Canadian Heritage Committee on Oct. 4th, 2018

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

Thank you, Madam Chair.

Good evening, Mr. Kee.

I was elected to the House in 2011, and I sat on the committee that reviewed the Copyright Act in 2012. That is when I first met you.

How long have you been working for Google Canada?

[Jason Kee]

I've been working for Google for just under five years at this point.

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

I'm mistaken, then, when I said I met you in 2012?

[Jason Kee]

You may have met me. I was previously working with the Entertainment Software Association of Canada for the video game industry.

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

Since you've been working for Google for five years, that means you started in 2012. In 2012, the advertising revenue for Google was established to have been about $40 billion in the States, and now it's more than double. Business has been very good, obviously.

As my colleague said, you've given a very smooth presentation. It obviously is your job. You were working for another company before, doing the same work, and I understand the value of this. It's important that all parties talk.

Non-professionals of lobbying came here to talk not to the consumer committee, not to the industry committee, but to the heritage committee, crying, saying they can't make a living anymore because the model has changed. Some others came to say it's terrible, that because the big companies' contracts are so bad, they don't get money. Yes, but the issue is not between the artists, the labels, and the broadcasters; it's because of the new guys in the system, which is you, and all the web giants.

The presentation you did is, of course, enthusiastic. Everyone is flabbergasted by how powerful and dynamic and positive you are. To tell the truth, I've even noticed that Google is one of the most-loved brands on both the Republican side and the Democratic side. You're in a very nice position.

The reality, though, is that artists come to us. David Bussières came to us with a lot of paperwork. He is an interesting artist because he is both a creator and is also self-administering his stuff. He has charts about all this stuff, and he just made this comparison.

David Bussières told us that he had received $153.04, which means 0.5¢ per play, for 60,000 watches of his video on YouTube. On radio, he receives $2.89 per spin.

How do you explain such a difference? You're going to tell me it's a different model, but the reality is that people are shifting towards your model. How do you explain that everybody is angry? The only thing I'll say to anyone about this is, “Well, follow the money.” Where is the money? I know it's in California, but it all came into your own pockets—not you, but Alphabet.

You're a great man. I've met you many times. There's no way to say that you're not convincing and that you're not there to protect this technological growth that's outstanding and that we use every day. I'm the first one to be on Google, all the time. However, how do you explain that there's such a discrepancy between your saying, “We do all we can, it's amazing, rah, rah, rah”, and people who come here and just cry, saying they can't afford to make a living as creators?

[Jason Kee]

There are a variety of responses that I have.

Number one, at least on our platform, we do see a tremendous number of artists and digital creators who are successful. In that respect, I would actually invite the committee to try to speak to them as well, simply because you will get a variety of different perspectives with respect to how they achieve their success and what lessons can be learned from what they are doing to essentially achieve success in the platform. I would be more than happy to facilitate some of those conversations if that would be useful.

With respect to the specific example that you raised, again, it's difficult for me to comment on a specific artist's example.

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

Yes, but there are many.

[Jason Kee]

Yes, but in this particular instance, it was a comparison of, I'm assuming, an advertising rate based on YouTube views versus a broadcast radio rate, in which case a single spin on broadcast is reaching an audience of 50,000 to 100,000 people. The revenue model is radically different because the value proposition that broadcasting offers is very different—

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

Totally, yes.

[Jason Kee]

—which is one of the reasons the board sets rates that also are very different, versus, again, 60,000 views. Literally, one spin may have been equivalent to 60,000 views on YouTube—

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

Yes.

[Jason Kee]

—at which point, we actually paid many times more.

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

This comes to a simple reality check. Of course I was there at the time when Galaxie came to ask for licences to play the stuff we were producing at the label. I said, “Well, if your product is going to keep people from buying records because your service is so great, I'm going to ask more from you than the normal rate I ask for radio.” I understand that.

The fact is that accountancy checks for artists and for artistry and for all those associated will say, “Well, man, we are losing ground.” Some will say, “Well, you know, record labels....”The question is not there; just follow the money.

When we had these broadcaster exceptions 20 years ago, to give them a break with their first $1.5 million of sales in their small radio markets, why did we do that? We did that because they were having a hard time and the artists said, “Okay, we'll give them a break.” It's an ecosystem, and they were having a hard time. Now the radio broadcasters are claiming that they are not having a hard time anymore, so they want this provision to stop. It's understandable. It's within the family, because it's things that we regulate, things that we agree on. When we see what's going on in Europe with what has just been said with the European Parliament, for example, imposing on you guys to make equitable deals with the artists, it evokes the same reality in Europe that artists are starving.

How can you explain, for example, that the YouTube revenues for artists vary so much? We have changes, and if I am not mistaken, it's an average of not 7/1,000 of a cent, but 7/10,000 of a cent per play. I understand the situation, but still it varies for a million plays from $250 to $4,000. How can this vary so much? How can it be possible for non-super-big corporations to follow this? How can it switch from $250 to $4,000 per million spins or listens? How can it change like that?

[Jason Kee]

As I previously expressed, I think the challenge is that on the ad-supported side there is a high degree of variability because it depends on the specific conditions and circumstances of where that individual artist's or creator's audience happens to be. It depends on the nature of the content they create, which is how they attract that audience. It depends on how attractive that audience is to advertisers. It depends on what the frequency rate is of the ads that run on videos.

Ads don't necessarily run on every single video, mostly because, first, users won't necessarily tolerate it, and second, it depends on whether there are available ads at the time the video is showing.

Just by way of explanation, most of the ads on YouTube are actually run through an auction system. It's called real-time bidding, whereby an advertiser will set basically a maximum bid. Once a viewer is literally watching a video, there will be a real-time bid that occurs and then the winning advertiser will have their ad displayed.

Sometimes—

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

No—

[The Chair, Liberal, Julie Dabrusin]

You're just about out of time. You have a half a minute.

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

A half a minute...?

Well, I'll simply tell you that to me, the ecosystem has changed to an online ecosystem, and clearly, just as radio would not exist if it did not have music to play, your system would not exist if there is no content, whether it's creative content or journalism and stuff, so we have to make sure that you do pay your fair share for the content that brings people to your place.

[The Chair, Liberal, Julie Dabrusin]

Now we are continuing with Mr. Hogg, please, for seven minutes.

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

Thank you.

Thank you, Mr. Kee.

In your submission you commented that you were committed to delivering more revenue to creators in the music industry. Following up on Mr. Nantel's comments, what is the process or plan that you have in place for doing that?

[Jason Kee]

One is to create new features and products to basically help the creators and artists diversify their revenue streams. Again, I cannot understate how important this is, primarily because of the variability that happens with ads.

This is why we have been investing considerably in rolling out a premium subscription product for both the video side and the YouTube side. A premium subscription product whereby users are paying a flat monthly fee—typically something like $10 a month—generates considerably more revenue for the creators, and that's why we're investing considerably in expanding that.

We actually only launched the YouTube music premium about a few months ago. We're now in about 20 different markets and we look to expand that. As we enter additional markets, that's a much larger user base for creators to get their share, as well as the additional features like channel memberships, as I mentioned.

This is where a music creator—for example, a musician—cultivates a sizeable fan following. Let's say they have a million subscribers; that can result in some decent advertising revenue, but as I said, it is highly variable. If they have a small portion, if 1% of that is willing to pay them $5 a month to sustain themselves, that's a very healthy revenue stream that they can use to sustain their business and then help to support them getting their artistic work out to the remainder of their audience.

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

Did I hear you say we should be doing something about copyright and making some changes with respect to that? Did I interpret that properly in terms of what you said?

[Jason Kee]

This is a matter of the partnership that we're engaged in and the features we're launching. It's not so much a function of the copyright system. This is that issue of how you can look at the copyright system to facilitate some of those partnerships by looking at the Copyright Board and transparency issues.

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

This is what we're looking at right now.

Did you participate? Did Google participate in the government's consultation processes to help inform us?

[Jason Kee]

Which specific consultation processes are you referring to?

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

The processes that we've gone through prior to this and this process today.