Canadian Heritage Committee on May 13th, 2014

[Ray Boughen, Conservative, Palliser, SK]

Thanks, Chair.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We'll now move to Mr. Stewart for about three minutes.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Thank you, Mr. Chair.

Thank you to the witnesses.

I'll keep it short because I only have three minutes. My questions are addressed to FACTOR.

In the supply chain of music we have people who pick up instruments and learn how to play. Then they might at some point decide that they want to move toward becoming professional musicians. FACTOR comes in when you decide that you want to cut a demo or start to perform in front of people for money.

There have been some suggestions that the FACTOR fund should be split and more money should be going to the early stages of musical development, that the money should be spent on getting kids their first instruments or perhaps getting them lessons or something before they get into the supply chain.

If that happened, if FACTOR's funding was split and you took on that role, what do you think that would do to your existing program?

[Susan Wheeler]

Before Duncan addresses the last part of your question, I just want to explain a little bit about what private radio does in terms of funding that element of the system. Sixty per cent of our annual contributions must be directed to FACTOR, but the remaining portion, the 40%, is discretionary, and that money is used for a number of initiatives similar to that, primarily MusiCounts, which funds musical instruments in schools. Radio broadcasters are huge supporters of that, as well as local community initiatives that really are able to be targeted in those communities that the radio broadcasters serve.

In our view, that element of the system is well covered through that funding and that FACTOR, as the professional administrator of music programming for professional musicians, is well suited to cover that side of the business.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Thank you.

[Duncan McKie]

[Inaudible—Editor] that comes from a sound recording, it's almost all of it, so that answers that question. If it comes out of collective initiatives, it's almost all of it.

I heard that testimony, 19,000 musicians in Canada who are underserved. If you take $4.5 million and you spread it among 19,000 people, you get about $250 apiece, so it isn't a critical amount of money.

What we do is we try to find people who are ready for the system who could use an amount of money which is reasonable to get them started in a professional environment. If people want to start a second system to help those beyond what radio does to help musicians at the earliest stages of their careers once they exit school or even younger, I think that's great.

When you start decimating funds, you start removing the opportunity from other people in the system. It's not a straight win. That's a zero sum game. You're taking money away from people who are deserving, have made a strong impression, and are developed and ready to go. I don't think it makes sense, frankly, from a funding perspective.

[The Chair, Conservative, Gord Brown]

Thank you very much, Mr. Stewart, and thank you to our panel. That's going to have to be the last word.

I'd like to thank all of you for coming today. We are just about to wrap up hearing from witnesses on this study, so if you have any other contributions, please get those to us in writing, hopefully by the end of the week.

We will briefly suspend. Thank you.

[The Chair, Conservative, Gord Brown]

Good afternoon, everyone.

We're going to call this 23rd meeting of the Standing Committee on Canadian Heritage to order. We're conducting our review of the Canadian music industry.

This afternoon, we have Graham Henderson with us. He is the president of Music Canada.

From the Radio Starmaker Fund, we have the chair, Sylvie Courtemanche, and the executive director, Chip Sutherland.

We also have Alan Doyle from Great Big Sea, a band that I've had the pleasure of seeing many times.

From Canadian Music Week, we have Neill Dixon.

We're going to start with Mr. Henderson from Music Canada. You have the floor for eight minutes.

[Graham Henderson, President, Music Canada]

Mr. Chair and members of the committee, thanks for the opportunity to speak today.

In my remarks I hope to provide a summary of some of the themes that have come through over the past months. Many ideas that have been presented to you resemble some of those that were put forward in our report, “The Next Big Bang”, which I have as a prop here, and which, in fact, previous witnesses cited it several times.

It was developed with a somewhat similar purpose in mind to your own study, and that is to identify a framework for a new industrial strategy for music. In doing so, we had to consider the context of the digital environment, trends in consumption, music discovery, and the growing importance of live performance to an artist's income. The report was generated by capturing many different voices through interviews as well as the contributions of complete chapters by experts. As such, it represents the collective thoughts of a broader community.

We focused on five key strategies: music education, digital innovation, music tourism, export expansion, and tax credits. Now, no report of any value rests idle, and since publishing in 2013 we have evolved further our thinking to include music celebration and music's role in city and community building.

Let's talk first about music education. Many witnesses have spoken passionately about the importance of music education. It develops skills such as critical thinking, spatial reasoning, cognitive development, collaboration, creativity. A study by the Information and Communications Technology Council confirms that ICT workers trained in music are better equipped to succeed in their fields.

Multiple witnesses have also expressed the belief that music education instills respect in the creative process. A national survey of schools in 2010 revealed a myriad of deficiencies, including lack of qualified teachers, insufficient class time, and under-resourced programs. Meanwhile, threatened cuts to music education has drawn intense criticism and media scrutiny in Toronto and Vancouver. Calls for a national music education strategy have been supported by witnesses as diverse as the Polaris Music Prize, Live Nation, and SiriusXM.

It was Mike Tanner of North by Northeast who suggested that the federal government has a role in “creating a cultural shift and a national identity built around music and music education.” We agree. The federal government has great authority and influence, and we would encourage you to work with music leaders to formulate a plan for leadership concerning music education.

On digital innovation, the promise of, and ability to adapt to, the digital environment have been consistent themes. The utopian promise of the Internet, however, has yet to be fully realized in Canada despite the rosy picture that has been painted by some. While the Canadian music industry in 2013 for the first time saw revenues from the digital market overtake those from the physical market, the fact remains that our digital sales are nowhere near replacing what we have lost in physical sales. Our digital market remains relatively undeveloped. Digital music sales in Canada remain nearly one and a half times lower than per capita sales in the United States. While we have recently welcomed great new digital services to Canada, we lag behind other leading music markets in launching these services. Rather than innovators, we are followers.

We are beginning to see a migration to new and exciting digital music services which offer consumers the ability to access music wherever they are and whenever they want, with new revenue models such as subscription services. Unfortunately, millions of listens on these services do not translate to a living wage for artists and those in the music industry. There has been an enormous shift in wealth away from creators into technologically driven intermediaries who are amassing fortunes on a scale that at times beggars the imagination. Intermediaries often blame the victims with tawdry accusations that creators are simply not adapting, as if we live in some kind of antediluvian adapt-or-die world. As artist-activist David Lowery said, the old boss is being replaced by a new boss. Power and wealth are now concentrated in intermediaries, technology firms that control access to the distribution system. And the artists? Lowery says that 99% are barely surviving while the top 1% prosper.

CIMA released a study that said artists earn about $10,000 a year from music and spend 29 hours a week on it. That doesn't sound like a full-time professional job to me. It's hardly a rosy landscape.

Canadian-born filmmaker, Astra Taylor, who has just published a book called The People's Platform, which you as policy-makers I would suggest absolutely must read, says that the difference between the old and new bosses is that the new bosses don't invest in artist development, and they don't pay advances. Read her book. She's critical of us, and she's critical of others, but she brings a new perspective and a balanced perspective to the debate.

The question here becomes what are we going to do about it, and what is our collective responsibility?

One way forward is to make it easier for digital services to launch and operate in Canada. Numerous witnesses have pointed to the slow nature of decisions made by the Copyright Board, through no fault of its own, and uncertainty in the legal landscape as deterrents to progress. Given the proper tools, personnel, and financing, the Copyright Board could become something more analogous to a business development office.

Parliament should also consider unleashing rights holders and digital services to do deals directly at fair market value rather than having to wait years for the Copyright Board and the courts, to whom board decisions are frequently appealed, to determine what they think the fair market value should have been. This will enable services to launch now with the certainty they require, and it will allow rights to be properly valued in Canada to ensure that being a Canadian musical artist can provide a sustainable livelihood rather than at best being a hobby.

Finally, we have the issue of piracy. Ad-supported piracy continues to plague creators. The digital landscape is littered with illegal services that do not pay artists or copyright owners. Many of them appear to consumers to be legitimate, and they are aided by the likes of intermediaries and other search engines, the search results for which, despite their claims, continue to promote illegal links. There is an opportunity here for international cooperation.

On the subject of music tourism, you have heard compelling testimony from both music presenters and tourism professionals about the power and the potential of music tourism for our country. David Goldstein of the Tourism Industry Association of Canada testified that as an international destination, we're slipping from eighth in the world to eighteenth.

He further spoke about music as a travel motivator as “one of the most compelling tourism products that spark economic growth in all regions of the country.” The Canadian Tourism Commission specifically identified music festivals and events as key motivators for young travellers. These activities would go directly to support artists and musicians in the way they are now earning more of their income, through live music.

Ottawa Bluesfest recommended commissioning a national economic impact study on live music. We fully support this idea and are currently in the process of developing such a study for the province of Ontario, and would, with the support of Canadian Heritage, happily extend it across the country.

On export expansion, export is clearly a critical piece in the development of an artist's career. “The Next Big Bang” relied heavily on input from CIMA and FACTOR. The growth of international markets for music brings forth many benefits for individual artists and music companies. In addition there is a reputational gain for Canada, as Duncan alluded to, as our musicians and artists become de facto ambassadors portraying Canada as culturally diverse and creative. As such they are an essential part of brand Canada. “The Next Big Bang” recommends a more cohesive national approach to export, with resources earmarked for a national export office.

The final area is interconnected tax credits. You have heard several witnesses suggest an update to the tax credit regime. We often point to the success of Canada's film and television production system, which has in large part occurred because of a system of stable, robust tax credits offered to domestic and foreign companies.

Tax credits are used to support industries that make significant investments in R and D. That is us. In music, artist development is our R and D, and for all the reasons previously expressed in these hearings, capturing a return on that investment is harder than ever.

I would urge you to examine the existing tax credit framework and to update it according to the testimony that came before me, which has included discussion on production, touring, awards programs, and digital development.

Thank you.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We'll now move to the Radio Starmaker Fund, for eight minutes.

[Sylvie Courtemanche, Chair of the Board, Radio Starmaker Fund]

Thank you, Mr. Chair, for inviting us to appear today. My name is Sylvie Courtemanche. In my day job, I am the vice-president and associate general counsel for government relations and compliance for Corus Entertainment, but I am also very proud to serve as the chair of the Radio Starmaker board.

I would like to introduce my two distinguished guests, who will be doing the talking today.

First is Chip Sutherland, who is our executive director. Perhaps more importantly, Chip is an entertainment lawyer from Halifax who has practised for over 20 years representing artists in the music business as well as managing such Canadian successes as Sloan and Feist. He is also the co-author of the Canadian edition of the bestselling book All You Need to Know About the Music Business by Donald Passman.

Also with me today is a man who really needs no introduction, Alan Doyle, the lead singer of Great Big Sea, an accomplished museum—

[Voices]

Oh, oh!

[Sylvie Courtemanche]

Sorry; I mean musician.

Well, it is Canadian Heritage so....

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

On a point of order, Chair, we're not funding any more museums, just so you're clear.

[Voices]

Oh, oh!

[Alan Doyle, Member of the Board, Radio Starmaker Fund]

My birthday's this weekend, too. That's a bad sign; that's a bad sign.

[Voices]

Oh, oh!

[The Chair, Conservative, Gord Brown]

I won't take this out of your time.

[Sylvie Courtemanche]

Thank you, Mr. Chair. I appreciate that.

Mr. Doyle is a songwriter and actor and is our artist representative on the Starmaker board.

Without further delay, over to you, Chip.

[Chip Sutherland, Executive Director, Radio Starmaker Fund]

Thank you, Sylvie.

The Radio Starmaker Fund is the English side of the Fonds RadioStar. We started handing out money in 2001.

To some extent we have the easy job, because we are focused on the commercial sector of the business. I was tasked with building the fund in 2001. The broadcasters came to me because I was an entertainment lawyer who represented artists exclusively. I had the easy task of looking at the landscape and saying, “What's the need? What do they need?”

I knew intimately the challenges faced by artists, as Graham has alluded to. There is the myth of the successful artist living the good life. You have a gold record. You win a Juno. You go down to the Bahamas and drink rum punch, and everything's great. That of course is not the reality. It's an ongoing struggle. Alan can explain that to you directly.

We focused early on, as Graham pointed out, to particular points that they're looking at now, which is the touring being so important and international being so important. We started that in 2003. That's because I had worked with bands for years, knowing exactly how expensive it is to get out there in the world. To give the CRTC credit, at the beginning the funding had been targeted for Canada, and they allowed us to move it internationally.

We have five programs right now.

We have domestic marketing and domestic touring. That's roughly half of our money. We give out $7.5 million a year. As Duncan explained, we are on the same curve that FACTOR is on, because we share a stream of that same money. We similarly have planned our money in three-year and seven-year cycles. We have a seven-year capital model. We're always pushing our money and keeping it level for seven years so that the industry can rely on a steady source and amount of funding.

We have domestic marketing, domestic touring, international touring, international marketing, and then we do some domestic industry-building things. For instance, we run an event at the Toronto International Film Festival called Festival Music House, where we showcase Canadian artists.

The touring component in particular is almost $5 million of the $7.5 million.

Our board is made up of 10 industry experts. We have the highest level of expertise on our board. We have someone like Alan; we have the president of Universal, Randy Lennox; the president of Warner Music at one point, Steve Kane; and we have high-level program directors and the broadcasters. We also have very key independent label people on our board, such as Ric Arboit, the head of Nettwerk records. We have very good people to make some of these decisions.

Touring is important for artists, because that money goes directly to artists and it develops a business that is the artist's equity. The labels do not have any involvement in the economic side of touring. That is an artist's business. We're writing cheques directly to the artists for them to go and build a business. They might sell three records and do okay, but then they tour for 15 years.

Take the band Sloan, who I work with. They had all their big records out in the late 1990s. They're still going and touring now, playing the songs that.... As k.d. lang famously told them, you make three records and then spend the rest of your life singing the songs on those three records. That is the reality for a lot of bands, and that's how they live—

[Alan Doyle]

Hopefully; hopefully.

[Voices]

Oh, oh!

[Chip Sutherland]

Sorry, Alan, except for your very successful solo career, which then involves more....

How do we stay relevant going forward? As I said, we're focused on marketing and touring. We don't make records. You need to have sales to get into the Starmaker Fund, so we assume you have your records and videos taken care of. We're trying to add that extra element to give them the boost to help them sustain themselves and become internationally relevant.

We try to maintain a steady input of new artists at 20%. Our average is around 21% new artists. We're not just giving the money out to the same bands. There are new people every year, which I always find encouraging; there are always new people breaking that ground. We manage our funding thresholds and success to make sure the sales level to get into the fund is relevant. We have a 91% approval rating of applications. If you can get to that threshold where you're in the fund, you have a 90% chance of being approved when you come to us for money, because we're very careful of how we manage all of the parameters.

We continue to focus on international programs. Two years ago we expanded all of our available digital initiatives to allow bands more flexibility for the kinds of things they wanted to innovate digitally. They can get funding for that. We've maintained an artist-centred approach, which means we don't judge people based on where they have their business set up. If they do it themselves, we fund them. If they're signed to Universal, we fund them. If they're signed to Nettwerk records, an independent, we fund them. We're more interested in the artist, and in that way we help the industry on the side.

Alan.

[Alan Doyle]

Thank you.

Let me quickly say it's a pleasure to be here. This is not my normal gig. It's a tough-looking room; I'm not going to lie to you. I'd also like to acknowledge the good work of the interpreters and translators behind the glass. I'm going to try to keep my Newfoundland accent down as much as I possibly can.

As an artist, it's good to be here as well, because it gives me a chance in front of the committee to say thank you to all the other groups that have spoken here today, including FACTOR, Graham, Neill, and all the guys, because in different ways, I personally, or friends or colleagues of mine, have benefited from all these institutions over the years.

In the little time we have in this section, I would simply like to explain why I was drawn to the Starmaker Fund. It's very simply because it kicks in on a part of a musician's or an act's career that is the most risky, the most costly, and the most in need of support. You can spend five years or a decade or so building yourself up to get to be perhaps nationally recognizable, and you want to take the next step, the next big thing that comes along, and that step is a massive one. To go from playing the local club to playing the bigger theatre, your expense triples. If you want to go from the theatre to becoming a hockey-rink band, your expense and risk quadruple. If you want to go into the United States, Australia, Germany, or wherever to take that step that will get you to becoming an A-list international artist, that's the biggest risk, the biggest expense, that you will ever have in your career. I've felt it on both sides.

I remember when Great Big Sea got signed to Sire Records in the States in the late nineties. We wanted to go, and we said, “Great, we got signed to a label in the States. Wow. We made it. Let's try to get a song on U.S. radio.” They said, “Well, okay. Here's how much a radio tracker costs for a week and a half.” I don't remember what it was, but it was somewhere around $125,000 for a campaign to try to get a song on the radio—and this is after you've made it, when stuff gets easy.

It's right at a point when you can start employing people long term. If you can get to that next step, then all of a sudden the guys who work every other week for you become constantly employed. One of the proudest things I had at Great Big Sea was looking down the bus and seeing 14 or 15 mortgages that were getting paid by our gig. It was such an awesome thing.

The Starmaker Fund kicks in right when you need it the most.

As I said, I'm grateful to all the people and the groups that have been represented here today. That's why I'm here, and that's why I'm grateful to get a chance to answer your questions, if you have any, about my experiences with it.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We'll now move to Neill Dixon from Canadian Music Week. You have the floor for eight minutes.