Canadian Heritage Committee on April 1st, 2014

[Shawn Cooper]

Realistically we wouldn't be talking about a lot of companies per year. There are maybe three to five serious music platforms in Canada that are raising venture capital level money per year. So you are already going to weed out a lot of the smaller applications. Realistically you're going to be getting asked for $500,000 to $750,000. The average series A for a company is typically between about $1 million and $1.5 million.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Thank you for these two recommendations.

Madame Sasseville and Monsieur Cunningham.

[Paul Cunningham]

As I stated earlier, what we would like to see is a level playing field from a regulatory and a CCD standpoint and to have it all equal across all different sources of music content in Canada. By doing that it allows us to continue to support Canadian music and also be able to compete with everybody within the marketplace.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Do you have an idea how it may be done?

[Paul Cunningham]

I'm not an expert on that in terms of how we're going to do it if it comes to regulating online or how we would regulate it across. I know that's more the CRTC.... I really can't answer that today. I just know that it's one of the recommendations we see. We should all be operating on the same playing field—especially the new digital online services—supporting Canadian talent, and having the same regulatory guidelines that terrestrial radio has today and that we have.

The other thing we want to talk a little more about is investing in the artists. With the change in the environment, what it really comes down to is that the days of distribution or of record companies being able to distribute an artist and sell CDs are gone. An artist is lucky to sell 20,000 CDs—a name brand artist—so that area in that distribution is gone for them.

What they're really needing is some way of being marketed better within the marketplace. They're needing genres of music that allow them to be played within the genre of where they're successful, whether that's folk or some of the other genres that are out there. We need to be able to find innovative ways to go out and market and promote those people.

We're very proud of the amount of money we've spent and how we've spent our CCD money in terms of trying to do those things. I'll use Cineplex and what Andréanne does for us.... That's an opportunity for new and emerging artists to get out in front of a whole brand-new group of people and actually be exposed to them. They wouldn't be able to do that in any other way.

To your point, Shawn, earlier on, you can have an app, but if people don't know about it or don't use it, it's never going to expose you.

We've been very proud of the way that we've gone out to try to promote talent out there. We've done it differently from a FACTOR or a Musicaction. What we believe is that we should be allowed to continue to do that and to find innovative ways to go out and really promote artists. I think we have a long track record of success in doing that.

We don't feel that institutional groups that have been out there for a long time have necessarily been progressive enough for change. They're built more on the produce-a-CD type of approach. We believe that we must have a new and innovative approach, and that's going out and actually talking to our customers as well about the new and emerging artists.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Thank you very much.

Madame Thomas...?

[Vanessa Thomas]

I have a few points, including help with the marketing efforts for the pure music services, which we consider ourselves to be, in that we're not tied to a multinational whose focus is not about music, and help with start-up funding grants for the new business models and changing the criteria for qualification, which does include being a Canadian-owned business. If it's a Canadian office of an American company that is committed, with various criteria, to the domestic market, I think there should be some window of opportunity there. Another point is potential tax breaks on the business costs of running a dedicated Canadian office.

Learning and understanding, as I was mentioning before, is so important. The personal education on the digital growth in Canada and supporting the education around that, be it in the schools...I didn't get to speak to that earlier, but introducing music, digital music, different platforms, and satellite radio.... There are all kinds of things that we can introduce to our children, who will eventually teach it back to us, because they're much better at doing that.

Finally, there is accelerating the rate-setting process through the Copyright Board.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Why is the process slower in Canada than in the U.S.?

[Vanessa Thomas]

Honestly, I don't know. There are various levels they have to go through. The first round was a two-year process, and we've been waiting over 18 months for a decision. I don't know why.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Do I have one minute? Okay.

I would like to ask you if you all agree with the recommendations of the others.

[A voice]

Yes.

[A voice]

If we all agree with the recommendations of...?

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Of Mr. Cooper and Madam Thomas.

[Shawn Cooper]

Of each other.

[Paul Cunningham]

I don't necessarily agree with Madam Thomas, but everybody has their own opinion in terms of expressing it.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

You have no opinion? Or do you think—

Yes, Madam Thomas.

[Vanessa Thomas]

I'm sorry to interrupt.

I also don't necessarily agree with all of Mr. Cunningham's either, so we can choose to disagree and have our own opinions.

[Paul Cunningham]

Just for the record, we are a Canadian-owned business.

But again, I just think it has to be a level playing field. You know, we have to charge for content. We have to pay artists. Having free streaming or something out there today is not going to trickle down to artists. People have to pay for content, and you have to be able to have a sound business model that pays the artists at the end of the day.

While I agree that we're slow with the regulatory in terms of understanding what we have to pay, at the end of the day we still have to pay those. So whether you accrue for it or you don't, you have to pay it, and we've paid over $75 million in royalties and $70 million in CCD.

[The Chair, Conservative, Gord Brown]

You have 15 seconds, Ms. Thomas.

[Vanessa Thomas]

Thank you.

We certainly deal with Re:Sound and we do pay a lot every single month, as we should, to the artists who are the basis of our business. So that is certainly not....

But I'm saying for the barrier to entry to other companies to grow the digital space, which is a place to showcase—where it's all about the artist and providing them space to showcase their talent.... The digital space is growing and it's growing worldwide and we can't stop it so we need to just support it a little bit more.

[The Chair, Conservative, Gord Brown]

Thank you.

We're going to move to Mr. Dykstra for seven minutes.

[Rick Dykstra, Conservative, St. Catharines, ON]

I just want to continue this conversation because I'm trying to make a determination as to where you two disagree. Maybe you could outline. Vanessa, maybe you could give me Paul's perspective on this and, Paul, you could give me Vanessa's perspective on this.

I'd really like to find out exactly where we disagree here because, Paul, you identified the core root of what my concern is, that artists are not getting paid for the creativity and the work that they're doing. I want to make a determination as to what direction we need to move here.

[Paul Cunningham]

Let me be clear, I absolutely agree that Songza pays the royalties for their artists at the current rate that they're set by Re:Sound. I'm sure that operating in Canada they're paying the royalties at the streaming rate today, so I'm not disagreeing with her that the company is not paying royalties. They absolutely are.

[Rick Dykstra, Conservative, St. Catharines, ON]

No, no. That's not my point. My point is that you two have a fundamental disagreement in philosophy and I'm trying to identify exactly what that is.

I'm just asking if you could —

[Vanessa Thomas]

I think I know what it is.

I think that Mr. Cunningham believes that our business model needs to be subscription-based. Our company has a subscription model, but it's not the main revenue generator for us, which is native advertising and integrating brands into our model. That's how Songza differentiates itself from other streaming companies. That is the model that the owners and co-founders have found works quite well for us as a differentiator. That is not the model we have; that's the model they have.

I believe that he also believes that we need to have a percentage of Can con within our system. I totally agree. I'm sure we're there. That is fine. We are here because we want to commit to emerging Canadian artists. I don't think that's a big barrier here. Those are the two take-aways that I have from listening to what he had to say.