“THE activities in which a country is most creative and hence, most capable of developing new domestic capital and the skills to use it are ultimately those that offer the best opportunities for exploiting available externalities and developing its distinct comparative advantage” — Jamaican Copyright Study, 2007.

Though artistes “take the spotlight”, they do not typically benefit from the royalties generated by their public performances (for example, when their music is played on the radio, or TV. In fact, it is the songwriters and publishers who profit from such Performance Royalties. In addition, this group also earns Mechanical Royalties derived from recorded sales as well as Synchronisation Royalties based on negotiated fees collected up front for the use of their songs in video games, films etc. It is this “hidden potential” that exists within the Caribbean that start-up Company C2W Music Ltd proposes to harness via the Jamaica Stock Exchange (JSE) Junior Market.

Let us examine the concept of Intellectual Property to better understand its earning capabilities. When a songwriter creates the lyrics for a song, there are steps to take in order to ensure the establishment of ownership prior to its release in the public domain. The copyright owner has an exclusive right to exploit his/her creative work and has the authority to prevent others from using the work without permission. A Copyright Licence may be granted to another person who or organisation that may then in turn distribute the protected work without the owner’s explicit permission, but are required by law to pay the owner a statutory royalty rate, and provide notification of release, along with monthly royalty statements.

In the case of Mechanical Royalties, a pre-determined sum of money is paid for each recording sold. For example, in the United States, royalties are based on a “statutory rate” set by the US Congress. Currently, the statutory rate is US$0.08 (negotiable) for songs five minutes or less in length and US$0.0155 per minute for songs that are over five minutes long. So, for example, a song that is eight minutes long would earn US$.124 for each recording sold.

Performance Royalties, on the other hand, are managed by Performance Rights Organisations (PROs), such as Broadcast Music, Inc (BMI), which track and collect licensing fees and distribute them quarterly to the various songwriters. According to the BMI website, in 2010, BMI distributed more than US$789 million in royalties to the songwriters, composers and copyright owners it represents. In fact, the annual Global Economic Survey released by the International Confederation of Societies of Authors and Composers in 2010 reported improvement in royalty collections for two consecutive years, climbing 5.5 per cent to approximately US$9.795 billion.

“Here is proof, that collective management is the solution for today and tomorrow, generating wealth for creators while withstanding economic changes and supporting digital music markets,” said the confederation’s Director, General Olivier Hinnewinkel.

Apart from the tremendous earning potential, there are significant economic and cultural benefits to be delivered as well. To demonstrate this, the overall rate of growth of royalty collections during 2010 slightly exceeded that of world GDP of 5.1 per cent, according to International Monetary Fund figures, with a noteworthy increase of 21 per cent in the Latin America-Caribbean region.

Based on a 2007 economic study, The Economic Contribution of Copyright-Based Industries in Jamaica — done by Dr Vanus James, Economist/ Consultant, Mona School of Business and the University of Technology, in 2005 — the copyright sector contributed $29 billion in producer’s values, or 4.8 per cent of GDP. The sector also accounted for 3.03 per cent of employment.

Compared to other sectors, as a percentage of GDP in the same year, the copyright sector ranked higher than electricity and water and just below the real estate and business services and agriculture, forestry and fishing sectors.

At the time, the study indicated that this sector’s earning potential was not being maximised due to lack of investment in both working capital and the human resources necessary to harness revenues which would allow it to become one of the main sectors leading the Jamaican economy.

The cultural benefits go without explanation. The Caribbean is already celebrated for its vibrant culture, particularly in the area of musical talent and C2W Music Ltd plans to capitalise on this and strengthen our image by unifying the region’s talent under one marketing thrust.

If successful in its listing, C2W Music Ltd will bring to the table the expertise and investment needed to propel this incredible income-generating avenue, enabling it to realise its full potential. Through this instrument, investors have the opportunity to not just participate in building this lucrative industry, but also to reap the potential benefits associated with it.

Gillian Bernard is a Wealth Advisor at Stocks and Securities Limited.