Canadian Heritage Committee on May 13th, 2014

[Neill Dixon, President, Canadian Music Week]

Good afternoon, everyone. I'd like to thank the committee for inviting me to speak here today.

I'm the president of Canadian Music Week. Now in its 32nd year, Canadian Music Week has become the largest, most influential music and media conference and festival in Canada. Each year, the event draws more than 3,000 delegates from more than 32 countries. The festival now features over 1,000 performers in more than 60 venues throughout downtown Toronto, engaging over 160,000 fans, with the total economic impact estimated at $16 million this year. By the way, it just finished a day ago. So if I look a little tired....

CMW assists in the education and development of performers and music business professionals of the future and promotes Canadian artists and recordings around the world. Our slogan is “bringing the world to Canada and Canadian music to the world”. CMW's key activities include music education, live performance, discovery and recognition, international trade and export, and music tourism.

In the past decade, CMW's efforts have increased the number of international music industry executives coming to Canada by more than 500%, resulting in thousands of dollars of new business being struck in territories including Japan, Australia, China, India, Germany, Britain, France, Southeast Asia, Latin America, and of course, the U.S.A.

We have seen increases in numbers of Canadian songs being placed in film and television productions, and we've facilitated export marketing training sessions presented by these experts. As a result, a better trained industry with a clear understanding of the export process is better able to take advantage of business and export opportunities.

Prior to running CMW, I started my music career as a working musician. You probably didn't know that.

[A voice]

I believe it's museum, a working museum.

[Voices]

Oh, oh!

[Neill Dixon]

You'll recognize this: it didn't pay the bills, so I used my entrepreneurial skills for the next 16 years in artist management, publishing, and owning the largest independent label of its time in the 1970s called Solid Gold Records.

First off, I think both FACTOR and Starmaker are doing a tremendous job. If there's no more money in the pipeline, then we should maintain the status quo, but there are a lot of worthwhile projects that go underfunded. My first recommendation is more money for FACTOR and more money for other industry initiatives in general.

I've seen a lot of changes in the business over the years, with technology having both positive and negative consequences. Unfortunately, with a poorly regulated digital economy, songwriters and composers have seen their income from reproduction, distribution, and performance of their work almost disappear. Traditional royalties have steadily declined since the year 2000.

This has also had a profound effect on CMW, as we watch labels, artists, and publishers' attendance shrink. Even the multinationals weren't immune. It forced us to think globally, and luckily we've been able to sustain ourselves during these tough times of more and more international registrations and bands.

Let's get back to royalties. When the Canadian government refused to recognize modern media, MP3 players, smart phones, USB, and all the other devices capable of reproducing thousands of works, it also rejected the collection of fees as prescribed in the legislation for those new generation devices, resulting in millions of works being pirated, transported, and stored with no compensation to the creators. Describing the fees as a tax instead of a royalty made things difficult to implement, and the artist paid the price.

The second recommendation is the Copyright Act should be absolutely modernized across all new media platforms. It would go a long way to guaranteeing that Canadian artists continue to be fairly paid for the use of their work and to ensure that they can make a living from their craft instead of begging for handouts.

While we're on the subject, Internet service providers should also contribute to the system because they have a substantial revenue stream from Internet subscriptions, bandwidth, and sales, which are in part attributed to the public desire to download and stream songs. However, with the exception of a growing number of legitimate outlets, a large portion of music delivered by ISPs brings almost nothing to creators.

It's not just the ISPs. Streaming services like YouTube enable people to listen to almost any musical work for free. Yes, they sell advertising, but much of that income never gets distributed to the rights holders. The government needs to get involved in protecting our rights on the Internet.

My third recommendation is that when it comes to export development, I agree with the concept of one central export office. After spending a lifetime promoting Canadian talent around the world by myself, it would be great to have some support. Over the years we've established a network of international festivals that we have reached reciprocal export development agreements with to promote each other's artists. I caution that we will still need flexibility in the ability to make immediate decisions to capitalize on opportunities.

Finally, on the subject of music tourism, about 20% of our festival audience is out of country. The numbers are even higher when it comes to business delegates. Our festival gets huge international coverage, and with the right support to invest in marquee talent, we have the possibility to grow into one of the premier festivals of the world.

We've heard a lot about Austin and Nashville. I was in Germany recently as a guest of the Berlin music board while attending Berlin Music Week. They gave me a little bit of their philosophy. The city had no music industry or cultural attractions after the war, and until the Berlin Wall came down, as recently as 1989, the city was still partially in ruins and it lost many of its young inhabitants. They had a lot of catching up to do. The Berlin government decided on a two-pronged strategy of cultural and tech to stimulate business. They took into account the value of music to attract young adults and the resulting lifestyle that would encourage the right workforce, and subsequently it would be easier for technology industries to move their headquarters to Berlin. The plan has worked. Berlin is now a thriving metropolis and a cultural hub and is now known as a music capital of Europe.

We're hoping to do that in Toronto.

Thank you for your time.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We're now going to go to the questions, and we'll go to Mr. Dykstra for seven minutes.

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

Thank you, Chair.

Again, thanks. We say this so much, it seems as if we don't mean it. But we appreciate you guys being here.

This really is something that is fundamental to where we are going with respect to Canadian music, and I can't think of a better place for it to start than out of a solid report from this committee and actually turning it into something that we can begin to implement.

Graham, the last part of what you spoke about or have spoken about is the Ontario Music Fund. I wonder if you could quickly identify how the foreign investment now works in terms of the tax credit. We have had a few people make suggestions like this, that we need to move in this direction overall from a Canadian perspective.

[Graham Henderson]

Yes, no problem. The Ontario Music Fund has set aside a portion of the fund, which is designed to encourage foreign direct investment by my members, Universal, Sony, and Warner, in Ontario. It's designed to mirror the tax credit system that is in place for film. In Ontario and federally, you have a bucket for the domestic film and television production business and you have a bucket for the international because we are very anxious to encourage Steven Spielberg to come and make movies here. This has been fantastically successful and has made Canada into one of the great film and television production places in the world.

That same model does not exist in music. There are tax incentives and government grants that are available for the domestic industry, but there's nothing that is specifically designed to encourage my members to invest in Ontario or Canada. So the Ontario government, in its infinite wisdom, decided to take a portion of the fund, which is $15 million a year over three years, earmark it for my members, who have—by the way, they elected not to cast it in terms of a tax credit, because the tax credit system is under review in Ontario because of the Drummond report. This doesn't say it couldn't be converted to it, but actually they kind of like a grant system because it has certainty up front. My members have to submit a business plan, the business plan is approved or rejected in bits and pieces, and then a number is set, and then we have to spend money to show that the success is already there. I think it's in excess of $3.5 million that is going to be spent by my members in this six months that would not otherwise have been spent in Ontario. We'd like to see that number obviously increase in a federal component.

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

Thank you.

The other piece is.... FACTOR is sitting right here. It's sometimes easier to speak when no one else is in the room, and sometimes it's actually good to chat when everyone else is here so we can actually see how to build together. I wonder if you had recommendations in terms of how we could address FACTOR.

We had a great presentation with them this morning, some questions in terms of direction. The theme, obviously, through the last number of weeks that we've been dealing with this, is whether or not we should be making changes to FACTOR in terms of how it funds and what its responsibilities are.

Alan, you touched on, as many of our witnesses have, the assistance that you received from it. Maybe I could get Graham to comment directly on some solid recommendations that would improve it, or if you think there are some things that are in FACTOR right now that should remain, please note them.

Alan, when Graham is done, maybe I'll turn the rest of the time over to you to comment on your experience with FACTOR.

[Graham Henderson]

I'll be brief and I'll give my time to Alan because I actually don't have any recommendations in that regard.

Our focus has been exclusively on what else we can do. We haven't looked at or studied exactly what we're currently doing. I thought Duncan made a pretty persuasive explanation of what it is they're doing and the strengths and the weaknesses.

Our focus, on the other hand, is on those other five, plus celebration, plus cities, and so on.

Alan.

[Alan Doyle]

My experience with FACTOR directly hasn't been that extensive. I know I've benefited from it tremendously through applications from our management company and stuff for making the earlier records, and Great Big Sea. I see it mostly in the music community around St. John's where friends of mine have applied for FACTOR funding and got it and have started burgeoning careers as a result of that whole involvement with them. My recommendation as an artist, if I could have one, is for all the groups I see around here: the more, the better.

We live in a world right now, as has been pointed out very eloquently a few times, where the industry that I work in has changed, probably more than any other industry, in the last 20 years. I used to make money selling records. My copyright used to be worth something. The records that FACTOR helps us build and the tours we go on, it's all but gone.

Recording music used to occupy about 40% of my money in the early 1990s. For myself, and just about every other artist kicking around in North America, especially right now it's—what would you say Chip? It's probably 5%.

[Chip Sutherland]

It's down significantly.

[Alan Doyle]

I really enjoyed hearing talks about changing legislation, where we could get some of the money back that we lost when people started being able to get our stuff for, not little, but nothing. How do you compete with nothing? It's free.

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

Alan, can I maybe touch on that from a tourism perspective. One of the recommendations that we've.... We had the tourism group here to talk about the industry itself. Graham quoted from it.

To all of you, what is the impact that could have in terms of its future? Obviously the way to make money now, you were just saying, is you have to tour, you have to play, and you have to promote yourself in that type of venue. The tough part, I didn't get that from the tourism folks when they were here. They were more interested in the foreign aspect of tourism than they were necessarily in Canadians going out all over the country to see you play on the other side of the country.

[Graham Henderson]

Can I quickly address that? I actually think what's being said here is, it's not that they're not interested in the domestic marketplace, it is our domestic marketplace, which is one of the most vibrant, dynamic, and diverse in the world. What we want to do is bring foreign tourists here to see them.

If we can bring tourists into Ontario or Canada with the lure of music tourism, we can help build back our tourism profile around the world and build a sustainable audience for Alan, two shows instead of one show. It's absolutely about showcasing our incredible world-beating local scene to the world.

[Alan Doyle]

I'm from Newfoundland. Tourism and music are bedfellows. I've said it from day one, and people have been saying it long before me. I honestly think that it's completely undervalued how big an economic engine Canadian music is. I honestly think it's almost ignored.

It's like, “Guys, do you know why they're here? Do you know why that couple from Connecticut is here? They're here to see us. They didn't come to do anything else. They came to see the band. They came for the festival.”

I have a bachelor of arts, so I'm not top-notch on the math, but that strikes me as free money. Isn't it? It's fantastic.

[Chip Sutherland]

I think one point to make about the touring thing, too, is that when you get to a certain level there are only so many times people can see you play. A band can only play in Sudbury so many times. How many times? Eleven times? There is a finite amount. If you think of your favourite bands, which I know you all have, how many times have you seen them? How many times have you seen Bruce Cockburn or whoever play?

That's why there either has to be a new influx of people who are fresh bums in seats or you have to get out. Canada, in terms of a marketplace, is a small place. To make a living, you have to get out, and then you draw people back.

[Alan Doyle]

Yes, I—

[The Chair, Conservative, Gord Brown]

Thank you. We're going to have to—

[Alan Doyle]

I don't want to get in trouble, but I'll say this very quickly. It goes the other way as well. It goes the other way. I just found out, for example, that for the government-assisted Canada Day celebrations, the gig in Trafalgar Square, the funding for it was removed. That was a prime way to help musical tourism for Canada. We had an amazing showcase for all the good stuff we do in the arts for people in the U.K.

How many people walk around Trafalgar Square in a day? They're from all over the world, and to showcase Canadian talent and Canadian music.... I'd encourage it. I'd love to see that come back. It was such a brilliant way for the world to get to see us for almost no money.

Sorry, Mr. Chair.

[The Chair, Conservative, Gord Brown]

Okay. Thank you.

We're going to move to Monsieur Nantel and Mr. Stewart for eight minutes, please.

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

Thank you, Mr. Chair.

First, I would like to thank the witnesses for being with us.

Ms. Courtemanche, thank you for your employer's continued contribution, even if it is simply your presence here.

You introduced your two colleagues. There is Mr. Sutherland, who works with Feist. This is obviously an artist who has done much, in terms of both being a commercial success and having a very particular artistic style. She is extremely popular. When Mac or Apple use her songs in advertising, it adds another dimension to the tracks we can all identify with and are so proud of.

You also have with you Mr. Doyle.

Mr. Doyle, clearly you have been there for a while, and you bring a lot to our heritage aspect. What you're doing has a heritage aspect. It's clearly popular music, but it's also so special, so peculiar and so close to where you're from, and that's very important. The whole thing around it, though, is that clearly you've been there for 21 years, and I think you've been signed to Warner all this time.

At that time, I was working for Sony, and I did so for four years. What shocks me now is to see that we have a strong advocate here in Mr. Henderson, with his speech about how we have to change the situation. We have to get involved. I'm happy to see that these foreign companies remain involved. When I was working for Sony, we invested in at least 10 projects that were completely local.

The question for me, I think, is that the biggest common denominator we've had among all the witnesses coming here is that the streaming services are the new thing. You were saying that we should enhance the copyright office to make it quicker and stuff, but what do you recommend? We all know that the share, the money you get every time, the micro-penny you get, is not sufficient for smaller-market artists.

[Graham Henderson]

The access is here. The access models will dominate. We're either going to make this work or we're not. If we don't make it work, then we will be doing a manifest injustice to the creator community.

As for what my recommendation is at a top-down level, I would say this. Policy-makers and/or governments have put technology at the heart of their policies for about 15 years. There was a promise that kind of went with it, and we heard it from the pundits and the professors. We heard it from everybody, including some artists. The promise was that it would all kind of take care of itself, that there would be a promised land: wealth, a middle class, and a golden age, some said, for the creator community.

Well, you've been sitting here. You've been listening. Where the heck is it?

[Voices]

Oh, oh!

[Graham Henderson]

We grew up in a world, all of us, where there was something called the Pareto effect, where 20% of the people have 80% of the wealth. That dominated, but the 20% of the money that was left over for the 80% in music was enough to create a middle class. That middle class, ladies and gentlemen, is gone. In the world that we're moving into, what we're seeing is an unprecedented shift of wealth away from creators to intermediaries, and as for our world, it looks like the 1% versus the 99%. That's what it looks like.

I would say that it is not enough to cast creators into the cockpit of some sort of social Darwinism, or as I said earlier, adapt or die. This is Canada, and we can do better, but we have to recognize the collective responsibility, and we have to put creators at the heart of our policy-making for the next 15 years.

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

Thank you. That's very convincing. It truly is.

Mr. Dixon, you did evoke the trouble with Google giving direct access to the various BitTorrents of this world. Do you have any advice on this issue?