FAQ - SOCAN's Internet Distribution
Q. On what basis is SOCAN able to make royalty payments for Internet performances?
A. SOCAN is able to collect license fees from Internet services based on the approval of SOCAN Tariff 22 by the Copyright Board of Canada, the Canadian regulatory body that sets the rates for the use of SOCAN’s repertoire of musical works in connection with performing and communication rights.
Q. What challenges did SOCAN have to overcome in order to secure the approval of Tariff 22?
A. SOCAN originally filed Tariff 22 in 1995 and has proceeded to do so every year since that time. An initial decision of the Copyright Board in 1999 confirmed the legality of Tariff 22. However, that decision was the subject of legal challenges in the Federal Court of Appeal and the Supreme Court of Canada. In 2007, the Copyright Board approved Tariff 22.A for online music streaming and downloading services. In 2008, the Board also approved Tariffs 22.B-G for other uses of music on the Internet, including music uses on websites operated by broadcasters. SOCAN had to overcome further objections in respect of Tariff 22, culminating in the Supreme Court of Canada decisions in July 2012. As a result of one decision, SOCAN lost the ability to collect license fees for the transmission of musical works in permanent downloads, while the other confirmed SOCAN’s right to continue to collect fees for streaming uses.
Q. Does SOCAN currently have any outstanding items with the Copyright Board related to Tariff 22?
A. Tariff 22.A was last approved by the Copyright Board for the years 2007-2010. In November 2013, hearings will be held in relation to the years 2011-2013. The Board is also considering arguments advanced by SOCAN to the effect that recent amendments to the Copyright Act relating to the new “making available right” have re-instated SOCAN’s right to collect license fees for downloading activities. SOCAN has also asked the Board to approve a number of agreements concerning audio-visual uses of music on the Internet. It remains to be seen if these agreements will be approved or if further hearings will be required.
How SOCAN Licenses Internet Services
Q. How does SOCAN license Internet services?
A. The operators of Internet websites that communicate musical works to the public are required to pay license fees to SOCAN in accordance with the terms and conditions of Tariff 22. The particular Tariff 22 item applicable to them depends on the nature of their music use.
Q. What are the various components of Tariff 22?
A. The following lists the various components of Tariff 22 as currently approved by the Copyright Board:
22A: Online Music Services
A. Services that offer on-demand streaming
22B to G: Other Internet streaming uses of music, in the following categories:
B. Commercial radio station websites;
C. Non-commercial radio station web sites;
D. Websites of commercial television stations and specialty/pay television service, pay audio services and satellite radio services;
E. Websites of Canadian Broadcasting Corporation, Ontario Educational Communications Authority and Société de télédiffusion du Québec;
F. Audio Websites (e.g. Internet radio)
G. Game Sites (e.g. sites accessed online to play games)
Q. Is YouTube paying fees to SOCAN?
A. Yes. SOCAN and YouTube concluded an agreement in early 2013 by which YouTube agreed to pay fees to SOCAN for the period 2007-2013 inclusive. The agreement requires the approval of the Copyright Board, but the parties are confident that such approval will be forthcoming and for that reason the payments contemplated by the agreement have been and continue to be made. SOCAN and YouTube are also currently negotiating for 2014 and subsequent years.
Q. Do any parts of Tariff 22 apply to television programs, movies and other audio-visual programming?
A. Yes. For example, approved Tariff 22.A for online music services applies to music videos. Approved Tariff 22.D, applies to websites operated by Canadian television broadcasters and specialty services offered via cable/satellite. Many of these websites stream audio-visual programs. SOCAN does receive license fees from YouTube, for their transmission of music videos, television programs and movies.
Q. Is SOCAN only able to license Canadian Internet services?
A. SOCAN has the right to seek license fees from any Internet service that communicates musical works in the territory of Canada, no matter where the transmission originates. As long as the communication has a “real and substantial” connection to Canada, the service responsible for that communication requires a SOCAN license.
Q. Is SOCAN licensing permanent downloads of music?
A. As noted above, a decision of the Supreme Court of Canada rendered in July 2012 held that the download of a musical work is not a “communication” to the public. As a result, SOCAN cannot currently license music downloading activities. All previously-collected fees for music downloads had to be refunded to the services. As also noted above, SOCAN is currently seeking to change this situation based on recent amendments to the Copyright Act, which introduced a new “making available” right.
SOCAN’S Distribution of Internet Royalties
Q. Who determined and approved the current Distribution Rules related to Internet performances?
A. Management presented their recommendation for the payment of Internet performances and the new Distribution Rules were approved by SOCAN’s Board of Directors in September 2013.
Q. Where can members access SOCAN’s Distribution Rules?
A. The updated Distribution Rules and the Simplified Distribution Rules are both available on the SOCAN website.
Q. What is the methodology for the payment of Internet royalties?
A. Data suppliers provide SOCAN with their full usage data. All source data is gathered and summarized. Thresholds are applied and records above thresholds are processed for distribution. The $ per performance amount is calculated based on the distributable pool amount and the number of performances, similar to traditional distribution methodologies.
Q. How will SOCAN allocate the revenue received for the online use of music?
A. All revenues received from online music services including YouTube, Internet radio sites, and online game sites will be placed in the new Internet pool. All other revenues from online sources like terrestrial and satellite radio, pay audio, broadcast and cable television, and YouTube movie rentals will be placed in the respective radio pools, pay audio pool, television and cable pools and cinema pools.
Q. How are audio-visual performances(music videos, television series, films) streamed via the Internet accounted for in the SOCAN distribution?
A. Music videos are paid as songs and appear on the new Internet Royalty Statement. Online performances of television series and films from websites operated by terrestrial broadcasters and cable operators are paid according to the census/survey data received for terrestrial programming. For example, if there is a performance of a film or series on a television station, which is also streamed on that network’s website, then SOCAN would credit the composer with one television performance only as the license fees collected for the online performances have been added to the television and cable pools. Online movie rentals by YouTube are paid via the Cinema distribution, but no programming information has been received from YouTube so far for any other performances of television shows and films. In addition, there are a number of audio-visual sites that are not currently paying fees to SOCAN, and we are hoping to license these in future.
Q. Specifically, what performance period does SOCAN’s distribution in November represent?
A. The November 2013 distribution of royalties is for arrears performances only and covers performances during the period of 1Q07 to 4Q12.
Q. When will SOCAN make payments for current performances?
A. Starting in February 2014, SOCAN will begin paying Internet royalties as part of its regular distributions. These payments will be one quarter behind the regular distribution payments for other royalty streams. Therefore, in Feb 2014 (2Q13), SOCAN will be issuing payments for Internet performances from the 1st quarter of 2013.
The SOCAN Internet Royalty Statement
Q. What period does the arrears payment in November 2013 cover?
A. The monies received and being distributed are for the period 2004-2012. The performance data available that has been received from the Internet services and processed by SOCAN cover the period 2008-2012.Therefore the arrears payment being distributed in November 2013 will cover the period from 1Q07 – 4Q12.
Q. From where is SOCAN receiving the performance data on which payment is based?
A. SOCAN is receiving data directly from the Internet services.
Q. How much money is being distributed in SOCAN’s Internet arrears distribution?
A SOCAN will be distributing $3,185,000 in arrears monies.
Q. How do Internet performances appear on the member royalty statements?
A. Internet performances are allocated as follows:
- Streamed performances of online musical works and videos offered by Internet service providers like YouTube, Vevo (U.S.) and Zik appear on a new Internet statement. Due to the quantity of data and existing system limitations, the specific Internet services on which the performances took place do not appear. For all performances, the performance type will be identified as DINA (Digital Internet A).
- YouTube performances of movies related to online movie rentals (not musical works/videos) appear on the Cinema statement as source CN.
- Internet performances of terrestrial and satellite radio, pay audio, broadcast and cable television are taken into account in the regular distributions for these pool types.
- No performance data is currently available for Internet radio stations and game sites.
Q. Why did SOCAN make the decision to pay Internet royalties only for works which receive 500 or more performances?
A. Due to the vast number of performances processed and the distributable amounts of arrears monies, the value of a singular Internet performance was estimated to be a fraction of a penny. Through thorough analysis of the available usage data and estimated pool amounts, SOCAN was able to derive that 500 performances would result in an earnings amount that is distributable. Therefore performances have been summarized so that 100 actual performances will be represented by 1 performance on statements, and we have set a minimum threshold of 5 summarized performances (representing 500 actual performances) for a payment to occur.
Q. Why is the value per performance lower than traditional revenue streams?
A. The value per performance is lower than traditional revenue streams, for example, radio, because the number of performances processed is significantly higher and the Internet revenue is much lower.
Q. Why is source information related to Internet performances not provided?
A. SOCAN’S operational system would not have been able to handle the volume of records unless the data from all sources was summarized prior to inputting to the SOCAN system.
Q. How does the future look for the licensing and distribution of Internet performances?
A. SOCAN was one of the first performing rights societies in the world to file an Internet tariff, and although it’s been a long, arduous process we won the right to license online performances for streaming activities and hope to collect on downloads again in the near future. While revenues seem low compared to traditional media sources, it is important to remember that the digital industry is still in its infancy and we expect a shift as public consumption of music via the Internet grows and ad revenues and subscriber revenues grow accordingly. As SOCAN is able to secure the approval of additional Internet tariffs, this will create an opportunity to increase the number of licensed services, which will mean greater fees collected and larger Internet distributions.