Canadian Heritage Committee on Nov. 27th, 2020

[The Chair, Liberal, Scott Simms]

Welcome back, everyone.

Everyone seems to be, with the exception of myself, virtual today, but these are the days that we're in.

We are studying, with witnesses today, challenges and issues faced by the arts, culture, heritage and sport sectors during the COVID-19 pandemic. Pursuant to Standing Order 108(2), the committee resumes its study on the challenges and issues faced by the sector. We moved the motion on October 23, 2020.

We have two hours today. We have one full panel and we have a second panel coming in an hour from now.

Again I'd like to remind our witnesses that you have up to five minutes to begin. Following that, there will be questions and answers from our MPs, respective of the parties and the time allotment. We'll get to that in just a few moments.

I just want to introduce the people here today.

We have with us a representative from the Association québécoise de l'industrie du disque, du spectacle et de la vidéo.

We have Solange Drouin, vice-president and executive director, public affairs. From Drayton Entertainment, we have Alex Mustakas, artistic director and chief executive officer, and from Music Canada, we have Patrick Rogers, vice-president, corporate affairs.

It's good to see you all.

We're going to start out with five minutes for an introduction and an opening speech. I will be somewhat lenient, but these hours can close very quickly, as many of you would know.

Ms. Drouin, you have the floor for five minutes.

[Solange Drouin, Vice-President and Executive Director, Public Affairs, Association québécoise de l'industrie du disque, du spectacle et de la vidéo]

Good afternoon, everyone.

Thank you for inviting us to appear before you today.

Before getting to the heart of the matter and talking about the pandemic, I'd like to take a few minutes to describe the world of music to you.

Globally, this environment is very largely dominated by three big multinational companies: Sony, Universal and Warner. Those three enterprises are present in Canada. Here, they distribute the musical content from international artists and they also develop the careers of Canadian artists they feel can be of international scope, such as Drake or The Weeknd, whom you know.

These three large corporations have virtually nothing to do with the production of Canadian francophone content or that of Quebec artists who speak other languages. Those Canadian francophone artists are almost all allied with independent enterprises that develop their careers here or internationally, in some cases. It goes without saying that the size of these independent businesses cannot compare to that of the three global enterprises.

It will be important to keep that in mind when you analyze the effects of the pandemic on our sector.

All businesses have suffered from the pandemic, of course. On the other hand, independent businesses do not have the same resources as multinationals to cope with it.

To understand our industry, the other thing to take into account is that income for the entire chain of music stakeholders comes primarily from three sources: revenues from the sale of recorded music, from the sale of concert tickets, and finally, funds and contributions from the use of music on the radio and in public places, for example.

With respect to recorded music sales, as you know, since 2005, these revenues have shrunk considerably in favour of streaming, without generating equivalent revenues, far from it. The pandemic has further accelerated this irreversible phenomenon.

The pandemic has also had a catastrophic effect on ticket sales due to the closure of venues. Under normal circumstances, revenues from this activity represent nearly 50% of total business revenues. However, the industry has been totally deprived of this for several months. This loss has had a devastating effect on the entire chain, since more than 75% of expenditures in this sector go to labour, including artists, back-up singers or choristers, musicians, technicians and designers, among others.

Finally, other revenues from music use have also suffered huge declines and will continue to do so. For example, in radio, royalties paid are calculated as a percentage of advertising revenues. As advertising revenues are declining, so are the resulting royalties for authors, performers and producers.

The portrait I'm painting for you is quite dark, I agree. However, the response of our community to the pandemic has been surprising, and even inspiring. Instead of giving up in the face of the enormity of the challenges, the music community has continued to work tirelessly to keep the link between artists and audiences alive.

Since the lockdown, in Quebec alone, several hundred albums have been released. All kinds of activities and shows have been created, such as virtual shows, shows on balconies and in drive-in theatres, and the production of music videos has continued. In short, the independent Canadian companies that accompany the artists have remained open and active.

All of this was made possible thanks to additional funding from the federal and Quebec governments. We have said it several times and we say it again today: thank you for this essential support.

These emergency payments provided our community with some predictability until March 31, 2021. Beyond that date, as it were tomorrow morning, the outlook for the future becomes blurred and uncertain. In fact, a broad consultation with our members revealed a great fear that 2021 will be worse than 2020. This is a fear to which is obviously added the exhaustion of the teams and the accumulation of losses.

Our independent companies have always been dynamic but fragile. The pandemic has made them even more fragile, and their capacity to produce, market and distribute music and shows for local artists has been reached.

In the coming months, a recovery plan must be implemented over as long a period of time as necessary, so that the Canadian and francophone music community can continue to make quality music in all its diversity accessible to Canadian audiences everywhere. To achieve this, financial investments will be necessary, of course.

In addition, the pandemic has exacerbated the urgency of revising two framework laws for our sector.

First of all, I'm talking about the revision of the Broadcasting Act. Bill C-10, currently before Parliament, establishes a framework for online businesses, often foreign, and will ultimately subject them to regulation that will enhance our content and financial contributions. This legislative review must be completed before the next election. We cannot flub this historic event.

The revision of the Copyright Act is another tool you can give the cultural community to ensure its sustainability. For example, the private copying regime, which has been successful for many years, must be reinstated.

Thank you for your attention. I'll be pleased to take your questions.

[The Chair, Liberal, Scott Simms]

Thank you very much; you're very kind.

Mr. Mustakas, you have five minutes, please.

[Dr. Alex Mustakas, Artistic Director and Chief Executive Officer, Drayton Entertainment]

Thank you, Mr. Chair and committee members, for allowing me a few minutes to crawl back in from the window ledge to appear before you today.

I'll give you just a bit of background. Drayton Entertainment is an award-winning charitable arts organization that produces professional live theatre at a circuit of seven venues throughout Ontario: the Hamilton Family Theatre Cambridge; the St. Jacobs Country Playhouse and the Schoolhouse Theatre, Kitchener—Conestoga; the Drayton Festival Theatre, Perth—Wellington; two stages at the Huron Country Playhouse in Grand Bend in Huron—Bruce; and, the King's Wharf Theatre in Penetanguishene, which is in Simcoe North. We also have a centralized production facility and recently announced youth academy in Waterloo.

What began as a relatively community-based volunteer arts organization back in 1991, a grassroots movement 30 years ago in the tiny village of Drayton, Ontario, has become one of the great success stories of Canadian theatre. Back then, there was one employee, a legion of volunteers, a nine-week season and a paid attendance of 14,000, with a modest budget of $99,000. Fast-forward to the 2020 season—the pandemic season—a season that would have consisted of 832 performances throughout the province to a paid attendance of over 275,000, with a $12.5-million budget and an estimated economic impact exceeding $65 million.

Drayton Entertainment now provides over 400 employment contracts to actors, musicians, designers and other creatives, making us one of the largest employers of professional artists in the country. Additionally, we employ upwards of 175 staff and have an active network of 550 volunteers contributing over 30,000 hours annually.

The remarkable thing I would like to note is that since our inception—because I've been here since the inception, and some of my staff would say it's too long—we have received zero operating funds from any level of government or arts councils. Of course, we have benefited from the occasional federal investment in capital infrastructure upgrades or expansions, resulting in a substantial return on investment.

The pandemic has impacted us in many theatres in three noteworthy ways. Firstly, the loss of all programming has caused significant hardships not only for us, but also for our municipality, tourism and hospitality sector partners, who rely on us as a major driver of regional economies.

Secondly, what we do is communal by nature, and this makes recovery a daunting prospect for any business.

Thirdly, despite the lifeline of the emergency wage support and the emergency response benefit, with no revenues to cover our fixed operating costs we've been forced to terminate all artist contracts and lay off the majority of our staff. It pains us to be in this position, of course. Along with our industry colleagues, we've mitigated financial losses, reduced overhead and minimized expenses through every possible means.

As we continue to navigate these challenges, we've identified four support recommendations to the standing committee.

I will start with number one, and that is a fair and transparent application process to access government funds. Criteria should be expanded for any current or future aid programs to include eligibility for those organizations that do not already benefit from annual operating funds from any tier of government. In short, arts organizations like ours should not be overlooked for not being a client of these entities and the subsidies or grants they provide. Earlier this year, the government announced that $55 million was allocated to the Canada Council for the Arts, which opted to disburse to just its current clients, with no opportunity for the rest of us to apply and make a compelling business case for support.

The second recommendation we would have is to top up the wage supports. We would respectfully recommend that the emergency wage subsidy restore the maximum 85% rate for the hardest hit sectors. This would allow us the flexibility we need to bring back workers to position our recovery. Even with the current wage subsidy program, which we are very grateful for, many arts organizations are operating with little to no revenue, unable to sustain the top-up wages or benefits required to retain our teams.

The third recommendation is mitigating fixed costs. Restrictive measures such as operating to a maximum of 50 audience members has the same net effect as a complete shutdown for us. With the new emergency rent subsidy program, there is concern that arts organizations may qualify for only the additional 25% top-up support in the event of a total lockdown, and that's determined by regional health authorities. Expanding this eligibility criteria would greatly benefit a sector whose venues have been largely sitting empty since March.

For our fourth recommendation—my personal favourite—if I were king of the world, I would create an arts recovery incentive fund. As we look to the future, a dollar-matching arts recovery incentive fund similar to the ministry's very successful arts endowment incentives program would enable arts organizations to tap into the philanthropy of our audiences, who would know that their gifts would be matched by the Government of Canada. I just believe all stakeholders would feel they have so-called “skin in the game” when it comes to recovery.

In closing, Mr. Chair, on a personal note, other than our industry's staggering financial losses, the mental health of our members is of utmost importance. A professional musician I spoke to recently said with tears in his eyes that being a musician is all he's ever done in his life. An actress, who has the weight of the world on her shoulder, said that she's trained for this all her life, but now wonders whether it's time to leave the business.

We need the creative sector. COVID-19 has been devastating to our emotional well-being.

Charlie Chaplin once said that he likes to walk in the rain, so that no one can see his tears. I hope you can see us through the rain right now because we can certainly use your help.

Thank you very much.

[The Chair, Liberal, Scott Simms]

Thank you, Mr. Mustakas. That was quite a powerful ending.

Now we go to Music Canada with Patrick Rogers.

Patrick, it's good to see you again. My best to you and your family, of course. You're no stranger to how things work around here. You probably know as much as anybody on this call.

I'll just let you have your five minutes, sir. Go ahead.

[Patrick Rogers, Vice-President, Corporate Affairs, Music Canada]

It's good to see you, Mr. Chair. Thank you for this opportunity.

My name is Patrick Rogers, and I'm the interim co-CEO of Music Canada. I'd like to thank the committee for the opportunity to speak today.

Music Canada is the trade association to Canada's major record labels: Sony Music Entertainment Canada, Universal Music Canada and Warner Music Canada. Normally, our work focuses on promoting and protecting the value of music, which helps artists and the businesses that support them to thrive and contribute to our economy and culture. However, in March when the Canadian music industry was forced to cancel the Junos the same week as North American sports were shut down, and as Canadians stopped gathering in large numbers, our members directed us to focus our efforts and resources on helping the most vulnerable individuals in our industry: artists, crews and everyone working the live-music space. The livelihoods of these individuals were among the first to be hit by the pandemic and will be among the last to recover.

To help ensure that governments at all levels had accurate information to understand the pandemic's impacts and to develop effective relief measures, we partnered with Abacus Data to conduct national polling about how the pandemic was affecting artists and their fans. One study surveyed over 700 professional musicians so that we could better understand the impacts through their lens.

Here are some important numbers.

The report found that professional musicians perform, on average, nearly 100 times a year, typically travelling across Canada and the world to do so. Revenue generated from live performances in turn helped support an average of 11 other people, such as band members, technicians and other industry jobs. A staggering 85% of musicians agreed that without live performances they will have difficulty earning enough to pay the bills.

The most important number is zero. There are zero live shows, zero festivals and zero gigs as artists, fans and the industry have understood them for generations. With this in mind, we've spent the pandemic amplifying the voices of artists in settings like this and assisting colleagues and organizations, like Erin Benjamin of the Canadian Live Music Association, as they work to highlight the difficulties being faced by venues and the artists who play in them.

In addition to surveying artists, we also commissioned a separate national survey of Canadians, with a first round released in May and an update in August. Those results were similarly startling. They underscored that the virus will keep Canadians, including identified music lovers, home long after they're allowed to attend events. About one in two of those live-music lovers believes that it will be six months or more after government restrictions lift before they'll feel safe returning to live shows and festivals, small and large indoor venues, and elsewhere. As time progresses, that concern has risen significantly.

Our research also confirms something that we knew to be true: Canadians miss live music. While watching a concert online might scratch the itch, it's no substitute for the feeling you get from being at a live show. Canadians love live music, and they've told us that they desperately want to go back when they believe it's safe to do so.

We know that live music will eventually return with the same energy and significance that it previously had, but government support is critical to ensure that it exists when we come out the other side. How do we get to the other side? Artists and individuals working in our sector need to receive continued and direct financial support—like the Canada recovery benefit—for as long as live-music venues are regulated, closed or only partially open across the country. These funds will be needed for longer than many expect. As we are witnessing now, the need will increase if the public health situation worsens.

Lastly, Music Canada and our industry colleagues came to this committee last year to discuss the need for copyright reform. Virtually the entire Canadian music industry asked that a few simple amendments be made to the Copyright Act to help ensure that artists are paid when their music is played. The report from this committee, “Shifting Paradigms”, provides a great road map for upholding that principle.

I hope that this committee and the government will return to that work soon because with the pandemic eliminating opportunities to tour for artists, the fallacy that artists don't need copyright protection has been exposed for the myth that it always was.

I'd like to thank the parliamentary secretary for her continued championing of this principle, both during the writing of the report and now in her new role.

I hope that, as you turn your minds to assisting the music community in the face of the pandemic, you will again recommend addressing those copyright measures, which will help bring relief.

Thank you for your time today. I'd be pleased to answer any of your questions.

[The Chair, Liberal, Scott Simms]

Thank you, Mr. Rogers.

Canada loves live music; indeed we do. That's a valid point.

Folks, now we're getting into the questions.

I'd just like to say something to our witnesses: If you want to get in on a conversation that's happening, you have to get the attention of the person asking the question. You can do that by waving at the screen; hopefully, the questioner will pick that up. I ask that the questioners please have a look at their gallery view to find out who wants to weigh in.

This is the first time in my life that I've ever chaired or been involved in a committee meeting where I'm the only member in the room. I'm not sure if I'm lonely or intoxicated with power. I'll figure that out, hopefully, by the end of the meeting.

Nevertheless, let's try to do this as quickly and smoothly as we can because it's a very important issue.

Mr. Shields, you have six minutes, please.

[Martin Shields, Conservative, Bow River, AB]

Thank you.

To the witnesses, thank you for being here today. I appreciated your comments.

Starting with Drayton, you listed five different things that you thought would help. Could you prioritize them in any given way? Then, with the bottom line, what amount of money would it take to get you out of what you've spent and what you're in debt for and get you ready to be going next time?

[Dr. Alex Mustakas]

I would suggest that the wage subsidy would be at the top of the list. Mitigating costs would be second. The incentive fund, of course, would help us in recovery. That is moving forward and raising money for the recovery and growth and generational change that we would like to do.

For us, as I guess a relatively modest-sized arts organization in this country, our 2020 losses will be close to $3 million. Next year, moving into 2021, if there is no programming, with just the fixed costs alone and just a very small core staff left, the losses will be over $1 million. One of the problems in 2020 was that because of our collective bargaining agreements with actor unions, advance royalties, creatives and so on, a number of buyouts cost us nearly $1.5 million.

We won't have that next year, obviously, because we have not contracted anyone. We're looking at, next year, at least a $1-million loss without even putting a key in any of our theatre doors.

[Martin Shields, Conservative, Bow River, AB]

When you give those numbers and you talk about the wage subsidy being critical to moving forward, how are you going to recover out of that deficit? You're saying you weren't allowed to qualify for the $55 million.

[Dr. Alex Mustakas]

Well, I think we need our staff to mobilize. We need an opportunity to raise money from our stakeholders. All we can do is wait until it's safe to go back into a crowded auditorium. There are surveys being done throughout North America saying that even when it's safe to do so, there's a 40% chance that some people will not be back right way.

It will take some time. We need staff to help us raise money and have campaigns to ramp up for future performances and so on.

[Martin Shields, Conservative, Bow River, AB]

Could a cash infusion be a piece of what's going to be able to make you survive?

[Dr. Alex Mustakas]

Certainly. What I fear is that if this is prolonged....

We're fortunate, because when I started the theatre company 30 years ago, we created a small stabilization fund that we put money into every year. We've been living off that for the past few months. Also, a number of our patrons who had bought tickets in advance left credits for us. We're using the cash from those credits as well, which will be a problem down the road when we do recover and they want to purchase tickets and they want to use their credits.

That's the situation we're in, unfortunately. If we had not had that stabilization fund, everything we worked for, for 30 years, and all the grassroots people who helped us, would have been gone in three months. We wouldn't have been able to survive.

[Martin Shields, Conservative, Bow River, AB]

That will be a critical point when you talk about the recovery piece. If you do have that lag in attendance, that will be a problem at the other end.

[Dr. Alex Mustakas]

Correct. You know, creative people and the arts sector are very good at doing business with limited resources. We have mitigated as many losses as possible. We've kept operating costs as low as we can. It's just, unfortunately, the fixed costs. We personally are a victim of our own success. We have seven venues across the province. Without putting a key in any of those doors, just the fixed cost, without salaries, is over $800,000.

We need to survive through this. Any of our suggestions will definitely help.

[Martin Shields, Conservative, Bow River, AB]

The one last thing you mentioned is the mental illness that people probably don't see, the mental health of the artists and what we may lose to that. Do you have any thoughts on how that could be dealt with?

[Dr. Alex Mustakas]

We need help. We need resources, to be honest.

We tried to do a short web series. We brought in some singers individually, and I have to tell you, for them it was an hour of normality, but I witnessed a sadness. I witnessed a weight on shoulders. I've witnessed physical changes in these people who have not been able to get on stage and perform. It's been months and months.

I certainly would recommend number five, that there be support for artists when it comes to mental health.

[The Chair, Liberal, Scott Simms]

Thank you.

Mr. Louis, you have six minutes, please.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you, Mr. Chair.

Thank you, panellists, for being here.

This is very emotional testimony from everyone, and it hits very hard.

I will follow up where Mr. Shields left off. It's too important to pass up the opportunity.

Mr. Mustakas, you described an artist saying that being a musician is all he's done for his entire life. That resonated with me because, until a year ago, I would have said the exact same thing. Theatre is a big part of Kitchener—Conestoga.

We all know that great art comes from struggle, but we haven't seen struggle at this level, at this depth, so I want to speak more about mental health.

I know that these artists and the people around them.... It's not just the artists; it's all of the workers who are on and behind the stage. Those programs we're talking about can help people get through.

I'm also concerned about our younger artists who are just trying to get into the arts. Is there any way to pair the two that you're talking about, supporting artists to help with the younger generation and seeing if we can help them get in? That way, they're helping their own peers.

[Dr. Alex Mustakas]

We certainly need the support. We have had a very successful youth program over the years that we're expanding. We believe this is an area where we will be most effective on generational change.

I know a lot of young people who are in acting schools and musical theatre programs and who study music and so on. I'm worried they won't have a place for an outlet when they're done. Any support we can get for them, I think, is critical. We miss our musicians. There's nothing like live music.

The other thing I should mention—it's not only the artists and the young people—is that we received just recently over 600 comments from our theatregoers. Many are of an older demographic who miss what we do and who tell us what a big part of their lives live theatre and live music have been. We have to think about all of them, as well. As soon as it's safe to do so, we will be back.

You're absolutely right, Mr. Louis. Great things come from struggle, from the bottom up. That's when community comes together. You can see the poster above my shoulder on Les Misérables if you want to talk about struggle.

We do need to not forget the grassroots who are our future as well.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

I appreciate that. As you say, it's not just the people on stage; it's the people who are supporting them, the whole industry in general.

Again, I've been to countless shows through Drayton theatre in St. Jacobs and other theatres. We talk about the experience; it's not just someone coming to the theatre. Maybe you could elaborate briefly on the restaurants and the shops and what they're adding to the economy. You mentioned the $12-million budget getting stretched to a $60-million impact just in our region alone. Maybe you could expand on that and how important that is.

[Dr. Alex Mustakas]

I've always believed that what an audience member sees on stage is the icing on the cake. We believe in the entire experience from the moment you think about going to the theatre.

We partner with restaurants and other attractions in the hospitality industry that's, obviously, been hit hard. We partner with our tourism organizations as well. They, obviously, have been hit hard as well.

We look at this as a full experience. We absolutely know that any location we've ever gone into has seen an immediate economic impact on the restaurants, hotels and other attractions. We can't forget that side of what the arts and the music industry do. It's just like sports, of course. It's really critical to all the other sectors as well.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

I appreciate your bringing recommendations because here on this committee we are all focused on helping and supporting, and we're looking for some solutions.

I wonder if you could elaborate on the arts incentive recovery fund you propose, on what you had in mind, because so many people in your organization and many others have a loyal fan base. You have people who, as you said, are missing the theatre and want to be there and want to help out, and if you ask them to step up financially, many of them, if they have a possibility to do so, would step up and help out.

How do you see something like that working?

[Dr. Alex Mustakas]

It's the incentive portion of this. We know it works when you can tell someone that if they donate $100, it will be matched by another person or another organization, the government. If we could convince the federal government and the provincial governments to participate, that $1 would turn into $3.

I feel those are the individuals, the stakeholders who want recovery and are willing to help, and it is an incentive.

I'll give you a personal example. A few months ago I held a board meeting here with volunteer board members and I said I would match up to $25,000 to encourage all of them to help. The first board member walked by me and said he'd match the whole thing. It was tough on me, but it worked.

That is the kind of incentive there is, and it has worked very well with the arts endowment incentives program to create endowments where we can't touch the principal. It's just the yearly payout, but in this particular case it would bring everyone together in a grassroots movement. You would partner with government and individuals and business and municipalities and all—

[The Chair, Liberal, Scott Simms]

Okay, thank you, folks.

Sorry, Mr. Mustakas. I thoroughly enjoyed what you were saying but the clock tells me I have to say otherwise.

Mr. Champoux, you have the floor for six minutes.