At its October 17 AGM in Toronto, Music Canada released a report that boldly attempts to offer redress for creative communities in music that have seen incomes bludgeoned as a bandwidth of Internet delivery platforms transmitting their content has morphed into a trillion-dollar industry. The income disparity between the content creators and the online conveyers is now commonly referred to as the “value gap”.
The 42-page document, entitled The Value Gap: Its Origins, Impacts and a Made-in-Canada Approach, is one of the first comprehensive collections of information about the value gap that also offers solutions available to Canadian policymakers to correct the imbalance.
“The Value Gap challenges the livelihood and sustainability of an entire global social class, and threatens the future of Canadian culture,” Music Canada President and CEO Graham Henderson bluntly declares. “Our creative industries and the Government of Canada need to come together to acknowledge that the problem facing our creators is real, that the landscape has dramatically changed, and that we need to adapt our rules and regulations before full-time creativity becomes a thing of the past.”
Henderson pinpoints the heart of the disparity for music is the “misapplied and outdated ‘safe harbour’ provisions in copyright law, which result in creators having to forego copyright royalty payments to which they should be entitled, and amount to a system of subsidies to other industries.”
For those who don’t know, the safe harbour provision states that companies such as YouTube are not legally responsible for the uploading of unlicensed material by their users provided they either compensate the rightsholders or remove the content when it is found to be infringing.
With an average of over 1 billion users per month, YouTube is the most-used streaming service in the world. According to the IFPI’s Music Consumer Insight Report, 82% of those 1 billion users are listening to music. Now that streaming, and YouTube, in particular, have become such strong market drivers, their role in compensating artists is more important than ever; hence the increasing dissatisfaction from the industry. According to Forbes, research conducted by MIDiA indicated that between 2014 and 2015, total views increased 132%, whereas rights payments only increased 11%. This would mean YouTube/Vevo’s pay per-stream rate decreased from $0.0020 to $0.0010 for that year.
From publicly available data, IFPI estimates that Spotify paid record companies US$20 per user in 2015. By contrast, it has been determined that YouTube returned less than US$1 for each music user.
Trent Reznor, Music Chief Creative Officer for Apple Music and Nine Inch Nails leader, argues that You Tube’s business model, owned by Google, was served on a gratis platter “built on the backs of free, stolen content”.
Music Canada’s report acknowledges that creators and governments around the world are taking notice, and taking action. “The European Commission has pinpointed the Value Gap as the cause of a marketplace that isn’t functioning correctly and acknowledged that a legislative fix is needed. Hundreds of thousands of U.S. music creators have agreed that the safe harbour provisions of the Digital Millennium Copyright Act need changing.
“In Canada, thousands of musicians, authors, poets, visual artists, playwrights and other members of the creative class, have urged The Honourable Mélanie Joly, Minister of Canadian Heritage, to put creators at the heart of future policy in a campaign called Focus on Creators.
The Value Gap: Its Origins, Impacts and a Made-in- Canada Approach provides insights into how policymakers can reverse the gap. For instance, the Canadian Copyright Act contains provisions that allow and, in some cases, even encourage the commercialization of creators’ work without the need for proper remuneration, undercutting one of its overarching principles: to ensure that creators receive a just reward for the use of their works.
To address these inequities, the federal government should take the following actions:
1. Focus on the Effects of Safe Harbour Laws and Exceptions
The Canadian government should, like its international counterparts, review and address safe harbour laws and exceptions, and their subsequent misapplication by some technology companies, as well as the cross-subsidies that have been added to the Copyright Act.
2. Canada’s Creative Industries are Asking for Meaningful Reforms
During the mandated five-year review of the Copyright Act slated to begin in late 2017, the government should review the Act for instances that allow others to commercialize creative works without properly remunerating artists, and end these cross-subsidies.
3. Remove the $1.25 Million Radio Royalty Exemption
Since 1997, commercial radio stations have only been required to pay $100 in performance royalties on their first $1.25 million advertising revenue. This exemption should be eliminated. It amounts to a subsidy being paid by artists to large vertically-integrated media companies.
4. Amend the Definition of Sound Recording
In the Copyright Act, recorded music is not considered a ‘sound recording’ (and thus not entitled to royalties) when it is included in a TV or film soundtrack. The definition should be changed to allow performers and creators of recorded music to collect royalties when music is part of a TV/film soundtrack.
And below, Music Canada President & CEO Graham Henderson delivering the opening keynote at Canadian Music Week‘s Global Creators Summit earlier this year.