Canadian Heritage Committee on Oct. 28th, 2010

[Roger Pomerleau, Bloc, Drummond, QC]

As for you, Mr. Quarles, you stated that you looked for ideas and that you kept the best ones. Your solution, if I understand it, is to collect a monthly fee from people who have the means to download this stuff, and that is slightly different from my colleague's proposal in the House.

What made you conclude that these were the best ideas? Who supports your option in this market, especially in Québec? Which associations support your proposal?

[Don Quarles]

The easiest answer is that we had some studies done that were economic studies, a study done that was on international copyright and whether or not this would fit into the WIPO restrictions, and we also had a technological study done. The technological study we did determined that file sharing can't be stopped. Remember, we're talking about file sharing, we're not talking about copying. The private copy levy deals quite effectively with copying, but what we're talking about is file sharing. File sharing is one to many, if you will; that 's probably the best way to describe it.

Essentially, over the three and a half years that we've been talking about this proposal, we've talked to every stakeholder we could possibly talk to, including the Canadian Recording Industry Association, who immediately said no, this is crazy. Having said that, over time, we've incorporated changes in this model in order to accommodate consumer groups. PIAC, the Public Interest Advocacy Centre, is very supportive of our proposal, the Union des consommateurs is supportive of our proposal, and so is CIPPIC at the University of Ottawa. On top of that, we've also talked to independent record labels and music publishers, and although their associations have difficulty supporting such a thing, we have individual music publishers and labels that are interested.

We think, ultimately, that the bottom line is that this is dealing with a broken part of the industry. It's been broken for some time. It really needs to be addressed. How are we going to address it? Are we going to continue trying to stop it?

I want to be clear that we also want to ensure that we're not talking about websites that are commercial enterprises making money off of people's music. Those people should be dealt with in the way the law should deal with them. But what we are talking about is individual file sharing. That's really what we're getting at.

I don't know if that answers your question.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Quarles.

Merci, Monsieur Pomerleau.

Monsieur Angus.

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

Thank you.

This is a fascinating discussion.

Mr. Quarles, you were in a 12-year-old Econoline van. Ours was 15 years old when we went on the road. It's interesting just saying that piracy destroyed the market. When we were 18 and we were on the road, we could play six nights a week. There weren't a lot of other options. It wasn't that we were a great band, but when we hit Waterloo people weren't on the Wii or doing ten million other things.

The market changed substantially through many factors. People drank a lot more in bars then. That was a substantial factor. They didn't hire bands because they wanted music; they hired bands to sell alcohol. We have a whole number of factors—demographic shift. We're left now, as you say, with a broken model. The old model is not coming back. We are going to have to find new opportunities.

I'm interested in your example, because we've had these technological threats in the past. In the early 1920s live musicians went after the recording industry. They said if you have records, people won't hire live musicians. The recording industry got set up and the recording industry said if you let radio come in, who is going to buy records? I was at the Future of Music Coalition meetings in Washington, and T Bone Burnett had a fascinating statistic. He said that by the late 1920s, record sales had dropped by 80%; by the early 1930s, it was 91%. Now, I'm sure the Depression had a huge part in that.

Did they outlaw radio? Did they put locks on it? They monetized the stream. Once they monetized the stream, they had found a new model.

With your option, Mr. Quarles, there have been attempts to try to do this: the SOCAN versus the association of Canadian ISPs. The court case ruled against SOCAN because they said the pipes themselves were basically dumb to what was within them, and you couldn't hold them liable unless they were made aware of copyright infringements.

Given the fact that the ISPs are now selling their own content--they're content distributors--they are also using deep packet inspection, so they actually have a very good sense of what's going through their pipes. Given the fact that tracking mechanisms like BigChampagne can track the BitTorrent traffic, do you think the case could be made, outside of a business-to-business model, where they might voluntarily sign on, but that the original judgment in SOCAN v. the Canadian ISPs might be overturned at this point because they can no longer say they don't really know what's being carried through the pipes?

[Don Quarles]

We're not going to hold a lot of hope in a judgment being overturned. Having said that, it's certainly our hope to come up with a business-to-business solution, one that doesn't require a change in legislation, one that doesn't require a lot of effort on the government's part, to be honest with you. We're actually looking for a business solution, and we want to include the ISPs as part of the solution. Whether they're a mobile provider or an Internet service provider, they're the ones that are going to be the delivery mechanism of the future.

Music may end up using cloud technology. The bottom line is whatever we move forward with, we hope for it to be technology-neutral, because we know this is probably not going to exist. It's going to be something else that we're going to be listening on or accessing music on.

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

Mr. McKie, in terms of how we find solutions, you had suggested that they had found the cost to an ISP would really be in the range of 20 euros. I don't know anybody around this table who would go up politically and say that we want to slap an ISP with a 20-euro thing. That solution would be dead.

The other solution would be three strikes. Now, I know there are people who like that, but I don't know if any of my colleagues want to go out and say that they're going to cut off some family's Internet after three strikes. That, to me, seems like it's problematic. We've seen the RIAA solution, which had 35,000-plus lawsuits. Some of them were spectacularly disastrous. How much more could you make people hate record companies than those lawsuits?

Then we have to start finding revenue streams. That seems to me a solution to this. There are little revenue streams here and maybe elsewhere. I'm interested in the private copying levy. I know CRIA has been against it; they think it supports illegal downloading. We don't believe that. We believe it's one badly needed revenue stream when other revenue streams seem have to dried up.

You're supporting the private copying levy. Have you talked with CRIA about how to bring them back onside in support of the private copying levy?

[Duncan McKie]

We have brought them back some way. They're prepared--I think they testified in front of this committee--to support the levy insofar as it doesn't provide a haven for file sharing. That has been their position all along, I think, although it was articulated more recently.

That's really our position too, honestly. As I said before, we think that the judgment was in error. We think that private copying is a necessity. It should apply to DARs. There are countries in the world, such as France, that have very rigorous copyright enforcement regimes and private copying levies levied on DARs, and they seem to coexist quite well.

As I say, I think CRIA has made some progress towards a position that at least recognizes the need in Canada for this revenue stream, but it wants to limit its application so that it doesn't imply that copyright infringement is justified under that regime. That's what I understand their position to be.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Angus.

We'll go to Mr. Armstrong.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

I can't wait to go home and surf the Internet and try to download some of that Charlie Angus band.

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

We're on iTunes. It's Charlie Angus and the Grievous Angels. That's G-R-I-E-V-O-U-S.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

You can pay me for that plug later on.

First of all, thank you both for your presentations. It's great to have you here.

I was interested in your discussion on innovation. What can the federal government do to foster innovation in our domestic industry and help exploit both the domestic industry and the foreign industry?

[Duncan McKie]

The federal government does a lot already, and I have to admit that we get a great deal of support from Heritage Canada. We had a renewal this year of the Canada Music Fund, but we also had some cutbacks in areas that I feel were really constructive. In particular, I don't think Canadians feel that sending their artists overseas is a waste of money or some kind of party. I think that's a media-induced illusion. I think we have to send our guys outside of this country.

When Avril Lavigne sang at the Winter Olympics in the closing ceremonies, did anyone not feel proud at that moment? We need those kinds of moments in our cultural life, when Canadians are feted outside of Canada and make money outside of Canada, frankly. If Michael Bublé couldn't play in the United States, Michael Bublé wouldn't be the big star he is today. The same is true of Céline Dion and Nickelback and all of these other great Canadian groups. Canada's just not a sufficiently large market for creating an income that supports artists at that level and allows them to reinvest in other artists in Canada, as Avril's label, Nettwerk, which is one of our members, did for years.

We really need those supports to encourage our artists to exploit foreign markets and develop there. They can stay in Canada and be residents of Canada but make their money abroad, come back here, and reinvest in other artists and have them grow. As they do that, of course, they're going to create musical works that all Canadians can hear and benefit from.

Our goal is to expand export marketing and to sustain the current domestic supports we have in place right now. Those have to be retained and hopefully expanded. But you know, it's a capital-intensive industry. It's expensive to compete with all those other people. The Chinese are learning to sing in English, guys. This is the great competitive wave that's going to be faced by artists around the world. So we just have to continue to invest in our people.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Thank you.

Mr. Quarles, you talked about how music file sharing needs to evolve from an illegal network to more of a licensed distribution mechanism of some sort. And you said that 80% of Canadians have said that they would pay to be legal and to legalize themselves.

Domestically, I can see some merit in that, but internationally, there are going to be accusations that we're actually stealing music or legalizing the theft of music. What do we say to our trading partners if we implement your strategy and your solution and they accuse us of that?

[Don Quarles]

There are a couple of things. Let me clarify. The study that was done was done at the University of Hertfordshire, which is in the U.K. So it's a U.K. study. It's our hope that we do a similar study in Canada at some point. But representing 80% of those who file-share was really important in that the results showed that people would like to pay if they could.

Now, that tells me that if they knew that part of what they were paying was going to go back to the creators of the music, most people, and I'm sure most people around the table, would probably nod their heads and say that it sounds like a great idea.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

To clarify, are you talking about a levy that would be on every household in Canada, or would it be specifically on people who download music? Someone like my grandfather or father, someone in their seventies or eighties, doesn't even have an iPod. They don't download any music. They've never done that. Are they going to be asked to pay this, or would it be something just for people who use this system?

[Don Quarles]

Well, when we first introduced this and started talking to some of the consumer groups, that was a big concern. It's a concern for me personally. I mean, my mom says she doesn't download music, but Charlie seems to think she does. The notion for us to create an opt-out was important. We would propose that there's an opportunity for people to opt out so they don't have to pay.

Now, of course that helps to bring it in line with WIPO treaties, but it also helped the consumer groups; it became a much more palatable experience for them.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

I have one more question.

You've brought this to us. You represent one specific group within this industry. What about the Canadian recording industry and other groups? What do they feel about this solution you've presented?

[Don Quarles]

We talked to the Canadian Recording Industry Association probably three years ago, when we first started talking about this. At the time they were convinced that CDs were coming back. That's what they told us.

Sorry, Justin, did you do that on purpose?

[Justin Trudeau, Liberal, Papineau, QC]

No, that's just my cough.

[Don Quarles]

But some of the major labels are coming around. There is some movement. Warner Music was trying to create a similar kind of licensing scheme, if you will, with something that has since disappeared. It was their attempt to create a portal, I think.

I think many of us have seen samples of websites that have come and gone, attempts to monetize music. For instance, iTunes supports maybe three to five million songs. Well, there are probably 100 million songs out there. We're really trying to capture something that is beyond our control.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Quarles and Mr. Armstrong.

Mr. Trudeau.

[Justin Trudeau, Liberal, Papineau, QC]

Thank you very much, Chair.

I'm interested in going on with this. I think there's real merit to both the simplicity of this idea--the lack of need for government to do much around it--and the possibilities of industries working together to reach a fair solution.

What do you think the impact would be on companies like Apple's iTunes, for example, if all of a sudden you could legitimately go on Acquisition or LimeWire, or whatever, and pay your $3 a month for music, when Apple is charging, in a sort of proprietary model, at $1 a song? Are you getting a lot of resistance to this idea from companies like that?

[Don Quarles]

When we first started talking about this, that was a big concern. With those that are legitimate download services, that was a concern.

In other words, what's going to happen to iTunes? The reality is that BitTorrent and files shared are a different level and quality of music. iTunes provides added value, and so will other companies that come out of this. There will be innovation from this because there will be companies that will determine what we need and want.

[Justin Trudeau, Liberal, Papineau, QC]

I think that's consistent with the movement we're seeing away from the web and towards the net. People are choosing applications to access their content, even if they have to pay a few dollars for something they could have found for free on the Internet, but it's troublesome to find and evaluate.

One other issue is that I can already hear certain critics announcing that you're proposing an Internet tax, the way the iPod levy was transformed into an iPod tax. The way I understand a tax, it is collected by governments and goes to government coffers. The $3 a month, or whatever it ends up being, would be directed at a separate organization, and artists. So in no way would it actually be a tax. Is that my understanding?

[Don Quarles]

Yes, absolutely. In fact, the more transparent it is, the better for everyone, especially the consumer, especially those of us who are sharing music. We want to know that it's going to the right place.

The collective would obviously have to be made up of songwriters, artists, record labels, and music publishers, and probably ISPs. In other words, there's a collective that ultimately is going to then pool the money, and then it will get dispersed based on this pro-rata distribution.