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Start with Equitable Treatment: Re: sound music licensing company’s submission to the consultation on a modern copyright framework for online intermediaries
Re:Sound welcomes this Government’s commitment to Canada’s creative communities and the value they bring both culturally and economically. The Consultation on a Modern Copyright Framework for Online Intermediaries provides a critical opportunity for stakeholders to provide insight on how Canadian copyright may be improved to ensure equitable treatment for rights holders and to better address their needs.
As background, Re:Sound is the Canadian not-for-profit music licensing company dedicated to obtaining fair compensation for Performers and Record Labels/Makers for their performance rights.
We advocate for music creators, educate music users, license businesses (through Entandem, our joint licensing venture with SOCAN) and distribute royalties to creators – all to help build a thriving and sustainable music industry in Canada.
Re:Sound does this in collaboration with our member organizations, ACTRA RACS, Artisti, MROC, CONNECT and SOPROQ, and the major record labels – Sony Music Entertainment Canada, Universal Music Canada and Warner Music Canada.
Fair and equitable treatment: how Canadian copyright is failing rights holders
As online intermediaries have proliferated, so too has the sharing of copyright material on these platforms. As such, this Consultation is timely and important.
We recognize the merit of the collective licensing model to manage remuneration from online intermediaries. However, addressing existing inequities within The Act is a priority that would efficiently and effectively benefit rights holders.
Among its goals, the Consultation seeks to protect and encourage the use of copyright-protected content online and to facilitate a flourishing digital market. Consistent with this approach, Re:Sound’s position is that rights holders should be compensated whenever their work is used.
The Act is intended to ensure creators are fairly compensated for the use of their music. Yet in two critical areas it fails to do so at the expense of two rights holder groups: Performers and Record Labels/Makers.
The first issue is referred to as the $1.25 Million exemption – a subsidy for commercial radio at the direct expense of rights holders; the second involves the definition of Sound Recording and its unfair exclusion of Performers and Record Labels/Makers from television and film royalties.
The $1.25 million exemption
From a copyright perspective, Recorded Music has 3 distinct components:
- The musical work – this is the music and/or lyrics written by composers, songwriters, or “authors.”
- The performer’s performance of the musical work – this is the unique individual performance of the music by musicians, vocalists, and other “performers.”
- The sound recording – this is the tangible record of the performance of the music, made by a record label or “maker.”
Prior to 1997, if music was played in public by businesses (radio stations, bars, nightclubs, restaurants, fitness centres, etc.), they needed a license from SOCAN, the organization representing the rights of the authors.
In 1997, the Copyright Act was amended to recognize performance rights for Performers and Record Labels/Makers. Re:Sound was created to administer these new rights, to collect the money from the music users (pursuant to rates set by the Copyright Board, which are based on a range of factors), and to distribute the money (royalties) to Performers and Record Labels/Makers equally.
A large group of users, privately-owned radio stations (collectively represented by the Canadian Association of Broadcasters) opposed the imposition of additional costs at a time when commercial radio was struggling to make a profit. In response, the Government created a ‘special and transitional’ exemption allowing commercial radio stations to pay only $100 in royalties on the first $1.25 million of advertising revenue they earn annually to Performers and Record Labels/Makers.
Current situation
Since then, massive industry consolidation has resulted in a dramatic reversal of fortune for commercial radio in Canada. Profits have increased more than 5,200% – from $3.6 million in 1997 to $194 million in 2019. This consolidation has allowed large, profitable commercial radio groups – sometimes owning over a hundred commercial radio stations – to manipulate the exemption by claiming an exemption on $1.25 million in revenues annually for each individual commercial radio station it owns.
Despite consolidation and extraordinary profits in the commercial radio industry, the ‘special and transitional’ measures have never been lifted.
Now, 25 years later, this subsidy persists, and has cost the creative community more than $162 million in lost royalties, while resulting directly in:
- Unfair treatment amongst users
Commercial radio receives privileged treatment among music users. For example, retail stores, restaurants, bars, sports arenas, and other broadcasters, such as satellite radio, receive no deduction, no privileged treatment, no exemption. Commercial radio is the sole music user to receive this special treatment. - Discrimination amongst creators
Uneven treatment exists within the music creator community as well. The licence fees paid to SOCAN (Authors) are based on 100% of the radio stations’ advertising revenue (with no deduction or exemption) while the fees paid to Re:Sound (Performers and Record Labels/Makers) for the same rights remove the first $1.25 million of advertising revenue from the calculation. - Canada being an outlier
There is no parallel or similar royalty exemption in any country in the world – this includes every nation that recognizes performers’ rights in whole or in part.
Moreover, as recently as 2019, both House of Commons Committees (Canadian Heritage and Industry), who were mandated by statute to review the Copyright Act, unanimously recommended the $1.25 million exemption be abolished.
Definition of sound recording
When a sound recording is used in film and television, it seems reasonable that all rights holders would be compensated for this public use of their recorded music. However, the specific definition of a Sound Recording in the Copyright Act has excluded Performers and Record Labels/Makers since 1997.
In contrast, Authors (SOCAN rights holders) are compensated for the public performances of their musical works in film and television. In 2012, the Supreme Court of Canada ruled that Performers and Record Labels/Makers were not eligible for compensation – based solely on the existing definition of sound recording and not the legitimacy of the claim itself.
Current situation
The current definition of a Sound Recording in The Act promotes a discriminatory policy: Authors are paid when their music is broadcast in TV and movies, while Performers and Record Labels/Makers are not. The rights holders represented by Re:Sound and its member organizations lose between $50 - $100 million in royalties each year because of the restrictive definition of “sound recording.”
As part of the Copyright Act Review, two Committees of the House of Commons rejected arguments that favoured the status quo. While INDU did not issue a direct recommendation regarding a new compensation model, the Heritage Committee, whose mandate dealt specifically with remuneration – and who heard directly from affected rights holders – recommended unanimously that the definition be amended to allow sound recordings used in television and film to be eligible for public performance remuneration (Recommendation 11; p. 28).
The solution
Performers and Record Labels/Makers are integral to Canada’s culture and economy. However, inequities in Canada’s Copyright Act have resulted in millions of dollars in lost royalties for this group, despite their important role in the Canadian music ecosystem.
Re:Sound seeks equity among rights holders under The Act, compensation for Performers and Record Labels/Makers when their music is used in film and television productions, and an end to unfair subsidies that benefit profitable businesses at the expense of rights holders – all points reflected in the 2019 Heritage and Industry Committee Reports as part of The Copyright Act Review.
In addition to the points we’ve shared above, Re:Sound wholly supports the Canadian Private Copying Collective’s (CPCC) technology neutral stance for private copying. Canadians continue to copy music but the formats they use have evolved; compensation for creators and music companies must keep up. Revenues from tech-neutral private copying levies would ensure Canadian creators and music companies are remunerated when their work is used.
With The Act set to be reopened in 2022 (to ratify term extension under the new CUSMA agreement), there is an opportunity to address these issues and to correct them.
By removing the $1.25 exemption and changing the definition of a sound recording, as well as adopting the CPCC’s technology neutral proposition, the Government can address these issues, correct inequities, and ensure Performers and Record Labels/Makers are fairly compensated through market-based solutions, without cost to the Government or individual taxpayers.