Thank you for the opportunity to appear before you today.
My name is Victoria Shepherd. I am here on behalf of the AVLA Audio-Video Licensing Agency, which represents over 1,000 members, including major and independent record companies and many independent artists, representing the vast majority of music played on radio stations in Canada.
I would like to express our enthusiastic support for this initiative to modernize Canada's copyright laws.
Creators and copyright owners need a clear legal framework that protects their work in today's digital marketplace. We applaud the government's effort to create new rules that will enable our members to sell and license their creative work.
I am here today to draw your attention to two issues regarding Bill C-11: first, a potential loophole in proposed amendments to the ephemeral recording exception; and second, recent requests by broadcasters for a major policy change on the ephemeral reproduction right.
In both cases, the end result would be contrary to the government's stated intention to provide a 30-day temporary exemption and could effectively annul the copying right.
Let me give you some background. For decades, radio stations played vinyl records and then CDs. Today, using digital technology, music is copied directly to hard drives. Radio stations have gained significant cost savings and higher profits thanks to the automation and operating efficiencies made possible by the right to make reproductions of sound recordings.
The point is that these rights have economic value. This is why broadcasters are required under the Copyright Act to compensate rights holders. It is also the basis for Copyright Board decisions in 2003 and then again in 2010. The board is an impartial, independent agency created by Parliament, which exhaustively considered expert testimony and the arguments of all stakeholders. It determined the fair and appropriate compensation to rights holders for the efficiencies broadcasters gain from utilizing the reproduction right.
No one during those hearings disputed that copies made by broadcasters have value.
The Copyright Board, in its 2003 decision, found that:
Copying music to a hard drive optimizes the use of these new [broadcasting] techniques, thus entitling rights holders to a fair share of the efficiencies arising from this reproduction.
The 2010 decision found that using the reproduction right “allow[s] stations to increase their efficiency and profitability”.
Commercial radio in Canada has grown steadily and significantly more profitable in the past decade, reflecting, in good part, the increasing importance of the reproduction right to broadcasters. Let's keep in mind that we're talking about the key business input used by commercial radio: music.
Music, more than anything else, is what radio business is all about. Over 80% of commercial radio programming is music. The Copyright Board has confirmed that reproduction rights are distinct from other rights associated with broadcasters' use of music, namely, the right to play the music.
These are separate rights that are separately owned by composers, performers, and record labels, and apply to separate and distinct activities. No one has been asked to pay twice, as the broadcasters argue. The foundation of copyright law is that the owner of a right be compensated by those who use the right.
Last week you heard testimony about the so-called layering of rights. The Copyright Board heard this argument and rejected it.
In its 2010 decision, the Copyright Board considered all commercial radio tariffs in a single, consolidated hearing at the broadcasters' request. They determined what broadcasters must pay for different uses of music and the rights connected to those uses. It found that the effective payment for all uses—equal to 5.7% of revenues—is fair, equitable, and well within their means. Within this total amount, the board set the rates under each tariff.
In Bill C-11, the government has proposed a 30-day exemption to the ephemeral recording exception. In short, Bill C-11 says that broadcasters should not have to pay for temporary copies of music. While the proposed 30-day exemption was unwelcome news to our members, we respect the government's right to set the policy.
Last year, at the Bill C-32 committee hearings, the broadcasters supported the 30-day exemption. The representative of the Business Coalition for Balanced Copyright, appearing on behalf of the Canadian Association of Broadcasters said, and I quote:
On the question of the ephemeral exception and the ability of radio stations to make copies, as the provisions now stand, the lifespan of those copies is 30 days. If radio stations want to make persistent copies of music to use as part of their operations, they can't now rely on the exception to do it.... This is simply short-term copying.
What we are most concerned about today is that the broadcasters appear to have much more in mind than a 30-day exemption. Last week you heard testimony that pointed to a potential loophole. Broadcasters apparently believe that Bill C-11, as drafted, allows radio stations to circumvent the proposed 30-day exemption by copying their music catalogue from one server to another every 30 days. Temporary copies will become permanent.
The original intent of the amendment is summarized on the Industry Canada website, and I quote:
With the adoption of new technologies, broadcasters today make temporary copies of the music they play on the air.... Recognizing the temporary and specific nature of these copies, the Bill removes the requirement to pay for any copies retained for less than 30 days.
Now some broadcasters are going even further. They want to change the original intent so that the legislation removes the requirement to pay for any copies at all. The government has specifically stated that only technical changes will be made at this stage. Broadcasters are asking for a full-scale policy change that is a complete departure from the government's stated intent.
Temporary does not mean permanent. This applies equally to broadcasters' latest request for a policy change and to the potential loophole in the bill as currently worded. Both could have the same result—making the temporary permanent.
All stakeholders should be concerned that, as drafted, this bill will create legal uncertainty. To avoid this outcome, and to support the government's stated policy intention of a temporary exemption, the potential loophole must be closed. To that end, we propose a straightforward technical amendment that will align the provision with the government's intent. We will submit our proposal to the clerk. We must get this right. Please ensure that 30 days means 30 days and that temporary does not mean permanent.
We think the Government of Canada got its priorities right when it said in the very first line of Bill C-11:
the Copyright Act is an important marketplace framework law and cultural policy instrument that, through clear, predictable and fair rules, supports creativity and innovation
We understand that this is a complex issue. We support the government in its effort to modernize the regulatory framework. We applaud the government's objectives to provide “clear, predictable and fair rules”. We believe our proposed amendment strengthens the legislation's ability to meet Bill C-11's stated objectives.
Thank you.