Thank you.
Re:Sound is the not-for-profit collective 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 and record companies. The money we collect is split 50-50 between the performers and the labels.
We appreciate that many of you have had your fill of copyright discussions, so I can assure you we would not waste the committee's time if our proposals did not align with the economic and job creation goals behind Bill C-11 and if they were not properly in order.
Re:Sound has tabled three straightforward proposed changes to Bill C-11.
One of these is highly technical, so in the interest of time I invite members to consult the background document and proposed amendment language we've given to the clerk. On this amendment I'd only state that it is a very simple language omission in the Copyright Act related to ministerial statements on reciprocity.
The other two amendments I believe warrant some more discussion at committee as they mean more money for more people. The first amendment would bring needed clarity and would allow Re:Sound to get millions of dollars out of a trust account and into the hands of musicians and businesses.
The second amendment addresses the serious market distortion in the current Copyright Act that dates back to the 1990s. Fixing this would inject millions of dollars a year into Canada's creative sector at no cost to taxpayers or consumers.
The first amendment is what we call the orphan amendment. What are orphans in the copyright context? They're eligible rights-holders, musicians, or labels who have not yet signed up with us at a particular point in time. They may not have signed up because they don't know about their rights or they may not have made a recording or existed as a band at the time a particular tariff was set.
The concept of orphans is not unique to us. They also exist in the context of reproduction rights, retransmission rights, private copying, and others. The difference is that in all of those other cases there are clear and expressed provisions in the Copyright Act that set out clear rules and obligations with respect to orphans. We are alone in not having these kinds of rules and this kind of clarity and can only think this was an oversight at the time of drafting.
Without any rules in the Copyright Act to clear up what obligations we have to these orphans, we may need to hold some funds indefinitely. To correct this problem, we simply seek an amendment—it's two lines long—that would give us the same clarity regarding obligations to orphans that all these other collectives have.
In short, this amendment would provide clarity on the entitlement of orphans to be paid, empower the Copyright Board of Canada to establish clear rules around limitation periods, and, crucially, it would allow Re:Sound to pay out millions of dollars in royalties that we've been forced to hold indefinitely due to the lack of clear rules under the Copyright Act.
Our job at Re:Sound is to collect and distribute money, not to collect and hold money in a trust fund. We're a flow-through organization and we need clear, transparent rules in order to do our job. If you can make this technical change to the act, we'll get money—that's money that's already been collected—out the door and into the hands of the rights-holders.
The other amendment I will talk about today is the elimination of the $1.25 million exemption for commercial radio in section 68 of the Copyright Act. The last time the Copyright Act was reviewed in the mid-1990s, Canada was in the middle of a deep recession and the future of commercial radio was uncertain. In 1995, for example, the entire Canadian radio industry—that's the entire industry—posted a total profit of only $3.6 million. So the government of the day enacted a “Special and transitional royalty rates” section of the act. Under this section, performance royalties to musicians and labels were phased in over time and each commercial radio station was only required to pay $100 on their first $1.25 million in advertisement revenues. This was and remains the only such subsidy in the Copyright Act and the only subsidy of its kind in the world.
Fast forward to the last few years and radio has been thriving and posting record profits in every market, in every language, and in every region of the country. In fact, between 2006 and 2010, the Canadian radio market experienced the second-largest absolute increase in revenue in the world behind only China. It grew by $330 million. This growth story is great news, and I want to be clear that we want to see the continued success for commercial radio in Canada.
However, because the Copyright Act has not been reviewed since 1997, neither has the $1.25 million subsidy been reviewed to reflect the huge and growing profits of the Canadian radio industry. All the while, musicians and labels, including hundreds of Canadian independent labels and musicians, are not receiving fair market compensation for the content they provide. This subsidy reduces the royalties earned by musicians and labels by about one-third, or $8 million a year. The bulk of this subsidy goes to a handful of large radio groups—not small radio groups but the large radio groups. This is a serious market distortion that benefits a very profitable industry at the expense of those who create the content that drives that industry.
Once again, I would state that we love radio and we recognize the tremendous work that many stations do in their communities, but please remember, commercial radio is a for-profit venture. That's why it's called commercial radio, and the business model is simple. Stations play music because music draws listeners. Listeners attract advertisers. In fact, 13% of all advertising dollars spent in Canada are spent on commercial radio. That's the highest proportion in the world.
Simply put, music drives commercial radio. It helps with the station branding and it helps target and retain certain demographics. Our proposed amendment allows the musicians and businesses who invest in and create the products that radio puts on the air to get properly compensated.
Remember, this is a legislated subsidy, so radio stations do not have any option but to be subsidized. To their credit, broadcasters acknowledge the importance of paying for music. In fact, the chair of the Canadian Association of Broadcasters stated to the precursor of this very committee that, and I quote, “We want to emphasize that broadcasters are not opposed to paying for the communication right.” That is, they are not opposed to the paying of royalties to musicians and labels that Re:Sound collects.
As far back as 2005, the Copyright Board weighed in on this subsidy and stated, and again I'm quoting here:
Even the smallest of stations would be able to pay the tariff. Allowing large, profitable broadcasters to escape payment of the full Re:Sound tariff on any part of their revenues constitutes at best a thinly veiled subsidy and is seemingly based on no financial or economic rationale.
So radio acknowledges that they think it's important to pay for the communication right, and even the Copyright Board, the expert regulatory body that is tasked with reviewing all economic data before it sets fair rates, has stated that every station can afford to pay the full royalty rate.
This amendment would have no impact on any other part of the Copyright Act and would ensure that $8 million a year is injected into the Canadian creative sector at absolutely no cost to taxpayers or consumers.
Re:Sound is very supportive of the goals behind Bill C-11, particularly to generate economic activity and jobs in the creative sectors. We believe the two amendments we have detailed today align very closely with those goals, and we would be happy to take any questions.
Thank you.