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Money For Your Muse: Canadian Music Funding & Associated Legal Issues

June 9th, 2016

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This article originally appeared in the May/June 2016 issue of Canadian Musician

Canadian recording artists and recording companies have access to the greatest support funding in the world. Some of the funding is from the various levels of government while other sources could be called quasi-governmental following from requirements placed on private broadcasters as part of their permissions to operate in the Canadian market.

Here, we’ll briefly discuss the four primary nationwide sources of this funding, their eligibility requirements, and the legal issues to consider for each. (Due to space limitations, we’re not able to discuss the provincial and regional funding programs that are also available.)

The primary sources for funding across Canada include:

  • The Foundation to Assist Canadian Talent on Recordings (FACTOR)
  • Radio Starmaker Fund
  • MuchFACT
  • The Department of Canadian Heritage & the Music Entrepreneur Component (MEC)

The impact of this funding can be significant. Some music companies access in excess of $1,000,000 per year. The rules and timelines surrounding these funds are subject to change, so it is important to have a current understanding of how each fits into your career, or that of your artist.

1) FACTOR – WWW.FACTOR.CA

 

Purpose

From the FACTOR website: As a private nonprofit organization, FACTOR is dedicated to providing assistance toward the growth and development of the Canadian music industry. The foundation administers contributions from private radio broadcasters as well as two components of the Department of Canadian Heritage’s Canada Music Fund. FACTOR has been managing federal funds since the inception of the Sound Recording Development Program in 1986 (now known as the Canada Music Fund).

Support is provided to Canadian recording artists, songwriters, managers, labels, publishers, event producers, and distributors through various programs. Whether an artist is looking to record a demo or full-length sound recording, market and promote an already existing album, or showcase and tour domestically and internationally, funding is available. FACTOR supports many facets of the infrastructure that must be in place in order for artists and music entrepreneurs to progress into the international arena.[1]

FACTOR was founded in 1982 by a partnership of private radio broadcasters in conjunction with the Canadian Independent Record Producers Association (CIRPA; now CIMA) and the Canadian Music Publishers Association (CMPA). FACTOR began with a modest budget and a single mandate: to fund albums by Canadian artists that had potential for commercial radio success. In 1986, FACTOR began administering federal funds that had been allocated by the then Department of Communication for the Canadian independent music industry. FACTOR would later become a major beneficiary of annual contributions made by private radio broadcasters as a result of licenses and license renewals under the Canadian Radio-television and Telecommunications Commission (CRTC)’s Canadian Content Development (CCD) policies. Today, FACTOR commands an impressive program budget and a suite of programs designed to reach every sector of the industry.[2]

A quick review of the FACTOR website reveals a plethora of programs and financing options for a variety of players in the music business. Funding is made available in the form of a grant, loan, or a combination of the two, depending on who is applying and for what program. Here, we’re focusing primarily on recording artists.

Programs

FACTOR’s funding structure is broken up into groups (called components) that are based upon the particular activities for which the applicant is pursuing funding. Activities eligible for funding can range from tour support to radio marketing. Components are further grouped into collections (called programs) that all relate to a particular project being undertaken by the applicant.

The programs currently offered by FACTOR include the Demo Recording Program, Live Performance Program, and Comprehensive Artist Program (which is designed to contribute towards the cost of acquiring, producing, and marketing a full-length album). Artists can apply to all or individual components of any given program for which they’re eligible. Specific funding structures and levels are set per individual program. For example, under the Comprehensive Artist program, FACTOR will fund up to $75,000 of eligible costs plus $5,000 in radio marketing (of which 25 per cent will be a loan and 75 per cent will be a grant).[3] Under the Live Performance Program, FACTOR will grant up to $20,000 annually for Level 3 artists, and $15,000 annually for all other artists (of which $5,000 can be attributed to showcasing).[4]

Eligibility

General eligibility for FACTOR programs is limited to Canadian citizens, permanent residents, and Canadian companies and corporations. FACTOR supports Canadian musicians to record, produce, and distribute primarily English-language, independent sound recordings nationally or internationally. (French-language recordings are funded through Music Action.)[5] If more than 50 per cent of a band or organization is Canadian, it will be eligible.[6] Eligibility for each component is tied to FACTOR’s internal artist rating system, and other component specific requirements. For instance, in order to qualify for the Comprehensive Artist Program, an artist requires a rating of 3.[7] For the Live Performance Program, all artists are eligible to apply, but only artists rated 2 or 3 are eligible to apply to the tour support component.[8]

Last year, the median indicia for level 3 artists included 31,061 album sales in the previous five years and $305,473.43 in touring revenue over the previous 12 months. The figures for level 2 artists were 9,897 album sales in the previous five years, and $72,354.96 in touring revenue over the previous 12 months.9

Legalities

Only the party that controls the Canadian commercial release rights and exclusive Canadian exploitation rights to the sound recording at the time of application may apply.

Typically, this will either be:

– A Canadian artist who has not licensed the sound recording to another party, or

– A Canadian Record Label that has signed the artist, or has licensed the sound recording, or has an option to license the sound recording. When a record label is the applicant, they are expected to retain control of the title for a minimum of five years from the release date. Major record companies, including their Canadian divisions, do not qualify as a “Canadian Record Label” for the purposes of FACTOR.

2) RADIO STARMAKER FUND – WWW.STARMAKER.CA

 

Purpose

According to its website: The Radio Starmaker Fund was created in the fall of 2000 on the initiative of the Canadian Association of Broadcasters and approved by the CRTC. It is a private fund which has as its stated purpose to “make a substantial and discernable difference to the careers of Canadian artists” by providing substantial incremental investment where the artist has established a proven track record and his or her label is making a significant investment in their future career.10 Starmaker funding is a non-refundable grant.

The funding and purposes for Radio Starmaker overlap from time to time with FACTOR but “double dipping” is not allowed. The organizations share information to ensure it. 

Programs

Funding can be secured for an artist in four main areas:

– Domestic Marketing[11]: Domestic Marketing is capped at $50,000 in funding per release. Website Design is included in this category and is capped at $25,000 per release.

– Domestic Touring[12]: Artists may apply for dates that occur up until eight months after the application deadline (although priority will be given to dates taking place within three to four months after the application deadline). Funding for live concert performances will only be considered in venues that have a capacity of 100 or higher. Also, headline appearances where the venue cap exceeds 1,000 will not be considered. Funds for domestic touring are capped at $1,500 per appearance, with a maximum of 25 funded dates over a 12-month period. Artists can apply for this type of funding independent of their Canadian label without having to make any significant investment.

– International Marketing[13]: Applicants for this type of funding must meet Starmaker’s general eligibility requirements (below), although there is no “significant investment” component here. Despite not being required, it should be noted that investment is viewed as an indicator of commitment to that particular territory. The record for which funding is sought must be released in the relevant territory within six months of the deadline for the round in which you apply. Major label releases in foreign territories are not eligible for funding in those territories. Specific funding levels are set per territory, with preference given to those labels that own, market, and administer their own copyrights in the territory being worked. Generally, funding is capped between $5,000 and $20,000, depending on whether the release has been distributed or licensed.

– International Touring [14]: Funding for international touring works much in the same way as it does in the domestic context, except that the dollar amount caps are set per territory. Generally, the maximum subsidy varies between $1,500 and $2,500 per appearance and a maximum of between 15 to 35 appearances per year within a given territory. Artists can apply for this type of funding independent of their Canadian label without having to make any significant investment.

Eligibility

To be eligible, you must be a Canadian citizen or landed immigrant and you must have met a minimum “Track Record”15 or sales level depending on genre. For pop/rock acts on indie labels, the artist must have reached a sales level of 7,500 units; for other genres such as urban, country, or electronic, the sales level is 5,000 for indie labels. Major labels must hit higher thresholds. Folk and jazz categories, for example, are even lower.

In addition to hitting the sales threshold, the indie label would have needed to make a “significant investment” in the artist in order to qualify for the additional funding. For example, for indies in pop music, that significant investment must be a minimum of $15,000 and cannot include recording costs.

The Board of Directors for the fund make decisions on funding requests quarterly and you can apply up to four times on an album cycle every two years.

Legalities

Radio Starmaker Fund is more oriented toward funding independent and major label initiatives although they do fund artist-operated indie labels provided they meet the qualifications. RSF differs from FACTOR in that the master recordings do not need to be owned or controlled by a Canadian artist or an independent label as Canadian major labels also participate in this fund; however, you do not qualify for funding if the royalties and revenues from the Canadian sales of your records are payable to a corporation outside of Canada.[16] Canadian artists signing to a U.S. or U.K. major or indie label for the territory of the world, for example, would not be eligible for this funding.

3) MUCHFACT – WWW.MUCHFACT.CA

Purpose

Created alongside MuchMusic to stimulate the production of new Canadian music videos, MuchFACT now provides funding to produce viral videos, electronic press kits (EPKs), and build websites for Canadian artists, independent labels, and management companies. The committee meets six times a year.[17] Funding through MuchFACT is a non-refundable grant.

Programs

MuchFACT provides funding in the following four categories[18]:

– Digital Tools: This category allows you to apply for funding within the range of $1 to $5,000 for creation of music content-related tools for online promotion of the artist including (but not limited to): innovative websites, EPKs, behind the scenes content, and online music content.

– Online Music Video/Project: This category allows you to apply for funding within the range of $1 to $10,000 for creation of small-budget music videos. This category is intended to support projects created primarily for online distribution.

– Music Video: This category allows you to apply for funding within the range of $10,000 to $30,000 for creation of a music video. This category is intended to support larger-budget productions intended for television and online distribution.

– Content Package: This category allows you to apply for funding within the range of $30,000 to $50,000. This option is reserved for the creation of digital content packages to build awareness and support for a music video. To be eligible for this grant, you must create at least two music videos or digital support tools.

Eligibility

All applicants for MuchFACT funding must be Canadian citizens, landed immigrants, or Canadian-owned companies. Additionally, the principal performer(s)/artist(s) must be Canadian citizens or landed immigrants. The objective of MuchFACT is to stimulate the production of new projects. As such, completed projects will not be considered for funding. Further, classical, jazz, country, children’s music, world music, and French-language music are all ineligible for funding. French-language projects should be submitted though MaxFACT. [19]

Legalities

In addition to the eligibility criteria listed above, MuchFACT requires that all funded projects meet certain legal standards.[20] Like FACTOR, the rights to both the master sound recording and the master video must be owned by a Canadian company or citizen, or landed immigrant. MuchFACT-funded projects must also fit within specific parameters set by the CRTC for Canadian content (certain elements of the audio [21] and production [22] must be Canadian), broadcast standards for controversial content [23] (as administered by the CBSC), and definition of a music clip (Category 8) [24].

4) MUSIC ENTREPRENEURS COMPONENT (MEC)

Purpose

MEC provides assistance on an annual basis for the production and promotion of Canadian sound recordings to eligible independent Canadian sound recording firms, using a funding formula based on an applicant’s sales in a reference period.[25] MEC recipients must repay their funding contributions if the contribution is equal to or greater than $100,000 and a target EBITDA number is reached.[26]

Program

MEC’s programs are divided into three sub-components [27]. We’re focusing on the following two sub-components that are relevant to sound recording firms and music publishing firms:

– MEC – Aid to Canadian Sound Recording Firms [28]: This is intended to support the ongoing production and promotion of Canadian sound recordings. To this end, MEC provides funding for the eligible activities of Canadian sound recording firms. Specific funding levels are determined based on the applicant’s eligible unit sales in a reference period in relation to the factored sales of all qualified applicants during the same funding period. The maximum annual contribution under this sub-component is the lesser of $550,000 or 50 per cent towards eligible expenditures incurred by the recipient.

– MEC – Aid to Canadian Music Publishing Firms [29]: This is intended to strengthen music publishing firms’ ability to develop Canadian songwriters and composers and promote new Canadian musical works in Canada and abroad. MEC provides funding annually for the implementation of project activities that support the objective of the sub-component. All funding is awarded on the basis of merit after an assessment by the department using specific criteria.[30] The maximum total annual contribution per applicant is $50,000 (however, the amount of the contribution cannot exceed 50 per cent of eligible expenses for the relevant period). Furthermore, the financial assistance awarded to a recipient cannot exceed, under any circumstances, the net revenues derived from eligible Canadian musical works in the firm’s reference year.

Eligibility

Specific eligibility requirements vary with each subcomponent:

– MEC – Aid to Canadian Sound Recording Firms31: To be eligible for funding, applicants must be a Canadian-owned and controlled firm [32] with its headquarters in Canada and be able to demonstrate a minimum level of financial viability. (However, an applicant will be ineligible if revenues derived from sound recordings are in excess of $20 million annually in each of the applicant’s last three financial years.) Further, an eligible firm must have an active roster of at least four Canadian artists33 and have released a minimum of six eligible recordings34 in the reference period, with at least one being in the most recent year of the reference period. These releases are further subject to minimum sales thresholds [35] in order for the applicant to receive funding. Key management personnel must be Canadian citizens or permanent residents. In addition, eligible firms must have been in operation for a minimum of three continuous years as a Canadian sound recording firm. Eligible firms may choose whether to apply for funding through MEC or FACTOR but any firm having been in operation for five or more continuous years must apply through MEC.

– MEC – Aid to Canadian Music Publishing Firms [36]: To be eligible for funding applicants must meet the same Canadian ownership and financial viability requirements as above, except that an applicant will be ineligible if total net revenues are in excess of $5 million in the reference year.[37] An eligible applicant must have either completed three years of continuous operation as a Canadian music publishing firm (or one year if it can be demonstrated that one of its key management personnel has at least five years’ experience in music publishing). Further, an applicant must have published a minimum of 10 new eligible Canadian musical works [38] in the reference year composed by a minimum of four Canadian songwriters or composers who are not shareholders or principals of the firm. Any work can be deemed ineligible on certain content related factors39, such as content that is offensive or excessively violent. The applicant must also have net revenues of at least $40,000 in the reference year, though the threshold is lower in certain instances).[40]

Legalities

Specific legal requirements vary with each subcomponent:

– MEC – Aid to Canadian Sound Recording Firms [41]: To be eligible for funding, applicants must own the Canadian copyright for the Canadian sound recordings it produces, co-produces, and releases or hold an exclusive license assigned to it by the Canadian copyright owner to release in the Canadian market. An applicant must also ensure to have fulfilled all of its contractual obligations with respect to artist royalty payments.

– MEC – Aid to Canadian Music Publishing Firms [42]: To be eligible for funding, applicants must own or control each of the minimum eligible works and have registered them with SOCAN.

The Bottom Line

Canadian funding for music companies and recording artists is unparalleled and its fruits are apparent in the global success stories this funding has helped to produce. Artists such as Drake, The Weeknd, Nickelback, Sarah McLachlan, Nelly Furtado, Carly Rae Jepsen, and many, many others have all benefited from the helpful kickstart these funds provide.

It’s important for artists and industry members to have a familiarity with these programs as they can provide valuable fuel for careers. The rules and procedures for accessing this funding change regularly. New funding pops up while other programs may disappear. Of course, there are also numerous provincial and regional sources of funding that operate in a similar fashion.

A mini-industry has developed to help artists and Canadian companies apply and administer some of these funds. Full access to these programs requires detailed advance planning and an intimate understanding of the various administrative requirements of the various funds.

Historically, Canadian independent record companies have been the largest beneficiary of these programs, providing the foundational support for indie powerhouses like Nettwerk, 604, Dine Alone, Arts & Crafts, and Last Gang Records, but in some circumstances, major labels in Canada have also been able to access these funds as well. Artist managers, music publishers, and live promoters also tap into some of the programs outlined above, building one of the strongest music communities on the planet.

Chris Taylor bio image

 

 

FOOTNOTES:

1 FACTOR: Our Mandate, online: FACTOR website https://factor.ca/about-the-foundation/our-mandate/.

2 FACTOR, online: Wikipedia https://en.wikipedia.org/wiki/FACTOR.

3 FACTOR, Comprehensive Artist Program Guidelines, online: FACTOR website  https://factor.ca/wpcontent/uploads/2015/07/FACTOR_Comprehensive_Artist_Program_Guidelines.pdf.

4 FACTOR, Live Performance Program, online: FACTOR website https://factor.ca/wp-content/uploads/2015/07/FACTOR_Live_Performance_Program_Guidelines.pdf.

5 FACTOR, Pocket Guide 2015, online: FACTOR website < http://factor.ca/wp-content/uploads/2015/07/FACTOR_Pocket_Guide.pdf.

6 Ibid.

7 Supra note 4.

8 Supra note 5.

9 FACTOR, Profiles and Ratings for Artists, online: FACTOR website http://factor-deploy.azurewebsites.net/application-details/profiles-and-ratings-for-artists/.

10 Radio Starmaker Fund, About the Radio Starmaker Fund, online: Starmaker website  https://www.starmaker.ca/about.

11 Radio Starmaker Fund, Funding Rules, online: Starmaker website  https://www.starmaker.ca/about/funding.

12 Radio Starmaker Fund, Domestic Touring, online: Starmaker website https://www.starmaker.ca/about/funding/domestictouring.

13 Radio Starmaker Fund, International Marketing, online: Starmaker website <https://www.

starmaker.ca/about/funding/internationalmarketing>.

14 Radio Starmaker Fund, International Touring, online: Starmaker website https://www.starmaker.ca/about/funding/internationaltouring.

15 Radio Starmaker Fund, Eligibility Requirements, online: Starmaker website  https://www.starmaker.ca/about/requirements.

16 Ibid.

17 MuchFact Background, online: MuchFact website http://www.muchfact.ca/about/background.

18 MuchFact Award Options, online MuchFact website http://www.muchfact.ca/awards/options.

19 MuchFACT Eligibility, online: MuchFact wesite, http://www.muchfact.ca/awards/eligibility.

20 Ibid.

21 See CRTC Radio Regulations SOR/86-982, s.2.2(2)(a) for audio criteria.

22 See http://www.muchfact.ca/awards/eligibility for production criteria.

23 A complete list of the CBSC broadcast codes can be found at: < http://www.cbsc.ca/codes/>.

24 See CRTC Television Broadcasting Regulations SOR/87-49, Schedule I, item 6 for definition.

25 Canada Music Fund, online: Government of Canada website http://www.pch.gc.caeng/1267201611990.

26 See note 28 for details.

27 Music Entrepreneur Component, online: Government of Canada Canadian Heritage website http://www.pch.gc.ca/eng/1289312416804.

28 Canada Music Fund Music Entrepreneur Component, Aid to Canadian Sound Recording Firms: Application Guide 2016-2017, online: Government of Canada Heritage website < http://www.pch.gc.ca/DAMAssetPub/DAM-musq-music/STAGING/texte-text/cH2015-01276AnnexA-VEMMECSndRcdgs_20162017_201509_QC_1442502571955_eng.pdf?WT.contentAuthority=12.5.1>

29 Canada Music Fund Entrepreneur Component, Aid to Canadian Music Publishing Firms, Application Guide 2016 – 2017, online: Government of Canada Heritage website < http://www.pch.gc.ca/DAMAssetPub/DAM-musq-music/STAGING/texte-text/mec-app-guide_1448380796548_eng.pdf?WT.contentAuthority=12.5.1>.

30 See note 28 at section 4.2 for details.

31 Ibid.

32 See note 28 at section 6 for definition of Canadian-controlled and controlled firm.

33 See note 28 at section 6 for definition of Canadian Artist.

34 See note 28 at section 2.4.1 for definition of eligible sound recording.

35 See note 28 at section 2.3.5 for details.

36 Supra note 29.

37 See note 29 at section 7.

38 See note 29 at section 7 for definition of eligible Canadian musical work.

39 Supra note 29 at section 2.4 provides a complete listing of disqualification factors for lyrical content.

40 See note 29 at section 2.5 for details.

41 Supra note 28 at section 2.3.2.

42 Supra note 27.

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