Good afternoon, everybody.
Welcome to meeting number 127, where we're continuing our five-year review of the Copyright Act.
With us today, we have from the National Campus and Community Radio Association, all the way from my neck of the woods, Freya Zaltz, by video conference.
We have from the Canadian Association of Broadcasters, Nathalie Dorval, chair, board of directors; and Susan Wheeler, chair, copyright committee.
Finally, from Stingray Digital Media Group, we have Annie Francoeur, vice-president, legal and business affairs.
We were supposed to also have someone from Radio Markham York with us. However, challenges came up with the tornado that affected her ability to come here. Hopefully, we can maybe get her in at another time.
We're going to get started right into this after I introduce our newest member, Mr. David de Burgh Graham.
Ms. Zaltz, you have up to seven minutes.
As you heard, my name is Freya Zaltz. I'm the regulatory affairs director for the National Campus and Community Radio Association. I also represent two additional associations, l'Association des radiodiffuseurs communautaires du Québec and l'Alliance des radios communautaires du Canada. These associations work to ensure stability and support for non-profit campus and community radio stations, and the long-term growth and effectiveness of the sector. Going forward, I will refer to the sector and the stations as C and C for campus and community. Together, the associations represent about 90% of the Canadian C and C sector, or 165 radio stations.
I'd like to tell the committee a little about the sector and how its stations are affected by copyright tariffs. I'll also emphasize the continuing importance of paragraph 68.1(1)(b) of the Copyright Act, which provides C and C stations with certainty and protection from some tariff increases that could impact their financial viability.
C and C radio stations reflect the diversity of the communities they serve. They are community owned, operated, managed and controlled, and some or all of their programming is produced by community volunteers. Being tied to communities so directly means that C and C stations produce programming that is rich in local information and reflection. They also present a wide variety of community perspectives, especially under-represented voices and content.
C and C stations in Canada provide their communities with access to local programming in more than 65 languages, including a number of indigenous languages. They provide an array of locally produced programming that reflects the linguistic duality of Canada and meets the needs of both French and English linguistic minority communities. They provide important community services.
The Canadian music industry and the public derive great benefit from the support that C and C broadcasters provide to Canadian artists as a result of their mandate to provide diverse content and exposure for new artists. Many successful Canadian artists owe their start to C and C radio. Because these stations focus on achieving their mandate rather than on generating profit, they can afford to take the risk of playing works by unknown artists who otherwise lack radio exposure.
One of the sector's concerns is ensuring that paragraph 68.1(1)(b) of the Copyright Act is preserved when the act is amended. That paragraph limits to $100 per year the fee that non-commercial radio stations must pay to the copyright collective Re:Sound for the rights associated with communicating to the public by telecommunication performers' performances of music works or sound recordings embodying such performers' performances within Re:Sound's repertoire, in other words, neighbouring rights.
Keeping that tariff and all others low is very important to stations in the C and C sector. Because they are non-profit, they have no stable sources of operational funding, and are usually under severe financial constraints. Some stations have tiny budgets, as small as $5,000 per year, and no paid staff whatsoever. Many already struggle to pay their expenses, and any additional tariff obligations, not matter how small, make them more vulnerable to closure due to insolvency.
Also, applicable tariffs have been steadily increasing in number and cost, and the tariff addressed by paragraph 68.1(1)(b) is only one of presently five tariffs that C and C stations must pay annually. This increase is due in part to listeners' expectations that they'll be able to access C and C stations' content via multiple platforms, including over the Internet. The costs of providing these services over multiple platforms, including the associated copyright tariffs, make it increasingly difficult for C and C stations to remain solvent.
In that vein, existing exceptions for ephemeral and internal copies should be retained for non-commercial uses, since non-profit broadcasters do not benefit financially from the use of copyrighted material.
Also, participating in Copyright Board proceedings and effective negotiations with copyright collectives requires resources and legal expertise, and for financial reasons the C and C sector has limited capability in these respects.
It would, therefore, help the associations to simplify the board's procedures where possible. The board's 2013 Re:Sound tariff 8 decision suggests that it understands non-profit users' financial limitations perhaps better than the copyright collectives do, so moving to a private agreement model is not necessarily in the association's best interests.
The C and C sector understands that copyright tariffs are intended to compensate copyright holders for their use of the work. Since C and C stations don't derive any profit from such use, and since, instead, their goal is to increase the exposure and further the careers of Canadian and emerging artists, they believe there's value to copyright holders in keeping tariffs low for the C and C sector.
The associations, therefore, appreciate the protection that paragraph 68.1(1)(b) provides by limiting the cost and providing ongoing certainty for one of the many tariffs that C and C stations must pay. They ask that this committee keep these issues in mind when contemplating possible changes to the act in order to ensure that Canadians continue to reap the benefits of a strong C and C broadcasting sector.
In conclusion, I appreciate the opportunity to speak today, and I would be pleased to answer any questions.
Ladies and gentlemen, on behalf of the Canadian Association of Broadcasters, I want to thank you for the opportunity to appear before you today to discuss issues relating to copyright, which are integral to our businesses.
Local broadcasting in our country provides entertainment, but it is also a critical source of news and information to Canadians from large urban centres with diverse ethnic populations to the most rural, remote and first nations communities.
From emergency alerting to local news in a variety of languages, radio connects communities. In fact, radio is one of the sole sources of local news and culture in rural and remote communities across Canada, many of which have already felt the sting of local newspaper and television closures.
Radio also plays a key role in maintaining the health of the Canadian music eco-system. Not only is private radio the number one source for discovering Canadian music it is also the number one source of funding for the development, promotion and the export of Canadian musical talent.
Last year alone, private radio contributed $47 million in Canadian Content Development funding, the majority of which was directed to the country’s four largest music funding agencies: FACTOR, MusicAction, Radio Starmaker Fund and Fonds RadioStar. Those agencies provide critical support to Canadian music labels and artists to create, promote and export their music internationally and across our vast country.
We are proud of the role we have played in helping to create the vibrant and successful community of internationally successful music artists our country enjoys today.
Over and above this important role, radio also invests in broadcast talent at the local level, creating employment opportunities, enhancing creativity and bringing local content to people everywhere.
Finally, let's not forget that local radio serves as one of the key channels that local businesses use to market their products and services.
We believe the Copyright Act, in its current form, strikes the very delicate balance of ensuring that artists are renumerated for their work while also ensuring that local radio has a reasonable and predictable copyright regime that reflects its continued investment in local communities and music artists. Indeed, section 68.1 of the act provides important support for local radio stations by mandating that radio will pay neighbouring rights of $100 on the first $1.25 million in revenue, and then paying a higher rate through a percentage of advertising revenue which is set by the Copyright Board of Canada. While the rate structure for neighbouring rights payment is subject to this special measure, as Parliament intended in 1998, the music industry still collects over $91 million in copyright payments from private radio each year.
If Parliament agrees to amend the Copyright Act by removing these exemptions, the primary beneficiaries will be the multinational record labels that are proposing it. Under the existing neighbouring rights regime, payments are allocated fifty-fifty between performers and record labels. Where the money flows from there is unclear, and worth further discussion before any amendments to the act should be contemplated.
What we do know from publicly available information is that Re:Sound, the copyright collective responsible for distributing neighbouring rights payments, takes 14% off the the top in administrative fees before anyone gets paid. Of the remaining amounts, the music industry has carefully concealed where that money might go. For example, in the English market, based on radio repertoire, we estimate that of the performers' share, after administration costs are deducted, 15% goes to international performers and 28% goes to Canadian performers. Of the labels' portion, no less than 41% goes to the multinational record labels, with Canadian labels receiving only about 2%. What this tells you is that multinational record labels will be the primary beneficiary of the proposed change to section 68.1, at the cost of local Canadian businesses.
The American labels are also asking you to change the definition of sound recording in the act to extract additional royalty payments from television broadcasters. In fact, the labels are attempting to squeeze out an additional payment for the use of music from broadcasters, distributors and digital platforms in a television program that has already been paid for up front by the producers of that program. Quite simply, they are asking us to pay twice for the same product, otherwise known as double-dipping.
The current definition of “sound recording” is carefully worded to reflect the contractual realities of the audiovisual production sector. This was confirmed by the Supreme Court of Canada in a 2012 decision. Any consideration of adding new costs on conventional television broadcasters, or on the digital sector, should be rejected as it would diminish Canadian broadcasters’ ability to invest in Canadian productions by shifting more than $50 million into the hands of foreign owned corporations.
Honourable members, the Canadian Association of Broadcasters respectfully urges the committee to reject any proposed amendment to the Copyright Act that would harm the Canadian broadcasting sector and jeopardize the important service that local broadcasters provide to Canadians.
I want to reiterate that the current legislation strikes the right balance between rights holders and local broadcasters, and that the proposal being advanced by the music industry risks coming at the expense of local programming and the valued and essential services that we provide to Canadians.
Good afternoon, ladies and gentlemen.
On behalf of Stingray Digital Group Inc., I would like to begin by thanking you for the invitation to participate in the discussions on the review of the Copyright Act, particularly with respect to music, the industry in which Stingray operates.
Founded in 2017, Stingray is a Canadian company headquartered in Montreal and currently employs 340 people in Canada. We distribute our services not only in Canada, but also abroad to approximately 400 million subscribers or households in 156 countries. We also serve 12,000 commercial clients in 78,000 locations.
For fiscal year 2018, approximately 47% of Stingray’s revenue comes from Canada. The more successful Stingray is abroad, the more Canadian artists benefit from the visibility abroad.
Stingray’s portfolio of services in Canada includes an audio music service called Stingray Music, which includes 2,000 channels dedicated to approximately 100 musical genres. Our services also include videos on demand, music videos, karaoke, concerts and a dozen linear audiovisual channels such as Stingray Classica, Stingray Festival 4K, Stingray Ambiance, and so on.
Our services are available on multiple digital platforms and through devices such as cable or satellite television, the Internet, mobile apps, video game consoles, in-flight or on-train entertainment systems, connected cars, WiFi systems such as Sonos, and so on.
More than 100 music experts from around the world are responsible for programming Stingray's various services and channels. This is one of the differences between Stingray and a number of other music service providers, which normally use algorithms to select the content they offer. Stingray's channel programming is also adapted to local markets and demographics.
Out of necessity, Stingray is also a technology company. Managing a large portfolio of digital assets and delivering the content across multiple platforms and markets requires Stingray to remain at the forefront of technology. The Stingray Group therefore invests several million dollars a year in research and development in order to remain competitive and retain its clients.
Stingray is committed to encouraging Canadian talent and artists, and it participates actively in the development and promotion of Canadian content. During the last broadcast year, Stingray spent approximately $379,000 in Canadian content development initiatives, which include payments to Factor, Musicaction and the Community Radio Fund of Canada, but also awards at music events and festivals, artists' performance fees, workshops, educational sessions, etc.
In addition to such CCD initiatives, after Stingray's IPO in 2015, the CRTC approved the change in ownership and effective control of Stingray, but it required that Stingray pay tangible benefits corresponding to $5.5 million over a period of seven years. In addition to these regulatory obligations, Stingray also contributes voluntarily in many other ways to promote and develop Canadian artists.
Very recently, Stingray partnered with ADISQ to create a new music video channel made available through television operators in Canada, named PalmarèsADISQ by Stingray. Pursuant to Stingray's desire to invest in young talent, a portion of the profits generated by the channel will be invested in local music video production through existing third party funds like RadioStar.
Through this initiative, Stingray will finance the production of music videos broadcast on its channels, but it will also help develop the careers of up-and-coming Canadian and Quebec directors and artists. Each year, Stingray also gives certain amounts to events or partners involved with the development and promotion of Canadian talent. For example, Stingray has been a regular sponsor of panels at les Rencontres de l'ADISQ and other similar events.
Stingray also produces the PausePlay series, which consists of exclusive interviews and intimate performances of popular and emerging artists recorded live to promote their new albums or tours.
Such recordings are made available by Stingray on social media platforms and channels to offer important exposure for those artists. We also have a Stingray blog where we have editorial coverage on album reviews, concert reviews, etc.
With respect to the review of the Copyright Act, we respectfully submit that the Copyright Act should remain as is at this time. We do not believe that any amendments are necessary. We believe that the current Copyright Act establishes the right balance between the rights holders and users such as Stingray.
We've certainly heard this and we find it very interesting.
First of all, I think you must know that many of the radio stations that are under the CAB umbrella are small stations. Almost 60% of these stations are small stations.
As for the stations that are owned by bigger ownership groups, they still remain small stations, but they obviously benefit from being part of a larger constituency. What happens there is that when we talk before committees like this one, radio is seen to have a sole operation, which is the great support it gives to artists and the cultural sector, but when you look at a broader range, where radio really does very well, you see that it's one of the last media outlets to provide reliable and professional news and information to Canadians wherever they are.
Many newspapers have closed. OTA stations have closed. What happens is that larger groups that have larger stations subsidize the smaller stations of the group for them to be able to provide those broader services to Canadians, in addition to the great support for artists and the cultural sector.
Community radio is growing at a much faster rate than any other radio sector. The number of new licences issued to community radio stations is significant, particularly in recent years.
The issue is that there is no stable source of operational funding. There are grants available. Stations engage in fundraising initiatives. Some in larger communities are very successful. In the smaller communities, they have a harder time raising enough funds to operate a station. When they're associated with a university, they have the added support of infrastructure, premises, all sorts of utilities and whatnot that community stations have to pay for out-of-pocket.
I would say there is an increasing interest across the country in developing community radio stations, but we're also starting to see some close at a rate faster than we've ever seen them close before. All those that have closed have closed because they are unable to meet their expenses. They can't raise enough revenue. In some cases, because they can't afford to hire staff, their volunteers burn out and just don't have enough energy to continue operating the station.
The requirements that stations have to meet in terms of their CRTC licences do require a lot of ongoing supervision. There are significant amounts of paperwork, being cognizant of what's being played on air and calculating percentages. In some cases, this is very difficult for volunteer-only stations to do on a long-term, ongoing basis.
While we're seeing a definite increase in the interest in community radio across the country and in the number of groups that are applying for licences, we're also seeing more struggles to continue operating, particularly by the smaller stations.
I would be interested in following up there. Quite obviously there has been interest, not only in a community like mine that's on the border, in terms of ensuring Canadian content, but there's a public interest clause for that as well. I'm interested in the comparables, especially when you're talking about some of the expenses that are happening.
You mentioned, as well, that your American competitors do not have to pay the same fees. In a border community like mine, where we actually have Canadian content penetrating American markets, maybe you can tell me the disadvantage or advantage.
I'm curious. You've noted that there is a difference in terms of the encumbrances, but the airwaves compete on both sides of the Detroit River, and the regions are very lucrative markets, and very challenging markets too.
I'd like to thank all of our witnesses for taking the time to lend us their expertise here today.
I'd like to start with Ms. Dorval.
Ms. Dorval, you mentioned that many radio stations offer a lot of local content, particularly news, and I just want to reiterate how important that is in many parts of my riding. However, I will tell you that many newspaper editors tell me that they swear that they actually hear the pages of their newspapers turning, oftentimes, in some of those reports. I think that's just an old joke.
I would like to ask a couple of questions along the same lines as MP Lloyd.
The exemption, when it comes to royalties, has existed pretty much as it was first created in 1997. I know that there have been some witnesses who have said that it was meant to be temporary. I understand that your industry has said, “no, this was meant to be permanent”, but even in looking at it when it was put in place in 1997, I don't believe that there's any kind of inflationary clause that goes along with it. At the very least, to get to a proper parity today with purchasing power, it would be about $148.20—that's probably an imprecise calculation. At the very least, would you not agree that there should be an elevation so that this amount is honoured in purchasing power of 1997 with today?
I would have to provide more detail to you in writing on that, given the number of stations we're talking about.
I can tell you what the five tariffs are, though. There is the performing rights tariff to SOCAN, which is at a rate of 1.9% of gross operating costs.
Then there are two tariffs that are paid to Re:Sound. One is for the one that we're talking about under paragraph 68.1(1)(b). Another is a streaming and webcasting tariff that's paid to Re:Sound. I think it would be more effective for me to provide the information about rates in writing.
The remaining two are to CMRRA and SODRAC. Those tariffs are currently the subject of a proceeding under the Copyright Board, so the rates are not resolved going forward. One is for mechanical rights, so for reproduction right of copyrighted material that stations use internally on hard drives, CDs and whatnot. Then the other is for online services. At this point, actually, the campus and community sector does not have a very clear idea of what sorts of rates we're even talking about for the online services because we have only begun to negotiate that.
I'd like to echo everyone's comments that it's been great testimony for us to think about. We've heard some different testimony over time. One comment is from artists saying they are making less money than they ever have.
Here today we've heard some testimony that we should just leave things as is. Your suggestion is that if we change things, the international labels will make more money. How so? Explain in a little more detail how that works.
Listening to your testimony, I think Canadian radio does some intangible things. I wonder if you have any information about the exposure that Canadian artists receive through radio. Is there a value to it, whether they're up-and-coming or if they're from a certain genre, that sort of exposure and development?
We heard testimony about the radio starmaker fund, when someone is purchased and whatnot. In particular, do you have any statistics about how our Canadian artists might receive some sort of tangible financial benefit by being exposed on that?
Those are some of the things in my head, if someone would start with that.
Oh yes, you're right. My apologies.
He talked about the contractual challenges that certain artists have when they're starting out. They don't have the contracting power to be able to arrange for things in a way that's as balanced as it might be now, once he has become Bryan Adams....
There was a very useful article recently about Spotify changing its business model, and it really reinforces the message we're trying to convey here. It talks about a traditional label deal. They have a pie chart that shows 41.6% going to the label, 48% going to Spotify and 10% going to the artist.
These are contractual arrangements that the labels have entered into with Canadian artists. It's not something that can be undone through a legislative regime. It's really something that is a business affair of theirs.
All we're saying is that under the copyright regime, if you change the amount that radio is paying out, the net beneficiaries, really, are the multinational record labels in the end. Yes, artists will get a bit more money, but the lion's share of that money will go out of Canada, at the expense of local broadcasters.
Thank you to our witnesses for appearing.
I want to focus on radio and in particular on for-profit radio. I don't really want to focus on the not-for-profit community radio stations at this point.
In looking at the research that our analysts have pulled together, it's clear that your revenues are under pressure, both in radio and in television, but the operating margins seem to be holding fairly constant although there is a slight decrease in the operating margin for radio.
A pretty big landmark study by the C.D. Howe Institute about three years ago concluded that the value of the royalties that artists and multinationals and domestic rights holders should be getting is about two and a half times what actually is being paid out. The study concluded that for the year they analyzed, which was 2012, about $178 million was paid out in royalty revenues, but the actual value of the playing of these songs on radio was actually closer to $440 million. It concluded that there has to be a new way of looking at how these royalties are structured.
The author of the report, who is a professor emeritus of economics at the Université de Montréal, concluded that the amount of royalty revenues is not fair. I wonder if you could comment on that study or on the principle behind the study.
We believe that copyright, as it is now, works. We understand that the artists are complaining. We do believe that there are solutions that need to be put in place, but we don't believe that those solutions mean reviewing the Copyright Act.
Part of the solution is that—and this is something I will address tomorrow with the other committee—we believe that some of the use of music should be brought under the Broadcasting Act and should be regulated. For example, if you play a radio in your retail outlet, the radio station is subject to the minimum Canadian content requirement, the 35% that my colleague was explaining earlier.
If you use the services of a commercial background music supplier.... Stingray is one of the biggest music suppliers to commercial outlets in Canada. We're not subject to any Canadian content requirement. We can play whatever we want. We made a submission in front of the CRTC last February. We proposed that commercial background music suppliers be subject to the same Canadian content minimum requirement, so that if you use the Stingray service in a commercial outlet, you will be hearing the same type of Canadian content as if you play radio or if you listen to your TV channel in your home, because TV channels are also subject to the same Canadian requirements.
That's one example of our saying this is where we need to make sure that royalties are going to Canadian artists and that we hear Canadian artists, but not review the Copyright Act.
I'm trying to get some timelines that we are crunching here. There's a good chance that by the time this committee gets a report done, and has handed it to the minister, and the minister gets the report back to Parliament....If the government actually wanted to introduce legislation, it could take some time. It may not happen before the next general election. My concern is that we have nothing.
Maybe starting with you Ms. Wheeler, and then finishing with our friends from Vancouver, what would be the top priority for things to be done, if you had one or two, really quickly? Or status quo, if that's what it is, because the parliamentary session is winding down.
Thanks. I'll share my time with Mr. Lametti.
My frustration, I guess that's the word, is trying to find an equitable balance, where the creators of music can be paid for their creations and not be in poverty. They're either in poverty, or very successful; there seems to be no in-between.
It's frustrating to try to find the right suggestions, particularly where there are revenue streams that are outside....Possibly, the frustration today is that the revenue streams aren't in this room.
Could you comment on what we are missing, in terms of balance?
Ms. Dorval, do you have anything? I think radios are playing a key role, as you said, in local news and other services, advertising local businesses and keeping local economies going.