Thank you very much.
I'm so sorry I can't be there in person. I had a CTV appearance this morning and couldn't get a flight out.
I'm Vanessa Thomas, managing director of Songza Canada. I'm very happy to be asked to speak today about the ever-increasing world of digital music in Canada.
Songza came to Canada in August 2012. We actually opened our physical offices in October 2013. Prior to opening the offices we grew organically to 2.4 million monthly unique users. We are presently at 2.7 million monthly active uniques. We are a music streaming service. We consider ourselves a lifestyle enhancement company where we provide playlists to the user based on their activity or their mood at that time of the day.
It's wonderful to live in a country where the government supports music. I welcome this opportunity to discuss how the money is spent and how digital services are going to become even bigger players in years to come. As radio becomes more narrow in their formats, which is happening, and the record labels reduce their marketing and promotion budgets, the digital platforms will become increasingly important to showcase emerging Canadian talent on a North American platform. We are not restricted by formats and can seed good emerging talent into 1,800 different playlists within Songza.
We have good infrastructure in this country with our broadband services, yet we lag in our services in this space. The growth of streaming music content is far behind the U.S. Our revenues for streaming were only 7% of the market last year whereas the U.S. reported recently that 21% of their revenues were from digital and streaming.
Why is Canada behind the U.S. and other countries in the development of music streaming services? One reason is that the regulatory framework in Canada doesn't foster innovation. The rate-setting process through the Copyright Board takes far too long, up to four to five years for an industry where business models are changing rapidly.
It's hard to build a business model without certainty as to how much you have to pay for the main inputs to your business. This certainly holds true for investors investing in these businesses. That's why Songza came to an agreement with Re:Sound—the organization that represents recording musicians and record companies—that allowed Songza to launch in Canada with certainty on those rates without having to wait years for a decision from the Copyright Board.
Services like Songza want to be able to use our platform for years to come, as we are now, to showcase emerging Canadian talent to North America that may not get exposure on regular terrestrial radio. However, the environment is not built to let digital companies thrive and succeed. The streaming services in countries with the most equitable streaming rights are challenged with building a business due to the cost of content. Canada continues to be among the most challenging countries in which to strike digital rights agreements with the publishers. This challenge has dissuaded many entities from actually operating in Canada, and in the end, it is the artists who suffer from that lack of exposure.
Digital companies cannot receive funding from the Canada Music Fund or FACTOR to help grow their businesses. There are no funds available within this space. Streaming music companies are paying more per stream in royalties than we are actually making in revenue, even with dedicated sales teams, at this early stage of our development.
Governmental incentives are often rooted in tax credits. Start-ups typically run large losses in the early years, which makes the tax credit of little or no value. However, digital music services' most significant cost is artist, label, and publisher royalties. If Canada were to develop a structure to provide subsidies for the payment of these royalties, it could both fuel technical advancement in new digital music services and distribution models, and also provide needed financial support for the creators and the performers. A subsidy approach is really a win-win for all interested parties.
Additional subsidies or incentives could be helpful to start-ups who create offices on the ground in Canada for purposes of localizing their services, both in regard to Canadian music repertoire in supporting the artist and Internet radio advertising of local Canadian businesses. Canadian ownership of the service as a whole shouldn't be the sole criteria in determining eligibility for grants, subsidies, and awards, to the extent the business operations in Canada are indeed focused on developing the domestic market, creating local employment, and breaking Canadian artists within their platform.
In summary, the government could help with marketing efforts for the pure music services to expand our reach, help with start-up funding grants for those new business models and change the criteria for those qualifications, provide tax breaks on the business costs of running a dedicated Canadian office, learn and understand the digital growth in Canada and support this digital innovation, and look outside of our boundaries to see what's happening in other countries. Accelerating the rate-setting process through the Copyright Board is essential.
Songza is a pure music service that is truly interested in music as an endeavour. We opened a Canadian office to further integrate into the fabric of the Canadian culture and promote Canadian artists. We hired a well-known industry veteran, Alan Cross, to head up our Canadian curation, and hired Canadian creators to create situations involving Canadian culture and artists.
Many streaming services are only having success as they are tied to a multinational, where the focus is not necessarily on music but other ventures. We are focused on local repertoire and are committed to supporting Canadian culture and artists. One example of this is the band Hey Ocean!, a Canadian band that we actually broke within our platform on Songza. The social media that came from that really propelled them to their first success.
I'm very excited to answer any questions. Thank you very much.