The Canadian broadcasting and telecommunications industry is subject to a of tariffs governing a myriad of rights, all collected by dozens of Collective Management Organizations (CMOs). Unlike��the US, which has continued with a remuneration system based on an anachronistic principle: commercial radio play has that excuses users (like radio stations) from paying a royalty to performers and makers of sound recordings. Such thinking dates back to a time when people actually bought music in the form of CDs or vinyl records, instead of just streaming it. The right to remuneration for performers and makers of sound recordings is guaranteed as part of the , but the US has not acceded to this WIPO treaty, though the proposed changes could��indicate an intention to fulfil its obligations.

Canadian artists are about the paltry sounding 10c per 1000 plays that webcasting services like Songza*��might pay to Re:Sound under . Particularly so when��compared to the roughly $1.10 per 1000 plays paid out by similar services in the US. However such an comparison��paints far less than the full picture – aside from the Re:Sound tariff, a separate rate is also paid by webcasters to for the composition. That’s not to say that the Canadian rates always result in ‘fair and equitable’ remuneration, but it does at least address the relevant stakeholders in a sound recording of a musical work, which is one of the areas where the US system appears to be fundamentally broken.

In truth, addressing the remuneration issue can’t promise to fix the problem of artists and songwriters being paid fairly for their work. The new digital media economy is a fundamentally different landscape that requires some radical thinking to navigate. Some�� to demonstrate how a healthy payment can easily be soaked up before it even reaches artists. Still, the US report promises to begin the sisyphean task of adapting the royalty regime to try to keep up with the pace of change.

Does this report have any significant impact in Canada? Possibly. ����have speculated that because the absence of a remunerative right for radio play in the US means that Re:Sound does not include US-based works in its repertoire.��This means��the commercial radio tariff here is calculated to only account for recordings from countries party to the Rome Convention. This is a significantly smaller group of works. For example, if US-based works account for roughly, say, 50% of what is played on radio, then the tariff is calculated to be about half of what it might otherwise be simply because half of the musicians and sound recording makers do not to��need receive any compensation from Re:Sound. A remunerative right in the US would likely trigger a reciprocal obligation, which is pretty much already guaranteed with the impending ratification of the . This means��tariffs would be calculated to incorporate a much larger body of works, which would likely result in a significantly higher royalty determination than broadcasters and streaming services are currently paying. If the tariffs are discounted at a (theoretical) rate of 50% due to US repertoire exclusion, then inclusion would logically merit something close to a doubling of the tariff.

In the meantime, Canadian performers can reflect on the upcoming judicial review for Tariff 8, in the hope that their royalties amount to more than a share of 50% of 0.01c every time someone enjoys the fruits of their labour over a webcasting��service. It's also worth noting that��although a right of remuneration exists for internet-based services in the US, the equivalent tariff in Canada ()��was��based on the commercial radio tariff (), and also appears to incorporate at least some of that aforementioned repertoire discount. Tariff 8, however, only covers a period of three years, and was determined with some serious evidentiary problems during the hearing process. Future certifications from the Board in this area are likely to rise.

There's much, much more to be said about Tariff 8, and hopefully this topic will be revisited in serious depth as the judicial review works its way through the courts. Stay Tuned.

*note that Spotify is not included as a webcaster, and is subject to a separate tariff as a fully-interactive audio website which is set at a higher rate than Tariff 8.

Andrew Hunter is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.��

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The recording industry launched a ��calling the rate��“a serious insult to Canada’s musicians because it sets the world’s worst royalty rates for non-interactive and semi-interactive music streaming” (The while Canada's is $0.0001, for the same retroactive period.)

Some felt the outrage was misleading to the public and to rights holders, suggesting that Canadian artists do earn fair rates overall, pointing out a reproduction fee in Canada that doesn’t exist in the U.S. (They presumably mean the Canadian Musical Reproduction Rights Agency’s (CMRRA)��, which applies only to pressed��copies of recorded music and is payable to the publisher.)

, however, suggested that the idea that musicians earn from several different sources isn't entirely accurate. For example, while performers, songwriters, composers, arrangers, and producers can earn for their respective roles, no one person (unless they happen to perform every role) earns 100% of every royalty. Also, these additional sources of income, like the mechanical licensing fee,��are outside of the scope of webcast earnings and, as such, aren’t accurate or cogent points when specifically discussing a criticism of webcasting rates.

All of this begs the question: what does an artist earn from online music streaming? It seems unfair to comment on the fairness of tariff rates without knowing the answer to this question. Unfortunately, the answer is far too complicated to express in one blog entry. But let’s start by looking at which tariffs are prompted by an online “play” and how they are meted out.

��sets the rates that certain music streaming services must pay to Re:Sound to play sound recordings. “Non-interactive” refers to services similar to traditional radio, where users don’t get to make decisions about what they hear, e.g. . “Semi-interactive” webcasts give users some control by choosing parameters such as genre, artist, etc., although the playlists are still largely curated by the service, e.g. . Re:Sound pays artists (those performing on a recording) and makers (those responsible for financing a recording, often a record label). This means that a feature vocalist (like Celine Dion), an instrumentalist (like Glenn Gould), a singer-songwriter (like Bryan Adams), or a background performer could all be eligible for Tariff 8 royalties, while someone who is strictly a songwriter would not be.

Tariff 8 pays on a per-play basis: CBC pays 13.1¢ per thousand plays, while commercial webcasters pay 10.2¢ per thousand plays. The distributed monies are further apportioned between everyone who played on a recording. To put this into context, ten thousand plays (approximately a month of consecutive streams) of a 4 minute song from a single webcaster would yield a dollar.

Also triggered by webcasting is SOCAN’s , as well as CMRRA/SODRAC’s , both of which pay songwriters and music publishers. These tariffs are more complicated than Re:Sound’s Tariff 8, but basically calculate royalties based on a combination of revenue and the number of plays/downloads/page impressions.

In many cases, artists who are both performers and��songwriters (like Bryan Adams) will earn royalties under these different tariffs for the same play of music. However, there are many more��instances where artists are only eligible for one stream of royalties: Tariff 8.

So what do��these artists make? How does a singer-songwriter in a band get paid when their song is played online? What about a member of a large orchestra? Due to the wide variability of these rate structures, we would have to develop a hypothetical, realistic environment in which to calculate rates for a few tangible examples. In my next post, we will do just that.

Jordan Fine is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.

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Adding fuel to the fire, another webcaster, , recently , and has subscribers. However, beyond the important business implications, the Board must revisit the legal question at the heart of the Re:Sound proposals - the extent to which copyright royalty standards of the United States (US) ought to influence Canadian royalty rates.

Tariff 8.A covers both simulcasting and non-interactive webcasting. Simulcasting is the communication of a traditional radio signal over the Internet, and is used by many Canadian broadcasters. Non-interactive webcasting is generally understood as the streaming of original Internet broadcasts, or web-radio. Canadian examples include and . Semi-interactive webcasting, covered by Tariff 8.B, involves the streaming of content which is influenced by user-inputted preferences such as genre and artist. This is the service provided by Pandora.

Re:Sound proposed that commercial semi-interactive webcasters pay a royalty rate calculated as the greater of:

a)���������� 25 to 30 per cent of the gross revenues; and

b)���������� 0.0023 to 0.004 per-play, with a minimum fee of $500 per channel up to maximum of $50,000 annually.

The issue of public consciousness is the argument of Pandora against per-play royalty rates, which it stating, “[t]here is such a disconnect, as has been demonstrated by the U.S. ... between the per-play rate and the fundamental economics of the business.” However, as recognized by , this sort of opposition is business-oriented rather than legal. The parties’ Statements of Case (available to the public by request) present a variety of important, even novel, questions, such as whether Re:Sound has the legal authority to compel webcasters to implement technological protection measures to prevent stream-ripping. However, the most significant legal issue relates to Re:Sound’s foundation for the proposed rates.

Re:Sound justified its proposal by arguing that the online music industry has outpaced the statutory licence regime in Canada, and thus the Board ought to take into account the global licensing market, and in particular that of the US “in order to encourage the entry of international services and foster the development of its online music market.” By the same token, Re:Sound advocated that the Board adopt the statutorily mandated royalty standard of of the US Copyright Act – “rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller.” As found by the Copyright Royalty Arbitration Panel (CARP) in , this hypothetical marketplace is proved by furnishing evidence of actual voluntarily negotiated agreements. Hence, Re:Sound confidentially submitted several contracts between Canadian rights-holders and webcasters for communication rights, which presumably include royalty rates roughly similar to those in the US.

Pandora and the Canadian Association of Broadcasters (CAB) both argued against any consideration of US rates for a variety of reasons. Most importantly, that US legislation grants full copyright in sound recordings in certain circumstances, rather than the right to equitable remuneration in s. 19 of the Canadian . The US found this distinction to be sufficient grounds to reject comparisons in its royalty decision. Similarly, for a variety of reasons the Board in Canada has expressed scepticism in the usefulness of American standards, most resolutely in the 2005 decision.

The Board, however, has not categorically rejected the application of the willing buyer/seller standard. For example, in the 2002 the Board acknowledged its usefulness as a starting point, but “only when it offers some basis for comparison with the industry under examination.” Furthermore, the Board has that executed agreements are “prima facie relevant to the task of setting a performing rights tariff…” As such, even if the Board rejects the US royalty rates on the basis of the inapplicability of US standards to determinations of Canadian royalty rates per se, Re:Sound may successfully advocate for the adoption of US-styled royalty rates as contained within the voluntarily negotiated contracts submitted as evidence.

Pandora and CAB countered Re:Sound by pointing out that the certified , which includes webcasters, sets out a markedly different royalty scheme for communications of musical works. The Board that the equitable remuneration to be paid for the use of sound recordings to Re:Sound is to be determined by first identifying the applicable SOCAN tariff over the same use, and then setting a 1:1 ratio, is long-standing.

The core of Re:Sound’s proposal was that the Board ought to adopt the US-approach to royalty determination, by estimating hypothetical market prices. However, as recognized, the Board has historically asserted “not only that a market price is only one of several possible rational bases for a tariff, but that in certain circumstances, public policy would lead it to ignore market considerations altogether.” Whether Re:Sound argued with sufficient persuasion that webcasting ought to fall within the cases decided by the market, rather than public policy or other factors, will be the most important determination of the Board.

Ken Anderson is a JD Candidate at Osgoode Hall Law School and is currently enrolled in Osgoode’s Intellectual Property Law and Technology Intensive Program.�� As part of the program requirements, students are asked to write a blog on a topic of their choice.

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