Canadian Heritage Committee on Sept. 27th, 2018

[The Chair, Liberal, Julie Dabrusin]

Order, please.

I would like to welcome everyone to our meeting of the Standing Committee on Canadian Heritage.

Today, we continue our study of remuneration models for artists and creative industries.

We have several witnesses with us: Ms. Caroline Rioux, from the Canadian Musical Reproduction Rights Agency Ltd., Mr. Allan Reid and Ms. Jackie Dean from the Canadian Academy of Recording Arts and Sciences, and Mr. Brian Fauteux and Ms. Brianne Selman, who are both researchers and are testifying personally.

We will begin with Ms. Caroline Rioux from the Canadian Musical Reproduction Rights Agency Ltd.

[Caroline Rioux, President, Canadian Musical Reproduction Rights Agency Ltd.]

Hello.

Thank you very much.

Thank you for inviting me to speak today.

I'm just going to start right in and I promise that my presentation is not going to be too long.

My name is Caroline Rioux. I am the president of the Canadian Musical Reproduction Rights Agency or CMRRA for short.

CMRRA acts as an agent for more than 6,000 music publishers and self-published songwriters. Together they represent more than 80,000 music publishing catalogues and millions of songs, which comprise a vast majority of the musical works commercially used and available in Canada.

Our role is to license the reproduction rights. We offer licences for the reproduction of works in a variety of circumstances. From inception, CMRRA has issued what we call mechanical licences for the reproduction of songs on physical products, such as CDs and LPs. Today, we also issue licences for the reproductions made by broadcasters and online music services.

The manner in which content is distributed and consumed has changed dramatically in recent years, both in the run-up to the 2012 amendments to the Copyright Act and a great deal more since then. Streaming services, such as Spotify and Apple Music, have emerged and we're witnessing a rapid decline in the download market.

In addition to this changing marketplace, certain exceptions that were introduced in 2012 have led to a 30% reduction in reproduction royalties from radio broadcasters. The private copying levy, too, has all but disappeared, even though the act of making private copies continues to exist on a massive scale, thanks to smart phones and digital storage devices.

As a result of this evisceration, the largest source of royalties we collect now comes from the streaming services. I'd like to take a moment to discuss that, in particular, because that too has been subject to rate reductions and unfair bargaining positions. We need your help to fix that.

Monsieur Pierre Nantel just last Tuesday made a comment that publishers are making bizarre deals with streaming services for small royalty rates. I think it's important to address this and to say that those very low rates exist at least in part because they've been based upon decisions made by the Copyright Board of Canada.

I should clarify for you that the last online tariff that was certified set us back considerably. Our streaming rates under this tariff, to my knowledge, are now the lowest in the world and well below market rates. We went from receiving 5.18% to less than 1.5% of a service's revenue. In addition, a key provision of the tariff sets out the minimum fee payable by online music services. That minimum fee is $100 per year, irrespective of the number of streams or volume offered by a music service.

The board reasoned that anyone who offered a compelling music service to consumers would naturally attract significant ad revenues, which would, in turn, generate sufficient royalties for rights holders. However, our experience has been that some of these services are happy to generate next to nothing in ad revenues, as the promotional value of a free service is much greater to them than the revenue from selling ads.

Under this tariff, major services could be paying much less than the 0.003¢ per stream, as stated by Monsieur Nantel in his remarks last week. We've seen proposed rates as little as one-quarter of one-thousandth of a cent per stream when we deal with those services.

Worse still, many of the services we've engaged with that operate an ad-supported platform have taken the position that royalties are not payable in Canada as a result of the hosting services exception introduced in 2012. This leaves us with protracted negotiations and a rate that ultimately doesn't reflect the fair value of the right. The only available alternative is litigation, which is costly, lengthy and uncertain. What's more, the only remedy available in instances of unpaid royalties are the royalties themselves. The expense of bringing a case is unjustifiable if the royalties ultimately recovered merely serve to pay the legal fees.

On the other hand, the risks for the services are low if their ultimate liability is really no greater than what they would have owed in the first place. Some collectives can claim statutory damages, but that option is not available to CMRRA, in relation to their reproduction right licensed under a tariff.

Finally, when these services are operated from outside Canada, and there are many of them, there aren't sufficient tools to enforce copyright. The ISPs are ideally placed in this fight by removing access to infringing services, but are understandably reluctant to take any position on the content they provide access to. This leaves us without any tools to meaningfully enforce against such services.

You heard last week from Michael Paris of the Movie Theatre Association of Canada, who made the point that there is no right without a remedy and on that, I agree with him.

Among the recommendations we're making on reform of the Copyright Act are several proposals we feel would assist in ensuring that the online use of music is fairly compensated.

First, we request that the Governor in Council make regulations requiring the Copyright Board to protect a minimum per use value for the copying of musical work.

Second, we request amendment of the hosting services exception to provide that it does not apply to any hosting service that actively plays a role in the delivery or presentation of musical works.

Third, we request amendment of the act to allow for all collectives to claim statutory damages for non-payment.

Fourth, we request amendment of the Copyright Act to authorize a court to grant injunctive orders requiring ISPs and hosting services to block access to infringing websites or prevent them from showing up in search results without the risk of liability to the ISP.

In addition, we urge you to limit the scope of certain exceptions to copyright, in particular, the backup copies exception which unfairly and significantly reduces the royalties paid to rights holders by commercial radio stations.

Of course, we support the extension of the private copying regime to include smart phones and tablets.

We'll be making a much more detailed submission available to the committee, but in the meantime, I welcome your questions.

[The Chair, Liberal, Julie Dabrusin]

Thank you.

We will now go to the Canadian Academy of Recording Arts and Sciences, with Allan Reid and Jackie Dean, please.

[Allan Reid, President and Chief Executive Officer, CARAS, The JUNO Awards, MusiCounts, Canadian Academy of Recording Arts and Sciences]

Good morning, Madam Chair, and thank you for having us at committee today.

My name is Allan Reid. I am the president and CEO of the Canadian Academy of Recording Arts and Sciences. With me is Jackie Dean, our chief operating officer.

CARAS is probably better known as the home of the Juno awards, which is obviously our national award show that happens every year; as well as MusiCounts, Canada's music education charity, and also as the home of the Canadian Music Hall of Fame.

Our main focus is to develop, showcase and promote Canadian artists and their music. This year's Juno awards will be held in London, Ontario, and we'll be including a week-long celebration of Canadian talent culminating in the Juno awards broadcast.

While the Juno awards is CARAS' most highly profiled award show and our main offering, the organization also works hard to support emerging Canadian talent through robust 365 days a year programming that seeks to assist artists in every stage of their development.

I often say that we're more than just an awards show. CARAS' mandate has evolved over the last few years into four key pillars: to educate through our charity, MusiCounts; to develop artists through the Allan Slaight Juno master class; to celebrate Canadian artists through the Juno awards and our 365 days a year programming; and also to honour our icons through the Canadian Music Hall of Fame.

We are with artists from birth to myth, as we like to say, and that is the continuum we want to support. Part of that support is to advocate to ensure the proper infrastructure is in place to further build the Canadian music ecosystem, which can be enhanced through a number of changes to the Copyright Act in order to strengthen the ability of musicians to make a living.

You've had an opportunity to hear first-hand from some great Canadian artists at this committee: Andrew Morrison from the Jerry Cans, who actually graced the Juno stage this year in Vancouver; Damhnait Doyle; Miranda Mulholland; and the host of the Junos, from Ottawa, Bryan Adams. They all tell a very similar story about how change is needed to amend the legislation, which will change not only the lives of artists, but the entire music system.

I've seen the struggles that musicians face, having built my career in the Canadian music industry. I was the head of A and R, artists and repertoire, for Universal Music, for 30 years. I was also the general manager for MapleMusic, one of Canada's top independent labels. I've had the good fortune to work with artists like Jann Arden, Sam Roberts, Sarah Harmer, and the Tragically Hip. On a personal note, I'm actually married to an artist as well, a very talented singer-songwriter named Kim Stockwood, from Newfoundland. So, the artist experience is something I see and live with on a daily basis.

It's important to note that at CARAS we have a very unique situation. We are not a label, we are not songwriters, and we are not music publishers. We don't benefit in any financial way from the changes that would be made, but we are the end result of the changes that will be made and what happens in the music industry. We want to make sure that all music creators have a chance to succeed and be showcased on the Juno stage.

The music sector is aligned like never before on these initiatives that need to be undertaken on the Copyright Act to improve the lives of our creators. Our colleagues at Music Canada have done an outstanding presentation on the value gap, the difference between the value of the artists' music and what they are paid as creators for the use of that music. It's a gap that has been widening over the last few years and we need changes to the Copyright Act to ensure that artists receive full value for their works.

What changes do we see in this sector? I'll pass it over to my colleague Jackie Dean to outline those for you.

[Jackie Dean, Chief Operating Officer, CARAS, The JUNO Awards, MusiCounts, Canadian Academy of Recording Arts and Sciences]

Thank you very much for having us here today.

I have been in the Canadian music industry for about 16 years. I'm a CPA by profession, so we all know how my brain works. I knew nothing about the industry when I first started, and I have grown to be a very passionate advocate for the power of music and what it means for the culture of Canada.

I started in the industry when it was on a decline, and I have seen the ability for an artist to join the middle class dwindle down. I've been involved in economic impact studies that have clearly shown the value gap, as well as the erosion of our industry. I know that some of the members around this table are new to the committee and were not here when many of our colleagues in the music sector appeared here before the summer recess. It may not surprise you to hear that we are very supportive of their recommendations.

We have four of them.

First, we call on the committee to to remove the $1.25-million radio royalty exemption. For two decades, commercial radio stations have been exempt from paying proper royalties on the first $1.25 million in advertising revenues. Much of this has changed in the business model of revenue, and this temporary exemption has done its job and should now be removed.

Second, the definition of a sound recording needs to be amended in the Copyright Act to allow performers and record labels to receive royalties for the use of their works in television and film soundtracks. As it stands currently, the composer of the work will receive compensation, but the performer won't. This substantial oversight is costing artists over $45 million a year in lost revenue and needs to be corrected.

Third, we need to extend the term of copyright for musical works to match our international partners. This has been a constant request not only from individual artists, but organizations such as CIMA, CMPA and SOCAN. Under our current laws, protection of musical works extends for the duration of the author's life plus 50 years. Almost all of our major trading partners, including those in the European Union and the United States, have terms of life plus 70 years for authors of musical works, which includes all music publishers, songwriters and composers. Not only would this bring Canada in line with its international trading partners, it would also ensure there is a robust compensation to allow these creators and their families to continue to receive monetary value for their works.

Finally, it's time that we bring support for creators into the 20th century. The private copying regime, which brings much-needed compensation directly into the hands of creators for copies of their music that are made, now applies only to media that are either out of date or obsolete, such as the blank CD or, until recently, the cassette tape. The regime needs to be made technologically neutral to keep up with the changes in how Canadians are making copies of their music today. This important source of income for over 100,000 music creators will soon be gone if the changes are not enacted soon.

I know for certain that these four changes will have a significant impact on our music sector, based on the work that I've done in the industry and what I have seen happen. It will ensure that we have a vibrant Canadian culture of music that we can continue to celebrate on the stage at the Juno awards each and every year across this country.

As a proud Canadian having belief in everything that we do as world leaders, I say that Canada can do better here, and Canada needs to do better here.

Thank you for your time. I look forward to your questions.

[The Chair, Liberal, Julie Dabrusin]

Thank you.

Now we will go to Brian Fauteux and Brianne Selman, who are primary and secondary investigators for the Cultural Capital Project.

[Dr. Brian Fauteux, Primary Investigator, Cultural Capital Project, As an Individual]

Good afternoon. Thanks to the committee for hearing us today.

We know that the committee has a genuine interest in providing livelihoods to Canadian creators. The spirit of our submission is to caution that in an industry characterized by market consolidation and an imbalance of power between artists and the big business of labels, proposals for legislation that do not address this imbalance may in the long term worsen the conditions for those at the bottom. Artists are not always the rights holders, and legislation from rights holders does not inherently help artists.

Our submission comes from a research team that includes me, an assistant professor of music at the University of Alberta; Brianne Selman, scholarly communications and copyright librarian at the University of Winnipeg, who will take questions afterwards; Dr. Andrew deWaard, Ph.D. in cinema and media studies at UCLA; and, two research assistants, Dan Colussi and William Northlich.

As mentioned, we're working on a SSHRC-funded insight grant project titled, “The Cultural Capital project: Digital stewardship and sustainable monetization for Canadian independent musicians”. We're looking at issues of fair payment for creators, as well as ways to encourage new and creative artistic production. We aim to represent here today everyday users and smaller-scale creators and hope to provide a diversity of position.

Everyone, of course, comes before this committee to argue in what they might perceive to be their own self-interest. As great as the achievements are of any of the media industries you have heard from so far, their success is based on the creativity of artists who are themselves users of creative goods. Copyright creates and maintains monopolies by creating exclusive rights that can only be exploited by the rights holder, but from its inception, copyright law has always also included limits to those monopolies in order to achieve a balance with the interests of the general public and to provide access to the public good of culture and knowledge.

Copyright has been effective at building assets for powerful oligopolies. Canadian musicians and users are at the mercy of non-Canadian media and tech companies. Universal, Sony, and Warner control roughly 86% of the North American recording and publishing market. Live Nation and AEG monopolize the live concert and ticketing business, while iHeartMedia and Cumulus have acquired the majority of terrestrial radio stations. SiriusXM dictates the satellite radio market and, as you might know, just recently purchased Pandora. Apple, Google, Amazon, Netflix and Spotify have come to dominate the digital streaming media sector.

There is stunning inequality among musicians, and it's getting worse. The top 1% of artists account for 77% of all recorded music income, while the 10 top-selling tracks command 82% more of the market than they did a decade ago and are played almost twice as much on top 40 radio. It is more winner take all in the music industries than ever before, and we need to ensure that the middle class of creators have the means to earn a living.

Massive profits are being made in the media landscape, little of which makes its way to artists and performers. A recent Citigroup report found that the U.S. music industry generated $43 billion last year but artists received only 12%. Much artist revenue has to be sustained by aggressive touring, an option only open to a few, and one that is difficult given Canada's vast geographical area. This market consolidation, combined with vertical integration where tour promoters are owned by radio stations, which are owned by owned by record labels, makes it harder for both creators and users to be exposed to diverse, vibrant and remunerated cultural goods.

We wonder, then, what other artist protection provisions might exist and be of benefit to Canadian creators.

Like the EU, which is pushing back against the American tech oligopoly with fines and legislation, it is worth considering antitrust solutions that challenge this market domination or, at the very least, maintain space for new entrants into the market. We support recommendations that aim to enable creators to have more control over their creations and their profits.

We recognize that the many industry representatives are in favour of a copyright term extension from the author's life plus 50 years to a term of life plus 70 years. We support efforts to make the lives of working musicians more financially viable; however, we caution against having this term extension dominate the narrative of this review. We would encourage a careful consideration of rights reversions as a way to mitigate the ill effects of extension.

Recently, Bryan Adams argued for rights reversions with the ability of creators to reclaim ownership of creations 25 years after they have been given away. This suggestion is one that does offer some balance to the historically imbalanced relationship between artists and labels, where creators are often pressured to sign away their rights for life.

Term extensions do not hold up to scrutiny in cultural economic theory. Most of the commercial value of a sound recording is extracted in the first 10 years, so 70 years after death provides no real additional incentive. Furthermore, it prevents a more vital public sphere to the benefit of major record labels, who get to further exploit an artist's work after their death. Indeed, studies show that older works in the public domain enjoy greater commercialization than similar titles with restricted rights.

Key to creators being able to exercise these rights and others already granted by the Copyright Act is the clarification that these rights cannot be contracted away. Record labels, publishers and platforms should not be able to add contractual stipulations that override things like creators' moral rights or a hypothetical reversion right.

We agree that public funding is and always has been crucial for independent Canadian creators, but we are extremely wary of this burden falling on users in the form of a smart phone tax. The variety of uses for these devices are numerous, and the vast majority of these uses will be for necessary connectivity, not piracy-related activities at all.

Copyright reform should not place unnecessary limits on user and artist freedom in an effort to remedy the financial issues that have come from an imbalance of power in the media industries. Instead, we encourage efforts to provide artists with higher payout rates via streaming and online music services. We caution against the technological optimism shown in the recent EU copyright changes that encourage the enforcement of copyright law by technological algorithm, which is an incredibly blunt instrument to apply to the general public. The additional costs of overly aggressive regimes of copyright enforcement provide ever greater barriers and costs for new entrants into the market.

The recent example of Sony trying to require takedown of all recordings of Bach is a good one for showing how expanding notice and notice into a regime where companies can unilaterally request takedown of content could have a significant harmful effect on the public. Small creators would unfairly feel the burden of this blunt style of regulation. When it comes to designing a balanced copyright system, there is no need to use a hammer when we can cut like a knife.

We wish to end by restating that a concentration of power creates power imbalances that require solutions that extend beyond those that benefit the rights holder.

We sincerely thank the committee for taking the time to hear us today.

[The Chair, Liberal, Julie Dabrusin]

Thank you very much.

We'll begin our question and answer period.

Mr. Hogg, you have seven minutes, please.

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

I'll be sharing 2.4 minutes with Ms. Dhillon, if you can monitor it that closely.

[The Chair, Liberal, Julie Dabrusin]

Thank you for that exact timing.

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

I've been struggling to find a set of principles as we go through this. Many international references have been made in terms of ensuring that we match some of our international partners. I'm assuming that we need to have some principles, but they'll be mitigated to some degree, or at least influenced, by the international standards that are put in place. I've listened to this submission and many others, trying to find out what those principles are. I think I heard today about at least a balance of power and ensuring that we're providing livelihoods. Throughout much of the testimony there seems to be a sense of the change that's taken place, which has been dramatic.

To each of you, were things a lot better with respect to the principles 40 years ago? Are those principles things that can be transported or interpreted for utilization today in terms of the copyright issues we're talking about? Reference was made to our rates being the lowest in the world and therefore not being balanced or not being competitive. I'm trying to look at the international references and the principles. We want to have a fair payment system.

Reference was also made to moral control. I'm interested in how we interpret moral control and what moral control means. What are the creator's moral rights that you referenced? I'm trying to find some of the principles that underline this within the context of internationality as well as what's happening locally. How do we then create a system that will allow us to have those moral rights and have the principles that we want to have nationally? How will we put those within an international context that will make sense so that we're able to protect them beyond this boundary?

If all of you could make the principles really clear and change my life, I would be forever indebted.

[Voices]

Oh, oh!

[Caroline Rioux]

I can certainly start. I was thinking about that myself in my hotel room yesterday.

When I started at CMRRA many, many years ago—I've been there for 27 years—we were in the CD marketplace at that point. When folks released these products in the marketplace without licences, without having put in songs on those products and they hadn't obtained the necessary licences or paid royalties, I had remedies at the time. I could call the pressing company, the distributor, the retailer, and effectively tell those folks that they were pressing or manufacturing infringing goods and it's not in anybody's interest. Those individuals, those companies, would be equally as liable for copyright infringement as the person marketing the product.

That got us very quick results. The pressers would say, “That's it, I'm not pressing; I need to see copies of your licences before I continue to press.” Or, the distributor or the retailer would say they were pulling it off the shelf. We got very quick results because there were remedies. There were remedies across the distribution channels.

Those remedies today in the digital age don't exist. The principles of copyright in terms of the bundle of rights haven't necessarily changed, but it's much harder to apply it now because of the exemptions—the hosting exemption, for instance. When companies take the position that they have no liability and it's not their problem, it becomes very hard to get to the source of the problem.

The other comment I could make, without taking too much time, is that as we've gone through this transition, the industry, for a moment in time I think, was trying to focus on the consumer as the bad guy in accessing this content that was infringing. There was a sense from everyone that they needed to put some protections in place to make sure that as a consumer...you know, everybody is not a thief because they've downloaded a song from the Internet for free or what have you.

Where we're now going, and these are the changes that we've seen in the EU recently and in other parts of the world, and this is what we're advocating for as well, is that we need a way to stop the tap from reaching the consumer in the first place. We need those folks who have the control over the content to co-operate with us, and to have the tools so that there's no ramification for them if they do turn off the tap.

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

You're saying the principles—

[The Chair, Liberal, Julie Dabrusin]

You're already over the time, if you were sharing it.

You have just under two minutes left.

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

Thank you.

[Caroline Rioux]

I spoke too long. I'm sorry.

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

Today we're talking about fairness to artists and promoting them and nurturing their talent.

Can I please ask Mr. Reid or Ms. Dean whether the Juno awards have ever taken place in Quebec?

[Allan Reid]

No, they actually have not taken place in Quebec yet. It's something we would love to see happen. Our biggest challenge in going into Quebec—we want to go to Montreal—is access to the Bell Centre. The Junos take place usually in an NHL-sized hockey rink, about 13,000 to 14,000 capacity, and our biggest challenge there is getting in.

We're in the last three weeks of the regular season of hockey, usually at the end of March or early April, and it is very difficult to convince Evenko and the Canadiens to give us the eight days we need in that arena—

[Jackie Dean]

Just before the playoffs.

[Allan Reid]

—just before the playoffs. It is our biggest obstacle.

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

If you could please maybe try to find another venue or something—because Québécois artists have so much talent, but they're under-represented on the Canadian music scene—it would be very helpful for—

[Jackie Dean]

Yes.

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

—the artists to be able to gain a foothold on the Canadian music scene.

[Allan Reid]

We want nothing more than to be able to go to Montreal. It's a fantastic music city, as Quebec is as a province. It's a challenge for us, for sure.

They've offered Laval as an opportunity, but honestly, we feel that if you're going to bring the Junos to Montreal, we need to be in the biggest venue.