Canadian Heritage Committee on June 5th, 2018

[Chris Moncada]

Just to put an exclamation point on Stuart's comments, the model, as we see it now, is that the industry has several Canadian players at a certain level from an independent label perspective. The health of those labels is what I think we're talking about here. The independent sector historically will do artist-friendly deals that will keep artists under contract for a short period of time. What we see happening time and time again is that artist X will sign a deal with independent label A, B, or C in Quebec or in Canada, and it either goes well or it doesn't. If it goes very well, then more times than not that artist is essentially taken out of that Canadian independent label with a large advance offer by an American company or a U.K. label. They then continue their career outside of Canada from an IP perspective.

So that's what Canada is losing: the IP. When we talk about how well Canadian music is doing, it's Drake, it's Bieber, it's Mendes. Those are Canadian passport holders, but they have American contracts. They are not contributing to the Canadian IP pool.

That said, Mr. Hogg, I think what we're trying to get at here, and maybe this is a good kind of common theme for you, is that if we can have more Canadian labels rise up from just that lower level to a more middle level, where that second contract that the artist needs can be funded and exported properly by a Canadian company, the IP stays here. The Canadian company grows and the artist maybe continues their business here rather than having to go somewhere else to do it.

All of what my colleagues here are examining will drive our bottom line and help us do that.

[Martin Lavallée]

With your permission, I'd like to add a partial answer.

In our minds, the principle underlying all these objectives is to establish a Copyright Act that clearly defines the creator's right, that clearly defines the ins and outs of what rightly falls to the creator. Once that's established, the rest will flow from it.

Earlier Mr. Nantel discussed compensatory measures that you would like to see implemented. However, we don't need compensatory measures if artists are compensated based on the fair value of their rights and if all that can be negotiated at the bargaining table. Leverage is needed to bring the players to the bargaining table. That lever is the act. An authorization must be obtained, and the negotiation is completely undermined if there's the slightest doubt that the authorization can be obtained. Consider a situation in which the person states at the start of the negotiations:

“I'm not even sure if I need to pay you. I may do so out of political reasons, but.... Well, let's talk.”

At that point, you immediately know that the value has fallen by half.

They give you the sense that you have no choice.

In my opinion and that of the Society for Reproduction Rights of Authors, Composers and Publishers in Canada, authors and creators should have the freedom to negotiate an agreement respecting their works in the conditions they wish and not be prevented from negotiating such an agreement because they are subject to an exception provided for in this act.

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

Madam Chair, how much more time do I have?

[The Chair, Liberal, Julie Dabrusin]

You have a minute and a half.

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

Okay.

Go quickly, Arif. Sorry about that.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thanks.

I wanted to ask you a few questions, Mr. Johnston, because through the questions posed to you by Mr. Van Loan, you were sort of put into the issue of cultural protections and trade. The impression that was left with the committee was that this was somehow a leverage piece, or that the Canadian government was not doing what it needed to do with regard to cultural protection in terms of trade.

I want to ask you for your comments on the fact that in the CPTPP, the agreement that was renegotiated after the exit of the United States, our government ensured that the cultural exemption continued to exist, and extended it, for the first time ever in Canadian trade history, to digital content and web content, allowing us to regulate in this area.

Minister Joly was very clear that the fact that it wasn't on the table in the first go-round was what prevented the Prime Minister from signing on to the agreement in the first go-round. We doubled down on that and ensured that it was protected, for the first time.

How does that impact the exact issues you're talking about with regard to supporting Canadian artists in terms of their remuneration in the digital world?

[The Chair, Liberal, Julie Dabrusin]

If you're able to answer that, you have half a minute.

[Stuart Johnston]

Oh, geez—answering cultural protection in half a minute.

[Voices]

Oh, oh!

[Stuart Johnston]

The only thing is that it's obviously the right thing to do. I mean, that protects our rights around the world. It sets a precedent for other trade negotiations, now and in the future. It echoes the principles of what we have with the EU trade agreement, with the original NAFTA, and now with the Pacific trade partnership.

Wording like that, and others like it, will only strengthen our position in the marketplace globally.

[The Chair, Liberal, Julie Dabrusin]

Now we will go to Mr. Shields.

You have five minutes, please.

[Martin Shields, Conservative, Bow River, AB]

Thank you, Madam Chair.

I found the conversation very interesting. Related to it—maybe a little differently—I have a son who was a senior executive in a company that has a large yellow and blue store in this town. He actually set the one up in this town. He worked for that corporation, which is one of the world's largest worldwide family-owned furniture businesses.

In Sweden they have a town that's five years out where they predict to go, and they have a town 10 years out. When you talk about the future, he's now moved into my daughter's and other businesses. You mentioned access. They don't care where in the world they get their products for their business. They just want them now. They're getting things out of China and the U.K., but they get them instantly—within days—from anywhere in the world. When you're talking about the future, when you're talking digital, when you're talking down the road—as this major company does with a community of 3,000 to 5,000—you're talking about what it will look like in five or 10 years, and you're wanting us to put in legislation that is going to be for the future. As I say to my kids and my grandkids, it's all about access. Access is it.

What recommendation would you make to us for your future? You're wanting legislation for the future, what is it?

[Stuart Johnston]

Well, taking private copying as an example, in part we're saying that it should be technologically neutral, because we don't know what the technology will be five or 10 years down the road. I think the fact that the act has a built-in review clause every five years is very important, and the fact that we're here today is a testament to that. We can't predict what's going to be down the road 10 or 15 years from now, but what we can do is ensure that we're on top of things as much as possible legislatively.

I would strongly recommend, then, that this five-year review continue five years from now and then again five years after that. That will, in part, ensure that we stay on top of what the trends will be going forward.

[Alain Lauzon]

We must look to the future. We're talking about the signed international agreements. Consider CETA in particular. However, Canada must maintain its independence and integrate his own policies. The international market is a good thing. However, when it comes to creation, assistance must mainly be provided to local organizations, and not just at the start, but also over a period of time. Once they're big enough, they can go international. Canada must nevertheless be able to establish, with its trade partners, its ability to implement its basic rules within the country.

You must also clearly understand the difference between the Canadian market and the Quebec market. French-speaking Quebec is more a niche market than the anglophone market within the diverse global market. The francophone market may be situated slightly more on the boundary of this digital upheaval. If we don't establish national rules similar to those we've set for commercial radio, we'll have to prepare for the future in a different way.

[Martin Shields, Conservative, Bow River, AB]

Mr. Johnston, you represent small businesses, and my kids are in small businesses. I have two mantras: one, get rid of the red tape; and two, government, get out of my way and I will succeed. You represent small businesses.

[Stuart Johnston]

Yes.

[Martin Shields, Conservative, Bow River, AB]

What is the challenge for small businesses? I have family involved in small businesses, and they have been very successful in a number of them, and that's what they tell me.

[Stuart Johnston]

Generally speaking, if you're talking across the board about all sectors, I would agree with you. The two challenges my members have right across the board, whether they're English or French, are cash flow and access to capital. We're not selling furniture. We're selling an intangible product. It's very difficult to get traditional business loans from the bank to continue with capital.

That's why a program such as the Canada music fund is so important. It provides the seed capital my members can leverage in the marketplace. They can then invest in artists' careers. They can discover, develop, market, commercialize, and export.

When we're talking small businesses, yes, get rid of the red tape and streamline the processes as much as possible, but we need legislation such as the Copyright Act to help protect our products here and around the world. We need programs like the Canada music fund to provide those seed dollars that are then leveraged by the industry and invested in the artists. We need a strong Broadcasting Act that recognizes some of the themes the CRTC brought forward in its report last week.

Government has a place in our industry, and I think it is a very strong partner in our industry, because, as Chris said, we are a global product. As soon as you put your music online, you're a global product. Because our market is so small in Canada, we need to be in markets around the world and we need to be able to chase those pockets of international markets where our artists are finding success. That costs time, money, and investment, so we need government to be a partner.

[The Chair, Liberal, Julie Dabrusin]

Thank you, we will now be going to Mr. Hébert.

You have five minutes.

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

Thank you.

My first question is for Mr. Lauzon or Mr. Lavallée.

You talked about reducing the number of exceptions contained in the act because there appear to be some hitches there. However, I especially noticed that you talked about the lack of user obligations.

I'd like to make sure I clearly understood your comment. When you say user, do you mean the listener or the Internet service provider that reproduces the work?

[Martin Lavallée]

We specifically mean the Internet service provider, or at least the cultural presenter, one that uses the product created by our members, our repertoire, for commercial purposes.

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

So the fish is easier to catch because it's bigger.

[Martin Lavallée]

Yes, but I constantly come back to my mantra: the right and its responsibility must also be clearly defined in the act.

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

You also mentioned upcoming copyright changes in Europe. What are those changes? Should we draw on some of those changes?

[Alain Lauzon]

International treaties in the digital field were signed around the world in 1996. Just think of the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. The European countries began to introduce these elements into their statutes. The European Commission did it first, and then the countries did the same in 1997 and 1998.

No amendments were made to the Copyright Act from 1997 to 2012 because of the political situation in Canada. Consequently, we are several years behind in integrating those changes, which have been ratified around the world. It's no one's fault; it's the situation that has occurred.

European countries are slightly ahead of us in what they're seeing in their market. The directives they'll be introducing address the entire concept of the responsibility of certain intermediaries. In many countries, those intermediaries have, for all kinds of reasons, enjoyed an exception that they may have been granted as a result of pressure exercised around the world. Today, we see that there are some problems. We talk about the GAFAs, for example. Countries are in the process of restricting or limiting these exceptions so that, under the acts that are passed, players that use intellectual property will have responsibilities, precisely in order to eliminate this value gap. What are we talking about? In particular, we're talking about user-generated content and network intermediaries.