The U.K. Copyright Tribunal has ruled in favor of music television company CSC Media Group Limited over its royalty rate dispute with Video Performance Ltd (VPL), which licenses public performance of music videos.

London-based CSC operates digital channels including the Chart Show, Vault, NME TV and Flava. It maintained that the historic licensing regime operated by VPL was "unfair and unreasonable."

During the three-week hearing, CSC argued that music television channels provide a considerable promotional benefit to record companies. The Tribunal found in its Sept. 7 ruling that there was "uncontroverted evidence... that promotion remains a significant part" of the function of music videos.

CSC's challenge was in response to a proposed royalty of 20% of gross revenue, which it found "unreasonably high." It also argued that the fact that advances were not referable to the anticipated royalty payable and were non-returnable was unreasonable and represented a barrier to entry for smaller TV companies.

The Copyright Tribunal reduced the level of royalty for CSC from 20% to 12.5% of gross revenue. It was the first time that a television music broadcaster has pursued its case all the way to the Copyright Tribunal.

The Tribunal also required VPL to make other changes to its license terms, including the narrowing of the definition of gross revenue. The Tribunal also ruled that advances should be capped at 30% of the anticipated royalty payable and should be returnable to the extent they exceed the 12.5% royalty.

"This case once again raised the issue of the promotional benefit received from the broadcast of copyright material," said Kevin Bays, who led CSC's legal team at solicitors Davenport Lyons, in a statement. "There is no doubt that this must be taken into account in fixing a reasonable royalty for the use of this material."

"This is a very disappointing result for our members who invest a great deal of time and money in creating this valuable repertoire, albeit the Tribunal did not go as far as awarding the 8% that was being sought by CSC Media Group Ltd," said a VPL spokesman. "We fundamentally disagree with a number of the key conclusions that led the Tribunal to make its decision."

In its ruling, the Tribunal took into account the impact of the Internet on commercial television and changes in the market, in particular the decline in television advertising revenue.