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SOCAN Announces New Arrangement for YouTube Revenues

In early November, SOCAN (the Canadian performing rights collective) announced the entering into of a new agreement which probably should have garnered more attention than it did: YouTube earnings unlocked for SOCAN members.

The basics of the new arrangement are this: SOCAN has entered into an agreement with Audiam, an organization which licenses “synchronization” right in compositions and recordings (as described in the Audiam FAQ), to collect revenues from YouTube arising from the use of songs in videos uploaded to YouTube. Audiam itself has evidently entered into an arrangement with YouTube for the license of the “synchronization” rights in compositions and recordings  – the “synchronization” right is the right to control the “pairing” or “synchronizing” of compositions or recordings with visual elements; when a recording of a song is used in a video, a license is required from the owners of rights in the composition and the recording of that composition (if just the composition is used, e.g., when a video consists of the live performance of a composition, then just the license from the owner of rights in the composition is required). The revenue in question arises from advertising revenues which YouTube collects for ads which are shown in conjunction with the revenues. SOCAN will be collecting from Audiam revenues payable to the owners/administrators of rights in the compositions (presumably the owners of the rights in the recordings will be contracting directly with Audiam or YouTube). Notably, the Audiam arrangement includes revenues from what I’ll call “unauthorized” videos – in other words, Audiam collects revenues not just from “official” videos which the copyright owners have created and uploaded to YouTube, but from “user-generated” videos, such as the proverbial “dancing baby” video where someone uses a song in conjunction with a video the user themselves has created.

A number of elements make this new arrangement and announcement notable, including the following:

  • SOCAN is generally not associated with the collection of synchronization revenues, as that has in the past been something which publishers have either administered themselves or licensed through the CMRRA (Canadian Musical Reproduction Rights Agency) – in other words, this deal with Audiam represents an expansion of the scope of rights historically administered by SOCAN
  • as the SOCAN announcement notes, “Earlier in 2013, SOCAN granted YouTube a performing rights license for Canada covering the years from 2007 to the present” – that appears to be a bespoke license granted by SOCAN to YouTube, outside the Tariff 22 structure
  • one factor not addressed by the announcement (and there’s no reason to expect that it should or would have been) is how this interfaces (or not) with the “Non-Commercial User-Generated Content”  provision found in Section 29.21 of the Copyright Act (Canada) – that provision had been referred to by many (including me) using the short-hand “YouTube exception”; might this be taken as an admission that YouTube itself cannot rely on the shelter provided by Section 29.21?

A move away from the “omnibus” tariff process and towards “bespoke” licensing arrangements seems important and one worth further discussion – it will be interesting to see whether similar future SOCAN announcements will be made with respect to other online platforms.

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SOCAN Announces New Arrangement for YouTube Revenues

Licenses for Public Performance of Music at “Live Events” in Canada

SOCAN (the Canadian public performance rights collective) recently announced that in 2012 they paid over $20 million in royalties from “concerts and live entertainment”. That figure represented a 14% increase year-over-year. SOCAN is most often associated with the playing of songs on the radio or television, and the royalties which are generated for the composers and publishers as a result of such “public performance” – but it is worth noting that using music at a concert or other live event can trigger a variety of different payment obligations, both to SOCAN and to another collective, Re:Sound.

In most cases, the venue at which music is performed live (i.e., performed by actual live performers) or at which a pre-recorded track is played in connection with some kind of activity will be obligated to obtain a public performance license from either SOCAN, Re:Sound or both. In some circumstances, if there is no “venue”, the individual or organization responsible for “putting on the show”, so to speak, will be obliged to obtain the necessary licenses. SOCAN and Re:Sound administer different sets of rights which are relevant to these kinds of situations:  SOCAN administers the public performance right in musical compositions (for the benefit of composers and publishers), while Re:Sound administers the public performance right in sound recordings (for the benefit of performers and makers).

Here’s how it all plays out:

SOCAN

SOCAN has a variety of tariffs applicable to the performance and use of music in “live” settings. For example, Tariff 3.A applies to the performance, by means of performers in person, of songs in “cabarets, cafes, clubs, cocktail bars, dining rooms, lounges, restaurants, roadhouses, taverns and similar establishments”. The venue in question must pay to SOCAN a license fee, payable annually, of 3% of the “compensation for entertainment” paid in the year covered by the license (subject to a minimum fee of $83.65 in 2012). “Compensation for entertainment” means compensation received by the performers, but does not include expenditures on things like staging, lighting equipment, costumes, etc.

SOCAN Tariff 3.B, on the other hand, covers the use of recorded music as integral component of an otherwise live entertainment performance at one of the aforementioned venues (so, as an example, pre-recorded backing tracks of music used by a singer, or the recordings used by a DJ accompanied by dancers). Again, the annual license fee is calculated by reference to “compensation for entertainment” paid – in this case, 2% of compensation for entertainment, subject to a minimum of $62.74 in 2012.

Tariff 3.C covers the use of recorded music at what is delicately termed “adult entertainment clubs” – but the fee is calculated differently: $0.04 per day, multiplied by the capacity of the club (as authorized by its liquor license). (So next time you hear “Girls, Girls, Girls” blasting at the Marble Arch, rest assured that Nikki Sixx is getting his cut.)

So far, that’s fairly straightforward, and we can see how the basic system is structured: identify a type of “use” and then calculate a license fee based on some relevant metric (fees paid, attendance, etc.). That being said, things start getting a little funky as the various categories of “use” aren’t always intuitive. This chart attempts to make some sense of the situation:

SOCAN Tariff No. Description Corresponding Re:Sound Tariff
3A live music in cabarets, cafes, clubs, cocktail bars, dining rooms, lounges, restaurants, roadhouses, taverns and similar establishments N/A
3B recorded music as an integral part of a live performance in cabarets, cafes, clubs, cocktail bars, dining rooms, lounges, restaurants, roadhouses, taverns and similar establishments 5A
4 A. performances at “popular music concerts” taking place at “concert halls, theatres and other places of entertainment” (including “open-air events” and including lip-synching and showing an audio-visual recording of a concert) (this license is split into “per event” and “annual” license fee options)B. performances at “classical music concerts” (this license is split into “per event” and “annual” license fee options) 5D
5 performance of music at exhibitions and fairs 5D
7 skating rinks 6B
8 receptions, conventions, assemblies and fashion shows (note that the license fee is different depending on whether the event is “without dancing” or “with dancing”) 5B
9 sports events  5H
10 parks, parades, streets and other public areasA. strolling musicians and buskers, recorded music

B. marching bands, floats with music

 5F, 5G
11 A. circuses, ice shows, fireworks displays, sound and light shows and similar eventsB. comedy shows and magic shows  5E, 5I
14 performance of an individual work at a single event when that work is the sole work performed  N/A
18 recorded music for dancing in “bars, cabarets, restaurants, taverns, clubs, dining rooms, discotheques, dance halls, ballrooms and similar premises” (note that this is different from 3.B, where the recorded music accompanies a live performance)  6A
19 fitness activities and dance instruction  6A, 6B
20 karaoke bars and similar establishments  5C

So, as an example, when Bruce Springsteen and the E Street Band perform a concert at, say, the Air Canada Centre in downtown Toronto, the venue is obliged to obtain a license from SOCAN pursuant to Tariff 4.A.

SOCAN provides a pretty handy page which sets out the various tariffs, license fee calculators and links to the various tariffs – users are encouraged to check it out.

Re:Sound

Although it may not be top of mind, the good folks at Re:Sound also have tariffs applicable to the use of music in connection with live performances – but whereas SOCAN’s rights are engaged either when a composition is performed live or when a pre-existing sound recording (on which a composition has been recorded) is played, Re:Sound’s rights are only relevant when the latter occurs. Re:Sound administers the public performance right in sound recordings, so only when a piece of recorded music is used (either in connection with a live performance of some kind or as the accompaniment to some kind of activity) will a Re:Sound license be required.

The Re:Sound tariffs don’t numerically line up with the SOCAN tariffs, though they cover the same set of activities:

Re:Sound Tariff No.
Description Corresponding SOCAN Tariff
5A recorded music accompanying live entertainment in cabarets, cafes, clubs, restaurants, roadhouses, taverns and similar establishments (pre-2013) / accompanying any type of live entertainment including theatrical, dance, acrobatic or other live performances (commencing in 2013) 3B, 4
5B receptions, conventions, assemblies and fashion shows 8
5C karaoke bars and similar establishments 20
5D festivals, exhibitions and fairs 4, 5
5E circuses, ice shows, fireworks displays, sound and light shows and similar events 11A
5F parades 10
5G parks, streets and other public areas 10
5H sports events (commencing 2013) 9
5I comedy and magic shows (commencing 2013) 11B
5J concerts – during entrance and exit of audiences and during breaks in the live performance (commencing 2013) 4
6A recorded music accompanying dance in any indoor or outdoor venue 3A, 3B
6B recorded music accompanying physical activities / [in fitness venues (commencing 2013)] 19
6C recorded music accompanying adult entertainment (commencing 2013) 3B

A caveat: because the world of tariffs is always in a state of relative uncertainty (due to the lag in tariffs being approved and the fact that the terms of proposed tariffs can be modified prior to certification), and because this stuff is just kind of complicated, there may be errors in the foregoing tables – corrections and suggested additions are welcome.

Continuing on with our earlier Bruce Springsteen example, if the Air Canada Centre hosts a Bruce Springsteen concert, they will be obliged to obtain a SOCAN license under SOCAN Tariff 4A (because there will be compositions which will be played by the band during the concert), and if there will be pre-recorded music which is being played before and after the actual concert, then a Re:Sound license will be needed under Re:Sound Tariff 5J. If there is pre-recorded music which is played during the concert, then a license under Re:Sound Tariff 5A will be required.

In short, venue owners and individuals or organizations putting on “live entertainment” in public need to answer two different questions: First, will there be pre-recorded music which is played to the public at the event in question? If so, then a Re:Sound license will likely be required, and a SOCAN license will likely also be required. Second, if no pre-recorded music is being used, will there be live performers playing music at the event? If so, then a SOCAN license will likely be required. (I use the qualifier “likely” in each case because there are some events at which the music being used will not be in the repertoire of SOCAN and/or Re:Sound, such as a live performance of public domain classical works.)

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Licenses for Public Performance of Music at “Live Events” in Canada

Newly Certified SOCAN Tariff 22.A Expands to Cover “Video-Clips”

On October 5, 2012, the Copyright Board of Canada certified SOCAN Tariff 22.A (2007-2010) and CSI Online Musical Services Tariff (2008-2010).  The tariffs themselves (SOCAN, CSI), the Board’s reasons and a fact sheet are all available at the Board’s website.  While in some respects this was a relatively unremarkable event (both SOCAN and CSI had similar prior certified tariffs), there are a few significant aspects of the new tariffs – this post will focus on the expansion of the SOCAN tariff to apply to “video-clips” and various uncertainties which result from that expansion.  (This post will not make further mention of the fact that these tariffs have been certified more than five years after they were first proposed, and nearly two full years after the last date of the period to which they apply because, well, life’s too short to keep pushing that particular boulder up that particular hill.)

The tariffs apply to three different online activities (or, as the Board describes them, “products”): the offering of permanent downloads, limited downloads and on-demand streams.  As a result of the Supreme Court of Canada’s decision in ESA/C v SOCAN (2012 SCC 34), discussed previously here, SOCAN is no longer entitled to a licensee fee in respect of downloads, so the new SOCAN tariff is restricted to streaming.  The previously certified tariffs contemplated the downloading and streaming of audio files – but the new SOCAN tariff has been expanded, starting with the 2010 tariff, to include both audio and “video-clip” files (the reason that the newly certified CSI tariff does not apply to video-clips is because CSI evidently did not request such an expansion (we can assume they will forthwith make such a request with respect to tariffs which await certification)).  Therein lies the interesting aspect of the new SOCAN tariff: what exactly does it apply to?  In other words, when the new SOCAN tariff uses the term “music video”, what does that cover and what kind of online services will be required to pay a license fee to SOCAN as a result?

Walking through the SOCAN tariff: Section 3(1) of the tariff states that it “sets the royalties to be paid for the communication to the public by telecommunication of works in SOCAN’s repertoire in connection with the operation of an online music service in the years 2007 to 2010″.  An “online music service” is one which “delivers streams to end users”.  A “stream” is “a file that is intended to be copied onto a local storage medium or device only to the extent required to allow listening to the file at substantially the same time as when the file is transmitted”.  A “file” is “a digital file of a sound recording of a musical work and includes a music video“.  A “music video” is “an audiovisual representation of a musical work”.  (The tariff uses the term “music video”, whereas the reasons use the term “video-clip” – it is unclear why the difference in terminology exists.)

Here’s where things get interesting.  The basic question raised by this post is this: does the new SOCAN tariff apply to a service like YouTube or any other service which delivers to its users “content” which consists primarily of audio-visual content making primary use of musical compositions (as distinguished from something like Netflix, which delivers audio-visual content like movies and TV shows which might contain musical compositions, but as a subordinate aspect of the content being delivered)?  Because if that’s the case, then this new tariff represents a significant expansion in the scope of SOCAN’s tariffs (recognizing that there is also a significant shrinking of its scope as a result of the exclusion of downloads from the tariff’s application) and a number of online services which previously were not subject to SOCAN tariffs will need to assess whether they now are subject to them.

While it is unclear the extent to which the tariff applies to a YouTube-like service, it is also unclear whether or not it is intended to.  In the factsheet for the tariff, the services iTunes, Zik, Slacker and Songza are specifically mentioned – and are described as “just a few of” the relevant services to which the tariff applies.  While there is some overlap between the activities undertaken by those identified services and what something like YouTube does, there isn’t perfect overlap – the identified services seem still oriented primarily towards delivery of audio content, with audio-visual content like “music videos” comprising a subsidiary activity.  But because of the way that “music video” is defined in the tariff (“an audiovisual representation of a musical work”), it appears that it would certainly cover at least some of the content available on YouTube – but how much of it?  For example, the “official” “music video” version of a song – by which I mean the official promotional film created or authorized by the performing artist or their record company – would certainly qualify as a “music video” under the SOCAN tariff and thus would require the obtaining of a SOCAN license.  Therefore Vevo-branded content on YouTube would seem of the type which would require a SOCAN license.  But what about “user-generated content” such as a fan-made video consisting of the audio track of a song coupled with, say, the fan’s own recorded footage or photographs?  Does that constitute a “music video”?  What about a service which provides access to audio-visual recordings of live concert performances of musical compositions?  Would each of those streams qualify as the delivery of a “music video”?

Of course, since we’re in the realm of Canadian online tariffs, other questions remain to be answered.  In applying to “music videos”, how might this tariff interface with, say, proposed SOCAN tariffs 22.D, 22.G and 22.I?  In the event of overlap, which would govern? When can we expect the current SOCAN tariffs (i.e., for 2012 and subsequent years) to be certified? When might the equivalent CSI tariff covering music videos be certified?  Will any of these tariffs be subject to judicial review?  As increasingly is the case, the certification of a tariff represents the opening of as many, or more, questions as may have been answered by the tariff.

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Newly Certified SOCAN Tariff 22.A Expands to Cover “Video-Clips”

Still Unsure: Copyright Board Denies Application for Interim Tariff on UGC and Online Movie Delivery

In a decision dated February 17, 2012, the Copyright Board has denied the request made by SOCAN for an interim tariff which would have applied to the online delivery of movies and television shows and the use of musical works in “user generated content” (UGC) – the interim tariff would have applied to services such as Netflix, YouTube, MySpace and Facebook.

The arguments which SOCAN advanced, as summarized in the decision, were as follows:

  • the websites who would be subject to the tariff use significant amounts of music and generate vast amounts of revenues, some of which is attributable to music contained with SOCAN’s repertoire
  • no tariff is in place which applies to these websites, and a Copyright Board decision on the matter is unlikely to be released before 2013 (and then will be subject to appeal, etc.)
  • the absence of a tariff (and the prospect of at least a year before we get a certified one) is unfair to both SOCAN’s members and to users of music: to members because they are not currently receiving any payments for the use of their works, to users because there is significant uncertainty as to how much they will eventually have to pay for the current uses (and so setting aside reserves for the liability becomes a matter of guesswork as much as anything else)
  • there is a gap created by the certified Tariff 22.D, which covers webcasts provided by conventional TV services, but does not apply to services like Netflix (thereby imposing a competitive disadvantage)

The objectors to the application argued as follows (again, as summarized by the Board’s decision):

  • the stringent tests for interim relief were not met by SOCAN
  • significant uncertainty exists as to whether the Board even has authority to certify significant parts of the proposed tariff – the Supreme Court has yet to release its decision on the issue of whether a “download” is a “communication to the public by telecommunication” – if it is not, then the proposed tariff cannot be applied in the proposed
  • current certified tariffs are user-based, whereas the proposed interim tariff is structured using a use-based approach – such a change should not be implemented without a full hearing on the advisability of it

The Board sided with the objectors, denying the SOCAN application, and based its decision on the following reasons:

  • user-based tariffs are more easily adaptable to “the constantly evolving Internet environment” and the Board isn’t inclined to switch to use-based tariffs without at least some evidence being proffered to justify the switch
  • the proposed interim tariff specifically targets certain services, which is a departure from previous tariffs which target activities
  • no economic rationale had been provided by SOCAN for the rates it was proposing to charge under the interim tariff
  • a number of issues arise in the context of the application (is SOCAN entitled to a tariff? who should pay it? what is the appropriate rate base?) which deserve a full hearing and so pre-empting the hearing by granting an interim tariff would be unadvisable
  • finally, “there are no deleterious effects that cannot be remedied through the issuance of the final tariff”

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Still Unsure: Copyright Board Denies Application for Interim Tariff on UGC and Online Movie Delivery

ASCAP, SOCAN, Public Performances and Telecommunications

The US Federal Court of Appeals for the Second Circuit decision in US v ASCAP (sometimes referred to as ASCAP v RealNetworks) (text of decision is available here) has generated a surprising amount of commentary – particularly from practitioners and academics outside of the United States.  The two cruxes (cruxii?) of the decision are that the downloading of a digital song file does not constitute a “public performance” for purposes of US copyright law – and so entities (such as RealNetworks and Yahoo!, who were applicants and appellees in the case) who offer music downloading services to end-users are not liable to make payment to performing rights organizations such as ASCAP – and that the district court charged with setting the royalty which ASCAP could charge to online service providers made some analytical errors in deciding on a rate.  For purposes of this post, only the first issue, that relating to public performances, will be discussed.

As Barry Sookman has noted (in a comprehensive post on the matter), the decision highlights differences between Canadian and US copyright law.  Ben Chaliss, writing at the 1709 Copyright Blog (and from a UK perspective), also provides a useful review of the decision in “Internet rates, rights (and wrongs)”.  As Barry notes,

[t]he decision highlights a significant difference between US and Canadian law on whether copyright owners of the performance rights in musical works are entitled to royalties when a copy of a music file is transmitted over a network

I’d like to explore how that “significant difference” arises, because I think it’s worth highlighting the fact that it stems from fundamental differences in how our respective copyright legislation conceptualizes the “bundle of rights” which comprise copyright, and not from divergence about how to interpret the same right.  In short, the same activities (selling a song for download over the internet) are treated differently on either side of the border because our copyright legislation characterizes the rights which are engaged in completely different ways.

In the United States, as has now been confirmed by the 2nd Circuit Court of Appeals, the downloading of a song does not constitute a “public performance” – an exclusive right of the copyright owner accorded by Section 106(4) of the US Copyright Act – and so no royalty is payable to ASCAP (or, presumably, BMI or SESAC, the other public performance collectives).

In Canada, by contrast, the federal appeals courts appear to have determined that SOCAN (the Canadian equivalent of ASCAP, BMI and SESAC) is entitled to a royalty when a song is downloaded – but not because the song has been “publicly performed”.  Instead, under Canadian law, a royalty is payable because the composition has been “communicated to the public by telecommunication”, a right which is exclusively controlled by SOCAN (see the Tariff 24 Ringtones Decision (2008 FCA 6) and the SOCAN v Bell Canada decision (released September 2, 2010)).

Compare the wording of the relevant pieces of legislation:

  • in the US Copyright Act: “the owner of copyright under this title has the exclusive rights to do and to authorize … in the case of … musical … works … to perform the copyrighted work publicly” (Section 106(4))
  • in the Canadian Copyright Act:“copyright”, in relation to a work, means the sole right to … perform the work or any substantial part thereof in public … and includes the sole right … in the case of any … musical … work, to communicate the work to the public by telecommunication” (Section 3(1))

ASCAP is not entitled to a royalty when a song is downloaded because that song has not been “publicly performed”.  Under Canadian law, however, whether the song has been “performed” or not (whether publicly or otherwise) is largely irrelevant  – SOCAN is entitled to receive a royalty when a song is downloaded because the song has been “communicated to the public by telecommunication”.  Canadian courts are not relying on an expansive concept of “performance” (whether public or not) when affirming the right of SOCAN to collect a royalty for downloads – they are recognizing the existence of a distinct, separate (even if logically subordinate) right.

The foregoing isn’t to say that the decision which the Canadian courts have reached about downloads and communications to the public is unimpeachable.  While it’s difficult to find fault with the US 2nd Circuit’s ruminations on the nature of a “performance” and its conclusion that downloading a song doesn’t resemble anything we would normally think of as a performance (as the court rather drily noted, “a download plainly is neither a ‘dance’ nor an ‘act'”), the conclusion of the Canadian Federal Court that a download constitutes a communication to the public seems somewhat less secure.  The Federal Court in the SOCAN v Bell decision notes that there is a distinction between the concepts of a “performance in public” and a “communication to the public”, but focuses its analysis only on the latter – and ends with the conclusion that one can communicate to the public “by means of a series of private communications” (supplemented by the notion that it is mostly the intention to communicate to the public which is conclusive, even if you only succeed in being “heard” (or downloaded) by one person).  The Court used an apt metaphor to describe its reasoning: a store sells goods “to the public” even if it only sells items one at a time.  That being said, the stability of that analysis, being heavily dependent on context, is open to question, and, as Sookman alludes, a Supreme Court confirmation would be welcome.

ASCAP, SOCAN, Public Performances and Telecommunications