Canadian Heritage Committee on Sept. 25th, 2018

[The Chair, Liberal, Julie Dabrusin]

Welcome, everyone, to the 120th meeting of the Standing Committee on Canadian Heritage.

Today, we're continuing our study on remuneration models for artists in creative industries.

For the first hour we have with us, from the Canadian Association of Broadcasters, Nathalie Dorval and Susan Wheeler; and from the Screen Composers Guild of Canada, we have Ari Posner and Paul Novotny.

Perhaps we'll just go in order. We can begin with the Canadian Association of Broadcasters, please.

[Nathalie Dorval, Chair, Board of Directors, Canadian Association of Broadcasters]

Ladies and gentlemen, on behalf of the Canadian Association of Broadcasters, we want to thank you for the opportunity to appear before you today to discuss issues relating to copyright, including remuneration for content creators. These are matters which are integral to our businesses.

Local radio in our country remains a popular source for local entertainment, but it is also a critical source of news and information to Canadians from large urban centres with diverse ethnic populations, to the most rural, remote and first nation communities. It shares our stories and our music with Canadians young and old, in their cars, on their phone and online, or simply in their homes. From emergency alerting to local news in a variety of languages, radio connects communities. In fact, radio is one of the sole sources of local news and culture in rural and remote communities across Canada, many of which have already felt the sting of local newspaper and television closures.

Radio also plays a key role in maintaining the health of the Canadian music ecosystem. Not only is private radio the number one source for discovering Canadian music, it is also the number one source of funding for the development, promotion and export of Canadian musical talent. Last year alone, private radio contributed $47 million in Canadian content development funding, the majority of which was directed to the country's four largest music funding agencies: FACTOR, Musicaction, the Radio Starmaker Fund and Fonds RadioStar. These agencies provide critical support to Canadian music labels and artists to create, promote and export their music internationally and across our vast country.

We are proud of the role we have played in helping to create the vibrant and successful community of internationally successful music artists our country enjoys today.

We are also very proud of the local star systems we have created in the communities we serve which was achieved through steady investment in local broadcast talent and the content they create every day that keeps our listeners tuning in. We believe our continued investment in local talent is a key differentiator and plays a critical role in attracting local audiences in a very crowded media environment where we compete with regulated and unregulated players.

We understand the role of this committee is to review aspects of the Copyright Act that may impact remuneration to artists. In this context, we would like to emphasize that the music industry is a broad ecosystem that involves artists creating music, record labels marketing and selling the music, and radio, in its unique position, to promote the music. It is critically important that the government exercise great care before tampering with this ecosystem.

It is also critically important that a distinction be drawn between remuneration to artists and remuneration to the predominately U.S.-owned, multinational record labels that appear before you, claiming to represent artists. Indeed, it was refreshing last week to see a successful artist like Bryan Adams appear before you and speak clearly from the artist's perspective. The proposals he made to you give a voice to the distinction between artists and labels.

We believe that the Copyright Act, in its current form, strikes the very delicate balance of ensuring artists are remunerated for their work while also ensuring that local radio has a reasonable and predictable copyright regime that reflects its continued investment in local talent, communities, and musical artists.

Indeed, section 68.1 of the act provides important support for local radio stations by mandating that radio will pay neighbouring rights of $100 on the first $1.25 million in revenue and then pay a higher rate through a percentage of advertising revenue which is set by the Copyright Board of Canada. So, while the rate structure for neighbouring rights payments is subject to this special measure, as Parliament intended in 1998, the music industry still collects over $91 million in copyright payments from private radio each year.

If Parliament agrees to amend the Copyright Act by removing this exemption, the primary beneficiaries will be the multinational record labels who are proposing it. Under the existing neighbouring rights regime, payments are allocated 50/50 between performers and record labels. Where the money flows from there is unclear and worth further discussion before any amendments to the act are contemplated.

What we do know from publicly available information is that Re:Sound, the copyright collective responsible for distributing neighbouring rights payments, takes 14% off the top in administrative fees before anyone gets paid. Of the remaining amount, the music industry has carefully concealed where that money might go.

For example, in the English market, based on radio repertoire, we estimate that, of the performer's share, after administration costs are deducted, 15% goes to international performers and 28% goes to Canadian performers. Of the label's portion, no less than 41% goes to multinational record labels, with Canadian labels receiving only about 2%. What this tells you is that multinational record labels will be the primary beneficiaries of the proposed change to section 68.1 at the cost of local Canadian businesses.

The multinational record labels are also asking you to change the definition of “sound recording” in the act to extract additional royalty payments from television broadcasters. In fact, the labels are attempting to squeeze out an additional payment for the use of music from broadcasters, distributors and digital platforms in a television program that has already been paid for up front by the producers of that program. Quite simply, they are asking us to pay twice for the same product, otherwise known as double-dipping.

The current definition of “sound recording” is carefully worded to reflect the contractual realities of the audiovisual production sector. This was confirmed by the Supreme Court of Canada in a 2012 decision.

Any consideration of adding new costs on conventional television broadcasters, or on the digital sector, should be rejected as it would diminish Canadian broadcasters' ability to invest in Canadian productions by shifting more than $50 million into the hands of foreign owned corporations.

The Canadian Association of Broadcasters respectfully urges the committee to reject any proposed amendments to the Copyright Act that would harm the Canadian broadcasting sector and jeopardize the important service that local broadcasters provide to Canadians. We reiterate that the current legislation strikes the right balance between rights holders and local broadcasters, and that the proposals being advanced by the music industry risk coming at the expense of local programming and of valued and essential services we provide to Canadians.

Thank you.

[The Chair, Liberal, Julie Dabrusin]

Thank you for that.

We will now go to the Screen Composers Guild of Canada, please.

[Paul Novotny, Screen Composer, Screen Composers Guild of Canada]

Good morning to everybody on the committee.

My name is Paul Novotny. With me is my colleague, Ari Posner. We represent the Screen Composers Guild of Canada, the SCGC.

The SCGC is the industry's national not-for-profit professional trade association. We represent the interests of our members with regard to communicating to producers, broadcasters and government agencies.

The SCGC was formed in 1980 and since 2003 has been certified under the federal Status of the Artist Act. Screen composers create original music for film, television and documentary. That media is exported internationally, around the world.

Unlike Bryan Adams, you might not have known our names until today, but you may very well know our work. I'm going to invite Ari to tell you a little about what he has been doing.

[Ari Posner, Screen Composer, Screen Composers Guild of Canada]

Thank you, Paul.

I'm just going to list a couple of examples of my work. Hopefully, you might be familiar with some of them.

One of the shows that people know me for is a radio show. It's called Under the Influence, which is hosted by Terry O'Reilly. He's been doing that show for 13 seasons, and I'm lucky that every week when he does it, he says my name at the end, “and music by Ari Posner.” That's where most people know me from.

The irony is that I've mostly made my living from doing scoring work for television and for film. Quite a few years ago, in 2010 and 2011, I was working with a colleague in Toronto and we scored the show called Flashpoint, which was a big hit for Canada. It was a landmark show because it opened the floodgates to the U.S. for us to be able to start exporting some of our content onto the bigger networks down there. Flashpoint was a landmark show for Canada. It was also a landmark show for my career, for sure.

Currently, I'm working with the same collaborator back in Toronto on a show called Anne with an E, which is a reimagined version of Lucy Maud Montgomery's story,Anne of Green Gables. Anne with an E just premiered its second season this past Sunday on CBC. It's been given the green light for a third season already and, most pertinent to what we're here to talk about today, it's airing around the world in 190 countries on Netflix.

[Paul Novotny]

Some of the broadcast properties that I've been involved with over my career include CBC's The Hour, with George Stroumboulopoulos. I wrote the music for that show, and for CBC News Now and CBC's The National. Seventeen years ago, when the 9/11 attacks occurred, it was my music that underscored CBC's reporting of that horrific incident.

I'd like to tell you about how screen composers uniquely locate themselves in the production ecosystem.

First, screen composers are the first owners of their copyrights. Like screenwriters, screen composers are recognized as key creative individuals, and this is a big separation for us. Our copyright policy currently splits ownership into two types of royalties for us. We get public performance royalties, and we get reproduction royalties. These music composer rights live alongside a separate bundle of the motion picture copyrights that are all embedded together into the one media property.

Once our music is married to picture, it is distributed, and it generates copy remuneration, which is derived from broadcast advertising sales that are reported by the broadcasters. Our remuneration rate is set by copyright policy, not by us. SOCAN is our agent that collects our performing and our reproduction rights internationally. That is the 20th century model of copyright for screen composers.

Further, you may ask, how is our money derived from advertising? Public performance and reproduction rights are calculated on a percentage of quarterly reported advertising sales from the broadcaster. Let's see how this is working in the 21st century.

Ari, can you tell us your story with regard to Anne with an E?

[Ari Posner]

As I've said, Anne with an E is a very good example of what people in my business are facing right now, because it's not working. That model is not working as it should. Copyright is broken in that way. I can give you very specific numbers about that. Netflix reported Anne with an E to be the fourth most binge-watched show on their network in 2017. That's a pretty large statistic. That means millions and millions of people from all over the world are watching and enjoying the show, and they're watching it fast. They're binge-watching it. That means they're downloading, downloading, downloading and watching it.

Yes, it's playing on CBC, and I do see some broadcast royalties from CBC, but that's the only place that it's playing terrestrially. Everywhere else in the world, it's on Netflix.

I can tell you that I've seen a staggering drop in the remuneration for that property; I would say it's close to 95%. If it were playing terrestrially in all those places, it would be a massive, massive difference. SOCAN, which is the advocate for someone like me, really has no way to get behind those closed doors of Netflix. Netflix will not give them the data they need in order for them to properly tabulate the views and turn them into a proper remuneration model.

Paul also has some experience with YouTube that he's going to talk about.

[Paul Novotny]

Yes. My latest story is about a film for which I wrote music, for a young Canadian upcoming film director and writer by the name of Cleo Tellier. Her film, Mishka, which is about teen pregnancy, was posted on YouTube on April 22 of this year. Mishka has achieved more than 20 million YouTube views since April 22. That film is generating $3,000 a month in YouTube advertising royalties for her, but under current copyright, there is no public performance or reproduction copyright afforded to me. I spoke with SOCAN about it, and they can't even indicate as to whether any level of proportionate remuneration will come back to me.

Ari and I are telling you these stories but we're also asking, like every other screen composer, what has happened to public performance and reproduction royalties in the 21st century for screen composers. Well, what we're telling you today is they've become insignificant or they don't even exist. The reason is that the money has moved to subscription.

So, what can we do? We don't want to come here and complain. We want to bring ideas. In the age-old adage of business, we're suggesting that copyright policy follow the money. Copyright remuneration policy must be augmented to include and gather money from subscription services.

We have an idea. We'd like to suggest a new subscription copyright levy. It's inspired by an existing blank media levy. We're referring to this as the SCGC copyright model. I'll explain the basic idea. There's been no econometric analysis of this; it is purely a principle, but I would like to explain how we think it could work.

It's an ISP subscription levy that would provide a basic 15 gigabytes of data per Canadian household a month that would be unlevied. There would be lots of room for households to be able to do Internet transactions, conduct business, share photos, download a few things, email, no problem. My own personal experience is that in a family, when you're downloading and consuming over 15 gigabytes of data a month, you're likely streaming Spotify, you're likely streaming YouTube, you're likely streaming Netflix. We think because the FANG companies will not give us access to the numbers they have, we have to apply a broad-based levy. They're forcing us to.

I'll move through this. We also believe that mobile should get some sort of consideration on this. We believe that this is a first response to what is fast becoming a grave economic condition.

The value gap is real. Basically, we're experiencing minuscule copyright remuneration from plentiful media consumption, and it's a woefully disproportionate remuneration. Ari can tell you just a little bit more about that.

[The Chair, Liberal, Julie Dabrusin]

Unfortunately, because you're at pretty much the end of your time, you might have to try to bring that out through the question and answer period.

[Paul Novotny]

Sure.

[The Chair, Liberal, Julie Dabrusin]

If I could have your 10- to 15-second closing, then we'll move right into questions.

[Ari Posner]

If it's okay, I would just like to finish with a quick quote by J.F.K., who said, “The life of the arts, far from being an interruption, a distraction, in the life of a nation, is very close to the centre of a nation's purpose—and is a test of the quality of a nation's civilization.”

I'd like all of you in this room to consider that if Canadian creators' rights are not better protected in the digital age, we have a country where people will be totally discouraged from pursuing a career in the arts. I truly believe our country will be less rich for it.

[The Chair, Liberal, Julie Dabrusin]

Thank you.

We will now begin the question and answer period.

Mr. Hogg, you have the floor.

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

Ari was going to say something before he was cut off.

I'm going to give you the opportunity to say the part that we missed out on, in terms of your submission.

[Ari Posner]

That's kind of you. Thank you.

I was just going to tell you that the value gap, which I'm sure is a term you've been hearing, is very real, and it's something that I am staring right down the barrel of. There is no question about it.

I think one of the reasons the Screen Composers Guild asked me in particular to be here is that I am right in the middle of my career. I'll be 48 years old this year. I have three young kids. I have a mortgage. I take a vacation or two a year, if we can afford it. I do not live an extravagant or luxurious lifestyle by any stretch. However, the only way I've been able to get this far is because of the value of my intellectual property, which are the scores I have composed. Those are what have allowed me to sustain and nurture a career and a family.

If I had to operate just based on the front-end fees that I get paid for the work I do, it would be impossible to sustain and nurture a career. That downstream revenue is so important to someone like me. Here I am working on Anne with an E, which is by far the most popular thing I've ever worked on, and I'm seeing less money than anything I've ever worked on before.

I feel like there is something in the ecosystem that is unbalanced, and I feel that it's copyright. If government can intervene with copyright to make it stronger and bring it up to speed with the times and the rest of the world, we have a chance of bringing back some fairness and balance into that ecosystem.

Thank you for letting me say that.

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

Do you have some examples of jurisdictions that have a system that would be amenable to the kinds of concerns you've been expressing as a result of a number of changes that have happened over the past number of years?

[Ari Posner]

I guess we could point to the EU, in terms of what they have just passed there.

[Paul Novotny]

Yes, the EU has recently passed article 11 and article 13. That's a perfect position to go from, because in Canada, Music Canada and the CMPC recommend very similar actions.

However, the levy we're proposing has not been done anywhere yet. This is a brand new idea, and we honestly hope that it can be considered. We think it's a solution for the world. We would envision and hope that the Government of Canada could adopt what I call a techno-moral responsibility for copyright to advocate moves like this to the rest of the world and find other nations that are willing to subscribe to these kinds of ideas.

Netflix is global, and essentially the 20th century copyright system is fragmented from country to country. I think a big part of Canada's view for the principles of copyright in the future is that we have to seek other nations that have the same values for the creators, and we have to create unions around that. It's the only way to stand up to a global entity like Netflix, Amazon, or YouTube.

Ultimately, as creators, we want to work with those entities. We're not averse to that. We want to share in the royalty. The 21st century copyright should be about equivalence, and right now we're getting the short end of the stick.

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

You said techno-moral.

[Paul Novotny]

Yes.

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

That is an interesting juxtaposition of words.

[Paul Novotny]

Yes. I can tell you more about that. There is a book I'm reading that is enlightening me on that.

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

Ms. Dorval, you made a reference that any changes to copyright now would be problematic. You feel that there is a right balance between performers and broadcasters.

Could you elucidate that a little more, so I get a better grasp and understanding of why there aren't some significant changes necessary within that framework?

[Nathalie Dorval]

Yes.

We're saying that the current balance achieved in the copyright in terms of broadcasters' contribution with remuneration to artists is fair.

Obviously, when we listen to that, we get the sense that the issue is not so much within the regulated broadcasting industry, but as you can see, the money is moving. As we were saying, this is an ecosystem. What these artists are feeling is that their royalty is a portion of advertising revenue, and the broadcasting industry is seeing these advertising revenues moving to online platforms. That is another issue.

This ecosystem is moving, and I do not think the solution is to change provisions that affect radio broadcasters who are largely already supporting the Canadian artists in Canada.

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

You made reference to the EU and the strategies there, and you feel that's, internationally, the best example in existence at this point. You think you can augment that, and it will be much more effective if the levy were added to it.

Is that a fair interpretation of your submission?