Bill C-11 Committee on March 1st, 2012

[Michael McCarty]

Do you want me to answer the question?

[The Chair, NDP, Glenn Thibeault]

We're having trouble with the mikes.

The time is stopped, of course, Mr. Lake.

Okay, there you are.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Here we go.

The point is that it seems the broadcast right is value paid to musical creators but the value actually is provided by IT creators. The benefit that is derived from the technology is actually provided by IT creators, it's not provided by music creators. Why should a music creator be compensated for work done by an IT creator?

[Michael McCarty]

It's using the reproduction rights. When a record company stamps out a CD they're reproducing the music. It's technology that's stamping the CD, but they are reproducing the music. That's where the value is. There's no question that they're using the reproduction right. The Copyright Board said it has value, in fact there was a famous moment when they first set the value. Somebody from the broadcast industry was testifying about how useless it was and how meaningless and trivial it was, and somebody in the Copyright Board said if it's so trivial and useless, stop doing it. Then the response was, we couldn't run our radio station then. So that shows you the value.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

The point is this. We all agree that the creators should be compensated for the creation of their music, for their creation. But you provide that music, the music gets provided to the radio stations, it's going to get provided regardless of what technology the radio station uses, and the radio stations pay for that music, and rightfully they should.

[Michael McCarty]

They pay for one right.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

It doesn't matter, they pay for the music. If the argument is that the music is worth more, then certainly you should go before the Copyright Board and argue that the music is worth more, and that right for the music can be--

[Michael McCarty]

The use of the reproduction right of the music is worth more. If you don't want to pay the royalty for the reproduction right, don't reproduce it. That's how intellectual property works, plain and simple.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

The fact of the matter is that they're paying for music, they've always paid for music, and they will continue to pay for music. If the music industry says that our music is worth more, then that should be negotiated. But for the radio stations to invest in technology that allows them to change the way they play their music, it has nothing to do with the music provided. The IT industry should be compensated for that, and they are; they pay for the technology that allows them to play the music differently.

Likewise, as consumers we buy music. In fact, the technology allows this and results in me buying more music than I've ever bought in my life. So I pay for more music because the technology makes it easier for me to play. I get more benefit because of the technology, so I pay for technology and consequently I buy more music. Why in the world should I be paying more for the technology? Why should I pay musical creators for the work that's done by technology creators?

[Michael McCarty]

When you download a song from iTunes you're using two rights, or that system is using two rights, a reproduction right and a performing right. We get paid for both.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I'm not talking in theoretical terms here, I'm talking about reality. I pay for my music and I pay for my technology.

[Michael McCarty]

Yes.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

On top of paying for my technology, why should I pay the music creators for the development of my technology?

[Michael McCarty]

You don't. You pay for the use of the right. I don't know how else to answer it, honestly.

[The Chair, NDP, Glenn Thibeault]

Thank you, Mr. McCarty.

Mr. Lake, I did give you some extra time as well, just in case.

To the witnesses who came today, I want to thank you very much for your information and for sharing your information with us.

We will suspend for five minutes.

[The Chair, NDP, Glenn Thibeault]

Ladies and gentlemen, witnesses, and members, I'd like to welcome you to the second half of the sixth meeting of the Legislative Committee on Bill C-11.

Before I begin, we still have those technical glitches, so I'm going to remind the members and the witnesses to ensure you do not touch the microphones today to ensure that our fantastic proceeding and verifications officer can make sure the mikes are on.

If there is a point of order, of course you have the right to do that. We just ask that you take one second, take a breath, and then speak. That will give our PVO the opportunity to turn your mike on. Again, we apologize for this inconvenience. It's beyond our control, but we will do our best to make sure we can get through this today and make sure everyone has the mikes on when they speak.

With that being said, I'll turn to our witnesses and thank them for coming today. Each of you has been briefed by our clerk that you have ten minutes of opening time. I will ensure that you stick to those ten minutes. That's part of my job.

I'd like to introduce our guests. From Corus Entertainment, we have Mr. Gary Maavara.

Did I say your name correctly, sir?

[Gary Maavara, Executive Vice-President and General Counsel, Corporate, Corus Entertainment Inc.]

Maavara.

[The Chair, NDP, Glenn Thibeault]

Thank you very much. Mr. Maavara.

And we have Ms. Courtemanche.

From Coalition des ayants droit musicaux sur Internet, we have Mario Chenart and Solange Drouin. And from Google we have Mr. Glick.

Welcome, witnesses.

We'll start with Corus Entertainment for ten minutes.

[Gary Maavara]

Good morning, Mr. Chairman and members of this special legislative committee.

My name is Gary Maavara, and I'm executive vice-president and general counsel at Corus Entertainment. With me today is Sylvie Courtemanche, who is our vice-president of government relations. Sylvie is also the chair of the Canadian Association of Broadcasters.

We wish to thank the committee for this opportunity to speak to Bill C-11. We certainly recognize that the introduction of legislation to amend the Copyright Act of Canada is long overdue.

We applaud the government for its efforts on copyright reform and are generally supportive of Bill C-11, but Corus is seeking small changes to this bill to correct a historical mistake. Before we discuss this issue, we would like to establish our credentials on copyright matters.

Some of you may be surprised to learn that Corus is one of Canada's largest publishers of books for children through Kids Can Press. Corus is also one of the largest producers of television content, and our Nelvana studio makes some of the most popular children's programming. Our characters, such as Franklin the Turtle and Scaredy Squirrel, are seen by audiences and readers in more than 140 countries.

Corus also operates some of the most popular television channels in this country, including household favourites such as YTV, Treehouse, and the soon-to-be-launched ABC Spark channel. We are also partnered on television operations that serve audiences in the United States, Europe, Africa, and Asia.

[Sylvie Courtemanche, Vice-President, Government Relations, Corus Entertainment Inc.]

We also operate 37 radio stations that serve local communities from Cornwall to Vancouver. Corus Radio is all about personality and connecting with local listeners and communities. Our stations reach approximately 12 million Canadians each week.

We are part of a radio industry that employs people and is a fundamental part of the local culture of virtually every riding in Canada, including that of every member of this committee. If you think about it, there are very few industries that can say that.

Radio stations are at the core of each community, providing entertainment, news, and public affairs programming, as well as important information such as weather and highway conditions. In a multimedia world, radio remains relevant and is one of the only ways local businesses and government can get their messages out to the community on a timely basis.

In particular, Corus's radio stations support and give voice to their communities. John Derringer's 13 Days of Christmas on Q107 Toronto is an example of how we support hundreds of local, provincial, and national charities across Canada. CHED's Santas Anonymous in Edmonton leads a campaign of 3,000 volunteers to collect, wrap, and deliver toys to as many as 25,000 children each Christmas. It has been doing so since 1955. Dave FM 107.5 runs Dave Cares, a service that promotes local charity events in the Kitchener, Waterloo, and Cambridge communities of Ontario.

Local radio also promotes local musicians and artists. Corus runs initiatives such as the Canadian Artists Selected By You awards, and the Fox Vancouver Seeds independent music competition. In September 2010 Corus launched the first-ever integrated music-based social media platform to support new independent music on air and online. In Peterborough, our station The Wolf is showcasing local music acts through annual music festivals, such as Wolfstock and The Gift of Christmas.

[Gary Maavara]

In this context, Corus creates a significant amount of content and is therefore concerned with the protection of our proprietary works. We know about copyright and we are invested in ensuring the laws make sense for creators and for users. We believe it is important that the members of this committee understand a basic reality about copyright: it does not create markets for content. It is true that good copyright law can help to protect the value in content, but it does not create it. Other factors contribute to that. Some of the most important of these value creation factors are what Corus Radio does each day. When you think about the modern digital world, we are surrounded by an ocean of music that is available everywhere from your personal iPad to the local bar, restaurant, club, concert hall, supermarket, elevator, and these days even at the gas station pump.

Local radio uses a small portion of this music and mixes it with local personality and information to create listeners, advertisers, and revenue. Radio competes with every other medium for your attention, so we understand the challenges of the digital economy. It's important to understand that in the context of the massive amount of piracy that the music industry endures as a result of digital technologies, radio is an island of stability. We pay higher amounts to the music industry each year and we provide massive amounts of support for local music content development and promotion.

Our cash contribution on music development alone has increased by 487% in the last ten years, and as an industry we paid about $65 million to music collectives last year for the use of their music. Our payments in this regard have increased by 63% in just the last decade. We are not disputing these payments, and they will continue.

We create an enormous amount of value in that music for the artists who create it. We are proud of our efforts in that regard, but we are seeking small changes to Bill C-11, the most important of which is to the exception for incidental copying done to facilitate our broadcasts. The proposed exemption would require radio stations to delete their entire catalogue of music and related data every 30 days. This involves thousands of songs and related data for every station. Operationally, it just won't work. Imagine if your local riding team had to re-enter your constituent mailing list data once a month. Let's say that process took five minutes for each name and address, and you had to do a few thousand a month. You get the picture. It's a big job, and deleting and reconstituting the same information is a waste of time and money. Requiring radio to do that would fly in the face of this government's stated wish to make Canada more efficient and competitive.

To take advantage of the new Canadian digital economy, radio needs the Copyright Act to support our growth in innovation, not stand in our way. Without our proposed technical amendments, radio stations will be forced to operate as they did in 1995 to limit this unnecessary liability. This is neither progressive nor logical. Creative businesses like ours need the necessary tools to remain competitive in the new digital economy.

The main opposition to our request is the assertion that artists benefit from the money we pay for the reproduction right and that they will lose $21 million. This is a gross exaggeration and it flies in the face of the actual economics of the situation. The vast majority of the current industry payments goes to offshore recipients and almost none of it ends up with any artist, let alone a Canadian one. This was confirmed to you on Tuesday by Bill Skolnik of the Canadian Federation of Musicians, who said the mechanical royalties are for the publishers and record labels, not the artists.

At best, artists may only see a fraction of the amount. If local radio can continue to grow local value, then the artists will continue to grow their revenue, but if radio is forced to continue to pay these reproduction tariffs, our ability to create local content will be threatened and so will revenue for local artists. Getting this provision right will make a significant difference to the future of local radio. Radio is about the only place where a member of Parliament can talk to constituents about important matters. Furthermore, we employ people who live in your riding and we help local retailers and their businesses to get their messages out to the local community in ways and at times that no other media can do. Local radio fills a need that no other medium does as well as we can, and our model is not sustainable under the current tariff regime.

The truth is that the reproductions made by broadcasters to get music into our playback systems do not harm or shortchange the rights-holders in any way. Private radio broadcasters make reproductions only to facilitate the broadcasting of the music we've already paid to use. This process also reduces the music companies' costs for distributing their content to our stations. No new use is made of the music. Radio makes no additional revenues, but our use adds enormous incremental value to the music.

For all these reasons, we are asking that Bill C-11 be amended to provide for a real exception that will still help artists protect their music while helping us to create the value in that music.

We have attached to our speaking notes our proposed amendments. These changes are very technical in nature, so we won't review them here.

Mr. Chairman and members of the committee, we thank you for your attention on this matter and we welcome any questions you may have.

Thank you.

[The Chair, NDP, Glenn Thibeault]

Mr. Maavara and Ms. Courtemanche, thank you for your presentation.

I now give the floor to the Coalition des ayants droit musicaux sur Internet.

You have 10 minutes, please.

[Mario Chenart, President of the Board, Société professionnelle des auteurs et des compositeurs du Québec, Coalition des ayants droit musicaux sur Internet]

Thank you, Mr. Thibeault.

Good morning. I would like to thank you for asking the Coalition des ayants droit musicaux sur Internet to appear before you.

CAMI is an organization that brings together the five author, composer, performer, producer, publisher and musician trade associations, and the four music right collectives that are active in the music industry. CAMI therefore is the unified voice of the entire Quebec music industry, representing over 100,000 music right owners.

CAMI is represented before you today by Solange Drouin, Vice-President, Public Affairs, and Executive Director of the ADISQ, and myself, President of the Société professionnelle des auteurs et des compositeurs du Québec.

We will be splitting the presentation of CAMI's five main recommendations, which are set out in the document we are providing to you today. That document also contains the specific, concise amendments that should be made to Bill C-11 based on those recommendations.

The five recommendations are: make Internet service providers liable; consolidate the right of reproduction; modify the user-generated content exception; address the private copying regime; and define educational fair use.

[Solange Drouin, Vice-President and Executive Director, Public Affairs, Association québécoise de l'industrie du disque, du spectacle et de la vidéo, Coalition des ayants droit musicaux sur Internet]

To begin, we would like to talk about the liability of ISPs or Internet service providers.

For ISPs, the only consequence of Bill C-11, as you know, is requiring them to notify an offender when rights owners report potential infringements of their rights. That scheme thus places the responsibility of reporting and prosecuting infringers squarely on the shoulders of right owners. As was stated earlier this morning, right owners do not have the capacity or resources to police the Web.

As well, habitual offenders will not be deterred by such a system and will simply keep up their illegal activity knowing that there will be no penalty from their ISPs. The ISPs themselves will simply go on hosting and allowing the unauthorized use of their works.

However, the ISPs have access to enormous resources that could be used to combat piracy, educate consumers and compensate the music industry for losses sustained. Yet, the proposed legislation stops short of asking ISPs to take any such actions or to compensate right owners in any way. The balance between the rights of creators and the interests of users that the government is seeking in Bill C-11 has therefore not been achieved—far from it.

Why not assign the people who are controlling and monetizing the bandwidth the job of introducing practices that protect the rights of the people who produce the content that circulates on it? How could we allow ISPs devoid of any liability to highjack the commercial appeal of content for the purpose of selling more subscriptions? ISPs are part of the solution and must never be excluded from the debate.

We therefore recommend, to make the notice and notice regime more effective, that ISPs be required, at a minimum, to disclose the names and addresses of potential offenders, and that notices be published in a register and kept there for a minimum of three years. That procedure would enable us to verify the efficiency of the system and to revise it if it proved to be unable to curb piracy. CAMI also recommends that Internet service providers, which have largely benefited up until now from the circulation of content provided by right owners without any remuneration or compensation in return, be made liable.

Second, the exception for user-generated content needs to be modified. The so-called "YouTube exception" makes it possible, for instance, for individuals to disseminate family videos on a pop music soundtrack. Individuals may also post any new work derived from a work, thus causing creators almost completely to lose control. Any individual can thus cause considerable harm to the market for a work.

Currently, websites whose contents are managed by users, such as YouTube, are required by law to negotiate conditions either with copyright owners individually or with organizations that represent them collectively. If Bill C-11 were to become law, Canada would become the first country in the world where companies such as YouTube would have the right to use protected works to generate revenue without any obligation to compensate content creators.

We believe that the current scope of this exception is too wide and causes irreparable harm to right owners, who have the right to benefit from this economic model in the making. We therefore recommend that the government limit the scope of the exception to acts accomplished for personal use and to limit this practice to works that have already been published or made available to the public with the agreement of the right owner.

[Mario Chenart]

Let us talk about reproduction rights and ephemeral recording.

The government wishes to bring broadcasting rules up to date by making sure that radio broadcasters will no longer be required to compensate copyright owners for making temporary reproductions of sound recordings required for digital operations. Ephemeral reproduction enables radio stations to create their own music catalogues by optimizing the operation of program management software and facilitating the use of the music. The exercise of reproduction rights results in savings on personnel, space and productivity.

The Copyright Board examined these considerations and set a tariff establishing the value of the right. The associated royalties are paid to us by commercial radio stations and the market has not collapsed as a result. To put things in perspective, the royalty rate that radio stations pay for all reproduction rights for works represents 1.4 per cent of their $1.5 billion revenue for the use of the music that itself comprises over 75 per cent of their programming. That is a good deal. The financial burden for broadcasters that is attributable to paying for reproduction rights is therefore not heavy. Consequently, the repeal of subsection 30.9(6) is not justified. Nonetheless, our brief proposes that in the event that a 30-day exception is introduced, there should be an amendment to provide that the exception could not be applied over and over.

Let us talk about temporary reproduction for technological processes.

The government's intention is to stimulate innovation and allow some technical reproductions by making sure that some temporary reproductions are not an infringement of copyright. However, in spite of the conditions that apply, the wording of the exception is still so broad as to threaten numerous digital reproductions with already established value. What we are particularly afraid of is the possibility that many would claim that almost all of their reproduction activities represent technological processes. What would then be left of the reproduction and of the related royalties?

So, in order to dispel any uncertainties as to the scope of the definition, we believe it necessary for the duration of the technological process to be defined and we propose introducing this notion in the wording of the law. The clarifications we are recommending in the form of specific amendments would make it possible to better identify the scope of this exception in accordance with the examples provided in the technical specifications. As well, these clarifications to the bill would exempt acts of reproduction that are already protected and that provide users with actual benefits, and have significant economic value that right owners should benefit from.

Let us now talk about private copying.

Initially, the private copying levy was collected from importers and manufacturers of blank audio cassettes and CDs. Today, only blank CDs are eligible. Hardly anyone uses these supports for copying anymore; they use digital audio recording devices such as iPods. Out of the 1.3 billion songs copied each year in Canada, 70 per cent are copied onto that kind of device. As these have become the main method of copying music and the levy does not apply to them, right owners receive no compensation for copies made on such devices. Incidentally, the revenue stream provided by the current levy is eroding at an alarming rate. Between 2008 and 2011 alone, it fell by nearly 70 per cent. The levy should have been extended to the new supports in order to reflect the new ways music is being copied, which would not be accomplished by Bill C-11. By legalizing reproductions made for personal use across the board without compensation, Bill C-11 in its present form would be catastrophic for music creators. CAMI, the Coalition des ayants droit musicaux sur Internet, therefore adopts the two recommendations by the CPCC, the Canadian Private Copying Collective. First, should it prove impossible to amend the legislation in order to allow this compensation, Parliament should ensure that the provisions found in section 29.22 are eliminated, so that copies of musical works are not allowed to be made without compensation. Second, the Berne Convention three-step test should be incorporated in the Copyright Act.

Let us move on to educational fair use.

The proposed legislation, while being represented as a balanced approach to copyright, contains many exceptions in favour of educational institutions, libraries and consumers without providing for monetary compensation for right owners. I would ask you candidly what favour we would be doing for educational institutions by eroding the value of intellectual property. Is that doing them a service? While exceptions to copyright are sometimes granted, under the international treaties that Canada has adhered to, they must be confined to certain special cases that do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder.

As these exceptions represent a form of expropriation of copyright, they generally come with fair remuneration. That is the case everywhere, but not in Canada.