Canadian Heritage Committee on Sept. 25th, 2018

[Annie Francoeur]

My understanding is that most of these artists are complaining about the royalties, or the lack of royalties, generated by streaming services and online platforms. I'm talking about the traditional delivery mechanism where we play music in stores. I think the artists are receiving royalties through SOCAN and Re:Sound for the use of their music in the background of commercial establishments, but I think they could receive more if we would make sure that all music services would be subject to the same minimum of Canadian requirement.

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

So even within the framework that you're talking about, in terms of Stingray, are you saying that they could receive more through that platform as well?

[Annie Francoeur]

Definitely.

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

Would that take away from Stingray's revenue?

[Annie Francoeur]

It would.

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

What type of impact do you think that would have, if we were to have some equitable process that was in existence prior to our getting all of this online streaming?

[Annie Francoeur]

I haven't made the calculation. It's something we can look into, if this is something you would be interested in having.

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

Obviously, with digitization and the online...we've seen a dramatic shift in delivery systems, and through that process, there have been a number of changes to the amount of revenue that is generated by various participants. It seems as though the composers are one of those groups that have been negatively impacted.

[Annie Francoeur]

Let me correct that. In terms of royalties, that wouldn't change how much we are paying, because we are still paying based on the tariffs that exist to SOCAN and Re:Sound. What would change is the allocation of the amounts that we're paying. More Canadian artists would receive a portion of what we pay, as opposed to international artists.

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

I think I understand, but....

[Annie Francoeur]

It's because the tariffs are built in a way that you pay either a minimum per commercial location or a percentage of revenue. Whatever we pay in royalties would remain the same. It's just that when SOCAN or Re:Sound distribute that money to their artists, the local artist would receive more because we have played more Canadian music, as opposed to famous international artists, where the money would go through SOCAN to their counterpart in the U.S. or U.K., which would then allocate to the international artists.

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

Mr. Hilchie, you made reference to remuneration going to music that's used as background music in video games. Can you tell me how that is represented today in terms of quantum as opposed to before we got much further into live streaming?

[Jayson Hilchie]

Just to fully understand the question, how it is...?

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

We've been hearing about all the dramatic changes we're all well aware of that have been happening over the last decade and probably longer, and more significantly, happening in the last number of years. Certainly if we look back at traditional sharing in terms of composers and game makers, those have started to shift.

I'm wondering whether or not you've seen much shift in terms of those you would use for background music for the video games you made reference to.

[Jayson Hilchie]

In fairness, I'm not on that side of the business, and based on some of the formulaic content I've heard here today, I'm glad I'm not, because of the percentage of revenue and things like that.

As I said earlier to Mr. Blaney, our game makers will have licensing and copyright deals with the rights holders, the collectives, or whoever in that particular case, and then that money will be distributed to the artist through the various formulas that exist in those systems, but I have no knowledge about what percentage that is.

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

We're hearing from other testimony that it is shrinking and in some cases disappearing. I'm just trying to find out where that might be and what impact that would have on the two businesses you represent in that framework.

[Jayson Hilchie]

Yes, a lot of the games in our industry create their own music using outsourced artists, not necessarily taking a song from the radio and putting it in a game. In fact, most of the music in a game is built for that game, like a movie score would be built for a movie, to enhance the playing experience. As I said, each of those companies that made that game would be doing that.

I don't have data on the fact that it's decreasing, but as I said, our industry is now up to about $140 billion in sales. We are creating products now on all sorts of different platforms. The number of video games that are in the marketplace now is more than ever before. As I said, discoverability is one of the problems for us. I can only take an educated guess and say that our industry is generating demand for more music than it ever has before, simply based on the fact that we are creating more products than we ever have.

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

Do copyright laws as they exist in Canada today provide sufficient protection to video game producers?

[Jayson Hilchie]

Not on everything, but the technological protection measures allow us to go after those who circumvent the encryption technologies that we use.

One of the other issues that presents itself, which I'll discuss more in-depth next week at the industry committee, is the notice and notice regime. We'd like to see an improvement in that regime, because there is a lot of confusion when someone gets a notice as to what goes in that notice and as to the ISPs with respect to sending them forward once they get sent from the rights holder.

Beyond that, we were very happy in 2012 with what we got in the Copyright Modernization Act. It wasn't everything, but it was a good compromise.

Our objective with this review is to ensure that what we got stays, and we're not specifically asking for any new material changes to it.

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

So your answer to the question is that you do have sufficient protection now and you're quite comfortable with the business model that's working out of the copyright legislation as it exists in Canada.

[Jayson Hilchie]

You can always make improvements to it, but we have a lot better protection than we had prior to 2012, and I think that, given the fact that we're not asking for anything new—

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

How does that protection compare to other jurisdictions, other countries, and other parts of the world?

[Jayson Hilchie]

Specifically around the notice regime, the ability to remove infringing content would be a plus, but we're really not advocating for that very strongly in this round. For us it's a matter of trying to get the notice and notice regime to work efficiently and properly.

[The Chair, Liberal, Julie Dabrusin]

That was very interesting, but I'm sorry, you're out of time.

I'm going to move to Mr. Yurdiga, please, for five minutes.

[David Yurdiga]

Thank you, Madam Chair.

Thank you, guys, for coming in today.

I want to speak a little bit on gaming.

When my children were growing up, we bought the machine and the program, and that was it and they played all they wanted. The new platform is concerning for grandparents, as I am, in that your grandson or granddaughter phones you and wants a gift card.

What you guys have done is remarkable. Now it's a continuous revenue source. You don't sell only the game, you sell the costumes, armour, or whatever it may be. It's brilliant, and on behalf of all grandparents, stop.