Canadian Heritage Committee on Oct. 4th, 2018

[The Chair, Liberal, Julie Dabrusin]

Go ahead, Mr. Hogg.

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

I was just referencing the European Union again. I think it's the area you were talking about, and Google's expressed opposition to the reforms, arguing that they would hamper the flow of information, turn tech companies into content police, and lead to the web's ossification. What would you recommend to us? What would you see as the policy practices or legislation we should be putting in that are going to complement the industry, the creators, as well as accommodate those who are going to provide the platform?

[Jason Kee]

Thank you for refreshing me.

In many respects, again because of our approach here, we very much view many of these challenges fundamentally as a business challenge. It has to do with the nature of markets, the nature of what users are willing to pay, what they are willing to tolerate. How can we encourage them to funnel more money into the industry and into the ecosystem so we have a sustainable ecosystem, because again we have a partnership model that means we're a success depending on their success.

In that instance, we don't necessarily view a legislative response as the initial wage responses, because that's a very unwieldy and blunt instrument that could have many unintended consequences, which is largely what generates our concerns with respect to what has been proposed in the European Union.

I think that in looking at it from a policy perspective, finding ways that are not legislative to encourage the parties to come together, one of the core roles I see government can play outside legislation is one as facilitator. You are the honest broker who can bring parties together to have discussions to work things out and figure out the best approach going forward. In many respects I think that is a logical place.

Also, as I said, there are the issues with respect to transparency, mostly so individual artists can have full visibility into where the revenues flow from, which in many cases they don't necessarily know. All they know is the cheques they receive at the end of the month.

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

You made reference to consultation a number of times in being able to do that. You're telling me this is what you're doing now, that there's a fair amount of consultation going on, and that's the strategy that Google uses, yet we haven't come to an agreement. Mr. Nantel pointed out a lot of frustration within the industry, and obviously we want to see how we can develop a fair process.

“Facilitation” is a nice word and you've been trying to do this for some period of time, but it doesn't appear to have worked, based on the information we're getting and the need for us to do this study. We're going to have to come back with something, and it looks as though it's going to have to be legislative in nature. If it is, what would you suggest that legislation should be?

Despite your saying it's messy and problematic, we don't seem to have a lot of options at this stage, because the marketplace isn't working in a way that appears to be equitably addressing the issues. Then it becomes incumbent upon governments to look at strategies that could create the principles and values we want to have reflected in Canadian society. How would you see that legislation coming about? What would that look like if you had to do that?

[Jason Kee]

I think it's a long way of saying that outside of what I've already suggested, we don't have specific proposals with respect to this, at least in our view.

I did participate in the copyright review five years ago. The Copyright Modernization Act of 2012 achieved a balance among the various parties that were engaged there. We supported that balance, and the government seemed to support that balance recently as well, and has defined ways within that framework to increase monetization opportunities.

Again, it's not clear to me how it would be legislatively easy to achieve, simply by virtue of the fact that we're talking about things like setting market rates and so forth, which is, again, a very heavy-handed approach.

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

I don't think any legislation is easy any time you're looking at trying to reflect the broad values of society and trying to put them in a place that will work and reflect what you want to accomplish as a society. If I'm interpreting what you're saying, it's that we should continue to consult and see how that works out, and try to set values or principles to be reflected within that consultative process. Is that what you're suggesting?

[Jason Kee]

Again, as a matter of policy, you could outline ways to bring the various parties together. As you are going to be engaging further during this process and hearing from other witnesses, this is also where I would strongly encourage the committee to hear from a range of creators, including those who have been successful on digital platforms, so that you have an inclusive view of those creators who have been able to achieve success—what worked for them and what didn't, and what their own recommendations might be.

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

We have been doing that. That is part of the process we've followed, completely.

[The Chair, Liberal, Julie Dabrusin]

We will now go to Mr. Webber.

I understand you are sharing your time with Mr. Yurdiga for a combined five minutes.

[Len Webber, Calgary Confederation, CPC]

Thanks, Madam Chair.

This is my first time sitting on the heritage committee. I'm usually at the health committee. In my three years there we've been talking about rare diseases and anti-microbial resistance and diabetes and concussions, so being here today and listening to your presentations is a breath of fresh air.

It's kind of ironic, because my family is very much into music promotion in Calgary. We have a television program, Stampede City Sessions. I don't know if you've heard of that or not. They're throughout the Pacific northwest and Memphis and Nashville in Tennessee. When we produce a show, we bring in local talent to play at our performing arts centre. Local talent, international talent, Canadian talent from throughout Canada—we bring them in and we showcase their talent. We're quite proud that we're helping these young individuals and bands do well.

From getting to know some of the artists, I know they absolutely love YouTube. That's how they market their talents. Without your services, without the Spotlight channel that you mentioned, and Creator on the Rise and all these different programs, they would certainly struggle, more so than they do now. I think of someone like Justin Bieber. He started out on YouTube, did he not? Was that not where he was discovered?

[Jason Kee]

That's correct. More recently, Shawn Mendes, who I think was mentioned at this committee as well, basically found his life on YouTube.

[Len Webber]

Right.

Again, my comments are more just to say thank you to you at Google and YouTube for doing what you do to help out these young artists. You mentioned seminars, for instance, on how to market their talents. I think you do a great job. You have me addicted to Google and YouTube. I don't know if I should thank you for that or not.

[Voices]

Oh, oh!

[Len Webber]

Does Justin Bieber help you out at all now that he has made it big?

[Jason Kee]

He's still very prominent on the platform. His latest album was released on the platform. This is part and parcel, as I said, of a number of music-specific features that we've been deploying. He actually has an official artist channel that allows him to sell merchandise and do all sorts of different things.

Again, Shawn Mendes in particular is a new up-and-comer—the “the new Justin Bieber”, as he's often called—who's been tremendously successful.

We just supported a documentary shot by a YouTuber named Casey Neistat on his up-and-coming experience. He taught himself to play guitar on YouTube and built an audience following after he did a fan meet-and-greet. Everyone said he should try to do it for a living. That, coupled with incredible talent, basically led to him creating covers, which led to him being discovered, which led to him basically being the youngest top-25 artist in history. Again, that's a tremendous success story.

[Len Webber]

Exactly.

Go ahead, David.

[The Chair, Liberal, Julie Dabrusin]

Go ahead, Mr. Yurdiga.

[David Yurdiga]

Thank you.

I want to talk a little bit about revenue sharing as time has progressed. Obviously, before the platform there were hard copies, such as CDs or DVDs. It seemed there wasn't as much talk about remuneration for the artist. However, once it switched from the hard copy model to downloading and then streaming, there seemed to be less and less pie left over for the artist.

Has the music industry adjusted to the new realities? I know that video gamers have adjusted quite nicely. The digital platform is working well for them. It seems that artists haven't changed with the new realities. Can you comment on that?

[Jason Kee]

I think it very much depends. For instance, Citigroup did a study that discovered that only 12% of overall remuneration flowing to the music industry was actually flowing back to the individual artists. This is the supply chain matter that I mentioned. While that's obviously not a great figure and we need to find ways to improve it, the other point they made was that back in 2000 it was 7%, so in terms of the share that's going to the artists, they're actually seeing more than they were I guess 20 years ago.

The principal reason is that now there are so many opportunities through digital platforms like YouTube and others that they can actually self-release. They can control their own future through us, and they can do the same thing through Spotify and Google Play Music and so forth. When they manage it themselves, they see a greater share of the revenue, because of course they're taking on all those additional responsibilities. When you add additional players into the value chain, that when's everyone takes their piece. That's where the cut comes in. Back in the days of the CD, the only way you could have a record released was to go through a label. That's how it was, but that's not the case now.

[The Chair, Liberal, Julie Dabrusin]

That takes us to the end of your five minutes.

We once again give the floor to Mr. Nantel, who has the last five minutes.

[Pierre Nantel, NDP, Longueuil—Saint-Hubert, QC]

Thank you, Madam Chair.

Mr. Kee, after the 2% on ad revenue, the European Union is preparing to require a quota of 30% to 40% of local European content on your platforms.

What percentage would you say Canadian content currently accounts for on your platforms?

[Jason Kee]

Percentage-wise, that is difficult to determine. It's difficult to determine what would qualify in overall percentage relative to the overall YouTube corpus. Also, with 400 million hours of content uploaded every minute, it becomes a bit of a meaningless statistic.

[Pierre Nantel, NDP, Longueuil—Saint-Hubert, QC]

Obviously, everyone knows that the figures that are being considered are definitely possible.

There is no doubt that all parties will ask you to help us properly determine the percentage. Canadian cultural content and Quebec music have been flourishing because criteria have been imposed on broadcasters to reflect our culture in their offering.

I would also like to talk to you a bit about taxation. Do you collect sales taxes on your subscriptions and advertising sales?

[Jason Kee]

With respect to GST or HST, no. That's because the nature of the legislation is such that if you're providing services from outside the country, it's an issue of whether or not you're required to collect and remit. We are working now to comply with the Quebec regime that was introduced recently, which we expect to do by January 1 of this year.

There are other services that are actually provided in-country, and because they're provided in-country, we do collect.

[Pierre Nantel, NDP, Longueuil—Saint-Hubert, QC]

Could we hope, as Canadians, that your services and advertising revenues collected in transactions with Canadian advertisers would be revenues declared in Canada?

Is that in the realm of possibility?