My name is Debra McLaughlin. I'm the co-owner and general manager of CFMS, a radio station operating in York region, Ontario. My business partner and I are independent broadcasters—a disappearing entity in Canada. More than that, we come from two of the most under-represented groups in media ownership: women and immigrants. As such, we have a slightly different take on many issues.
I'm here today to address three key points: Collection of copyright should not cost more than the payments themselves; all radio stations are not equal, and even a scale based on commercial revenue does not reflect the economic disparities in the system; music plays a diminishing role in generating revenues for many radio stations.
CFMS broadcasts in markets that live in the shadow of the largest city in Canada, Toronto. Serving the cities of Markham and Vaughan and the towns of Richmond Hill and Whitchurch-Stouffville, the station delivers important local information to close to 700,000 residents. Despite being inundated with radio stations from surrounding markets, these areas had no voices until we launched in 2013. Research from Ekos showed that a remarkable 52% of residents who lived in these municipalities could not name their mayor, but they could name the city of Toronto's mayor. These same respondents scored available radio as “poor” on providing relevant surveillance information, such as traffic, weather and local news headlines.
The areas for which we are licensed come together with five other distinct communities to form the regional municipality of York, the seventh-largest market in Canada, with a population of 1.1 million. Although they are clearly unique in terms of government, demographic composition and economic infrastructure, the industry's audience rating service, Numeris, absorbs these markets into the larger Toronto CMA definition for the purposes of reporting ratings. This obliterates their distinctiveness and any possibility that media planners and buyers might analyze York region as a market on its own.
As the provider of the currency valuation for broadcast advertising revenues in Canada, the decision by Numeris not to distinguish or measure smaller markets reduces or eliminates access to significant revenues. Stations licensed to areas such as Scarborough, Mississauga, Milton, Orangeville and many other small places in the GTA are treated similarly, reducing their ability to compete for advertising dollars.
Like every other radio station, we are competing with new technologies and new platforms, adjusting to a changing environment. Our focus is local reflection. It is the only way we can distinguish our brand. We tell the stories of the characters and life in markets where residents do not define themselves as being part of Toronto.
In restricting our focus to these markets and providing a narrative of the experience of their residents, we are fulfilling the requirements of the Broadcast Act. We also broadcast in third languages on our single frequency. We deliver programming in English 18 hours a day Monday through Friday, and 16 hours on Saturday and Sunday. The remainder of our schedule is third-language Canadian programming, giving a voice to residents with a non-English, non-French mother tongue.
Our particular licence is unique in this system. It might even be perceived by the CRTC as an experiment. However, with growing multicultural communities, especially in tight spectrum markets, it may also be a model of stations and service requirements to come.
In order to report on the nine third languages and the English programming to which we have committed, we work with six different producers and a full-time music director. To meet SOCAN reporting requirements, it takes on average the equivalent of 24 hours per month, or close to $9,000 per year, to research and translate the information provided. This investment of resources results in a payment to the collectives of less than half that amount on a yearly basis. If we look at it over four full years of operation, we have paid over $32,000 to deliver just $13,000 in copyright payments.
Given our challenges in generating revenues, this seems particularly onerous, and the rationale for doing this is weakening. With the multiple platforms on which music can be enjoyed—streaming, audio services and satellite radio—and the proliferation of broadcast signals both within and outside market borders, the value of music as a driver to the listenership of many radio stations has diminished.
With the deregulation of formats by the CRTC, listeners have not only experienced duplication of music and artists across stations, but also the collapse of traditional formats across eras and genres. It is not unusual to have high duplication of music across stations that are targeting different populations and even distinct demographics.
A case in point is an artist like Taylor Swift. As an example, her current hit song can be heard on 10 of 26 stations licensed in the GTA. The audiences of these stations range in age. They could be from 18 to 34 or 35 to 64. They're heavily skewed female in some cases, and balanced male-female in others.
To put this in context, when rights are negotiated in television, there is an exclusivity for a period of time, and a tiering of costs. Rights for first runs are more expensive than syndicated, and rights for cable distribution are less than for broadly received networks. This is not the case for music.
Studies done over the years in multiple markets by different reputable research companies indicate that the number one reason listeners turn to radio is local news and information. The finding is almost uniform across age groups and genders. Music is second or third.
To be clear, I am not suggesting that the contribution music creators make to the radio landscape is insignificant. It is, however, diminishing. By opening up distribution platforms and promotional streams, musicians and their representatives have unintentionally, perhaps unwittingly, but nonetheless certainly diminished the significance of their contribution to the hours tuned to radio.
Any changes to the Copyright Act should therefore consider the impact of new delivery means, the revenue they generate based on their use of copyrighted material for the companies that operate them, and the absence of their contribution to incenting the creation of new material. I believe the Copyright Act must anticipate new ways of recovering value from these benefactors of Canadian music, and recognize that radio no longer benefits in the way it once did.
Not all radio is equal, either. Vertically integrated companies may lose revenue to radio, but they more than make up for it through increased sale of bandwidth that consumers use to stream music. Judging by their annual reports, these companies actually come out ahead in the exchange of services. The value of music creation is therefore much more valuable for these companies than it is for smaller stations doing just as important a job in bringing news, information and entertainment to Canadians located outside of major centres.
When the cost of reporting on the use of music outweighs the revenues it generates for artists by almost three to one, it is clear that something has been lost in the application.
As you heard from CAB earlier in this process, radio provides more than just royalty. It is reported by more than 70% of the Canadian population as their primary source for new music. This is a role we value. But in the ecosystem of music, we plant the seeds and increasingly other entities harvest the crops. We pay considerably for them to do so.
Thank you for your time. As one of Canada's smallest broadcasters, we appreciate the opportunity to have a voice in this process.