Guest Post – Collective Rights Management in Nigeria: Unitary v Multiple Collecting Society Models by Olumide Mustapha (@lumes_bg)

music

The recent reports regarding the Concerned Copyright and Intellectual Property Owners’ (CCIPO) open letter to the Honourable Attorney-General of the Federation, Mohammed Adoke-Bello (SAN) (AG-Fed) is of tremendous import with regards to the development of the music industry in Nigeria. The letter contained a plea by the CCIPO for the AG-Fed to intervene on behalf of the former to compel the Nigerian Copyright Commission (NCC) to approve another collecting society for owners of music copyrights.

 

The matter centres around the issue of collective administration of musical copyrights in Nigeria. In particular, the issue of the collection of royalties and the monopoly of the Copyright Society of Nigeria (COSON) in this area, being the only body approved by the regulator, the NCC, to operate as a collecting society for music rights.

 

As it stands, COSON has both been very vocal and visible with respect to its fight against criminal copyright infringement as well as holding various organisations and industries liable in civil law for lack of payment of license fees. This is in addition to its public relations offensive and educational activities to promote the issue of copyright in the music industry. The organisation’s efforts over the last two years have been commendable and the amount of fees they have been collecting and distributing have reportedly been increasing year on year.

 

Where the organisation has been heavily criticised has been in relation to its royalty calculation and distribution formulae, and associated methods. Lack of transparency has also been a levied at the company in addition to the issue of its lack of adequate infrastructure for monitoring the uses of works by commercial users throughout the country.

 

Now, while I am in total agreement with the wide held view that competition is crucial to the development of any industry and economy, the area of collective rights management is unique and therefore requires a gradual process of development until it can be (fully) de-regulated.

 

The mere approval of another collecting society will not in itself ensure that more users will pay license fees for use of music in their respective businesses, nor that music owners will enjoy greater compensation for use of their works. The tendency of (over)- “fragmentation” that is prevalent in most spheres of Nigerian social and economic structures will likely be the result of this desire for ‘de-regulation’, resulting in more confusion, higher transaction costs and ending in less users paying license fees or using music.

 

What   is Collective   Rights   Management:   Pro-Monopoly   v Anti-Monopoly

 

Collective management of copyrights is a system in which owners of works authorize collective management organisations (“Collecting Societies”) to monitor the use of their works, negotiate with prospective users, issue licenses against appropriate remunerations, (usually on the basis of a tariff system), collect such remuneration and distribute it amongst the owners of the works.

 

The rationale for this system arises from the impracticability of managing these activities individually. The transaction costs involved for rights owners to individually administer the public performance rights, (for example), to their works would likely end up being more than the price of the license fee for the use of same.

 

Thus, third-party organisations represent the interests of a group of owners and these ‘collective rights’ organisations, (by virtue of their core activities), enjoy economies of scale when administering these rights on behalf of a large group of rights holders.

 

COSON has repeatedly argued that it is adequately protecting the interests of Nigerian music copyright owners, citing the many civil suits it has filed against various organisations and industries that use music in the course of their businesses. The anti-monopoly advocates, on the other hand, point to COSON’s lack of transparency and accountability, with particular regard to monitoring of works and royalty distribution amongst its members.

 

NCC: Collecting Society Approval Powers

 

Nigeria’s current legal framework with regards to the collective management of music rights (and its regulation) is contained in the Copyright Act Chapter C28, Laws of the Federation of Nigeria 2004 (the “Act”), and the Copyright (Collective Management Organisation) Regulation 2007. We operate what can be described as a unitary Collecting Society model with the flexibility to accommodate multiple societies, while having NCC as the overall regulator.

 

Based on our system, the NCC is not obliged to grant any other organisation a license to operate so long as it is of the opinion that COSON is adequately serving the interests of music copyright owners. Also, because the Act is silent on what would constitute the ‘adequate protection of interests’, it is presumably left to the NCC to decide upon.

 

Going Forward

The primary focus should be on issues surrounding the distribution methods of COSON as well as the adequacy of its infrastructure for the monitoring of the use of works. Audio recognition software as well as the use of ‘field operatives’ to gather accurate evidence of use of works by businesses, broadcasters and other commercial users should be the short to medium term aim. The accurate collation of music usage by licensees also serves the secondary purpose of providing a basis for a more equitable distribution of royalties and license fees amongst members. Commercial users are not mandated by law to keep playlists and logbooks so it is even more imperative for COSON to carry out these activities.

 

Both sides in the dispute must not lose focus of the ultimate goal; to wit, having a suitable administrative framework for music copyright administration in Nigeria, that would involve a simple and efficient method for users to obtain lawful   licenses   to   enjoy   creative   works,   whilst   ensuring   the   equitable distribution of fees and the rewarding of creators thereby stimulating further creativity and innovation. It seems both sides of the argument have this intention in mind and must therefore cooperate and engage in continuing dialogue to find some middle ground on which a consensus can be built.

 

Olumide Mustapha Esq (QSEW) is a Media and Entertainment Attorney. He can be reached by telephone on +234 810 421 55 00, or by email at lumimustapha@gmail.com. He also tweets from the handle @lumes_bg.

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To read further on COSON and its battles, disputes and progress, check out BON, COSON and MUSIC-SHUNs: 5 THINGS.

 

 

 

Streaming IS the Future; but Nigerian Music Needs to Turn on The Tap

music

Last week, Adele’s manager, Jonathan Dickins, was reported as saying during an interview that streaming is the future whether musicians liked it or not. His comments followed news that Taylor Swift had pulled her entire catalogue from Spotify, the world’s most popular streaming service.

Taylor Swift is not the first musician to grow less than enamoured of the service, or with streaming as an income generator for the industry. Last year, Radiohead musician Thom Yorke described Spotify as “the last desperate fart of a dying corpse”, when the group pulled its music off the service. More recently, musician/songwriter Aloe Blacc published an op-ed in which he also expressed grave reservations about streaming as a sustainable source of income. How true, can it be then, that streaming is the future?

Looking at it from Blacc’s perspective, there might be a point about the reward system but I think rather than an indictment on Spotify, it’s more symptomatic of where the industry is, as a whole. Blacc writes –

“Consider the fact that it takes roughly one million spins on Pandora for a songwriter to earn just $90. Avicii’s release “Wake Me Up!” that I co-wrote and sing, for example, was the most streamed song in Spotify history and the 13th most played song on Pandora since its release in 2013, with more than 168 million streams in the US. And yet, that yielded only $12,359 in Pandora domestic royalties— which were then split among three songwriters and our publishers. In return for co-writing a major hit song, I’ve earned less than $4,000 domestically from the largest digital music service.”

If that’s what’s now considered a streaming “success story,” is it any wonder that so many songwriters are now struggling to make ends meet?”

It sounds dire, but that’s 168 million streams versus exactly how much in sales? According to this site, the track sold 237,000 copies when it debuted in July 2013 and only broke the 1,000,000 mark 5 months later in October. Take a look at Billboard’s half year charts for digital singles too. Album sales are down, and have been on the downward trend since 2010. Streaming and subscription revenues, on the other hand, are growing, climbing 51% in 2013 and crossing the $1bn mark (summary here; full report here). The head of Global Trends and Futuring for the Ford Motor Company has also been quoted as saying that “young people prize access over ownership.” So, what’s the issue? Is Spotify, together with the other streaming services simply ripping people off?

The issue may be that content creators don’t fully understand the service yet. Chances are that many users don’t understand the back-end either (they don’t really need to, in all honesty), so if you’re one of them, you might want to check out this post. Another post suggests that Spotify has not sufficiently controlled the narrative and has allowed content creators and the media replace fact with fantasy.

In the latter post (the Lefsetz Letter), the point is made, agreeing with Adele’s manager, that YouTube is by far the bigger monster, paying far less than Spotify does, closely followed by P2P platforms, which pay nothing at all. The post however disagrees with Adele’s manager on some music being taken behind the subscription pay wall, because that would simply push users to YouTube and P2P, leaving the content creators with nothing.

Does this mean anything for streaming in Nigeria? Probably not in the near future. Unreliable mobile internet and expensive data plans mean that very few people without WiFi modems stream much. Furthermore, given that most of our musicians give most of their music away for free downloads, there is little incentive to explore streaming anyway. So, perhaps the Nigerian market prefers ownership to access and this is all moot for now. But I’m an advocate for long-termism, and mobile internet will work someday and voice/data bundles will become more affordable for the streaming demographic. What then?

The current industry model will probably need to change in a year or two. Right now, the model for success is giving music away for free, hoping it becomes a hit that leads to RBT revenue and, ultimately, live performances. This sort of ties in with Dickins’s breakdown of how revenue streams for successful artists today –

60-65% of their income is going to come from tickets, 15-25% from tour merch, 10-15% from publishing, 2-4% from ancillary and 2-4% from record sales.” (Here’s the link again, just in case; emphasis in the quote mine).

You can see though that it’s significantly different, in that 70-90% of revenue will come from touring (not “shows”!) and tour merchandise. However, publishing revenues aren’t insignificant either. Enter, COSON (and its pursuit of digital royalties).

If RBTs are going to be the way forward here, then the crazy percentages that the telcos take of the gross revenue (60-72%, before VAS companies split the net with the artistes/labels) need to come down significantly. The music industry should lobby as hard as they can for legislation to support this (shouldn’t be too hard, with so many entertainers gunning for office in 2015).

If, on the other hand, the African market is to become as competitive as the foreign market, then the industry needs to support its domestic music streaming companies. Streaming kills piracy, and if the numbers are large enough (hint, hint, artistes and label execs), it will put money directly in their pockets. As Lefsetz says, “tech is all about scale” and “people who put brakes on the future end up screwing themselves.”

In conclusion, everyone knows that digital is here and analogue is gone. For Nigerian musicians to fully maximise  revenue from digital, given that their largest market is local, they may need to approach the issue a little differently.

BON, COSON and MUSIC-SHUNs: 5 THINGS

It has now been widely reported  that IBAN* and BON** (associations of independent television and radio broadcasters) have chosen, in response to lawsuits by COSON, seeking the payment of royalties for its members, to stop playing the music of COSON-registered artists. Here are a few bits and bobs on collecting societies and royalty payments.

  1. What is a Collecting Society?

A collecting society is an organisation that, as the name suggests, collects royalties income on behalf of its members. What income? Well, you’d have to go back to Copyright 102, on who owns the music, for copyright basics. However, to quickly summarise, the music and the process through which it is made confers exploitable rights on different people. If you’re a busy song writer or a touring singer, the chances are that you cannot track all the stores, radio and tv stations, digital platforms, etc. playing or selling your music. Collecting societies do this for their members. Examples of collecting societies outside Nigeria are The Harry Fox Agency, PRS for Music, ASCAP, NORM, SAMRO and so on. In Nigeria, we have COSON – the Copyright Society of Nigeria. COSON is the collecting society for musical works and sound recordings in Nigeria. What are musical works and sound recordings? See Copyright 101.

2.   Does COSON represent only singers/artists?

In theory, no. I reckon COSON would also argue that it doesn’t just represent singers in practice.  In theory, COSON should represent and indeed holds itself out to represent everyone in the music-making process – singers, writers, instrumentalists, producers and so on. However, the nature of copyright is such that if a producer or instrumentalist was hired and paid a one-off fee for their work, it is deemed a work-for-hire and copyright vests in the employer. Which brings me to the “in theory” part, because in Nigeria,  most singers write their own songs and the producer (hired and paid a one-off fee) sequences the music with software. After Cobhams, not too many others hire session bassists, guitarists, percussionists, etc., unless you’re part of a fuji or highlife band, but you get the drift. If a singer who’s written his own music (or his label), hires a producer (on a one-off fee) who lays the beats, who owns the copyright in the work? The artist? That’s right. But I am more than happy to be corrected if my assessment is wrong.

3.   How do Collecting Societies pay their members?

I’m just going to copy and paste the ASCAP formula . You can find the breakdown and explanation on their webpage, here.

Use Weight  X  Licensee Weight  X   “Follow The Dollar Factor”   X   Time of Day Weight   X   General Licensing Allocation

+

Radio Feature Premium Credits
(for radio performances only where applicable)

+

TV Premium Credits
(for performances in highly rated series, where applicable)

=

CREDITS

You can also view BMI’s method here.

How does COSON pay its members? They also describe it on their website and here’s another copy and paste:

“At COSON, there are two categories of distributions: Specific Distribution and General Distribution.

“When a license is issued for a clearly identifiable work or a log is received from which the royalty due to a particular work is clearly discernible (e.g radio & TV promos, road shows, jingles, ringtones, etc), the copyright owner/s is entitled to a royalty based on how much the society has collected on behalf of the owner from the user. The only deduction in this case will be the administrative cost.

On the other hand, a general distribution is made to members across the board, in cases where the royalty collected cannot reasonably be ascribed to any specific work or where the members at an AGM have decided that a token be paid to all members irrespective of the amount of use of their works. General distributions are usually done once in a year.”

4.   Is COSON the only collecting society in Nigeria?

Uhm, yes, although Charlie Boy and his friends at MCSN would probably disagree with me. And this article, here, suggests there should be more than one. However, the Copyright Act says that you cannot officially be a collecting society unless the Copyright Commission licenses you as such. The Act goes further to state that that the Copyright Commission does not need to license more than one collecting society if it is satisfied that a single society can carry out the role adequately. Therefore, as the law currently stands, royalties for the broadcast of musical works and sound recordings in Nigeria are payable to COSON alone.

5. Does COSON’s “International Standards” Argument Fly?

COSON prefaces most of its statements on this matter with a reference to international standards and practices for the industry. If we want a world-class industry, then YES, it certainly makes sense for us to adopt the standards that the very best representatives of the international industry have imbibed. However, our history, both economic and political, has shown (and it’s unclear to me whether this is fortuitous or by malevolent design) that wholesale adoption of international standards has not always worked. In his piece on the matter, industry heavyweight, Efe Omorogbe frowns at the BON/IBAN tack of wanting to develop a system that takes the “peculiarities of the Nigerian industry” into cognisance. Obviously, given how long BON and IBAN have contended with collecting societies (and other, more sinister motives, as alleged by COSON), there are some trust/credibility issues. But there is nothing wrong (if BON/IBAN are sincere) with looking at the roles that culture, environment, etc. played in the evolution of international systems while they were evolving, and see if we need to tweak any parts of what we’re adopting. For instance, is it a factor worth considering that in the royalty regimes practising these international standards, pirates and piracy are not as pervasive as they are here? Is it worth considering that our traditional channels for distribution now involve an Alaba “distributor” negotiating a one-off fee with the artist and  the artist expecting no more sales income from the album (thank God for digital)? These have no direct bearing on radio and television per se, but they underscore the point that our industry is neither American nor British – it is Nigerian.

Clearly, BON and IBAN have to pay for licences to exploit the music, unless they all decide to become 100% talk radio stations. This is more so as they are required to have 80% Nigerian content. If their ban is as a result of not wanting to pay at all, it is unconscionable. If, on the other hand, they want to develop a royalties regime in good faith for the Nigerian industry, then rather than merely complaining about antagonism and harassment, they should be putting out counter-proposals to COSON’s. Eventually, the law suits that have been filed by COSON will reach a conclusion and things will come to a head. It will be interesting to see if the ban will last as long as the lawsuits.

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**IBAN – Independent Broadcasting Association of Nigeria

**BON – Broadcasting Organisations of Nigeria