Bill C-32 (40th Parliament, 3rd Session) Committee on Feb. 3rd, 2011

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Can a comparison be drawn between radio, which enables us to listen to music free of charge without paying royalties, even when we buy a radio, and music streaming on a computer?

[Anthony Hémond]

There are a lot of similarities between radio and music streaming. The difference is that, in the latter case, users have some control because they can choose certain pieces they want to listen to. Users seek out this interactivity.

To a certain degree, a comparison can be drawn with radio. Levies were imposed on the sale of blank cassettes in the past because those cassettes were used to record what people heard on the radio or vinyl disks. While preparing the brief that we wrote on the bill, I had occasion to read the documents prepared by subcommittees in the 1980s. That was 30 years ago, and what was already being proposed at the time in the case of private audio-visual recording was royalty systems. That was the solution that seemed most appropriate. However, 30 years later, we want to question everything. And yet that was really a win-win system for users and creators.

[The Chair, Conservative, Gord Brown]

Merci.

We'll move on to Mr. Angus for seven minutes, please.

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

Thank you very much.

Once again, it is a fascinating discussion.

Mr. Oakey, you were correct on one element on the levy: the United States doesn't use a levy. You're absolutely correct. They sue people. A hundred thousand people last year alone were sued in the United States. They don't actually get to court. They just get a thing in the mail that says, “Give us five thousand bucks, or we'll sue you for a million bucks.” That's not exactly consumer friendly.

You didn't mention that many European countries use a levy, because a levy has been found to be a balancing act. It goes back to the days of the cassettes, when they started to notice that music revenue was starting to drop off because people were making numerous copies.

As a musician, I never had a problem with making copies. Nobody makes more copies than musicians, because we love music. It's not about dinging people and shutting them down. It's finding some balance.

You threw out the $75 fee that my colleagues over there just love to run with. Yet I look at the Copyright Board's decision, and it seems completely at odds with the position you're taking. When it was applied to cassettes, it wasn't market distorting. When it was applied to CDs, it wasn't market distorting. Sure, we heard people complain. I used to hear people say, “I've never made a copy. I'd never make a copy. Why should I pay the levy?” I never met so many digital virgins in my life. The fact is that people are making massive numbers of copies.

When it came before the Copyright Board, sure, the rights holders were going to start up as high as they wanted, but the Copyright Board adjudicates. It makes them go through it. It tests them. You could start with seventy-five bucks, and they could bring it down to five bucks, because one of their decisions is going to be that it has to be based on the intent. For example, James Moore asked if the iPod levy would be applied to cars now. Well, it wouldn't be applied to cars, because you don't buy a car to record a song. If you do, you have lots of extra dough that you probably shouldn't have anyway. It applies to music players. Now, there are many other forms out there right now—people have phones and everything else—but the Copyright Board was very specific: it had to be marketed as a music player. That's it. It was very limited in what it was.

The Copyright Board also made it clear that it is not going to be market distorting.

The other element is if say, for example, iPods drop from $300 to $59, and we have a $10 iPod fee on them, it's within the minister's power to change it to a percentage or to change it to whatever dollar figure he wants so that we ensure that it's not market distorting.

You come here and say that this is going to be $75, and it's going to drive people to the United States. Did you ever see people driving down to the United States to buy cassettes?

[Terrance Oakey]

No, I didn't say it was $75. I said that SOCAN asked for it to be $75.

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

But you seemed to leave the impression here that you thought that was bad and that it would be market-distorting—

[Terrance Oakey]

Absolutely.

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

—whereas, when the Copyright Board adjudicates, they're not going to take SOCAN's word. They're going to ask what a fair market price is. That's how the Copyright Board works.

[Terrance Oakey]

We think that a levy on iPods or similar devices would be market-distorting, because it isn't in the United States. Canadians can easily go to an online retailer based in the U.S. and buy their iPod there. I would argue that artists would likely receive less money because in the end more people are going to buy their products in the U.S.

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

But the levy wasn't market-distorting on cassettes; it wasn't market-distorting on CDs.

[Terrance Oakey]

Well, on a blank CD, what was it? Was it 25¢, or 29¢? And in the U.S., a blank CD retails for about 15¢.

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

So do you think people went to Buffalo to buy CDs?

[Terrance Oakey]

I'm saying that's obviously market distortion.

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

I think you're incorrect there, and I think the issue of finding a way to do some form of digital remuneration has to be addressed—

[Terrance Oakey]

We agree.

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

—or we have to go to the issue of suing people, because there's no in between. Or we go to digital locks. The Conservative position is that we're going to take out the remuneration, but we're going to put locks on so that you can lock down your content. I think that's going to lead people to piracy.

When I drive down the highway and I get a cup of coffee and that cup of coffee stinks, I don't take it up with the rights holder, the coffee maker, like our previous witness. I leave and go to another coffee shop. I talk to young people, and when they find a product.... For example, my daughter tells me that the last CD she ever bought had a digital lock, and she couldn't back it up. She said, “Twenty-five bucks, Dad?” That's the last CD she ever bought. She went out and downloaded the entire album and felt it was her due. I've talked to many young people, and if it's not easily accessible, they will get it.

The issue is, we move to digital locks because it's the only solution, if we don't have remuneration. How do we find the balance for access and remuneration? People have to be paid. Otherwise you're going to put a lock on it to keep people from stealing it.

[Howard Knopf]

Or maybe we wait for the industry to develop a new business model, after all these years.

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

But Mr. Knopf, we've been waiting for it for 15 years. Unless you have a monetizing stream, there is no business model.

[Howard Knopf]

In Canada the industry has come to rely on this revenue stream. By their own figures from the CPCC, it generated about $160 million over ten years, distributed to 97,000 copyright owners, many of them large publishers.

What that means is that the average musician who received a cheque—and that leaves out most of the emerging artists—got something considerably less than $160 per year, which isn't very much money. I used to be a musician too. We both know that musicians like to drink beer, and $160 doesn't go very far these days.

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

I know, but copyright.... It sucks being a musician; nobody's arguing that. Nobody's arguing that they only get $160, but it's their right. I hate to be the socialist here saying that I don't have a problem with Bono getting millions, but copyright is based on the idea that if you sell a lot of songs, you make a lot of money. And if you're a working musician and you only get $160 every quarter—sometimes it's that and sometimes it's $5,000—you still have a right to get it.

I don't see how the new business model is going to appear, if we say go out and find a new business model, if there's no way to be remunerated. Either we do a levy on the product or we're going to do a levy somehow online, in the way that they monetized radio in the 1930s, but you're going to have to come up with a revenue stream. Otherwise, selling T-shirts ain't gonna cut it.

[Howard Knopf]

Mr. Angus, in the U.K., Australia, and the United States there's no levy. Yes, there are lots of lawsuits. Those mass lawsuits are being thrown out by the courts right, left, and centre. There will be a way—

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

They just went after Jammie Thomas again for $1.5 million. She's been in court three or four times. The vast majority don't get to court because they're afraid to. They're going to pay the $5,000 fee to RIAA, rather than—

[Howard Knopf]

Nobody's encouraging that, but if we put in the levy that the music industry wants, the inevitable consequence is that you legalize all kinds of downloading, which many in the industry consider to be piracy. That's why the industry itself is so badly split on it. The recording industry hates the idea.

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

The four big labels that represent the U.S. labels are against it. Pretty much every other independent music company and organization in the country supports it, because they recognize that it's a revenue stream. So we're not legalizing piracy; we're saying copies are being made, and nobody's getting paid. We can shut down isoHunt, but people still aren't getting paid.

That's the question. We have to find a model, somewhere along the line, to say that for all the monetizing out there, all the access, someone's going to be paid at the end of the day. I don't see that coming from the suggestion that consumers are going to go to Buffalo to buy an iPod more cheaply. It's not a reality.

[The Chair, Conservative, Gord Brown]

Thank you, Mr. Angus.

We will move on to Mr. Lake for seven minutes.