It's a pleasure to be before the committee today as part of your study on emerging and digital technologies.
We have a collective deck to support our remarks. We thank the chair for agreeing to this format, since it best reflects our collaborative approach to the issues. My colleagues and I will each speak to our areas of focus. We'll be passing the baton at various stages in the presentation.
I'll begin with slide 2.
[Translation]
I would like to start by congratulating the committee on its work on emerging and digital technologies. The committee's study is of great interest to us. It confirms things we have heard about and brings to light new perspectives for us.
We would like to use this opportunity to share our views on each of the seven questions brought up in the mandate of your study and to outline the next steps.
As we cannot speculate on the government's future policy directions, we hope that the information and the analysis we will present today will help you complete your report.
[English]
Looking at slides 3 to 5, we'll begin our presentation with the first question the committee asked--namely, how developments in emerging and digital media are affecting Canadian cultural industries.
I'll speak in depth to this question, since we believe the impact is profound. Slides 3 to 5 address this question, and I will speak to the slides as a whole in my remarks.
Technology is affecting arts and culture around the world. It may be a renaissance of sorts, with seemingly unlimited opportunities to create, share, and consume cultural content. The audience is global and wants to engage, demanding all sorts of content as and when they want it, and on the platform of their choice.
Devices, suppliers, and traditional lines of business are blurring. To meet market and creative demand, new partnerships and business models are emerging, bringing together those who traditionally define themselves as part of the cultural industries and those who do not.
Several of the committee's witnesses noted the hybrid environment, where there is significant interaction between traditional and new media. We note the same trend.
Canadians are heavy consumers of media: 95% of Canadian households have access to broadband and spend about 42 hours a month on the Internet, yet they continue to watch over 100 hours of television and listen to over 73 hours of radio a month. In addition, 2 billion videos were viewed on YouTube alone in November 2010; 83% of Canadians online are on Facebook, and 17% are on Twitter. As well, comScore data for the month of October 2010 demonstrated that the eight most visited Canadian domains were those of Canadian media companies.
At the same time, we're seeing total album sales declining. While there was increased growth in digital album sales in 2009, it did not offset the decline in physical album sales.
While a dominant business model has yet to emerge as a sustainable replacement to CD sales, there is reason for hope. The popularity of music streaming services, although still small, appears to be on the rise in Europe, where such services are more widely available than they are in North America. This model is based on revenue from advertising and subscriptions, and has been identified by some in the music industry as a strong alternative to unpaid downloading via peer-to-peer networks.
With respect to books, U.S. estimates are placing the market share of digital book content at less than 10%, with digital rights issues dividing publishers from authors and rights holders. The issue of borderless markets for digital books is challenging traditional territorial rights of publishers and distributors.
[Translation]
The periodical industry is expecting a change in digital ad revenues, which could increase by almost 30% by 2013. In the film and television industry, the volume of production has remained stable. Digital media production, which is defined as content delivered by the Internet, mobile networks, gaming consoles or media stockage devices, is growing.
Creators working in this field generated $2.24 billion in gross revenue in 2008. Canada's video game development sector generates about $3.5 billion in revenue and employs directly and indirectly more than 14,000 highly skilled employees.
[English]
In 2009, as many Canadians listened to streaming AM/FM radio as to downloaded music. Some three-quarters of radio stations stream their content live online in Canada, and for the past three years, Canadians listened to streamed AM/FM radio more than any other source of streamed audio content.
[Translation]
The committee has heard from a broad spectrum of witnesses, who have provided many examples of Canadian success stories. I want to add a few more examples to that list.
Flashpoint is a Canadian production funded by what was formerly the Canadian Television Fund. It has been extremely successful in Canada as well as in the United States. It is the first Canadian dramatic series to be broadcast in prime time on an American network since Due South in the mid 1990s.
In addition, the dramatic comedy Les hauts et les bas de Sophie Paquin continues to garner interest in France, Belgium, Switzerland, Italy and Russia. The broadcasting rights to its English counterpart Sophie have been sold to South Korea and Brazil.
[English]
YouTube continues to be a valuable promotional vehicle for Canadian artists. For example, Jeremy Fisher's homemade video for his 2007 single, Cigarette, topped over two million views.
The Kobo eReader is competing with global brands such as Amazon and Apple, and digital book warehouse Agrégateur ANEL- De Marque's online marketing and digital content management service for the French-language book market in Canada is drawing attention from French and Italian publishers.
In fact, since 2009 annual online sales by Canadian publishers have increased by 13% to over $18 million. These publishers produce over 3,500 e-books annually, generating $8 million in sales, and both figures are expected to grow exponentially.
In periodicals, The Hockey News has been downloaded by over one million users since its launch in October 2008.
[Translation]
National cultural organizations have also made considerable progress. We gave a few examples during our presentation to the committee last November, so I will only mention a few others. Radio-Canada's website TOU.TV has received more than 25 million web hits during its first year of existence. The National Arts Centre's website Artsvivants attracts young Canadian from across the country.
The committee met with Tom Perlmutter, of the National Film Board. He talked about the enormous success enjoyed by the organization's national online screening room. The website nfb.ca was the first platform in North America where French-language films by francophone creators could be viewed. The NFB application for iPhone was also very successful with more than 700,000 film viewings on iPhone in less than six months.
[English]
We will move to slide 6 and turn to the second question you addressed in your study, which is the opportunity piece.
In its DES consultation paper, the government said that in the global reality, digital media and content are essential to Canada's economy and society, and digital media creators are at the centre.
Digital media can be compared to the soft infrastructure that is as important as the hard infrastructure, such as broadband connectivity. Both will have a deep impact on Canadians as citizens, consumers, and creators. Digital content will drive the uptake of infrastructure and devices, distinguishing Canadian digital offerings in a crowded global marketplace.
As noted by Monsieur Pierre Proulx of Alliance numérique in his presentation to your committee, the whole world is the market, and cultural industries are looking internationally.
Moving to slide 7, we see a range of business strategies emerging that are being led by cultural entrepreneurs who understand that like all sectors adapting to technological change, they must take risks, invest, innovate, and interact with audiences, new partners, and new markets.
As Carolle Brabant of Telefilm noted when she appeared before the committee, the capacity for infinite mobile and instantaneous reproduction of content with marginal costs is leading cultural industries to think differently about what they are selling.
A review of the testimony that you've heard shows that many in the industry are not waiting for legislative solutions. They are exploring, taking risks, and feeling things out to see what works and what doesn't.
The government is supporting cultural entrepreneurs to take risks. A prime example is the experimental stream of the Canada Media Fund, which funds the development of leading-edge non-linear content and applications.
The private sector is stepping up with the launch of innovative funding models like Kickstarter, a platform where creators post ideas and visitors offer funding for the ideas they like best.
The creation of the Canadian Media Production Association shows the way producers are now thinking of themselves in the digital space.
Microsoft's contract with Toronto-based Polar Mobile to build 500 applications for its new smart phone shows that Canadian companies are at the top for providing content and content applications.
On slide 8, we address your third question.
[Translation]
The committee asked whether there is a way of ensuring that creators of artistic and cultural content are compensated for their work. I have talked about how business models are evolving and about the emergence of new value-added networks.
[English]
Financial support for the creation of content comes from governments, the private sector, the not-for-profit sector, ticket buyers, readers, donors, artists, creators, publishers, and producers, among others.
[Translation]
Market framework legislation also plays a role in the digital market. We have the Electronic Commerce Protection Act and the Personal Information Protection and Electronic Documents Act.
[English]
We have the act to amend the Criminal Code with regard to unauthorized recording of a movie.
[Translation]
We also have the Copyright Act.
My colleagues could answer any questions you may have on these policies.
[English]
Really, Canada's creative entrepreneurs have the drive to take on emerging and digital media, develop opportunities with new partners, negotiate their terms, and manage their success.
[Translation]
Now, I will let my colleague from the Department of Human Resources and Skills Development, Louis Beauséjour, answer the committee's fourth question.
My colleague already said that digital technologies are providing Canadians with new possibilities and are having strong repercussions on many sectors, including the cultural sector. Clearly, digital skills are becoming increasingly important in the labour market.
[English]
We are faced with two challenges.
One issue is ensuring that Canadians have the right mix of skills to participate in the ICT sector and other sectors that depend on emerging digital technologies.
The other issue is that we know that more than 40% of Canadian workers have low levels of essential skills, such as literacy, numeracy, and problem solving. These are not just older workers: many lacking essential skills are under 35 years of age. Without these basic skills, it is difficult to upgrade to digital skills, and a workforce lacking digital skills is less adaptable to new technologies.
[Translation]
During the consultations the Government of Canada held on the digital economy, several major themes related to skills development emerged. These themes are the following: support of digital skills development through training, teaching and mentorships; increased recognition of foreign academic qualifications; improved information on the labour market; and support for research and innovation in digital training.
[English]
We also know that the Government of Canada cannot act alone in this regard. That means working with provinces and territories, given their responsibility for education. It also means working with industry to ensure those already in the workplace are digitally literate so that they can adapt to the changing economy.
Let me briefly describe some of the steps we are already taking to support digital skills development.
[Translation]
The Office of Literacy and Essential Skills, OLES, is collaborating with partners from across Canada in order to improve literacy and essential skills, including the digital skills of adults.
The department provides support to provinces and territories through labour market agreements and through labour market development agreements. These agreements can be used in part to fund digital skills training.
[English]
Finally, the sector council program supports two sector councils that address human resources issues in the digital economy. These are the Information and Communications Technology Council, ICTC, and the Cultural Human Resources Council. These organizations are involved in a number of digital skills projects. Overall, the department is looking forward to constant engagement in the digital economy strategy and the opportunity it presents for increased digital skills for Canadians.
:
The question is with regard to the impact of changes in foreign ownership rules, including legislative and regulatory changes, on Canadian content and culture.
In June of last year the government released a consultation paper inviting views on foreign investment in telecommunications and noting that foreign investment restrictions on broadcasting are not being considered.
[Translation]
This decision is explained by the fact that policy objectives under the Telecommunications Act and the Broadcasting Act are distinct. Strategic issues relating to telecommunications networks differ greatly from those regarding broadcasting and content.
[English]
Broadcasting plays a key role in developing, protecting, and promoting Canadian culture, and the Broadcasting Act is primarily cultural in nature. The Telecommunications Act, by contrast, is primarily economic in nature. All major telecom and cable providers in Canada, such as Bell, Telus, Rogers, and Videotron, are regulated under the two acts. The Broadcasting Act applies to their subscription television services such as Bell's IPTV service and Rogers cable service. The telecom act applies to telecom services such as Internet service, fixed telephony, and wireless telephony.
Independent of telecom foreign investment restrictions, provisions of the Broadcasting Act remain in place. Canada's broadcasting system will continue to be supported by a number of policy, regulatory, and funding provisions in place to achieve the objectives of Canada's broadcasting policy.
It was very clear from the consultation paper that the government will not consider anything that might impair its ability to pursue Canadian cultural content policy objectives. In November, indicated that the foreign investment rules for telecom and decisions concerning the next 700 megahertz spectrum option will be considered together as part of an integrated regulatory approach.
Let us turn to the last slide.
[Translation]
At the November 22 International Institute of Communications conference, Minister Clement articulated his vision of a globally competitive Canadian digital economy, which is characterized by innovation and enhanced productivity, which in turn results in enduring prosperity.
[English]
indicated that the digital economy strategy will become a key plank of the post-economic action plan governmental agenda, with a focus on supporting jobs of tomorrow and economic growth to ensure future prosperity. He highlighted a broad objective for Canada to be a nation where business, community, and individuals have the skills needed to use digital technologies to their advantage, and where a globally competitive information and communication technology sector supplies more markets with more innovative products and more new services.
Federal action alone will not achieve this objective. It will require collaborative action across the economy. Industry, provinces, and individual Canadians must all play their part. In that context, the government is focusing its efforts in five priority areas.
The first is to facilitate the development of a world-class infrastructure. This is essential for business to adopt ICTs and innovate and for Canada to attract investment.
Second is supporting business adoption of digital technologies to boost productivity and innovation. Adoption of digital technologies is essential to improving Canada's lagging productivity and innovation performance, especially for small business.
The third is to enable a digitally skilled workforce. A leading digital economy will require a workforce with the skills and creativity to develop and use new global digital technologies.
The fourth is to help successful Canadian companies supply digital technologies to the world. A globally competitive Canadian digital industry will protect high-paying jobs, attract investment, and provide a trusted supply of critical technologies.
The final priority is to create the conditions necessary to realize Canadian content on all digital platforms. This will help to profile Canada as a creative and innovative nation.
As part of the collective national effort needed to realize a successful digital economy, met with his provincial and territorial counterparts on January 13 and 14 to discuss key issues pertaining to the digital economy. The meeting was very positive, and the ministers left with a shared agreement on the importance of the digital economy. Officials will be following up with work in some key areas.
:
Thank you very much for being here and welcome. I apologize for the delay, but there was no way around it. I am terribly sorry.
I heard what you said earlier about what you have done so far. However, we have been conducting a study over the last few months, and various witnesses have suggested some solutions. For all sorts of good reasons, we could consider some of those solutions. I will list seven or eight of them. Maybe you would categorize them differently. Let's say that I have seven suggestions. I would like you to first tell me whether any of those seven solutions are currently being considered.
Basically—and I will allow each one of you to speak if there is time—I would like to know which of those solutions we can prioritize and which are not feasible.
First, it was suggested that the Broadcasting Act and the Telecommunications Act be merged. I could not agree more with that idea. It was also suggested that we not open our market to foreign companies. Globalive has been in Canada for a year and, despite that fact, the price of cellular phones has not gone down, which was why the market was opened up in the first place.
Second, it was recommended that wireless telecommunications companies be considered as broadcasting companies.
Third, it was suggested that convergence be regulated by requiring converging companies to divide their business.
I am not necessarily promoting these suggestions, but this is what we have heard here.
Fourth, it was recommended that convergence also be regulated by asking converging companies not to give priority to their own business.
Five, it was suggested that the Internet be regulated in a number of ways. Among other things, you talked about streaming, about streaming music. However, we know that this has more to do with the right of public communication. We could perhaps make those who stream music pay royalties, like broadcasters do.
Six, it was recommended to increase funding to the Canada Media Fund and to already existing programs, assistance programs for digitalizing several elements that are currently in the process of digitalization, such as Canadian and Quebec literature.
Are some of these solutions already being studied? Which of them would you prioritize? Do you believe that some of the solutions are unworkable?
:
Thank you for your question.
First, I want to say that the policy on copyright comes under the jurisdiction of Canadian Heritage and Industry Canada. I am accompanied today by my colleague, Mrs. Colette Downie, Director General of the Marketplace Framework Policy Branch at Industry Canada. We will share our time.
It is true that the difference between copyright and droit d'auteur is a historical one. In addition, legally speaking, the two systems originated in two different parts of the world.
Let's talk about copyright.
[English]
It's a part of marketplace framework law. It's one of the key elements of marketplace framework law in Canada, along with other laws. It supports the development and availability of content.
Points in the deck presentation mention global audiences. How does copyright support global audiences? Well, bringing our copyright law up to international standards, as an example, is a way to enable Canadian creators and Canadian rights holders to participate on an even playing field with other countries.
We were talking about exports, and Ms. Cliff was highlighting some of the key success stories of programming. In terms of direct access, from my reading of the testimony that you've heard, part of what is changing is the interactivity and the way creators are reaching their audiences. It can be a much more interactive process. What is changing is that creators have more direct access to their audiences, who participate with them and shape with them what the creative product is.
I was reading some of the testimony. Jumpwire Media, as an example, testified before you. They have an online model through which they are tracking individual sales of their product. That's an example of the changing approaches. That means that the business relationships are changing as well.
Who creators work with and how they distribute their material is changing. Again, I think that is certainly part of the testimony that you've heard.
Copyright gives creators a whole series of rights. They have a series of economic rights. They have moral rights. They're able to license or assign those rights, either partially or regionally or for specific time periods or for specific media. I think the Copyright Act is a good three or four inches thick, and it tells how all of that supposed to work.
Basically, creators have this series of rights that they start with when they make a creation. The choices that they make in bringing that creation to market amount to the management of those rights. As business relationships change and create greater responsibility for them--and that's another point for creators--it's possibly a challenge, but it's also an opportunity for them to be able to manage their rights in different ways.
:
Thank you very much, Mr. Chair.
The study is about opportunities and challenges, and I wanted to pull those two together, because this is where the catch-22 comes in of people not knowing where to go. The opportunities of the digital media are extraordinary: anywhere in the world people can have information, knowledge, learning, and content. It can be anything you can think of--any information, any entertainment.
This is an important opportunity we don't want to miss. I think it's the greatest thing since the printing press was invented, but the challenges that come with it are what I am hoping, out of this meeting, we would be able to square. It seems to be a difficult circle to square, and how we do that is what I wanted to pursue in my line of questioning.
For instance, I was glad to read in your presentation, which I think is good, that access to broadband is being widened and that the government has a progressive policy on widening it. Growing of broadband is good, but you were asked by my colleague, Mr. Scarpaleggia, about what places you can turn to. While access to broadband and to Internet and to digital media is important, the question is, what happens when you have that access? The challenge, therefore, is how you allow all of this. The Justin Biebers of the world, in a little basement, come up with a grand, wonderful design, get it out there using this brand new piece of technology, and hit the world with a bang. That's the wonderful thing about it.
The challenge is how people who are using it--the Justin Biebers of the world, and anyone who uses the technology to reach this global audience--can maintain their copyright, their own creative content, their intellectual property. It has to be challenged, and I don't know how we're doing on that.
It's my understanding that the United Kingdom has been moving forward and is not just pursuing digitalization, but getting ahead of it. We're pursuing it still. The thing is that every day, even while I'm speaking to you now, something new is going on. Something is happening, something is changing, and we keep trying to shove the toothpaste back into the tube. I wondered whether there are lessons we can learn from what they're doing in the United Kingdom.
I wanted to apply that question very specifically to the CBC, given that the CBC is a public broadcaster and has to depend very much on government funding to bring it fully into the use of digital media for disseminating and marketing its content, as we see the BBC has been doing throughout the world. Everywhere you go you can pick up BBC on the digital media. You can't do that with CBC yet. We know that our ability is hampered because we don't have market distribution. Could this digital world be used by the CBC for distribution? Could CBC be our distributor using digitization? How do we pay for it? Do you have a plan to help them because they don't have the same access to market funding as the other market-based broadcasters?
The other question I want to ask is whether there is any intent to look at the Broadcasting Act, because these are now broadcast media. Broadcast media is no longer radio and television; broadcast media is Justin Bieber sitting in the thing and using digital media to go out there to reach everybody. Are we looking at this in a proactive way? Are we asking whether we should look at the Broadcasting Act? Is there something we can do to take advantage of the opportunity while dealing with some of the challenges of intellectual property?
I haven't even gone into moral rights. You take something Justin Bieber did and then go and play with it in the basement, and it turns out something brand new, but you're using Justin's intellectual property and tickling it to make something new. That is about intellectual property; it's about moral rights. We have not talked about moral rights in this country, but I know that Europe has dealt with moral rights.
How are we going to deal with all of this? These are difficult questions, I know. I'm asking you to go “blue sky” and be creative in your thinking.
:
I want to draw your attention to what I feel is an inconsistency. You can be the judge of whether it is a major or a minor one.
On page 8, you talk about ways of ensuring that creators of content are compensated for their work. Ms. Cliff, at the beginning you said that Canadian businessmen—I assume you were talking about creators—have all they need right now.
However, upon reading Bill on copyright, currently before us, we realize that three new provisions will result in artists losing $74 million in copyright fees. First, there is the non-modernization of the private copy system, which, as is does not apply to digital audio players, results in artists losing an average of $13.8 million a year. This is directly related to our topic of discussion. The private copy system exists, but it applies to older material. Bill C-32 does not cover new material, such as MP3s or iPods. Because of this, artists are losing $13.8 million a year.
Similarly, the education exemption translates into a $40-million annual loss for the artist. This is because you want to enable those involved in education to get what they need on the Internet without having to pay copyright fees.
There is also the abolition of ephemeral recording, which you talked about earlier. The reason why broadcasters are asking for a royalty holiday—if I may call it that—on ephemeral recording is that the material has become digital. Now that it's costing them less, they want to pay less. This is resulting in artists losing another $21 million a year.
The losses add up to at least $74 million a year. That amount can also be much higher.
The YouTube exemption, that is, the exemption on user-generated content, means additional lost income for the artist. Collectives from around the world have signed a contract with Google to pay royalties on the music used on YouTube. On September 30, 2010, the Société des auteurs, compositeurs et éditeurs de musique de France, SACEM, announced the signing of such an agreement with YouTube. By adding the YouTube exemption, which applies to user-generated content, you are pulling the rug out from under Canadian collectives that could have negotiated the same royalty contracts with Google or YouTube.
Maybe you could set me straight on this, but I don't see any other rights in Bill that will be marketable, except perhaps in the case of photographers. However, it's also not clear that there will be more such rights than there are today. I don't see anything in Bill C-32 that would enable creators and artists to collect new royalties to offset the $74 million they're losing. I also don't see any business opportunities related to YouTube, Google and other similar websites.