Canadian Heritage Committee on April 29th, 2014

[Christian Breton]

In fact, I will answer by using an established artist as an example. I am not going to name any, but the situation arose twice during the past six months.

The artist approached us to obtain a licence for his album. The album was ready to be launched and the artist was looking for a recording company to market it. In this case, the artist was eligible for touring assistance. We had nothing to do with the tour. We were not producing the show. However, by signing with us for production of his album, the artist was no longer available for touring assistance. This meant a loss of $25,000 for the artist. In the past, we could compensate the loss of that amount by recovering it in other ways, but this is no longer possible. That is the situation.

We also do a lot of development. We launched a small independent label under Musicor that is called Ste-4, and we sign new groups under that label. However, those small groups have to grapple with the same problem; their survival often depends on the touring subsidy and currently they don't have access to it if they sign with us.

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

Once again, this indicates that the system reacts too slowly. Ten years ago it may have been true that an artist who signed with a big label received assistance for touring. Today, even artists who sign with a big label absolutely need to tour.

[Christian Breton]

I think that the difference is that 10 years ago shows were used to promote disks and to help with the sale of the disk. Today, a disk is often perceived as a tool to promote the tour. That is where we are at currently.

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

I have a question for you, and feel free to answer. I think all of you could answer the question.

Our study is about the ways we can help the music industry in a media context that is in flux. In Quebec, with an organization that is more independent from the other large international companies, we have managed to carve out a spot in the retail market, in the visibility market. It was not only the American rules. Over time we have managed to free ourselves from international rules and to carve out a place and take our fair share of the pie.

Currently, because of online streaming, we have to devise a reaction plan so that our music can carve out and maintain its place in this international competitive environment.

Do you think we should intervene in supporting marketing rather than production, which is doing rather well?

[J. Serge Sasseville]

There would have to be programs to support the aggregators who on behalf of several record companies, commonly called “labels”, stream our artists' music.

Did you want to add something, Christian?

[Christian Breton]

This goes back to what we were saying earlier. Regarding streaming, we negotiated with Sélect Digital for a year and a half to obtain better conditions. Our content has just arrived on Rdio and Deezer. Finally, when all of the major companies are at the table, our negotiating power is minimal.

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

What would you recommend? Is there something that could help?

[Christian Breton]

That's somewhat difficult for us, as we are sitting on the fence, in a way. We are managing a streaming service, and that is very difficult because we are fighting against giants. At the same time, we are trying to develop our service to help local and Canadian artists gain visibility. We also promote international artists. It's very difficult to survive.

No one is currently making any money in streaming. That's the problem. Even companies that provide streaming services make no money. A solution must be found to ensure that companies that provide streaming services can make a bit of money and that the royalties—although they are currently very minimal—do not become too high. Legislation should be passed for music that is broadcast at no charge.

[The Chair, Conservative, Gord Brown]

Thank you, Mr. Nantel.

Ms. Jones, you have the floor for seven minutes.

[Yvonne Jones, Liberal, Labrador, NL]

Thank you very much.

Thank you to the witnesses for your presentations this morning. It's a very interesting discussion, for sure.

This Sunday I logged on to YouTube and could listen to the top 40 hits for February all free. You can do that any day, which really causes one to wonder how those artists make money and a living today. It's not just the top 40, but it's everywhere. You go to a bluesfest or a jazzfest and you go home and you can go onto YouTube and look for those songs, the music, those artists and you can listen to them and it doesn't cost you anything.

When I hear what you're saying this morning with regard to where music sales have gone in the country, a drop by 46% since 2008, and how this is affecting artists and how they are able to contribute artistically via their music in this country, I can see where your concerns are.

It's very interesting that you just talked about live streaming and the fact that nobody is making money off it. My question this morning would be, what would your recommendations be to our committee to go forward to the federal government and how we make changes in the country to allow for some profitability for these artists and people who are involved in the music industry?

[Steve Jordan]

The first thing that has to be looked at is with current funding, the measurement for success tends to be aligned with record sales. I can't speak for Musicaction but definitely with FACTOR the measurement for how effective funding goes tends to go towards sales and that is not really a useful measure anymore. I think you can look at things like YouTube plays. You can look at streaming numbers, if any of the services actually release them, which I'm not sure is even possible; I know I've tried for Polaris nominees and have not had much success. I think more thought has to be given into how you actually measure the success of the projects and the artists that are currently being funded and are being funded moving forward.

The second thing has been touched on today. And it's becoming pretty clear in the minds of, I think, most of the people in the industry, that the recordings are there as a promotional expense, pretty much, and that the real way forward for any kind of economic success is touring and appearances. We can also touch on royalties that you get when a song is placed in a commercial or in a TV show or in a movie, that kind of income as well. These are things that can support those efforts and actually shifting focus more towards those things without, as I said before in my presentation, losing focus that artists still make albums. This is still their artistic output. It's the main thing that they go forward with; it's the reason why they tour. It's the thing that moves them to go forward as an artist, so you can't completely abandon the album and the recording as a thing to support, but the measurement for success and the way forward for economic success goes around all the other pieces that we've mentioned and that others, I'm sure, will mention.

[J. Serge Sasseville]

The thing is that right now we're in the middle of a transition period. I think that everybody is looking for the right business model. We thought a few years ago that it would be downloads. It is not. It may be streaming services, maybe it won't be streaming services. What's important is that the public funding allows artists and record companies in Canada to be able to position themselves on a market that is more and more a global market. We have to have funding programs that are in line with what's going on.

[Brian Hetherman]

Music has never been, I don't think, ever more enjoyed than it is right now. That's the biggest irony of it all. If ever music was the soundtrack of people's lives, it is currently right now. The problem is very few people are making money on it. There's going to be a long stopgap between where we are right now and the position where artists and rights holders are being paid enough to actually continue to do it. That's the sticking point: we need to figure out how we get from here to there. Everyone's made some very good suggestions as to a start at least.

[Yvonne Jones, Liberal, Labrador, NL]

Did you want to add anything, Christian, or you're good?

[Christian Breton]

No, I think I've given enough output.

[Yvonne Jones, Liberal, Labrador, NL]

Good.

I think the goal, obviously, is how do we get the exposure and the recognition both domestically and internationally, and how do we derive revenue from that? I think we can all agree. I agree with your statement. We're in a transition period, there's no doubt about that.

But if you were to look five years out now, in terms of the Canadian music industry, what needs to happen from a federal government perspective to enhance that industry and to increase that exposure both domestically and internationally into markets? Where should we be going? What direction would you be giving us now in that process, so that we make best decisions and best policies to enhance the industry?

[Brian Hetherman]

I think in the early stages we need to encourage the funders to focus some energy on the.... I don't want to say they should divert all of the funds towards touring, because that doesn't allow them to continue to make the recordings that are the stem of all of the other things we're talking about. I think, as it stands now, touring is still a very hard funding element to access. It needs to be more accessible. One of the key things I mentioned in my speech was being export-ready. There are levels of artists who can be successful in Canada on a smaller scale, but you need to be export-ready. You need to be able to go into a foreign territory.

I spend a lot of time outside of this country in some of my work with Canadian Music Week. So I attend Midem, Eurosonic, PrimaveraPro, all of these events in France, Holland, Spain, where Canadian artists showcase their work and/or work with other foreign companies, and see foreign acts showcase their work in other territories as well. If the artist is not export-ready, then it doesn't make any sense. No one's going to be interested. They'll just move on quickly. But if the artist is export-ready—and many of the artists that Steve has mentioned today at various points in their career became export-ready—and then made the transition to be able to get outside this country and make themselves known.... So we need to find ways to transition some of the funding over to touring and make it accessible.

Right now, the funding agencies or organizations are going through a period of transition. How do we fund enough that these recordings can actually happen and be marketed because of the expenditure related directly to promotion and marketing? Where's the cutoff line as to what artists should be considered export-ready? That's a tricky slope right now.

[J. Serge Sasseville]

I would go at it a little bit differently. I think that we have to embrace the digital world and have measures and programs that allow us to take our place in the digital world. First, the catalogue, it has to be digitized. An important part of the catalogue of Canadian songs has not been digitized, so is not available in the digital world, first of all.

Second, support our Canadian services, be it downloading or streaming. Make sure that they compete on a level playing field, which is not the case right now, as I just explained, because of the tax situation. A Canadian who subscribes, who buys work from a Canadian artist on a Canadian platform, pays more than on a foreign platform because of the tax situation. At the end of the day, like I said, if all Canadian platforms are being shut, we lose control over the way our music is positioned because it will be all on foreign platforms. Then, we have to make sure that—

[The Chair, Conservative, Gord Brown]

I'm sorry, I'm going to have to cut you off there. I'm sorry about that, but we're well past our time.

We're going to have to move to Mr. Hillyer for seven minutes.

[Jim Hillyer, Conservative, Lethbridge, AB]

Thank you.

Before the committee makes a recommendation to the government, I want to make sure that we have an understanding of the proper role of government in any endeavour, whether music or not. We're talking about a cultural heritage; we're also talking about economic support. Nowadays the government gets involved in all of those things.

But I am going to ask a couple of questions about whether or not this.... We talk about the fact that it's tougher for artists to make a living. I guess my first question is why artists who get paid a few cents per stream or .00-something cents per stream license their music to these people. If it's not profitable, then why do they do it?

[Christian Breton]

They feel that if they're not there and every big artist is, they can't compete. As I said, our catalogue has been available in Rdio and Deezer in Canada since this week, actually. We're just on this week. Rdio is actually putting out a press release to say that they have our catalogue now. However, we know they're not paying much; artists know they're not paying much, but they were calling us asking why they weren't there and saying that they want to be there.

It's promotion. As I said, it's like the recording of the CD and what we were saying earlier about touring. A CD is now a promotional item. For them, it's paying them pennies, but they're going to be there and they're going to have exposure. That's basically why they want to be there.

[Brian Hetherman]

Some international artists in the past and currently—Rolling Stones, AC/DC, bands that are massive historical bands—don't make their recordings available for those streaming services, but they are in the fortunate position to be able to say “you can't have it”. In many cases, some of them prevented their music from being available on iTunes for many years as well.

The problem, if you're a developing or a current artist, is that it's not as though you're making the sales up in other areas. In other words, if you withhold your music from a streaming service, you aren't automatically selling more CDs or even the same number of CDs or the same number of digital downloads. Basically, what is happening is that those sales are eroding regardless, so whether you have your music on a streaming service or not, your sales are decreasing.

Most people I think do it. As someone running a record company, I was certainly resistant at first at making my music available on streaming services, especially after I got the first royalty report. But to not be there means that you're not living in the current world of the way people consume music.

To the point earlier about YouTube, I know that probably 80% of the people who experience the artists whom I work with do so on YouTube or some service like it, from which I get paid a minimal amount or next to nothing. But it continues to build the artist's profile in the hope that, if there's a perfect storm and we get a radio hit or get a song on the video channel, the YouTube streams are—

[Jim Hillyer, Conservative, Lethbridge, AB]

In the past, we used to have to pay for that exposure. Now we're getting paid .0001 cents for that exposure, so I'm not sure that it's appropriate for us to say that they're not getting paid enough and so we have to do something about it. Artists are finding value in doing it.

I think we need to make sure that contracts are observed and that people aren't forced to put their music on, and we should have regulations against services such as Napster, which would start downloading music that artists never agreed to have downloaded. But if this is something that we used to have to pay for, I'm not sure that we want to step in and make sure that the—

[Steve Jordan]

It might not be clear. This is not something that they used to have to pay for.

[Jim Hillyer, Conservative, Lethbridge, AB]

Well, advertising....