Bill C-11 Committee on March 1st, 2012

[The Chair, NDP, Glenn Thibeault]

Mr. Chenart, your 10 minutes have expired.

[Mario Chenart]

Thank you.

[The Chair, NDP, Glenn Thibeault]

Thank you.

Now Mr. Glick has ten minutes.

[Jacob Glick, Canada Policy Counsel, Google Inc.]

Thank you, Mr. Chair.

My name is Jacob Glick. I am Google's Canada policy counsel.

It's my pleasure to talk to you today about copyright law, not only because I'm a copyright law nerd, but also because copyright law has become an increasingly important public policy issue for everyday Canadians.

My plan, in the 9.721 minutes I have remaining, is to touch on Google's commitment to Canada and discuss how the framework established in Bill C-11 is critical to jobs, growth, culture, and productivity.

Let me begin by discussing Google in Canada. We have offices in Kitchener--Waterloo, Toronto, Montreal, and Ottawa. In addition to adding people and space in Kitchener--Waterloo, Google is poised to reopen our expanded Montreal office. If I have time in the questions I'll tell you all about the climbing wall connecting the first and second floors in that office.

Google is consistently named one of the best places to work in Canada. Google Canada increased its employment by over 50% last year, and expects continued hiring growth in 2012. Through the “Get Your Business Online” program, Google is helping over 60,000 Canadian businesses get online for free. Our engineers in Montreal and Kitchener--Waterloo are developing products used by hundreds of millions of people all around the world. These engineering offices are expanding and will continue to generate highly skilled, knowledge-based jobs right here in Canada.

I am pleased to say that Google supports Bill C-11. It's not perfect, but perfection is rarely possible on complex public policy issues with a wide variety of divergent stakeholders. Of course, like many stakeholders we suggest some technical amendments to ensure that the stated purposes of the bill are reflected in the language. These suggestions, which have been provided to the clerk of the committee, are submitted on behalf of Google and Yahoo.

In addition, we support the amendments put forward by the Business Coalition for Balanced Copyright, a coalition of Internet, telecom, mobile, and retail companies and trade associations that appeared previously before the Bill C-32 committee.

While we have taken positions on a number of aspects of the bill, I want to focus my remarks on two issues: the non-commercial, user-generated content provisions; and the appropriate role of online intermediaries.

First, on non-commercial user-generated content, the Internet and digital technology have democratized the economics of content, production, promotion, and distribution. Never before in the history of mass communication has it been so easy for an individual to create and disseminate content reaching global audiences with ease. In 2011 alone, hundreds of thousands of hours of new Canadian content was uploaded to YouTube. The vast majority of this new Canadian content was non-commercial and user-generated.

Members are likely aware of Maria Aragon, the Winnipeg pre-teen whose Lady Gaga cover got her global recognition from an audience as diverse as Lady Gaga herself and Prime Minister Harper. The provisions in Bill C-11 that protect non-commercial, user-generated content can help nurture the next generation of artists like Maria, who will help tell and shape Canada's story without risk of lawsuit. As long as they meet the reasonable conditions set out by the bill, these artists will be free to experiment, re-mix, and mash-up content.

The Internet also makes it easier than ever for creators to move from the non-commercial world to the commercial one. Canadians have proven remarkably adept at becoming commercial successes online.

One of my favourite examples is Haligonian Andrew Grantham. He produces talking animal videos on YouTube. One could make the case that Haligonian Grantham was the most-watched Canadian entertainer last year anywhere in the world. His “Ultimate Dog Tease” video was the second-most-popular video on the planet. This is Canadian content, popular on its own merit, shaping a global discourse.

Bill C-11's protections for non-commercial, user-generated content will be important to creative communities in Canada. They allow creators to continue to confidently share their creations online with the world, and help foster the next generation of commercial successes.

The second issue I want to address is the appropriate role of Internet intermediaries.

In general, we support the Internet intermediary safe harbour provisions in Bill C-11. I'd like to offer some evidence on how important clarity on these provisions can be to the growth of the online economy.

One of the critical issues the government has identified in this bill is ensuring that copyright law doesn't hinder the development of cloud computing in Canada. This is an important exercise, as the wrong legal framework could slow or handicap investment in Canadian cloud services.

A recent study by the Harvard Business School looked at the impact of a U.S. court decision on investments in cloud computing in the U.S. and the EU. The case in question was brought against Cablevision by a consortium of U.S. TV networks. The networks claimed that Cablevision's network PVR service violated copyright, and the courts disagreed.

The court decision clarified the U.S. rules around cloud computing generally. In Europe, that kind of legal clarity on cloud computing hasn't been developed yet. So the Harvard researchers compared investments in cloud computing in the U.S. with investments in Europe. After the Cablevision decision, investments in cloud computing increased by as much as $1.3 billion in the U.S., and Europe lost out.

The Harvard study shows that clarity on copyright may be the single most important factor in determining whether investment flows in the online economy to one jurisdiction or another.

Another study, by Booz & Company, on U.S. angel investors and VCs and their attitudes toward copyright, underscored this point. It found that 80% of investors are uncomfortable investing in business models that are open to unpredictable regulations. Additionally, 81% of investors also said that weakened copyright safe harbour rules would be more likely to slow their investment decisions than would a weakening economy.

To reiterate, for these investors, bad copyright law, with insufficient safe harbours for online intermediaries, is worse than a recession. The study showed that investors want to see clearly defined legislation to protect intermediaries who are acting in good faith. The study concludes that the net benefit of appropriate protections for intermediaries could more than double the pool of investors.

Both of these studies demonstrate how important it is for investment, growth, and productivity that government get the legal regime right. Largely, Bill C-11 succeeds in this task. There are a few amendments Google and Yahoo recommend to provide clarity to ensure that the companies and investors make Canada a leader in cloud computing. The clerk has been provided with these.

You have the amendments put forward by the Business Coalition for Balanced Copyright, which we also support. We would also urge you to avoid amending the enabler provision in a way that would put at risk the safe harbours in Bill C-11 and consequently chill investment in cloud computing.

Let me conclude by saying that Canadian content is succeeding online. Canadians have embraced the open Internet, and they benefit from the increased choice and competition it provides. Clearly, we are in the midst of a new era of individual creativity, facilitated by the Internet. With this legislation, the government is protecting an important creative platform, allowing for the creation of new Canadian cultural content, and helping to grow a critically important Internet economy.

Thank you for this opportunity to speak today, and for those of you playing the home game, I tweet at jacobglick.

I'm happy to answer your questions.

[The Chair, NDP, Glenn Thibeault]

Thank you, Mr. Glick and witnesses, for your presentations.

Before I get to the first round of questions, there has been a lot of talk about the costs related to the ephemeral rights. I've asked the analysts to do some research at the Copyright Board. They will find out what the rates are, and they will report back to this committee next week with those costs and rates.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

[The Chair, NDP, Glenn Thibeault]

You're welcome, Mr. Regan.

We are now moving to Mr. Braid for the opening round. You have five minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

That actually sets me up well. That segue is helpful. I think that is one of the areas I'll perhaps have some questions on, as well.

I'd like to start with the representatives from Corus. There has been a lot of discussion since the work of this committee began about this 30-day issue radio stations are confronted with. They have the choice—it almost sounds like choosing the best at an ugly contest—of paying a 30-day reproduction fee or deleting and recopying. That's essentially the choice you seem to be faced with.

Let me start with this fairly simple question. When you acquire a new piece of music and download the music file to play on the radio, do you play it for only 30 days and then chuck it, or do you play it for longer than 30 days?

[Gary Maavara]

Of course we play it for longer than 30 days.

It's important to also think of the download of that music in the same context as you might an iTunes context. When we bring the music down from the service that's provided to us by the studio—which incidentally saves them the cost of having to ship the CD to us by an over-the-ground process—there's a lot of money saved on both sides of the equation.

We get a song that comes down that's in a particular form—and the Bell representative talked about that a little bit—but we also get a range of data as to who wrote the song, who published the song, and whether the song has Canadian content or not. The process of entering that on iTunes has the stuff all load into your computer automatically, but it doesn't work like that for us.

In our case it's a little bit like what it is for those of you who maintain a contacts database, say in Outlook, where you've got to put in the name of the person, their address, phone numbers, and e-mail, and that all takes time—say five minutes. So it takes five minutes to download the song, and then it takes five minutes for you to input that data, which sounds great, but then think about it in the context of 9,000 pieces of data a month. That's where we get to that small-market broadcaster who was talking about having to hire somebody. You literally have to have somebody who has to sit there for 9,000 times five or ten minutes for every song, every month.

That's why it's not just about—as one of the parties who was here earlier talked about—transferring from one hard drive to another. The system doesn't work that way.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay.

Each file will have a different 30-day clock, I presume?

[Gary Maavara]

That's the other thing that was mentioned earlier.

We don't stop. We have two, three, four, or five songs coming in every day. Our music people for each radio station look at the big pool of music and they say “I need this one, I need that one, and I need that one”, but they also bring down a lot of music that they're not necessarily going to play, because—going to the point that Mr. Cash was talking about earlier about developing music—our development people have to listen to a ton of music every day in order to select what's going to go on air, and that is another download. So what you'd be saying to us is it's not only the songs that we use, but all the stuff that we have in the register to pick from. Or let's say a musician dies or something, and you want to pull that out of the shelf. You'd have to go get it, bring it down, and then get rid of it.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay.

With my final time I want to ask you to elaborate on what the costs are to radio, the various costs to acquire and to play music, a breakdown of what those costs are, a description of what the costs are, and how those costs have trended in the last ten years, for example. Can you speak to that?

[Sylvie Courtemanche]

The way it works now, as it was explained earlier, is the music is digitally sent to us. At that point we download it into our database.

I will just add to what Mr. Maavara told you earlier. One of the reasons we have to manually identify everything is that we have to turn around and pay all of these collectives, so we have to identify whose music it is, and they require digital logs to do that. So we're doing this not just to facilitate our broadcast, but to then be able to turn around and be accountable as to what's payable to whom. That's another important factor I wanted to talk about.

Having said that, we pay the reproduction right, which is the transfer, of $21 million. We pay the performance right, and we pay that to authors, composers, record labels, and performers, and that's a total of $64 million. Those are the costs of playing music on radio in copyright.

[The Chair, NDP, Glenn Thibeault]

Thank you, Ms. Courtemanche and Mr. Maavara.

Your five minutes is up, Mr. Braid.

Now to Mr. Angus for five minutes.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you.

It's great to have you all here.

I think the folks back home who've been watching the copyright hearings might get the impression that you all look at each other as blood enemies, when actually we're all involved in the same business, which is creating culture and moving culture. It's finding the balance: what is fair and what's not? When I read some of the testimony of the Copyright Board, you guys go at it pretty hard, and that's your job. Our job is to step back and say, “What's the balance here?”

I only have a few minutes, and my colleagues are going to follow up on the issue of the mechanicals because it's so important. But to clarify, Mr. Maavara, you'd talked about money going offshore to these publishers, these labels. The Canadian Federation of Musicians said musicians don't benefit. The accurate thing would be to say session musicians are paid a fee; they're not involved in mechanical royalties. That's an important clarification. If you pay musicians to play on your record, they get paid, but the mechanical royalties are still part of the larger puzzle. The guy who comes in and does the flute might not get a mechanical royalty, but the publisher is given a 50% share of every dollar. The royalties are split. On every dollar, 50 cents goes to the publisher, and 50 cents goes to the musician.

When I was on Stony/Warner, they took the publishing. It wasn't that they were shipping it to an offshore bank account; they needed it to keep the label going. That's who gave us our advances. That's what made it possible. If I were independent, I could divide the 50% publishing share up with my musicians. It's money that comes back into the chain of music development. So I think we need to be clear: we're not talking about you having to pay an unfair fee that's being shipped off to some Cayman Island bank account. This is money that's going right back into our music system.

Mr. Glick, I wanted to ask you a few questions.

We're seeing these new development platforms. When I was in Washington at the Future of Music Coalition, one of the guest speakers was OK Go. Now, OK Go couldn't get played on radio; nobody would touch them till they put a video on YouTube, the famous one with them on those treadmills. The next thing we knew, they were at the Grammys. So you are creating a new platform to give musicians an opportunity.

For example, someone sent me an e-mail the other day of this group Shovels & Rope. I'd never heard of them before. I get an e-mail, and I check them out on YouTube. I figure their video probably cost them about a hundred bucks, but they're fantastic. With digital quality you don't have to pay what used to be paid. When we were starting out, it cost us $10,000 to $30,000 for a video, and it might never get played. That was a huge investment for musicians. It killed us, especially if the television station decided not to play it.

So there is an opportunity through YouTube, through the new distribution methods, for new artists to get their independent stuff out there. Everybody points to Google as making all the big bucks. We're getting access to a phenomenal catalogue of material we never had before. How do you balance that off with the other argument that some of the catalogue is being illegally distributed and someone's losing royalties? What's the balance for Google?

[Jacob Glick]

At YouTube we have developed one of the most sophisticated anti-piracy systems in the world—Content-ID. It allows the largest record companies in the world and small independent artists alike to give us copies of their music, which we then scan against the corpus of data on YouTube. This way we can identify, on behalf of those artists, uploads to YouTube of their content. Then we give those artists the opportunity to monetize the uploaded content.

[Charlie Angus, NDP, Timmins—James Bay, ON]

I want to step in there, because I had uploaded a radio documentary I had done and the registry had picked some of the background music, which had been paid for. YouTube erased the content, and we had to make a filing. I think it was under Warner's catalogue. Warner said it was a fair use. It seems to me that this is a pretty sophisticated system. Yet what I thought was a fair use of my own work was stopped.

[The Chair, NDP, Glenn Thibeault]

Please be very brief, Mr. Glick.

[Charlie Angus, NDP, Timmins—James Bay, ON]

How do you balance that?

[Jacob Glick]

The short answer is that we've invested $30 million developing the system and over 50,000 hours of engineering time, and it's not a solved problem yet. It's very complicated because the manner in which rights are divided up is very complicated. The manner of deals within the industry is complicated, and it's tough to keep all of those balls in motion, but we do our best to find ways to remunerate artists, keep fans' material up as much as possible, and balance free speech. So we try to find a win-win-win.

[The Chair, NDP, Glenn Thibeault]

Thank you, Mr. Glick and Mr. Angus.

Now we'll go to Mr. McColeman.

[Phil McColeman, Conservative, Brant, ON]

Thank you, Chair.

Thank you, witnesses, for being here.

I'd like to go to the witnesses from Corus and pick up where Mr. Braid left off. You had mentioned the $64 million to creators and $21 million for the mechanical fees or royalties—whatever you want to call them. How have those trended over the last ten years? Go back ten years, if you can, and tell us the trend line on those expenses, if you will.

[Sylvie Courtemanche]

Right.

For what we call the communication rights, which is the right to broadcast the content, that has increased 63% over the last ten years. On the reproduction right or the mechanical right we're talking about, that's increased 483% over the last ten years. And just to put this in contrast, our revenues have increased 41% over that time period.

[Phil McColeman, Conservative, Brant, ON]

As a business model, you've—as most businesses do—operated on a certain margin that's dictated by marketplace factors. You've either had to lower your margin or increase your cost to the consumers or your customers.

[Gary Maavara]

Yes.

Mr. Angus used probably the perfect word for this debate, and that is balance. When we see these tariffs increasing by an amount of 483% against our revenue growth of 40%, something's got to give.

The problem we have is that this structure that we put in place over the last few years is not sustainable. We are not going to be able to provide the local content, the local colour, which makes radio valuable and which in fact makes people want to listen to the music on radio. It's just not sustainable.