Canadian Heritage Committee on June 5th, 2018

[Richard Hébert, Liberal, Lac-Saint-Jean, QC]

My next question concerns precisely the point you're making. How are your artists remunerated at the ole company?

[Jason Klein]

Speaking as a music publisher, I would say the music publishers actually have one of the most creator-friendly remuneration models there are. There are several types of deals that we do, but for the typical publishing, which you may have heard of from the Canadian Music Publishers Association, there is generally a fifty-fifty rule that you split. That has become a bit of a convention. We refer to it as a writer's share and a publisher's share, and SOCAN is certainly very familiar with this concept. The performing rights societies are a big part of how that convention was established as it's codified in their distribution rules.

On a typical co-publishing agreement, where we invest in a songwriter and we acquire a share but not all of the copyright ownership, the typical co-publishing split there is about 75:25 in favour of the creator.

[Richard Hébert, Liberal, Lac-Saint-Jean, QC]

Now I'll turn to the two organizations.

I've heard a number of proposals, such as ending some of the exceptions under the act. Could payment of a royalty upon purchase of a cell phone or laptop or desktop computer be a solution to generate revenue to assist artists? Can you answer with yes or no?

What do you think, Mrs. Côté?

[Geneviève Côté]

That's for sure. It's what M^e Daigle was saying about private copying. We think this system should absolutely apply, regardless of what the music is copied onto. Not a lot of blank compact discs are sold any more.

[Gilles Daigle]

I can play Spotify's repertoire for you in five seconds.

[Jason Klein]

It's an essential way in which we all use music. I won't speculate, but most people who have smart phones are using them for music, and it's certainly the way we listen to and consume music.

We're in a pennies business more and more these days. We can't discount what appear to be small pieces of revenue because they all add up to what, at the end of the day, should justify our continued investment in music and the continued creation of new content.

[The Chair, Liberal, Julie Dabrusin]

Thank you.

We will now go to Mr. Eglinski for seven minutes, please.

[Jim Eglinski, Conservative, Yellowhead, AB]

Thank you, Madam Chair.

Welcome to our presenters today.

On Saturday morning I woke up about six o'clock and flicked on the television and there was a gentleman selling CDs from the artists of the 1950s. I actually watched the program for an hour as they went through because that's my era of music. Patsy Cline was on there and Elvis and all of those. You can get 160-some songs for five simple, easy payments of $29.95, and if you send it immediately within the first eight minutes, you would get a free CD of Elvis alone.

I was thinking about our committee when I was watching this and I said, “I'm going to listen to this for a while.” That's why I did listen for an hour, but the music was good. I could understand it as it was clear and precise. I don't remember the company that was pushing this but there was a guy on there for an hour and he was trying to sell. Would there be royalty rights going to those old stars for their doing something like that? It was a promotion program using the old music of the 1950s. I was just curious.

Mr. Klein.

[Jason Klein]

That really depends on what was on that compilation. There may be some sound recordings that have lapsed into the public domain. There may have been some that weren't, or are newer recordings of those older songs that are still protected. Certainly most of the compositions would likely still be protected by copyright, so there would have been some sort of back-end arrangement where the publishers likely were compensated to some degree for that, and to the extent that there were copyright-protected masters in there, there would have been some underlying deal. Of course, for the telethon, it was marked up substantially.

Unfortunately there are people who don't know about Spotify yet—

[Voices]

Oh, oh!

[Jason Klein]

They're prepared to spend those five easy payments. Most people are going for the 12 easy payments and getting everything, but it's good to know that's still there.

I think behind the scenes everyone is still getting paid.

[Jim Eglinski, Conservative, Yellowhead, AB]

I was trying to determine how he could make money with probably 30 or 40 artists—a good number of them dead, but some still alive. How would he be making money at roughly $150 for all these songs, and yet if he had to pay royalties.... I was very curious, but so much for that. It's still there.

[Jason Klein]

It's probably a licence royalty per master. On a compilation, that would be ordinarily somewhere in the range of 10¢ to 15¢ per track.

[Jim Eglinski, Conservative, Yellowhead, AB]

Okay.

[Jason Klein]

Then there would be a physical, or what we call on the publishing side, a mechanical royalty, to the extent that these are protected compositions, which is 8.1¢ per song in Canada. If you do the math on that and look at the retail markup, he's probably still doing okay. When you break that down on an individual songwriter basis, no one is making a ton of money there, other than the person selling that compilation for the five easy payments.

[Jim Eglinski, Conservative, Yellowhead, AB]

It's guys like me, early in the morning.

[Gilles Daigle]

I think it's an interesting point that you raise. If the copies of those CDs and the embedding of the music in those CDs are made in Canada, and the CDs happen to have music from Sam Cooke, Jim Reeves, and Otis Redding, then there's a good chance that there wouldn't be any royalties payable to them because their works are not protected in Canada for 70 years, the way that they are in the United States. That's something that, of course, is of concern to us.

[Jim Eglinski, Conservative, Yellowhead, AB]

You're right. Thank you.

[Gordie Hogg, Liberal, South Surrey—White Rock, BC]

Did you buy it?

[Jim Eglinski, Conservative, Yellowhead, AB]

No. My wife said, “No, use this.”

I was going to say, “It's only $150.” I'm old-fashioned. I'm trying to help out the poor guy.

[Pierre Nantel, NDP, Longueuil—Saint-Hubert, QC]

You could have made copies.

[Jim Eglinski, Conservative, Yellowhead, AB]

Yes, I could have made copies.

Mr. Klein, you mentioned something about a Conductor program. You didn't go into it too much. I wonder if you could explain it a bit more. I would also like you to dwell on why the digital thing is the real challenge for you.

The second part of the question is, you tell us what we can do to help you on that. That is directed to the committee.

[Jason Klein]

Certainly. I'll turn to the Conductor question first. Conductor is a software solution that we've developed for internal purposes over the past five or six years. It does everything from ingesting the deals that we use when we enter into a new agreement with a writer or we purchase a catalogue.... All that information goes into Conductor. All of the works that are part of that deal are populated into that software. It takes care of ensuring that the works are properly registered around the world and with all the various societies, including SOCAN and its counterparts.

Most importantly, it pulls in the data that we receive from hundreds of different service providers, collective societies, and rights management agencies around the world. As you can imagine, that data doesn't always perfectly align. In fact, I would say it mostly doesn't. Our software works to conform that data, so that we can properly match it and ensure that we're not sitting with massive pending lists of unmatched royalties. It essentially ensures that we're distributing royalties accurately to our rights holders and that we're not missing anything.

That's the essence of what that software does. It sort of takes everything from the deal side all the way through to the user side and pulls all that data into one place. It does it very effectively. That's something we've developed over the past several years and it's been very helpful. Obviously, as part of the move to digital, the challenge we face is in data and ensuring that the data can be processed effectively, that royalties don't get missed, and that the reporting we receive is complete and accurate.

As for the move to digital, and the challenges, and what the committee and the government can do for us.... It goes back to the recommendations that we've all made. It's to ensure that, at the end of the day, we have the leverage we need, as creators and investors in creative output, to negotiate fair value for our rights. Essentially, that means revisiting some of the exceptions that were introduced in 2012.

Even the charity exception that Mr. Daigle mentioned is an example of how there's a slippery slope when you introduce user rights in the form of exemptions, where they're open to interpretation. They can be misinterpreted or applied in a way that doesn't necessarily reflect the original intention. I think that's what needs to be done here with the exceptions that we've identified, to ensure that we have the leverage that we need as rights holders to negotiate fair value for the use of our property.

[Jim Eglinski, Conservative, Yellowhead, AB]

Thank you.

[The Chair, Liberal, Julie Dabrusin]

Now we'll move on to Mr. Nantel, who will have seven minutes.