Good afternoon. My name is Catherine Jones, and I'm the Executive Director of Connect Music Licensing.
I'm lucky to have worked in the music industry for 25 years, at a record label, at a broadcaster and now at Connect. I've witnessed first-hand the seismic shift that has occurred since the dawn of the digital age. In my early days at Universal Music Canada, I remember when we first got email—first internal, then external. It was the beginning of a series of changes that would fundamentally alter the way musicians and record labels are paid for their work and investment. As a result of these changes and the effect on the industry, I have been through five major restructurings, and I made it through four.
At Connect, we represent more than 2,700 rights holders of sound recordings in Canada. Our membership spans the breadth of the Canadian music industry, ranging from single self-produced and self-released DIY artist-entrepeneurs to Canada's largest record labels, with Canada's leading independent labels in between.
Our mission on behalf of our members is to return maximum value when their sound recordings are used commercially by others. This includes distributing royalties for public performances or recordings, negotiating licence agreements with commercial music users, and collecting licence fees from those who make reproductions of our members' sound recordings. Our licensees include services like Stingray, background music suppliers, radio and television broadcasters, online music services like iHeartRadio, and many more.
To elaborate on the seismic shift I referenced earlier, new technologies have changed the ways music is accessed, consumed, reported and paid for by music users. Just like so many of our members, Connect has adapted in order to unlock the greatest value for our members as the ways we listen to and interact with the music have evolved.
Two years ago, Connect completed a drastic overhaul of our operations with our partners at Re:Sound, which slashed our administrative costs by 28%, putting $1.2 million annually in additional royalties into the hands of Connect members. As part of this overhaul, we identified and eliminated duplicative processes and implemented a simpler, more direct way to connect the identifiers our members provide about the recordings directly with the data Re:Sound receives from commercial music users. This generates more revenue for our members, expediting and increasing their paycheques when their music is used.
We are a lean and nimble music licensing company, committed to international best practices, and we've done what we can to get more of every dollar that we collect into the pockets of music creators within our current copyright framework. The reality for our members is that within that framework, there exists a massive gap between the value of their music and what is returned to them by the music users who commercially use and profit from their music.
This disparity is known as the value gap, a term you've all become very familiar with during this study of remuneration models for artists and creative industries. The value gap is not the result of a failure by the music industry or the artist to adapt; it is the result of misapplied and outdated copyright legislation that has not kept pace with technological change.
To give you an idea of the scale of harm of the value gap, between 1999 and 2013, global music revenues decreased by approximately 70% in real terms. In Canada, between 1997 and 2015, music revenue fell to just one-fifth of what it would have been if it had kept pace with inflation and real GDP growth. Industry is only now, in the last three years, seeing a modest return of growth.
Andrew Morrison of The Jerry Cans and artist and label owner Miranda Mulholland, both members of Connect, appeared before this committee and offered a first-hand glimpse into their economic realities. It is becoming increasingly difficult for them to rely on the value of their recorded music for financial stability. They worry that the middle-class musician is disappearing.
There are, however, changes to the Copyright Act that this committee could recommend that would immediately improve the music ecosystem for Connect members.
The first would be to remove the $1.25-million radio royalty exemption. Since 1997, commercial radio stations have only been required to pay $100 in performance royalties on their first $1.25 million in advertising revenue. This two-decades-old exemption is outdated, inequitable and, in 2018, wholly unjustified. I understand that this recommendation has received a fair bit of attention at this committee, so I'd like to provide some clarification.
We heard the concerns expressed by community radio stations during last week's hearing. To be clear, what has been proposed by music industry groups and artists would have no effect on community radio stations. Community radio stations are not covered by the $1.25-million exemption. They are, in fact, separately exempted entirely from royalties, other than the nominal payment. We support retention of the community radio station exemption, which requires a total of $100 in royalties to be paid by such stations annually to record labels and performers. That said, Canada's largest vertically integrated media corporations—commercial enterprises that benefit from the exemption for each radio station that they own—no longer need to be subsidized by musicians and record labels.
The second change would be to amend the definition of “sound recording” in the Copyright Act. The current definition of a sound recording excludes performers and record labels from receiving public performance royalties when the recordings are broadcast in film and television soundtracks.
Miranda Mulholland summarized this problem succinctly when she appeared before this committee with her Republic of Doyle example. Even though her fiddle-playing features in almost every episode of the show, and despite this program being syndicated in multiple global markets, she only received a one-time, union-negotiated fee for each studio session.
Contrast this with the experience of screen composer Ari Posner, representing the Screen Composers Guild of Canada, who told the committee last week that he could not survive on his upfront fees alone and that he relies on the royalties he receives from the public performance of his compositions to pay his bills and support his family.
Our recommendation is simply that performers and record labels be afforded the same rights as composers and publishers when their work in film and television is broadcast or performed.
Number three, we also recommend the creation of a private copying fund. This will ensure that recording rights holders and performers, as well as composers and publishers, are fairly compensated for non-commercial reproductions of their recordings, without creating an extra cost for the consumer.
I teach licensing and copyright at Humber College in Toronto. The introduction I give to my students about Canadian copyright law is that any song you hear on the radio, on a streaming service, on vinyl, or on a CD has two separate and distinct copyrights that make up the whole.
One of them is for the composition for the lyrics and the notes in the song; the other one is for the sound recording, or the song, which covers whoever creates it and the musicians who perform on it. In almost all uses of music, the two rights are treated equally—in downloads and streams, for example—but in film and television, and with the radio royalty exemption, they are not. The effect of these provisions is that my members are subsidizing massive media companies that are syphoning value away from their music.
On behalf of Connect's members, I ask that you give careful consideration to these recommendations to close the value gap in Canada.
Thank you.