On Friday March 1st, Music Canada President Graham Henderson addressed a sold out crowd at the Canadian Club of Toronto, bringing the message that ‘music can help’ in creating jobs and economic stimulus, developing young minds, and creating export-ready talent that will promote the Canadian brand to the world.
With Members of Parliament Dean Del Mastro, James Rajotte, and Andrew Cash, as well as Toronto City Councillor Gary Crawford in attendance, Henderson’s speech noted that what matters most to Canadians, and consequently, their elected leaders, is jobs and the economy. “Our message at Music Canada to decision makers at all levels – is that music can help,” said Henderson.
Speaking about music’s role in the economy, Henderson referenced Price WaterHouse Cooper’s Economic Impact Analysis of the Sound Recording Industry in Canada report, which determined that the major and independent recording companies alone generate about $400 million in spending and contribute $240 million to the national GDP. Henderson reiterated that these are “thousands of solid, well-paying jobs, largely for young people in a cutting edge digital environment,” while noting that the Ontario Chamber of Commerce recently named music as one of Ontario’s global competitive advantages alongside traditional powerhouses mining and manufacturing.
Henderson noted that “perhaps no sector has experienced the consequences of the digital revolution more directly than the music community. The entire ecosystem has been disrupted.”
Speaking about the changing landscape, Henderson said the process of transformation is not over. “A 38 billion dollar market world-wide has become a 16 billion dollar market. But this year, for the first time in 13 years, we have seen an increase in the size of that market. A very small one, but an increase nonetheless. And make no mistake; our much feared and much maligned copyright reform legislation played a role in this. The sky has not fallen, children are not being frog-marched to jail, culture is not locked down….in fact we are on the road to recovery.”
In the new landscape, digital sales have grown significantly but not enough to make up for the diminution of physical sales, said Henderson. “Revenues from the digital market are on a different scale than those derived from CDs. We sell singles not albums. And streaming music generates a fraction of a penny per stream.”
And, while there are more and more digital services, “they are not all created equal,” said Henderson. “The landscape is littered with illegal services that don’t pay artists or copyright owners – many of which appear legitimate to the consumer, aided by Google search results that obscure the simple existence of legal sources of music.”
“We need to start thinking and planning for a world in which people discover new Canadian music in different ways,” said Henderson. “The audience is moving, are we following it? It is also an accepted fact that live performance income has emerged as increasingly vital to the livelihood of musicians. What are we doing to help in this area?”
Henderson teased out highlights from a new study that Music Canada will be releasing on March 21st at Canadian Music Week, revealing five opportunities to facilitate the growth and sustainability of the Canadian music industry.
The five key opportunities for exploration and investment were identified as:
- music education
- digital innovation
- music tourism
- export expansion, and
- interconnected tax credits
Speaking on music education, Henderson called the first area of exploration “nothing short of a game changer.” Henderson quoted Chilly Gonzales, who said that if we really want to raise the bar, this is the way to do it.
A recent study by the Coalition for Music Education found that schools across Canada are finding deficiencies in music education programs linked to lack of funding and prioritization, resulting in unqualified teachers, insufficient resources, and minimal class times.
“The private sector is stepping up,” said Henderson, noting Music Canada recently announced a $250,000 donation to music education through MusiCounts, as well as Coalition Music’s work in creating an education program that includes three education streams, including the business of music.
“Private sector support is fantastic,” said Henderson, “but clearly there is a role for government to play in supporting music education and cultural scenes that serve to retain and attract young, talented workers.”
Speaking on digital innovation, Henderson said “clearly in order to successfully evolve from analog to digital we must embrace technology and use it to our benefit – we are all well familiar with the other side of that coin. Our community has a long history of using technology to create music and engage fans.” Henderson referred to three areas of opportunity.
“Innovation should become a centrepiece of existing funding models.” On this subject, Henderson said that innovative companies and artist entrepreneurs will be more likely to weather the storms of technical disruption. “Therefore,” said Henderson, “it should be the goal of funding agencies to encourage and reward innovations that fundamentally improve core business functions, the chances for creator success, and fan discovery.”
Speaking on the second opportunity in digital innovation, Henderson said “technology should be leveraged to enhance music discovery and the promotion of Canadian music, if not through regulation, than through partnerships and incentives.” Henderson used the approach used by CBC Music, Zik.ca, and the Canadian iTunes store as examples of services with a greater focus on Canadian content, saying that funding programs and incentives could “power up these partnerships for the benefit of Canadian music.”
Thirdly, Henderson addressed the challenge of monetization in the digital space, saying the upcoming report will talk about the challenges of “generating dollars from this business of pennies.” Henderson quoted Martin Mills, the founder of Beggars Group, who said “the demand for recorded music is higher than ever, and I know of no way that the investment of time and money that is needed for new music to be made can happen, other than in the monetization of how people listen to recorded music.”
“With the transition to digital consumption, how do we ensure great enough scale in the sale or access to music to ensure adequate revenues?” asked Henderson. “We are all familiar with the horror stories” said Henderson, referencing indie band Grizzly Bear’s tweet reporting that a single CD sale was worth more to them than 300,000-plus streams on Pandora.
Henderson called on digital retailers to prioritize the Canadian market, “not just by launching here – but by investing in marketing their services – and in hiring Canadians." Henderson noted Deezer’s commitment in this area, “and we anticipate this will mean greater scale for them and subsequently more opportunities for Canadian artists and music companies,” said Henderson.
Next, Henderson addressed the report’s third area of exploration: our live music scene. Calling it “our hidden, unused super power,” Henderson said “live music represents an enormous latent potential to boost our economy through the enhancement of one of Canada’s most import economic sectors, tourism.”
“This is a sector that has slipped so profoundly that the Canadian Chamber of Commerce has identified Canada’s poor performance as one of our top 10 barriers to competitiveness,” said Henderson. “But here again, music can help.”
“Tourism is important because, at least in Ontario and I suspect across the country, it is the single largest employer of young people.”
Henderson commended the work of the Ontario government, highlighting Minister Michael Chan’s recent announcement of Ontario’s ambitious plan to make Ontario one of the global destinations for live music tourism.
“We know from our economic impact study that over HALF of all jobs in the live music sector are here in Ontario. We know that we have one of the largest, most diverse music scenes in the world. That gives us a built in global competitive advantage,” said Henderson. “We also know from a report by the Ontario Arts Council that 9.5 million overnight tourists to Ontario participated in arts and culture activities during their trips in 2010. For almost half of them music was the motivation for their journey. It is also a fact that arts and culture tourists stay longer and spend more.”
Next, Henderson referenced Music Canada’s recent study of Austin, Texas, where “we learned what a city can do when it sets out to establish itself as the ‘live music capital of the world.’”
“Austin’s population is about one-third the size of Toronto. However, it has a commercial music industry that contributes $1.6 billion a year in economic impact to the city – roughly 2 ½ times the annual impact of Toronto’s music industry. Music tourism accounts for nearly half that number. The difference is – they have a PLAN.”
The fourth area for exploration identified in the report, is promoting export ready talent. “Canadian artists and musicians are an integral part of Brand Canada,” said Henderson. “Ask someone in Germany – India or Japan – what they most associate with Canada – and it will likely be a Canadian musician.”
“Tangible and intangible benefits alike accrue from international success of our artists,” said Henderson. “And it is money well spent for governments – with Canadian Blast documenting almost 700 business deals in 2010/11 from its participating 98 Canadian music companies – producing a 1:46 rate of return on the federal dollar.”
The upcoming report will recommend a more elaborate public-private partnership with the creation of a export office at the Canadian Independent Music Association, said Henderson. “But we stress it must operate on an ‘open to all’ basis,” he continued.
The final area of exploration highlighted in the report is support through tax credits at both the federal and provincial levels, said Henderson. The section is led by Nordicity Group, who have conducted extensive research in the field, particularly focused on Ontario’s tax credit regime. “You don’t have to look far in this country to find a tax credit best practice,” said Henderson.
According to Nordicity, tax credits have played a critical role in underpinning rapid growth in the film industry, where they have been in place for the longest and their use has been most widespread, said Henderson.
Henderson cited Nordicity’s 2011 analysis of the Ontario Sound Recording Tax Credit, which demonstrated that although it has a limited scope, it delivers a good return on investment. Nordicity found that for every dollar the Ontario government invests in the sound recording industry in the province through the OSRTC, it receives $1.27 in tax revenue.
“CIMA has recommended expanding the scope and level of existing tax credits – we agree,” said Henderson. “But we have also demonstrated that it must mirror the film tax credit system, in extending the tax credit to foreign direct investors such as Sony, Warner and Universal. We have shown this will generate a further $60 million in additional spending and 1300 direct and indirect jobs – jobs for young people. Works for film…works for music.”
Concluding his speech, Henderson noted the digital era has impacted every aspect of the music business, “from production to delivery to the consumer. It is imperative that our policies – funding programs – and public-private partnerships reflect this changed landscape.”
Regarding the upcoming report, Henderson said “we have identified 5 key areas for exploration but this is just the beginning. It is our hope that the report we release at Canadian Music Week will stimulate a wider discussion about how music can help make Canada stronger and more competitive and how Canada can help the music to thrive and prosper – we all win.”
The presentation generated lots of discussion on Twitter, embedded below: