Why Now is the Perfect Time to Discuss Performance Rights

It’s Toronto’s time to shine! This past October, Governor General David Johnston officially declared 2015 to be the “Year of Sport in Canada” and Toronto’s hosting of the Pan American Games is clearly one of the reasons why. The major sporting event is a fantastic opportunity for the city’s economic development. In fact, the Ontario Chamber of Commerce expects the games to bring in 250,000 new visitors as well as more than $3.7 billion in new economic activity. Considering that tourists spend $1.1 billion in food and beverages alone every year, each tourist the games bring in is a potential new consumer for bars and restaurants in the city. As the business becomes increasingly competitive, eating and drinking establishment owners might want to rethink their practices and come up with new ways to attract clients in order to make the most of the Pan American Games. And music might just be the answer.

In May 2015, Re:Sound, one of Canada’s various music licensing companies, published Music Has Value, a report about “the value of music to customers and businesses,” and the results are prominent: music does influence customers’ decisions. According to that report, 75% of Canadians notice the music being played in bars and restaurants and 88% of Canadians enjoy hearing music in such establishments. Moreover, 80% of Canadians “feel that music in a bar [or] restaurant […] enhances their experience.” This appreciation often translates into very cogent actions such as making patrons stay longer, returning to the business in the future, and recommending the place to others. Music, whether live or recorded, can be used as a powerful “marketing tool that adds value to businesses” and should therefore be carefully chosen.

This desire to hear music in eating and drinking establishments should emphasize, not trivialize, the source of that music. In fact, according to that report, “customers not only want to hear music in the businesses they patronize but they are also concerned about where that music comes from and if its creators are being fairly compensated for the commercial use of their music.” Upon learning that a business was not complying to music licensing laws, almost 50% of Canadians would take some kind of action, including not recommending the establishment to others. And such reactions are not only true of Canadians. The report adds that 40% of Swedish consumers would also have a negative opinion of a business if they discovered it was using music illegally. Therefore, in order to take advantage of music as a means to attract new clients, business owners must not only take in consideration what they play, but also its legality. In Canada, that means complying to the various rules surrounding performance rights.

Canada’s Copyright Act gives copyright owners the exclusive right to perform music works in public or to communicate them to the public by telecommunication. Such rights do not only include live performances but also the use of recorded music in a public setting. SOCAN (the Society of Composers, Authors and Music Publishers of Canada) and Re:Sound both provide business owners with multiple tariff licences applicable to various uses of music. Paying one copyright collective however does not exempt licensees from paying the other.

SOCAN’s Tariff 3A is a licence to play (publicly perform) live music in an eating/drinking establishment. The annual fee for this specific licence is 3% of the yearly compensation for entertainment, for a minimum of $83.65 per year. Compensation for entertainment includes the artist’s remuneration as well as any tips given by customers or in-kind contributions from the business owner (free meals, transportation, etc.).

Tariff 3B, on the other hand, allows those establishments to play recorded music accompanying live entertainment. Licensees are required to pay 2% of the annual compensation for entertainment, for a minimum of $62.74 per year. Re:Sound’s equivalent to this licence, Tariff 5A, demands 0.9% of the aforementioned compensation, for a minimum of $37.64 per year.

Tariff 15A is probably the SOCAN licence that applies to the highest number of businesses, as it covers the use of music for background purposes. The annual fee depends on the size of the establishment: $1.23 per square metre or 11.46 cents per square foot; and a minimum yearly fee of $94.51. Seasonal establishments are only required to pay half of the aforementioned rate, provided they are operating under six months per year, though the minimum annual fee applies nonetheless. Keep in mind that paying for a streaming service or online radio will not exempt business owners from paying this licence (digital music services such as Spotify have reiterated this in their Terms and Conditions of Use and do not allow, in most cases, commercial use of their platform). However, no royalties will be collected for the use of a radio receiving set.

On the other hand, Tariff 3, the comparable Re:Sound tariff in this case, requires fees that can be calculated in one of  three ways: “1) the total annual tickets sold or admissions multiplied by $0.000831; or if that is not available, 2) the total capacity of the establishment, multiplied by the number of days of operation in a year, multiplied by $0.001558; or, if that too is not available, then 3) the area of the establishment in square metres or square feet, multiplied by the number of days of operation in a year, multiplied by the number of days in operation in a year, multiplied by $0.002597 (per m2) or $0.000239 (per ft2).”

Finally, SOCAN’s Tariff 18 allows licensees to play recorded music for dancing. The annual fee is based on the establishment’s capacity as well as the days and months of operation. After a series of calculations based on those variables, the final number should be equal to the percentage required by SOCAN for this particular licence. Tariff 6.A, Re:Sound’s comparable licence, also uses these variables to determine the required annual fee. The calculations will vary depending on whether the establishment can accommodate more than 100 patrons or not.

The Pan American Games will probably not have much of an impact on Toronto’s already busy music scene, nor the way musicians are compensated for their work. But as they give restaurant and bar owners the chance to target a new consumer base, they also allow public performance rights to be discussed as an investment as opposed to a mandatory compensation. And as with most investments, rules need to be followed and content creators and performers need to be remunerated.

 Aicha Tohry is an IPilogue Editor and a JD candidate at Université de Montréal.

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