DIGITAL LICENSING COMMITTEE RECOMMENDATIONS

Simon AderinlolaSept 28 & 29, 2015

Committee composition & mandate

• Better understand the new

technologies driving present digital

exploitation of music.

• Explore/comprehend the business

models behind these platforms and

reward structures for value chain

components/elements/members

• Identify key players to engage with in

the digital realm so all parties in music

get recognized & transit to the digitized

• Identify aspects of the present rules of

engagement that need be upgraded to

better address remuneration of rights

owners –make recommendations

A need to engage & jointly reboot

Background

• The key players and rights involved in licensing music in Nigeria closely mirror

those of other major markets: no wheel reinvented.

• Licensing done right ensures that rights holders, including authors/ composers

& artistes who create the music offered through digital channels, are fairly

compensated. Copyright management & enforcement is a specialized task – a

dedicated, skilled, full-time job.

• Depending on the digital service, the rights may be licensed directly from rights

holders or, where tariffs apply, from a collecting society like COSON, under pre-

defined terms. Tariffs are certified by the Nigerian Copyright Commission.

• Strong institutions make all players avoid ‘business as usual’ & sit up

• The CMO model brought sanity to our confusing rights management regime.

Next, we need to give voice to any identified pent-up demands and make the

industry welcoming by usable rules of engagement and a listenership culture.

Copyright considerations: downloads

Services that provide permanent music downloads

Example: Full track downloads to mobile

• Copyrights: Musical Work & Sound Recording

• Rights: Mechanical Rights, Communications to thePublic by Making Available (Performing Right), Distribution Rights

• Rights Holders: Author/Composer, Publisher, Artiste, Record label & COSON (CMO)

• Split of the Rights: Musical Work - Author/Composer, Publisher & COSON (CMO)

Sound Recording - Artiste, Record label &COSON (CMO)

Copyright considerations: streaming

Can be non-interactive, semi-interactive or fully online/mobile on-demand streaming where playlists are created and users have part or full control over selection and timing of the tracks streamed.

• Copyrights: Musical Work & Sound Recording

• Rights: Mechanical Rights, Communications to the Public by Making-Available (Performing Right)

• Rights Holders: Author/Composer, Publisher, Artiste, Record label & COSON (CMO)

• Split of the Rights: Musical Work - Author/Composer, Publisher & COSON (CMO)

Sound Recording - Artiste, Record label & COSON(CMO)

Business models

(1) Subscription (2) Advert-Supported [“FREE is not a business model”]

Unique business models have emerged with the advent of convergence. There are elements of performing rights in digital transmission of works even when the end result is a permanent download and there is also an element of mechanical rights in a streaming service.

Rights Split recommendations:

• Streaming on-Demand - 70% Performing Rights

- 30% Mechanical Rights

• Download - 70% Mechanical Rights - 30% Performing Rights

Vending & access platforms

• Mobile Devices

• Broadband Subscription

• Cloud Services

• Social Media

Webcasting

12.5% of gross revenue subject to a minimum of N0.485 per track streamed

Non-negotiable parties at the table

Whose Rights may be affected?

• Author

• Composer

• Publisher

• Performer/Artiste

• Phono-record (bearer medium) producer

What kind of permission/authorization may be required?

• Reproduction/Mechanical License

• Public Performance/Communication-to-the-public Licence

• Digital Distribution License

• Making-Available Licence

• Direct Licensing

• Collective Management OrganizationIGNORANCE - illiteracy/alliteracy -

is no excuse

Further excerpts from the recommendations document [to be made public]

• The primary parties – Author, Composer, Publisher – to get 10% of gross. COSON

should help collect, except for members who specifically ask in writing that COSON not

cover/fight for/protect its interests locally/internationally. The Telco, aggregator, label &

performer/artiste then share the balance

• Gross Revenue – means End-user price or all revenue received by the licensee either

directly from its users (via subscription fees or paid-for activities) or other revenue streams,

including, but not limited to, advertising, sponsorship, and commissions.

• Accounting and Reporting – verifiable accounting reports are best submitted & deemed

due quarterly, within 31 days after the quarter’s end. Licensee is required to keep and make

available a signed quarterly statement showing transactions on the use of music.

• Licensing: Licensee (to exploit musical work) to pay an advance ofN500, 000. 00 (Five

Hundred Thousand Naira) only before commencement of any of the services. Terms could be

discussed with COSON.

• For the sound/master recording right, it is proposed that this right will be

negotiated separately from the publishing right by the artiste/performer (as the

first owner of the rights) &/or phonogram producer /record label (where the right has

been transferred).

What have we learnt? What can we use?

A functional Nigerian analogy via CBN

The Banking and Payment ecosystem is a reasonable analogy

of what works.

Benefits of a framework: Once a new banking/payment product

is launched without proper weighting & inclusion of a

Financial institution’s contribution, it becomes a failure point & you can’t hold that partner to any standard expectations or SLAs if your transactions aren’t

passed.

Learnings:

(1) Scope any service end-2-end (2) Make relevant parties, their

contributions and rewards visible

ISSUER

ACQUIRER

SWITCH

PROCESSOR

TERMINAL OWNER

SCHEME MANAGER

AGENT AGGREGATOR

AGENT SUPERVISOR

CUSTOMER TOUCHPOINT

…impossible is nothing. Just adapt what works already in-country!

So what should be happening?

• Education: Users/exploiters of digital music should first be aware of the governing

rules around music they use, lest litigations fly. Get tool-schooled!

• Parties in the ecosystem must be ready to shift to rightly accommodate all efforts

behind musical works – past & present. Status-quo is short-term myopia for all

• This is no anti-Telco vendetta. They pay taxes & employ. Regulator in 2001

collected 285 million USD, with no backbone & no mVAS visibility = today’s impasse

• Again, The NCC (Comms) hasn’t yet a clear model to capture what happens in the

OTT space. It’s licensing doesn’t yet embrace that new alive & kicking eco-system.

Once Telco data/ISP Wi-Fi gets affordable, that industry again takes off!

• Global platforms like iTunes (Apple), Ovi (then Nokia), Play store, SONY had/have

good reason for taking circa 30% of gross revenues or less

• Engage professionals/experts – local and international – or we plan to fail!

….LET’S BENCHMARK, START THE DISCUSSION & TOGETHER SET THE NEEDLE

What else should be happening?

• Mobile music needs strong institutions: This event’s first two welcome

remarks were assigned to the two relevant regulators (both NCCs)…not in error.

They are the ones to meet, assess recommendations & then invite parties to the

table [IP-blacklisting very possible & commercials could be treated like PORN]

• Imbibe transparency: data I request on the use of my work is not a privilege!

• Just as the CBN engaged the NCC (Comms) profitably, NCC (Copyright) can do

likewise, as the Nigerian digital space is mostly Telco and OTT platform – driven

• FREE/FREEMIUM is not illegal, but someone has to pay if licensed content is

used to drive early or mid-term sales - except the legitimate owners of the work

together agree it’s free for a period or purpose

What should be done?

Who should do

it?

How should it be done?

How shall we measure progress?

Yes we can reboot…starting today