A chapter of the S.A.C. Story – By Ian Thomas

Ian Thomas
Ian Thomas

Award-winning songwriting and Canadian legend Ian Thomas whose songs have found international success with many artists such as Santana, America, Manfred Man, Chicago, Bette Midler and Ann Murray, played an integral part of the evolution of the Songwriters Association of Canada.  We invited him to share his memories of the journey.  We also hope you will hear his appeal and join us.

In the words of Ian Thomas

In the mid-eighties I went to Ottawa with a group of songwriters to bend the ear of then Minister of Communications, Flora MacDonald. The issue of the day was that the mechanical rate for song usage in recordings had been fixed at 2 cents in 1924 and over 60 years later the rate was still sitting at … 2 cents. It was a wake up call for many songwriters who, like myself, had been living in a bit of a bubble. Many of us just couldn’t believe why no one had done anything about this? More importantly though was the realization of why we expected someone else to look out for our interests in the first place. We needed to grow up.

That Ottawa trip and the attendant publicity succeeded – the mechanical rate increased. The publicity alone probably outed and shamed the industry into action. An awakening creative community of songwriters shortly thereafter founded the SAC. It was a group of talented writers and kindred spirits who knew that songwriters needed dome serious advocacy and education in the business of music. 

From 1998 to 2000, I took a turn as president of the SAC in a rather transitional time. The board and I worked hard and we accomplished a lot. We acquired a greater national profile, our own office, our first full time Executive Director, our first full time secretary and a new quarterly magazine. 

Songwriters Magazine stirred up criticism from a few industry moguls. One article brought on considerable harrumphing from a few publishers. The article, “Looney Tunes” used some actual contracts to show how little money could trickle down to songwriters on every dollar earned. It was an educational, not a sensationalist, article and so no names were mentioned. We offered to print any rebuttals but none were offered. It’s hard to argue facts. The real problem was that advocacy for the creative community was offensive to some who posed as champions of writers while making a living at acquiring their rights. There were many in the music business establishment who simply didn’t like the notion of writers becoming better businessmen.

We visited the Heritage Ministry in Ottawa often in my years as SAC president. I must admit then Heritage Minister, Sheila Copps was a friend to the creative community. I think she sensed that authors’ rights were something of a canary in the coalmine in the fallout from international trade agreements and multinational corporations. Despite a sympathetic minister, I soon understood the sad reality that our Canadian government was merely a government by the best-funded lobby. Then, as now, we were up against an ever-increasing full court press from corporate lawyers working 24/7 to whittle away creator’s rights. My two years as president were an age of reason compared to current realities where unbridled capitalism is so mistakenly being considered the same thing as democracy. Where the common good is evaporating into the garish wealth acquisition by the few.

We have seen “work for hire” language erode creative rights. Language in some film contracts currently demands that, “producer shall be known as author of all work created by composer”. The latter is like Morris Levy of Roulette Records who, in the formative days of rock n’roll, insisted on co -author status of anything released on his label. I never imagined this would become a corporate template with full authorship, no less. Such corporate evolution requires a permissive societal moral regression.

Some commercial music users state that SOCAN and songwriters do not “fit into our business model”. That model seeks profit from music streaming without paying a penny for the music. This is akin to wanting to open a chain of hamburger outlets around the world …  if they can get the hamburger for free. Outrageous? Not in the corporate boardrooms of the new millennium.

A few songwriters have a lofty notion that music should be free. In 2014, corporations hold an unbridled sense of entitlement to songwriters income as they seek to drift-net the industry. “Free music”  means somebody else will gladly take the income your music might generate if you find it so distasteful. You won’t be writing for a living … well not your own.

The future has never looked so bleak for music creators. This has become a struggle for our very economic existence. As writers we have never needed the SAC more than we do now. As Canadians, there has never been a time when we needed to seriously dig down deep and “stand on guard for thee.”  Take your pick. As a Canadian … or as a songwriter, it is our watch.

Disclaimer:  This blog is part of an occasional series whereby those involved in the founding of the Songwriters Association of Canada have been invited to share their memories with us.  These articles represent the recollections, perspective and opinions of their author only, and not the organization.   

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Monetizing Music File-Sharing: Reconciling Consumer Behaviour with a Willingness to Pay

Creative Commons license.  Photo by:  Brett Levin Photography
Creative Commons license. Photo by: Brett Levin Photography

By: Andreas Kalogiannides*

The issue of unauthorized music file-sharing in Canada is a “good news bad news” situation:(1) millions of Canadians (perhaps as high as 40%) regularly file-share music without a licence;
however, according to a recent study commissioned by the Songwriters Association of Canada (the “S.A.C.”), as much as 69% of Canadians who do file-share music are willing to pay a monthly fee to do so.(2) In an effort to reconcile this gap, the S.A.C. is advocating for a voluntary collective licence to monetize non-commercial music file-sharing over peer-to-peer (“P2P”) networks (the “S.A.C. Model”).

This article does not present an in-depth discussion of the legal merits of either the S.A.C. Model or of collective licensing generally; rather, it aims to merely introduce the nuts-and-bolts of the proposal and stimulate conversation on this issue.(3)

A Summary of the S.A.C. Model

The S.A.C. Model proposes that private individuals who engage in non-commercial music file- sharing would be licensed to do so through the payment of a monthly licence fee, appearing as a line-item on the individual’s Internet service provider (the “ISP”) bill.(4) The licence would permit individuals to music file-share over P2P networks (including BitTorrent clients) and other platforms such as Facebook and Twitter. Notably, however, the generation of commercial revenue from file-sharing activities is ultra vires the S.A.C. Model and would require the appropriate licence(s) from the rightsholder(s) or collective rights organization(s).(5)
Performers, songwriters and rightsholders would receive a pro-rata share of total licensing revenues based on the number of times their works are file-shared. Such distributions would be based on data collected by technology and media measurement companies.(6) Individuals who do not file-share music would be able to opt-out by signing a written declaration to that effect; similarly, rightsholders would also be able to opt-out, in which case they would receive no licensing revenue if their works are file-shared.(7)

Canada’s existing collective licensing framework would serve as the backbone of the S.A.C. Model as regards administration, revenue distribution and rate-setting, meaning that collective rights organizations, including the Society of Composers, Authors and Music Publishers of Canada (“SOCAN”), Re:Sound and the Canadian Mechanical Rights Reproduction Agency (“CMRRA”), would continue to distribute these royalties to their members just as they do now. The only difference being that a new company, Song-Share.ca, would be formed to help the collectives organize this process.(8)

The Right Solution at the Right Time

The S.A.C. Model does several things right. First, the S.A.C. Model prioritizes legal content over illegal content. For example, under the current ISP subscriber model, consumers acquire Internet access only and not content. By separating network access and content, and given the inherent nature of the Internet as a communication technology (e.g., a broadband connection is all you need to consume all manner of content, legal or illegal), this model inadvertently facilitates music piracy. I have termed this situation the “access-content” disconnect. The unfortunate result is that, solely by virtue of having a broadband connection, consumers have access to both legal and illegal music on an equal scale; legal, digital music must now compete with “free”.

But, the S.A.C. Model helps narrow this “access-content” disconnect because it offers an easy- to-swallow value proposition directly to consumers at their Internet access point: pay a negligible monthly fee and share, swap and consume unlimited music content through your broadband connection. This arrangement is similar to how cable television providers bundle network access with content (e.g., access to the Rogers cable network is only offered through the purchase of channel packages); like the cable provider, the ISP becomes the intermediary through which content is delivered.(9)

Second, the S.A.C. Model is a “business-to-business” approach, meaning that music fans and file-sharers would not have to change their behaviour, install any software or buy new hardware; they just make a small monthly payment. And the evidence suggests that Canadians are willing to pay: a recent study conducted by the S.A.C. and CROP, a Montreal-based research firm, found that 69% of Canadians are willing to pay a reasonably monthly fee in exchange for a (10) 
licence to file-share music. More uplifting still is the fact that the study also found that 93% of
Canadians believe that songwriters and performers should stand to benefit from this licence fee.(11)

Third, there is precedence for the S.A.C. Model. From 2008 to 2010 in Denmark, TDC, a Danish ISP, operated TDC Play, a tethered download and streaming service whereby mobile and broadband customers we re given unlimited access to licensed music along with their subscriptions.(12) To date, more than 340 million tracks have been streamed and downloaded through TDC Play, and it has been argued that the service has helped reduce unauthorized music file-sharing and even increased TDC’s customer retention rates.(13) TDC has since entered into negotiations with KODA, the Danish collective rights organization, to set a new royalty rate for the period of 2010 to present; and, it is particularly telling that the International Federation of the Phonographic Industry (“IFPI”), which rarely involves itself in private negotiations, has
(14) come out in support of TDC Play.

Where Do We Go From Here?

From the perspective of songwriters and performers, the S.A.C. Model would create a new revenue stream from a popular use of music that, while illegal under the Copyright Act,(15) continues unabated and does not bear any royalties. Moreover, this revenue stream could potentially dwarf current music industry licensing revenues – a conservative estimate is that $405 million could be generated annually from licensing just 25% of total Canadian ISP accounts at $5 per month.(16) Consider that in 2010 SOCAN collected $275 million for the use and performance of music in Canada.(17)

The S.A.C. Model is a sustainable, real-world solution which monetizes a consumer behaviour that is difficult, if not impossible, to change. And, importantly, the model can be implemented using our existing music licensing infrastructure. The S.A.C. Model presents an excellent opportunity for the Canadian music industry and the ISPs to sit down at the negotiating table and start talking because, frankly, not only has the demand for music never been higher, but also because Canadians fundamentally believe in the importance of compensating songwriters and performers for their hard work.

This article originally appeared in the Ontario Bar Association Entertainment, Media and Communications Section Newsletter, Volume 22 No. 2.

*Andreas Kalogiannides is a Toronto intellectual property lawyer specializing in copyright, licensing and music law.  He is interested in issues at the intersection of the music business and the law, particularly on novel licensing models and copyright infringement in digital environments.  Most recently, Andreas was in-house counsel at a collective rights organization representing the publishing industry; he has also held positions at a major record label, a music industry collective, the Copyright Board of Canada, and the Future of Music Coalition.  Andreas can be reached at andreaskalogiannides@gmail.com.

For more information regarding the Songwriters Association of Canada’s music file-sharing proposal, please visit http://www.songwriters.ca or click for brief and detailed versions of the proposal.

FOOTNOTES

1 See “Monetizing Music File-Sharing: A New B2N Model”. Songwriters Association of Canada. Available online at http://www.omdc.on.ca/AssetFactory.aspx?did=7321. Page 6. [S.A.C. Music File-Sharing]. See also “Songwriters Association of Canada Music Consumption Behaviours Research Preliminary Report, March 2011”, Appendix D: CROP/S.A.C. Survey on Music Consumption Behaviour, at pages 40, 41, and 65. Available online at http://www.omdc.on.ca/AssetFactory.aspx?did=7321. [CROP Survey].

2 Ibid S.A.C. Music File-Sharing at page 6. See also CROP Survey at pages 65, 68, and 70.

3 The author makes the assumption that neither will Canadians stop downloading, distributing or sharing music without payment nor will any legal measures – on their own – stop this behaviour.

4 The licensee fee is not a “levy” or a “tax” on music, as surmised by some; unlike levies or taxes, a consumer may opt-out of the model if they self-declare that they do not file-share.

5 See S.A.C. Music File-Sharing supra note 1 at page 5.

6 Since the early 2000s, technology and media measurement companies, such as Big Champagne Inc., have collected data on ticketing, social media, and P2P internet traffic on behalf of record labels, music publishers and other industry stakeholders. Notably, Big Champagne was recently acquired by Live Nation, Inc.. See Halperin, Shirley. “Big Champagne CEO on Live Nation Deal: ‘We’re Going From Playing a Little Club to the Biggest Stage in the World’”. The Hollywood Reporter. December 15, 2011.   Available online at http://www.hollywoodreporter.com/news/big-champagne-live-nation-eric-garland-274204

7 See S.A.C. Music File-Sharing supra note 1 at page 5.

8 Similar to the ownership make-up of SOCAN and Re:Sound, Song-Share.ca would be owned by equal parts songwriters, music publishers, artists and record label executives. See S.A.C. Music File-Sharing supra note 1 at page 8.

9 Opponents may argue that this still does not solve the access-content disconnect because consumers can simply opt-out of the model, not pay the license fee, and then file-share anyway. In response, I argue that these people would still be liable for copyright infringement, and, that when offered the ability to pay a reasonably monthly fee, the majority of consumers would do so to avoid legal consequences.

10 See S.A.C Music-File Sharing supra note 1 at page 6. See also CROP Survey supra note 1 at pages 65, 68 and 70.

11 Ibid S.A.C. Music-File Sharing at page 8. See also CROP Survey supra note 1 at pages 65 and 71.

12 For clarity, TDC Play is a tethered, walled-garden service whereby subscribers have access to free, legal music downloads and streaming for as long as users have a TDC account. This is somewhat different to the S.A.C. Model that is not limited to a particular ISP, and that would licence music file-sharing that originates on any server and on any platform. See “IFPI supports TDC music service in Denmark”. International Federation of the Phonographic Industry. April 7, 2010: Copenhagen, Denmark. Available online at http://www.ifpi.org/content/section_news/20100426.html [IFPI].

13 See “TDC Play reaches 340 million streamed, downloaded tracks”. Telecompaper. June 30, 2011. Available online at http://www.telecompaper.com/news/tdc-play-reaches-340-million-streamed-downloaded-tracks– 812744.

14 SeeIFPIsupranote12.

15 R.S.C., 1985, c. C-42.

16 This figure is based on Canada’s estimated 27 million total internet subscriber accounts and calculated according to the following formula: ((27,000,000 * 0.25)*$5) * 12 months. See S.A.C. Music-File Sharing supra note 1 at page 8.

17 See “SOCAN Announces 2010 Financial Results: Music Use Higher Year Over Year.”. Society of Composers, Authors and Music Publishers of Canada. May 4, 2011. Available online at http://www.socan.ca/press- release/socan-announces-2010-financial-results-music-use-higher-year-over-year.

From Brussels with Love: The Creators Conference, February 20, 2013

BrusselsIt’s an incredible feeling being in a room full of music creators who have traveled from many countries around the world for a common purpose: Bettering the collective lot of music creators everywhere.

I am in Brussels, along with the S.A.C.’s Managing Director, Isabel Crack, attending “The Creators Conference”, hosted by the European Composers and Songwriters Association (ECSA).

Clearly, there is a shared understanding that making the world a better place for those of us who create music will not be easy. We have daunting problems and limited resources. We work in our respective continents and countries under very different regulatory and legal frameworks. Our continental European counterparts have “authors’ rights”, while we in North America and the UK work under copyright (an upcoming blog will go into the differences).

But there is also an understanding that as different as our situations may seem, they are increasingly similar. Global connectivity and large mergers are making the world an increasingly smaller and in some ways less diverse place.

Rather than many significant music publishers in various territories as there once was, there are now basically three global giants: Universal, SonyATV/EMI and Warner. These companies have enormous market share everywhere.

And of course Google, Apple and Spotify are all global concerns as well.

These massive companies would prefer not to deal with dozens of local laws and regulations. Increasingly they are pushing for global “harmonization” and “One Stop Shopping”, and prefer to deal directly with one another, thereby bypassing performing rights societies and other music collectives.

In a world where huge commercial interests negotiate directly with one another on a global scale, creators must form global alliances to ensure we have a voice in the process, that we are fairly compensated, and that there is transparency.

That is why this conference in Brussels, capital of the European Union, is so important.  And it is why “The Fair Trade Music Principles” which we are developing with music creator organizations in Europe, Latin America and Africa, as well as Canada and the US is a vital tool for us to establish a sustainable music industry for creators.

The Fair Trade Music Principles transcend our regional and cultural differences and give us a common platform for a proactive and unified approach in this new global environment.

Fair Trade Music Principles for a Better Future

2012 was a ground breaking year for songwriters and composers worldwide. For the first time our organizations formed alliances both in Canada and around the world.

In Canada, the S.A.C. joined with the Screen Composers Guild and SPACQ, our counterpart in Quebec to form Music Creators Canada.

Music Creators North America was formed following a meeting with the Songwriters Guild of America (SGA) and Nashville Songwriters Association International (NSAI). We have also joined hands with our colleagues at the European Composers and Songwriters Association (ECSA), and the International Council of Authors and Composers (CIAM).

The work will continue in 2013 and beyond to strengthen these newly created relationships so that music creators around the globe can and will speak with a united and powerful voice.

But what will that unified voice say? Surely, with so many organizations from so many parts of the world involved, agreeing upon a common narrative will be difficult.

Well, we have good news on that front. Almost all of the organizations have agreed upon a set of principles: the Fair Trade Music Principles.

In the coming weeks, I will present each of the Principles and explain the thinking behind each one.

Here is the first:

We call for new (and existing) music business models built on principles of fair and sustainable compensation for music creators.

One only has to think of Apple, a company that transitioned from a niche computer manufacturer to the most highly valued company in the world. The transition was built on the incredible popularity of the iPod, which originally had one purpose: to play music. (The iPod of course led to the iPhone.)

In addition, we have Spotify, Rdio and Pandora, not to mention Google and Internet service providers, generating combined revenue streams in the billions of dollars annually.

Without music these businesses would not exist, and yet those who create the core element to this vast wealth, the music creators, are the beneficiaries of very little, if any of this massive value chain.

So we find ourselves in much the same place that Third World coffee growers were in before the Fair Trade Coffee movement, and this is a situation that music creators must and will work globally to correct.

It is time music creators were fairly included in these value chains based on our collected works. The fact that we are working together internationally to achieve this goal is a real step forward.

Bill C-11: A Backward Step For Music Creators

Here is a simplified list of key provisions in Bill C-11, the current revisions to Canada’s copyright law that are expected to be passed shortly, and a brief explanation of why they do little to improve the lot of music creators, and in some cases are detrimental to our situation.

1) Format and Time Shifting, Back Copies
The proposed legislation would permit reproduction of a work for private purposes where the work is a lawful copy—and not merely rented or borrowed—and where the individual making the copy did not circumvent a technological protection measure. A similar right for making back-up copies is also proposed.

The problem: Music creators and publishers will essentially lose two revenue streams thanks to Bill C-11. One is the private copy levy, which was not extended to mp3 players and similar devices in the new law. Since the levy only applies to recordable CDs, and sales of those are falling dramatically, it is only a matter of time before this revenue stream virtually disappears.

Secondly, music creators and publishers currently receive “broadcast mechanicals”, a royalty paid by broadcasters when they make copies of songs for broadcast purposes. Bill C-11 eliminates this revenue stream.

2) Anti-Circumvention Provisions
Bill C-11 would prohibit the circumvention of technological protection measures used by rights-holders to secure and control their digital content.

The problem: Since little or no music is protected by these measures, and has not been for years, this provision will do nothing to reduce the billions of songs that are file shared every year and for which music creators receive no compensation. The SAC believes the monetization of music file sharing is the only sensible approach in any case. The model we propose is available at http://www.songwriters.ca/proposalsummary.aspx

3) Changes to Fair Dealing
Bill C-11 expands the existing categories of fair dealing exceptions to include dealings for the purpose of parody or satire as well as for education purposes.

The problem: Because the definition in Bill C-11 is so broad, this provision will almost certainly lead to years of costly litigation to determine what is “fair dealing” and what is not. Bottom line: Huge legal costs and less revenue for music creators

4) Changes to Statutory Damages*
Non-commercial infringers of copyright would face considerably less exposure to statutory damages. The range of possible statutory damages would be reduced to $100 to $5,000 per infringer and cover all past infringements.

The problem: This provision limits damages to an amount so small that suing will not be economically viable, except for those with the deepest pockets. Again, the SAC does not favour litigation as a policy against music file sharing, but we understand litigation may be the only recourse in certain extreme situations. In other words, if legitimate damages are in excess of the proposed limits, why shouldn’t creators and right holders be able to sue for the full amount of the loss?

* We have had further legal opinion on this matter that creators and right holders can opt out of statutory damages and seek legal remedy for full actual damages. The question remains whether statutory damages are set at appropriate levels.

5) Limited Liability for ISPs and Search Engines
The government has proposed limiting the liability of ISPs and operators of Internet search engines for the copyright infringements of their subscribers, in that they act as mere conduits on the Internet.

The problem: ISPs already have “safe harbour” protection in law and have claimed for years they are only “dumb pipes”. Without getting into whether this is true or not as many assert, it does create a situation where Internet service providers have little incentive to work with right holders to address the issues.

So Bill C-11 legislates less revenue for music creators, imposes more expenses in holding on to the revenue we do receive, and more confusion as to what are rights as creators are.

It is worth noting that members of the SAC board, as well as other right holders, have gone to Ottawa many times to deliver the message to government that this bill is not a good one for Canada’s music creators.

Bill C-11 makes it clear our advocacy work to improve the legal and business environment for our creative community is far from done.

Many thanks,
Eddie Schwartz
President, S.A.C.

Click Here to read Bill C-11.

Does Spotify Make Cents for Creators?

There has been a lot written about Spotify in recent days. As of now Spotify operates in Europe and the US only, but there are very similar services in the works here in Canada, and the discussion below may well apply to them as well.

Some of the attention Spotify has received lately is because a growing number of independent record labels have stopped allowing Spotify to stream the music of their artists. The central complaint has been that the revenue stream from Spotify is so miniscule that it provides virtually no compensation for music creators and indie labels, while undermining sales of physical product such as CDs, which pay considerably more.

Spotify has responded by announcing that it has paid the music industry roughly $150 million over the 3 years it has been in business.

That may seem like a lot, but for those of us who write and perform music there is both much more to the story, and unfortunately, far less.

Let’s begin with the $150 million figure. Since that revenue was paid out over 3 years it averages $50 million a year. Keep in mind that although Spotify has only operated in Europe for most of that time, the music it streams originated with creators from all over the world, and so that $50 million must be split between creators and right holders in the US, Canada, France, Australia, the UK, Ireland, and many more countries around the world.

Now let’s compare revenue from other sources to get some perspective.

In Canada, our excellent performing rights society, SOCAN, collects about $250 million a year from radio, TV and other sources. BMI, ASCAP and SESAC, the US performing rights societies, collect an amount between $1 and $2 billion a year. Worldwide performance revenues are billions more. This all sounds like a great deal of money. But when it is divided among all the creators and right holders in the world it amounts to modest payouts to the vast majority. SOCAN’s average royalty payment to songwriters is in the area of $500 annually.

So the $50 million a year from Spotify when divided among the world’s creators and right holders amounts to payments that are far below other uses such as performing royalties, and in fact are microscopic for creators and right holders.

Some argue that this kind of comparison is unfair to Spotify because it is still relatively new and in time it will reach many millions more subscribers and pay a reasonable amount to those who write and perform the music.

Maybe. But after 3 years, Spotify has only 1.6 million paying subscribers in Europe, or less than one half of one percent of the population. That does not bode well for Spotify eventually reaching the size of audience that it would need to fairly compensate creators.

So the situation comes down to this: Music creators are being asked to subsidize a model that pays them very little now, and may never pay a reasonable royalty for the use of their work.

As we have seen with a number of independent record labels, some are just saying no.