PPCA tariff increase

Last year the PPCA announced that tariffs for everyone using recorded music in a business will be increased. Now, if you haven't been watching this debate, or don't know what this all about I'll give you some simple background.

If a business uses recorded music as a part of it's entertainment then a fee is due to PPCA. PPCA collects the fee on behalf of the big labels. Use their recording, pay a fee. All that is fine to a point. The fee increase is set to close down clubs all over Australia. I personally know of two that have closed because of the fee increase. How big is the increase? Well, a simple RSL playing music in the background of a restaurant that seats 150 (regardless of how many people actually eat there) will have their fee increased from $124.19pa to $9277.40pa. That might be able to be absorbed by an RSL, but take my friends old nightclub.

The club is licensed for 200 people and he used to open 3 nights per week (2 nights would be bands and no recorded music was usually played). When opening he would only open half of the club on most night and have about 50-100 patrons for the night. His old fee was about $900pa. A club like his comes under Tariff E1. This states that the fee payable is 67 cents per person according to the license and not actual patronage, per night of operation. So, 3(nights) x 52(weeks in a year) x 200(licensed to hold)x0.67(tariff E1 fee). Thats almost $21,000 per year.

Let's put together another equation. A small 100 patron pub has bands and DJs throughout the week. The average patronage over the week is 40 per night and the bar takes $1000 per day as an average and is running with about 200% mark-up on drinks, staff costs are $200 per day, rent is $1000 per week. The bands struggle to split the $7 covercharge. Maintenance and insurance costs are $250 per week and the power is $200 per week, promotion $200 per week, miscellaneous items of $200 per week. Already, all of this equates to a gross profit of about $1370 per week. Which is really not very much considering it probably cost over $100,000 to set-up, and the licensee is working 7 days a week to manage the place, not even taking into account that it might of run at a loss for a number of years when first started. So that gross profit is going to equate out to $71,240. The new PPCA fee for this place would be 7(days) x 52(weeks in a year) x 100(licensed to hold) x 67cents. Now, that's $24,388 bringing the profitability of the business down 34% to $46,852. At this point the licensee has two choices, take a huge cut off the door or pack it in, because I don't know anyone that is able to run a pub 7 days a week that would work for such little money and wear the risk of owning the business.

Enough of all that, a major nighclub might have a bill of over $200,000 dollars each year. That would be regardless of what their bottom line was. But here comes the fix! Not only is the fix great because our venues keep pumping but it will allow for independent artists to get a promotional leg up. On the surface this looks great. Clubs Australia are going to be supplying music to venues that is out of the realm of PPCA and as long as the venues don't play a single piece of PPCA music (BMG SONY, UNIVERSAL, EMI etc.) they won't have to pay the fee. Under the surface US releases aren't usually covered by our PPCA so the 'American Top 40' is most likely still going to get some play.

In a media release from Clubs Australia they stated, "Clubs Australia will set-up a program to source and distribute the music of artists not signed to major record labels and who are consequently exempt from the restaurant tariff. As part of the new scheme, local musicians will be given the opportunity to sell their music in clubs while money earned from the sale of background music CDs will be used to establish a fund for talented Australian musicians." What this means is that independent artists are likely to get a piece of the background music in RSL, Social Clubs, Gyms and maybe even eventually the Nightclub scene.

What this makes me think. Get together with local artists and put some CD's together and hit the restaurants and bars with some info about how they can avoid the new PPCA fees.

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