Industry Committee on Oct. 1st, 2018

[Hélène Messier]

I'd like to speak for myself.

According to established practice, the director and the scriptwriter receive an initial fee for their services. Afterwards, they negotiate rights on the secondary uses of the work in the collective agreement or their contract.

I think Ms. Beaudry wanted to add something about a statement that was made earlier.

[Marie-Christine Beaudry]

Yes.

For television, we pay royalties to the directors, even for the initial use. Those royalties come from the revenues we receive from the broadcasters. That is part of the basic licence that the directors give us. For television, it's a little different from what was explained about feature films.

It's important to emphasize that for feature films, the producer has investors, and the amounts he receives must first of all go to the distributors. The first revenues go to the distributors and to the venues that distribute the works. Afterwards, what the producer receives has to be given to the investors, such as the Canada Media Fund or Telefilm Canada.

When there is money left, it is shared between the screenwriters and the directors. It's a fact that the revenue generated by the producer will be given first to the granting organizations.

[Gabriel Pelletier]

I would like to correct something.

In our collective agreement with the AQPM, directors do not receive royalties paid at the outset out of the funds that went into a production. Once the original broadcasting licence is given, there are royalties on subsequent sales.

In fact, it is the ARRQ that collects the royalties. Generally, there are returns on those when works are sold abroad.

[Marie-Christine Beaudry]

With your permission, I'd like to correct something because I am currently working on this.

I'll give you the example of a program broadcast by CBC/Radio-Canada.

CBC/Radio-Canada acquired first-use rights for broadcasting programs or films on its airwaves—for subscription video broadcast on demand, SVOD, and for free video on demand. That is part of the initial licence and of the contract we have with the director.

However, a percentage is negotiated and remitted to the director out of any funds we receive from CBC/Radio-Canada, from either SVOD or free video on demand. We currently prepare distribution reports to that effect for the ARRQ. You may think that these are not very large amounts of money, but the producer himself does not receive enormous amounts either.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Mr. Angus, we'll go back to you for two minutes.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you.

I joined CAPAC when I was 17 and went on the road. That became SOCAN. I won't say how many years ago I did that. Over the years I've received revenues from television, book publishing and music, and I'm still involved.

I find the question with music, Madame Dupré, very interesting, because there have been some very good upsides from the digital revolution. The cost of recording dropped substantially. We used to spend almost all our money on lawyers' fees and we never saw a dime, because of all those recoupables they charged to our account. If the record companies didn't want to stock you, there went your product. Now you can stock it yourself online, so there's an upside.

The downside is the disappearance of live music across the country, with bands being told they have to use T-shirts to pay to tour now. Twenty years ago people would have laughed at that.

Then on the revenue streams, we've lost the private copying levy, the royalty mechanicals from radio, and musicians are suffering a continual drop in income. Now Spotify is the latest; there you get, I think, .0005¢ for every thousand plays or something.

I don't know of any other artists' sector that faces such uncertainty in its remuneration stream. There are good opportunities in the digital realm for musicians, but there are also still a lot of pitfalls. How would you describe the reality for working artists today in the music world? Where do we need to start finding some level of coherent remuneration?

[Marie-Josée Dupré]

Indeed the situation is not the best. Mostly, with the digital world, all the licence fees are now calculated per view. The number of views you need to reach to get some revenue is totally insane, but they see this as a one-on-one communication, as opposed to mass communication like radio and audiences at concerts and so on.

If the licence fees we get from those services are not adjusted to somewhat reflect what CDs used to be in the physical world, we'll never get there anyway. You said there was no live entertainment anymore. There still is, but people think that music is free. In a restaurant or a bar, they will pay for their food and beer, but when it comes to musicians, they say they're promoting them, so they shouldn't be paid for this. You just get the door and stuff like that. It's often the philosophy of free music.

[Charlie Angus, NDP, Timmins—James Bay, ON]

We felt the same with previous transitions. Radio did not want to pay for music. They said they were offering a service. Radio did pay—

[Marie-Josée Dupré]

Yes.

[Charlie Angus, NDP, Timmins—James Bay, ON]

—and it transformed the recording industry. We saw that with cable television paying when they weren't going to pay. What is stopping us being able to establish credible, but not restrictive, copyright licensing agreements with organizations like Spotify, with YouTube? Is it that we need an international movement? It seems to me that we always find these technological barriers, and then we have to fight, and that's when artists get remunerated, but we haven't seen that move into this next realm yet.

[Marie-Josée Dupré]

I don't know if any international move or coalition is possible.

As I said, there were talks some time ago about multi-territorial licensing. One digital service would get a licence from one collective. They would pay all the licence fees, and it would be distributed in the different societies and then obviously to the rights holder. Is this more efficient? Maybe it's a more efficient or easier process, but will we get more? What kind of value do we give...?

As you said, we don't physically distribute CDs anymore. All the costs have been reduced, but then there was no increase. I don't know how.... We will need some help from the different rights holders to stand together and make sure that they fight for their rights. I really don't have the solution to make sure that it goes back to 20 years ago, when everybody had a decent living as a musician. It's very difficult to think of any particular scheme that will be really efficient and

profitable.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

That's the challenge of this committee: to try to come up with some credible solutions.

We're going to go to the last two questions at five minutes each.

Go ahead, Mr. Graham.

[David de Burgh Graham]

Thank you.

I'm going to pick up where I left off an hour ago with Telus on FairPlay. Is it okay to pursue users of the Internet without a court order?

[Ann Mainville-Neeson]

We believe that the FairPlay application does provide for procedural fairness. That's what's really important. The court order process is simply to ensure that there is procedural fairness. We believe that there is certainly the possibility that you can create an independent agency that would provide that fair process.

[David de Burgh Graham]

You've harped quite a bit on the fact that Bell and Rogers are vertically integrated, and it's a concern that I share. I personally don't believe that companies should be media distributor, producer and Internet provider all at once, because I think there's a fundamental conflict of interest in those companies. Do you have any thoughts or comments on that and why Telus is not a vertically integrated company?

[Ann Mainville-Neeson]

Certainly we have expressed significant concerns with various elements of vertical integration, and it's more for another forum and another legislative review that is happening. We believe that the Broadcasting Act does need to be amended in order to be able to address the competitive issues.

Why is Telus not vertically integrated? Obviously, we'll all pursue our different strategies. We believe, since many years ago.... We want to unleash the power of the Internet and provide the best there is to offer. It's simply a question of strategy. To the extent that vertical integration can create some incentive and opportunities for anti-competitive conduct that can harm consumers, that issue needs to be addressed.

[David de Burgh Graham]

Can you dive a bit more into how it harms consumers?

[Ann Mainville-Neeson]

It's mostly from a broadcasting perspective. The broadcasting environment is such that we are required to offer the programming services that the vertically integrated companies own. They have every incentive to either foreclose competition by making certain services that are particularly popular unavailable to us—and we've had to fight through that with the CRTC in the past—or to increase their rivals' costs, such that for the wholesale rates that we would pay to offer the same programming services that they offer to their subscribers, we would have to pay more.

The rationale for doing that is clear. They want to raise our costs so that they can compete against us in various markets, not just in the broadcasting market but also in the various other ways that we compete, such as the wireless markets, the Internet space and television distribution. Also, of course, we all know that television is moving online. To the extent that you might say that Rogers Cable is not necessarily competitive with Telus in our markets, because we only offer TV in the west and in parts of Quebec, ultimately it does become competitive when they're offering their services online through, for example, Sportsnet Now, which is an over-the-top offering that can supplant your TV subscription.

[David de Burgh Graham]

Earlier we were talking about DPI, deep packet inspection. I used to work in the industry. Does it threaten net neutrality? What is Telus' position on net neutrality?

[Ann Mainville-Neeson]

Telus is a firm believer in net neutrality.

When I say we're a firm believer in net neutrality, I think a principle needs to be applied to some elements in such a way that it makes sense for consumers and for the country as a whole. Some elements—for example, security, privacy of information—are principles that sometimes compete with net neutrality. You need to have balance in applying all of these various principles, which are all equally important.

[David de Burgh Graham]

Well, if you give yourselves the right as an industry to inspect packets, to inspect traffic and traffic shape and so forth, do you not then give yourselves an obligation to monitor that traffic? If illegal traffic were to go through it, wouldn't you then have an obligation to react to that, because you've now taken on that role of judge of the traffic, as opposed to being just a common carrier?

[Ann Mainville-Neeson]

Traffic management practices are generally more commonly applied with respect to peak times and those types of things, as opposed to actually determining what kind of content is there or what kind of packets are being transmitted.

[David de Burgh Graham]

That's my point. It's a very important difference to get out there.

[Ann Mainville-Neeson]

It is. Certainly, I'm not suggesting that traffic management practices won't necessarily look at different types of content, but these are the types of practices that would be applied and reviewed by the CRTC.

[David de Burgh Graham]

Thank you. I've already been cut off.