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

[The Acting Chair, Conservative, Maxime Bernier]

Thank you, Mr. Rodriguez.

Now I'll give the floor to Mr. Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chairman.

Good morning, madam, gentlemen.

Some aspects of the business of certain copyright-related industries are still a bit foreign to me. A little earlier, there was vigorous talk about the $21 million. If $64 million represents roughly 4.8%, $21 million represents more or less 1.65%. That's not necessarily a fortune, when you compare it to $1.5 billion.

One thing intrigues me. The durability of a radio station, among other things, is related to what's offered to the community served by that station. We know that the regional aspect is often important. In your industry, what percentage of the industry's overall budget can internal production represent?

[Sylvie Courtemanche]

I don't have that figure. I can commit to providing it to you, but I don't have it in mind.

[Serge Cardin, Bloc, Sherbrooke, QC]

My purpose was to make the connection between what you have to invest and pay in order to produce internally and what you use that is already produced. Ultimately, you have an inventory of a number of artists who are there, at the ready, prepared to appear day after day on your airwaves and who nevertheless represent the equivalent of a number of productions. You have hundreds and thousands of artists in reserve, in inventory: singers, performers, authors, musicians, except for dancers because you don't see them—

[Sylvie Courtemanche]

That's the value of the people who are on the air. It's not just the music that has value; the hosts also have major value. You have to take that into account. Radio programs or stations often have good ratings not because of the music, but because of the hosting. I'll give you a good example. Paul Arcand's program in Montreal has the highest rating at his station. There's no music; there's just talk. Music isn't the only thing that has value; spoken content is very important as well.

[Serge Cardin, Bloc, Sherbrooke, QC]

That depends on the station's purpose. You wouldn't necessarily be able to afford to pay a lot of Paul Arcand who speak like he does to fill your entire station.

[Sylvie Courtemanche]

In the mornings, a music station always has a well-known host because that's how they attract an audience: not just with music, but really as a result of spoken content. In Quebec City, for example, the morning programs of virtually all the stations consist of spoken content. There's virtually no music.

[Serge Cardin, Bloc, Sherbrooke, QC]

That's why I think it's important to have a clearer idea of your internal production compared to all the products of artists and creators that are used. I believe that has a price.

We're focusing on an amount of $21 million, which I think is of relative importance compared to $1.5 billion.

[Sylvie Courtemanche]

We're focusing on payment, but also on the principle. We don't agree with the principle.

[Serge Cardin, Bloc, Sherbrooke, QC]

The principle is important in both ways. There are authors, creators, who took advantage of that principle to make money, and you want to abolish it overnight.

[Sylvie Courtemanche]

The amount for production-related royalties has been set at more than $21 million since June 2010. Before that, it was $9 million. There's been a one-time increase of $12 million. That's how it works. That's one of the reasons why we find it hard to accept. It started off at zero, then increased a little, to $3 million or $4 million, and then was set at $9 million. And suddenly, in the twinkling of an eye, the amount suddenly more than doubled. That's why the industry is irritated. If it continues like that, the amount will have doubled again in three years, and it won't stop. That's the situation we're facing.

[Serge Cardin, Bloc, Sherbrooke, QC]

We're aware of advertising costs because we've had repeated elections. There were elections in 2004, 2006 and 2008, and we'll be having another one soon. The volume of radio advertising is increasing too.

[Sylvie Courtemanche]

Yes, but we went through a recession, and I can tell you the industry took a hit during that period. Local radio is the hardest hit industry during a recession.

[Brad Phillips]

The only thing that is of value to a radio station is that which attracts an audience that we can sell to advertisers. The process of transferring from one computer to another computer is of no value to us. It's just something we have to do so we can do the thing that has value.

When we do the thing that has value—play it to our audience—we pay for that, happily.

[The Acting Chair, Conservative, Maxime Bernier]

Thank you, Messrs. Cardin, Phillips, Van Loon and Keller, as well as Ms. Courtemanche.

We'll now suspend proceedings for three minutes to let the other witnesses get settled.

[The Acting Chair, Conservative, Maxime Bernier]

Good afternoon. Welcome to our guests. We'll now continue our meeting on Bill C-32.

Today we're pleased to have the radio consultant, Mr. Guy Banville, testifying as an individual, and Mr. Paul Larche, president of Larche Communication Inc. Thank you for being with us. We also have Mr. Ross Davies, vice-president for programming and operations at Haliburton Broadcasting Group Inc. Thank you for being with us.

Every participant will have five minutes to make a presentation. Then committee members will be able to ask questions.

I will give the floor to Mr. Banville for five minutes.

[Guy Banville, Radio Consultant, As an Individual]

Good afternoon. My name is Guy Banville. For 37 years, my career has focused essentially on my role as a program director at radio stations in Quebec and France. Whether in the dance music format of the 1980s, the RockDétente format that I created with an amazing team in Quebec in 1990, the national program of the 190 radio stations in the Europe2 network in France, or the Quebec radio stations of the RNC Media group in recent years, I realize that the design of all these radio offerings to date has been indissociable from the development of Quebec artists.

I know that you've heard a lot about Quebec artists, but perhaps a little less about Quebec broadcasters. So I thank you for giving us the opportunity to appear before you today to add the voice of Quebec broadcasters to the discussion.

I'm used to saying that record producers are gardeners, that artists are flowers and that radio stations are perfume makers. We like the flowers we select, and we offer them to our listeners, who sometimes, even very often, go out and buy the perfume. We pay a portion of our incomes to the gardeners.

With its contribution to the development of Canadian content and its copyright royalties, radio takes part in the artistic development of Quebec artists. Its contribution is not always quantified, such as when it broadcasts promotional interviews or sponsors shows and festivals. In Quebec, 65% of what we broadcast is francophone music, mostly Quebec music. That gives you an idea of the enormous presence of Quebec artists on our airwaves.

Today, Quebec radio is facing major challenges, and those challenges are the same for large and small radio stations alike. I'm going to name two.

First, Quebec radio must invest extensively in technological tools in order to prepare for the migration of content to the new digital platforms. It also has to deploy considerable resources and money to develop radio hosting talent because we believe the future of radio depends on the human voice. After all, that's what differentiates us from other music platforms.

However, radio personalities, that is to say radio hosts, who we think are also artists, have to develop unprecedented technological adjustment ability. In addition to communicating well on air, they must, for example, be agile in their use of social media and digital archives. In view of these challenges, we fear there will be a significant increase in our production costs. That's part of our situation. In view of the fact that the number of radio services based in Quebec is higher than the number of Quebec operators, any increase in copyright royalties would result in a net outflow of money from Quebec to international recipients. I understood what was stated earlier.

Quebec broadcasters, both big and small, support Bill C-32. We believe this bill represents a serious step toward the adoption of a sensible copyright system in the Internet and digital technology era. The current Copyright Act is obsolete and impractical in the digital economy. From the broadcasters' standpoint, it creates a climate of uncertainty at a time when we are improving our services. It also creates numerous royalty levels for what is essentially a single activity, music broadcasting.

In many industries, users of copyright-protected works are required to make copies, given the various digital technologies currently in use. Copies made by broadcasters are simply an incidental factor in the process of broadcasting music. Including an exemption for reproductions made by broadcasters acknowledges their incidental and technical nature.

The amendments being proposed by broadcasters are consistent with the general aim of Bill C-32 to limit royalties relating to a number of technical processes, such as the provision enabling consumers to record programs for later listening or viewing, which is essentially an exception to the broadcaster's right to fix its signal.

Broadcasters support an approach based on the principles for the adoption of exemptions for incidental reproductions. Broadcasters support Bill C-32. Quebec broadcasters support Bill C-32.

I'm going to ask Mr. Ross Davies to continue.

[The Acting Chair, Conservative, Maxime Bernier]

Perfect.

Mr. Davies, you have five minutes.

[Ross Davies, Vice-President, Programming and Operations, Haliburton Broadcasting Group Inc.]

Good afternoon. My name is Ross Davies. I'm the vice-president of programming and operations for Haliburton Broadcasting Group Inc., based in Toronto, Ontario.

I'd like to thank you for inviting us to speak here today.

I am a life-long broadcaster. Having followed in the footsteps of my late father, I grew up in this business. During my career I've held key programming positions in Canadian radio. Like most people in broadcasting, I started at the ground floor, working in various tasks in the programming area, which included on-air announcing, music programming, and program management.

I spent over 20 years at CHUM Limited. I was fortunate to ultimately advance to the position of vice-president of programming for CHUM Group Radio, responsible for all its radio stations across the country.

I am the former vice-president of programming for Astral Media Radio GP, and I spent two years in the satellite radio business helping to launch XM Satellite Radio in Canada, in 2005.

I've also operated my own broadcast consulting firm representing a number of clients in Canada, including Standard Radio, Maritime Broadcasting, and Haliburton Broadcasting.

I am the past president of the Ontario Association of Broadcasters. I was the inaugural chair of the Radio Starmaker Fund and the former first vice-president of the Canadian Academy of Recording Arts and Sciences, CARAS. I still remain a member of MusiCounts, the music education committee for CARAS, and I once again sit on the board of directors for the OAB.

My position with Haliburton Broadcasting has brought me full circle in the radio business. After many years in the corporate office, I have returned to true grassroots radio, spending my days hand in hand with the people in our company, making our radio stations compelling, entertaining, and relevant to each of the communities we serve in Ontario. It has been a remarkable experience for me to once again see first-hand how vital local radio is in this country.

Haliburton has 18 radio stations, located in communities throughout north, central, and southern Ontario, reaching thousands of listeners each day.

Each year, for the past five years, our company has produced a new CD featuring up-and-coming local artists from our listening area. Virtually all of these artists are without a record deal. Our Moose Trax CD features 10 to 12 local artists and their songs. Not only do we promote the availability of this CD to the public for purchase, we also feature the songs on all of our stations, providing exposure throughout Ontario.

As my colleagues have said to you today, we support Bill C-32. Copyright reform is necessary and urgent, and we urge this committee to pass this bill.

Local radio is the strongest marketing tool for Canadian artists and music. This role needs to be recognized by government and the Canadian music industry.

Local radio is one of the most important and influential media today as it relates to local and community matters.

We understand paying to broadcast the music, but it's not fair to pay five times for the same thing. The cost of copyright has gone up 500% since 2001. This is endangering our business. In fact in some of our smallest radio markets, the reproduction tariff obligation represents the difference between being able to keep our stations on the air or not.

The bottom line: local radio matters to Canadians. It needs to be supported, and we need the broadcaster exception to stay in Bill C-32.

I'm going to leave you with some examples of direct contributions that broadcasters make within their own communities to local events and initiatives supporting the music industry, nurturing community interest in musical artists.

Here are some of the many music industry initiatives the CAB radio station members have supported this last year: the Winnipeg Jazz Festival; Kitchener-Waterloo Oktoberfest concert series; the City of Pembroke music festival; the Waterloo Region District School Board, for purchase of new instruments and sheet music; the Mariposa Folk Festival; RNC Media-Antenne 6 bursary program, to support students from the journalism program of Collège de Jonquière; the Western Canadian Music Awards; Les Rencontres de I' ADISQ; North by Northeast; MusiCounts, the music education program from CARAS; and FanFest at Canadian Music Week.

Private radio makes a real and substantial contribution to Canadian artists. The broadcaster exception in Bill C-32 will ensure that we can continue to do so.

Thank you.

[The Acting Chair, Conservative, Maxime Bernier]

Thank you.

Monsieur Larche.

[Paul Larche, President, Larche Communications Inc.]

Thank you.

Thank you for having me here today.

My name is Paul Larche. I'm the owner and president of Larche Communications. I've been working in the radio industry since 1975, starting in Timmins, Ontario. I was also a part-time musician early in my career and owned a recording studio. I purchased my first radio station in 1995, CICZ-FM in Midland, Ontario. My company now currently operates four radio stations in the province of Ontario, employing 65 employees.

In my 36 years in the radio business, I have witnessed first-hand a lot of changes, many brought on by the advances in technology and the new digital world. When I started we played most of our music on turntables using good old vinyl 45s. But what hasn't changed is our primary mandate, which is super-serving our local communities.

Our companies are vital to the fabric of the communities, through hundreds of year-round fundraising activities for local charities, coverage and promotion of local events and stories, and the dedication of countless hours and energy required to bring people together for a common cause. We don't just broadcast music to our communities; we are an integral part of them. In the past five years, my stations have raised over $750,000 for worthwhile charities in our communities, something we're very proud of.

As you've already heard from my colleagues, copyright is one of the biggest issues facing radio broadcasters. I'd like to explain to you, from a technical perspective, what actually happens at a radio station to get music on air. Maybe this will help you understand the process and why this reproduction right payment makes absolutely no sense.

At its core, the practice of getting music on air is fairly simple. The music industry asks us to air music and sends us a copy. To be clear, there was never any payment exchanged for this part of the process. They need the promotion that comes with the airplay, and we need the music to play on air. It's always been a great exchange.

When the Copyright Act was reformed last time in 1997, things started to change. Music was being delivered on CDs, and radio stations were using technology that required transferring the music into computer servers for playback. Unfortunately, this simple upload was now identified as a “copyright event”, and despite the fact that radio stations made no additional money from the procedure, this purely technical process at the time was valued at $5 million per year by the Copyright Board.

These days, no one uses CDs anymore. Instead of sending promotional representatives to our stations and pressing the music to CDs and putting them in CD cases, the record companies now just use a digital delivery service to send us individual tracks. They are still pushing the music, and they are still asking us to play it on air. Now, instead of uploading a CD, our music programmers simply accept the invitation from the record label and the song often automatically uploads into our systems. As of last June, this process has now been valued at $21 million by the Copyright Board.

That's right: our stations are now making three different copyright payments, for a total value of $21 million across the industry, to simply accept an invitation from the music industry to play their song. As I'm sure you can imagine, I have a hard time rationalizing the cash grab.

I have an even harder time processing the relative cost of these copyright payments to things like my employee salaries and benefits, technological upgrades to keep my business competitive, investments in research and development for new platforms to ensure the music we play gets heard by as many people as possible and frankly also to help me promote local artists in my area—particularly because this $21 million is on top of the $64 million that our industry pays to play the music in the first place, and then an additional $51 million in contributions to Canadian content development.

I'm a small business. There are many more like me across the country. Our increasing copyright payments have a huge impact on our bottom lines. Of the four radio stations I own, two are relatively new and they're not making money yet.

Now, listen, don't get me wrong; I am more than happy, and I think it's more than just, that we pay our fair share for music. We should; we get great value for it. Our stations have always had a terrific relationship and partnership with Canadian artists. We have many awards from their industry to support this fact. But this reproduction payment is just downright unfair. When I explain the subject to my musician and artist friends, they agree it's irrational. Most of them are not even aware of it. And when I tell them that most of the money goes outside of Canada to international record companies, they often get mad.

The bottom line is that the reproductions made by broadcasters to get music into our computer system do not harm or shortchange the rights holders in any way.

Broadcasters make reproductions only to facilitate the broadcasting of the music. We've already paid to use it. New use is made of the music; radio makes no additional revenues. This is a purely technical event and is no different from what individual consumers do when they transfer songs they've legitimately acquired onto their iPods.

[The Acting Chair, Conservative, Maxime Bernier]

Merci. Can you conclude?

[Paul Larche]

Yes.

Private broadcasters are pleased with Bill C-32, and we're hopeful that this committee will work together to pass it.

I thank you for the opportunity.

[The Acting Chair, Conservative, Maxime Bernier]

Thank you, Mr. Larche.

Now I'll give the floor to Mr. Garneau.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chairman.

Thanks to all of you for being here today.

Thank you for taking the time and the trouble to come here today.

I love radio stations. I listen to them. All Canadians listen to them, and they perform a great service, very enjoyable. I think in probably many cases the music component is an extremely important part of it. In fact, I think one could go as far as to say that in many of these cases, if they didn't have the music, there wouldn't be the station. The question is one of recognizing what the value of that music is.

I'm not a lawyer, I'm not a broadcaster, but I can do my math. I've got some figures here from the Copyright Board. Those figures were provided by broadcasters, by yourselves. If I look at the past five years, it would seem that the profits before interest and tax—this is averaged over the 644 stations, and I'm dealing with all of them—average about 20%. Most companies and enterprises in this country would be delighted to have that kind of money.

If I also look at how much is paid out in royalties in the country, you pay out about $85 million in royalties to a number of different organizations, which represents about 5.7% of the $1.5 billion industry. As I say, I can do the math here, and I'm having real, serious difficulty understanding why the amount of money that you're paying in royalties is such an unacceptable burden. I'd like you to enlighten me on that quickly, and I have some other questions.

Thank you.