Canadian Heritage Committee on March 27th, 2014

[Jodie Ferneyhough]

It's no different from any other time. They have to have some skill. They have to be born lucky to have the ability to write a song and to craft a great song.

I talk often on music publishing panels across the country. I always say to the people, whether they are in a band or whether they're just a pure songwriter, that they have to build fans and a fan base. Often songwriters don't understand what that means, because they're not performing for people; they're just writing a song.

You have to attract me; I am the fan. The other songwriters are fans. The bands that you want to put your song into are fans. They have to work at their craft. It has never changed. The Internet, as I said, just gives you more noise that you have to cut through. You're no longer competing to be the best artist in Toronto, in Ottawa, in Canada. You're now competing to be the best artist in the world. A guy like Psy can do a crazy song like Gangnam Style, which would have never made it before. That's what you're competing against now; you're competing against millions of YouTube hits, so it's a craft.

[The Chair, Conservative, Gord Brown]

Thank you, Mr. Ferneyhough.

Thank you, Mr. Falk.

We're going to move to Monsieur Nantel, pour cinq minutes.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Thank you, Mr. Chair.

I will share my time with my colleagues.

I want to begin by telling you that we are very aware of the huge amount of information we need to understand, at various levels. Distinctions need to be made between such terms as publishing and record company. The issues can be very complex.

We all agree that music makes all the difference. The song Happy is currently experiencing tremendous success around the world. We can see how important of an anthem a song can become. This song is generating revenue. However, that is not the case for a young artist like Mr. Faber, who appeared before us two days ago. He has had three or four hit songs in Canada, one of which reached second place on the charts, but despite everything, he says he has to continue working in construction.

My question for you is specifically about the contemporary marketing of music. Clearly, its production and its critical mass of specialists or creators have been successful, and you are here to tell us about that.

Earlier, Mr. Daigle said that the Internet had a mitigating effect. I have two questions about that.

Mr. Murphy, you mentioned earlier the loss of the Creators' Assistance component. Mr. Daigle and Mr. Murphy, I would really like to hear your thoughts on that, as I would like to understand what kind of a relationship will be established between SOCAN and publishers in light of that funding cut.

The CMPA representatives may also have an opinion about tariffs on streaming. The song Happy is heard everywhere billions of times a day. Even though the singer receives only very small amounts of money every time his song is played, that still translates to millions of dollars. However, for a Canadian artist like Mr. Faber, that translates to a $17 cheque at the end of the year.

Perhaps we should give the floor to Mr. Murphy, since this is a more complex question. Mr. Murphy, I would like you to be fairly brief, so that we can still hear from the other witnesses. Since you are far away, you may go ahead.

[David Murphy]

Regarding the abolition of Creators' Assistance, that component should be distinguished from the Aid to Publishers component, which is working very well. We are satisfied with it. However, one of the objectives of the Creators' Assistance component was to support the operations of associations.

The PMPA is a small association with about 50 members who are mainly located in Quebec. We have few employees, only one of whom is insured. With two employees, we would be able to conduct research and provide more comprehensive statistics. However, since the Creators' Assistance component was abolished, the PMPA has had fewer means to provide better services to its publishers and to help them.

I have been the president of the PMPA for four years. Previously, as president, I would dedicate between 5% and 10% of my time to the association. Today, that figure is between 20% and 25%, on a volunteer basis. The association cannot continue on the same path. This is not sustainable over the medium term.

As for tariffs on streaming, I would say that publishers and record labels are worried about streaming because providing that service also cuts into their sales.

As one of your witnesses showed, the tariffs paid are very low. For 10,000 streams on Spotify, the revenue is $72. For the time being, this is not our salvation and will not save our industry.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Ms. Bihl or Mr. Daigle, did you want to add anything on this issue?

[Gilles Daigle]

It goes without saying that the available funds—and we hope they will continue to be available—are important for songwriters, composers and publishers. I am echoing Mr. Ferneyhough's comments. He said earlier that, unfortunately, a major portion of that funding was actually dedicated to the production of physical media, in the sound recording sector.

That said, our members primarily want to be compensated for the use of their works. We are asking for an equitable share, but of what? Let's start with the rates and tariffs that apply to the revenue of those online music services, including streaming services.

The Copyright Board held hearings in November on those issues, including streaming services. Even if we managed to obtain equitable rates—good rates of 10%, 12% or 15% for revenues generated through free online music services—if those rates applied to almost nothing, the amount we would receive would also be almost nothing.

Of course, some complex issues are behind all this. However, at the end of the day, we want our members to be paid for the use of any of their property. Although funding is important, we primarily want our members to be compensated for the creation and work that goes into their music.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

I understand.

Mr. Daigle, I would like to use my remaining 30 seconds to say that, even though everyone is happy to see that some amounts have been secured, it's important for the work we do here to be used by the House. The report on digitalization and digital issues in Canada that was tabled in 2011 has been shelved. It's sad that we have lost three years, even though the issues are as urgent as they are.

[The Chair, Conservative, Gord Brown]

Thank you, Mr. Nantel.

Mr. Dion, you have seven minutes.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Thank you, Mr. Chair.

Thank you all.

Thank you so much for being here.

You have touched on two topics. The first one is the current structure of the Canada Music Fund, and I would say that all of you have suggested a new structure.

In the perspective of the report of this committee, we'd like you to be as specific as possible on what you are suggesting for a new structure of the Canada Music Fund. Are you asking to come back to the creator's assistance program, or do you have other views about that?

My second question is about something you have all discussed—regulations.

Some things are still a bit unclear for us. Can you help us understand what the three-step test is? If other countries are adopting better regulations than us, what are those regulations? Try to be as specific as possible, keeping in mind that we will submit a report to the government.

There are two things to speak about: the structure of the Canada Music Fund and the kind of regulations you would like to see.

Maybe since he is far away from us, Mr. Murphy—

[David Murphy]

May I take the floor?

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Yes, you may start.

[David Murphy]

For now, I am not suggesting that the funding structure be changed. I am rather suggesting a simple change to the eligibility criteria for the Support to Sector Associations Program. Currently, this program requires a minimum operating budget of $300,000. If that minimum was reduced to $100,000, associations such as the PMPA or the CMPA could receive support through the program. Funding is provided to publishers and record labels, but only record label associations are provided with assistance. All the PMPA is asking for is this change.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Okay. Thank you.

[Elisabeth Bihl]

On your question on the Canada Music Fund, it has been in place for about the past 20 years, more or less. It has helped and it has been very effective during this time; however, as we've just discussed, everything has changed. There's a new business model and there's a new way of doing business. Therefore the fund that has worked so well in the past needs to be looked at now with new eyes, a new model that attaches to the new business—

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

What would be this new model?

[Elisabeth Bihl]

At the end of it all, you will have probably a very large panorama of the adjustments required. I will not be able to go into the details, but one has to understand that publishing, recording labels, and the association have different roles to play now. The whole fund has to be looked at from this point of view and redeveloped.

Ideally, it should be more than it is because it's a new world. We probably will need to look at expansion, but in principle, it has to be re-examined with a new model in mind for distribution.

[Jodie Ferneyhough]

As the music publishing group, we currently receive $625,000 that's supposed to be spread over 65 various companies that can apply for funding. There is one record company in Toronto that receives the exact same amount that all of the publishers do. I think it's an unfair balance that we receive 7.1% of the income, and one of the labels receives 7.1%. I'd like to see that balanced a lot better, moved and shifted, not necessarily to a fifty-fifty model, but more to a model that recognizes what you're doing.

If you're making masters, you should be able to get more money. If you're working with songwriters, you get different kinds of money. It shouldn't be based on whether you're a record label or whether you're a publisher. It should be based on the economics of doing business.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Mr. Daigle, do you have anything to say about this?

[Gilles Daigle]

Since I was the one who brought up the three-step test, I can perhaps respond to that part of your question.

To provide you with some context, the Berne Convention includes a clause on that three-step test. As far as exceptions go, the test is applied under the Berne Convention in the European countries that signed it. The idea is to try to limit the scope of exceptions to copyright.

So what are the test's components? First, exceptions must be limited to special cases. Their scope should not be general, but rather restricted to limited cases—special cases. Second, the exception must not be in conflict with the normal exploitation of the work in question—for instance, a musical work. Finally, the third part of the test aims to ensure that the exception is not unduly damaging rights holders' legitimate interests.

I have a suggestion with regards to this. Currently, this test is only used under the Berne Convention. In order to finally better protect rights holders' interests, the test should be adapted and included in the Copyright Act. That way, the legislation could bind the courts better when they consider the scope of exceptions. Otherwise, I think it's too easy for the courts to say that the three-step test is part of an international convention we are not bound by, and so that convention has no force of law within our legislation as such.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Is Canada the least regulated country under the three-step test and therefore the country that has implemented it the least often?

[Gilles Daigle]

I said the least regulated, but I should have instead began by saying that we have the most exceptions. Since our legislation as such does not contain that three-step test....

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Which countries have integrated the three-step test into their legislation?

[Gilles Daigle]

In Europe, the test and the convention's provisions automatically apply to the legislation of a number of countries. That's not the case in Canada.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

What's the situation in the United States?

[Gilles Daigle]

Like us, the U.S. is currently looking to adopt in its legislation....