Making sense out of the music industry and a recent Copyright Board decision.

Reading the comments in reply to Michael Geist's BLOG article indicating that the Copyright Board has made a decision on music download royalties indicates common confusion over copyright and royalty issues with the larger music industry. While I Am Not A Lawyer (IANAL), I have spent many hours talking about this with musicians. It is yet another example where "clarification and simplification" is needed not only of the Copyright act, but also of a legacy arrangement between industries.

To make sense of any discussion about music you need to start from an understanding that there are two, sometimes competing, branches of the music industry: the music publishing branch, and the recording branch.

The short-form is that at the moment if you want to distribute recorded music online in Canada you need to both get permission (and make payments) to a record label, as well as pay a fee to a collective society that represents the composer/publisher of the music.

Going back over a hundred years ago, only the publishing branch existed. Composers would author music, and those who wished to perform music would pay to those composers. At the time performers were treated as "trained monkeys", who weren't granted copyright or any type of respect for being artists in their own right.

Then the first digital music devices (player pianos) and "talking machines" (early analogue recorders) came along. As is the age-old pattern, the incumbent music industry saw this new technology as "theft" given someone recording could buy the sheet music once, record it, and then sell many copies. John Phillips Sousa's opposition to to recording devices lead him to make a submission to a US congressional hearing in 1906.

These talking machines are going to ruin the artistic development of music in this country. When I was a front of every house in the summer evenings, you would find young people together singing the songs of the day or old songs. Today you hear these infernal machines going night and day. We will not have a vocal cord left. The vocal cord will be eliminated by a process of evolution, as was the tail of man when he came from the ape.

In other words, the technology that allowed music recording was thought so bad that it would cause us to de-evolve as a species. While the technology that the incumbent industry fears has changed, I doubt few young people won't recognize the irony in comparing the entrance of the recording industry with current debates. The only difference seems to be that current governments seem to have forgotten history and are seeking to protect the incumbents from progress.

Given the music publishing industry would never give permission for these devices to exist, the governments in many countries stepped in to say that permission was not required: only a government set royalty rate was required to be paid per copy of a recording. While the contours of this regime is different in different countries, including whether the regime is compulsory or opt-in by the industry, in Canada this means that there is a collective society that will collect a royalty on behalf of the music publishing branch. This is the Canadian Musical Reproduction Rights Agency Ltd. (CMRRA) It is this royalty, in relation to music download services, that was decided on recently.

This handles the music publishing branch, but there are still performers and labels that are part of the recording branch that want their money as well. There isn't one payment to one group of copyright holders that need to be done when distributing music, but two. When the Canadian Private Copying Collective seeks to set a new levy for private copying, this collective is made up of members from both branches and thus a single payment can be made. This is not the case for all aspects of music distribution.

The negotiations with the recording industry is what we hear about most often, given the recording branch of the music industry, and 4 major transnational labels in particular, have managed to grab nearly all the political and other power in the industry worldwide. While this monopolistic control is generally bad for the interests of the publishing branch and the vast majority of performers, this is a historical reality we have to deal with at the moment.

There are many of us that believe that this is a temporary situation. Cory Doctorow often talks about the recording industry dominated music business and the current business model transition. When talking about the fact that, if left to market forces rather than draconian government intervention, the labels will diminish in relevance as the other parts increase, he says "technology giveth and technology taketh away". While the technology to record and distribute recordings required large capital investment over a large part of the century that the technology to recording and distribute has existed, a growing number of private citizens now have the required technology in their private homes.

When I had a chance to talk to a number of famous Canadian musicians at the Ministers forum on Copyright, I was essentially told that the primary purpose of a record label was as a bank for musicians in that they provided the necessary financial investment. As this roll decreases with technology reducing or eradicating many of the historical costs, I believe (and hope) the relationship between musicians and other parts of the recording industry such as artist development, production and promotion will flip on its head. Rather than labels scouting musicians and "signing" them to contracts that put most of the control in the hands of the labels, musicians will scout for business talent and sign contracts that keep the majority of the control (and money) of the music in the hands of the musicians.

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Complexity of the industry

I've posted some further clarifications about the nuances of this tariff at:

An extract:

Note that this is only one of several payments online music services are required to make to copyright owners. Services may also need to pay for the right to communicate musical works, which is dealt with under SOCAN's famous Tariff 22. Assuming that "making available" isn't a separately licensable act, this would take care of underlying compositions and lyrics.

However, in Canada, performers and sound recording makers (usually record labels) also have multiple rights. Each may ask for remuneration for the communication of their respective performances or sound recordings. Expect NRCC to file a tariff covering these rights soon. Of course, don't forget about permission to reproduce master recordings, which must be obtained separately from the record labels. And while in practice performers often assign their rights to the labels, that isn't always the case so still more negotiations might be necessary.