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.
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
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
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
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
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
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.
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
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
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
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
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
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
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
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
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
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
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.
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.
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
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
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
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
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.
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
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.
Ms. Rioux: I completely echo my colleagues here in their thought
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
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
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
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
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.
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
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
The Chair: Thank you.
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
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
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
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.
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.
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?
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
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
Ms. Finlay: There were very high-level recommendations, but we
don't know what has happened since then.
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
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.
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
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
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
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
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
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
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
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.
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
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.
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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.
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.
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
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
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
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.