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The Rambler by Graham Henderson: My testimony before Ontario’s Standing Committee on Finance and Economic Affairs

Graham_headphones3Blog ThumbnailThe Rambler is a column by Graham Henderson, President of Music Canada. Graham writes from time to time about developments in the music industry, new trends or just about music! Let’s face it, Graham has been around for a long time and has a lot to ramble on about.

Last week I had the chance to testify before the Provincial Finance Committee in support of the government’s Ontario Music Fund. It was an excellent opportunity to remind all parties of the importance of the music community – all facets of the music community. I felt it was particularly important given that we face a potential Spring election. It was therefore timely to stand up for the Ontario Music Fund. If there is an election, we want to make sure that whatever government is returned by the people of Ontario, it is a government that support the value of music and will not only stand by the Fund, but move to increase it.

When you appear at the Committee you are offered 15 minutes to use as you see fit. I chose to speak for 10 minutes allowing time for questions. Only one of the parties is entitled to ask questions. In my case it was the turn of the Liberals; this explains why there were no questions from the Conservatives or the NDP. However, simply judging from the body language, I can tell you that music is a topic which seriously interests people in government. It is inspirational, it is exciting. It is a gift that keeps giving. As we have always said, “Whatever your problem or opportunity, music can help.” Governments at all levels are waking up to this.

The days when the sole reason for supporting music was for its intrinsic value to our society and culture are waning. Today music is increasingly seen as a critical even essential component in a thriving economy. It is claimed that Archimedes once said, “”Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” As I point out in one of my answers – music is a very long lever, and it offers advantages to the economy out of all proportion to its own economic footprint.

I was particularly intrigued by Donna Cansfield’s questions. She picked up on the theme of music education, stressing its importance and allowing me to amplify the need for governments to at the very least demonstrate leadership in this area. But she also asked about music piracy and I thought her concern was moving. It is not particularly fashionable to talk about “piracy” these days. But it continues at an absolutely rampant pace. During the copyright reform debates, opponents of the cultural industries appeared before the various committees minimizing the impact and proposing techno-utopian solutions. The most bizarre of all was the idea that touring and performing would supplant the income lost because people, FANS, refuse to pay bands for their music. That canard has died a particularly swift death and its advocates simply proved the poverty of their vision and common sense in ever having proposed it was a workable solution in the 21st Century.

The other reeking skeleton in the closet is how little intermediaries like Google are doing to make it easy for consumers to find legitimate sources. I have written about this here. I would also refer you to David Newhoff’s excellent blog on the subject of Google, as well as IFPI’s sad tale about the infestation of Google by illegal search results – about which they are doing essentially nothing. Our friends at David Lowery’s excellent blog The Trichordist have also touched on the question of exactly how little intermediaries pay creators for the privilege of leveraging their art into untold billions of viewers and by extension fabulous wealth; wealth that is concentrated in increasingly fewer hands by the moment and on a scale which would make the Borgias cringe and blush. Here is an excerpt from this blog:

One of the most accessible points of piracy starts at Google search and they can absolutely do more to assist legal and licensed businesses that pay artists. Digital Music News recently reported that “ Google Receives Its 100 Millionth Piracy Notice. Nothing Changes… ” As we’ve seen with Google’s swift retribution to Rap Genius , search can very effective to discourage or remove bad actors from the legitimate marketplace (When it is in Google’s business interest to do so!). Google is also tracking over 200,000 known domains engaged in active piracy . This seems like an easy problem to solve.

Not only did a series of research studies by the USC Annenberg Innovation Lab identify Google as one of the primary companies feeding advertising to pirate sites, but there is actually a longer darker history of Google assisting illegally operating business online .

Artists don’t get paid anything from pirate sites profiting from advertising revenue. This is the big one, those who pay nothing at all but distribute the most music at the highest volumes.

Ms. Cansfield said, “I think there are things that we can also do, working with the Federal Government, and I was surprised you didn’t mention more of that, because that pirating of music is a significant drain on the economy.” I agree with her, and we would more than welcome any assistance the Provincial Government would care to offer! Together we are stronger.

 

Here is the transcript of my presentation, courtesy of The Legislative Assembly of Ontario.

The Chair (Mr. Kevin Daniel Flynn): Our next delegation this morning is from Music Canada: Graham Henderson and Amy Terrill—or Graham by himself.

Mr. Graham Henderson: By myself.

The Chair (Mr. Kevin Daniel Flynn): It’s the same as everybody else, Graham: 15 minutes. Use that any way you see fit. If there’s any time left over at the end, questions will come from the government this time. With that, the floor is yours.

Mr. Graham Henderson: Okay, thank you very much. Good morning, members of the committee, and thanks for the opportunity to speak today.

I would like to focus my remarks on something that was in last year’s budget, in order to ensure that you’re well aware of the positive nature of the policy and its impact on our sector. I’m talking about the Ontario Music Fund, which is a $45-million grant program spaced over three years.

As many of you know, Music Canada has actually been at the forefront of advocating for not only this initiative but also the Ontario music community in general. I’m confident in saying that the fund was designed to respond to market challenges that we brought forward to the government, and also the opportunities for growth and investment.

Allow me to explain. Music is now widely considered to be a key competitive advantage for Ontario. In a groundbreaking study that we commissioned a couple of years ago, PricewaterhouseCoopers determined that the major and independent recording companies alone generate about $400 million in spending and contribute $240 million to the national GDP. Over 80% of that activity takes place in Ontario.

Our sector employs thousands of young people in a cutting-edge digital environment, and then there is the live sector. The live sector in Ontario accounts for over half of the activity in Canada. Toronto is a “must” stop on every global tour and a home to thousands of homegrown artists. It is a key economic sector. It’s one of the top three markets for live music in North America.

The cities of Toronto, Hamilton, Kitchener, London, Guelph, Peterborough, Windsor, Kingston and Ottawa have all identified the potential of music in their communities. Each of these communities sees it as an important part of the community and a catalyst for benefits ranging from music tourism to investment and talent attraction and to community building. These same benefits were highlighted in a recent white paper released by the provincial Conservative Party. I commend them for having drawn some attention to this.

Similarly, the Ontario Chamber of Commerce has ranked music along with traditional powerhouses like mining and manufacturing as three of Ontario’s key economic sectors.

So why, might you ask, was there a need for government intervention in the form of the fund? The answer to that is germane to the issues that you deal with on a regular basis: financial liability, market imperative, investment climate, retention and attraction of jobs.

Perhaps no sector has experienced the consequences of the digital revolution more directly than the music community. Our entire ecosystem has been disrupted. Our community has embraced this challenge, and adaptation was necessary, but it certainly wasn’t easy. The process of transformation is far from over. A $38-billion business worldwide has become a $16-billion business. Revenues in Canada in the recorded music sector are less than half what they were in 1999.

While digital sales have grown significantly, they are not enough to make up for lost physical sales. Revenues from the digital market are on a completely different scale from those derived from CDs. We do not sell albums; we sell singles. Streaming music, which is becoming increasingly popular, generates a fraction of a penny per stream.

While there are more and more digital services, they are not all created equal. The landscape is littered with illegal services that do not pay artists or copyright owners. Many of them appear to be legitimate to the consumer, and they’re aided by Google. Google search results obscure the simple existence of legal sources of music.

Robert Levine, who is the former editor of Billboard and author of a book called Free Ride, wrote, “It has never been easier to distribute a creative work. At the same time, it’s never been harder to get paid for it.”

The Canadian Independent Music Association released a report recently, Sound Analysis, that concluded that 60% of the independent music companies in Canada—and these are basically small businesses—generate less than $50,000, and only the top 10% earn more than $500,000 a year. Artists, whom you should all consider entrepreneurs, earn an average of about $10,000 per year from music-related activities, and they spend about 29 hours a week pursuing music, because they must generate income elsewhere to put food on the table. This is radically different from just 10 or 15 years ago. Music is becoming a hobby, not a career.

People are also discovering music in different ways. Discovery is moving online—has moved online—yet for decades we have relied on a strategy to expose Canadians to new music using radio.

Almost all of our digital retailers are foreign-owned, posing the question, how do we guarantee shelf space?

All of this is unprecedented. Yet despite the gloom, we have learned from our research that there are unparalleled opportunities to leverage music in order to generate jobs and investment.

Austin, Texas—and we’ve spent a lot of time there—provides an example of a community that has figured out how to harness the power of music to create one of the most resilient economies in the United States while also supporting the small businesses and artist entrepreneurs who make up the sector. As the 11th-largest city in the United States, they were the last into the recession and the first out, and they credit their music community for that benefit. It’s on the top-10 list of every measurement: attracting young people, population growth, rate of venture capital investment, number of start-ups, number of jobs created. In Austin, music generates $1.6 billion.

By comparison, Toronto, which is three times as large, generates only one third of that activity. In Ontario, and we know this from the Ontario Arts Council, arts and culture tourists stay longer and spend more, and almost half of them list music as the key motivator for their trip.

In Austin, music is part of every pitch that the chamber of commerce or its mayor makes when they act as the business investment arm for the city. The government credits music for getting them the Formula 1, something that they were very, very anxious to get.

Music and tech are inextricably linked. We have seen this in Austin, but it has also been backed up by a study released by the Information and Communications Technology Council which points to a strong correlation between vibrant music scenes and technology clusters.

So it is in this challenging market environment where opportunity lies that the Ontario Music Fund appeared, to build on the competitive advantage that the music community has organically created and to turn the province into a live music and recording capital of the world. For the first time—the first time—Ontario is directly leveraging its live music prowess to generate increased tourism activity, which is a great source of jobs, if not the number one source of jobs, for young people. For the first time, Ontario is using the successful film and television model and applying it to music in order to attract and repatriate recording projects to our world-class music studios which, until now, have been suffering.

You might ask, “Why not just lower corporate taxes for companies and the artist-entrepreneurs?” Well, we believe that the stark numbers that I shared with you earlier demonstrate that the majority of our community needs access to capital and not lower taxes.

At Music Canada, we’ve identified seven key areas of growth for the music community in Canada at large and Ontario as well. They are: music education, digital innovation, music tourism, export development, tax credits or grant programs, music celebrations and community building.

With a bit of help from the government, the private sector is ready to create new wealth and jobs in this province. I’m confident that you’ll see that the Ontario Music Fund is money well spent.

Thank you.

The Chair (Mr. Kevin Daniel Flynn): Very good. Thank you, Graham. You’ve left about five minutes.

Who would like to go first? Steven?

Mr. Steven Del Duca: I’ll go first. Thanks very much, Mr. Chair.

It’s great to see you, Graham. Thank you for being here and for delivering those remarks that I think underscore the importance of the decision that our government made last year with budget 2013, around the music fund itself.

The question I have is that in terms of going forward, you talked a great deal about how important it was for us to come to the table with that $45 million, I believe, over three years. I’m wondering, as we go forward, what other steps the government can take to support the industry—perhaps not by way of more funding, because $45 million over three years is considerable, but other measures the government can consider taking to support such an important economic driver, that sometimes is counterintuitive. People might not think it provides the economic activity that it actually does.

Mr. Graham Henderson: It’s correct. It’s a fulcrum that you can use to achieve immense leverage that is totally disproportionate to the size of our own economic footprint. Music tourism is a perfect example of that.

Minister Chan has announced the Live Music Strategy. The objective is to create in Ontario a global destination. We’ve never drawn attention to the fact that we have one of the most vibrant music scenes in the world. We’ve never spent any money on it. The government could simply support Minister Chan, as could the other parties, as he focuses and concentrates resources, that exist today in the ministry, on music. That would be one key area.

Once you build a music scene, you can also use it to leverage the attraction of businesses, the retention of businesses, young people and even immigrants. So as the province of Ontario looks at how it is going to attract the right immigrants to the marketplace, simply think about the advantage that our existing scene can offer you. It’s a big advantage.

Finally, I would suggest that music education is something that has been allowed to languish across the country. Just as you’ve announced an initiative to support mathematical education, you should be thinking about what you can do for music, because it is dying in our schools.

Mr. Steven Del Duca: Interesting. Thank you.

Mrs. Donna H. Cansfield: Thank you very much and thank you for your presentation. I so wholeheartedly concur with you. Anyone who doesn’t have a teenager or who wasn’t a teenager doesn’t understand the value of music. We still have our Beatles albums. It’s just part of who you are and your heritage.

I want to ask two questions. First of all, about the education—and I concur wholeheartedly—interestingly enough, one of the countries in the world with one of the most vibrant music programs is Finland. That’s because in Finland every child takes music and every child gets an instrument.

Mr. Graham Henderson: Yes.

Mrs. Donna H. Cansfield: They have one of the best music programs in the world because they have nurtured that. I think that’s something we could work on.

The other part of it is the illegal market. I think there are things that we can also do, working with the federal government, and I was surprised you didn’t mention more of that, because that pirating of music is a significant drain on the economy.

Mr. Graham Henderson: You can help us simply by vocally demonstrating leadership, by speaking out on issues like music education. We do not have Premiers or Prime Ministers like Bill Clinton and others, who vocally stood up for the importance of music education. If you can start to do that, it helps us.

We have an initiative that raises money called MusiCounts to put instruments into the hands of young musicians. Similarly, the federal government has done a lot to help us in our battle against illegal sources, but they could certainly do more. One of the biggest problems we have is that consumers cannot find legal services on Google. Type in: “Carly Rae Jepsen”; pick your song; press “search.” You would have to look to page 7 of the results to find iTunes. Before you get there, you have six and a half pages littered with illegal sites which are constantly being taken down and constantly being put back. With government support, maybe we can urge intermediaries to actually do something to help consumers find legitimate sources, because I think they’d like to.

Mrs. Donna H. Cansfield: I concur with you, and I think it’s an education. I’m going to suggest that most young people who download music don’t realize how illegal it is. So there’s a whole education component—

Mr. Graham Henderson: Right—or the harm.

Mrs. Donna H. Cansfield: —or the harm that it’s doing to the economy.

Mr. Graham Henderson: The difference between an artist’s career today and 15 years ago is stark.

Mrs. Donna H. Cansfield: You’re right. Thank you very much for your presentation.

The Chair (Mr. Kevin Daniel Flynn): Thank you for coming.

Graham Henderson is the President of Music Canada. He also writes on an eclectic range of topics on his personal blog at www.grahamhenderson.ca.

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