Sally Yoon is an IPilogue Writer, IP Innovation Clinic Fellow, and a 3L JD Candidate at Osgoode Hall Law School.

What did your look like this year? As music streaming services grow in popularity, more people have included them as part of their daily lives. On November 29th, The Competition and Markets Authority (CMA) released its of its market study into music and music streaming. According to the report, streaming services are the primary method of music distribution for labels and artists, with 39 million active users and over 138 billion streams in the UK in 2021. Moreover, competition between music streaming services and the digitization of the market improved consumer outcomes greatly, though creators still had concerns about their earnings from streaming.

Falling subscription fees, benefits for emerging artists

Music streaming services have evolved to significantly benefit consumers in today's market. These services offer consumers access to an enormous catalogue of music, better audio quality, and new features, without the price tag. In fact, the report reveals that the price of music streaming plans dropped more than 20% between 2009 and 2021 because they did not keep up with inflation.

The music streaming market is also showing some positive results for creators, especially new artists. First, virtually anyone can share their music. Although the market is highly competitive, it has never been easier to create and record music and share it on streaming services. Secondly, deal options for creators are improving. Although creators do not necessarily need a label to share their music on streaming services, many of them are finding that they have more options in what type of deal they would prefer (for example, DIY distribution, A&L services, traditional record deals). Moreover, artists find that having an existing prominent following online helps them while negotiating a record deal. Major contracts with new artists for multi-track deals revealed more favourable terms for creators — an increase in average gross royalty rates, shorter minimum commitment periods and a reduction in the proportion of recordings owned by labels.

Average UK artist yearly streaming earnings from majors and average UK royalty rates. Source: CMA analysis of data from the majors.

Challenges call for broader policy debate, not competition intervention

Digitization has also presented some challenges. Market digitization has primarily limited competition to already popular artists — although streaming services offer a wide selection of music, consumer tastes tend to favour a small number of successful artists. Moreover, streaming allows both new and old music to reach new audiences, increasing competition as new music competes with older music for a share of streaming revenue.

Ultimately, the report concludes that these outcomes are not primarily caused by market competition and therefore, a competition intervention probably would not increase revenues for artists. Rather, the report calls for a broader policy debate, encouraging the government to consider further legislative and policy reforms for creator compensation in collaboration with DCMS Select Committee recommendations.

Labels are urged to provide more transparency to their artists about how streaming service earnings are calculated and how existing deals with streaming services will impact their current and future earnings. In addition, government and policymakers should examine options available to incentivize songwriting, such as determining a fair split between publishing and recording shares and exploring the licensing rates for music streaming. Future conversations revolving around these issues are critical, as the sustainability of the music streaming market depends on consumers and creators alike.

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As the spheres of interest of consumers and copyright holders get closer in the Digital Age, there is a pressing need to get to know (and eventually confront the needs of ) consumers of copyright-protected materials.�� An increasing body of academic literature looks at copyright users¹ (often indiscriminately). Within that area of research, there are important justifications to zoom in on individual consumers more specifically (i.e., those physical persons who perform commercial transactions for personal purposes). While they share common interests with other users (just as they also do with copyright holders), consumers have little in common with broadcasters, film producers and even educational institutions, all larger copyright users.

The Neglected Consumer

We seem to have neglected consumer protection in the last decades as a stand alone deserving field of study. The free market enthusiasts among us have been very influential and skilled at convincing governments that market forces could take care of consumers and that minimal intervention in their name was only necessary when a market failure had been identified. Also, the lines between private and business spheres, home and work, personal and commercial purposes have all become blurrier than ever. Everything is interchangeably portable, making the classic definition of “consumer” more confusing than ever before.

It is arguable that there is merit (perhaps more than ever before) in preserving a distinct “consumers’ zone” that is equally portable. It is the one inhabited by physical persons who in their private sphere make commercial transactions and experience goods for personal purposes. They share common and distinct values and aspirations that our society needs to cherish, promote and protect.

Digital Music as a “Commoditized Good”

The underlying copyright in music does not take away the mass market nature of digital music whether it is distributed through CDs or online. As a starting point of the analysis, consumers should get the same minimum level of protection that they get for other goods (including implied conditions of quality, fitness for purpose and of quiet possession)².�� As uncontroversial as this proposition may seem, it is less than certain that current Canadian laws support it. The fact that music is an intangible and that it is not sold but licensed still gives rise to a lot of uncertainty as to the applicability of Canadian provincial sale of goods laws (and the Québec Civil Code).

Indeed, it is not clear that sale of goods laws’ implied conditions (and Québec Civil Code) apply to the intangible aspect of digital music, largely predominant over the physical medium, when there is any. Common law warranties similar to the statutory implied conditions may apply, but their nature and scope are not providing much greater certainty. Consumer protection laws often provide that those statutory implied conditions cannot be contracted out in consumer transactions. This offers little help if they do not apply in the first place.������������

Confirming the applicability of sale of goods laws implied conditions (and consumer protection laws making implied conditions obligatory in consumer contracts) would start an interesting conversation. The scope of permitted use of digital music, as dictated by technological protection measures and/or contract terms would then be analyzed through the implied conditions of quality and fitness for the purpose for which the product was intended. For example, can the music provider limit the scope of use to certain audio devices or the number of copies permitted for time-shifting purposes? Also, can the music provider negate “users rights” provided in copyright law such as under the private copying regime for musical recordings or fair dealing provisions? Do digital rights management systems (“DRMs”) breach the implied condition of quiet possession?�� Given the hurdles on the applicability of sales of goods laws to the largely prevailing intangible aspect of digital music, much of these questions have been left unexplored.

Consumers and Copyright Works

One key question is whether consumers require even greater protection with respect to copyright works than with respect to other goods.�� The rationale supporting greater protection is that consumers interact differently with copyright materials than with traditional consumer goods. There are rights and values that are involved in this interaction (such as freedom of expression, creativity, privacy) that are fundamental in free and democratic societies. Whether there is a need to provide that greater protection depends heavily on the consumer that lawmakers envisage or want to promote. Is it a passive or an active consumer (or “consumer-author”)? And is the nature of the consumer still being defined in the Digital Age?�� What aspirations are reasonable and justify protection?

In Canada, the Copyright Act has been presented as “a balance between promoting the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator (or, more accurately, to prevent someone other than the creator from appropriating whatever benefits may be generated)”³. Recognizing that consumers are also an integral part of the process of culture and innovation, and that this sphere is not limited to authors and copyright holders, brings another weight in the balance.

It is arguable that lawmakers predominantly have a passive view of consumers of copyright works. Between the passive consumer and the consumer as author (which through her transforming acts, already receives some protection under copyright laws), there is a broad category of consumers who may also be closely aligned to one of the core objectives of copyright law, to promote and incent creativity and innovation.

Introducing a “private purpose” right for consumers, similar to what was proposed in Canadian Copyright Reform Bill C-61,⁴ would be an endorsement of the legitimate space that is required for consumers to deploy their participatory innovation aspirations to a greater potential. This private purpose right would define a virtual space in which consumers are allowed to perform a broad range of acts of a non-commercial nature for themselves and as they interact within their private spheres.

It All Revolves Around the “Purpose”

Clarifying the scope of use of digital music and other copyright works for private purposes could be perceived as an expansion of “users’ rights” and could on that basis receive fierce opposition by copyright holders. Free market believers will argue that copyright holders alone should determine the permitted scope of use of copyright materials.�� Further, they will argue that free competition will ensure that consumer interests are adequately preserved, inadvertently forgetting that copyright is a state granted monopoly that needs to be constrained within the limits of its core purpose. Moreover, the constant threat of piracy justifies that copyright holders have “carte blanche” for the secure dissemination of copyright works. Last but not least, any breathing space given to consumers should not unreasonably interfere with the copyright holders economic interests as per the “three-step test” for exceptions from copyright under various international treaties.��

These concerns are legitimate, however one pivotal word taints the discussion and that is “purpose”. We seem to have lost the sense of purpose in copyright law.�� Refocusing on a justifiable and proportionate incentive system to promote creativity and innovation, recognizing that consumers are integral to the realization of this purpose, as opposed to passive receptacles, would be a start. In the same vein, we also need to shift the copyright framework from an act-based set of exclusive entitlements to a purpose-based one.�� This would include a clearer delineation between commercial-based uses and non- commercial ones and how they are linked to the economic rights of the copyright holder. Focusing on purpose in those three instances may be showing a path towards some reconciliation.����

Conclusions

Dusting off old sale of goods and consumer laws for the Information Age, redefining the consumer we want to promote, and introducing a private purpose right in copyright law, are lower common denominator propositions. They are not likely to fully satisfy those consumers who believe they should get everything for free. To copyright holders, the relief may prove to be greater than the sacrifice. More clarity could go a long way in alleviating the irritant of fights against consumers for limited gains (never a good place to be in business). Such tune-ups may not make all interested parties sing in harmony but it will reduce a lot of unnecessary confusion and give consumers some breathing space. With that, it will arguably bring greater credibility to copyright law and hopefully, more respect for the legitimate interests of copyright holders.

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¹ This includes the works of Jessica Litman, Niva Elkin-Koren, Deborah Tussey, Josef Liu, Julie Cohen, Lucie Guibault, Natali Helberger and P.Bernt Hugenholtz. Some of these authors have already put forward similar recommendations to the ones discussed in this article.

² The Canadian Copyright Act does not have a pre-emption clause.�� The U.S. Copyright Act takes precedence over any conflicting state laws. By the Federal nature of the Canadian Copyright Act, some precedence principles apply.�� Also, in the U.S. the Uniform Computer Information Transactions Act (“UCITA”) is one recent attempt to address the trade in intangibles in the Information Age

³ Théberge v. Gallerie d’art�� du petit Champlain Inc. [2002] 2 S.C.R. 336. In the U.S. Article I, section 8 of the Constitution of the United States places the promotion of innovation and creativity at the forefront of the copyright objectives with no reference to a need to reward authors.

⁴ Bill C-61 An Act to amend the Copyright Act, presented on June 12, 2008, s. 17.��

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This article��is based on a paper presented at the conference: on September 18, 2009, organized by IP Osgoode.�� The article originally appeared in����(click to view a sample PDF of vol 13,��issue 4).��

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