Canadian Heritage Committee on May 6th, 2014

[Jason Kee]

I'll start. Define “problem”. It's definitely an issue for some. I think we have all heard their concerns flagged, both in the context of this committee and elsewhere.

It's important to note that on the concerns that have been flagged, there's no consensus even amongst the artistic community about the impacts of streaming and what they actually think about it or what they don't think about it. Every single time I hear a newspaper article about the reduction in royalty rates they're getting from streaming, I'll see another artist who basically says, “well, actually my royalty rates are pretty good”, and/or “to me it's a really powerful discovery service, I'm actually making more money from X, Y, and Z”.

As a consequence, the challenge is not the royalty rate per se. The challenge is that the skills that are required to succeed have radically changed. Some are doing a better job at adapting than others because it's just a completely different environment they're operating in. That's the biggest challenge. Again, if all you do is write songs and your entire living is based purely on royalty-collecting songs, then it's going to be challenging because that royalty is going to diminish over time because now there's more that needs to be done. The question is, okay, then how can you adapt? How can you actually embrace that or pivot into it?

The other thing that actually goes to another recommendation where actually I think you'd find a broad consensus is the issue with respect to streamlining, or at the very least making faster and more efficient, the process at the copyright board. It has been a significant impediment to the development of new services, and it doesn't do anyone any good because it's slow and it's uncertain, which is bad for the collectives, the artists, and the services. We have to look at ways that we can actually improve that process to make it faster and more efficient—frankly, actually more transparent and accessible—and to speed that along. That will probably be resources given to the board because right now it is radically understaffed, especially as the landscape becomes more complex. It's also what you can do to actually improve the process.

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

Mr. Albert? Mr. Péloquin?

[Eric Albert]

I think I can answer your question, Mr. Dion.

We talked about that in our presentation. I think there is an imbalance today between what the services pay and what the artists receive.

I mentioned that some services pay between 50% and 70% of their revenues in rights and royalties. But, as we mentioned earlier, artists and creators get $100 royalty cheques for those same services. First, we need a full investigation to see exactly where the money goes from the time a royalty is paid to the time it is received.

We also need to raise awareness about the value of the music industry, or of the music in Canada. Mr. Nantel mentioned that in Nordic countries, like Sweden, Finland and Norway, subscription services are very successful. Monthly rates are higher than anywhere else in the world and everyone makes money.

In Canada today, not everyone would necessarily agree to pay even $10 per month for access to a service like Deezer or Google Play or the like. The percentage of customers interested in that is much lower in Canada than anywhere else in the world. We have to raise awareness so that the marketplace comes to understand that music has a value, that it is not free and that everyone has to pay for the music they consume. With time, consumption habits will change and that is the way to go.

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

With time or with policies?

[Eric Albert]

With both. Policies can influence the result.

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

Which policies would you like to see implemented?

[Mathieu Peloquin]

Let me answer that question. It depends on the playing field we have. There are more services and more music on offer, and more music is being broadcast. But the pie is still the same size; the amount of money is the same. If we allow those distribution services to proliferate without establishing very precise parameters, how will we be able to contribute to Canadian culture, to support artists?

The market is becoming more competitive; these days, it is true, an artist must absolutely be an entrepreneur. The reality is that, each time we invite an emerging Canadian artist to our Stingray offices in Montreal, the artist thanks Galaxie for having broadcast his music in Canada and having been the first radio station to do so.

In the west, on Telus, there are 100 channels broadcasting music. For us, that is a huge amount of money for Canadian content and other programs. For Google, it could represent a contribution of more than $5 per year per subscription for various Canadian programs.

Today, some players make no such contributions. Everyone sees it as a virtue and everyone wants to contribute to various Canadian programs. I believe that we have to establish parameters that would allow them to do so.

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

Mr. Erdman.

[Justin Erdman]

You asked, is there a problem? I believe that a problem exists in both directions. The first direction, as Mr. Albert mentioned, is that we pay a significant percentage of our revenues, the majority I would say, to take care of the rights on royalties. I believe strongly that artists should be compensated; it's simply difficult to build a business under that burden.

The flip side is that the more artists see that there is an opportunity to get out there and be known, there's an expectation that they should all become known. I don't think artists necessarily have a right to become famous and earn a living from their music—not all of them. I think that applies in every industry. There are always going to be some people who rise above, and there are some people who are going to be journeymen.

The vast majority of artists are simply not going to be able to access that next level. That's the way it's always been in the music business. There's a good reason for that: it's a business, and you need to create a marketable product. I think that the vocal minority who are talking about not being able to earn a living haven't necessarily done the legwork to discover whether this is a viable option for them. They haven't necessarily made the contracts that are required. They haven't necessarily built other aspects of that complete breakfast that I was talking about: their merchandise, their touring, their social media presence, and all the other things that go into a successful music career today.

I don't know that I would look to significant governmental change. I would say that right now the burden is on us to find a viable model for streaming, and it's difficult to do that under the current burdens imposed by the royalty rights.

[The Chair, Conservative, Gord Brown]

Thank you.

We'll go to Mr. Weston. We have about five minutes left.

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

Thank you, Mr. Chair.

Mr. Kee, there are at least two lawyers at this table, Mr. Dion and myself. After having seen—

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

A point of order—

[Voices]

Oh, oh!

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

—I'm not a lawyer.

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

You're not a lawyer.

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

I'm a political scientist.

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

So, just one lawyer, then.

After having seen the film The Internship and read the book The Circle, I am very pleased to see that Google has a

real lawyer, not just a virtual lawyer, so please relay that to them.

You used the word “chasm”. You said that we can jump over the “chasm” and deliver Canadian music products to other countries because we have streaming.

Is it possible for streaming companies in other countries to steal our musicians' products and stream them here in Canada with no consequences?

That is my second question.

We talked about silos and different aspects, the ingredients of breakfast, and things like that. Are we missing some collaboration and coherence in how we're doing this?

The first question is maybe for you, Monsieur Albert.

[Eric Albert]

I think, to answer your question, the chasm that I referenced is the amount of money being paid by the services and the amount of money being received by the artists. You referenced the possibility of foreign services established elsewhere and if there's a possibility for them to steal the content and to broadcast it back into Canada. Technically, that is possible. But those companies, like those anywhere else, could potentially face copyright infringement.

There are a lot of services available in Canada today that broadcast from the U.S. and don't pay royalties in Canada. It still exists.

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

Is that a real problem for our musicians, our authors, our artists? Are they losing significantly because somebody in another country is just doing what you do, but in reverse?

[Eric Albert]

It is possible. I don't know what that number is. I think the industry probably needs a little more research if that number doesn't exist. But that is a consideration. Piracy, as a whole, is an issue facing this industry. It faces Canadian musicians, like anybody else. It is definitely an issue with foreign services coming into the country, let alone services that actually do pay royalties but are not, you know—I hate to use the word— “regulated”, but don't face the same contributions and obligations that regulated services based in Canada face.

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

Do you have any comments, Mr. Kee or Mr. Erdman, on reverse streaming?

[Jason Kee]

I don't doubt that it basically does happen. It's not legal, or at least it's not authorized. There are people who are distributing into the country. That's clearly illegal because they have no authorization.

I think the more challenging issue you get into is that people then actually work around the territorial block. The system identifies you as a Canadian. Therefore, if we are not in your territory, you can't get access to it, so they'll go around that. That's a lot more challenging.

I don't know what the numbers are, whether or not it's a significant number with a significant market impact. I think that is an open question. I think as we get more mature as a marketplace, as the copyright board process increases and streamlines, as we have more legitimate services that actually have negotiated deals in place entering this country, that will go away as an issue because we'll have so many legitimate options there will be no need to go to the hassle of using illegitimate ones.

[Justin Erdman]

I would add that I personally believe that piracy is simply the cost of doing business now. I think it should have been dismissed long ago, frankly. I don't think anyone is going to legislate it away, or impose criminal penalties that are going to be a significant impediment to it. There are always ways around it.

From what Jason was just saying, it's the simplest thing to press a button and get around geographic blocks. I don't know that I would spend too much time thinking about it. I'd rather spend time figuring out ways to create more viable streaming businesses that do operate legitimately.

[The Chair, Conservative, Gord Brown]

Thank you very much.

That's going to be the last word.

Thank you to our panellists for being with us today. Thank you for your contribution. If you have any more input, please get it to us in writing. Thank you very much.

The meeting is adjourned.