Canadian Heritage Committee on May 4th, 2010

[Daniel J. Caron]

In fact, the problems we had have been solved, but I wouldn't be able to provide any major details on the subject. I'm not a building experts from the Department of Public Works. For the moment, there's been no damage.

[Royal Galipeau, Conservative, Ottawa—Orléans, ON]

Thank you.

Thank you, Mr. Chairman.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much for attending this morning. Those were great answers, and I'm quite pleased.

We'll recess for a few minutes.

[The Chair, Conservative, Gary Schellenberger]

Welcome back. We will have the second half of our meeting this morning.

Bear with me, I'm going to attempt some French this morning.

From the Association des producteurs de films et de télévision du Québec we have Claire Samson, president and chief executive officer, and Brigitte Doucet, deputy general director.

From the Entertainment Software Association of Canada we have Jason Kee, director of policy and legal affairs.

Ms. Samson, please try to stay within the ten minutes. I'll hold up a pencil or a pen when you're getting close.

[Claire Samson, President and Chief Executive Officer, Association des producteurs de films et de télévision du Québec]

Good afternoon.

The APFTQ has been in existence for more than 40 years now and represents more than 130 professional production companies working in both official languages in all audiovisual production sectors in Quebec. We want to thank the committee for the opportunity to express our digital vision today.

We are currently in a period of transition to the transmedia or multi-platform production and use of cultural content. This is a new transition period, we should say, since our industry has undergone a number of technical and technological changes since the CRTC's ancestor, the Canadian Broadcasting Commission, was founded in 1932. Perhaps we're tempted to think that these changes were minor in comparison with those we are currently facing, but that would be a mistake.

These changes have resulted in quite significant upheavals to justify numerous adjustments to the mandate of the CRTC, or that of its forerunners, and various legislative amendments. The governments of every period have managed to adjust to the new realities and to take steps to adjust the oversight of the broadcasting and telecommunications industries to those realities.

The government must revise certain policies and acts already in place without delay to adjust them to today's reality, while enabling those of tomorrow to find their place as well. We do not support the position that everything is new, that nothing is like the past and that no oversight is required, or the opposite view that all new platforms should be covered by the oversight currently in existence.

We submit to you that the solution lies more in a grey area between those two extremes. An initial observation in broadcasting and telecommunications is that there has been an explosion in the number of content dissemination channels and distribution channels. The entire existing production, dissemination, communication and distribution system is now being reproduced with certain adjustments in the virtual world of digital media. However, a number of acts and government policies no longer apply there.

In our view, we should start by adapting broadcasting and telecommunications legislation to this new reality. The starting point lies in their respective policies. I will spare you the examples, but you can refer to our document. The policies under the two acts can very well be updated and adapted to digital media. We think that most of the major principles they contain are directly applicable to digital. Of course, the scope of those two acts will have to be expanded to clearly cover all the ways of communicating content, both known and to be invented. As for the resulting regulatory oversight, it will also have to be as technologically neutral as possible, while complying with new established policies.

The second observation concerns convergence. Digitization and convergence accentuate the trend toward the concentration of media ownership rights. There are increasing interrelations and complementarity between the telecommunications, publication, broadcasting and Internet sectors, where a small number of economic players own vast families of businesses.

[Brigitte Doucet, Deputy General Director, Association des producteurs de films et de télévision du Québec]

In light of these findings, we believe that a comprehensive government strategy is needed to develop a Canadian communications policy that would embrace dissemination, distribution and communication for both conventional and digital media, and that would reflect the values and principles that must be complied with in Canada. All the acts concerned can then be amended to comply with this policy framework.

Now, allow us to present a number of specific positions on foreign ownership, Canadian content, the major ownership groups, copyright and financing.

With regard to foreign ownership, it should be noted that the first principle of the broadcasting policy is to ensure that the broadcasting system is owned by Canadians and under their responsibility. We are convinced that is the only way to ensure compliance with all the other principles set out in the broadcasting policy. The federal government wants to deregulate this aspect for telecommunications and satellites. From the outset, we want to support the position of a number of cultural industry stakeholders, that there is no evidence that the relaxing of foreign ownership rules advocated by the federal government is the best way to solve the perceived problem of excessively high rates for consumers or of the lack of capital to develop infrastructure. We believe the government should analyze the problem, as necessary, and assess all the means at its disposal to solve it, as well as their impact. In that way, it will be in a position to implement the best solution. We are not convinced there is a problem, but, if that is the case, we believe the solution lies more in the enforcement of policies and regulations than in greater access to foreign capital.

What we fear is much too broad control by foreign interests. For example, a foreign business operating a satellite with growing bandwidth needs could promote the dissemination of its foreign content to the detriment of Canadian content, which could make it very difficult, even impossible, for Canadians to access Canadian content. How then could the principle of the diversity of voices be complied with.

Until the federal government has a clear and firm position that it will protect all Canadian cultural media from foreign control, we fear that what has happened in the case of Globalive will occur in the broadcasting field. The government should introduce policies, legislation and regulations that are solid and appropriate. It must ensure that the requirements arising from the Canadian Broadcasting Policy are equitably complied with in every distribution channel. Without this political will, the danger we refer to will be very real.

[Claire Samson]

As for Canadian content, we firmly believe that the new Canadian communications policy, including communication concerning digital media, will have to provide, in particular, for regulations that afford a framework for the supply of cultural content through digital media. Today, the CRTC has preferred not to regulate in this field in order to monitor developments—the entire Internet. We think it is time to do so, to ensure that there is Canadian cultural content and that it is accessible on all platforms.

This new policy should also provide that the obligation to contribute to the presentation of Canadian content applies to new cultural content and service providers offering access to that content through digital media. In fact, the majority of principles set out in the Canadian Broadcasting Policy should apply comprehensively to communication involving all media, including digital media. However, the resulting regulation should be adapted to the reality of new dissemination and distribution channels. It could take the form of sufficiently appealing incentives to attract providers and ensure that the interests of all stakeholders in the system are addressed.

With regard to large ownership groups, the APFTQ contends that the new broadcasting context increasingly calls for regulation that can guarantee that the major ownership groups do not conduct themselves in such a way as to jeopardize the existence of the conditions necessary for the diversity of voices. The principle of the diversity of voices is protected under the Canadian Broadcasting Policy. Policies must aim both to limit the rate of increase in ownership concentration and to frame the practices of those groups by putting in place guidelines that guarantee a genuine diversity of voices. For more details, we can provide you with a copy of the brief that we filed with the CRTC specifically on this subject.

[Brigitte Doucet]

With regard to copyright, we note that a brief was submitted to the federal government during the last consultations. It can be provided to you as necessary. What we are presenting now is a summary of certain aspects addressed in that brief.

With regard to piracy and protective measures, I will briefly say that, in representing all producers in Quebec and Canada in music and the audiovisual field, we filed an application for an injunction against a Quebec website that was permitting illegal file sharing. The Superior Court rendered a judgment and ordered that the site be shut down. One week later, the site was back on line, but hosted outside Canada. We continued our efforts for a year and a half before we came to the conclusion that it was impossible to fight. They had chosen a country that did not give us access to the identities of the persons responsible for operating the site. We thought it was the same people. Experience has shown us that it is very difficult to achieve a result against mass piracy. In our view, the persons responsible for this kind of website are clearly acting illegally. However, it appears that's not so clear in the act.

To solve this problem, we suggested ensuring that there is a clear statement that these providers of content retrieval tools are acting illegally and that, for those who choose to protect their content, the way of circumventing content should be made illegal.

We're also talking about the responsibility of intermediaries, but I won't go into the details. We'll come back to that in greater detail during the question period, if necessary.

With regard to ownership of copyright in an audiovisual work, we agree with other stakeholders that the act is silent on this point. You have to wait until the product is finally created in order to determine, through the courts, what creative contribution determines who holds copyright. To date, the case law has granted copyright to producers, screenwriters and directors, but it is never clear, never certain. There are types of production where there is no script. There are also types of production where the director merely broadcasts. The solution we propose in order to reach a permanent resolution of this situation and to simplify the release of copyright—a matter of greater importance with regard to digital—is to make provision for a scheme of exemptions for the employer, as is the case under the Copyright Act. In the context of people's jobs, when something is created, the employer is the first holder of copyright to succeed in exploiting it. In our view, the producer of audiovisual content, the only person who is there from start to finish and who hires people in turn and as necessary, should be granted the same kind of exemption and be the first owner of copyright.

[Claire Samson]

In closing, I'll talk about financing. The creation of the Canada Media Fund has shaken up the established order. From now on, not only will the fund finance the production of original television content, but that content will also have to include one or more digital media components.

We understand the government's wish to promote research and development in both technology and viable business models. Our traditional Canadian content will have additional distribution channels. The only minor point that has been forgotten in the process is the cost of these new requirements. Television as we know it will thus be impoverished in favour of new media. We think it would have been interesting and appropriate to enable Internet and new platform providers to contribute to the creation of a new fund to finance productions intended for the new platforms. We believe this is a missed opportunity.

In conclusion, we definitely would not want to see the political, legislative and regulatory frameworks that have enabled the cultural industry to grow abolished. Let's adjust them, as we have always managed to do in the past, in order to foster and promote Canadian cultural content on all platforms.

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Kee, please.

[Jason Kee, Director of Policy and Legal Affairs, Entertainment Software Association of Canada]

Thank you, Mr. Chair.

My name is Jason Kee. I'm director of policy and legal affairs with the Entertainment Software Association of Canada.

The ESAC is the industry association representing companies in Canada that develop, publish, and distribute video and computer games for video game consoles, handheld devices, personal computers, and the Internet. Our members include Canada's leading video game companies and collectively accounted for more than 90% of the $2 billion in retail sales of entertainment software and hardware in Canada in 2009, and billions more in export sales worldwide.

We thank the committee for the opportunity to present the views of the ESAC on the challenges and opportunities of digital media.

First I'd like to give you a few quick facts about the Canadian video game industry.

Canada is rapidly establishing itself as a world leader in the global game industry and is currently ranked third in the world in game production, after the U.S. and Japan. Unlike many other Canadian creative sectors, we are a net exporter of creative product, and over half of Canadian video game companies report relying on foreign sales for 90% to 100% of their revenues.

The Canadian industry is estimated to generate $3.5 billion in revenue annually and indirectly employs over 14,000 people in highly skilled, high-paying jobs across a variety of disciplines, including programming, art, animation, visual effects, game design, and production. Our industry continues to experience explosive growth. And despite the economic downturn, job growth has remained at the 30% mark over the past few years. This makes Canada the fastest-growing game development location in the western world.

While this is a major achievement, we cannot afford to remain complacent. We are currently in the midst of a profound transformation, brought about by the development and adoption of digital technologies, which is affecting the digital industry, such as the games industry, as much as more conventional industries. The issues, challenges, and opportunities arising from these changes are many, and they must be considered holistically with a view to their overall impacts on all sectors. Only a comprehensive approach, one that recognizes the interrelationships and linkages between different segments of the digital ecosystem and examines issues in this context, will permit us to develop effective solutions.

We strongly support the development and implementation of a comprehensive national digital strategy. Such a strategy must be highly ambitious and long-term, with a view to creating sustainable next-generation jobs and securing Canada's position as a world leader in the digital economy. In order to accomplish this, the digital strategy must include a comprehensive plan to support the production and distribution of content and the growth of robust domestic creative and digital media industries.

Content and technology exist in a symbiotic relationship. The development of new digital products, services, and distribution methods, enabled by a vibrant ecosystem of business models, will foster Canadian creative industries, generate innovation and technology in communications, and drive investment, economic growth, and job creation.

In our recently released paper entitled “Game On, Canada! Playing to win in the digital economy”, we call for a comprehensive strategy that positions content industries at the heart of the digital economy. The paper provides ten concrete recommendations on a range of topics that are critical to the ongoing success of the domestic video game industry and that will ensure Canadian competitiveness in digital sectors.

We have circulated a copy of the paper to the committee. Many of the issues and recommendations have already been raised by a number of witnesses, particularly the Canadian Interactive Alliance. Accordingly, we will just touch on a few, which we would be happy to expand on if you have any questions.

First, we must adopt a plan to develop and retain cutting-edge talent. We should actively promote education in traditional technology areas, such as mathematics and science, but also in creative disciplines, such as art, animation, visual effects, game design, and sound design, as well as training in the business of digital media.

Canada should also remove regulatory barriers to bring in foreign workers with the right education, training, and experience in the digital sectors. Expanding existing programs and adjusting cumbersome work permit and visa processes will not only address unmet domestic supply of skilled employees, but will also spur skills and knowledge transfer and further job creation and retention of high-value employees in Canada.

Reliable access to financing and capital is essential to the development of robust digital media industries. Due to the high levels of risk involved, venture capital and other forms of outside financing can be difficult for digital media creators and companies to obtain. New sources of capital will incentivize investment by providing a means to hedge against risk, thereby reducing industry volatility and providing more stable and predictable growth for the sector.

New funds should be allocated for the experimental stream of the Canada Media Fund, potentially in addition to a new interactive digital media fund, not only to supply the domestic market for content, but also to support world-class Canadian content destined for international audiences.

We should also bolster existing provincial tax credit programs for digital media by introducing a new federal tax credit program.

Quebec's success in attracting major players, including Ubisoft, Electronic Arts, and Eidos, and more recently THQ and Warner Brothers Interactive, has been attributed to tax credit programs for digital media and very supportive government policies.

However, in the wake of this success, other jurisdictions have introduced their own tax credit programs. With those programs, coupled with the rising Canadian dollar, we are in danger of losing one of our most significant competitive advantages. The introduction of a robust federal digital media credit will ensure the competitiveness of the rapidly growing domestic industry and assist Canada in establishing and retaining a leading position in the digital economy.

Updating our intellectual property framework and in particular modernizing Canada's aging copyright regime for the digital age are crucial to the development of a successful digital media industry and a market-driven digital economy. Online piracy fundamentally undermines the integrity of the online marketplace by requiring creators and companies to compete against their own products. It siphons revenue that's necessary to recover the significant investments associated with digital media production, which in turn leads to business failures and lost jobs.

A robust copyright regime that provides effective protection for creative works in the digital environment benefits creators, businesses, and consumers alike by providing greater certainty in the digital marketplace and permitting market forces to operate properly. By protecting the considerable time, money, labour, and creativity that companies and creators invest in these new and innovative digital works and enabling creators and companies to determine the most appropriate means to distribute their works, a modern copyright regime will spur investment in the development of new digital products, services, and distribution methods and support a diverse range of new business models, fostering legitimate competition, greater consumer choice, and lower prices.

Canada must enact copyright reform that brings Canada into full compliance with the WIPO Internet treaties, including prohibition of the circumvention of technological protection measures that protect copyrighted works and the trafficking in circumvention devices and services.

In Canada, the liability of those who knowingly facilitate, encourage, or contribute to the infringement of copyrighted works is ambiguous and uncertain. This must clearly be established. We should introduce safe harbours for ISPs, but these harbours should be conditioned by effective cooperation with copyright owners in combating online infringements.

Further, ready cost-effective access to a first-class wire-line and wireless broadband infrastructure is crucial to the development of new products, services, and distribution methods in the online environment, which will in turn drive broadband adoption and lead to greater development. Access to advanced broadband infrastructure is indeed essential for online games and the digital delivery of games and is vital to the entertainment software industry's future growth. Canada should adopt a comprehensive plan to develop and deploy the next generation of broadband in the near term.

Finally, Canada must make a concerted effort to update our legal and regulatory regime for the digital economy and should review existing framework legislation and regulatory regimes, including the Broadcasting Act and the Telecommunications Act.

Furthermore, as part of this process, Canada should review and possibly reconsider the role and mandate of government institutions such as the Canadian Radio-television and Telecommunications Commission, as well as the Copyright Board, and consider the roles they should adequately play in the online environment.

I will happily answer any questions you may have.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

[Royal Galipeau, Conservative, Ottawa—Orléans, ON]

Mr. Chairman, I have a point of order. Behind the opposition table, there are chairs reserved for opposition officials. Behind the government members' table, there are chairs reserved for officials who work for government members. However, there are two individuals seated behind me whom I do not recognize. Can we please invite them to sit down in the public gallery?

[The Chair, Conservative, Gary Schellenberger]

Would you gentlemen please move into the public sector?

Thank you.

[Royal Galipeau, Conservative, Ottawa—Orléans, ON]

Thank you, Mr. Chairman.

[The Chair, Conservative, Gary Schellenberger]

You're welcome.

The first question will be from Ms. Dhalla, please.

[Ruby Dhalla, Liberal, Brampton—Springdale, ON]

Thank you very much to all of you for your very insightful presentations.

I think you talked about what we as a country need to move forward on to ensure that, as Mr. Kee described, we're at the forefront of a lot of these changes.

I want to first touch on something Mr. Kee spoke about towards the end of his presentation in regard to the CRTC and some of the regulatory and legislative changes that are required. You hinted at the fact that we need some changes to these regulatory bodies to ensure competitiveness in the future.

What are some of the suggestions you have garnered from stakeholders in regard to these changes? What would they look like? How would they assist in taking us forward to ensure we are competitive and we continue to have that explosive growth in the industry?

[Jason Kee]

With respect to the CRTC, it's an area we watch very closely. But our members, being video game companies, are neither broadcasters nor telecommunications providers, so they're not directly regulated, which is a position we quite like being in.

As an aside, I would point out that our industry and its explosive growth is an interesting example of a situation that has really grown up quite organically. You have had a number of supportive government policies to grow the industry, but we haven't required regulation to foster creation of Canadian content, because we are delivering Canadian content, frankly to global audiences.

As a consequence, at this juncture we wouldn't have any specific recommendations. I know that a lot of different ideas have been floated, both towards this committee and in general. I think it's mostly that we need to reconsider it. The CRTC itself has been calling for a re-examination of its mandate; it feels it doesn't have the tools to address a lot of the issues that are coming up in the online environment. Everyone is talking, of course, about convergence. A re-examination of both the CRTC and all the legislation it administers is, I think, worthwhile.

All of this being said, this is going to be a complicated endeavour. It's not going to be easily accomplished. You need to make sure that all of the stakeholders have a voice at the table and can express their views on what they feel the mandate should be, whether or not everything should be amalgamated into a single communications act, whether or not there's actually any point in doing so. I think all of these views need to be considered, but as part and parcel of an overall digital strategy.

This is part of that issue of taking a comprehensive approach whereby we have to consider how each individual piece affects the whole. While the video game sector may not be much affected, certainly wide swaths of the digital media sector would be, particularly in audio-visual. We have to be very careful and cognizant of those impacts.

[Ruby Dhalla, Liberal, Brampton—Springdale, ON]

Here is another question. I go into schools every week in my riding and talk to a lot of the young kids. Instead of doing their homework, from what I hear from the teachers and parents, they're all playing Nintendo or are on their television and playing all the games that have come out. From the days of Pac-Man and Atari, I think there has been a dramatic progression.

Do you think your association has an educational role to play in terms of reaching out to some of these young kids and that your association could perhaps play in educating parents as well with respect to some of the content that kids are seeing? How would we proceed with regulations? As you said, the industry isn't regulated; there aren't a lot of guidelines surrounding it. What role do you think you would play in that type of regulatory change?

[Jason Kee]

That's a great question. There is an element in our paper that I didn't have a chance to address, which was with respect to digital literacy. We are actively promoting digital literacy and encourage the government to actively promote digital literacy.

When we say “digital literacy”—the term itself is a little unclear—we take a very comprehensive view of it. It's not just teaching kids how to learn to use digital technologies and to navigate the online environment, but also to fully appreciate all the risks involved with the online environment and all the ancillary issues that come up. We're talking about issues such as cyber-bullying, online privacy and safety and security, issues of what's called cyber-ethics, which has to do with behaviour in the online environment. It also includes respect for intellectual property rights. Education has a key role to play there.

We have actually been very proactive on these particular issues. I should be clear: with respect to the CRTC we're not regulated; however, five provinces have enacted regulations about video game content. We work very closely with provincial governments with respect to administering these acts, to make sure that children are not getting access to inappropriate content. We have a rating system. Kids shouldn't be playing games that are rated “M”, which means they are for those above the age of 17. We work with them on that. We work with such groups as the Media Awareness Network to promote awareness of the ratings as well as digital literacy.

Certainly I think there is a significant role for industry to play on the educational front as well as to work in coordination with not-for-profits such as Media Awareness Network or the Kids' Internet Safety Alliance, and in coordination with government to support that and push it out to the provinces, and frankly, also incorporate some of the information into school curricula, where kids can get access to it.

[The Chair, Conservative, Gary Schellenberger]

Time's up.

We move on now to Madame Lavallée, please.

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

Thanks to everyone for your evidence. It is extremely interesting and there may be too much information for us to be able to absorb, as the librarian who appeared before you said.

I want to talk to the people from the Association des producteurs de films et de télévision. I want to talk to you about foreign ownership because you are one of the rare witnesses who have talked to us about it in such an explicit manner.

First, I want to tell you that the Quebec cultural world, to which I have spoken, is extremely troubled about a number of points. On the one hand, it is troubled because everyone increasingly sees that telecommunications and broadcasting are the same thing. We also see that telecommunications businesses, which used to have nothing to do with broadcasting, now do. That's not just because of the convergence of cable companies, but also because, among other things, smart phones have become genuine broadcasters. Not only do people want to present television directly on them, as is currently being done in France, but also—you'll no doubt be talking to me about this—they're also producing “mobisodes”, episodes for mobile telephones. That's broadcasting.

I have a nice advertisement here, that I like to show you, which shows that the person who controls access controls content and cultural content. This is an advertisement from Bell, which offers free Canadian cultural content apps. This one is in English. They provide free access to CBC Radio, but also to Disney, which is American, and Maclean's, which is a magazine. No doubt in Quebec, free app offers would be very different, but the fact nevertheless remains that we can clearly see that telecommunications and broadcasting are increasingly the same. By providing foreign ownership access to telecommunications businesses, it's as though we were giving it to broadcasting businesses, a sector where there is currently no regulation.

First, it seems clear that you are opposed to foreign ownership of telecommunications businesses, aren't you? Second, even if there were no foreign ownership issues, don't you think we would have to have this public debate? Third, do you agree with the CRTC, which wants to merge the Broadcasting and Telecommunications acts?

[Claire Samson]

First, we are indeed not in favour of greater access to Canadian ownership for foreign interests, whether it be in satellites or broadcasting. Today, those businesses are all vertically and horizontally integrated. It would be extremely difficult to limit that to satellites.

And if you allow me to give you an example of what scares us, eventually what if a Canadian satellite company were sold to the United States? We know that five years from now the Americans will be ready with 3-D television. Broadcasting 3-D television will require between three and five times de bandes passantes, je ne sais pas comment ce qu'on dit ça en anglais. The bandwidth capacity will require three to five times the capacity that television requires to broadcast today. If those satellites are not owned by Canadian interests, we may very well end up with no Canadian signals on the satellites, because there will be no more room, or at what cost? So that's one example.

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

Pardon me for interrupting you, but less than two hours ago, the Telesat officials were seated exactly in the same place as you. They assured us of the contrary, saying that they were only “pipes”. They used the English word “pipes”. Are you contradicting them?

[Claire Samson]

Yes, I'm contradicting them. There are limits to “pipes”; there are limits to this pipe. As in the example you cited concerning smart phones, the person who controls the pipe controls the content. We live in a quite developed country, which can decide that its culture will exist and that it will be on the airwaves, whether it be wireless, satellite or something else.