Thank you very much, Mr. Chair.
Good afternoon, members of the committee. My name is Eric Baptiste, and I am the chief executive officer of SOCAN. I am joined this morning by Gilles Daigle, SOCAN's general counsel.
SOCAN is a society that administers public performance rights of authors, composers and music publishers. We currently have over 150,000 members across the country, and we also represent the world's repertoire of musical works in Canada.
For many years, SOCAN has been advocating for Canada to establish robust copyright legislation, so that creators would be compensated fairly and equitably. The Copyright Act has always been and always will be the cornerstone of Canada's entire creative sector.
Copyright royalties have always been an essential part of our creators' compensation. That is now the case more than ever, given the technological changes we are going through that continue to emerge.
The contribution of copyright in a rapidly changing digital environment is becoming, more than ever, one of the centrepieces of creators' remuneration. I will now quote Minister Bains at the launch of the intellectual property strategy, where he said:
We know IP is a critical ingredient in helping Canadian businesses reach commercial success. Canada's IP Strategy will make sure Canadians know the value of their intellectual property and how to leverage it to improve, innovate, increase profits and create middle-class jobs.
We hope this principle will guide your thinking as you prepare your report.
This afternoon, SOCAN wishes to focus on three aspects of the Copyright Act that we think should be updated.
The first aspect is the extension of the copyright protection term—which is currently 50 years after the author's death—to 70 years after their death.
With the current term of protection, Canada is one of the laggards at the international level. Our main trading partners, including the United States of America and the 28 members of the European Union, have long had a 70-year term after an author's death. Even Mexico's term is 100 years. Our creators are clearly less well protected here in Canada than abroad. I ask you directly this afternoon, does Canada want to continue to be in the same category as countries like North Korea or Afghanistan?
Some commentators—very few, to our knowledge—will tell you that increased copyright protection would be to the detriment of consumers. There is no evidence that we are aware of that the consumer would be disadvantaged with an extension of copyright protection. Let us look at the reality of many countries that have adopted 70 years after the author's death as a term. Music consumption in these countries, often more important than here in Canada, has continued to flourish over many years, with no measurable impact on users.
A second aspect that the committee should consider is the loophole created by subsection 32.2(3) of the act, which provides an exemption for so-called charitable organizations if their use of music happens in the interest of a charitable enterprise. To be clear, it is not SOCAN's intention to penalize charitable activities when conducted in the true sense of the word, but rather to prevent organizations that circumvent the act and try not to pay their dues.
Let me explain. Currently certain organizations, theatres, and festivals with budgets of sometimes several million dollars adopt the position that they are charitable organizations within the meaning of the Copyright Act because they have obtained this status for tax purposes. To close this loophole, we propose two changes. First, clarify that the exception applies only if the use of music is “without intent to gain”. This is already the case in the exception applicable to agricultural and industrial fairs. Second, clarify that being a charitable organization within the meaning of the Income Tax Act is not in itself sufficient for the exception to apply for copyright.
The third aspect is related to the private copying levy.
The private copying system was created to make up for losses of revenue caused by certain media formats—namely cassettes and, later, blank compact discs.
We feel that the current system should be reviewed, and an element of technological neutrality should be introduced, so that new digital media that are now standard for private copying would be included. We are mainly talking about tablets and smart phones.
We are also advocating, like all music stakeholders, for a transition fund to support that significant use of our creators' musical works.
In addition to our three main points, we agree with the request of other groups who are advocating for doing away with the exemption of the first $1.25 million in revenue for commercial radios in terms of royalties for sound recordings and performers. The same goes for the current definition of “sound recording”. Those are isolated situations that we find outdated and unfounded.
In closing, we must keep in mind that creators are entrepreneurs, and we must give them the necessary protections so they can benefit from their work. There have been huge changes in the way we consume music. Smart phones have become ubiquitous. Downloads and now streaming have surpassed physical product sales. More needs to be done to bring the Copyright Act into the modern era and to ensure balance between the rights of users and creators.
Thank you very much.
Members of the committee, thank you for inviting us to appear before you.
I am the chair of the Canadian Private Copying Collective. I am joined by Lisa Freeman, the collective's executive director.
In 1997, the Copyright Act of Canada was amended to allow Canadians to copy audio recordings to an audio recording medium for their private use. At the same time, the private copying levy was created, so that creators would receive compensation for the use of their music.
Under the act, manufacturers and importers of blank audio media pay a small levy for any imports and sales in Canada. Those levies are collected by the Canadian Private Copying Collective for its member societies, which represent performing artists, composers, music publishers and disk producers.
For many years, the private copying regime was an important source of revenues, generating over $300 million for 100,000 content creators, helping them continue to create and market important cultural content.
The wording of the Copyright Act originally aimed to make the private copying regime technologically neutral. However, the decisions of the Federal Court of Appeal and the previous federal government restricted it to blank CDs, which are now becoming obsolete.
As most consumers are currently copying music onto devices such as smart phones, the use of blank CDs to copy music is declining rapidly. As a result, the private copying revenues for content creators are also dropping rapidly.
In 2015-16, Canadians copied more than two billion music tracks, or double the number of copied tracks in 2004. However, copyright holders currently do not receive any compensation for the majority of those copies, including hundreds of millions of unauthorized copies on devices such as smart phones.
During the same period, annual revenues stemming from private copying levies decreased by 89%, going from a peak of $38 million in 2004 to less than $3 million in 2016.
What would have happened if Canada followed the European example in 2012, when the act was reviewed, and made the regime technologically neutral, so that levies would apply to smart phones and tablets? According to sales data for those devices, a levy of $3, which is roughly the equivalent of the European average, would have generated $40 million per year. That is an amount of $240 million lost, only between 2012 and 2017. Urgent action is needed.
The CPCC recommends that the government make the regime technologically neutral, so that it would be in line with the way Canadians consume music.
The solution is to amend the act, so that the regime would apply both to audio recording media and to devices.
The CPCC is also proposing that other minor amendments be made to the act. In that sense, it would be enough to clarify that the regime applies only to copies of a sound recording an individual has in their possession. However, we don't want there to be any confusion. Providing or obtaining music illegally, be it through an unlicensed online service or through stream ripping, or even, of course, by stealing an album in a store, is still illegal.
It should also be clear that the private copying regime must neither harm online music services nor legalize illegal services.
Whenever it is possible to do so, copyright holders license the fruit of their labour to those who want to use it. The private copying regime is not intended to compensate copies that cannot be controlled.
We need a permanent legislative solution, but, in the meantime, it is of the utmost importance to establish an interim fund of $40 million.
The private copying regime remains the best solution to what is an ongoing problem. Streaming may dominate the legal music market, but Canadians still value and make copies of music—over 2 billion a year since 2010—and the levy system is the best mechanism to compensate rights holders for copies that can't be licensed. It just needs to be amended so it can keep up with how Canadians consume music in a changing marketplace.
With minimal revisions, the private copying regime can be restored to what it was originally intended to be: a flexible, technologically neutral system that monetizes private copying that cannot be controlled by rights holders, without undermining legitimate online music services.
The process for setting levies would remain the same, as the CPCC would be required to file a proposed tariff with the Copyright Board and to prove, through empirical evidence, which devices and media are ordinarily used to copy music.
As it stands now, Canada is an outlier. Most countries in the EU, central and eastern Europe, embraced the technological shift years ago, and now have healthy private copying regimes that extend levies to a wide variety of media and devices, like smart phones and tablets.
A comprehensive global study of private copying produced in December of last year by CISAC, the international organization of authors' societies, called out Canada on the need for our regime to be “updated and adapted to new uses with levies on digital devices”.
Without a legislative solution like the one that the CPCC now proposes, Canadians' private copying activity will remain illegal, and royalties to music creators to compensate for the massive private copying of their work will very soon be completely eliminated. Canadian music creators need to be paid for this extensive use of their work, just as the businesses producing and selling the devices used to make the copies all get paid. The private copying levy is not a tax, nor is it charity or a subsidy program. It is earned income.
The Copyright Board ultimately determines the value of the levy. However, CPCC's proposed levies will certainly be a small fraction of the cost of a smart phone or tablet, and will be comparable to the levy rates in many European countries, where the average levy payable on a smart phone, for example, is around $3, the price of a cup of coffee.
As always, the levy would be payable by manufacturers and importers of the media and devices. In fact, we all know that the cost of many smart phones and tablets is already subsidized for consumers by intermediary companies that provide these devices in a bundle with mobile network services.
We can't begin to stress how urgent the matter has become. At the same time as music creators have been losing revenue from private copying, their income from many other sources has also been in decline, in part due to additional exceptions to copyright introduced in 2012.
The individual Canadian artists and Canadian businesses whose music is copied for personal use can only produce and compete on the international stage if they are paid when their work is used.
We urge the government to immediately follow this parliamentary review with the introduction of legislation, so that the necessary minor amendments to the act can be made as soon as possible.
Thank you for your time, and we look forward to your questions.
My name is Ian MacKay, and I am the president of Re:Sound Music Licensing Company. I welcome the opportunity to participate in this committee's critical work in reviewing the Copyright Act and its impact on the music industry and musicians.
has stated that Canada “requires a copyright framework that works well in the context of our fast-paced digital world and provides creators with opportunities to get fair value for their work”, and has stated that we need a copyright framework that “effectively supports creativity and innovation.”
I have one more quote and it's from an artist, the very talented and Juno award-winning artist William Prince, who said, and I'm paraphrasing a bit here, if you want me to build you a house, I have to have a reasonable expectation that I'm going to get paid for it.
As you've heard from many others, the Canadian recorded music industry has experienced significant disruption, shifting from an economy of dollars to one of pennies or micro-pennies. Critical changes are needed to address outdated and unnecessary subsidies and exemptions that are unfairly preventing creators from receiving fair compensation for their work.
So where does Re:Sound fit in? Re:Sound is the organization that collects and distributes equitable remuneration in Canada on behalf of more than 621,000 artists and sound recording owners, ranging from big businesses like the major record companies to small artist entrepreneurs. We represent them directly through our member organizations and through bilateral agreements with international collecting societies.
We are a not-for-profit organization. We collect from thousands of music users, including commercial radio, satellite radio, and individual businesses like gyms, restaurants, nightclubs, etc. The rights we administer are mandatorily collectively administered. Creators cannot prevent businesses from using their recordings or negotiate directly. They can only rely on collecting equitable remuneration after the fact.
These income streams are crucial for creators, and they go straight to creators. The money we collect is split fifty-fifty between artists and sound recording owners at source.
Both the music industry and the copyright laws that govern it must keep pace with the rate of technological change. That is why we at Re:Sound are always working hard to innovate. We do this by working with organizations like SOCAN on streamlining the licensing process, or, as Mark Schaan, the director general, marketplace framework policy branch, mentioned to the Standing Committee on Canadian Heritage a couple of weeks ago, through our Music Has Value research.
We do this research to help music users understand how music brings value to their business and how they can use it as a competitive advantage.
We also work to ensure we distribute royalties as efficiently as possible. This is reflected in our work to obtain full radio logs from ratio stations and work with other organizations, including Bell Media, to improve reporting of data and ensure that as much of every dollar is distributed to creators as possible. And once again, that's half to artists and half to sound recording owners.
But creators are missing out because of two outdated, unnecessary, and unfair exemptions to the Copyright Act that deprive them of over $60 million a year in income. As you've already heard from organizations ranging from the Canadian Federation of Musicians to ACTRA, Artisti, and Music Canada, these are fundamental issues that need to be fixed.
It's rare to get this type of consensus from such disparate groups representing very different parts of the music ecosystem.
The first exemption I'm going to talk about is the removal of $1.25 million radio royalty exemption. You've already heard about this from some other witnesses, but under the current act and since 1997, commercial radio stations have been exempt from paying royalties to performers and sound recording owners on their first $1.25 million in revenue, even when the station is part of a large profitable ownership group. This exemption costs rights holders approximately $8 million in lost income, and is an unwarranted and inconsistent subsidy to a highly profitable industry.
It's outdated and was intended to be a temporary measure but still exists over 20 years later. Internationally, no other country has a similar exemption, and the exemption does not apply to all rights holders. It doesn't apply to songwriter or publisher royalties, meaning that it's only performers and record labels that are asked to subsidize a very profitable industry. Commercial radio broadcasters play recorded music for about 81% of their programming time, so that's 81% of the “house” that William Prince referred to earlier. The creators of that music should be paid accordingly with no subsidies and no exemptions.
It's also an exemption that's only available to commercial radio broadcasters, so it's not technologically neutral. It doesn't apply to such newer forms of distribution of music as satellite radio, pay audio, and streaming. It's out of step with the rest of the world.
The second exemption is the definition of “sound recording” under the Copyright Act. Under the current act, the definition of sound recording precludes artists and sound recording owners from receiving royalties when their recordings are performed in TV and film soundtracks. Once again, this only applies to artists and sound recording owners, not to other rights holders, depriving them of approximately $55 million a year in lost royalties. When music is used in a TV show or a movie on Netflix, the composer, music publisher, and songwriter all receive public performance royalties, but the artist and sound recording owner do not. This disadvantages Canadian artists and puts Canada out of step internationally.
The compensation provided by such streams as equitable remuneration has become more critical to ensuring the livelihood of Canadians working within the industry. The profound impact of these two unfair and outdated exemptions cannot be overstated. The Copyright Act should be modernized to remove these subsidies and ensure that creators are paid whenever businesses commercially use their work. Doing this would have an immediate effect on the livelihood of artists.
Re:Sound is also a member of the Canadian Music Policy Coalition. We support the recommendations outlined in the documents submitted on its behalf. Many of them have been explained far more eloquently by others who have already appeared before the committee. They include continuing the important work that has been started on Copyright Board reform, updating the private copying levy to make it technologically neutral, and extending the term of copyright for authors from 50 to 70 years.
My name is Solange Drouin. I am the vice-president of public affairs and executive director of the Association québécoise de l'industrie du disque, du spectacle et de la vidéo, or the ADISQ.
I'm speaking today on behalf of some 250 independent entrepreneurs, be they producers of sound recordings, shows or videos, record companies, artist managers or other entrepreneurs, who are responsible for producing 95% of the country's francophone music content.
The independent industrial structure that characterizes Canada's francophone music production was born 40 years ago, and it is unique in the world. For support in the production and marketing of their works, Canadian francophone artists almost always turn to local entrepreneurs, small and medium-sized companies.
Everywhere else in the world, music production is dominated by three multinational companies: Sony Music, Warner Music Group and Universal Music Group. In the 1980s, those businesses left our market, and that enabled Canadian francophone artists and entrepreneurs to band together to create a truly dynamic ecosystem to which our public is now attached. This situation should make Canadians and our leaders proud.
Nevertheless, those companies are still present in our market; they are our competitors. Need we mention that their means are huge compared with ours? Although the entire music industry has been in turmoil for more than 15 years, independent companies are made much more vulnerable by the transformation of music's competitive market, which has become unfair and unbalanced. That specificity must be taken into account in this process.
You are inviting us to participate in a discussion on urgent amendments to be made to the Copyright Act for artists and content creators. The Copyright Act is an economic piece of legislation with a concrete impact on all Canadian content creators.
Essentially, compensation for Canadian music content creators comes from a combination of revenues and royalties for sound recordings and shows. For those two elements to be optimized, members of the artist's professional entourage dedicate all their energies to the effective marketing of their works.
The legislator—in other words, you—must ensure that all the relevant legislation is as efficient as possible. It's simple: without consumption, there are no revenues. However, when consumption occurs without adequate laws, there are no adequate revenues either.
So the work you are doing is fraught with consequences. You have an opportunity to finally remedy a number of elements in the act that are currently unfairly depriving content creators of revenues.
The Copyright Act, owing to many exceptions that have been added to it over the years, especially since 2012, is a real Swiss cheese today, and that considerably weakens its scope and causes significant harm to copyright holders—in other words, authors, artists and producers. This is an incomprehensible situation in a country like Canada, and it is imperative and urgent to put an end to it.
If, for social reasons, we as a people find that it is important to give certain citizen groups exemptions or special treatment, the price should not be paid by the music industry's copyright holders.
I will give an example I have been giving since 1992, so since I have been at the ADISQ. In Quebec, the decision was made that it was important for children to have breakfast every day, so it was decided to provide them with cartons of milk every morning. Dairy producers were not asked to pay for the milk, but we as a society accepted to take on that responsibility and to pay for it collectively.
If exemptions are to be given to certain groups because it is right to do so socially, that can be done in other ways, such as by providing tax credits, more specifically for charitable organizations. However, there is no need to make a group of creators bear the responsibility for that.
I would also like to remind you that, at the ADISQ, we approve of several proposals presented by witnesses who came before us and by others who are appearing with us today. I will go over them quickly, in a non-exhaustive manner.
First, the radio royalty exemption on the first $1.25 million in revenue should be eliminated.
Second, the definition of a “sound recording” should be amended so that artists and producers can receive royalties for the audiovisual use of their works.
Third, it is clear that the duration of copyright for musical works should be extended from 50 years to 70 years for songwriters.
Last, the private copying regime should be amended so that it applies to every type of device used.
The changes brought on by technology are obviously at the heart of the discussions related to the current review. The act needs to be in step with how people consume music, which it currently is not.
New technology makes tools available to everyone in the music ecosystem, from creators to consumers, including a wide array of professionals. That said, regardless of the tools used, every player still has the same role: creating a good song, promoting it, or listening to it.
Technology is not the key to creators' salvation. Block chain technology, for instance, may provide another way for them to collect royalties for the use of their work. But whether it will be more effective than existing methods is open for debate. One thing is certain: without strong legislation protecting artistic works and ensuring the payment of royalties for their use, enhanced royalty distribution tools will do little to help creators.
No one is denying the challenges the music industry is facing, but the scale of the losses bears repeating. Since 2004, sound recording sales have dropped by 72% in Quebec. Digital work sales, which never made up for the loss, are declining as well, having dropped by 42% since 2013.
Recently, music industry giants have seen a modest return to growth thanks to streaming. It is important, however, to consider that news carefully and insightfully: only a handful of artists are reaping the benefits—international stars with a global following.
ADISQ now estimates that 30 million streams are necessary in order for an album to be successful financially. Last year, the Quebec artist who came closest to that threshold received 8 million streams. The artist is actually an English-language band with a following outside the province. As you can see, 30 million streams is a very high threshold indeed.
In that landscape, it is untenable for rights holders to continue operating under an act that abounds with exceptions that are outdated, unwarranted, and unfortunately unique to the Canadian regime.
Cultural diversity is a principle Canadians hold dear, and content creators—authors, artists, and producers—are the pillars on which that principle rests. When they are no longer able to make a living from their craft, that diversity is directly threatened. It is happening as we speak. Fortunately, you have the ability to restore the power of a crucial tool to ensure the sustainability of a Canadian music industry that is professional and diverse.
As you can appreciate, urgent action is needed. In 2016, ADISQ was saying that the music industry had reached a tipping point, and now, two years later, we are edging closer to the point of no return. The time to turn things around is now.
There will always be music, to be sure, but will our music still be listened to?
That is a very important point. We are enjoying an amazing time in Canada. We have global superstars who dominate the music scene, and most people here would share my view that the Canadian content elements put in place have helped create an environment that is conducive for these green shoots to take root before going to external markets. If you don't have a market at home that enables you to test drive your music and talent, it is much more difficult to start in the U.S. or Europe.
We are very proud of the fact that these artists, creators, and SOCAN members benefit from those regulations, provided that the criteria—which are quite smart and flexible—are met. It is a mixture of whether you're Canadian, or whether the sound recording was fixed in Canada, and so on, and whether these criteria are met. They are mostly met. That's a key difference.
Some members have asked about the growth of the pie, noting that some artists or creators are not feeling the growth themselves. Most of the growth has come from digital services, like streaming services and user-uploaded content, which have no such regulations. It's the usual free-for-all. We are a very open country. We are a country close to the United States, which has the most powerful entertainment industry in the world. We are open to Europe as well.
Because we distribute the money we collect according to actual usage, if we say that 35% of content on Canadian radio has to be Canadian, then at least 35% of the royalties we collect will go to Canadian rights holders. If on a streaming service there's no such regulation, and only 3% of the music consumed there is Canadian—I'm not giving you exact numbers, although we have them—you don't need to be a specialist in math to understand that the money collected goes to other creators in other countries.
It is also imperative to ensure, through broadcasting regulation and not copyright regulation, that Canadian content is at least discoverable on those services. You cannot force people to click on a clip or listen to a song. People are free to choose; it's not like a radio station. However, Canadians should at least know about the availability of Canadian music so they can decide whether they want to listen to it or not. It's a key element that needs to be taken into account, and it explains some of those apparent discrepancies. They all have very good explanations.
You did your homework, and thank you very much for your interest.
Yes, at SOCAN we believe very much in transparency and accuracy. We are obsessed about data points. We believe we hold, through our efforts, one of the world's best databases of sound recordings. We control the information of about 66-million sound recordings, 27-million songs, etc.
Layla is an effort to introduce drilled-down information to enable clients of the reproduction rights service, which we own in Audiam, to really follow in real time how much money has been made on YouTube, on Spotify, and Apple Music. We believe in that. We want to make that available to everyone.
Technology is not the enemy here. Technology is a disrupter. Technology has created challenges, and we believe technology is the solution to problems caused by technology. By having more transparency and by investing in good systems and data, we can automate most of the matching between reports we get from, say, Spotify or YouTube, with the information we have. We can identify most of the long tail at reasonable costs.
SOCAN's cost is about 10%, so 90¢ gets returned to the members. We are one of the most cost-effective collectives of this size in the world, and our costs over 10 years in constant dollars have actually gone down, so technology is really helpful.
Mr. Chair, I will share some of my time with Mr. Longfield.
First of all, could I ask all four of you to provide us with some data? I don't need it right now. I would like to know how much your revenues have changed over the last 20 years. If that's feasible, could you go back 20 years and show us, “This is what we got, and this is over the years”, so we can see the progression and see how it has changed over a 20-year period?
Could you also include your expenses? I would imagine your expenses would have changed as well. If you can imagine two charts you could provide to the clerk, that would be very helpful.
We're going to finish our example, and then I'm going to pass it over. If I understood, Mr. Daigle, the Festival internationale de Jazz de Montréal is a big festival. They use music, and they compensate the artists when the music is used. Another festival in another city might call itself, say, the XYZ festival of X town, or X festival, and they say, “No, we are a charity, and we don't want to pay.”
How do you propose to fix that?