John Lorinc's Creators and Copyright Part II (cont.)

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Part II: Sectoral Issues (continued)

Music

In terms of popularity, economic viability and critical acclaim, the Canadian music sector is one of this country’s great cultural success stories. In the last forty years, Canada has produced a large and vibrant music industry with a broad range of talent and many international stars. While the particular evolution of Canadian music has many ingredients, there’s little question that Canadian content rules governing broadcasters have played a critical role, by comparison to the various categories of policies geared to other cultural industries (e.g., tax incentives, block grants, postal subsidies, etc.).

As in other creator sectors, Canadian musicians and composers earn their income from various sources: commissioning fees, royalties based on CD sales, royalties from the broadcast of their music on the radio, television or other media; levies on blank media, and, in the case of performers, from revenues generated by “neighbouring rights” (i.e., a performer’s right to a fixed version of their performance, which is remitted by broadcasters).

A range of organizations, unions and collectives represent all or some of the commercial interests of this broad category of creators.

The most prominent of these is SOCAN, the Society of Composers, Authors and Music Publishers of Canada, which has approximately 70,000 members, of whom about 25,000 are active. Formed in 1990 following the merger of two predecessor organizations whose roots go back to 1925, SOCAN collects licensing fees from anyone playing or broadcasting live or recorded music. It grants music users permissions in the form of licenses based on tariffs set by the Copyright Board. These rates apply to a broad range of users, including radio and television stations, educational institutions, theatres, adult entertainment clubs, karaoke bars, skating rinks, theme parks, planes and ships. SOCAN also manages reciprocal agreements with international performing rights societies.

The other leading music collectives include SODRAC, which tends to be more active in Quebec (although not exclusively so), and the Canadian Musical Reproduction Rights Agency (CMRRA). The Canadian Private Copying Collective, in turn, collects and distributes the blank media levy established under the 1997 Copyright Act amendments. (The CPCC has collected $59 million since 1999, with the proceeds split between producers of sound recordings, performers and authors, i.e. lyricists and composers.) This collective represents a compensatory solution to the music industry’s concerns over previous copying technologies, such as cassettes and, more recently, write-able CDs.

The Songwriters Association of Canada, with 1,200 members, represents a broad range of songwriters, from novices to stars like Sarah McLaughlin, working in all categories of contemporary music. SAC maintains a song depository (which currently contains over 10,000 works) that serves to provide proof of copyright ownership. The organization also involves itself in negotiations intended to improve the contractual arrangements between songwriter-performers, publishers and record labels – a relationship that has witnessed a long and troubled history since the birth of recorded music (e.g., folk musicians whose songs were popularized by rock groups, with little or no financial compensation). It is not within the scope of this report to examine the precise state of these contractual arrangements as they currently exist in Canada.

The Guild of Canadian Film Composers was founded in 1980 in order to develop a formal contractual agreement between producers and musicians commissioned to write scores for audiovisual works. It took almost two decades to accomplish this task, however. In 1999, CAPPRT ruled that the Guild could negotiate a standard contract with producers; it was formally certified as an artists’ collective bargaining entity in 2003. (Under the provisions of their collective agreement, most film composers working in Canada within territory specified by the Status of the Artist Act – including U.S. composers hired by runaway U.S. productions – are subject to the terms of the contract.

As with directors, film composers continue to strive to have their creative work formally recognized at the level of public policy. Under the terms of various tax incentive mechanisms designed to encourage the industry to hire Canadian talent, the work of composers is treated as an business expense, rather an intellectual property asset, with underlying rights.

The Canadian Music Centre, founded 45 years ago, is a repository of scores, primarily but not exclusively, written by contemporary classical composers. It holds the works of 635 composers, and comprises about 16,000 pieces of music. When a composer joins, he or she permits the Centre to promote the work, which includes an authorization to make copies of scores in the repository in order to respond to rental or purchase requests from orchestras and other musicians seeking to perform the composition. (This model is similar to what the Playwrights Guild of Canada has established.)

For the past few years, the Centre has been making digital copies of the scores in its collection, and is now about half way through its repertoire. The Centre’s intention is to be able to make its database of digital scores available electronically, via a website, to further promote its members’ music. At the moment, however, they have not taken this step because there’s no way to guarantee that the scores will not be copied. Existing encryption technologies and other anti-copying measures are inadequate. The situation is yet another vivid illustration of how the public can be denied access to creative work because there’s no mechanism for paying creators and respecting their rights.

Still, the main financial issue facing contemporary classical composers is the fact that there are so few performances of their work. Classical composers derive their music income from commissions, and earn the lion’s share of their revenues up-front. Most also teach in a private or university setting; only a handful are successful enough to survive exclusively on commissions. Shoring up copyright protections is but one step in addressing the larger problem, which is that artists are entitled to be paid for their work, not just the ancillary activities that allow them to make ends meet.

Rounding out this list is the Canadian chapter of the American Federation of Musicians, which has a membership roster of about 17,000 artists, three-quarters of whom are freelancers (its full membership is 130,000). The AFM is a 108-year-old trade union in the U.S., but has the status of a professional association in Canada. It represents all musicians hired to work for the CBC, for example. For musicians who play in clubs or at events such as weddings, the AFM provides services such as contract protection, immigration assistance, etc. Though typically not recording artists, such musicians often have their work recorded or broadcast without their permission, through live-to-air simul-casts on radio or cable stations. Often, the broadcasters ask the bands for a waiver, which essentially takes away the musicians’ right to collect any future royalty revenue that may be generated by such uses.

Among its other duties representing the interests of its session musician members, the AFM negotiates and administers special payments which incude a pro-rata share of industry profit as well as royalties for “new use” arising from the subsequent use of existing recordings in advertising jingles, films, television series, international television deals, and so on. For professional session players, such special payments can account for an extremely significant source of income, representing as much as 60% of annual income for prominent U.S. musicians.

The relationship between recorded music and technology is a vast topic. Sound recording and mixing technology have revolutionized all forms of music. Musicians and songwriters have used a range of musical technologies to invent new styles. And successive generations of consumer electronics -- some successful, others not -- have made recorded music universally accessible.

As with television, the combination of broadcast technology and home recording devices have produced significant challenges to the music industry. But as radio survived television, the music industry, in the past, learned to co-exist with private copying on media such as cassettes, in the way that Hollywood, though initially threatened by home copying, discovered how to capitalize on the mass consumer acceptance of VCRs.

The music industry’s confrontation with the dilemma posed by Internet copying is a well-publicized story, and one that is not limited to the Canadian context. In recent years, retail sales of CDs have plunged, from 67.3 million in 1999 to 55.2 million in 2002 (projected), according to a study conducted for Industry Canada. Over the same period, sales of blank CDs has jumped from 45.5 million unit to 155 million, while sales of CDR/RW writers has seen a comparable increase. The reasons cited include high price points and consumer downloading from file-sharing sites, as well as the rapid adoption of the technologies that enable such copying – CD burning, MP3, high-speed network access. Another explanation for the declining sales is the production of fewer CD titles.

Most observers note the generational aspect of this trend, with younger listeners being far more willing to make unauthorized digital copies than an older generation of consumers. But there is also a strong measure of inconsistency in attitudes towards unauthorized copying. Young consumers accept technology-driven economic trends, such as the rapid obsolescence of computers, and the $1 royalty cell phone users readily pay for ring tones (ring tones, as a consequence, now bring in billions in royalty revenues each year). But they balk at paying for recorded music found on the Internet.

One well-known Canadian recording artist cites the apparent, and difficult to comprehend, disconnect among many music consumers. “My fans come up to me at concerts with their burned CDs and ask me to sign them,” she says. “They don’t get it. They are just helping themselves…The temptation is just too great.”

To counter this practice, the major record labels have enlisted the support of internationally known recording artists, shut down Internet radio, and launched enormous lawsuits against file-swappers, making use of new anti-piracy laws in the U.S. The Canadian Recording Industry Association attempted to pursue a similar legal action, seeking to force ISPs to disclose the names of subscribers suspected of swapping large numbers of music files; the claim was rejected by the Supreme Court of Canada.

As is well known, there’s no consensus within the music world about such hard-ball legal tactics. Many musician/songwriters hope these legal actions will serve as a deterrent. But groups like SAC and SOCAN distanced themselves from the CRIA case and many critics condemned the music labels’ strategy as an attack on its own fans.

Moreover, there is no agreement on the precise nature of the threat posed by Internet copying, which is now extensive (one estimate from the U.S. is that 40 million people downloaded music in 2002.) Those who defend file-sharing point out that Top-40-style downloading represents only a portion of this activity, as many Internet users are looking for music that is either in the public domain or no longer commercially available.

Lastly, there are some songwriters, artists and musicians who believe that posting music on the Internet represents an online promotional/marketing tool that can lead to sales of their albums and therefore compensation for their creative work. Some small independent labels have pursued this approach to circumnavigate structural impediments in the industry – e.g., increasingly Top-40-oriented radio play lists centrally programmed by huge broadcast conglomerates, and lack of exposure in retail music chains where shelf space is increasingly dominated by the artists represented by the major labels.

One Canadian songwriter tells the story of trying to persuade her record company, one of the majors, to take a more innovative approach to marketing her latest album as a way of countering sales lost to the Internet. Her strategy involved a combination of value-added packaging, sales through non-traditional retailers, Google-based advertising links, e-commerce sales from her own website, and lifestyle marketing through consumer magazines. But her label rejected this approach as too “outside the box,” so she released the CD independently. The move has “absolutely” paid off, but it also means that she’s had to take a much more hand’s-on role in the business end of her craft, she says. “The days of being able to sit at home and write songs are over, for everybody.”

The most recent piece of the Internet music puzzle has to do with the advent of fee-based download sites, such as I-tunes, where consumers can buy songs for 99-cents. In that case, the record companies negotiated the rate directly with Apple, leaving the creators out of the discussion. Two-thirds of the fee goes to the label and one-third goes to Apple. Songwriters and publishers receive a small fraction of the fee remitted to the record label – an amount similar to the approximately 8 cents received as a mechanical royalty for a song contained on an actual CD sold. This amount is administered by the publisher, 50% of which is remitted to the songwriter or applied to the songwriter’s account in the event of an un-recouped advanced.

In Canada, songwriters see a greater opportunity to influence the economic structure of these new music distribution sites. At present, Puretracks.com has been established as a domestic fee-based downloading site. As of the fall of 2004, there’s no agreement in place over the fee structure, and songwriters hope to have greater input into the licensing agreement Puretracks negotiates with CRIA and the Canadian Music Publishers Association, which is also representing songwriter interests. In the meantime, the Canadian Music Publishers Assocation have filed for a tariff with the Copyright Board to have a percentage of the download pie set, so that they would be paid directly from Puretracks or similar businesses and not be bundled with the record companies share of royalties to then be subsequently accounted from the record companies to the publishers.

What remains to be seen is whether these kinds of sites will become economically viable for the music industry, and also accepted among consumers, especially with the advent of legislation intended to promulgate the making available right that is designed to limit file-sharing. The broader point is that the legitimacy of such arrangements rests on respect for creator rights; if the deals negotiated between these filing-sharing services and the music labels fails on this score, the whole system will collapse.

In terms of the federal government’s copyright policy moves in this area, Ottawa has been promising to ratify the WIPO treaties for several years. Based on the Status Report on Copyright Reform submitted in March 2004 by the ministers of Canadian Heritage and Industry, WIPO and other related legislative changes now being discussed include the implementation of an exclusive making available right for producers and performers; measures to discourage tampering with technological protection measures and rights management information that identifies copyright material; the introduction of exclusive distribution rights for audio performers (these already exist for producers and authors); and a legislated recognition of moral rights for audio performers.

But an economic impact report recently commissioned for Industry Canada casts some doubts about the benefits of the WIPO treaty for domestic performers. “Performers and sound recording makers share interests in common in creating and supplying recorded music, though the economic position of the former is mostly considerably weaker than that of the sound recording makers, who often have the superior bargaining position,” concluded Ruth Towse, associate professor of cultural studies at Erasmus University in Rotterdam. “The underlying motive of the WIPO Treaties is the promotion of international trade in copyright material. The likely effect is that implementation could increase revenues to performers and sound recording makers, but the revenues are likely to accrue mainly to non-Canadians.”

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