I call the meeting to order. We are going to get started. We have a busy meeting ahead of us.
Welcome, everybody, to meeting 139, as we continue our legislative five-year review of the Copyright Act.
Today we have with us, as an individual, Jeff Price, chief executive officer and founder of Audiam Inc. We have, from Facebook, Kevin Chan, head of public policy, and Probir Mehta, head of global intellectual property policy—say that five times fast. We have, from Google Canada, Jason J. Kee, public policy and government relations counsel. Finally, from Spotify, we have Darren Schmidt, senior counsel.
Welcome, everybody. You will each have seven minutes to make your presentations. We'll go through all the presentations, and then we'll get into our questioning.
Just so all of our members are aware, Mr. Schmidt, from Spotify, will leave at five o'clock. If you have questions for Spotify, front-load them. Is that fair enough? Excellent.
We're going to start off with Mr. Price. You have seven minutes.
Thanks for having me.
My name is Jeff Price. I ran a record label called spinART Records for about 17 years, releasing bands like the Pixies, Echo and the Bunnymen, Ron Sexsmith, and even a Gordon Lightfoot record.
In 2005 I launched a company called TuneCore that quickly became the largest music distribution company in the world. I changed the global music industry business model. What I did was allow any artist anywhere in the world who recorded music to have access to distribute music and put it onto the shelf of digital music services where people would go to buy the music. Upon the sale of the music, I also changed how they were paid. I gave them 100% of the money. There was no record label between the artist and the retail shop. They were the record label. Anything that we were paid flowed through to them.
In addition, I allowed them to keep ownership of their own copyrights. The traditional music industry had to first editorially decide they were going to let you in, and then upon being let in, you would assign ownership of your copyrights to them, and then they would pay you about 12% of the money.
We democratized the music industry and let everybody in to put their music onto the digital shelves. When the music sold, they would get all of the money and they would keep ownership of their copyrights.
The company grew very rapidly. Within about a three-year period, the clients of TuneCore sold over $800 million in gross music sales of their music—the “everybody else”. All of this money flowed through and went back to them. TuneCore was paid a simple upfront flat fee for its service, so we commoditized distribution while democratizing it.
A number of years into running the company, a very strange thing happened. We were distributing, every single month, between 100,000 to 150,000 new recordings. To provide some perspective on that, the Warner Music Group, in its heyday, was distributing about 3,600 new recordings a year. We were distributing 100,000 to 150,000 new copyrights every single month. We were distributing 50 years in the music industry in a month. These days it's over 250,000 new recordings a month coming from these do-it-yourselfers, these people who own their own copyrights and get all of their money coming back to them.
Four years into running the company, I began to think about the second separate royalty these people got, because it turns out they were two things. Here's an example: Sony records hired Whitney Houston to sing the song I Will Always Love You, which I will sing at the end of this—no, I won't—but Dolly Parton wrote the lyric and the melody. Those are the two separate and distinct copyrights. Every time that recording streamed or was downloaded, there were two separate licences and two separate distinct payments that had to be made, one to Sony for the recording and one to Dolly for the lyric and the melody. It turns out that the clients of TuneCore—the do-it-yourselfers—were both Sony records and Dolly Parton at the same time. Every time there's a download or a stream, there are two licences and two payments. TuneCore was only collecting the payment for the recordings, not for the lyric and melody, and it began to embark on a curious adventure. Where is the second royalty?
I discovered over $100 million had been generated in the second royalty that they had never been paid because of inefficiencies in the system. There were no pipelines, no way to do this, and we began to recover that money.
Along the way, as we got to the end of my TuneCore tenure, I launched a second company in 2012. I left TuneCore and launched a company called Audiam. The $100 million that hadn't been paid to the Dolly Partons of the world, the songwriters, never left my mind.
When Audiam was born—my new company—I thought we really needed to go to work for the Dolly Partons of the world, or the people who work for the Dolly Partons of the world, and ensure their music is licensed and being paid for by the streaming and other digital music services. That's what Audiam now does—it licenses and collects money for Bob Dylan, Metallica, Red Hot Chili Peppers, the people who wrote the songs, who sometimes are the same people who did the recording.
We discovered, in the United States and in Canada, massive infringement. The digital music services were using these compositions, these lyrics and melodies, without licences, and they were doing it without any payments either. We embarked on a way to help remove that friction in licence and work with many of the people I'm sitting here with.
But the thing that has really stuck with me that I want to drive home to you as a committee is that the majority of copyrights that are being produced, created, distributed today in music come from the “everybody else”. They come from outside of that traditional industry. Their market share is growing as far as revenue and market share are concerned, while the major music record labels' market share is declining. It's these people who are being impacted by what's happening today, because they're getting the larger market share. As you go forward in time, the volume of copyrights that is being created will continue to be propagated from the diaspora, the “everybody else”.
The really important point is that traditionally you would have a multinational corporation like Sony, one entity with three million copyrights; now you have three million individuals, each with one copyright. The way these people are impacted is contingent upon rulings, regulations, rates and so forth—copyright, and what should and shouldn't be licensed—but remember now it's about the individual as opposed to a multinational corporation, in many respects.
Two kids in their bedroom came to TuneCore, as one example of thousands. They wrote a song about sexting and sold over one million copies of this song around the world with no idea that they had earned these royalties. Their money ultimately was taken and given to the large music publishing companies—Universal, Warner and Sony—based on their market share, because they didn't even have the information to know that they earned it.
That's a quick summation of me and my company, and I suspect that's why I'm here today.
Mr. Chair and members of the Standing Committee on Industry, Science and Technology, on behalf of Facebook, I want to thank you for giving us the opportunity to speak to you today.
My name is Kevin Chan, and I'm the head of public policy at Facebook Canada. I'm joined by Probir Mehta, the head of global intellectual property policy.
At Facebook, we encourage creativity and the spread of culture online. We believe that, through Facebook, content creators from all walks of life, including musicians, sports leagues, publishers and television or film studios, are given new ways to share their content, attract the offline audience and promote their creativity.
Facebook also gives rights holders tools to protect and promote their content, while protecting the right to freedom of expression for all users.
I want to start by sharing some concrete examples of how we're working with artists, creators and cultural institutions across the country to promote and empower their work.
Many copyright holders have Facebook pages and use our tools to promote and expand the reach of their content. At Facebook Canada we have a partnerships team whose mandate is to work with publishers, artists and creators to help them maximize the value of the Facebook platform by reaching new audiences, engaging directly with fans and promoting their work here in Canada and around the world.
For the last two years, this team has led a partnership with the National Arts Centre, helping it fulfill its mandate of being an arts centre for all Canadians across the country. For the recent Canada 150 celebrations, Facebook was proud to have been the NAC's digital partner as its musicians and artists travelled across the country connecting with Canadians both physically and online.
To give you just one example, with respect to the NAC English Theatre's recent Tartuffe tour to Newfoundland, the sharing of some of the tour's content on Facebook allowed the NAC to greatly expand their footprint in the province, reaching over 395,000 Newfoundlanders online, or about 75% of the province's population.
We're also focused on supporting emerging creators, helping them engage and grow their community, manage their presence and build a business on Facebook. For three years we have supported emerging Canadian music artists through the Canadian Academy of Recording Arts and Sciences master class program, participating as mentors on how to reach new audiences on Facebook.
Finally, many cultural institutions are non-profit organizations with charitable status, and earlier this month we were very excited to have launched several new ways for charities in Canada to fundraise directly on Facebook. We make this service available without charging any fees and are thrilled that around the world over $1 billion has already been raised in this way directly on Facebook. We are looking forward to having an equally positive impact in Canada.
Facebook takes the protection of rights holders' intellectual property seriously. To that end, Facebook has implemented a number of measures to help rights holders protect their rights through a rigorous global program to combat copyright infringement.
We have three pillars to our intellectual property program.
First, our terms of service and community standards are the foundation our platform is built on. They expressly prohibit users from posting content that infringes any third parties' IP rights or otherwise violates the law, and they state that users who post infringing content will face penalties up to and including having their accounts disabled.
Second, our global IP protection program provides rights holders with opportunities to report content that they believe is infringing. We have dedicated channels for rights holders to report instances of infringement, including via our online reporting forms available through our intellectual property help centre. Reports can be submitted for a variety of content types, including individual posts, videos, advertisements and even entire profiles and pages. These reports are processed by our IP operations team, which is a global team of specially trained IP professionals who provide 24-7 coverage in multiple languages, including English and French.
If a rights holder's report is complete and valid, the reported content is promptly removed, often within a few hours. We also implement a comprehensive repeat infringer policy, under which we disable Facebook profiles and pages that repeatedly or blatantly post infringing content. Users who have their content removed in response to a report are notified of that removal at the time it occurs. These users are also provided information regarding the report, including the name and email address of the rights holder that submitted the report in case the parties wish to resolve the matter directly.
Third, we continue to invest heavily in state-of-the-art tools that allow us to protect copyright at scale across our platform, even if no rights holder has reported any specific instances of infringement.
We have developed our own content management tool, Rights Manager, to help rights holders protect their copyrights on Facebook. Participating rights holders can upload reference files, and when a match is found can decide what actions to take: blocking the video and thereby eliminating the need to continuously report matches as infringing, monitoring video metrics for the match, or reporting the video for removal.
For many years, we have also used Audible Magic, a third party service that maintains a database of audio content owned by content creators, to proactively detect content that contains the copyrighted material of third parties, including songs, movies and television shows. If a match is detected, that content is blocked, and the user that uploaded the content is notified of the block and given the opportunity to appeal if the user has the necessary rights.
In our transparency report released just a few weeks ago, we highlighted data covering the volume and nature of copyright reports we received, as well as the amount of content affected by those reports. During the first half of 2018, on Facebook and Instagram we took down nearly three million pieces of content based on nearly half a million copyright reports.
Lastly, Facebook believes that the copyright regime should represent everyone's interests. Regimes such as the one in Canada are flexible, and they promote innovation while protecting the intellectual property of rights holders.
Facebook hopes that the committee will continue to maintain the innovation-friendly regime of the Copyright Act, in order to promote the development of new content options and new ways for creators to launch their business and build a name for themselves.
Thank you again for the opportunity to appear before you. We would be pleased to take your questions.
Thank you, Mr. Chair. We appreciate the opportunity to participate in your review.
Google has over 1,000 employees across four offices in Canada, including over 600 engineers working on products used by billions of people worldwide, and ads and cloud teams helping Canadian businesses make the most of digital technology.
Canadian businesses and creators of all kinds use our products and services to connect with consumers and monetize their audiences. According to a recent economic impact study published by Deloitte, which I believe has been distributed to the committee, businesses, publishers and creators generated up to $21 billion in economic activity last year alone, supporting hundreds of thousands of jobs.
The essence of Google’s remuneration and revenue models is a partnership model. Creators such as publishers, producers and developers supply content, while we provide distribution and monetization, technical infrastructure, sales, payment systems, business support and other resources. We then share the resulting revenue, the majority of which goes to the creator every time.
Partnership means that we only earn revenue when our partners earn revenue. It is in our interests to ensure our partners’ success and sustainability. This is why we invest significantly in technology, tools and resources to prevent piracy on our platforms. The Internet has enabled creators to connect, create and distribute their work like never before to build global audiences and sustainable revenue streams, but this new creative economy must ensure that creators can both share their content and make money from it, including cutting off those who would pirate that content.
Five key principles guide our substantial investments in fighting piracy: create more legitimate alternatives; follow the money; be efficient, effective and scalable; guard against abuse; and provide transparency.
The first principle is to create more and better legitimate alternatives. Piracy often arises when it is difficult for consumers to access legitimate content. By developing products that make that easy to do, Google helps to both drive revenue for creative industries and give consumers choice. For instance, the music industry has earned over $6 billion in ad revenue from YouTube, including $1.8 billion in the last year alone.
To do this, we offer a variety of services: ad-supported services like YouTube, subscriptions like Google Play Music and YouTube Premium, and transaction-based services like Google Play Movies & TV. We also support emerging forms of monetization, such as in-app purchases in Google Play Games, and YouTube memberships and Super Chat, which allow users to directly support their favourite creators. Also, we’re finding new ways to allow creators to develop other revenue streams, such as merchandising, ticketing and brand sponsorships.
We want creators to diversify revenue and reduce dependence on ads or subscriptions. This not only helps them build sustainable creative businesses but also insulates them against the negative impacts of piracy.
The second principle is to follow the money. Sites dedicated to online piracy are trying to make money. We need to cut off that supply. Google enforces rigorous policies to prevent these bad actors from exploiting our ads and monetization systems. In 2017 we disapproved more than 10 million ads that we suspected of copyright infringement and removed some 7,000 websites from our AdSense program for copyright violations.
Third is to provide enforcement tools that are efficient, effective, and scalable. In Search, we have streamlined processes to allow rights holders to submit removal notices. Since launching this tool, we’ve removed over three billion infringing URLs. We also factor in the volume of valid removal notices in our ranking of search results.
On YouTube, we’ve invested more than $100 million in Content ID, our industry-leading copyright management system. Content ID allows rights holders to upload reference files and automatically compares those files against every upload on YouTube. When Content ID finds a match, the rights holder can block the video from being viewed, monetize the video by running ads against it or leave the video up and track its viewership statistics.
Over 9,000 partners use Content ID. They choose to monetize over 90% of the claims—and 95% in the case of music—and we’ve paid out over $3 billion to these partners. Content ID is highly effective, managing over 98% of copyright issues on YouTube and 99.5% in the case of sound recordings.
These are just a few of the enforcement tools that we make available for creators and rights holders.
Principles four and five are to guard against abuse and provide transparency. Unfortunately, some do abuse our tools, making false claims in order to remove content they simply don't like. We invest substantial resources to address this and publish information on removal requests in our transparency report.
Google is generating more revenue for creators and rights holders and doing more to fight back against online piracy than it ever has before. Intermediary “safe harbours”, such as the measures clarifying liability of network and hosting services, introduced in 2012, are essential to this.
Indeed, such protections are central to the very operation of the open Internet. If online services are liable for the activities of their users, then open platforms simply cannot function. The risk of liability would severely restrict their ability to allow user content onto their systems.
This would have profound effects on open communication online, severely impacting the emerging class of digital creators who rely on these platforms for their livelihood and curtailing the broad economic benefits that intermediaries generate.
Similarly, limitations and exceptions in the act, such as fair dealing, provide critical balancing by limiting the exclusive rights granted so as to encourage access to copyrighted works and allow for reasonable uses.
One of these uses is information analytics, also referred to as text and data mining. In order for machine learning systems to learn, they need data-based training examples, and it is often necessary for the data sets to be copied, processed and repurposed. In some cases, these data sets may include material protected by copyright, like training an automated text translation system using a corpus of books translated into multiple languages. Unless there is an exception to allow this technical copying, processing and storage, machine learning could infringe copyright, even though the algorithm is merely learning from the data and not interfering with any market for that data or impacting the use by the authors.
It is unclear whether this activity would fall within existing exceptions, putting the Canadian government's substantial investments in artificial intelligence and Canada's significant competitive advantage in this field at risk. We strongly recommend the inclusion of a flexible copyright exception that would permit these types of processes and give much-needed certainty.
I'm happy to discuss these issues with you in more detail and I look forward to your questions.
Thank you for inviting Spotify to contribute to this committee's statutory review. My name is Darren Schmidt. I'm senior counsel at Spotify, responsible for content licensing in Canada and globally.
I'm delighted to talk to you about Spotify, and particularly about the benefits of our service to recording artists and songwriters, as well as their fans.
We've also been requested by this committee, as well as the Standing Committee on Canadian Heritage, to explain generally the various ways that we pay royalties to rights holders, recording artists and musicians.
First, let me introduce the company.
Spotify is a Swedish company that was created in Stockholm in 2006. Our service launched for the first time in 2008, and it was made available in Canada in 2014. Our mission was, and remains, “to unlock the potential of human creativity—by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired” by these creators.
Spotify is now available in 78 markets, and it has more than 191 million active users every month and 87 million paying subscribers. Through August 2018, it has paid over 10 billion euros back to rights holders around the world.
Spotify has heavily invested in the Canadian music industry, and it supports the creators of music, whether they are songwriters, composers, recording artists or performers. Spotify has given Canadian artists great exposure via its playlists. Some of Canada's most popular weekly playlists on Spotify are Hot Hits Canada, with half a million followers, and New Music Friday Canada, with 250,000 followers. In fact, even released a playlist on Spotify.
More than 10,000 unique Canadian artists have been promoted through Spotify's editorial and algorithmic programming in the past month alone. Spotify has identified over 400 Canadian artists with over a million streams just in this year to date, three-quarters of which also have what could be described as a hit song—that is, one track that has produced over a million global streams since Spotify launched.
In 2017, the Government of Canada and Spotify celebrated Canada's 150th anniversary with a focus on Canadian music, promoting influential Canadians' playlists across digital outlets. We inspired Canadians to celebrate this nation's birthday with music. The campaign was complemented with substantial advertising, digital media and on-platform support.
Just this fall, we launched a campaign specifically targeted at growing our francophone hip-hop audience, and it includes marketing and editorial partnerships with prominent blogs in Quebec.
While Spotify does not typically have a direct financial relationship with recording artists and songwriters, as I'll describe shortly, it knows that the music industry as a whole is growing again after a terrible run in the early 2000s. Canada, like many markets, entered a steep decline in revenues as piracy sites like Napster, Grokster and others took off. Broadly speaking, recorded music revenues nearly halved since their peak in the late 1990s, and in Canada it was no different.
However, things have changed much for the better. Not only is the global music industry back to growth, but so is music in Canada, and 2017 was the first year that revenue from music streaming accounted for over half of the overall music market. The IFPI—that's the global organization representing record companies—has reported that the music industry in Canada has had three successive years of growth. This is a remarkable achievement, given that revenue from streaming was negligible just five years ago. Spotify, since launching, has been a big part of that comeback story.
I want to turn now to providing some detail for this committee about how Spotify licenses its music and how those licenses result in payments to rights holders and creators.
By its nature, Spotify's service is one that relies on licenses from rights holders in order to get content on its service, rather than on user-generated content. As I believe the committee is aware, music has two separate copyrights associated with it, one for the composition and a separate one for the sound recording. The copyrights to the songs are typically held by music publishers, while the sound recordings are typically owned by record labels. Spotify obtains its licenses from both sides of this divide.
For the sound recordings, it obtains global rights from large and small record companies, as well as from—although rarely—some recording artists directly, to the extent that they control the rights on their own recordings.
With regard to the music publishing side—that is, for the songs underlying the recordings—the world is much more fragmented and difficult. This fragmentation has two primary causes.
First, unlike sound recordings, it's relatively common for a musical composition to be owned by several different entities. Consider the track In My Feelings by recording artist Drake. The copyright for that track is controlled by a single record label, Cash Money Records, distributed by Universal Music Group, my former employer. However, the song underlying that track has 16 different credited songwriters, along with five different music publishers, each controlling a different percentage of those rights. Here we have an example of per-work ownership fragmentation.
Second, depending on the territory, different kinds of entities or royalty collection societies control different kinds of rights. Canada is a good example. In Canada, Spotify has a licence with SOCAN for the public performance rights of the compositions, but the reproduction right, or the mechanical right, for those same compositions comes from other entities, primarily CSI, which is itself a joint venture between CMRRA and SODRAC, for now, along with some others.
Spotify pays SOCAN, CSI and others, and those entities in turn are responsible for distributing those royalties to rights holders, songwriters and music publishers. I should note that I’m leaving a lot out for the sake of brevity—primarily about how in Canada, unlike in some other territories, there is no blanket mechanical licence, which would be very helpful. It is my understanding that certain statutory changes are under consideration today, or will soon be under consideration, that could effectively remove the existing blanket licence for public performance. These issues, and the resulting increase in fragmentation they represent, make it more difficult to ensure that songwriters are identified and appropriately paid for their contributions.
There are a lot of other changes forthcoming in the market. For example, SODRAC has been acquired by SOCAN. These changes may substantially change the licensing landscape. In any event, the fact that Spotify pays entities who then distribute royalties to their members means that Spotify does not generally have visibility into the amount that an individual creator receives for their creative contribution. This is true in Canada and also in the rest of the world.
In summary, Spotify was a late entrant into Canada due to our determination to respect copyright and seek licences rather than rely on copyright safe harbours. Since launching in late 2014, our story, and that of Canadian music, has been one of success.
Today, millions of Canadians are choosing not to pirate music but to access it legally. This encapsulates the origins of Spotify. We had an innate belief that if we built a legal and superior alternative to stealing, artists and songwriters would thrive. That work has begun, and we still have a long way to grow.
Thank you for letting us contribute to this study. We look forward to answering your questions.
Some numbers have been bandied about up here, and I want to provide perspective on those.
A million streams on Spotify generates in the United States—and this is somewhat commensurate in Canada—somewhere in the neighbourhood of $200. That does not make a living.
What's interesting is the value of getting a million streams. It means you probably have at least 100,000 people streaming your music. How much would you pay as a technology company to hire someone to bring you 100,000 users? What is the financial value of that to an investor or an IPO?
This is unfortunately where we have a diverging of interests. Pandora has never made money. Spotify, with market capital over $25 billion, has never made money. YouTube, before it was acquired for $1 billion, never made money. The value of those entities was predicated on their market share. It's the musicians' music that attracted the users to utilize the technology, which was rewarded by finance and Wall Street in the form of IPOs and sales, and there's nothing wrong with that.
What I do have an issue with is when I hear these companies getting upwards of a trillion-dollar market cap, or a half-trillion-dollar market cap, who have aggregated the world under the umbrellas that we're sitting with here. Facebook Google, Spotify—all wonderful companies—have hundreds of millions, billions, of users aggregated under those umbrellas with market caps up in the tens or hundreds of billions, yet they're turning around and giving someone—this is a real royalty rate in the United States—$0.0001 U.S. per stream on their ad-supported platform. Something's not right.
I wouldn't agree with that.
Number one, it's worth noting that on the music side, we're actually a licence platform. We have thousands of licence agreements with collectives, publishers and labels worldwide. They feed what we call “YouTube main”, the general online video platform, as well as some of the specific music-related services we have, such as Google Play Music or YouTube Music. We're operating in a licensed environment there.
Second, with respect to the broader user-generated content, despite the fact that we had the benefit of the safe harbour, which allowed us to operate the business, it still didn't stop us from implementing our Content ID system in order to basically manage that content.
I think it's one of the most powerful copyright management tools on the the planet. It allows all rights holders of any class, whether music or any other type, to monetize content uploaded by users and make revenue, or, if they choose, they can block it and take it off the platform if they want to drive revenue to other platforms. They can do that as well. That certainly didn't stop us from introducing it and working with partners so they could monetize.
User-generated content aspects are critical to an open Internet. This is the whole point. We have any number of very successful music artists—lately it's been Shawn Mendes—who essentially made their mark on the platform, and if it weren't for open platforms like this, they might never have been discovered. Justin Bieber is another classic example.
I wanted to ask Mr. Price a question, first and foremost, since we're talking about copyright. It would be good to discuss the topic with a creator, then to move on to user rights. Since Mr. Schmidt must leave before 5 p.m., I want to make sure that I can talk to him.
When I was part of the Standing Committee on Canadian Heritage, I had the opportunity to hear you speak by video conference from New York. I don't know whether you can answer my question. It concerned figures shared by an artist, songwriter and producer who was well aware of the value of these things. I'm referring to the brother of Pascale Bussières, David Bussières, a member of Alfa Rococo. He had a very successful piece that was played extensively on the radio. I don't have the exact figures on hand, but I know that he earned about $17,000. The piece was a hit about three years ago. I was wondering about the fees paid by Spotify. The fees amounted to $11, as opposed to $17,000 for commercial radio. That's a very clear example. How can this be explained when it was the same piece and about the same period?
Streaming platforms such as Spotify are the dominant model. That's the issue, as Mr. Price said. Everyone here is wonderful. All your products are wonderful. My girlfriend has just subscribed to Spotify, and she loves it. She finds it much better than Apple Music. That's not the issue. As Mr. Price pointed out, the issue is that the people who provide content can no longer make a living off it. I don't know whether you see how clearly these two amounts illustrate the issue. It's the same period, the same type of success and the same type of listeners. In Quebec, on the radio, he earned $17,000, whereas on Spotify, he earned $11.
How can you explain this?
It's Pharrell. Pharrell Wilson...?
Mr. Jeff Price: I just know him as Pharrell.
Mr. Pierre Nantel: Anyway, he complained so much about getting, in my approximation, about $300,000 for that song. It is ridiculous.
Twenty years ago that same type of worldwide hit, which made everybody dance in the street and feel happy, would have brought in something like $3 million for him, which should be very normal, because he enlightened the lives of everyone, which is the beauty of music.
Let me make it clear. I will check out that submission that you sent on this question. I can't wait to see it, because clearly this is something that....
You're tough to hate, because you have a great product. It's the same for Facebook and the same for Google. We all know that Google is in the top five of the most loved brands in the States, on both the Republican and Democratic sides. You can't be against Google. I use it all the time, but the reality is that in some markets, as I've said many times to you, we are not a northern domestic market; we are a bubble of France for whom copyright is super-important, just as it is in France.
I need to make sure that Mr. Price gets to say something, because in Quebec we have a very articulated industry where we know each other very well and we have a large importance for local content in our consumption of television or music. For us, we see the big difference.
Mr. Price, as an American artist composing and being so involved everywhere, would you agree that there's a mystery deal that has been done in the micro-pennies that are paid to artists? How on earth can a publishing house sign such deals with the streaming services?
Thank you to all of you for the presentations.
On May 8, 2018, the Fédération nationale des communications, FNC, which represents workers in Canadian communication and cultural industries, stated that Facebook and Google absorb a large majority of advertising revenues that previously went to newspapers and other news outlets, which has deprived the news industry of helping to sustain itself.
Along similar lines, News Media Canada referred to news aggregators, or your company operators, as free riders.
As part of their submission, FNC suggested creating a new category of copyright work, a journalistic work, which would provide journalists a collective administered right for remuneration for the dissemination of their works on the Internet.
If such a right existed, would it oblige Google, Facebook and other online service providers to pay royalties for news articles? How might this affect your operation?
Article 11 of the European Union's proposed directive on copyright in the digital single market would affirm the copyright of publishers for digital use of press publications. Would this include the publication or distribution of publications on Facebook and Google News? How would we ensure compliance with this new law? It was proposed.
I don't know if you're familiar with it, but it certainly would elevate and perhaps help the news agencies that are being shared on your platforms.
That's right. I think for the content we're talking about, rights holder content, if it shouldn't be on Facebook—we've talked a lot about music this afternoon—it would be taken down.
Obviously if a publisher had, let's say, a firewall around their content on the website, and then somehow somebody nonetheless was able to share their content on Facebook, we would obviously want to make sure we were in compliance and we would take down that content. In this case, when people are able to share news articles on Facebook, what I'm saying is that they have allowed for that sharing. They've allowed for people to take a hyperlink or a URL and put that somewhere else—for example, on Facebook. That actually, incidentally, sir, drives a lot of traffic to their sites.
I do want to say one other thing, if I may. We do take our responsibility seriously with respect to the news ecosystem. We know that many Canadians do, in fact, get at least some of their news from Facebook, so we are investing in partnerships. For example, we have a partnership with Ryerson University, with their School of Journalism, as well as with the Digital Media Zone, in which we're working with entrepreneurs to see what kind of innovative business models may emerge for the news ecosystem. That's the kind of work we're engaged with. We just finished with the graduating class of 2018. There are five start-ups that I think are going to make a really good run of it as businesses.
Those are the things we're looking at. I think the challenge with the proposal that I've heard is that it kind of relies on publishers and users to decide how much a particular piece of content is shared. Any kind of business model that's based on that would be at odds, I think, with how sharing actually works.
Yes, which is why the disintermediation of the label is so fascinating.
One of the biggest challenges I've had sitting here is being quiet. To be honest, there were so many times I wanted to jump in and say, “Wait.”
Remember from the do-it-yourself perspective that these are artists who are their own record labels. There is no middleman between them and their money in regard to the revenue for the sound recording.
With all due respect, the statement that there is no direct licence between some of the digital services and Canadian songwriters is patently false, depending upon what country you're in. In the United States, the DSPs—digital service providers—are required to go directly to the owners of the lyric and melody to get a licence with them directly and pay them directly every single month on the 20th of the month for the revenue they earned from the previous month.
There are plenty of mechanisms in place to assure they can figure out who has what split. The number one way they can do this is by saying, “We won't make the sound recording live until you tell us, record label”, and I can assure you that the record label will move heaven and earth to figure out who's supposed to get what money, because they need that sound recording live because it's their whole economic ecosystem.
In order to get artists paid—I've been thinking a lot about this—frankly, number one, artists need education. They don't understand what rights they have and what rights they don't have. They don't understand the difference between a sound recording and a musical composition. Let's start there.
Now let's move to the idea that you can't escheat someone's money, that you can't take someone's money and give it to somebody else who doesn't own the copyright; we just passed a law in the United States that now allows that to happen to Canadian citizens. If you're unaware of the Music Modernization Act, it says that your revenue can now sit in the United States in a newly formed organization called the mechanical licensing collective. If you don't understand in Canada and you become a member of that organization, your money can now be legally taken from you. You can't have black boxes anymore.
We just landed a rover on Mars today, for God's sake, and we can't figure out who owns copyrights? Come on.
When you move into how difficult it is to license, I agree—it is difficult. You know what? The music industry is hard. It's hard to learn how to play an instrument. It's hard to learn how to market and promote yourself and tour. It's hard to build Google. It's hard to build Facebook. This is a difficult industry, but that doesn't mean that we should turn around and take the people who create the stuff and say, “We're going to make you our employees so that we can accomplish our goals.”
I'm sorry, I'm getting off on a little bit of a tangent. It's just that some of the things I've been hearing I fundamentally disagree with.
So remove the black boxes, hold onto the money till the copyright holder is found, educate the artist community so they understand what rights they possess and where they can go to enforce those rights to collect their money, and then ensure that the DSPs using the music follow the laws. If you don't have the licence, don't use the music, and if you don't know whether you have the licence, you don't have one, so don't use it.
Mr. Chan, you mentioned earlier that you have a local team at the advertising sales office in Toronto. I'm sure that many people who know about public finances—which isn't the case for me—reacted strongly when they clearly heard that Canadian companies were required to collect taxes, but American companies weren't required to do so. It's still heresy, but it isn't your fault. It's our fault. It's up to us, the government, to resolve the situation.
Mr. Kee, Mr. Sheehan mentioned earlier that the Fédération nationale des communications, journalists' associations and cultural groups were complaining that your company now collects 50% to 80% of online advertising sales revenue. We're talking only about the information industry here. This situation has led to the loss of several thousand jobs.
I had a great-grandfather who worked in the ice box business. When the refrigerators and freezers arrived, he wasn't happy. He wanted us to continue chopping ice in the river and placing it in ice boxes. He lost his business. That's normal.
Our current news media may be less trendy and less modern than your company. However, in the past, advertising sales have enabled these media companies to hire many people. About 130,000 people work in the media industry in the area of advertising sales. If you've claimed 50% of these sales, how many jobs have you created in Canada?