Mr. Chair, and members of the committee, thank you for inviting me to speak here today. My name is Justin Erdman. I'm a drummer, a huge music fan—heavy metal, in particular—a 12-year veteran of the Canadian music business, and the Canadian managing director for Deezer, the most widely available subscription streaming music service on earth. We are currently operating in 182 countries, with over 30 million songs streaming on the web, smart phones, tablets, and dozens of other devices.
My teammates and I are proud to have launched Deezer in Canada with a real reverence for and commitment to this country. Our nation's unique listening habits are a function of our multiculturalism and multilingualism, so we have ensured right from the start that we have representatives in both Toronto and Montreal and that we have catalogues from not just from the major labels, but also from as many Canadian independents as possible in both official languages, and many languages beyond. Just recently, for example, we added a huge amount of the franco-Québec repertoire from our friends at Distribution Select. We are proud to have their catalogue available on Deezer.
Mr. Vice-Chair, I saw from a previous meeting's transcript that you're currently a Deezer user. I thank you sincerely for that, and hopefully our new additions to the catalogue will improve the experience for you.
Speaking of which, we are equally proud of a self-imposed mandate. We deliver a minimum of 33% Canadian content in our recommendations and promotions, with a goal of promoting Canada's incredible musical pedigree as well as amazing young Canadian artists whom we aim to develop into global stars.
Deezer's reach and unique human-based editorial approach helps Canadian stars break out beyond our borders. In our first year we've helped to promote internationally artists like Wildlife, Misteur Valaire, July Talk, and Brett Kissel, whom we've spoken of before, and we go even beyond that. In less than a year, starting with our official launch in June 2013, we've now directly invested several hundred thousand dollars into promoting Canadian artists, their albums, and the tours and festivals they perform in.
Even in its relative infancy, streaming is a highly competitive business with small start-ups and giant conglomerates alike jumping into the fray. Each company has different goals, but I believe my teammates and I are in it for the right reasons: introducing Canadian artists and music fans to an exciting future in which more artists become successful, more music is listened to, and the Canadian music business grows rapidly because of technology, not in spite of it. I have a few ideas for specifically how we can help that process along.
I've read with great interest the transcripts of previous hearings on the topic. You've covered a lot of ground and you've had a lot of champions of the industry here before you. We're a varied bunch and yet we all share a common thread. We are the beneficiaries of years of robust government support of Canada's cultural industries, and in music, through Canada Music Fund, FACTOR, Musicaction, and other structures, as you've heard. The support is more important than ever but perhaps the time is right to begin an evolution of these structures.
We're entering the third generation of the music business, the post-piracy years. The first generation was physical objects being sold, records, cassettes, CDs; the second was digital files, MP3s; and the third was streaming, a service-based model as opposed to selling a thing that fans then own. This phenomenon has been called the rentership society. You may have heard this term. Young people see no need to buy things as they once did. With homes, cars, cable TV, and of course, music, you can rent them all with no commitment.
But where does that leave our precarious music business model that is predicated almost exclusively, until recently, on selling things? Well, that's where music streaming answers. A recent speech at the global music industry gathering Midem, by Marc Geiger of William Morris Endeavor, the global talent agency, suggested that subscription rates will actually rise over the next 10 to 15 years, and the commonly-accepted view of the music industry's glory days being long past is simply a misunderstanding of current trends. The fact is fans will spend more money each year on music through subscriptions than they did in the previous two music business generations. As an example, at Deezer's regular retail price of $9.99 for our best service tier, that equates to approximately $120 per year per user. In previous generations, the average was between $40 to $55 per user per year, depending on which source you use. More money in the system means that labels can afford to invest in more artists, and because the services are available on so many devices and are so easy to use, fans listen more. In the case of Deezer, it's around 60 hours a month, on average.
So streaming is quite simply the future. And now the challenge before all of us is to arrange that path as neatly as possible. This is not just self-interest as a business person; this is much more self-interest as a music fan.
Here are four suggestions on how to do this. I should point out they are not the official position of my employer. They are more based on my individual experience. Previous to Deezer, I was at Universal Music Canada, and before that at MuchMusic.
First, encouraging foreign investment in music technology is vital. Music technology is an incredibly hot sector. Streaming services, apps that supplement the listening experience, and Internet-connected audio hardware have all seen a huge amount of activity of late. Deezer is arguably the best example of how a foreign-owned music technology business can inject new direct funds into the Canadian music industry, and we should seek new ways to encourage others to do the same. The most immediate way would be to streamline the set-up of international branch operations such as the one I set up for Deezer, and to provide guidance and assistance when it comes to following the various administrative and taxation policies currently in place.
I spent a lot of time just learning what the right questions were, and I'm still figuring out the answers.
Second, we should incentivize telcos to include music as a standard part of each cell phone plan. Mobile is the future. According to the CWTA, there were 27.6 million subscribers in Canada in 2013, and more than half of that number have smart phones that are primed to use music services like Deezer. Two-thirds of our user base currently use Deezer on their mobile devices. So if telcos and their devices are the access point for the music business of the future, we need to ensure that the telcos see their role here as fundamental to the sector's renaissance and growth, and that they are given good reason to participate.
Third, I would like international streaming services to be able to access grants or matching funds to promote Canadian artists internationally. Currently we can't do this. We have to have the labels or artists do this themselves, which just adds an extra step. Instead I propose giving services like Deezer access to at least matching funds specifically for international promotions. This will benefit artists, music fans, and of course services like ours that are providing jobs and direct investment in the country.
The final point is education, something many of my colleagues have brought up in previous meetings, but I come at it from a different angle. Having pirated music myself in the past, I know how easy it is. I know how impossible it is to legislate it away. Students are the biggest consumers of music, and many build their identities around the music they love. So let's focus on getting students using legal music options earlier and thus educating them on the value chain that makes their favourite music possible. Let's include streaming options as part of their education. They will then access legal music that compensates creators. As they get older, they will hopefully continue to be subscribers benefiting the next generation of developing artists.
Thank you for your time, and I look forward to questions.