The American Music Fairness Act (AMFA): The Canadian Dimension

Last week I posted a blog on the American Music Fairness Act (AMFA), draft US legislation that seeks to end the exemption that US terrestrial broadcasters enjoy with respect to payment of broadcast royalties to performers and labels for playing recorded music. It is an anomalous situation in which the US is the only developed country jurisdiction to provide such an advantage to terrestrial broadcasters. Not only that, the exemption unfairly tilts the playing field within the US broadcasting industry by discriminating against digital broadcasters, since streaming services and digital and satellite US broadcasters are required to pay performance royalties. It is also an anomaly because terrestrial (and other) broadcasters are required to pay royalties to songwriters and composers when they play their music, just not to performers (in the case of AM/FM stations).

As a result of this longstanding special treatment for terrestrial radio stations, which dates back to the dawn of the radio era in the US, not only do US performers in the US not get paid royalties when their work is played on terrestrial radio, but foreign artists are likewise deprived of such payments. As a result, many countries reciprocate by denying to US artists the ability to collect performance royalties when their works are played on terrestrial radio in their countries. This is permitted by the international convention that governs such matters, the WIPO (World Intellectual Property Organization) Performances and Phonograms Treaty of 1996 (WPPT). The WPPT, which the US ratified in 2002, provides that, in the words of WIPO;

performers and producers of phonograms have the right to a single equitable remuneration for the direct or indirect use of phonograms, published for commercial purposes, broadcasting or communication to the public. However, any Contracting Party may restrict or – provided that it makes a reservation to the Treaty – deny this right. In the case and to the extent of a reservation by a Contracting Party, the other Contracting Parties are permitted to deny, vis-à-vis the reserving Contracting Party, national treatment”.

In other words, instead of applying national treatment, i.e. treating foreign performers “no less favourably” than domestic performers, Contracting Parties could apply reciprocity, discriminating against foreign performers if their home countries failed to provide the full benefits of the treaty. Tit for tat, or the “mirror principle”. At the time the US acceded to the WPPT it filed a reservation with respect to equitable remuneration because the performance right under US law is not applicable to terrestrial broadcasting. This led a number of countries to exercise their right to refuse to collect or pay royalties owed to US artists for performance of their works on their terrestrial radio stations. Among them was Canada, as well as many EU countries, including Ireland and, at the time, the UK.

But it gets more complicated. The policy of applying reciprocal rather than national treatment to US performers was recently challenged in a dispute between copyright collectives in Ireland. The Irish court then referred the matter to the EU Court of Justice (ECJ). In a preliminary ruling, the ECJ found that Irish law, which applied reciprocity, was not consistent with EU law, which is silent on the reciprocity question leading the Court to conclude that it was not permitted. However, this was not the end of the matter as the European Commission is now launching a study into the impact of this decision. A solution, pushed by some in the European music industry, is to amend EU law to allow individual member states to continue to apply the reciprocity principle, writes music journalist Chris Cooke.

Because Canada, like Ireland the UK and others, applied reciprocal rather than national treatment to US performing rights, Canadian broadcasters were not required to pay, nor did Canadian collecting societies (Re:Sound and others) collect, performance royalties on US works. The US music industry, which to date has been unsuccessful in having the terrestrial broadcast royalty exemption lifted despite years of trying, has been seeking “national treatment” as a fallback. If granted national treatment, US performers are able to collect radio royalties in countries that mandate payment of performance royalties by broadcasters, even though they and non-US performers are denied such royalties in the US. For US performers it is a partial solution. That solution is now coming to Canada.

As part of the updating of NAFTA and its replacement by the USMCA (known as CUSMA in Canada), the US, Canada and Mexico agreed to national treatment when it comes to “all categories of intellectual property covered in the (IP) Chapter”; viz.

each Party shall accord to nationals of another Party treatment no less favorable than it accords to its own nationals with regard to the protection (2) of intellectual property rights.” Article 20.8 (1)

But that is all about “protection”, not payment of royalties, right?

Did you notice the footnote (2)? That says, among other things,

for the purposes of this paragraph, “protection” also includes…any form of payment, such as licensing fees, royalties, equitable remuneration, or levies, in respect of uses that fall under the copyright and related rights in this Chapter.”

To implement this commitment, on April 29, 2020, the Government of Canada published a Statement Amending the Statement Limiting the Right to Equitable Remuneration of Certain Rome Convention or WPPT Countries, in the Canada Gazette, the publication of record for the Government of Canada. In plain English, this complicated “statement amending the statement…etc” means that U.S. recordings are now eligible in Canada for equitable remuneration under all tariffs applied by the collecting society responsible for performance royalties. U.S. recordings fixed before 1972 will also now be eligible. This is as a result of changes introduced in the US by the US Music Modernization Act, which among many other things, extended copyright protection under US federal law to pre-1972 sound recordings. The change in Canada for pre-1972 recordings came into effect April 29, 2020 while the rest of the changes came into effect on July 1, 2020, the date when the USMCA/CUSMA entered into force.

This is one more copyright related commitment in the USMCA/CUSMA that I probably should have included in my blog on the cultural aspects of the trade agreement that I posted on its first anniversary at the beginning of July this year. (I am making amends now). As an aside, and unrelated to the USMCA, for certain tariffs (satellite radio, pay audio, simulcasting, non-interactive and semi-interactive streaming) U.S. recordings became eligible as of August 13, 2014 as a result of Canada’s ratification of the WPPT. (This was because US law requires digital broadcasters to pay performance royalties, so Canada accorded US recordings national treatment). As noted above, on April 29, 2020, pre-1972 U.S. recordings also became eligible for the same treatment.

As a result of the USMCA, for US artists the problem of performance royalties paid by Canadian terrestrial broadcasters is “solved”, even though they do not get performance royalties from terrestrial broadcasters in their own country. This change will impose some additional costs on Canadian radio stations although the Canada Gazette did not hazard a guess as to the cost, saying in effect that it was too complicated to calculate. Canada also has its own peculiarity when it comes to payment of performance royalties, which complicates calculations. The first $1.25 million in advertising revenues for terrestrial stations is sheltered from performance royalty payments except for a nominal $100 fee. In effect, this is a greatly watered-down version of the performance royalty exemption enjoyed by US radio stations, and is as controversial in Canada (and as unpopular with the music industry) as the terrestrial broadcast exemption is in the US.

While the new USMCA/CUSMA provisions will help US artists earn revenues when their recordings are broadcast in Canada, this does nothing to solve the problem for Canadian artists with regard to royalties for the broadcast of their music on US AM/FM stations, nor does it do anything for US artists in the US (a far bigger market of course). Any improvement in outcomes for artists is a step forward, but the tiny step taken in Canada is dwarfed by what would happen in the US if the American Music Fairness Act becomes law. It has a long way to go, and the US broadcast lobby is well organized and well-funded. This is not the first time this issue has come before Congress, the most recent being in 2017 when the “Fair Play Fair Pay Act” was introduced. Despite determined efforts by the music industry at generating support in Congress, ultimately it did not make it through the legislative sausage machine. Now the issue is back on the congressional agenda; it is high time to end this anomalous exception to payment of copyright performance royalties by bringing US law into alignment with the rest of the modern world.

Getting national treatment for US performing artists in Canada is positive (for this one group of performers) but is nonetheless only a half-step forward, an interim measure. The US Congress needs to fix the problem once and for all by passing the AMFA and eliminating the broadcast exemption. That is the right thing to do for all artists affected by the non-payment of performance royalties for radio broadcasts, whether they are from the US, Canada or elsewhere. Enacting the AMFA would also eliminate the disparity (some would say unfairness) whereby Canadian broadcasters will now be paying royalties to US performers while Canadian performers are denied the same benefits in the US.

© Hugh Stephens, 2021. All Rights Reserved.

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