Music , the Law & Money Streams Part 2 – Money Streams
BUSINESS
Paul Sanderson is a lawyer in private practice with his own firm , Sanderson Entertainment Law ( www . sandersonlaw . ca ). He is the leading author of legal publications on arts and entertainment law in Canada . His publications include Musicians and the Law in Canada ( Carswell Legal Publications ), now in its 4 th edition , and Music Law Handbook for Canada ( Seraphim ).
By Paul Sanderson
Music , the Law & Money Streams Part 2 – Money Streams
1 . MUSICAL COPYRIGHTS For musicians primarily involved in composition and songwriting , musical copyrights exploited through music publishing is the most important revenue source for them .
What Is Paid ?
Mechanicals – For physical mechanical licenses governed under the Mechanical Licensing Agreement , the industry standard negotiated by CMRRA on behalf of CMPA for publishers and Music Canada for record labels is 8.3 cents ( less CMRRA ’ s 6 per cent or SODRAC ’ s 10 per cent if they administer ) for songs under five minutes in duration . The main users are record companies . Digital online mechanical licenses are granted by CSI , a joint venture of CMRRA and SODRAC .
Public Performing Rights – These are licensed by SOCAN , Canada ’ s only performing rights society . The main uses occur on TV , film , radio , in concerts , bars , etc . If you write and perform your own compositions , a source of revenue that can accrue from live performances that is often overlooked is the fact that , if you are SOCAN member , for performances in bars with a cover charge of six dollars and over , SOCAN pays performing rights revenue . There are numerous tariff items . Payments depend on use .
Synchronization Rights – Placements of music and record masters used in film , TV , commercials , video games , etc ., are an important source of income from music . The monetary value varies depending on the type and duration of use and the context . Typically , flat fees are negotiated by and paid to rights holders and , depending on one ’ s bargaining power , perhaps a percentage of DVD sales , etc .
Print Rights – 10-12.5 per cent of sales , if a publishing agreement is in place .
Subsidiary Rights – These are negotiated and based on use .
If a music publishing agreement exists , the music publisher administers the copyright and shares the revenue with the songwriter based on the terms of the agreement . Typically , the revenue paid to the songwriter ranges from 50-75 per cent of net income .
2 . RECORDINGS Revenue from recordings is derived from sales , licensing , and distribution of audio and audiovisual recordings in both physical and digital formats and relevant copyright royalties , namely neighbouring rights and blank tape levies .
The value of the revenue varies depending on whether one is signed to an agreement – for example , a recording agreement – or if you have entered into a licensing or distribution agreement , or if you are an unsigned artist . Under a recording agreement and a licensing agreement , audiovisual recordings are treated as and paid as a record .
Also note that , for each exploitation of a recording , there is often a fee paid for use of the music and performance embodied in the recording . Don ’ t forget CFM union payments that apply if you are a member .
What Is Paid ?
Sales – Typical royalty rates are : under a licensing agreement , 20 per cent of PPD ; under a distribution agreement , the money paid is based on pricing of the recording , less a 20-30 per cent distribution fee , and subject to the aggregator ’ s percentage ( typically 9 per cent , if digital ). If the artist is under a recording agreement , typically royalties are 15-18 per cent of PPD . If under a record production agreement , typically the artist is entitled to 50 per cent of net receipts .
Royalty rates also vary based on format ( CD , vinyl , etc .) The revenue also depends on whether the sale is at retail or live , the territory , pricing , and configurations ( singles , EPs , LPs , etc .) Physical recordings are subject to packaging deductions , sales discounts , and reserves . Agreements are subject to customary escalations based on sales plateaus achieved , for example , an extra 1 per cent at gold and platinum sales plateaus .
Master Use Licenses – For film , TV , video games , etc ., if signed with a label , it ’ s a 50 / 50 split . If not , 100 per cent goes to the artist who is the master owner . Typically , flat fees are negotiated . Many factors affect the value of such licenses , including indie vs . major deals , types of TV uses , territory , duration of use , etc .
Licensing samples , typical payments are a flat fee , royalties , or a combination of both .
Ad Revenue – A percentage of ad revenue is paid based on whether the ad is skippable , non-skippable , an overlay , or display ad . Payment is based not on views but on a per advertisement basis .
Digital ( Electronic Transmissions via Internet , Satellite , Cellular , etc .) – Welcome to micro-transactions and the metadata accounting age . Metadata is increasingly important to track data and make payments .
Downloads – iTunes-type model , where 99 cents – 30 per cent = 70 cents . If under a record agreement , the artist ’ s royalty percentage applies . Ringtones and ringbacks pay 50 per cent of retail price to customers . The artist ’ s royalty rate applies if signed to a record agreement .
Streaming – Paid per stream based on free vs . ad based . If signed , artist royalty applies x net revenue received by the record company , subject to types of uses such as non-interactive streaming , satellite radio , video streaming , etc . For podcasting and bundled services , one is paid based on a portion of fees collected by the digital distributor .
Neighbouring Rights – Under the Copyright Act , 50 per cent goes to makers ( typically record labels ) and 50 per cent to performers for their performances in the sound recording . Tariffs are set by the Copyright Board and are collected and paid by Re : Sound . Artists can be both types of rights holders if they own their recordings and perform on them .
Blank Tape Levies – A percentage from every blank audio recording medium goes to CPCC and is shared with record labels , music publishers , songwriters , and recording artists as follows : 58.2 per cent goes to artists / publishers , 23.8 per cent to performers , and 18 per cent to record companies . One must join through an aggregator such as SOCAN , CMRRA , SODRAC , etc . to be entitled to such royalties .
Conclusions This is a very complicated area of law , rights , and practices . Rights and revenue streams are ever evolving in the music industry , which itself is also undergoing rapid transition .
The above is general information only and skilled legal and accounting advice should be sought in any specific situation .
This article is adapted from the author ’ s lecture on February 21 , 2016 at the JAZZ . FM91 Jazz Connect Conference . These issues can and do vary in other countries .
62 • CANADIAN MUSICIAN