Episode 244
Exploring the 2.99% Royalty Rate: A Deep Dive into Music Licensing
The episode elucidates the stark reality that music creators receive a mere 2.99% of the revenue generated from streaming platforms, such as Spotify, in Canada, a figure that significantly undermines their financial viability. This percentage, dictated by the Copyright Board of Canada, is distributed by SOCAN among songwriters, composers, and producers, further exacerbating the challenges faced by artists reliant on these meager payouts. The discussion highlights the systemic issues within the music industry, particularly during the COVID-19 pandemic, which has intensified the financial struggles of creators. We delve into the complexities of music licensing and the calculations that determine royalties, revealing that the average payout per stream is approximately 0.0084, an amount that barely qualifies as compensation. This conversation serves as a crucial reminder of the importance of transparency and advocacy for fair compensation in the ever-evolving landscape of music distribution.
Takeaways:
- The current license fee paid by music services platforms in Canada is set at 2.99%.
- SOCAN distributes the 2.99% license fee among songwriters, composers, and producers on Spotify.
- The Copyright Board of Canada plays a significant role in determining the set rates for royalties.
- Artists receive approximately 0.0084 per spin on Spotify, which is significantly less than one cent.
- The disparity in revenue between creators and platforms like Spotify is a matter of grave concern.
- To maximize exposure, artists should disseminate their music across all available platforms simultaneously.
Companies mentioned in this episode:
- SOCAN
- Spotify
- CBC Radio
- Nielsen
Transcript
At this current moment, 2.99% of a music services platform is what they pay.
Speaker A:So their annual revenue, 2.99% of that annual revenue in Canada is taken as their license fee.
Speaker A:So they pay that to SOCAN.
Speaker A:SOCAN then takes that 2.99% and it's distributed amongst all of the songwriters and composers and producers that have taken part in anything on Spotify as a platform.
Speaker A:So that's.
Speaker A:That's the.
Speaker A:About 3%.
Speaker A:Whereas if you're looking at the platform itself, Spotify is making a lot of money.
Speaker B:So 97%.
Speaker C:How did they get away with that?
Speaker C:Like, I mean, it's crippling the creator.
Speaker C:I'm really sorry to jump in.
Speaker A:No, no, go ahead.
Speaker C:But it sounds to me that they're really crippling a revenue stream for artists that desperately depend on, you know, that type of royalty or money coming in.
Speaker C:Where did they come up with that number?
Speaker C:Why is it so low?
Speaker C:Do you have any insight on that?
Speaker A:I do.
Speaker A:The number is actually not created by those platforms.
Speaker A:However, it is argued by those platforms.
Speaker A:And you can have a debate legally when the Copyright Board of Canada sets a rate.
Speaker A:So basically what happens is the Copyright Board of Canada sets right where.
Speaker A:Whenever that was, and it does predate me being in the copyright world, but that rate was set.
Speaker A:And then once the rate is set, they can appeal basically and go to court and say, we don't think that we should be paying more than 2.99%.
Speaker A:Or it may have been at 1.29%.
Speaker A:And SOCAN would say, well, let's get it to 5%, and they meet somewhere in the middle.
Speaker A:So there is a.
Speaker A:A conversation, and it is mandated by the Copyright Board of Canada, which actually ends up being the one with the gavel to say, this is what is set.
Speaker A:Now, what socan does is they have what we call agreements, and in those agreements we are able to change that percentage.
Speaker A:But if when I say change the percentage, it has to be on par with what the Copyright Board of Canada has, because everybody knows what the Copyright Board of Canada right is.
Speaker A:So it can't be 10% when Copyright Board is 2.9%.
Speaker A:It is crippling.
Speaker A:It will be really nice to see a change, especially during COVID 19, where the dependency of music for both the livelihood of creators and the listener is both on the same platform.
Speaker A:So it will be great to see that increase.
Speaker A:But I digress.
Speaker A:I'm not the Copyright Board of Canada and I can only, you know, really vouch for and be an advocate for those creators.
Speaker A:And that's what I do.
Speaker A:But when it comes to.
Speaker A:So your payouts are actually going to be smaller when looking at a platform like Spotify.
Speaker A: .: Speaker A:So it's less than a cent.
Speaker C:80% of a penny.
Speaker C:Wow.
Speaker A:Of a penny.
Speaker A:Yeah.
Speaker A:Now, the reason being is because this is what actually happened.
Speaker A:So you have that license fee that I talked about at the beginning, but then you also have the total number of spins.
Speaker A:And you have to understand that if they are paying a license fee, that license fee has to be divided by the millions, hundreds of millions of spins on their platform.
Speaker A:So that's why it becomes so small.
Speaker A: .: Speaker A: .: Speaker A:Because we do have to accommodate the weekend.
Speaker A:Who has 200 million spins?
Speaker C:Gonna ask?
Speaker C:Yeah, because they contribute to the daily spin number, like, significantly, as opposed to.
Speaker A:Exactly.
Speaker A:So that's why you have to take that.
Speaker A:You have to do that calculation.
Speaker A:Total number paid divided by total number of spins gives you your unit.
Speaker A:Unit price times spins per artist gives you your royalty.
Speaker B:That's helpful.
Speaker B:Wow.
Speaker A:Yeah.
Speaker A:So it really does manage expectations.
Speaker A:And I do pride myself in being totally transparent and managing expectations because as you said, I've worked with so many people in this industry, some who are, like, leading the industry in terms of their clout and their success, but some who are just starting, and I don't ever want someone who's just starting to think that they're going to be in a position that is blown out of proportion because of what they see on TV or what they hear or, you know, what they hear in terms of royalties.
Speaker C:Right, Right.
Speaker C:What do you think is.
Speaker C:Is like the biggest mistake that artists make or new artists make just off the jump?
Speaker C:Do you think that they should wait or hold off on putting their stuff up on streaming services, or do you think that's fine?
Speaker C:Any traction is good traction when you're starting?
Speaker A:I would say any traction.
Speaker A:It's good traction because, like I said, if all of these platforms have your music on them simultaneously, it gives people a place to go.
Speaker A:As long as you're not paying for putting your music on a particular platform.
Speaker A:But it doesn't hurt to have all of your music on all these platforms, because once you're on all of these platforms, you can Direct anybody you're talking to to any one of these platforms.
Speaker A:Plus, take into account your traditional radio, which still is one of the most actively used platforms for people, even though Spotify and Apple Music and YouTube Music exist.
Speaker A:Right?
Speaker A:So if you can do everything all at once, and sometimes people ask, well, what should I do?
Speaker A:Should I focus on my performance?
Speaker A:Should I focus on connections?
Speaker A:Should I focus on the, you know, disseminating.
Speaker A:Disseminating my music through these audio platforms?
Speaker A:The answer is do it all.
Speaker C:Okay?
Speaker A:Do it all.
Speaker A:Because when you do it all, you also build a story that is cohesive with everything you have online.
Speaker C:Right?
Speaker A:And it doesn't necessarily spend more, mean spending more money.
Speaker A:Because I, you know, yes, you could do a music video, but I would say instead of doing a music video, put your song on platforms, do live and make those connections.
Speaker A:Right?
Speaker A:And then when you look at traditional radio, I spoke about this earlier, be creative in how you're going to get onto traditional radio.
Speaker A:There is a difference, however, and it's the exact same equation as Spotify.
Speaker A:So I'm going to relate it to your traditional radio stations.
Speaker A:If you listen to a radio station within a particular region, they are only servicing that particular region.
Speaker A:So again, you're going to take the license fee divided by that number of people who are particularly listening in that region, and that's going to be your royalty.
Speaker A:Well, we do have one station in Canada that is national and that's CBC Radio.
Speaker A:So CBC Radio pays a lot larger of a license fee and therefore their royalties are a lot bigger.
Speaker A:So let's say you have a regional radio station that's giving you a dollar per spin or just less than a dollar per spin.
Speaker A:CBC Radio is typically giving upwards or around $30 per spin.
Speaker B:Whoa.
Speaker A:Yeah, Right.
Speaker A:So add that to your strategy and like, boom, I just got all my money back for my recording sessions.
Speaker B:You've just got a lot of people thinking in a whole new light about.
Speaker C:So what about.
Speaker C:What about like, radio shows that are syndicated, like, nationally or internationally?
Speaker C:Do they.
Speaker C:Do they have to pay a different royalty?
Speaker C:Like, say, like, I know Seacrest gets on like a bunch of stations in Canada.
Speaker C:Does that matter or does that.
Speaker A:Not really.
Speaker A:It does.
Speaker A:So if you, if it is syndicated, then so can.
Speaker A:And resound.
Speaker A:Both your music rights organizations have reciprocal agreements around the world.
Speaker A:So if your song, and this is where you get international money from in your royalty bucket is if your song is playing in Japan, you may not even know it became a big hit in Japan, but the Japanese know, and they know that the song is recorded or written by a Canadian.
Speaker A:So that money that's collected in Japan is sent over to Soken and then sent to you via your royalty.
Speaker A:So those reciprocal agreements are crucial to making a lot more money than just domestic.
Speaker A:If you are domestic, you're going to make your standard royalties.
Speaker A:But the second you, you end up being played in another country, then that money actually does come to you through socan.
Speaker C:And what about like, say you get a song on a TV show or a movie, how does that royalty work?
Speaker C:And does socan work in that space as well?
Speaker A:Of course.
Speaker A:So when you think socan and resound, you are thinking anything that is done by a Canadian creator, which could include composer as to your point, and that includes so resounding different than socan.
Speaker A:So socan, just to make the distinction, socan is focused on the creators, those of us that are writers, producers, composers for TV, etc.
Speaker A:Those who are using their intellectual property.
Speaker A:Resound is what we call neighboring rights.
Speaker A:And they're the ones who take care and are responsible for representing anybody who is a background musician.
Speaker A:So if you are on the recordings and you were played bass in the background, or you play drums in the background, or you're a background singer, a backup singer, then that's where your stream of royalty is going to come from.
Speaker C:Right.
Speaker A:Okay.
Speaker A:So when it comes to film and television, a name that tops my head is Michael Power.
Speaker A:He is done everything from Paw patrol to Hawaii 5o.
Speaker A:He makes all of his living literally just writing anything for tv.
Speaker A:And the same applies.
Speaker A:So you're still licensed.
Speaker A:The radios and the movies have to acquire a license.
Speaker A:That license is for public performance.
Speaker A:They also need to require acquire a license for making sure that when movies are played that they have all of the applicable licenses and then those royalties are sent back to the composer or songwriter.
Speaker B:Wow.
Speaker C:And how does it work for an artist performing at a venue?
Speaker C:Because I know I've sang at bars and like other venues and I haven't had to worry about any of that.
Speaker C:Does the venue take care of licensing as far as people publicly performing other people's music?
Speaker A:Yes.
Speaker A:So the venue, if they are properly licensed and they are not operating against the copyright board and the copyright law, then they actually, as a venue, pay a license fee.
Speaker A:So let's take your local bar, your local bar pays a license fee to socan that license and resound, actually.
Speaker A:And so that license fee is based on the music usage.
Speaker A:If you are singing as a live musician, that's one license fee, and that's different.
Speaker A:And the rates are different than if you were playing at a concert, for instance.
Speaker A:And then what they do or what socan does is we have a census that's done by Nielsen and I'm sure you know of Nielsen, they are the ones, Billboard, Canada, all them, you know, they're the data company.
Speaker A:And Nielsen actually has sensors that are placed in different metropolis areas to pick up the.
Speaker A:The most popular music that's playing.
Speaker A:So that.
Speaker A:And we do a, what we call a census.
Speaker A:Over 21 days, we're able to figure out what's the popular music that' playing in this quarter.
Speaker A:And then that's how the royalties are disseminated.
Speaker A:But if you are doing a concert at a local bar, let's say, or you're doing an event, you've promoted this, this event that you're doing, then it is the responsibility of the creative or the artist, whomever it is, that singing to let us know, A, that you performed at a concert so that you get your royalties and B, what was on your set list.
Speaker C:Wow.
Speaker A:So then you'll get what we call a direct distribution.
Speaker A:And the way that that's done is you take, let's say the license fee that we receive from the venue is $500.
Speaker A:And there were five songs performed throughout that concert.
Speaker A:It's a really small concert.
Speaker A:And there were five songs performed and you wrote and produced all of them.
Speaker A:Well, we're.
Speaker A:That $500 is going to be divided by the five songs, which means dol per song.
Speaker A:And if you wrote and recorded everything and there's no other creative, you get that $500.
Speaker A:But if each of them has a co writer or a producer, let's say, then of each song you get $50 and your producer gets $50.
Speaker C:Huh?
Speaker C:I don't think a lot of artists know that.
Speaker B:I'm certain that a lot of people do not know that.
Speaker A:That's why it's so important.
Speaker A:It is so important to make sure that if you do whatever you are performing, make sure you take note of that and you let socan know, because we are getting money on the back end.
Speaker A:And if we haven't gotten money, because the only way a royalty is created is if a license fee is paid.
Speaker A:So if we haven't gotten money, and I'm noticing this in some areas where venues, whether it be lack of education or trying to go around what they're supposed to do, if I hear from you that you've performed at a venue that hasn't paid me a license fee, well, my job then is to go and get that license fee for you.
Speaker C:Wow.
Speaker B:Wow.
Speaker C:I have no idea.
Speaker C:This is incredible.
Speaker C:Yeah.
Speaker B:This is.
Speaker C:Yeah.
Speaker B:For everyone listening, this has definitely been one of our most informative.
Speaker B:Informative conversations.
