Monthly Archives: October 2014

We should support music streaming services

Published 10/9/2014

By Eric Baptiste

You might find this surprising: I welcome music streaming services of all types, and stand ready to support Canadian-based and international services so that they may thrive here in Canada.

On one key condition: they must fairly compensate all of the creators and other rights holders responsible for the music that is the very lifeblood of their business.

Yes, all creators and rights-holders, including authors, composers and music publishers, as well as the record companies and the artists they represent.

For both individual consumers and businesses, music has value. As ASCAP President Paul Williams so well noted, “Literature, music and art have value to individuals, to businesses and to countries. They open our hearts and minds. They inspire. They teach. They comfort. They drive economic growth and innovation. They define our time; they define our cultures; they bring us together.”

Copyright supports that value. Copyright helps music creators as they work to make an honest living writing songs or composing music for lyricists and AV works for film and television. Copyright is what allows songwriters to earn money for the public performance of their music. Copyright allows SOCAN’s members to sustain a career in music creation, maybe even flourish . . . and, most importantly, continue writing.

But today when music is streamed online – the increasingly preferred format for listeners – songwriters are vastly underpaid for the music they create. We’ve all read news stories about songwriters earning some thousandth fraction of a penny for each streaming play, or making only a pittance for a million or more plays.

There are many reasons for this. In Canada, one reason is that, despite best efforts to establish a general framework that might have allowed their earlier entry into the market, streaming services have been slow to arrive. Remember also that streaming services require a number of different rights to operate legally in any country. In Canada we have two things that pose challenges to streaming: ISP usage caps that no longer exist in other countries, or are much lower here; and bandwidth costs that are much higher than in comparable countries.

Other factors are not specific to Canada and reflect the relatively small economic size of emerging streaming services when compared with radio and television stations, which were established decades ago.

Whatever the metric, these new services are dwarfed by many orders of magnitude by traditional media such as TV and radio. The only metric in which streaming services might excel is market valuation, and this is not one against which we can apply royalties. This is a big concern for the future.

Many people don’t realize that when a radio station in a major market plays one song (“a spin”), that spin may very well have hundreds of thousands of listeners at the same time. The economic value of such a spin, reaching so many people simultaneously, cannot simply be compared to the value of one stream, reaching only one person. This is a key point that is almost always overlooked.

Finally, the split of royalties between rights holders tends, in most countries, to disproportionately favour record companies, and to a lesser extent, performers over music creators and their publishers. In many cases that split is 80% to 20%, respectively.

While I sympathize with Re:Sound and Music Canada about the low value assigned to their rights by the recent Copyright Board of Canada’s “Tariff 8” decision, the Copyright Board was quite correct to continue its longstanding approach, which has been confirmed by the courts, that the relative values of the rights of creators and their publishers on the one hand (“authors’ rights”), and of the record companies and performers on the other hand (“neighboring rights”), are generally equal. In the music ecosystem, the source of music is represented by two separate yet equally important groups: the authors, composers and publishers who are at the origin of music; and the performers and record companies that play a major role in bringing it to the market. More and more people are agreeing with this apt description of the manner by which music makes its way into society.

We should all want fair compensation for all of those who are involved in the creation and performance of music. We want to work together, with the labels and the streaming digital platforms that wouldn’t exist without the music created by members of music rights organizations worldwide. We want to create a win-win-win-win situation for those who stream music, those who create it, those who record it, and those who listen to it.

Fair compensation for streaming will eventually be established. After all, we’ve successfully licensed the rights of every new music delivery system that has ever been invented, from radio and television, to cable and satellite. Online streaming is just the newest kid on the block, and we’ll need to work toward fair compensation with them, as we have with other media before. Current problems will eventually be solved, as they have been before.

However, the eventual economic success of streaming services is out of our control. The number of paying subscribers matters. The size of the ad revenues they’re able to collect from “free tiers” matters. These revenues are very small today and, even with the best splits between all right -holders in the world, and the application of higher rates to the revenues of streaming services, the total compensation paid to rights-holders will remain low unless their fundamental economic metrics improve.

Fair compensation for online streaming is a top priority everywhere. The livelihood of music creators depends on finding solutions that allow them to earn a fair living for their work from the streaming businesses whose essential product is their music. Songs and compositions are the engines that drive huge revenues for these big streaming businesses, so music creators must be compensated fairly.

Technological innovation should be supported, but we can only fully embrace such progress when it allows music creators to thrive alongside the businesses that provide new platforms for distributing their works.

Online services increasingly important as TV viewing habits change

Published 10/2/2014

By Jennifer Brown

As television viewing habits change, online audio-visual (AV) services are going to become increasingly important as a source of income for the songwriters, composers, and music publishers served by SOCAN.

While SOCAN already had a number of agreements in place with online AV services, this summer the Copyright Board of Canada approved Tariff 22.D.1 for Online Audiovisual Services and Tariff 22.D.2 for User-Generated Content. We’re pleased that we now have a tariff to apply to all online AV services in Canada, so that we can license the newer ones and generate royalties for our members that more accurately represent the full TV spectrum. These new tariffs for the use of music in streamed movies, TV programs and other audio-visual works online will allow songwriters, composers and music publishers to receive royalties for previously uncompensated uses of their works by online services, such as Netflix.

That’s especially important, given the changing habits of television viewers. Over the past couple of years, traditional TV revenue to SOCAN – which is based on a percentage of gross advertising income of the television station or network – has been changing.

Numerous reports suggest that all forms of traditional TV are experienced advertising revenue losses of between 4.5 and 8 percent in 2013. Specialty TV has remained strong, with revenue growing at 5.2 percent last year. TV viewing still remains robust, with bigger gains in the 55-plus age demographic.

But this increase is likely not offsetting younger generations, many or even most of whom never have watched TV in the traditional sense. Still, households with numerous TV subscriptions are expected to outnumber households who terminate all TV subscriptions by 100 to 1. It does appear, at a high-level view, that Canadians have not abandoned TV, but might be viewing it in different formats.

The 2013 Rogers Innovation Report found that while 90 percent of Canadians still watch their television sets, more than eight out of 10 people view “entertainment” on a second device – and that could be a laptop (60 percent), smartphone (42 percent) or tablet (23 percent). About 61 percent of Canadians use another device while watching TV, while more than a third of Canadians looked up information online while watching.

What all of this means for the overall industry is still difficult to tell definitively – which is why SOCAN will continue to monitor these and other trends and consult with those experienced in the industry to determine the best course of action for all of our members and licensed music users.