In my previous post, I detailed how a single digital spin of a song can trigger multiple webcasting tariffs. I also mentioned that royalties are not always paid wholly and directly to a single “creator” of music, but rather distributed on a percentage basis, depending on the various roles in the creation of the musical recording. I promised I would describe how a Canadian musician may get paid for a song they performed on, wrote, or produced. I’ll start with Re:Sound’s Tariff 8.
But first a disclaimer: what follows is merely an explanatory exercise based on a hypothetical environment. I can not know for certain what Bryan Adams’ tariff 8 income is. However, I can run through the steps of calculating what he might make, assuming the likely circumstances in which his recordings are based. The purpose of this exercise is not to guess the exact number on a cheque. The purpose is to understand the nature of royalty distribution and the measure of remuneration performers and makers earn for their work.
In theory, determining “what an artist gets paid” is fairly straightforward for Tariff 8 when a non-interactive, commercial play-count is available, as it is a simple matter of per-play royalties (see: the Tariff 8 fact sheet and page 63 of the Copyright Board’s decision). It is important to note that rates are the same between non-interactive and semi-interactive webcasts. Consequently, ambiguity of the language in the tariff leading to confusion about which category a particular service falls under will not affect royalty distribution.
The Tariff 8 fact sheet describes the revenues of different sized webcasters:
“very-large” webcasters earn $5.8M annually, with 3 billion song plays per year;
“large” webcasters earn $130,000 annually with 70 million song plays per year; and
“medium webcasters” earn $30,000 annually, with 15 million plays per year.
Using a combination of Tariff 8’s analysis of Canadian demographics and the reality of the current webcasting industry, let us imagine a hypothetical realistic market comprised of two very-large webcasters (similar to Pandora), ten large webcasters (similar to Songza), and fifty medium webcasters. I will apply these market conditions to four typical artist roles in the music industry to determine how much each would be paid under Tariff 8.
FOUR RECOGNIZABLE ARTIST TYPES
While there are many permutations of creator roles (Artist/Producer, Performer/Songwriter, Producer/Engineer, and so forth), for the purposes of this exercise, I will examine four well-known artists to whom we can relate. The following table outlines:  their roles on a particular recording;  which tariffs those roles trigger;  the likely ratio of royalties to be split (note that while these are not exact numbers, I can make a reasonable estimate of the splits based on the number of personnel or songwriters on a given recording);  an estimate of total play counts, determined by Spotify’s historical play count values which I will apply to the hypothetical market outlined above; and finally  a calculation based on the ratios between the different-sized webcasters described above. (Editor’s note: I reworded the description of item  to clarify that I was calculating a total estimated play count from the hypothetical market I had described.)
Bryan Adams, “Summer of ’69”
- Performer (lead singer, rhythm guitarist): Tariff 8 – 80%
- Songwriter: Tariff 22, Online Music Service Tariff – 50%
- Publisher: Tariff 22, Online Music Service Tariff – 25%
- 25 million plays in 2014
As a feature performer, Bryan Adams is entitled to eighty percent of his group’s Tariff 8 royalties, as Canadian organizations tend to distribute on an 80/20 basis split between feature performers and background performers. I will apply the same distribution model to this calculation, however band members may indeed negotiate their rates evenly if they please (for the purpose of this exercise, I will apply an even split to Arcade Fire’s earnings below).
It should also be noted that Tariff 8 is split evenly between the performers and the makers. As a result, Adams is entitled to 80% of half (or 40%) of the total royalties distributed for webcasting under Tariff 8. On 25 million plays, the song earns $2550 in the year’s T8 royalties, of which his label gets half, leaving $1275. Individually he earns 80 percent of that half, $1020 – almost enough to buy a new Fender Telecaster.
Win Butler, “We Exist” (Artist: Arcade Fire)
- Performer (lead singer, rhythm guitarist) – Tariff 8 – 10%
- Songwriter: Tariff 22 – 16.67%
- 18.75 million plays in 2014
Arcade Fire is, at times, a large 20-piece band. It would be reasonable to assume that the band might employ the 80/20 split evenly between the six principle members and then evenly among the remaining fourteen musicians, respectively (the split may be on on a per-song basis, and may be conditional on the songs’ arrangements. For our purpose we will assume an equal allocation). Win Butler will then earn 13.33% of half the song’s earnings. On 18.75 million plays, the song earns $1912.50, splitting $956.25 to the band he takes a mere $127.50 of the year’s earnings.
Chantal Kreviazuk, “Brave” (Artist: Josh Groban)
- Songwriter: Tariff 22, Online Music Service Tariff – 33.33%
- 2.5 million plays in 2014
As she did not perform on the recording, Chantal Kreviazuk’s yearly earnings for “Brave” are nil.
Janina Fialkowska, “Mazurka No.1 in F-Sharp Minor” (Composer: Chopin)
- Performer: Tariff 8 – 100%
- 2,500 plays in 2014
As the solo pianist, Janina Fialkowska earns 100% of the 50/50 split of T8 royalties between her and her record label. The total earnings for 2500 plays is 25 cents, and Janina would earn 12.5 cents for the year.
While some of these amounts are not enough for a new Fender Stratocaster, it is important to keep in mind that I’ve only calculated the amount payable for webcasting of one song, under one tariff. All of the artists above have a deep catalogue of music, much of which is being played across different mediums, and incurring different tariffs.
In my next post, I will examine in further detail Tariff 22 and the Online Music Service Tariff.
Jordan Fine is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.
My friend neatly summarized the outrage over Re: Sound Tariff 8 royalty rates. The socio-economic context for these rates bears consideration.
On average, artists earned 37% less than the average worker in 2006. This is despite the creative industries’ contribution to the national economy of $84.6 billion, or 7.4% of Canada’s total real GDP in 2007. The arts rival the energy, forestry, minerals and metal sectors in terms of their impact on the GDP.
As consumers substitute online streaming for sales, artists’ income diminishes. Now, the Copyright Board has set rates that are “one-tenth of the rates freely negotiated by the music industry” with online services in Canada, writes Barry Sookman.
In short, the Copyright Board is not adequately considering creators’ interests in its policies.
The arts sector’s contribution to Canada’s GDP is indeed demonstrative of how important artists are to our economy. This a fact often disregarded in tariff rate dialogue and calculation. However, there are many factors at stake beyond the mere socio-economic context within which artists reside. The rates cannot exceed values which, when totaled among all eligible artists, would cease to provide sufficient incentives for online services to operate.
The rates must also be careful not to treat a digital spin in the same manner as a broadcast radio spin. The latter is limited by a variety of facets: broadcasts cannot be immediately repeated or skipped; they are temporally static. Digital music is less constrained by time and resources, offering more flexibility to the digital ‘broadcaster’ and the user. As digital spins are less predictable in incidence, they have the capacity to reach a disproportionate frequency. Accordingly, the rates must fairly compensate artists, but they must avoid unfairly handicapping the companies licensing those artists’ music for digital dissemination.
Moreover, Tariff 8 royalties are only one source of licensing income for performers and makers. Criticizing one tariff rate without examining the entire context of music royalties is akin to suggesting that a Cola maker’s earnings from vending machines is unfair, without accounting for the numerous other streams of revenue like restaurants, groceries, and convenience stores. Tariff 8 would be inhumane were it the solitary source of royalty income for artists. This is not the case.
This is all not to suggest that the rates are thus inherently fair or unfair. As an artist, I am personally wary about rates whose unit of measurement falls so far right to the decimal point that it is danger of falling off the page. Yet, it is important to note that the calculation of a fair rate is not as simple as examining a high socio-economic value for arts in combination with the low values yielded to creators and makers in that field, and then concluding that the copyright board has failed to account for their interests. Creators’ interests are undeniably important, but they are not the only interests at stake.
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