Industry Committee on Sept. 19th, 2018

[The Chair, Liberal, Dan Ruimy]

We'll go back to Mr. Albas for five minutes.

[Dan Albas]

Thank you. I'm going to be sharing my time, hopefully, with Mr. Lloyd.

I'm going to follow up from my colleague Mr. Baylis.

Mr. Paris, in regard to this subject, obviously, some films that were filmed close to 100 years ago are sometimes remastered and now are available, reformatted for smaller screens like phones, etc. I just wonder how you could have someone receive royalties for streaming, at least with your business, where you have exhibitors. They actually say, “I'm going to charge x amount at the door, and this is how many people saw it, so I can pay on a per basis” but for something that ends up being used in a whole bunch of different ways, essentially, what is being asked here is for the royalties to be paid every time a show is streamed or is shown online.

I watched Mr. Smith Goes to Washington on Google. I think they do that as a free service. Hopefully, Mr. Tacit won't have to take it down now. Perhaps you could just explain what some of those costs would work out to be for different platforms, such as exhibitors versus streaming.

[Michael Paris]

Sure. The section I'm referring to here, just for reference, is section 19. You're going to test my memory here, but the section, as I recall, refers to any sort of public communication or communication of the work by telecommunication. I don't act for a streaming service and I'm not a copyright lawyer by trade, but my understanding is that it would apply to streaming.

In the hypothetical case you're talking about, with Mr. Smith Goes to Washington, which is a historical work, what would happen on the exhibitor's side is that we would pay a fee from the distributor who holds the rights to that film. We would kick up to that person a portion of the film rent from each per-ticket sale. That would be a public performance, when you walk into the cinema and you see it.

If you were to remove the exemption that entitles stakeholders to neighbouring rights or a royalty stream from a public performance or telecommunication of that work, our rights go beyond an obligation to the distributor and we would end up paying a royalty to, I believe, the maker or the performer of the recording that's incorporated into that film.

Our point is that the balance that's been struck in the act to date is that once you sell your rights to include your work in a film, you're prohibited, on the back end, from also assuming neighbouring rights, which are designed to provide compensation where the public communication of that work is out of your control. Think of performance on a radio station, something like that. The record label isn't involved, obviously, in granting permission every time a song is played on the radio. Neighbouring rights exist to provide a flow of royalties from that uncontrolled, perhaps unintended, use of that work, whereas in film the inclusion of a song, a dance performance, an acting monologue, whatever it is, is very intentionally included, negotiated, and compensated up front.

Putting the burden on exhibitors to pay again, we suggest, upends the balance that has served the film industry so well to date.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

I'll quickly take over. I'll also keep on this line of questioning. How many people are currently employed by the people you represent, approximately?

[Michael Paris]

I can speak to Cineplex. We're talking of tens of thousands.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

With that, if we go with the recommendations to include the sound royalty, there's the double-dipping you're talking about. Does that put you at a significant competitive disadvantage to Netflix, Prime Video and those companies?

[Michael Paris]

Yes, of course, and that's a great question. We have a number of competitive disadvantages, not the least of which is that Netflix doesn't pay tax here, so there's that. There is the other added cost that Netflix doesn't necessarily pay film classification fees, all the costs that go with operating a bricks-and-mortar business that streaming services don't bear. In this particular circumstance, with a royalty such as this, I suppose it would apply to exhibitors and streaming services equally—if I'm right about that—so it is one layer of additional cost. It's one thing for the large chains to deal with that cost. It's quite another thing for independent cinemas.

I'll go back to what my colleague said about ISPs. If you're running a single-screen cinema—

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

But it will kill jobs in your industry.

[Michael Paris]

Yes, it absolutely will kill jobs—and cinemas.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to Ms. Caesar-Chavannes. You have five minutes.

[Celina Caesar-Chavannes, Whitby, Lib.]

Thank you. I'll be splitting my time with Mr. Lametti.

Thank you for coming.

Mr. Paris, to continue the line of questioning from Mr. Lloyd, what are the implications to having these royalties paid, for the recordings or the tracks, once they're in the exhibitor's possession or are being played there? What are the implications further to the other components of the film? If we start off by saying that these royalties need to be paid—you mentioned choreography, you mentioned other components—and go down this road, what are the implications of that to the exhibitors and, beyond that, to many of these organizations, some of which are mom-and-pop shops, some of which are single-screen cinemas? What are the implications beyond that?

[Michael Paris]

To give you a really short response, this would be an additional operating cost, a higher operating cost. I'm not in a position right now to tell you or quantify what that would be. We're responding to the proposal as it is now.

In terms of talking about what it would be for other collectives, I can only tell you that the proposal I'm speaking about today arises from the music industry. It doesn't come from those other things. But once you start treating one class of creators differently, it's obviously going to follow on. I'm forecasting a little bit here. The implications of higher operating costs will depend upon the business position of the chain or the individual cinema operator.

I can tell you very generally—one of the honourable members alluded to it earlier, and I'm sure everyone will be unanimous here—that the creative economy is undergoing a great deal of disruption. The study from Telefilm noted that exhibitors are competing with streaming services, but we also compete, I would say, with every other form of out-of-home entertainment that exists: sporting events, concerts, museums, anything on your phone. When you add additional operating costs, that's money that those independent cinema operators cannot invest into the cinema itself, including the theatre, technology, hiring young people for their first jobs, and on and on down the line.

[The Chair, Liberal, Dan Ruimy]

Mr. Lametti, you have two and half minutes.

[David Lametti, Liberal, LaSalle—Émard—Verdun, QC]

I think what you're all asking us to do is to look at the initial positions between copyright and contract in the sense that you're asking us to say whether the writer should be paid up front in a contract or get additional copyright royalties later.

The same applies for joint ownership, which Mr. Plante and Ms. Hénault just talked about. For our part, we have to determine whether the author should be paid just once, in advance, under a contract, or later on, through copyright royalties.

Mr. Payette, I am surprised that you do not have an opinion on what Mr. Adams recommended yesterday. Subsection 14.1 of the Copyright Act currently provides a reversionary right for authors for 25 years after their death. What Mr. Adams called for yesterday is that this be the case for 25 years after the creation of work.

It is very important for you to state your position on this, don't you think?

[Jérôme Payette]

If I may, let me state my position. I think it is 25 years after the author's death—

[David Lametti, Liberal, LaSalle—Émard—Verdun, QC]

That is what the act currently provides.

[Jérôme Payette]

Yes. He is calling for copyright to revert after 35 years, but, as I said, that can be negotiated under a contract.

[David Lametti, Liberal, LaSalle—Émard—Verdun, QC]

Yes, but that changes the basic position, the initial power, doesn't it?

[Jérôme Payette]

Yes, of course. My position is clear: I do not think that should be included in the act. If Mr. Adams had wanted to recover copyright after 35 years, he could have done so in a number of ways. He could for instance have negotiated that from the outset or decided not to deal with a publisher. There were a number of avenues available to him.

I do not think that is the real issue in the review of the act. It is more a question of determining how revenues can be collected for authors and creators.

[David Lametti, Liberal, LaSalle—Émard—Verdun, QC]

That is exactly what Mr. Adams suggested, namely, that authors have to be given greater powers from the outset, specifically a reversionary right after 25 years.

[Jérôme Payette]

That's right.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Mr. Masse, you have two minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Mr. Paris, just to get a summary in terms of the costs you'd be incurring—you can't quantify it, from the suggestion—what would be the administrative elements to it? Perhaps you could quantify that. I know you can't put a price on it. Regardless of where the money goes, I'm just curious about the processing or whether that's not really a factor in all of this.

[Michael Paris]

In the material file by Music Canada, I think they estimated the cost of these additional royalties to both broadcasters and exhibitors would be somewhere in the order of $45 million. There's no citation provided for that number. I don't know if it's greater or less than, but that's where they ballpark it.

In terms of how it would be administered, I expect you would probably have to have a Copyright Board tariff that would be negotiated and paid. I don't know if I can speak to you on the nuts and bolts as to how that would be administered. I can tell you that I would expect them to organize it in the same way other collectives enforce or govern their mandates.

[Brian Masse, NDP, Windsor West, ON]

Would it be fair to say there is or is not an easy way to piggyback that new proposal on current infrastructure in terms of administration, or is that something that would require a new model?