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The Rambler by Graham Henderson: Tariff 8 decision establishes “10% of Nothing Rates”

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.

Six years (think about that people, SIX YEARS!) after the Copyright Board of Canada began the rate-setting process for non-interactive and semi-interactive music webcasting, they finally have released their decision, a decision with far-reaching, deleterious repercussions for the music community around the world. The Copyright Board of Canada has decided that the music produced by our marvelous creators is essentially without value.

The new music streaming rates certified by the Board amount to 10% of what digital services companies have been paying while the slow wheels of the bureaucracy turned, and less than 10% of what those same services pay in the United States. And, by the way, the rates in the United States are no great shakes either and have been the subject of intense criticism from the artistic community for years. I therefore refer to the new Canadian rates as the “10% of Nothing Rates”. The decision is unconscionable. It compounds the damage done by many of the Copyright Board’s decisions on major new tariffs, which have also been the subject of Judicial Review by the Federal Court of Appeal. It will further imperil artists’ livelihoods, and threatens to rob them of the fruits of their labour in the new digital marketplace. And it will further undermine the business environment, undercutting the ability of labels and other music companies to make future investments in Canadian talent.

Let me pose a rhetorical question that throws everything into relief: Do Canadian plumbers get paid wages equivalent to 10% of American plumbers? Teachers? Auto workers? Farmers? Who? What profession receives compensation in Canada for their labour that is equal to 10% of the wages paid across the border? I will tell you who: NOBODY. So, why does the Copyright Board of Canada think this is okay to stick musicians with rates like this? Is it because they essentially think that the creative process is valueless? That is a question which will have to be answered; it and many other hard questions.

This all could have been easily avoided. The music licensing company Re:Sound provided compelling evidence to the Board, including market-rate benchmarks based on negotiated agreements they’ve had in place with music companies for years. It’s common sense that the fairest way to compensate artists and record companies for use of their music would be to respect the agreements they’ve already made with each other. But the Board, unfathomably, ignored the evidence and assigned one of the worst royalty rates in the world to the market for streaming.

The Board’s decision comes as the result of an inherently flawed system that lacks clear criteria for rate-setting. Their mandate allows them to set royalty rates for streaming music services based on what they think is “fair and equitable.” Yet they have no statutory or regulatory obligation to take into account existing agreements that the music industry and its business partners have successfully negotiated in the marketplace. Setting the rates that digital music service providers are required to pay at 10% of what they currently pay throws those negotiated agreements and the creators along with them out the window. The result is that the new royalties are anything but fair and equitable. Millionaire and billionaire owners of intermediaries will rejoice, and creators will wince.

The newly certified rates add insult to injury for artists who rely on fair compensation for use of their music in order to make a living. A recent study commissioned by the Canadian Independent Music Association (CIMA) found that individual artists in Canada are living well below the poverty line, with an average income of $7,228 per year.

Artists’ incomes have been eroding gradually for over a decade, and the decision to set webcasting rates at bargain basement levels will make it even more difficult to be a career musician in Canada. The Tariff 8 decision came down – ironically – just as artists were testifying before the Heritage Committee about the already bleak reality they face. There was an overwhelming consensus that it is nearly impossible to make a living today as a professional musician. When asked by a Committee member about the peaks and valleys musicians have in terms of earnings, Alan Doyle of one of Canada’s most beloved bands, Great Big Sea, responded, “When’s the peak again?” Jodie Ferneyhough, President of the Canadian Music Publishers Association, pointed out in his testimony that, “It’s hard to make a living on micro-pennies.”

Tariff 8 is a travesty, not only because it impoverishes Canadian creators, but also because it is completely offside with international standards that support the growth and development of the global music industry.  It puts a black mark on Canada, which now stands alone in its adherence to a mandatory tribunal process that allows a government-appointed board to completely set aside marketplace determined rates. Not one of our major trading partners behaves in this manner.

For those who are quick to blame the current government for this mess, stop right now. It was not the current government that created this mess; it IS however the current government that can fix it.

Not only is Canada an outlier, the new streaming rates will make Canada an international pariah as it impacts creators worldwide. Every artist in the world will be paid 10% of the U.S. rate when Canadian consumers stream their music. Digital music services, such as Pandora in the United States, will be breaking bad to use Canada as an example of why rates should be driven down and creators should be paid less in their own countries. I’ve written previously about Pandora opening up that box, when they sided with entrenched media and Internet companies to lobby the United States Congress to reduce royalty rates paid to performers. In a separate effort, Pandora launched a lawsuit against ASCAP to lower royalty rates paid to songwriters. Pandora’s part in the Internet Radio Fairness Act debacle in the U.S. backfired at Congress and caused a massive artist backlash that grew into the enormously successful “I Respect Music” worldwide grassroots movement. Started by artist and entrepreneur Blake Morgan, the “I Respect Music” campaign was a call to action for musicians and music lovers alike.  That groundswell of support and overwhelming respect for the cause, led Representative Jerry Nadler to introduce a Bill to ensure that artists would be paid for all forms of radio airplay.

We would be well advised here in Canada not to ignore the backlash that occurred south of the border when Pandora made that ludicrous play. Here, too, we are seeing rumblings beginning to reverberate throughout the music community in response to Tariff 8.

Not surprisingly, Re:Sound filed an Application for Judicial Review of the Board’s decision and, in response, more than 70 labels and other music organizations, including Music Canada, released a joint statement in support of their action.

As more and more artists, producers and businesses in the broader music community become aware of the real consequences the tariff will have on them and their ability to thrive in this industry, they are taking to social media to express their shock and outrage.

Toronto pianist, songwriter and producer Mark Masri:

London boyband Poacher:

Ottawa record store Compact Music:

As grim as it has been for artists over recent years, the Copyright Board’s decision on Tariff 8 divides us more clearly than ever before into winners and losers, with the intermediaries hitting the jackpot and the middle class of the music community going bust. We need to bring back the balance and restore order to the music ecosystem in Canada. A technoutopia may initially sound like it would be a land of happy citizens, but like all nebulous ideals, this vision has nothing to do with reality – it is an imaginary place, and literally “no place” we can all live.

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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