Oct. 21 Election Could Be A Music Biz Fiasco

By David Farrell

As elected party leaders galumph across the country making a growing list of outrageous promises, or slagging each other like high school brats, the prospect of a minority government looms ever larger—and with it an end to Liberal majority that made support for Canada’s cultural industries one of its signature policy planks in the last election.

Gathering dust on the table right now are proposals to modernize the Copyright Act meant to improve the lot of music creators and intellectual property owners, streamline the Copyright Board so that royalty rates and tariffs are dealt with in a timely fashion, and a concertina folder of other items that include CBC funding and fixing the border that discriminates against Canadian acts working in the US.

Copyright law at the best of times makes for dry reading. It’s not a subject matter that galvanizes audiences, and that’s why politicians don’t include it in party platforms. A great many taxpayers yawn or become testy when they are told that subsidizing cultural industries, or paying more to watch content online, is the right thing to do.

And the CBC, one of the most important voices in promoting independent Canadian artists in the country, has detractors who are loud enough to be heard over a convoy of combine harvesters.

So, what are the issues at stake?

Reciprocity for Canadian musicians crossing the border would be a big help. Flowers of Hell bandleader Greg Jarvis neatly summarizes the inequity in a HuffPost opinion piece: “Canadian groups headed to America have two choices: Stump up $2000-$5000 in border fees and union dues and wait weeks for a permit, or go without and risk a two to five-year personal ban from the U.S. Whether it's a one-night show played for beer and beds or a full arena tour makes little difference to the costs and paperwork involved.

“Meanwhile if an American band wants to come north, all they've got to do is rock up to the border with a gig contract, an e-mailed invite from a promoter, and a list of gear and merch.”

Remedy the ‘safe harbour’ provisions in the copyright law: Music Canada has been loudly thumping its message that tech giants have grown fat off the backs of content providers. Believe it or not, the result is the near-collapse of income for a growing number of creators. That linked disparity is what has come to be known as the “value gap”.

“A broken copyright framework, ill-adapted to the challenges of the digital age, is now generally recognized as the cause of the Value Gap,” according to a published prescription for change released by Music Canada.

Continuing: “Of particular concern are copyright exceptions, often referred to as ‘safe harbours’. These provisions are intended to shield Internet and telecommunication network services from liability when the service is simply acting as a dumb pipe — that is, when copyright works such as music are made available through their services without their knowledge or control. However, overly broad and ambiguous safe harbours enable platforms like YouTube, which actively track and control the content, to avoid paying adequate royalties to artists and creators for music distributed over their platforms. When large technology companies do this, artists and music creators effectively subsidize them.”

A Heritage Committee is calling for a review of Canada’s safe harbour provisions—but a hung parliament lessens the likelihood that the copyright portfolio is going to get priority status from a government clinging to power.

Music Canada figures that as much as $1.6B was lost in 2017 from the current safe harbour provision. That’s a lot of dough.

The org’s remedy is simple but requires changing the Act and pushing it through both houses on The Hill.

First, the Copyright Act should include measures to guarantee that user-upload platforms such as YouTube negotiate fair and appropriate licensing agreements with rights holders and, secondly, ensure that unauthorized protected works or other subject-matter are not available on their services, and are not uploaded in the future.

Repeal the $1.25M exemption on commercial radio stations: Commercial radio stations pay royalties to music creators as a percentage of the station’s advertising revenues. However, the Copyright Act contains an exemption relieving stations from royalty payments to performers and record labels on the first $1.25 million of the station’s advertising revenues. The waiver applies to all commercial radio stations in and is a legacy condition put in place in an era when Canada’s radio landscape was dotted mainly with small to medium-sized, family-owned chains. Today the landscape has changed, and four companies now own most of the licenses. Changing the exemption, and waiving the condition for small owner-operated stations, Music Canada estimates an additional $8M annually would flow to recording artists and record labels. No such exemption exists for songwriters, composers or music publishers.

Change the definition of ‘sound recording’: The way ‘sound recording’ is defined in the Act is discriminatory and punitive, exempting payment to the recording act and affiliated record label when recorded music is embedded into a film or television program. Again, the exemption does not apply to songwriters, composers or music publishers. Music Canada estimates this disparity perpetuates a $45M annual royalty loss to performers and record labels. "This effectively constitutes another subsidy to broadcasters and other parties at the expense of creators," according to Music Canada’s calculation.

Other measures:

–Make permanent the two-year $20M increase to the Canada Music Fund.  

–Dedicate 5% of the government’s spectrum auction proceeds to support the creation, distribution and development of Canadian artists and companies.

– Create a clear and comprehensive digital strategy: The heavy lifting in this folder is being undertaken by European governments and the EU where consumer protection laws are reigning in global tech platforms such as Facebook, Google and online services such as Netflix. Among the growing list of practices under scrutiny is whether these global companies are flouting obligations to pay state taxes and whether they should be required to provide a percentage of revenues to a cultural fund.

In Canada, broadcasters are required by law to apportion part of their annual revenues to fund the creation and marketing of Canadian content directly or through not-for-profit orgs such as FACTOR and Quebec’s parallel, Musicaction. The reoccurring question is whether online platforms such as YouTube, Netflix, Disney, Spotify and other players should be made to pay the piper as well, or do we wait for broadcasters to challenge the inequity and be granted the same immunity from paying a culture tax? If the latter were to happen, it would be the undoing of Canada’s policy funding for cultural independence and enterprise.

Heady stuff, none of which we are going to hear bandied about in the stump speeches politicians are making in the run-up to Oct. 21 – but the issues are all too real. The creative class has seen incomes halved and even quartered. 

A dossier of documents, thousands of research hours and a wealth of lawyers have been invested in discussions with various parliamentary committees in the past several years and, right now, the forecast for change is looking dimmer by the day.

A lot can happen on the campaign trail even in a day, so perhaps my pessimism is unwarranted–but if I’m right, it’s likely going to be a long wait before any of the above captures the attention of the reds, blues, greens and orange.