Neighbouring Rights in the US and Canada: Contracts and Copyrights

The news that Clear Channel Media and Entertainment and Big Machine Label Group have reached a private agreement whereby the broadcasting undertaking will pay to the record label and its artists a revenue-based royalty for terrestrial radio broadcasts is instructive for a number of reasons.

Here is what the agreement accomplishes: at its most basic, the agreement will result, for the first time in the United States, in royalties being paid to the owners of sound recordings and the performers who appear on them for the public performance of sound recordings (i.e., when a song is played on a Clear Channel “terrestrial” radio station).

How is that different from the status quo?  Before the Clear Channel / Big Machine agreement, “terrestrial” radio play in the US only triggered payment obligations to songwriters (and their publishers) – so, to take a random example, radio plays of “…Baby One More Time” (performed by Britney Spears) would result in Max Martin, the writer of the song, earning royalties (along with the publishing company which handles his publishing rights), but no royalties being earned by Britney herself (or the musicians performing on the track).  The distinction noted above about “terrestrial” radio play in the US arises because play on other types of “radio” (technically, non-interactive digital transmissions such as satellite (e.g., Sirius XM), internet radio and cable TV music channels) does trigger a royalty obligation – which the provider of the relevant service had to pay to SoundExchange, the performing rights organization (PRO) authorized by the Library of Congress and the Copyright Royalty Board to collect the royalties.  That royalty obligation, however, is rooted in legislation: the Digital Performance in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998 created the framework for the royalty.

So, to summarize, by law in the United States, only songwriters are entitled to royalties when their songs are played on US “terrestrial” radio stations.  When it comes to “digital” radio, both songwriters, record companies (the owners of the copyright in the sound recordings) and the performers themselves get to enjoy royalty payments.

That apparent lack of parity has long been a source of tension in the US music and broadcast industries – as discussed previously on the Signal, lobbying efforts have coalesced around the proposed Performance Rights Act – which still basically shows no sign of being enacted into law any time soon (this Los Angeles Times story describes the fight between the music industry and the broadcasters as having endured “for almost a century”).  For an impressively comprehensive assessment of the topic, see “From Whether to How: The Challenge of Implementing a Full Public Performance Right in Sound Recordings” by Mary LaFrance (Harvard Journal of Sports & Entertainment Law, Vol. 2, p. 221).

So, in light of that history and set of circumstances, what solution has Big Machine Label Group come up with?  A privately negotiated agreement with a single (albeit large – Clear Channel has something like 850 radio stations) broadcaster.  Which is great for artists who are part of the Big Machine Label Group (a grouping which includes Taylor Swift and Tim McGraw), and likely leaves other performers (and record companies) wondering hey, where’s mine?  The trick, of course, is that since the right being compensated by the agreement is not statutory-based, the rightsholders (i.e., the performers and owners of the sound recordings) have very little leverage to exert over the radio broadcasters: if the broadcasters refuse to come to the table and agree on a contract, they can’t be sued for copyright infringement.

We could sum up the US approach, then, as  contractual, incremental, ad hoc, and rights-holder driven.

How would we describe the Canadian situation with respect to performing rights for performers and sound recording owners?  Essentially it’s a mirror image: legislative, comprehensive and collectives-driven.

In Canada, so-called “neighbouring rights” (meaning rights in performer’s performances and in sound recordings as such) were part of the 1997 amendments to the Copyright Act (Canada), and Section 19(1) of the Act creates right of “equitable remuneration” for performer’s and “makers” (i.e., the owners of rights in sound recordings, i.e., primarily record companies) when there is a performance in public or communication to the public by telecommunication of a sound recording (and the performances embodied therein).  In the wake of those amendments to the Act, a collective was created – Re:Sound (previously the Neighbouring Rights Collective of Canada) – and that collective has been collecting royalties (properly “equitable remuneration”) and distributing them to makers and performers for over a decade.  A list of the currently certified Re:Sound tariffs regarding public performance can be found here and a list of the proposed tariffs can be found here.

The Canadian process is markedly different from that found in the United States with respect to these rights: it is modulated through the mechanism of a collective proposing tariffs for certification to the Copyright Board, rather than ad hoc negotiations with individual “exploiters”.  The length of time it takes for tariff proceedings to advance is an obvious source of disgruntlement for many, but it is rather remarkable, by comparison with the position in the US, just how quickly the process for remunerating performers and makers has gotten up and running in the wake of legislative reform.

A true comparison will arise only if and when the US enacts the Performance Rights Act (or similar legislation), which would be the analogue of the 1997 amendments to the Canadian Copyright Act – only then would we be able to compare “apples to apples” so to speak, and assess the relative speed of the two jurisdictions in effecting a settling out of the rights management process.  But for the moment, two sets of people should be pleased with the existing situation: Canadian performers and makers, and US performers who are part of the Big Machine Label Group.

Bob Tarantino

About Bob Tarantino

Bob Tarantino is Counsel at Dentons Canada LLP and focuses his practice on the interface between the entertainment industries and intellectual property law, with an emphasis on film and television production, financing, licensing, distribution, and IP acquisition and protection. His clients range from artists and independent producers to Canadian distributors and foreign studios and financiers at every stage of the creative process, from development to delivery and exploitation.

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