:
Mr. Chairman, members of the committee, thank you very much for your invitation to appear before you today. We hope these discussions will provide valuable insight into the evolution of the Canada Music Fund.
FACTOR is a private not-for-profit corporation that was established more than 30 years ago by private radio and Canadian music companies with just $200,000 in voluntary radio contributions.
In 1986 a private-public partnership was formed when FACTOR began to administer government funding offered through the sound recording development program. In the most recent year on record, FACTOR received $8.4 million from the Government of Canada through the Canada Music Fund and $11.1 million from private radio broadcasters through their Canadian content development contributions mandated by the CRTC. This makes private radio the majority funding partner in FACTOR.
This revenue model allows us to supplement Canada Music Fund programs with funding from private radio and to develop independent programs financed entirely by the private radio sector. In 2012-13 we committed close to $17 million through our various programs, supporting almost 2,000 funding requests.
Through FACTOR-administered government and radio support since 1982, Canadian companies and artists have been remarkably successful both domestically and abroad. Companies such as Nettwerk, Maple Music, Arts and Crafts, Paper Bag, Secret City, and Justin Time are most notable, as is 604 Records, which recorded the Carly Rae Jepsen hit Call Me Maybe, which achieved more than 10 million downloads worldwide in 2012.
This year FACTOR supported six Juno-winning albums, and in 2014 the FACTOR-supported album Throw a Penny in the Wishing Well, by Jennifer Gasoi, won the first Grammy ever for a Canadian children's recording. We are extremely proud of these accomplishments and the role FACTOR has played in supporting these sound recordings.
:
Notwithstanding these successes and in the face of the profound changes confronting the music industry, FACTOR has completely overhauled its programs and systems. We began with consultations with Canadian Heritage and the music industry in 2012 and launched the new system in the spring of 2013.
In our new system, we ask music company applicants to submit revenue reports based on their exploitation of master rights to recordings. This includes revenues from all sound recording sales, including digital sales and placements in ads, TV, and film. We then rank companies based on that revenue and fund them according to their national standing. This has replaced rankings based entirely on the physical sale of CDs.
For artists, we created a national ranking based on an aggregate score on 17 separate measures of achievement. An artist's ranking on this scale determines their eligibility. This inclusive approach attempts to reflect how today's artists build their audiences and careers and position themselves for commercial success. Included in this assessment are live performance dates completed and booked, their social media success, press notices, placements in ads, films and TV, the strength of their marketing team, and sales of recordings in all forms.
Companies and artists then apply through our programs for support. FACTOR plays a critical role in providing early-stage financial assistance to Canadian artists and music companies. FACTOR operates on a merit system whereby applications are judged by a national network of juries composed of more than 1,000 music industry professionals.
In our demo program, we provide grants of $1,500 to record a single or demo track that can be used by artists to help promote themselves and professionalize their work. Any artist can apply to this program, provided they submit the requisite materials to our juries. In 2012-13 we funded 215 such projects. In the past year some 279 have received financing under this program, a 30% increase.
At the next level, our full-length juried sound recording programs allow many first-time applicants who wish to create a full-length recording to compete for support in a program that is also juried. Once approved, artists or their representative companies can access additional marketing, showcase, touring, and video funding. In 2012-13, 131 such projects were funded; this number rose to 141 in the past year.
Beyond this level, we provide comprehensive support to more established companies and artists for a funding package comprising a sound recording, marketing and promotion, showcases and touring, and videos, both traditional and digital. Support can be as much as $150,000 in matching funds per project.
It is also notable that this support and all support for sound recording projects is given in the form of matching funds, which are forgivable loans, repaid based on the overall commercial success of the project. Repayments have averaged about 20% in past years. Overall, FACTOR approved 513 sound recording projects in 2013-14, 234 of which were full-length sound recordings. I should note that sound recordings can also be released exclusively on a digital platform.
Although FACTOR supports the production of sound recordings as a primary investment amounting to about $4 million per year, the bulk of the overall budget is allocated to marketing, promotion, touring and showcasing, and videos, with $6.5 million spent on marketing, almost $3 million on touring and showcasing, and $400,000 on videos both digital and traditional.
To support the export of Canadian works, we allow half of any marketing budget to be spent outside of Canada. Additionally, $2 million of the $3 million in touring and showcasing support is spent in international markets. This ratio is growing as FACTOR sees more demand for live performance support outside of Canada.
Our funding is pan-Canadian. In the year 2012-13, we supported artists, companies, and projects in and from all provinces and territories. With respect to submissions and approvals, some 52% of projects were approved nationally. On a provincial basis, most achieved a success rate within 5% of that number. Only Saskatchewan, at 42%, and the territories, at 22%, fell outside of that range.
We also support a network of regional education coordinators with an annual grant of $360,000. They provide local guidance to artists in their region who wish to access FACTOR programs.
FACTOR also supports a wide variety of collective activities intended to celebrate our achievements, enhance the domestic and foreign market potential of artists and companies, and subsidize business development costs. There are four such Canada Music Fund collective initiative programs, which we administer, each with a specific goal in mind.
The largest component supports major awards and conferences, such as the Junos, Canadian Music Week, North by Northeast, Polaris, M for Montreal, POP Montreal, Sled Island in Calgary, the Halifax Pop Explosion, the Manito Ahbee aboriginal festival in Winnipeg, BreakOut West, and many more from all across the country, including Yukon and the Northwest Territories. These projects also receive substantial financial support derived from radio CCD contributions.
Other components include support for marketing on digital platforms, export showcases, and official language minority showcases.
We also have a $450,000 sponsorship fund that underwrites more than 60 smaller events per year, which are outside the scope of the collective initiatives, and it's funded exclusively by private radio. Recipients have included the Lunenburg Folk Harbour Society, the Alianait Arts Festival in Nunavut, the Interstellar Rodeo in Edmonton, and MusicFest Canada, a national competition focused on young artists in classical, jazz, and choral ensembles.
FACTOR staff continue to work with our federal government partners to improve our programs and services. Today, wherever an artist lives in Canada, we have a program available to help them at each stage of their career. Ultimately, we are in the business of helping the industry do what it does best: create, market, and export great Canadian music. Canadian music is one of our greatest national exports and a huge source of pride for all Canadians from coast to coast to coast.
We are very honoured to be entrusted with such an important role in ensuring this impressive legacy continues for many years to come.
We welcome your questions.
Thank you for inviting us this morning. My name is Pierre Rodrigue, and I am the Vice-President of Communications and Marketing at Bell Media. However, it is in my capacity as chairman of the board of directors of Musicaction that I appear before you today. With me is Louise Chenail, chief executive officer of Musicaction.
As you know, Fondation Musicaction manages funding programs which support the development of the independent francophone music industry in Canada. Musicaction also manages the RadioStar Fund, but my presentation today will deal only with the two components of the Canada Music Fund which we administer, and which complements the “Music Entrepreneur” component, which is managed directly by the Department of Canadian Heritage.
Before presenting the foundation's five main mandates, I would like to give you an overview of the structure and governance of our organization.
First, our foundation is based on a public-private partnership. Based on its revenue sources, Musicaction has been a true public-private partnership for 30 years. Since 2002, Heritage Canada has contributed 6 million dollars per year to help manage the “New Musical Works Component” and the “Collective Initiatives Component”. This significant funding is complemented by contributions from private broadcasters, worth $2.5 million.
Secondly, I will tell you about the composition of our board of directors. Our board is composed of representatives from broadcasters and the music industry, but also—and this is something that distinguishes us from factor—representatives from the Société professionnelle des auteurs et compositeurs du Québec. We benefit from the expertise of these music industry representatives, who continually review the programs. We are also aware of the risk of potential conflicts of interest, so our foundation has developed strict ethics and governance policies, governing the request acceptance process, among other things.
Thirdly, our foundation has a policy of visibility. Musicaction has a detailed policy concerning the obligation to use the Canada wordmark in recognition of Heritage Canada's support. The policy provides for sanctions if the rules are not respected and includes a rigorous verification procedure.
Fourthly, we fund projects individually. Through its various programs, our foundation provides funding for individual projects and does not fund companies as a whole.
I will now present Musicaction's five main mandates.
The first two mandates of the foundation are essentially carried out through the “New Musical Works Component” and its seven programs. The first mandate is to support the production and marketing of francophone music content. This mission is carried out through the album and song production programs, which are designed to guarantee access both to intermediate entrepreneurs with a proven record, called “Recognized Producers”, as well as emerging companies and self-producing artists, through a competition process involving selection by a jury.
These two separate approval methods ensure access for everyone, as well as the quality of the projects that are funded, and a great musical diversity. Through these two programs, 110 albums and 15 production projects are supported every year. More than 385 songwriters and composers also receive support for their role in producing this content.
This first mandate also involves a national marketing program, which supports the marketing and promotion of sound recordings, image production and stage productions. While 31% of annual funding for new musical works, in other words $2 million, goes to production, 46% of this component is allocated to national marketing. The marketing mandate is carried out through three other programs, international marketing, sales and management.
Finally, the second mandate under the new musical works component is to develop and renew francophone music. Musicaction has programs to support emerging artists. The first aspect of this mission is the program to support emerging artists, which aims to train new artists at the beginning of their career and to integrate them into the music industry.
We are currently supporting around 15 new artists. Through its other programs, the foundation has also implemented criteria that support emerging artists. Every year, through the “New Musical Works” component, 210 separate applicants, excluding singer-song writers, benefit from our financial support. The large number and range of recipients, including artists, producers of albums and shows, record labels, managers, editors, distributors and music industry associations, demonstrate that all players in the music industry can have access to funding in a way that respects quality, diversity and the renewal of the discipline of music.
Our results show that our initiatives have been successful, despite the extremely difficult context of the music industry today. In four years, 20 projects that we supported received certification and more than 200 awards were given to projects and artists that we supported. In 2013 alone, out of the 20 best-selling francophone Canadian albums, 11 had received support from us.
In 2012-2013, the 25 recognized producers who had received support from us had invested nearly $50 million in the music industry.
In other words, thanks to the Canada Music Fund and private broadcasters, each dollar invested by Musicaction helped generate more than $14 in independent revenue for companies.
Now, let discuss the last three mandates. They were strengthened in recent years through additional funding from the department for specific initiatives, under the “Collective Initiatives Component”.
Firstly, there is support for francophone minority communities. In 2008, Heritage Canada entrusted Musicaction with the management of the “Music Showcases Program”, whose main objective is to encourage performances by francophone artists from Francophone minority communities within large-scale tours.
To give you some figures, during the program's first installment, we supported 70 artists, presented more than 200 showcases nationally, and saw 50 national tours and more than 250 performances outside of the country. This significant and sustained presence on stages in Canada and abroad has resulted in the emergence of a number of important young artists. I could mentioned Damien Robitaille from Ontario, or Radio Radio and Lisa LeBlanc from Acadia.
The second mandate is to develop digital markets. In addition to the support for individual digital initiatives, additional funding from Heritage Canada has been invested in collective digital projects since 2010-2011. The goal is to increase the amount of digital content available, but also to increase its visibility amid the huge range of music available online.
The 29 projects funded run the gamut from a mobile application for a large festival with a download link, to a project to adapt and integrate an international digital distribution structure. In short, these new broadcasting, revenue-related, and exclusive original content creation projects have undoubtedly helped to improve the positioning of francophone Canadian music on the Web.
Examples of the foundation's initiatives to promote programming and encourage the emergence of new projects include meetings between music technology professionals, project presentation activities, consultations with experts, collective consultations, and permanent digital committees. Even if the first steps toward establishing a dialogue and creating new habits have been taken, there is still much work to be done to optimize the content available and to establish a presence in the digital space.
Finally, the third mandate under Collective Initiatives is to develop international markets. By supporting showcase presentations, networking activities and collective stands at fairs, this program allowed us to develop new partnerships with some of the most prestigious international festivals. I could mention the Francofolies in Spa and in La Rochelle, le Printemps de Bourges, or WOMEX, which increase visibility with foreign professionals.
In its first three years of existence, the program supported 203 artists, and 196 showcases were presented in 29 different events, mainly abroad. As a result, individual requests for international marketing support increased. Canadian artists have never been so active in francophone parts of Europe.
To conclude, I will make four observations concerning current issues.
First of all, we need to invest more and better in the new digital ecosystem which is constantly evolving, in order to be more visible and more accessible.
Secondly, given the emergence of new business models, assistance programs must be flexible in order to meet the needs of a constantly changing industry.
Thirdly, as borders open up, exporting to target markets will become essential.
Finally, the challenge will still be to ensure that our artists can both continue to produce high quality content and have the means necessary to stand out both on the Canadian market and on target export markets, throughout the digital universe.
Thank you for your attention.
:
Mr. Chair, members of the committee, my name is François Bissoondoyal, chairman of the board of directors of RadioStar and also Director of Disks for l'Équipe Spectra.
Before giving you a brief history of Fonds RadioStar, its objectives and its results since we have witnessed changes in Canadian music consumption, first allow me to thank you for having invited us.
Fonds RadioStar was created in 2001. It is a not-for-profit organization born out of the CRTC's 1998 policy concerning commercial radio. This policy provided for a financial contribution of 3% of the purchase price of radio companies to a marketing fund for Canadian culture.
With the goal of promoting French-language Canadian culture, and targeting emerging artists in particular, Fonds RadioStar was officially launched in August 2001, before the first impacts of the changing consumer behaviour in the digital world were being felt by the music industry.
Since its creation, Fondation Musicaction has managed RadioStar, under the authority of an independent board of directors which is separate from that of Musicaction. Fonds RadioStar thus also benefits from expertise and optimal resources to carry out its mandate.
Also, this double management system by Musicaction and Fonds RadioStar as well as national marketing programs under the Canada Music Fund allow us both to ensure that these programs are complementary and can be leveraged, and to avoid duplicating expenses. In this way, we ensure that the fund is meeting its objective of intervening later in the marketing process than other sources of funding.
I will now discuss access to funds.
Funding is available for recent and existing albums that are already on the market. In the case of a record label recognized for promoting new artists, this funding is available one month before the launch, after providing proof that an initial investment in the project has been made.
Since 2007-2008, the return has been based on meeting a sales threshold which varies depending on the musical genre and the number of albums produced by the artist in question. This is a simple and objective criteria which reassures the client that his or her request will be granted if he or she meets the necessary threshold. And indeed the acceptance rate for projects received since this change has been around 99%. This criterion also gives companies the flexibility of investing at the moment that best suits them to ensure the best possible conditions for their artists' development projects to succeed.
One of the other fundamental principles of the fund, we should remember, is to give priority for funding to emerging artists. The thresholds are lower for first albums, facilitating access to funding. On average, since 2007-2008, 65% of projects that were funded were associated with artists who had produced no more than two albums in their career.
Here are a few figures and results associated with this funding.
From its foundation until the last fiscal year in August 2013, Fonds RadioStar has supported the second marketing phases of 544 albums. These albums are associated with 371 different artists and 9 projects are associated with artists' groups. More recently since the overhaul of 2007-2008, 200 albums which received funding and which came out between 2008 and 2012 generated total sales of a little over 2.8 million units. Out of these albums, 22 received certification, 10 platinum and 12 gold.
Looking beyond albums and artists, over 12 years the fund has directly supported the activities of 145 different companies, including 121 record labels and 24 different concert producers. It has also indirectly supported people working in the marketing of an album, including radio promoters, press relations representatives, concert agents, Web promoters and so on. On this last point, analysis of investments in these projects shows there has been a clear change in marketing strategies, which are now more focused on current music consumption trends.
We should not abandon traditional music marketing methods, but we need to be present in different spaces. Today, strategies are emphasizing Web promotion, notably the production of images for the Internet and support for on-stage performances. Over the last 3 years, 45% of investments have been directed to these areas; 25% toward the Web and 30% toward the stage — compare to 28% in 2004-2005.
To ensure that our initiatives remain relevant, we are continually adjusting the fund based on an analysis of the trends and on consultation with industry.
For example, once the new revenue resulting from the Bell-Astral transaction was confirmed, and after consultation with industry representatives, the fund, with the approval of its board and of the CRTC, immediately adopted a series of measures to bolster the available funding. Given that there is a desperate need in terms of promotion, notably because of the industry's transition towards digitalization, we decided to act as quickly as possible while reserving some of that revenue to extend the life of the fund. This flexibility also allows us to promote alternative initiatives to funding individual projects, and this benefits the industry as a whole.
Recently, in 2012, the fund added a “Collective Projects” Component to its marketing assistance program. This component supported a study concerning consumption habits, sociodemographic trends, the search for new content, and new purchasing processes for francophone music content, which involved 5,000 respondents. The results of this study were included in a practical guide which is available on the Web to all of the players in the music industry.
To conclude, allow me to make a few observations concerning the issues that the industry is currently facing.
Firstly, the democratization of the means of production has led to an abundance of content on the market. As a result, while it is necessary to have original and high quality content, to stand out, marketing is increasingly important.
Secondly, the diversification of promotion and distribution channels, the increase in marketing and international competition costs, notably involving huge stars, require increasingly large marketing budgets. Apart from a few instant successes, most careers develop over a much longer period than before, and even established artists practically have to start at square one or work very hard to maintain interest. So we need to invest more.
For us the goal is to ensure fair access to funding and to maintain a fair balance between demand and the fund's objectives and financial capacity.
Thank you.
:
I can start with the second one first and say, to give it a short answer, that I'm sure we have some weaknesses.
Let me talk to you a little bit about access because that's one of the things some people have commented on. Anyone can access FACTOR. FACTOR is not an exclusive club that belongs only to a group of independent labels who have a monopoly on the funding.
If you're an artist in any part of the country that wants to start out, wants to begin a career, you can access FACTOR for a $1,500 grant to record your first demo or single. Indeed, if you're a band or an artist and you get a showcase invitation from a legitimate festival in Canada, we will fund you up to $5,000 to go there, no matter what you've done. We have entry-level programs for people right across the country.
Also I'd say that distribution of our funds regionally is, importantly, very equitable. In fact I think somebody pointed out that 80% of the English music business is in Ontario and only 59% of our approvals are in Ontario, so there's a disproportionality. There's a larger percentage—or 52% of our approvals are in Ontario—and every province gets about the same number, as I pointed out. So, there's an equal probability that if you have a project that you're proposing to us, you'll get funded whether you're in Newfoundland or in Victoria or in Toronto.
There have been some misconceptions I think about.... The last thing I'll mention, and I mentioned it in our notes, is that we were the first organization to move towards funding that is not based on the sale of physical CDs, which was the old model of counting units. We are now fully engaged in measuring the commercial success of the company based on all forms of distribution, including digital, and with respect to the artist, we also dropped that singular condition. Now, we have 17 measures that cut across all of the artists' activities, including their digital activities, including their touring, including their live....
I think we're incredibly robust when it comes to our approach. If we have any weaknesses, it’s that we can't cover all the ground. Some people like you to be, to quote the chair, like peanut butter and spread all over the place. It's just not possible. The demands are sometimes beyond what we can meet. Although some might say that's not a weakness, I would say it's problematic to be continually meeting those issues, for us.
Your question gives me the opportunity to demonstrate the fundamental difference between FACTOR's funding and that of Musicaction when it comes to the viability of the organization.
Duncan M. McKie told you about the three major transactions which occurred recently in Canadian broadcasting. You will remember that the transaction affecting Standard Radio did not concern any francophone stations, that the transaction involving CHUM did not involve any francophone stations and that the transaction involving Bell-Astral, if I remember correctly, concerned 23 francophone stations out of about 100.
If you do the math, you can see there have been significant investments which will lead to concrete benefits for FACTOR's long-term funding. Musicaction and even RadioStar do not benefit from the same level of investments. This does not change the government's investments, but, keeping the same proportions, there is no reserve fund of $30 million, even at Musicaction.
Why do I say that the outcome would be the same? Obviously, given the financial context and given that the music industry has been going through some tumultuous changes in recent years, programs cannot be set in stone and cannot remain unchanged for many years.
Our board wisely decided to set up a permanent review mechanism for our programs. We need to resist the temptation to jump on the bandwagon of the most popular model. Every year, new models emerge and while we may be tempted to adopt them, we do not. We were on the cutting edge when it came to digital.
Every year, we implement several new pilot projects, for example in the area of international management. For certain marketed products, we even invite industry to submit new projects. We ask which pilot projects might meet the latest needs. Obviously, we do not dedicate a significant percentage of our funding to this, but we invest enough to be able to test the market.
We need to be flexible, and we need to do so in collaboration with Heritage Canada. In theory, according to our agreements, Heritage Canada could tell us to keep our action plan and to review it in five years, but this is not the case. We often have discussions with our granting organization. Broadcasters also play a role. They could easily write a cheque at the beginning of the year and then disengage. But the board members who represent broadcasters listen to people in the music industry. They participate in these review committees and they adopt new programs from time to time.
:
Mr. Chair and members of the committee, thanks for the opportunity to speak today.
In my remarks I hope to provide a summary of some of the themes that have come through over the past months. Many ideas that have been presented to you resemble some of those that were put forward in our report, “The Next Big Bang”, which I have as a prop here, and which, in fact, previous witnesses cited it several times.
It was developed with a somewhat similar purpose in mind to your own study, and that is to identify a framework for a new industrial strategy for music. In doing so, we had to consider the context of the digital environment, trends in consumption, music discovery, and the growing importance of live performance to an artist's income. The report was generated by capturing many different voices through interviews as well as the contributions of complete chapters by experts. As such, it represents the collective thoughts of a broader community.
We focused on five key strategies: music education, digital innovation, music tourism, export expansion, and tax credits. Now, no report of any value rests idle, and since publishing in 2013 we have evolved further our thinking to include music celebration and music's role in city and community building.
Let's talk first about music education. Many witnesses have spoken passionately about the importance of music education. It develops skills such as critical thinking, spatial reasoning, cognitive development, collaboration, creativity. A study by the Information and Communications Technology Council confirms that ICT workers trained in music are better equipped to succeed in their fields.
Multiple witnesses have also expressed the belief that music education instills respect in the creative process. A national survey of schools in 2010 revealed a myriad of deficiencies, including lack of qualified teachers, insufficient class time, and under-resourced programs. Meanwhile, threatened cuts to music education has drawn intense criticism and media scrutiny in Toronto and Vancouver. Calls for a national music education strategy have been supported by witnesses as diverse as the Polaris Music Prize, Live Nation, and SiriusXM.
It was Mike Tanner of North by Northeast who suggested that the federal government has a role in “creating a cultural shift and a national identity built around music and music education.” We agree. The federal government has great authority and influence, and we would encourage you to work with music leaders to formulate a plan for leadership concerning music education.
On digital innovation, the promise of, and ability to adapt to, the digital environment have been consistent themes. The utopian promise of the Internet, however, has yet to be fully realized in Canada despite the rosy picture that has been painted by some. While the Canadian music industry in 2013 for the first time saw revenues from the digital market overtake those from the physical market, the fact remains that our digital sales are nowhere near replacing what we have lost in physical sales. Our digital market remains relatively undeveloped. Digital music sales in Canada remain nearly one and a half times lower than per capita sales in the United States. While we have recently welcomed great new digital services to Canada, we lag behind other leading music markets in launching these services. Rather than innovators, we are followers.
We are beginning to see a migration to new and exciting digital music services which offer consumers the ability to access music wherever they are and whenever they want, with new revenue models such as subscription services. Unfortunately, millions of listens on these services do not translate to a living wage for artists and those in the music industry. There has been an enormous shift in wealth away from creators into technologically driven intermediaries who are amassing fortunes on a scale that at times beggars the imagination. Intermediaries often blame the victims with tawdry accusations that creators are simply not adapting, as if we live in some kind of antediluvian adapt-or-die world. As artist-activist David Lowery said, the old boss is being replaced by a new boss. Power and wealth are now concentrated in intermediaries, technology firms that control access to the distribution system. And the artists? Lowery says that 99% are barely surviving while the top 1% prosper.
CIMA released a study that said artists earn about $10,000 a year from music and spend 29 hours a week on it. That doesn't sound like a full-time professional job to me. It's hardly a rosy landscape.
Canadian-born filmmaker, Astra Taylor, who has just published a book called The People's Platform, which you as policy-makers I would suggest absolutely must read, says that the difference between the old and new bosses is that the new bosses don't invest in artist development, and they don't pay advances. Read her book. She's critical of us, and she's critical of others, but she brings a new perspective and a balanced perspective to the debate.
The question here becomes what are we going to do about it, and what is our collective responsibility?
One way forward is to make it easier for digital services to launch and operate in Canada. Numerous witnesses have pointed to the slow nature of decisions made by the Copyright Board, through no fault of its own, and uncertainty in the legal landscape as deterrents to progress. Given the proper tools, personnel, and financing, the Copyright Board could become something more analogous to a business development office.
Parliament should also consider unleashing rights holders and digital services to do deals directly at fair market value rather than having to wait years for the Copyright Board and the courts, to whom board decisions are frequently appealed, to determine what they think the fair market value should have been. This will enable services to launch now with the certainty they require, and it will allow rights to be properly valued in Canada to ensure that being a Canadian musical artist can provide a sustainable livelihood rather than at best being a hobby.
Finally, we have the issue of piracy. Ad-supported piracy continues to plague creators. The digital landscape is littered with illegal services that do not pay artists or copyright owners. Many of them appear to consumers to be legitimate, and they are aided by the likes of intermediaries and other search engines, the search results for which, despite their claims, continue to promote illegal links. There is an opportunity here for international cooperation.
On the subject of music tourism, you have heard compelling testimony from both music presenters and tourism professionals about the power and the potential of music tourism for our country. David Goldstein of the Tourism Industry Association of Canada testified that as an international destination, we're slipping from eighth in the world to eighteenth.
He further spoke about music as a travel motivator as “one of the most compelling tourism products that spark economic growth in all regions of the country.” The Canadian Tourism Commission specifically identified music festivals and events as key motivators for young travellers. These activities would go directly to support artists and musicians in the way they are now earning more of their income, through live music.
Ottawa Bluesfest recommended commissioning a national economic impact study on live music. We fully support this idea and are currently in the process of developing such a study for the province of Ontario, and would, with the support of Canadian Heritage, happily extend it across the country.
On export expansion, export is clearly a critical piece in the development of an artist's career. “The Next Big Bang” relied heavily on input from CIMA and FACTOR. The growth of international markets for music brings forth many benefits for individual artists and music companies. In addition there is a reputational gain for Canada, as Duncan alluded to, as our musicians and artists become de facto ambassadors portraying Canada as culturally diverse and creative. As such they are an essential part of brand Canada. “The Next Big Bang” recommends a more cohesive national approach to export, with resources earmarked for a national export office.
The final area is interconnected tax credits. You have heard several witnesses suggest an update to the tax credit regime. We often point to the success of Canada's film and television production system, which has in large part occurred because of a system of stable, robust tax credits offered to domestic and foreign companies.
Tax credits are used to support industries that make significant investments in R and D. That is us. In music, artist development is our R and D, and for all the reasons previously expressed in these hearings, capturing a return on that investment is harder than ever.
I would urge you to examine the existing tax credit framework and to update it according to the testimony that came before me, which has included discussion on production, touring, awards programs, and digital development.
Thank you.
The Radio Starmaker Fund is the English side of the Fonds RadioStar. We started handing out money in 2001.
To some extent we have the easy job, because we are focused on the commercial sector of the business. I was tasked with building the fund in 2001. The broadcasters came to me because I was an entertainment lawyer who represented artists exclusively. I had the easy task of looking at the landscape and saying, “What's the need? What do they need?”
I knew intimately the challenges faced by artists, as Graham has alluded to. There is the myth of the successful artist living the good life. You have a gold record. You win a Juno. You go down to the Bahamas and drink rum punch, and everything's great. That of course is not the reality. It's an ongoing struggle. Alan can explain that to you directly.
We focused early on, as Graham pointed out, to particular points that they're looking at now, which is the touring being so important and international being so important. We started that in 2003. That's because I had worked with bands for years, knowing exactly how expensive it is to get out there in the world. To give the CRTC credit, at the beginning the funding had been targeted for Canada, and they allowed us to move it internationally.
We have five programs right now.
We have domestic marketing and domestic touring. That's roughly half of our money. We give out $7.5 million a year. As Duncan explained, we are on the same curve that FACTOR is on, because we share a stream of that same money. We similarly have planned our money in three-year and seven-year cycles. We have a seven-year capital model. We're always pushing our money and keeping it level for seven years so that the industry can rely on a steady source and amount of funding.
We have domestic marketing, domestic touring, international touring, international marketing, and then we do some domestic industry-building things. For instance, we run an event at the Toronto International Film Festival called Festival Music House, where we showcase Canadian artists.
The touring component in particular is almost $5 million of the $7.5 million.
Our board is made up of 10 industry experts. We have the highest level of expertise on our board. We have someone like Alan; we have the president of Universal, Randy Lennox; the president of Warner Music at one point, Steve Kane; and we have high-level program directors and the broadcasters. We also have very key independent label people on our board, such as Ric Arboit, the head of Nettwerk records. We have very good people to make some of these decisions.
Touring is important for artists, because that money goes directly to artists and it develops a business that is the artist's equity. The labels do not have any involvement in the economic side of touring. That is an artist's business. We're writing cheques directly to the artists for them to go and build a business. They might sell three records and do okay, but then they tour for 15 years.
Take the band Sloan, who I work with. They had all their big records out in the late 1990s. They're still going and touring now, playing the songs that.... As k.d. lang famously told them, you make three records and then spend the rest of your life singing the songs on those three records. That is the reality for a lot of bands, and that's how they live—
Mr. Alan Doyle: Hopefully; hopefully.
Voices: Oh, oh!
Mr. Chip Sutherland: Sorry, Alan, except for your very successful solo career, which then involves more....
How do we stay relevant going forward? As I said, we're focused on marketing and touring. We don't make records. You need to have sales to get into the Starmaker Fund, so we assume you have your records and videos taken care of. We're trying to add that extra element to give them the boost to help them sustain themselves and become internationally relevant.
We try to maintain a steady input of new artists at 20%. Our average is around 21% new artists. We're not just giving the money out to the same bands. There are new people every year, which I always find encouraging; there are always new people breaking that ground. We manage our funding thresholds and success to make sure the sales level to get into the fund is relevant. We have a 91% approval rating of applications. If you can get to that threshold where you're in the fund, you have a 90% chance of being approved when you come to us for money, because we're very careful of how we manage all of the parameters.
We continue to focus on international programs. Two years ago we expanded all of our available digital initiatives to allow bands more flexibility for the kinds of things they wanted to innovate digitally. They can get funding for that. We've maintained an artist-centred approach, which means we don't judge people based on where they have their business set up. If they do it themselves, we fund them. If they're signed to Universal, we fund them. If they're signed to Nettwerk records, an independent, we fund them. We're more interested in the artist, and in that way we help the industry on the side.
Alan.
Let me quickly say it's a pleasure to be here. This is not my normal gig. It's a tough-looking room; I'm not going to lie to you. I'd also like to acknowledge the good work of the interpreters and translators behind the glass. I'm going to try to keep my Newfoundland accent down as much as I possibly can.
As an artist, it's good to be here as well, because it gives me a chance in front of the committee to say thank you to all the other groups that have spoken here today, including FACTOR, Graham, Neill, and all the guys, because in different ways, I personally, or friends or colleagues of mine, have benefited from all these institutions over the years.
In the little time we have in this section, I would simply like to explain why I was drawn to the Starmaker Fund. It's very simply because it kicks in on a part of a musician's or an act's career that is the most risky, the most costly, and the most in need of support. You can spend five years or a decade or so building yourself up to get to be perhaps nationally recognizable, and you want to take the next step, the next big thing that comes along, and that step is a massive one. To go from playing the local club to playing the bigger theatre, your expense triples. If you want to go from the theatre to becoming a hockey-rink band, your expense and risk quadruple. If you want to go into the United States, Australia, Germany, or wherever to take that step that will get you to becoming an A-list international artist, that's the biggest risk, the biggest expense, that you will ever have in your career. I've felt it on both sides.
I remember when Great Big Sea got signed to Sire Records in the States in the late nineties. We wanted to go, and we said, “Great, we got signed to a label in the States. Wow. We made it. Let's try to get a song on U.S. radio.” They said, “Well, okay. Here's how much a radio tracker costs for a week and a half.” I don't remember what it was, but it was somewhere around $125,000 for a campaign to try to get a song on the radio—and this is after you've made it, when stuff gets easy.
It's right at a point when you can start employing people long term. If you can get to that next step, then all of a sudden the guys who work every other week for you become constantly employed. One of the proudest things I had at Great Big Sea was looking down the bus and seeing 14 or 15 mortgages that were getting paid by our gig. It was such an awesome thing.
The Starmaker Fund kicks in right when you need it the most.
As I said, I'm grateful to all the people and the groups that have been represented here today. That's why I'm here, and that's why I'm grateful to get a chance to answer your questions, if you have any, about my experiences with it.
:
Good afternoon, everyone. I'd like to thank the committee for inviting me to speak here today.
I'm the president of Canadian Music Week. Now in its 32nd year, Canadian Music Week has become the largest, most influential music and media conference and festival in Canada. Each year, the event draws more than 3,000 delegates from more than 32 countries. The festival now features over 1,000 performers in more than 60 venues throughout downtown Toronto, engaging over 160,000 fans, with the total economic impact estimated at $16 million this year. By the way, it just finished a day ago. So if I look a little tired....
CMW assists in the education and development of performers and music business professionals of the future and promotes Canadian artists and recordings around the world. Our slogan is “bringing the world to Canada and Canadian music to the world”. CMW's key activities include music education, live performance, discovery and recognition, international trade and export, and music tourism.
In the past decade, CMW's efforts have increased the number of international music industry executives coming to Canada by more than 500%, resulting in thousands of dollars of new business being struck in territories including Japan, Australia, China, India, Germany, Britain, France, Southeast Asia, Latin America, and of course, the U.S.A.
We have seen increases in numbers of Canadian songs being placed in film and television productions, and we've facilitated export marketing training sessions presented by these experts. As a result, a better trained industry with a clear understanding of the export process is better able to take advantage of business and export opportunities.
Prior to running CMW, I started my music career as a working musician. You probably didn't know that.
A voice: I believe it's museum, a working museum.
Voices: Oh, oh!
Mr. Neill Dixon: You'll recognize this: it didn't pay the bills, so I used my entrepreneurial skills for the next 16 years in artist management, publishing, and owning the largest independent label of its time in the 1970s called Solid Gold Records.
First off, I think both FACTOR and Starmaker are doing a tremendous job. If there's no more money in the pipeline, then we should maintain the status quo, but there are a lot of worthwhile projects that go underfunded. My first recommendation is more money for FACTOR and more money for other industry initiatives in general.
I've seen a lot of changes in the business over the years, with technology having both positive and negative consequences. Unfortunately, with a poorly regulated digital economy, songwriters and composers have seen their income from reproduction, distribution, and performance of their work almost disappear. Traditional royalties have steadily declined since the year 2000.
This has also had a profound effect on CMW, as we watch labels, artists, and publishers' attendance shrink. Even the multinationals weren't immune. It forced us to think globally, and luckily we've been able to sustain ourselves during these tough times of more and more international registrations and bands.
Let's get back to royalties. When the Canadian government refused to recognize modern media, MP3 players, smart phones, USB, and all the other devices capable of reproducing thousands of works, it also rejected the collection of fees as prescribed in the legislation for those new generation devices, resulting in millions of works being pirated, transported, and stored with no compensation to the creators. Describing the fees as a tax instead of a royalty made things difficult to implement, and the artist paid the price.
The second recommendation is the Copyright Act should be absolutely modernized across all new media platforms. It would go a long way to guaranteeing that Canadian artists continue to be fairly paid for the use of their work and to ensure that they can make a living from their craft instead of begging for handouts.
While we're on the subject, Internet service providers should also contribute to the system because they have a substantial revenue stream from Internet subscriptions, bandwidth, and sales, which are in part attributed to the public desire to download and stream songs. However, with the exception of a growing number of legitimate outlets, a large portion of music delivered by ISPs brings almost nothing to creators.
It's not just the ISPs. Streaming services like YouTube enable people to listen to almost any musical work for free. Yes, they sell advertising, but much of that income never gets distributed to the rights holders. The government needs to get involved in protecting our rights on the Internet.
My third recommendation is that when it comes to export development, I agree with the concept of one central export office. After spending a lifetime promoting Canadian talent around the world by myself, it would be great to have some support. Over the years we've established a network of international festivals that we have reached reciprocal export development agreements with to promote each other's artists. I caution that we will still need flexibility in the ability to make immediate decisions to capitalize on opportunities.
Finally, on the subject of music tourism, about 20% of our festival audience is out of country. The numbers are even higher when it comes to business delegates. Our festival gets huge international coverage, and with the right support to invest in marquee talent, we have the possibility to grow into one of the premier festivals of the world.
We've heard a lot about Austin and Nashville. I was in Germany recently as a guest of the Berlin music board while attending Berlin Music Week. They gave me a little bit of their philosophy. The city had no music industry or cultural attractions after the war, and until the Berlin Wall came down, as recently as 1989, the city was still partially in ruins and it lost many of its young inhabitants. They had a lot of catching up to do. The Berlin government decided on a two-pronged strategy of cultural and tech to stimulate business. They took into account the value of music to attract young adults and the resulting lifestyle that would encourage the right workforce, and subsequently it would be easier for technology industries to move their headquarters to Berlin. The plan has worked. Berlin is now a thriving metropolis and a cultural hub and is now known as a music capital of Europe.
We're hoping to do that in Toronto.
Thank you for your time.
First, I would like to thank the witnesses for being with us.
Ms. Courtemanche, thank you for your employer's continued contribution, even if it is simply your presence here.
You introduced your two colleagues. There is Mr. Sutherland, who works with Feist. This is obviously an artist who has done much, in terms of both being a commercial success and having a very particular artistic style. She is extremely popular. When Mac or Apple use her songs in advertising, it adds another dimension to the tracks we can all identify with and are so proud of.
You also have with you Mr. Doyle.
[English]
Mr. Doyle, clearly you have been there for a while, and you bring a lot to our heritage aspect. What you're doing has a heritage aspect. It's clearly popular music, but it's also so special, so peculiar and so close to where you're from, and that's very important. The whole thing around it, though, is that clearly you've been there for 21 years, and I think you've been signed to Warner all this time.
At that time, I was working for Sony, and I did so for four years. What shocks me now is to see that we have a strong advocate here in Mr. Henderson, with his speech about how we have to change the situation. We have to get involved. I'm happy to see that these foreign companies remain involved. When I was working for Sony, we invested in at least 10 projects that were completely local.
The question for me, I think, is that the biggest common denominator we've had among all the witnesses coming here is that the streaming services are the new thing. You were saying that we should enhance the copyright office to make it quicker and stuff, but what do you recommend? We all know that the share, the money you get every time, the micro-penny you get, is not sufficient for smaller-market artists.
:
The access is here. The access models will dominate. We're either going to make this work or we're not. If we don't make it work, then we will be doing a manifest injustice to the creator community.
As for what my recommendation is at a top-down level, I would say this. Policy-makers and/or governments have put technology at the heart of their policies for about 15 years. There was a promise that kind of went with it, and we heard it from the pundits and the professors. We heard it from everybody, including some artists. The promise was that it would all kind of take care of itself, that there would be a promised land: wealth, a middle class, and a golden age, some said, for the creator community.
Well, you've been sitting here. You've been listening. Where the heck is it?
Voices: Oh, oh!
Mr. Graham Henderson: We grew up in a world, all of us, where there was something called the Pareto effect, where 20% of the people have 80% of the wealth. That dominated, but the 20% of the money that was left over for the 80% in music was enough to create a middle class. That middle class, ladies and gentlemen, is gone. In the world that we're moving into, what we're seeing is an unprecedented shift of wealth away from creators to intermediaries, and as for our world, it looks like the 1% versus the 99%. That's what it looks like.
I would say that it is not enough to cast creators into the cockpit of some sort of social Darwinism, or as I said earlier, adapt or die. This is Canada, and we can do better, but we have to recognize the collective responsibility, and we have to put creators at the heart of our policy-making for the next 15 years.