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Tag archive: Value Gap (31)

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Leading Canadian copyright lawyer says “support for Canada’s content creators is imperative” in Globe and Mail op-ed

Barry Sookman, one of Canada’s leading copyright lawyers, wrote an op-ed published in The Globe and Mail on January 18, addressing two of the major challenges facing the cultural industries in Canada: pirate streaming and the Value Gap. The piece was later posted in its full, unedited length on Sookman’s personal website.

Sookman says that “our outdated legal frameworks” are a significant contributing cause of these challenges. He references Music Canada’s 2017 report The Value Gap: Its Origins, Impacts and a Made-In-Canada Approach, which shows that “the market value of music in Canada is still a fraction of what it once was, and equitable remuneration for access to music remains elusive.”

The report defines the Value Gap as the “significant disparity between the value of creative content that is accessed and enjoyed by consumers, and the revenues that are returned to the people and businesses who create it.”

As Sookman points out, the Value Gap is not only a problem for music creators. He says that most of Canada’s leading cultural industries are also affected, including journalism, television and film.

A coalition of author and publisher groups have documented the harm caused by the Value Gap to their sector, and in 2017 launched the I Value Canadian Stories campaign to urge Canadian lawmakers to “restore balance between the need to compensate our creators for educational copying and the need to promote access to quality content.” The campaign website notes that royalties to creators and publishers for copying of their works have declined by 80% since 2013.

Sookman concludes that, given the magnitude of this problem and the threat to Canada’s cultural industries, the issue, as well as practical solutions, “deserve the attention and support of Canadians.”

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Media Advisory: Where would Google be without creators and the distortion of copyright protections?

Toronto, Nov. 2, 2017: In a ground-breaking report, Music Canada, a national trade organization, documents the scale of harm being caused by the Value Gap – defined as the significant disparity between the value of creative content that is accessed, particularly through user upload content services like YouTube, and the revenues returned to the people and businesses who create it.

“This is the story you will not hear from Google,” says Graham Henderson, President and CEO of Music Canada.  “YouTube would never have emerged as the largest music service without distorting the use of safe harbour protections in copyright law that were created to protect ‘mere conduits’ or ‘dumb pipes.’  We now know that today’s digital platforms are the smartest pipes that have ever been imagined.”

Creators and governments around the world are taking notice, and taking action. In Canada, thousands of musicians, authors, poets, visual artists, playwrights and other members of the creative class, have urged the Canadian government to address the Value Gap in a campaign called Focus On Creators.

The Value Gap: Its Origins, Impacts and a Made-in-Canada Approach is available for download at https://musiccanada.com/resources/research/the-value-gap-report/.

Interviews are available at request.

– 30 –

For more information please contact:

Corey Poole
Communications Coordinator
Music Canada
647-808-7359

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IFPI’s 2017 Connecting With Music report includes Canadian insights

Today, IFPI released Connecting With Music, its 2017 consumer insight report with information from 13 of the world’s leading music markets. The report was created with data commissioned from Ipsos Connect, and provides a snapshot of the way music fans around the globe are engaging with recorded music.

In 2017, Canada became the sixth largest recorded music market in the world, surpassing Australia, and Connecting With Music offers insight on how Canadian music fans’ listening habits compare with other markets and global figures.

Global trends highlighted in the report include:

Young people are highly engaged with licensed music, especially streaming

Globally, 85% of 13-15-year-olds are streaming music. In Canada, streaming is even more popular among young people, with 89% of 13-15-year-olds reporting streaming music via both audio and video services. 99% of Canadians aged 16-24 identified as licensed music consumers, similar to the global average of 98%.

Music fans engage with licensed music in multiple ways

In Canada, music fans on average access four different licensed ways of listening to music, which is the same as the global average. The four consumption models are: purchase of physical product or paid downloads, audio streaming services for music, video streaming services for music, and listening to music on broadcast or internet radio.

Almost all Canadian internet users (99%) reported listening to licensed music, which is slightly higher than the global average of 96%.

Generally, Canadians are a little less engaged in licensed audio streaming (39%) than the average of global music fans (45%), and 46% of Canadians reported having paid for music in the last six months, compared to 50% globally.

Listening via smartphones is increasing

Overall, Canadians are using smartphones to listen to music a little less than the global average. Globally, 90% of paid audio streamers are using a smartphone to listen, compared to 81% of Canadian respondents. That gap reduces when considering the listening habits of 16-24-year-olds, 84% of which listen via smartphones globally, compared to 81% of Canadians in the same age bracket.

Despite high engagement with licensed music, piracy is still a significant concern

While the percentage of Canadians accessing unlicensed music (33%) was lower than the global average (40%), piracy remains a significant concern in Canada, with 27% of Canadians reporting stream ripping versus the global average of 35%.

Stream ripping is considerably more prevalent among young people, with 43% of Canadians aged 16-24 reporting stream ripping, and a global average of 53% in the same age bracket.

Of those who reported downloading unlicensed music, 54% of global respondents reported also using Google to find it. That figure for Canadian respondents is 46%.

The Value Gap remains an issue

Though video streaming services like YouTube are the most popular form of on-demand music streaming, the revenue returned to music creators from plays on these services is much lower than other licensed music services. 86% of Canadian YouTube users, and 85% of global users reported using the service for music in the past month, translating globally to 1.3 billion users.

One quarter of Canadians surveyed said that they do not pay for a streaming subscription because “anything I want to listen to is on YouTube,” confirming that the Value Gap is very much an issue here in Canada.

 

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Graham Henderson gives keynote address on the Value Gap at CMW’s Global Creators Summit

On April 21, 2017, Music Canada President and CEO Graham Henderson delivered the opening keynote at Canadian Music Week‘s Global Creators Summit, highlighting the growing issue of the Value Gap for music creators. In “The Broken Promise of a Golden Age,” Graham urges artists and creators to stand up for what’s theirs, and use the power of democracy to generate positive change for the creative community.

Following CMW, the speech was featured on FYI Music News, and the full recording, initially live-streamed on Music Canada’s Facebook page, can be viewed below.

Canadian creators are encouraged to join the Focus On Creators initiative and sign the letter to The Honourable Mélanie Joly, Minister of Canadian Heritage, urging government to put creators at the heart of future policy.

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Recommended Reading: Canadian Musician – “YouTube: Friend or Foe of the Music Industry?”

In the May/June 2017 issue of Canadian Musician magazine, journalist Michael Raine spoke with leaders in the Canadian music industry, including Music Canada’s President and CEO Graham Henderson, about the Value Gap and the industry’s complex relationship with the streaming giant.

Regarding YouTube’s assertion that the music community should be satisfied with the payments it receives from the service, Henderson said “it’s ludicrous because if they were on the same footing [as other streaming services], it wouldn’t be $2 billion, it would be $20 billion or $30 billion that they would be paying out and I can tell you we would live in a very, very different world. They would restore the old balance where there was enough money in the hands of independent and major labels so that they could actually invest in artists.”

Stuart Johnston, President of the Canadian Independent Music Association (CIMA), expressed similar concerns. “If YouTube were to pay rights holders even what Spotify pays for their free tier, it would be a significant and positive step forward for the independent community, but they don’t,” said Johnston. “So that business model – and I am going to say it over and over again – it devalues music. It is an unfortunate situation.”

Safwan Javed, an entertainment lawyer, songwriter and drummer, and VP of the Songwriters Association of Canada, spoke to the problems resulting from the safe harbour provisions. “Imagine the labels’ move with YouTube is to say, ‘We need to renegotiate our agreement,’ and YouTube says ‘no.’ So what’s the labels’ next move? If they want to go to a contentious and aggressive posture and say, ‘OK, we’re going to pull our catalog,’ well that’s all fine and the videos they’re making are not uploading, but other people are probably going to still be uploading stuff,” said Javed. “The general public will still be able to upload stuff, and sure you can try to police that, but policing that is exceedingly difficult and you’re spending a lot of resources on something that is essentially like a whack-a-mole that doesn’t stop.”

Raine highlights the growing chorus of artists that are speaking out and calling for reforms, specifically the artists petitioning the US Copyright Office to reform the Digital Millennium Copyright Act (DMCA), and the Focus On Creators initiative in Canada, which has sent a letter to to Minister of Canadian Heritage Mélanie Joly, which urges her to put creators at the heart of future policy.

The article is available online at http://canadianmusician.com/features/archives/214.

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Canada climbs to sixth largest global recorded music market in IFPI’s Global Music Report 2017

Toronto, ON – April 25, 2017:   Today the International Federation for the Phonographic Industry (IFPI) released its Global Music Report 2017, which shows Canada is now the sixth largest recorded music market on the planet, surpassing Australia.

The annual Global Music Report compiles revenues from physical and digital sales, streaming, synchronization and performance rights, to provide a ‘state of the industry’ snapshot while highlighting innovation and investment within the industry as it progresses further into the digital age.

Highlights of Canada’s 2016 music revenues:

  • Overall recorded music revenues rose 12.8% in 2016 and totalled CAD $489.4 million
  • Digital music revenues accounted for 63% of recorded music revenues in 2016
  • Total streaming revenues, including subscription and ad-supported streaming, more than doubled in 2016, rising from USD $49.82 million to an impressive USD $127.8 million
  • Subscription audio streaming generated the majority of all streaming revenues in 2016 at USD $94.45 million, compared to USD $15.72 million from ad-supported audio streaming and USD $17.59 million from video streams
  • Digital revenues grew to USD $233 million in 2016, up from USD $170 million in 2015
  • Revenues from physical sales continue to decline, falling to USD $99 million in 2016 from USD $114.4 million in 2015

Though music consumption around the world continues to rise to never-before-seen levels, the “value gap” remains a significant problem, as the revenues returned to music creators have not kept pace with music consumption.

“I am happy to see Canada regain its position as the sixth largest recorded music market in the world,” said Amy Terrill, Executive Vice President of Music Canada. “While the growth in overall revenues, driven by a huge increase in subscription audio streams is very encouraging, the music community must remain united and vigilant in fixing the value gap. I urge the Canadian federal government to put creators first in any future policy decisions, such as the upcoming Copyright Act review in 2017, so that creators can be properly compensated for the record levels of music consumption we’re witnessing.”

“The whole music community is uniting in its effort to campaign for a legislative fix to the value gap and we are calling on policymakers to do this,” said Frances Moore, chief executive of IFPI, in the report release. “For music to thrive in a digital world, there must be a fair digital marketplace.”

Key figures from global recorded music revenues:

  • Global revenue growth: +5.9%
  • Digital share of global revenues: 50%
  • Digital revenue growth: +17.7%
  • Growth in streaming revenues +60.4%
  • Physical revenues: -7.6%
  • Download revenue: -20.5%

Canada’s ascension to the sixth largest market follows IFPI’s announcement in February that Drake was named Global Recording Artist of 2016. Justin Bieber and The Weeknd took the number five and number ten spots, respectively, as Canadians occupied three of the top 10 positions.

Today’s Global Music Report 2017 shows that albums by Canadian artists performed very well at home in 2016, with six of the top ten album spots occupied by Canadian artists, including Drake’s Views at number one. Other Canadians in the top albums chart include Céline Dion, Leonard Cohen, Justin Bieber, The Weeknd, and The Tragically Hip.

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Music Canada reacts to 2017 Federal Budget

Music Canada is pleased to see that the 2017 federal budget, which was tabled yesterday in the House of Commons, contains encouraging language for Canada’s music sector.

Intellectual Property Strategy 2017

The budget announced that the Government will develop a new intellectual property strategy over the coming year. The budget notes that “intellectual property rights incentivize creativity and the development of new ideas and technologies by helping companies, academics and inventors recoup their investment once new products reach the marketplace.” This is especially true in the music business, as music is intellectual property, and musicians are innovators.

Recorded music is an investment intensive business, and a strong intellectual property regime gives labels the confidence to invest in new artists and recordings, which helps all parties in the recording ecosystem. Record labels are the primary investors in music, investing 27% of global revenues into discovering, developing, and marketing artists. A & R (artists and repertoire) is record companies’ defining skill, and the equivalent of R & D (research and development) in other sectors. We welcome the Government’s IP Strategy, which the budget states will “help ensure that Canada’s intellectual property regime is modern and robust and supports Canadian innovations in the 21st century.”

Canada’s Digital Future

In this budget, the Government has placed a priority on supporting Canada’s digital innovation, with a section on Canada’s Digital Future. Recognizing that Canada’s creative entrepreneurs and cultural leaders are essential to building an inclusive and innovative Canada, the budget acknowledges that Canada’s creative industries are facing rapid and disruptive change, which includes both risks and opportunities. The budget states that the Government will outline a new approach to growing Canada’s creative sector – “one that is focused on the future, and bringing the best of Canada to the world.”

The music industry has extensive experience in adapting to digital disruption. In many ways, the music sector was “the canary in the coal mine” in this regard: with the launch of Napster in 1999, the music industry was the first media sector to feel the full impact of the Internet. But, after almost two decades of nearly uninterrupted declining revenues, the global music sector reached a key milestone in 2015, with a return to positive revenue growth and digital revenues surpassing income from physical formats for the first time. This achievement was made possible by the transformation of record companies to meet changes in consumer behavior, the proactive licensing of new digital services, and continued investment in talent and innovation in bringing artists to a global audience. We have some perfect examples of the last point; last year, Drake topped IFPI’s Top Ten Global Recording Artist chart, while fellow Ontarians Justin Bieber and The Weeknd reached #5 and #10, respectively.

However, despite these encouraging results, the music industry’s transformation is not complete. There is a weakness in the foundation, known as the “Value Gap.” While music is now being consumed at record levels around the world, the surge in consumption has not been matched by coinciding remuneration to artists and producers. Addressing this market distortion is crucial to ensuring creators are fairly compensated. We look forward to working with the Government of Canada to address the Value Gap as part of the plan for Canada’s digital future.

Promoting STEM to Young Canadians

The budget also includes a laudable section on promoting STEM to young Canadians, noting that they are “curious, talented, entrepreneurial and well-educated”, making them “well-positioned to deliver the next great breakthrough in science, technology, engineering and mathematics (STEM).” This is very true, though we note the equal importance of studying the humanities, and encourage the Government to consider a broader outlook, by including the arts in this strategy.

An arts education does more than prepare students for careers in the culture sectors. Arts educations instill the importance of creativity, and teach students to apply creative thinking and design skills to STEM projects. By expanding the outlook from STEM to STEAM, the Government can help students develop the full skillset required for careers in tomorrow’s labour market.

 

Budget 2017 rightly states that changes in the economy presents incredible opportunities for middle class Canadians, and that Canadians’ future success “will be determined by our ability to prepare for and adapt to change.” As we strengthen Canadian content creation and prepare for the future, Music Canada is committed to working with government to ensure music is properly valued & creators are fairly compensated.

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Music Canada’s Graham Henderson speaks to the Economic Club of Canada on “The Broken Promise of a Golden Age”

On November 1, Music Canada’s President and CEO, Graham Henderson, delivered a moving address to the Economic Club of Canada on the erosion of creators’ rights in the digital age, and what can be done to re-establish a fair working environment.

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Canada’s cultural industries were well represented with attendees from Sony Music Canada, Warner Music Canada, Universal Music Canada, The Motion Picture Association of Canada, the Writers’ Union of Canada, SOCAN, CIMA, CMPA, The Screen Composers Guild of Canada, the Ontario Media Development Corporation, Canada’s Walk of Fame, Ontario’s Ministry of Tourism, Culture and Sport, Re:Sound, and TD Music. Guests from Ryerson University, OCAD, Humber College, CGC Education, Colleges Ontario, and York University represented the education sector. MPPs Monte McNaughton, Lisa MacLeod, Rick Nicholls, Lisa Thompson and Steve Clark were also in attendance.

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We were happy to have been joined by local musicians as well, including Miranda Mulholland, Amanda Martinez, Caroline Brooks of the Good Lovelies, Murray Foster, Alysha Brilla, Jay Douglas, Sonia Aimy, and Sally Shaar of Ginger Ale & The Monowhales.

The Economic Club of Canada’s President and CEO, Rhiannon Traill, who took on the role five and a half years ago with vision and passion, introduced Graham’s address. Rhiannon thanked Graham for the support he has shown for the Economic Club of Canada and for her as President and CEO, and praised Graham as a champion for Canadian culture.

“You’re about to hear a very important speech, and I am really, really proud to be hosting it,” she said. “Graham is an advocate, he is an innovator, he is a collaborator, a bridge builder, a visionary, and a truly great Canadian dedicated to advancing and protecting our country’s music, arts, and culture.”

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Below is the full video of Graham’s speech, titled The Broken Promise of a Golden Age: How creators got squeezed out in the digital era, and what can be done to restore their rights.

Graham’s address was followed by powerful remarks by Miranda Mulholland, who shared her personal experiences to shed light on just how dire things have become for creators trying to earn a living from their work in Canada. Miranda really drove home Graham’s message – we must fight to restore the rights of our creators, who bring such livelihood, spirit and identity to our country.

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Miranda is an accomplished violinist, singer, and label owner of Roaring Girl Records, which represents many JUNO and Grammy award winners. She’s a member of Great Lake Swimmers, Belle Starr, and the recently formed Harrow Fair. She has played or sung on over 75 albums, including JUNO nominated and award winning albums.

By all metrics she is an accomplished and respected musician, but in a very open manner, laid out the financial reality for creators in Canada.

“This is embarrassing, and I will level with you. I can barely afford rent in a city that I need to live in to work,” said Miranda. Musicians have had to become entrepreneurs, and experts in many fields, just to get by in the digital age. “I’ve had to get used to being a marketer, a promoter, a data entry clerk, a driver, a travel agent, a social media expert, and a paralegal, just in order to make a living as a singer-songwriter violinist. This is our new reality.”

Miranda and Graham agreed that we’ve reached a crisis point, and we cannot accept the argument that there’s nothing we can do to change current circumstances. We must fight for our creators, and we owe it to them to restore balance to the world in which they live.

Below is a selection of tweets from the event:

https://twitter.com/monowhales/status/793499575910797312

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Speech: Graham Henderson at the Economic Club of Canada – “The Broken Promise of a Golden Age”

The following is the full text of a speech delivered by Music Canada’s President and CEO, Graham Henderson, to the Economic Club of Canada on November 1, 2016.

Back in 2003, a famous Canadian recording artist had this to say when he was asked about his prospects in the new digital economy: “we are entering a golden age, a golden age.” This was an idea embraced by artists, the media, pundits, professors and most importantly, policy makers around the globe.

The reason for this heady optimism was the seismic events which were then unfolding in the online distribution and consumption of creative content. Peer-to-peer file sharing had become the default way for people to access virtually unlimited music for free, and the iPod had taken mobile digital music into the mainstream.

The artist who praised the unfolding of this golden age believed that the digital era would usher in a utopia for both musicians and the consumer. Artists would gain access on the Internet to a larger audience than ever before, and in return for the collapse of their traditional marketplaces, they would make more money from the sale of concert tickets, merchandise and other means. This was an epic leap of faith with virtually everything riding on one thing – the promise of digital technology.

The passage of time has instructed us that we might have benefited from a judicious skepticism, that we might have done well to have questioned the extraordinary promises and prognostications that were being made at the time. Had we done so, I wonder if the world in which we now live would have the characteristics that it does – a world in which the creative middle class, within the span of a single generation, has virtually ceased to exist.  A world in which artists struggle more than ever before to earn a living wage and put food on the table. As they transition to the world of the self-employed “entrepreneur”, they are working longer hours and are sometimes engaged in activities for which they have little aptitude, such as data entry clerks – all for scandalously less money.

Jaron Lanier is an author, composer, computer scientist and, some say, the father of virtual reality. He is concerned about the challenges facing creators. In a recent edition of the World Intellectual Property Organization’s magazine, Lanier concluded that, “We have seen an implosion of careers and career opportunities for those who have devoted their lives to cultural expression. … Opportunities are rare compared to the old-fashioned middle-class jobs that existed in great numbers around things like writing, photography, recorded music and many other creative pursuits.”

Here in Canada, our creators, the people who build our nation’s cultural foundation and much of the intellectual property we export – are struggling, and along with them the people and businesses who support their work are struggling. Well paid jobs with benefits are disappearing and being replaced by precarious employment.  Culture today, more than at almost any time in our history, is dependent on the largesse of the government.

One of the most deeply unpleasant aspects of the past 20 years has been the manner in which the gutting of the creative class, and now an entire way of life (think of youth being told they must accept a world of precarious employment), has been presented as an inevitability. At a recent round table, I sat beside a young entrepreneur who was beside himself at the idea that the Minister of Heritage was having hearings on the digital economy. For him, it was a pure and simple case of the “horse being out of the barn.” There was no turning back the clock, and no point belabouring the issue – “we’re done. This is the world we live in.”

Today I want to question that supposition. The idea that we cannot change the circumstances in which we live seems to be, dismayingly, widely held. I believe this outlook is founded on a sort of market-driven, hyper-capitalism, a debased and absolutist form of economic, technological determinism. Ayn Rand would love this; it is a sort of libertarian fantasy: the market determines how we live our lives and governments need to get out of the way – and that means us, the people. But let’s remember that we live in a social democracy – we live in a place where the people, not corporations, and not plutocrats, get to decide how to order their lives.

We must (and I include our government policy makers here) harness our imaginations. We cannot look at the world and see it only as it is. We have to be able to see it as it might and should be. And frankly, creators are really good at doing that.

Creators for centuries have fought and in some cases died to change the worlds in which they lived. Oppressive forms of employment were ameliorated; people, not corporations, gave us universal healthcare – because PEOPLE decided that THAT was the way they wanted to live their lives.

We are inheritors of this great tradition. And we can deploy it to restore the balance. Minister Joly, for example, as part of her cultural consultations, has asked us to think outside the box, to be bold and to think big. Well, one way to do that is to ignore the conventional wisdom that tells us: this is the way it has to be. And that is what I hope to do today.

But first, let’s look at how we in the creative community got to where we are today.

The foundation for most of the rules and regulations which govern our modern digital environment are two treaties adopted by the World Intellectual Property Organization in 1996: The WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.

To help us better appreciate the magnitude of the task the negotiators of those treaties faced, we need to understand what the world looked like at that time. This was a world in which digital technologies – and their adoption by consumers – were in their infancy.

In 1996, less than 1% of the world’s population was online. If you were one of the few, it was via a dial-up modem that delivered websites at the rate of 30 to 60 seconds a page. You searched the 100,000-odd websites using AltaVista or Yahoo – Google wouldn’t launch for another two years.

In 1996, email had yet to surpass the U.S. Postal Service in terms volume of messages delivered. Alanis Morissette’s Jagged Little Pill was the world’s top selling album – though fans were more likely to purchase it from a mail-order club than an online retailer.

After the adoption of the WIPO treaties, it would be a full two and a half years before Napster appeared. It was four and a half years before the introduction of the iPod (2001), six years before the advent of the Blackberry “smartphone”, eight years before the first video was uploaded to YouTube and over a decade before the first song was streamed on Spotify.

The people setting the rules for our world were well-intentioned and clever; but the reality is that they were guessing. Now there is nothing wrong with guessing. We all make educated guesses on which we base our actions.  But the beauty of our world is that with the passage of time and the accumulation of experience, we have the luxury of reassessing our situation, and adapting our behaviours when those first guesses clearly turn out to have been ill-founded. We have now had 20 years of experience with those early WIPO guesses.  How are we doing?

Well, the preambles to these treaties give us an idea of what WIPO wanted to do. The people who drafted the Copyright Treaty, told us that it was designed to (1) recognize the profound impact of the development and convergence of information and communication technologies on the creation and use of literary and artistic works, (2) emphasize the outstanding significance of copyright protection as an incentive for literary and artistic creation, and (3) recognize the need to maintain a balance between the rights of authors and the larger public interest.

These are laudable goals.  But very clearly everything would come down to the question of balance. If balanced correctly, the new rules would supercharge the digital marketplace – a boon to both creators and the public.

But very quickly, fissures began to appear. Technology advocates and so-called intermediaries argued that in order for the new technological infrastructure to get off the ground, creators were going to have to give up something to get something. What they would give up would be copyright payments that would otherwise have been required under the pre-WIPO rules: exceptions would be created.  In return, creators would benefit from a larger, more diverse marketplace.  So-called “middle men” would disappear.  All manner of economic miracles would take place. It would be win-win.

So when the first major country to implement the WIPO Treaties, the US, did so in 1998, the intermediaries and other technology companies insisted on a quid pro quo:  a series of “safe harbours” from liability.  These safe harbours were codified in the Digital Millennium Copyright Act, and subsequently served as a template to legislators around the world. Almost every exception excused someone from making a payment to a copyright owner that they would otherwise have had to make. But there was also a social quid pro quo that was articulated over and over and over again: creators would be better off.  In my view this amounted to more than a bargain, more than an article of faith: it was a social contract. A bargain which very quickly turned Faustian; a social contract that is now in a shambles.

The French economist Olivier Bomsel was among the first to call this arrangement out for what it was – a massive system of cross-subsidies. By foregoing money otherwise payable to them, the creative community would subsidize the development of the technology infrastructure.

Up to this day, much of the policy-making regarding copyright law continues to be driven by the popular mythology that digital technologies and platforms produce lucrative new opportunities for the creative economy.

Until very recently, however, the hypothesis that digitization and the Internet would unleash a Golden Age for the creative economy had not been adequately put to the test. Music Canada decided to address this information gap by commissioning an independent analysis to measure the impact of digitization on the creative economy.

The author of this study is Dr. George Barker, Director of the Centre for Law and Economics at Australian National University, and currently a visiting fellow at the London School of Economics. His paper examines the data on the effect of digitization and the Internet on among other things, Canadian music industry sales.

The paper seeks answers to the questions, “Have digital technologies and the Internet –together with the copyright liability exceptions adopted to spur them — spawned a Golden Age for creative content?”, and “Has the need for intellectual property protection fallen in light of these benefits?”

The answer to both questions, according to Dr. Barker, is no. His study found that digital technologies and the Internet were associated with sharply reduced demand, prices and sales, and consequently, to lower investment and employment.

The evidence he cites overwhelmingly supports this finding, and here are but two examples from music:

  • Globally, music sales fell about 70% in real terms between 1999 and 2013.
  • In Canada from 1997-2015, music revenues fell to 20 percent of what they would have been had they kept pace with inflation and real GDP growth – a modest expectation, to say the least.  This resulted in a cumulative revenue gap of over 12 and-a-half billion dollars.

Put another way, over 12 and-a-half billion dollars that would have gone to artists and rights holders simply disappeared. Most remarkably, this happened at a time when music consumption rose to record levels.

As music was gaining in value and use to the consumer, its value to the creator was going into sharp decline.

Francis Gurry, the Director General of WIPO, decried this phenomenon, concluding that the migration of creative works from analog formats and physical distribution to digital technology and internet distribution had been accompanied by an “avoidable and inappropriate loss of value to creators, performers and the creative sector.”

At least for musicians, a key component of the social contract was that while the market for the sale of music might decline, new and different income sources would arise.  Infamously, this came to be associated with the idea that touring and merchandise income would supplant the sale of music products.  It has not. If there is a Golden Age, it has eluded a new generation of musicians.

It comes as no surprise then that, in 2011, the average artist in Canada earned about $7,200 per year from music-related activities, according to a 2013 study conducted for the Canadian Independent Music Association. This reflects the sharp erosion of the ability of artists, especially young ones struggling to build a career, to earn a living from their creative work.

As alternative income sources failed to appear, a new and offensive concept has appeared: the idea that creators have an inner compulsion to create, and that remuneration is not integral to the creative impulse – an idea which reached its nadir in Amanda Palmer’s remark that musicians would be happy to perform with her for “beer and hugs”.

Musicians aren’t the only creators feeling the pinch. According to a 2015 survey by the Writers’ Union of Canada authors are earning 27% less from their craft than they did in 1998, after taking inflation into account.

The survey also found that median net income from writing was less than $5,000 and the average income was about $12,900 – far below the average Canadian income of $49,000. More than 80% of writers earn an income from their writing that is below the poverty line!

Creators are not alone in their struggle to stay afloat in the new economy. Taking a broader view, British economist Guy Standing argues that technologies are disrupting the way income and earnings are distributed. In his new book, “The Corruption of Capitalism,” Standing describes the appearance of a new “rental wedge” “between profits, which are growing, and ever more concentrated, and wages, which are falling and ever more uncertain.”

The “Precariat,” as he calls the new social class, is “defined by the insecurity and instability of the work it performs.” He identifies them as “Uber drivers, millennial interns, part-time lecturers and the cleaners and couriers of the ‘gig economy’.”

Creators belong on this list as well – as its charter members, I would argue. I have heard corporate executives and government policy makers discuss the “gig economy” in almost breathless terms – invariably the people extolling its virtues have full time jobs with benefits and pensions.  They have no IDEA how desperate life in the gig economy can be. Musicians know.

All of this is taking place in an environment in which music is generating fabulous amounts of money. It is just that, as Gurry points out, very little of it seems to be finding its way on to the creators’ side of the ledger.

Part of the problem has to do with how people are consuming music online.  There are two principal methods – subscription and ad-supported.  It is the latter — ad-supported, on-demand music services such as YouTube and SoundCloud — that have driven most of the increase in digital music consumption. But those services deliver far less revenue than paid services.

A subscription service, such as Spotify for example, returned $18 (US) a year per consumer in 2014 — compared to YouTube’s $1. Ad-supported services, with more than 13 times more users than paid services, delivered less than one-third as much money to artists and other rights holders.

The effect of this gaping disparity is that overall digital music revenue growth has lagged far behind consumption.

This disparity has been dubbed the “Value Gap” – which we define as “the gross mismatch between the volume of music being enjoyed by consumers and the revenues being returned to the music community.”

So where to from here? What can be done to restore the creative middle class and level the playing field?

As I noted when I began, we are fortunate in Canada to live in a well-functioning social democracy. We can make choices about the type of society we live in, and collectively, through our political representatives, we can take action.

Music Canada is among those now calling for reforms. But the entire creative community, here in Canada and around the world, is speaking up.

The Writers’ Union views the situation we face as nothing less than “a cultural emergency for Canadians.”

“If we want a strong and diverse publishing and cultural industry, it is essential that creators are reasonably and fairly compensated,” it argues. “If writers continue to be compensated … at these low rates it will inevitably become impossible for professionals in the field to earn a living.”

This year in Europe and the US, thousands of artists have petitioned their governments to address the value gap and rebalance the rules.  Expect more of the same, very soon, in Canada.

There is very clearly a call to action – so what should this action look like?

Well for a start, any approach to the problem should be holistic and multijurisdictional.

Music Canada has been aggressively opening new channels to do this. For example, we have been taking the message to municipalities that they can implement simple, straightforward local policies to improve the business environment for creators and the businesses that support them.

Music Canada identified these options in our 2015 Music Cities report. The report has gone viral all over the world.

The idea of local governments creating music cities, and mayors running on pro music platforms, would have been ridiculous just a few years ago. Yet today nine municipalities of various sizes across the country have Music Cities strategies in place. And more are coming.

Municipalities are taking these steps because they understand that the benefits are worth the effort. For example: job creation, economic growth, tourism development, city brand building, artistic and cultural growth. Strong music scenes have also been proven to attract other business investment along with talented young workers who put a high value on quality of life, no matter what their profession is.

At the provincial level, Ontario and BC are trailblazers, having created music-friendly programs that are almost unique in the world, with substantial music funds and music-friendly policies such as red tape reduction strategies to facilitate live music performances.

For her part, Minister Joly has been crisscrossing the country, asking people to think big, to be ambitious and to step outside the box.

So let’s think about that. How CAN the federal government get involved? How can it innovate and, like Ontario and BC, blaze a new trail? The government has made it clear that it wants a new toolkit to confront the challenges facing Canada’s creators, that it seeks a new social contract.

It has four levers in its toolkit: legislation, program funding, policies and treaties, and institutions. Here are some thoughts about how those levers might be pulled to benefit our creative community.

Legislation

This one is simple.  End all the cross-subsidies paid by creators. Now.

The businesses that benefit from these cross-subsidies have become wealthy beyond imagination over the years. The goal initially was to get them off the ground. Job done. The creative community has been making its contribution for two decades. It’s payback time.

Policies and Treaties

First, I’d like to applaud the federal government on signing the CETA agreement with the European Union. This treaty contains provisions that will encourage the creation of intellectual property assets.   The production of these assets results in a double dividend for our country – 1) they are material assets, which are owned by Canadians and are exportable, and 2) they are cultural – assets which allow us to tell our story to the world.  More of this please!

Second, I note that Ontario, BC and municipalities across Canada are all designing policies to attract foreign direct investment in the domestic music economy.  The federal government would do well to heed those examples, and pitch in with supportive policies of its own.

Third, Canada is home to one of the most vibrant live music scenes in the world. Provinces and municipalities are awake to the music tourism opportunities this presents. This is an easy one Ottawa:  tell the rest of the world what a brilliant destination we are for music tourism; market music! Brand Canada as one of the greatest live music scenes in the world, and brag about it!

Program Funding

Canada currently boasts an enviable system of programme funding for music. But that funding needs to keep pace with inflation as well as the changing realities of the marketplace and creators’ lives. I have repeatedly urged the government to pay attention to how the lives of creators have changed. For example, in a globalized market, developing export opportunities is critical for them. So? Spend money on the Trade Routes programme – a LOT of money; earmark some of it for music.

Next, artists’ incomes have cratered. What could that mean? Well, how about the fact they can’t afford homes. Housing affordability has become an increasingly urgent issue for them. The federal government should seriously examine this issue in the context of cultural infrastructure.  And by the way, Ontario? Get with that as well … cultural infrastructure has to be part of your infrastructure spending.

Musicians used to be surrounded by a universe of enablers and supporters. They are gone with the ecosystem, gone with the money. Musicians are now more-often-than-not micro businesses, sole proprietors, entrepreneurs. Has any thought been given to a programme to fund skills and entrepreneurial training?

Institutions

Here, the federal government has already taken positive steps such as increasing funding for the CBC and the Canada Council for the Arts. During her recent consultations, Minister Joly made the point that the government is looking to go in new and bigger directions. She looked back to an era in which the CBC, the CRTC and the Canada Council had been created.

First, one institution that needs to be repaired is the Copyright Board of Canada. I’m actually flying tomorrow to hearings that are being conducted by the Senate into the operation of the Copyright Board of Canada. That is first on our list of institutions I would encourage the government to modernize, and to turn it into a true business development office for the creative industries.

But here’s a really big idea. Right across the country music education is in jeopardy. Increasingly, the students with access to music education are from more affluent communities. Inner city youth, remote, rural and indigenous communities are getting shut out. But it is not just music, it is the liberal arts in general that are at risk.

We need to reconnect our young people with the importance of a liberal arts education, with the importance of creativity. One of the things we’ve seen is an erosion of respect for the creative process. Rebuilding respect for the humanities will assist us in rebuilding our shattered framework.

The federal government needs to exercise a leadership role because this is a national issue of national importance.  The federal government already supports a programme like this – focused on science.  It is fantastic and connects young people with the importance of a science education.  If Science then, why not Humanities?  I urge the Department of Heritage to convene an expert panel to consider this issue and to establish a permanent National Humanities Council.

CONCLUSION

I will offer a sort of coda at this point.  One of the questions being asked by the Minister of Heritage is “how can the government use content to promote a strong democracy?” This got me thinking about the intimate connection – throughout history – between creators and democracy. Poets, film-makers, and novelists have always played an essential role in the fight for democracy and civil rights.  Here in Canada we have an immediate example at hand, Gord Downie’s Secret Path. But to his name we can add Pete Seeger, Solzhenitsyn, Vaclav Havel, Billie Holiday, Nina Simone, Percy Bysshe Shelley, Fela Kuti and many, many more. These are all people who were banned, exiled or jailed for their fight for justice and democratic principles.

It is instructive, is it not, that after the revolution in Czechoslovakia, the people turned not to a strongman but to a playwright. A playwright whose velvet revolution had been powered by illicit tapes of Lou Reed’s band, The Velvet Underground.

As you may have heard when you entered the room, our background music was a selection of protest songs.  That has been one of music’s great contributions to our world: music and protest anthems have been associated with just about every social change for decades.  I’ve put a Spotify playlist together which you’ll find at your seat.

Our creators are truly, as Shelley famously said, “the unacknowledged legislators of the world.”  Now when he says they are legislators, he doesn’t mean they’re lawyers, he doesn’t mean they’re necessarily politicians. What I think he is saying is that creators predict our future, they underpin our future, and they create a framework (political AND cultural) for our future. To the extent we allow those voices to be in any way compromised or marginalized, our democracy will suffer a great loss.

Should we just “get used” to the way things are?  The people opposing the brutal child labour regimes of the 1st Industrial Revolution did not “get used to” those conditions – they fought to change them – and they changed the world.  We’re are in the midst of what some are calling the 4th Industrial Revolution.  Young people today, and creators, members of the “precariat”, are also objecting to the circumstances of their lives. And I warrant they will fight to change them.  As I said at the outset, in a social democracy we do not have to get “used to it”.  We have the right to decide what sort of world we live in.

So my answer to the Minister’s question is this: If you want a stronger democracy that is less vulnerable to special interests, do everything in your power to restore balance to the world in which our creators live. Encourage and enable them.  Our creators are not living in a golden age.  That was the original goal, they didn’t get it, the promise was broken – so we owe it to them.  Now.

And let’s all remember, the fight for democracy and justice has always had a soundtrack.

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‘Value gap’ growing, according to new UK figures

New figures released yesterday at Canadian Music Week by the BPI – the record labels’ organization that promotes British music – highlight the growing “Value Gap” that exists between consumption of music in the UK and the amount that record labels and artists receive in revenues from video streaming platforms.

Geoff Taylor, BPI Chief Executive, told delegates that the number of people streaming music in the UK doubled in 2015, resulting in a 70 per cent increase in payments from services such as Spotify and Apple to record labels, helping to propel the market to overall growth.

However, while UK streams of music videos almost doubled during the same 12 month period, the revenues paid to labels for those streams flat-lined, rising by less than half of one per cent. This disparity neatly encapsulates the market distortion characterised by the IFPI as the “Value Gap”.

Taylor added: “The rising flow of royalties that should be nurturing artists and labels has slowed to a trickle, as platforms that rely on safe harbours use consumer demand for our music to grow their own businesses at the expense of creators.”

Frances Moore, CEO, IFPI, gave the keynote speech on the ‘State of the Global Music Industry’ in which she referred to the findings of IFPI’s recently released Global Music Report, which showed that the music industry grew in 2015 for the first time in almost two decades, with digital revenues overtaking physical revenues for the first time.

Addressing the conference, Moore said: “We are at an extraordinary moment in our global business. Music is being consumed at unprecedented levels. Measurable growth is being achieved for the first time in nearly two decades.

“Yet the job of turning around the global music industry is really only just beginning and the scale of the anomaly to be fixed is huge. Music is driving economic activity and digital commerce. Yet, in terms of the value being returned to its creators and investors, music is massively undervalued.”

Cary Sherman, Chairman and CEO, RIAA, said: “DMCA reform has become an international phenomenon. Thousands of artists, dozens of music organizations and managers are speaking out and it’s beginning to make a difference. The fundamental unfairness of our existing laws, the stature of artists and power of music, is breaking through like never before.”

Graham Henderson, President and CEO, Music Canada, said: “The value gap is a striking example of how wealth has shifted from those who create content – our artists and their partners – to the large companies that build their platforms on that content. Creators are worse off today than they were when digital came into their lives. This is disturbing and was avoidable. Policy makers now have the opportunity to rebalance the framework in such a way that creators are fairly compensated.”

Dan Rosen, Chief Executive, ARIA, said: “The local Australian music business has done a great job in embracing new digital platforms, giving fans unprecedented access to the music they love. However, we need to ensure that the policy environment reflects the true value that music provides to digital services and allow money to flow back to the artists and labels to sustain a healthy ecosystem of creativity.”

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