Thank you for inviting us here today.
My name is Frédérique Couette, and I am the executive director of Copibec, the collective society established by Quebec authors and publishers.
A not-for-profit organization, Copibec grants licences and remits royalties to authors, freelance journalists, creators and publishers. Each year, we manage millions of traditional and digital uses, which would be too complicated to manage individually. Collective administration is the exercise of copyright and related rights by organizations acting in the interest and on behalf of the rights holders.
The Union des écrivaines et des écrivains québécois will tell you about the economic situation of Quebec writers. Only 10% to 15% of them are able to make a living from their writing. In a market as small as ours, copyright revenue from sources other than book sales is particularly important for both authors and their publishers. Compliance with copyright rules is essential to ensure that authors can continue their creative work and that the publishing industry can survive. The $200 million that Copibec has remitted to authors and publishers during its 20 years of existence has supported the continuity of an innovative cultural sector.
In the review of the Copyright Act that led to the 2012 amendments, we warned MPs and the government about the negative effects of introducing too many exceptions in the act and adding the word “education” to the fair dealing exception. Unfortunately, we can only conclude that our fears were, for the most part, well founded.
Representatives of the education sector stated that it was merely a clarification and that licences would continue to be purchased. Yet, in the month following the enactment of the amendments, Quebec universities asked to renegotiate their licences with Copibec and demanded an 18% reduction in the annual royalty per student. Since then, every renegotiation of agreements with Quebec universities and CEGEPs has resulted in a further decrease in royalties. Consequently, the annual royalty has declined by nearly 50% for each university student—from $25.50 in 2012 to $13.50 in 2017—and by 15% for each CEGEP student.
Outside Quebec, universities, colleges and education departments and ministries terminated their licences with Access Copyright in January 2013 and forced rights holders into a spiral of legal actions. The institutions are appropriating the right to free, systematic, institutionalized reproduction of excerpts of creative works for which they previously paid licence fees to the collective society.
In June 2014, Université Laval followed suit and refused to renew its licence with Copibec, forcing rights holders to launch a class action. Fortunately, Copibec and the university recently came to an amicable agreement that provided a favourable outcome for all parties involved.
Over the last five years, there has been a proliferation of lawsuits and a steady erosion of licence revenue due to pressure from the education sector. For example, since 2012, our authors, creators and publishers have seen a 23% drop in the royalty paid for each page copied by the universities, even though Copibec has kept its administration fees unchanged at 15%.
The impact of this steady decline in collective administration revenue is very significant, as nearly 75% of the licence revenue distributed by Copibec comes from the education sector. Quebec's authors, creators and publishers are most affected by this, since the majority of the 72 million copies reported to us annually are copies of excerpts from Québécois works.
Our authors and creators are feeling the brunt of the decrease in collective administration revenue, as their already precarious situation and their financial capacity to do creative work are being further eroded with each dip in revenue from one of the links in the copyright chain. Our publishing houses are also being compromised, since 80% of the annual reports relate to reproductions from books, and the associated revenue accounts for 18% of their net profits, on average.
Collective administration royalties paid by Copibec make a significant contribution to keeping our cultural journals and publishing houses afloat, so that they can continue to tell our stories and provide educational content that meets the specific requirements of our school system.
Let's not kid ourselves: what's at stake here is the dissemination of our culture and our conception of our cultural heritage.
Rights holders have modified their collective society to bring it into line with the new needs of the consumers of creative works. In response to the advent of digital reproduction media, they asked Copibec to manage additional rights for uses such as classroom projection, digitization and instructional platforms.
We also offer users the ability to make copyright payments online and have accelerated the processing of data we receive and payments to rights holders.
In partnership with publishers, we have developed the DONA service, which allows institutions to acquire a work on a digital platform designed to meet the needs of students with perceptual disabilities.
In 2014, Copibec and its partners also created SAMUEL to provide schools and CEGEPs in Quebec as well as francophone communities outside Quebec with access to a wide variety of high-quality French-language content through a digitized content platform.
We continue innovating to promote local culture, make art more accessible, and increase availability and remuneration.
With regard to rights holder remuneration models, collective administration is an integral part of the revenue sources of authors and publishers. It is an efficient, versatile, internationally recognized model that assures cultural diversity and availability. It is part of a drive toward modernity and the future of a society that invests in its culture in the digital era.
In this regard, Quebec's collective administration experience, despite the regrettable decline in royalties, provides an effective model that has evolved in response to users' needs without ever losing sight of the importance of combining availability of works with remuneration for their use. In this model, annual royalties paid for the use of works have always been very affordable. For university students in Quebec, they make up, on average, less than 0.5% of their total annual tuition fees. For universities, they are less than 0.1% of the annual operating budget. Paying royalties for reproducing excerpts of creative works has never jeopardized the Canadian education system or resulted in excessive debt loads for students.
Although reform of the Copyright Board does not fall directly within this committee's purview, I would express our deep disappointment with the fact that the proposed reforms for modernizing the Copyright Board do not deal with the harmonization of damages awarded to collective societies.
The review of the Copyright Act, in which you are participating, will be a lengthy process, and during that time, Quebec's authors and creators are not receiving the royalties to which they are entitled for the extensive use of their works by educational institutions outside Quebec. This situation persists even though tariffs have been certified by the Copyright Board and the Federal Court has handed down a decision clearly establishing that those institutions' copying policies are unfair.
This crucial issue must be resolved with an amendment to the act. In the meantime, we urge the federal government to act now to encourage the restoration of healthy, lasting and necessary relationships between the authors of literary works, through their collective societies, and the education sector.
I conclude my presentation by quoting the following passage from the 2017 Creative Canada Policy Framework concerning the Copyright Act: “A well-functioning copyright regime should empower creators to leverage the value of their creative work, while users continue to enjoy access to a wide range of diverse cultural content.” Collective administration is perfectly consistent with these objectives and strikes the difficult balance between access and remuneration.
Thank you for the invitation to appear today. My name is Roanie Levy and I am president and CEO of Access Copyright, a not-for-profit copyright collective. I will be sharing my time today with professional writer Sylvia McNicoll. She will provide you with a creator's account of the current copyright challenges.
For 30 years, Canadian creators and publishers of trade books, textbooks, journals, newspapers and magazines have licensed the copying of parts of their works through Access Copyright. We manage these rights at Access Copyright in the same way that Copibec does, as just explained by Frédérique.
As explained by Frédérique, collective licensing is a practical and efficient model to administer rights. For a reasonable fee, educators and students have legal access to content, with the assurance that creators and publishers are paid for its use. For over 20 years this model has worked. Access Copyright distributed almost $450 million to writers, visual artists and publishers.
Unfortunately, changes to the Copyright Act in 2012 have had devastating consequences. The education sector made a unilateral decision to interpret fair dealing as free copying when they decided to stop paying for the use of over 600 million pages a year and instead rely on so-called fair dealing guidelines. That's 600 million pages that creators and publishers are no longer receiving compensation for.
Royalties collected by Access Copyright from the education sector have declined by 89% since 2012. Historically, these royalties represented 20% of the creators' writing income and 16% of publishers' profits. This is an estimated loss of $30 million a year in licensing royalties to creators and publishers, and notably this amount does not include the loss in primary sales due to the substitution effect of free content copied under the education sector's copying policies.
When we reference the 600 million pages that are copied for free, it's important for the committee to understand what we are referring to. These pages are not, as the education sector would have you believe, licensed scholarly journals. They are not open-access content or material written only by salaried academics. The 600 million copies in question are items like short stories, novels, poems, essays, children's stories and Canadian textbooks, all items that were previously paid for under Access Copyright licences and that continue to be copied today.
In 2017 the Federal Court unequivocally concluded that York University's guidelines and practices are not fair. They are not fair, as the court says, in either their terms or their application. In other words, the words on the page and the way they are used are not fair. York's guidelines are virtually identical to the copying guidelines and practices adopted by educational institutions across Canada outside of Quebec. The court found clear evidence of the substitutive impact of copying and the corresponding direct and adverse effect on creators and publishers.
I must emphasize that this is a matter of public interest. If you believe Canadian culture is important, you must ensure that creators and publishers are fairly compensated when their works are used. Fair compensation does not limit access as the education sector argues. Rather, it ensures that creators can continue to do what they do best: writing, researching, designing and publishing the Canadian stories and texts that are essential to Canadian students at all levels.
Despite these challenges, I remain optimistic, because there are two things that the federal government can do to remedy the situation.
First, clarify that fair dealing does not apply to educational institutions when the work is commercially available. This will ensure creators are justly compensated for the use of their works and reduce costly litigation, the expense of which is largely borne by creators.
Second, harmonize statutory damages. We were disappointed to see the recent reforms to modernizing the Copyright Board did not extend statutory damages to all collectives. Ensuring that all collectives have access to statutory damages through harmonization of the provisions that are already in the act will make the Copyright Board's certified tariffs meaningful and ensure that writers and visual artists are paid when their works are copied.
There is no rationale that justifies why musicians and songwriters should have the means to ensure that they are paid for the use of their works while authors and visual artists do not.
Ultimately we all share the same goal for all creators: to enable creators to get paid properly and on time.
Thank you all for listening.
I've been writing for over 30 years, which coincides with Access Copyright, I guess. I have more than 35 books published, some internationally. I may not be the most famous writer, but I have one of the longest publishing careers in my genre, which is writing for children and young adults.
Funded by a Canada Council arts abroad grant, in October I visited Colombia because grade 7 students study my historical fiction set in Hamilton, Ontario, called Revenge on the Fly. I visited 17 different schools, and every one of those children held my book in their hands and cheered. It was wonderful to share our culture with these children.
However, as I told emerging Colombian writers in a Bogotá library talk, the secret of the longevity of my career is, sadly, my ability to accept less money.
Back in 2012, my income was $45,000. I edited a magazine, worked as an artist in residence, spoke at libraries and schools, and wrote articles for adults as well as novels for kids. Secondary rights, such as public lending rights and copyright licensing, were and are still a crucial part of the writer's earnings, as is selling foreign rights. It's static income. I don't have to work all night to earn it.
This year, with two novels out, school visits, and teaching, and including Canada Council travel expense money, which is considered taxable income, I will earn $17,000. Writers have always had to struggle to cobble together a livelihood, but never like this.
In 2012, our Canadian government unintentionally granted the education sector free content with the fair dealings clause in their Copyright Modernization Act. The educators believe you said that they could have 10% of my work for free. They don't need a licence at all.
My 2012 Access Copyright payment of $3,000 dropped to $300 in 2018. Schools have not paid a licensing fee since 2013 and they're suing Access Copyright for alleged overpayment.
Schools at all levels continue to buy fewer books and copy without licences. Yesterday I visited a Canadian school, grades 3 to 6 in a gym. There were 200 kids. Not one of those children held my book in their hands. None of my novels were on display, nor were they in the library.
Every page I create requires research, writing and rewriting, as well as editing and design. Not one of these pages is free to produce. I love my role of cultural ambassador. I'm proud to do this work, even if I can't live on it, but with the current compensation models for writers and artists, our culture is not sustainable.
I urge you to stand up for it. Support strong copyright laws. As Roanie said, rescind the educational exemption when our work is commercially available and address those statutory damages.
This will not only benefit me and writers—
Are professional writers an endangered species?
In 1998, a Canadian writer earned an average income of $12,879 from writing. Twenty years later, a survey, conducted by UNEQ in Quebec and The Writers' Union of Canada in the other provinces, reveals that the average income derived from writing now sits at around $9,000—$9,169 in Quebec and $9,380 in the rest of the country—according to 2017 earnings reported by writers. That represents more than a 30% drop in earnings, without adjusting for inflation.
The survey also reveals that nearly 30% of writers report doing more now to earn a living than they did in 2014, and I'm a living example of that.
How does a Canadian writer actually earn their living?
Their primary source of income is still book sales, in other words, royalties from publishers—10% of the list price of the book. Those royalties make up 40% to 45% of the income earned from writing.
The public lending right program and royalties paid by copyright collectives like Copibec account for between 20% and 25% of writers' income.
Public readings, workshops, talks and other such activities represent roughly 20% of their income.
Finally, some writers engage in freelance work or publish in literary magazines. Others are able to obtain grants and prizes, but not many.
A patchwork of sources make up a writer's income. By piecing together different sources of income, an author may have a shot at earning a decent living.
Let's not forget, writers are self-employed workers with precarious jobs who do not enjoy the same minimum labour standards as salaried workers. Nor do writers benefit from the protections afforded by a framework or collective agreement.
Now let's discuss the threats posed by the digital world.
Nowadays, anyone can appropriate a work online without too much trouble. Every single day, we see people breaking copyright rules, whether for commercial or educational use. Here are some examples.
Day in and day out, teachers and educational institutions across Canada take advantage of the fair dealing exception for the purposes of education or training, set out in the 2012 Copyright Act, to avoid paying royalties for using and copying works. Creators earn that much less.
Worldwide Facebook groups facilitate the sharing of digital books, similar to a member-based service. Creators earn that much less.
A website in France provides access to book summaries for those who don't have time to read the book. The site does not pay a single royalty to the author of the actual book, claiming that its service encourages readers to discover new writers. Creators earn that much less.
YouTube tutorials on how to download books for free in 2018 show viewers the process step by step. Creators earn that much less.
We also want to tell you about a phenomenon called controlled digital lending.
California company Internet Archive, which manages the website openlibrary.org, is trying to show public libraries and Canadian university libraries that they can legally engage in the widespread public lending of works without having to pay a single royalty. The practice is known as controlled digital lending.
On May 31, at the ABC Copyright Conference, held in Vancouver and organized by a number of British Columbia colleges and universities and sponsored by the University of Alberta and the Canadian Association of University Teachers, Internet Archive representatives and universities promoted the practice of controlled digital lending. Under the guise of a digital library, these platforms provide universal access to books, whether or not they are in the public domain, without regard for the basic principles of moral rights or fair compensation for the use of works.
Ariel Katz, associate professor in the faculty of law at the University of Toronto, gave a presentation shockingly titled “Make Canadian Libraries Great Again”. In it, he maintained that the fair dealing exception in the Copyright Act was vague enough to allow controlled digital lending. He reassured the audience that the exceptions in the act opened the door to numerous possibilities without any legal risk:
We can do anything we want with regards to works unless the Copyright Act says otherwise…. Copyright owners always have the choice to speak to Parliament, who will listen and make amendments as appropriate…. Until then, [controlled digital lending] is permissible.
Will the government allow these kinds of abusive practices to take hold in defiance of copyright? Will the government tolerate Canadian universities partnering with commercial organizations to take maximum advantage of the exceptions set out in the act? Will the government stand idly by as companies impoverish creators by depriving them of the income they are owed?
This situation illustrates the bad faith of some in the educational sector and their desire to trample upon creators' rights in the name of open access. We find that shameful. It's hard to believe not only that private companies are basing their business models on the weaknesses in Canada's Copyright Act, but also that they have found a receptive audience in our very own universities.
At the international level, it's interesting to note that some countries are making real progress in protecting rights holders from digital dangers and lawless, ruthless multinational companies.
This summer the European Union, with some difficulty, passed a directive whose general political orientation deserves to be examined. The principle of this reform is to incite platforms like YouTube, that belong to Google, to provide better compensation to the artists and creators who contribute content, and see to it that these platforms not allow copyright-protected content to be downloaded.
The European MPs had to face a barrage of lobbyists advocating free-of-charge access in the name of innovation and freedom of expression, the very essence of the Web, according to them. Despite that, the members from 28 European countries held firm and finally passed that directive, which represents an unprecedented step forward in the protection of copyright in the digital age.
In the Netherlands, an agreement has just been concluded between the government and the public libraries to regulate the lending of digital material by establishing fair compensation to be divided 50-50 between the authors and publishers, based on the “one copy, one user” model. Under that model, a digital book can only be lent to one reader at a time. An embargo concept was also added, so that there will be a period of 6 to 12 months between the publication of a book and the possibility of borrowing a digital version of that book. The point being that when a book has just been published, it is important for the author that he or she be able to sell some. If the book can be borrowed in digital form immediately, he will lose revenue.
These are our recommendations.
We ask that you review the notion of fair use in the copyright act, and that the term “education” be better defined in section 29.
We recommend that the other exceptions be defined and circumscribed according to the principle that any exception should only exist when access to the works is impossible otherwise. An exception must remain exceptional.
A model of fair remuneration for offers must be put in place and be made mandatory as regards digital loans in educational field libraries by imposing the “one copy one user” model.
Furthermore, we must give management companies the means to collect on fees that are due without having to go down the legal path.
Finally, we must oblige digital platforms to put in place—as some of them already have—a detection system to prevent copyrighted content from being placed online as is done in the European model.
On behalf of Quebec authors, we thank you for your attention.
Good morning, Chair and members. Thank you for having me here today.
My name is Emily Harris. I'm president of the Canadian Association of Film Distributors and Exporters, or CAFDE, which represents the Canadian film distribution industry and its members on matters of national interest. We're pleased to be here today to present to this committee on its work related to supporting our artists and creatives, who are the backbone of the Canadian film industry.
CAFDE is a non-profit trade organization that serves to represent a variety of businesses, from small independent film distributors to large global media organizations. Our current members include CropGlass; D Films; Elevation Pictures; Entertainment One and Les Films Séville, which is the company I work for; KinoSmith; Métropole Films; Mongrel Media; Pacific Northwest Pictures; levelFilm; LaRue Entertainment; and mk2 Mile End. It's a diverse membership that represents independent films as well as large-budget features.
CAFDE members provide Canadians with the vast majority of theatrically released films in Canada, two and a half times more theatrical releases than the six major Hollywood studios combined. Our activities include government consultation, outreach and engagement, with an aim to bring attention to the challenges facing the film distribution industry and the cultural, social and economic repercussions of our changing landscape.
As it relates specifically to artists and creatives, my remarks that follow will focus on the essential role that we believe Canadian film distributors play in maintaining the current Canadian film ecosystem. It is CAFDE's perspective that without the regulatory framework that has existed for decades, the Canadian feature film industry would not be what it is today. Artists and creatives can only thrive and grow if their work is seen and discovered. The work of our members tries to bring that to the forefront.
Canadian films, as I'm sure you know, attract audiences at home and abroad. Canadian creatives are celebrated on the international stage. Most importantly, the Canadian film industry provides a unique platform for Canadian creatives to share Canadian stories. All Canadians benefit from a system that showcases and supports this diverse and important work.
The Canadian film distribution industry provides consumers with access to feature films. Our industry as a whole contributed $1.9 billion in revenues in 2017. However, in order to demonstrate the dominance of non-Canadian ownership in our industry, we need look no further than current box-office numbers. In 2017 box-office revenue was over $999 million, but of that amount, 87% of the market share went to non-Canadian distributors.
The industry includes 464 Canadian enterprises involved in Canadian film distribution, with profits of over $330 million and contributions of over $162 million to wages. The industry also employs over 1,300 Canadians across the country. However, all of these figures are a drop in the bucket compared with what non-Canadian companies are taking out of the industry. To maintain these jobs and opportunities and to retain talent in Canada, there is a need for a revived regulatory framework that deals with modernization of the film industry in light of digital changes and the declining commissions of Canadian content in our broadcast ecosystem. Without strong Canadian film distribution companies, we posit that there would be no Canadian feature films, which would impact all facets of the industry, including artists and creatives.
To that end, there are three key pillars that we think are essential to ensuring that the film industry in Canada is positioned to employ, empower and fund our feature film creatives—modernization of the existing film distribution industry policy, creation of a fair playing field for all parties, and specific film mechanisms included in our broadcast regulations.
In respect of the first pillar, the existing Canadian film distribution policy has established and allowed the film sector in Canada to thrive, which is essential for creatives to work and thrive in Canada. In 1988 the Canadian government attempted to put in place protections for the Canadian film distribution sector for fostering and growing the Canadian film industry in the face of foreign competition. To do so, it announced the creation of the film distribution policy. Until recently, this policy framework protected the 13% of the Canadian theatrical marketplace not controlled by Hollywood. For the most part, this policy was adhered to, but as technological shifts impact the industry, unfortunately this is less and less true.
You may be asking why it is important for artists and creatives to maintain this 13% ownership. Ensuring that the Canadian distribution sector exists ensures that funds remain within our cultural ecosystem. It keeps revenues inside Canada, with companies that contribute to funding and programming, and supports the systems that allow Canadian content and Canadian content creators to thrive. With this revenue, Canadian distributors are able to invest in and fund Canadian feature films and ensure that homegrown jobs for creatives continue to exist.
It is CAFDE's opinion that we must formalize and modernize the existing policy framework. In the absence of legislation, it has been difficult to enforce the stated intent of the policy, leaving the door open to circumventions of that policy.
To preserve the long-term viability of the Canadian film distribution sector and ensure jobs and funding for creatives, it is crucial that the government prioritize and promote the policies that have existed to date and have built the feature film industry. These Canadian-owned taxpaying companies reinvest in Canadian production and content, ensure the public's access to Canadian films and employ Canadians.
The second pillar, levelling the playing field, relates to the regulation of OTTs. If the development, production and distribution in Canada's ecosystem and the creative sector jobs associated with it are to be maintained and grown, we need to ensure that our regulatory framework provides a level playing field for all participants. Non-Canadian broadcast undertakings, like foreign-owned over-the-top players, need to be required to contribute to the cultural ecosystem to ensure Canadian content is discoverable by Canadians. As the vertical integration of our broadcast system intensifies and new digital platforms emerge, the government must take steps to ensure that a diverse representation of Canadian content continues to be commissioned and acquired by all entities exploiting content within our borders.
CAFDE recommends that the OTTs, which increasingly make up the services Canadians are using to consume culture, commit to buying and streaming Canadian content, and in particular, Canadian feature films. We are also looking forward to the results of the broadcast and telecom act reviews to see whether there is broad support for companies that act as BDUs, broadcasting distribution undertakings, with more than 2,000 subscribers to contribute a percentage of revenue into the ecosystem, as is currently required of our Canadian-owned broadcasters.
The third pillar is that Canada has long supported the tool kit that prioritizes exhibition of Canadian content, both within Canada and around the world, and we need specific mechanisms to support film on broadcast. Content creators and distributors require broadcaster support to ensure Canadians can access films beyond the traditional theatrical window. I would note the theatrical window is becoming more limited with respect to the digital era. Unfortunately, support of Canadian feature films by broadcasters has been eroding over time.
Specifically, in both pay and free television, our members have seen a substantially reduced commitment to Canadian films by Canadian broadcasters over the last five broadcast seasons. This trend has been consistent across all broadcasters and appears to represent a change in strategic direction, with a direct impact on content creators and distributors in this country who focus on feature film.
To reverse the trends of decreased commitment to Canadian film and to strengthen the ecosystem for Canadian cultural productions, CAFDE recommends the government continue to create a home for Canadian feature films on television by reinforcing existing mechanisms that encourage the exhibition in prime time of feature films made in Canada.
This can be accomplished by mandating that Canadian broadcasters devote a given amount of their schedules and thus part of their required CPE, or Canadian program expenditures, spend to a new specific category 7(d) that is earmarked for Canadian theatrical feature films. To date, broadcasters have had the latitude to program within this category as a whole, and without any specific requirements for feature films, we have seen films get less airtime than television series.
CAFDE also proposes that the Canadian Broadcasting Corporation, CBC, as the national broadcaster, update its commitment to Canadian feature film and reaffirm a commitment to licensing a minimum number of Canadian theatrical feature films. Ideally, this would be at least one new film monthly, aired during prime time, for Canadians to discover and enjoy.
On the whole, we also urge this committee to ensure that the certainty inherent in existing copyright legislation be maintained. The ability to set budgets and have structure around residual and profit payments ensures stability for distributors in a vastly changing landscape.
Thank you again for having me here today and for considering CAFDE's recommendations, which will not only benefit Canadian creators, Canadian film distributors and the economy but will also ensure Canadian content is seen widely, here at home and around the world.
Thank you, Chair and everyone, for having me here.
By the way, I feel very good that we've just completed a deal with Emily's company. We have acquired at least as many theatricals as she wants. I'm here with clean hands as far as she's concerned.
Voices: Oh, oh!
Mr. Brad Danks: I want to talk about the opportunities portion of why you're here, because we have a bit of a different situation in what we've done. While I don't disagree with the notion of protection and things that we need to do within the Canadian marketplace, there are some things we've learned over the last few years that are very fundamental, I think, for the future and are things to talk about. Then I will talk about the artists' component of what you're dealing with.
Our channel is a small niche channel in Canada, but we were the first LGBTQ channel launched in the world, and we are now the most successful brand on the planet in our particular area, which is I think in some respects unique to Canadian broadcasting.
One of the things we've noticed over the last few years with digitalization is—and this is very important—that content markets are moving from vertical to horizontal. What I mean by this is that they're moving from national to international. Sadly, most of the Canadian strategies to deal with this have been to strengthen the vertical side of our business, not the horizontal side. In fact, the broadcasting system is in a crisis right now, primarily because of its strong verticalization. We created what I like to call the Maginot line of the digital world, and the digital went right around it, just like the Maginot line before World War II. That's what we're trying to deal with right now.
The other thing we're seeing is the rise of global platforms. Netflix was the first. They began to change the world, with Amazon, Hulu, Apple and others. A lot of U.S. studios will not be selling content through Canadian broadcasters after 2020. The world is going to change very quickly over the next few years. This is not just a Canadian phenomenon, although in many respects we're the canary in the coal mine due to our proximity to the U.S. and our dependence on U.S. programming by our major broadcasters.
What we've seen around the world is that there is a movement among strong local players, many of whom we have good relationships with, to fight back, and this is an opportunity for Canadians. I want to talk about that.
When we first saw the change in the landscape, we did three things that I think all Canadian broadcasters should do.
First, we developed a direct-to-consumer platform. It's called OUTtvGo. We launched it in 2016. It's the gay Netflix, as you might want to call it or do call it, and it's done well. I won't get into the subscriber numbers, but to give you some idea in terms of revenue, after the three big cable companies, it's our fourth-highest revenue per month within the Canadian system. It should be third within the next year.
That said, direct-to-consumer is very difficult. It's increasingly difficult when the technology is so strongly set by the high players—the Netflixes, the Amazons and so on—and in fact we feel direct-to-consumer works better for us in territories that we can't get into otherwise.
The second approach, of course, is the technology platforms themselves. I think everybody knows that Amazon is coming to Canada in a big way this following year. This will have fundamental impacts on the BDU structure in Canada and the Canadian system. OUTtvGo, our direct-to-consumer platform, is the type of thing that would sit well within those types of platforms. We've been platform agnostics in doing deals with all the major technology companies, which are, quite candidly, much easier to deal with than the Canadian BDUs for a Canadian channel.
The other thing we've done is that we've looked around the world and have said that there are the same phenomena going on, so there have to be opportunities abroad. We developed what I call the Goldilocks strategy, which is the strategy of not too hot and not too cold for us. “Too hot” would be the U.S. and the U.K., where content is expensive for us to launch into, but “too cold” would be Russia, where the politics just aren't quite right for us.
The three countries we targeted were Australia, New Zealand and South Africa. With the Commonwealth connections, we felt that co-production agreements and other similar situations would make sense. We've done that, and we've done well. We've launched in New Zealand with TV New Zealand, which is the largest player—sort of the CBC of New Zealand—and really the largest company. We're on their platform selling Canadian content.
In our first two months on TV New Zealand, of the top 20 titles that we sold in our branded platform, 15 are Canadian content, with 14 of those financed by the CMF. By the way, one of them is a French-language original with English subtitles. That was number two on our platform one month, which is telling you that there are opportunities even for French language shows. By the way, this is a show that would not get distribution in those countries without little OUTtv doing it for them.
It was the same thing in Australia—we ended up launching with the largest broadcaster in Australia, Channel 7. That would be roughly the CTV of Australia. We've done another deal with another broadcasting group, and a third with another one already.
Last month we did a month of preview with DSTV in South Africa. DSTV is the largest player in all of Africa. They are larger than Bell, Shaw and Rogers combined. They launched us in Africa for one month free. Their distribution is all of Africa up to the end of the sub-Sahara, because north Africa is part of the middle eastern buy in the television business.
It was a phenomenal experience. They did not launch us outside South Africa—we were warned by their partners to maybe hold off—but to launch an LGBTQ channel in South Africa, I can tell you, was something. It was really quite amazing. The response was overwhelmingly positive, and we're in the process of figuring out how to come back.
In all three situations, the strong backbone of Canadian content is being distributed into those territories, and the story is really simple: If you're in New Zealand, Australia, South Africa and 20 other countries that we're talking to right now, you're seeing a retreat of American content.
You're also seeing the premium content prices go up dramatically. The world of intermediating foreign content as a primary strategy is over. It is going to end really quickly over the next two to three years. It's going to leave a lot of the business models that we have in this country in trouble. The faster we change our model and move it around, the better.
This is an enormous opportunity for Canada. We have one of the best ecosystems, one of the best industrial complexes of producers and filmmakers and so on in the world. I live in Vancouver, which is the world's third-largest production centre. Toronto is the fourth; Montreal is very high.
When you're sitting in Johannesburg or Sydney or Auckland or Stockholm and you're talking to people there, they envy Canada's opportunity. We spend too much time looking at the United States, saying we have to be just like them. There is enormous opportunity if we're just us and we get this right.
I did want to address some of the issues before you in regard to what Canadians need in content and creative, and then what we need in protecting our artists.
We have taken a different path with our model. We partner with a lot of our producers, and by “partner” I usually say to them I have good news and bad news for you—the good news is you're our business partner; the bad news is you're our business partner.
What that means for us is that we share risk with the producers, but we also provide them with transparent reporting on things. We pay them very quickly, and we also show them what is going on in the markets and the revenue values.
I was an entertainment lawyer for 12 years, and I used to always say to my clients to never do a revenue share and never do net profit, because you never get paid. However, what has emerged over the last number of years is a change within the digital world.
I have one minute. I'll go through the rest quickly.
What do we need? We need access to markets and assistance. We need to build global service providers. We need to provide accurate reporting for artists, direct payments, and transparency, and one of the things we really have to look at is some of the changing technology.
Free is not a business model, and for anybody who has been sitting here and listening to it, free is great if you're an Internet giant and you have a complementary business—if you're Google on search or Facebook on social—but it will never be a business model for artists. It doesn't make sense.
There are new emerging models. For example, Amazon in the U.S. would have 12¢ an hour for your video payments. On one of our shows, we almost got the budget back just on that pricing. It doesn't sound like much, but it will add up with a lot of views. Micropayments and such will emerge.
One of the best developments is in blockchain technology for video. Blockchain technology will allow the tracking and transparency of video content and how it goes around the world and how things perform. As we develop that, we'll be able to develop more business models for artists out there. If we can do one thing, it's to encourage the development of those technologies for artists and understand that a micropayment structure in the future is a whole lot better than free.
I think it's a great question.
As Brad indicated, the direct-to-consumer model and the on-demand model are more and more a function of every licence that we're doing. It's very rare now that you do a deal where they aren't looking for some sort of an on-demand capacity.
I also really liked what Brad said, that free isn't a model. There needs to be proper value associated with the grant of that on-demand right. As we move forward, I think we have to be flexible about what rights we are granting, what partners we're working with.
When we talk about a level playing field, Netflix is both friend and foe. It is a client of a lot of content producers. However, we need to make sure that the value we are getting from it and the value that it's bringing into the ecosystem, which are two separate things—the licence fees it's paying for its content and any contributions it's making to the ecosystem—are equivalent with what we're asking Brad to do.
Right now, we have been a little slow to ask Netflixes and the YouTubes and the Amazons of the world to pay into the system the way that Brad has to and the way that our BDUs have to, and that's unfair. We are incentivizing foreign-owned companies to work in our sandbox, and to syphon profits out without contributing in.
Each different client will potentially have a different business model. We're interested to see how the broadcast act review and the telecom act review play into that.
There needs to be an approach that recognizes that Netflix is the same service. You may be watching Netflix and someone else may be watching OUTtv, but they're doing the same thing for the consumer. To have left them unregulated for so long has created this inconsistency and lack of equivalency between our Canadian-owned BDUs and these foreign-owned players.
The other point I would make is that we have to be ahead of these things. To do that—and I think Brad's company is a great example—success at home is important, and then we need to incentivize people to grow. We want to make sure that we don't throw the baby out with the bathwater, in terms of the regulations that have existed which have allowed companies like OUTtv to grow and thrive.
What we don't want to have is a regulatory framework whereby a Canadian-grown company hits a wall and is now disincentivized vis-à-vis its foreign-owned companies. We need to create a structure where we're protected at home, so Brad can grow and get his direct-to-consumer platform and then launch globally.
I think it's that second step where we're not seeing the same protections that we have vis-à-vis the foreign-owned companies.
The way the remuneration models currently work is that we partner with the producer of the film, who has entered into agreement with the creators, location managers and the like, and we are delivered a finished film or presented with a script and promised delivery of a finished film.
Our members review that film's prospects and come up with an amount they think they can guarantee the film will earn. The analogy we've used is that it's as if we were a real estate agent who has agreed to sell your house. We know the best buyers for your house and we know how best to market it; however, we will also guarantee you at least a certain amount for your home, and we put our revenue on the line as a starting point to guarantee that return.
The producer is then able to take the amount that has been guaranteed and go to a bank, funding agency or private equity funder and say, “We have interest in the Canadian market to the tune of this amount.” That's how the producer secures the remainder of the funding for the film's budget.
When the film is delivered, we are then responsible for taking it out to the market, approaching the theatrical exhibitors and the Amazons, Netflixes, Bells, Coruses and OUTtvs of the world and earning licence fees, revenue splits or transactional amounts for the exploitation of that film.
As those funds come back in, we recoup some percentage of the fee for ourselves. We recoup the expenses we incurred so doing, and the guaranteed amount as promised. All remaining funds, for the most part, will be paid back to the producer to then go back to their profit participants, however that has been negotiated.
We ask for a little as a middleman, but a middleman with financial risk associated with our investments. It's that risk that then allows Telefilm or whatever funding agency is involved to feel that, yes, there is market interest for this feature film, and their equity investments will be recouped.