SOCAN acquires Montreal rights agency SODRAC in bid to deliver better returns

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Collecting royalties may soon become more efficient for Canadian musicians, as two of the country’s biggest music rights agencies agreed to consolidate this week, hoping to put more money in the pockets of Canada’s favourite songwriters and their publishers in the hard-to-get-by digital era.

The Society of Composers, Authors and Music Publishers of Canada (SOCAN), the countrywide rights agency that collects money on behalf of more than 150,000 songwriters, composers and their publishers when their music is performed, has completed the purchase of a Montreal-based agency that administers a related copyright – a move to bundle royalty collection and find efficiencies that SOCAN hopes will deliver better returns to its songwriting members.

Music copyrights and royalties are a complicated mess on a good day. But in a streaming-first world where working musicians make demonstrably less money from their recorded music than from the late-90s heyday of purchased CDs, strong royalty collection can help offset that shift. SOCAN has been strengthening its royalty-collection muscle this decade through an acquisition spree, hoping to deliver more money from more copyrights to more members in more jurisdictions.

Many of those have been tech-company acquisitions, but on Tuesday, SOCAN will announce the purchase of the 9,000-member Society for Reproduction Rights of Authors, Composers and Publishers in Canada, better known as SODRAC.

Whereas SOCAN traditionally collected royalties for musicians when their music was performed in public – such as on the radio, in a restaurant or by a cover band – SODRAC administers licenses for separate reproduction rights, such as when a record label makes copies of CDs or records.

Today’s pre-eminent all-you-can-stream model of consuming music, dominated by YouTube, Spotify and Apple Music, has blurred the line between the reproduction and performance of a song, entangling those copyrights in new ways. SOCAN said its acquisition of SODRAC serves to consolidate and streamline royalty collection for Canadian songwriters and the publishers that invest in them. Both agencies are not-for-profit; SOCAN will acquire SODRAC’s assets for a dollar, the companies said.

“It’s all in response to changing conditions and the need to adapt to an environment that’s changed," Eric Baptiste, SOCAN’s chief executive officer, said in an interview. “You can’t deal with 2018 licensing needs with tools and structures that evolved mostly at the end of the previous century.”

Administering both copyrights, he continued, “should result in reduced commission rates and more accurate and timely payouts.”

Canada’s music-rights sector has been rife with consolidation this decade. SODRAC’s Toronto-based sister agency, the Canadian Musical Reproduction Rights Agency (CMRRA), similarly collects reproduction royalties, and was acquired by the U.S. rights-management organization SoundExchange last year. Earlier this decade, SOCAN, SODRAC and CMRRA began talks to create a “formal alliance” to save costs, but decided not to proceed.

Since then, SOCAN has been scooping up complementary technology companies from around North America and introducing new tools to innovate music-royalty collection. In turn, it’s seen seven years of growth when the broader recorded-music industry has been slow in its recovery from the sector’s Napster-led crash in the early 2000s.

SOCAN said in June that it had collected a record $352-million in royalties in 2017 from the use of its members’ music, beating the prior year’s record by 8 per cent.

In May 2016, SOCAN bought Seattle-based MediaNet Digital Inc., whose technology helps better collect real-time song-streaming data online and make sure no plays are left uncounted. A few months later, it purchased Audiam, a New York-based company that audits and polices services such as YouTube to properly license content for reproduction royalties – making it SOCAN’s first foray into administering that copyright.

“It makes way more sense to be able to … benefit from the economies of scale that SOCAN can bring to reproduction rights,” Mr. Baptiste said. “It’s a labour- and tech-intensive activity, so scale does matter.”

SOCAN has also developed a new royalty dashboard to help songwriters analyze how their music is heard worldwide, helping them make more educated decisions, such as marketing to a city where they didn’t realize they were popular. And earlier this year, the agency partnered with the University of Toronto to study how it could use artificial-intelligence technology to better scan the internet for new revenue sources and undiscovered talent.