SOCAN seeks judicial review of the Copyright Board of Canada's decision for online music services for 2011-2013

September 27, 2017

      On August 25, 2017, the Copyright Board of Canada released a decision on the use of music by Internet streaming services. Today such services include Apple Music, Google Play and Spotify.

This was the Copyright Board's first opportunity to consider the new “making available right,” which was introduced in the Canadian Copyright Act as part of 2012 amendments. The decision also set the royalties to be paid by streaming services for the period 2011 to 2013. 

The making available right (also known as “MAR”) is a new right that was intended to clarify the full scope of copyright protection for online uses of works, including musical works. It has been part of international copyright legislation for years, and it confirms that the rights administered by SOCAN include the right to make music available to the public online in a way that allows end-users to access them where and when they choose to do so.

On the interpretation of the making available right, SOCAN is pleased that the Copyright Board accepted SOCAN's arguments that its introduction in Canada added a new component to the protections that already exist in the Copyright Act.

Unfortunately, the Copyright Board of Canada declined to set a royalty rate for the making available right, claiming there was not sufficient evidence for it to do so. Yet SOCAN's expert economist, and even the expert testifying on behalf of the objectors to the proposed tariff, put forward potential royalty rates for this new right.

In the cases for which royalties were approved by the Copyright Board, SOCAN was extremely disappointed and is very concerned about the significant reductions in the rates implemented by the Board. While the Board expanded the base upon which those rates apply by including advertising revenues, this is not expected to offset the reduction in the rates in any meaningful way. SOCAN does not believe that the new rates even begin to reflect the high and growing value of the music to music streaming businesses that rely heavily – if not completely – on the musical works created by SOCAN's nearly 150,000 member songwriters, composers and music publishers.

For example, the Copyright Board reduced the previously existing rate of 7.6 percent to 5.3 percent for both on-demand-by-customers and services that recommend music to their customers. When customers use portable devices such as smartphones or tablets, which has become commonplace in the market, the rate for SOCAN was decreased from 5.3 percent to a mere 3.48 percent of revenues. The Copyright Board also removed the previously certified royalties on per-stream and per-subscriber minimums, replacing those with a $100 minimum fee per service per year, which means virtually no royalties are paid for the use of music on advertising-supported "free" tiers offered to customers.

      On September 25, 2017, SOCAN filed an application for judicial review of the Copyright Board of Canada's rate decision in the Federal Court of Appeal. SOCAN is seeking, among other items a review of:
1. The Board's decision not to set a royalty rate for the making available right.
2. The significant lowering of the streaming rate percentages.
3. The departure from previously-certified minimum fees.

These decisions follow hearings that took place before the Copyright Board in late 2013 and early 2014, which highlights the serious problem of the Board's inability to render timely decisions. The uncertainty caused by these delays is disruptive and harmful to all stakeholders in the Canadian music ecosystem, including the tens of thousands of Canadian businesses using music and all music creators and publishers.

"We don't need decisions for time periods that have come and gone five years ago," said SOCAN CEO Eric Baptiste. "We need decisions that are relevant to what streaming services are doing with our members' music today. In the online world, royalty rates based on facts that existed in 2013 may just as well have been set in the Ice Age."

SOCAN is actively involved in current public consultations concerning the Copyright Board process and will make every effort to ensure government takes the necessary actions to remedy this situation, which cannot continue if Canada wants to remain competitive or even viable on the world's music stage.