Inside the CMO – PERAK – KAHC Tariff for Hotels, Bars and Restaurants: Part 3

The Copyright Act of 2001 is an Act of Parliament to make provision for copyright in literary, musical and artistic works, audio-visual works, sound recordings, broadcasts. The Act also establishes Kenya Copyright Board (KECOBO), a state corporation under the Office of the Attorney General and Department of Justice (AG). Principally the Act empowers KECOBO to license and supervise the activities of collecting societies, also known as Collective Management Organisations (CMOs). Anybody who wants to use music (subject to copyright) in public needs a licence to do so. The licence fee, or royalty, depends on the type of use. Royalty rates are set in tariffs, which are determined by CMOs.

The Pubs and Restaurants Association of Kenya (PERAK), the Kenya Association of Hotel Keepers and Caterers (KAHC) among other public performance or communication to the public rights licensees have actively engaged both the CMOs and KECOBO regarding tariff setting and licensing conditions. Their key message: the setting and approval of the tariffs for bars, restaurants and hotels must be consultative and cater for the interests of all parties involved.
On 21 April 2017, the Collecting Society Tariffs (CST) with the Schedule of Joint Music Royalty Tariffs, 2017 was gazetted by the AG. It is stated that the CST revokes the Copyright Act (Kenya Association of Music Producers and Performance Rights Society of Kenya) Tariffs, 2015. The CST has several classes that are relevant to hotels, bars and restaurants are the following tariff categories: 1) Nightclubs and Discotheques; 2) Private Members’ Clubs; and 3) Hotel, Restaurants and Bars; 4) Elevators and Lifts; and 5) Company Vehicles. There are several aspects of the current tariff structure that are problematic from a KAHC-PERAK perspective:

  1. The ad hoc determination and fluctuations of tariffs.
  2. The reclassification of user types according to places of exploitation of music.
  3. The introduction of a tier system based on star ratings for hotels, restaurants and bars.
  4. The use of the terms “sound and musical rights” and “visual, sound and musical rights” which have not been defined and connected to the relevant rights owners and/or respective CMOs.
  5. The removal of maximum and/or minimum tariffs.

In 2015, a hotel in Nairobi measuring 2,000 square feet was required to pay KES 30,000 for use of audio and sound recording as background music. In 2017, the same hotel is required to pay KES 51,200 under the hotel, bar or restaurant tariff alone. This is almost a 50% increase in tariffs without any apparent justification. In both 2015 and 2017, it is not exactly clear how the unit amounts in KES were arrived at, other than the CMOs’ insistence on international benchmarking. Which countries were considered in the benchmarking process and why? Such concerns lend credence to claims of arbitrariness and opaqueness in setting of tariffs by the CMOs.
The reference to “places of exploitation of music” in the CST is not clear and misleading particularly to users such as hotels, bars and restaurants which may have several other “places of exploitation of music” within the same establishments. For instance, the CST refers to Live Music Performances, Halls, Shops and Stores, Nightclubs and Discotheques, Private Members’ Clubs which may easily be located within a single Hotel along with Elevators and Lifts. The danger of using the term “place of exploitation of music” to denote user categories is that it may amount to royalty stacking (where a user is charged multiple tariffs for the same establishment) and discrimination (where different users are charged different tariffs depending on the “place of exploitation of music”).
Similarly the introduction of a tier system based on star ratings for hotels, restaurants and bars is not clearly defined. For instance, which criteria for star rating will be used by the CMOs? What factors will be considered in adopting one criterion for star rating over another?
The most problematic aspect of the CST is the use of the terms “sound and musical rights” and “visual, sound and musical rights”. It is not clear from the CST under what circumstances a user exploits either “sound and musical rights” or “visual, sound and musical rights” or both. In particular, these terms appear to overlap since both “musical” and “sound” “rights” are used twice which may lead a user to question where the distinction lies between the rights of copyright owners and related rights holders. In this regard, users and the general public at large have a right to know the meaning of these two sets of terms in the CST labelled with respect to the respective shares for authors, performers and producers as reflected in the gazettement of the registered CMOs.
In light of the above, it appears that users have been denied access to crucial information relating to the benchmarking procedures and tariff-making processes and data used by the CMOs to arrive at the rates in the CST. This is in contravention of the right to access to information pursuant to Article 35 of the Constitution and the Access to Information Act No. 31 of 2016.

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