Canadian Heritage Committee on April 8th, 2014

[Brett Kissel]

That's right.

[John Weston, Conservative, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

That would a great message, “This is good. This is happening. This has helped us.” It would encourage all those people who are involved and in the back to keep going.

We do have the tax credit for musicians and artists. It was brought in recently by the Conservative government. Do you see that as going somewhat down the road of doing this ParticipAction for students?

By the way, as someone who promotes health and fitness, I love your analogy.

[Allan Reid]

Thank you.

Actually, just before we get there, I'm curious. How do you currently measure it? How does the government measure this right now?

[John Weston, Conservative, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

I don't know that. That may be my own ignorance, but I'm saying that if we can measure it, if there are metrics around it that are really compelling, then it gives ministers and finance ministers and prime ministers the fodder they need to move forward confidently and say, “We're being good fiscal stewards of taxpayers' money, and look at the wonderful dividends we're getting.” They love to be able to say that.

[Allan Reid]

It used to be measured by record sales. It used to be measured by units. That's just no longer the case anymore. The gold record used to be 50,000 units sold in Canada. It's now gone down to 40,000, and it may go even further down, for certifications. We've seen that happen globally.

I was just very curious to know what your current measurement criteria were. Sales are obviously a key piece. It really is as Brett and Louis are doing. They're entrepreneurs. They're a business. That, I think, is a true measurement. They're taxpayers. They're putting money back into the economy from the money they're making.

[Louis O'Reilly]

Just on that, for the last five or seven years, I've been getting documents sent to me by Statistics Canada that I have to spend a whole half a day on, inputting information about my artists, how much money they make, how many CDs, how much comes from foreign sales, and even about me personally, as a company.

I think Statistics Canada has their hooks into certain people in the industry. I've been suffering through that. I understand the value of it, because I'm an economist by background, but I'm sure you have the metrics there, if you need them.

[John Weston, Conservative, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

There are great leaders who are economists.

[Voices]

Oh, oh!

[The Chair, Conservative, Gord Brown]

Thank you very much. That will be the last word for the panel.

I'd like to thank our panellists for their contribution to our study.

We will briefly suspend.

[The Chair, Conservative, Gord Brown]

We are going to call meeting number 17 of the Standing Committee on Canadian Heritage back to order.

For the second hour we have Ian MacKay, the president of Re:Sound with us. We also have Sébastien Nasra from Avalanche Productions & Sound Publishing. He's the president and founder of M for Montreal. Last, we have Richard Petit and Annie Morin by video conference from Montreal. They are with Artisti and Union des artistes.

We will start off with Mr. MacKay, for eight minutes.

You have the floor.

[Ian MacKay, President, Re:Sound Music Licensing Company]

Thank you, Mr. Chair, and members of the committee.

My name is Ian MacKay, and I am the president of Re:Sound Music Licensing Company.

Re:Sound is a not-for-profit organization dedicated to obtaining fair compensation for artists and record companies for their performance and communication rights. We represent the royalty rights of more than 12,000 musicians, including featured and session musicians, as well as record companies when recorded music is played on commercial radio, satellite radio, pay audio, music streaming services, and in other businesses that use music. The money we collect is split fifty-fifty between the performers and the record labels.

Re:Sound's member organizations are Artisti, who are here with us today, ACTRA RACS, the Musicians Rights Organization of Canada, MROC, the Quebec Collective Society for the Rights of Makers of Sound and Video Recordings, SOPROQ, and Connect Music Licensing, who has already appeared before this committee.

The committee has already heard from a number of witnesses about the challenges facing the music industry and how that industry is changing. There's no question that recorded music is being consumed in more ways than ever before, with some sources of revenue declining, like CD sales, while others have some growth on the digital side.

The distinction between what is core music consumption and what is secondary music consumption is not as clear as it once was. Today a significant part of the income received by musicians and record companies comes from royalties for uses of recorded music on broadcast radio, satellite radio, pay audio, and increasingly, from music streaming services. Re:Sound licenses these uses on behalf of performers and record companies through rates that are certified by the Copyright Board of Canada.

As Stuart Johnston, the president of the Canadian Independent Music Association, said when he appeared before the committee a couple of weeks ago, the industry has splintered in terms of revenue sources and what was a dollar business has become a pennies business. At Re:Sound our focus is on getting fair rates for creators of recorded music, collecting all those pennies, and getting them to the rights holders, doing our part to ensure a healthy musical ecosystem.

There are two main recommendations Re:Sound would like to make to the committee today that we believe will be important in ensuring that Canada continues to have a strong recorded music industry going forward.

The first one is the elimination of the $1.25 million exemption for commercial radio. The second is ensuring that the regulatory process here in Canada is well placed to encourage a thriving musical economy and efficient digital marketplace. I will now speak to each of those in a bit more detail.

First is the elimination of the $1.25 million exemption.

In 1997, the Copyright Act was amended to grant performers and makers of sound recordings the right to receive fair compensation for the public performance and communication of their works. This amendment brought Canada in sync with 85 other countries around the world. Previous to this, only composers and music publishers, represented by SOCAN, had received royalties from radio play, while the people who performed and created the recordings had not.

The right was meant to parallel the existing composer-publisher right as it does in other countries, but it was substantially restricted at the time by a provision that commercial radio stations were only required to pay $100 on the first $1.25 million in advertising revenues. This was and remains the only such subsidy in the Copyright Act and the only subsidy of its kind in the entire world.

The rate-setting body, the Copyright Board, weighed in on this subsidy as far back as 2005, stating, “Even the smallest of stations would be able to pay the tariff,” and further, “allowing large, profitable broadcasters to escape payment of the full tariff on any part of their revenues constitutes at best a thinly veiled subsidy and is seemingly based on no financial or economic rationale.”

This subsidy removes about a third of the royalties performers and makers would otherwise receive from commercial radio. It reduces those royalties by about $8 million per year. The bulk of this subsidy goes to a handful of large radio groups. Removing this subsidy would cost nothing to government, but would mean that commercial radio would pay the proper royalty set by the Copyright Board for the use of recorded music, rather than the substantially subsidized rate they currently pay.

My second recommendation, as I said, is regarding the regulatory process for music. I quoted the Copyright Board just now, and you've already heard from a number of previous witnesses about the crucial role the Copyright Board plays. The Copyright Board is the tribunal that sets the rates to be paid by businesses that use music, including commercial radio, satellite radio and streaming services, and webcasters.

The concern is that with rapidly changing business models in the music industry and increasing demands on a Copyright Board with limited resources, as currently formulated the regulatory process can be perceived as a barrier rather than as a facilitator.

The committee heard from diverse witnesses in the last few weeks including Jodie Ferneyhough, the president of the Canadian Music Publishers Association; David Murphy, the president of the Professional Music Publishers Association; Gilles Daigle, the general counsel of SOCAN; and Victoria Shepherd, the executive director of Connect Music Licensing; that there is a need for a faster regulatory process, particularly in the emerging digital marketplace. This is also highlighted in Music Canada's report from last year, entitled “The Next Big Bang: A New Direction for Music in Canada”.

Victoria Shepherd quoted the statistic that 21% of total industry revenue in the U.S. comes from streaming, while in Canada it is only 7%. Vanessa Thomas, the managing director of the streaming service Songza, who appeared a week or two ago, said that part of the explanation for this gap could be because music services are not launching in Canada because they are still waiting for some of the rates to be set by the Copyright Board.

These businesses need to know what they have to pay for music, and the rights holders, the performers, and the record companies need to know what they will earn. Parliament needs to ensure that the Copyright Board is adequately resourced so that the regulatory process facilitates a thriving digital music business that encourages innovation of new models of distribution for music, which will then take the place of what we know is the big problem with services that provide music and nobody gets paid for.

Thank you for your time today. I would be pleased to answer any questions that the committee has.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We'll now move to Sébastien Nasra from M for Montreal.

You have the floor for eight minutes.

[Sébastien Nasra, President-Founder, M for Montreal - Mundial Montreal, Avalanche Productions and Sound Publishing]

Good morning everyone. My name is Sébastien Nasra.

First of all, allow me to thank you for the privilege of speaking as part of this exercise, the pertinence of which I salute as it comes at a key time in the evolution of the Canadian music industry.

My presentation will be in what can be referred to as Frenglish, so please keep your headset on and listen to the music.

It's been said of me that I am an industry international man of all trades. Classically trained as a percussionist from the Conservatoire de musique du Québec, I am the proud recipient of both a CEGEP diploma in administration and a law degree from Laval University.

In 1994, at the age of 23, I founded Avalanche Productions and Avalanche Sound Publishing. Avalanche went on to become an established 360 operation of artist services—management, publishing, label, album and show productions—and a significant player in the Canadian music industry launching the local, national, and sometimes international careers of acts such as The Soul Attorneys, Jorane, Les Respectables, Beast, Elisapie Isaac, and more.

Furthermore, my continuous determination to break borders has led me to build bridges with the rest of the world and create, in 2006, M for Montreal, a showcase conference and export platform now internationally renowned and locally celebrated, going into its ninth year of existence. M is a springboard into international markets that has contributed to the careers of many acclaimed acts, such as Half Moon Run, Patrick Watson, DJ Champion, Coeur de Pirate, Karkwa, Suuns, P.S. I Love You, and many more.

In 2011, along with seasoned Toronto-based programmer Derek Andrews, we launched Mundial Montréal, serving and supporting the Canadian world music community through a yearly showcase conference and by currently creating an unprecedented network of presenters with a clear goal: developing opportunities for talents emerging from the richness of the Canadian cultural diversity.

In only three years, Mundial has become internationally recognized as the premier professional meeting place in North America for global music. Other involvements in different aspects of the industry include serving on theboard of directors of organizations such as SOCAN. I was a founding member of APEM, Association des Professionnels de l'Édition Musicale, and I am currently serving on the board of ADISQ. But enough about me.

I would like to draw your attention to some of the needs of Canadian music and to future possibilities. First of all, I must challenge some commonly held misconceptions.

While it is true that anyone can do a recording in his living room and put it on YouTube, the fact remains that the cost of equipping oneself with the means to produce a quality product and to have consistent visibility are increasingly high.

How do we deal with the challenge of the digital era, social media, and the broader role of corporations? We believe that there are some key solutions: workers, workers, workers. Companies must have help hiring and attracting specialized workers, mainly in viral marketing and social media advertising.

It's all about social networking, right? For that, it takes bodies, young potential music industry professionals for the future that will give young organizations the ability to grow their support staff more efficiently and more effectively.

One has to remember that when the fund was set, the instant social media needs did not exist at all, and it is in no way replacing the traditional media or marketing needs, but it is actually in addition to the existing needs of skills and clout to be able to compete in the new marketplace.

The market hasn't changed much. People still want music and need to access music more than ever. It's the way of bringing it to their attention and getting it in their ears that has evolved with technology, and the faster pace with which it's delivered.

I have some recommendations. This might sound funny, but we need more geeks. It's the revenge of the nerds. We need funds dedicated to keep up with the need for fast, constant social media and network maintenance, online marketing plans, conversations with the public, creation of quality online content, innovation in practices, and evolution in e-market penetration methods.

A little earlier, we talked about developing a young audience. Firstly and secondly, we must educate young people and put them in contact with music which, as evidence has shown, has beneficial effects on cognitive development and motivation. We must also capture their imagination before they are taken over by video games, movies and TV.

Let's talk about marketing and commercialization. Production is relatively well-supported, but it has become increasingly difficult and costly to sell a product. It is important to maintain support for creation and production, because without a good quality product, no one will buy it even with all the marketing in the world.

The priority is touring, touring and touring. At the end of the day, that is the best type of local, national and international promotion. It has been clearly proven that artists who tour can do nothing but develop artistically, develop their audiences and develop demand for their projects while generating various types of spinoffs, including jobs for technical staff and others.

In terms of research for new opportunities for music, there is a cruel lack of support for developing new initiatives. I am talking about support for business plans and market studies to facilitate the presentation of music on various non-traditional platforms, like movies, TV, video games, multimedia, and advertising, to name a few.

I want to talk about diversity in diverse cities. The Canadian cultural mosaic is larger, bigger, and more diverse than ever. It is not only French and English anymore. It is starting to express itself as the new Canada.

Recognizing the organizations and events that represent, support, and bring to the masses the sounds and cultures of a wide variety of global beats and voices of the world that have adopted Canada as their home is an essential step moving forward in supporting our incredibly diverse communities that form the social fabric of Canada 3.0.

In listening to other voices who have opinions in this area, we noticed that, namely, the Government of Ontario and heavy hitters of the Canadian music industry based in Ontario are being strategically aggressive with even more Toronto-centricity and establishing Toronto as the most significant music hub in the country.

While we understand their motivations, we would like to think that the magic of the Canadian music scene is about more than one place. Examples like the National Music Center in Calgary, initiatives like BreakOut West, the ECMA awards, Les Francouvertes, or M for Montreal, to name a few, all contribute in their own way to make Canada so special, unique, and diverse. Again, the D word, diversity.

As for exports, I would like to clarify that some industry stakeholders would like to see a single model and a single window for dealing with and organizing export missions. We do not believe that such a model promotes diversity, nor is it the best approach for tangible individual results for artists.

Why? Because each project has different artistic content, different timing, different needs and different strategic approaches. The tools available to artists and Canadian entrepreneurs must remain flexible, diversified, and strategic so they can respond quickly to the rare opportunities that arise in an increasingly competitive international market.

The department did consult industry on this specific point in the fall of 2012, and the exercise clearly showed that the diversity of stakeholders and the diversity of business models is the way to go.

Finally, we want to underscore the difference between flourishing in Canada and developing the artistic careers of Canadians, in terms of market development, of course.

Because, at the end of the day, it's all about the music, man.

Thank you for your attention. I would be happy to answer any questions.

[The Chair, Conservative, Gord Brown]

Thank you.

We will now go to Montreal, from Artisti et Union des artistes, Richard Petit and Annie Morin, for eight minutes.

[Annie Morin, Director, Artisti and Union des artistes]

Thank you, Mr. Chairman.

Good afternoon, committee members.

First of all, I would just like to thank you for inviting us to give our opinion on the effects of technological change on the creation, distribution and consumption of Canadian music.

The UDA, represented today by Richard Petit, one of its directors, is a professional association representing around 12,000 performers, including singers.

Artisti is the copyright collective created by the UDA in 1997. We have over 3,100 members, singers and musicians of all languages. To date, we have distributed to them over $25 million in royalties under the system of equitable copyright remuneration.

Let's come back to the effects of technological change. The effects are many, and we have recommendations to make on steps to take to offset the negative ones.

Don't forget, it is easier than ever before to copy and listen to music. Accessing it is child's play. Just think of iTunes, the various streaming sites or even YouTube, which provide access to a huge catalogue of music. However, there is not always a fee for that access, and the income that should in principle make its way back to the musical performers does not always materialize.

Take YouTube, for example. Almost everyone listens to music online on YouTube. To listen to music accompanying videos or still images on this site, the audience pays nothing. As for the performers whose musical performances are accessible in this manner, they often do not receive anything either.

We believe that if anyone receives any income in connection with such use, a portion of that income should go back to the performers, as is the case with the equitable remuneration system under sections 19 and following of the Copyright Act. That system provides for a 50/50 sharing of royalties between the makers of sound recordings and the performers.

To do this, changes would have to be made to the Copyright Act such that the equitable remuneration system would capture the free dissemination of videos involving music.

As for other Internet broadcasts, there are two types. On the one hand, there is radio show simulcasting, and on the other, there is non-interactive and semi-interactive streaming, such as Songza. This is similar to conventional radio.

For these broadcasts, the performers and makers of sound recordings are waiting for the Copyright Board of Canada to set an equitable remuneration tariff soon. These broadcasts will ultimately be subject to equitable remuneration, with a 50/50 split between makers and performers, which is a good thing, in our view.

[Richard Petit, Artisti and Union des artistes]

There are also on-demand broadcasts, i.e., broadcasts for which the audience pays something and chooses what they want to hear, such as on Rdio, Deezer or ZIK.

For these other broadcasts, the performers have to negotiate compensation under their recording contract. However, a number of songs on these sites come under contracts that were entered into at a time when such technological developments were inconceivable. Several artists complain that they get absolutely nothing for these broadcasts. The same situation occurs with more recent contracts, which is even harder to explain.

Finally, there is the purchase of music on sites like iTunes. There too, the performers are stuck with what they managed to negotiate under their recording contracts. More often than not, given that sales have plummeted and that royalties have been scaled back, along with album production costs, they rarely receive any remuneration for these uses.

In order to get an accurate picture of musical income sharing in the digital universe, we believe it would be useful to conduct a study of online uses not covered by equitable remuneration in order to determine how the royalties are distributed among various stakeholders in the music industry.

Artisti and the Union des artistes would like, at the very least, to make sure these studies identify what percentage of the royalties or income from music that is used or sold makes its way back to the performers. In short, what do they get back after they have paid off all of the non-subsidized album production costs.

[Annie Morin]

That said, there are other ways of ensuring that performers receive a share of the revenue generated by other users of their music in the digital sector.

First, the exception under section 68.1 of the Copyright Act that exempts radio stations from paying fair compensation on the first $1.25 million in annual revenues could be repealed. Ian MacKay spoke briefly to this earlier.

Furthermore, under the private copying regime royalties could be collected on the sale of any device or blank audio recording media. We have proposed this in the past and those proposals are still current and so we are repeating them before you today. In fact we would recommend that a committee be struck in order to examine the modernization of the private copying regime.

Finally, we would like to emphasize the fact that music allows Internet service providers, music listening device manufacturers and global music services to make money and generate revenue but performers are the ones who are left out of the payment chain. Therefore, we would like government measures to be taken to insure that these service providers, website operators and device manufacturers share a part of the income that they earn from the use of that music with the performers.

[Richard Petit]

Now we would like to speak about support for performers in the music industry.

To date this support has been directed to production companies rather than to the performers themselves. In the same way that the music industry needs support, so do the performers. Performers who work on an album are not compensated for the time they spend doing that and only receive a small amount for their studio recording sessions.

If they can completely cover the album production costs, then they may be able to collect royalties. However that hardly ever happens. Whether the production is profitable or not, production company staff receive a salary thanks to a system of subsidies whereas the performer has to take on several jobs in order to make ends meet.

Ms. Couture, who appeared on the first day of your hearings, said that it is good to see the real challenges that performers face on a daily basis so that policies are crafted accordingly. One of their challenges is to live with no income during that whole period that precedes the creation of an album. When performers are in a production period, they need a salary in order to be able to spend their time creating.

We find it unfortunate that the business plan for a viable music industry is based on the assumption that performers are volunteering almost all their time. We believe that subsidies for the performers would rectify this unfortunate situation. How can that be done? It could be done by providing subsidies that would be parallel to and connected to production, for the purposes of guaranteeing a salary for the performers, salary that would be more than simply a repayable advance. If performers are the source of musical endeavours, then they have to be part and parcel of the funding mechanism and be compensated.

[Annie Morin]

We would be happy to answer your questions.

[The Chair, Conservative, Gord Brown]

Merci.

We will now go to the questions and we'll start with Mr. Boughen. If I could just remind members that we do have our panellists from Montreal through video conference, so please don't forget.

You have the floor, Mr. Boughen.

[Ray Boughen, Conservative, Palliser, SK]

Let me add my voice to welcome our panel members in Montreal and here in Ottawa. We appreciate your taking time to visit with us and help us with our study.

We heard a lot of different questions, and any of the panel members may feel free to answer the questions.

On positions around funding that's favourable for the development of the artists, could you expand on that a little bit? What kind of dollars are we looking at and where would those dollars come from in general terms?

Ian, could you start us off?

[Ian MacKay]

Sure.

In terms of what I was presenting, the funding there is royalties. It's royalties for the play of recorded music on radio. It exists but it's reduced by what I think was meant to be a transitional provision in the act that limited the amount of royalties that were paid. This is taking $8 million a year out of the royalty pool for musicians and record companies. That subsidy was introduced in the act with the new royalty back in 1997. At the time the entire radio industry had a profit of about $3 million.

Fast forward to today and the profits of the radio industry are in the hundreds of millions. It's a much more concentrated industry. You have the four major radio groups representing over 80% of the revenues of the industry.

We would look at all of that and say, if that subsidy was ever justified, it certainly isn't justifiable in today's world. In a free marketplace the artists and the record companies should be getting fair compensation for the music that's played on radio, and that's all we're asking for. Of the $8 million that would be injected into the music system, not a penny of it would come from government. It's not asking for additional funding. It's asking for payment for things that are being used.

[Ray Boughen, Conservative, Palliser, SK]

Thank you.

Sébastien, what's your view on that?

[Sébastien Nasra]

I'm not totally clear on the question. Is it about the funding that's available to artists?

[Ray Boughen, Conservative, Palliser, SK]

Yes. How do they access the funding?