so collected enables the company to calculate the aggregate amount of time on any given day or over any
period that is utilised by any radio broadcaster for the broadcast of music sound recordings. The information
gathered is sold to interested parties.
Page 274 of [2014] 2 All SA 263 (SCA)
[40] Mr Quintin Stewart, Managing Director of a company that monitors radio and television broadcasts in South
Africa testified that, by the use of technology, one can accurately determine the content of broadcasts.
[41] Mr Spiro Damaskinos, a director of Sony Music Entertainment Africa (Proprietary) Limited, testified that for a
decade he was directly responsible for its marketing and promotional relationships with radio and television
broadcasters. He testified about how radio stations clamoured for new releases and that recording companies
were always under pressure to supply new content. He testified about what is common knowledge within the
recording industry, namely that, ironically, even though consumers have increased access to music through
the internet and digital technology and even though the music they sell has never been more popular,
revenue through the sale of physical and digital products has continued to decline. Much of this is due to
increasingly sophisticated illegal downloads. It was accepted that a benefit is derived by recording companies
from airplay by radio stations, but that did not necessarily translate into sales and revenue certainly, not as
much as it used to.
[42] Dr William Bishop, an economist, testified in support of NAB's case. He, like others, accepted that placing a
value on intellectual property is generally not an easy task. This proposition is not contentious. In the event of
a rate that is prohibitive, radio stations would resort to using the efforts of session musicians captured on a
disc or other device in their music broadcasts. There are instances of persons who use sound recordings, who
have resorted to this method, particularly in the United Kingdom.
[43] Dr Bishop favoured the revenue per time channel calculation as NAB would have it. Dr Bishop could not
understand the logic of SAMPRA's exclusions from editorial content. He was of the view that revenue in either
formula should be based on actual figures rather than notional ones. Simply put, this means financial
statements, rather than the rate card less the estimated discount. Dr Bishop took the view that either formula
could be scaled up or down to get to a rate that would avoid perverse reactions and consequences. He
agreed that an acceptable formula was one that reduced distortions but warned against setting the rate so
low that it was considered not worthwhile. Dr Bishop was struck by the complexity of regulation in the radio
industry in South Africa. In considering profit against revenue, Dr Bishop testified that one could have revenue
with a bad profitcrunch and, similarly, one could have profit soaring out of proportion to revenue. Whilst he
accepted that there was no direct correlation between revenue and profit, he stated that there was some
correlation.
[44] It will be recalled that NAB's formula incorporated the profit average for the industry. Dr Bishop stated that it
was for someone else to explain why that was adopted. He accepted that some form of sharing, either in
revenue or profits, has to be factored into a formula. Viable sharing has to be appropriate and efficient. Whilst
he described the symbiosis between the record industry and radio broadcasters as a joint venture of sorts,
he accepted that it was not truly such.
[45] Mr Jonathan Shaw, a music business entrepreneur, testified that a large proportion of music broadcast in
South Africa originates from American companies.
Page 275 of [2014] 2 All SA 263 (SCA)
[46] Mr Colm Tonges, an accountant, testified on behalf of NAB. He is a partner at Price Waterhouse Coopers
("PWC"), an auditing firm, and was instrumental in compiling NAB's formula. He rejected the 10% proposed by
SAMPRA as being arbitrary. In justifying the revenue per time channel approach, he testified that one of the
principles PWC tried to incorporate was that the more people were listening, the more revenue would be
generated, and that the time channel proposal ought to be viewed in that light. Thus, the best way was to
link revenue to time channels in order to ensure that that objective was being met, rather than simply having
regard to revenue across all time channels. Like other witnesses, he too favoured actual revenue reflected in
a broadcaster's financial statements. In looking at letters of demand from SAMPRA, PWC considered its
formula in relation to seven radio stations that were different in size and got a range of a royalty rate of
between 6,8 to 8,8%. That exercise was purely to illustrate the levels of royalty that would ensue if SAMPRA's
formula was adopted.
[47] PWC factored in audiencereach in its formula to ensure that radio stations with a greater audience paid
more. Mr Tonges accepted that revenue bears a relationship to listenership, but testified that it is not the only
variable and that demographics impact on revenue as well. Audience income is thus not irrelevant. Audience
size can be fairly accurately determined by market surveys.
[48] A concern by PWC was that if the level of royalty was too high, the viability of radio stations may be affected.
Justifying the inclusion of industry average profits in the NAB formula, Mr Tonges stated that basing a formula
on an individual station's profit might prove inequitable. So, for example, a wellrun station would pay higher
royalty than one less so. This, he stated, should be contrasted with loss making radio stations that would not
pay any royalty, even though, notionally, they could have higher music usage. An industry average avoided
such a result.
[49] Dr Nicola Theron, an economist who is the Managing Director of an economic consultancy, testified. Like
others, she preferred revenue in the formula to be based on actual rather than notional figures. She too
spoke of the difficulty of placing a value on intellectual property. In respect of exclusions from SAMPRA's
definition of editorial content, she stated that the exclusions are something one needs to be certain of. She
thought that in respect of international comparisons, developing countries would be more comparable to