Industry Committee on Sept. 24th, 2018

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

Thanks for coming today, and my apologies for being late.

I appreciated your testimony today.

My first question is going to be for either you, Madam Dorval, or Ms. Wheeler, regarding costs within the industry over the past 20 years. Just in looking at inflation of 2%, costs go up. On the 1997 decision to have $100 for the first $1.5 million, would you say that legislating a fixed cost like that and not addressing it for over 20 years now may be something that could be looked at? Would there be a rate you could look at that you could say would be reasonable as a cost?

[Nathalie Dorval]

If I may offer a different perspective on this very good question, even if we were changing this amount, the end result is that very little is going to make it to the Canadian artists. What you've heard is from the U.S. multinational labels that are coming before you. They seem to be talking on behalf of artists, but really, in terms of what they're doing—I think you've been provided the graph—it's a money grab. Most of this money is going out of the country to international labels, and very little is remaining in the country for Canadian artists.

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

Why is that, though?

[Nathalie Dorval]

It's the way they distribute this money going forward. There is a fifty-fifty split between the record labels and the performers. On top of that, when they start, they deduct about 14% for admin fees. In the graph we've provided, you see that international performers get 15% of that, multinational labels get 41%, Canadian labels get 2%, and Canadian performers end up with 28%. Most of this is just leaving the country, while it's weakening smaller radio broadcasters and the broadcasting industry, which is providing other key services to Canadians across the country.

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

That leads me into my next line of questioning. Some of our clerks have provided us with some excellent leads.

To start with, in regard to sound recordings and the exclusion of sound recordings from royalties, it seems that 44 countries include sound recordings in the royalties structure. Some of those countries are not outlier countries. They include the United Kingdom, France and Germany. The pattern I saw is that these countries aren't neighbours of the United States. Could you comment on how Canada's proximity to the United States maybe makes it necessary for us to have a unique system?

[Nathalie Dorval]

You're talking about the definitions of sound recording and television programming. We need to be very prudent when looking at this.

We are in a very complex copyright regime under the Canadian act. A great balance has been achieved. It's not a simple exercise. When you look at the regime in place, sound recordings in Canada are being cleared at the source. The producer goes to the artist, the songwriters and the label, and they clear that music up front. That's where we have a different regime; it's not being paid again when it's broadcast.

That's why we're saying if we were to keep maintaining this clearance at the source, and then pay back when we broadcast, we're going to be paying twice for the same input.

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

Yes, although countries such as France, the United Kingdom and Germany have this double-dipping, as you say. Rather, maybe they don't have the double-dipping, but they don't exclude sound recording. Can you give me a comparison of what it's like for somebody like your stakeholders in Germany? How has that impacted their industries?

[Nathalie Dorval]

Maybe we can go deeper to provide you additional information, but I am not familiar with the German or French regimes, so I wouldn't be able to answer that.

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

Delving deeper into my last question, is it our proximity to the United States, which is such a cultural behemoth, that requires us to have a more complex system than the European model?

[Susan Wheeler]

I would just add that we already have a unique system here in Canada compared to the U.S., in the sense that radio broadcasters in the U.S. don't pay this tariff. Canadian broadcasters are actually paying multinational record companies for rights that aren't even recognized in their country of origin.

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

How can we better compensate Canadian artists instead of these multinational artists, if this is an issue? What would be your recommendation for how we deal with that?

[Nathalie Dorval]

The appearance of Bryan Adams before you last week was really telling in terms of the different perspective you can get from an artist who's sitting before you and really speaks for himself. It's different from what you may hear from the record labels.

Maybe looking additionally at how this pie is already being distributed with the money that's already flowing in the system could be part of the answer.

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

My next question will be for our community radio witnesses here, who have joined us over video feed.

You noted in your submission that you'd like the Copyright Board to be a simplified regime. It's easy to say you want it to be simpler, but in what ways should we recommend that it be simplified to help you out as an organization?

[Freya Zaltz]

I would prefer to answer that question afterwards in writing, if I may.

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

Please follow up in writing.

[Freya Zaltz]

The recommendations that the campus and community radio sector would make are mirrored in the recommendations that were contained in a report by the committee that was studying the Copyright Board in the last couple of years. There were some issues raised by all of the different stakeholders in that proceeding.

The campus and community radio sector didn't participate in that initial review process because we felt that all the concerns we could have raised had already been very ably raised by other groups. However, they were concerns with respect to timelines, how long the Copyright Board takes to initiate and conclude proceedings and to issue decisions, and other procedural matters. The procedures of the Copyright Board are not easily accessible by someone who doesn't have specialized legal training. It's difficult to understand the steps, follow what's going on and contribute what's required. Certainly it could be much more transparent and user-friendly in terms of how it operates.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move to Mr. Masse.

You have seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair. I'll continue with Ms. Zaltz.

I represent Windsor, Ontario, where the university campus and others have made significant investments in their broadcasting. What is generally happening with campuses and community broadcasters right now? Are we the exception, or has there been a bit of a renewal and continued interest and expression to develop it further than before?

[Freya Zaltz]

Community radio is growing at a much faster rate than any other radio sector. The number of new licences issued to community radio stations is significant, particularly in recent years.

The issue is that there is no stable source of operational funding. There are grants available. Stations engage in fundraising initiatives. Some in larger communities are very successful. In the smaller communities, they have a harder time raising enough funds to operate a station. When they're associated with a university, they have the added support of infrastructure, premises, all sorts of utilities and whatnot that community stations have to pay for out-of-pocket.

I would say there is an increasing interest across the country in developing community radio stations, but we're also starting to see some close at a rate faster than we've ever seen them close before. All those that have closed have closed because they are unable to meet their expenses. They can't raise enough revenue. In some cases, because they can't afford to hire staff, their volunteers burn out and just don't have enough energy to continue operating the station.

The requirements that stations have to meet in terms of their CRTC licences do require a lot of ongoing supervision. There are significant amounts of paperwork, being cognizant of what's being played on air and calculating percentages. In some cases, this is very difficult for volunteer-only stations to do on a long-term, ongoing basis.

While we're seeing a definite increase in the interest in community radio across the country and in the number of groups that are applying for licences, we're also seeing more struggles to continue operating, particularly by the smaller stations.

[Brian Masse, NDP, Windsor West, ON]

I know there's a big challenge with capital. That seems to be for improvements for the physical components necessary for upgrading and so forth. The big gap seems to be that it's only grant-based. The nominal revenues coming in keep operations going, but getting capital improvements is very difficult. Interest can grow but capital improvements are quite expensive.

[Freya Zaltz]

That's true. Also, the funding that is available is usually project-based. It doesn't cover operating expenses at all except to the extent that they're associated temporarily with the completion of a project. Also, the infrastructure capital investments.... For example, as one of the presenters mentioned, the Community Radio Fund of Canada does provide project grants to stations, but it's not available for capital expenditures. If they need a new antenna, or a transmitter or studio equipment, they have to fundraise separately to pay for that.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

I'm going to move to our broadcasters. With regards to the content you're providing, you've noted the difference in terms of international markets and compensation. How would you compare the local news content, weather, sports and other things in your programming versus that of competitors, in terms of empirical data that you already have?

Is there a net benefit to those elements with regards to radio broadcasting differential? You've noticed a difference in terms of the payments going to the markets, but are you also providing an increased capacity of local news and other types of content?

[Susan Wheeler]

We don't have any statistics to provide you at this time, but we can provide you with an analysis of our programming expenses.

I should note that overall, around 78% of radio's revenue goes to expenses. That would include programming production, technical, sales promotion and general admin. That's a very large portion of our revenues going to just day-to-day operations to keep the stations on the air and to offer the programming that you've referenced, including news and information programming.

[Brian Masse, NDP, Windsor West, ON]

I would be interested in following up there. Quite obviously there has been interest, not only in a community like mine that's on the border, in terms of ensuring Canadian content, but there's a public interest clause for that as well. I'm interested in the comparables, especially when you're talking about some of the expenses that are happening.

You mentioned, as well, that your American competitors do not have to pay the same fees. In a border community like mine, where we actually have Canadian content penetrating American markets, maybe you can tell me the disadvantage or advantage.

I'm curious. You've noted that there is a difference in terms of the encumbrances, but the airwaves compete on both sides of the Detroit River, and the regions are very lucrative markets, and very challenging markets too.

[Susan Wheeler]

Absolutely. There would be a clear disparity there, in terms of the Detroit radio stations broadcasting into Windsor. They would not be paying neighbouring rights or performance rights to the artists for the music they play on the radio. Canadian broadcasters do pay that to artists who come from countries of origin that recognize that right, so non-U.S. performers.