Thank you, Mr. Chair, and members of the committee.
My name is Ian MacKay, and I am the president of Re:Sound Music Licensing Company.
Re:Sound is a not-for-profit organization dedicated to obtaining fair compensation for artists and record companies for their performance and communication rights. We represent the royalty rights of more than 12,000 musicians, including featured and session musicians, as well as record companies when recorded music is played on commercial radio, satellite radio, pay audio, music streaming services, and in other businesses that use music. The money we collect is split fifty-fifty between the performers and the record labels.
Re:Sound's member organizations are Artisti, who are here with us today, ACTRA RACS, the Musicians Rights Organization of Canada, MROC, the Quebec Collective Society for the Rights of Makers of Sound and Video Recordings, SOPROQ, and Connect Music Licensing, who has already appeared before this committee.
The committee has already heard from a number of witnesses about the challenges facing the music industry and how that industry is changing. There's no question that recorded music is being consumed in more ways than ever before, with some sources of revenue declining, like CD sales, while others have some growth on the digital side.
The distinction between what is core music consumption and what is secondary music consumption is not as clear as it once was. Today a significant part of the income received by musicians and record companies comes from royalties for uses of recorded music on broadcast radio, satellite radio, pay audio, and increasingly, from music streaming services. Re:Sound licenses these uses on behalf of performers and record companies through rates that are certified by the Copyright Board of Canada.
As Stuart Johnston, the president of the Canadian Independent Music Association, said when he appeared before the committee a couple of weeks ago, the industry has splintered in terms of revenue sources and what was a dollar business has become a pennies business. At Re:Sound our focus is on getting fair rates for creators of recorded music, collecting all those pennies, and getting them to the rights holders, doing our part to ensure a healthy musical ecosystem.
There are two main recommendations Re:Sound would like to make to the committee today that we believe will be important in ensuring that Canada continues to have a strong recorded music industry going forward.
The first one is the elimination of the $1.25 million exemption for commercial radio. The second is ensuring that the regulatory process here in Canada is well placed to encourage a thriving musical economy and efficient digital marketplace. I will now speak to each of those in a bit more detail.
First is the elimination of the $1.25 million exemption.
In 1997, the Copyright Act was amended to grant performers and makers of sound recordings the right to receive fair compensation for the public performance and communication of their works. This amendment brought Canada in sync with 85 other countries around the world. Previous to this, only composers and music publishers, represented by SOCAN, had received royalties from radio play, while the people who performed and created the recordings had not.
The right was meant to parallel the existing composer-publisher right as it does in other countries, but it was substantially restricted at the time by a provision that commercial radio stations were only required to pay $100 on the first $1.25 million in advertising revenues. This was and remains the only such subsidy in the Copyright Act and the only subsidy of its kind in the entire world.
The rate-setting body, the Copyright Board, weighed in on this subsidy as far back as 2005, stating, “Even the smallest of stations would be able to pay the tariff,” and further, “allowing large, profitable broadcasters to escape payment of the full tariff on any part of their revenues constitutes at best a thinly veiled subsidy and is seemingly based on no financial or economic rationale.”
This subsidy removes about a third of the royalties performers and makers would otherwise receive from commercial radio. It reduces those royalties by about $8 million per year. The bulk of this subsidy goes to a handful of large radio groups. Removing this subsidy would cost nothing to government, but would mean that commercial radio would pay the proper royalty set by the Copyright Board for the use of recorded music, rather than the substantially subsidized rate they currently pay.
My second recommendation, as I said, is regarding the regulatory process for music. I quoted the Copyright Board just now, and you've already heard from a number of previous witnesses about the crucial role the Copyright Board plays. The Copyright Board is the tribunal that sets the rates to be paid by businesses that use music, including commercial radio, satellite radio and streaming services, and webcasters.
The concern is that with rapidly changing business models in the music industry and increasing demands on a Copyright Board with limited resources, as currently formulated the regulatory process can be perceived as a barrier rather than as a facilitator.
The committee heard from diverse witnesses in the last few weeks including Jodie Ferneyhough, the president of the Canadian Music Publishers Association; David Murphy, the president of the Professional Music Publishers Association; Gilles Daigle, the general counsel of SOCAN; and Victoria Shepherd, the executive director of Connect Music Licensing; that there is a need for a faster regulatory process, particularly in the emerging digital marketplace. This is also highlighted in Music Canada's report from last year, entitled “The Next Big Bang: A New Direction for Music in Canada”.
Victoria Shepherd quoted the statistic that 21% of total industry revenue in the U.S. comes from streaming, while in Canada it is only 7%. Vanessa Thomas, the managing director of the streaming service Songza, who appeared a week or two ago, said that part of the explanation for this gap could be because music services are not launching in Canada because they are still waiting for some of the rates to be set by the Copyright Board.
These businesses need to know what they have to pay for music, and the rights holders, the performers, and the record companies need to know what they will earn. Parliament needs to ensure that the Copyright Board is adequately resourced so that the regulatory process facilitates a thriving digital music business that encourages innovation of new models of distribution for music, which will then take the place of what we know is the big problem with services that provide music and nobody gets paid for.
Thank you for your time today. I would be pleased to answer any questions that the committee has.