Canadian Heritage Committee on June 5th, 2018

[Peter Van Loan, Conservative, York—Simcoe, ON]

That's probably a prudent response.

The sound recording definition was another issue that you folks raised. Can you tell us how you would like that to be reworked? What is it that is lacking in the definition now, and do you have an alternative wording of how that could be changed? This is within the act, right?

[Stuart Johnston]

Yes it is.

The current proposed wording is being worked on right now. I believe my colleague Graham Henderson was here last week talking about the same thing.

[Peter Van Loan, Conservative, York—Simcoe, ON]

I think I asked him similar kinds of questions.

[Stuart Johnston]

Yes, and they're putting together some language that hopefully will be before you in short order. We're working on that right now.

[Peter Van Loan, Conservative, York—Simcoe, ON]

The other one of your asks was this radio exemption, and this is the first $1.25 million, I think it is, of revenue to a radio station is exempt from commission. That was—I wasn't there but I believe—instituted so that you had some protection for the mom-and-pop radio stations, the small-town radio station. The argument that is made by folks in your industry is that when that was done, there were a lot more mom-and-pop radio stations. There's been a lot of industry consolidation since, and everybody belongs to the big giants. We know that a lot of them do, but not all of them do.

Is there a compromise, an approach here that can be found that still provides that protection for the small-town radio station, which literally provides a kind of community service to a small town, while at the same time allows you to achieve some of your objectives reflecting the change in the industry writ large? Do you have an objection to something protecting or achieving that original objective for the mom-and-pop radio station?

[Stuart Johnston]

No, of course not. The year 1997 was a different era for Canada's radio broadcasters, private radio broadcasters, the commercial broadcasters—CBC, as an example, is exempt from this exemption—but it was a different day. As you pointed out, there were many more mom-and-pop stations across Canada.

In the last 20 years, of course, we've seen a tremendous vertical integration in the industry, consolidation of the players. But where there are small family operations that are not part of the conglomerates, for sure.... One could even look at those earning $1.25 million a year in revenue—or less—pay the $100, as opposed to the first $1.25 million is exempt, other than the $100. I'm sure there is a compromise to protect the small ones, but really it comes down to the premise. It's a theme that we're all saying, music has value. If you're going to use the content and commercialize it, please pay the value.

[Peter Van Loan, Conservative, York—Simcoe, ON]

I'm going to ask the other set of witnesses to give your thoughts on the exact same three questions, and if there are other changes you would, specifically, want in. We have these three specific ones, and I think that's very helpful to have specific recommendations for a change.

[Alain Lauzon]

Thank you very much.

You have to understand that we are not on the same basis as the copyright that we represent. CIMA and Mr. Johnston represent what we call the song recording, and we represent the works. In the law, it could be written differently. We can assume that for the works, there's not that level of exception with the radio broadcasters compared with the others.

[Peter Van Loan, Conservative, York—Simcoe, ON]

You have all the protections they're complaining they don't enjoy yet.

[Alain Lauzon]

I would say that's something.

We issue licences for non-commercial radio, very small licences. All of them are lower than 1.25%, but we issue licences. It's our right because we have the right to issue licences. They may be small amounts, but, at least, for the use of the music, our members are paid under the law. It's not an exception. When it comes, and when we were in front of the board with the low-revenue stations, we got them a lower rate because we have the right, but we discussed it, and we came to an agreement with them for the low station. It's the difference between having an exception and having us come to an agreement with the radio broadcasters related to that level.

[Peter Van Loan, Conservative, York—Simcoe, ON]

Would you prefer it to be just contractual arrangements or Copyright Board arrangements rather than a statutory change?

[Alain Lauzon]

No, we went through the Copyright Board, but we still discuss those kinds of things. Our point is that we receive fair value. We understand that small radio stations don't have the financial ability that the large radio stations have, but we prefer to negotiate to have the right instead of an exception.

[The Chair, Liberal, Julie Dabrusin]

Now I'll turn the floor over to Mr. Nantel for seven minutes.

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

Thank you very much, Madam Chair.

Thanks to everyone for being here this morning.

My first question is for Mr. Moncada.

One of the biggest members of your association is Arts & Crafts Productions. I think this is a very interesting name for a label because this is precisely what a label stops doing, which is professionalizing the artist. I mean it in a very good way. The competition internationally is super industrial. It's not arts and craft artists doing things in their basement that is the big invader. Everybody is listening to the same stuff, discovering all sorts of stuff. There are many good things about it.

Since you are representing independent music labels, are there any nuances you would like to bring to the presentation by Music Canada? Of course, representing all American labels, they do have a good amount for budget and representation. They made a very good presentation and laid out some issues. Are there any nuances you would like to provide concerning what they said?

[Chris Moncada]

I haven't seen what they said, but I can add some colour to an independent Canadian label in a global marketplace, if that's what you're asking.

I think the major difference between what we do and what they do is that they have the luxury of what I call “catalogue cover” every quarter or every month. A label like Warner knows that old Fleetwood Mac records and old Neil Young records are going to stream and sell a certain amount every month. That's in their budget every quarter. They know they're going to get that, so they can take risks on new talent accordingly. A label like Arts & Crafts or Dine Alone Records or Last Gang Records does enjoy some catalogue cover, but not nearly the amount. I'm eating what I kill every quarter. With that risk comes a lot of scrutiny and a fair amount of stress to make sure that you're seeing success with current music all the time.

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

Thank you. What an expression; it's like a squirrel.

We all know that what you're referring to is the parallel in Quebec with the ADISQ, being of the same type of companies but probably a bigger commercial volume, so they see the difference very obviously. It's important to nuance the points of view that are brought up here.

Messrs. Lauzon and Lavallée, you mentioned value gaps and the migration to new listening platforms. The Minister of Canadian Heritage constantly talks about a cultural ecosystem, but it's also a Rubik's cube consisting of various issues that influence the situation. The only observation we can make at this time is that rights holders, that is to say, the creators, are not the ones who reap the value. That's very clear, and everyone agrees. The CRTC has clearly stated it, and people in the business have breathed a sigh of relief: the arbitrator just said something that was consistent with reality.

What do you think of its recommendation that we finally ask Internet access providers to make a contribution?

[Alain Lauzon]

Several years ago, all stakeholders in the cultural and music community requested that Internet access providers be required to make some form of contribution. However, developing that idea is still the biggest problem. The willingness of Internet access providers to make a contribution is also an obstacle. I've been working in the industry for 15 years, and we've definitely been talking about this situation in the context of the Internet for 10 years.

Several potential solutions are possible, but one thing is certain, and that's that we're in favour of the idea of asking Internet access providers to make a contribution.

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

I would also like to discuss the need to reform the Copyright Board of Canada. The CRTC has not addressed this issue because it's not at all its responsibility. On the other hand, we've heard a lot about it. Unfortunately, there are no publishers among us today. I'm surprised that this issue hasn't arisen more often since the start of these hearings, but everyone agrees on the strange nature of this agreement that the publishers have signed, which provides that fractions of cents will be paid to rights holders in the context of ongoing distribution services. We won't be able to change this situation. The major artists represented by these labels and the publishing houses themselves have lamented the fact that their music, on a piecework basis, is not worth much.

Do you think we can hope that a compensatory measure will be adopted for Canadian rights holders whose visibility, discoverability, and markets are undoubtedly more restrictive than those of international artists?

My question is for Messrs. Johnston and Moncada, as well as Messrs. Lauzon and Lavallée.

[Stuart Johnston]

There are so many answers to that. There are so many nuances to that broad question. We were encouraged by the CRTC report last week. We know the Broadcasting Act is going to be reviewed over the next year, and the CRTC report is hopefully going to form the basis of that review or at least feed into that review. I think that CRTC report had a lot of very positive recommendations along the lines of what you were just discussing, with regard to ISPs and levelling the playing field. That will go a long way.

The fact that we're here today reviewing the Copyright Act and looking at ways to improve the Copyright Act to hopefully keep on top of the modernization of the digital world we're living in is, I think, very positive, as is looking at removing the exemptions and examining the exemptions that we're all talking about—the radio exemption, the sound recording definition, and whatnot. All of these pieces will feed into the system and strengthen the foundation for our creators.

Going to the question you're talking about, with regard to the deals with the digital service providers, the Spotifys and whatnot, those are in part market rights, particularly the fully interactive services like Spotify. They are negotiated via labels. Fortunately for the independent community in Canada and around the world, we have a body called Merlin. Merlin is based in Amsterdam, London, and New York. They represent 20,000 independent labels around the world, and they negotiate with 20 digital services like Deezer, Spotify, and YouTube, so we have someone in our corner, the independents, who has a very strong voice. We represent 12% of the digital market through Merlin.

There are things happening, and there are organizations out there that are working very diligently, but for the purposes of today, there are many things we can change within the market in Canada through the recommendations that we and others who have appeared before you are making.

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

Is it correct that—

[The Chair, Liberal, Julie Dabrusin]

We'll have to leave it on that note, unfortunately. Maybe we can carry that through in the next sets of questions.

We are now going to Mr. Hogg, for seven minutes, please.

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

I will be sharing some of my time with Mr. Virani.

I think the four recommendations you came up with at the beginning, Mr. Johnston, are pretty similar to things we have been hearing through all of the testimony, and Mr. Lavallée's question with respect to how we have come to have a system in which we have moved from protecting authors to protecting users is then contained within that.

Are there some principles that underlie all of these recommendations? Is there a set of principles we might look at because we don't know what the future will bring in terms of digitization? You made reference to blockchain and the issues around that.

Are there some principles that should be inherent in these recommendations that made reference to the issue of equity? I'm not sure exactly what equity means. It probably means something different to each shareholder or each segment of the industry. Are there some foundational principles we should be looking at that underpin a number of the recommendations, for instance the four recommendations that have been made for virtually all of the testimony we have received, some things we might look at that will give us a little more endurance into the future?

[Stuart Johnston]

I think before you there is a document we distributed on behalf of, I think, 19 music industry associations. We submitted it to the Department of Canadian Heritage in the fall. SODRAC is a signatory; CIMA is a signatory, as are CMPA and many others. We have broken down these recommendations into principles. They are real-world applicability, forward-thinking rights, and consistent rules. We have broken down our recommendations under each of those headings.

I think what it comes down to ultimately is that we need to ensure that those who create and commercialize intellectual property are protected and paid under our law. I think that's the basic premise.

[Chris Moncada]

I can add to that, Stuart, if you want.

[Stuart Johnston]

Please.