DETAILS OF PROPOSAL - UPDATE MARCH 2009

In October of 2007 the S.A.C. published it’s proposal for the monetization of the file sharing of music. Since that time we’ve received a great deal of input from consumer advocates, music industry colleagues, legal experts, MPs, Government officials etc. Accordingly some elements of our proposal have been reconsidered while others have been further developed. Here is a brief description of the changes:

SUMMARY OF CHANGES

A)    Internet and wireless subscribers may opt out
B)    Participation is voluntary for Creators and Rights holders
C)    Amount of licence fee to be determined by a regulatory or judicial process

THE BACKGROUND

1. Whereas:

• An estimated 1.6 billion music files are shared online in Canada1 each year.
• The total number of purchased downloads in Canada was 38 million in 2005.2
• The proportion between these two is 98/2 – 98% sharing, 2% purchasing. 

We Therefore Believe:

Consumers have clearly demonstrated their wish to access music by means of user based distribution systems.

2. Whereas:

• Virtually every song ever recorded is available through user based distribution systems3(more than 97 million recordings)4
• About six million songs are available on legal sites.5 

We Therefore Believe:

File sharing is both a revolution in music distribution and a very positive phenomenon. The volunteer efforts of millions of music fans creates a much greater choice of repertoire for consumers, allowing songs - both new and old, well known and obscure - to be heard.

All that's needed to fulfill this revolution in distribution is a way for Creators and rights holders to be paid.

THE UPDATED PROPOSAL

3. We propose an amendment to the Copyright Act which would establish a new right: The Right to Remuneration for Music File Sharing.

4. We define Music File Sharing as the sharing of a copy of a copyrighted musical work without motive of financial gain.

Since the new right is limited to activities that take place without motive of financial gain, parties who receive compensation for file sharing would not be covered by this right. Therefore, this new right is distinct from rights licensed by legal music sites like iTunes and PureTracks.

5. The new right would cover the sharing of music, between two or more parties, using any technology.

6. In exchange for this sharing of their work, Creators and rights holders would be entitled to receive a monthly fee from most internet and wireless accounts in Canada.

7. While at least 70% of Canadians regularly use the Internet to file share music, and 90% of them use it occasionally, naturally not all Canadian Internet users use the Internet for that purpose.  We propose that they should be allowed to opt out of the payment of the fee. Broadband internet and wireless subscribers will be able to opt out of the licence fee if they do not share music files and if they sign an undertaking to pay a predetermined amount of damages if they are caught file sharing.

Payment of this fee would remove the stigma of illegality from file sharing. In addition, it would represent excellent value to the consumer, since this fee would grant access to the majority of the world’s repertoire of music. Existing download subscription offer a mere fraction of the file-sharing repertoire.6

Creators or other persons entitled by by this system to claim a portion of the licensing fees but who nevertheless do not wish to be compensated under such a system could similarly opt out. Acceptance of license fees would amount to a waiver of the right to sue for the unauthorized transmission by Canadian users.
 

8. This scheme would present a major financial improvement for the music industry. Since the license fee would be paid by most internet and wireless accounts, the amount of income generated annually could adequately compensate the industry for years of declining sales and lost revenues, and would dramatically enhance current legal digital music income. Sales of physical product would continue to earn substantial amounts, albeit gradually decreasing. Masters would continue to be licensed to movies and television. Radio would continue to sell advertising and pay royalties on music.7

We believe strongly that by giving Canadian music Creators a solid business model for the 21^st century, this endeavor would initiate a golden era for music in Canada. Ultimately, we see this model being adopted internationally, and we are working with Creators groups around the world to effect a global system of remuneration for the sharing of music files.

9. Though fears have been expressed that this new system would “canabalize” existing businesses like iTunes there is no proof of that. In fact there are studies that have found the opposite to be true.8

Existing music sites like iTunes and PureTracks would continue to be licenced directly by Creators and rights holders and would continue to attract business with a depth of “value added” services and security features which is not found in file sharing networks. 

ISPs would receive an administrative fee for collecting and remitting licence fees to the appropriate collective(s).

As file sharing becomes a legal activity, ISPs would fill their servers with clean great sounding versions of all the popular socially distributed tracks keeping much of the activity within their own networks thereby drastically reducing expensive bandwidth demands. This would mean millions of dollars in savings for ISPs. 

10. The collective would be responsible for tracking vast amounts of internet and mobile file sharing activity as well as distributing royalties to creators and rights holders. Tracking could be outsourced to one of the companies that currently does this work.

11. CANADIAN COPYRIGHT AND LEGISLATIVE ISSUES

Regarding WIPO implementation, we are not opposed to the legal protection of Technical Protection Measures (TPM) or "digital locks", however we believe the obvious economic benefits of our model make such protection measures obsolete. Given the consumer aversion to TPM's, we believe their use will inhibit the success of recordings in which they are embedded, and they will simply fall out of use.

We support Rights Management Information (RMI) protection since RMIs will assist in the identification of files and the attribution of rights without posing any problems for consumers.

The Songwriters and Recording Artists of Canada are in the process of consultation with the broader music industry, as well as consumer groups, Internet Service Providers and telecoms in order to gather support both in Canada and internationally for this proposal. We look forward to discussions with all concerned to make this proposal a reality that will be of great benefit to all.

The Songwriters’ Association of Canada (S.A.C.)

Why the monetization of music file sharing is good for me if I am an Internet Service Provider:

1. Monetization will dramatically lower ISP bandwidth costs. Once file sharing is an authorized activity, ISPs can establish their own proprietary servers to service the bulk of file sharing activities. Since users would access the most shared songs on this “internal” system, it would lead to a dramatic reduction in the need for bandwidth to the world wide web, and a considerable cost saving to providers.
2. Since unauthorized file sharing would be virtually eliminated, notice and notice provisions as contemplated under Bill C-61 would be reduced or eliminated along with associated costs to the ISPs.
   
3. Creators and rights owners would be in a position to offer ISPs an administration fee. Some percentage of the collected licence fee would go to the ISPs, making them in effect the creators and rights owners business partners.
4. Once music file sharing is monetized, other new business opportunities will present themselves to ISPs, such as the development of proprietary portals for music file sharing that would lead to ancillary advertising and other revenues.

Why the monetization of music file sharing is good for me if I am a Consumer:

1. Guilt free, low cost access to the world’s entire repertoire of music. Users of file sharing networks will know they have done the right thing by supporting creators in their work by paying a small licencing fee.
2. Clean virus free files. Bringing file sharing into the full light of day will eliminate many of the problems these files create for consumers.
3. Access to tens of millions of songs, many of which are not found in digital stores or anywhere else. Even the most obscure titles can be found on peer to peer networks, in fact the internet has become the greatest living repository in history for all kinds of music. Consumers will have unlimited access to all this music and more to come in the years ahead.

Why the monetization of music file sharing is good for me if I am a Creator:

1. Creators will finally be paid for this new and growing use of their work. Like everyone else, performers and creators of music have the right to be paid when their work is used, and music file sharing eclipses all other uses, including iTunes. In fact, an enormous number of the songs on iPods today came from some form of music sharing. After ten years of receiving no compensation for this new use of music, performers and songwriters will finally be paid for their labours, so they can continue to do what consumers want them to do: create music.
   
2. The monetization of file sharing will create a low cost distribution system with equal entry for the works of creators at all levels. Very few artists are fortunate to be signed to recording contracts and fewer still are ever front racked at HMV or Wal Mart. Authorized file sharing would offer a conduit to the world for aspiring creators and compensate them for their efforts.
   
3. Fair distribution of the licencing fee “pool”. Third party companies such as Big Champagne gather file sharing data that would be applied to the pool of money created by the licencing fee. This ensures that the monies received by creators and rights owners would directly and accurately reflect how often their music is file shared.
4. Once music file sharing is monetized, other new business opportunities will present themselves to creators.
   

Why the monetization of music file sharing is good for me if I am a Rights Owner:

1. Rights owners will finally be paid for this new and growing use of their catalogues. After ten years of receiving no compensation for this new use of music, rights owners will finally receive compensation.
2. Increased value of catalogue. Much of what is file shared is catalogue music that may have represented little value to rights owners in the past. Current works would also increase in value.
3. Record labels and Music publishers will have the funds needed to develop aspiring artists and songwriters.
   
4. Once music file sharing is monetized, other new business opportunities will present themselves to rights owners