Bill C-11 Committee on March 6th, 2012

[Mario Chenart]

That is a very good question. I believe that they might act if they were made aware of the fact that someone is doing something illegal in that place and if they remain silent about it, if they do not intervene to divulge that information and stop things from happening or inform the authorities, they could be considered accomplices.

[Paul Calandra, Conservative, Oak Ridges—Markham, ON]

Okay. You also—

[The Chair, NDP, Glenn Thibeault]

Sorry, Mr. Calandra. You have four seconds left, so I don't think you'd be able to get the full question in.

[Paul Calandra, Conservative, Oak Ridges—Markham, ON]

Okay.

[The Chair, NDP, Glenn Thibeault]

I appreciate that.

Now we're moving on to Mr. Cash for five minutes.

[Andrew Cash, NDP, Davenport, ON]

Thank you, Mr. Chair.

Thanks to all of you for being here and to some of you for being here again.

I wanted to get back to this confusion on the government's side around the idea of paying twice for something. Let's say a radio station leases or rents space, an office space, to do business. They rent it. Does that mean they shouldn't be paying for the heat, the hydro, and the telephone connection? No. Of course they're going to pay for those things, too. But what the government is saying is that they should pay for those things, but they shouldn't pay for the right of reproduction. Either the government is very confused about the business that we're in here—in the music business, in radio—or they are intentionally obscuring and confusing the issue.

The issue here is that radio stations are not paying twice. They're paying for very different uses. It's similar to saying that I buy a car and therefore I shouldn't have to pay for parking because I've already bought the car. I've paid for it once already, so what the heck?

For anyone who's ever worked in the music business or in any creative industry, the argument is absurd.

Ms. Saxberg, I want you to just help the government side understand the realities of life as an artist. We're talking about fairness here, right?

We're talking about fairness. We know that the music industry has taken a hit over the years. We know that. We know that artists have struggled. We know that labels have struggled. At the same time, we also know that broadcasters have had a field day.

So where is the fairness? Can you please help these guys understand the realities of the business?

[Catharine Saxberg]

I do think my colleagues have put forward some really helpful information today in terms of the historical context and the original thinking by the Copyright Board to have discounted rates, essentially, when radio was hurting, in order to demonstrate the music industry's willingness to play ball with a very important partner. Radio is still probably one of the most important—if not the most important—individual drivers for getting people to share new music, but it's by no means the only individual driver.

I started my career in radio. When I started my career in radio, it used to be that you could play a song on a Tuesday morning on a radio station and there would be lineups at the record store, right? There was that kind of really intense cause-and-effect relationship between the music industry and the radio business. That's not the case anymore. That's not to say that radio isn't still incredibly important in the value chain for music, but there are a lot more ways in which music is being exposed, and the ways in which people consume music are very different.

So in some ways, to my colleagues' point, the amounts that radio stations were paying for rights over those years were deliberately undervalued, because in some ways there was the argument that radio stations make over and over again about the promotional value of music, which is still valid, but not nearly to the same degree that it was 10 years ago, 5 years ago, or 20 years ago. So given that the relationship has changed, given that music was undervalued, what we have now been doing is bringing the value of music up to what is actually a fairer market value.

That, I think, has been part of the struggle here in trying to understand the differences in terms of the rights that we're compensated for and how they compare over the historical record.

[Andrew Cash, NDP, Davenport, ON]

Thank you.

I wanted to ask Monsieur Chenart if he could speak a little bit about the ways in which artists, musicians, and composers eke out a living. I listen to the government side, and they talk almost dismissively about this $21 million. On top of that, we have private copying. Tell us about the realities. We're not talking about a bunch of millionaires here, are we?

[Mario Chenart]

Everything depends on the market in question. If we are talking only about the Canadian market, the figures will not be the same as on the international market. If you want to have a career in Quebec, for instance, a successful song may generate $10,000. Can you live on such an income?

And so you have to write many, you have to find someone to sing your songs, and you have to write a lot of them. Perhaps you have to do something else. Some musicians write and will have that type of income. They are musicians and will earn fees in studios. They may work on stage with an artist and earn perhaps $300 a day, on the average. As you can see, no one is being bled dry with that sort of fee. Of course...

[The Chair, NDP, Glenn Thibeault]

Thank you, Mr. Chenart.

Now to Mr. Del Mastro for five minutes.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you very much.

If I might say at the outset, I just want to thank Mr. Cash for clearing that up for us on the issue. I'd just like to expand a little bit on the clarification, if I could.

There's a very important relationship between radio broadcasters and the music industry, a critical one, I would actually argue. Their industry relies on music to gain listeners, and the music industry depends on the radio broadcasters to disseminate the content. We could argue about whether that's less important today than it was 20 years ago, or what have you, but the bottom line is that they could also make the argument that their focus and part of how they reinvented themselves was to really nail down and focus on local markets, because ultimately every radio station in this country can be replaced. There's no need to go to a radio station on the dial; there's no need for a radio station in Peterborough. If you just want to listen to music, you can buy a satellite subscription and listen to music. The value is in the other things that radio stations are doing. The local content really matters, and it's why radio is popular.

I think in the argument we're hearing here today, both sides have set aside the fact that they're in a necessary relationship. It's a marriage, and it may not be a perfect marriage—and I think that's what we're hearing today—but it's a very important marriage.

What I heard from the broadcasters, and what I continue to hear from them on this—and this, Ms. Shepherd, is what I would like to get an answer on—is they are indicating very clearly that they do pay rights for music, so they're not getting anything free. They pay performance royalties in excess of $60 million, and they also pay in excess of $30 million through a CRTC fund that nobody acknowledges at the committee, but they do pay it, and that goes into FACTOR, a very significant fund for the Canada Music Fund, and then we have the broadcast mechanical. What they're arguing on the mechanical or ephemeral rights is that they don't want to make copies; they'd like to buy the music in the format they use in the first place, but nobody will sell it to them in the format they use.

Mr. Cash used the example of a car. If Mr. Cash wants to buy a car, we don't make him buy a city bus first and then tell him that if he would now like a car we'll sell him one. He can go out a buy a car.

What the broadcasters are saying is that they would like to buy the music in the format they use it in. They don't want to make copies, they don't want to have to re-record things every 30 days, they just want to buy the music in the format they use it in, but the industry isn't providing it to them in that format. Can you tell me why that is the case?

Frankly, if that were the case, the Copyright Board would simply look at the entire issue, ephemeral and performance royalties, and suggest the value of that single payment. It would then be adjudicated as to the fact that they used to have 60 plus 21, and we now have a situation where they're buying strictly in the format they use, and the value is X. I think that's just a simpler system for everyone.

[Victoria Shepherd]

I think that's what the Copyright Board did in the activities that resulted in its 2010 hearing. What happened is, at the broadcaster's request, the Copyright Board heard all of the rights holders together in one consolidated hearing. The performance right was considered and the reproduction right was considered. At the end of the day, the effective rate was 5.7% for all uses, the reproduction activity and the performance activity. The effective rate across the board was set at 5.7%, and then, from there, each tariff is given a relative value. So that is, in fact, what the Copyright Board did.

To go back to your point about the digital delivery service, again, I can't speak about that. I can tell you that they're not being sold music because it's being delivered to them at no cost.

In terms of what kind of format they want the music in so that it's compatible with their servers, I can't speak to that because I don't know if radio stations are all using exactly the same system.

I think, on our end, there's no debate for us in terms of whether or not broadcasters are valuable partners, but you guys very clearly said that this 30-day exemption was temporary, and we just want to make sure that's what it is.

[Dean Del Mastro, Conservative, Peterborough, ON]

I think what we were getting at, and I think we were clear on this as well, is that we think there should be a single payment.

In the retail industry we do have a clarifying statement that most retailers are now forced to make, which is “included at no extra charge”, and I think that's what the service is providing to them.

I really appreciate the panel today. I think we've had some excellent testimony. Thank you very much.

[The Chair, NDP, Glenn Thibeault]

Thank you very much, Mr. Del Mastro.

Now to Monsieur Nantel. Cinq minutes, s'il vous plaît.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Thank you, Mr. Chairman.

Thank you to all of you for being here. I would like to specify that it is indeed the work of the Copyright Board to regulate all of this and that in this bill, the 30-day exemption is unfortunately a loophole that allows for a constant renewal of those 30 days. Therein lies the problem.

If we could at least limit the number of repetitions of that copy, this loophole that is cheerfully proposed to broadcasters so that they can avoid the Copyright Board would be abolished.

We have to stop going around in circles. This is an issue that falls under the purview of the Copyright Board, end of story. If we want to avoid any problem, we have only to ensure that there will be no renewal of this grace period of 30 days. It isn't complicated.

A little earlier, I heard people talking about ephemeral copies, mechanical rights, of course, but also about levies. I also heard the words ''format shifting''. In reading your document, I can see that there is a serious problem related to backup copies and personal copies in sections 29.2 and 29.4 of the act.

Don't you find it unfortunate that the words ''format shifting'' do not appear in the act? Would the use of those words not be preferable to the prevailing vagueness that allows people to make copies for themselves, for some use or other?

[Mario Chenart]

Do you mean technological processes?

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Yes.

[Mario Chenart]

We analyzed these terms in cooperation with SODRAC, and we fully subscribe to all of the amendments SODRAC proposed in this regard. This very technical work was done by SODRAC. That organization did the meticulous work involved in drafting amendments in very clear, simple, concise and surgically precise terms so as to modify the current text of the act, so that it will not have an adverse effect on our people.

[Jean-Christian Céré]

Insofar as personal copies are concerned, we say that a copy is a copy, no matter what support is used to make it. Ideally, we would extend the personal copy provisions to iPods, that are used to make more than 70% of copies. Failing that, at least let us not introduce that exception that will put a complete end to personal copies in the very near term. Year after year, this generally amounts to about 30 million a year.

In an industry where all micropayments are important, we can say that personal copies are excessively important for all of the rights holders. They are a source of income that can help artists to persevere and continue to create rather than choosing to do something else.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Earlier, I heard Ms. Saxberg say that according to the Berne Convention, a right cannot be withdrawn from someone. And so it is important to remind everyone that the personal copy regime has already been established. In fact, it is established regarding CD-Rs. Technology has evolved toward... So this is not a new right or a new royalty, but something that applies to the replacement of the CD-R technology.

Mr. Chenart, you wanted to add something?

[Mario Chenart]

I simply wanted to remind people—if there were colleagues who were present when the law that applies to personal copies was brought in—that right from the beginning, it provided that audio supports were covered. A large company challenged the text of the law and won its case. And so we lost that right, which was contained in the spirit of the act and was spelled out, because of a legal formulation. The Supreme Court entrusted the duty of correcting that to political leaders, but it was never done. We are here today, and we have the opportunity of doing that.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

That is correct.

[Mario Chenart]

It was in the act right from the beginning.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Quite so.

In fact, I would very much like to hear what you have to say about the pricing policy of the iTunes Store.

We can talk about all sorts of things here for a million years, but in reality, we all know that 90% of the music on iPods is generally downloaded illegally. Moreover, we also know that there is, strangely, a right to 10 reproductions on computers and 5 on portable readers, or the reverse, when you purchase a song from iTunes.

How do you feel about that?

[Mario Chenart]

Honestly, I am not even aware of the most recent changes in this particular case. I don't know if Jean-Christian would have an answer.

I do know that collective agreements are concluded with our associations to manage the rights of songwriters and composers in these cases. To my mind, iTunes has a licence.