Canadian Heritage Committee on April 22nd, 2010

[The Chair, Conservative, Gary Schellenberger]

We'll call this shortened meeting to order.

Welcome to meeting nine of the Standing Committee on Canadian Heritage. Pursuant to Standing Order 108(2), this is a study on the emerging and digital media: opportunities and challenges.

I am going to introduce Mr. Graham Henderson, president of the Canadian Recording Industry Association. He will then introduce the rest of the presenters.

Because of the vote, our meeting is shortened to an hour and a quarter. If we can keep our comments as short as we can, we can allow more questions and answers. The question and answer period will be five minutes, and I will be strict on that.

Mr. Henderson, please....

Mr. Angus, you have a point of order?

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

Yes, Mr. Chair, I do have a point of order.

I know I am asking this on an odd day, because we have lost time, but I have been finding with these hearings that the five-minute rule we have is not very helpful in terms of allowing witnesses to respond and allowing us to set up a line of questioning. I feel we end up having to be rude when we ask people to stop because there are so many issues we're trying to deal with.

My understanding was that it had been a seven-minute rule. I know on other committees it is seven minutes. I just feel that in this hearing, if we are going to get the most out of our witnesses and create a conversation, five minutes does not do that.

[The Chair, Conservative, Gary Schellenberger]

Mr. Angus, this committee has always had five minutes. The other day it became seven minutes in the first round because I did allow the questions to be answered.

Mr. Rodriguez keeps at me to stick to the five-minute rule, and I will do that again today because we are short. We have already lost a couple of minutes debating that. We're going to go ahead.

Mr. Henderson, please....

Madame Lavallée.

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

I'm very sorry for pressing this point, Mr. Chair, but if memory serves me well, we had seven minutes during the first round, and five minutes during the second and any subsequent rounds. As I recall, that's how we proceeded.

[The Chair, Conservative, Gary Schellenberger]

Okay.

Do you care?

[Dean Del Mastro, Conservative, Peterborough, ON]

Well, I was hoping the witnesses might stick to five-minute introductions.

As far as the question times, I don't care if it's five or seven. As long as it's equitable to everybody, we're good with that.

[The Chair, Conservative, Gary Schellenberger]

I'll be very fair. I think I was the last time. I've never really cut anyone off from replying.

I just ask my questioners not to push it right to the last minute.

Mr. Henderson, please.

[Graham Henderson, President, Canadian Recording Industry Association]

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.

Darlene.

[Darlene Gilliland, Director, Digital Business Development, Universal Music Canada]

My name is Darlene Gilliland. I am the director of digital business development for Universal Music Canada. I am very grateful to the committee for the opportunity to speak to you today.

I plan to cover three topics: who Universal is and how we engage with the opportunities that new media presents to grow our business in Canada; how the challenges presented by the lack of a predictable, rules-based climate for investment in new media limit the growth of that business; and how government can help.

To start, Universal Music is Canada's largest music company. We sign artists to recorded music deals. We also provide distribution for independent labels in both English Canada and in Quebec. We discover artists, we create records with them, we market, distribute, and promote them and their recordings. In short, we create music and we build careers.

Our Canadian artists include Bryan Adams, Diana Krall, Shania Twain, Tragically Hip, and new artists like Hedley and Stereos. We also market and distribute international stars like U2, Elton John, and the Black Eyed Peas here in Canada. We are music people, absolutely, but we are also business people and investors in Canadian talent and technology.

My role at the company in digital business development and the team I work with exist because Universal sees the power in new media to create revenue streams for our artists. In my role I am tasked with strategically implementing new business models that are capable of generating sustainable long-term revenue and delivering a legal music experience that fans can enjoy.

This is not the old days. We are not sitting back and wishing for the days before the Internet. It's quite the opposite; we are heavily engaged in reorienting our business against incredible challenges in the conditions in Canada.

I'll mention a couple of the things we do. First, we license our music and our videos in legal ways to technology companies, big and small broadcasters, mobile carriers, and websites here in Canada and outside of Canada as well. When I talk about licensing deals, what I mean by that is a deal that makes music legally available. You can listen to music in your iPhone application through deals that we do. You can buy an MP3 download over your cellphone after you hear a great song on the radio. You can watch a video on your home computer. That's what we do. All of these can be legally licensed uses that compensate the creator and bring the music to the fan, where they want to hear it.

The companies we work with to build those models understand a couple of things. They know that music is valuable to their consumers, they know that creators must be paid for their work, and they know that working with us directly helps them build value for their business.

I also want to point out that we do use social media in technology constantly as part of our marketing and promotion efforts to reach our fans. Twitter, Facebook, SMS, iPhone applications--all the new technologies are key elements of our marketing strategies. They may not be our revenue-driving strategies at the moment, but they're key in marketing.

As one interesting example, if anyone is an active Twitter user, we actually worked with our Canadian artist, K'naan, to create new lyrics for one of his songs using Twitter “tweets” from fans. K'naan then recorded a song made up entirely of those lyrics, and we were recognized for that by Wired magazine. So we're there.

We're also diversifying. We create and run artist websites and online fan clubs. We design added-value music products, VIP merchandise, and concert tickets.

In short, we are not just sitting around on our hands. People like me did not even work in the music industry in the good old days. We are not running from this new reality, we are doing our very best to embrace it, to work hard on creating business models, and to provide value for everyone in the new media community. That's creators, that's technology companies, and that's consumers. We don't believe these things are mutually exclusive.

Despite our efforts, despite managing to grow our digital business slightly every year, our digital marketplace in Canada is on track to cap out well below our market potential and well below the level that other developed markets will reach. A few numbers are helpful here. On an industry-wide basis, as reported by the IFPI, in the world of physical CDs, Canada represented 10% of U.S. sales. In the digital world we're 4%. This is a substantial difference. I think it helps illustrate this point very well.

We attribute it in large part to the lack of a robust copyright regime and protection for creators' works in our country, especially when we stack Canada up beside our international peers. Our peers have had these protections for a long time.

When technology companies see the piracy that flourishes here in Canada and the uncertainty in our laws, they are apt to invest elsewhere, and they do. The result is that Canadian creators and consumers miss out on innovative music services that are launching elsewhere, including the U.K., France, Sweden, and the United States. We miss out on the jobs, revenue, taxes, and consumer choice that come with them.

Government can help us in two key ways: first, we need government support in new media, as in any industry, to create a rules-based and predictable environment in which business can invest, and in which investments made today by the music industry can continue into the future; second, we need government support for and belief in the fact that compensation for artists and the shifting terrain of new media are not fundamentally incompatible. We believe we can build that market, a market in which technology thrives and creators can earn a living, with the appropriate protections in place.

Universal invests in music and in Canadian talent and culture, and our government invests in music and in Canadian talent and culture, but our laws create a climate in which the product of our investment competes with “free”.

Perhaps over the years this issue has seemed complicated; it doesn't need to be. We can't compete without government assistance in making sure creators' work product receives the same level of protection through copyright as a technology company receives through the patent on the touch screen on their phone.

All intellectual property industries depend on mechanisms put in place by government to foster innovation, encourage investment, and protect creators. We are no different.

We are not asking government to take us back to the old days. We're not giving up here on our efforts to build a market--we're up for the challenge--but we're here asking for your help with that.

Thank you very much.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Go ahead, Mr. Millar, please.

[Charlie Millar, Director, Digital Business Development, Warner Music Canada]

Thank you.

My name is Charlie Millar. I work as a director of digital development as well.

I've been asked to present to you today the following: what I do, and how what I do is linked to digital media and emerging technology. Specifically, I will address my background, my reasons for entering the content business, my role, and the reason for my attendance today. Last, I'll provide a summary of how government can support my role from a digital business development perspective.

Prior to joining Warner Music Canada, I worked as an economic consultant for KPMG. My focus was technology and pharmaceutical brands. After KPMG, I worked for a marketing company that specialized in selling and designing consumer brand marketing programs. One of our clients was Telus. I actually launched the Internet with Telus, out west, about six years ago now.

What were my reasons for entering the content business? Well, playing music in a number of small bands over the years, it was evident...of the vital role that music, or content, played in the development of new technology and the next generation of music monetization models. Therefore, with a background in economics and with a love of music, it was logical that I would join a record label and work in digital music.

My role at Warner Music Canada is to integrate into the company digital commerce opportunities. I also work with Canadian businesses to educate them and to license content to these businesses. I collaborate with them to ensure a profitable and sustainable business model for the distribution of our artists' content. Specifically, I work with a tremendous number of software companies to ensure that they're involved in licensing content and are developing business models that are sustainable for the artists' content in the long run and are sustainable for their own profitability. This is very important.

Finally, I develop relationships with Internet service providers--Telus, Rogers, and Bell--original equipment manufacturers--RIM, HTC, and LG--and software developers. These are key future business partners for us. These partners will support our acts internationally and domestically in Canada and cannot be denied. Specifically, these companies are the future account base, and together we are going to create new ways for our labels to monetize their content. It's very exciting. These services will be essential in the digital generation of the music business.

I'll now outline my reason for attending this committee meeting.

Warner Music is a significant player in the industry. It has committed national commercial interests and has consistently outpaced the recorded music industry in digital revenue. We have three basic priorities, and I want to explain these to you so that you get a sense of where we see the priorities in the digital music space.

We are extending our leadership in the core download business. You may see this as the iTunes business, but primarily this is the four Ps of marketing we focus on: product, price, promotion, and placement.

We are recalibrating the balance between promotional and commercial within social media. This is very interesting. We have relationships with YouTube. We have relationships with ad-supported networks. What we're doing is removing startup misconceptions around “free” and engaging businesses in sustainable business models. Ad-supported network models right now are at an emerging business level, not sustainable.

We are developing and cultivating new business models by targeting opportunities around scale. What I mean by this is that we're engaging networks and OEMs around bundling content services with device sales and connectivity.

To back up a little bit, the digital market has three main consumer segments. We have done a lot of U.S. research to support these, which I'll use as a proxy for the Canadian consumer. However, we are actually working with CRIA to develop our own consumer research.

The first consumer segment is the traditional listener. You would see this as a radio or CD listener. They “lean back”: they're passive, they listen to the radio, they put the CD in. This segment requires targeted product offerings. The CD-centrics require digital conversion vehicles, such as gift cards.

The second segment is the digital collector. They are very “lean forward”: they're on their computers, they're multi-screen, they're mobile, they're iTunes users. For this segment we're looking at product management--again, the four Ps of marketing help in this area, and that's where we're driving our attention--but also at service and product innovation, specifically in subscription services. You hear the words “digital cloud” these days.

The third and last segment are the pirates. They are “lean forward”: they represent a cross-section of all behaviours. This requires implementation of ubiquitous deterrent measures from government and network-based controls.

In summary, how can government help?

From a sales perspective, from a digital business development perspective, government can help by assistance with deterring pirate lean forward behaviour; two, implementing ubiquitous government deterrent measures so that Canada and all its provinces can become an environment for digital entrepreneurship and service; and specifically, creating a location for foreign direct investment and/or domestic next-generation technology, to be done in a way that is, I hope, export ready.

From a free market perspective, industry is willing and able to sell Canada to the world, but it is essential for government to set up appropriate ground rules for the digital music business to be successful.

Thank you very much for your time.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Ms. McKennitt, please.

[Loreena McKennitt, President, Quinlan Road Limited]

I'd like to thank the committee for the opportunity to appear today, and to acknowledge the daunting task facing its members as it makes its way through this process.

As some of you may know, I am a singer-composer and the sole owner of my one-artist record label, Quinlan Road, which encompasses both audio and visual production companies.

I have often been characterized as one of the early artists who went independent, as I began my career in 1985 busking on the streets of Toronto. After five years of a do-it-yourself approach, I signed a licensing agreement and now have a mixture of licensing and distribution deals around the world with a variety of companies. These have realized sales of over 13 million recordings. Currently, not only do I continue to function as an artist, but I also manage both the creative and the business sides of the operations of Quinlan Road on a daily basis and on an international level.

I appear today out of concern for present and future creators of many disciplines and out of concern for their respective industry infrastructures.

I have been fortunate throughout my 25-year career to own and control all aspects of my recordings and image rights. Subsequently, my revenue sources exist not only through CD sales or digital sales, but through performance revenues and licences. Because of the way I have invested in my career and my business, it has allowed me to own my masters and directly license them for use in film, theatre, dance, or other kinds of media. At the same time, this does not prevent me from granting permissions for no fee in selective circumstances.

It is very difficult to look to the future in new digital technology without establishing a firm consensus on the real value of intellectual property and who actually owns it. For years it has been clearly established and accepted that the individuals who create it own it, and that the medium in which it is experienced does not diminish that principle.

That point brings me to the novel and newly crafted term of “user rights”.

It is my view that we should be extremely careful with this kind of language, because it isn't a matter of user rights but rather user permissions. Once we dispel the notion that in this respect there is no such thing as user rights, or that people own the music in a CD or a digital download, we can cease worrying about how to balance these rights. Many things the public wishes to do with what they purchase can all be accomplished within the framework of permissions and personal use.

In my company we confront the new realities every day. We have been hard at work trying to offer new products in new ways and to fully leverage the new technologies. But I am here to tell you that making predictions and investments is impossible without some stability in the fundamental recognition and protection of intellectual property.

It is not just my own revenue stream that is affected. It's the jobs of many talented people I have employed over the years. I would like to give you a sample.

They include many recording studios that no longer exist; engineers who specialize in recording classical or acoustic instruments; technicians, their suppliers, and their administrative staff; graphic artists; photographers; makeup artists; mastering companies; CD manufacturers, such as Americ Disc in Quebec; retailers large and small, many now defunct, such as Sam the Record Man; printers, such as the Stratford Beacon Herald; publicists; travel agents; airlines; musical equipment suppliers; insurance companies; local media advertising outlets; caterers; and on it goes.

I know there are those who advocate a proposed business model that would see artists touring all the time. Not only is this not always viable from a monetary sense--or from a human sense, once people start having families--but for many artists such as myself, touring was always a loss leader in order to promote my recordings. Now parts of the touring industry are starting to see the corrosion of their businesses. This has impacted venues, promoters, their local crews, and popcorn sellers, all of whom are now struggling to stay alive.

As well, one should not be misled by equating fame with business viability, as there are many famous people through the new technologies who are still unable to make a viable living. This can hardly be viewed as a business model.

It may be fashionable in some corners to say the arts don't really provide much employment or revenue to society, but when I look at my small company, which once had 15 employees and now has five, and then extrapolate that to the whole industry, the scope of this calamity that presently exists cannot be underestimated.

How has this devastation been accomplished? Although some folks would like you to think otherwise, it is not because, like some sort of buggy whip, copyright has become obsolete and we owners of content property should just “get over it”. Although it might be true that we, as creators, have been slow to enforce our ownership rights, we have counted on our representative organizations, the legal system, and policy-makers to protect our fundamental rights and ensure that our international obligations in this regard are upheld.

Regardless of the details of any regulation, as the law exists now, everything recorded is copyrighted by the creator of that work and is not someone else's property unless licensed or authorized in some way by the creator. Others cannot claim it and watch us scramble to claw it back.

Let me give you a brief snapshot of my own situation with respect to peer-to-peer sites.

You may have a copy of a site called isoHunt. It promotes a full inventory of my audio and video catalogue. This site operates as a bridge to those who want to download my music for free. As many of you will know, the business model of many websites is to offer content that costs little or nothing to them, but that has value to the public, so they can then sell the advertising real estate on the side.

Having been driven over the Canadian border by judgments against them in the U.S., isoHunt has recently brought a lawsuit in Canada asking for their “aiding and abetting of piracy” to be declared legal here. In the current vacuum of uncertainty over copyright reform, many operators are staking claim to the territory that simply is not theirs.

The second site I would like to mention is Mininova. When this site was brought to my attention last November, they too carried my full audio and video catalogue. This site was very helpful, because it proudly boasted a calculator installed for the purposes of advertising dollars, which indicated that my full catalogue of over ten titles had been downloaded over 4,100 times in the previous 53 days. Of course, this does not address single album downloads, or the rest of the year, or the previous years, nor any of the other sites undertaking this practice in Canada or around the world.

It is interesting to note that at the end of November, the Mininova site was forced by a decision of the court of Utrecht to completely alter their business model to feature only those creators who deliberately wished their content distributed for no charge, or, as others would put it, for free. Today, the search for Loreena McKennitt will bring up several album titles with the corresponding links to Amazon, where one might purchase in the legitimate way.

So you see that progress can be made. It is essential that Canada not be considered a pirate nation when it comes to both regulating and realizing the full advantage of all the advantages of new media. It cannot be right that what is produced after years of training and large investments by individuals, businesses, and governments will suddenly be devalued by a change in the rules.

Nor must we allow clever manipulation of language and media to create confusion in the minds of the public as to what the real issues are, especially by those who have hidden vested interests or who operate in theory and not in the reality of actual business.

The watchdogs must be able to see through the smokescreen created by those who operate not by permission, not even by forgiveness, but from a strategy of taking what they can get away with before someone gives notice and takes them down.

In closing, I would like once again to thank this committee for all their hard work and due diligence. I would welcome responding to any questions.

[Graham Henderson]

Mr. Chairman, I'd like to conclude for our panel with the words of K'naan, who is one of, I think, our musical heroes, perhaps one of the world's musical heroes right now. I don't know if you saw that stirring performance of Wavin' Flag on the Junos, but I know it made the hair stand up on the back of my neck.

He says:

I am proud to be a part of the Young Artists for Haiti fund-raising effort. I am inspired by the performances of my fellow artists on Wavin' Flag, but I am saddened to think that some people might download this song from pirate sites rather than pay a few cents for a great cause. We need a way to end this. We need copyright reform now.

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Our first questioner will be Mr. Rodriguez, please.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Thank you, Mr. Chair.

I want to thank our witnesses for coming here today.

We talk a lot about opportunities, challenges and problems, but I do not get the feeling that any concrete solutions are being put forward, because all of this seems rather complicated. Digital technology opens up a great many borders. It is far easier for our artists' work to be showcased just about everywhere, on multiple platforms and in social media. However, at the same time, it is much more difficult to collect royalties.

Piracy and illegal downloading are issues with which we must contend and to which there are still no concrete solutions at this time. I'm not certain that the technology exists today to counter these problems, or whether we need to push for legislative changes. I listened to your comments on piracy problems and I totally agree with what you said. In terms of the Internet, what steps could be taken to address this problem? How can we deal with the downloading issue with the means available to us today?

[Graham Henderson]

I believe it starts with a very simple, straightforward baseline. We have to draw a little box around what's legal and what's illegal and send clear messages to the people of Canada about what's right and what's wrong.

I've always said about the people of Canada that I think we all think of ourselves as law-abiding citizens. The problem is that we have no laws to abide by. Now, lots of other countries--France in particular, South Korea, Sweden, England--are taking very aggressive stances to protect their creators. France is perhaps in the lead. We're nowhere near taking the steps that France has taken to protect its creative class and, in fact, its business community. But I would argue that to simply, as a very baseline, implement the intellectual property treaties as contemplated by, for example, Bill C-61, or before that Bill C-60, would be the first step on that road.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

So then, the first step is the World Intellectual Property Organization.

That's the first step. What comes after?

[Graham Henderson]

Go ahead, please, Charlie.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

I'm asking you to help me to help you.

[Graham Henderson]

Yes.

Just before I turn to Charlie, one thing I will say is this: Does that make a difference? It absolutely makes a difference.

I was just looking at some statistics that are about to be published by the IFPI, which show that there's a return to growth in the music markets in South Korea, Sweden, the U.K., and 12 other countries. That is directly linked to improved legal regimes.

On the other hand, Canada, along with some other countries, has experienced the steepest declines.

So there is a direct connection between an improved legal regime in investment and in purchasing.

Go ahead, Charlie.

[Charlie Millar]

I brought with me a small outline from an international strategy document. From an international perspective, Warner Music Group follows three basic principles that support our strategy, which I explained previously in the meeting.

There are three strategies. I'll start from the bottom up. There is an evolving connectivity system in the world. There are evolving connectivity drivers from a technological perspective. This means there's a trend toward multi-screen connectivity. So aside from the government angle, there is the network operator aspect. This is where there's connectivity; we're working with connectivity multi-screen approaches to access scale and access consumers.

The second thing is there is impending competition to migrate to the digital content cloud. So aside from government, we're working this channel to bring these companies, which already exist in the U.S. and in Europe, into Canada to take advantage of these new services. They don't exist right now in Canada.

The third one is that there is an improving political environment internationally--I can reference digital Britain--that our company is looking to as one of the three elements or three trends that are essential in supporting our digital priorities.

In summary, you have the government requirements on one hand, which Graham has spoken about, but we have our tactics in place to address the new digital technologies. Those are already there.

[The Chair, Conservative, Gary Schellenberger]

That's the end of that particular questioning.

Remember, you're the one who keeps telling me to stay on five minutes.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

But you said seven minutes.

[The Chair, Conservative, Gary Schellenberger]

No, no, I said that last time I did that. I'm not doing it this time right yet.