I am Graham Henderson, and I would like to introduce Darlene Gilliland, who is the director of business development for Universal Music Canada. Beside her is Charlie Millar, the director of digital business development for Warner Music. Beside him is Loreena McKennitt, who I am sure is known to all of you, a world famous artist and also an important owner of a very important Canadian independent label.
Not with us today is Grant Dexter, who is stuck in Europe because of volcanic ash. I think it is important that we make that point. Just because he is in the music industry, it doesn't mean it was volcanic “hash” that kept him there.
That was just my little music industry opening joke.
So who am I? I am the president of the Recording Industry Association, but before that I worked for about 20 years with artists, labels, songwriters, performers of all stripes, major labels, independent labels. I'm married to a recording artist.
During my last five years at Universal, I was also the head of the e-commerce unit.
Today what I want to do is introduce you to what I call “digital doers”. These are people who are on the frontier of the so-called digital revolution, people who live it and breathe it. We have been for years, I think, unjustly run down by a lot of people, often insulted, misrepresented as to what it is that we do, but today you get to meet us. And I think you're going to find that we are very different from what you may have read about us.
I am going to start by offering a proposition, and the proposition is that a society should be judged--among other things, but could be judged--by how it treats its artists, and I think this committee in particular would be concerned about that.
Now, I didn't say that. That was said by Jaron Lanier. I've brought his book in here, You Are Not a Gadget. Jaron is a computer scientist, a composer, a visual artist. He's an author, and he is credited with coining the term “virtual reality”. He lives and breathes Silicon Valley. He has been selected as one of the top 100 public intellectuals. He has been put on the Encyclopedia Britannica's list of history's 300 greatest inventors. So he is not a man to be trifled with.
I want to start with a quote. This is what he says:
If you want to know what's really going on in a society or ideology, follow the money. If money is flowing to advertising instead of musicians, journalists, and artists, then a society is more concerned with manipulation than truth or beauty. If content is worthless, then people will start to become empty-headed and contentless. [This] has resulted in a new kind of social contract. The basic idea of this contract is that authors, journalists, musicians, and artists are encouraged to treat the fruits of their intellects and imaginations as fragments to be given without pay....Reciprocity takes the form of self-promotion. Culture is to become precisely nothing but advertising.
We're well over a decade into this utopia of demonetized sharing and almost everyone who does the kind of work that has been collectivized online is getting poorer. There are only a tiny handful of writers or musicians who actually make a living in the new utopia, for instance.
He says that everyone is “becoming more like a peasant every day”, and that “it's going to get worse”.
Now, you have heard a lot in this committee from breathless boosters of everything digital. And you know what? We, in our own way, are breathless boosters of things digital, because digital offers an enormous opportunity for our creators and for us. But it is a double-edged sword. We can make no mistake about that.
I am going to suggest to you that we always have to temper our enthusiasm with caution and a judicious skepticism, which seems to be almost completely absent in today's commentary. Instead of simply asking, “How fast can this thing go, and how much can I put on it?”, we should also be asking, “What are the consequences?”
Because this is a cultural committee, I am going to refer back to one of the touchstones of my life—I am an English literature student—Mary Shelley. Her book Frankenstein was about what happens when science or technology is introduced into society without thinking through the consequences.
Now, because we're concerned about consequences, it doesn't mean we're anti-tech. Quite the contrary; it means, I think, that we are cautious and judicious, and I think as a society we should be.
So let's talk a little bit about Canada and digital innovation. This committee was told last month that everything in digital Canada was pretty darn good. The gist of this message was that there was no need for action by Parliament.
Nothing, however, could be further from the truth.
The people who've been spinning this “Don't worry, be happy” line have now been espousing it for almost a decade. Meanwhile, we have fallen behind, from a digital innovator to a digital follower.
The view from academia, I'm afraid, is a little myopic. The Conference Board of Canada has recently given Canada a D in innovation.
You were given specific examples of how artists were supposed to have succeeded by giving their music away. One of them was Radiohead, another one was Trent Reznor of Nine Inch Nails. But what you weren't told was what Trent Reznor said after his experiment. And by the way, a lot of what he says is unprintable:
This is the thing I learned from Radiohead. I don't want to ask a fan what they think my music is worth.
Then he gives an example of saying to an imagined fan, “Hey, I just worked for a year on this thing,” and the fan's response of, “Well, I think it's worth ten cents.”
Trent's response to that is pretty much unprintable.
He goes on to say this:
I naively thought at that time that if you gave the public the choice of do the right thing or not, I thought people would actually do it. Five bucks for an album? And I found that most people, no, they really don't want to do that. I think I laughed about that and got attacked by everybody for whining about wanting to get paid for work that I did. The steps we've taken since then, I think, have gotten closer to something that approaches a business model. It doesn't work for bands that nobody knows yet.
This committee also heard last month that smaller Canadian players are finding success in new markets like Facebook applications.
Well, the fact is that the only Canadian company in Facebook's list of top 15 apps is Research in Motion. That is not a small company.
You were told about a Canadian company called Polar Mobile, which endeavours to supply apps to the iPhone market.
You were told about business models that were predicated on free culture.
But what you weren't told was that the CEO of Polar Mobile, Kunal Gupta, concluded that the philosophy of giving content away for free is simply not working for him.
You were also told that BitTorrent sites and other peer-to-peer technologies are “finding increasing favour with legitimate businesses”. Indeed, there are uses that we have for them. But what you weren't told--and what is patently obvious, I should have thought, to everyone outside the ivory tower, but even within the ivory tower--is this: the overwhelming majority of content on BitTorrent sites is, to put it frankly, stolen.
This was the result of a recent study supervised by Professor Ed Felten at Princeton--no real friend of the music industry--who found that 99% of the content shared over BitTorrent is infringing.
The problem is that a culture built on stealing cultural assets cannibalizes itself. Creative industries wither, and countries like Canada end up with a D in innovation.
I'm going to leave you with a little meditation on this by another important author. If you are going to make policy on this topic, you need to read this book. If you are going to make policy on this issue, you also need to read Debora Spar's book, Ruling The Waves: From the Compass to the Internet, a History of Business and Politics along the Technological Frontier. She says:
If we view cyberspace from history...[we see that] once the technological frontier has moved beyond a certain point, power--and profits--seem to shift away from those who break rules and back to those who make them.... [The establishment of these rules] is a crucial stage along the technological frontier. It clarifies relations that often will have been murky to this point and allows successful pioneers to build their firms and markets in a more stable, less chaotic environment. It is a stage that is absolutely critical for a technology with commercial intent.
With that, I will turn it over to my colleagues.
Before I do that, let me just say that we are asking this committee to support the sort of rules-based environment that practically everybody else in the world has. It's a rules-based environment that will benefit creators--such as Loreena--investors in the business community--such as us--and you know what? It will even benefit consumers. Consumers in Canada just do not have the same choices that they do elsewhere.