Industry Committee on May 8th, 2018

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Would it be a government fund or a fund whose money would come from the Web giants?

If I understand your argument correctly, Facebook and Google are making money using our creators' brains. Are you suggesting that the government create a fund to subsidize these?

[Pascale St-Onge]

It could be an independent fund, but the government must be willing to set it up.

However, if we look at what has been done with the Canada Media Fund, for example, we have seen over time that money has gone much more into containers than into content. That's why, to have content that fills containers, we need to find a way to support them. We could create a fund to which companies like Google, Apple, Facebook and Amazon, or GAFA, would be asked to contribute in the form of royalties, which could be direct royalties or royalties on the profits they generate in Canada. It could also be a tax on advertising revenue, for example. There are various avenues to explore, and the money invested in this fund could be distributed to those who produce the content. That's what we did in the television field in Canada in the 1990s when the Canada Media Fund was created.

We are moving away a bit from the subject of the Copyright Act.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

With respect to television, the problem, the challenge, is that the government controlled the bands in the case of television, but nowadays we don't control the Internet. Indeed, the government sold a channel and its owner gave the government back a certain amount that was paid into a fund. However, we don't manage the Internet's use. Things don't happen the way they used to, in the case of television.

[Pascale St-Onge]

The fact is that radio waves are public. That's one of the reasons the government set up the Canada Media Fund. In reality, it's also because the cable companies made a lot of money with the content. As a result, they were used to fund the system and enable a major television production system to emerge.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

It's your turn, Mr. Curley.

[Patrick Curley]

What worries me is that often in this debate creators have been pitted against consumers.

I don't understand that logic, especially when we're talking about the giants. I'll just mention the example of Apple Music or Spotify. A Spotify subscription costs $10 or $12 a month. The company is making incredible profits. If the rate payable to the creator is increased, we'll get money that is currently remaining in the hands of the Web giants.

I don't think it's about taking something away from consumers and giving it to creators. The giants are companies worth billions of dollars. Spotify was listed recently, and I don't remember how many billions of dollars it is worth. It seems to me that a certain portion of that value should go to the creators, because the purpose of the business is to sell music.

I don't understand why we can't ensure that Canadian and Quebec creators are paid in a way that supports their work and gives them a reasonable income, considering how the company uses their music.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

What do you think, Mr. Lavallée?

[Martin Lavallée]

Whether it's the big guys in this world or the companies that make billions of dollars, if the legislation is clear, they'll sit at the bargaining table. If they have a right to release or licences to obtain from certain people, or with respect to the assets they use, they will be at the bargaining table. As an aside, this is why management and other companies exist. In fact, grouping the rights holders within these companies brings bargaining power.

The problem lies in the number of exceptions in the Copyright Act. How do we change things and make sure that the big guys of the world can be at the table? It's simple: you have to make the legislation and their responsibilities clear.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Are there any particular exceptions you'd like to emphasize?

[Martin Lavallée]

Yes. There are a few, in fact.

However, understand my situation. I'm not talking on my own behalf or on behalf of my company; I'm speaking on behalf of a coalition. So I'm not speaking for one sector, but for all sectors.

There is the exception of network services. In fact, these people have servers abroad or cloud servers. So there is the whole question of the scope of the Canadian act with respect to reproductions made elsewhere, but which essentially and exclusively serve Canadians. There is also the whole issue of transparency. We are told a lot that it is confidential, how much we can pay and how much income we can earn, but we are not given details in reports.

There is an exception for technological reproduction. Anything resulting from a technological reproduction is an exception under the act.

All these exceptions have a cumulative effect. In short, the giants tell us that they do not really need to sit down at the bargaining table, but they do so to show that they are serious, and they propose a minimal amount. For our part, we tell them that it is not enough. So they oppose, invoking one of the exceptions I just mentioned.

If, during the negotiation, we establish that this exception doesn't apply, then they will move to the second, then they will go to the third, then to the fourth. So there is this cumulative effect comparable to Gruyere cheese—think about the inside of that cheese—and it's very difficult for us, collectively, to sit down, regardless of the platform or sector we represent. The solution keeps coming back: the number of exceptions must be reduced, and they must be made clearer.

A case of technological reproduction was brought before the courts. Most users tell us that their activities are technological. The process, from a to z, is therefore an exception, since they are all reproductions resulting from a technological treatment.

It is this kind of excess that undermines any negotiation we may have with these people.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Mr. Jeneroux, you have seven minutes.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Thank you.

To continue on that, you're essentially asking for clarification within the act to allow you to better negotiate with these big web giants. That's the role that you're looking for in government. Madam St-Onge, you were speaking of a fund of some sort.

If I can get Mr. Curley and Mr. Lavallée to comment, you're looking more for just the clarification so you can continue to negotiate yourselves. Is that fair?

[Martin Lavallée]

In the introduction to my presentation, I told you that we had discovered exceptions introduced in 2012 that hurt and reduced our income. This income was fixed either by an administrative tribunal whose function is to assign an economic value to a right, or during free negotiations.

In fact, I'm not commenting on the decisions of each of the sectors that the coalition represents, namely whether they favour any funding or compensation. I reserve this right on behalf of my members.

However, my mandate today is to tell you that there are too many exceptions, that they are too broad and that it is impossible to rely on market forces to determine a solution comparable to what is happening elsewhere in the world.

We said that these companies were the big guys of this world, but these big guys have the world as their playground for negotiation. We realize that this world often asks us how it is that we couldn't get more and that they, they have this or that, private copying in audiovisual, for example. But the answer is very simple: our legislation doesn't allow it.

There are some loopholes somewhere and there is room for interpretation.

I apologize to the interpreters for my Franglais.

[Patrick Curley]

I'll give you a concrete example. We have an agreement with YouTube in the United States where we get a certain percentage of the money they generate on ad views paid to us as the publisher of the composition that's in the video being used. That is actually generating something now. It should be generating more. Up until recently, they weren't paying anything in Canada because of one of these exceptions, and Martin can advise probably better than me on the particulars. Basically, they claimed there was no right of reproduction in a composition so they didn't have to pay this. They've come to the table, apparently, recently because they had to negotiate some other things where they basically were able to concede that point, so I believe now there are agreements in place. There was a period of five to seven years where we were receiving income for this use in the United States but we weren't in Canada.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

I guess that's the UGC, the “YouTube exception”, if you will. That predominantly was about the mash-ups, the composition piece. YouTube, or Google, is launching here in Canada this YouTube Remix relatively soon. I understand it's within the calendar year. Does that help mitigate some of this now that the streaming...?

[Patrick Curley]

You have to consider that the best-case scenario is several years of lost revenue, and again as Martin said, it's a much worse negotiating position right from the get-go.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

I'll get your comments on that, too, Martin, but I'll just add one more piece to it. If YouTube, Google, launches this new streaming service for music, do you think the UGC exemption should then still continue to apply for the video component of this, or is this just all about the music?

[Patrick Curley]

I understand where the exceptions....The idea is that you're giving consumers the ability to do these things. In reality what you're doing is you're giving giants a negotiating tool they can hammer Canadian creators with. That's basically what it comes down to. They are generating billions of dollars on the backs of creators worldwide, but we control to a certain extent what can happen in Canada. Why not give our creators the tools to defend themselves?

[Martin Lavallée]

I will continue along those lines and respond to your comment.

Each of the artists and creators is quite pro-choice. If they want to give their work for free, they will do so, and if they want to give it at a ridiculously low price or if they want to opt for an open-access program or a Creative Commons licence, they will do so.

There's no problem.

We're trying to protect those who want to live off an economic model and negotiate an agreement with someone who uses someone else's property.

As I told you in my presentation, basically, if someone wants to use someone else's property, regardless of the type of use, they should have the tools to negotiate something on a scale of value, which can range from zero to a maximum value. However, it is fundamentally a question of what the Copyright Act is for and what its primary function is. It's a philosophical question.

Currently, we can't ignore the Supreme Court of Canada's interpretation of the act as currently written. If I may, I will read a quote that shocked us when we heard it.

In 2012, roughly concurrently with the introduction of exceptions to the Copyright Act, the court informed us that it “reflected a move away from an earlier, author-centric view which focused on the exclusive right of authors and copyright owners to control how their works were used in the marketplace”.

That's the state of the law in 2012. At the same time, three years later, in 2015, this same Supreme Court tells us that it is not its responsibility, in interpreting the legislation, to do what the legislator, meaning you, chose not to do by adopting it.

In other words, the clearer the legislation and the more targeted the exceptions, the less we will have to fight on just about every point in court, and the less we will have to live with something that says that copyright law—and this is what we've presented to you consistently—should not be author-centric. It's a paradox, and it's nonsense.

This isn't a debate about the digital revolution, and we don't want to go back to the way things were before. On the contrary, we find that in the Copyright Act, for which you are ultimately and jointly responsible, technological neutrality should ensure that, regardless of the technological platform, there is protection that leads to retribution.

[Voices]

Hear, hear!

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

You brought your fan club.

Mr. Masse, you have seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you to the presenters for their testimony here today. I want to make sure it's clear that most other countries actually tax them. Is it your position that they should at least be taxed—the web giants that we're talking about here—including those involved in distribution?

[Patrick Curley]

Are you talking about GST? I don't understand how they're not, if you're just asking my position. That's more of a government revenue situation. It doesn't really affect the royalties that we get paid, but yes, if you're asking me personally, I think so. Yes.

[Pascale St-Onge]

The Fédération nationale des communications has repeatedly taken a position that Canada's failure to impose its own sales taxes on digital purchases is an abdication of its fiscal sovereignty. So we are, without question, in favour of imposing sales taxes, as Quebec is doing and is trying to do. It's a must. Legislation, whether tax, copyright or other legislation, must apply on digital and online platforms. Criminal law applies, so I don't see why the rest wouldn't apply to these platforms as well. We think it makes no sense.

[Martin Lavallée]

The question answers itself. I spoke earlier about the urgency of restoring equity to our digital world. You have suppliers like Tou.tv and Vidéotron, with Illico. When I rent a movie on Illico, I pay the tax, but when I do it on Apple TV or Netflix, I don't. It's nonsense.