Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue No. 9 - Evidence - November 2, 2016
OTTAWA, Wednesday, November 2, 2016
The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:21 p.m. to study, and make recommendations on, the operation and practices of the Copyright Board of Canada.
Senator David Tkachuk (Chair) in the chair.
[English]
The Chair: Senators, just before we get started, I have an announcement to make. Yesterday, Brett Stuckey, our Library of Parliament analyst on leave, welcomed a seven-pound baby into the world. Her name is Charlie Virginia Howard. I'm told that everyone is healthy, so on behalf of the committee, I want to congratulate Brett and her family.
Good afternoon. Welcome to the Standing Senate Committee on Banking, Trade and Commerce. My name is David Tkachuk, and I'm the chair of the committee.
By way of background, section 92 of the Copyright Act requires a statutory review of the act to be undertaken by a committee of the Senate, of the House of Commons or of both houses of Parliament every five years. In 2017, the federal government is set to review the federal Copyright Act. Our committee thought it would be helpful at this time, in anticipation of this review, to hold a couple of hearings on the operation and practices of the Copyright Board of Canada.
Today is the first meeting. We anticipate that we will report to the Senate by the end of the month with recommendations for the government to consider.
I'm pleased to welcome today a number of copyright licensing bodies and representatives of content creators. In the first of two panels, we have from the Society for Reproduction Rights of Authors, Composers and Publishers in Canada, Martin Lavallée, Legal Counsel, Director, Licensing and Legal Affairs; from Google Canada, Jason J. Kee, Public Policy and Government Relations Counsel; from the Canadian Musical Reproduction Rights Agency, Carolyn Rioux, President; and from Access Copyright, Erin Finlay, Director, Legal and Government Relations, General Counsel.
Thank you for your interest in the work of our committee and for being with us today. In order for us to have adequate time for our question and answer session, we'll commence with each of you having about five minutes or so for opening remarks, and then we'll open the floor for questions.
Let us please proceed to the order on the agenda. Mr. Lavallée, please begin.
[Translation]
Martin Lavallée, Legal Counsel, Director, Licensing and Legal Affairs, Society for Reproduction Rights of Authors, Composers and Publishers in Canada: Mr. Chair, members of the committee, my name is Martin Lavallée and I am the Director, Licensing and Legal Affairs, of the Society for the Reproduction Rights of Authors, Composers and Publishers in Canada (SODRAC). I thank the members of the Senate committee for their invitation.
As a collective society for the reproduction rights to musical works, SODRAC grants licences to any user interested in exploiting the musical repertoire of its thousands of members, in exchange for fair and equitable royalties which we distribute to the creators. To do so, SODRAC can either negotiate directly with any potential user, file for a tariff, or initiate arbitration proceedings with the Copyright Board which, as a quasi-judicial independent tribunal created under the Copyright Act, establishes royalties payable for the use of works collectively entrusted to a society such as ours.
We must turn to the board only when our good faith negotiations are halted by an incomplete exchange of underlying data. Without the board, it would be impossible for us to obtain crucial, sensitive information regarding the different uses of our repertoire in a given sector or industry, or to argue complex and highly specialized points of law in an independent expert forum, such as the Copyright Board.
Since our mission is to ensure the recognition of our rights, to determine the equitable value of the works entrusted to us and to pay our creators efficiently, we fully recognize the prominent and vital role played by the board. Indeed, the board is a preferred forum where all concerned can freely discuss the following points: the interpretation of the Copyright Act which will decide the existence of our right for some users; the determination of fair value to both rights holders and users, relying on complete evidence and expert analysis; and implementation of rules of the new exemptions introduced in the Copyright Act in November 2012.
The biggest challenge for the board is the time it takes to render its decisions. Previously, SODRAC was able to reach agreements with the vast majority of its licensees without having to involve the board, and, thus, created a functioning market for the use of works of the authors and publishers it represents. But for the past 10 years, deadlocks in negotiations have forced us to go to the board three to four times per year on average.
We can attest that any appearance before the board requires a lot of time and resources, and represents a significant investment for our society and for all concerned. To these costs are added the costs associated with the delays. Until a final decision is rendered, users benefit from the uncertainties and try to impose their conditions, the royalties are pressured downwards, and the authors and publishers we represent are not paid for the use of their works. The table in Appendix 1 attached hereto highlights this problem.
It is for these reasons that we support and encourage any action or recommendation to improve the operation of the board, while making sure that the independence of the board is left untouched. We are convinced that the board should preserve its status as a neutral arbitrator. It is risky and even dangerous to attempt to influence the way an independent tribunal should decide. All attempts to establish criteria for determining tariffs related to copyright would be a mistake. If a party disagrees with the outcome of a decision, judicial review, despite the additional delays, remains the only appropriate route.
It is in this context that SOCRAC presents the following recommendations as part of this consultation: first, study the appropriateness of appointing commissioners and a full-time chair of the board; and then provide the board with the necessary resources it needs for the full implementation of its mandate, as proposed by Mr. Claude Majeau, Vice- Chairman and Chief Executive Officer of the board, in his report to the Standing Committee on Industry, Science and Technology on May 5. Specifically, we recommend providing specialized legal resources as we agree with the board that it has in fact become a tribunal of first instance for copyright related matters.
On behalf of SOCRAC, thank you for your attention. I will be pleased to answer your questions.
[English]
Jason J. Kee, Public Policy and Government Relations Counsel, Google Canada: Thank you for the opportunity to appear before you. Google is a global technology company that specializes in Internet-related products and services. While you may know us best for services like Google Search, Gmail and Google Maps, our interactions with the Copyright Board and the tariff system typically revolve around two of our online content services; namely, Google Play Music and YouTube.
Google Play Music is our online music service. It offers unlimited ad-free access to about 35 million songs for a monthly fee as well as a more limited ad-supported tier. It's cross-platform, so subscribers can listen on their smartphone, tablet, Smart TV or the Internet and discover new music through interactive radio stations as well as generate playlists of their favourite music. Google Play Music also includes the ability to purchase songs and albums à la carte and store up to 50,000 songs from their own collection in the Cloud to stream to their own devices.
YouTube is our online video platform. It's a global open platform that allows anyone to upload videos, connect directly to fans and build a global audience. Further, it allows creators to monetize their content, primarily with online advertising, and offers detailed analytics so creators can understand their audiences. While the majority of content on YouTube is not music-related, it has become a powerful platform for music discovery, giving opportunities for new talent to emerge and get discovered and for big stars to get even bigger, adding new revenue streams to the music industry as a whole.
Music licensing for online services like Google Play Music and platforms like YouTube can be very complex, involving multiple overlapping rights administered by different rights holders and/or collectives. This can be extremely challenging to navigate.
In our view, one of the benefits of the tariff system is that it generates efficiencies, setting predictable, standardized rates. Unfortunately, due to several ongoing issues, the benefits are not being realized to the extent they could be.
First and foremost, there are considerable delays in the tariff-setting process, and it often takes years for a proposed tariff to be certified by the board after it's been filed. According to a study by Professor Jeremy de Beer, who I understand will be appearing before you tomorrow, it takes tariffs an average of three and a half years to get certified after filing and almost four and a half years to be certified if there is a hearing.
This creates considerable uncertainty in the marketplace, as it is extraordinarily difficult for anyone to build a music service when you cannot know the cost of your primary input, namely music licensing, until four or more years after the fact. This uncertainty is compounded by the fact the tariffs apply retroactively once they are finally certified and the rates can vary considerably from year to year, as tariffs are typically filed on an annual basis.
Furthermore, if the rate increases, it's possible that interest can be payable on outstanding amounts. This means that any music service may find its cost structure on which it built its business radically changed years later, and it makes it extremely difficult to actually depend on the rates as a consistent matter.
Given that online music services are already fairly low-margin businesses, this uncertainty and unpredictability makes it very difficult to operate a viable and sustainable service. Further, it disproportionately affects smaller start- ups and emerging services, which are the very businesses we should be supporting in order to support and sustain a vibrant and competitive marketplace.
Another challenge is that the current tariff-setting process is quite complex, cumbersome, formal and legalistic and requires expert legal assistance in order to properly navigate. This makes the process both inaccessible — as many simply lack the capacity to participate in the process — and costly, not just in terms of legal fees, which can be considerable, but also in terms of the sheer time, energy and resources that must be devoted to the process. Again, the burden of this falls disproportionately on smaller start-ups and emerging services who may not be equipped to participate.
Moreover, from a broader public policy and economic development perspective, it would be preferable for emerging services to be investing their scarce resources into building sustainable businesses and supporting a competitive marketplace rather than in a costly and at times unpredictable legal process.
To address these challenges and make the tariff process more certain and predictable, we have several broad recommendations. First, we should consider simplifying the tariff-setting process in order to expedite certification. This would help address the issues around accessibility and cost, and mitigate issues around ongoing delays.
Second, we should consider eliminating retroactive application of tariffs so rates only apply after they have been settled. While dealing with delays will assist with the retroactivity issue, it's critical that businesses understand their actual costs before they actually launch.
Third, we should remove these compulsory requirements for annual filings, as that can create duplicative and burdensome proceedings that at times are unnecessary.
Lastly, it's imperative that any process preserve the flexibility for services' other users to negotiate directly with collectives and rights holders. Music licensing is very complex; occasionally the scope of the tariffs can be unclear, especially when applied to emerging technologies and services as they are developing. So services must be able to deal directly with collectives and rights holders where appropriate.
We thank the committee again for the opportunity and we welcome your questions.
Caroline Rioux, President, Canadian Musical Reproduction Rights Agency: On behalf of CMRRA, I would like to thank the committee for the opportunity to be here. CMRRA is a music licensing collective that represents music rights holders of all sizes, from large music publishers to individual songwriters. On their behalf, we grant licenses that authorize the copying of their songs.
In large part, our licensees are record companies that release sound recordings on products like CDs, online music and audiovisual services that offer music streaming and downloading, and radio and television broadcasters that make copies of music for their operations.
For many years, CMRRA has been successful in negotiating acceptable terms with record companies for the licensing of physical products. However, negotiations with other categories of users have not always been possible. With radio broadcasters, for example, CMRRA found itself fundamentally at odds with users who denied the existence of any legal basis for the payment of royalties for their reproduction rights.
Also, as the online music market evolved with a variety of new business models, it has been difficult to enter into agreements without a tariff of first impression. As such, CMRRA has for many years been involved in filing of tariffs to establish the royalties to be paid for the reproduction of works by certain users.
The Copyright Board of Canada fulfils the essential role of establishing a benchmark value for the use of music in Canada. The process allows for the disclosure of information fundamental to the determination of value, which may not be an option available to a party with lesser bargaining power in a direct negotiation.
Once a tariff is certified by the board, it creates a level playing field, with standard terms and conditions that apply to all users within a specific category, thereby allowing Canadian businesses to enter the Canadian market on the same terms as large multinationals do.
To facilitate the certification of tariffs, CMRRA and SODRAC formed CSI. CSI's first commercial radio and online music tariffs each took less than a year to be certified. Since these initial proceedings, however, the board's ability to render timely decisions following each hearing has been severely diminished. I have included in my submissions a table that outlines the relevant dates for each of CSI's tariffs to demonstrate the increase in the time it has taken to receive decisions.
The time spent to render decisions has been particularly lengthened by recent changes to Canada's legal framework. More often than not, Copyright Board proceedings raise legal issues of first impression, including most recently the initial interpretation of new rights and exceptions introduced in the act in 2012. The board is also grappling with new principles established by the Supreme Court of Canada. This has substantially increased the board's workload and underlines the need for specialized expertise in determining the value of copyrighted works.
To fulfil its mandate, the board needs a full-time team of legal, economic, technological and administrative experts to render fair, sound and timely decisions. The board's apparent shortage of resources has coincided with a period of significant expansion and change in the music industry globally.
Without updated tariffs in place, the resulting lack of direction leaves some businesses fearful of entering Canada without the certainty of the cost of doing so. The uncertainty also puts CMRRA at a disadvantage in its negotiations, a fact that some services use to push for rates that do not reflect the inherent value of music, particularly with respect to free music offerings.
Without made-in-Canada rates in place, the result may be a marketplace that threatens to become stunted or driven by decisions stemming from other territories. Without an effective, independent and properly resourced Copyright Board, the Canadian music industry suffers from loss of value and opportunity.
While we are unable to comment on exactly what resources the board requires, we urge our government to, first, assess the board's workload in light of the current environment to determine the proper and sufficient resources it needs to get through the current backlog; and second, put in place a work plan to ensure that new tariff applications can be dealt with in a timely fashion.
Such an assessment, in fact, has little to do with a five-year review of the Copyright Act. Our view is that it was incumbent on our government to anticipate the impact of the 2012 amendments by developing a plan to properly support the implementation of those changes. It is in this spirit that we urge our government to begin such an assessment immediately and not wait to do so as part of the 2017 Copyright Act review.
Thank you and we look forward to continuing the discussion.
Erin Finlay, Director, Legal and Government Relations, General Counsel, Access Copyright: Thank you, Mr. Chairman and committee members, for inviting me here today and for taking the time to study this important issue. My name is Erin Finlay and I'm the Director of Legal and Government Relations at Access Copyright.
Access Copyright is a copyright collective that represents over 600 Canadian publishers and 12,000 Canadian creators. We license the copying of books, magazines, journals and newspapers to schools, universities, colleges, governments and businesses.
Access Copyright negotiates licences and files tariffs with the Copyright Board when licences cannot be voluntarily negotiated.
In these submissions, I'm going to address two main themes: first, the important role of the board in the market for copyright-protected works; and second, the impact of delays at the board.
The Copyright Board is a critical part of an efficient and properly functioning market for copyright-protected works. Copyright-protected works — in our case, books, magazines, journals and newspapers — are both non- rivalrous and non-excludable, meaning it's difficult to prevent individuals from using or accessing works and that use by one person does not exclude use by another. These particular characteristics of copyright-protected works mean that government intervention is often required to ensure that the market for the works functions efficiently. This is particularly the case in a digital world.
When there is confusion in the marketplace, or when one party acts in an unfair monopolistic or monopsonistic manner, or a deal cannot otherwise be negotiated privately, stakeholders, both users and rights-holders, need to have recourse to the Copyright Board to quickly solve that impasse.
If the impasse is not resolved quickly and efficiently, the market for the exchange of these goods is broken. It might stall, where no one uses and no one produces the content, or we might have a free rider problem, or the incentive to create copyright-protected works may disappear, resulting in an under-provision of that content.
In those situations, rights-holders and users depend heavily on the board to right or correct the market — in other words, to ensure that the market functions properly and continues to move forward.
As an example of the important role of the Copyright Board in what we do, in 2010, Access Copyright filed a proposed tariff with the Copyright Board to cover the copying of works by colleges and universities. The tariff was filed because it had become difficult for the collective to renegotiate licences that had been in place with the education sector for almost 20 years. Rights-holders were facing a complete cessation of royalty payments, and universities and colleges were confused about what uses they could and could not make of the content.
The board very quickly issued a decision that clarified the copyright-protected uses that were authorized for the users and triggered continued payment for the rights-holders. Shortly thereafter, deals were negotiated privately and the majority of users came back under voluntary licences with the collective. This was not the end of the story, but the market was functioning again at that time as a result of quick Copyright Board intervention.
That was in 2010. Today, we are facing significant challenges with delays at the board. Continuing on with the same tariff example, in November 2012 the Copyright Modernization Act came into force, which created a lot of confusion in the market. By December 2013, virtually all participants from the user community withdrew from our tariff process that was ongoing in front of the board. The tariff hearing, which was scheduled to be heard in February 2014, was adjourned sine die by the board and did not come back on again until January 2016. The process was, therefore, stalled for almost two full years.
That delay was damaging. Between the time of the adjournment and the date the hearing was set down again, all voluntarily-negotiated licences expired and rights-holders have been largely unable to renew or renegotiate new licences. Authors, visual artists and publishers are now without a source of revenue that they've had for 20-plus years as we await the board's decision.
There are undoubtedly numerous reasons for the length of time it takes to pursue a tariff from start to finish, but it simply takes too long, particularly in a market that's in constant flux.
These types of lengthy delays create both rate uncertainty and use uncertainty, making the market unpredictable for all stakeholders. Users do not know what uses they can make or how much those uses will cost. Rights-holders are operating for significant periods of time either with revenue uncertainty or without revenues at all.
Delays also mean that board decisions often come out after a tariff term has expired. Once a decision is issued, rights-holders are faced with retroactive collection or reconciliation of royalty payments, but perhaps even worse, users may be faced with a clawback of permitted uses, resulting in potential copyright infringement claims for uses they thought were authorized throughout the entire tariff period. This is precisely the type of situation that we all need the board to correct quickly and efficiently.
There's a complex list of factors that leads to these delays, but the system cannot continue to operate this way. We recognize these are not easy problems to fix and that the board is facing a myriad of novel and complicated valuation and legal issues, but the current state is not indicative of a properly functioning market for copyright-protected works, and in our submission ought to be reviewed.
Thank you. Those are my submissions, and I would be pleased to answer any questions you may have.
Senator Black: Mr. Chairman, I have a number of questions. It may be appropriate that I ask or two or three and go to the second round.
Thank you all very much for being here. I understand from your joint evidence, if I can summarize what I have heard, that it would be that the board acts as an arbitrator if parties can't come to their individual agreements; correct? So you would only go to the board if you can't come to an agreement.
Secondly, there is a widely held consensus that the board has become ineffectual because it's principally too slow in rendering decisions and the marketplace moves on. Do we have agreement on that? Okay.
I also take from that that the problem is the board is too slow because it's not properly resourced. Is that a fair comment?
Mr. Kee: Yes.
Senator Black: Okay, very well. That's very helpful, because we need to set the stage.
What are the consequences of this? I hear and I accept every word of what you say, but let's move up to 30,000 feet. I want to know, and I know that viewers watching this will want to know, what the consequence of this is on the Canadian economy. Does it really matter, except to you?
Mr. Kee: I'll start because, notionally, my perspective is of the user insofar that we are a licensee of work. We license the works. From our perspective and also, again, from that of other services, there actually is a negative impact because the delays and other challenges that we've all spoken to generate uncertainty. Uncertainty makes it very difficult for new uses to emerge and for new businesses that are basically relying on those uses to emerge.
In my view, at least, we actually want a vibrant ecosystem of uses. It's good for creators because it means you have a vibrant marketplace that they can leverage and secure more revenues. It's good for users in terms of users, who are essentially consumers, because it basically means you have competing services that are also offering increased features and lowering the prices. The uncertainty that's being generated by the delays is actually an impediment to developing those services.
Senator Black: Okay. Following up on that, is there a risk, if I'm a creator and I'm having this kind of issue in Canada, that I would create in the U.S., Japan or Germany and deal with copyright issues through those countries? Is that realistic?
Mr. Kee: It's more of a market issue than necessarily, say, a Canadian creator issue. Again, the collectives can certainly speak because they represent classes of creators, but they are representing and administering their rights in Canada.
Senator Black: I'm worried about losing creators.
Mr. Kee: In that case, what would happen is the creator would be subject to a potentially similar, but different, structure for each individual country that they are marketing to. If a creator is looking to market to other places, they still can go to the United States and Europe and so forth, and they will be subject to those regimes. It's just that the rules they would be subject to here, I think, would be limiting.
[Translation]
Mr. Lavallée: As to your question about the Canadian economy, the important thing is the value of this part of the economy, the value of creation. If the board is not there to set a fair and reasonable value, the value of a right would be driven down. To answer your question, if it is bad for the economy, it is simply bad for the overall value paid to rights holders, and that is not necessarily because we are seeking to maximize revenues. We are seeking fair value and a Canadian solution. Otherwise we would get the value that is imposed in other countries and that is not necessarily the same.
[English]
Ms. Rioux: I would like to add that, in our experience, we have seen large online music services, such as Spotify, which is here today but which took many years to enter the Canadian marketplace; or Pandora, an enormous service in the U.S. and in other territories that has not entered the Canadian marketplace because there is this uncertainty in this country; and I could list others. Amazon has a music service that has not entered Canada as well. All of these are economic values we are not seeing as a result.
To answer your second point, if I understood your question correctly, I would say that our Canadian creators are counting on — you're developing yourselves in your home country to begin with before you can go outside and really prosper outside of Canada. At least, that's been my experience, or to my knowledge, that's how it works. If the economic value is not there because there just aren't enough venues to collect your royalties or to generate those royalties from, then it's very difficult to make that second step and move into other countries.
Senator Black: That is all very helpful.
The Chair: When you say "music service,'' do you mean to sell music, do you mean to simply pay a fee to listen to music, or is it a combination of both?
Ms. Rioux: It's really both, yes.
The Chair: Are most music services both, or are most one or the other?
Ms. Rioux: There's been a shift in the last decade, I would say. The iTunes store, for instance, was quite active for a number of years. In the last few years, we've seen a decline in download sales from that store and from other download services.
Now, we have seen a bit of a ramp up on the streaming services. They have been very successful in the last couple of years because we have managed to some degree to get into some direct licensing agreements, despite the delays with the Copyright Board. Those are getting to be quite successful, but that increase has not reached its full potential, I would say. Also, it just took too long for these services to actually enter the marketplace because of the uncertainty that we had seen.
The Chair: Do the artists benefit more from a listening service than a selling service? Do they like the fact that you can access all these thousands or hundreds of thousands of pieces of music for a small fee?
Ms. Rioux: The music publishing business has always been a business of pennies: It's by adding them up and by having the most usage possible and the broadest scope possible of usages that you can earn revenue and make a living at it. Yes, songwriters, artists, music publishers — everyone in the ecosystem really welcomes those services coming to Canada.
The Chair: Just like big radio stations in that they pay pennies per song every time they play.
Ms. Rioux: Yes.
The Chair: Ms. Finlay, did you want to make comment on Senator Black's question?
Ms. Finlay: I just wanted to add that this is not just about Canadian creators. We each represent foreign rights- holders as well, so it's about the use of content in Canada. When royalties flow through the collective, we also pay out to foreign rights-holders through collectives in other countries. That was the only point I wanted to clarify.
Senator Enverga: Thank you for the presentations. We learned a lot from all of you. The general opinion was that the main issue with the Copyright Board is that everything seems to be delayed or takes too long. In your opinion, in order to meet the needs of the content creators and copyright collectives, what is a reasonable time period? Is it a days or a couple of days? How much delay do you have, on average? What do you think?
Ms. Finlay: I can't speak for the averages, but I will tell you that in our tariffs, the most recent tariff we have on the books is six years in the making, and we're still awaiting a decision. There are a lot of reasons for that delay, which is why I'm struggling with your question a little bit.
I don't know what's reasonable and what all of the issues are. Some of these are incredibly complex legal and valuation issues. In our particular tariff that I've been speaking about, I believe we had 101 objectors — 101 participants — at the beginning of the tariff hearing. That on its own creates quite a morass of complications to weed through.
In terms of what's reasonable, what would be of most benefit is if a decision came out during or at the beginning of a tariff period, because the board values a tariff for a certain period of time, 2010 to 2015, and decisions are coming out post-2015 — maybe one or two or three years later. We're faced with trying to fix what happened five or six years ago, collecting money for that, and figuring out what uses were licensed and what weren't. That is actually the result that's the most challenging.
So in terms of timing and what is ideal, "ideal'' would be to have a decision at the early part of the tariff period so that parties can move forward knowing exactly what they're paying for, how much and what they're able to do.
[Translation]
Mr. Lavallée: I would like to point out that tariffs are filed on March 30 of one year and take effect the following January 1. That is what the law provides. This means that a decision should theoretically be made in the following nine months so that the filing of the tariff coincides with its implementation.
When a decision is appealed to the Federal Court of Appeal, for example, it is for legal reasons only, and some decisions are rendered within four to six months. We must bear in mind that a tribunal should always have enough time to render the best decision possible.
The reason issue of resources to study the various tariffs was raised is that there are a great many tariffs. While they are analyzing and coming to an agreement on tariff A, for instance, tariffs B and C are next in line. At least, that is how it seems. I know they are working on various decisions, but at some point they must be able to set priorities. They have many tariffs at the same time, but if they had more resources, they would for one thing be able to work more quickly to examine each of the tariffs. Secondly, if we are really talking about periods of time, I would suggest a year to a year and a half, depending on the complexity of the file.
[English]
Ms. Rioux: I completely echo my colleagues here in their thought process.
For my part, I'd like to divide up the two periods, the period that comes before a tariff hearing and then the period following a tariff hearing. Depending on the complexity and the number of different players that come into a tariff proceeding, the timelines might differ, for good reasons. Once a tariff has been heard, once the hearing is concluded, I'd like to see a much quicker resolution of the issues.
I testified earlier that our first CSI tariffs, the first commercial radio tariff, was decided in 11 months following the hearing. For online music services, it was decided in six months, amazingly. I would like to see tariffs rendered at least within a year after the termination of the hearing.
Mr. Kee: I would echo the sentiment that it varies, so pinning a singular timeline is going to be challenging because it does depend a lot on the complexity of the issues that the board is going to have to tackle.
In addition to the resources issue that was basically raised, the issue of finding ways to simplify the procedure in order to expedite is something we should be looking at to try and make it a faster process. In some cases, some of the delays are not the fault of the board; they are just because of the parties involved and because they're very complex issues they're trying to navigate. Even so, if you can find a way to almost pull those out for resolution while things are basically waiting, that would be worthwhile considering.
Similar to that, it would be something like nine months to a year, if not shorter. If you don't know what the results are going to be, everyone is sitting and waiting for the board to figure this out before you can actually move forward with your service.
Senator Enverga: Could I ask another small one?
The Chair: I just want to go around the table once. If there is time, we'll come back.
Senator Greene: Perhaps mainly to Mr. Kee, could you compare and contrast your company's experience in the U.S. with what it is up here?
Mr. Kee: Well, certainly that it's faster, as a general rule.
Senator Greene: How and why?
Mr. Kee: Essentially, they have a simplified procedure, which actually expedites quite quickly.
Also, again to the point that Senator Black raised earlier, the Copyright Board of Canada is not solely a body of last resort. Certainly there are plenty of tariffs that are basically proposed and that are anticipatory, but they need to be ironed out. The copyright appeal board in the United States tends to follow a bit more of an appeal process, and they also have very firm timelines that are basically dictated. Essentially, they are compelled to have a resolution within a set period of time. They have very firm deadlines that they have to adhere to, which actually helps expedite considerably.
Senator Greene: Would you prefer a system like that up here?
Mr. Kee: I think as a general matter, yes. I certainly would want to do a more detailed comparison to see what elements of that system would work appropriately up here and look at what we could incorporate into our system, just because we do find that they can allocate things more efficiently. They seem to be able to get through tariffs rapidly and are essentially comparably resourced as the Copyright Board is in Canada, which demonstrates the procedure they follow tends to work better.
Senator Greene: Are they 50 per cent quicker?
Mr. Kee: I couldn't tell you the firm timelines off the top of my head. I would probably say at least that, given the fact that we don't see the kind of delay issues there that we collectively experience in Canada.
Senator Greene: Would you like to comment, Ms. Finlay?
Ms. Finlay: My understanding is that the decisions come out in roughly six months. We are not involved in the U.S. to that extent, so I can't comment beyond that.
Senator Greene: Thank you.
The Chair: I have been notified by Senator Campbell that he thinks he has a conflict of interest. I do not believe that he does, but nonetheless, he would like to just speak to it for a second and then he can ask his question. Go ahead, Senator Campbell.
Senator Campbell: Honourable senators, I just want to note for the record that I believe I have a private interest that might be affected by the matter currently before us. The general nature of the interest is that I receive copyright proceeds from being an author. Now, it's $400 a year, so I'm obviously a struggling author, but I would like to ask questions. I was also represented by the Writers Guild when I was a screenwriter. I just want those things out there. I don't expect anything that happens today will add one cent to the royalties that come in from my book. Thank you.
Has technology overtaken the copyright industry? Things happen so quickly now. Who would have imagined Spotify, for instance? Has our technology, within the government copyright legislation, kept up with it? Is that one of the problems?
[Translation]
Mr. Lavallée: I would say not. We have of course shifted from analog to digital, but what makes it difficult are the exceptions to the Copyright Act. The Copyright Act was intended to be neutral as regards technology, but that means a lot of things. Very specifically, when a copy is made to create a disk or an electronic file, it is the same act of reproduction. That is what I mean by "neutrality,'' neutrality of the medium and neutrality of the technology used.
The complexity of copyright derives from the way the act is written. I do not want to overload our discussion, but when we question the board's delays and the complexity of the issues it has to address, this can in a sense be traced back to the interpretation of the Copyright Act. As the joke goes, there are four sections that set out the rights, and 150 sections that stipulate the exceptions.
Moreover, in November 2012 — interesting to see you laughing at the joke —, new exceptions were introduced that increase the act's complexity. You know how quickly tribunals operate in general, not only the Copyright Board. It is just now that we are seeing the effects of the interpretation of the sections and exceptions introduced in November 2012. This is not ancient history: it is very current and timely.
So I do not think technology has complicated matters. Rather, it is the exceptions to the act that have further complicated what is a reproduction in terms of reproduction rights, and what constitutes a public communication and making something available as regards exceptions to the act.
[English]
Ms. Rioux: I completely agree with Martin, and I would like to add two examples as to why I agree. I'll go back to my testimony, which was that CSI's first commercial radio decision was rendered in 11 months and our first online music tariff was rendered in 6 months, and that was before the exceptions to the Copyright Act came into effect in 2012.
Those tariffs were very much also responding to changes in technologies. The radio stations at the time were beginning to move from using CDs as the means by which they would broadcast music to servers and made more and more use of copying music to facilitate their broadcast operations. That is a shift in technology, and yet a tariff was rendered reasonably quickly.
With respect to the online music market, our first hearing was in 2006, I believe. I think I have my table here. Six months later, we received a decision, in 2007. That was at the time when iTunes had become the dominant player to sell music online, and that was really a shift from selling physical products, commercial CDs, to the digital world. There was a big shift in technology there, and yet we managed to get these decisions relatively quickly.
Mr. Kee: I do think evolving technologies will present a challenge, and as the regime evolves over time to try to address the challenge, it tends to fall behind. I think music licensing is a good example insofar as it has evolved considerably over hundreds of years as technology has evolved. It was once a public performance right for people who were performing live. Then as technology evolved, there was a communication right that was incorporated into public performance. You can quibble about how that is interpreted. Sound recordings, people making recordings, there is basically that evolution as well.
So I think trying to navigate that with evolving technology can be a challenge. Sometimes that is what can result in delays with the board as well; they are also trying to navigate those. Then there is dealing with legislative shifts that are trying to accommodate technologies as well.
I think there is going to be ongoing tension. I think the core principles are sound. It's a matter then of how you can specifically implement those principles.
The Chair: Thank you.
[Translation]
Senator Ringuette: My first question for Mr. Lavallée pertains to music. How many tariffs are there in the music sector?
Mr. Lavallée: Let me count. The tariffs operate by specific market. There is the radio market, commercial radio. There is the online market, which does not necessarily encompass all online activities. There is also music in audiovisual works. There are tariffs for television, tariffs for online movies, because the world is of course changing —
Senator Ringuette: So there are about 10 or 12 tariffs?
Mr. Lavallée: There are about 10. There is also the criterion of specific time periods, and when changes are made to the act — As to commercial radio, once the board has set the tariff, the parties have reached peace in the industry. So they could not agree at the outset, appealed to the board and reached industrial peace for 10 years or so until suddenly there was an exception to the act. So they had to go back to court, and then there is disagreement on interpretation. Take ten or so tariffs and multiply them by the factor of changes to the act. The tariff will be the same, but for the period following the change to the act.
Senator Ringuette: I understand all of that, Mr. Lavallée, but do you negotiate with your clients, the authors, every year or every three or five years?
Mr. Lavallée: You are referring to our members and the duration of the membership contract? It is two years.
Senator Ringuette: Do you issue user permits for two years also?
Mr. Lavallée: No, not necessarily. The two-year period is automatically renewable depending on the repertory. The interesting thing is that our tariffs are usually set for as long as possible. We consider the changes that could be made to the services offered, the value of those services, but not changes in technology. For example, we could decide today to offer service X, as well as services Y and Z. This service was free before, but people will have to pay, which was not expected. In that case, shorter-term tariffs are set. This is not directly related to the duration of the membership contracts, but rather to the market. When I say this is relevant, that is because the board takes time to make decisions, which forces us to use short-term tariffs. We have no idea what the decision will be.
I am not sure if you follow me. For example, we are currently awaiting a decision on online music 2011-13. In 2014, 2015 and 2016, we filed tariffs to make sure there would be no gap. These tariffs are for one year only.
Senator Ringuette: Under the regulations, do they have to be for one year only? Whether online music is offered by the Google or the Amazon server, it is still an online service. So the tariff should be constant and long-term, which would make the system more effective.
Mr. Lavallée: That is what we would like. With respect to the tariffs for online music 2011-13, there is a new product. In the example I mentioned, there was no continuous streaming, no webcasting. It was not expected since the first provider of online music was Apple, which offered permanent downloads only. Then streaming came along, on demand streams, which we had expected. Then came the Pandoras of the world, which offer continuous streaming. That was not expected. Now we are waiting to see what the rules of the game are, what the board decides with respect to both the transmission mode and the value before we propose long-term tariffs. We would like them to be of a commercially acceptable length, from three to five years.
Senator Ringuette: Thank you.
Senator Massicotte: Thank you for being here. This is all quite complicated. We are trying to understand. Of course, as Senator Black said, the recurrent complaints pertain to delays, lateness, which creates uncertainty and complicates transactions and the market.
Your comments are clear regarding the United States and the board. I understand that the board reviewed its process in 2014. What conclusions did it reach? The board knows of course that there are substantial delays. These people are certainly engaged and professional. They had to make an effort to improve the process. Would it be possible to see a summary of the 2014 report, to know what the impact was and to see where we are now? I do not know if someone could answer.
[English]
Ms. Rioux: I'll attempt a short answer. If I understand correctly, the process was put on hold, The Copyright Board felt that the five year review of the Copyright Act was coming up and there was emphasis placed on the Copyright Board as part of that copyright review, so the process of their own internal review and consultation was put on hold. I'm not really sure that there were conclusions reached as a result of their assessment.
[Translation]
Senator Massicotte: My understanding is that they held consultations and had discussions with you. Are you saying that you never saw the final report of that study?
[English]
Ms. Finlay: I do want to agree with you that the board staff and panel members are incredibly competent and dedicated. No one here is suggesting they are not.
I don't know that there were actually board consultations to the extent that we would have liked them. There was a working group put together. It was primarily a working group, as I understand it, of external counsel who represent collectives like us and users in front of the board often. That was the working group looking at the operations of the board.
The last I saw of the board's work on this issue was the working group report of February 2015. It was presented to a number of stakeholders, but I don't know that anything much has happened since then. I'm sure there are a lot of internal things happening at the board, and discussions, and we just haven't been a part of that or been consulted about those.
Senator Massicotte: Who makes up the working group you referred to?
Ms. Finlay: My understanding is it's that working group. The consultations were primarily with a group of external counsel that represents parties in front of the board. That was the working group that was put together to conduct these papers. There were other research projects that went on as well.
Senator Massicotte: But nothing concrete and specific came out of it?
Ms. Finlay: There were very high-level recommendations, but we don't know what has happened since then.
[Translation]
Mr. Lavallée: If I may, I can confirm that they are the companies' and users' outside counsel. One of the reasons that it was all put on ice is that, when the recommendations were made and provided to all the parties involved for comments, the latter were unable to agree. That is perfectly normal because the interests of the respondent, who are often the users, are very different from those of the applicant, who are often the rights holders.
I would like to talk about the respondent, the users, and go back to your question, Senator Campbell, as to whether technology has changed anything. The stakeholders who use our works are Apple, Spotify, Amazon, Pandora, Google and Netflix. These are the stakeholders we are talking about right now. As to the French-language music and world music that SOCRAC represents, the music of the major players, who are in large measure represented by the Canadian Musical Reproduction Rights Agency (CMRRA), the new players we are dealing with are people who are very well prepared, very complex, and have interests to defend. For our part, we also have interests to defend. It is often difficult to get fair rules and the board has to help us do that.
[English]
Senator Tannas: Thank you for being here.
Just listening to this, it's obviously complicated. I'm reminded of a saying that I have heard a number of times, that government's motto is that there is nothing that we can't make more complicated. There is another saying I'll put in, too, at the risk of being really corny, but perfection is the enemy of the good.
My question is regarding the deadline that exists in the United States. I presume that their copyright laws have a similar level of complication. You have mentioned that they are resourced similarly to our board but they hew to a deadline by which they absolutely have to make a decision. Many times, there is comfort in that because if it's complicated, well, you can get, "On the one hand, and on the other hand,'' and take yourself deep into analysis and arrive at paralysis.
Number one, have I got it right that perhaps our problem is a lack of a deadline and the fact that things are getting more and more complicated? You need more data in order to make the decision, because you want to make the perfect decision. In the United States, is it kind of good enough because we have a deadline we have to deal with? Would you be prepared to live with good enough if similar deadlines were put forward here in Canada?
Ms. Finlay: I think you have hit the nail on the head. Presumably, that is how it works in the U.S.: It's good enough. I think one of the challenges we're facing in what we have seen lately is, as Ms. Rioux talked about, a decision coming out after a hearing. What we are seeing is rounds and rounds of post-hearing questions digging for exactly that and looking for the right and perfect answer. We may be in a position now where that is not attainable or even ideal.
I agree with the proposition that we have got to get to good enough so that the market can start up again. We will work it out. We will negotiate licenses once the board makes important decisions, and we will get there. The market will function again. But I think you're 100 per cent right there.
I did want to take one second here, because I don't want to leave something on the record for fear of misstating it. The board did consult with everyone about the paper. It sought input of all stakeholders when it issued the recommendation, so I didn't want to leave it suggesting that they didn't reach out to us. They did.
Senator Tannas: To the others on our panel, would you accept good enough? Would you accept decisions that were made in six months as opposed to an open-ended process that went on for years and years? Would you swap the U.S. process of making those decisions, which are equally complicated and rife with all of the issues, one for the other?
Ms. Rioux: I hesitate to agree with you. Because each hearing can potentially be unique and deal with different issues, some more complex than others, in my mind, it seems that what we need is some sort of a consensus among the players that this particular decision that we're dealing with should not take more than a set amount of time to be rendered. Right now, we don't have an understanding of how long it will take to render a decision. We said that we have been waiting for three years now, as of this November, since the hearing took place for our last on-line tariff. It would be nice even just to have agreed that this decision will come out in 12 or 18 months or what have you, but there is just no indication as to when that might be, so we just don't know.
Rather than answering that every single decision should have to be rendered within a particular time frame, I think there has to be a discussion, consensus and agreement that certain tariffs will be rendered by certain decisions.
Senator Tannas: You're already there because you can't get consensus; right? Would it be possible to say, "Look, it is this unless both parties agree that it is something else?''
Ms. Rioux: In terms of the time frame? Yes.
Senator Tannas: You have this unless there is mutual agreement that it should be longer.
Ms. Rioux: Or shorter.
Senator Tannas: I suppose you're right. Thank you.
The Chair: I think you have to have deadlines. I mean: "When will my house be finished?'' "Oh, whenever.'' I don't think that works.
Senator Tannas: It's complicated.
The Chair: It's complicated; right? We have deadlines for everything. Otherwise nothing would get done. We even have a deadline here. I have three minutes, so now, all of a sudden, you have a minute and a half each. I'd appreciate if one of you could answer each question, and unless there's a monumental addition, you don't have to chime in.
Senator Black: I have a question on process, building on what my colleague Senator Tannas has had to say. I want to talk about simplifying process. Is it possible that the process could be simplified whereby, rather than going to a full hearing, you meet with a discovery person or an arbitrator in an initial phase, and that person has a short period of time either to resolve it or it moves on to a hearing? Then, building on what Senator Tannas has said, it gets resolved within 12 months unless the parties agree otherwise. Does that make sense?
Ms. Finlay: Absolutely. I think case management makes a lot of sense, but also perhaps a mediator in the middle.
Senator Black: That doesn't happen now.
Ms. Finlay: No.
Senator Black: Does it happen in the U.S.?
Mr. Kee: It can. It depends. I agree, again, that we shouldn't let the perfect be the enemy of the good. It's important to realize that users and collectives represent different interests. We will always quibble about the rights.
Senator Black: We are under pressure. We've got to keep moving. Mediation or binding arbitration?
Ms. Finlay: It essentially is binding arbitration. Case management, I would say.
Senator Black: Very well. You mentioned something about eliminating retroactivity. That sounds very sensible to me. Is there consensus?
Ms. Finlay: As long as the tariffs are certified within a reasonable amount of time, because otherwise you're giving up a lot.
Senator Black: Presuming there are time limits and discipline around timing, I would have thought it's punitive to have retroactive rates.
Mr. Lavallée: It's punitive for the rights holder, because we are losing our rights.
Senator Black: Okay. That's the other side.
Mr. Lavallée: I was totally against this suggestion simply because they are using the rights. The Copyright Act is clear. Don't use the rights until you get authorization to do so.
Senator Black: That's not a good idea.
Mr. Lavallée: That's not a good idea. This is why there are interim decisions, by the way, which are issued by the board.
Senator Enverga: We are talking about delays and those sorts of things. I just want to know how many stakeholders are affected. It looks like it is more struggling artists, like Senator Campbell here, who are being strangled. How many people are involved here? Are there any backlogs? Can you let us know how large a backlog there is right now for tariff certification?
Ms. Rioux: Backlogs? Well, yes. We mentioned earlier that our on-line music tariff for the period of activity between 2011 and 2013 has not yet been certified.
Senator Enverga: How many backlogs are there?
Ms. Rioux: This particular tariff applies to a number of I would say maybe 25 different on-line music services, and it affects a huge group of rights holders. We're talking about hundreds of thousands of songwriters and music publishers.
The Chair: I want to thank you all for coming. These have been great presentations, and I think we're all a little more fully informed about this issue.
Colleagues, just as a bit of internal business, there will be a meeting of the steering committee after this is over. There are two members here who will have to remain.
I am pleased to welcome now a number of copyright licensing bodies and representatives of content creators. Specifically, in this second panel, we have from Music Canada, Graham Henderson, President and CEO; from the Society of Composers, Authors and Music Publishers of Canada, Gilles Daigle, General Counsel, Legal Services; from the Canadian Music Publishers Association, Margaret McGuffin, Executive Director; and from Re:Sound Music Licensing Company, Ian MacKay, President.
Mr. Henderson, please go ahead.
Graham Henderson, President and CEO, Music Canada: Thank you. I am Graham Henderson, President of Music Canada, a little different from some of the other folks who have been testifying here today because I represent the major record companies. We are the folks who are in the business of making, creating, promoting and marketing music, along with our artists, with whom we have economic and creative partnerships, and also many of the independents in the country with whom we have distribution agreements and so forth.
We employ hundreds of Canadians, so what happens here today and what happens at the Copyright Board has a direct abiding impact on the livelihood of Canadians. This is meaningful.
The music sector obviously relies on copyright as an economic driver. Without copyright, our members and our artists do not have an ability to monetize their work and earn a livelihood. The Copyright Board is a key institution in that framework, and as you know, as you've heard, it sets rates. We can charge for everything from new and innovative online services to the playing of music online or by satellite radio. It runs the gamut.
I listened to the previous panel, so I'm not going to repeat a lot of what you've already heard. You've heard an awful lot about how slow it is. It's slow. And it's torturous. There were some questions about what does that do and what does that mean. It makes forecasting for us very difficult.
You heard about the study that produced the number of three and a half years. That can be a little misleading. That's an average. The more economically significant tariffs can take sometimes four to six years. So don't look at the averages. Think about, what are the really significant things? How long are they taking?
You heard a little bit about retroactivity. That is not actually a problem in terms of money. If you and I are engaged in a negotiation about, "I'm going to have to start paying you a certain amount of money from day one,'' and if we don't figure it out until day 200, I know it's going to be some amount of money. Any business is capable of reserving money and putting it aside against that ultimate outcome.
Retroactivity, however, does have other impacts on us, and if it drifts and it drags, it can create chaos in the marketplace. Besides, you want to get paid when the right arises, when your work has been used; you don't want to have to wait years for it.
Yes, we want deadlines. Look, a lot of this is about best practices. I think what this body should be concerned with is the Copyright Board. Are we all concerned with reaching out into the world and discovering what best practices are? Actually, as it turns out in this case, there are some pretty damn good practices taking place in the United States of America. We had a conference last year where we had one of the judges come up and make a comment about deadlines. His comment was, "Deadlines sharpen the mind.'' That's kind of the theme that I got a sense from all of you here. It is, in fact, about 11 months, not 6, from inception of a hearing to issued judgment in the United States. That's the whole kit and caboodle, so this is definitely possible.
You've heard the idea that perhaps we need more resources. I have no doubt everybody needs more resources, but sometimes isn't that a little bit of an example of institutional creep? Aren't the issues we need to really look at are what are we doing, how are we doing it and why are we doing it? If we keep doing the same darn thing, maybe we do need more lawyers and maybe we do need more economists, but maybe there's a way to shortcut things.
So if all we're going to do is tinker with process, we may start adding and the organization gets bigger instead of — maybe it needs to get smaller. Maybe —
The Chair: You're talking about a government organization here.
Mr. Henderson: What? Sorry, where am I? Okay, let me just move on.
I think the other point I want to make in the time I have left is it's not just slow. The board is also unpredictable, and other than this overarching requirement that it has to set fair rates, it's not bound to use any specific criteria for setting royalty rates.
For instance, it's not required to use marketplace rates as benchmarks, and the board routinely discards evidence of previously negotiated rates for the same uses of copyrighted works at issue between the same or similar parties in the proceeding.
The judges and decision makers are rarely experts in the subject matter before them. For that, they rely on expert evidence. In fact, it is an important responsibility of judges and decision makers to weigh and to apply expert evidence to the facts of the case. In tariff proceedings, the board has on many occasions rejected the expert evidence of both parties completely in favour of its own precedents or its own staff's economic analysis.
For me, the businesses I represent and the artists, this is a deeply troubling trend, and it's not procedurally fair. The board should be weighing and applying the best evidence that's provided to it. That's what judges do right across our country. This type of decision-making cannot be allowed to continue.
I've exceeded my five minutes. I can reserve my other comments and will do so should I get asked questions.
Gilles Daigle, General Counsel, Legal Services, Society of Composers, Authors and Music Publishers of Canada: Thank you, Mr. Chairman. I'd like to thank you for inviting SOCAN to this committee meeting and allowing us to participate in your dialogue. It is an issue of great importance to our performing rights society and its members.
I should start by clarifying that SOCAN, as a performing rights society, administers the performing right in musical works. This is something of a different responsibility than some of my colleagues you heard from earlier who administer reproduction rights, the making of copies. In the case of SOCAN, you need to think more in terms of concerts, music performed and reproduced, but by radio stations and television stations as well. Our broadcasting tariffs are easily the most important sources of our revenue, but we deal with a whole panoply of small users as well: bars, restaurants, skating rinks and karaoke establishments.
To answer one of the questions that was raised earlier, in the case of SOCAN, we have over 25 tariffs, so you actually have to look at different uses and collective societies in order to get the full picture of activity that relates to music licensing in our country, which is pretty much the same situation elsewhere.
SOCAN has 130,000 members. There was a question about membership earlier. Similarly, we serve approximately 120,000 users from the small establishments, the small concert halls to the National Arts Centre to the broadcasters in the country.
I'm here, essentially, to focus on what I perceive as being the biggest issue, and perhaps that's becoming increasingly clear as your proceedings move forward. That issue is the time it takes the board to issue its decisions from the end of hearings. It is slow. It's extremely slow, but it hasn't always been.
I've had the pleasure, and it has been a pleasure, of being actively involved in Copyright Board proceedings as counsel for SOCAN for 26 years now. It explains much of the grey hair that I have. When I started in this business in 1990, the Copyright Board really had just two things to do: It approved SOCAN's tariffs the same way that its predecessor did — on a part-time basis, I might add — and it was responsible for a new re-transmission royalty regime. They were big hearings, but they only came up every five years.
Back then, it regularly took six months to a year for the board to issue its decisions, but it's not the same board anymore. The board's mandate, and some of my colleagues touched on this, has been changed drastically since that time. New rights were created and entrenched in the Copyright Act in 1997. My friend will talk about that, I'm sure. These rights, as is the case for SOCAN, made it an obligation for us to file tariffs with the board. We don't have the option; we have to file our tariffs with the Copyright Board.
The advent of new parties before the board and changes to the Copyright Act meant that all of a sudden it wasn't just about SOCAN anymore. Parties such as the reproduction rights collectives, the CMRRA, for instance — from whom you've heard — suddenly had the right and availed themselves of the right to file tariffs.
With the advent of new rights and new collectives, you have new objectors and new users who come into the process. All of this means more and longer hearings. Then you add to that the complexity of the new technologies that arrived. The new technology in particular of the Internet has given rise to very complex issues. We have been in the courts over those issues ever since; we still are.
The Copyright Board is not denying there's a problem. They want to render decisions in a faster time frame. They say they no longer have the necessary resources to do so. From my perspective of having been on the front seat and watching them for the last 26 years, I think they're absolutely right. If you take care of that big problem, many of the others will fall aside. That's what I'd like to leave you with.
Thank you.
Margaret McGuffin, Executive Director, Canadian Music Publishers Association: Thank you for inviting me here today to make this presentation. I would like to begin by telling you briefly about the Canadian Music Publishers Association, our members and the role the Copyright Board plays in their businesses.
The Canadian Music Publishers Association represents more than 40 publishers. We represent the multinational publishers, large Canadian music publishers and small businesses — entrepreneurs with one or two people in their offices. These companies all represent and invest in thousands of Canadian songwriters and thousands of Canadian songs. These songs are heard daily on radio and television, in the movies you go to see and in the video games that your kids are playing.
Creators require a functioning marketplace in order to innovate and make Canada globally competitive. In the music publishing world, our members are dealing with a quickly changing model. Royalties from physical product and downloads are dropping off quicker than we can actually recover royalties in the streaming world. Things are moving quickly.
Unfortunately, this market position suffers further when we do not have a Copyright Board that is functioning in a manner that will give us quick and efficient tariffs. The delay in rate setting has introduced a great deal of uncertainty, not only for our businesses but for the online music services that are launching, both foreign and Canadian. This is detrimental both to services that want to launch and to the rights-holders.
I'm just going to step back a moment and tell you a little bit about music publishers. It's part of the world that most people don't really hear about. While some musicians record their own songs, other musicians co-write with other people. Some musicians cover the songs of other songwriters. Songwriters are not necessarily always celebrity names. You may never have heard of them, but you're hearing their songs in all of those different places that we've talked about. It's a very important part of the Canadian creative economy.
A music publisher is the songwriter's business partner. The music publisher invests in the songwriter, supports the songwriter in his or her creative development, and uses their specialized knowledge and contacts to promote that songwriter and his or her songs.
Our organization and our partner organization in Quebec recently surveyed our members to take a look at our industry. We found that our members — and that's not the entire music publishing industry, but our members — represent a $200 million industry in Canada. Performing rights, collected by SOCAN, represent 56 per cent of that total; reproduction rights represent 22 per cent; and then there are other rights that are collected, including the sync right, which is placing a song into a movie, a game or feature film.
Performance rights are collected by SOCAN, reproduction rights are collected by CMRRA and SODRAC, and in some cases CMRRA and SODRAC collaborate and collect through CSI. These four collective management organizations access the legislative framework of the Copyright Board and rely on it in different ways.
The Copyright Board fulfills an integral role in establishing the inherent value of music, and it is a vital institution to the survival of the music publishing industry in Canada. Our members would like to see an independent and properly resourced Copyright Board that can quickly deal with the constant changes in the technological landscape. This is currently not our reality. Today, our members are still waiting, as you heard, for tariffs from CSI. Additionally, we're still waiting on the valuation of the making available right that was part of the copyright reform process in 2012.
We don't come here with the perfect recommendation, but we believe the type of resources the Copyright Board needs need to be carefully examined and considered, and we don't believe all of these changes need to be linked to the 2017 review of the Copyright Act.
Canadian music publishers welcome the growth of new online music services and technologies that connect music fans with the music they love. The growth of the online market presents a vital opportunity for our publishers and for our Canadian songwriters. At the same time, these rights-holders deserve a fair value for the music that is the core of these services.
I'd like to thank you for inviting me here today, and I welcome your questions.
Ian MacKay, President, Re:Sound Music Licensing Company: Thank you for the opportunity to address the committee on this issue.
First, a little bit of background on my organization, Re:Sound. Re:Sound is the not-for-profit organization dedicated to obtaining fair compensation for artists and record labels for their performance and communication rights. What SOCAN does for songwriters and music publishers, we do for the performers and the makers of the sound recordings.
We represent the royalty rights of thousands of featured and session musicians, as well as major and independent record labels, when music is played on commercial radio, satellite radio, pay audio, music streaming services and in other businesses that use music, like nightclubs, stores and fitness centres. The money we collect is split fifty-fifty between performers and labels, and it's split at source.
I would agree with what other people have said in that there's no question that the Copyright Board has a tremendous role to play in the Canadian musical ecosystem. By their own estimates, there is $434 million in royalties generated per year by the tariffs that the board certifies, and these are extremely important to the livelihoods of creators.
Beyond this, the board affects a broader Canadian economy and a vast number of Canadians. The House of Commons Standing Committee on Canadian Heritage noted in 2014 that the Canadian music sector alone contributes nearly $3 billion annually to the Canadian economy, including over 10,000 people employed in sound recording and concert sectors and over 30,000 professional songwriters.
As Gilles mentioned for SOCAN, it is also true for Re:Sound. For the rights that we represent, it is mandatory that we go to the Copyright Board. We do not have the choice as with exclusive rights that you heard about, like reproduction rights. Even if we come to a negotiated settlement with music users, we still need to take that settlement to the Copyright Board and get it certified by the Copyright Board.
There are several considerations that we would say should be taken into account by the committee.
First, and you've heard about this from other people, with the advent of the digital age, things are just moving far too quickly in terms of business models and music consumption for the tariff certification process as it currently exists. You have already heard how long the tariff process takes. I won't go into that again; I think you've heard that enough. I will say that for us, with the additional factor that even when we settle tariffs and go to the board with a settlement with music users, it can take two to three years from then before we get it certified. We've come to an agreement with the music users, but still we have to wait two to three years before it's official.
Because things are changing so rapidly, a delay of two or more years from the end of a hearing until a decision is rendered can mean that the business model and the evidence on which that decision is based no longer exists. Music streaming, which you've heard about from other witnesses, is one of those things. Music streaming has exploded in the last five years, so a two-year delay when you're dealing with a music streaming tariff means that the whole world has changed. It's not the same world of music consumption as before.
Additionally, more and more, the consumption of music cuts across international boundaries, and there were some questions in terms of other jurisdictions. I think it's important that our regime here in Canada is not entirely in isolation. We can't be isolationist in an increasingly international world, and if our approach is at odds with the rest of the world, it could create disadvantages to Canadian creators and creative industries.
Canada obviously is not alone in dealing with digital challenges. Many tribunals around the world have to deal with this as well. Many tribunals, as you've heard before in response to other questions, do have fixed deadlines for making decisions. There were some questions about the U.S. tribunal and yes, in their case, they do have mandated deadlines to meet decisions. They also, at the beginning, have a mandated settlement conference, and then after that, as I think Graham mentioned, the whole process from start to finish, until the decision is rendered, takes 11 months, including the hearing and everything.
There is another difference with the U.S. board, and that is they have three full-time judges on that board: a chief judge, one with copyright expertise; the second one must have copyright expertise; and the third must have economics expertise. The U.S. board has established mandated criteria that they have to use to apply their decisions, and they have to do it within a mandated, prescribed time frame.
If you look internationally, many other countries also have mandatory criteria and timelines. In many countries, the aim is to get creators and music users to try and work amongst themselves and only come to the board if they need to.
I would say that where creators and music users are able to agree on the terms of a tariff and you can avoid the need for a full hearing, certification of these tariffs should be fast-tracked. If we have to go to the board, it should be a quicker process. That approach would incentivize parties like us and the music users to negotiate terms amongst ourselves, avoiding lengthy and costly hearings — the hearings are very costly to everybody involved — and freeing up board resources to deal with other things.
The timeline for decisions is certainly the most challenging issue for the board. We believe that there would be real benefit to looking at what is being done in other countries. Some examples have been given by various people. By taking that together with the example of the court system and how quickly the courts render decisions, and then asking how we can apply that to this particular situation of what the Copyright Board does, we can ensure a flourishing marketplace in today's rapidly changing world.
Thank you for your time.
Senator Tannas: You were here earlier, and you have, I think, echoed a lot of what we heard. I want to make sure that we're all on the same page.
Regarding extra resources for the board, I heard yes and I heard no, that it wasn't necessary. I will put that down as a maybe, and we'll hear what the board itself has to say on this.
In terms of deadlines and front-end case management, is everybody on the team for that?
Ms. McGuffin: Yes.
Mr. Daigle: If I may, sir, that would be subject to the adequate funding issue, from my perspective.
Senator Tannas: Fair enough. We want good decisions. We just want good enough decisions in a time frame; right?
Mr. Daigle: Exactly.
Senator Tannas: I think that's good.
Mr. MacKay, you mentioned that the objective should always be to have agreement without having to come to the government and ask for some artificial and arbitrary number.
In courts there's an interesting thing that I've unfortunately learned about in my experiences where either side can tender an offer. In fact, both sides can tender offers. If the court decides that your number was fair and my number was unfair, I get to pay your court cost times two, because I have been the unreasonable one, in their view, when they actually make the decision.
I'm not necessarily advocating that particular thing, although I think it could be interesting, but are there any other tools besides front-end case management, which I think could be very good, where the right person says, "Look, I think this is what the outcome could be, so you might want to rethink things,'' which is how it works? Is there something there where we could recommend there be a penalty if you're dragging an unreasonable partner into the tariff process and you actually are vindicated through that process?
Mr. Daigle: I can speak to that on behalf of SOCAN. SOCAN has to file tariffs with the Copyright Board. We are there because our rights have been taken away. For us to then be the subject of — whether you call them user fees or costs in those circumstances — I don't think is reasonable at all.
Senator Tannas: Doesn't apply. Fair enough. Thank you.
Mr. MacKay: I would add to that that I think an incentive system can work as opposed to a penalty system, an incentive system where the parties are incented to come to agreements. If they are encouraged to come to an agreement and know that the board will deal with those on an expeditious basis so they can come to a conclusion faster than going through a full hearing, then I think that would incentivize people to work things out amongst themselves.
Senator Tannas: So the case management creates an incentive in and of itself?
Mr. MacKay: Case management, and I think also if there were an expedited timeline for the board to certify settlements in the case of organizations like SOCAN and us, where we have to go to the board even if we settle it.
Senator Tannas: Thank you.
Senator Massicotte: I'm trying to understand, because what you said is different. People are using this collectivity or these organizations. They can do a one-on-one deal, but I gather very few people do that because it's time-consuming and they don't have the expertise, so they are going to give it to somebody to manage it for them. Call it what you wish. You're not going to pay more than what the market seems to be for that type of product. If the two parties mutually agree, the user and the producer, why do you need to go back to the board to have them ratify and use the agreement? I'm missing something.
Mr. Daigle: In the case of SOCAN — and I think Ian would agree in that his organization is subject to the same requirements in the Copyright Act — there has to be a tariff filed and ultimately approved by the board.
Now, in SOCAN's experience, I can say that we often have negotiations and discussions with users prior to going to the Copyright Board. Sometimes we reach agreements and sometimes we don't. When we reach agreements, again in SOCAN's experience, the board has typically approved those. The issue is that until they do, and if it takes a very long time before they do, that uncertainty between the parties continues. Will they or will they not approve our deal?
Senator Massicotte: Why did legislators force agreement by the board of a mutually agreed deal by two parties? There must have been a public purpose there. What would that be?
Mr. Daigle: I think you hit the nail on the head. Parliament has decided that there is a public policy interest that goes beyond the board serving as a mere arbitrator in these cases.
Senator Massicotte: Because they were scared the negotiating power is not the same?
Ms. McGuffin: Our members as publishers get money from SOCAN, where they have to go for every tariff to the board. They also get money for reproduction rights through CMRRA and SODRAC. CMRRA and SODRAC only go to the board when they have to. In the case of online streaming and download services, once there was a tariff of first impression. It has been very rare that users haven't come to the table to negotiate, and they don't go to the Copyright Board in those cases. Webcasting has never had a rate set, so there are only two or three webcasters in Canada currently licensed for the reproduction of music.
Senator Massicotte: From my understanding of the industry, which is only very preliminary, you often go to the board in resolving your agreements. In private practice, let's call it contract, probably one out of a million go to court. In your case, there seems to be a very high percentage —
Ms. McGuffin: CMRRA and SODRAC prefer not to go to the board. It's a 40-year-old business for CMRRA. They never had to with their record companies. It has always been a private negotiation.
Senator Massicotte: Why is there such a large workload imposed upon the board?
Mr. Henderson: There are two types of rights in our world. There are remunerative rights, which are the subject of the Copyright Board, and then there is another world where our exclusive rights take place. Exclusive rights you would see in the modern world with a streaming service, which is on demand. That's negotiated directly with Spotify just the same way as the sale of records, physical product. Somebody wants it. They want that piece of product, and that's negotiated in the marketplace.
But there is a second set of rights. In a digital environment, it is of increasing importance. There is a spectrum of streaming services from on demand, like Spotify, down to services that look more like radio, where the user has less opportunity to decide what they are and aren't hearing. Plus then there are the radio tariffs. There is a whole range of these that are called remunerative. We are subject to the Copyright Act and we are subject to the Copyright Board. We don't have a choice.
I think the issue that you're getting at is the two parties, as Gilles and the others pointed out, were talking to one another and come up with an agreed-upon rate that we think is fair. I don't believe there is an equality of bargaining power issue that exists. But we agree that it's fair; we've signed a deal; we take it to the Copyright Board and yes, they may approve it, but it can take years.
Let me give you an example of why that matters. We may be collecting the money from that tariff for one, two or three years. Where is that money? In the bank. That is no place for money. We want to take that money; we would like to invest that money in the careers of artists; we want to hire people; we want to make our marketplace work. So in any situation where that arises, where money has to go into stasis and sit there, that is not good.
Senator Massicotte: I think there is a high percentage of transactions that go to the board in your industry. Is that accurate? That causes a significant workload that is not there, say, under real estate contracts or other forms of contracts.
Mr. Daigle: I think it's fair to say that as between SOCAN and Re:Sound, together we probably have the largest amount of tariffs in the industry. Because we are subject to mandatory filings with the Copyright Board, I believe the answer to your question is yes.
Senator Massicotte: Thank you.
Senator Enverga: We are learning a lot about the tariff process. There will be a hearing, and then, Mr. Henderson, you told us that you want the board to be put upside down and change it again. Is there a way to perhaps automate the whole process? Is there a way to do that for certain tariff processes?
Mr. Henderson: I'm not saying it should necessarily be turned upside down. I'm not saying either, by the way, that it shouldn't get more resources. I'm saying we have to decide what its job is, define its job and then attach the appropriate resources to it.
Now, the issue of technology, of course, is very important in our world. At one of the agencies that I represent, CONNECT, which is another collective, we just went through a whole process. I know Ian has done that. We have all done that. We employ technology to make our organizations more efficient. I don't know whether that's available to them, but all I'll say is if you think that's a good idea, you should propose that to them. Then they should have to come back and say why that is or isn't a good idea.
Senator Enverga: But do you think it's possible?
Mr. Daigle: I think, sir, there is a distinction that needs to be made when you're talking about automation —
Senator Enverga: That's right.
Mr. Daigle: — between the licensing process. When we're talking about Copyright Board matters, that's the valuation of the rights. That valuation is either parties getting together and hoping to come to an agreement on what the value should be, or ultimately having to go through a trial before the Copyright Board. I'm not sure how I see an automation process applying in the latter situation.
In terms of actual licensing, I think all of the collectives have engaged in processes that facilitate that licensing process with the users, letting them apply and obtain licenses by accessing our website, for instance, or making payments on-line, et cetera. We have worked quite hard with our users in order to develop those systems, and I believe they are actually working quite well.
The Chair: Mr. Daigle, when you develop your negotiations with the users, be they arenas, bars or other facilities that use music, do you deal with organizations or are there cases where you've got to deal with individuals? How does that work?
Mr. Daigle: That's a very good question, senator. In most cases, we're dealing with organizations and typically the associations that represent user groups, whether it's the Hotel Association of Canada or the Canadian Association of Broadcasters. There is a multitude of these associations, and that facilitates greatly the process when we're dealing with what we call "small users,'' not in a derogatory sense.
In the new online world, as was referred to earlier, we are dealing with giants in the industry that are individual services. We deal directly with Apple, we deal directly with Spotify and we deal directly with Google. I'm sure it will come someday but there is not yet a central association of these new types of music users, and these are the giants of the industry. They can handle themselves quite well.
Senator Black: First of all, is the existing board full time? Are the commissioners full time?
Ms. McGuffin: No. There is one full-time vice chair and two part-time positions on top of that, where Ian pointed out that in the U.S. — not that you want to look and replicate that — there are three full-time judges.
Mr. Daigle: There are also two vacancies.
Ms. McGuffin: There could potentially be five.
The Chair: The board will be here tomorrow, so you can ask them.
Senator Black: Excellent.
It seems we can take away from this that the board plays an important role, and no one is doubting that. We take away that there are clearly time issues, and the U.S. and perhaps the U.K. could be a model on how to deal with that. We take away that there are resources issues, and perhaps that could be addressed not only through resources but then process, potentially settlement conferences, and there are other models around that could be looked at. Those kinds of issues can be dealt with to streamline the organization, in theory.
There's something I'm having trouble understanding, and I've seen it in the evidence — and only you, Mr. Henderson, have raised it today. That is the issue of what you call unpredictability. As a lawyer, I take that to be that the board is not following its own decisions. It's not adhering to principles that a court normally would. As a quasi- judicial panel, this surprises me very much. I'm wondering, then, why one of your organizations hasn't taken the board to court so the court can set out the guidelines that a board should be following?
Mr. Henderson: Ian, you did actually allude that the United States has criteria they have to apply; correct? There is sort of a framework that limits their —
Senator Black: Set by the court?
Mr. Henderson: Itself, so that sort of narrows the ambit of it. I'm not sure quite what the question —
The Chair: Senator Black is a lawyer, so he —
Senator Black: No, no. Let us keep it simple. If my clients were going before a panel and the panel was unpredictable or inconsistent or not following the laws of natural justice, I would be in the Federal Court.
Mr. Henderson: We do end up in the Federal Court.
Senator Black: This is what I want to understand. Why is it unpredictable?
Mr. Henderson: Things are constantly being appealed. I don't know whether more things are appealed out of the Copyright Board than from other boards. But a lot of it has to do with their mandate. The overarching requirement is to set fair rates. That's a pretty broad category. They are therefore not required to use marketplace rates as benchmarks. If fair is the issue —
Senator Black: I have your point. Okay.
Mr. Henderson: To your point, if that's what other courts did, then it would make litigation and everything a lot more difficult.
Senator Black: I understand your point. You're suggesting that perhaps somebody — government — would impose guidelines.
Mr. Henderson: Yes.
Senator Ringuette: I'm going to try to make this short. I'm imagining where we're only talking about the U.S. I'm imagining that you have counterparts similar to your organization in the U.S. Do you meet?
Ms. McGuffin: Yes, we do.
Senator Ringuette: Do you also meet at an international venue as a grouping of —
Mr. Daigle: Yes.
Senator Ringuette: You do. I'm also imagining that, at these international meetings, you identify a new product line that will require a new tariff and you all agree with what this new product line is and how it is defined. Am I right?
Mr. Henderson: No. I would say "no.'' We wouldn't be inventing new product lines at those —
Senator Ringuette: No. I shouldn't say product lines. "Users.''
Mr. Henderson: Yes.
Senator Ringuette: Online users, new online users, the evolution of the use of the products that you have rights to.
On the international scale, would you be identifying these new user groups for your product? Would you be identifying a name for this grouping? Would you be discussing internationally that kind of issue with your international colleagues?
Mr. Daigle: Speaking for SOCAN and the meetings that I attend on an annual basis, which are, as you would expect, more on legal topics than others, there is some but not a lot of discussion about that. I'll tell you why. Very simply, all of the discussions that we on the domestic scene might have with users or user groups are typically covered by non-disclosure agreements. We're actually not in a position to openly discuss in a forum like that the details on such things as licensing rates. In Canada, for SOCAN, it's a lot simpler because our Copyright Board decisions are publicly available. In the meetings we attend, there is more about what we're working on types of discussions, but I don't think they go to the extent you seem to be asking in your question.
[Translation]
Senator Ringuette: Mr. Daigle, you said there are 25 different tariffs in your organizations. Do your counterparts around the world have about the same number of tariffs?
In each of the groups, there are similarities at the international level. In any case, I will talk to the board about it tomorrow, but it is not unlike other kinds of organizations that establish tariffs, definitions or a code for a specific product.
That would make things much easier. If a song is played on an FM station or an iPhone, whether in Canada or in France, it would automatically be part of a group and part of a tariff. If a group is agreed upon internationally, it would be much easier because it is agreed upon. It would then be much easier to determine the tariff for that product.
[English]
Ms. McGuffin: Before I joined CMPA in this role, I was consulted and worked on 15 different tariffs as a consultant and expert witness in front of the board. In almost all of those cases, we looked at international rates and international precedents, and the board considered when they were relevant and when they were not. In some cases, the market is very different.
In the case of SOCAN, in the U.S., the rates on performance rights are set by judges who are, in one collective's case, dictated by consent decree, which severely limits how the rate is set. The rate setting process for SOCAN is very different than that in the U.S.
Senator Ringuette: Just to clarify, I was not implying the rates were the same. I was talking about the groupings of end users.
Ms. McGuffin: I think that's already done. I think we share with our international colleagues on a regular basis, and many of the companies I deal with have offices in all of those countries.
Mr. Henderson: We all share best practices.
Ms. McGuffin: We share best practices.
Senator Ringuette: I don't get the feeling that that is automatically agreed upon by the board here. It would eliminate a lot of negotiation.
Ms. McGuffin: In my experience, where we have brought international precedents in that were comparable or not comparable, they have looked at those. I do not believe that's a problem.
Mr. Henderson: No, that's not quite true.
Ms. McGuffin: It's a problem in terms of grouping and hearing that evidence.
Senator Day: We almost had a debate going here, which could have been interesting. We have been talking about music and sound recordings, et cetera, all evening. Does the Copyright Board have any jurisdiction with respect to print or video?
Mr. Henderson: You did hear from Erin Finlay from Access Copyright, which represents book authors and publishers.
Senator Day: So when a music score is published, who looks after that? Is that your side of things?
Ms. McGuffin: SOCAN has tariffs that relate to the audio-visual field too, as do CMRRA and SODRAC.
Senator Day: And the board deals with these? Okay.
Mr. Daigle, you talked about 1997 and a lot of new rights being created. Was the board transformed significantly when it had to start dealing with all these new tariffs and new rights that were being created?
Mr. Daigle: I would say no. In fact, I think that's the crux of the problem. Without getting into actual dollars and cents, there has not been a significant enough increase in the board's resources to address all of these issues, and from my experience, when you talk about backlogs, that's when it all started.
Senator Day: Interesting.
Mr. Henderson: When you get an influx of tariffs, you get an influx of new uses. One of my questions — and I do not know the answer but I think it has to be asked — is: Are they doing too much? For example, in certifying tariffs that have already been agreed upon, how many resources, hours and days go into that? What is being plowed into that that maybe should not be plowed into it? In my understanding, and someone can correct me if I'm wrong, I think that in the U.S. they have fewer staff.
Ms. McGuffin: They also deal with fewer tariffs. They are not dealing with all of the uses that the Copyright Board is. They are dealing only with the reproduction rights of the publishers and with the neighbouring rights for the labels and artists.
Mr. Daigle: It's a very difficult issue to assess. I'll give you an example. In 2010, I believe, a decision of the Copyright Board concerning commercial radio stations was appealed by the broadcasters. It went to the Federal Court of Appeal, which returned the decision to the board for a redetermination because, in the court's view, the decision had insufficient reasons. Well, if you're the Copyright Board and you're faced with that, what do you do the next time around? Presumably, you take the time and resources necessary to make sure that you have got sufficient reasons. They are stuck between a rock and a hard place sometimes.
Senator Day: Could you tell me when the Copyright Appeal Board changed its name to the Copyright Board?
Mr. Daigle: 1990.
Senator Day: What brought that about? What were they doing beforehand that resulted in a change?
Mr. Daigle: Before then, they were dealing simply with my organization as it then was, and it had been doing so since 1936.
The big change actually took place as a result of the free trade agreement in 1988, and I believe the laws changed in 1989. It created the retransmission royalty regime, which I guess I'd call a special hearing to deal specifically not just with music rights but the royalties to be paid to all of the content providers in the context of the retransmission of distant signals by cable operators and other broadcasting distribution undertakings. That was a new regime.
That was the first big change. That's where the Copyright Board became a permanent board and had four members, initially, at the time. From my perspective, having been there, things were working quite swimmingly, until two things happened: the advent of the Internet in 1995 and legislative changes in 1997.
Senator Day: Ms. McGuffin, you pointed out that part of the problem is that the Copyright Board isn't keeping up with these new rights. Some of the older rights, like those for printing, are disappearing because of downloading and other things. People aren't buying records anymore and that revenue stream is lost, but the new revenue streams that the Copyright Board has jurisdiction over in some cases require you to file tariffs, and in other cases you have the option. That's part of the problem that you're all experiencing here now. Do I understand that correctly?
Ms. McGuffin: Exactly.
Senator Day: Mr. Henderson, you talked about holding in the bank. You talked about some of these royalties. Is all of your business a royalty stream from which you take a percentage and then pass a percentage on to the owner of the work? Is that how it works?
Mr. Daigle: Often but not in every case, for SOCAN, especially with the smaller uses where the fee might be $100 a year. We have flat fee tariffs in some cases. When we're talking about major activities such as broadcasting, it's typically a percentage of revenue.
Mr. Henderson: It's an increasingly bigger part of our world, speaking for the major record companies. For people who make master recordings, the percentage of our revenue that would have been derived from uses subject to the Copyright Board in the early 1990s would have been very, very small. But now, it can be upward of 25 per cent of the bottom line, or more, which makes it extremely significant. That $430 million number is an extremely big piece of the pie.
Senator Day: With your customer or your client, you have made an arrangement based on the business relationship you have with them. You say, "I'll be able to give you a certain percentage on this work as we collect it,'' but your tariff that's based on that hasn't been approved yet. So a little bit later on, two years later, you find out that the tariff was wrong one way or the other and it gets revised. Is this the money in the bank that you hold back for the artist or the owner down the line?
Mr. Henderson: In some cases, the royalty is paid by the user to us but we can't pay it out because the final tariff has not been fixed. In that case, we hold onto the money they are paying us until there is a final decision and the number is decided upon. Once that number is decided upon, we may have to pay some back, and then we pay the rest through.
Senator Day: But you may be holding back for a couple of years something that a struggling artist could be —
Mr. Henderson: I should add one other thing about the question of whether the board can fix itself. It's not that I don't trust them to fix themselves; it's just that I think we need to be more aggressive in our pursuit of best practices in this day and age. That working group didn't start in 2014; it started in 2012. That's been going on, with nobody — like, where are we?
The Chair: Are they paid by the day?
Senator Black: They're lawyers.
The Chair: These have been great hearings. You have all been extremely informative. Thank you for your professionalism and for your dedication to entrepreneurs, intellectual property and creative artists, which we need in our country and who we need to promote and protect. We're all in agreement of that. It's a big part of our business community in Canada. As the Banking, Trade and Commerce Committee, we're happy to represent all your interests.
(The committee adjourned.)