CHER Committee Meeting

STANDING COMMITTEE ON CANADIAN HERITAGE

COMITÉ PERMANENT DU PATRIMOINE CANADIEN

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 12, 1998

• 0841

[Translation]

The Chairman (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): The Committee on Canadian Heritage is currently doing a study on the federal government's role in the area of culture in light of the challenges of the new millennium.

I would like to start by welcoming all our distinguished guests and thanking them most sincerely for coming to meet with us and give us their views.

As you can see, we have tried to do something different today. Usually, we hear from witnesses, who present briefs. However, this time, we decided to use the round table approach to foster a more lively discussion.

We began our study about one year ago, even before the election. The idea is to review federal government support programs and see how they will apply to the challenges facing us in the future, particularly given the very rapid rate of change in some areas.

[English]

The three main challenges that we have defined are, first of all, the advent of new technologies, especially communication technologies like the Internet, which are racing at an almost breakneck speed; secondly, the evolution of the global economy and global trade; and thirdly, the changing demographics of our country, which again are almost visible changes that are happening extremely fast.

First of all, the committee wanted to inform itself regarding the extent of these challenges. We heard from many experts, and also from officials from the ministries, so that we could get much more background information than we had to start with.

We have now decided to have these round tables in the second phase. We've had four of them so far, relating to the arts, to heritage institutions, to publishing, and, yesterday afternoon, to film and video. Today we will hear from you people from the broadcasting sector, and finally we will be hearing from the sound recording sector.

In the following weeks we're going to here from federal cultural institutions such as Telefilm, the National Film Board, and other federal institutions, after which we intend to travel to the various communities—and especially the smaller communities—to hear from people in the field on how they see themselves being able to face the challenges we share.

• 0845

I'm really grateful for your presence. You are all very eminent individuals, and you represent a really important cross-section in the real front line of your sector.

This is going to be a free exchange, so you can speak as freely as you like. We hope the exchange will be lively and informative for all of us. All of the round tables so far have been extremely stimulating. All you have to do is just raise your hand and you'll be recognized in that order. Of course, both official languages are in order.

Just as a guideline, we have prepared a series of five questions. You will find them in your papers, and you may address any of them or all of them in whatever order you choose. Since they are just a guideline, though, you don't have to be really tied down to them. They're just to give you an idea of the sort of information that would be most interesting to us.

To kick things off, I'd like the participants to introduce themselves briefly by giving their names and what they do.

We'll start with a great friend of the CBC, Mr. Jim Abbott.

Mr. Jim Abbott (Kootenay—Columbia, Ref.): My name is Jim Abbot. I'm the member of Parliament for Kootenay—Columbia, the Reform Party heritage critic, and a great supporter of CBC Radio One.

Mr. Kevin Shea (President and Chief Executive Officer, CanWest Global System): My name is Kevin Shea. I'm the president of Global Television Network, and I also oversee our new specialty service, the Prime Television Network.

[Translation]

Mr. Jacques Saada (Brossard—La Prairie, Lib.): My name is Jacques Saada and I am the Member of Parliament for Brossard—La Prairie, in Quebec.

Mr. Pierre Roy (President and Chief Executive Officer, Réseaux Premier Choix inc.): My name is Pierre Roy and I am the President and Chief Executive Officer of Réseaux Premier Choix, a division of the Astral broadcasting group.

[English]

Hon. Perrin Beatty (President and Chief Executive Officer, Canadian Broadcasting Corporation): I'm Perrin Beatty. I'm the president and chief executive officer of the CBC. I'm a great supporter of much of what Mr. Abbott has to say.

Mr. Bruce Cowie (Executive Vice-President and Chief Operating Officer, Baton Broadcasting Inc.): Good morning, Mr. Chairman. My name is Bruce Cowie. I'm the executive vice-president and chief operating officer of Baton Broadcasting, Toronto.

Mr. Ken Stein (Senior Vice-President, Corporate and Regulatory Affairs, Shaw Communications Inc.): Thank you, Mr. Chairman. My name is Ken Stein. I'm senior vice-president for corporate and regulatory affairs for Shaw Communications. We're based in Calgary, which is a great spot for Reform and for Liberals out west. I'm very pleased to be here this morning.

Mr. Abraham Tagalik (Chairman, Television Northern Canada):

[Editor's Note: Witness speaks in his native language]

My name is Abraham Tagalik. I'm the chairman of Television Northern Canada. I'm really glad to be here. I'm glad to know we're not the only cold part of the country right now. I'll be sharing a bit of the aboriginal side of things. Thank you.

Mr. Mark Muise (West Nova, PC): My name is Mark Muise. I'm the PC heritage critic and MP for West Nova, in southwestern Nova Scotia.

[Translation]

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): Mauril Bélanger, Member of Parliament for Ottawa—Vanier, in Ontario.

[English]

The Chairman: Who is prepared to start off? Don't be shy. Being from your sector, you should be used to it.

Mr. Mauril Bélanger: Give us a “Jim” of an idea this morning, Mr. Abbott.

The Chairman: Yes, Jim. Why don't you take after CBC television or something?

Mr. Jim Abbott: I'd be happy to throw the cat into the chicken coop here.

As you know, the Reform Party position relative to the CBC—and it relates to broadcasting overall—is that we are faced right now with satellites and with the multichannel universe that is a reality. I'd be very interested in getting Mr. Tagalik's perspective on this, a northern Canadian perspective. Of course, in southern Canada, I believe the figures show that about 90% of the homes are connected to cable; therefore the choices they have are not over-the-air choices.

The decisions that are made with respect to CBC television, as opposed to CBC Newsworld, are decisions—and I'm talking now about viewing decisions—that are made in a very broad universe. That's quite unlike my own, because I happen to be fortunate enough to have a home on a lake in the Rocky Mountains, so I have a choice of CBC or CTV, both snowily.

I guess where I'm coming from is that Mr. Beatty knows our position vis-à-vis the support of CBC Radio One, the support of public news gathering—that is, television news gathering—and the support of Newsworld, but the commercialization of the rest of the CBC television broadcasting, and this would apply because even Mr. Stein, with Shaw—their organization—is of course getting into broadcasting....

• 0850

There are no more distinctions. There are no more lines. People are broadcasting. People are putting programs together. People are using all sorts of different ways of communicating, be it satellite, LMCS, all the rest of it.

So here's my question, then, and this is what I would like to have an answer to: in realistic terms, what are the practical ways we could be looking at to ensure Canadian content that people are going to want to watch? I believe it's going to have to be content that people are going to want to watch. Would you agree that the real answer is in the production values of things that people want to watch as opposed to mandating what people are going to want to watch by regulation?

The Chairman: These questions are addressed to you, so why don't you start, Mr. Tagalik?

Mr. Abraham Tagalik: Being an Inuk and looking at the country as a whole and the whole globalization of everyone on this planet...we're so much closer together now that we have television, and we can communicate so easily now. Being an Inuk, I think we have something to offer, not only to Canada but to the rest of the aboriginal world. We're always looked on as a leader in what we're doing, and what we're doing in television is ground-breaking, I think.

You talked about the CBC. We totally support the CBC, but being an Inuk and an aboriginal person, I think we need to help the aboriginal community so much more than we need to help the other parts of the community or Canada in general. Anything we do for that cause is never enough.

Right now we're looking at starting a national aboriginal television channel that can be seen right across this country. We'll be applying for that in the spring, and hopefully by 1999 we'll have a channel that we can watch that is dedicated to aboriginals, which is from an aboriginal point of view, where we tell our own stories the best way we know how. That's the kind of thing we're looking for.

We're also looking for the government's help in funding more programs and more help on the distribution side and the legislation side.

Mr. Jim Abbott: What funding source would you be hoping for?

Mr. Abraham Tagalik: Basically we are under the northern native access broadcast program and also under the national distribution program, but those programs are just being cut all the time. We certainly don't want to rely on government funding. One of the things we're working on is basing it on cable revenues that go back into programming and into aboriginal programming. So we're looking to the CRTC for a good mandate for an aboriginal channel. I think the time is right for that.

I don't know if I completely answered your question, but I'm trying to explain where I'm—

Mr. Jim Abbott: I guess my question...and it wasn't supposed to be specifically to yourself, but I am very curious, because you do have the same access to satellite as anyone on the 49th parallel. Would you agree that the people in northern Canada are going to watch Canadian shows if they choose to watch Canadian shows as opposed to being mandated to watch Canadian shows or forced to watch Canadian shows?

By the way, I am in full support of Canadian shows. I think we have absolutely stellar shows that take second place to none. I'm not suggesting they're second-rate. I'm just asking if you would agree that is the avenue, that is, people will watch Canadian shows as opposed to being mandated, you must do this or you must do that, which are the standards CanWest, CTV and CBC are stuck with.

• 0855

Mr. Abraham Tagalik: Right. I think part of it is we have to legislate certain rules. You know we wouldn't have a strong Canadian television or music industry if it weren't regulated.

If you just let it go out the door and it's a free-for-all, I think when you look at the kids up north, they know what's happening in Detroit as much or more than they know what's happening in Vancouver or in Ottawa. I think when they're given a choice they watch the flashy American programming that is eye-catching and deals very well with controversial issues, or things like that.

If there is no regulation, I think we'll always lose out. But we can also fight back and produce a lot better quality programming, as you mentioned earlier.

When you look at the 500-channel universe today, a lot of it is all junk. It's all the same, no matter what channel you go to. It doesn't change from one channel to another. We have to keep producing real, culturally relevant programming for our people, not only for the aboriginal community but also for the Canadian people in general. I think we really have to keep this part of the market and this part of the industry actively going.

The Chairman: Why don't we hear now from Mr. Cowie?

Mr. Bruce Cowie: Thank you, Mr. Chairman. Jim has posed the classic question of the day in terms of what people want to watch.

A friend of mine many times uses this idea to explain the answer in the very simplest way: If you walk into a room and there are four television sets and they all have the same program on, the people watching those sets don't care whether they came from cable, from satellites, from a laser disc, or a VCR. What they're interested in is whether they like the program or not.

We've come to a time in the growth of the broadcasting industry in this country where we face programming Canadian programs from a much different perspective than we did 20 years ago. Canadian programming today is a survival instinct for broadcasters in this country.

As the spectrum widens, the more choice that is there, those things that make us distinctively different are Canadian programs. You've seen in the last two to three years major companies like Global, Baton, WIC, and others, who have been trying to arrive at a critical mass that allows the dynamics for them to tell Canadian stories and have them compete with U.S. programming. That's the challenge of the 1990s, and it's the challenge of the future of television broadcasting in this country.

The broadcasters have accepted it. They understand the challenge, and I think they're moving forward very quickly and are beginning to turn out top-quality shows, as Jim Abbott suggests, and there are many more to come. We'll talk, I'm sure, later on in this hearing this morning about some of the dynamics that need to be in place for that to happen.

The Chairman: Could I pass on to Mr. Shea now, please?

Mr. Kevin Shea: Just to echo Mr. Cowie's remarks, we can no longer, if we ever could, mandate Canadian viewing. Canadians have had the choice of perhaps the richest broadcasting system in the world, and they've had it for many years.

What we find with the growth of more and more competition, competition in more content and competition in distribution, which is bringing more programming from around the world to Canadian television sets—the only way we can be distinctively different is to provide unique Canadian programming. We need to get more of it, and we need to make it better.

We all hope that five or seven years from now there will be a variety of people appearing before this committee and others in this great city, saying, you know what, we've finally made it. We've finally made it whereby Canadian programming is being viewed by masses in Canada, it's profitable in Canada, and it's making money around the world.

• 0900

We're not there on the second point. More and more people are watching Canadian content primarily because—and it really is your first question—of the various incentives we put in place in this country to make it happen. We needed to do that and will continue to need to do that.

It's not profitable yet, but it is starting to be sold around the world. It's a great story with respect to the benefits of the various initiatives, the cable fund and Telefilm Canada, but we have to get to that next level and produce Canadian content that is truly a worldwide profitable commodity, because the rest of the world is moving in that direction.

I think you know Canada is now the second largest exporter of content in the world. Who would have thought many years ago that this could happen? We have to get more of it. We have to get better content, and we desperately need government to protect what we call in our business market rights, not border rights.

We're not sitting here saying keep American or European signals out of this country, but we have to find a way—and we shouldn't be shy about this—to protect the programming rights that we buy, that Ken Stein buys, and that Bruce Cowie buys, through rules and laws that protect us better than we have been to date.

The Chairman: Thank you.

The minister appeared yesterday during the film and video round table. She brought evidence of the various segments of Canadian content relating to publishing, film, and so forth. In television it was 42% of the total from the statistics she produced.

We also had evidence from some of the film representatives that echoed what you are saying, that today it's becoming more and more of a world market rather than just a domestic market. In the film business, when the Americans produce a film now, they produce it with the view of selling it around the world rather than in the United States and Canada.

Mr. Beatty, you are next. When you make your remarks, do you see the 40% being already an optimal position or do you see it increasing quite substantially? What should we do to address Mr. Shea's question about spreading the Canadian message around the world and making it a worldwide commodity so it becomes more and more profitable and sustainable?

Mr. Perrin Beatty: Perhaps I can frame the issue in a somewhat different way, just going back to Mr. Abbott's premise earlier.

We start by saying that from our perspective at CBC we're not looking to build walls around Canada. The days when you could have a protected market and command viewers to watch you are long since gone. They started to die with the advent of cable. They're certainly gone now that satellites can leap any boundary they can put in place. There isn't a wall thick enough or high enough that it can't be leaped over by a satellite or pierced by a fibre optic cable, and we have to recognize that. It has to be our starting point in framing policy in Canada.

Those of us in the broadcasting industry have to start from another premise. Looking at it in terms of the competition we're facing, we will never have less competition than there is today. Anybody who thinks he can build a business based on having a protected market, that viewers can be coerced into watching Canadian content if they don't want to, or that Canadian content should be treated as the cultural equivalent of cod liver oil—it tastes bad, but it's good for you so you're going to take it anyway—is using a strategy that's bound to fail.

Our starting point is that increasingly those walls will be coming down. We'll be seeing increasing competition. Power has shifted from behind the TV set to in front of it: the viewer is king. If Canadian cultural policy is to succeed or fail, it will succeed or fail on the basis of our capacity to produce programming that reflects Canadian values and perspectives and is attractive to people so they choose to watch or listen to it.

Let us by all means invite the best the world has into our living rooms, but let's also ensure there's still room for Canadian voices to be heard in Canadian homes. That's the fundamental question this committee has to wrestle with.

• 0905

I believe there is an appetite for Canadian content in Canada. I think Canadians do want to see programming that's relevant to them and that reflects their values, their needs, their aspirations, their dreams, and the challenges they face.

What is fascinating for me—and this is information we have not shared widely at this point—is we collaborated with others in the industry this summer on perhaps the most massive qualitative rating survey that has ever been done in Canada, and we're still analysing the results from that, but one of the figures that comes back from the results is that Canadians now, perhaps for the first time, rank Canadian programs, in terms of quality, as good as or better than what's available from abroad.

Canadian tastes are changing. The stigma that used to be attached to Canadian programming, where people's attitude was that if it's Canadian, it's not as good as something coming in from abroad, is changing. There's a significant market in Canada for Canadian programs.

Another issue, though, that the committee needs to look at—and it comes back to your question, Mr. Chairman—is the economics of our production industry in Canada. Can you produce Canadian drama and Canadian variety and pay down your costs, recover them fully, in a Canadian market? The answer on that is no, you can't today. It's not sustainable in the marketplace by itself, because of the size of our market.

The question then becomes, for those of us who are in the industry, how do you assemble the financing you need to enable you to produce programming in Canada and still be profitable, particularly for my colleagues in the private sector?

One answer is by exporting from Canada. CBC television is responsible for about 10% of the television exports from Canada, but our role in the system is somewhat different from our private sector colleagues' roles. That's why I believe a mixed public-private system is important for Canada.

We believe the money that is given to us by Parliament should be used by us to produce conspicuously Canadian programs—with our market being a Canadian market, with us aggressively trying to market the programs internationally, and with every sale we can make internationally bringing money in that we can reinvest, but our focus should be on producing programs aimed at Canadians, with the export sales being very much a secondary consideration.

A program such as North of 60, which is really quintessentially Canadian, we recognize is going to have limited international sales, but that's one of the reasons Parliament has mandated the public broadcaster and has helped to finance the public broadcaster: to produce programming aimed at a domestic Canadian market.

I think we can increase the number of Canadians watching Canadian programs. The great surprise and enormous pleasure for us was that when I instructed that we would Canadianize our English television prime-time schedule, we found that our audiences went up last year, notwithstanding the fact that we were facing even greater competition than ever before.

This highlights what my colleagues were saying earlier. In a 75-, 100-, or 1,000-channel universe, what makes you distinctive, what sets you out from the pack, what allows you to offer something nobody else is offering? My answer would be it's those programs that speak to who we are as Canadians. And it's on that course that we've set our future in the CBC.

This committee, by encouraging policies that recognize the changes that have taken place in the marketplace and in technology, can help to promote the development of a vibrant, exciting Canadian culture in the future.

The Chairman: Thank you.

Next on my list is Mr. Muise.

Mr. Mark Muise: Thank you, Mr. Chairman.

I have a slightly different tack. I'm just wondering, with all the different mediums to distribute or to have information sent out on these days, with the convergence of those various technologies, how will that impact on the broadcasting industry?

Further to that, how will the Internet itself impact either negatively or positively on the broadcasting industry, and how can or should the industry be protected, if at all? I've heard that we can't do that now, but I'd just like some discussion on that to see what your thoughts are.

• 0910

Mr. Kevin Shea: From a broadcaster's perspective, we don't have a firm grasp yet of what the impact of fragmentation will be as a result of new distribution technologies. We certainly know the impact of the fragmentation because of new channels, where we've seen in North America conventional broadcasters such as Global or CBC, ABC, and NBC significantly lose market share. There are now 100 channels.

We live in both a very interesting and beneficial broadcasting environment in Canada. By and large, most people see content either over the air or by cable. Satellites have had some impact, but it's predominately in rural Canada and they are predominately foreign subscribers, unfortunately. They're looking at American satellites as opposed to Ken Stein's offering.

But in the next couple of months we're going to see the introduction of new over-the-air MMDS and LMCS, all sorts of new technologies that will impact broadcasters, because we won't have the convenience of the rating system that's currently now available or exclusive to the cable industry. Our channels could be carried differently. We won't be on channel 3 necessarily on the cable system; we might be on channel 22 on some LMCS system. It makes promotion very difficult. We don't know if they're going to be providing program substitution, which is fundamental to rights protection in Canada.

So we have a bunch of “ifs” in front of us. We really haven't seen the full impact vis-à-vis people buying these new services. We do know, though, that where there is a real live, no regulations environment in the U.S.A., new technologies, versus the cable industry, have had limited impact. By and large, Americans are sticking to either their off-air service or cable television. DTH and all the new technologies have had limited impact in urban America.

While I favour competition, our prediction and our hope is that it is the backbone of the cable industry that has kept this country connected to watch both the best Canada and America have to offer and provide rights protection in the middle vis-à-vis program substitution.

New technologies frighten us from purely a monopolistic point of view. It's coming. Will they have impact? I think we'll have a better sense in about four or five years. My hunch is that Canadians will stay connected to Canadian cable television systems.

The Chairman: Mr. Stein, do you have a comment?

Mr. Ken Stein: Yes, both to relate to the question and also in terms of your opening question, Mr. Chairman.

I think Kevin is correct that the strength of cable television in North America, in Canada and particularly in the United States, is there and will continue to be there for some time. But there's no doubt in anybody's mind that in order to be competitive cable television has to embrace the new technologies and has to lead in the development of new services just as well as anybody else.

At Shaw our main objective, which goes back to Jim Abbott's earlier comment, is to try to break down the barriers. We're trying to be one of the world's leading distribution technologies, whether that involves cable or satellite delivery or any other means of technology. We've now totally converted all of our systems serving the city of Calgary to digital television, where people get pay services or choice television via digital boxes. We're probably North America's, if not the world's, leading deployer of that new technology.

Of course, we were finally successful in being able to participate in the development of direct broadcast satellite services. So in terms of the technologies, we think one has to continue to invest and to develop that new technology. You can't just sit back and say okay, here it is and it's strong. As a $750-million-a-year company we're spending $200 million a year alone in capital expenditures just to try to keep extending that fibre through the interior of British Columbia and making sure we're rolling out dishes and that type of thing.

• 0915

On the other side of this, of course, is also programming. As many of you know, we now do own YTV, and we're trying to build on the tremendous success that Kevin built in terms of probably, in my view, the world's best children's television service. I think that, as a country, we've done an awful lot of things right in areas that we have specialized in, and children's programming is one area in particular. It's not just YTV or the Shaw children's programming initiative. Michael Hirsh at Nelvana is now responsible for programming Saturday morning on CBS.

So these are things that, as Canadians, we can really take a lot of pride in. I think those kinds of successes, both what we've been able to do in the distribution technologies as world leaders in that area and what we're able to do on the programming side, mean to us that the future is just going to be tremendously exciting as long as we continue to break down the barriers.

In this country, we've done a number of things right. The Canada Television and Cable Production Fund was originally a private sector initiative. It was presented at a hearing by J.R. Shaw and his colleagues as being a way of trying to foster and develop more Canadian programming. It's certainly correct that this government has strengthened and ensured the continuation of that fund, and it has brought to it pubic moneys that are crucially important to ensuring that this sector can continue. That's an example of the kind of good things government can do.

There's the fact that the commission has established a framework for the launch of new services over the last ten years. We now have 44 cable, pay, and specialty services in this country. It's a tremendous record of achievement in terms of being able to launch those new services and to have Canadians watch those services in amounts we have not seen before.

What we have not done right in this country is that we have continued to stick to the old boxes. If you're a cable company, you're a cable company. If you're a broadcaster, you're a broadcaster. If you're the CBC, you're the CBC.

The future world is going to be driven by the people who are in broadcasting, cable, and computer software.

I also happen to be chairman of Sergio Marchi's committee—Kevin's one of my committee members—the special advisory group on international trade for culture. It's interesting that the leading advocates of the government who are doing more in this area come from the new technologies. They are saying that the driving force of the new economy is going to be knowledge and information. This means that culture and the people who work in it—these are producers, film creators, writers, directors, and software producers—are no longer sort of a fringe, marginal group on the side of the real economy. They are now going to become—or they are—the central part of the new economy.

So I think that what we have to turn our minds toward is creating a new version of how we look at broadcasting. I think we have to take a view of it that says we really have to find ways of encouraging investment and reducing constraints. We have to meet our Canadian objectives, but we have built a strong enough, I think, sense of what we can do in this country that we really have to be able to take that global. We have to be able to break down the barriers so that we can have the kind of integrated companies in this country that we are up against as we deal outside this country in the future. Thank you.

The Chairman: Mr. Stein, I think you bring an important point forward. Yesterday, we heard quite a lot about this cross-channelling and integration. Independent producers were saying that the CBC and others should do much more to interact with them and help them in their productions. There was also talk about a bigger use of co-ventures.

Maybe you could address these things and tell us as you go along what we should be suggesting in regard to changes that can be brought about to make this integration more effective or to bring it about.

Mr. Ken Stein: Well, I wouldn't want to comment for the CBC.

The Chairman: No, no, I didn't ask you to do that.

Mr. Ken Stein: No, I understand, but I will anyway.

Mr. John Godfrey (Don Valley West, Lib.): Everybody else does.

Mr. Ken Stein: Everybody else does. Thank you, John.

But I think the CBC has in fact made great strides, as have others—TVOntario, YTV, and Global—in terms of working with independent producers. I think we are today seeing more of those kinds of alliances.

• 0920

The point I'm making more is.... For example, Robert Lantos' company Alliance.... We've had discussions over the last few years about video on demand, with everybody saying “Oh that's a pipe dream. Who's going to do video on demand?” Robert Lantos and myself and J.R. Shaw got together and we talked about it. We said, well, why don't we go for it? Why don't we try to develop a video-on-demand service? You need a little bit of hardware knowledge and a lot of software knowledge and film industry knowledge. So we formed an alliance, a partnership—Shaw has 50%, Alliance has 50%—and we went forward to the commission for a licence.

Everybody said, what the heck's the cable industry doing getting into the video-on-demand business? We sat there and looked and said, why aren't we getting into...? I mean, everybody's saying we should be leading in these areas; we shouldn't be throwing roadblocks.

Too many times in this country people try to throw out the breaks. They try to put too many constraints on people, rather than saying let's go at this. I remember you had Bernard Ostry here, and I remember, back when I was a lot younger person, trying to work on communications policies as an official. There was a certain view around—you know, “Let's wait. Let's develop the policies first for cable television and then we'll let it happen.” And that's just totally wrong.

What you have to have happen is you have to get into the bobsled and you have to get down the track. Then you just have to drive as well as you can to stay on the track. But you can't wait at the top and plan your route out. By the time you do that, the race is over. You just have to get in there and go for it.

The Chairman: Thank you.

[Translation]

Mr. Bélanger.

Mr. Mauril Bélanger: Thank you, Mr. Chairman.

[English]

I would want to hear a little more on the notion that you just raised, and that's the difference between television networks as distributors—hardware versus producers' content, programming—whatever vocabulary you use. What in your mind should the government be doing in terms of its own policies, its own regulations to encourage one direction or another?

I have a sense that the Canadian public sees TV networks as monolithic outfits that are really concerned about the bottom line, which is perfectly legitimate if you're in business. The public's view of that is perfectly legitimate as well, because that's not their concern.

Where does TV fit in as a social agent? Should the government indeed force the split of TV as distributors, as broadcasters, versus television networks as producers of programming? It's a concern or an idea that I'd like to see addressed.

Mr. Shea, I'd like to hear more from you on the notion of rights. Perhaps you've pushed the envelope a little further in terms of where you think the government should be going to protect those rights, which you've talked about twice, now. I would like to hear a little more on that. Is there an opportunity here, as we are about to try to propose a cultural policy for the Government of Canada, to insert some of those motions in there? I'll limit myself to that for now.

The Chairman: Why don't we wait, Mr. Shea? If you and the others can make a note of these points that Mr. Bélanger brought up, then when your turn comes, you can address them.

We'll go on to Ms. Bulte.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): Thank you, Mr. Chairman.

There are two things I'd like to address. One is export. How do we encourage the export of our Canadian product, especially, following what Mr. Bélanger said, for the independent Canadian producer?

I understand we are in the lead in exporting children's programming. There was an article in the paper recently about how the United States government had recently done our Canadian producers a favour, in a sense. They had mandated a certain amount of children's programming on PBS. Yet when I spoke to some of those independent producers, they said, “Well, it's great for us, sure. We get the exposure, but we don't get any money from PBS. They just give us a licence to have it aired.”

• 0925

It didn't make sense to me. Is there something we can do, as a government? Yes, we have the exposure to that market, but I understand that the chain of actually making money, where the producer starts to make money, is a long, long way down.

What do we do in return when we import programs? I'd be interested to hear from the CBC side.

Then again, about working with Canadian independent producers, what is the industry's...? I know it's important to have Canadian content, and yes, the cable fund is a wonderful thing that gives some of those independent producers the ability to get their shows funded. But I also understand it's done on a first-come, first-served basis. The major Canadian producers have this system in place to access that fund first. What can we do to assist the smaller, non-publicly traded company, who is a producer, to produce more Canadian content, and encourage that industry to grow?

The Chairman: I would suggest that our guests make a note of these things, and your turn is going to come.

I will now recognize Mr. Beatty, Mr. O'Brien, and Monsieur Roy, in that order, and then maybe you can address some of these points.

Mr. Perrin Beatty: Thank you very much, Mr. Chairman.

Perhaps I could go back to Mr. Muise's question about new technologies and observe that for those of us in this business, and for the development of broadcasting both in Canada and around the world, during our lifetime Moore's law will probably be more important than any legislation passed in any legislature anywhere in the world. What we're seeing is technological innovations taking place at a breathtaking speed, which are making it infinitely easier, day by day, to distribute signals both domestically in a country and around the world.

This has impacts in terms of national sovereignty. It has impacts in terms of the structure of established industry, such as the broadcasting industry in Canada today.

Where it drives us is to rethink who we are as the CBC. It comes back, in a sense, to Mr. Bélanger's question as well, about separation between carriage and content.

When the CBC was created 60 years ago, it was in part for the same reasons as we exist today, and that was a concern that Canada's airwaves were becoming Americanized. It was important for us to ensure that Canadian programming reflecting Canadian experiences and values would be heard in Canada as well.

A second reason, though, was an engineering reason—to extend signals to all parts of the country, to move outside the great cities or away from border communities and ensure that people could get their first radio signals.

That engineering function is largely gone at this point. There's no place in Canada, including in the far north, where there isn't a tremendous range of signals available. The issue isn't how do we deliver signals to people. The question is what those signals are and what the content is.

We in CBC have been doing a good deal of rethinking, and we're in the process of re-examining our strategic planning. Certainly where it drives me is to say: what is our business? We are not our stuff—our trucks, our studios, our transmitters, our cameras and so on—we're our content; we're our programs; and we are created and mandated by Parliament to connect Canadian eyes and ears with Canadian cultural content, and to do so in whatever way is most efficient and effective for doing so.

It drives me in this direction. First, that in our development, increasingly we should be welcoming the development of new media. It will fragment traditional, conventional audiences, but we may as well accept that. It's like complaining about winter if you complain about this new technology coming. It gives us some satisfaction to complain, but there's not a great deal that we can actually do about it just by complaining.

These technologies are coming. If our mandate is to expose Canadians to material that reflects their lives and values, then we should be using these technologies as effectively as we can to be able to connect our citizens with that content.

Increasingly, as we do our planning for the future, we're moving into new media. Even at the time that I was dealing with a $414-million financial monster, we committed ourselves to moving aggressively into new media, and we have one of the most popular web sites in Canada. That's just the front end of it, and I believe it's going to be ever more important for us in the future as a means of connecting with people.

• 0930

Digital radio is really a misnomer. It's not radio as we've known it; it's wireless multimedia, and it will give us the ability to reinvent the medium and to connect with people in a fundamentally different way.

Digitization in television allows us, both in production and in distribution, to do our business in a fundamentally different way from the way in which we've done it ever before.

But we in the CBC should be focusing ourselves on what is our key business. Our business is the content. Our goal should be, if there are a thousand roads into the home, to be in every one of them with Canadian content that's attractive and appealing to Canadians—to not lock ourselves into any one technology, but increasingly do what PBS describes: when they commission programs they're going to be showing on air on PBS, they refer to it as the executive summary of the work that's done by the producer, and they build onto that new media content and other content as part of the total package they're building at the time they conceive of the program.

So all of us have to start to refocus where our energy should be.

Should we be forbidden to be in the production business? We are doing more co-productions than ever before. We have more involvement with private producers than ever before in our history. We are working together with the private sector to a greater extent than ever before in our history, doing partnerships with Global, with WIC, with Atlantis, and with others in development of programming. On the web we're working very closely with Sympatico and with others—non-traditional partners—to develop new programs and services.

But I would caution the committee that in the United States, there used to be a prohibition on the ability of networks to produce their own programming. That's been done away with, and the American industry is moving in exactly the other direction.

The appeal I would make to the committee is don't put artificial legislative impediments in the way of the industry doing what makes sense, in terms of its organization, to most cost-effectively deliver programs and services to Canadians. Allow the industry the flexibility to respond as technology and the market change.

Finally, I bring us back again to what I was saying earlier. If our goal is preserving and enhancing Canadian culture, the challenge for us, both as parliamentarians and as members of the industry, is to develop policies that give incentives to create programming that is attractive for Canadians to watch, to see, and to hear.

We can export. We should do so wherever possible. We have a joint venture with Power Corporation in North American TV where we're programming two channels, Newsworld International and Trio, which are pumping Canadian programming into the United States at the present time. We'd like to extend that, and the government could be helpful if we are looking at taking the signal into other parts of the world. Other people in our industry would certainly be prepared to work with government as well in terms of extending their signals into other parts of the world.

The issue of rights is critical to us, and I'd simply underscore what's been said earlier on that. I would hope the committee would look very carefully at the implications of these new technologies for rights and what needs to be done there.

The Chairman: I'll recognize Mr. O'Brien, then Monsieur Roy, Mr. Abbott, and Monsieur Saada.

Mr. Pat O'Brien (London—Fanshawe, Lib.): Mr. Chairman, thank you.

First of all, my apologies for being a few minutes late. With the schedule around here this week, I think I'll support cloning. It's been rather hectic.

I have a couple of questions. In a meeting of this committee a week or so ago, we had an interesting idea proposed that what we really should do in Canada is not regulate Canadian content but rather regulate American content. I wonder what the reaction of some of our guests today would be to that concept of regulating American content, I guess the point being that we've come at it from the wrong point of view altogether.

Specifically, I'd like to hear at some point from Mr. Beatty. This is probably very easily obtainable, and maybe I should know this, but I confess I don't. I'm wondering what the level of support at the current moment is for the CBC, for its very entity. I hear everything from “Abolish it” to “Give it more money and strengthen it”. I hear more of the latter. I certainly support the latter, as an individual Canadian and parliamentarian, but I do hear the whole range, so I'm curious to know what your polls show and what can be done to educate the public and strengthen public support for the CBC.

• 0935

Finally, I'd like to hear from Mr. Tagalik at some point on specifically what challenges he faces in his capacity in television in the far north. What is the number one challenge he faces in that part of our country?

Thank you.

The Chairman: I hope everybody has taken note of Mr. O'Brien's questions. We'll go to Mr. Abbott, Mr. Saada, Mr. Roy, Ms. Tremblay, Mr. Cowie.

Mr. Jim Abbott: Thank you, Mr. Chairman.

We've been talking a lot about government regulation. The CBC is in a unique position in terms of extracting a tremendous number of government resources. In answer to Mr. O'Brien, I believe the number is just in excess of $850 million from the Department of Canadian Heritage, which represents about 40% of its budget. I'd like to address that because I think the question was raised earlier by Mr. Bélanger about how television is a social agent. Truly it is a social agent.

Last night when I was tuning in to The National, I turned on the CBC channel about 10 minutes earlier to what I think was a 9 p.m. program. The wonderful lyrics I was entertained with added the word “erection” to the words “Jesus Christ”. I don't think they were referring to a mechano set. I found it highly offensive. If I go to CTV, dealing with exactly the same topic, although not in the same aggressively sacrilegious theme the CBC took, I find Spin City to be somewhat off the wall.

My antipathy and the antipathy of many Canadians toward the CBC is that they have $850 million a year invested in this. My antipathy toward the CTV is significantly less because my choice is to turn it off. If a sufficient number of people turn it off, they will make a profit decision. That program will either be supported or not supported based not on whether I as one individual choose to leave it on or turn it off, but on what a group of people do; whereas I have no choice about listening to the sacrilegious garbage I heard last night.

When the CBC speaks about taking these programs that set us apart as Canadians, it strikes me that many Canadians, myself very much included, believe they have ownership by way of taxes in what is happening at the CBC.

If we take a figure of $850 million of my taxpayers' money going into the CBC, should the CBC not be more sensitive to what is of concern to Canadians in its programming? Don't the taxpayers deserve more sensitivity on the part of the CBC?

[Translation]

The Chairman: Excuse me, Mr. Roy, I forgot you. I will therefore give you the floor before Mr. Saada and Ms. Tremblay.

Mr. Pierre Roy: Thank you.

As a partial response to the question asked by Ms. Bulte about exporting Canadian programming, I would first like to assure you that independent Canadian producers do have access to the airways, to traditional distributors, to specialty channels and to pay television channels. I don't think Alliance, Atlantis, CINAR or Coscient would have become important players internationally had they not first and foremost been major producers here in Canada with access to Canadian broadcasting services. So I think that is the first rule that should be maintained.

As regards the new technologies, we have always been somewhat apprehensive. We always thought that the appearance of a new technology would result in the disappearance of the previous one. Cinema, television, and now the Internet, distribution resources, cable services, satellites and LMCS systems will enable us to reach new audiences that were formerly inaccessible, as is the case for certain French-language services. This will enable us to reach francophone audiences throughout the country that were formerly inaccessible. If you do not live in a majority francophone region, you do not have access to French-language services because of the lack of capacity of the cable networks and the fact that you can not be reached through the Hertzian waves. Technology now makes this possible. Thus technological developments will be very positive.

• 0940

In order regards to protect our rights, we must maintain a distinct Canadian market as regards broadcasting rights, to enable Canadian broadcasters to buy the right to broadcast foreign programs in Canada without having to compete with the American players.

Living beside a player like our American neighbour which has a concept of its domestic market very firmly rooted in its approach, we must maintain a distinct Canadian market for broadcasting rights. If we do not do this, it would be very difficult for broadcasters to have access to certain types of programs, because they would have to spend significant amounts of money, which would mean that they would not have Canadian dollars to spend later on. So this concept of a distinct market for broadcasting rights must be maintained at all costs, because of the close proximity of the Americans.

The Chairman: Thank you very much, Mr. Roy, particularly for these very specific suggestions that will be most helpful to us.

Mr. Saada and Ms. Tremblay.

Mr. Jacques Saada: Mr. Roy just answered my question in part. As a francophone, I am somewhat concerned, because, since the beginning of our discussion, I've been hearing about constraints. Mr. Shea referred to the fragmentation of the market and the need for exports for investments. Mr. Beatty spoke about examples of partnership with the private sector. I am sure it is quite natural, but all the examples mentioned were taken from a non-francophone context.

I am not questioning anyone's motives here. I would just like to ask you to help me understand. Is the new dynamic—and this is what interests the federal government—compatible with the maintenance and promotion of a francophone presence in broadcasting? If the context or the future are favourable in this regard, are there any very specific steps the federal government could take to encourage this?

The Chairman: That is a very relevant question, Mr. Saada. Perhaps you might make note of it, Mr. Roy, and answer it later, together with Mr. Beatty.

I will now give the floor to Ms. Tremblay.

Ms. Suzanne Tremblay (Rimouski—Métis, BQ): Personally, I am concerned about two things. Jacques just raised my first concern: the francophone community, the francophone communities throughout Canada. I am just back from a trip out West, during which I had access to Radio-Canada only, not even to RDI. I could only get the basic service, because the cable companies did not offer the other channels. Forty-five stations were available in the hotel where I was staying—44 in English and Radio-Canada.

During my trip out West, I saw Quebec's situation presented for the Western audience. The program Le Manitoba ce soir lasted 10 minutes, and it was followed by some news from Montreal and I saw Daniel L'Heureux on that. After this half hour of news on Manitoba ce soir, the international news was presented. I started zapping to see what I could find, but I never figured out which were the Canadian channels and which were American. At one point, I noticed that two stations were presenting exactly the same thing. So I got up and when to get the channel guide on top of the television set and I realized that at 8:30 p.m., right in the middle of prime time, CTV was showing exactly the same thing as an American channel. The two programs were identical: both the images and the ads.

So I am really concerned about the lack of access. It is all very well to say that the new technology will open up all sorts of options to francophones. However, if there is no political will on the part of the cable companies or the broadcasters, francophones will no longer have access to anything in very short order. As long as we can maintain Radio-Canada, they will have access to that, and nothing more. I find this rather sad. We hear a lot of bragging about many things, and all of the potential of the new technologies, but that is not the real situation. We are not delivering the goods to francophone minorities.

• 0945

The other thing that concerns me—and this may appear somewhat paradoxical—is the continual weakening of Canadian culture by the invasion of American programming. We have heard a lot of talk about deregulation, but I have less and less confidence in deregulation, because it leads to abuse. It leads businesses to continually try to make more and more profits. The ultimate objective of deregulation is to enable people with money to make more.

I am wondering why Canada is not considered a foreign country with respect to the United States, and why we do not have access to international channels, rather than to American channels. There is a CNN International channel, which is much more interesting than the CNN American channel. If this were the case, we would be recognized as a genuinely sovereign country. Why can we not be like other countries and have access to ABC International, CBS International, rather than having direct access to these much more American channels, which are making Canadians more American?

I think we really must react against this invasion, and be more open to the world, rather than to these American channels. I'm sure that technology could help us get out of this sort of... I don't know how to describe it, but the first image that comes to mind is a lobster pot.

Some hon. members: Oh, oh!

The Chairman: That's a very good question. I think we have given our guests a number of challenges.

I will now give the floor to Mr. Cowie.

[English]

Mr. Bruce Cowie: Thank you, Mr. Chairman. There has been a large number of questions since it came around the first time.

The Chairman: I know.

Mr. Bruce Cowie: I will not answer them all—you'll be pleased to hear that. I wish to respond to two of them, however.

One question dealt with the convergence of technologies and how Canadian culture will see its way through that on the television screens.

I had the pleasure of co-chairing a national working group for the Department of Canadian Heritage three years ago. Out of that report and out of that study, which was very extensive across this country, broadcasters chose not to bet on any technology.

Broadcasters chose to bet on storytelling. Through whatever gateway exists, whether it's direct-to-home satellite, whether it's cable, or any of the other modes of movement of information in the future, we wanted Canadian programming to come up first and we wanted Canadian programming to be competitive in each of those venues. That's the choice that those involved in that study, by consensus across this country, made.

There's enough information to indicate that most viewers will only watch somewhere between seven and ten channels, on average, at any time. They all have their favourites. They're not all the same. Our job, as conventional broadcasters and the CBC, is to be one of those seven or eight or nine channels.

To do that, we're going to have to provide a critical local service in the markets we serve across this country, and we're going to have to have storytelling in a dramatic form that will compete with programs from anywhere else in the world. It sounds very simple, but that in fact is the roadway into the future of television broadcasting in this country.

It's no longer a choice. It is no longer something the CRTC or communications is going to require us to do. If we want to be in the business, and if we want to contribute to the cultural agenda in this country, we have no choice.

I want to respond, Mr. Chairman, if I can, just briefly, to the smaller independent producers. There's a very serious problem, because if you take an extension of what I've just said, the need to discover Canadian stories to get them into a position to be told on the television screens in this country, you need to have a groundswell of development that will make that work.

• 0950

I have no intention of referring to our own company here, but by example, what we have done, because critical mass is required to compete...and I remind you that the population of Canada is about the same as that of the state of California. That's what we're competing with, so we need to get to every corner of this country and try everything we can to get Canadian stories told.

In our new Vancouver licence, which we believe will be a template for the future for private broadcasting in this country, there is national programming being produced from Vancouver, Canadian stories by Canadian producers, a program that now ranks in the top 20 in this country. In addition to that, there are transition funds for young Canadians who are working in industrial production and who want to do Canadian cultural shows. We're funding that now in Vancouver.

There are young producers who have one-offs or short series. They are being funded for the first time, and in fact, on that station, most of the regularly scheduled programs across the week are done by independent producers. It's a new way, and I think you'll see it spread out across the industry, because we can't tell all the stories, and the few small independent producers can't tell all the stories. We need more.

In addition to that, development agencies have been set up by us on both coasts, one in Halifax, one in Vancouver, and with independent funding in the prairies and at the central operations in Ontario. That's not unlike what Global or anyone else will do, because everyone has recognized that first of all you have to find the story, and then you have to tell it. There's a very simple adage in the business we're in: a great story told well makes good drama. A good drama is a story well told. So that's where we're all going.

Here's my last point on this. What the Government of Canada can do through its agencies is help us with the funding. There is not enough money available to make the programs that ought to be made and aired in this country. As Kevin said, it is not yet profitable. We're trying to get it there, but for the foreseeable future, there is going to be a requirement for funding in order for us to build this higher level of competitive Canadian shows.

Thank you, Mr. Chairman.

The Chairman: Thanks, Jim.

We have just a little upwards of 30 minutes left. This is getting very interesting and lively. It was from the start, anyway. I wish we had more time, but I have a long list of speakers and I think we have to address some of the questions the members put, so I would ask you to be concise so that everybody has a chance.

I will now recognize Mr. Tagalik and then Mr. Godfrey, and then I'll give Mr. Roy and Mr. Beatty a chance to answer the various questions that were put, especially in regard to French-language programming. Then it will be Mr. Bélanger.

Mr. Tagalik, go ahead.

Mr. Abraham Tagalik: Listening to the different angles, I think we all face some of the same challenges. I think if the CBC hadn't been given the history of support that it has, we wouldn't be here today talking in this forum.

I think when television was coming up north, the Inuit saw it as a challenge, as something that was going to erode our own culture. There were votes in the communities as to whether to allow television to come in or not, because so much changed, like the values it was presenting to the children, and the different role models.

For example, when the Archie Bunker show came around and you saw this old man who had no respect for his son-in-law and this son-in-law who had no respect for his father-in-law, what kind of role model do you see when that's presented in your home? In Inuit culture, you're supposed to respect your mother-in-law and your father-in-law. It was a real shock when that came into the homes up north, and people asked how someone could be like that. Yet, the Archie Bunker show was a sitcom, and it really presented values to our children that were never there before.

• 0955

I think being an Inuk and also representing the Indian population you hear “the only good Indian”. How are Indians portrayed in the media? Look at North of 60. Look at any movie you'll find anywhere and that same message comes across. I think if we're going to change that we have to allow the aboriginal community the same chances everyone else gets.

When I spoke to a young girl in Vancouver about setting up a national aboriginal channel, she said it's really good you're trying to do that. Her mother has no basic level of service at home where she can understand in her own language, in her own way of thinking. I think this is the ray of hope the CTNC, the national aboriginal channel, is looking at.

I think Mr. Cowie said funding is the major problem. I think that is the number one problem with our community. We look at ourselves as a ray of hope, and there are good role models and positive ways of presenting our culture. We really enhance Canadian culture. The Inuit building igloos and hunting and the Indians right across the country have something positive to offer. But so many times it's presented in a bad way. Anytime you watch a program on Indians, it's Oka or something negative that's presented. Then the picture gets blown up to make it worse than what it actually is.

I think we have to show things in a positive light from the right perspective. I think that's one of our biggest challenges.

We have high unemployment. We have high suicide rates. Look at the aboriginal community. We face a lot of problems, and a lot of them have to do with role models and how we're presented in the mainstream. I think we have to change that.

I have a lot to say, but I'll leave it at that. There's a lot of food for thought here in that we're looking for the same benefits the CBC enjoyed. We have to encourage the aboriginal community to come out and think positively about ourselves and the way we present ourselves. I think that's one of the challenges we face. Thank you.

The Chairman: Thank you very much, Mr. Tagalik.

Mr. Godfrey.

Mr. John Godfrey: I have a question for the private network folk. I'm trying to understand your business case for the future. I think I understand it from the past, because you lived originally in a kind of regulated monopoly where the real money was to be made by simulcasting—the very phenomenon Madame Tremblay described so effectively—whereby you took American programming that you bought for low.... You protected yourselves by putting your ads in at the same time the American networks were doing it. That seems to be the heart of the business.

Now the business, it seems to me, is being threatened in two ways. The first is by the multiplication of channels. It may be that there is a top seven, but it still poses problems. There's a decreasing audience as you get a larger and larger number of choices. You can offset that through specialty channels. You can use a number of strategies, but basically you don't get the kind of return you used to from that monopolistic position.

The second thing is that this monopolistic position clearly depends on regulation. You need a CRTC to defend your economic interests, because if it doesn't allow you to simulcast or if the new technologies mean it's simply uncontrollable, that through a satellite or through the emerging multi-channel universe you simply can't plug all the holes so that you're covering yourself, because there are so many options at different times, it seems to me that basically destroys the existing business case. I'm trying to figure out what the new business case is. I guess it's a question of show me the money. So far the only thing I've heard is, we'd like yours, to allow you to have more Canadian content. But I guess I want to know where the money of the future lies. Is it going to be in content if we don't fund you? Do you go out of business with all of these technological challenges? Is it going to be in specialty channels? Is it still going to remain in some fashion or other in the distribution and carriage system? Tell me how the technological challenges of today are going to affect the business case of the future for the private sector.

• 1000

The Chairman: At this point I'm going to recognize Mr. Stein, then Mr. Shea, and then Mr. Bélanger and Mr. Abbott. I'll ask Mr. Beatty and Mr. Roy to close, because I think the points raised by Mr. Saada and Madame Tremblay need to be addressed very importantly.

Mr. Stein.

Mr. Ken Stein: Thank you, Mr. Chairman. There are a number of very good questions that have been put on the table. I'm sure we don't have time to deal with all of them today. I would like to focus on a couple of them.

The first is the one Mr. Godfrey just posed, and that is what is the future business model. I think the future business model is going to be absolutely focused on providing customers—our subscribers, our viewers—with exactly what they want; that is, whether it's going to be through the Internet or whether it's going to be via satellite. The focus is going to continue to be on that. We have to be able to find means of ensuring that we meet their demands and their requirements.

The way the business is changing is that people are finding different ways of getting the product, of paying for it, and they want to access it in different ways. We have to be smart enough to be able to combine the technologies to be able to do that in a way they find attractive. So we always have to find new and better ways of being able to do it.

In terms of the new technologies and the questions of access, in particular the question of the francophone services, I understand the problems people talk about, and that Madame Tremblay talked about, in terms of a francophone who goes out into particular parts of the country and doesn't get access to those viewers. For us, though, it's one of the big successes in selling satellite dishes. We have substantive francophone communities that live in areas where there are not substantive francophone services, and our satellite service does offer a substantive package. The same package of francophone services that is available in Quebec is available to a resident in Calgary, Alberta. We find that kind of approach works very effectively for us.

Secondly, in terms of Internet access, you can access sites in a variety of languages from wherever you are in the country. We find that particularly with the development of high-speed access—we are North America's leading service provider in high-speed access right now—providing access to multilingual, multicultural services, francophone services is very high in demand.

Finally on that point, I think it was very interesting that when we were going through the battles in Canada of trying to offer a digital music service in Canada and finding a great deal of opposition to it, and finally being able to do it, one of the challenges that was put to us was, what can you do with your U.S. colleagues in terms of offering Canadian music services? We looked at this and went down to L.A. We talked to them about what kinds of services we could develop. The only ones they were interested in were the Quebec music services. They said that in terms of being able to look at the world market—and it hasn't developed as well as we would have liked; not all the new technology goes as well as we would like—they were particularly interested in those.

Of course, there are some very strong Canadian stars who are well known as well. But it was beyond that in terms of having access to that type of music.

If you're positive about these new kinds of opportunities and you focus on them as a country, as an industry, I don't think it's just a matter of looking for funding. It's also looking for allies around the world. It's looking for means of dealing with the U.S. market, of using our trade policies in a more focused way in terms of trying to open up those markets. I think those kinds of things will work better in the future.

The Chairman: Mr. Shea.

Mr. Kevin Shea: I'll try to be brief and touch on the number of issues or questions that were raised with respect to private television.

The great news for us as a sector is that this coming September the CRTC is holding the first hearing ever to review CRTC regulations. We suffer a bit from antiquated rules. This is our opportunity to modernize and in fact to address in a public forum many of these issues that have been raised today. Everything—aspects of substitution; minutes of commercial time; levels of content, be it Canadian or American; hopefully, foreign ownership—the full list of issues, is finally going to be explored, and we as a sector are quite happy about that.

• 1005

I want to touch briefly on the questions raised with respect to independent producers. Someone once said to me it was much easier to define them ten years ago, because those were the producers who wanted to produce programs about communism.

Today, independent producers are on the front page of the business section, as they were today with Alliance Communications, boasting record profits and a share price that's going through the roof. You had representation yesterday from Micheline Charest, the hero of animation production out of Quebec—and a stock price that's going through the roof. It's unbelievable that independent producers, the communists of yesterday, are today's leading businesses. So you sort of wonder, do they need support?

Here's what's interesting. They're making money, but it's not on Canadian television; it's on what we call “service work” in our country.

What's also interesting is that today's independent producers are also broadcasters. Alliance owns two networks. Atlantis owns two networks. We own a network, but we're not an independent producer.

So you get to that fundamental issue of how we can get successful at Canadian content. This is Mr. Godfrey's question. When does the money stop having to be pumped in? How do we get more of it and better content?

I will acknowledge that the fastest way to get there is to allow us Canadian television networks to be equity owners in content. We're not today. ABC, NBC, CBS, as Mr. Beatty said, are making their own content. We at CanWest Global are the only station in Canada that owns networks in Australia, New Zealand—we're lighting up a new network in Ireland in a couple of months—yet we can't produce as an entity to sell to ourselves.

So we hope in the modernizing of regulations, back to this September, when we focus on more and better, we have to allow equal access to equity participation in content; otherwise we're not going to make it. I submit that an independent producer today, Alliance or Atlantis, are broadcasters, and they have funny rules to which we would certainly like to gain access. They're leaders in the business community. They have the front pages and we don't, at the moment.

The Chairman: Thank you, Mr. Shea. That was a very important point.

[Translation]

Mr. Bélanger.

Mr. Mauril Bélanger: I was listening to Ms. Tremblay, and I feel I must make two comments. The first is that Canadian nationalism suits you very well. The second is that if you continue...

Ms. Suzanne Tremblay: You could be an actor.

Mr. Mauril Bélanger: The second is that if you continue defending the francophone community in Canada, I may eventually think that that is what you really want to do. To convince me, you need only give your support to broadcasting TFO in Quebec. I apologize for repeating this old theme, but I would like to take this opportunity, given that Mr. Beatty is with us.

Ontario has a little gem in TVO. TFO is the French channel of TVO and is now being broadcast in New Brunswick. There are discussions about broadcasting it in Manitoba and Prince Edward Island and there are some agreements with some cable companies in some parts of Quebec, but they are outside the major centres.

There has been a fairly systematic opposition from Télé-Québec and even from Radio-Canada. That surprised me, and I hope some day we will be able to get to the bottom of this publicly, and that Radio-Canada will support TFO's presence in Quebec. If we really want to encourage the francophone community, we have a network that could develop if it could get revenue from cable companies in other provinces, as is already being done in New Brunswick and elsewhere. However, there is this opposition to TFO, which I frankly do not understand. Since you all know each other, I would encourage you all to work on achieving this.

If you have to talk to cable companies in Quebec, please do so. I know that Shaw and others are broadcasting TFO by satellite, and there are some agreements in place that are working very well.

• 1010

If we want to support the francophone community and French- language programming we must encourage this little broadcasting gem we have that is working so well and offering high quality programming. Thank you.

The Chairman: Thank you, Mr. Bélanger.

[English]

Mr. Abbott.

Mr. Jim Abbott: You've been very generous with the time you have given me, so I'll be very brief.

I just have a request, actually. I would really appreciate receiving representations, and if you want to send them, I'm sure the appropriate way would be to send them to the committee through the clerk. I would find it useful to understand the positives and negatives of a third national channel or a third national network, since we have Baton and CanWest here. I understand that with the different ownership situations with respect to CTV, etc., although Baton is the major one, there are other players in it.

I guess my question, what I would like to have addressed, would be this: Should the government regulators be waiting for the question of ownership of the various stations to sort itself at the commercial level? In other words, if WIC and CanWest could get together, presumably they would almost automatically be a national network because of the Alberta situation. My question really is whether or not the government should be taking a relative hands off on this issue in order to let the entrepreneur, the marketplace, decide? Or should the government actually be encouraging a third national network?

I don't expect an answer to that this second, but I would really appreciate a brief. Don't make it any more than two pages, because I'm sure all of us get more than enough information. Just give us a brief summary so that we could understand the implications from your perspectives—and all of your perspectives, Mr. Beatty as well. Perhaps thrown into that would be the consideration of Madame Tremblay relative to where a French-language national network fits into this. Or does a French national network fit into this picture that I'm speaking about?

The Chairman: Unfortunately, Mr, Cowie, Mr. Shea and others, we don't have the time for you to answer Mr. Abbott in-depth right now. As is his suggestion, though, maybe you could drop us a line—and this addresses itself to all of you. If you have any points, suggestions or recommendations to make, we would of course warmly welcome them. In fact, we seek them. Feel very free to write to the committee, and we'll make sure that all the members receive the literature. The researchers will study them to filter to us the key points in any submissions. The idea is that these things be taken into account when we make our report.

[Translation]

Ms. Tremblay, you asked to make a brief intervention.

Ms. Suzanne Tremblay: I would like to reply officially to what Mr. Bélanger was saying. I don't want to get into an in-depth discussion of this issue with him. I've been trying to explain the situation to him for several months now, and he apparently refuses to understand.

In Quebec, we have an educational network, Télé-Québec, which we subsidize through our income taxes. We have had an agreement with New Brunswick for 25 years to give that province Télé-Québec free of charge. TVOntario wants to reach all the other provinces since Mr. Harris started threatening to cut its funding. TVO was not interested in coming to Quebec before. So there is a regulation issue here. If TVO wants to go to Quebec and the other provinces free of charge as Télé-Québec does, there's no problem. It would be quite welcome.

The Chairman: Thank you very much for this clarification, Ms. Tremblay.

[English]

I'm going to ask Mr. Beatty to go first, and then I'll ask Monsieur Roy to close our discussion today. I would appreciate it if both of you especially would also pick up the questionnaire regarding the francophone services.

• 1015

[Translation]

Mr. Perrin Beatty: Thank you, Mr. Chairman.

Mr. Abbott raised the issue of a third French-language channel to be broadcast throughout Canada. Our policy is that we would welcome the expansion of broadcasting service in all regions of Canada if broadcasters accepted certain responsibilities towards the people living in these regions as regards their programming, production, and so on.

Thus, we would be prepared to accept, for example, the expansion of TVA into other parts of Canada, if it were to offer a genuinely regional schedule and one that reflects Canadian diversity. Broadcasters must agree to assume certain responsibilities regarding the regions they serve if they want our authorization to extend their services.

A number of members have raised the issue of services in French outside Quebec. I would just like to mention that in addition to our local news service in Western Canada and other parts of Canada, we do have regional slots on RDI. We applied for four licenses from the CRTC for new specialty channels in French and two licenses for English-language services.

In addition, we have radio services throughout the country. In light of our financial problems, we decided to further regionalize the schedule of Radio-Canada's French-language radio service. It is more regional than ever. I think we have made some progress and that we are now better reflecting the Canadian reality throughout the country.

The reason the issue of service for francophones and the challenges of the French-language market were raised may be that the Canadian broadcasting industry is more successful in a number of categories than it is in the English-language markets.

The content produced in Canada by Canadian broadcasters has a real Canadian culture component in French-language markets. Market development has been very successful and these services enjoy a great deal of support in the French-language market. The great challenge facing broadcasters serving the English-language markets is to get the same level of support for their Canadian programming in the English-language markets.

As far as the new services and technologies go, the same situation prevails in English-language and French-language services.

[English]

Look around and survey it. I see nothing but opportunity out there for us to provide new services and connect with audiences in new ways.

For example, particularly as it relates to francophone audiences,

[Translation]

the head of the government, at the Francophonie Summit, mentioned the lack of information in French on the Internet. This provides Canada with an excellent opportunity to become the biggest information supplier in French on the Internet. I would encourage the government to examine its policies and perhaps establish a fund similar to the television production fund to promote development of genuine Canadian programming for the Internet, particularly in French.

• 1020

[English]

It's a real opportunity for us to show leadership.

Mr. Abbott raised the question of a program that he didn't approve of last night on television. I can't comment specifically on that program because I didn't see it.

I can say in general, though, that inevitably, from time to time, there will be programming on that neither he nor I will find attractive. We obviously don't go out of our way to try to put on programming that's going to be offensive to him or to me or to anybody else.

But, Mr. Abbott, heaven forbid that we would reach the day that whatever was on CBC would be predictable and conventional and would not challenge us. There will inevitably always be some programming that will be challenging and that people will disagree with, and that's the nature of a free press and free society like ours.

However, you raised a corollary question. You said essentially that this will always be there, but in the private sector, it's not being funded, so it's qualitatively different. You raised the question: how can CBC be sufficiently accountable for what it has on?

I would respond to you that we have a level of accountability that far surpasses that of any other broadcaster in Canada today. We're accountable to the government for our budget. It sets our budget each year. We are not financed by a licence fee that's fixed and outside of government. Each year, we have to justify every dollar we get.

We're accountable to Parliament when this committee considers our estimates, annual report, or any issue of concern to it.

We're accountable to the CRTC. Indeed, our licence is up for renewal, and we'll be faced with very difficult questions about how we're doing our job and how we can do it better.

We're accountable in the marketplace. We generate about $300 million in the marketplace. If indeed we put on programming that's offensive to viewers, our audiences will drop. It will have an effect on our bottom line as well. So we're not insulated from the marketplace.

We're accountable directly to our listeners and viewers. This year, we've instituted, for the first time, an on-air annual report in both English and French. We explain to our audiences what we've been doing and where we've held ourselves accountable to them. We attempted to respond to their questions with the Internet and on the radio.

We're responsible particularly for our journalism through our ombudsman. I believe we are still the only national broadcaster anywhere in the world to have an ombudsman charged with the responsibility of looking at journalistic standards in ensuring that we do our job. We're proud of that and we're very much aware of our accountability to our audiences and to the people of Canada, who own us.

Finally, the bottom line is this. If we're irresponsible, arrogant, or unaccountable, we'll lose public support, and the CBC will not survive if we do. We're very sensitive to that, and it's our goal to ensure the survival of what we consider a vital institution for Canada.

Mr. O'Brien had asked the question about what our survey data were showing in terms of public support for the CBC. I'm pleased to say they show strong support. Both public and private survey data show very strong support for the maintenance of CBC. I'd be pleased to put together for the committee—I could perhaps make it available for you—some of that data.

But you also asked what we could do to strengthen that support. Through our programming, we have to ensure that we're offering something that's unique and valued. Canadians have to feel it justifies the investment they have in the corporation. We're determined to do that, and we're looking at every aspect of what we do to discharge that responsibility better.

As well, it's our job to tell our story more effectively. We have to go out and explain why public broadcasting is so important in providing a bright and strong thread that ties our national fabric together in Canada.

I could perhaps conclude, Mr. Chairman, by saying just very briefly that as I look at the challenges that face us, whether these are in French-language broadcasting, new technologies, or our conventional broadcasting, when I look around, all I see is opportunity. All we need in this country and corporation is to have the vision to understand the breadth of that opportunity out there. All we need is the courage to see it through, adopt new ways of doing things, make a clean break perhaps with the past, and recognize that we won't be living in a protected world in the future.

Our obligation is to go out and put on dynamite programming on all media that people will want to see, that they'll be proud to associate with Canada, and that will help to ensure that Canadian stories are told in Canada, and that Canadians can see their country and the world through Canadian eyes. I'm more optimistic and enthusiastic about that and about the role of the CBC in doing that than I've ever been before in my life.

• 1025

[Translation]

The Chairman: Mr. Roy.

Mr. Pierre Roy: If we want to deal with the concerns raised by Mr. Saada and Ms. Tremblay, I think that in the next few years, we will have to encourage the development of the supply of French- language services in order to maintain and even develop a francophone presence on our Canadian airwaves. Developing the supply of English-language services, whether they come from English Canada or the United States, is very important.

If we continue to develop the francophone presence... We've done this in the past. We created specialty channels that offered services that were completely comparable with those available in English Canada, and the public supported our efforts. If we want this presence to develop, we must, given the limited size of the Quebec market, have access to sources of funding such as those we have today, such as Téléfilm or the cable companies' fund. These sources would supplement the amounts that could be invested in programming. The supply of French-language services must develop in a comparable fashion to the supply of English-language services.

With respect to Mr. Bélanger's comment, we may not have the time here to get into a debate about TFO. However, I would be pleased to shed some additional light on this debate. I don't think any Quebec broadcaster has ever been against TFO's presence in Quebec, and I think Ms. Tremblay's answer earlier was quite good. We would be quite prepared to have TFO or TVO in Quebec if the rules of the game were comparable.

The Chairman: Briefly, Mr. Bélanger.

Mr. Mauril Bélanger: I agree, Mr. Roy. Perhaps this debate about TFO should be left for another time. I apologize, Mr. Roy, because I'm going to be somewhat critical. This is the third time in three days that I have made this comment. You confirm the rule that "things always happen in threes". I apologize ahead of time, and I hope I will not make you angry.

I would ask you to be aware of the words you are using when you talk about "English Canada". I am a French Canadian from Ontario. I represent a riding in which 40 per cent of the population are francophones. There are hundreds of thousands of francophones in Ontario. There are several more hundreds of thousands throughout Canada, from coast to coast. Only one province, New Brunswick, is officially bilingual. I would like to ask you where all these people fit into your definition of English Canada.

Mr. Pierre Roy: I was talking about the supply of English- language services, not about services for English Canada. I apologize.

Mr. Mauril Bélanger: Thank you.

Mr. Pierre Roy: In fact, I can tell you that a year or two ago, we asked to have all our channels distributed throughout Canada. Formerly, they had been available in Eastern Canada only. They are now available from coast to coast. We hope that this technological development will allow for greater accessibility.

[English]

The Chairman: I have the job of trying to summarize what we heard, and I'm going to try to do it as briefly as I can.

It was extremely important and symbolic that you started the debate, Mr. Tagalik, from the point of view of our guests. It was really important for us to hear that the new regulations and the new technologies have allowed you to hear stories in your own language, in your own way of receiving them.

I was struck too by what you said to us about the example of Archie Bunker, because I know when I used to see Archie Bunker, I saw it as a satire that pointed out all the wrong sides of things so that you came to the conclusion that this is not the way we should be going. It was really interesting that from the point of view of your people, they saw it as a wrong example that really reinforced that your story must be told to coincide with the way you see things yourselves.

I recognized the point you made that maybe we should strive for a national aboriginal channel that will tell that story. Of course that's going to be a formidable challenge, given money and everything, but anyway, I'm glad you made the point, because I think the point was well taken, and certainly the example was very forceful.

• 1030

You made another point that came through amongst all the other guests. In a 500-channel universe—and some people say it will be many more than 500 channels; it could be 1,000, 2,000, or 10,000—a lot of it is mostly the same. In your own words, I think you said “mostly junk”. It was really interesting, because I think I heard Mr. Cowie say the average person only watches 7 to 10 channels and not 500 or 10,000.

The point made by Mr. Cowie was very pertinent. What we must strive to do here in Canada is to be one of those 7 to 10 channels. The only way we're going to do this is to produce programs of quality where Canadian content will predominate and in a way that Canadians want to see themselves. Unless we can achieve this, we won't reach our goal.

We all recognize that incentives must be there and that regulation must still be there. At the same time, we must take into account a completely different world, a worldwide market, and a fast-evolving technological world. Although Mr. Shea said he feared it and admitted that broadcasters fear it in a way, because they don't know what's ahead, at the same time I got the sense that most of you, if not all of you, said we should welcome the advent of new technologies. We don't know what's ahead, but we must be part of it, and we must use it to produce more competitively, but also more effectively, programs of quality that people will receive better.

Mr. Beatty, you made an important point when you said that in the first days of the CBC, one of the challenges was to bring the signals from community to community across Canada, and today the signals are plentiful. In fact there are so many of them we can't count them any more. So the challenge now becomes how to get into all these channels that are already there.

So content is what matters. What we retain from today, really from all of you, is the value of content. Unless that is there, unless it reflects our values, and unless it is of quality, people will not listen. They will go somewhere else.

Mr. Stein made an important point in saying for all of us that we must not only develop new technologies and be part of them but be proactive with them and be proactive in using them. I think Mr. Beatty and all of you made the point.

I also heard that we've become leaders in children's programming, and I was just thinking and linking it to the previous round tables we had. In many of them came the feeling, especially amongst publishers and authors, that really where it starts with Canadian content is with the children. Mrs. Bulte brings this up all the time, this issue of education, and it is an issue we shouldn't forget.

Another point that came out strongly today was the need to integrate the sectors and not put walls around sectors. We need to make this multimedia world more flexible so it reflects the evolution of our world. In that sense, Mr. Shea, you welcome the revision of the CRTC regulations, which we hope will reflect this.

A strong point was made by both Mr. Saada and Madame Tremblay and was also picked up by Mr. Bélanger in his request about TFO, that francophone services be more readily available. You've explained this to us, Mr. Beatty and Mr. Roy especially, but I think....

• 1035

[Translation]

It might be a good idea for Mr. Roy and Mr. Beatty to send us some written information on this matter, because it is very difficult to deal with such huge topics in five or ten minutes. Mr. Roy, one of your main points was that the development of French- language services must be comparable to that of English-language services. You also emphasized the importance of maintaining the rights of Canadian broadcasters. As you know, we will be studying this matter quite soon. Finally, the Department of Canadian Heritage has studied the whole issue of copyright with respect to the third phase of the Internet and the new technology.

[English]

To sum up, the point that seems to predominate is content of quality and what you said, Mr. Cowie, in two words: storytelling of quality.

I think, Mr. Beatty, you also said programs must be dynamite; otherwise we won't survive.

It was a most fruitful round table. I know a lot of thoughts come out and we ask ourselves how to condense all these things together, how to look at it and make sense out of it, but there are threads that come through in all of these.

I express the feeling, I'm sure, of all my colleagues when I say how much we appreciate your presence here and your having come out.

[Translation]

Thank you very much for coming. We very much appreciated your testimony.

[English]

All the best.

• 1037

• 1055

[Translation]

The Chairman: I will now call the meeting to order. We will get our round table under way. I would like to start by extending a most cordial welcome to our guests and thanking them for coming to this meeting. We are very grateful that you took the time to come in to meet with us. I know that some of you had to travel to be with us today.

I will describe the rules very briefly. Those who were at the first meeting already have some idea of what we are trying to do. We decided to use the round table format rather than hear individual witnesses present their briefs and answer our questions, which is our normal practice, in order to foster much more dynamic discussion.

Our study is about culture in light of the major challenges facing us in the next century. We have determined three major themes: the new technologies, the development of the world economy and trade, and the changing demography of our country.

[English]

First of all, we worked in three phases. The first phase was to inform ourselves, as a committee, regarding these new challenges, by listening to experts and officials from ministries.

The second phase is the six round tables. We've had five already, on the arts; heritage; publishing; film and video; this morning, broadcasting; and now the last one, on sound recording.

In the following weeks, we are going to hear from representatives of certain federal institutions, like Telefilm, the CRTC, the National Film Board, and others. After that, we intend to travel around Canada and meet people in their communities, especially smaller communities, to find out how they face those challenges.

The format here is very free and easy. You just signal when you want to be heard, and we go by rotation.

[Translation]

Naturally, people may speak either of our two official languages. We hope our discussion will be as fruitful and dynamic today as in our earlier meetings.

There are five questions in the documents we sent you. I would invite you to answer some or all of them. It is up to you. These documents are intended simply as a guide to give you some idea of the focus of our study.

[English]

To start with, I would ask you to introduce yourselves very briefly, just your name and what you do, starting with Mr. Rosen.

Mr. Earl Rosen (President, Marquis Records): My name is Earl Rosen and I operate a classical record company called Marquis Classics, which specializes in putting out sound recordings of Canadian classical performers and Canadian composers.

[Translation]

Mr. Jean-François Denis (Founder-Director, Empreintes DIGITALes): I am Jean-François Denis, the Founder-Director of Empreintes DIGITALes, which deals with a very specialized type of electro-acoustic music. Our head office is in Montreal.

Mr. Robert Pilon (Vice-President, Public Affairs, Association du disque et de l'industrie du spectacle et vidéo québécois): I am Robert Pilon, the Vice-President of ADISQ, the association of independent discs producers in Quebec.

Mr. Jacques Saada: I am Jacques Saada, the Member of Parliament for Brossard—La Prairie, in Quebec.

[English]

Mr. Holger Petersen (President, Stony Plain Records): I'm Holger Petersen, Stony Plain Records, a label based out of Edmonton, Alberta, a roots music label.

[Translation]

Mr. Perrin Beatty: I am Perrin Beatty, the President and Chief Executive Officer of the Canadian Broadcasting Corporation.

[English]

The Chairman: I understand, Mr. Beatty, you're going to be with us for a short time.

Mr. Perrin Beatty: Unfortunately, Mr. Chairman, I will have to leave for the airport—

The Chairman: I appreciate that, so just signal to us whenever you're leaving.

Ms. Cecconi.

Ms. Pegi Cecconi (Vice-President, Anthem Records): I'm Pegi Cecconi, Anthem Records, predominately a hard-rock label, recording only Canadian talent, working out of Toronto.

Mr. Ken Stein: I'm Ken Stein, Shaw Communications. We are the licensee for Digital Music Canada, in Canada, and we own 11 radio stations in Canada. I'm here at the invitation of John Godfrey.

Mr. John Godfrey: John Godfrey, parliamentary secretary for Canadian Heritage.

• 1100

If I can make an administrative suggestion, after we've done the round table, we might have brief comments from both these folks who have to get to the airport, just to give us a bit of context.

The Chairman: Thank you, Mr. Godfrey. That's a good suggestion.

Mr. Pat O'Brien: I'm Pat O'Brien, MP for London—Fanshawe, and vice-chair, Ontario caucus.

Mr. Malcolm Perlman (President, Sunrise Records): I'm Malcolm Perlman of Sunrise Records, a retailer in southern Ontario.

Mr. Alexander Mair (President, Attic Records Ltd.): I'm Al Mair, president of the Attic music group, probably the largest English Canadian independent label. We distribute both Canadian artists in Canada and internationally and foreign artists in Canada. I'm also vice-president of SOCAN and a director of CIRPA.

Mr. Mark Muise: I am Mark Muise. I'm the member of Parliament for West Nova and the PC Heritage critic.

Mr. Jason Sniderman (President, FACTOR; Vice-President, Sam the Record Man): I'm Jason Sniderman, vice-president of Sam the Record Man, a wholly owned Canadian retailer that has been in business for 60 years. I'm also the president of FACTOR and vice-president of FMC, which helps distribute SRDP funds to Canadian artists and record companies.

[Translation]

Mr. Mauril Bélanger: I am Mauril Bélanger, the Member of Parliament for Ottawa—Vanier in Ontario.

The Chairman: Thank you very much, Mr. Bélanger. I will ask Messrs. Beatty and Stein, who have to leave us soon, to present their views.

[English]

Mr. Beatty, could we have some remarks from you and from Mr. Stein so that we can kick it off?

Mr. Perrin Beatty: Mr. Chairman, I may surprise you, based on your experience earlier, but I'll be very brief. Having to catch a plane focuses the mind.

I think I would perhaps underscore some of the points I made earlier by saying that the new technologies give us opportunities to do things in a very different way from how we've done them in the past, first of all.

Secondly, they represent both a threat to the established way of doing things and an opportunity for the future. Nowhere is that more the case than in the field of sound recording. Issues related to copyright are perhaps even more important in this field than they are in the field we were talking about earlier this morning, because the new technologies make it possible to very easily make a digitally perfect copy and to distribute the material very widely.

As a case in point, you could get Alanis Morissette's new single and pull it off the web today, although it's not officially released for sale at this point. The same was the case for the Madonna single some weeks ago. Although it's a flawed copy—it's a recording of something that was broadcast on air—it indicates the power of the new technologies to change the way in which business is done and to raise issues related to rights.

The new technologies, though, also give us the opportunity, if we see ourselves as an instrument, as CBC does, of Canadian cultural policy.... It provides us with new ways of cost-effectively promoting and distributing Canadian content. We're determined to be very present in new technologies, whether it's on the Internet, in terms of providing services to Canadians and around the world over the Internet, or through the introduction of digital radio. All of this will enable us to do our job of providing services to Canadians internationally more effectively than has been the case in the past.

Finally, I would say that what is necessary for us as a broadcaster is to focus on what our mandate and our business is. Our mandate is to encourage and to promote Canadian content and to ensure that Canadian voices can be heard in Canadian homes. Irrespective of what technology we're employing in doing that, our focus should be on the mandate, and we should be prepared to be innovative in developing and pioneering new partnerships with others and in pioneering the development of new technology to achieve that. We should not be locked into any traditional way of doing things, if we're to discharge our mandate and responsibilities.

The Chairman: Thank you, Mr. Beatty.

Mr. Stein.

Mr. Ken Stein: Thank you, Mr. Chairman. I'm not sure I can be as brief as Mr. Beatty, but I'll certainly try. As well, I think I'd really want to read the transcript. As Perrin has indicated, we have stayed over, and I have to leave quickly as well.

The main thing to me about all this is I think Canadian music producers and creators face very much an uphill challenge. There's no doubt from what we've seen in our company that that is a challenge. In terms of the new technologies and the development of those technologies, there is still a debate going on as to whether they help that situation or hamper it.

• 1105

I know that in terms of our radio stations and our music services, Digital Music and also Country Music Television, we appreciate the kinds of difficulties one sees in this industry. We're not convinced that the approaches we've taken in the past, the lack of dialogue between the sound recording industry and the radio industry in particular—and I can say that because I'm a neophyte to this whole situation.... We're not sure the dialogues we've had have been as productive as they could be in terms of really focusing on the key thing, which is the development of Canadian talent. We get locked into arguments about economics of radio, whether it's profitable or not. We get into arguments about content quotas and whether they're appropriate for our listeners, etc.

Over the next number of years we're going to have to do more to strengthen Canadian radio services. We're going to have to do more to develop new technologies. We should be doing more to develop more Canadian Internet sites that provide Canadians with real audio services that will emphasize Canadian products. We have to do more of those kinds of things.

We just went through a large hearing with the CRTC. They in fact tried to use a round-table format such as this to try to come to some suggestions about that. I'm sure the commission will do its usual excellent job at laying out what the overall policy should be, but over the next number of years, what's really going to be important is that we're able to work more together as an industry.

I said to somebody before that I don't know why we're always in these arguments between radio and the sound recording industry, and they said, “Well, that's just the way it is”. We don't have those same arguments on the television side. We have disagreements with television producers and independent producers, but generally we've seen real success in our partnerships with Alliance, Atlantis, and CINAR, as examples.

There has to be more done in that area in order to deal with the questions you've laid out.

The Chairman: Thank you very much, Mr. Stein.

Thank you, Mr. Beatty, for being here.

Mr. Perrin Beatty: Thank you very much, Mr. Chairman.

[Translation]

The Chairman: Feel free to take part in the discussion.

[English]

You're welcome to join in. Who wants to start?

Mr. Mair.

Mr. Alexander Mair: Mr. Chairman, with your permission, this is not a presentation per se, but I did do a lot of thinking about this and jotted down a number of notes, and probably five minutes would put many items on the table for discussion and consideration.

The Chairman: Why don't you just introduce the items and feel very free to send the detail of it on to the committee so it gets distributed to the members?

Mr. Alexander Mair: Okay.

Your first question was regarding the federal cultural support measures currently in place. In the past the most important ones to the music industry were the Canadian content regulations on radio. These have been crucially important and haven't cost the government a penny. That's very important.

Unfortunately, as our friend from Shaw indicated, there is ongoing dialogue with the broadcasters, who, in our opinion, continue to abuse those regulations through ghettoizing and capping it at 30%. We hope the CRTC's current review will include both an increase and, equally important, enforcement of the regulations, whatever they may be.

These regulations have helped the domestic industry create thousands of jobs. Hundreds of millions of dollars have been spent making records, making videos, marketing those records domestically and internationally, and helping those artists get launched. For every artist who signs a recording contract, basically we're starting another small Canadian business that may be employing anywhere from five to 25 people. Careers are usually driven by recordings.

The FACTOR program, Musique Action, is beneficial but grossly underfunded. It was less than $5 million until this year. Now it's $10 million for the first time. By necessity it's project-oriented. We believe that in the larger companies we need something else besides project-oriented funding. We look at the film business, and even the book publishers and their programs from the government have addressed building companies.

We need the infrastructure to be able to deliver Canadian artists and maximize their potential. Other programs—Canada Council, provincial arts councils, etc.—are artist-oriented programs. To date they have excluded having almost any dialogue with the commercial music industry on the basis that they are arts programs. Some of us have attempted to build bridges with those organizations, to date not very successfully.

• 1110

Your second question on the major impacts of technology—we are an industry that is very used to technology and comfortable with it under most circumstances. Ten years ago, the introduction of CDs revitalized what was probably a dying industry. We were delivering a product, vinyl and cassette, that was not top quality, was not durable, and by necessity was forced to be sold at a very low price. CDs have had enormous impact. I can't say anything more about it.

Video channels such as MuchMusic and Musique Plus also have had a major impact on our business, including the costs of doing business. New delivery systems such as DVD—direct versatile disk—the Internet, digital radio, etc., will all impact on our business, no question about that.

We are very concerned that whatever that impact is, that using our music, we be paid a fair value for it. Obviously “fair” is one of those words with two sides to the coin. But as the people who fund the creation and the marketing, we are not interested in giving away our product so that other companies can make money on our backs.

One problem with all this introduction of new hardware and delivery systems such as digital versatile disk is that it confuses the consumer at home, and they tend to sit back and wait. Even today, CD players' penetration in Canada is just over 50% of households. The only way we're going to get that figure up is to have the younger consumer buying CD players. The older consumers who don't have them by now will probably never buy them. So we're going to go up 2% or 3% a year, and it will take us, simplistically, 10 or 15 years to get up to the home penetration that turntables and cassette players currently have.

There's one fallacy I hear very often from the artistic community about new distribution systems, particularly the Internet, and that is, it's going to eliminate the record companies and the need for infrastructure. I say that's a fallacy because there's already proof that the only successful records are the ones that are marketed. People allude to downloading of David Bowie and other artists off the Internet, but they're already established.

There are 35,000 music sites already on the Internet, and they're growing daily. We work with an American company called Music Boulevard, which is the second largest retailer of music on the Internet. They are making no money selling records, but rather by selling advertising to the large companies who can afford it. When you go into their web site you see flashing in your face, “Céline Dion has a new album. Push here to buy it.” They charge about $25,000 for that advertising.

Yes, the role of record companies in the future—music companies—is going to change drastically, but we are not dinosaurs, and we will adjust as appropriate.

The third theme was impact of trade liberalization. To date, it hasn't had a lot of impact. Broadcasting, and radio broadcasting in particular, is one of our major sources of exposure, and the government regulations to date have not allowed foreign ownership of radio, although reading the Financial Post last week and the current TNN-CMT situation—that concerns us. One, the ignorance of TNN in the United States. They refer to Canada as a country with a population of 15 million people. I find this very strange. They don't even know the population of this country, but they want to increase their ownership, and they want to reduce Canadian content, when you read between the lines.

Canada and one other country in the world share a common border and a common language with a country substantially larger than them—Canada and the U.S., and Germany and Austria. There is not a single Austrian recording artist successful internationally. Obviously we have a lot more to thank for. We have a number of recording artists successful internationally.

Unfortunately a lot of those, such as Shania Twain, Alanis Morissette, David Foster, and Bryan Adams, choose to leave Canada from a tax base. Bryan Adams pays his taxes in Ireland; Shania Twain lives in Lake Placid, New York, and pays American taxes; Alanis Morissette lives in California and I assume pays California taxes.

The Globe and Mail two weeks ago had an article on Céline Dion and pointed out that her publishing company is in the Bahamas. There is no music publishing community in Bahamas; there is tax shelter.

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I'm not faulting any of these artists for it, but to me they aren't part of the “Canadian” music industry. They are basically expatriate artists who get the advantages of Canadian content regulations without having any obligation to record here, pay taxes, etc.

With the globalization of the cultural industries, it's getting extremely difficult to compete with the branch plant operations of the multinationals with deep pockets and sophisticated international distribution. Canadian-owned companies are being forced into niches such as Mr. Rosen's company in the classical field, and there are jazz labels, etc.; Mr. Denis specializing in acoustic music. That does not mean there is not the potential for a Canadian-owned, successful multinational record company, but at this point we don't have one that is truly in charge of its own destiny even from coast to coast, let alone internationally.

There is some belief that getting the multinationals further involved is the answer. I would suggest that's the wrong answer. By definition a multinationals' job is to suck money out of this country and pay taxes elsewhere. They would be interested only in the artists who are capable of being successful worldwide, such as Céline. We can still do it here. Turning everything over to and giving up with multinationals is not the answer.

Theme four is the question of changing demographics. I suggest this is very positive. As the population grows, we now have children's records, artists such as Raffi and Sharon, Lois and Bram, aimed at the two- to six-year-olds. Because of television channels, video channels, kids get into pop music younger, so we now have another segment developing, aimed at the 9- and 10-year-olds, up to about 16. You have heard of the Spice Girls, the Back Street Boys, etc. They are aimed at that market.

Then we have the urban soul rock, aimed at an older demographic. Then we move into adult contemporary. Then we move into middle-of-the-road. Of course, overlying on all of this are jazz, classics, country music, etc.

We have to recognize that the active music buyer tends to be on the younger side; not kids, not teenagers, but on the younger side. I say “buyer” because everybody consumes music. If you listen to the radio, you watch television, you rent a video, you're consuming music, but you may not be paying for it directly.

Theme five is the role of the federal government. I suggest the government must continue to support content quotas, such as Canadian content on radio and Canadian programming on television. There is a noticeable lack of Canadian musical talent on television. Moses Znaimer convinced private broadcasters and the corporation that there's no room for music on television.

There is the odd show, as we all know. In fact, the Toronto Star this morning comments about the ratings on Rita MacNeil's CTV special last week. The headline says it was a smash, with 1.6 million viewers, which is very, very high for CTV. This week the CBC is running another Celtic show, with some of the same musicians.

We don't have a shortage of musicians in this country. We don't have to have their two shots a year on television all in one week.

The production funds available from the government and other areas are normally earmarked, it appears, for drama. I suggest those should be opened up to allow the creation of Canadian music shows. We need our own talk shows in Canada. We in the record industry know with an appearance on Jay Leno, Saturday Night Live, etc., we can measure the impact in record sales the following week. That national exposure is so crucial.

The Juno Awards were the first televised award series in the world, over 30 years ago. The Grammys weren't being telecast when the Junos started. Britain started telecasting its awards only about five years ago. We were leaders in that concept of televising our domestic awards.

We believe there is room for different kinds of government support. We are not looking for hand-outs. Soft loans have appeal. Refundable tax credits are of much interest to us. We understand Saskatchewan has committed...and Alberta and Quebec are very close, and other provinces are also considering refundable tax credits. If these come in in the provinces, we hope the federal government will take a leadership role in matching those tax credits. They have worked in the film industry. They can work in the music industry.

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The last thing I would like to refer to is the Copyright Board. Mr. Beatty raised the question of copyright. He has left the room, but he alluded to it. Yesterday CBC illegally downloaded the Alanis Morissette track off the Internet, where it has been on illegally, and they broadcast what was referred to as an eleventh-generation copy from a sound quality point of view. This happens more and more. The whole question of respect of copyright is under attack.

We did have a situation recently with the Copyright Board in SOCAN. When the new phase two of copyright was passed in 1997, the government supported the concept of administrative collective management of copyright. Then the recent decision of the Copyright Board in January was just the opposite.

The Copyright Board is constituted to have up to five members. It currently has three, two of whom are neophytes, with little experience and expertise in the area. To those who are aware, the two neophytes made a decision very damaging to the music community. The position of the only experienced member of the board, Michel Hétu, was diametrically opposed, but he was overruled. Parliament instructed the Copyright Board to have a judge on the board. To date none has been appointed. We feel this is a major shortcoming.

We would like to see phrase three of copyright with a good Copyright Board in place and phase three immediately embarked upon so it doesn't take what we were told between phase one and two would be two years and proved to be ten.

Finally, as you know, I've appeared before at this committee a couple of times previously. We hope the MAI will be history at this point, unless we get the cultural carve-out.

That covers most of the things I think we will be talking about.

The Chairman: Thank you.

[Translation]

Mr. Bélanger.

Mr. Mauril Bélanger: Isn't there anyone else? I would prefer to wait at this point.

The Chairman: Fine. Would anyone else like to intervene at this point?

[English]

Mr. Rosen.

Mr. Earl Rosen: Mr. Mair covered most of the topics. I'll try not to repeat what he said.

There are a couple of areas in the particular area I work in, which is classical music, where I think we have a much closer relationship with various federal institutions than perhaps the pop industry does. This has been very important to us. Certainly when I look at my colleagues who run independent classical labels in other countries, many of them don't have some of the same tremendous support we have here, the most significant of which is the CBC. Without the CBC Radio network there would not be a classical music industry in Canada. They provide us access to our listeners and they provide us with tremendous support.

On the other hand, it's ironic that while some of the independent labels say they have to compete with the multinationals, my biggest competitor from a commercial point of view is the CBC, which also acts as a record label, but with much deeper pockets than a private sector company has to operate with. We have a very significant love-hate relationship with the CBC as a result. The other is that we are very dependent on many of the art support programs such as the Canada Council to help develop the infrastructure and give artists the opportunity to develop careers in which, when they reach a certain stage, we can participate from a recording point of view.

There is an analogy I could use. A couple of years ago I was on an Ontario committee that studied cultural industries. I remember David Mirvish talking about commercial theatre. He said very strongly that without the not-for-profit sector there couldn't be commercial theatre, because that's the training ground. In many cases it's the support that's given to the arts communities that develops the artists to the stage where we can participate on a more commercial basis.

A good example of that is that we have a liaison with the National Arts Centre and we are soon to be releasing a recording by Linda Bouchard, who is one of Quebec and Canada's leading contemporary composers. This has come about because of the kind of relationship we can have with the arts community. We're doing the same thing with the Banff Centre.

The final area of public federal institutions that I find tremendously useful is the Department of Foreign Affairs and its activities internationally to promote and support Canadian culture. While a lot of the talk has been on what goes on in Canada, certainly we have had tremendous support.... They play a crucial role in helping introduce Canadian artists in certain countries, particularly countries that are used to a high level of government intervention. Specifically, I've had direct experiences in Japan, London, and Paris where the Canadian embassies have provided tremendous support.

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I remember when the minister announced culture as the third pillar of Canada's foreign policy. So far it hasn't really been supported with the financial backing with which other aspects of foreign policy get supported. I would certainly encourage a much greater role for the Department of Foreign Affairs in promoting Canadian culture internationally.

Those are my remarks from a particular point of view, that of the classical industry.

The Chairman: Thank you.

Mr. Sniderman.

Mr. Jason Sniderman: I would like to offer some embellishment or clarifications on what Mr. Mair and Mr. Rosen preceded me with.

As I said, I'm not here only as Sam the Record Man, a retailer, I'm also here as the president of FACTOR, which is one of the arms of the SRDP in distributing funds to the music industry. SRDP, through FACTOR and through its sister organization Musique Action, has provided a good focus and effective distribution of dollars to the music industry.

Just some numbers. We at FACTOR, which takes care of the anglophone market, have done over 1,400 projects. We have spent over $20.3 million of taxpayer and broadcast money, but for that $20.3 million we have engendered $328 million worth of sales worldwide, which translates into 17 million records worldwide.

Yes, it's a prudent use of federal government and broadcast money, but it is underfunded. Perhaps that's why Mr. Mair alluded to the perspective that it is project oriented.

Our mandate with the DCH is to support and help grow the industry. Because we are underfunded, some of the policies we have are driven by projects, but we do try to offer one-stop shopping for the entire industry.

In response to what Mr. Stein said about the lack of cooperation within the music industry between the broadcast and music components, I would have to disagree. I think FACTOR and FMC in general have served as an excellent laboratory as the meeting ground for the sometimes contradictory forces of the broadcast and music industry. However, under the watchful eye of the music industry and under the guidance of the DCH, we have been obliged to behave, work together, and work towards the betterment of Canadian culture through the policies we have established.

In conclusion, on public funding of the arts, specifically music, of course we could always use more money. We are perhaps underfunded in comparison with other cultural components in this country, but we have done the best with what we can. We are now obviously working in complement with the Canada Council.

About changing technology, I would have to echo what Mr. Mair said, but I do think the physical distribution of product will be something which, maybe not in this generation or within my buying cycle, the baby boom cycle, will go the way of the dodo. Definitely in the next generation of music consumers, who are becoming more computer-literate, physical distribution will be a thing of the past.

At this point, through methods such as Sound Scan, which tracks the sales of records at the cash registers, the physical distribution of product is becoming very much leaner and more cost-efficient. Multinationals are using tools such as computer tracking of sales to refine their marketing pushes further, sometimes limiting the physical distribution of product when the demand isn't there. It would obviously be prudent, in multinationals' best interests in realizing cost efficiency, to get rid of the waste that's associated with physical distribution of product, especially if they can achieve the same type of results in transmission over the Net, by modem, or optic cable. They have been trying to do this type of thing, with or without retail, for the last 20 years. I think at the first opportunity they have to distribute product without the bother of retailers or physical transmission of product they will do so.

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Of course this will result in a loss of jobs in the traditional retail sectors, and they will not be made up in the transfer of transmissions to the telecommunications sector. These jobs will be rationalized and shifted within the telecommunications sector but certainly not embellished. At that point I believe the branch offices of the multinationals will be redundant and a further erosion of the launching platform of Canadian intellectual property will occur.

In addition, independent record companies such as Mr. Mair, who is probably the most prevalent example, or Ms. Cecconi, distributing Canadian product within our country, will be vying for distribution from telecommunications companies, not necessarily from multinationals. Either they will be cut out of the loop because they can't compete or they will be hijacked or blackmailed and forced to pay exorbitant costs to access the modes of transmission, which will be controlled across borders without our control if we don't do something at this point.

Now I will talk about distribution as the president of FACTOR. The modes of creation over the last 15 years have become much more egalitarian. With the advent of porta-studios and Midi and recording production costs coming down, obviously you have given production back to the artists. This was probably most recently evinced with the cottage industry build-up of independent music in the early 1990s. When a large number of independent artists were shut out of the opportunities of the multinationals, they opted to create a marketplace themselves, using independent retail sources and using new technologies such as fax, phones, and electric press kits. Of course MuchMusic created a market for them. As I said, when these modes of physical distribution become less and less offered to them, they will have to find new modes of distribution or suffer at the hands of whatever distribution they can get their hands on.

One thing about the Canadian music industry that hasn't been touched by Mr. Mair or Mr. Rosen, and it never really gets talked about—I will talk as Sam the Record Man now—is the incursion of foreign-owned retail, which has resulted in a dramatic shift in how records are marketed in this country. As opposed to the supposed expansion of the marketplace for pre-recorded music with the incursion of English and American retail, there has been a shake-out of tragic proportions in Canadian-owned retail. Foreign-owned retail has had different economies of scale and different priorities in establishing beachheads in Canada. The casualties of these inequities have been the failures of at least three major retailers over the last 8 years, which resulted in the closing of close to 400 stores and the resultant job loss.

It's interesting to note that this week, I believe, in the Globe and Mail there was an article on how successful Canadian artists have been over the last year, but the two sources quoted for retail were an English retailer and an American retailer. No Canadian retailers were cited in the article.

My father, who some of you know—some of you may not know him personally—has spent the better part of his life promoting Canadian talent. He is a true chauvinist when it comes to promoting Canadian talent. Whether it was francophone or anglophone really didn't matter to him. His belief in Canadian talent happened because his survival depended on it, not because it was a priority he thought would bring him huge rewards. He needed to make himself a success and the artists he associated with were Canadians. His priority was Canadian because he was a Canadian. He helped build a star system and he worked his entire life to maintain it, not to watch multinational retailers not build on it but merely to reap the rewards he had sown.

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Foreign-owned retail was predatory in pricing, using the vertical integration of parent companies to fund loss-leader expansion. This has been borne out by EMI, which owns not only a retail chain but publishing and production companies.

In other cases retail has outsourced Canadian intellectual property from other than Canadian suppliers. We've seen this in the book publishing industry when Tower Records in Toronto tried to import their book section from the States and were caught doing it and were told to change their practices.

It is odd that Canadian music retailers never enjoy the protection or privileges that Canadian booksellers have. American booksellers have been prevented from establishing beachheads or investment strategies in Canada. Canadian booksellers were long allowed to remain open on Sundays, whereas music retailers were prevented from doing so. In some cases it was not in the federal dominion but the provincial dominion.

Canadian music in general and Canadian music retail specifically have had a very weak lobby at the federal level and consequently have been taken for granted for years. This is our own fault. It was always assumed Canadian music independence, the industry, the retail, would take care of themselves. However, unfortunately this neglect has resulted in many casualties within our industry, not only from a retail perspective but also from that of the independent music sector.

Canadian retail has received only cursory support from foreign-owned multinational record companies. Multinationals offer only pejorative support to Canadian artists and independent companies. When a company or artist no longer fits their company mandate, the multinational mandate, then that intellectual property is lost.

Multinationals increasingly see no further than their next-quarter projection, and they pay the same respect to Canadian artists and retail in doing so. Their objectives and priorities are those of a head office, a head office that has little or no interest in the nourishing or support of Canadian culture but rather relies on the clever exploitation and milking of it for success, and of course, as Mr. Mair and Mr. Rosen said, paying taxes outside this country.

Investment Canada requirements are looked on with a cynical eye. Any commitments made are short-lived and not monitored. Multinational corporations pay lip service to Canadian culture. When it is prudent, they will eventually close their branch offices and operate with hard drives jammed full with foreign-owned Canadian intellectual property from offices in New York, Los Angeles, and London, without the nuisance or conscience of Canadian cultural watchdogs or government standing committees.

The last point on retail deals with record clubs, which are wholly owned by foreign-owned multinationals. It's an unfair practice. I know many people within the Canadian industry participate in it, but I would hazard to say many people, many publishing companies, many artists, are coerced to offer up their publishing at loss-leader costs so record clubs can loss-leader their product with unfair price advantages to most retailers, also bastardizing the price perception of CDs and tapes by customers.

The changing demographics will impact on us in two fashions. First, culturally, the fractionalization of cultural interests has resulted in the boutiquing of the music industry. It will be difficult to project a return on investment, because target markets are small and hard to access or service. It has been witnessed, I believe, since 1978, when Abrahams Burkatt attempted to homogenize American radio, that there has been gradual erosion of a broad market base. Music is now boutiqued, serving specific cultural and social needs for various cycles or demographics.

From a technological viewpoint, as I said, the next generation of music consumers will be absolutely computer-literate and the idea of purchasing music through traditional physical means will be as foreign to them as horse and buggy or a communal telephone. Music will be transmitted from the artistic source, we hope, via modem or Internet or fibre optic link. We hope the artists will be involved in the process. We hope the artists will be empowered to take hold of some of the transmission facilities themselves.

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Existing record companies will exist—they won't become dinosaurs—but they will need to reinvent themselves as marketing and merchandising companies. But they will not only be competing against record companies; they'll be competing against giant ad companies. They'll be taking the message of their artists on a global basis, not only competing against the record companies, but vying for space from telecommunications companies and competing against huge advertising companies such as Vickers and Benson.

There will be a huge demand for marketing funds so that Canadian-owned companies will be able to adapt to and merchandise themselves to a global market. Canadian independent companies and artists may no longer need to rely on multinational music companies for distribution exposure, but they will need the marketing funds and the help and assistance of the federal government to be able to market and merchandise themselves on a global basis against many new competitors.

Thank you.

The Chairman: Thank you very much, Mr. Sniderman.

Mr. Pilon.

[Translation]

Mr. Robert Pilon: I will make some brief comments on four of five themes. My colleagues have already stated the main points. Federal programs have been effective in our sector. It should be understood that ours may be one of the cultural sectors in which the federal government's involvement has been least developed as compared to other sectors such as television production, book publishing or film production.

Nevertheless, there have been three types of measures, generally speaking, that were useful. First of all, there were the regulations set out in the Broadcasting Act, and the related regulations put in place by the CRTC. I am thinking particularly of the requirement to offer Canadian and francophone musical content on radio and television. This has resulted in a 30 per cent Canadian content quota on radio, and a 65 per cent Francophone content quota for French-language stations and also quotas for MuchMusic and Musique Plus for Canadian and francophone content.

We referred earlier to the review of radio policies conducted last fall by the CRTC. Everyone is waiting impatiently for the CRTC's decision. Rumours are that the decision will be delayed, because it seems to be quite a difficult issue. One of the important themes repeated several times, particularly by Mr. Bélanger, the vice-president, is that one of the demands of broadcasters is to change the ownership rules. I will not comment on the issue as such, but, clearly, there is a demand that stations and groups, which for the time being have only two stations on the Toronto or Montreal market, be able to have four or five. This demand is probably justified and there are probably some arguments that could be put forward that make some sense.

However, I must point out to you that Mr. Bélanger and a number of other commissioners asked the broadcasters what they would be prepared to do in exchange. That is where the problem lies; and it comes up systematically. The broadcasters told us that they were ready to do this, but they would give nothing in exchange. A number of suggestions were made, namely to increase Canadian content to 35 or 40 per cent, or to have a better distribution of francophone and Canadian content, particularly during prime time.

I took part in a panel discussion last week in Toronto during Canadian Music Week. All the heads of all the major radio companies in Canada, with the exception of Radio-Mutuel, were there. All of them, with the exception of one whose name I have forgotten, said: "No trade-off". So there is really a problem there. There is a very basic problem. I know this is in the hands of the CRTC, but at the last minute, it will come back to the government, because of the power it has under the Act.

The Broadcasting Act gives broadcasters some tremendous advantages. We in the music industry are not opposed to that. It should be remembered—and people seem to have forgotten today—that in 1968, when the Broadcasting Act was passed, Canada had expropriated a number of foreign concerns. There were American and British companies that owned radio and television stations and cable systems. Those companies were expropriated. That act entailed many consequences.

At the time it was said that henceforward only Canadians would have the right to own and control radio, television and cable companies. The percentage of foreign ownership was 20 per cent, and it was increased to 33 per cent, but, generally speaking, nothing changed. Only Canadians could own and control radio, television and cable companies.

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American firms such as CBS cannot set up a television station here in Ottawa. Infinity Broadcasting cannot set up a radio station in Toronto.

This is a huge privilege for entrepreneurs. It is a huge privilege that I support because we had wanted to build—and this has been the ruling by Canada's governments for generations—a Canadian broadcasting industry that belonged to us in order to finally be able to promote our culture. It is a good decision.

But there is a fundamental trade-off. If Canadian entrepreneurs are told that the Canadian market is reserved for them because they are Canadian, I think they have a duty in return. In other words, we are bending the market's rules. That is important. And if we bent the market rules, it is because the Canadian government felt there was a need to change the market rules to ensure there were obligations in exchange and that those people would promote Canadian culture and help in its development.

But only one side of the trade-off is working. Businesses always want more privileges when it comes to their property and even domestic competition. They still do not want to open the market up to Americans in terms of foreign competition, but they do not want to have any obligations in return. That cannot work. Why should we continue to grant them these privileges without imposing any obligations in return?

As far as the music industry is concerned, people will end up saying that if that is the case, we will allow free access to the market and let the Americans in. People from the music industry could even ask MTV in the United States whether a deal was possible and whether they were willing to help Canadian businesses and performers. We haven't reached that point, but you must understand that it is a two-way street and that the spirit and letter of the Broadcasting Act are very clear on that. So there must be some trade-off. That is critical.

As for the Sound Development Recording Program, Ms. Copps doubled the funding last year. It is still a modest program, but doubling the subsidies in tough economic times is a huge step forward. Everything will have to be reassessed, and that will happen over the next year or two. New formulas will have to be found, not just for project funding, but for the entire business, there will have to be medium or long-term funding to consolidate the industry and not just enough money to help it survive.

As for the major changes to Bill C-32, we are still unclear on the role of those who partook in the process, but the introduction of neighbouring rights was a major change because it is not a North American philosophy. Canada has set itself apart from the United States. That greatly changes the entire spirit of the Act. It will have monumental consequences in 20, 30 and 50 years.

Unfortunately, there are too few exceptions in the Act, such as an overly long phase-in period, in our view, which means that the music industry must still wait some time before getting any meaningful amount of money. But it nonetheless remains a major change. Perhaps we should move on to phase 3, which is essential since electronic distribution of music is imminent. In fact, Holger and Jason spoke about that. It is essential if we want things to run along smoothly and ensure that rights are protected in the new world of electronic music distribution.

So a number of things must be done. Last year, the World Intellectual Property Organization passed some treaties in Geneva. Canada must abide by these treaties and change its laws accordingly. It is therefore important to now move on to phase 3.

As for the major impact of technology, I would like to invite committee members and the government in general to exercise caution. There are an awful lot of myths around, such as not being able to regulate the Internet. That is a huge myth. You hear it everywhere. It is fashionable nowadays to say that we live in a time of globalization, liberalization of markets, the Internet, where everything has changed, that we are living in a new world where there are no borders, where there is a paradigm shift, where everything must change and where nothing can be regulated anymore.

I would suggest you delve into the matter a little further, to look into this very closely and to be wary of myths. You must always wonder who invents them and why they are sustained. Why would regulating no longer be possible?

I think there are economic interests behind all that. The best proof that it is false to say that you can no longer regulate is that those who are pushing hardest for regulating the Internet are none other than the big American entertainment multinationals.

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Why? Obviously, those people are not pushing for regulation on Canadian content on the Internet, but for regulations on electronic commerce because they will not start electronically distributing films or records if their property is not protected. Impossible. So electronic commercial dealings will never take off as long as rights are being protected. Those big companies invested billions of dollars and do not want to expose themselves to piracy.

If there can be Internet regulations for copyright and protection of those doing electronic dealings, it can be regulated for content, including pornography. It is a question of political will and not a technical question.

What must be done in the future? There is talk of liberalizing trade. I appeared before this committee about ten days ago so I will not repeat what I said. You know my views and you know how important it is to maintain the exemption for culture if we do go ahead and establish the necessary ties throughout the world.

Even though the government has intervened very little in music compared to other industries, some positive things have occurred, including the regulations on broadcasting, the SRDP and Bill C-32 last year. We must now go further and move on to phase 3, the reassessment of the SRDP.

Five or six weeks ago, Ms. Copps published a document proposing a thorough review of Canada's films policy. That made us wonder. It is a very interesting working document. In my view, that is exactly what our industry needs right now. We have reached a point where it is not enough to say there will be a review of the Sound Recording Development Program, the SRDP, because it is about to end. I think we have reached the point where the same exercise must be done for the music industry as for the film industry. All the policies must be reviewed: the SRDP, the involvement or rather, as Holger said, the non-involvement of the Arts Council in the music industry, as far as popular music is concerned.

The role of Téléfilm must be examined in terms of its assistance in producing variety shows. CBC's inexcusable lack of involvement in programs highlighting Canadian singers should also be reviewed. It is inexcusable that nowadays, there isn't one single major weekly show on public radio, or on television for that matter, including private networks. Why don't private networks have more obligations? Despite the dozens of recommendations that we and our Toronto colleagues have made during numerous hearings, why is it that the CRTC has never imposed on CTV, Quatre-Saisons or TVA any obligation to have a window for variety shows that would feature Canadian music performers, when it did impose such a requirement for children's shows and dramas? All those issues should be examined.

Even if it takes a year or a year and a half, let's do it. The task force on the sound recording industry, which tabled its report two years ago, had made some progress. The industry had been reviewed, studies had been done with the assistance of the Heritage Department and recommendations had been made.

The Chairman: Time is moving on.

Mr. Robert Pilon: Can I have 10 seconds? I am getting to my conclusion.

The Chairman: Yes, fine.

Mr. Robert Pilon: The task force did make some progress. A number of recommendations were implemented, namely Bill C-32 and the recommendation to double the funding for the SRDP. Now we have to go much further. We have to do for the sound recording industry what the government did for television and books, and is planning to do for the film industry. Canada must draft a clear music policy.

Thank you. I apologize for taking too long.

The Chairman: No, that's fine.

Since we only have 35 minutes left, we should perhaps speed up the discussion and use the round-table formula, which is much more dynamic.

So I will give the floor to Mr. Bélanger, who will no doubt give you some challenges.

Mr. Mauril Bélanger: If that is my mandate, Mr. Chairman, I will try to fulfill it.

I have heard about this new technology. Distribution methods are indeed evolving very rapidly. Though the government may wish to regulate the access to these new methods of distribution, I wonder whether it is technically possible for it to do so. It may not be.

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There are two sides to the coin. As soon as a technology is developed, there are very astute and bright people who find a way to get around the rules and get what they want without paying a cent.

Without assuming that control would be impossible, I would like to hear your reaction and ask you whether the industry can indeed find means other than this control, or regulating access.

I listened very closely to Messrs. Pilon and Sniderman. Without saying it is impossible to regulate the industry, I would like us all to suppose for a minute that technically, we get into a real mess and are not able to get out of it. Could you suggest any other solutions for us? That is the first thing.

[English]

Second, this is somewhat in jest but somewhat also to stimulate a bit of debate. Very recently I was asked by someone from the broadcasting industry to put a question to Mr. Sniderman, and I will put it. The question I was asked to put—and it's part of this whole debate of quotas—is, would you agree to having 30% of your floor space dedicated to Canadian production only, exclusively?

I understand that the fact that I was asked to ask that question—and I won't name the source—

Mr. Jim Abbott: But they'll be paying for lunch.

Some hon. members: Oh, oh!

Mr. Mauril Bélanger: He hasn't yet.

That fact illustrates there's a tension between the broadcasting as a mechanism and the producers of music. So as a way of deflecting, I suppose, the criticism, they're asking, “Well, would they do it?”

So the question is very sincerely put. How do the people who retail feel about that? And at some point, I wouldn't mind having—

Mr. Jason Sniderman: Is that a minimum or a maximum?

Some hon. members: Oh, oh!

Mr. Mauril Bélanger: You explain that.

Something we haven't touched on as a committee in our tables is this whole notion of clubs. For instance, I'm not sure that there are Canadian-owned book clubs or video clubs. You said there are no Canadian-owned record clubs. Is there an opportunity here for a cultural policy to intervene and perhaps help stimulate such a thing, and if there is, do we need more, and that kind of thing?

I hope this helps, Mr. Chairman.

The Chairman: We won't tackle these questions specifically to the people asked right now. Later on we'll just go around again, but make a note of the questions so we can address them when your turn comes.

Mr. Abbott.

Mr. Jim Abbott: I was interested that Mr. Sniderman made the point that there's very weak lobbying at the federal level. Apparently he wasn't around during copyright discussion.

Some hon. members: Oh, oh!

Mr. Jim Abbott: I think Mr. Pilon and perhaps his counterpart, Mr. McCabe, know their way to my office, in any event.

I would like to challenge Mr. Pilon, because he said the intervention relative to your industry has been the least developed at the federal level. I sometimes wonder if 30% of the airplay time is not intervention. It strikes me as a very significant intervention.

During the last discussions of the copyright, in phase two of copyright, for example, we have to be very careful of intervention. I predicted—and I regret to inform you that there's an article in the Financial Post today that bears out my prediction—that the tape levy undoubtedly is going to be challenged under NAFTA. In my judgment, for Canadian artists to potentially get $12 million, which I believe was the number we were talking about, that could very well bring into focus SOCAN fees, which are probably in the range of $100 million.

In other words, it is not simple to take these interventionist steps when we live in 1998, when we have the World Trade Organization, when we have NAFTA and potentially the MAI.

• 1200

I was also interested in Mr. Rosen's comments about the competition between a private entrepreneur and our publicly funded CBC, which I find highly regrettable.

The same as Mr. Bélanger, I would like to throw a little cat in the chicken coop here. Also from the Financial Post on March 7, “Country Sings the Blues”:

Terri Clark is about as P.O.'d as an Albertan can be. “Here I am, a Canadian artist, and I co-wrote Something in the Water with two Americans. Mercury Canada released it in Canada and it died 'cuz it wasn't considered Canadian content. To be recognized as a Canadian in Canada means the world to me.... But hello! I'm a Canadian. Canada's really funny about that.”

Shania Twain is also quoted in here in exactly the same way, as is Paul Brandt. Vicki Dalziel, general manager of Country Music Television Canada says:

That has been our biggest difficulty.... Canadian talents become superstars, go south and then can't get on Canadian airwaves because of Canadian content rules.

This is bizarre. This is just totally bizarre.

My question to the group is this. Considering that, and not just on the basis of this article—we know this is an existing situation—do we not agree that the CRTC rules as they are now constituted will forever make us a farm team, able to develop young undiscovered talent but when people become major international stars—and truly Canadians are capable of it; the sky is the limit for talent; we have shown that time and time again—when they do hit the sky, all of a sudden they are no longer Canadian. So our CRTC rules, our broadcast rules, such as the 30% rule, relegate Canada to be the developer of talent until Canadians are accepted in a worldwide context.

The Chairman: Mr. Godfrey.

Mr. John Godfrey: I would like to begin by complimenting everybody who has appeared, because they have done something virtually none of the other groups have done. They have addressed the points we put to them, and systematically and usefully. I don't know what it is about the discipline you must all have. I don't know. It's something you have in common. It must be something you share.

The second reflection is that clearly our task as a committee is going to be extremely difficult. If we're to be meaningfully useful to specific industries such as this one, which are systems chained together and having a kind of integrated logic, we're going to have to select certain priority ones or recommend to the minister that she, on the model of the film distribution or the film options paper, take up this urgently or something, because I doubt very much we as a committee are going to be able to treat the full complexity of each of these systems with the attention it deserves in the time we have.

My third reflection is that if you take a big-picture view of the industry over a 30-year period, it's a success. It seems to me what I hear you saying is that the content rules have worked. We have lots of evidence of home-grown artists who have gone on to do great things, and this didn't just happen by market forces. There was a policy there that worked. But as we contemplate the future it seems to me basically there are or were three different kinds of businesses in the room. I'm into business models today for some reason I can't quite fathom. Business 1 is the radio business. Those folks have left. Business 2 is the record companies. Business 3 is the distribution companies, the Sam the Record Man, if you like. Each of them has a different business challenge in the way in which these things work.

Ironically, as we've thought of other business models, whether book publishing, film production and distribution, or private television, or I would argue radio, the big, untold story is how much of these business models, which are.... All these companies are telling us how Canadian they are, how much they depend on American business for distribution. It basically underlies their main economic activity.

I think we've had a fairly good sense from Mr. Sniderman of the challenges his business model faces. I guess I want to ask the Canadian-grown companies about their business model. How has it evolved over time? How much is it dependent on the foreign component, either export or distribution of American artists, and where do they see it all going?

• 1205

The Chairman: Mr. Denis.

[Translation]

Mr. Jean-François Denis: I have not spoken very much thus far and I will do so now.

The Chairman: As you know, silence is golden.

Mr. Jean-François Denis: I have a very small business and I work in the music industry which is strong in our country, but very marginal. Electroacoustic music, which is very specific, does not represent an industry per say, but represents culture.

We have talked a lot about policy and market rules. I think it is also very important to discuss content. Quotas are an administrative way to manage content which has very arbitrary parameters. You can see that by the examples given earlier. The content is deemed Canadian if it is of a certain type, but is no longer Canadian if a certain percentage is not met.

On the other hand, there is a lot of talent and creativity in Canada. Empreintes DIGITALes, my CD company, does not sell millions of discs, nor hundreds of thousands, but a few thousand copies of each disc.

It is very similar to the book industry, where you have cookbooks, adventure novels and poetry. Our countries' greatest performers are also literary poets. Of course, some authors write biographies, which is very important, but the creativity is in the content and identity. Cultural products are made in very different ways and the profits are often marginal. If no leeway is given, a document or other product will never materialize. It is very important that there be some margin; there is a margin around this page, for instance, to contain it.

The reason my business survives is because of passion. That doesn't pay, but it needs to be fed nonetheless.

The Chairman: But what are you expecting from the federal government?

Mr. Jean-François Denis: The measures that already exist under the SRDP. The type of music that interests me is managed by the Canada Council, which does quite a good job. However, there is a shortage of funds and everybody has spoken about it. The problem is that the money is awarded on a project-by-project basis. A CD collection cannot be done as a project.

The Chairman: So you agree with Mr. Pilon and Mr. Mair?

Mr. Jean-François Denis: Yes.

The Chairman: It should be allocated by business rather than by project?

Mr. Jean-François Denis: Yes, much more so, because it takes time to get a clear vision and there will be bumps along the way. Our businesses should be funded on a more continual basis, even if they are working on the fringe, on a very small profit margin and on a non-commercial product. Even if it is not an industry per se, it remains nonetheless one of the pillars of Canada's contribution to concert music.

The Chairman: Thank you very much. That is an important point. I will give the floor to Ms. Bulte and Mr. Desrochers.

[English]

Ms. Sarmite Bulte: Thank you, Mr. Chairman.

I just wanted to bring to your attention that yesterday we had the Minister of Canadian Heritage here, addressing the committee as we dealt with members from the film industry. One of the things distributed to us was market share of content by origin in each of the various industries. At the bottom of that was film. One of the things the minister actually used in an example was the success of the sound and recording industry. She was using you as an example; the quotas. When she was talking about how to improve the film industry, your industry was being used as the model. The whole discussion of quotas came up: would they be applicable. We looked at the distribution.

• 1210

I would like to thank Mr. Sniderman for his presentation. It was very informative to me. He raised a very good question. Why are we regulating the book distributors but not the sound distributors?

I think what you should do is follow very closely what will be happening in the film policy area, because we seem to be linking the two together. The problem with distribution of feature films in Canada is that the distribution is controlled by Americans. It's an agreement we've entered into. I would urge you to look at that and follow what happens in the film industry. I concur with Mr. Godfrey that maybe our recommendation should be to go back to the minister and ask her to have a special study done on the sound and recording area. One of the things about what has worked, what hasn't worked, is I'm hearing that FACTOR has worked and it is a good thing to continue.

On Canadian content, if I could follow Mr. Abbott on Canadian content, in one of the first meetings I had with Mr. Mair we talked about Canadian content. Unfortunately, the public doesn't realize the Canadian content is not in prime time. Canadian content, 30%, can appear at any time of the night, such as when we're all asleep. That doesn't do a lot for the times when we drive to work or we drive our children to school. That is not when it's regulated. I think we have to be careful when we're saying it's 30% content.

I would like you to raise practical concerns as we're here discussing things. We can have 30% Canadian content and that sounds wonderful, but it's no different from saying 30% Canadian content in a retailer store. If we stick it at the back it won't make any difference. That's exactly what we're doing here.

When you're addressing these concerns, address some of the myths we need to have in front of us to deal with the problem.

The Chairman: Mr. Muise, if you will allow me, after Mr. Desrochers I would like to give a chance to Mr. Petersen, who came all the way from Alberta. I think it would be a shame if he went back without having had his say.

Mr. Desrochers.

[Translation]

Mr. Odina Desrochers (Lotbinière, BQ): I would first like to make a few comments, especially with regard to my colleague from the Reform Party. I have always had trouble understanding why their party, which has so strongly defended Canada lately and has a very particular vision for it, would have trouble defending Canadian culture. I would like their great view of Canada to be reflected in their defence of Canadian culture. But in my view, authors, broadcasters and distributors should work together.

My question is for Mr. Robert Pilon. The Bloc Québécois recently asked the government once again to implement the copyright system provided for in Bill C-32, introduced by the Minister of Canadian Heritage. I would like to know whether regulation will follow. If the regulation is not passed soon, what would be the consequences for performers?

My second comment is obviously on broadcasting. We are still waiting for a decision on Canadian music quotas, especially in Quebec. If the decision is delayed, what might be the consequences for all performers and the song industry in Canada and Quebec?

The Chairman: Thank you very much, Mr. Desrochers. Mr. Pilon, I will give you a chance to answer a little later.

[English]

Mr. Petersen.

Mr. Holger Petersen: Thank you.

In response to Mr. Godfrey, Stony Plain Records has been in existence for 22 years. Our history has been that basically our first 10 years in the industry were development years, break-even years; barely break-even years. Most of that time it was a one-person to two-person company. We made a lot of mistakes.

• 1215

My own passion is for roots music, which is music that involves singer-songwriters, the western side of country music, blues, music from the folk tradition—music that isn't highly commercially viable in many ways. It took at least that amount of time to find like-minded players in the international community and in the national community. Had it not been for SRDP funding to attend trade fairs, FACTOR funding, and CIRPA's participation at Midem and major trade fairs, we wouldn't have been able to find those partners over the years.

I'd just like to emphasize the long-term development that's required for Canadian companies to find their place in the market. Also, with the kinds of artists we work with in those areas, a long-term development process takes place. In many cases you have to invest a considerable amount of money over a long period of time. Those artists don't get as much airplay. They need to be exposed by being on the road.

We are pursuing a niche market, and to pursue that, you need, of course, the passion to understand the music, where it's coming from, and the players involved in that. You also need to understand the opportunities that are available to you—the publications and radio formats that are available. Those, again, take time.

I'm happy to say that in the last 10 years we have turned around the company. We work with 15 Canadian artists who are signed to the label. We have learned a lot about niche marketing in the international marketplace. And a large part of that is due to money that has gone through organizations, especially FACTOR, which again, I'd like to say, from our experience, is incredibly well-administered, with a good balance between overhead and productivity; very street-oriented; and very responsible.

I'd also like to reiterate, as everybody else has, the need for constant copyright reform. Phase three is something that will give us an equal playing field internationally and will result in the further well-being of all Canadian organizations in the industry.

More money put through SRDP and through FACTOR will have a very positive result. The music industry is a very fiscally responsible industry. There's a very positive multiple factor. There's a quick and higher return than in many other cultural industries. There's a higher impact internationally. I'd like to see more supports go through those systems, and again, I support copyright legislation. Those would be my two key points.

The Chairman: Thank you very much, Mr. Petersen.

Mrs. Cecconi.

Ms. Pegi Cecconi: I just want to key in on how Canadian content and industry are so much one and the same. We started off as a one-artist label that became successful, without question. We've had lots of other bands since then. Their success is not as great, but ultimately what we have is a bunch of Canadian artists who live in this country and bring in lots of money. Over 90% of our income comes from outside this country, and it comes here and taxes are paid.

Ultimately it's very important that our industry survive. If middle-sized companies like ours had a little more support, as opposed to an artist-by-artist thing, we could go further and keep more money in the country.

So when I hear about a country singer saying, “I'm not Canadian any more”.... Part of those regulations were to help build industry or record in this country. We have brilliant studios. Write with Canadians. We're good writers. Be published by Canadians. So it's more than just, “I was born here. I am.” It's to try to help and build the industry and keep tax dollars, copyright, and everything in this country.

That's pretty well all I have to say now.

The Chairman: Thank you very much, Ms. Cecconi. The point is certainly clearly made.

Mr. Perlman, do you want to intervene?

Mr. Malcolm Perlman: Yes. I'll be very brief.

• 1220

I did want to bring out the point which was brought up at the Canadian Music Week panel last week about the book clubs, which Jason alluded to.

BMG—both Columbia House and BMG are foreign owned—apparently gave commitments as to what they would agree to and they have not fulfilled any of their commitments. I don't know whether these commitments were made to Investment Canada or to whom, but nobody has bothered to ensure these commitments have been fulfilled, and they just do what they like. They absolutely annihilate the perceived value of the artistic product, as does their competitor Columbia House. To add insult to injury, they are foreign owned.

Before making my final point, I wanted to address Mr. Abbott's comment about NAFTA and the article he read in the Financial Post. I understand we are talking about a cultural industry here. This isn't a commodity, this is our very being. That is why it is treated separately. I believe under NAFTA cultural matters are excluded because we would like to preserve and nurture them.

My final comment is on retail, where I come from. We've been in the business only 20 years. Believe me, it is not easy when you have to compete with a multinational. There are no regulations. I don't know whether or not Investment Canada reviews entry into the business, but the principal operator in the retail business today has its decisions made in London, England. That does nothing to open up markets.

I would feel our culture was being enhanced if these people would come here and go to Chicoutimi or to Timmins and open a store there. They don't. They seem to move into areas that are established. They don't seem to; they do. Then they come in with all their guns blazing and basically wipe out the independent retailers in the area and give the others a very hard time. From a business perspective the ultimate object is to wipe out the competition and then put up the prices.

I feel it would be irresponsible if this wasn't brought to the attention of the government, because we've been so quiet. Nothing has been said. We owe it to the next generation that we provide a more level playing field in order to ensure we have some control over our culture.

The Chairman: Thank you very much, Mr. Perlman.

Mr. Muise, you've been extremely patient.

Mr. Mark Muise: Thank you.

We've seen various witnesses, not specifically at this round table, come in and say something to the effect that we can't put walls up, or we can't put up barriers; the best way we can promote ourselves is by letting the thing go and prove to whoever that we're very good. But then we hear comments such as that we have many artists who have benefited from the Canadian content rules but now are living in Los Angeles or the Bahamas and paying taxes there. What can be done to satisfy both groups here? I'm not sure what to think. I would like some opinion on that.

• 1225

The Chairman: To sum up, I'll allow those who have not spoken lately to make a brief intervention and maybe pick up on some of the questions that have been started.

Mr. Mair.

Mr. Alexander Mair: I'll try to address a number of things.

To Mr. Muise's comment, my suspicion is that most of the people who have said we shouldn't have any walls and so on are users, as opposed to creators. I may be wrong in that, but there always seems to be a dichotomy between those who believe in the need for regulation and those who for their business reasons don't want regulations. Broadcasters in this country are usually a good example of that: protect us but don't protect anybody else.

To Mrs. Bulte's question about Canadian content distribution, she said we had talked earlier. What she was referring to was that the CRTC regulations currently cover an 18-hour day, from 6 a.m. till midnight, but they don't force proper distribution of the music throughout the day, so there's a lot of Canadian music between 11 p.m. and midnight, when no one is listening, and very little Canadian music played in the morning and afternoon drives, which have the most listenership.

On Mr. Bélanger's question to Jason, I'm sure Jason will answer. However, I think it's important to note that Sam the Record Man carry in their stock, which they have paid for, probably every Canadian record available. So whether or not they should be putting 30% of their inventory.... If they have one copy, they don't necessarily need 20, unless it's selling.

On the Canadian content regulations and the increase from 30% to 35%, what that really means is playing two more Canadian songs a week in rotation. It is not a big increase.

Mr. Abbott quoted from the Financial Post this morning. I had it in my briefcase. I hadn't read it. This is a quote from a U.S. lobby group. To me the important thing was:

...the U.S. has refused to sign the Rome Convention, which calls on all other 97 countries signing the agreement to charge royalties for broadcasts. A senior U.S. trade official said Congress refuses to let the U.S. administration sign the treaty because U.S. radio stations are balking at paying performer royalties.

Someone joked about who paid for lunch with Mr. Bélanger. We know the American broadcasters pay for a lot of lunches and have enormous clout with their federal government. With 97 countries in favour, the United States is going to attack Canada?

Pegi referred to the article from last Saturday's Financial Post on the country acts. If you read the CRTC regulations, one of the points is to build a domestic recording industry. As she said, if the artist recorded here and spent that $100,000 or $150,000 making the record here, they would qualify as Canadian content under the “P” in the MAPL process.

Shania Twain, interestingly, has sold 2 million records in this country. One out of every three English Canada households bought Shania Twain's record; and she is complaining about lack of exposure. That's more, pro rata, than any other country in the world.

The regulations have helped develop the Canadian industry. The farm team concept.... Sarah McLachlan, from Mr. Abbott's province, just won two Grammy Awards. She still lives here. Anne Murray, Gordon Lightfoot.... Pegi didn't identify her group, which is Rush.

How many records has Rush sold internationally, Pegi?

Ms. Pegi Cecconi: Forty million.

Mr. Alexander Mair: Forty million records. They chose to stay here.

It's always going to be a fact of life in any country in the world that people will move for whatever purposes. It's a fact of life that people will try to avoid paying taxes.

Mr. Muise asked about it. What do we do? Why does Bryan Adams pay his taxes in Ireland? Because he pays a flat 10%. They have a special law for artists. You don't have to live there. I have a friend who is an Irish citizen for tax purposes and who has never been to Ireland. He pays 10% on his worldwide income and then he's free to do with the rest as he pleases.

We have a very negative tax system for artists, for small companies.

• 1230

Mr. Denis mentioned the situation about being allowed to make mistakes. One of the problems with our current tax system is if you have a good year, the government grabs 50% in taxes right away. The next year you've made a mistake and you're back knocking on the bank's door, and they're asking you to personally sign the loan yet again.

There are obviously a lot of items here. I've left the question John Godfrey asked. That is definitely an important one, but I'm sure my other colleagues will comment on some of these as well.

The Chairman: If there's time we'll come back to it for sure.

[Translation]

Mr. Pilon, you had asked for the floor.

Mr. Robert Pilon: I would have first liked to answer Mr. Bélanger's question.

The Chairman: All of our hearings are transcribed.

Mr. Robert Pilon: Yes, he will be able to read the transcript.

Mr. Bélanger asked us to suggest other solutions if the regulation of new technologies, including the Internet, proves to be impossible. I will repeat that it is important to look a little further, beyond the trendy myth that says that it is impossible, when no one has any proof that it is really so.

I have never seen one single government's study on regulation. It would not be complicated and would not cost a fortune. You could invite an engineer and an economist and ask them to look into regulating new technologies, film distribution, television broadcasting, music on the Internet or similar things. Ask an engineer, an economist and a lawyer to take a technical view of matters. Let us set up a team of three people. That should not cost very much. We would have a better grasp of the issue and could stop talking nonsense and proffering platitudes that no one has ever checked. Although I am neither an engineer nor a lawyer, from what I can gather, it should be possible and it is mostly a question of political will.

If it were to be absolutely impossible, what would the other possibilities be? The other possibilities, of course, would be to provide financial support.

The cultural policy instruments used by the Canadian government have been of three kinds: public help—grants, advances of funds and loans—regulations concerning content and regulations concerning property. In my opinion, it's the balance between those three kinds of policies that explain the success of cultural policy in many areas.

There will be a problem if we say that we won't regulate content anymore while still continuing to grant subsidies. I think there's something unhealthy when you're producing films, books and records and you don't keep a window for that. There's something artificial in that. I'm not saying that we shouldn't be giving any subsidies, on the contrary. Our sector more specially, the pop music sector, gets 0.2% of all public aid granted in Canada by all levels of government. It's minuscule.

[English]

We are really the poor cousins of the cultural industry. There should be more there. But subsidies alone won't do the job. You also need a window to expose your products. So some sort of regulation is necessary as long as there is this inequality in the competition between the huge U.S.-based multinationals and the small Canadian-owned companies.

[Translation]

That's what the problem is: if it weren't for that structural inequality, we probably wouldn't need any regulations. That's what constitutes the base of the regulations. We don't want regulations because of philosophy, ideology or principles. We would like to have them because they're necessary.

Mr. Abbott said there were perhaps too many interventions.

[English]

Well, it's a societal choice. It depends on what we want. It depends on what Canadians want. If Canadians don't think that maintaining a diversity of cultural expression and giving Canadians access to those different cultural products is important, if they think it's enough to have U.S. music and Hollywood movies, well, so be it. If it's the choice of Canadians, so be it. But there's a huge price to pay for that, a huge price to pay for that. How long are we going to stay a different country from the U.S.? So that's the choice to be made.

We from the cultural milieu won't be able to force government to do something the people don't want.

• 1235

[Translation]

If our fellow citizens don't want something, then the cultural industry people will withdraw. The record producers will go somewhere else if they want to keep on making records. They'll make records with American artists or they'll do something else. It's a matter of what society chooses. If we think it's important for us to have cultural products that reflect the expressions of our artists and the concerns of our fellow citizens and that we want to share with the rest of the world, then we have to do what has to be done.

[English]

The Chairman: Mr. Rosen.

Mr. Earl Rosen: I'd like to make a brief comment on what Mr. Abbott said and then respond to Mr. Godfrey.

It's ironic that someone like Terri Clarke would find out from broadcasters that they won't play one of her records because it doesn't count as Canadian. There's nothing that keeps the broadcasters from playing that recording. They have 70% of the other time. It's a very bizarre phenomenon that once a person is a Canadian, a broadcaster will not play their records often, unless it counts as Canadian content. That's a choice broadcasters make.

In response to Mr. Godfrey and some of the other comments about the importance of our work abroad and our foreign business, it's a matter of balance. Our company and many independent labels couldn't exist if it weren't for the infrastructure that exists within Canada, brought about by Canadian content regulations, the support of FACTOR, and the support of the Canada Council for certain kinds of projects. That gives us a solid domestic base.

I could never make a living and I could never support my company on that base alone, trying to sell classical music only in Canada. But without that home market, I couldn't then expand abroad. I do about 80% of my business outside Canada, and it is because I have a very firm home base to work from that I am able to expand to do my sales outside Canada, to introduce Canadian artists around the world, and to give them opportunities to build their careers, because often it's impossible or very difficult for artists to get live performances unless they have records available. So it's more than just selling records; it's giving Canadian artists a chance to build international careers.

So what we try to do is have a balance between having a solid Canadian market and then using that as a stepping stone into the international market.

Just as an aside, when NAFTA came along, it had no direct impact on my business except psychologically. My partner and I decided that our domestic market was North America, and we treat the United States as our domestic market. We've had very good success in expanding our sales as a result.

So it really was as much a cultural thing. I suspect some Canadian companies may be afraid of going into the American market on their own, but for us it's worked out very well.

Thank you.

The Chairman: Thank you, Mr. Rosen.

Mr. Sniderman and then Mr. Abbott.

Mr. Jason Sniderman: I'd like to further embellish what Robert has said regarding windows. Yes, it's important to establish windows. One of the points I wish to make in my comments on new modes of distribution is that those windows will not be controlled by the people we have an emotional attachment to, who are multinational record companies. Even though we in the independent Canadian side are sometimes at odds with multinational record companies, at least we share a vested emotional interest in Canadian artists in some form or fashion.

There's no guarantee that AT&T or Bell or whoever is transmitting your message down the fibre-optic link will give any type of care as to what you're doing, on an emotional basis or on a cultural basis. So besides the regulatory notion of keeping the windows open, you have to make sure that who the window is open with cares about what you're doing from a cultural basis. If they don't, forget about it; it's over.

From the Canadian content perspective.... Now I have to talk as Sam the Record Man, because I've been at FACTOR for 15 years and I've been the president of FACTOR for six years, and I'm not necessarily allowed to have any type of political perspective on Canadian content requirements. I'll preface my remarks with that. The people on the committee know where I'm coming from.

I watched with interest the CRTC applications in December, and I had long conversations with Monsieur Pilon. I grew up in an era when Canadian content had just started. I know my father was very proactive and very involved in it. When I was ten years old and there was a limit to the amount of good Canadian music, for whatever reasons, Canadian music we all could be proud of, I could understand it.

• 1240

For me, Canadian content requirements are the ultimate no-brainer. My kids, who are 10, 11, 12 years old, don't know whether it's American or Canadian; they know it's good music.

It shouldn't be a problem hitting 30%. It shouldn't be a problem hitting 40%, 50%, 60%. That's not the issue. The issue is this. Maybe Al could tell me.

Has a study even been done saying Canadian content is detrimental to your listenership?

Mr. Alexander Mair: Not a single study has ever been done by the CRTC or broadcasters.

Mr. Jason Sniderman: What is the supposition that playing Canadian music is bad? When you can show me that, then I can agree that maybe it should be 30%, 35%, 25%. Until someone can put on the table that playing Canadian music is detrimental to listenership, how can we make those suppositions? How can you spend years, days, hours, months, talking about Canadian content requirements when you don't know the other side of the story? When it becomes a prevalent argument that Canadian content is bad and people are turning off their radios in droves, then I can understand that.

I've never had a problem in supporting Canadian talent. It was how I was brought up. Everyone at this table makes a living out of supporting Canadian talent, because that's how we make our living. It goes hand in hand. It's a cultural issue, but yes, it's also a financial issue.

I look around the table and I've known these people for years. It has not been a question of whether we support Canadian talent. Those are the people we work with. Those are the people who put bread on our table. The whole issue of 30%, 35%, 25% to me is moot until something says 70% is better; or not better.

The Chairman: Mr. Bélanger just came back.

You got the answer.

Mr. Mauril Bélanger: Yes. Whoever asked me the question now has the answer.

The Chairman: Mr. Abbott.

Mr. Jim Abbott: To use a phrase Mr. Pilon used, “fashionable statement”, somehow it seems to be a fashionable statement for the Bloc and other adversaries to suggest that somehow the Reform Party is anti-Canadian as far as content rules or anything else are concerned. Nothing could be further from the truth.

The Chairman: Excuse me, Mr. Abbott. You weren't describing Mr. Pilon as a member of the party, were you?

Mr. Jim Abbott: Oh, no. That's for him to say.

My point is this. As the committee is aware, because I've mentioned this on other occasions, I have a very personal vested interest in the success of Canadian artists. My daughter is married to a musician-composer. They are supported from his income, along with my two granddaughters. If you want anybody who has more of a vested interest in the success of people in your industry, I don't think you could find anyone.

However, I am a pragmatist. As I look at this issue pragmatically...and the reason why I used the tape levy as an example was I predicted—and I'm sincerely afraid my prediction is going to come through—during the second phase of copyright negotiations that reaching out for that $12 million on the blank tape levy was going to direct the attention of the trade interests in the United States. And they are the Yankee trader, and they are predatory. Let's be clear.

Mr. Mauril Bélanger: Good prediction.

Mr. Jim Abbott: The point is, why would we have gone ahead with something like that, going after $12 million and probably putting the SOCAN fees alone, which are over $100 million...in the light of that kind of thing? We do live in a world where under NAFTA we are currently trading over $1 billion a day, and culturally we trade with the United States $1 billion a year. That being the case, why are we not more pragmatic? Why are we not more careful? Are we careful we are not overreaching in our protection?

I take Mr. Rosen's point as being an absolutely classic example of a businessman in Canada who has said “my domestic market is the United States”. He has taken advantage of that. Those are the positive things that have happened. It has been the international trade with the United States; 80% of our trade happens with the United States and it comprises 50% of our gross domestic product. These are not nice. These are not things you want to hear, but these are realities.

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I have, as I say, a very personal vested interest in you being successful. I want you to be successful. But to be thinking in terms of building walls so that a person like Mr. Rosen would still have the Canadian domestic market and to think we don't have the World Trade Organization or NAFTA, that we don't have these realities, is just absolutely unrealistic.

So I suggest, on the other side of the coin, that the fashionable statement is that we can protect ourselves, we can create all of these barriers and walls, and so on and so forth, without looking at what the tradeoff cost is going to be to do that. If we determine what the tradeoff cost is going to be to do that, then let's go ahead and do it, but let's not have a repeat of what we did in phase two of copyright.

The Chairman: Phase two of copyright, by the way, was a product of a majority of people who think in a very democratic fashion.

Some hon. members: Oh, oh!

The Chairman: Monsieur Pilon.

Mr. Robert Pilon: Mr. Abbott, first, on home taping, to my knowledge the clause of Bill C-32 on home taping hasn't been proclaimed yet. Last week I heard a comforting rumour about this being done, but still I don't know. We're still waiting to know officially if it's been proclaimed or not.

Are you surprised, frankly, about that?

Mr. Jim Abbott: No, that's what I said. I predicted it.

Mr. Robert Pilon: I'm not either. They told us ten years ago, eight years ago, seven years ago, three years ago, and six months ago that they were coming at us. I'm not surprised. But then, do they have a case?

It's pretty funny here. You have someone from a huge market in a huge country saying, “In our country, if a citizen illegally tapes a record of Céline Dion, that's fine for us. Céline Dion won't get any money and the producer won't get any money. But if in Canada, someone tapes a record of Bruce Springsteen or Madonna, ho, ho, we want the money.” So that's a one-way deal they want. They want all the money for them and don't want to give us our money.

They want to change their bill, change their act, and have us send them money. I don't think we should be that naive. All the international agreements allow us to do what the government intended to do, which is reciprocity. We're clean. They won't win their case. But they're bullying; they're trying to do that. If they change their legislation, then we'll change ours. I don't think we should be naive enough to send them money when they don't send us anything.

The Chairman: Is there one last intervention, Mr. Godfrey?

Mr. John Godfrey: I have two comments, in the nature of a nostras culpa. It does seem to me, with 20-20 hindsight,

[Translation]

always mustard after lunch.

[English]

that we have really neglected to have two important factors, if I may use the word in the original sense, at the table. One we've already talked about, which would be the commercial radio people. It would have been lovely to have them present and see them squirming about their morning drive show practices.

The other one, which really is hugely lacking at the table, is the 90% of the foreign record and distribution companies that dominate the market. What we have here is 10% of the business, and it would be nice to have the other 90% at the table to tell us about the recording business.

So it seems to me it's been a very useful exercise but not an entirely realistic exercise, because the big monsters are missing. Just the good guys are here. I just want to put that on the record as something we should have thought of before the meeting.

• 1250

Mr. Robert Pilon: We hope we have CRIA. I gather they have been invited. They should have been there. It's an important part of this industry. Some of the companies have made substantial investments in Canadian artists, starting with Céline Dion and many others. That's fine.

Let's be clear here. You ask about the strategy, the model. We're convinced the independent industry, as happened in the TV industry.... Look at this article on Alliance in the Globe this morning: $135 million a year in annual revenue. There's no independent record music company; which is far from that.

Our view is that there should be, as there is in the book industry and as there is in the TV production industry, a more solid, Canadian-owned industrial base to ensure there is a future for the production of Canadian artists. That doesn't mean we're going to throw the country to the multinationals tomorrow. We're not asking for what happened in the broadcasting sector in 1968, expropriation of the multinationals. We're asking for a better balance in the industrial structure. If you want to have a better balance between the independent sector and the multinational sector, first you have to have an independent sector. You don't really have it today, because it's very shaky.

The Chairman: My job is to wrap up what we've heard, but we've heard lots of things. I'm going to try to summarize the main points in what I heard, starting with Mr. Beatty and Mr. Stein.

Mr. Beatty felt new technology should be welcomed. He gave the example of digital recording and digital radio. He suggested the mandate of the CBC should be to protect Canadian voices in Canadian homes. Mr. Stein deplored the lack of dialogue between radio broadcasters and the sound recording industry. He felt there should be closer partnerships. But when Mr. Mair spoke we heard the counterpoint, which is always interesting, because this is the way you make up your mind.

Mr. Mair, if I could sum up what you said, and I think it was very much the gist of what we discussed here, first of all, about Canadian content, you felt this should be maintained. It was your view that very often radio broadcasters abuse the regulations and the CRTC and other agencies should find a way to reinforce the rules and regulations. Also, you were the first to bring up the question of funding; that it shouldn't be project to project but rather looked at on a continuous basis. I think that point was brought up by Mr. Denis as well, and others: that the funding should not be project by project.

I think all of you welcomed the new technological advances. At the same time I heard a very strong voice from all parties that this should be subject to strict copyright rights; that new technology shouldn't be a way for copyright rights to be abused.

Mr. Pilon raised a very interesting point, whether it is impossible to regulate the Internet, as we had asked him to. The feeling was that we have to find ways of seeing that phase three of copyright addresses these things and is studied very soon.

I think there was a feeling from those who addressed the question that demographics is a positive development. You mentioned, for instance, the role of children's records and the way they have become much more prominent.

I think everybody felt there should be a very proactive role on the part of the federal government and we should look at tax incentives and other ways of formulating our support to your industry.

Mr. Mair, I think you made the point, and I certainly noted it, that the Copyright Board now is deficient in two members. Two of the three are neophytes who are not experienced. That's a key item, and before we even get to the report I certainly have taken note of it. I will pass on your remarks, which are very important.

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We had very interesting testimony from Mr. Rosen

[Translation]

and Mr. Denis explained that you operate in a specialized sector of your industry. You're talking about thousands or records rather than hundreds of thousands of millions of records. You're looking for quality and a specialization that will open a door to a huge market. You compare that to poetry, to prose and to restaurants, those who produce works for the restaurant sector, which is very specialized.

[English]

In the same vein, it was interesting, Mr. Rosen, that you suggested maybe the Canadian base you have is really essential as a stepping-stone or projection to a bigger market. I don't know who mentioned that—I think it was you, Mr. Rosen—but we also made a point of noting that there should be a greater role for the Department of Foreign Affairs to push culture through the embassies. I think that was a very important point.

Mr. Sniderman, you really brought us into your own world very well. This is something which as lay people we don't hear about too often. What you had to say about your own perspective both in recording and as a retailer was really very striking. I noticed too that you didn't quite agree with Mr. Stein's remarks about the lack of dialogue. You felt that there was dialogue, and that we should be ready to shift from physical distribution of recording to the new modes, and this would raise a really important challenge, which again comes back to copyright; which always comes back.

We also noticed you said foreign-owned retail stores are gradually taking over and three major Canadian ones have closed. Should we have the kind of protection that is now afforded booksellers? These are points that, frankly, we'll have to wrestle with.

You mentioned record clubs. I think Mr. Bélanger made a very important point: why shouldn't we look at the kinds of policies we need in Canada to foster record clubs and book clubs and others? It is obvious there is a big problem there.

[Translation]

Mr. Pilon, you reinforced the whole idea of government support and that aspect is extremely interesting in the area of Canadian content that you support very, very firmly. Mr. Sniderman said:

[English]

let's look at it again; we've never studied it; you think quality is going to do it.

If I understood you rightly, you're not for a firm percentage regulation, but rather just.... Maybe I misunderstood you, but I thought you felt Canadian content rules should be looked at again very closely. You felt 30% might be just a minimum. Why not shoot for 30%, 40%, 50%, 70%?

I also felt the question of technology.... Again, we shouldn't treat technology as a myth that cannot be addressed in the way we look at our culture.

Mr. Perlman, I retain one sentence from you. I wrote it down because I think it very much illustrated what we were about. You answered Mr. Abbott or somebody else by saying this is not a commodity but our very being. I think it really translates a lot of what we are about. Monsieur Denis mentioned that too,

• 1300

[Translation]

the passion that drives him

[English]

and I think Mr. Rosen brought that up as well: the value system. This is really what we retain from all these round tables: that as long as we have the passion, the quality, and the value system to keep, we can cope with the rest—the commodity and the entertainment part.

To sum up, this was an extremely useful, informative, and challenging session for us. Many ideas came forward, but we can't capture them all, so if by any chance you can take the time, or if you want to, if you feel you haven't been heard enough, please drop us a line. Write to the clerk of the committee. We'll be very pleased to entertain—in fact we welcome—any concrete suggestions you would like to make beyond those you have advanced today.

Mrs. Cecconi, I discovered something today. When you talk about 100 million records, it makes me feel very encouraged and very proud. It's wonderful.

Mr. Robert Pilon: May I ask you a question, Mr. Lincoln?

The Chairman: Yes.

Mr. Robert Pilon: We're not very familiar with the process this committee is going through. Where are you heading with all of these sessions? What should the end result of this process be?

The Chairman: I thought I started with that, but I'll explain it to you very briefly.

We started about a year ago, as you know, before the last election. This new committee agreed to continue with this study, which is really wonderful.

The first phase was to inform ourselves of the challenges we have placed as the three key ones: advancing technology; demographics; and international trade, the globalization of trade. We heard from all kinds of experts. We met with officials of ministries to inform us and get a better background, especially for the members who had not been on the previous committee.

The second phase was these round tables. We listened to people from six different sectors of activity. Sometimes, of course, the sectors cross over.

The third phase now is going to be to listen to various pinpointed sectors of federal institutions: Telefilm, the National Film Board, the CRTC, and others.

Following this, we're going to travel across Canada. We're going to meet people in their communities, especially small communities, to see how they manage to keep the culture going. We'll visit a few big cities too, but mostly smaller communities. We're going to do this in two phases, the east first and then the west, because it's such a massive country. We were hoping to have finished in June, but it seems that would be impossible with the travel, so we will continue the travel into the fall.

I've discussed this with the minister, and we are hoping we'll get a report in to her before the end of the year, by December 31. The report will be made to Parliament, of course. From there on, we don't want to reinvent the wheel, we don't want to duplicate things that have been done before by others. All we want is to complement, to give a new sense of direction in regard to these challenges, hoping it will be useful.

Your participation has been really first-class. It's given us new ideas, new ways of looking at things. Thank you.

[Translation]

Thank you very much.

[English]

The meeting is adjourned.