CHPC Committee Meeting

    Good morning everyone.

    This is meeting number 20 of the Standing Committee on Canadian Heritage. We are conducting a study on the Canadian music industry.

    Because of votes today, we are going to have two panels, but we've been working with our witnesses to put everything into one meeting starting now and running until one o'clock.

    We will have the one panel of witnesses and, as a result, the opening remarks today will be limited to three minutes. I apologize to our witnesses for that, but you will have opportunity in the questioning to expand on your opening comments.

    We have one witness appearing by telephone and two witnesses who are going to be with us today through video conference. Lula Lounge, which was scheduled to join us, were delayed by weather and so, unfortunately, they will not be with us today.

    I am going to go through the list of the witnesses.

    First of all, from the Institut de la statistique du Québec, we have Dominique Jutras, director, and Claude Fortier, project manager. By video conference from Richmond Hill, Ontario, we have from Warner Music Canada, Steven Kane, who is the president. By video conference from Vancouver, British Columbia, from Nettwerk Music Group we have Simon Mortimer-Lamb, president and CEO. From the Coup de coeur francophone, we have Alain Chartrand, executive and artistic director, who is here with us today. As well, by telephone from L'Équipe Spectra, we have François Bissoondoyal, director, and also Roseline Rico, vice-president.

    When we get to the questions, I ask that our members not forget our folks joining us by video conference as well as our folks joining us by telephone.

    We will start with the Institut de la statistique du Québec.

    Mr. Jutras, you have the floor, for three minutes.

    Thank you, Mr. Chair.

    Good morning. Thank you for having invited us to appear before you today.

    I will briefly talk about the key points we want to present to you today. Essentially, these are statistical numbers. We do not have any definite opinions, but our numbers can still provide interesting insight.

    Based on our studies, we can see that the use of cultural products and services has been decreasing for the past number of years. The latest data, from 2013, show that results are rather negative in terms of use and profits.

    In Quebec, for example, CD sales, that is sales of physical products, decreased from 13 million units in 2004 to 6 million units in 2013. Moreover, this decrease in the sale of physical products was not made up in sales of electronic products. You may think that this would be counterbalanced by sales of electronic products on iTunes, in particular. We have seen an overall decrease in the number of sales of physical and digital sound recordings. In one decade, the music and song recording market decreased by 30%. This is a significant number.

    The impacts of this decrease are greater in the case of Quebec products. We noted that, in 2013, 38% of recorded audio products sold were Quebec products. That number used to be 50%. This means that the market for Quebec products shrank, and this occurred within the context of an overall decrease.

    Why was there a greater decrease in the sale of Quebec products compared with other products? On the market for physical products such as CDs, 50% of the products bought by Quebeckers were Quebec products. In the case of digital albums sold online, however, one-third of the products were from Quebec, but this number fell to 7% for digital tracks sold individually. While sales of digital albums and tracks are increasing, the market share of national products of these digital markets is shrinking. The numbers have therefore fallen from 50% of the market to about one-third.

    In addition to this, there is what is happening in the area of song and music shows. Our study showed that numbers are also falling in this field. We often think that show ticket sales will compensate for any losses in music sales. However, show attendance and markets have also been decreasing. Things changed between 2004 and 2012. The proportion of income associated with Quebec shows went from half to about one-third. That is clearly a decrease.

    I have to keep it short, but I do not have a clock to tell me how much time I have left.

    You're pretty well out of time, but—

    The study I provided to you also includes the analysis of household expenditures. It would be useful to look at what is happening there. We used data from the Survey of Household Spending pertaining to expenses in culture and access to culture.

    This market has represented about 5% of all household expenses over the past 10 years. That number has stayed the same but the proportion used for cultural products fell sharply, while the proportion for access to culture increased quite a bit. These numbers are very important.

    Thank you.

    I'm going to have to cut you off right there. You will have a chance to expand on it a little later.

    We're now going to go to Richmond Hill, to hear from Mr. Kane, from Warner Music.

    You have the floor.

    Thank you for the invitation to appear before the committee.

    As just noted, the marketplace for recorded music in Canada has greatly eroded in the last 10 to 15 years. We commend the government for introducing framework legislation in the Copyright Modernization Act to help rectify the many problems we face in rebuilding a commercial market for recorded music, but this alone will not stem the tide. There is still a missing piece. What is missing is a public policy that addresses foreign direct investment.

    The world has changed dramatically in the past 15 years and the marketplace is more and more global. Businesses have ever-increasing options about where to invest. Years ago Canadian policy-makers at all levels sat down to craft a policy that would stimulate domestic film and television production in Canada. A crucial piece of that strategy was the introduction of tax credits at the provincial and federal levels to encourage foreign direct investment in our country. Even municipalities jumped on the bandwagon. For some reason this critical piece of the film industry's success story was left out of the framework that was crafted to support Canada's music industry. You can begin to rectify this by extending a film tax credit-like system to music.

    Demand uncertainty has always been an issue for the music sector and our development of artists is fundamentally a form of R and D. Therefore, we believe it deserves some type of public support akin to tax credits available to R and D-intensive industries in Canada. We are not suggesting the money should be diverted from programs such as FACTOR, which offer vital and effective support to the independent community. What we are suggesting is that for sound business reasons you should implement a framework to encourage foreign direct investment in Canada's music industry. It worked for film and it will work for music.

    Take the example of the Province of Ontario, which just this year implemented a revolutionary support program for all sectors of the music community not just recorded music. Live music is a beneficiary. But there is also a very specific program that is designed to encourage Warner Music Group and our competitors to bring foreign direct investment to the province of Ontario, and that is exactly what we are doing. Over the next three years Warner Music alone hopes to bring over $4 million of fresh investment into Ontario, into the music sector.

    I'll stop there. I'm happy to expand during the question period. Thank you for your time.

    Thank you very much.

    We are now going to Vancouver to hear from Simon Mortimer-Lamb from Nettwerk Music Group.

    You have the floor.

    Thank you very much.

    Nettwerk was founded 30 years ago in Vancouver and has since grown into an international music company employing over 80 people offering record label, publishing, and management services to a diverse roster of recording artists, producers, and songwriters. I would very much like to thank the Canadian government and the Department of Canadian Heritage for renewing the Canada Music Fund. These funds have had a significant role in the development of both Nettwerk as a business and the artists we've had the pleasure to work with. Indeed, the early international success of Sarah McLachlan can be tied to the support received from FACTOR.

    As everyone is already very well aware, the ministry has undergone significant changes in the retail landscape for recorded music. Nettwerk has always prided itself as being at the forefront of identifying those changes and then adapting to and leveraging new technologies and innovations. However, even with that foresight we had trouble reacting to a dramatic shift in the physical retail market in 2008 and 2009 where products were returned en masse. The support of the Canadian Music Fund during that period was invaluable in allowing Nettwerk to—

    Could you please slow down just a little bit please for our interpreters. I know you are trying to get through it quickly. Thank you.

    No problem.

    The support of the Canada Music Fund during that period was invaluable in allowing Nettwerk to continue to release great Canadian artists, all the while weathering this negative retail storm. Indeed, we have built a business that can survive and thrive in a digital retail economy. In today's marketplace you have to be everywhere, on every platform, monetizing every behaviour of your artists' fan base. The CMF has afforded Nettwerk the time, patience, and resources to build the teams and systems to do just that for our clients.

    So my recommendation is don't change what is working. The CMF is working.

    The title for my section should really be “Can we get on with it already?” I know the committee has heard of the dire predictions about the effect that streaming will have on the artists' and the labels' bottom lines for recorded music sales. It doesn't need to be this way. There needs to be less navel-gazing and debate about how good it used to be, and we need to get on with building Canada's retail marketplace. Streaming should be a big component of that marketplace, and the fact that it isn't today is not acceptable, especially when you see countries like Sweden having 72% of recorded music revenues coming from streaming. Recently that country posted 2013 total recorded music revenues that were 20% higher than in 2009. During that period Canada's declined to 7%.

    Many streaming service providers are choosing to stay out of Canada given the uncertainty created by the length of time it takes for tariff decisions. To echo Victoria Shepherd of Connect Music Licensing:

    Without the improvements to the Copyright Board, we are simply not realizing the full potential of the dollars we're all investing.

    Finally, there was a recommendation in past sessions of these hearings about committing funds toward educating young people about the costs and amount of work that go into creating music. It's a noble idea, but let's at the same time ensure a market environment that provides a multitude of licensed and legitimate music-consumption options for the next generation.

    Thank you for your time.

    Thank you very much.

    We'll now hear from Alain Chartrand from Coup de coeur francophone.

    You have the floor.

    Thank you for inviting me.

    I would like to begin with some background. Founded in Montreal in 1987, Coup de coeur francophone is an organization whose mission is to promote and present local, national, and international song. Its programming focuses on discovery and creation.

    What characterizes Coup de coeur francophone and distinguishes it from other events is its festival format that includes one 11-day event in Montreal followed by events that showcase songs throughout Canada. The festival's home is in Montreal but since 1992 it has spread from one ocean to the other thanks to a pan-Canadian network involving 10 partners and...

    Monsieur Chartrand, plus lentement, please.

    You are telling me that I am speaking too quickly. That is because we have very little time, only three minutes, and that is stressful.

    Thanks to the creation of a network involving 10 partners throughout Canadian provinces and territories, this is a traveling festival that spans six time zones. Each year, in November, Coup de coeur francophone puts on 200 shows in more than 45 Canadian cities.

    As the festival director, I am not an expert in new technology. However, for almost 28 years I have been focusing on creating meeting places between the artists and the public. I have therefore chosen to focus my remarks on one theme, and that is the effect of technological change on the kinds of live shows that we and many other festivals present. My testimony will reflect the work that I do at Coup de coeur francophone.

    The main challenge that we face in putting on shows, and particularly when all our programming focuses on discovering new artists, is getting the public to the venues. From that perspective, technological change has had a significant effect on promotion and communication and has enhanced considerably our ability to reach the public whose profiles change depending on the kind of music being showcased.

    Promotion over the Web and various social networks, that are the main sources of information for 18-to-24-year-olds, has become a major factor in the marketing of shows. For shows of our size, advertising is increasingly involving greater investment in Web platforms and less in advertising spots and newspapers, radio and television.

    In a document entitled “Innovation numérique au sein du spectacle vivant“, digital innovation in the performing arts, published last year in France, the following observation was made:

    One of those new actors is the public, that the artist, the producer and the presenters now have direct access to. In the chain that starts with creation and ends with the public, this new parameter is having a multiplier effect whereby each link benefits from the work of the other. The outcome is a pollinating effect that fosters the development of artists' careers.

    In terms of the funding provided to distributors, we think it is important that the Canadian government support the strategy that gives organizations an opportunity to hire specialized staff, develop original content and use different platforms.

    In terms of copyright, the broadcasting of works over digital networks raises the issue of copyright management and fair remuneration for creators. On that issue we can only echo those who have condemned the current system, that I would call homeopathic because of the kind of royalties paid to those who create and perform the music compared to the profit made by those who distribute it.

    Does the Canadian government not have the right tools to correct this situation? That is my question.

    For a festival such as ours that takes place throughout Canada, the use of new technology for the purposes of communication has greatly contributed to our ability to reach the public. This is true for the festival as well as for the artists who perform. This pan-Canadian adventure has shown us how important it is for minority communities that we develop local content in French.

    Thank you.

     Thank you.

    Mr. Bissoondoyal, you have the floor for three minutes.

    Thank you, Mr. Chair.

    My name is François Bissoondoyal and I am the Director of Labels at Spectra Musique, a division of L'Équipe Spectra.

    I will briefly introduce our company, which has been active on the Canadian cultural scene for more than 35 years.

    L'Équipe Spectra owns two concert halls in Montreal: Le Métropolis and L'Astral. It also manages three large-scale events: The Montreal International Jazz Festival, the FrancoFolies de Montréal, and Montréal en lumière. We are also an agency for artists and a record label, and we produce more than 30 artists.

    I will now get to the heart of my arguments.

    As you know, the music industry has not been doing well for the past several years. Several previous witnesses explained this. There are three major points, notably the almost unlimited access to musical works, which means that it is increasingly difficult to protect copyrights. Then there is the decrease in royalties. There is also the growing popularity of streaming, which allows people to listen to songs without buying them. Users pay a monthly fee of between $5 and $10 and can access 10 or even 30 million songs. In such a situation one might wonder why they should buy an album. The consumer's way of setting priorities has also changed. The cost of living is going up and consumers may cut down on buying so-called luxury items.

    We propose three solutions or possibilities.

    The first is to get royalties from the sale of MP3 players. Such royalties already exist for blank formats such as CDs. So we could simply extend those royalties to other devices.

    The second solution, as was mentioned earlier, would be to give a tax credit for production and marketing of sound recordings. This tax credit would be given to companies whose shareholders are Canadian, of course. This would allow us to increase the production of new Canadian content, and therefore to create or maintain jobs. Furthermore, it would reduce the financial risk for producers. It is very important that this credit be offered in addition to what the Canada Music Fund already provides. In Quebec, there is already a tax credit for producing sound recordings. In Canada, there is a tax credit for film, as was mentioned earlier.

    The third solution is somewhat more technical and concerns entrepreneurs in the music industry. Currently the number of units sold is the basis for determining how much support will be given. In order to compare various companies more objectively, it seems to us that it would be fairer if the Canada Music Fund set up a new system that placed more value on a record label's willingness to take risks. The formula for calculating the amount of support given would be based on a points system taking the following three things into account: the company's investment in production and marketing; the number of albums produced and marketed; and the revenue generated by these activities through a sales bonus.

    The goal of all this would be to support and maintain the careers of Canadian artists.

    In conclusion I would simply say that of course, we support the measures recommended by the ADISQ.

    Thank you for having given us the chance to speak to you.

     Thank you very much.

    We will now move to questions. We will start with a seven-minute round, beginning with Mr. Falk.

     I will remind members that we have folks with us by telephone and by video conference.

    Mr. Falk.

    Thank you, Mr. Chairman, and thank you to all the witnesses who testified here this morning.

    Mr. Kane, I'm going to direct my first question to you.

    In your presentation to this committee, you commented on the importance of FACTOR investments in the industry. I'd like you to comment a little bit more on whether the government's objectives in funding the Canadian music industry are being met.

    Specifically, are we increasing Canadians' access to a diverse range of Canadian music choices? Are we also increasing the opportunities for Canadian music artists and cultural entrepreneurs to develop their skills, and make a significant and lasting contribution to our Canadian culture?

    I guess the short answer to that, Mr. Falk, is yes. I think programs like FACTOR or on the private sector side, Starmaker,have been essential and vital for the development of not only Canadian musical talent, but the Canadian music business.

    Some of the most innovative and bold music entrepreneurs this country has produced have come from the independent sector and have been able to learn their craft and perfect their profession through the support of organizations like the Canada Music Fund, and FACTOR in particular.

    At Warner Music we are very proud of our long association and partnership with some of the country's leading independent record companies, whether that's Six Shooter Records, or Stomp out of Montreal, or Pacific Music out of Vancouver. What I see there is an opportunity to expose more Canadian artists to the Canadian public and at a time when we're watching businesses being built, become self-reliant, and really become in many cases the torchbearers for Canadian culture moving forward, not only in this country but around the world. You only have to look at people like Feist, and to our friends who networked over the years—Sarah McLachlan—and many of their great acts.

    It is still such a key component to building a solid industry infrastructure in this country that I would wholeheartedly say yes, it remains vital.

    Good, thank you very much.

    Mr. Mortimer-Lamb, could you comment on that a little bit as well?

     I would echo the same thought that yes, indeed, those objectives are being met. You see diversity both in artists releases and independent record labels and publishing companies and what their speciality is. Whether it's jazz music or in the case of network, a lot of singer songwriter, folk music, it allows that breadth of genre and it has allowed effective building in independent music companies.

    Okay.

    Mr. Mortimer-Lamb, in your testimony you made reference to Sweden and what they're doing there as far as streaming is concerned. You indicated that revenues were significantly up there in the music industry and in music sales.

    Where are those revenues going? Are they finding their way back to the artists, to the producers, or to the songwriters? When they do their streaming there, where does that money end up?

    Obviously, the streaming companies have to pay the content providers. That would run the gamut of record labels, their artists, artists individually if they're independent, and the producers and creators of that content. So yes, that money is flowing back through to the content creators.

    Do you see a system like that in Canada today, or is it even feasible to roll out something like that?

    There are already players here where that's already happening. From our example or our experience with our artists, we're seeing that on a worldwide basis. We're seeing some of our Canadian acts with revenue from parts of the world where they've never been to and have never had the ability to physically sell there. That's coming from streaming services like Spotify, or even down to YouTube, where video plays are generating ad revenue for that artist's content.

    The infrastructure and the retail models are there and that flow of money is coming back to the content creators, and that's happening worldwide for us and for our clients. It's really about the hurdles to provide these legitimate retail models and help build that sector in Canada so that the Spotifys and the Pandoras come to our marketplace and provide more options for the consumer.

    Thank you.

    Mr. Jutras, I have a question for you as well, along the same vein.

    Do you see the money that the Canadian government is investing in the Canada Music Fund as meeting its objectives?

    I do not analyze the effect of the Canadian government's investment in music. Rather, we look more at production. We have seen that the volume of production has been steady, but that the market is declining, based on our indicators. This might make you think, as other witnesses have said, that this market is undergoing a transformation which we do not entirely understand. We know that there is more music today than there has ever been before, but money does not seem to come up out of the system in the same way it once did.

    The financial flow within the system has been profoundly changed. So indeed, the state will undoubtedly continue to intervene in order to support production. However, music broadcasting and music consumption have undergone significant transformation, and we will need to find ways to stimulate the system again or to build a new model that will allow us to get the money from the system to the artists.

     To our witness who called in via telephone, I would also have a question for you. You made a comment that there's difficulty protecting copyrights. Can you expand a little further on that?

    Monsieur Bissoondoyal.

    In fact, it's fairly simple because music is quickly and easily available on the Internet. When I say copyright protection, of course, I mean that there is a whole system for pirating music and it's very simple. The music industry is not alone in having problems. Film and television are in the same boat. They are just a few years behind in terms of feeling the effects.

    This quick and easy access to music, of course, allows a huge number of people to obtain these products. So making laws on this subject is increasingly complicated.

    Thank you.

    Mr. Nantel, you have the floor for seven minutes.

    Thank you, Mr. Chair.

    Thank you all for being here today. I think that each of you is playing a very important role in your industry and we are lucky to have you with us. I know it was complicated to plan the meeting with each of you. We apologize for the technical problems that we had today, and for the votes which delayed the meeting.

    Mr. Bissoondoyal, my question is for you. Earlier you mentioned—and I think you are right—that it is rare that we talk about the challenges of people in the music industry. If I remember correctly, Spectra Musique has been around for around ten years. You arrived on the scene rather late in the industry. Are you saying that in your opinion—and again I think you are right—that in terms of the challenges facing the music industry those challenges will also be felt by film and television, because it is so easy to make copies, is that correct?

    I believe that is the case.

    I would like to make a small correction. The label has existed for five years. We created it under quite particular economic circumstances.

    I think that there is hope, thanks to the government's support, for us to have a greater presence and to have a certain success.

    Yes. And you proved that with Douze hommes rapaillés, which was a huge success.

    I wanted to hear your thoughts on this subject, because I think this is a comparison that we do not make often enough. I think that the whole audiovisual world does not see what's coming. But the ordeal of the music industry should show that this is the case.

    I heard someone from Nettwerk saying that we should stop being nostalgic and demonstrate some forward thinking.

    Mr. Mortimer-Lamb, you've been talking about the example in Sweden. Could you please tell me in a few words, what's Sweden's secret so that their local artists do take their cards out of the game on the streaming game?

    I think there are several elements to it. I think there are cultural elements as well which can influence that. One of the important pieces that I'm aware of is just how Spotify came out of Sweden in the big player there.

    They partnered with a lot of mobile companies to have their service embedded within Europe's mobile phone subscriptions. You've got a culture of very easy access and good access to mobile phones with data plans, etc., etc. They were able to very quickly reach the consumer and present their value propositions to them, and it really took off in a great way. I think that was one of the keys to it.

    If ever you have more information that you want to share with the committee, we'd be very interested in having more information regarding the privileged access they have. I've been working for Audiogram in Montreal for something like six years and to me Nettwerk has always been the parallel. Nettwerk has evolved so much within the music industry, managing producers, managing songwriters, and getting involved in all these fields. So your advice is well-appreciated.

    Specifically, Mr. Mortimer-Lamb, you spoke about the emergence of smartphones.

    I hope that we will have a few minutes to talk with Alain Chartrand, the great advocate for francophone culture across Canada, who represents Coup de coeur francophone. He is doing amazing work. I could simply mention Lisa LeBlanc. I believe he was the first to foster her great talent.

    My question is for the representatives of the Observatoire de la culture et des communications. Earlier, like Mr. Mortimer-Lamb, you mentioned that people are now investing more in the means to have access to music. With the explosion in the number of music devices, people are investing more in the hardware than in the content. Could you tell us more about that?

    Exactly. This observation is fundamental and confirms what everyone is seeing. At least, it's possible to put some numbers to it. Overall, 5% of household expenditures are allocated to culture and to access products. “Access products” means telephones and the Internet, for example, whereas “cultural content” means buying books, for example.

    It has been observed that money spent to buy books, records and real cultural products—not access products—has gone from 55% to 40% of money spent on culture. Where, then, are consumers spending their money? They are not using it to buy cultural content, but to buy access products with which to access culture. This is an additional phenomenon. I was saying a little earlier that money wasn't going to creators or to industry, but that it stays upstream somewhere, with the providers. That's where the consumer population is spending its money.

    Doesn't this situation also come with an old problem like that experienced by the Quebec film industry in the 1950s? Full-length features weren't being done in panavision for big screens. Only American productions had access to that.

    Today, we are experiencing a loss of market access. In fact, local productions, be they from Nettwerk or large companies from Montreal, don't have access to the market because the amount of royalties for streaming, for example, don't allow us to take our place within the market.

    Have you noticed something? As you were saying earlier, the loss of physical sales has shifted to digital sales, and our part of the digital sales market, which was built over years by Sam the Record Man, Renaud-Bray and Archambault has been lost.

    I will try to give a very visual explanation of the point you are raising. When walking into a bookstore or a record store—if we want to talk about music—there are display cases and national products are easy to see. When one ends up on the Internet, where are those national products? They remain very hard to find.

    The most eloquent example is the world of bookstores. There are shelves, and books written by Canadian authors appear on them. However, on the Internet, extra effort has to be made to get access to them. You all know the system. The “trendy” or mainstream product is what's being pushed. To draw up a mental image, imagine the size of the screen. The full range of choices is not seen.

    My next question is for Mr. Kane, from Warner Music Canada.

    I don't know if you're here in French or in English. I'll speak in English to make sure.

    There are many phases in the market. Many players tend to fade; some others tend to go up. There are trends. Is there anything that has changed?

    My colleague Kennedy Stewart wants to tell you about the various income tax measures you've evoked for outside cash to come in. I wanted to ask you if anything has changed, because I remember that artists as important as Lynda Lemay were discovered and put on the market by you in the eighties. Am I right?

    Yes, definitely. Warner Music Group has a long and storied history of development of great Canadian talent on both sides of the border. You can go back as far as Gordon Lightfoot, Blue Rodeo, Billy Talent, who has an enormous international career. Lynda Lemay is a perfect example. Lynda, at this point in her career, sells much more internationally than she does in Canada, which means as the repertoire originator, there's an international royalty that comes back into Canada that allows us to continue to invest in local Canadian artists.

    This is a tradition that moves forward with our young emerging artist Meaghan Smith, who is actually managed by the Network Management Division. And to the last speaker's point, if you were to open your browser to iTunes right now, you would seen an incredible presence for Ms. Smith's new record.

    I think it needs to be said—

    Mr. Kane, we're going to have to move on, and I'm really sorry. We're well past Mr. Nantel's time

    Mr. Dion, you have the floor. You have seven minutes.

    Thank you, Mr. Chair.

    First, thank you to Mr. Jutras and Mr. Fortier for coming to tell us about the extent of the problem. I unfortunately do not have the time to discuss it with you.

    Mr. Kane and Mr. Mortimer-Lamb, just for the record, I'm sure you will say that although you think that the Canada Music Fund is meeting its objectives, it doesn't mean that the government doesn't have a lot to do in order to improve its ability to help the music industry face its new challenges. Do you agree with that?

    One hundred per cent....

    Mr. Mortimer-Lamb?

    Yes, I would too.

    I think it's safe to have that clarification.

    Second, you came with different suggestions, like a tax credit. We've heard this one before, but I think it's the first time, Mr. Mortimer-Lamb, that this committee has heard about the Swedish streaming model you just mentioned.

    Can you sum it up in the clearest way, and then I will invite Mr. Kane, Monsieur Bissoondoyal, and Mr. Chartrand to react to your proposal.

    Okay. Let me describe it. I think it's driven by consumer behaviour and how people are able to use their devices, mobile phones, laptops, iPads, whatever it is, to access and experience music.

    The promise or value of streaming is effectively to be able to have a huge music catalogue at your fingertips where the consumer can find any music they're interested. Indeed, those services also curate music to people, which we network...and its marketing campaign spends time with those retailers, helping them curate our artists because we want them at the forefront.

    The Swedish example is really about a market embracing the change and allowing a retailer and a technology to go into the market in a very meaningful way, and that was Spotify.

    We're seeing that being replicated in other countries. For example, Brazil is now opening up for us as a potential streaming market because, again, it's access for its consumers, it's access for us to get our music in front of those consumers, and the streaming platform is allowing that.

    We never had significant revenues in Brazil, and granted it's slowly growing, but you see this trend of the value of the experience of streaming for consumers in many countries.

    Thank you very much.

    Maybe I'll ask Mr. Kane to react to this proposition. Would you support it?

    Yes. Again, as mentioned earlier, one of the key elements was that there was a very close and very effective relationship between the telcos in the Nordic countries and companies like Spotify, where they came together with a very effective marketing campaign and a very effective introduction into the market of this service. That's what we have to work towards in this country, but the first step is getting these services to open up and creating a friendly atmosphere for them to come in and do business and not continue to put roadblocks in their way.

    To the earlier point of seeing the physical book or the physical CD in a traditional retail environment, it's not coming back. We have to embrace this new technology, invest in the R and D, and again I'll tie that back into the tax credit. Allow these companies, whether they're multinationals or locally owned, to invest in the R and D of artist development to make that content rich and desirable for people using these services like Spotify, RDL, etc.

    Mr. Bissoondoyal, could you respond to Mr. Mortimer-Lamb's suggestion?

    If it's possible, I would like to add something about what I said earlier about streaming.

    Yes, go ahead.

    I would like to clarify that we are not against systems for listening to music online. They exist already in Canada, like Deezer and Rdio. Spotify is not here yet. It must be understood that, in this business model, royalties are not high enough to replace the loss of record sales. I am not saying that we have to eliminate these systems, quite the contrary. However, perhaps this way of using music could be adapted to make it more sustainable for Canadian businesses.

    Mr. Chartrand, what do you have to say about that?

    This is not the area I usually work in, but the proposal is interesting. It is important not to forget the royalties for creators. I do not know exactly what kind of impact this would have on royalties for creators or if it would considerably improve the current situation.

    Mr. Mortimer-Lamb, for the creators of music, would your system be helpful or not?

    I think we need to take a step back and look at it. We're talking about a world that was a unit-sale world. This is about monetizing consumer behaviour. In the old world, you would go out and spend $10 or $15 on your CD of the artist. That artist might never see that consumer again in a commercial transaction. With streaming and what I would characterize as a pay-for-performance model, every time that consumer interacts with the content of the artist, the artist is being paid.

    If you think about how many times you have listened to your favourite albums over the decades, that's a significant return, and a recurring return, for that artist. We have to get away from the concept of the one-time sale. That's gone. I understand that we're talking about pennies here, but we can talk about a lot of pennies from a lot of people for a lot of periods of time. I have an artist in Canada who hasn't released an album since 2006 and is still generating great income, both on digital downloads and on streaming. That's significant.

    Thank you very much.

    Thank you, Mr. Dion.

    Now I'll go to Mr. Boughen for seven minutes.

    Thank you, Chair.

     Let me add my voice and welcome you to our panel. It's nice of you folks to give us your time and to share your thoughts with us.

    Claude, I have a question for you. Do you think an organization like FACTOR, which is a third party, should be responsible for managing CMF funding? What do you think of that?

    I cannot really add anything to this topic.

    Okay. Let me turn to Alain.

     With 28 years of experience in the music industry, Alain, I'm sure you can handle that.

    I want to make sure I understood your question correctly. You are asking whether the Canada Music Fund is a good program.

    There is a healthy volume of music being produced in Canada so far. That is the case in Quebec in particular. We are looking specifically at the industry in Quebec. The production volume has remained steady and is increasing. That is how it is.

    There is a problem on the consumption side. The market is changing. The way people consume music is changing at a basic level and this has a significant impact on that part of the file.

    I believe it is important to continue to support production and content. It is essential.

    Can you please explain what role the music publishers play in the development of the career of a songwriter or a composer? The world has changed in music over the past number of years, which is particularly true with digital.

    Steve or Simon, what do you think of that?

    Is that in the context of the value added of the publishers? Is that the question?

    Yes.

    Publishers play a vital role, from the concept of working with their songwriters to getting their songs placed with other recorded musicians. That can be an international focus.

     For our Canadian songwriters, we're getting them into co-write scenarios. We're getting their music in front of major labels like Warner to have their songs picked up for a major artist.

    In addition, our publishing company employs a film and TV licensing team. We're able to work with songwriters to create works that are used in film, television productions, and advertising, which generates licence fees and performance royalties every time that song is played in those productions.

    Publishers have a huge role to play in creating value.

    Okay.

    Steve, if we look at the digital technology, how is that affecting songwriters and composers?

    Again, as Simon pointed out, I suppose it's affecting them in that the more platforms we have, the more points of entry that people have into music, the more touchpoints they have, the greater the chance of consumption, continued consumption. It's all about access. The digital infrastructure, the digital framework, becomes just as key for a non-performing songwriter as it does for a self-contained artist who writes and performs his or her own material.

    It's all about access. It's all about the opportunity for artist discovery, song discovery, and repeat business.

    Thank you.

    Chair, given the constraints of time, I'll go back to you.

    Well, you still have almost three minutes, if you want to use it.

    Oh, okay. I will. Thank you.

    Continuing on with digital technology, how can the adoption of digital technologies be an asset to the development of music history? We don't produce singles anymore. We hardly produce albums. We plug into the machine in the car or the kitchen of the house and you can hear a couple of hundred musical items inside of a couple of hours, and it hasn't cost you any money.

    What's the answer to that, Steven?

    I'm not going to immediately be contrary, but I am going to be contrary.

    It's actually the exact opposite, sir. We create singles. One of the most fascinating things to me about the emergence of the digital music world is that in so many ways it's kind of back to the future. It's a song-based world now.

    Again, it goes back to what Simon said earlier. We may be talking about pennies, but those pennies can add up. Once you get to a real critical mass of subscription services and millions of Canadians signing up to a service like Rdio or Spotify, what have you, that consumption goes up, and it's driven by the song.

    You're correct that there are still a lot of services out there, a lot of ways to access music that are free.

    YouTube was referenced earlier today. YouTube ad revenue is one of our fastest growing sources of revenue. It's up to us to monetize it properly. It's up to us to learn how to market our artists through these services and to continue to produce and introduce compelling world-beating content, and to encourage companies like the one I work for, Warner Music Group, to put Canadian artists on par with anybody around the world because, by God, they are on par.

    The more we can invest in that and the more we can continue to bring that content to the world, when you plug in that machine in your kitchen, sir, you're going to be pulling up Meaghan Smith, the Barenaked Ladies, and Blue Rodeo. And they're going to get paid for it, and I'm going to get paid for it, and I'm going to continue to invest in artists in this country.

    I hope that wasn't too contrary.

    No, not at all. It was good to hear.

    We've heard from a number of witnesses who said there's no money to be made in singles, that it's minuscule dollars. It's good to hear the opposite side of the coin.

    I'll just add one other quick thing.

    You did ask about publishing. There's clear evidence that publishing is a pennies business, and they do very well.

    All right. Thank you very much.

    We're now going to move to Mr. Stewart, and we are going into a five-minute round.

    Mr. Stewart, you have the floor.

    Thank you, Mr. Chair.

    Thank you to all the witnesses for coming today and presenting your views.

    When I say I escaped from the music industry into politics, I think a lot of people question why I did that, but here I am today. I'm happy to take part in this study, and I'm glad to have you present today.

    We've talked a lot about delivery and the wider range of choice, how people can access music. I'm wondering about new marketing tools.

    How do you cope, as deliverers or producers of this music? How has marketing changed in the industry now? You could perhaps even think about how the government might help in some ways to facilitate any new approaches you've taken on marketing.

    Mr. Mortimer-Lamb, since I'm from the west coast, perhaps we'll start with you.

    Sure, okay.

    Our approach to marketing is really about going where the fan is and where the potential fan is, and if that means that it's social media, then it's Facebook, and to a certain extent for certain artists it's YouTube as well.

    So it's about marketing that can make those social connections back to the artists and tapping into that fan base with an affinity for that type of music or that particular artist. So, yes, it's still a social thing. It's an online thing that I think helps in a lot of cases. It's about analyzing lots of data to figure out where the activity is and where to focus our efforts.

    In terms of the government's support and the Canada Music Fund, a lot of the dollars we receive are used effectively to go to those marketing initiatives and for us to be better and more effective at it. We continue to try to improve that, and those funds are a great assistance in that.

    We have heard from some festival organizers. I go on iTunes and I'm overwhelmed by the amount of choice that I have there, and so what I look for are clues from other sources to say, oh, I've heard of that name or something. I might listen to it or preview it.

    So how do festivals tie in to that? Would you choose festivals over Facebook, and again, this is open to whoever would like to answer this. How do you help a new emerging artist get known these days?

    Mr. Kane.

    I read with some interest the comments of Mr. Monahan of Bluesfest yesterday on the whole festival.

    It might be the cart before the horse. A promoter like Mr. Monahan is not going to put an emerging artist on his main stage. It takes marketing dollars and investment to get an act to the point where someone is going to be intrigued enough at the festival to shift from one stage to another, or in fact just buy a ticket.

    Marketing in the last 10 to 15 years has become a more expensive proposition. You have to hit a wider audience. You really have to target things whereas perhaps in the past you might have been hitting five or six publications and a handful of radio stations. You really have to lay out that plan so, again, you're hitting as many touch points as possible. This can be very expensive.

    That's why in the new Ontario Music Fund, we're obtaining matching funds for every dollar that we spend on marketing an Ontario-produced recording.

    Again, it allows us to extend and lengthen our reach so that we're able to go three or four singles deep on an album. We're able to take our time in setting up a record properly so that there's already audience engagement by the time your product hits either the digital services or the physical stores. So, again, within that tax credit model, if we are able to prolong our investment and mitigate some of our risks, we can bring these records to market much more effectively.

    Can I ask how much it would cost? I'm a new band and I'm pretty good or I'm in a band that's pretty good. How much would it cost to get somebody to the main stage of a festival? What kind of investment do you need to make as long as they're quality musicians? Can you give me a ball park range?

    It's totally case by case. One thing, just as an aside, Nettwerk has prided itself—with the support of the CMF—on maintaining a good roster of staff to help drive a lot of these initiatives so we can do a lot of that internally. It really comes down to where you're going to target.

    If you're going to hyper-target a market, you're going to spend money on advertising. If you're going to go for radio, you can really spend a lot. So it's very case by case. Sometimes it can be a heavy touch and light costs. Sometimes it can be high costs and a light touch and a few avenues to do it. But it really is case by case.

    Okay, thank you very much, Mr. Stewart.

    We're now going to go to Mr. Dykstra and I believe you're going to split your time with Mr. Weston, is that correct?

    I might split it with him and I might not. I haven't really decided. We'll see.

    You have the floor.

    Thank you.

    Mr. Kane, it's been interesting for us because one day we're hearing from one group that says things are in dire straits and extremely difficult and that they don't know how the industry's going to survive. Then today, we've had the opposite, in the sense that....

    When I look at the recording industry and the impact of live music—and I guess I should be asking those who are negative toward the industry right now when they're here—there's more live music being played, there's more live music being created, there's more live music happening across the country and around the world. It seems to me that the demise of the industry is more around the executive side of the industry than it is about the music and the live playing of music. I wonder if you could comment on that, because just yesterday we had almost the exact opposite position being held by a couple of those who were presenting. You mentioned Mr. Monahan.

    I wonder if you could comment on it.

    What's the old Mark Twain quote, “The rumour of my demise has been greatly exaggerated”?

    Right.

    Look, we are in an incredible transitional period. The recorded music industry has had to face new barriers. We've had to rethink how we're doing things. In terms of the great panacea promise of “Tour, tour, tour—you'll make your money on t-shirts and shows”, there is truth to that. It's what musicians have always done. They've always released a record, toured, and had income from there.

    In Mr. Monahan's remarks yesterday, he talked about supply and demand, the laws of scarcity. I would ask you to consider this about the panacea of the live world. Every musician I know has to stay on the road twice as long as they had to. What happens when you go to a festival, when you go to a club, and you and all of your peers, that middle class of musicians, are on the road at the same time? How long will that demand remain? How long does a decent paycheque, a decent payday, come from clubs and promoters when they can turn around and take a band that's maybe had a couple of hits...which used to be able to get you the opening slot on a big tour, or perhaps your own tour of theatres? Now you're lucky if you don't have to do a buy-on to somebody else's big tour and lose money touring.

    We have bands on the road right now. We have a band that's about to do the Warped tour. They're not going to make any money. Do you know who's going to make up that shortfall for them, who's going to make sure they can get from show to show, and have a pizza at the end of the night and a place to sleep? Their record label. It's called tour support, and it's one of the marketing tools that the industry still brings to a band's career. We understand that if you want a long career, you'd better get out there and touch people, you'd better have some hit records that radio can play, and you'd better build a solid, solid tour business.

    To the idea that the recorded music world lives in some kind of vacuum and is not part of an ecosystem that helps build such festivals as Bluesfest or the Toronto Jazz Festival or Osheaga, they're all part of that ecosystem; none of us live in a vacuum. If one of us goes down, it has a huge effect on the rest of this community. Without record labels investing in new artists, who will these festival owners put on their main stage?

    I guess this is like the “dawning” of a new era, though I don't know if you'd use the word .

    Simon, perhaps you could respond to this. We're going through this huge transitional phase, and we'd better just learn how to deal with it and move forward versus trying to think that we're somehow going to be able to attach ourselves to what happened in the past—i.e., the sale of CDs. I'm sure you've had a chance to read the transcripts a little with regard to the witnesses we've had here. They tell the exact opposite story that you're telling us: there is no money at all to be made from streaming, it's 0.00005¢ per, and at the end of the year they might make $47 or $48. You're taking sort of the opposite position there.

    How do we as a committee, when we're looking at recommendations, square these two circles?

    Even just thinking about the Canadian market on its own, about its streaming opportunities, its reach to the consumer is not sufficient enough. We have to get that scale, we have to get that reach. Piracy is still a problem. It always will be. We need tools to battle that.

    In terms of giving access and providing legitimate modes and means for people to experience music, we need to raise the profile of that. We need to get more consumers using it. I think allowing that certainty for some of these retail models to come into the market is really, really important.

    Streaming is pennies, but look, we have Canadian artists who have some streaming income in Canada. It's not very big. The streaming income around the world for them, and the performance revenues they receive as well, are good. All I'm saying is that we need to make improvements in the landscape in Canada to improve our own home market.

     Thank you very much.

    Mr. Nantel, you have the floor for five minutes.

    Thank you, Mr. Chair.

    Mr. Mortimer-Lamb and Mr. Kane, I want to let you know that the information you are providing us is very useful.

    Mr. Mortimer-Lamb, you were talking about the joint promotion that's been happening in Sweden.

    I insist again, please send us any info you've got on this, because you were talking about the telecoms and the streaming services working hand-in-hand showing up as a big offering. But it also comes back to Mr. Kane's saying that we want the Copyright Board of Canada and everybody involved to make this business model work.

    I'm going to ask you a question that we will not be able to answer, because I will have Mr. Alain Chartrand's point of view on this, given that what you're referring to is a market thing. We all know that in Canada we have two cultures, two official languages, which make things much more complicated. You did refer also to the tour support that you guys provide.

    This leads me to my question for Mr. Chartrand.

    You organize festivals all across the country. You have artists such as Vincent Vallières, who is with Spectra Musique, and who will be doing shows all across the country this fall. Do you get tour support? Do the two cultures make things more complicated in terms of establishing a business model and providing access to business people?

    I will tell you about the work we do. What we do is put newcomers on the stage. We create an event where the focus is on the fact that the performers are still unknown. By creating this event, we provide the opportunity to introduce them.

    This leads me to the marketing aspect. I think of it very specifically in terms of new technology and in terms of the impact it can have on an organization of our size. It changes everything and also means that the process must be as integrated as possible in terms of the work of producers, artists and distributors. This is a bit beyond our capacity because it is very expensive to ensure you are visible on television or in the papers. At this time, the ability to reach people through social media is increased greatly by the fact that the artists will themselves send out information. This adds to the information put out by producers and distributors.

    Regarding the English/French duality, there obviously is not much of a francophone music industry outside Quebec. Associations are the ones that support the artists and help them develop. In some regions, living as a francophone is a bit like playing an extreme sport. These are quite significant challenges for young artists.

    New technologies and social media are clearly very important to young artists in terms of marketing. It is also very important to have the ability to create content with local artists within these various communities. I think it is important that they be able to do so.

    Is tour support still provided, either by major or independent labels, whether they are Canadian or from Quebec? Is the government providing enough support for cross-Canada efforts related to our heritage and both official languages?

    As for government support for this project, it was a long-term endeavour. However, I must say that we are quite satisfied with the heritage recognition for this project. It is particular in that it involves investments in various heritage sectors in a variety of regions. At first glance, it may seem like it is another Quebec project. However, what is particular in this case is that it is really Quebec reaching out to francophone communities to create a project together.

    Regarding tour support as such, some artists and their record labels do have access to funds for producing, exporting, marketing and distributing works by the artists. Companies receiving funding from SODEC can choose to set aside a certain amount to potentially put towards a tour. However, tour support as we saw previously, from multinationals, provided to foreign artists, is no longer available.

     Thank you very much.

    I'd like to thank our witnesses for being with us today. We're sorry for the inconvenience. I appreciate your patience helping us through this today. If you have any other contributions you wish to make to our study, please send them to us in writing.

    The meeting is adjourned.