Music Law 101 Edition #2

by SaskMusic

August 26, 2013 in Doing Business

In our April/May 2010 edition of the Session, we provided Music Law 101 Edition #1 Basic Copyright Law. To expand on the concepts introduced in that article we are pleased to now provide Edition #2 REVENUE FROM SONGWRITING. Similar to our first edition, we have attempted to keep the language and jargon in easy to follow english and discuss only general aspects. Given the complexity of this topic, we would caution that the reader should not rely simply on this article to answer any specific questions. We are always available to assist members with any sp ecific question respecting these issues. We would again provide credit to Bob D’Eith of Music B.C. ( our sister organization in British Columbia) for all of the work he has provided for this article.
A) The Publishing Deal

© 2011 Saskatchewan Publisher Inc. This is the copyright notice of the ownership of the underlying copyrights of the songs on an album. Initially the ownership rests with the author(s) of the musical work, however the author may assign these copyrights to a publisher. The above example assumes that the writer of the song has assigned the copyrights to a publishing company. This is referred to as a “publishing deal”.
Under the current Copyright Act, an author of a work may assign the underlying copyrights to a third party publisher. Traditionally, a publisher took 100% of the copyrights in exchange for the writer receiving an advance against future royalties recouped against 50% of any revenues generated by the copyrights. After recoupment, the writer and the publisher would share 50/50 on all revenues. In regard to public performance royalties (SOCAN) the publisher shares in up to 50% of the public performance royalties generated by such copyrights (as set out below). What is more common today is the co-publishing deal where the writer may retain part ownership of the copyrights in the work and up to 75% of the income generated by the copyrights. Another method of dealing with publishing is the publishing administration deal where the copyrights remain with the writer, but the publisher administers the publishing and charges a percentage commission for doing so (usually 15-25%).
B) Registration of your Copyrights
In Canada, formal registration is not legally required to protect copyright. Copyright in a work is protected automatically under the Copyright Act once the work is in a tangible form (such as a chart, sheet music or embodied in a sound recording). Notification as to the copyright (©) is not strictly required, but it is very important to give notice to the world as to the ownership of the underlying copyrights in a work. By doing so, radio will know what publisher/writer to place on the reports to SOCAN, film producers will know what publisher/writer to place on the “cue sheet” to be registered with SOCAN, and artists wishing to use the song on other recordings will then know what entity to approach if they want to cover your song.
Even though registration of your copyright is not required in Canada, registration is required if you ever want to obtain any songwriting royalties. These royalties are collected from the users of music and distributed by SOCAN. If you have not registered your song with SOCAN, you will not receive any of the money collected by SOCAN for the use of your song.
C) The MAPL Designation
The “MAPL” designation you have seen on Canadian albums/CDs refers to Canadian content regulations determined by the Canadian Radio and Television Commission (CRTC). As required by the CRTC private radio in Canada must play a certain percentage of music (currently set at 35%), which is “Canadian”. In order to qualify for radio play, acceptable “Canadian” recordings must have at least two of the music, artist, production or lyrics embodied in the recording created or provided by a Canadian citizen or company. If a song qualifies, then it can be used by radio stations to fulfill their Canadian Content (also known as “CanCon”) minimum play requirements. It is imperative that the MAPL logo filled correctly be placed on all commercial releases to ensure that radio is aware of its CanCon status. As a Canadian artist, this gives the artist a distinct advantage in securing Canadian radio play.
D) Revenue from the Songwriter Copyright
1. Public Performance Royalties--radio, television, theatrical, live performance and performance of pre-recorded songs.
When a publisher signs up with SOCAN (the body authorized to collect public performance royalties in Canada with some minor exceptions), the publisher agrees that it may only receive up to 50% of this revenue. The writer’s share is paid directly to the writer (or in the case of a co-write, royalties are split according to the writing percentages allocated for the song). A “work notification form” is filed with SOCAN to enable SOCAN to pay out royalties to the correct parties. This income is administered exclusively by SOCAN in Canada and primarily by ASCAP and BMI in the USA. Each country has its own public performance rights society to administer these revenues. The Canadian copyright board has watered down SOCAN’s exclusivity by allowing broadcasters to secure a “modified blanket license” directly with film/television composers. Given SOCAN’s relative monopoly if your song is not registered SOCAN you will not receive any royalties for its use. It really is that straight forward.
2. Mechanical Licensing Fees. If the song is reproduced on a “mechanical contrivance” such as a CD, cassette tape or other media, the label or individual pressing such album, pays the publisher/writer of the song a fee of approximately $0.077 per song per record sold. In Canada, this is a “prescribed rate” set by agreement between the recording and publishing industry. In the USA, the rate is a “statutory rate” set by legislation. If an artist or label wishes to record a song, they must first secure a “mechanical license” from the owner of the copyright. This can usually be done through the CMRRA in Canada and the Harry Fox Agency in the USA. If the writer is not represented by these agencies, then the artist or label would have to contact the publisher or author of the work directly to secure their mechanical license. In the USA, once a song is publicly released, a mechanical license is automatically available for a statutory rate.
3. Synchronization Licensing fees. When a song is placed on a film or TV soundtrack, the producer of the film or TV program is responsible to pay the publisher or author of the work a “Sync Fee”. This fee is paid in order to allow the producer to synchronize the song to film. The amount of this fee is usually a result of negotiation between the copyright owner and the respective show. Use of music in film and television has increased approximately 40% over the past 5 years but the fees being paid are on average 60% lower. Most artists however see an increase in income from other revenue streams if one of their songs is featured in a film or television show.
4. Ringtone and Master Tones. Use of songs on cell phones has become a lucrative business for music.
5. Private Copying Levy. Owners of copyrights in musical works were denied revenue due to pirating of copyrighted material for decades. Part VII of the Copyright Act created the so-called “Blank Tape Levy” on recordable media including Cassette Tapes, CDRs and other media as determined as commercially viable under the legislation. A blank media levy was introduced in 1997, by the addition of Part VIII, “Private Copying”, to the Canadian Copyright Act. The power to set rates and to set the distribution allocation is vested in the Copyright Board of Canada. The Copyright Board has handed the task of collecting and distributing the funds to a non-profit private organization known as the Canadian Private Copying Collective ( CPCC). Specifics of this levy are as follows:
• The levy applies to “blank audio recording media”, such as
• The levy is paid by importers and manufacturers of such media sold within Canada (and typically passed on to the retailer and passed on to the purchaser).
• The levy is collected regardless of the purchaser’s end use of the media.
• The private copying levy is distributed as per the Copyright Board’s allocation as: 66% to eligible authors and publishers,18.9% to eligible performers and 15.1% to eligible record companies.
• The Canadian Private Copying Collective has developed a methodology by which the proceeds are distributed to rights holders based on commercial radio airplay and commercial sales samples, ignoring radio/college airplay and independent record sales not logged by Soundscan. This methodology has been criticized as favouring major-label artists. As of September 7, 2007, over one hundred million dollars had been distributed.
• In conjunction with the levy, the Copyright Act allows individuals to make copies of sound recordings for their own private, non-commercial use. They may not distribute the copy.
• On December 17, 2004, a Canadian judge ruled that the blank media tax no longer applied to MP3 players such as Apple Inc.’s iPod. Before this decision, the rates were $2 for players with less than 1 GB of capacity, $15 for players up to 15 GB, and $25 for players 15 GB and over.
• On February 12, 2007, the CPCC asked the Copyright Board of Canada to reintroduce the levy of $5 to $75 into the sale price of MP3 players in Canada. In addition, the CPCC also proposed levies of $2 to $10 for memory cards (since withdrawn), and 8 cent increases to CD, CD-R Audio, CD-RW Audio, and MiniDiscs. This is the source of the recent statements by federal government Members of Parliamenty against the $75 Ipod tax.
• On January 11, 2008, The Federal Court of Appeal rejected the Copyright Board of Canada’s proposed new levy on MP3 players, stating that the board erred in law, ruling that they do not have the regulatory authority to impose such levies.
The members of the CPCC are the following Member Collectives:
• Canadian Musical Reproduction Rights Agency (CMRRA)
• Society of Composers, Authors and Music Publishers of Canada (SOCAN)
• Society for Reproduction Rights of Authors, Composers and Publishers in Canada (SODRAC)
• Neighbouring Rights Collective of Canada (NRCC)
• ACTRA Performers’ Rights Society (APRS)
• Société de gestion collective de l’Union des artistes Inc.
• American Federation of Musicians (AFM)
• Audio-Video Licensing Agency Inc. (AVLA)
• Société collective de gestion des droits des producteurs de Phonogrammes et de vidéogrammes du Québec (SOPROQ)
The Private Copying Levy is paid to labels, performers, publishers and songwriters. If an artist is not published and not signed to a label, then it is important to register with the AVLA and CMRRA as well as SOCAN and ACTRA/AFM.
This Levy is a very significant point of contention in the current copyright reform discussions. The source of funds for the levy is very quickly disappearing. With the diminished use of CDRs, there will soon be very little revenue for distribution. This is why the imposition of a new levy on the sale of digital devices is so important. At the time of writing this article, the current federal government has publically declared its opposition to what it call the “ Ipod Tax”. For SaskMusic, the issue should really not be viewed as a taxation issue but rather an issue of replacement of an existing ( but diminishing) revenue stream.