Canadian Heritage Committee on May 1st, 2014

[Ted Falk, Conservative, Provencher, MB]

Thank you.

Mr. Jutras, I have a question for you as well, along the same vein.

Do you see the money that the Canadian government is investing in the Canada Music Fund as meeting its objectives?

[Dominique Jutras]

I do not analyze the effect of the Canadian government's investment in music. Rather, we look more at production. We have seen that the volume of production has been steady, but that the market is declining, based on our indicators. This might make you think, as other witnesses have said, that this market is undergoing a transformation which we do not entirely understand. We know that there is more music today than there has ever been before, but money does not seem to come up out of the system in the same way it once did.

The financial flow within the system has been profoundly changed. So indeed, the state will undoubtedly continue to intervene in order to support production. However, music broadcasting and music consumption have undergone significant transformation, and we will need to find ways to stimulate the system again or to build a new model that will allow us to get the money from the system to the artists.

[Ted Falk, Conservative, Provencher, MB]

To our witness who called in via telephone, I would also have a question for you. You made a comment that there's difficulty protecting copyrights. Can you expand a little further on that?

[The Chair, Conservative, Gord Brown]

Monsieur Bissoondoyal.

[François Bissoondoyal]

In fact, it's fairly simple because music is quickly and easily available on the Internet. When I say copyright protection, of course, I mean that there is a whole system for pirating music and it's very simple. The music industry is not alone in having problems. Film and television are in the same boat. They are just a few years behind in terms of feeling the effects.

This quick and easy access to music, of course, allows a huge number of people to obtain these products. So making laws on this subject is increasingly complicated.

[The Chair, Conservative, Gord Brown]

Thank you.

Mr. Nantel, you have the floor for seven minutes.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Thank you, Mr. Chair.

Thank you all for being here today. I think that each of you is playing a very important role in your industry and we are lucky to have you with us. I know it was complicated to plan the meeting with each of you. We apologize for the technical problems that we had today, and for the votes which delayed the meeting.

Mr. Bissoondoyal, my question is for you. Earlier you mentioned—and I think you are right—that it is rare that we talk about the challenges of people in the music industry. If I remember correctly, Spectra Musique has been around for around ten years. You arrived on the scene rather late in the industry. Are you saying that in your opinion—and again I think you are right—that in terms of the challenges facing the music industry those challenges will also be felt by film and television, because it is so easy to make copies, is that correct?

[François Bissoondoyal]

I believe that is the case.

I would like to make a small correction. The label has existed for five years. We created it under quite particular economic circumstances.

I think that there is hope, thanks to the government's support, for us to have a greater presence and to have a certain success.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Yes. And you proved that with Douze hommes rapaillés, which was a huge success.

I wanted to hear your thoughts on this subject, because I think this is a comparison that we do not make often enough. I think that the whole audiovisual world does not see what's coming. But the ordeal of the music industry should show that this is the case.

I heard someone from Nettwerk saying that we should stop being nostalgic and demonstrate some forward thinking.

Mr. Mortimer-Lamb, you've been talking about the example in Sweden. Could you please tell me in a few words, what's Sweden's secret so that their local artists do take their cards out of the game on the streaming game?

[Simon Mortimer-Lamb]

I think there are several elements to it. I think there are cultural elements as well which can influence that. One of the important pieces that I'm aware of is just how Spotify came out of Sweden in the big player there.

They partnered with a lot of mobile companies to have their service embedded within Europe's mobile phone subscriptions. You've got a culture of very easy access and good access to mobile phones with data plans, etc., etc. They were able to very quickly reach the consumer and present their value propositions to them, and it really took off in a great way. I think that was one of the keys to it.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

If ever you have more information that you want to share with the committee, we'd be very interested in having more information regarding the privileged access they have. I've been working for Audiogram in Montreal for something like six years and to me Nettwerk has always been the parallel. Nettwerk has evolved so much within the music industry, managing producers, managing songwriters, and getting involved in all these fields. So your advice is well-appreciated.

Specifically, Mr. Mortimer-Lamb, you spoke about the emergence of smartphones.

I hope that we will have a few minutes to talk with Alain Chartrand, the great advocate for francophone culture across Canada, who represents Coup de coeur francophone. He is doing amazing work. I could simply mention Lisa LeBlanc. I believe he was the first to foster her great talent.

My question is for the representatives of the Observatoire de la culture et des communications. Earlier, like Mr. Mortimer-Lamb, you mentioned that people are now investing more in the means to have access to music. With the explosion in the number of music devices, people are investing more in the hardware than in the content. Could you tell us more about that?

[Dominique Jutras]

Exactly. This observation is fundamental and confirms what everyone is seeing. At least, it's possible to put some numbers to it. Overall, 5% of household expenditures are allocated to culture and to access products. “Access products” means telephones and the Internet, for example, whereas “cultural content” means buying books, for example.

It has been observed that money spent to buy books, records and real cultural products—not access products—has gone from 55% to 40% of money spent on culture. Where, then, are consumers spending their money? They are not using it to buy cultural content, but to buy access products with which to access culture. This is an additional phenomenon. I was saying a little earlier that money wasn't going to creators or to industry, but that it stays upstream somewhere, with the providers. That's where the consumer population is spending its money.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Doesn't this situation also come with an old problem like that experienced by the Quebec film industry in the 1950s? Full-length features weren't being done in panavision for big screens. Only American productions had access to that.

Today, we are experiencing a loss of market access. In fact, local productions, be they from Nettwerk or large companies from Montreal, don't have access to the market because the amount of royalties for streaming, for example, don't allow us to take our place within the market.

Have you noticed something? As you were saying earlier, the loss of physical sales has shifted to digital sales, and our part of the digital sales market, which was built over years by Sam the Record Man, Renaud-Bray and Archambault has been lost.

[Dominique Jutras]

I will try to give a very visual explanation of the point you are raising. When walking into a bookstore or a record store—if we want to talk about music—there are display cases and national products are easy to see. When one ends up on the Internet, where are those national products? They remain very hard to find.

The most eloquent example is the world of bookstores. There are shelves, and books written by Canadian authors appear on them. However, on the Internet, extra effort has to be made to get access to them. You all know the system. The “trendy” or mainstream product is what's being pushed. To draw up a mental image, imagine the size of the screen. The full range of choices is not seen.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

My next question is for Mr. Kane, from Warner Music Canada.

I don't know if you're here in French or in English. I'll speak in English to make sure.

There are many phases in the market. Many players tend to fade; some others tend to go up. There are trends. Is there anything that has changed?

My colleague Kennedy Stewart wants to tell you about the various income tax measures you've evoked for outside cash to come in. I wanted to ask you if anything has changed, because I remember that artists as important as Lynda Lemay were discovered and put on the market by you in the eighties. Am I right?

[Steven Kane]

Yes, definitely. Warner Music Group has a long and storied history of development of great Canadian talent on both sides of the border. You can go back as far as Gordon Lightfoot, Blue Rodeo, Billy Talent, who has an enormous international career. Lynda Lemay is a perfect example. Lynda, at this point in her career, sells much more internationally than she does in Canada, which means as the repertoire originator, there's an international royalty that comes back into Canada that allows us to continue to invest in local Canadian artists.

This is a tradition that moves forward with our young emerging artist Meaghan Smith, who is actually managed by the Network Management Division. And to the last speaker's point, if you were to open your browser to iTunes right now, you would seen an incredible presence for Ms. Smith's new record.

I think it needs to be said—

[The Chair, Conservative, Gord Brown]

Mr. Kane, we're going to have to move on, and I'm really sorry. We're well past Mr. Nantel's time

Mr. Dion, you have the floor. You have seven minutes.

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

Thank you, Mr. Chair.

First, thank you to Mr. Jutras and Mr. Fortier for coming to tell us about the extent of the problem. I unfortunately do not have the time to discuss it with you.

Mr. Kane and Mr. Mortimer-Lamb, just for the record, I'm sure you will say that although you think that the Canada Music Fund is meeting its objectives, it doesn't mean that the government doesn't have a lot to do in order to improve its ability to help the music industry face its new challenges. Do you agree with that?

[Steven Kane]

One hundred per cent....

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

Mr. Mortimer-Lamb?

[Simon Mortimer-Lamb]

Yes, I would too.

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

I think it's safe to have that clarification.

Second, you came with different suggestions, like a tax credit. We've heard this one before, but I think it's the first time, Mr. Mortimer-Lamb, that this committee has heard about the Swedish streaming model you just mentioned.

Can you sum it up in the clearest way, and then I will invite Mr. Kane, Monsieur Bissoondoyal, and Mr. Chartrand to react to your proposal.

[Simon Mortimer-Lamb]

Okay. Let me describe it. I think it's driven by consumer behaviour and how people are able to use their devices, mobile phones, laptops, iPads, whatever it is, to access and experience music.

The promise or value of streaming is effectively to be able to have a huge music catalogue at your fingertips where the consumer can find any music they're interested. Indeed, those services also curate music to people, which we network...and its marketing campaign spends time with those retailers, helping them curate our artists because we want them at the forefront.

The Swedish example is really about a market embracing the change and allowing a retailer and a technology to go into the market in a very meaningful way, and that was Spotify.

We're seeing that being replicated in other countries. For example, Brazil is now opening up for us as a potential streaming market because, again, it's access for its consumers, it's access for us to get our music in front of those consumers, and the streaming platform is allowing that.

We never had significant revenues in Brazil, and granted it's slowly growing, but you see this trend of the value of the experience of streaming for consumers in many countries.

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

Thank you very much.

Maybe I'll ask Mr. Kane to react to this proposition. Would you support it?

[Steven Kane]

Yes. Again, as mentioned earlier, one of the key elements was that there was a very close and very effective relationship between the telcos in the Nordic countries and companies like Spotify, where they came together with a very effective marketing campaign and a very effective introduction into the market of this service. That's what we have to work towards in this country, but the first step is getting these services to open up and creating a friendly atmosphere for them to come in and do business and not continue to put roadblocks in their way.

To the earlier point of seeing the physical book or the physical CD in a traditional retail environment, it's not coming back. We have to embrace this new technology, invest in the R and D, and again I'll tie that back into the tax credit. Allow these companies, whether they're multinationals or locally owned, to invest in the R and D of artist development to make that content rich and desirable for people using these services like Spotify, RDL, etc.