Monetizing Music File-Sharing: Reconciling Consumer Behaviour with a

Willingness to Pay

By: Andreas Kalogiannides*

This article first appeared in the Ontario Bar Associations Entertainment, Media and Communications Section Newsletter, Vol. 2,
No, 2.

A Summary of the S.A.C. Model

The S.A.C. Model proposes that private individuals who engage in non-commercial music file-
sharing would be licensed to do so through the payment of a monthly licence fee, appearing as
a line-item on the individuals Internet service provider (the ISP) bill.
1
The licence would permit
individuals to music file-share over P2P networks (including BitTorrent clients) and other
platforms such as Facebook and Twitter. Notably, however, the generation of commercial
revenue from file-sharing activities is ultra vires the S.A.C. Model and would require the
appropriate licence(s) from the rightsholder(s) or collective rights organization(s).
2


Performers, songwriters and rightsholders would receive a pro-rata share of total licensing
revenues based on the number of times their works are file-shared. Such distributions would be
based on data collected by technology and media measurement companies.
3
Individuals who do
not file-share music would be able to opt-out by signing a written declaration to that effect;
similarly, rightsholders would also be able to opt-out, in which case they would receive no
licensing revenue if their works are file-shared.
4


Canadas existing collective licensing framework would serve as the backbone of the S.A.C. Model
as regards administration, revenue distribution and rate-setting, meaning that collective rights
organizations, including the Society of Composers, Authors and Music Publishers of Canada
(SOCAN), Re:Sound and the Canadian Mechanical Rights Reproduction Agency (CMRRA),
would continue to distribute these royalties to their members just as they do now. The only
difference being that a new company, Song-Share.ca, would be formed to help the collectives
organize this process.
5


1
The licensee fee is not a levy or a tax on music, as surmised by some; unlike levies or taxes, a consumer may
opt-out of the model if they self-declare that they do not file-share.
2
See S.A.C. Music File-Sharing supra note 1 at page 5.
3
Since the early 2000s, technology and media measurement companies, such as Big Champagne Inc., have collected
data on ticketing, social media, and P2P internet traffic on behalf of record labels, music publishers and other
industry stakeholders. Notably, Big Champagne was recently acquired by Live Nation, Inc.. See Halperin, Shirley.
Big Champagne CEO on Live Nation Deal: 'Were Going From Playing a Little Club to the Biggest Stage in the World'.
The Hollywood Reporter. December 15, 2011. Available online at http://www.hollywoodreporter.com/news/big-
champagne-live-nation-eric-garland-274204.
4
See S.A.C. Music File-Sharing supra note 1 at page 5.
5
Similar to the ownership make-up of SOCAN and Re:Sound, Song-Share.ca would be owned by equal parts
songwriters, music publishers, artists and record label executives. See S.A.C. Music File-Sharing supra note 1 at page
8.

The Right Solution at the Right Time

The S.A.C. Model does several things right. First, the S.A.C. Model prioritizes legal content over
illegal content. For example, under the current ISP subscriber model, consumers acquire Internet
access only and not content. By separating network access and content, and given the inherent
nature of the Internet as a communication technology (e.g., a broadband connection is all you
need to consume all manner of content, legal or illegal), this model inadvertently facilitates music
piracy. I have termed this situation the access-content disconnect. The unfortunate result is
that, solely by virtue of having a broadband connection, consumers have access to both legal and
illegal music on an equal scale; legal, digital music must now compete with free.

But, the S.A.C. Model helps narrow this access-content disconnect because it offers an easy-
to-swallow value proposition directly to consumers at their Internet access point: pay a negligible
monthly fee and share, swap and consume unlimited music content through your broadband
connection. This arrangement is similar to how cable television providers bundle network access
with content (e.g., access to the Rogers cable network is only offered through the purchase of
channel packages); like the cable provider, the ISP becomes the intermediary through which
content is delivered.
6


Second, the S.A.C. Model is a business-to-business approach, meaning that music fans and file-
sharers would not have to change their behaviour, install any software or buy new hardware;
they just make a small monthly payment. And the evidence suggests that Canadians are willing
to pay: a recent study conducted by the S.A.C. and CROP, a Montreal-based research firm, found
that 69% of Canadians are willing to pay a reasonably monthly fee in exchange for a licence to
file-share music.
7
More uplifting still is the fact that the study also found that 93% of Canadians
believe that songwriters and performers should stand to benefit from this licence fee.
8


Third, there is precedence for the S.A.C. Model. From 2008 to 2010 in Denmark, TDC, a Danish
ISP, operated TDC Play, a tethered download and streaming service whereby mobile and
broadband customers were given unlimited access to licensed music along with their
subscriptions.
9
To date, more than 340 million tracks have been streamed and downloaded
through TDC Play, and it has been argued that the service has helped reduce unauthorized music

6
Opponents may argue that this still does not solve the access-content disconnect because consumers can simply
opt-out of the model, not pay the license fee, and then file-share anyway. In response, I argue that these people
would still be liable for copyright infringement, and, that when offered the ability to pay a reasonably monthly fee,
the majority of consumers would do so to avoid legal consequences.
7
See S.A.C Music-File Sharing supra note 1 at page 6. See also CROP Survey supra note 1 at pages 65, 68 and 70.
8
Ibid S.A.C. Music-File Sharing at page 8. See also CROP Survey supra note 1 at pages 65 and 71.
9
For clarity, TDC Play is a tethered, walled-garden service whereby subscribers have access to free, legal music
downloads and streaming for as long as users have a TDC account. This is somewhat different to the S.A.C. Model
that is not limited to a particular ISP, and that would licence music file-sharing that originates on any server and on
any platform. See IFPI supports TDC music service in Denmark. International Federation of the Phonographic
Industry. April 7, 2010: Copenhagen, Denmark. Available online at
http://www.ifpi.org/content/section_news/20100426.html [IFPI].
file-sharing and even increased TDCs customer retention rates.
10
TDC has since entered into
negotiations with KODA, the Danish collective rights organization, to set a new royalty rate for
the period of 2010 to present; and, it is particularly telling that the International Federation of
the Phonographic Industry (IFPI), which rarely involves itself in private negotiations, has come
out in support of TDC Play.
11


Where Do We Go From Here?

From the perspective of songwriters and performers, the S.A.C. Model would create a new
revenue stream from a popular use of music that, while illegal under the Copyright Act,
12

continues unabated and does not bear any royalties. Moreover, this revenue stream could
potentially dwarf current music industry licensing revenues a conservative estimate is that $405
million could be generated annually from licensing just 25% of total Canadian ISP accounts at $5
per month.
13
Consider that in 2010 SOCAN collected $275 million for the use and performance
of music in Canada.
14


The S.A.C. Model is a sustainable, real-world solution which monetizes a consumer behaviour
that is difficult, if not impossible, to change. And, importantly, the model can be implemented
using our existing music licensing infrastructure. The S.A.C. Model presents an excellent
opportunity for the Canadian music industry and the ISPs to sit down at the negotiating table and
start talking because, frankly, not only has the demand for music never been higher, but also
because Canadians fundamentally believe in the importance of compensating songwriters and
performers for their hard work.

For more information regarding the Songwriters Association of Canadas music file-sharing
proposal, please visit http://www.songwriters.ca/ or click for brief and detailed versions of the
proposal.

*Andreas Kalogiannides is a Toronto lawyer specializing in copyright, intellectual property
licensing and music law. He can be reached at andreas@kalogiannideslaw.com.

10
See TDC Play reaches 340 million streamed, downloaded tracks. Telecompaper. June 30, 2011. Available online
at http://www.telecompaper.com/news/tdc-play-reaches-340-million-streamed-downloaded-tracks--812744.
11
See IFPI supra note 12.
12
R.S.C., 1985, c. C-42.
13
This figure is based on Canadas estimated 27 million total internet subscriber accounts and calculated according
to the following formula: ((27,000,000 * 0.25)*$5) * 12 months. See S.A.C. Music-File Sharing supra note 1 at page
8.
14
See SOCAN Announces 2010 Financial Results: Music Use Higher Year Over Year.. Society of Composers, Authors
and Music Publishers of Canada. May 4, 2011. Available online at http://www.socan.ca/press-release/socan-
announces-2010-financial-results-music-use-higher-year-over-year.


137 Berkeley Street
Toronto, ON M5A 2X1
B: (416) 209-7223 | F: (647) 723-7321
andreas@kalogiannideslaw.com
www.kalolaw.ca