Fitness Class Tariff Decision

Stephen Peach and Lindy Morrison respond to the Copyright Tribunal decision.

On 16 June 2010, the Tribunal made an order formalising the new tariff of $15.00 per class or $1.00 per attendee per class, in line with its decision of 17 May 2010. Click here to view the Copyright Tribunal’s Order.  

PPCA has decided to assist licensees with the implementation in two ways. First, the new scheme will not be retrospective, as PPCA has elected to introduce the new scheme from 1 November 2010 (rather than 17 May). Second, PPCA has elected to implement a rebate scheme for eligible licensees until 30 June 2012. This is as follows:-

An eligible licensee is a licensee under the new scheme who:

• pays its account promptly and without default, in accordance with PPCA’s Standard Terms and Conditions; and
• does not engage in unauthorised or unlicensed use of sound recordings comprising part of the PPCA repertoire.

The above scheme will come into operation despite the fact that Fitness Australia has lodged an application in the Federal Court for a review of the Tribunal’s decision (“Appeal”). The Federal Court will either confirm the Tribunal’s decision or require the Tribunal to reconsider the case. The existence of the Appeal does not affect the validity of the Tribunal’s 17 May decision or PPCA’s ability to apply the new scheme as set out above. The additional fees which PPCA collects under the new scheme from 1 November, and which are in excess of those payable under the current tariff (which will continue to operate until 31 October 2010), will be paid into a suspense account. They will remain in that account until the Federal Court has decided the Appeal.

PPCA will write to all licensees affected by the new scheme in relation to implementation. PPCA will also write to those licensees once the Appeal is concluded. PPCA will publish further information on this website as it becomes available.

MEDIA RELEASE                                                                                      

17^th May 2010                                              

AUSTRALIAN ARTISTS AWARDED BETTER DEAL FOR FITNESS CLASS MUSIC

Click here for the Fitness Decision.

Australian recording artists and record labels have welcomed today’s decision of the Copyright Tribunal which will see improved rates paid for licensed music when it is used in fitness classes.

After hearing evidence over five weeks, the Tribunal has ruled on a new fee structure for licensed sound recordings used in fitness classes which will see profit-driven fitness operators pay a new  rate of $15.00 per class or $1.00 per attendee in a fitness class.

Previously, Australia’s $1 billion dollar a year fitness industry paid a recorded music tariff of just 96.8 cents per class. For a class of 25 attendees, this worked out at approximately 4 cents per person. This scheme was reviewed after an application to the Tribunal by the Phonographic Performance Company of Australia (PPCA), representing Australian recording artists and record labels.

PPCA Chief Executive Stephen Peach said, “Today’s decision by the independent umpire represents an important improvement for artists and labels whose music is widely used in fitness classes to attract and motivate participants. The Tribunal has recognised the previous scheme undervalued the undoubted contribution music makes to the fitness industry.

In its judgment the Tribunal found:

This application to the Tribunal has permitted the first comprehensive examination of the use of music in fitness classes. It has revealed that recorded music is an essential accompaniment to such classes. Without it the classes would not function in the manner in which they are presently conducted and which fitness class attendees have come to expect. No evidence was provided of satisfactory alternatives to the provision of music as an accompaniment to the classes. In the Tribunal’s view, the amount currently being paid does not reflect this essential nature of music in classes. The Tribunal believes that it is appropriate that users of recordings in fitness classes should pay an amount that reflects the value of music to such classes.

Mr Peach said the fitness industry had “waged war” against any increase in the music tariff. The multinational chain Fitness First admitted it largely bankrolled the courtroom fight which saw an enormous amount spent in opposing fair returns to artists and labels.

Bizarrely, however the Fitness First chain announced last month that regardless of the outcome of today’s ruling it was not prepared to abide by the umpire’s decision on a fair price and will force the introduction of second-rate cover version music in all its fitness classes.

Mr Peach said, “Fitness First has treated both its members and recording artists with utter contempt. We’ve seen a groundswell of discontent from gym members and fitness instructors who’ve been ordered to use cover music and who are even being encouraged to dob in colleagues who try to use real music in classes.

“Of course, fitness centre operators have a choice about whether to use real music in their classes. We are confident that many fitness centres will choose to continue to use real music and that they will have a strong business advantage over those that take what we think would be a very short-sighted decision to switch to low quality cover versions”.

Responding to the Copyright Tribunal decision, Lindy Morrison (PPCA Board member and former drummer from the Go-Betweens) said, “This demonstrates that the license fees paid for the use of recorded music in gyms were inadequate and did not reflect the value of the music. Bands are small businesses and like all small business need to be rewarded for their product, which requires specialist skills, time, and costly resources to create.”

At the start of the Copyright Tribunal hearing artist Marcia Hines added her support saying, “I do believe musicians should be paid for the music they create: it's only fair."

End

For further information contact:

Stephen Peach
PPCA CEO                                        
02 8569 1100            

Felicity Moffatt
0418 677701

About PPCA
PPCA is a national, non-profit organisation established in 1969 to provide non-exclusive licences for the public performance and broadcasting of protected sound recordings and music videos.  PPCA distributions are made directly to copyright owners and to Australian recording artists registered with PPCA under its artist direct distribution scheme.

The fitness tariff applies to all recordings (both Australian and international) which are protected under copyright law. This is the vast majority of all recordings typically used in fitness classes.

About the fitness industry
The fitness sector is dominated by Fitness First with more than 70 centres nationally and other high profile operators including Fernwood Women’s Health Clubs, Curves and Contours.

According to industry reports, the fitness industry is experiencing strong growth of around 10 to 15 per cent with many fitness centre chains growing above the industry rate. Australia is the 11^th largest market in the global fitness industry.

Fitness Class Tariff Review - The Facts

Photo: Artists at court supporting PPCA's case for a better deal from fitness centres

Media Releases

 Fitness Tariff Review Fact Sheet (24.04kB)

 Fair Deal Sought for Music Played in Gyms (23.80kB)

 PPCA's Application to Copyright Tribunal - Fitness Tariff (3.27MB)

 Artists want fair deal on fitness centre music - April 2008 (22.29kB)

Fact Sheet

PPCA is a non-profit organisation which collects and distributes revenue from sound recording licences to Australian recording artists and record labels.

PPCA licenses fitness centres, gyms, individuals and others to play sound recordings in fitness classes under the Fitness Tariff. 

The fitness tariff applies to all recordings (both Australian and international) which are protected under copyright law. This is the vast majority of all recordings currently used in fitness classes.

PPCA believes recorded music is a vital aspect of fitness classes and that the creators of recorded music -the artists and record labels- should receive a fair and reasonable return for the use of their creative work in helping drive revenues and profits by fitness centres.

The proposed new rate

At present, the rate paid by fitness centre operators is 96.8 cents per class. PPCA does not believe this is a fair market rate – it does not reflect the true value that recorded music adds to the business of a fitness centre.

For classes,  this equates to a rate that can be as low as just 2.4 cents per person (class of 40) or 5 cents per person (class of 20). This rate is inappropriately low given the fees charged for gym membership, or charged for fitness classes on a fee-per-class basis.

PPCA conducted a two-year consultation process with the fitness industry and engaged experienced economic consultants to carry out a study to calculate the value of music in fitness classes. The fitness industry was given the opportunity to comment and had input on the way the survey was conducted.

Based on this economic research, PPCA has proposed a new scheme calculated on a per member per month basis to be consistent with the periodic membership model which is typical of this sector.  Such periodic memberships generally entitle the member to have access to the full range of services and facilities offered by the fitness centre, including fitness classes. Specifically, PPCA has proposed to the Tribunal that the rate be $4.54 per member per month or $0.99 per casual visit offered by commercial fitness centres.

The tariff review applies only to commercial, profit-driven fitness operations and not small community-based or similar groups (such as, for example, classes held in schools, church halls or rehabilitation centres).

The Copyright Tribunal is an independent body headed by a Federal Court judge. It will hear evidence presented by PPCA, the fitness industry and the ACCC (who have elected to participate in these proceedings and provide independent evidence to the Tribunal).  After the conclusion of the hearing, which is expected to be some time in the second half of 2008, the Tribunal will deliver a judgment on what the tariff should be.

The value of sound recordings

To support its proposed new rate, PPCA will argue there is overwhelming evidence that music in fitness classes provides valuable motivation, improves people’s workouts, creates structure for classes and adds atmosphere.  As such, music plays a key role in attracting members to fitness centres (and hence, increasing fitness centre revenues).

A study of Australian fitness class participants will be presented showing that most people regard music as essential to fitness classes and could not imagine the classes without music.  It follows that an absence of music in fitness classes would result in a significant drop in membership, and hence revenues, of fitness centres.

It’s estimated that 97 per cent of fitness classes use music and it is played for almost the whole duration of the class.

Since the advent of aerobics in the early 80s, the use of recorded music in fitness classes has continued to grow and is now an essential part of fitness classes. The sound recordings played in fitness classes are specifically selected so the pace and beat of the music fit the type of class and match the type of exercise being done.

Recording artists and record labels should be properly rewarded for the important contribution their music makes when it is played during fitness classes.

Growth and profits in the fitness industry

Australia is the 11th largest market in the global fitness industry with total sector revenues of over $1 billion per annum. There are an estimated 1150 fitness class providers in Australia.

According to industry reports, the fitness industry is experiencing strong growth of around 10 to 15 per cent per annum with many fitness centre chains growing above the industry growth rate.

The top five chains by number of locations in Australia include Curves, Contours, Fernwood Women’s Health Clubs and Fitness First. The Fitness First multi-national has more than 75 centres in Australia and over 200,000 active members.

Recent market research into over 100 fitness centres across Australia shows that the average cost of fitness centre membership is about $768 a year, the average price for a month membership is $64 and the average price for a casual visit is $14.

PPCA believes the fitness industry can absorb such an increase in the cost of recorded music which should be regarded as a normal business expense. 

The 2008 Australian Fitness Industry Survey (AFIS) found that:

• 51 per cent of fitness clubs reported membership numbers being up in the last 12 months - 26 per cent reported that numbers were up "significantly"

• Regional fitness clubs are operating as successfully as their metropolitan counterparts

• 41 per cent of clubs report that they intend to raise fees in the next 12 months

• The highest reported fee was $1,500 a year

• Clubs spend an average of $17,543 on advertising each year.

History of the Proceedings

In December 2005, PPCA wrote to a number of fitness industry associations, including Fitness Australia, to notify them of PPCA’s intention to review the rate payable under the Fitness Tariff and to invite them to participate in a consultation process with PPCA in relation to the review.

During 2006, PPCA met with Fitness Australia’s representatives a number of times to reach an agreement as to the Fitness Tariff.

On 8 December 2006, PPCA issued formal proceedings in the Copyright Tribunal. The Tribunal will conduct a review of the Fitness Tariff, and will determine a reasonable fee for the Fitness Tariff on the basis of economic and other evidence. The revised Fitness Tariff would apply to all businesses and individuals licensed under PPCA’s tariff V. Even if agreement is reached between PPCA and Fitness Australia, the Tribunal will still need to review the agreed rate.

A copy of PPCA’s application to the Tribunal is available on this website.   Please click here to view the application.  

PPCA’s draft licence scheme in respect of the revised Fitness Tariff is contained in the application.  The draft licence scheme includes PPCA’s Standard Terms and Conditions for Licences for the Public Use of Protected Sound Recordings.  These can also be found on this website via the link http:/www.ppca.com.au/forms.htm.

On 25 January 2007, Fitness Australia Incorporated joined the proceedings as the First Respondent.

On 1 March 2007, PPCA filed its Statement of Points in support of its Application.  Please click here to view the Statement of Points.   

On 1 May 2007, the ACCC informed PPCA that it wished to join the proceedings pursuant to section 157B of the Copyright Act 1967.  On 8 May 2007, this was formalised by the Tribunal.  The tribunal delivered its decision on the 17th May 2010. Click here for the decision. 

The Tribunal formalised its decision by an order dated 16 June 2010.  The Order notes the implementation date and rebate scheme referred to above.

For further information contact PPCA’s Licensing Department on 02 8569 1111.

www.ppca.com.au

Last updated: 21st June 2010