Industry Committee on June 12th, 2018

[The Chair, Liberal, Dan Ruimy]

Welcome, everybody, to meeting number 122 of the Standing Committee on Industry, Science and Technology as we continue our five-year legislated review of the Copyright Act.

With us today we have some interesting folks. From Audio Cine Films, we have Jean-François Cormier, President, and Hugo Desrosiers, Vice-President. From Border Broadcasters, Inc., we have Francis Schiller, First Director, Public Interests Research and Communications Inc. From Music Canada, we have Graham Henderson, President and Chief Executive Officer. From the Alliance of Canadian Cinema, Television and Radio Artists, or ACTRA for short—I prefer the shorter name—we have with us Laurie McAllister, Director, Performers' Rights Society and Recording Artists' Collecting Society, and Elliott Anderson, Director, Public Policy and Communications, National.

You will each have up to seven minutes. We are running a little bit behind, so we're going to get started right away.

We're going to start off with Audio Cine Films.

Mr. Cormier, you have seven minutes.

[Jean-François Cormier, President, Audio Cine Films Inc.]

My name is Jean-François Cormier. I am from ACF in Montreal.

We're basically a non-theatrical rights representative for Canada, meaning that we manage public performances for major studios and films. Our role is to make sure that public performance licences are issued for all types of public performances using basically commercially available movies. We've been in business since 1966. We've been operating across Canada for about 30 years, and we operate in basically any and all types of public institutions, private business, and government. Any type of public performance of a movie, in a park, in a school, in a library—anywhere, basically—has to be licensed with us since we're the rights representatives for specific studios and the films they represent.

An example of what we do is that movies in the park in municipalities during the summer have to be licensed. We also license public libraries for film events they might have for small or large groups. We license school boards and schools for leisure movie presentations. We license the Alberta legislature. They want to show movies in one of their buildings, so we license all across the board.

It's pretty straightforward. We have a set number of studios and films we represent, and our licensing is for those. We have about eight or nine employees, and a lot of our revenues and licences previous to the last copyright changes were from educational institutions, colleges, and universities that paid a licensing fee in order to present commercially available movies, classics, and new films, either in film classes or any type of class that might use film.

Obviously, the new changes affected us in a very negative way. Probably up to 35% to 40% of our sales and overall revenues were affected, because right off the bat, any type of presentation that occurred for educational purposes in schools, colleges, or universities no longer required a licence.

What we found over the last five years is that definitions that were in the last Copyright Act were general. They weren't nailed down, so educational presentation is used in various situations. In classrooms for curriculum needs, it's clear and it's acceptable, but in all sorts of other situations, we find that there's a lot of—from our perspective—abuse. For example, in a school, Friday night movie night with families and kids at 7:00 p.m., for them it will be an educational presentation because they're using a culturally significant film, I don't know, like Toy Story or something. To us, it's not an educational presentation; it's a leisure presentation. We have to fight a lot of these types of situations. We're a small company, and we don't always have the time or energy to make sure everything is respected across the board.

Over the last five years, we've spent most of our time trying to police those types of situations as best we can. We don't have any difficulties with any other types of situations—public performances in any other type of organization aside from schools—but we found that in schools, there are a lot of grey zones, and we tend to be on the losing side of the argument when it comes to grey zones.

Hugo, is there anything else you want to add?

[Hugo Desrosiers, Vice-President, Audio Cine Films Inc.]

Yes, if I may.

The major aspect that affected us with the last change of the law is what Jean-François called the fair dealing aspect. We had to fight a lot and educate a lot. The organizations liked to pretend they were doing it on a fair dealing aspect.

The other aspect that was a lot of trouble for us was all the documentary sites. We have partner studios that produce and distribute a lot of the documentaries and they lose a lot of business. I spoke with the president of one of those companies and he lost almost 90% of his business since the law changed, because all his documentaries were used in class for educational purposes. Since the fair dealing aspect of the law has been applied, he's had a lot of trouble financing new productions, so most of the schools tend to get content from the U.S. instead of getting Canadian-made and specific types of documentary content, because nobody wants to finance them.

[Jean-François Cormier]

One of the major arguments that was mentioned five years ago was that a lot of these small independent documentary companies would have a lot of difficulties with the new regulations and the educational exceptions. It's come to fruition that a lot of these companies have either gone under or have had to scale back a lot of their productions. We are a bit different in that we deal with commercial movies, so it's a lot of leisure, but, again, a lot of our movies are used in educational presentations for various reasons.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move to Mr. Schiller from Border Broadcasters.

You have up to seven minutes.

[Francis Schiller, First Director, Public Interests Research and Communications Inc., Border Broadcasters, Inc.]

Mr. Chair, vice-chairs, committee members, clerk, and committee staff, thank you for the opportunity to appear before you today as part of the statutory review of the Copyright Act.

My name is Frank Schiller. I am here as a Canadian adviser to Border Broadcasters, Inc., the not-for-profit copyright collective that represents 26 over-the-air American television stations, including ABC, CBS, NBC, and Fox affiliates.

Local and distant digital broadcast signals and programming from these TV stations are appropriated and imported into Canada, packaged in channel bundles, and then sold to pay TV subscribers in all markets across Canada. Cross-border television broadcasting reflects our common values, our shared communities of interest, and programming diversity. From modern digital broadcasting infrastructure to local news, weather, sports, and entertainment programming, as well as emergency alerts, local TV brings us together.

Since the dawn of television, local U.S. border stations have had a distinguished legacy of strengthening and deepening the relationship between Canada and the United States. Canada has been importing U.S. television signals and programming for over 40 years. This has been happening without notice, consultation, consent, or compensation for the U.S. station owners in the Canadian listing and licensing process.

I am seeking your committee’s support on two fronts today: first, your support for fair treatment and full compensation for U.S. border stations in Canadian local and distant signal retransmission practices, including under copyright; and second, your support to modernize the cross-border retransmission right provisions under the existing Canada-U.S. trade agreements, including the North American Free Trade Agreement and/or the Canada-U.S. free trade agreement.

Your committee's review of copyright is timely. The related issues go back to the retransmission rights provisions first set out in article 2006 of the Canada-U.S. FTA. At the time, there was no compensation consistent with the 1976 U.S. Copyright Act for American stations subject to cable retransmission in Canada. The intent was to bring equitable and non-discriminatory retransmission remuneration to accommodate U.S. border stations and program owners. Since then, there have been significant technological changes, including the switch from analog to digital television broadcasting, as well as important regulatory developments, including a retransmission consent regime that was adopted by the U.S. Congress in 1992. This was followed in 2008 by the end of the advertising-only business model for local TV broadcasting.

Canadian laws and regulations encourage Canadian TV services to take and appropriate without consultation, consent, or compensation the signals and programming of U.S. border stations. After 30 years of administration, U.S. TV stations are still waiting for equitable and non-discriminatory treatment in Canada. Canada does not require reporting, auditing, or notification provisions when Canadian distributors are licensed to package and sell listed American digital signals and programming to Canadian TV subscribers. As a result, U.S. stations cannot reasonably determine where and when their digital broadcast signals and programming are being sold to Canadian TV subscribers.

Canada accepts inaccurate data for Canadian viewership of retransmitted American TV services. This causes economic injury to U.S. station owners. For example, in 2010, TV viewing measures changed in Canada, with under-representation of U.S. border stations. At the same time, Canada changed its distant signal distribution regulations linking the distribution of distant U.S. signals to all Canadian distant signals. The immediate impact of these changes was a significant under-reporting of Canadian viewership of U.S. TV stations. Consequently, copyright allocations to U.S. border stations were retroactively reduced by over 64%. At the time, this resulted in an unfair liability of $7.4 million against Border Broadcasters, Inc.

Moving forward, remission of the copyright liabilities for border broadcasters is essential for fair trade. It's notable that local U.S. TV border stations receive no copyright remuneration for local retransmissions. This needs to be corrected moving forward.

Canada also permitted the retransmission of sets of digital HD signals from U.S. stations beginning in 2000. However, Canada did not begin to update the definitions of local digital signals and distant digitals for copyright remuneration purposes until 2013. The Canadian copyright system is not providing for equitable and non-discriminatory treatment of U.S. stations.

Modernizing our trade arrangements now will result in win-win outcomes, including for Canadian viewers, and an ongoing cross-border legacy that will continue to strengthen Canada and U.S. relations.

New commercial revenues from consent rights in Canada’s listing and licensing processes, in addition to equitable and non-discriminatory remuneration opportunities, will benefit local Canadian television.

Canada should support the retransmission consent annex to the cross-border services chapter as proposed in NAFTA 2.0 negotiations currently. This will rebalance and correct the unfair existing practices while supporting a vibrant and sustainable domestic market into the future. Television broadcasting is part of the digital envelope. The U.S. experience confirms that local stations are profitable and they reinvest retransmission consent revenues in local digital broadcasting infrastructure as well as expanded local news offerings.

Recent U.S. studies highlight that in most small and medium-sized markets, local TV stations are the primary source for local news online. With the digital transition complete, U.S. stations are getting set for the introduction of the new ATSC 3.0 television broadcast standards. This includes next-generation digital video delivery services to both mobile and fixed receivers, seamlessly combining over-the-air and broadband delivery. Next-generation TV test markets even include autonomous vehicle researchers and manufacturers.

By co-operatively working together now as old and close neighbours, allies, and free trade partners, we can improve copyright and consent remuneration opportunities. This will benefit local viewers, communities, TV services, and broadcasters on both sides of the border. This can all be accomplished within Canada’s existing cultural exemption.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move right to Mr. Graham Henderson from Music Canada.

You have up to seven minutes.

[Graham Henderson, President and Chief Executive Officer, Music Canada]

Good afternoon, and thank you for the opportunity to testify to this committee on behalf of Music Canada.

This committee's review of the Copyright Act comes at a critical time for Canada's creators. It is a time when governments around the world are questioning whether the current digital marketplace is functioning fairly for the world's creators. The reality for music creators in Canada is that there are provisions in our own Copyright Act that are preventing them from receiving fair market value for their work. I believe the best way this committee can assist in creating a marketplace that is transparent and that supports Canadian creators is by providing the government with straightforward, accessible solutions to address the value gap.

Music Canada has produced a comprehensive report—almost one of a kind in the world—on the value gap, and you have it in French and English in front of you. We define the value gap as “the significant disparity between the value of creative content that is accessed and enjoyed by consumers...”. This is enormous, and the revenues that are returned to the people and businesses who create it are tiny.

Today more music is consumed than at any time in history; however, the remuneration for that content has not kept pace with the record levels of consumption. The same is true for digital video content, film, and journalism.

I was pleased to hear Minister Joly recognize this point earlier this year, when she stated, “The benefits of the digital economy have not been shared equally. Too many creators, journalists, artists have been left behind...”.

The origins of the value gap can be found more than 20 years ago. It was the dawning of the digital marketplace, and countries around the world struggled to reinterpret copyright laws that were designed for an analog age. They wanted to protect creators, but they also wanted to give a boost to young technological start-ups. Inevitably, perhaps understandably, mistakes were made.

Around the world, lawmakers and policy analysts thought of the Internet as a series of dumb pipes, where your browsing habits were anonymous and the data travelling between sites was so vast it was unknowable. Twenty years later, we know that the Internet is composed of the smartest pipes humankind has ever devised. Your web habits are meticulously tracked, and metadata that they generate is collected, analyzed, and sold every second of the day, mostly without our consent or knowledge.

While well intentioned when created, the impact of these laws today is that wealth has been diverted from creators into the pockets of massive corporate entities. What little is left over for creators is unfortunately concentrated in fewer and fewer hands. As a result, the creative middle class has virtually disappeared, and with it numerous jobs, opportunities, and dreams.

Now, there's no need to point fingers. No one planned for the creative middle class to suffer. The important thing at this juncture is to move forward purposefully and without delay to get the rules right. You should make absolutely certain that Canada's Copyright Act ensures a creator's right to be fairly remunerated when their work is commercialized by others.

The value gap is built on outdated safe harbour policies from around the world. The announcement made last week by Minister Bains and Minister Joly that the Telecommunications Act and the Broadcasting Act will be reviewed is an important step and in line with international movement to find a solution to the problem. Safe harbours have been raised by other witnesses, and I hope that the committee will give significant consideration to addressing them.

Right now, the Copyright Act is exacerbating the value gap by effectively requiring creators to subsidize billion-dollar technology companies. There are four steps that this committee could recommend. They could be immediately and quickly implemented, and would help creators and harmonize Canadian policy with international standards.

The first one would be to remove the $1.25-million radio royalty exemption. Since 1997, commercial radio stations have been exempted from paying royalties on their first $1.25 million of advertising revenue. This amounts to an $8 million annual cross-industry subsidy paid by artists and their recording industry partners to large, vertically integrated and highly profitable media companies. The costs to creators since inception have been $150 million.

Internationally, no other country has a similar subsidy, and the exemption does not apply for songwriters or publishers, meaning that performers and record labels are the rights holders who are singled out to subsidize the commercial radio industry. This is unjustified and should be eliminated.

The second one would be to amend the definition of “sound recording” in the Copyright Act. The current definition of “sound recording” in the Copyright Act excludes performers and record labels from receiving royalties for the use of their work in television and film soundtracks. This exception is unique to television and film soundtracks, and does not apply to composers, songwriters, and music publishers. This is inequitable. It's unjustified, particularly in the light of the profound role music plays in soundtracks, and it is costly to artists and record labels who continue to subsidize those who exploit their recordings. The cost to creators is about $55 million a year.

The third one would be to amend the term of copyright for musical works. The term of copyright protection in Canada for the authors of musical works is out of line with international norms. Under the Copyright Act, protection for musical works exists for the duration of the author's life plus a further 50 years, and that is out of line with international standards.

The fourth and final one would be, in private copying, to renew support for music creators. Years ago, a private copying levy had been created, originally intended to be technologically neutral. It has been limited by various decisions to media that are obsolete. This important source of earned income for more than 100,000 music creators is now in jeopardy unless the regime is simply updated. Music creators are asking for the creation of an interim four-year fund of $40 million.

Each of these changes would remove an unfair subsidy. This would harmonize our laws within our industries and bring us to international standards. These changes can be done simply, and they can be done today.

This is an exciting time. Seize the moment. As you review the act, you have the opportunity to put creators at the heart of your policy-making, ensuring that they are paid every time their work is commercialized by others.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Finally, we're going to move to the Alliance of Canadian Cinema, Television and Radio Artists, ACTRA.

Laurie McAllister or Elliott Anderson, you have up to seven minutes.

[Elliott Anderson, Director, Public Policy and Communications, National, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA)]

We're going to leap back and forth.

[The Chair, Liberal, Dan Ruimy]

You can share your seven minutes.

[Elliott Anderson]

We'll share our time. We won't make you do two seven-minute ones.

[The Chair, Liberal, Dan Ruimy]

All right.

[Elliott Anderson]

Thank you, Chair, vice-chairs, and members of the committee. My name is Elliott Anderson, Director of Public Policy and Communications for ACTRA, the Alliance of Canadian Cinema, Television and Radio Artists. We'll call it ACTRA from here on.

We're a union representing more than 25,000 English-language performers living and working in every corner of the country.

With me is Laurie McAllister, who is Director of ACTRA's Performers' Rights Society, and also director of ACTRA's Recording Artists' Collecting Society. That's ACTRA PRS and ACTRA RACS.

ACTRA PRS collects and distributes residuals for performers in audiovisual productions—film and television—and ACTRA RACS collects royalties for artists and musicians on sound recordings. Laurie also serves on the board of SCAPR, which is an international coordinating body of 60 performer collective management organizations from 43 different countries, all working together to improve the exchange of data and performer rights payments across borders.

We appreciate this opportunity to speak with you.

The Copyright Act recognizes the inherent value of creative works. It is an important piece of legislation that has a material impact on performers and their ability to sustain a living and contribute to Canadian culture.

New technology has dramatically changed the way creative industries work, and the act needs to reflect the new economic reality our artists are operating in. While it's easier than ever to have your work seen and heard by people around the world, it's harder than ever to be properly compensated for that work. The digital shift has generated billions of dollars for multinational corporations who exploit creative works for huge profit, but the creative talent who generate those works are not always seeing the benefit. Despite the high profile of performers and recording artists, the reality for most is an incredible amount of hard work for a very modest return.

Laurie.

[Laurie McAllister, Director, Performers' Rights Society and Recording Artists' Collecting Society, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA)]

Most actors and recording artists receive very modest compensation for their time spent recording a work, whether it’s a film, a series, or a song that is enjoyed and exploited for profit for decades. There is value in their performance. Performance draws us in, keeps us engaged, and keeps us tuned in. The average Canadian adult watches over 30 hours per week of TV and online programming, and we spend over 15 hours per week listening to music.

Content and music are embedded in our lives and fuel our economy. Our artists, though, are struggling. The middle-class artist is disappearing. Many live at or below the poverty line. It's not because they aren't good. It's not because they don’t book jobs. It's not because they don’t get airplay. It's because they aren’t compensated fairly for the use of their work.

As content and music have shifted to digital distribution platforms, those creating the work have been paid less for its use, if at all. This value gap is devastating to their livelihoods and is threatening the future of our cultural industries. In the digital era, it’s more important than ever that our legislation ensure performers are fairly compensated for the value they create.

[Elliott Anderson]

Among our priorities today, the first for ACTRA members is passage and adoption of the Beijing treaty. In Canada's Copyright Act, rights of performers in audiovisual works are minimal. This arbitrary exclusion means that our actors and performers don't receive the legislated protection that others in the creative class receive, and it means we're leaving money on the table in countries around the world, money that could be flowing to Canadian performers.

If Canada signs and implements WIPO’s Beijing Treaty on Audiovisual Performances, we could change that. By adopting the Beijing treaty, we would protect our performers’ moral rights in audiovisual works and protect the right to remuneration for the exploitation of their works.

There are several reasons I want to lay out for the passage of the Beijing treaty.

First, it's a basic issue of fairness. These are rights that performers on sound recordings have already been afforded through the Rome convention in the WIPO Performances and Phonograms Treaty. Audiovisual performers—actors—are simply seeking the same rights.

Second, new rights would underpin the collective bargaining we have been doing for three-quarters of a century at ACTRA. Being part of an international treaty will help performers and the producers they work with ensure their rights are respected when their work is used abroad.

Third, economic rights would provide security for performers in the digital shift. We simply do not know how production and distribution models will change in the next 5 to 10 years. They've certainly changed a lot in the last 5 to 10 years. Having copyright protection will ensure performers can share in the economic returns generated by their creative works.

Finally, the moral rights would provide performers with basic rights as artists to have their name associated with the work of their choosing and to object to any modification or change that would injure their reputation.

Seventy-eight countries have signed this vital treaty and are in the process of ratifying. Adopting it would be an overdue step for performers and would bring Canada in line with the international community.

[Laurie McAllister]

I want to address three issues that are important to the recording artists and musicians we represent through ACTRA RACS, some of which will echo what we have just heard from Music Canada.

One, we ask that Canada stop relying on artists to subsidize profitable media corporations and repeal the $1.25-million exemption for commercial radio. In 1997 the exemption was introduced as a temporary solution for a struggling commercial radio industry. By 2016, commercial radio, now vertically integrated and run by a handful of large media corporations, had increased its profits 12,000% to over $437 million. Struggling artists are subsidizing large profitable media corporations, which claim the exemption annually for each individual station they own. The cost to performers and makers is $138 million in lost revenue over the past 17 years. Canada is the only country with this exemption, and eliminating it will have no impact on true small stations, including campus and community radio.

Two, amend the definition of “sound recording” as set out in section 2 of the Copyright Act. According to this definition, a sound recording is no longer a sound recording if it accompanies moving pictures, meaning performers and labels are not compensated for its use in film and TV. The effect of this runs contrary to the intent of the 1997 amendments, which were made to bring performers and makers in line with other music rights holders. Authors and publishers have long been compensated for the use of their work, including film and TV soundtracks. This inequity costs performers and makers an estimated $55 million per year in lost revenue. In 44 countries around the world, performers and makers have the right to receive royalties when sound recordings are used in film and TV, including in France, Germany, and the U.K.

Three, correct private copying. The private copying regime was introduced in 1997 to allow Canadians to copy music for private use without infringing copyright. In exchange, rights holders were to be compensated through a small levy on blank audio recording media. The intent was to be technologically neutral. You got it right in 1997; it was supposed to be future proof. However, a court decision limited the levy to media that are quickly becoming obsolete, blank CDs.

Since copies of music are primarily made on devices such as smart phones, this has had a devastating impact on our rights holders. Annual revenues from the levy have dropped from $38 million in 2004 to less than $3 million in 2016, while private copying activity doubled over that same time period. The effect is that rights holders have not received compensation for billions of private copies made of their work.

We support the Canadian Private Copying Collective proposal, which includes a long-term solution for copyright reform and an interim proposal for a four-year $40 million per year fund, to ensure music creators continue to receive compensation for copies made of their work until a more permanent solution can be enacted. It’s worth noting that this one correction will benefit the spectrum of music rights holders and is urgently needed.

[Elliott Anderson]

We’ll be submitting a comprehensive brief, which will cover all issues important to our members and to other Canadian artists in more detail.

For today, we thank the committee for their time and look forward to your questions.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to jump right into questions from our members.

Mr. Longfield, you have seven minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Mr. Chair, seven minutes isn't nearly enough, so I'll try to keep my questions short.

It's great to see you again, Graham. It was a great presentation. We sat on the Ontario Chamber of Commerce board together, many years ago now.

Music is business. I think when we look at the connection of music to the economy, we have a model that needs some sort of market correction. The market was based on some assumptions that no longer exist, in terms of technology being used and how our artists are being compensated for their work.

Could you help me to draw a connection between the intellectual property rights of a digital creator of coding versus the intellectual property rights of a digital creator of music?

[Graham Henderson]

I'm not an authority on copyright inherent in coding, but I think what you said off the top, about music being business, is very salient for this committee. This committee might think of creators as belonging to the heritage committee, because that's where we proposed the creative component of our study, but every musician is a businessman, and now more than ever. The ranks of artist entrepreneurs are growing daily. Every song that is created by an artist entrepreneur is an innovation capable of commercialization. Rightfully, they are core stakeholders of ISED. I think that's an important point.

[Lloyd Longfield, Liberal, Guelph, ON]

The creators of music can be Inuit, first nations, young people, old people. They go across a cultural spectrum and we support SMEs differently than we support artistic creators.

[Graham Henderson]

That's right. Each young artist who enters the marketplace could be thought of as a start-up. Our government has rightly accorded all kinds of benefits to technology start-ups, and that makes sense. What's missing and what we can add now to redress that balance is to focus on our creators as business people who are creating innovations and who are engaged in business start-ups. Some of them have quite complex little businesses, but all of those businesses are being seriously impaired by the types of injustices that Laurie and Elliott outlined, these very small returns, despite the fact that the music is being used extensively, and around the world.

[Lloyd Longfield, Liberal, Guelph, ON]

This might relate to Mr. Schiller as well as you, or ACTRA, or other people who are at the table.

I have a new General Motors automobile. It has Sirius satellite. It's American. You get it for free for six months. I never renew it because it's all American and I'm used to listening to Canadian music. We don't get access to Canadian music on the technology in our vehicles through these satellite networks that are coming up to us from the States. Is there some consideration in terms of satellite transmission either from the States to Canada or Canada to the States that we need to look at in terms of this act?

[Elliott Anderson]

I wouldn't say in terms of this act. I may very well end up in front of this committee as we look at the Broadcasting Act and the Telecommunications Act. The exemption of the digital sphere from the regulations that the CRTC employs is actually a huge factor in that. Basically, we have traditional media, where there are Canadian content rules but increasingly, we're listening on different platforms.