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The “Two Sides” of Music Licensing (Flowchart)

What This Chart Shows — A Quick Guide for Artists

As a musician, your work exists in two legally separate copyrights: the composition (the music and lyrics) and the sound recording (any specific recorded performance of the composition). Both can generate income from licences, but they flow through entirely different systems: negotiated licences and tariffed licences. This chart maps both kinds of licensing.

The left side of the chart follows the revenue from the composition. If you have a music publisher, they will administer your composition rights on your behalf. Among the types of sales and licensing income your composition can earn, two main kinds tend to be licensed by collective societies: “mechanical royalties” (paid whenever your composition is reproduced — on a CD, download, or during many kinds of streaming), collected by CMRRA and/or SOCAN RR, and “performing rights royalties” (paid whenever your composition is played publicly or broadcast), collected through SOCAN. If you self-publish, you can collect both the author’s (i.e., composer’s and lyricist’s) and publisher’s shares of these royalties yourself.

The right side follows the revenue from a recording of the composition. If you are signed to a label (i.e., a record company), the record company typically holds the rights in your “master recording” and licenses its use to others. The master recording is the official sound recording of the composition that can then be licensed. If you own your master recording, you can choose to license these rights yourself and you can choose to use the assistance of a collective. If you contract with a record company, you can negotiate a share of royalties from the record company.

Among the many kinds of sales and licensing income your recording can earn, two main types tend to be licensed by collective societies: reproduction royalties for uses like streaming and background music, collected by Connect or Panorama, and neighbouring and public performance rights royalties for certain public uses of your recording, collected by Re:Sound. In the case of most reproduction royalties, your share of revenue is paid to you either directly or through the record company, if you have one.  In the case of neighbouring and public performance rights royalties, your share is collected by Re:Sound and often split 50/50 between your record company (as maker of the recording) and you, as the performer. If you own the master recording, you may be able to negotiate with the record company for a share of the maker’s 50%.  If you own the master recording as an independent label and have not otherwise contracted with a record company, then you can collect the maker’s share of this royalty directly from Re:Sound or through a membership in Panorama. The performer’s share can be collected directly from Re:Sound or through a membership in ACTRA-RACS or Aristi. If you are not the only performer, this 50% performers’ share is generally shared among the performers.

To receive payments from a collective society, you first have to register for a membership with that society (if you are eligible) and register each work in which you have a right to collect a share of licensing income.

A key takeaway: a single stream of your music on a platform like Spotify triggers royalty obligations on both sides of this chart simultaneously — for your composition and for your recording — through different collectives and different agreements. Understanding both sides ensures you are not leaving money uncollected.

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THE TWO “SIDES” OF MUSIC LICENSING IN CANADAParty To AgreementType of AgreementMoney from Negotiated LicensingMoney from Tariffed LicensingTHE MUSIC COMPOSITIONTHE MUSIC RECORDINGComposer/Lyricist(Author)Music PublishingAgreementMusic Publisher(Publisher)CMRRA orSOCAN RRSOCANRe:SoundMusician / Vocalist(Performer)Recording AgreementRecord Company(Maker)Connect orPanoramaRecordCompanyTariffedReproductionRights LicencesNegotiatedReproductionRights LicencesNegotiatedLicencesOther RightsTariffed PerformingRights Licences(Compositions)Tariffed PerformingRights Licences(Recordings)NegotiatedLicencesOther RightsNegotiatedReproductionRights LicencesTariffedReproductionRights LicencesLicensed users of either tariffed or negotiated licencesin all categories of music use rights in compositions(other than tariffed performing rights in compositions).Licensed end users of tariffedperforming rights in compositionsand/or sound recordings (e.g., TVbroadcasters, stadiums, concerthalls, radio (terrestrial, satellite,and internet), nightclubs,restaurants, fitness clubs, onlineservices, etc.Licensed users of either tariffed or negotiated licencesin all categories of music use rights in recordings(other than tariffed performing rights in recordings).(Note 9)(Note 10)(Note 9)50% Royalty(Note 2)50% Royalty(Note 3)50% Royalty(Note 6)50% Royalty(Note 5)Note 1Note 1Note 7Note 8Note 4Note 4
Solid arrows show money from negotiated licensing; dashed arrows show money from tariffed licensing. Grey boxes are parties to an agreement; green boxes are types of agreement. Note numbers refer to the notes below the chart.
Notes

Note 1: Licensing reproduction rights in compositions

When licensing reproduction rights (also known as mechanical rights) in compositions, the music publisher may choose either to do so directly with a licensee or engage a collective like CMRRA or SOCAN RR to act on its behalf for some of these rights. Tariff income is only collected by an authorized collective society.

Note 2: SOCAN royalty: the publisher's share

The usual share of the SOCAN royalty to the publisher is 50%. If the author self-publishes, then the author may retain this entire publisher's share in addition to the author's share. If the author co-publishes, then this publisher's share may be split between the author (as a co-publisher) and the publisher as they may agree.

Note 3: SOCAN royalty: the author's share

The usual share of the SOCAN royalty to the author is 50%. As between any separate lyricist and music composer, the usual split between them is 50/50, i.e. 25% of the SOCAN royalty to each author.

Note 4: Licensing reproduction rights in recordings

In licensing reproduction rights in sound recordings, the record company may choose either to do so directly with a licensee or engage a collective like Connect or Panorama to act on its behalf for some of these rights. Tariff income is only collected by an authorized collective society.

Note 5: Re:Sound royalty: the maker's share

The usual share of the Re:Sound royalty to the maker of the sound recording is 50%. If the performer is also the maker (i.e., if the performer also owns the sound recording), then the performer may retain this entire maker's share in addition to the performer's share. Each record company can either engage Re:Sound to collect this royalty directly or engage the collective Panorama to act on its behalf to do so with Re:Sound.

Note 6: Re:Sound royalty: the performers' share

The usual Re:Sound royalty share to all the performers of a sound recording is 50%. Each performer can either engage Re:Sound to collect this royalty directly or engage the collective ACTRA-RACS or Artisti to act on its behalf to do so with Re:Sound.

Note 7: Mechanical royalties from the record company

When a music publisher licenses a record company to make and copy a recording of a composition, the resulting “mechanical royalty” due to the publisher from the record company for this right is typically based on “sales” by the record company to consumers (which typically go through wholesalers and retailers). This share of sales is typically paid to the publisher directly by the record company. “Sales” refers to sales of tangible goods such as CDs or vinyl LPs. The wording of the licence agreement itself will determine if sales also include “permanent downloads” and/or “conditional downloads” (see Note 9 for details and the intersection with tariffed performing rights licences paid by online services).

Note 8: Performer royalties on physical sales

When a record company sells physical copies of a recording (e.g., CDs, vinyl albums, etc.), any royalty due to the performers from the record company from use of this right is typically based on “sales” by the record company to consumers (which typically go through wholesalers and retailers). This share of sales is typically paid to the performer directly by the record company.

Note 9: “End users”, and how downloads and streaming work

“End users” in this chart mean the entire range of people and companies who license rights to use music. The end user in this chart is the one responsible to enter into the applicable music licence. For example, a listener may listen to music on a radio broadcast, but it is the radio station who is the end user and must license the right to broadcast the composition and the recording.

“Downloads”, meaning digital downloads online, pose a uniquely difficult kind of music use to assess. First, these can either be “permanent downloads”, in which the buyer retains a permanent copy of the work, or “conditional downloads” (also called “limited downloads”), in which the buyer retains use of the download only as long as the buyer remains a subscriber to the service (e.g., Apple Music, Spotify).

An online service offering only “permanent downloads” must license reproduction rights to the composition from either the publisher or an authorized collective like CMRRA or SOCAN RR, as applicable. It must also license reproduction rights to the recording from either the record company or an authorized collective like Connect or Panorama, as applicable. Permanent downloads alone do not, however, generally trigger an obligation to license tariffed performing rights for either the composition or the recording.

An online service offering “conditional downloads” is generally also required to similarly license reproduction rights in both the composition and the sound recording, although these are typically licensed under streaming or subscription-service licensing arrangements which also include performing rights licences, rather than being treated simply as permanent downloads or sales.

An online service offering music streaming typically must similarly license reproduction rights to both the composition and recording, as described above, but must also license tariffed performing rights. Re:Sound administers these tariffed performing rights licences in a recording (see Tariff 8), provided that it is for non-interactive and semi-interactive services. Fully interactive services do not fit within Re:Sound's tariff for performing rights and require a negotiated licence from either the record company, other rightsholder, or an authorized collective. SOCAN administers collective performing rights licensing of a composition whether under a tariffed licence (see Tariff 22A) or otherwise.

Note 10: Grouping of performing-right end users

To simplify, this chart groups “end users” of the “performing right” in one group, whether licensing these rights to the composition and/or the recording. Whether any particular end user must license one right and/or the other depends on the authorized tariff, the exact right, and the exact use concerned in each case. The most important example of this are performing rights to television broadcasts of music used in the soundtracks of TV shows or movies. In these cases, the TV broadcaster does need to license performing rights in the compositions, but not in the recordings. Canadian law does not consider the reproduction of a recording in the soundtrack of a TV show or movie to be a “sound recording” to which neighbouring rights apply. So, in these cases, the broadcaster need only license the performing rights in the composition from SOCAN.