you take away the Madonnas and so forth, would they still be profitablerecord industries in the country like Australia?

I have lost my train of thought; I am really just here to answer questions. Mr Elder wassaying that, if a young group came into a record company with a smash hit sound, everyonewould be wanting to sign them up and give them a great deal all over the world with whateverroyalty rate they chose to negotiate. Savage Garden are one group from Australia that justrecently got a No. 1 in the United States. They were basically rejected by every label inAustralia because no-one could particularly hear their smash hit sound until it was on the radio.That is pretty much true of most other artists. If we all knew what was going to happen inadvance, we would not be making those failure records. But, unfortunately, we do not.

CHAIR —There was one suggestion made to us yesterday that we should ask each and everyartist that comes before us as to what arrangements they have with what record companies,and what they stand to gain out of the deals that are made. Would either Eric or David beprepared to make a comment?

Mr McCusker —I have a comment about what Mr Elder said in relation to that—that youcould go in and you should be able to just negotiate what you want. In the situation of a lotof things that it is going to affect, I think of people like Men at Work who put out greatesthit records—



CHAIR —No, you personally was the suggestion. I forget who made it yesterday inCanberra. It might have been Professor Fels—it has been confirmed that it was. I hope I amnot putting words into his mouth but the suggestion was made—

Mr McCusker —Would you like to know what the contractual arrangements are with, say,Mondo Rock?

CHAIR —Yes.Mr McCusker —That is a complicated question. I am happy to answer it but I would need

to do some research. Mondo Rock was signed to one record company in Australia at one stageand to an entirely different multinational for the rest of the world.

CHAIR —Right. So you have signed up for Australia—Mr McCusker —This was quite a long time ago.CHAIR —And another one for the rest of the world?Mr McCusker —That is right; this can happen.CHAIR —That is something which Professor Fels and others were thinking may well happen,

would happen and in fact should happen.Mr McCusker —It seems that would be quite a strange thing. If we are talking about the

multinationals and saying that it does not really matter whether the money goes to Warner BrosBrazil or Warner Bros Australia; but in a situation where it is on Mushroom here and anentirely different record company in the rest of the world, and then the imports come in andMushroom would be competing against a company that it basically had no connection to butit would obtain no benefit for.

CHAIR —But should you not have the capacity to come to an agreement with a companyin Australia for your product, whatever it may be, a song that you have written or that youactually perform? You say, ‘Look, you can have the rights to sell that in Australia for a coupleof months or whatever, but after that I am going to go overseas to try to have some worldwideexposure and get royalties from overseas as well.’

Mr Cottle —May I just interrupt, Senator. The rights that we are talking about—namely,the rights of songwriters and composers; copyright in musical works—are not negotiable bylaw. There is a single statutory royalty rate that applies in this country. It was determined aftervery lengthy judicial proceedings by the Copyright Tribunal. The same situation applies inother developed countries which have established their own locally conditioned, determined,equitable, standard royalty rates. So the royalty rates of composers are simply not negotiablewith the record company or with their publisher.

CHAIR —Should that be freed up or not?Mr McCusker —I think it is very important because, in a way, we are being asked to

respond to an economic pressure, but we cannot. It is fixed. If the price of a CD does comedown to $20, to 6.25 per cent of retail or 9.306 per cent of quoted price to wholesale prices—Ido not know if I am confusing the issue—that is not negotiable, so we cannot respond to that.We will earn less.

CHAIR —But should you be able to?Mr Cottle —The point is—and I think everybody agrees—that there is no possibility of the

royalty rate becoming variable in Australia because you are talking about thousands andthousands of musical works being reproduced on millions of records all the time, and the ideaof differentiating at the point of first production in the value of those works is, really,



commercial nonsense. That is the case everywhere around the world. Even if the rates werevariable and negotiable in Australia, that would not have any impact upon the rates payablein the US, Taiwan, the Philippines or Thailand. That is the essence of the point that we aremaking.

If I may make a couple of other fairly general points, Mr Elder spoke about what happensin response to this bill being theoretical at this point, and that he was more concerned withhard-edged reality. Let me tell you that for composers there will be a very clear hard-edgedreality the minute this bill is passed. The minute this bill is passed, they will get no royaltiesin Australia on imported copies. Regardless of what changes in the patterns of localmanufacture and import are adopted by the record industry, at the moment there are manyimported CDs coming into this country, either by the majors who may not be able to fulfilan order in a local factory, or by independents.

CHAIR —How many CDs do you say are imported into this country? What is a percentage?Mr Cottle —According to the best estimate, between five and 10 per cent. What that would

mean for songwriters like David and Eric is that they will not be paid royalties in Australiaaccording to Australian conditions immediately, regardless of what changes in the patternoccur. Nothing could be a more hard-edged reality for songwriters than that.

The second broad point I wanted to make to the committee is in relation to this breathtakingdichotomy in treatment by the government of the film industry on the one hand and the musicindustry on the other. The record industry worldwide is about half the size of the film industrywhen you take into account all the markets open to film. That is approximately the positionin Australia as well.

The Australian government, by my calculation, currently pumps a net total of in excess of$100 million in direct financial assistance into the film industry. It is probably a gross of $150million, and it recoups maybe $30 or $40 million from the film industry. There are those whocan give you more accurate figures than I. Themusic industry, by my calculation, gets directfinancial assistance from the government of almost nothing. The contemporary music industrymay get something around $1 million through the Australia Council, probably less. So on theone hand there is this extraordinary beneficent cultural treatment of the film industry andalmost nothing going to the music industry. I would certainly argue that music is at least asculturally valuable and important to the Australian community as film.

Not only is that the case—we can live with all of that—but on top of that you want todismantle the property protection and potentially the industry for music and, if I may say so,glibly leave other structures of property protection for other forms of culture and artunchanged. That does produce, you must forgive us, a fair amount of anger and frustration.They are the only words I can think of.

Mr McCusker —Why is the Australian music industry to be considered of such low valueand worthy of so little support? That is what I do not understand.

CHAIR —With respect, I think that is very much a rhetorical question. You do havemembers of APRA who were approached by APRA to put in a submission but who take acompletely different view to APRA and, as a result, felt motivated to put that different viewto indicate how the current arrangements in Australia are in fact restricting their artisticactivities. I refer, of course, to Mr Lyndon-Gee’s submission that he gave to the committeein Canberra yesterday, which he only bothered to write and submit to us as a result of theapproaches APRA made to him that he disagreed with. So before we get too excited talkingabout why the government does not like the Australian music industry or whatever, there is



a divergence of opinion and there is evidence before us suggesting that the current structurein fact does impact adversely on some Australian artistic performers at least.

Mr McCusker —May I ask what ratio of submissions from APRA members was pro—

CHAIR —That I do not know, other than Mr Lyndon-Gee’s, which I thought was a verypersuasive argument. I just thought for the record here it ought be indicated that—

Mr McCusker —Probably somewhat exceptional in the range of views expressed by APRAmembers, would I be right in saying?

CHAIR —Chances are that is the case, but the vast majority of APRA members have notput pen to paper at all to this committee, I would imagine.

Senator McKIERNAN —I was going to follow up on that point. Mr McCusker, you puta view to the committee this morning which was different from what Mr Lyndon-Gee put tous yesterday in Canberra. The argument that he put to us was that he felt it would be betterfor him to be receiving a small payment—I am not sure whether royalty is the correct wordto use—because he could generate a volume from it and it is better for him to receive, say,a thousand royalty payments which were relatively small than it would be to receive 20 whichare relatively large. You have argued, I would put, the complete reverse, in that you are gettingvery little royalty payment from your overseas sales at all—or is that just for writing?

Mr McCusker —I was talking about writing. I have not, at times, received significantamounts from overseas. The original version of ‘State of the heart’ was on a Rick Springfieldrecord and I think it sold a million copies, mainly overseas, not here, but I am not quite surewhere the point is leading to, sorry. As a composer, as I say, at the moment a statutory rateis fixed. What happens is that usually, if the record is very successful, it sells a lot and youtherefore make more. It is not a matter of saying, ‘Okay, look, I’ll give you a bargain priceon my composition and you will sell more records.’ I do not think the composition is asufficiently large section of the price to really make that much difference.

Senator McKIERNAN —That is the writer’s royalty or the copyright payment that youtalked about. What about the artist’s copyright on royalty payment, which is what Mr Lyndon-Gee was talking about? You are also a performer.

Mr McCusker —I am also a performer, yes. That is a variable according to the relationshipbetween the artist and the record company and can vary from territory to territory to territoryand is not negotiable. Usually if you are a famous artist you will get a larger chunk of the pie.Michael Jackson ends up with 20 per cent or something whereas a beginning artist may endwith 10 per cent. I believe Gareth Brooks pays for his own records and gets a 50-50 deal andhas made something like $400 million out of it, but that is an exceptionally large artist’sroyalty. That is quite flexible and negotiable with companies, but, again, where does it lead?

Mr Cottle —We do really get into the realms of theory. If the suggestion is made that,instead of the 10 CDs of a particular set of works that are currently made, released and soldin Australia, Eric is going to have 100 CDs coming in from America so isn’t 100 times theAmerican royalty better than 10 times the Australian royalty—well, of course it is. But thepoint is: who can guarantee that it will be 100 copies in substitution for the existing 10 copies?Who can give us a guarantee that retailers, if they are able to source, for whatever reason,cheaper disks at wholesale, will not take the margin?

The belief throughout the industry is that, in most cases, they are bound to take theadditional margin if they can. The other issue for Eric is that he has no guarantee at all thatthose 100 copies, assuming they are 100, will come from the US. Why wouldn’t they come



from the Philippines or Thailand if whichever distributor is involved can source them theremore cheaply? If the only criterion for sourcing product is price, as is assumed by everyonefrom the PSA onwards through this saga, then why wouldn’t you source it at the cheapestpossible price? Therefore, you would source it in Thailand or you would source it in Taiwan.Why would you bother going to America?

Senator McKIERNAN —The argument is actually somewhat different from that. Theargument says that the Australian produced disc will also be reduced in price, so you willcontinue to source it in Australia.

Mr Cottle —That is up to the record companies to give evidence about. If they believe theycan sell it at a particular price and still make a profit, that is a matter for them. But from ourperspective, if there is import replacement, as is assumed by everyone, for what is currentlylocally manufactured, composers’ royalties will either reduce, certainly take longer to bereceived and in many cases disappear because of regional considerations. That is the essenceof what we are putting to you.

Senator McKIERNAN —The final question, because of the time constraints: whatpercentage of the CDs sold in Australia today are Australian artists, bands or whatever? Havewe got any idea on what that is?

Mr Cottle —There are those who could give you better evidence. I can tell you that, in termsof airplay of Australian compositions, the percentage is around 20 per cent Australiancompositions. If that is reflected in record sales, I suspect it would be a bit less than that—around the 15 per cent to 20 per cent mark.

Senator McKIERNAN —Within the industry is success measured by the number of discssold or is it airplay on radio?

Mr Cottle —It is both. In terms of commercial success, both forms of usage provide royaltyincome to songwriters so both are more or less equally important.

CHAIR —What percentage of foreign recordings sold in Australia would be composed byAustralians?

Mr Cottle —Very small.

Mr McCusker —Infinitesimal.

CHAIR —The parallel importing that we are dealing with also deals with the capacity tosell CDs from elsewhere, doesn’t it?

Mr Cottle —What would be parallel imported under this legislation is all recordings whetherthey are Australian artists or foreign artists. It is just as likely that Australian compositionsrecorded by Australian artists would be parallel imported as it is that foreign recordings offoreign artists would be parallel imported. It is difficult to see any reason for a distinction.

Mr McCusker —A case in point of someone it is going to affect very strongly is Men atWork. Their records are released according to contracts that were signed a long time ago, sothey cannot change the terms of their contracts. If they put out a greatest hits record, thatwould be released probably all over the world because they are famous all over the world.There may be 30,000 or 40,000 copies come from a number of different territories intoAustralia because they still have a very strong base in Australia. So they stand to lose not onlythe writers’ royalties but perhaps completely from the very real possibility of discs sourcedfrom Asia.



All of this complication in terms of collecting the money, the time it takes, the verificationand all of that stuff to me is what the parallel importation restrictions are for. They are nota sweet deal for the music industry; they are a way, a means and a structure that makesadministering this invisible copyright of intellectual property and get a return to songwritersand artists for what they do. That is hard to administer because it is invisible and there aresuch complicated things as piracy.

There is a perception that CDs are too expensive in Australia. Does the government thinkit is because of the parallel importation that the CDs are expensive?

CHAIR —It is not only the government.

Mr McCusker —The US has parallel importation. Almost everybody has parallel importprotection, not as a sweet deal but just as a way of administering copyright because it isdifficult.

CHAIR —Is the vast majority of music composed or written by Australians recorded andsold in Australia?

Mr McCusker —Yes, I would say so.

CHAIR —Would that change, do you think? Would a composer then all of a sudden recordand sell overseas if we got rid of these parallel imports?

Mr Cottle —I would like to make a comment about that. It is a given in the music industrythat it is very difficult to succeed commercially in the local market. In order to succeedcommercially, a band or a songwriter really has to have international success. Whether we likeit or not, the most effective way to get international success, if not the only way to getinternational success, is to plug into the international system of distribution and promotion.Unless an Australian act can get the Sony, Polygram or A and R promotions people interestedin their record in that market, it is almost impossible for an Australian act to gain internationalsuccess. Everybody in this industry, certainly for the past 15 years, has tried to look beyondthese shores, tried to look externally, to get that foreign success. The fear is that what we willdo by this legislation is unplug ourselves from that international network. That is one of thefears that we have.

Mr McCusker —That is the case now. If my new band Big Foot was signing a contract andthis bill had gone through, I would be saying to the international department, ‘Say no. Theylove us, they want us bad. We can dictate some terms.’ The terms I would be dictating wouldbe, ‘Do not release my record in Asia because I do not want my Australian sales underminedby that.’

CHAIR —And you could do that?

Mr McCusker —I could do that, but is that what the government wants to do—stopexporting to countries around the world?

Mr Cottle —And not have a say in how it is released in countries around the world?

Senator COONEY—When you say you have to get international success, is it easier to startoff in Australia—getting a contract, pressing a record—or easier to go overseas and front theagents or whatever you have over there?

Mr McCusker —It is easier because you are here, because it is a hands-on industry. Thegeographical isolation of Australia has made it difficult, in a way. It is an industry based onpromotion. It is based on ‘being there’. It is based on being able to motivate the A and Rpeople, the promotions people, and being able to go to radio and all those sorts of things. It



is quite difficult from Australia. Every time you have to do it you have to cough up a largeair fare.

Canada has succeeded more—Canada is equivalent, in a way, to Australia as a generatorof copyrights but, in order of magnitude, has far greater success—because, firstly, they haveproximity to the biggest market in the world, the American market. Secondly, they haveenormous support from their government in terms of quotas on radio. They now have a schemewhere there is dollar for dollar matching of production costs. The Canadian government hasbeen far more proactive in support of the music industry than has the Australian government.

It is easier to start out in Australia because you are here: you can build a base, a followingof fans. You can play in the pubs. You can get your 5,000 fans and, when your record comesout, it starts charting and that starts the whole flow of a hit. A hit is like a wave you generate.

Senator COONEY—It keeps legal work in Australia too, doesn’t it?Senator BARTLETT —I have a couple of questions in relation to the issue of the cost of

CDs in Australia. I guess as artists you would like your work to be as cheap as possible tomaximise the likelihood of people buying it. As far as consumers are concerned, the peoplewho buy, consume, more records more than anybody else are musos, I would imagine. Theytend to buy a hell of a lot. So, from that angle as well, do you feel that, broadly speaking, CDsare too expensive in Australia?

Mr Faulkner —I have travelled around the world and I have bought CDs all over the place.It pretty much averages out. If you go to Japan or the UK you pay a lot more. In the US itis cheaper.

Mr McCusker —In Switzerland it is a lot more.Mr Faulkner —It is really apples and oranges anyway compared with the price of things

around the place. But, no, I do not think particularly.Senator BARTLETT —You do not feel from your dealings with record labels, distributors

or whatever that there is massive fat padding and that they are skimming a huge amount ofcream off the top?

Mr Faulkner —They are profitable industries, but does destroying it somehow make it abetter industry for everybody else to consume? Perhaps you can find some way of telling themto make less money. We would all like that in whatever industry you choose in the world, butI do not think it is possible without getting very interventionist. This is completely a bathwater-baby situation we are talking about here in the case of protecting our intellectual rights.

Senator BARTLETT —I would imagine, regardless of whatever system is in place, peoplelike John Farnham or Kylie Minogue would be able to look after themselves all right, but alot of the submissions we have got are, I have found, from ‘medium poppy’ people—to usethe term you used in your submission—or totally unknown people just slogging around at thegrassroots level. How much scope do medium level artists have in terms of negotiating abilityin the music industry with labels et cetera? How much chance would you have in managingto renegotiate a system that—

Mr McCusker —I think in, say, stuff that has already been put out, already in existence—whether it be Men at Work or Little River Band—you have no hope at all because it is alreadyenshrined in contract. They are not going to change contract because we are in some kind ofdifficulty here with a government doing strange things to the copyright law. I do not thinkyou would have a chance of changing that. If you were in a very powerful position, if it wasSavage Garden coming up for renegotiation, you would probably have some power of sway



to stop the international record company from releasing the product into markets where perhapsthe mechanical rate is ridiculously low or where the structures are not in place. You perhapscould do that. But I also think it is very counterproductive when what you want to do witha band is get it out to the world.

Mr Cottle —I emphasise that that contractual ability, if some artists do possess it, relatesto their services as performers. It does not relate to their intellectual property, namely, thesongs they compose. Nothing will stop cover versions of Eric’s songs or Dave’s songs beingmade and released in the Philippines, Thailand or Taiwan by local artists or released in karaokeversions by whoever. There is the possibility of those compositions being imported intoAustralia; they can do nothing about that, contractually.

Senator McKIERNAN —Are there controls on the importation of those now?Mr Cottle —Yes, there are.Senator BARTLETT —I want to clarify this. This legislation will not affect performance

royalties, airplay and those sorts of things, will it?Mr Cottle —No.Senator BARTLETT— Okay. A few people this morning have brought up the issue of the

growth in the number of people buying things through the Internet. What sort of impact doesthat have at the moment on royalty payments? You would still get money at the US royalty—

Mr Faulkner —Yes, from the source. You would presumably get your royalty from them.Mr Cottle —Because it is not being imported into the country for commercial distribution.Senator BARTLETT —Is that growth of Internet buying a problem, from your perspective?Mr Cottle —I think it is very difficult to see precisely what impact it is going to have. Most

people agree that at some point in the future people will obtain their software on-line ratherthan buying bits. I think that is right. My own personal view is that pricing issues will self-adjust to take account of the on-line availability of those works over a period of time. Themarket will in fact self-adjust to take account of that factor. The one crucial point for copyrightowners is that the rights of transmission and availability on the Internet are themselvessatisfactorily protected. That is a whole other area of legislation that is being looked at by thegovernment at the moment.

CHAIR —Thank you very much. We will now move on to the Australian Copyright Council.[10.38 a.m.]BAULCH, Ms Elizabeth Mary, Executive Officer, Australian Copyright Council, 3/245Chalmers Street, Redfern, New South Wales 2016

CHAIR —Welcome, Ms Baulch. We have received your submission, which bears the number164. Would you like to make an opening statement?

Ms Baulch—As the committee would be aware from our submission, we oppose theprovisions in Copyright Amendment Bill (No. 2) 1997 which would allow the importation ofsound recordings. I will briefly highlight the points that we made in our written submission,but first I want to make a couple of comments about why we have these parallel importationprovisions at all. It is partly because there are suggestions from time to time that they areseverable from the basic copyright rights that copyright owners have, and in fact that is notthe case.

The copyright system operates by giving a person legal rights in a work that enable thatperson to sell or otherwise derive income from the work. It is this ability to derive income



from the rights in the work which is intended to foster the creation of new work andinvestment in publishing and distributing the work. In one sense, copyright is an internationalsystem because of the operation of the international copyright treaties, but rights are grantedand traded on a territory by territory basis, so the situation with the owner of rights in onecountry may be different from the situation with the owner of rights in another country. Infact, this is quite commonly the case. The value of the Australian rights and the investmentbased upon them are diminished if parallel imports are allowed.

Firstly, I will make some comments on our problems with the basic policy behind theCopyright Amendment Bill. We have always been concerned about the assumption that, if youremove the parallel importation provisions, then prices will necessarily come down. It is clearlynot a direct correlation, as evidenced by the fact that countries that are said to have lowerprices than Australia, such as the US, New Zealand, and Canada, all have parallel importationrights. It is obviously a much more complicated scenario that we are looking at here.

Secondly, even if prices would come down, we do not think the benefits of this wouldoutweigh the likely damage to Australian music. We are not just talking about an industryhere; we are talking about a creative culture and a sense of national identity. Australiancomposers and artists would be worse off for a whole lot of reasons.

As was mentioned in the previous presentations, most Australian musicians and composersare seeking international release. They are more likely to be able to do that if the companiesthey are dealing with in Australia have international affiliations than if they have to traipseoff overseas. The risks of seeking international release are going to be much greater if parallelimports are allowed. Firstly, the recording artists and composers, as you have already heard,get lower royalties for recordings first sold overseas. Secondly, it takes the artists andcomposers longer to receive their royalties for recordings first sold overseas. The advancesthat they get under their contracts will be lower because they are tied to expected sales in theterritory.

The bill would allow the importation of deletions, for which they receive little or often noroyalties whatsoever, and they may be imported even if the Australian sales are still healthy.The bill would also allow the importation of CDs sold at a low price in countries with a lowdisposable income. The risks of export would be much greater if we allowed this bill to bepassed.

Our understanding is that it will be much more difficult for copyright owners to initiate acustoms seizure of pirate recordings because it can be very difficult to differentiate piraterecordings from non-pirate recordings. As it stands, the copyright owner knows that, if it hasnot licensed the importation of a batch of recordings, then it can prevent that importation underthe current provisions. That would not be the case under the bill. There is an increase inpenalties under the bill, but it is difficult to believe that somebody who is undeterred by a fineof $250,000 is suddenly going to be deterred by a fine of $275,000. I may be wrong, but itis difficult to see.

Lastly, in terms of the policy behind the bill, I reinforce the point that Brett Cottle made:this bill clearly reduces copyright protection in Australia and this is completely inconsistentwith other efforts by the Australian government to encourage higher standards of copyrightprotection in countries with little or no current copyright protection. It is sending the wrongmessage.

I have a couple of points to make about the drafting of the bill. The bill would allow importsof CDs with no royalties payable to the Australian artists and composers in a number of



situations. Firstly, the bill would allow CDs made in a country with no copyright protectionaltogether to be imported into Australia. Papua New Guinea is an example. If somebody madea recording of an Australian songwriter’s songs in Papua New Guinea, that recording couldbe imported into Australia without any payment whatsoever to the Australian composer.

There are countries that have a copyright law, but they do not protect foreign rights holders.Taiwan, for example, has a copyright law, but it does not protect Australian rights holders,so you could have a recording made in Taiwan that could be imported into Australia withoutany payment to the composers.

There are different periods of protection for copyright works in different countries aroundthe world. You could have a situation where a work is still protected by copyright in Australiabut is in the public domain in another country. The owner of copyright in that work inAustralia could have their copyright devalued by the importation of CDs made in anothercountry where that work is in the public domain.

My next point is about the claimed change of the onus of proof referred to in thegovernment’s press release about this bill. In our view, there is no change in the onus of proof.The way this bill is drafted, it is exactly the same position as for the limited provision forimportation of books or for any other exceptional defence under the Copyright Act. Thecopyright owner still has to make out every element of the importation, as now. They haveto prove the chain of title, obviously, but also absence of licence, and that the importer knewor ought to have known that the imports would infringe copyright if made in Australia. Wecannot see the correlation between that claim and the drafting in the bill.

Lastly, the bill would allow importation of recordings made under compulsory licence. Thisis different to the situation under the books provisions, which do not allow the importationof books made under compulsory licence. It is also different to the position in Singapore, oneof the few countries that does allow parallel imports but does not allow importation of CDsand recordings made under compulsory licence.

The other problem with the bill allowing recordings made under compulsory licence is that,in our view, this is inconsistent with the TRIPS agreement. Under the TRIPS agreement,members of the World Trade Organisation, including Australia, are required to empowercustoms officials to seize pirated copyright goods on notice by the copyright owner. TheTRIPS agreement defines pirate copyright goods as goods made without the consent of theright holder in the country of production. In our view, recordings made under compulsorylicence are not made with the consent of the copyright owner. They are made undercompulsory licence. That completes my formal statement.

CHAIR —Thank you. Can I address a few questions in relation to your written submission?On the first page, in a footnote, you refer us to article 27 of the United Nations UniversalDeclaration on Human Rights and you purport to quote it. Is that the full article 27 that youquote?

Ms Baulch—I would have to check that.

CHAIR —Because if my memory serves me correctly, and I do not have it in front of me,I think there is a further part to it, referring to reasonable access for the public, which is theother part of the debate in this whole issue as to where the consumer stands and what is withinthe best interests of the consumer. I would like to think that you might be able to tell us whatthe full article 27 tells us and what weight we ought to put on reference in that article, if itdoes say so, about giving reasonable access to the public. That might be helpful.



You then quote the Gregory committee on page 2, which I note is a 1952 report. In 46 years,have industry practices changed somewhat, do you think? There are certain challenges nowfacing the industry, including purchases from the Internet and things of that nature, whichmight not necessarily have been around at the time of the Gregory report.

Ms Baulch—I do not know that they have changed to that extent, but I included this as anindication of how long we have had these rights around and as an indication of the purposeof them.

CHAIR —You have a quote from a 1991 memorandum of WIPO. What is the status of thatmemorandum?

Ms Baulch—It was produced in connection with the meetings leading up to the diplomaticconference in December 1996 which eventually adopted the WIPO copyright treaty and theWIPO performances and performers and phonograms treaty.

CHAIR —But that memorandum was not endorsed by the committee of exports, was it? Itwas just a working document which, at the end of the day, was not adopted by the committeeof exports?

Ms Baulch—No, but it represents the view of the World Intellectual Property Organisationabout rights being traded and treated on a territorial basis.

CHAIR —On what basis do you say it represents their views when it was only a workingdocument and was not adopted by the committee? It was a memorandum that got circulatedbut it was never adopted and, as I understand it, it was only ever a working paper which meantthat member countries did not sign up to it.

Ms Baulch—What was not adopted in the end was a proposal to include in effect parallelimportation rights in the treaty which was considered in December 1996. That does notnecessarily mean that countries which were involved in that negotiation do not regardcopyright as being traded on a territorial basis. The point of this quote was to support ourcontention that copyright is treated and traded on a territorial basis.

CHAIR —Yes, but once again it is only a working document which was not formallyadopted, so it is only a matter of speculation whether it necessarily represents the members’views.

Ms Baulch—It represented the view of the International Bureau of the World IntellectualProperty Organisation.

CHAIR —It was a working paper, but does that of necessity represent the views of thebureau or the members?

Ms Baulch—It was a paper prepared by the International Bureau of the World IntellectualProperty Organisation.

CHAIR —Yes, but it is like if the Public Service prepares a document for governmentconsideration. It does not make it government policy, does it? It is just a working paper forgovernment to take it or leave it. That is the only status of this document, isn’t it?

Ms Baulch—I was not contending that it had any other status than that. It was there, as Isaid, to support the generally held view that copyright is treated on a territory by territory basisand treated on a territory by territory basis.

CHAIR —Once again, you are trying to clothe it with some authority, which I thought wejust agreed it did not have because it had not been officially adopted—it was just a workingpaper. Sure, the people who produced the working paper were of that view, but the people



who were preparing that working document did not have any status to then portray that to theworld as the official view.

Ms Baulch—Of the members of—

CHAIR —Yes, that is right. Can you explain why the multinationals would no longer havean incentive to have a local presence? I think that is a suggestion in your paper. Why wouldn’tthey still be interested in operating in Australia?

Ms Baulch—It goes back to the official statement I made. What they own in Australia arethe Australian rights. Those Australian rights are devalued if parallel imports can be broughtin. The incentive that they would otherwise have for investing in the production and marketingand distribution is diminished.

CHAIR —Yes, but how much of that should be left up to basic market forces? Whilst I agreewith you that that may be the case, or an argument could be made out, in relation toinvestments made and failures, et cetera. Mining companies explore a lot but they have somefailures, some successes. Is that the basis of parallel import legislation—to try to give someprotection to the industry by way of nearly a tariff or subsidy type protection as opposed tousing copyright protection, which is simply designed for intellectual property protection andnot for market protection?

Ms Baulch—The parallel importation provisions are copyright protection. Copyright worksby giving the rights owner in the territory exclusive rights to do various things. One of thoseis the exclusive rights to make reproductions of a work.

If you have the exclusive right to make reproductions of a work in Australia, for exampleby making CDs, the intention behind the copyright legislation is that that gives you a basisfor creating the work in the first place, then investing in the production, marketing anddistribution of that work. That exclusive control over the reproduction is affected by parallelimports of those CDs in the similar way that it is affected by somebody making piraterecordings in Australia.

CHAIR —Japan and Singapore allow parallel importing.

Ms Baulch—I am actually not sure about Japan.

CHAIR —And they have local production as well. So I am not sure that, from the worldexperience, one could necessarily make out the argument that, if you allow parallel imports,you will not have a local manufacturing base because two countries that do allow it do seemto have a healthy manufacturing base.

Ms Baulch—My efforts to check the situation in Japan did not bring me to any conclusionabout the situation there. The most I could say is that it is ambiguous and the learned articlesI have received about it are all in Japanese and have not been very helpful.

Senator COONEY—It is a language that is exclusive to the country.

Ms Baulch—The difficulty in just looking at the legislation of various other countries isthat this provision can be ambiguous and there can be different views in the country as towhether or not it allows parallel importation.

CHAIR —On page 3, paragraph 5.1 under the heading ‘Questionable assumptions about theeffect of parallel importation on competition and prices,’ we had a representative before usthis morning who sells in excess of $30 million worth of CDs each year, so I would assumethey are relatively large players in the market and fairly attuned to the commercial realities



of the CD market. They say that if this legislation gets through that this will result in a dropin the cost price to retailers of approximately 25 to 30 per cent.

Ms Baulch—Is this the submission made in confidence?

CHAIR —No, this is now a public document from Woolworths Ltd—I can indicate thesource of it. I would have thought that, with respect, compared to the Australian CopyrightCouncil they would possibly be more attuned to the commercial reality of CD sales. They arethe ones who negotiate every day with the record industry, trying to get prices down andmarketing strategies, et cetera. I do not know what percentage of the market $30 million worthis, but I would assume it is a fair slug. They are saying that it will have a significant pricereduction effect of 25 to 30 per cent. Coming back to the very first question I asked aboutreasonable access to the public, and if we can get a price reduction, even of 20 per cent, forthe Australian consumer out there—individual consumers do not walk into these committeessaying, ‘Yes, I would prefer to buy CDs $7 cheaper,’ or something like that—because as aparliament we have a responsibility to all Australians, not necessarily just to specific interestsor industry groups. What sort of weight should we put on all that?

Ms Baulch—Perhaps I could go back to the first question about the relationship betweenthe rights of creators and the access issue. There are clear statements about that in both theBerne convention and the TRIPS agreement, which I am happy to provide to you. In relationto the second question, perhaps I could repeat what I said at the outset, that is, there is clearlynot a direct correlation between prices and parallel importation because countries which aresaid to have lower prices, such as the US, Canada and New Zealand, all have parallelimportation provisions. That has always been our difficulty with it—this assumption that theyare related in that way. There are clearly other forces at play there and that is not alwaysclearly made out in the debate about this issue.

CHAIR —We can agree to disagree on that.

Senator McKIERNAN —In regard to the comment that you made in response to the Chair’searlier question about the submission being made confidentially, it was, indeed, a confidentialsubmission which, during the in camera hearing, it was agreed it be released publicly.

CHAIR —I indicated that it is now public.

Senator McKIERNAN —It is now public?

CHAIR —Yes.

Senator McKIERNAN —I take the opportunity to compliment the Copyright Council onits submission. I thought it was very clear, very concise, very direct and to the point. I putthat on the record first. I am, of course, going to limit my questioning of you to two areasonly. I would like clarification of what happens currently in the matter of karaoke recordings—which was mentioned by the previous set of witnesses and is also mentioned at 6.2 of yoursubmission. That would be one of the growth industries in the music industry in Australia,I would have thought. Where are those recordings produced now? What protections are therefor Australian artists for those recordings—the intellectual property as contained in thoserecordings and of course the performance as well?

Ms Baulch—You will have to ask the other witnesses about where the karaoke recordingsare made. I do not have any special expertise about that. The composer would generally bepaid the agreed or compulsory set rate in the country of production, but those recordings couldnot be imported into Australia without the consent of the holder of the Australian rights inthe recording and the musical works. I think that in the AMCOS submission there is reference



to the way that royalties are collected for recordings made in another country and importedinto Australia.

Senator McKIERNAN —I will be asking the question again of further witnesses. It is stillnot clear. You have got some doubt—and I think that came through in earlier questioning—about the benefits to consumers of this measure that is before the parliament. You mentionedthat in 5.3, beyond certain benefits. A witness yesterday put the proposition to us that it isbetter to receive a smaller royalty for a higher volume of sales than it is to receive a largerroyalty for a smaller volume of sales. I have already addressed this question to an ARIAwitness as well. The argument is that if the prices in the shops are going to be reduced, andit could be up to $10 we are told—that has not been substantiated I might add—it would createa greater volume of sales. Are you aware of those arguments and do you give any credenceto them?

Ms Baulch—Yes. Nobody knows what would happen, but if there are 10,000 CDs that areimported on which no royalties are paid, then you are worse off than if you have 1,000 CDs,all with royalties. So if they are deletions that are imported on which no royalties are paid,or if the royalties are minuscule, then you may well be worse off even if the numbers aregreater.

Senator McKIERNAN —Is that a matter of commercial negotiations on behalf of theindividuals?

Ms Baulch—I may leave that to be answered in greater detail by the music managers whoare giving evidence later, I understand, about what is possible to negotiate in this environment.But my understanding is that it would be very difficult to prevent the release of deletedproduct.

Senator McKIERNAN —Do you have any projections about the levels of imported productthat Australia might be receiving if this bill is passed in its current form? Ninety-five per centof the CDs bought and sold in this country are now produced in Australia.

Ms Baulch—I could not answer that.

Senator McKIERNAN —Thank you.

Senator BARTLETT —I have a couple of questions. Could you clarify for me again theissue of the hypothetical of someone going to Papua New Guinea and recording a cover albumof someone else’s songs. If I were to do that now and then try to sell that material in Australia,how would that work in terms of ensuring there were royalty payments?

Ms Baulch—You would need to notify the owners of copyright in the songs on therecording that were being imported. Then a royalty could be negotiated on those importrecordings for the songwriters.

Senator BARTLETT —And under this legislation, what would the situation be then?

Ms Baulch—The songwriters should get zilch.

Senator BARTLETT —So I could just go up there—I would not need to tell them I wasdoing it—and I could catch them unsuspecting with my fabulous album of cover versionsreleased on the Australian market.

Ms Baulch—You would have no obligation to notify them either about making the recordingor about importing it into Australia.



Senator BARTLETT —At the start you said a number of organisations are affiliated withthe Copyright Council. How does that work in terms of affiliation? Who are the people whoare affiliated with you?

Ms Baulch—We are a non-profit organisation. A lot of our funding comes from theAustralia Council, the government’s arts funding and advisory body. We also have 25 affiliatedorganisations. They are organisations whose own members are owners of copyright orperformers. In terms of this issue, the affiliated organisations include the Media, Entertainmentand Arts Alliance, APRA, AMCOS, ARIA—they are the main ones.

Senator BARTLETT —Do they give you direction, or whatever, in terms of the sort ofposition that the council takes or are you able to operate independently?

Ms Baulch—We notify affiliated organisations that we are preparing a submission andcirculate that in draft if requested. Then organisations may directly endorse the submissionor they may make reference to our submission in their separate submissions.

Senator BARTLETT —Affiliates, broadly speaking, do not provide much in the way ofyour funding?

Ms Baulch—In terms of funding, no.Senator BARTLETT —I am just trying to get a flavour of the direction of where the

organisation sits and things. There has been an implication that everyone who is taking thissort of approach is basically doing so under fear and terror from baseball bat wielding recordindustry people and that sort of stuff.

Ms Baulch—I am happy to tell you it is not true. Perhaps I should also say that our maininterest is in the songwriters and the recording artists. ARIA is affiliated with us, but generallythey are big enough to look after themselves. We are more concerned about the smallercreators at the bottom of the food chain, as I think you described them before. We see themas our interests.

Senator BARTLETT —One more question, if I may, around that Internet issue which wetouched on earlier. I am just wanting to get a clear picture of it. Is that perceived as a problemor potential problem from your perspective?

Ms Baulch—Certainly the delay with introducing new legislation to give copyright ownerseffective rights to control their works on the Internet is a big consideration. There are processeshappening at the governmental level, but we have not seen any legislation. So we are veryconcerned about that.

Senator COONEY—It has been said that the Australian customer would like cheaperrecords, which I think would be right. Do you know whether there is any research done intothe question of whether the Australian consumer wants the owners of intellectual property tosurrender that property without reward? If you do know of any research, could you direct thatto us?

Ms Baulch—I am certainly not aware of any research like that. But I am happy to makeinvestigations.

Senator COONEY—Thanks very much.CHAIR —Thank you, Ms Baulch, for your written submission and your oral evidence. I

understand you have taken a few matters on notice and we look forward to receiving that fromyou. Thank you very much.



[11.10 a.m.]

CASWELL, Mr David Allan, Member, Media, Entertainment and Arts Alliance, CnrChalmers and Redfern Streets, Redfern, New South WalesHRYCE, Ms Michel Maree, New South Wales Branch Secretary, Media, Entertainmentand Arts Alliance, 245 Chalmers Street, Redfern, New South WalesROWE, Mr Norman John, AM, Member, Media, Entertainment and Arts Alliance, CnrChalmers and Redfern Streets, Redfern, New South Wales

Mr Caswell—My name is David Caswell, and this year I have been a member of MEAAfor 25 years. I am a singer, songwriter, record producer and just about everything else in themusic business, which is how you survive in this country.

Mr Rowe—I am Normie Rowe, AM. I am also a member of the Media, Entertainment andArts Alliance. I have been a member since 1963. I have been in show business for a bit longerthan that, as an amateur of course. I am very concerned about what is going on here.

Ms Hryce—Senators, I will commence today and talk briefly to the written submission thatyou have before you, and then we will call upon Mr Rowe to follow me, and then Mr Caswell,to discuss their actual experiences in the industry and what we perceive are our concerns.Initially I would like to hand you a one-page sheet, of which we have some copies, with thenames of some of our leading artists who are supporting our submission. We apologise fornot getting it to you earlier.

I would like to start by saying that the Media, Entertainment and Arts Alliance does supportthe coalition government’s commitment to copyright reform. The basis of the reform has beenput forward by the government to ensure that in the new communications environment therights of all creators of intellectual property are appropriately recognised and protected, whilstat the same time users have reasonable access to the materials.

MEAA and its colleagues were very—perhaps not excited—pleased to see the release ofthe most recent discussion paper for the government in respect of copyright reform. That isthe one that is looking at improving the rights of performers within the copyright area.However, as you can see from our submission, we have a number of concerns with thisparticular bill. We hope that what we have presented in our submission to you is focusing onthe performers or, often, composers and people in the industry, as we believe that performers’rights—what little we have got at the moment, or what we hope to achieve—will beundermined. A number of other copyright owners’ rights will also be undermined, althoughthe government is attempting to do so for reasons that are sensible to the Australian consumer.

I suppose we are faced with this funny situation where we hope within a few months wewill persuade all of you, the Australian people, the government and the world, that Australianperformers, after 30 years of lobbying, should be entitled to copyright, particularly in theirrecordings. Gentlemen, you will be aware from our submission and from those of others, andlooking of course at the recent WIPO treaty on performances, that finally we have on theinternational agenda something that can persuade our record companies and everyone else thatAustralians should be entitled to a form of copyright—moral rights and economic rights intheir works.

So over here we are faced with this sort of task that we are getting ourselves ready for, andwe are feeling very hopeful for the first time in many years. At the same time that this billon the other side is hitting us, we believe—and it is clear in other submissions—that this billwill impact on copyright owners’ royalties. So this is the dilemma we are faced with.



The other issue that we are concerned with is that performers—although they do not havecopyrights in their recordings, and certainly depending on whether they are well-knownperformers—attempt to negotiate the best deal they can with recording companies forpercentage payments on the basis of sales. So it is a royalty but in fact it is not a copyright,a statutory right.

I have had some experience negotiating with the majors on behalf of my members forrecording contracts, and I must say they are not the easiest people to have on the other side.They are tough negotiators; it is always hard. However, I believe it is made tougher becausewe have no statutory right to a royalty, unlike the composers, who might try to get a bit morethan they are entitled to statutory-wise if they are performing and the rest. We go in and say,‘We want this,’ so we have to fight very hard; it is the basis of contractual arrangement.

I have negotiated with Disney, Polygram and Sony for a number of deals for groups ofperformers, particularly in the opera and in cast recordings and the rest, to try to push thisnotion of royalties so we can look at it as a statutory obligation. It is hard but it is notimpossible; it is the way of the commercial world, and I understand that.

Performers are concerned at what little they can negotiate through contractual means in termsof whether they are a composer and performer or just purely a performer on a recording thathas sold around the world. My understanding of the industry—my colleagues will talk a bitmore about this and clearly the representatives of the publishers coming on later will talk inmore detail—is that Australian performers manage to get a better percentage deal from saleswithin Australian territory. This is the market; this is Australians marketing to themselves, theirfans and everyone else, and it becomes reduced as it goes on.

We are very concerned that if this bill encourages the production of CDs outside of Australiaand they are then brought back into the country, the performers’ deal, the performers’ incomefrom that—call it a royalty, but it is not a copyright one—will be reduced as well. We are alsovery nervous about the notion that Australia can be flooded by remainder copies of ourAustralian performers, let alone others. These are the concerns of the performers individually.

Performers, as you will be aware, and creators of recordings as well as film and television—indeed, nine out of 10 of the members that I represent—have a broader concern: they havea concern for their industry and for Australian culture. So their concerns in this issue as wellas others go way beyond their own pockets. Firstly, in terms of looking at the industry, weare extremely concerned that independent groups and our fledgling artists are really going tobe affected by parallel importing. If we have a situation where the majors say, ‘We are notearning enough here from profit, from our rights to recordings in Australia and being able toimport in,’ if they are not earning a wack of money in profit to be able to then move on—andit is debatable how much they put into the industry, but to move into the industry—we havea problem.

I have spoken to a number of our performers and, indeed, independent record producers andretailers and there seem to be two ways that people start off—again, my colleagues will talkabout this a bit more, but I would like to get this through. We have our fledgling bands andperformers who will often work day jobs, night jobs—work around the clock—to try to savethat money to put out their first CD. No-one in particular is ever going to look at anyone.Johnny Farnham was a nobody once. He did not become a hit because everyone went boomand ‘this is it’. It is usually the younger kids who are trying to do what is left of the pubcircuit, trying to play to an audience to put their CD out.



My understanding is that these kids have to raise money themselves to put into the CD, tothen try to get someone to sell it. They sell it at their gigs for a lesser price. After they havedone this a few times, maybe an independent retailer—which is often an independent producerof music in this country on a small scale—will notice them and maybe take them on, givethem some money and some important advances. When they have gone through that periodthey will come to the attention of the majors.

My understanding is that that is the situation with the Whitlams. I have had a long talk withthe manager of the Whitlams through the past six months when looking at difficultiesmusicians face. So for the little band starting off, there is no point putting the CD out to evenstart if you are not, at the end of this, going to attract that major there with the money to beable to give you the publicity and sell you here and overseas.

So our concern is that, if these companies are not earning the money to invest back into ourindustry here, our performers are not going to develop and we are not going to get groups likethe Whitlams, who have just sold enormous numbers of things and will be the next big thingthat is going to hit overseas following Silverchair. It is not going to happen. We are worriedit is not going to happen.

Senator COONEY—It is a bit like going to your first branch meeting on your way toparliament.

Ms Hryce—Exactly.

CHAIR —In the Labor Party.

Ms Hryce—You do have to perform, don’t you, on the first one? So we are concerned aboutthat side of the industry. We are also concerned about these independent retailers who are oftenindependent producers. This is really the niche area of our market that is developing newAustralian music. Polygram is not going to run out and listen to this band down the road; theyare going to wait until they get to some degree to show a bit of interest. These are the peoplewho work in a very tight situation. They often have their retail stores, their recording; theytry to put together the money to give to the artist or to work with the artist to get them on themove.

My concern about the parallel import effect on them is not only the fact that the majors areno longer there for them to try to get money fed back to them as well: if we allow a situationwhere the prices of CDs coming into this country drop, and we are flooded with these $2 CDsand everything else, what happens to these independent retailers who are trying to put outAustralian music and produce Australian performers in Australia? They will not be able tocompete with a $5 CD from Woolworths.

At the moment the industry sits very precariously. I am very concerned that this group ofpeople who are essential to the development of our recording industry will be wiped out. Theyare just there now. I think that they will go.

Finally, the most important thing to me and our colleagues—our colleagues here as well asthose out working or not working—is that the record industry is not like the shoe industry.There is a similar argument to the shoe industry in the sense that we would like to think wewill promote our own industries. But it is a bit further than this. The recording industrypresents our culture, talent and our view of the world. Australian consumers want to hear that.They want to see their bands, they want to buy their music. We are concerned that the billin this state will destroy that. We do not want that to happen.



CHAIR —Why would the Australian consumer change their tastes and desires if thelegislation is passed?

Ms Hryce—We are concerned that a number of effects of the bill will actually wipe outa whole lot of players in the industry. I think Allan will talk a bit as a composer andsongwriter and will explain to you. Perhaps Allan could quickly answer that question.

CHAIR —Perhaps later on when you have made your comments. We will allow you to keepon.

Ms Hryce—Yes. I think it is easier to explain through a performer. As you can see, ourrecommendations are on the last page. We would like to see the government doing things thatare more positive for the music industry—of course not at the expense of taking away moneyfrom the film industry, but similarly generous perhaps. I think two areas that the governmentcan look at that would be important include, firstly, the Australian music code of practice. Itsets that rate for Australian air time on Australian broadcasting. We would like to see thatincreased. That varies depending on whether you are in the country, the city and all the rest,but we would like to see that get a bit higher.

We have Australian content quotas on television. How much Australian television wouldbe made without those laws to encourage people to make them? We want that to be stronger.We would like the government to put forward policies that support this industry, and a fewdollars would also not go astray. Finally, we would like to see the government introduce andsupport performers rights in the form of a copyright, and then performers, even more so, willbe fighting strongly to protect this.

Mr Rowe—Thanks very much for allowing me to appear today. As I said before, I havebeen in this industry for a very long time. I know it implicitly. I choose not to live overseas.I choose to live in Australia. This is where I choose to raise my family. I love this countryvery much.

Senator COONEY—You have even served in its defence forces.

Mr Rowe—I have done so, but so did 50,000 other Vietnam veterans. I have learned to lovethe entertainment industry of Australia because of its independence, because of its ability tosurvive the constant onslaughts of government legislation, banks and big business trying totake from it on a constant basis, or control it or, when it cannot be controlled, to reduce it tonothing.

When I first started recording in 1964, no Australian compositions were being recorded—literally none. However, in those days there was support for the industry in television. I willrun through for you the television shows which rated:Bandstand, The Go Show, SaturdayDate, It’s all Happening, Teenscene—I am not saying one after the other; I am saying all atonce—Six O’clock Rock, Sing Sing Sing, Uptight, Happening 70, Happening 71andHappening 72—which were one after the other, of course—Kommotion, Rock‘n’Roll Circus,Countdownand many and varied other national and local shows such asTonight, Middayandothers. They all supported the Australian music industry and, eventually, in its turn, theAustralian writer.

There was a plethora of visual exposure opportunities for Aussie performers, and they wereof all ages and they all had an opportunity to get a go in our own country. That is why I amhere. What is going to happen with this bill is that the opportunity will be taken away formany young performers, and even old performers like me, to get a bloody go. That is not fair.



I do not care what you say about free market access and level playing fields and all thatsort of thing. Previous governments have virtually destroyed the shoe industry and have triedto have a go at the textile industry, and I do not want to see interference in the music industry.From my understanding of the sorts of questions that have been asked from that table thismorning, this industry is not understood. What you are talking about are little five-inch plasticdiscs with a little hole in the middle. What we are talking about is somewhat less tangible.

People like Allan and the other guys who were sitting here and all the other songwriters sitthere day after day working diligently, skilfully employing their techniques to write songs thatwill touch the hearts of people, the general public, in their day-to-day lives. It seems to methat the only people who can really understand what it takes to be a songwriter and what theyreally deserve are people like me, people who cannot write but who really wish they had theopportunity to—and so what I do is that I sing the songs.

People are coming along here and saying that you will see importation from places likeSingapore, New Guinea, the Philippines, Indonesia and a lot of other countries which do nothave any controls over these copyright laws. Are you trying to tell me that they will not comeback into Australia. For God’s sake! If you put a child into a lolly shop and say, ‘We aregoing away for an hour and a half; don’t you dare touch anything,’ you do not expect thatchild to sit there legs crossed and hands in its lap and expect it not to touch. If you do expectthat then you are even more naive than I think you might be.

The point is that if you look at what has happened with deregulation in a greater, supposedlymore respected industry, the banking industry, and see what has happened to the servicessupplied to the community then how can you expect that the large retailers and largecorporations will not take advantage of this. It is their business to take advantage of this. Theirjob is to make sure that that is the first thing their corporations sell. Their first responsibilityis to their investors, not to the people who give their love and heart and soul to things. IfBanjo Paterson had written Waltzing Matilda today it would never have been heard. Radiostations in my day—

CHAIR —That is speculation, is it not? It is a rhetorical comment.Mr Rowe—I would have expected that from you, Senator.CHAIR —That does not assist us.Mr Rowe—If the opportunity for exposure is diminished there is no way that that product

will receive the appropriate accolade. It is up to the public whether they buy it or not but theyhave to see the damn thing first. In the 1960s—

CHAIR —That is a bit like Savage Garden’s problem with the current situation.Mr Rowe—Savage Garden were rejected in Australia and had to go overseas.CHAIR —Under the current regime.Mr Rowe—Under the new regime they would not have even got a look in over there. What

I am trying to say to you is this.CHAIR —Once again that is speculation.Mr Rowe—You want us to talk, you want to inquire—CHAIR —A part of inquiring is to ask questions along the way. If you are offended by that,

I will not ask any more questions until you have finished.Senator McKIERNAN —You should let the witness make the statement and then take the

questions afterwards.



Mr Rowe—The thing is that in the 1960s and the 1970s—and this is all part of history—there was incredible television and radio support for the music industry in Australia. WhenI first started off there were very few people writing songs and having them recorded. By theend of the 1960s people like Daddy Cool, the Little River Band and those of that ilk wererecording their own songs. They were recording exclusively Australian material because ofthe support that was given. Then someone said that it would be a good idea if we deregulatedthe amount of Australian product on Australian radio—let us stop that. From the 1960s and1970s the power of Australian music has diminished and it has been left up to Triple J, whoare largely hand fed, and that is about it.

If it had not been for this radio exposure and the television exposure in those days, we wouldnot have had people like the Seekers, Olivia Newton-John, the Little River Band and RolfHarris. Even Dame Joan Sutherland would not be able to get a look in these days. If you wantto do something for the industry and if you want to lower the price of records, let us try tosell more records. One thing is for sure—and I just do not quite understand—and this will bemy last statement. You alluded this morning to Woolworths suggesting that the removal ofthe status quo will lower the retail to the public sale price. That cannot be said. That is justas much speculation as what you were saying about me.

CHAIR —That is right.

Mr Rowe—But you were prepared to make that statement as if it were gospel. You cannotsay that.

CHAIR —I did not say that. I said a suggestion was made to us, and then I read it out fromthe Woolworths submission.

Mr Rowe—What you can say is that a retailer can access a product which is made for alarger mass market cheaper than you can access it for Australia. We have only 17½ millionpeople here. They have 150 million or 200 million people in other parts of the world. Theyhave another language in Japan. Are you trying to compare apples with oranges, as they sayin parliament? The product will not be cheaper necessarily at the retail place unless theretailers decide that it will. Certainly what will happen—and this is, of course, a very importantthing for anybody who is in the retail marketplace—is that the wholesale price will be cheaper.It will be a damn sight cheaper if you make it 70c a royalty for a song for people like Allaninstead of $1.30 or whatever it might be. That is the way I feel. I am sorry I am verypassionate about this, but this is my life.

CHAIR —We appreciate that. That is fine.

Mr Rowe—It is not just my industry; it is my life. I really am offended by people muckingaround with it.

CHAIR —I think we are used to having passionate presentations between each other andalso from witnesses, so there is no need to—

Mr Caswell—I will probably try to be a little less passionate than normal, but I do not thinkI can be a great deal more positive. Australian songwriters and performers are an endangeredspecies. As far as I am concerned, if this bill is passed, we are going to become an extinctspecies.

First, I would just like to say I resent the implication that every artist and every writer whogets up here is in some way a lackey of a major record label. The only good news in thisparticular introduction that I am about to give is that something miraculous has happened. Itis the first time in the 25 years that I have been in the music business that I have actually seen



the music business united on anything. They are united in their opposition to this bill for thedamage that it is going to do. I am no apologist for major record labels. I am not even anapologist for multinational publishing companies, because I am currently in dispute with mypublishing company. It seems to me that if this comes in, it is not going to hurt themultinational record companies that much. They will go from being a manufacturing anddistribution organisation to becoming an importing organisation. What it is going to do is killoff the local industry, kill the people at our end of the food chain.

I have been writing songs for, I guess, 25 years. I have had a fair bit of success. I have had400-odd recordings from my songs. I have had songs released overseas that have charted.Basically I have done all right. It has paid for my divorce and all of that kind of stuff. I havesurvived with support from these evil multinational publishing companies, and I do not likethese people that much. My ability to survive as a song writer, my ability to make acontribution to Australian culture, dies with me, and people like me, when I become an extinctspecies rather than an endangered species. My ability to survive is because of the seed moneythat is provided by major companies that have been prepared to advance me money, whichin most cases has been recouped out of the money that my songs have earned. I could not havesurvived without that.

I have been really lucky. I have had 25 years in the business now. I have a track record thatwill at least keep me going after the other members of my species are dropping like flies, butthe bottom line is that there are young talented songwriters coming through at the moment,young talented artists, young talented bands. If this bill comes in, there is going to be nowherefor them to go. At one point I was proposing to ARIA that they present a special award tothe CES for its support for rock and roll. These kids are struggling. It is not going to get anybetter.

Forget the industry. We are talking about writers and we are talking about artists. I do notpersonally care what happens to the multinational record companies; that is their problem. Ido care what happens to Australian writers and I do care what happens to Australianperformers. As far as I am concerned, anything that wipes out Australian music wipes out ourculture.

I came to Australia 30 years ago at the age of 14. I chose to become an Australian for whatit stood for. I stood for the things that I used to think Australia stood for. I am proud to bean Australian. They have got a whole bunch of people in Canberra arguing about over whetherwe should become a republic. I do not care whether we become a republic or not right nowbecause at the rate we are going we are going to have the really pointless exercise of havinga republic and no culture. That is where this is headed. Any questions?

CHAIR —Thank you very much. One philosophical question that arises from both Normie’sand your presentation, Allan, is this. With bank deregulation, the footwear industry and theextinct species, I am trying to get a handle on whether your argument is that the industry isworthy or deserving of some sort of government protection in relation to tariff or industrysupport, or are we talking about the protection of intellectual property, which copyrightlegislation is designed to do?

I am just trying to find out where you are placing the most weight, because, if you aretalking about industry support—say, with the footwear industry that you should not bederegulating it like Keating did with the banks or whatever—that is fine, but can youunderstand that in my mind I might be thinking that is a different argument to how we oughtto be dealing with intellectual property rights?



Mr Caswell—As far as I am concerned it is a combination of the two. When I write a song,that is my property. I invented it. I own it. I own all the rights to it. If subsequently I decideto give a piece of it away to a publishing company in return for the work they put in exposingthat song and making money for me, that is my decision. The way things are at the momentare: I create a song; it is my property; I own it and I have certain rights associated with thatwhich, if this legislation comes in, are going to be undermined. That is one point.

The other point is, as I started to say before, that economically this does not hurt the majorsas much as it hurts the minors, as much as it hurts the independents. They will not be ableto compete. That is the breeding ground for Australian music. I do not like using the word‘industry’. ‘Industry’ implies the people gather together and achieve something. I do not thinkthe Australian music industry is an industry because I do not think it does either. This is thefirst time I have seen the Australian music industry united on anything, as I said before.

I am an idealist. I care about things. It is like, ‘Give me another windmill, I want anothershot at it.’ The thing I care most deeply about is Australian culture. It is not about theAustralian music industry; it is about Australian writers and it is about Australian artists havingsome rights and having an opportunity to keep going. One thing for sure is that you are notgoing to get rich in this business, but at least you are making a contribution. I have had 25years of doing something I really enjoy and scratching a living out of it. It is great.

Ms Hryce—I would agree with what Allan is saying. The problem at the moment is thatperformers do not have copyright. We would like to think you are going to support us in ourcopyright efforts in the not too distant future.

CHAIR —Have you got ARIA on side on that?Ms Hryce—I am sure—CHAIR —It is just a rhetorical question.Ms Hryce—I am sure their attitude will be very different this time round than last time

around. So there are two issues there. Quite clearly, we want performers’ copyright, but whenwe get it we want to make sure it is worth something and it has value in these recordings. Sowhen Allan records his own song as a performer, he will be entitled to copyright and royaltiesfrom his composition as well as his performance.

Mr Rowe—I do not know from which states you all emanate—CHAIR —We have got a good spread: Queensland, Western Australia, Tasmania and

Victoria.Mr Rowe—So none of you will know Parklea markets obviously. It is very similar to any

market anywhere else in Australia. I was there on Sunday with my kids and I heard my greathit ‘Shakin’ all over’ for which I received two gold records. That was for 50,000 sales. I havenot to this day received one penny in royalty for my performance on that record. The onlytime I have ever received a royalty was from a record sale. I can assure you it is reallyinteresting getting a one cent cheque later on. That song would never have been a hit had Inot recorded it and promoted it around Australia, had we not had the radio industry supportingus, had we not had television supporting us, had we not had people coming in and saying, ‘Letthe market forces take their shot. Let us make everything cheaper and all this sort of thing.’You do not have to put Australian music on TV any more.

CHAIR —Normie, in your opening comments you mentioned independence from bigbusiness and how you thought that that was so important, yet the statistics we have been givenare that, in relation to market share, Sony has 24 per cent, EMI has roughly 20 per cent,



Polygram has 17.5 per cent, Warner Bros has 15 per cent. Those four major players have over75 per cent of the Australian market.

Mr Rowe—Why wouldn’t they have?

CHAIR —With respect, the current situation is hardly independence from big business. Thatis the current situation.

Mr Rowe—The point is that the reason there are such big players there is that all of themajor independents from not the current decade but the previous three decades have beenswallowed up by those major companies. They were just bought by them. We have gotten toa stage where if we do not own our culture then what the hell do we own?

CHAIR —I am wondering how much things will really change when you have such a hugemarket share by those from overseas of 76.8 per cent which has been asserted to us.

Mr Rowe—Purely and simply because there will be no incentive for internationals inAustralia to record Australian material. Why would they? Why would they spend the money?

CHAIR —So will we still get people like Savage Garden? Why did they persist with SavageGarden?

Mr Rowe—The only reason they persisted with Savage Garden is that Savage Garden couldnot get a look in in Australia.

Mr Caswell—That is not quite true actually. Savage Garden were always going to be a topicof conversation, given how successful they are at the moment. As I said before, I am not anapologist for the major record companies. Any money they put into Australian writers andAustralian artists however grudgingly—and the same with the publishing companies—is allwe have. It is like the only show in town. We get no support from anywhere else. Previousgovernments’ and for all I know the current government’s idea of Australian culture is to throwmoney behind the Sydney Symphony Orchestra and get them to play tunes by dead Europeancomposers. We are talking about Australian culture here. I am no friend of the major recordlabels.

CHAIR —I do not think the music industry will be united over that comment.

Mr Caswell—No, sure. It says: Allan Caswell—this is my opinion. The point of it is to getthe seed money to keep our writers and performers going, to get them started and to give themexposure to keep our damn culture alive. However grudgingly they give it to us, that is allwe have. They are in business. They do not care what their percentage share is. If you are inbusiness the idea is to make a profit. As I said to you before, it does not worry me whathappens to the multinational companies other than the fact that if they are not making a profitthey just move from being a production and distribution centre in Australia to being animporting business and then we lose that. If the government is really serious about helpingAustralian writers and Australian artists, they ought to look at the radio industry where weget stuff all support in terms of airplay.

Mr Rowe—That is new material.

Mr Caswell—No, but it is minimal. In a country that is predominantly peopled byAustralians, they do not get to hear a lot of Australian music. Because every radio station—apart from Triple J—in the whole country has the same play list, basically what you arehearing are really good records by Daddy Cool, Sherbet—

Mr Rowe—Normie Rowe.



Mr Caswell—And Normie Rowe, definitely. You hear a lot of Normie, the Delltones andother friends of mine.

Mr Rowe—But I have not recorded for 20 years.

Mr Caswell—I am known because I have been successful in the country music industry.People say, ‘What radio station do you listen to?’ I say, ‘Triple J’, and they say, ‘But theyplay a lot of shit.’ I say, ‘Yes, but it is new shit and it is Australian shit. I want to hear that.’As I think Dave Faulkner said before, we are talking about throwing the baby out with thebathwater. If this legislation comes in, it is basically going to kill off the people down our endof the food chain.

There are lots of other issues that many other people are going to talk about, but I amconcerned with what is going to happen to the people that create the music in this countryand the people that create Australian music for Australians. There are people out there whowant to hear Australian music because they are Australians, and they understand it. But if theydo not get some support and if something like this wipes us out, then I dread to think whatis going to happen at the opening ceremony of the Olympics when they have no Australianmusic to play.

Ms Hryce—Could I just make another point on that issue: we are concerned that, if themajors no longer feel obliged to produce anything in Australia, markedly reduce their presenceand become a post-office box in Australia for a bit of distribution from somewhere else, theyare not here looking at artists or having our artists throwing themselves in front of them. Theyare not a part of the industry if they are not here with enough people watching it. If theybecome a post-office box, who is going to notice the up and coming Australian performersand composers? It means every Australian will have to go overseas, which is a major problem.

CHAIR —Or a greater opportunity for the small independents to develop in Australia?

Ms Hryce—My concern with the independents is how they are going to compete. As I saidin the submission, the small independents—like Half a Cow, A Go-Go in Melbourne, and anumber of other retailers as well as independent producers—cannot put in a bulk order likeWoolworths or Brashes who say, ‘We will have 400,000 of those CDs for America and wewill just throw another 100,000 on for our Australian market.’ It is not their market.

These people, the independents, survive in a very tight situation. They will not be able totake advantage of bulk-billing and if the prices come down enormously through the retail sales,as Woolworths suggests it will, they still have to spend that money to create their CD or toput it forward. You come down to a situation of whether you are going to buy an Australianperformer for the $30, because it still costs that person to do that and to sell it, or whetheryou are going to buy Celine Dion? There is a real concern on that level. It is not only themajors disappearing, not seeing anyone and not putting some of their profits in to promoteour performers both here and internationally; also we believe that independent level will findit hard.

CHAIR —Do you know how much money they do put in to promoting Australianperformers? Do we have a figure?

Mr Rowe—Who specifically?

CHAIR —These majors such as EMI, Sony, Warner Bros.

Mr Caswell—I think you would probably have to ask them that.

CHAIR —All right.



Mr Caswell—What I know is principally as a songwriter. I have made several trips toAmerica to work with American writers to try to get my songs placed over there and to takeAustralian culture to the world. It has been financed basically by me, but the money has comefrom these wicked, cruel, multinational publishing companies that had enough faith in me toadvance me the money in the hope that I would earn it back at some point.

Senator McKIERNAN —Before I ask a question, can I just make a short comment. I wouldaccept the criticism made by Mr Rowe that I do not understand this industry or this area. Idid not prior to reading the submissions and I do not pretend to now. I thought yesterday atone time that it was actually quite simple—as an old lefty standing side by side with ProfessorFels fighting the multinationals in partnership with the conservative government, which is anew alliance but nonetheless might be a more effective alliance than I have had in my shortcareer within Australia if we could have brought the multinationals to bear.

Professor Fels, unfortunately, yesterday was not able to convince me that the passage of thislegislation would indeed curtail the power of the multinationals in this particular industry. Yourappearance here has added a greater dimension to it. However, rather than providing clarity,it has confused me somewhat because your submission is talking about protecting theAustralian culture. I thought this was about providing cheaper CDs to the Australian consumerby reducing them by up to $10 a time.

That is the preamble and I will come to the question: one of the larger groups of consumersof recorded music in this country is the musos themselves. Isn’t it in your interests as a tradeunion and as performers to bring down the price of CDs to Australians generally andparticularly to your section of the industry?

Mr Caswell—Not at the expense of the culture itself.Mr Rowe—Nor of the livelihood of the writers.Mr Caswell—I am no different from anyone else—Mr Rowe—Where are they going to get the money to buy the records in the first place for

Godsakes?Mr Caswell—I would naturally prefer to pay $22 for a CD—or whatever it is going to get

down to; no-one yet has been able to explain to me what the price is actually going to be—than $30. I guess I am talking about protectionism but it is a question of what you areprotecting. Sure, a lot of musicians buy records—the ones that can still earn enough moneyto have money left over for records after they have paid the rent. With the deteriorating livemusic scene and the lack of air play on radio and stuff, for a lot of musicians buying a recordis not really high on the list of priorities.

I support the idea that the population of Australia should have cheaper CDs. But I alsosupport the idea that the creative community of Australia deserves to get some kind of rewardfor the work they have put in. If they cut the sales tax down a little bit that would cut CDprices down and that might make life easier for everybody.

Mr Rowe—But that has happened and the retail price did not change. So how can youexpect it to happen with this—

Mr Caswell—This bill is definitely going to benefit large retail chains—Woolworths andpeople like that—but it is going to wipe out small retailers. If the majors decide to makerecords overseas, it is going to put the people who print the covers out of business; it is goingto put the photographers out of business; and it is going to put all the small independent recordstores out of business.



Mr Rowe—Some of us who have no talent to write their own songs.

Senator McKIERNAN —The argument has been put to us—and it was certainly put to uswith some force yesterday—that it is not so much the royalties or the copyright payments ofthe performers, but the margins by these multinationals, the people who control the industry.That is what is going to be hurt when we pass this bill and allow the competition, when weallow people to bring those top selling records in from overseas. I do not think we are talkingabout bringing in Normie Rowe CDs from overseas but maybe a few other names such asSpice Girls and Madonna.

Mr Caswell—If you pass the bill rather than when, because I would like to think thatbasically you are not going to. As I tried to point out before, I am speaking today with verylittle interest in what happens to the major record companies. There are plenty of other peoplethat it will affect. I am giving you—as the gentleman who opened the proceedings said—aworst case scenario. The worst case scenario is that, in sorting out these greedy multinationalrecord companies, you are going to wipe out the small independent artists, the smallindependent writers and the small independent record stores. You are going to put a lot ofpeople out of work. If you really want to handle the multinational record companies, I havea theory: what you do is force radio to play a greater percentage of Australian music.

Mr Rowe—Sixty per cent.

Mr Caswell—No, let us be fair.

Mr Rowe—No, no, no.

Mr Caswell—Normie, this is my best case scenario. Fifty per cent. That means Australiansare hearing 50 per cent Australian music.

CHAIR —What if they don’t want to?

Mr Caswell—It is tough. Just go with me on this.

Ms Hryce—We know they want to.

Mr Rowe—We already have proof that that is not so.

Mr Caswell—This is about as realistic as this legislation that is being pushed through atthe moment, so go with me on it. It is not Disneyland; this is a possibility. Fifty per cent ofwhat you hear on radio has to be Australian. The major record companies are going to haveto go around looking for Australian acts. If you want to do something positive, do somethingpositive for the writers and artists of this country.

Ms Hryce—The other issue, in answer to one of your questions, is that we have a concern,first, on the copyrights. There is no reason any longer to produce a CD in Australia. They willgo and do it in Taiwan or New Guinea, where they do not have to pass on the royalties whenit is distributed back. Who in their right mind wouldn’t? You would if you were a businessperson. So they are going to do that. The composers and the artists are going to lose theirroyalty that they are entitled to now because they will not receive any on it, as Libby Baulchwas discussing in terms of this issue.

The other thing is that we are going to be flooded with remainders and everything that theywill not be receiving anything or a very small amount of money back from. So for the actualsales themselves—not only for the rest of the world but within Australia—the income comingback to the writers and composers will be vastly reduced. That is not even taking intoconsideration that the majors may disappear and become a post office, which in effect means



they are not looking to even give money to composers or to have performers perform and singon their CDs.

Mr Rowe—Before you said that, by lowering the retail cost of CDs, basically the peoplewho are going to be hurt are the majors or whoever was going to make the largest margin.I do not know if you understand—but I am sure you should by now—how song writers andperformers actually gain remuneration for their work. There is a royalty paid. That royalty isby way of a percentage—a percentage of 90 per cent of gross retail price. If the retail priceis dropped by a third, then surely by extrapolation the royalty paid to the song writer and theperformer has to drop by a third.

CHAIR —Not necessarily.Mr Rowe—Why?Ms Hryce—Is the government going to increase the royalties?Mr Caswell—If the song writer’s royalty is based on retail price.CHAIR —No, because there is a substantial margin at the moment that the wholesalers are

making.Mr Rowe—But it is fixed on a retail price.Senator COONEY—That is right. That is what you are left. That is the point you should

make.CHAIR —The argument, if I can try to put it very quickly, is that the wholesalers are

making a significant margin. If they were open to competition from overseas, they would beprepared to substantially reduce that margin to obviate the necessity for retailers to sourceoverseas supplies—as a result of which the wholesale price would come down substantially,and we are talking about the price to the retailers. Woolworths in their submission tell us thatthey make all of 7.64 per cent. They sell their CDs at the moment at $23.82 and the cost tothem is $22.00, so they say they make a margin of 7.64 per cent. So the real fat seems to be,allegedly, in the wholesale area.

Mr Rowe—Did they mention that, if they do not sell it, the product can go straight backto the record company at no cost? Did they mention that? What is the risk?

Mr Caswell—Can I make a point? When Mr Cottle was talking before he was talking aboutwhere songwriters make their money: it is a fixed percentage, or mechanical royalties, of theretail price. I am not an accountant, but it seems to me that if a record was selling for $30and is suddenly selling for $20, then I am going to lose a third of the income that I am entitledto for that song.

CHAIR —That is for the songwriter.Mr Caswell—I do not think I should be happy about this bill—seriously.CHAIR —Do you think though, and this is the other argument, that if the price comes down

by a third there is a fair chance that you might sell a substantially greater number and thereforemake up some of that lost income, if not all of it, or, indeed, increase your sales?

Mr Caswell—Do you know what? I have been here all day. I heard Mr Elder say that hedoes not know. I have heard everybody say, ‘We do not know what is going to happen.’Everybody has said we do not know what the price is going to go down to. Everybody hassaid we do not know how it is going to affect the industry. At the moment, we have a situationin place where we do know what is going on. If this bill is passed, we are going to get intoa situation where anything can happen.



Senator McKIERNAN —I have a tangible question. Parallel importing has now beenabolished in Singapore. What has been the effect on local artists in Singapore?

Mr Rowe—Do they have a local industry and how much of that is in English? Again, youhave apples in one basket and in the other one you have watermelons or something.

Senator McKIERNAN —There is a local industry in the United Kingdom, and the UnitedKingdom fairly recently decided not to abolish parallel importing.

Mr Rowe—That is 58 million people. We have only 17 million. I do not think it compares.

Senator McKIERNAN —They are two tangible examples of what is happening in the worldtoday which we can look to. They are not direct comparisons as it is somewhat of an applesand oranges situation.

Mr Caswell—Exactly. If we keep comparing apples and oranges then we are going to getno closer to knowing what exactly is going to happen.

Senator McKIERNAN —That is the difficulty with committees such as ours. We are giventhese arguments all of the time. There was quite a deal of stress put in the submission to thecommittee by the ACCC yesterday about what is happening in other parts of the world.Singapore got a mention. Japan got a mention. Questions came out of there. Canada, Swedenand the United Kingdom have got a mention. The European Union has got a mention. Yet,in parts of Europe, it is actually more expensive to buy the product, depending on the typeof product that you buy, than it is to buy the same product here in Australia.

Mr Rowe—Can I make a suggestion? Australian recording performers were most successfulsomewhere between 1965 and 1975—would anybody agree with that? I should say the mostsuccessful in Australia, en masse. Record prices were then very small. We did not see the sizeof platinum records or any of that sort of thing. When CDs first came onto the market—andthe prices have not reduced very much—they were $10 to $15 dearer than vinyl and still therewere platinum records being sold; there were enough to warrant a platinum record beingawarded. I do not quite see how you can sell more records when it is more expensive, andsell fewer records when it is not expensive, and then turn around and say, ‘If we lower theprice, we are going to sell more records.’ I do not think you can say that. This is fact.

Ms Hryce—In terms of the UK, it may be that they have raised this sort of issue, but froma performer’s point of view I would like to point out that the UK, as a member of theEuropean Community, has indeed supported ASEDA II and then been involved in a numberof the treaties that we have listed for you today, which provide a great deal of protection forboth performers and composers and creators in music. This is where I am concerned: that wehave almost none of that for performers so that this is going to impact even more strongly onus at this time.

Senator COONEY—Earlier on, Mr Rowe, you talked about the drop in the Australiancontent of television.

Mr Rowe—Yes.

Senator COONEY—Not now, but could you give us a statement showing how thatoccurred.

Mr Rowe—I have it here, as a matter of fact.

Senator COONEY—No, not now because we haven’t the time. There was a change inlegislation which brought that round, I think you were saying. Could you get a copy of that



legislation—Ms Hryce, you ought to be able to do that as the secretary—are you on thecommittee of management of the federal body?

Ms Hryce—Yes.Senator COONEY—Could I also get from you how typical the positions put by Mr Caswell

and Mr Rowe are of the various artists, composers and songwriters around the country. I donot know whether you were here earlier this morning. There was a gentleman who gaveevidence in Canberra yesterday and I was not there. I would like to see how typical he wasand how typical are Mr Rowe and Mr Caswell.

Ms Hryce—Yes.CHAIR —Thank you for your presentation.

[12.12 p.m.]FABINYI, Mr Jeremy Rohan, Chief Executive, Australian Music Publishers AssociationLtd and Australasian Mechanical Copyright Owners Society Ltd, 6-12 Atchison Street,St Leonards, New South Wales 2065RICCOBONO, Ms Fifa, Deputy Chair, Australian Music Publishers Association Ltd andAustralasian Mechanical Copyright Owners Society Ltd, and General Manager, J. Albertand Son Pty Ltd, 6-12 Atchison Street, St Leonards, New South Wales 2065

CHAIR —Welcome. Would you like to make an opening statement.Mr Fabinyi —I would like to thank the committee for the opportunity to address you. I am

very grateful that Fifa Riccobono is here. I am not sure whether you are aware of hercompany, J. Albert and Son. It is one of the great Australian music companies with a proudhistory of supporting, investing in and developing Australian talent. Unfortunately, thechairman of the board of directors of AMPAL and AMCOS, Mr Norm Lurie, who is also themanaging director of Larrikin Music, cannot be with us today. He is on an important exportmission selling Australian music overseas. I am sure he would like to be here, but I woulddraw your attention to the submission which he made individually to the committee and whichI believe is submission No. 117. I also draw to your attention the submission of one of hiswriters, Eric Bogle, submission No. 84.

It has been suggested that people giving evidence before this committee should be requiredto state any vested interest. I have no hesitation in doing that. As chief executive of theAustralian Music Publishers Association, clearly I have a vested interest and I have a keeninterest in the outcome of this committee’s deliberations. As a former manager and participantin the artists’ and managers’ campaign against the introduction of parallel importation as aresult of the PSA report in 1990, I spent an awful lot of time, effort and energy on thisparticular subject.

I must say that the real vested interest that I have in this legislation is a passion forAustralian music and for the Australian music industry. I believe that we can be very proudof the Australian music industry and its achievements. It is not an industry without itsdetractors; it is not an industry that should not be subject to criticism. Certainly I have beena party to some of that criticism over its time. I think healthy criticism is worthwhile, but Ithink it would be a big mistake for this committee to go away with a view that the musicindustry is a bunch of ratbags. The music industry has achieved great things, and my concernis the damage which I think will be inflicted on the Australian music industry and onAustralian culture if this exercise in academic economics which is before us gets played outto its full conclusion.



I can recall growing up in the 1960s and listening to my crystal set as I went to bed,listening to the hits of the UK and the US, and occasionally there was an Australian artist,often with a version of an American song coming across. It is hard to express the impact onme and my life the first time I ever saw Daddy Cool perform—an Australian band singingAustralian songs.

Similarly, I can recall the pride I felt when I was on tour with a band in America in the mid-1970s and heard LRB coming out of the radio having major hits, or being backstage at theUs festival in 1983 with my friends from INXS, the Divinyls, and hearing Men at Work lead50,000 people singingI come from a land down under—or hearing that Crowded House hadbeen voted the most popular band in the UK. And now we have Savage Garden No. 1 on thetop of the charts in America.

I must say there has been a lot of talk about Savage Garden in the hearings and in the pressand in the media. I respectfully submit it would be an absolute dereliction of the duty of thecommittee if it did not seek out the real facts regarding Savage Garden. I do not intend to gointo them; I do not have the full facts. I can guarantee you that the full facts regarding SavageGarden can be given to you by John Woodruff, the manager and the original investor in theband—who I note gave a submission where he sought to appear before the committee—is theonly way you will get the story about Savage Garden. I urge you not to take account of thestories you are hearing; hear the real story about Savage Garden.

CHAIR —I understand that we will be, in Melbourne, next week.

Mr Fabinyi —As I said, Australian music was a cottage industry. Now we are competingand winning on the global stage. Right now we have acts like Silverchair, Peter Andre,Midnight Oil, Gina G, Nick Cave, Troy Cassar-Daley, Lee Kernaghan, David Helfgott, SlavaGrigorian, Human Nature, Tina Arena, Kylie Minogue, OMC, Crowded House, and the listgoes on, who are out there earning millions of dollars of export income from their work forthis country. It is an achievement of which we can be very proud. This committee has heardevidence deprecating the achievements of the industry, sneering about the tiny proportion ofmusic in Australia that is Australian.

I do not have access to detailed statistical analysis, but I advise the committee to be verycareful about analysing some of the information which has been put before them to date. Inoted yesterday there were some comments made about a figure of six per cent of the majors’product being locally licensed. I simply do not believe that this data has been correctlyinterpreted. I know there were ABS figures where that was extracted from. As I say, I believeit is being used completely out of context to the way in which those figures were calculated,and again I would suggest that perhaps it would be incumbent upon the committee to actuallyfind out the real figures involved and not rely on some of these wild assertions from peoplewe should expect to give real, detailed, hard evidence to this committee.

CHAIR —Are you able to assist in that regard at all?

Mr Fabinyi —I would happily assist, but the Australian Bureau of Statistics is somebodywe should all talk to and say, ‘Let’s analyse these figures.’ If you want to get certaininformation, they have obviously done detailed studies I believe, and I am happy to be partyto a discussion with them—

CHAIR —I was just hoping that as you were making that assertion you may have had aconsultant or somebody investigate those figures which allowed you to make that assertionabout the ABS figures, that is all.



Mr Fabinyi —I am not doubting the ABS figures for one second. I am saying I believe theway they are being interpreted is not correct. I have not done detailed research but, if I may,I will table for you this document. I do not pretend this has any more statistical validity thansome of the anecdotes you heard yesterday from other people, but this is a list of theAustralian top 100 albums of 1997. It is a chart brought out by ARIA. It lists that seven ofthe top 20 records sold in Australia last year were by Australian artists. I table that but, as Isay, I think you need something a bit more detailed than to rely on that. But I certainly thinkyou need something more detailed than to rely on some of the so-called expert evidence thatwas presented yesterday.

Australian music is competing in the toughest music market in the world. Our competitionis from the English speaking countries with which we compete: the US, the UK, New Zealand,Canada, South Africa—all countries, by the way, which have parallel importation protection.There are some other countries like Japan which have the benefit of language to give theirlocal product an edge, but we are out there competing head to head with the big ones. Theup-side, of course, is that there is export potential. If we can make it through, then we canwork into their markets and we can make hits. It is very difficult for a Japanese act to do that.So I think the sorts of figures that—

Senator COONEY—Are a lot of English records going to non-English speaking countries?

Mr Fabinyi —As I understand it, in Japan the breakdown is 85 to 90 per cent Japanesemusic, and obviously the balance is non-Japanese music. What that breakdown is versus theUS, the UK, China or whatever, I cannot tell you, but those are the figures which were givento me.

So I think this idea that you judge the Australian music industry by whether we have 70per cent Australian music in Australia is just plain idiocy. As has been said before, we areworking in a global market. We have the potential to embrace, encourage, respond to andenjoy foreign music which has been presented to us. Our job now is to develop our ownindustry, to develop an export industry and to work together with the government to improveour performance and to maximise our export income. We should be looking to the future. Wetalk about new technologies and the Internet and so forth. Our aim surely should be to be anet exporter of music and a global player in the information age.

This bill is about looking backwards. This bill is about being negative. This bill says, ‘It’shopeless. You’ll never be any good, Aussie. Don’t worry about it. Let’s just find a way to buycheap American and English products.’ We think this bill will be a disaster for the Australianmusic business. We believe that the premise of the bill—the premise being that the price ofsound recordings in Australia is so high that urgent legislative intervention is required toaddress the problem—does not stand up to any sort of objective analysis. I think after ProfessorBewley’s presentation yesterday there is not really anything much more I can say about that.This bill is bad policy but, more than that, it is bad legislation. With regard to the first point,we do not think the bill should be passed. With regard to the second point, we do not thinkthe bill can be passed in the way in which it is drafted.

We come before you as representatives of music publishers and composers. Yesterday youdid not hear anything about music publishers and composers. It was just quickly fleshed over.There was a mere mention at some point acknowledging yes, of course, composers will bethe losers, composers will be worse off. We do not believe that the interests of publishers andcomposers have been taken into account by the government. We do not believe there has beenadequate consultation. We do not believe the government understands the implications for



publishers and composers. We believe that this bill throws up all sorts of unintendedconsequences which have dire effects on music publishers.

In our submission, we go into a lot of detail about how the music industry works to try toexplain the role of publishers and the role of composers. I do not intend to repeat what is inour submission. I am sure you have all had a chance to read it. I do just stress that it is thecomposers who are the creators of the musical works. They are the people who write the song.It is at the foundation of the music business. It is the most important critical first step. Withoutthe songs, there is no music. Composers generally entrust their songs to music publishers whoadminister them and exploit them.

What will this bill do for publishers and composers? This bill provides a positive incentiveto record companies to move their manufacturing out of Australia and offshore. This says torecord companies, ‘If you move your manufacturing facility from Sydney to Malaysia orIndonesia or Taiwan, we will reward you by making you pay less for the use of the songs onthe records’—a positive incentive to export our industry overseas. Is that good for the balanceof payments of the country? I think we need expert economic advice to do that.

I stress the point—you have already heard it today—that, if the record is manufactured inAustralia, the mandatory statutory royalty rate must be paid. For example, Australian worksare not protected if the record is made in one of a huge number of countries. Some of thesecountries, such as Taiwan, have large, sophisticated manufacturing facilities. They are nothypothetical facilities and they are not deletions in Afghanistan. This bill would allow importsfrom those countries, countries where there is no copyright law and no obligation to paycomposers a single cent. We have heard the karaoke example. The sound-alike business is ahuge industry. I am happy to answer questions about that, if you like.

This bill would allow imports from countries where, as our government is fully aware, thereis no effective copyright protection and no likelihood whatsoever that the copyright ownerswill receive a reward. The government knows that. They cannot say they do not know that.The bill would allow the importation of musical works which are out of copyright in a foreignterritory but still protected by copyright in Australia.

It is interesting that the PSA report—heaven forbid that I should quote from the PSAreport—specifically addresses that issue. It said that such imports are unfair competition fordomestic suppliers. That is on page 158 of the PSA report. Clearly it is unfair competition fordomestic suppliers. The question was put to Mr Paterson yesterday: should records be allowedto be imported from such countries? He said, ‘Oh, absolutely not—that’s the completeantithesis of competition policy.’ Those are exactly the sorts of unintended consequences whichwill flow from this bill. One of the key recommendations of the PSA report—

Senator McKIERNAN —You are stuck in a groove!Mr Fabinyi —One of its key recommendations was that imports should only be allowed from

countries providing comparable levels of copyright protection over the reproduction of musicalworks and sound recordings. That is the principal recommendation: imports should only beallowed from countries providing comparable levels of copyright protection over thereproduction of musical works and sound recordings. The matter was raised with the ACCCyesterday in terms of, ‘What you’re suggesting now is inconsistent with the PSA report.’ Theanswer was, ‘Yes, what we’re saying now is inconsistent with the PSA report.’

Let us move on to another subject that was not resolved yesterday. This bill will removefrom publishers one of their most important income streams. It will remove their capacity tofurther invest in signing, developing and funding new works and their ability to promote and



market works in their catalogue. The bill renders valueless rights which publishers have spenttens of millions of dollars acquiring. You go out there and you enter long-term contracts withsuppliers to represent in this country. You pay a lot of money to acquire those rights. Thoserights will become meaningless if you can not, as the Australian copyright owner, collect theroyalties flowing from the exploitation of those rights in this territory. Therefore, the rightsfor which you paid large sums of good Aussie dollars evaporate.

The bill removes the most effective method that we have of combating piracy and detectingpirate and counterfeit products. I believe ARIA referred to the detailed legal submission—itstabling, I presume, is imminent. It deals in some detail with those issues and also with thebreach of the international obligations under TRIPS which are built into this legislation.

As I said before, not only should the bill not be passed; I also submit that, after thegovernment finds out what this bill really means, it cannot be passed in its current form. Thegovernment surely cannot allow itself to be party to a massive rip-off of artists’ rights. Thebill, as it is currently drafted, would be considered throughout the world as one of the mostradical and draconian attacks on authors’ rights ever perpetrated by a developed nation. Tosay our trading partners would be dismayed by this rolling back of international propertyprotection would be an understatement. I think sanctions and retaliations would be inevitable.Certainly the US and others have already indicated that a 301 order will follow, but that ison the basis of the principle; that is without seeing the detail of what this bill really does.

Why are we doing all this? It is an academic, theoretical approach that has been put forward.It is not supported in a comparable country anywhere else in the world—not only is it notsupported but it is rejected out of hand by the Monopolies and Mergers Commission in theUK. The Monopolies and Mergers Commission was a detailed, credible thorough analysis ofthe recording music industry in the UK—not the same as the PSA report. That commissioncame to the conclusion that parallel importation would not reduce prices of CDs and couldbe damaging because of the increased risk of piracy and the general weakening of copyrightprotection which is territorially based.

Why are we doing it? There is a theory that has been energetically pushed—in fact, youcould say it is a crusade on the part of the ACCC. You could also say it is an overdose ofideological zeal. It is a peculiar sort of ideology because it is geared towards only soundrecordings. It is not a policy or ideology that actually deals with the subject at hand—intellectual property.

We have heard nothing about how we are going to do the same thing to computer softwareor books. In fact, we understand that there has been an undertaking that that will not happento computer software and books. It is an argument which has been characterised by all sortsof emotive phrases such as ‘monopoly’ and ‘anti-competitive’.

I put it to everyone that this tie is my property. I have a monopoly over this tie. This is myproperty. You cannot sell this tie from me. This is my tie. Intellectual property is a propertyright. To try to couch it in all of this economic gobbledegook—‘It is a monopoly right’—isjust not addressing the way the rest of the world addresses these sorts of issues.

Every time that this theory that is being perpetrated comes up and collides with the realitiesof the music business, some plausible semblance of a justification is invented to say, ‘We havesolved that this way.’ With due respect to Bruce Elder this morning, I think that was a classiccase of giving somebody a concrete example of a problem that exists in the real world andthem saying, ‘You would solve that by negotiating a deal where you get the same rate all over



the world. Yes, that solves that problem. Let’s get on with the next one.’ That has nothingto do with the realities of the music business.

We heard yesterday talk about, ‘You will solve deletions contractually because the artistswill just buy them all up,’ or some such absolute nonsense. The idea that artists—and I amstraying into the artists’ territory here for one second—have equal bargaining power whennegotiating a record contract in the United States or the UK and are able to put in place termsand conditions which US artists are not able to achieve is plainly not in the real world; it isa fantasy.

One of the other great lines we have heard which I cannot resist is this idea that there isgoing to be this huge boom in jobs in the retail sector to make up for all the jobs we are goingto lose in the manufacturing, recording, publishing, composing and artists industry. Doesanyone believe this? I do not think so.

Did you ask Woolworths today what extra jobs are going to be provided by whatever it isthat they have put forward? I have not read their submission and I am not aware of what theyhave said. Really, do you see Woolworths creating a huge boom in jobs in the retail sectorto make up for all these jobs that we are going to lose? I do not think anybody believes this.

This whole thing is based on the PSA report from 1990. That report in 1990 looked at 1980sdata. The world has changed and moved on. The music industry has moved on. I will not gointo much detail, but you can question me about it if you like.

CHAIR —Is that a separate note? If you like, you can table that if you do have the detailswritten there.

Mr Fabinyi —No, I will stay with my opening statement. The original debate is about USprices and Australian prices. We are not talking about that any more. We are talking aboutimports from Asia, from Third World countries, from countries such as Paraguay and Bulgaria;we are talking about imports from countries all over the world. We are talking about a timewhen we have an economic crisis occurring in the Asian countries. I would see that a majorthreat from Asian governments and businesses attempting to acquire hard currency would bea flood of product coming in—some legal, some not so legal, and some ostensibly legal buton which no royalties are paid. There is a huge piracy problem in the region.

We do not think there is any genuine need, either economically or socially, for theseamendments. They threaten the livelihood of our members and composers. We come heretoday to put our point forward. We realise that this may be a long crusade on our behalf, butwe will not give in. We are going to fight this. I think I can say that, despite the odd personwho will not agree with us, the overwhelming majority of the music industry stands behindus on this, and we will build up a head of steam if we have to take this whole process further.

I just want to take up a point that was made yesterday about how record companies areintimidating artists. Not surprisingly, I have been travelling around the country talking tocomposers and artists about what I see is the danger of this bill. I have to tell you that theyare not backward about coming forward to me if they do not agree with me. We have hadsome full and frank exchanges of views in public and in private about this very issue. I ampleased to say that in virtually every case once the discussion was through I convinced themabout the validity of our arguments.

CHAIR —You did not beat them into submission.

Mr Fabinyi —I did not beat them into submission. I did not threaten them and I have tosay that if I had they would have laughed at me. The view that Australian artists and



composers are a herd of impressionable, frightened spokespeople for evil multinationalcorporations is an insult to a group of people who are making an important contribution tothis country and its culture—they are people voicing their real concerns about the future oftheir industry and their livelihood.

I have a different view about intimidation. I believe that the vilification and the pilloryingof Australian artists who make a stand against this bill has been an absolute disgrace. If yourefer back to comments made about Peter Garrett some time ago it was a shameful, shamefulthing. Artists who speak out have been labelled as either greedy pop stars or unwitting tools.I am heartened in the knowledge that their legacy will remain long after those bureaucratsresponsible for those slurs are forgotten.

CHAIR —Thank you. The top 100 that you have given us, the Australian top 100 albums—you said seven out of 20—

Mr Fabinyi —Savage Garden, Tina Arena, Paul Kelly, Human Nature—

CHAIR —That is not the question I am getting to. Seven out of the top 20 were Australian.How many of the 100 were Australian?

Mr Fabinyi —The figures are there. If you give me time we will count them all up. Theyare all there.

CHAIR —I thought you might have known off the top of your head. What sort of percentageof the market does the sale of CDs represent?

Mr Fabinyi —I invite the committee to get detailed information about those sales figures.That is not my area of responsibility. I cannot give you that information.

Senator McKIERNAN —Yesterday we were given information that 20 per cent of theindustry was Australian and 80 per cent was other than Australian. The figures you have givenus here would appear to counter that argument.

Mr Fabinyi —I am not putting these forward as statistically valid figures. I am saying thatI do not know the figures. I am saying that a variety of figures were put forward. I think itis important to find out what the real figures are so the committee can make its deliberationsknowing the real figures. There is a figure of six per cent floating around that I submit isprobably according to my experience wrong. So a figure of six per cent was mentionedyesterday.

CHAIR —What would you say from your experience then?

Mr Fabinyi —I would say 20 to 30 per cent. Australian airplay is about 20 to 30 per cent,as I understand. I think that is a fair indication.

Senator McKIERNAN —Seven out of 20 is a lot more than 20 or 30 per cent. How do youdifferentiate what is Australian here?

Mr Fabinyi —I am doing this on the basis of Australian bands. They are highlighted on mycopy. We will highlight them and send them to you. I am sorry I did not take the technologyinto consideration.

Senator McKIERNAN —I note No. 17—say no more.

CHAIR —What is that? Bill Lawry ‘12th Man.’ Do you think the Australian communityat large has been given adequate access to the less popular type of music through the currentarrangements that we have in Australia, the less popular titles that might exist on somecatalogues that are not readily available? There has been some criticism.



Mr Fabinyi —We represent music publishers and composers. Our works, our catalogues,are available. We have no restriction on access of musical works. If you want to use one ofour musical works there is no restriction on you doing so. You have the benefit of thecompulsory licence provisions in order to do so. We do not make available recorded product.That is not our business. We have no say over the access of product.

CHAIR —Are you aware of the alleged problem that people cannot access—

Mr Fabinyi —The Music Publishers Association believes very strongly that Australiansshould have access to the widest possible choice of recorded music and in fact through accessvia the Internet they have exactly that. These days an individual has access to any piece ofrecorded product that is gettable via the Internet.

CHAIR —Your organisation, as I understand it, is part of the AAA agreement that wasreferred to.

Mr Fabinyi —I overheard the conversation—it was a chilling thing to hear. Obviously thereare problems with that agreement. As far as I am concerned, that agreement has no standing.The agreement has not been consummated; it is an agreement in principle. There is a draftagreement in place. It was drafted by ARIA’s external lawyers. If it has the problems whichwere highlighted yesterday, I do not want to have anything whatsoever to do with it. Thatagreement was an honest attempt on our side to go the next step to try to come up with avariety of systems to make music more accessible. That was our intention. If it has notachieved that intention—the government and the ACCC clearly think we are going down thewrong path. Right now publicly I renounce the AAA agreement. I believe it should be tornup. I think we would be foolish after what we heard yesterday to say anything more aboutit.

Senator COONEY—Shouldn’t you get your own lawyer’s opinion first? I would not goripping it up on the say so of yesterday.

Mr Fabinyi —The person who said it is one of the most powerful people in the country.

Senator COONEY—That is a different issue as to whether or not he is a lawyer. You aregiving way to pressure there.

CHAIR —He did have David Shavin QC’s opinion that he was relying on. As part of thatagreement your organisation must have been involved in at least providing some instructionsfor the drafting of that agreement or not?

Mr Fabinyi —The problem of a record company failing to make available a sound recordingis essentially a sound recording problem. Our prime concern in the drafting of that agreementwas that where you have musical works for which the copyright is controlled in Australia byan Australian company but the sound recording rights are not being controlled in Australiaby the sound recording company that that product can flow into Australia and that it shouldbe only fair and equitable that all products sold in Australia should be on the same basis. Sowe were very keen to continually make that point that we believed that there needed to bea fee payable to cover that situation. I am not pretending for a second that I was a great fanof the AAA agreement and I had my own points. We did put it in and it was in an honestattempt to try to solve a problem.

CHAIR —In the AAA agreement we were also told, at Recital or Background C, that ARIAand AMCOS ‘have, by way of a separate agreement, resolved to enter into this agreement.’You may say it is commercial-in-confidence. If it is I will accept that. Are you willing todivulge to us the basis of that separate agreement? According to this terminology, ARIA and



AMCOS ‘have, by way of a separate agreement, resolved to enter into this agreement.’ Haveyou already entered into that agreement? Are you willing to divulge what it might mean forthe consumers of music in the country?

Mr Fabinyi —As I said, the AAA agreement is an honest attempt to improve access andavailability. The general principles were agreed between the parties. The agreement has notbeen consummated either by signature of agreement between AMCOS and ARIA. I do notbelieve any AMRA person has actually signed that agreement. I believe that is probably a draftyou are looking at.

CHAIR —Yes, but the agreement says that ARIA and AMCOS have already entered intoa separate agreement whereby they both have agreed to enter into that agreement.

Mr Fabinyi —We have agreed in principle. There is no written agreement between ARIAand AMCOS.

CHAIR —So there is no written agreement between ARIA and AMCOS to enter into thisagreement.

Mr Fabinyi —No, there is an agreement in principle.

CHAIR —Do you want to divulge any more detail, other than that there is an agreementin principle, as to what it may or may not have contained?

Mr Fabinyi —I am not being evasive. There is an agreement in principle to do it. It is trueto say that we and ARIA are still negotiating on the various details. For example, if yourquestion is what the split-up is between the dollar payment, that is a matter of some discussion,but that is a matter between ourselves and ARIA, I would submit. We agreed betweenourselves and ARIA that we would not allow the resolution of that disagreement to stand inthe way of putting this forward if this was what people wanted, if this is a way to solve aperceived problem.

Senator McKIERNAN —Briefly, going to your chart of top 100 albums, albums are CDs,are they?

Mr Fabinyi —That is right.

Senator McKIERNAN —I ask the question because you mentioned the PSA report—twice,and that is rubbing salt in the wound. Some criticism has been directed to the PSA report tosay that effectively its conclusions were directed at the audiotape market rather than the CDmarket. You did say that the industry moves on and that technology has moved on, but youdid not pick up that point. Is that a valid criticism?

Mr Fabinyi —If you look at the chart which the ACCC provided in its submission, I believethat relates essentially to sales of cassettes. Appendix J of the PSA report, which I do not havebefore me, relates to CD prices. I think that is a good example of the intellectual rigour thathas been applied by the PSA in gathering data that supports its theories on the one hand andnot worrying about the others that do not. We heard yesterday that piracy is a red herring—Ithink that was the expression used. In no other part of the world would any responsible persondescribe CD piracy and counterfeiting as a red herring.

Senator McKIERNAN —I mentioned by way of interjection No. 17—Bill Lawry’s ‘Thisis your life’. That is not highlighted on your highlighted chart as being Australian. I wouldhave thought it was.

Mr Fabinyi —Yes, it is highlighted.



Senator McKIERNAN —I have been misdirected. I have been given a copy that it is noton.

CHAIR —I am glad we have cleared that up.

Senator McKIERNAN —That actually brings my calculations into some doubt. I counted21 out of 100, so if the figures are correct it is now 22 out of 100, which would bringcredibility to the 20 per cent figure that was quoted yesterday.

Mr Fabinyi —Let me say, and again I do not mean to give undue influence to this particularpiece of paper, that you would find that the top 20 sellers are a hugely greater percentage ofthe sales than the bottom 80.

Senator McKIERNAN —That is a worry when you see that the Spice Girls are noted twicein that top 20.

Mr Fabinyi —That is a matter of opinion! My daughter would disagree with you.

CHAIR —Did ARIA do a survey, whereas ABS do it from actual sales.

Mr Fabinyi —If you want expert opinion on the chart, you should speak to ARIA. Myunderstanding is that it is taken from sales information.

CHAIR —Thank you.

Senator McKIERNAN —You were somewhat forceful in your argument that the bill wasin effect sending an industry offshore, and with that the jobs of Australians. You said that weshould get expert advice on that. I put it to you that yesterday we did have expert advice onthat in the form of the ACCC who have done extensive studies into this matter. They gavea prolonged submission to the committee on that matter. Do you accept that forceful argumentthat was given to the committee yesterday by the ACCC?

Mr Fabinyi —Let me say that perhaps the ACCC did not take into account some of thecomments which I have made today in coming to that opinion. When you create a positiveincentive to move offshore, the logic that local prices would fall to meet the competition—when you have what the ACCC describes as unfair competition—I don’t believe stands upto rigorous analysis.

Senator COONEY—The ACCC listens to Greenspan and you listen to Pavarotti!

Senator McKIERNAN —I am certainly surprised with the force of opinion and the forceof views that have been put to the committee so far in response to this bill. We experiencedsomething similar on an earlier copyright bill that went through the committee last year—itwas urgent at the time but it is still sitting on theNotice Paper. What was the consultationthat went on with your industry prior to the development of this particular bill? The issue hasbeen around for a number of years. You mentioned the PSA report as well, but with regardto this bill from this government what was the consultation with you?

Mr Fabinyi —I would submit that we believe there has not been adequate consultation. Wewere invited to make a submission to the interdepartmental committee. We sought meetingswith the minister and we were not given an audience with Senator Alston. We do not believethat anybody who understands the unintended consequences of this bill could really have doneit if they had been aware of what those unintended consequences would be.

CHAIR —What about with the Attorney-General?

Mr Fabinyi —That is true. We had a very brief meeting with the Attorney-General.



CHAIR —And the Attorney-General is responsible for this bill jointly with the Minister forCommunications. You picked out that you did not have a meeting with Senator Alston, butyou did have a meeting with the Attorney-General, who is responsible for it.

Mr Fabinyi —I do not believe that the interests of publishers and composers have beenadequately taken into account in developing the policy of this bill.

CHAIR —I understand that, but that is different.Mr Fabinyi —I do not submit that we have had adequate consultation. I do not believe that

10 minutes with Daryl Williams is adequate consultation, with due respect to the Attorney-General.

Senator McKIERNAN —You may have been more lucky than many of the other peoplein just getting to meet him. I will not comment on that. I am not in any way imputing anythingto the Attorney-General, Mr Williams, a fellow Western Australian. When you were consultedduring those 10 minutes and there was the opportunity then to put additional material in awritten form to the Attorney, did you do that with the same vigour and force that you havedone here this morning, both in the content of this submission to the committee and your oralpresentation?

Mr Fabinyi —I am happy to provide you with a copy of our submission to the interdepart-mental committee which we took and spoke to in our meetings with Mr Williams.

Senator McKIERNAN —Are you able to say whether or not any of the views expressedwithin that submission to the interdepartmental committee were reflected in any way in thebill, or would it be your assertion that you were just dismissed?

Mr Fabinyi —I do not believe we were adequately considered. Further, certainly when wespoke to the Attorney-General we were not contemplating a bill as draconian as the one whichfinally emerged. In terms of consultation on the bill, the first time that we were aware of itwas when it was introduced into the House of Representatives. There was zero consultationon the structure of the bill with us as an important industry player.

Senator McKIERNAN —Thanks very much.Senator BARTLETT —I have one question for Ms Riccobono touching perhaps more on

your role with Alberts. In your submission you made the fairly straightforward statement thatyour company’s income stream, and thus its profitability, will be severely curtailed, and therewill be flow-on effects of not having being able to invest and support Australian artists. Couldyou step through specifically why you feel your income stream is going to be cut back?

Ms Riccobono—Albert’s is an Australian company; we are an Australian label and apublishing house. We have been a label in excess of 30 years. It has been our strength in thepast to work with artists and writers at a very early stage in their careers. Because we are anindependent, we do not have the financial backing that the majors have so we cannot wait untilan act develops and gets to a great level and then go out and purchase the band or whatever.So we get in a lot earlier—when we see a glimmer of hope somewhere, we take them. Ourstrength is to develop and create that act. It might take six to 12 months, or even 18 monthsor longer, but we are prepared to put that in because we know what the results could be inour environment.

Professor Fels keeps talking about this coming about: its being against the multinationalsand how it is going to help the independents. I am an independent and I have not been ableto see one thing here that is going to help us. We have supported artists since 1962. We startedwith the Easybeats, Billy Thorpe and the Aztecs, all of that, when there were no songs being



written in this country. Every artist that was out there was recording an American or anEnglish song that was already No. 1.

Our director was a visionary and he wanted to see Australian music put forward. Hesupported Australian songwriting. He went in with all the faith that he possibly could andsupported the Easybeats, who in turn went overseas and were quite successful, disbanded andcame back and we ended up with a writing team called Vander and Young. Because of thefaith in them as writers, we were able to then look at more acts. We came up with John PaulYoung and AC/DC—which is our biggest rock export. These were bands that we supportedfor years. We were in the red for years, but always with the hope that when one got away itwould pay big. We were very fortunate that after five years that AC/DC were on the road—andit was not until 1979—they went finally out of the red and into the black.

We as an independent helped to create that situation. The major record companies do it toa degree but not as well as the independents. There has to come a time when you have tomarry with a major to take it to the next level. The label has been going in excess of 30 years.We have always worked with the majors—EMI in particular and Sony as well. We fight likecat and dog; nothing has changed. Half of the people in this room I have fought with for thelast 27 years, and I love it. They have been supportive where we need it, but we still knowwhat we can earn out of this marketplace. If we cannot get it happening in this marketplace,there is no point in us being here.

Senator BARTLETT —I am particularly interested in the impact on—as I was saying earlieron—the medium poppies or whatever, and that applies to labels as well as artists, et cetera,because I tend to think that, regardless of what you do, the multinationals will be able to lookafter themselves at the end of the day.

Ms Riccobono—You are not going to hurt the multinationals. You are going to hurt us. Wehave only been going for 114 years, and this might just change it.

Mr Fabinyi —If I could just put another point of view: I believe that what it would meanin the publishing industry is that there would be fewer independent publishers and thatpublishers would be forced to do deals with the multinational corporations. There would bemore power, less competition, and creativity would be stifled by this legislation.

Senator BARTLETT —Just following that a bit further forward—using your company asan example, if that is okay—in terms of your income stream you are saying that you areprimarily a publishing house, you also have a label and a recording studio and that sort ofthing.

Ms Riccobono—Yes, we have a commercial recording studio, but we have two studios thatwe keep full-time for ourselves, just for our writers. They can come in and sit and we willhire musicians and whatever is required for them to have the environment to develop. Weprobably have about seven new writers on our books at the moment and, obviously, all of ourexisting writers. Some of them have been with us in excess of 25 years—Vander and Younghave been with us for 30 years. They are still considered to be one of Australia’s best writingteams and best production team.

Again, going back to Mr Elder’s comments, ‘Yeah, go out there and determine what youwant’, I say, ‘In another lifetime’. When we were out trying to get deals in America, nobodyeven considered Australians. We just did not rate. Twenty-five years ago nobody wanted toknow who you were. Now we have some credibility out there, but it has been a long timegetting there.



Senator BARTLETT —Would the majority of your income come through the publishingside of things?

Ms Riccobono—Publishing and recording on the label side. A lot of income that is frompublishing is not necessarily directly related to the label, so it is publishing income.

Senator BARTLETT —In a purely business sense, that is where you would be reinvestingthose profits—back into the composers and—

Ms Riccobono—Just to keep two studios running all the year with engineers—there wouldbe an excess of $200,000 just to keep the studios available for our writers and artists. Thatis money that we keep investing.

Senator BARTLETT —Can I just narrow it down specifically to the publishing area andwhy you think that your income would dry up or diminish in that area.

Ms Riccobono—We have been saying here that there is going to be a reduction of anythingup to one-third.

Senator BARTLETT —That is, if prices fall.Ms Riccobono—That is what this is all about, isn’t it?Senator BARTLETT —One of the threads of it, yes. What if they do not fall, which is also

one of the counter-arguments?Ms Riccobono—If they do not fall, then we are where we are if you do not change the

legislation.Senator BARTLETT —No, if we change the legislation but the prices do not actually go

down, which is also being counter-argued.Ms Riccobono—Well, forget it. That means that we do not have any protection for the

product that we have and for the songs that we have.Senator BARTLETT —So it still does not actually matter whether the prices go down or

stay up; you are still going to be impacted upon?Ms Riccobono—No. It is the protection that has gone.CHAIR —The protection from what? I do not quite follow that.Ms Riccobono—As copyright owners, if anybody starts to import into the—CHAIR —But the protection is the price and your investment, isn’t it?Ms Riccobono—No.CHAIR —What Senator Bartlett was saying is that if the price remains, you will still be able

to make your appropriate profit.Mr Fabinyi —If the product sold in Australia is imported from overseas, then Alberts or

any other Australian publisher will not be able to get a return on their investment in Australiafrom the exploitation of those rights.

Ms Riccobono—That is the point I was making.CHAIR —Even if the prices remain the same?Mr Fabinyi —The price has nothing to do with it. Publishers will get screwed, no matter

what happens to the price.CHAIR —Can I ask you to take two questions on notice, because they are somewhat

technical in nature. On the top of page 11 of your submission, you tell us current internationalpractice provides for the mechanicals to be paid in the country of sale, et cetera. Reading that



paragraph, the question I have is why is this so. Why does this international custom dependon parallel importation rights? If it does not, then surely Australian composers would havenothing to fear?

Mr Fabinyi —I do not understand the question.

CHAIR —I was hoping not to delay the proceedings too long. You have told us that thereis a current international practice with the mechanicals and you have in place agreements withother societies that allow for product manufactured in one territory to be exported royalty freeon the basis that the country of import licenses and accounts for the mechanical royalty. Sucha scheme could not continue for imports into Australia if parallel importation protection istaken away from Australian copyright owners. Why couldn’t you keep on with suchagreements, even if the legislation were altered?

Mr Fabinyi —I am happy to take it on notice and give you a written response.

CHAIR —Yes, that is what I am asking. In paragraph 5.3 you make comments about importsfrom countries with no copyright laws. Can you tell me what you believe the effect will beof the new section 10(1), subparagraph (h)?

Mr Fabinyi —This is not a trick question, is it?

CHAIR —No. That is why I have asked you to take it on notice so you can come back tous with some detail on that because I think the assertion from the government point of viewis the fear, from those regimes that do not have copyright, that you will not be appropriatelyprotected from section 10(1)(h).

Mr Fabinyi —Can you give me a hint what section 10(1)(h) might possibly be?

CHAIR —I can to a certain extent. The new section 10(1) would define non-infringing copyas a copy:(b) made by or with the consent of:

. . . . . . . . .

(ii) the owner of the copyright or related right in the sound recording in the country (theoriginalrecording country) in which the sound recording was made, if the law of the copy country did not providefor copyright . . . when the copy was made.

Mr Fabinyi —What section are you quoting?

CHAIR —Section 10(1), and then read through all that into (h), but you would need to readother subsections as to what non-infringing copy means, et cetera. It is quite a detailedquestion. It is not a trick question; I am not expecting you to answer it here.

Mr Fabinyi —It is 10(1)(h) you are saying?

CHAIR —Yes.

Mr Fabinyi —I am sure there is a great answer—

CHAIR —I do not want you to answer it now because I do not think it would be fair, butI would like you and your support team to look at that and to deal with that question becauseI think it might be a fairly pivotal point in the whole discussion as to whether what has beenasserted could in fact occur.

Mr Fabinyi —All I can say is that we have sought expert legal advice. I understand thecommittee will be hearing that expert legal advice. Quite frankly, I will handpass it directlyto them, and you will be hearing from them directly.



CHAIR —All right. Do not take it on notice then. I will ask them on Monday or wheneverit is next week we are in Melbourne.

Senator COONEY—Just remember that all legal advice is expert; it is just that it is notthe same.

CHAIR —That is exactly right. Thank you very much, Ms Riccobono and Mr Fabinyi, foryour submissions.[1.07 p.m.]SPECK, Mr Jorg Michael, Manager, Investigations, Music Industry Piracy Investigations,8th Floor, 263 Clarence Street, Sydney, New South Wales

CHAIR —Welcome, Mr Speck. I invite you to make an opening submission, keeping inmind that we have your submission which has been numbered 142.

Mr Speck—Music Industry Piracy Investigations is the jointly funded anti-piracy operationof AMCOS and ARIA. I thank you for the opportunity to be here, and I will read my openingstatement.

CHAIR —Do you wish that statement to be incorporated inHansard? Can we agree thatthe opening statement can be published and put intoHansard? There being no objection, itis so ordered.

The document read as follows—Government has clearly ignored the full extent of the industry’s concerns relating to theimportation of illicit sound recordings if this Bill becomes law.Our concerns, to some extent, are held by others.In this regard, I would like you to consider the following statements:

Enforcement of intellectual property rights offences is likely to increase in difficulty overthe next five years. Changing technology and increased levels of technological skills willmake the commission of intellectual property offences easier and their detection and prosecu-tion more difficult.

Over the next five years there is likely to be an increasing demand for criminalenforcement of copyright offences and increasing criticism of the priority that lawenforcement gives to investigating such infringements.These are statements from the Office of Strategic Crime Assessment, the body responsible

for forecasting crime trends up to five years ahead for the Attorney General and the Ministerfor Justice.Against this forecast, Government proposes to increase penalties and enhance civil proceedingsand nothing else.

How can an organisation like the OSCA make such an assessment? And why is soundrecording piracy/intellectual property fraud a law enforcement issue at all?Quite simply because of the very nature of sound recording piracy, at the commercial end itis big, sophisticated business often involving organised criminal activity.

It doesn’t start out as some accidental event. It is big business. Typically trans-nationaloperations, criminal by their nature and activities they take advantage of legislative andenforcement deficiencies to market their wares in various territories.

Here in Australia, professional sound recording pirates can and do factor the cost of civilactions into their operations. Indeed it has been our experience that these operators are not



affected by civil actions which usually only serve to make their operations more efficient. Thisis the experience overseas also.As a result, law enforcement agency intervention is required.

The explanatory memorandum implies that the Australian Customs Service will be that lawenforcement agency in a parallel import environment. Further, that it will not require furtherresources.This is in our opinion, nonsense. The Australian Customs Service could do with moreresources to deal with the matters that are currently priorities. An obvious example is thesignificant amount of narcotics that make it through the barrier.

Fortunately in this case the community can rely on other law enforcement agencies to pursuesuch matters once the Custom’s mechanism has failed. Often several law enforcement agenciesvie for control of investigations into narcotics matters once they are identified in the marketplace.However, when the Customs mechanism fails for this industry and illicit product appears inthe market place we cannot expect that kind of law enforcement agency interest. Indeed wecan expect almost none.Several police services have advised us that they will not undertake copyright investigationsin any circumstances. Rather they would refer them to the Australian Federal Police. TheAustralian Federal Police has a practice of only investigating matters that can be describedas high end criminality when resources permit. This is kind of like making the grocer firstprove that an extortion is part of some organised criminal enterprise before the police will takea report.

Our experience, once law enforcement agencies become involved, is even less heartening.We rarely receive more than several calls per year from the Australian Customs Service

relating to seizures or suspect importations.ACS seizures total approximately 1,000 units, against the MIPI seizures of approximately

270,000. This is not because the ACS is inefficient it is because of their resources and theclearance systems that are in place.

Since MIPI’s inception there has been 3 major actions against multi-million dollar—largescale operations. Two were trans-national and all were involved in their illicit enterprises.

One of those matters is now 3 years old. Five instructing DPP solicitors on—offendingcompany liquidated and free from the risk of a POCA action, no one has been charged.

In another of those matters it has now been two years since the execution of searchwarrants. No offender charged, again the offending company has liquidated—there are noassets—there is no risk of any POCA action and the offenders continue their activities hereand off-shore.

In the third matter in which the search warrants were executed over 12 months ago, noone has been charged. Again offending company liquidated and so it goes on. In this casethe operators were also prosecuted civilly and still they re-formed and conduct their oper-ations from the same premises.These are just some examples—there are more (AFP letter to Commissioner).

Finally where are these agencies going to get their specialist training in intellectual propertyfraud matters? They do not receive any at the moment and there does not appear to be anymovement afoot to provide any.



Civil prosecutions can be no less fulfilling for copyright owners at present. Civil action iscostly, difficult, complicated and its efficacy is questionable. As I have stated earlierprofessional sound recording piracy operations can factor in the cost of civil actions andconduct themselves virtually unimpeded.

And so against this background, where it is generally accepted that sound recording piracyis a serious issue for the industry and that the importation rights model is the superior anti-piracy model, government has produced this bill.

By the nature of the Bill and statements made in support or explanation of the Bill I believeit is accepted that sound recording piracy will increase.

Make no mistake, it will. This Bill if enacted will become a useful tool for sound recordingpirates.

Also, in a trans-national activity like intellectual property fraud, it would be mindful toremember that offenders are unlikely to be located or remain in your jurisdiction.

On the issue of increased penalties, it is naive to believe that increasing penalties will actas an effective deterrent to offenders undertaking a very high profit and very low risk activity.

The alleged ‘reverse onus of proof’ in practical law enforcement is likely to be so ineffectiveas not being capable of being relied upon in formulating a prosecution or action. Alternativelyit is capable of being defeated in the first blush of a prosecution. In a practical sense it willbecome another obstacle to copyright owners and another technicality for sound recordingpirates to effectively hide behind.

This Bill fails because it does not adequately address the prevailing law enforcement issueslet alone the potential ones.

As much as anything else, the Government owes it to the community to protect it from largescale criminal activity and fraud in the market place.

CHAIR —I invite you now to pick out the eyes of it, if you like, as to the specific pointsyou wish to make.

Mr Speck—I would say that if this bill becomes law the government has clearly ignoredthe full extent of the industry’s concerns. Our concerns are held by others, and I would liketo draw your attention to two statements. The first is:Enforcement of intellectual property rights offences is likely to increase in difficulty over the next fiveyears. Changing technology and increased levels of technological skills will make the commission ofintellectual property offences easier and their detection and prosecution more difficult.

The second statement is:Over the next five years there is likely to be an increasing demand for criminal enforcement of copyrightoffences and increasing criticism of the priority that law enforcement gives to investigating suchinfringements.

Those are concerns that support the clearly stated concerns of the music industry expressedby the Office of Strategic Crime Assessment, a body charged with providing over-the-horizoncrime forecasts to the Attorney-General and also the Minister for Justice. In that context, whatthe government proposes to do here is simply increase penalties and enhance civil proceedings.

The fact that an organisation like OSCA can make such a series of statements begs thisquestion: why is sound recording piracy a law enforcement issue at all? It is, quite simply,by the very nature of it. At the commercial end it is large-scale, sophisticated business, ofteninvolving organised or entrenched criminal activity. It does not start out as an accidental



event—it is big business. It is typically transnational, and it typically takes advantage oflegislative and enforcement deficiencies.

Here in Australia, for example, professional sound recording pirates can factor in to theiroperations the cost of civil operations. As a result, it is often the case that law enforcementagency intervention is required. The explanatory memorandum indicates that that agency islikely to be the Australian Customs Service and that they will not require any assistance. Thisis, in my opinion, a nonsense. I think it is already apparent to all and sundry that they coulddo with more resources to deal with the matters that are currently priorities.

The purported flood of narcotics that breached the barrier is a classic example of that. Thedifference between the narcotics example and us is this: if narcotics breach the Customs barriercontrols, there are often several, sometimes up to four, law enforcement agencies vying fora piece of that cake. As far as the Australian music industry and individual victims areconcerned, we are lucky to get any interest—and really get none—from law enforcementagencies.

Several state police services have advised that they are not prepared to investigate intellectualproperty infringements or copyright infringements at all—rather that they would defer thoseinvestigations and refer them to the Australian Federal Police. The Australian Federal Policehave a policy of investigating only high-end criminality matters so far as intellectual propertyis concerned. I would suggest that this is like asking the grocer to prove an extortion is partof an organised criminal activity before the police will take a report.

Even when we can get law enforcement agencies involved the experience is less thanheartening. We rarely receive more than several phone calls per annum from the AustralianCustoms Service. The Australian Customs Service seizures total in the vicinity of 1,000 unitsagainst the anti-piracy unit seizures of approximately 270,000 units. I must say that this is notbecause of their inefficiency; rather it is because of the clearance processes in place, the lackof resources that exist and also the fact that the import provisions provide the very bestavailable deterrent.

Since MIPI’s inception, there have been three major operations into large-scale multimilliondollar transnational operations. One of those matters is now three years old; five instructingDPP solicitors on, with the offending company liquidated and free from the risk of a proceedsfrom crime action, no-one has been charged. In the second case, it is now two years since theexecution of the search warrant and the situation is very much the same. In that case, theoffenders continue their operations here and offshore. In a third matter in which searchwarrants were executed over 12 months ago, no-one has been charged. The situation is exactlythe same: liquidated company, no assets, nobody charged. In this case, the offender was alsoprosecuted civilly. The end result of that is that the offenders have re-formed their enterpriseand continue to conduct themselves from the same premises in the Sydney metropolitan area.These are just some examples. There are many more.

Finally, I would ask this committee where these agencies would get their specialist trainingin the investigation of intellectual property matters. They do not receive any at the momentand there does not seem to be any move afoot for them to receive it from anywhere else. Civilprosecutions of professional sound recording pirates can be no less fulfilling for copyrightowners. Civil action is always costly, always difficult, always complicated and alwaysprotracted, and its efficacy is questionable. As I said earlier, civil actions can be factored in—and, in fact, are factored in—to professional sound recording pirates’ operations. So, againstthis background, sadly, the nature of sound recording piracy is accepted. We have this bill.



By the very nature of the bill and the statements made in support of it, or in explanationof it, it is generally accepted that there will be a rise in sound recording piracy. Make nomistake, there will. On the issue of increased penalties, it is naive to believe that increasedpenalties will act as a deterrent in an enterprise that is very high profit and very low risk. Thealleged reverse onus of proof in practical law enforcement terms is likely to be so ineffectivethat it cannot be factored into the formulation of a prosecution or action.

Alternatively, it is capable, I believe, of being defeated in the first blush of a prosecution.In a practical sense, it is going to become just another obstacle for the copyright owners. Iwould like to say in conclusion that I think this bill should fail because it does not adequatelyaddress the prevailing law enforcement issues or the potential law enforcement issues. Finally,as much as anything, the government owes it to the community to protect it from large-scalecriminal activity and fraud in the marketplace.

CHAIR —In your submission to us in the third paragraph and in your comments to us youtold us about the importation of illicit sound recordings. What are we talking about there? Arewe talking about piracy or parallel importing which, under the current law, is illegal?

Mr Speck—We are talking about all the forms of piracy specifically.CHAIR —Well, that does not help me. Are you describing parallel importing as piracy?Mr Speck—No.CHAIR —So when you talk about the importation of illicit sound recordings you are not

talking about any parallel importing, albeit that it may be against the law at the moment?Mr Speck—When I talk about illicit sound recordings I am talking about pirated material,

bootleg material, cover versions, sound alikes, unlicensed material—that kind of thing.CHAIR —What do you mean by unlicensed material?Mr Speck—I am talking about material where—CHAIR —CDs that are imported into Australia may not be licensed by whoever under the

current—Mr Speck—I am specifically talking about sound recordings where there are substantial

fraudulent documents in existence purporting to establish its legitimacy. The reality is that thatis not the case. It is, in effect, a hybrid form of piracy relying on the specific definition ofpiracy. I am not talking about parallel importations.

CHAIR —In the last paragraph on the first page of your submission you tell us:. . . a global operation imported directly into Australia a catalogue of sound recordings . . . on initialtesting several hundred positive matches—that is copyright infringements.

What did you mean by that? Can you explain that to me?Mr Speck—Yes, I can. An organisation existed in this country which was a subsidiary

corporation of a global operation. That global operation is based in Europe. There is a pyramidof corporations established in countries where the identity of directors can be concealed, wherethe identity of offices of the company can be difficult to identify because of the nature ofrecording corporations. That corporation, as I say, had established a distribution company here.It advertised in the media, it had a warehouse, it had distribution deals and it was selling alarge-scale catalogue. I have a photocopy of the catalogue with me that I can supply to youif you wish.

CHAIR —Undoubtedly, it would be of interest to members, but this operation that you aretalking about emanated in Europe?



Mr Speck—Yes, it imported into this country.

CHAIR —Which has certain parallel import legislation protecting the European scene?

Mr Speck—Yes, these were exports from Europe.

CHAIR —Following on from that, what does MIPI do internationally in relation to lawenforcement? Do you just check in Australia or do you also go overseas—without, of course,divulging any operational secrets?

Mr Speck—The nature of the major infringements we identify are transnational andinternational in every case. To efficiently investigate and prosecute them, the investigationmust become transnational. In that regard, we investigate matters wherever they take placein one form or another.

CHAIR —In your opening comments you mentioned criminal activities and then expressedconcern that they were not being pursued as rigorously as they otherwise might. Do you seethe copyright law for the industry as being to assist them against unfair practices so that theycan take the appropriate civil actions? Other companies, for example, have to do that againsteach other under the trade practices law in this country for companies engaging ininappropriate behaviour towards each other—whereas in criminal proceedings you have alwaysgot that higher onus of proof and often you do rely on civilian witnesses—or, in this case,possibly the recording industry—to provide the necessary information to enable the prosecutionto run their case. So there are different scenarios.

Mr Speck—I do not think this industry is any different from any other corporate victim offraud here in Australia or internationally. The vast majority of matters are prosecuted civilly,and that places a tremendous burden on the financial resources of MIPI itself and the membercompanies. However, there are clearly cases where operators are impervious to civilprosecution. I can provide examples of that. It is an emerging, identifiable trend; it is thereason that OSCA expends its resources looking at the issue where organised criminal activityor entrenched criminal activity becomes involved. There was a case as late as last year wherethe Naples office of the anti-Mafia public prosecutor’s office identified a family manufacturing10,000 compact discs and 50,000 music cassettes each week.

There are a number of other examples I can give from my notes. For the sake of brevity,I will give just one or two. The Irish journalist Veronica Guerin was shot dead in consequenceof her expose in drug trafficking. The follow-up investigation of that saw the raid of asuspect’s premises where a large quantity of video and audio duplicating equipment andquantities of pirated material were seized. In the Netherlands in January last year, the FederalPolice seized some 6,000 pirate compilation CDs from two men involved in the cocaine trade.There was a case recently where an operation in Sydney was using illicit sound recordingsas part of its ecstasy and cocaine business. It was an Australian Federal Police case last year.

There are any number of other examples. There is not, for this industry, a cheap way ofprosecuting or protecting the market. It is very expensive to go to the police. It is cheaper toprosecute civilly. When this industry goes to the police, it is a very serious infringement. Thepoint of my being here is to say to you that this is already an emerging trend. The nature ofthis legislation is going to rapidly make it a more obvious trend in this country, as it hasalready been in others.

CHAIR —Why would that be, given the assumption—and of course it is an assumption—thatif prices do come down the bootleggers will not be making as high a profit, one wouldimagine, and therefore the returns will not be as great?



Mr Speck—Because it decreases the risk of detection to start with.CHAIR —Why would that be?Mr Speck—Quite simply, in the current environment, it is possible to tell who owns what.CHAIR —Why would that change?Mr Speck—If parallel imports were allowed, that whole process of identification of

offenders would blow out. That whole process of testing and providing the fundamentalcomponent of the brief of evidence to commence a prosecution would take so long that theinfringing material would dissipate. It would become totally ineffective.

CHAIR —Do you have any technical measures in place to detect piracy at the moment?Mr Speck—It is very difficult at best to detect piracy. The best measure is the appearance

of offending material in the marketplace. That is quite simply the most efficient means froma prosecutorial point of identifying the material.

CHAIR —What percentages of CD sales in Australia do you say are from pirated sources,from parallel imported sources and from legit sources, if we can use that term?

Mr Speck—I could not express an opinion on parallel imported material. In relation toinfringing material, we can never factor in the dark figure of fraud. Any figure that I wouldgive you would be a clear understatement of the situation. I say that on this basis. Any of theempirical victim studies that are available always show that frauds far exceed the recordedfrauds. There is also the variable of detection in the marketplace. I would put it, on what wehave available to us, in the vicinity of five per cent of the market.

CHAIR —It has been suggested to us, albeit that the figures vary, that about the sameamount is coming into the country through Internet sales. Does that create as big a problemthen as piracy for the industry in Australia?

Mr Speck—I see the Internet as an emerging law enforcement issue. It is one that peopleand institutions with more social control than the music industry need to contend with first.

CHAIR —But I understand that the Internet is legal if I am purchasing for my own purposes.I can put in an order and purchase into Australia. We have been given figures—at one timeof 2.7 per cent and at another time seven per cent figure, but let us say in rough terms fiveper cent—for the number of CDs being purchased in Australia that are purchased through theInternet. The suggestion is that that will continually increase because of the cheaper pricesthat people can obtain for that product overseas and, therefore, chances are that peoplepurchasing through the Internet will overtake in any event the purchase of pirated materialwithin the country. Do you have any view about how that may impact on the totality of theindustry if, because of the price differential, 30 per cent or 40 per cent or more of product isbrought in from overseas via the Internet?

Mr Speck—I have no doubt that the industry will adjust to meet any emerging technologicaltrend in customer service delivery, but there is a whole range of issues involved—for instance,the importation of sound recordings that contain racial vilification, pornography, et cetera.

Your contention is, sir, that if it is imported for individuals, then it is legal. If that is thebenchmark for our barrier control, then that kind of material has the capacity of entering themarketplace. As for whether or not it will affect prices, I do not know. I am here in mycapacity as a law enforcement expert.

Senator McKIERNAN —Thank you for providing us with a copy of your submission tothe IDC. I expect after the IDC received that submission they immediately got on the phone



to talk to you further about the array of matters that are contained in the submission. Can youtell us what actually happened?

Mr Speck—Eventually a person contacted me from the IDC. He came to Sydney and wehad a meeting at my office.

Senator McKIERNAN —Were the concerns that you have expressed in this submission,which is six to seven pages plus the appendices, listened to, and, if they were, were theyreflected in the bill?

Mr Speck—Quite clearly they were listened to. I do not think they were acted on. Thereis limited reflection of our concerns in the bill, and that reflection is a poor one and ineffectiveone.

Senator McKIERNAN —What other contact do you have in a formal, official sense withgovernment or government instrumentalities?

Mr Speck—We liaise frequently with members of the Australian Customs Service and withmembers of the Australian Federal Police. That is about it.

Senator McKIERNAN —Were you able to give this submission to the AFP or the CustomsService or at least make them aware of it? If so, did they have a reaction or a response?

Mr Speck—I made it available to the Australian Customs Service and also to the AustralianFederal Police. I understand the Australian Federal Police made a submission to the IDC. Myunderstanding for that is generated by the fact that a member of the Australian Federal Policecontacted me for some information about the nature of parallel importation.

Senator McKIERNAN —It is interesting that whenever a nerve is hit you get a reaction.We have seen this consistently throughout the hearings. That, to me, shows that a great bigbarricade has been put up in defence rather than the hearings being used as an exercise inlistening and learning, as was the instance in many of the committees that I served on in theprevious government. It is unfortunate but—

CHAIR —Senator Murphy was given notes by industry representatives yesterday as well.It has gone both ways, and I think it is a bit of a cheap point to make. Sure, I am getting notesfrom time to time from people but your Labor colleague yesterday was similarly getting notesfrom industry representatives when I was asking questions. So it goes both ways.

Senator McKIERNAN —How long has MIPI been in existence?Mr Speck—Nearly four years now.Senator McKIERNAN —Why were you set up by the two organisations that fund you?Mr Speck—As I understand it, the anti-piracy unit was reconstituted to more efficiently deal

with the investigation of sound recording infringements, to take a more holistic approach toidentifiable offences and to participate in any transnational actions that took place.

Senator McKIERNAN —What investigatory powers do you have? Do you have the powerof apprehension? If you know of somebody who is in the act of committing an offence, canyou apprehend them? Do you have, as it were, tacit policing powers?

Mr Speck—The only investigative powers we get that have a legislative or lawful basis arethe common law powers at a state level and section 13 of the Commonwealth Crimes Act.It is very limited.

Senator McKIERNAN —You would be aware that recently both the Australian CustomsService and the Australian Federal Police have had their resources cut back. Has that had animpact on your work with those law enforcement bodies?



Mr Speck—It has had a noticeable impact. There has been a complete shift in customerservice delivery from those organisations. Where, in the past, these people would have giventhe impression of being able to offer every assistance in every possible instance, they nowclearly say to you that they do not have the resources to investigate matters, that any matterwe ask them to investigate will be prioritised, that is put in a queue, and that it may well bepossible we will receive some investigative assistance. We have been very lucky, comparedwith some copyright owners, so far as assistance is concerned from the Australian FederalPolice and the Australian Customs Service, and that is because we spend so much moneypreparing the brief of evidence before we go to them.

Senator BARTLETT —In relation to the nature of the prioritised material, I have a roughidea of two different types. There may other ones, but the main one, I presume, is stuff thatis just direct copies of legitimate material that someone has copied onto a tape or a CD andthen put a pretend cover over it.

Mr Speck—A clone which is a full copy of the sound recording, the printing on the disc,the slick, the cover and rear of the CD is a counterfeit. A sound recording where the tracksare taken from a legitimate recording, placed on another recording and then the album is giventhe appearance of somebody else’s product is a pirate.

Senator BARTLETT —What about the types that are not actually legally available, likerecordings of live performances? Does that come under your—

Mr Speck—Yes. I had intended to continue.

Senator BARTLETT —Sorry.

Mr Speck—The next form of illicit sound recording is the boot, which is an authorisedrecording of live performances in certain circumstances. That is a large market in itself. Youmight be pleased to know that two of the world-class bootleg operations that exist globallyare Australian. They operate out of Australia. In fact, one operates relatively close to a lawenforcement agency building and that law enforcement agency indicated some two years agothat it was not a matter within their purview. The bootlegs are very expensive products madeat no cost to the bootleggers. A bootleg of the 1972 concert of, say, Led Zeppelin inMelbourne will be about $70 and nobody, except the offenders, gets any money from that.The government does not get any money; nobody gets any money.

A copy of Mick Jagger singing at the Kardomah Cafe, when it existed, is worth $70 to $110in the marketplace. I can give you the names of stores or retailers that sell it now, openly,without any fear of prosecution. Nobody gets any money from that, except the offenders.

The next form of illicit sound recordings that exist are the sound-alikes, the recordings thatare clearly deceptive. The punter does not know he has been dudded until he sticks it in themachine when he gets home. He has some non-Anglo-Saxon person purporting to be a well-known Anglo-Saxon artist, invariably, or a bad quality recording of something else. It is arelatively common occurrence for us at MIPI to hear from people who have purchased in goodfaith sound recordings where you can hear the needle or the stylus hitting the vinyl, whereyou can hear people heavily affected by colds suffering from those colds while the concertsare being recorded. They are the large bulk of the recordings that I would describe as illicit.

There is another body of recordings that fit all those categories that are designed to bedelivered within corporate shells. They are backed up by a wealth of bogus and fraudulentdocumentation that often takes years and years to disprove, and it completely reverses thewhole process. It is an ideal example of why the reverse onus of proof would not work. These



people present themselves with an array of documents that prove that they own this material,that it has existed for a long time, and it takes many years to prove that that is not the case.Often we are looking for people who worked for companies in the 1960s, and that is a frequentoccurrence now. Given a lesser risk of detection, we are going to see a whole lot more of it.

Senator BARTLETT —Statistics and information you provided at the end of yoursubmission give a lot of information about other countries’ piracy rates, so I presume youwould have a fair idea of trends in that area. One of the allegations that has been made in anumber of submissions in relation to Norway was that piracy increased fairly dramaticallywhen they introduced parallel imports.

Mr Speck—Yes.Senator BARTLETT —And ACCC seem to believe that not to be the case. Are you aware

of—Mr Speck—Yes, I am. With the Norway example, the level of piracy increased markedly.

It was clearly noticeable in the marketplace. I dispute the figure, I dispute the methodology.It was still obvious to the investigators that there was a dramatic influx of pirated material.Singapore is another example. It is clearly obvious to a seasoned traveller that there is nowa significant influx of pirated material.

Once the barriers were freed amongst the European Union states, the anti-piracy investigatorsput aside the methodology and put aside the collection of statistics altogether. The anti-piracypeople were the busiest people in the music industry in most of those countries. The natureof the offences changed; the virulence of the operators changed. Clearly there is an increasein piracy, given an increased opportunity coupled with a decreased opportunity of prosecution.

Senator BARTLETT —At the moment under the current set-up, to detect pirate copies orto determine whether something is pirated—and I guess that would apply with duplicates orwhatever, rather than bootlegs—

Mr Speck—Yes.Senator BARTLETT —Basically all you need do is contact the authorised importer. You

have got one spot to go to, and that can tell you straight away; is that right?Mr Speck—It is a very simple process for anyone that lives, eats, breathes and gets to work

to know that certain artists belong to certain owners in this country. If that benchmark wereremoved, it would take a very sophisticated system and, I would suggest, considerableresources to replace it as effectively, or even come close. The very nature of how these peoplewill profit from this marketplace will change dramatically. I am not talking about how muchthe publisher will lose, how much an artist will lose; I am talking specifically about how muchthese people will make. It is impossible to tell. If the benchmark does not exist, I defyanyone—presented with a professional, sophisticated, pirated copy of a sound recording—toproduce a plausible identification method which just is not completely opposed to the wholeprocess of trade facilitation that is supposed to exist at the barrier. You would have towholesale stop importations of material and undertake fairly laborious scientific testing toidentify anything.

Senator BARTLETT —Is there any priority that either you or the industry gives betweenstamping down on your duplicate-type pirates versus your unauthorised live recordings, or doyou just tackle whatever you can find?

Mr Speck—In the past 3½ to four years we have started with the largest and worked ourway backwards. I can say that that ensures I have a lengthy career in the Australian music



industry. And there are still plenty to go—still plenty of the people we identify early operating,or conducting themselves, albeit in a different form, still living in that grey zone commercially.

Senator COONEY—The evidence you have given is fairly vital evidence. I was wonderingwhether you could qualify yourself, either in writing, if modesty requires you to do so, or justtell us what experience you have had in investigations. Obviously it is not the first time youhave given evidence, I would have thought.

Mr Speck—I have given evidence once or twice before, Senator. I joined the New SouthWales Police Service as a cadet when I was 16. After being sworn in, I had some experiencein general duties before undertaking criminal investigation duties, together with specialweapons and operations squad duties. Subsequent to that, I performed duties with the specialforces group as an operative, a trainer and a state adviser.

Senator COONEY—What do the special forces do?Mr Speck—It is a permanent undercover operation conducted by the New South Wales

police. Subsequent to that, I was a senior investigator, supervisor and relieving commanderat various units and task forces at the Drug Enforcement Agency and the major crime squadin the north-west region of the New South Wales police. Since 1994, I have been the managerof investigations for MIPI itself. I undertake lecturing in investigation methods at variousplaces. I am a technical adviser to the Indonesian police on copyright enforcement, and I alsoassist other agencies where required.

Senator COONEY—Can I ask how old you are now? You joined the force when you were16.

Mr Speck—I am 38 now.Senator COONEY—In the evidence you have given today, have you drawn on that

experience?Senator COONEY—Yes, I have.CHAIR —Thank you, Mr Speck. That concludes today’s proceedings.

Committee adjourned at 1.46 p.m.


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