Good morning, Mr. Chairman, members of the committee, and ladies and gentlemen.
I'm Michael McCarty, president of ole. We're Canada's largest music publisher. We have over $115 million invested in music copyrights. With that kind of investment on the line, we have a keen interest in Bill C-11. Our catalogue of more than 45,000 songs generates significant royalty revenue around the world, which flows back into Canada, contributing to our GDP, employment, and tax base. Ole's songs and songwriters have received numerous Canadian awards, as well as a Grammy for White Horse, one of the many Taylor Swift compositions we own.
Bill C-11 may be a well-intentioned attempt to modernize Canada's Copyright Act, but the fact is that it will be destructive to music creators and rights holders, and it does not address the biggest piracy problem of all, corporate music piracy. That said, the bill's shortcomings can be overcome with relatively simple but vital changes to the legislation. We urge the committee to return the bill to Parliament incorporating these changes.
Our position is simple. Creators must be compensated for the use of their work throughout the entire digital value chain. This is perhaps an obvious statement, but one that needs to be made in the face of the anti-copyright forces so prevalent today. Here's the reality: it's been 18 years since the Internet was switched on and 13 years since Napster arrived. This powerful combination spawned a decade-long, money-drenched frat party, enjoyed by entrepreneurs, tech start-ups, venture capitalists, telecoms, Internet search engines, and hardware manufacturers. Creators and rights owners were not invited to the party but ended up footing the bill. Their financial hangover knows no end, and Bill C-11 is not the cure.
Copyright is a good thing. Copyright transactions transform art into dollars. Copyright transactions create vibrant markets that enable creators to monetize their work, leverage its value, fuel their careers, and protect their artistic integrity. This is the very currency of the value chain that enables the artists' work to reach the public and for them to be paid appropriately for it. In the digital age, ideas may be more valuable than tangible goods, and a country that fails to protect intellectual property fails to protect its economic future. This means preserving the creators' and rights holders' ability to profit from their creations, not just their right to profit.
To transform digital art into dollars, copyright laws must apply to those companies whose products and services facilitate access to the digital art. To paraphrase the infamous rock and roll pioneer Jerry Lee Lewis, there's a whole lot of monetization going on. But like much of Mr. Lewis's activity, it happens largely outside of the law.
This copyright monetization generates billions of dollars per year to the benefit of all concerned, except for the creators and copyright owners. Bill C-11 will not change this. The bill heavily favours those who are happy to benefit from music but who think it is someone else's responsibility to pay for it—the free riders. It favours the distribution industries over the creators and allows delivery systems to be built at their expense. Vast wealth has been diverted into the pockets of industries that enable and profit unjustly from infringement. ISPs, Internet search engines, advertisers, websites, and device manufacturers are all involved in monetizing music, often without paying any of the proceeds to those who created it. While severely undermining the value of recorded music, the free riders have built very lucrative businesses for themselves. Unfortunately, for the most part the system does not pay creators because the law does not require it to. Under Bill C-11 these companies will continue to enjoy their free ride.
Under the banner of protecting innovation, the bill seeks to protect the innovation of the technology sector at the expense of those who create music. In fact, songwriters and musicians provide innovative cultural work that is just as valuable to society. Favouring one innovator over another is hardly serving the Canadian public.
The bill provides no new viable tools to help creators monetize their art and misguidedly places nearly all of its anti-piracy hopes on failed strategies such as digital locks and notice-and-notice. For music, techniques such as digital locks and suing music fans have failed to reduce piracy or build the marketplace. Notice-and-notice, heralded as targeting ISPs for the piracy activity on their networks, simply requires them to assist in redirecting blame to the consumer. This amounts to even greater protection for the ISPs as they profit from piracy. We don't need band-aids for copyright enforcement; we need a marketplace. As long as the primary enablers of piracy are shielded from liability, creators' works can be taken, sold, or consumed without their being paid.
One of the great ironies of the copyright monetization act is that not only does it not provide any modern tools for our belt, it will actually take two of them away: the broadcast mechanical and the private copying provisions. This is a backward step in our ability to turn digital art into dollars. The broadcast mechanical royalty is one of the most important ways songwriters get paid from radio stations that use their music. It licenses the digital reproduction process used by most modern stations to get music on the air. The broadcast mechanical is a clear example of the copyright system working.
The government uses legislation to create a right, which in turn creates a marketplace. This important revenue stream produces approximately $20 million a year and will disappear under Bill C-11. I hope this is an unintended consequence that will be corrected.
In the late nineties Canada created an elegant, progressive response to the nearly identical problem we face today, the widespread, unstoppable copying of music. Our private copying system was an effective tool to let music fans copy music, while ensuring that creators got paid from the sale of blank CDs. Copying music onto CDs is all but obsolete, replaced by newer digital media and services.
As a result, this private copying revenue stream, which to date has paid our artists over $180 million, is headed towards insignificance. Canada needs to catch up. There are over 40 countries around the world whose private copying system applies to most digital devices and media. Bill C-11 would permanently block our efforts to modernize our private copying system. We need to move forward, not backwards.
There are relatively simple amendments that can be made to make Bill C-11 work, and we have made detailed drafting suggestions in our written submission.
First, rein in the free riders by broadening the enabling provision. This was intended to make the enabling of online copyright infringement itself an infringement of copyright, but it is so narrowly written that it will only apply to the most egregious pirates. It should be broadened to include all of the industries that profit parasitically from piracy.
The result would be a law similar to the U.S. contributory infringement concept. Companies that contribute to copyright infringement can be as liable as those that actually commit the infringing act. It was this law that inspired the creation of the iTunes store. Apple needed a way to immunize the iPod from contributory infringement claims, so they created the iTunes store, which brought the labels onside, resulting in one of the most innovative digital services ever devised, and this delivered a new revenue stream for creators and rights holders.
An improved enabling provision would create a marketplace solution to the free-rider problem and would eliminate the need for extending the private copying levy. Companies that enable infringement would be liable for their actions. For instance, ISPs would have a simple decision to make: take the infringing material off their networks, or negotiate payment with the owners and suppliers of the content. This would jump-start a well-functioning marketplace and would enable ISPs to turn their underground piracy-facilitating business into a legitimate one.
Our second suggestion is to reverse the expropriation of current rights. If Bill C-11 goes ahead without revisions, millions of dollars of annual broadcast mechanical revenue will disappear. Because of a major loophole in the legislation, in order to avoid paying royalties broadcasters would simply have to refresh their hard drives every 30 days by copying one drive onto another. Ole supports the submission of the Canadian Music Publishers' Association and CSI on this subject.
Finally, while our position is that broadening the enabling provision would create a marketplace where an extended private copying levy would be unnecessary, in the absence of such a circumstance ole supports the specific recommendations made by the CPCC and the CMPA to extend private copying.
To conclude, if Bill C-11 is passed in its current form, the result will be to reduce the collective annual income of songwriters and artists by millions of dollars, to provide increased legal protection to the companies that facilitate and profit from piracy, and to support the philosophy of “steal the content to build a distribution business".
A fair marketplace exists when a willing seller and a willing buyer are free to negotiate the sale of goods or services. When the buyer can take the product without paying, there is a failed marketplace. For the creators of music, the failed digital marketplace has left them unable to effectively turn their digital art into dollars.
How long do our artists have to wait for the law to catch up so they can make a proper living? Bill C-11 will be the last opportunity to fix this for at least a decade. We must support all Canadian creators in every area of endeavour. We must not discourage our children's dreams of becoming artists who can also pay the rent. The time to get it right is now.