Royalties Revealed

by SaskMusic

July 28, 2009 in Finding Money

You write a song, perhaps hoping that someday millions of people the world over will hear it, be moved, buy your album, and name their firstborn after you. And then the royalty cheques will start pouring in, and you'll be able to buy Mom & Dad a house in Malibu. But how do you actually go about collecting royalties? Will you even recoup enough to buy a box of Kraft Dinner? Will you someday receive a cheque in the mail for $2.31? And how come you aren't getting rich, when C95 played you at least ten times last week?

All these and many more exciting questions will be answered in today's episode of…Royaltie$ for Dummie$.

For simplicity's sake, meet the following:

Joe Songwriter - representing all songwriters, lyricists, composers, music publishers, or other copyright owners.

Ted User - representing any businesses that license music (nightclubs, radio stations, cinemas, etc.)

Who is SOCAN, anyway?

The only performing rights society in Canada is a non-profit association called The Society of Composers, Authors and Music Publishers of Canada. It exists to ensure that its member composers, lyricists, songwriters and music publishers are compensated when their music is broadcast or performed in public.

Its role is to license people like Ted User in return for copyright fees. It then distributes these fees (in the form of royalties) to SOCAN members (Joe Songwriter) in Canada, plus the thousands of foreign music copyright owners whose works the society also licenses in this country. SOCAN's distributions reflect the use of music in Canada. If foreign music is performed, royalties are paid to foreign copyright owners; if Canadian music is performed, royalties will go to Canadians.

It would be impossible for Joe to keep track of the millions of public performances accessed by thousands of Teds across Canada and abroad. Similarly, Ted would find it impossible, not to mention costly, to obtain the permission of each of the hundreds of thousands of Joes in Canada and abroad each time he wished to perform (or authorize someone else to perform) music. SOCAN handles this go-between work.

SOCAN also has a mandate to protect, preserve and promote the rights of music creators. As well, SOCAN is dedicated to improving the status of its membership and copyright laws on both national and international levels.

SOCAN was formed in 1990 when the two previous Canadian performing rights societies, Composers, Authors and Publishers Association of Canada (CAPAC) and the Performing Rights Organization of Canada (PROCAN), merged their operations to form a single entity.

Now, Ted just needs one license. He doesn't have to pay fees to two performing rights societies. A single set of SOCAN tariffs now exist; program and cue sheet submis-sions and analysis aren't duplicated. Plus, Joe Songwriters belong to a single society that is able to speak with a strong, unified voice on behalf of its members and on behalf of members of foreign affiliated societies around the world.

SOCAN administers "performing rights." This gives Joe the sole right to perform in public or broadcast his works, or to authorize others to do so, in return for compensation. Since Joe is the creator and/or legal owner of an original work, the rights belong to him. No one else may reproduce, sell, or otherwise use his creation unless Joe says so. And he has a right to be paid for the use of his creative efforts. Joe owns the rights to his musical works, or "intellectual" property.

Joe may assign certain rights to other parties, usually a music publisher. In Canada, reproduction rights (mechanical and synchronization rights) are normally handled by a licensing agency such as the Canadian Musical Reproduction Rights Agency Limited (CMRRA) or assigned to the Society for Reproduction Rights of Authors, Composers and Publishers in Canada (SODRAC) Inc.

There are societies like SOCAN in every developed country, and most new and developing countries. Through agreements between these societies and under international copyright treaties, the musical works of SOCAN members like Joe are protected almost worldwide. Likewise, the works of foreign music creators (such as Joe's cousin in France) are protected & licensed for performance in Canada by SOCAN.

Golly gee! How can I become a SOCAN member?

Not so fast. To join SOCAN, Joe must have created musical works that fall into at least one of the following categories:

* The work has been published by a music publisher;
* The work has been recorded (and released for sale.)
* The work was/will be performed at a SOCAN-licensed event (e.g. radio, TV or a live setting like the Flatland Music Festival, or a club where there is a cover charge above $6).

There are no membership fees for writers. The Membership Agreement between SOCAN and Joe Songwriter is initially for two years and, unless terminated by either party, is renewed automatically for successive two-year periods.

Joe should inform SOCAN of any new songs that are likely to be performed. This ensures that performances can be identified when they show up on logs. (He can't get paid for songs he hasn't registered.) A "Work Notification Form" is used to provide the information SOCAN requires - titles, composers and publishers, agreed-upon share percentages and duration. (If Joe has co-written, he will tell SOCAN how much of the pie each writer receives.)

SOCAN must be informed of the status of each active title: Has it been assigned to a publisher? Has it been released commercially on a CD or cassette? Has it been used in film or on TV? Have there been foreign performances.

What does this mean to Ted User?

Virtually every person or organization that broadcasts, performs or authorizes the performance of copyright music in public needs a license to do so. Almost all music performed in public is protected by copyright, with the exception of certain religious and educational performances and those in the public domain (non-copyright music by composers, songwriters and lyricists who have been dead for at least 50 years).

What does a SOCAN license do for Ted?

Without SOCAN, he would have to obtain the permission of each copyright owner whose music he intends to use. (That would be impossible.) The Copyright Act requires that Ted obtain a SOCAN license to perform or authorize others to perform copyright music in public.

What kinds of performances require payment?

Music in public, whether in restaurants, clubs, hotels, banquet halls, dance halls, offices, stores, etc., all requires payment of a license fee. Also, whether the music is live or recorded (i.e. jukebox), a license is required - buying a CD, sheet music, hiring a band or a DJ does not give Ted the right to perform that music in public. Musicians hired to perform covers don't have copyright permission, either. It is up to Ted to make sure that the performance of music can legally take place.

How much do these licenses cost?

That depends on the particular use of music and the type of establishment. There are 22 different tariffs that apply to a variety of venues and kinds of performances and Ted may have to be licensed under more than one. (For a rock show at a local club with gross receipts of $5000, the license may be around $125.)

When does he need the license?

Before musical performances in public begin - otherwise, he'll be liable for copyright infringement.

How are fees set?

Each fall SOCAN files its proposed tariffs for the coming year with the Copyright Board. Ted has the opportunity to file an objection with the Copyright Board. The Board considers the objections, and, if necessary, holds public hearings to decide the appropriate tariffs. Fees payable to SOCAN by music users vary depending on where, how and under what circumstances the music is performed.

With the rare exception, SOCAN does not bill Ted each time a particular song is performed. Instead, it issues "blanket" licenses to users, allowing them to use as much as they wish of the world repertoire of SOCAN music. Then Ted doesn't have to worry about ownership of the music or the demands of each copyright owner. This eliminates what would be a staggering amount of paperwork for both SOCAN and Ted.

Ted's foreign counterparts who use SOCAN works are subject to the laws in their own country and the tariffs and distribution practices established by their local performing rights society.

The SOCAN Licensing Department is responsible for the collection of fees due under the various tariffs, and the maintenance of Ted's records and files. Staff also track down unlicensed music users and advise them of SOCAN and its licensing requirements. It is up to Ted to ensure he obtains the appropriate license by paying the approved fee. If he doesn't, it is also the job of the Licensing Dept. to gather evidence for legal action.

When a performance occurs without a license, legal action for copyright infringement may be initiated. The result (unless a settlement is agreed upon and license fees paid) is nearly always a judgment against the music user for the license fee, damages, costs, and often an injunction that prohibits the defendant from performing any of the musical works in the SOCAN repertoire.

How will SOCAN find out about my performances?

SOCAN's Board of Directors sets distribution rules based on how much money is being collected, and how much is being paid out. The amounts paid out for different distribution (pay) periods will vary for a number of reasons including: changes in license fees, SOCAN's operating expenses, interest rates, and the number of logged performances for that period. Distribution rules are continually under review and change from time to time to reflect these variations.

Fees collected are placed in five distribution "pools":

* Television: Most music on broadcast TV is accounted for using cue sheets provided by the networks, broadcasters, copyright clearance agencies, foreign societies & independent producers of TV shows & films. Every second of music is assigned a "credit" which is given a value proportionate to the license fees collected from each station carrying the program with that music on it. Producers must sign the cue sheets.
* Radio & General: It is not cost effective to log every song on every radio station in Canada 24 hours a day, 365 days a year. Instead, SOCAN uses a sampling system to identify works broadcast on privately owned, commercial stations. The sample is a representative cross-section of Canadian stations, based on format, region and language. CBC provides airplay logs of local programming on a sample basis. In addition, samples are obtained from non-commercial, campus and community radio stations across the country. Organizations which supply music services to shopping malls, offices, in-flight music, etc., also submit programming details to SOCAN which are analyzed on a sample basis.
* Concert: Program info obtained from concert promoters, orchestras and performers is analyzed. SOCAN must receive a license fee before a live performance can be processed. While promoters & concert presenters regularly notify SOCAN of performances, SOCAN relies to a great extent on info supplied by its own members through printed concert programs & completed Notification of Live Music Performance forms.
* Cinema (movie theatres): analyzed and weighted according to the relative number of screens and the number of weeks each film is exhibited. Performance credits are based on those films listed in the major English and French daily newspapers in Canada. As with TV, music cue sheets from producers are used to calculate royalties.
* Foreign Income: All revenues received from foreign societies are passed directly to SOCAN members.

In the case of the first four pools, monies are distributed to SOCAN members and the members of foreign affiliated societies according to SOCAN rules, based on performance information acquired and analyzed by SOCAN.

Performance credits are determined based on a variety of factors including the number of performances, musical duration and the level of license fees collected. (Basically, they add up all the performances, look at how much revenue license fees brought in, and then figure out how much Joe gets. Since this isn't predetermined, they can't tell Joe in advance what his cut will be worth.)

Because of the time necessary to obtain and analyze the all the information, payments are made approximately nine months after the actual performances.

Distributions of domestic and foreign income are made to Joe Songwriter in February, May, August and November (except Cinema distribution, which is made each August).

So what kind of money are we talking about?

Bottom line is, don't count on paying off your album with royalties. Don't even count on buying pizza for the band with your royalties.

Airplay royalties will vary depending on which station, how many times, for how long a period, your song(s) is played. You might get 10¢ a spin, you might get $1 a spin. But even the folks at SOCAN would not give even a ballpark range for a "normal" payout.

Plus, by the time your paperwork is processed and a cheque arrives at your door, you'll probably have given up on ever seeing it.

The good thing about royalties, however, is that they're a gift that keeps on giving. If your song stays on playlists even after it's peaked out (such as those being constantly played on classic rock stations), you can continue cashing cheques for years to come. And that may add up to a nice chunk of change when you least expect it.

Based on information obtained from the SOCAN website ( )

By Lorena Kelly for SaskMusic. Originally Published October 1998.

This article is posted as initially published- deadlines, contacts and links may not have been updated. Please keep this in mind when using this resource. For reprint/usage permission or any other questions, please contact SaskMusic.