EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 10, 1996

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[English]

The Vice-Chair (Ms Phinney): Ladies and gentlemen, I'd like to call this meeting of the Standing Committee on Canadian Heritage to order.

Before we begin hearing the witnesses, Mr. Abbott wants to make a comment. Following that we will immediately resume hearing our first witnesses on Bill C-32.

Mr. Abbott (Kootenay East): Thank you, Madam Chair. On Tuesday last I moved a motion. I have spoken with Ms Noel and I'm satisfied there's no conflict of interest, nor any appearance of conflict of interest. Therefore I request unanimous consent to withdraw my motion.

The Vice-Chair (Ms Phinney): Do we have unanimous consent?

Some hon. members: Agreed.

The Vice-Chair (Ms Phinney): Thank you.

Our first witnesses today are from the Canadian Conference of the Arts, Keith Kelly and Mireille Gagné. Madam Gagné.

Ms Mireille Gagné (President, Canadian Conference of the Arts): Thank you.

[Translation]

On behalf of the Board of Governors and the membership of the Canadian Conference of the Arts, I would like to thank you, Madam Chair, and the members of the Standing Committee on Canadian Heritage for inviting us to share our views with you on Bill C-32.

As Canada's largest and oldest art advocacy organization, the CCA has long been preoccupied with the issue of copyright reform.

We are happy to count among our members thousands of creators and copyright owners who see this legislation as essential to their long term economic future. The CCA shares this perspective and regards the optimal form of copyright legislation as a bill of economic and moral rights for creators and copyright owners.

The CCA congratulates the Minister of Canadian Heritage, the Honourable Sheila Copps and the Minister of Industry, the Honourable John Manley for this long awaited initiative. In the preparation of this legislation, we understand that officials have worked hard to achieve what they consider to be a balance of interests between creators and copyright owners, and the user communities.

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The CCA does not accept this premise as appropriate for effective copyright reform. In our opinion, copyright legislation is in place to protect the economic and moral rights of creators and copyright owners. We are, however, well aware of the great pressures from user communities to consider their specific economic circumstances.

As you are aware, the focus of our brief on Bill C-32 is on the individual creator and copyright owner. This decision was taken to ensure that the essence of copyright reform is clearly kept front and centre in the deliberations of the Standing Committee.

You will hear compelling and compassionate arguments by various user communities asking you to put their interest and needs ahead of the legitimate aspirations of creators and copyright owners. The CCA asks you to resist the temptation to accede to their demands.

We ask you to deliver back to the House of Commons a bill which further advances the economic and moral rights of creators.

We respectfully ask the members of the Standing Committee to recognize that the Copyright Act is in fact a legislation which confers and affirms the ownership of intellectual property by creators and copyright owners. The principle of property ownership should be as free of limitations as possible.

In the domain of copyright, the creator or copyright owner seeks appropriate payment for the use of their works in the market place. It is through this payment that creators earn a livelihood, or be it a modest one, in the pursuits of their craft.

The Canadian copyright system is built upon the principle of collective rights management, through the system users have easy recourse to copyright material and the creator and copyright owners receive payments through the collective for any use of their work.

The collective management system engages the users and the collectives (on behalf of creators and copyright owners) in negotiations which fix the rate and nature of compensation for the use of protected works.

If both sides fail to agree, they can then seek the intervention of the Copyright Board to arbitrate a fair agreement which takes into account the interests and claims of both sides.

This current rights management model works well and ensures that the interests of both sides are well respected. This is why the CCA has joined other organizations in seeking the removal of exceptions from Bill C-32. The rights of creators and copyright owners to directly control the use of their work is fundamental and should not be undermined by extensive and far-reaching exceptions within the proposed legislation.

In fact, the CCA would support only one exception within Bill C-32, thus simplifying the recommendations within our brief to the Standing Committee. This exception would apply to those rights for which no collective exists, and would stand only until one is created by the creators and copyright owners.

With this single exception, the entire body of Bill C-32 could be stripped down to the essential reality within the domain of intellectual property that the rights owners enjoy unfettered freedom to govern the use of their works in the marketplace.

We realize that the removal of all other exceptions would be seen to be a setback by such interests as the disabled community, the library and education communities. However, let us be plain, it is never in the interests of creators and copyright owners to place an untenable burden on any user.

The Coalition of Creators and Copyright Owners has continuously affirmed their desire to negotiate with flexibility and sympathy for the specific realities and needs of these organizations. However, it must be left to the creator and the copyright owner to ultimately negotiate terms. In this, the intervention of Parliament, which restricts or removes this right, is inappropriate and inconsistent with similar policy positions taken by the government.

In recent months, periodical writers have entered into a protracted dispute with newspapers and services who are insisting that these creators wave their electronic distribution rights in return for a standard contract for their services. This is a very important source for potential new revenues for writers in the emerging information highway environment.

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The CCA, on behalf of the Periodical Writers Association of Canada, asked both the Department of Canadian Heritage and the Department of Industry to intervene in the dispute to ensure that the rights of creators and the interests of users could somehow be reconciled in a mutually satisfactory manner.

The response of the two Departments was that this was a matter of private contract between writers and newspapers and wire services, they could not, nor would they intervene.

While problematic for creators in some respects, this position in stark contrast to the approach taken by the Government in the drafting of Bill C-32 which intervenes extensively in contracts between the creator and the user, in favour of the user.

In conclusion, Madam Chair, the CCA respectfully encourages the members of the Standing Committee to accept our recommendation which will transform Bill C-32 into a true bill of economic and moral rights for creators and copyright owners and affirm the principle of collective rights management as a cornerstone of Canadian intellectual property policy.

Thank you for this opportunity to present our views to the Standing Committee on Canadian Heritage.

[English]

The Vice-Chair (Ms Phinney): Mr. Kelly.

Mr. Keith Kelly (National Director, Canadian Conference of the Arts): That was our opening statement.

The Vice-Chair (Ms Phinney): Thank you very much. That was certainly brief.

[Translation]

Today we could perhaps try to shorten our questions.

Mr. Leroux (Richmond-Wolfe): More than yesterday, less than tomorrow.

[English]

The Vice-Chair (Ms Phinney): Did you follow the example of the witnesses?

[Translation]

Mr. Leroux: We in the Committee agreed on the principle that in order to do our work properly, we had to try and obtain as much information as possible. Your concern with time is legitimate because that is your role, but we should at least have the time to the heart of the matter. That is very important. The issues on the table show that.

[English]

The Vice-Chair (Ms Phinney): There's your first minute, Mr. Leroux.

No, I'm just kidding. Go ahead.

[Translation]

Mr. Leroux: As you know, I appreciate you Mac. I would like you to talk to me about two or three things. My questions will be short, and I will let you answer without interrupting you.

I would like you to talk to me about the exceptions and the effect they might have on the principle of collective administration, free negotiations. There are various agreements between creatives, collective societies, governments and associations, etc. That is also the case with respect CANCOPY.

SODRAC told us that the exceptions would make the agreements obsolete. I would like you to confirm to me that, in the case of CANCOPY, the effect would be the same, and I would also like you to explain to us more specifically what the impact might be. What is the message being sent through the exceptions provided for under the bill, as regards the social responsibility of major institutions? I would like you to explain to me what you see as the message being sent by the bill, which clearly exempts large areas of society, such as educational establishments, libraries, archives, etc.

In your brief, you also spoke about basic conditions regarding exceptions. You are speaking as an individual creator and you say that every exception must meet two criteria, which you identify. I would be grateful if you could elaborate on that.

I would also like you to speak to us about clause 30.07. This clause, which refers to what we might call a no fault provision, deals with the incidental use of works covered by copyright. I would like you to tell us what you think the impact might be.

Madam Chair, my questions were short.

Ms. Gagné: First, we shall talk about the exceptions. The general principle underlying our position is that these are the rights of creators and copyright holders.

As you know, creators and authors live partly from the royalties collected for them. In present economic circumstances, the situation faced by a good number of these authors is not an easy one. If you begin to allow a few small exceptions... You know that amending a piece of legislation is a lengthy process. If you entrench those exceptions in law, it will be a long time before they can be removed.

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Meanwhile, creators and copyright holders will have lost considerable income, particularly as there are a number of aspects involved here. We spoke about the information highway. There are implications there that are just beginning to emerge, and we know that things change very quickly. Therefore, if we begin to set up obstacles, the situation will be very dangerous.

Collective societies are trying to work together in so far as possible with other organizations, radio stations, and other groups involved in disseminating the works of authors. That is not an easy task. If we take just the case of libraries or museums, we see that there are photocopying machines freely available to people. They can photocopy the number of pages they want. How can such a collective society find its way into each of these small libraries, concert halls, night clubs, etc.? That is very difficult.

There is no doubt that such an exception would adversely affect the compensation which an author or copyright holder might fairly and normally receive. Therefore, the impact of such exceptions is primarily financial, pecuniary. There is a basic principle that people using something should pay for it, that fair compensation should be provided for using an object. I think that this principle is basically understood and accepted.

Mr. Leroux: As regards the bill before us, you seem to be suggesting that there are some people who are negotiating slowly or hardly at all in the hope of benefitting from future exceptions. They think to themselves: "There will be exceptions; therefore I'm going to withdraw and not negotiate for the moment." Is that your impression?

Second, would you agree with us that such exceptions allow major institutions to abandon a fundamental principle, namely the recognition of rights and willingness to negotiate with the holders of such rights when drawing up ground rules?

[English]

Mr. Kelly: We certainly agree that is one of the effects. The broad scope of exceptions in favour of the large institutions really cuts the creator and the copyright owner out of the equation of how their works are going to be used.

The two criteria for exceptions that you were referring to are that they should be clear and specific. In none of the cases that we see in Bill C-32 is there the clarity and the specificity that would limit the damage to the interests of creators or copyright owners that we would look for as a benchmark of fair treatment of intellectual property rights in the act.

The Vice-Chair (Ms Phinney): Mr. Abbott.

Mr. Abbott: Your presentation this morning was excellent. It did generate two questions in my mind, though. The first was the issue of appropriate payment.

As a committee, we've been inundated about the business of ephemeral rights, time shift, and so on and so forth. In your judgment, would there be an appropriate payment? Or would there be a demand? Or would it be considered to be an appropriate payment if, due to some kind of technological change, some new gizmo in the system, a work is being transferred from one medium to another or from one location to another? In other words, it means that an electronic copy is being made. Should the artist be looking for what you call ``an appropriate payment'' when that happens? Do you understand what I'm driving at?

Mr. Kelly: The short answer is yes. I think that kind of activity should be subject to an appropriate payment. What that payment is, of course, is going to be determined in negotiations between the creators, the copyright owners and the users.

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This is a field of rights that has now been very clearly established in Canada. We have SODRAC, which has been quite successful in signing licences with broadcasters to cover ephemeral-use issues. And certainly what the CCA wants to do is maintain and enhance the economic and moral rights of creators, not roll them back. But all of this should be subject to fair negotiations between the user community and the rights holders.

Mr. Abbott: I don't want to take a lot of time on this, but I take it then that you're not buying into the argument that probably the vast majority of Canadians would see that there is some very valid argument that there should be some form of payment, for whoever, when a creator's work is displayed or performed. That is fine, but in spite of the fact that this creative work is not being viewed, performed or enjoyed by anyone - this is simply an electronic transfer - you're saying there still should be some type of consideration. Okay, thank you.

With respect to your one exception - rights for which no collective exists - can you give me an example so that I can understand what we're talking about?

Mr. Kelly: Cinematographic works are a very good example in which works on film and video are so complex because of the different fields of rights contained in them. It has been very difficult to establish a collective to manage all of the rights contained there. So that's certainly one area. I suppose there are others, but I would say that this.... The public lending right is not really a right under the current construction.

Mr. Abbott: I'm trying to canvass the second part of that - I think I wrote it down correctly - where you said ``collective rights management is a cornerstone''.

Mr. Kelly: Yes.

Mr. Abbott: So is it the position of the CCA that an author-creator can only exercise his or her right to his or her property through a collective?

Mr. Kelly: Absolutely not.

Mr. Abbott: Okay, then I misunderstood ``collective rights management is a cornerstone''.

Mr. Kelly: Well, no, the collective rights management approach has been one that has had tremendous success in this country. For the ease of both the creator to manage their rights and the ease of the user to access protected material, the collective rights management system has really proven to be tremendously efficient on both counts. We believe it is up to creators to determine how they manage their rights. If they want to manage their rights individually and negotiate one on one with potential users, that's their right. The vast majority of creators in this country, however, appreciate the benefits of collective management. The collectives have worked extremely well, and they have really been able to provide extensive revenues to creators and copyright owners through the simplicity of collective management.

Mr. Abbott: So while you're suggesting that this is obviously the route you would see as being the most pragmatically valuable way of going about doing things, you're not inferring that the copyright of the creator must be realized through a collective.

Mr. Kelly: No. In fact we believe creators have the right to manage their own economic rights in whatever way suits them best. We think there are advantages to be had in the collective management of rights, but we would not want to remove that fundamental right from the creator or copyright owner to either use a collective or to negotiate individually.

Mr. Abbott: Thank you.

The Vice-Chair (Ms Phinney): Mr. Bélanger.

[Translation]

Mr. Bélanger (Ottawa - Vanier): Ms. Gagné, we heard presentations from SODRAC and ALAI. In both cases, they asked us to ensure that the legislation would distinguish clearly between copyright and neighbouring rights. It was suggested that there was a hierarchy in terms of rights. I would like to have your comments on that.

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Ms. Gagné: I'm not aware of everything SODRAC and ALAI said yesterday, but in fact, copyright is the first right. That's what exists at the outset. If there is no author, there is no artist, no performer. I don't want to minimize the work of artists in any way, shape or form, because for music as well, if there is no pianist, the score stays on the shelf. So, both are essential.

However, I think that if you look at it in a hierarchical way, you can say that copyright is indeed the first right. However, neighbouring rights would certainly support in an honourable way the work that is done by artists and producers.

Mr. Bélanger: Therefore, you share the views of SODRAC and ALAI?

Ms. Gagné: If I understand what you told me correctly, yes.

Mr. Bélanger: All right.

[English]

Mr. Kelly, in your last comments you mentioned that you believe rights owners ought to be left alone in negotiating as best they can. Yet the submission that we have recommends that this committee insert into the act an equal one-third, one-third, one-third distribution of the royalties coming from blank tapes. How do you reconcile those two views?

Mr. Kelly: With some difficulty, I suppose.

Mr. Bélanger: Sorry, I didn't mean to do that to you.

Mr. Kelly: First of all, when we looked at the actual text of Bill C-32, equitable versus equal was an issue that was raised by several of our members, and we felt we had to reflect that in the brief. Basically, just as you talked about what is sort of a hierarchy of copyrights, we also talked about hierarchy or influence within our own business. For the individual artisans or creators versus record companies or producers, there is always a little anxiety about how fairly those relationships can be managed. We therefore felt it was important to insert into the text some notion of ``equal'' rather than ``equitable''.

If I could also just speak to the neighbouring rights issue for one moment in the hierarchy of rights, we are, as you know -

Mr. Bélanger: Don't take too much of my five minutes, please.

An hon. member: Oh, oh!

Mr. Kelly: On the non-derogation clause - which we have supported, as you know - SOCAN has made a recommendation that in their view will significantly strengthen that clause and protect the rights of the creators from incursions because of additional rights burdens or payments. And we have a copy of that recommendation, which I'd be very happy to leave with the clerk.

Mr. Bélanger: We'll be meeting with SOCAN, anyhow.

On the question of blank tape royalties, I don't know the exact wording, but I think you recommend that the wording in the act should be loose enough to accommodate or englober future technologies. What about existing technologies, let alone future ones, such as videos and computer diskettes and so forth? Do you have a position on that, and would you share it with us?

Mr. Kelly: We certainly have a position on that. We had always hoped that the royalty would include all forms of taping medium: videotape, computer disks, the whole profusion of copyright reproduction technologies that you can use at home. We would hope we could make that move in this legislation; if not, we'd certainly like to see it in phase three.

Mr. Bélanger: Ten years from now.

Mr. Kelly: Pardon me? It only feels like that.

The Vice-Chair (Ms Phinney): Mr. Leroux.

[Translation]

Mr. Leroux: I'd like to get back to the issue of the Copyright Board. You say that the CCA feels that clauses 68 and 83 are an unjust attack on the autonomy of the Board and that they must be deleted from the bill because such restrictions are a threat to the quasi-judiciary independence of the Copyright Board.

I would like you to develop that because the issue of judiciarization has been raised in a few briefs. I would like you to discuss that and afterwards, we could discuss clause 68(2)b).

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[English]

Mr. Kelly: I can try.

Certainly the notion that the Copyright Board should be free to listen to evidence on both sides, both the user's evidence and the creator's evidence, and come out with a position that fairly balances their concerns is essential in order for the Copyright Board to be able to function.

What you have in proposed section 68 is a permanent preferential tariff for advertising revenue. You have all kinds of stipulations that the Copyright Board is going to have to step over.

Really, either you have a Copyright Board, give it a job and let it do it, or you don't have a Copyright Board, in which case you can give them such detailed instructions as to how to execute the responsibilities.

Mr. Bélanger: [Inaudible - Editor].

Mr. Kelly: All right - one third, one third, one third notwithstanding.

Some hon. members: Oh, oh!

[Translation]

Mr. Leroux: Clause 83(9) of the bill reads as follows:

(9) In exercising its power under paragraph (8)a), the Board shall satisfy itself that the levies are just and equitable, having regard, among other factors, to the amount of the levies payable under comparable laws of other countries and the nature of the North American sound recording industry and also any prescribed criteria.

That's included?

Mr. Kelly: Absolutely.

Mr. Leroux: Now let's look at the issue you raised regarding clause 30(7) concerning the incidental use of works protected by copyright. This seems to be a major sticking point for you.

Ms. Gagné: The principle remains the same, be it incidental use, in small or large blocks: for any use, any insertion of all or part of a work, the law must apply in the same way. Copyright exists and it must be compensated because it exists. It is inescapable. There are so many possibilities for incidental references. It's used continuously. If you add an exception for that, you're removing a significant proportion of potential revenue.

[English]

Mr. Kelly: The other thing that concerns us is this is a new exception. This exception did not exist before. In the opinion of our legal adviser, in practice this exception may be much broader than the legislative drafters originally intended.

May I just read her opinion briefly?

[Translation]

Mr. Leroux: Yes, go ahead.

[English]

The Vice-Chair (Ms Phinney): I think that's a good idea.

Mr. Kelly: Okay.

The purpose of this exception is to permit certain incidental use of copyright materials. Such an exception might be geared towards an on-the-spot newscast with a musical band in the background or a painting behind a person being interviewed. However, the wording of this provision goes much farther and is open to anyone who uses a part or whole copyright work as long as that use was incidental and not deliberate. For example, students and educators could use this provision. The exception...allows other uses such as modifying work, or using work in association with a product, service, cause or institution, that may be harmful to the reputation of the creator. Also the creator's name need not appear on the work and his decision to use a pseudonym or to remain anonymous need not be respected. The scope of these problems enormously increases in relation to multi-media works and works on the Internet. Unless this exception is carefully and substantially narrowed, creators will be seriously harmed by it.

[Translation]

Mr. Leroux: The opinion expressed seems clear to me. It's the principle of "I'm not guilty and I won't pay because I didn't know". This new exception that exists nowhere seems to be very complex, very complicated.

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It was said that this existed in the laws of other countries, but it was accompanied by conditions. That doesn't seem to be the case here.

[English]

The Chairman: Mr. Abbott.

Mr. Abbott: Before I ask the question, let me declare my bias. I have some serious concerns about the proposed tape royalty, particularly about the amount of money that will ultimately end up flowing to the people you're concerned about, namely the creators. I put that out on the table.

In your judgment, if this does become law, is it important that, whatever the tape royalty is, it be applied on the retail price?

What I'm driving at is this. My best guess is that the landed wholesale or the landed manufacturer's cost coming into the country - because I believe most of the tapes are actually assembled outside of the country - would probably be in the range of $1. Many of these tapes, after they go through all sorts of hands and receive all sorts of promotion, will end up easily at $7.95 or more. So there is a tremendous amount, a phenomenal amount, of mark-up on the tapes.

I don't buy that the royalty is only going to be 35¢, but let's use that number. If the royalty were 35¢ and were applied on the dollar, that 35% increase on the cost of the tapes would be passed all the way through this food chain and we would suddenly have an extra $60 million, $70 million or more - perhaps even over $100 million - being extracted from Canadians as they purchase their 44 million tapes.

So would you agree that it would be only logical that the legislation be very specific that the 35¢, or whatever the royalty is, be collected at the point of retail sale as opposed to being applied at the lowest level, in other words, at the starting point of this? Would you agree that would be logical?

Mr. Kelly: No, we wouldn't agree with that, mainly for the following reasons.

The way the royalty works in other countries is at the point of entry. We have to have faith in the marketplace. If we apply it there, then retailers and wholesalers can make their own decisions about competitive place in the marketplace, whether they pass it on, take it as a cost of doing business or whatever.

If you tack it on at the retail level, you may well say it's more transparent that way, but it also reduces the flexibility of the retailer and the wholesaler to make judgments about how to place their products in the market.

Mr. Abbott: Permit me to gently challenge your position.

Mr. Kelly: Okay.

Some hon. members: Oh, oh!

Mr. Abbott: Your organization, on behalf of the artists, would see a royalty on 44 million tapes.

Mr. Kelly: Yes.

Mr. Abbott: Again, if we arbitrarily accept the 35¢, it doesn't make any difference to your organization where the 35¢ is collected, as long as it's 35¢ times 44 million.

What I'm suggesting is that for the end user on a $7.95 tape, for example, a 35% additional mark-up through this food chain is going to be $2.80. So suddenly a $7.95 tape is in the marketplace for over $10.

It seems to me the people you represent are no further ahead, and furthermore, if the 35¢ were transparent.... I'm sure it's not your suggestion that you want to hide the 35¢, so why not have it transparent: this 35¢ is for copyright?

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Mr. Kelly: These tapes, as you quite rightly observed, for the most part come from outside Canada. When they come into the country is when other duties and taxes are paid. I don't know why this would be any different.

No, it doesn't particularly matter where the money comes from, as long as the money flows. However, for ease of administration it would seem to me the point of entry is where the royalty would be payable, and not increase what I'm sure the retailers would consider to be another paper burden on them. They don't have to keep track of whether we paid 35¢ on this...or ``these are unsold tapes; if we send them back to the factory, how do we get our 35¢ back?'' For simplicity, I think it's better if the royalty is paid at point of entry into the country, rather than putting another burden of administration on shopkeepers and retailers.

Mr. Abbott: Just in conclusion, he and I obviously have a difference of opinion, because I think the retailers would be pretty interested in 35% on one dollar becoming $2.80.

The Chairman: Maybe you can challenge Mr. Kelly after the session. I hope it will be a challenge of the mind only, because he's a big guy.

Mr. O'Brien. I notice you stole my tie.

Mr. O'Brien (London - Middlesex): Yes, we must have consulted, Mr. Chairman. Mine has to be back by noon.

Thank you for your presentation. I want to explore the length of time of copyright as you see it. Do you see a shelf life or a sunsetting for copyright, or do you think it's unlimited, ad infinitum?

Mr. Kelly: There are provisions in the act, life plus fifty, for the rights of the individual copyright owner or creator. Are you asking a broader philosophical question, about whether copyright is sustainable in the information highway environment?

Mr. O'Brien: Yes, I'm thinking more of whether there's a time after which it would expire. I think the bill talks about fifty years, in places. Do you support that?

Mr. Kelly: Yes.

Ms Gagné: Yes, definitely.

Mr. O'Brien: Mostly, from what I heard, you seem philosophically opposed to exceptions, right across the board.

Ms Gagné: Basically.

Mr. O'Brien: Right. Yet the current legislation provides for a number of exceptions, and so do more than half the Rome countries, as I understand it. Can you elaborate on your objection to exceptions in totality?

Mr. Kelly: It really comes down to the question of what is an economic right. If copyright is an economic right, the person on whom that right is conferred should have the full freedom to exercise it without undue restraint. When we oppose exceptions, what we're saying is that we see them as an infringement on the economic right and the ability of the creator or the copyright owner to have full control over their protected works and to set the terms for use of their protected works in the marketplace. That is the philosophical basis for our position on exceptions.

We understand there are exceptions in the current Copyright Act and exceptions can be found in the legislation of many other jurisdictions around the world. However, Canada can dare to be different and really develop a exemplary bill of economic and moral rights for creators and copyright owners. I think this is something we should dare to achieve.

[Translation]

Ms. Gagné: It has also been said that copyright collectives are very accommodating and try not to overtax groups or organizations that represent elements with greater problems. Therefore, there is a great deal of understanding on that subject. It is not in the author's interest to overtax the consumer.

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[English]

Mr. O'Brien: Surely, though, in a country the size of Canada, with the geographic hurdles we have to overcome to keep this country together - and other hurdles, obviously - there are some extenuating circumstances that would warrant some exceptions.

I'm from the field of education, so let me go to that. In terms of trying to educate people in remote areas, they don't have ready access to the materials we do in Ottawa or the other urban areas. Are you not at all sympathetic to exceptions in that regard?

Mr. Kelly: No -

Some hon. members: Oh, oh!

Mr. Kelly: - especially in education. The irony I've always found very difficult to accept is that in education, where you're trying to foster an appreciation of works of the intellect and works of the mind, when it comes to paying people who generate that, the education community seems to want to step back.

I would say it is an integral part of and totally consistent with the objectives of education to accommodate in your operations the payment of royalties to creators. If you use the works, you should pay for them. Again, we can negotiate favourable terms; we're not inflexible. We don't want to see anyone put out of business, as Mireille has said. But ultimately the right is held by the creator and copyright owner, and the terms of use should be dictated in negotiations between the user and the creator.

Ms Gagné: The children of this country should learn about the responsibility of borrowing rights, and the sooner the better, at the end of the line.

[Translation]

The Chairman: Mr. Leroux has asked for permission to ask you a brief question. I have your word, Mr. Leroux?

Mr. Leroux: Yes. You spoke of provisions in the legislation that profoundly distort the very basis of copyright. You said, among other things, that there was a problem regarding unpublished works. I would like you to briefly discuss the impact of the bill on unpublished works. You devoted a significant proportion of your presentation to this.

[English]

Mr. Kelly: Again, I am quickly trying to find the legal analysis that we have commissioned.

[Translation]

Mr. Leroux: On the fourth page of your brief, which is not numbered.

Ms. Gagné: Yes, there is a more detailed study of the issue.

[English]

Mr. Kelly: Yes. The bill currently provides that after the section comes into effect and a work has not been published, performed in public, or broadcast, and the death of the author was within of 100 years of the coming into force of this section, copyright protection is for 50 years until the calendar year-end of the coming into force of the section.

The proposed changes vastly affect the rights of individual creators by abolishing perpetual copyright in their unpublished works. Perpetual copyright protection in unpublished works has always been an important element of Canadian copyright law as a means to protect authors and copyright owners from derogations of their private rights. Perpetual protection has protected authors and made works available to the public that otherwise would not have been available. If that protection is removed, there is great fear that many artists and creators will destroy unpublished works rather than let them fall into the control of people without their consent.

Under the proposed changes, if the author of letters was dead 100 years, the biographer could include all the author's letters in the biography five years after the new law comes into effect. In fact, at that time any publisher would be able to publish a book that existed only of those letters or unpublished works without compensating the estate of the deceased author. Furthermore, those documents could be amended in a manner that may prejudice the reputation of the creator, could be published without the author's name on them, or could be published with the author's name on them even when the author originally used a pseudonym or remained anonymous, and the letters may be used in association with any service, cause, product or institution that may harm the reputation of the author of the letters.

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This example illustrates why some authors would rather destroy their unpublished works than make them freely available to the public.

The Chairman: Thank you very much, Mr. Kelly.

[Translation]

Ms. Gagné, thank you for your appearance before us today. We greatly appreciate it.

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[English]

The Chairman: May I call the meeting back to order?

[Translation]

From the Guilde des musiciens du Québec, we are pleased to welcome Ms. Gisèle Fréchette, president, and Mr. Eric Lefebvre, vice-president. You have followed the work of this committee and you are familiar with our procedure.

Ms. Fréchette, please proceed with your presentation, and then members will ask you questions. Go ahead.

Ms. Gisèle Fréchette (president, Guilde des musiciens du Québec): Thank you, Mr. Chairman.

Dear members of the Liberal Party, of the Bloc Québécois, of the Reform Party and the New Democratic Party, allow me on behalf of the Guilde des musiciens du Québec, to express our position regarding Bill C-32, an act to amend the Copyright Act.

The Guilde des musiciens du Québec, a syndicate duly constituted pursuant to the Professional Syndicates Act and recognized by the Status of the Artist Act represents 3,500 members, all of them artists who practice the art of instrumental music on a professional basis in Quebec.

Our organization is pleased to participate in this first genuine review of a piece of legislation that has become obsolete after being in force more than 70 years. Although the current bill contains new measures that are essential to the development of the profession of musical performer, we nevertheless believe that the legislator has remained much too timid in his intentions.

Certain provisions contained herein may even be detrimental to the rights of artists. Let us point out that among western countries, Canada is a model of respect for human rights and individual liberties. But it still lays behind as regards respect for the rights of performers and intellectual property.

In this regard, we must live with the shame of not yet being among the 50 signatory countries of the Rome Convention, adopted in 1961, which, among other things, provides for the protection of performing rights. And yet, artists are often the main ambassadors of our cultural vitality.

Audiovisual works have been omitted. The government has not provided for the fees to be paid to musical performers for audiovisual works. Ironically, this is the 100th anniversary of cinema, and soon television will be 50 years old. I think it may even be 60. Animated pictures accompanied by sound have been part of the collective imagination for a very long time now.

Who among us, for example, has not been struck by a film soundtrack or the musical score of a television program? How can we forget to provide decent pay for a musician that has contributed to the recording of a soundtrack for a film that is rebroadcast on the airwaves? Of course, the musician is paid a fee for the initial recording of his performance and its broadcasting. That's not where the problem lies.

The problem for a musician is to hear his contribution to a work being rebroadcast on the airwaves, again and again without getting a red cent for it. Why is it that the contribution of a musician to the success of a film does not merit additional compensation based on the distribution of this work, especially when the success of a film leads the producer to market a soundtrack recording?

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The copyright release provided for in clause 17 means that the musical performer loses all his rights over his performance as soon as he authorizes the embodiment of that performance in a cinematographic work. Since the musician cannot exercise any rights over his performance for that reason, he cannot receive any royalties on the sound recording that is distributed.

We request that the wording be amended to better define the rights of the producer of a cinematographic work and prevent further erosion of the rights of performers.

Although the legislator has not included provisions regarding audiovisual works in this bill, the bill does contain other provisions that directly threaten the principle of rights of use in the audiovisual field which were hard won over the years by artist associations.

Clause 16, among others, calls into question rights to remuneration that currently exist in collective agreements between artist associations and producer and broadcaster associations. This provision creates an unacceptable system of release of rights, given the current practice prevailing between these partners.

Moreover, the definitions of producer and sound recording proposed in clause 2 are not specific enough and present several problems. In the case of sound recording, for instance, the wording seems to indicate that it is made up solely of sounds. However, in the era of CD-ROMs. that can be read by a conventional reader or by a computer, images accompany sound. The definition proposed is already obsolete before it is even enforced.

Lastly, the Guilde is also concerned by the introduction of a new concept, namely the creation of copyright in performer's performances, in sound recordings and in communication signals. I will spare you a complex demonstration of the confusion generated by this new concept as provided for in clause 15. You can read that on pages 8 and 9 of our brief.

However, allow me to point out that the advantage of our proposal regarding this new concept is to increase the coherence of the provisions that allow the copyright holder to take action against any person who violates copyright. It's not sufficient to have rights. One has to be able to have them enforced.

Let us now turn to the exceptions which, in our opinion, are unacceptable. Through its new bill, the government is introducing exceptions to the legislation which would have a greater scope than those adopted in 1924. Among others, these exceptions cover educational institutions, libraries, museums, etc.

The system as proposed here is the greatest threat yet to Canadian copyright. It would make null and void several agreements that have been signed between these organizations and authors

associations or collective copyright societies for public performance rights, the presentation of works in classroom and the reproduction or photocopying of literary or musical works.

We feel that the legislator has simply given into pressure groups of users who refuse to remunerate copyright holders in the same way as other service providers. We are stunned to see a government distort to that extent the role of a piece of legislation in our parliamentary procedure by incorporating in the bill a shopping list from those opposed to its application.

How can we reasonably believe that our educational institutions, to mention just that exception, can claim to be cultivating the notion of respect for a work among the young when these very institutions will be able to pirate the works of authors and performers as they see fit? Collectively, we are on the wrong track.

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We are aware of the specific situation of these institutions, but we believe that collective societies can continue to negotiate in good faith with organizations representing user communities by taking into account their ability to pay.

This is why we recommend the addition of a clause that will remove the exceptions provided for in the bill. You may wish to read chapter III of our brief on this subject.

Let us now turn to remuneration for sound performances. The government's current legislative proposal anticipates remuneration of performing artists and producers for the public performance of sound recording. That's fine. Thus, every time a musician's record plays on the airwaves of a Canadian radio station, that artist will receive an amount of money through a collective.

However, the legislator has omitted to grant performing artists the right to collectively manage certain rights provided for under clause 15. Amendments to the bill are therefore essential. We feel that it is indispensable to allow all copyright holders to collectively manage all their rights.

After 75 years of free use, radio broadcasters will be obliged to pay royalties to performers. It was high time that they should. In fact, this is what radio broadcasters have been doing since 1961 in the 50 countries which signed the Rome Convention. But, because there is a but, the criteria currently stipulated in the bill would reduce the responsibility of broadcasters.

In fact, as payment of royalties to performers, all Canadian radio stations would be required to pay annually only a ridiculous token amount of $50 on the first 1.25 million dollars in advertising revenue.

The bottom line is that 65 per cent of them would only have to pay this one-time amount in order to fully discharge themselves of their responsibilities in this area. In the light of such figures, how can such a bill be described? The Guilde des musiciens du Québec is opposed to any inclusion of criteria intended to reduce the contribution of broadcasters in the establishment of tariffs based on the right to remuneration.

Such criteria must not be used by the government in order to interfere in the decision-making process of the administrative tribunal, that is the Copyright Board, which will be responsible for applying the legislation. The Guilde therefore asks that certain provisions referred to in Chapter IV of our brief, on pages 15 and 19, therefore be amended.

A levy on private copying: Who has not sometime been tempted to record on cassette the latest CD of his or her favourite performer and given the copy to a friend? How many copies of records have been made in this way since the appearance of cassette recorders?

Every private copy thus made is one less record sold by the performer and a considerable shortfall for performers, authors, and recordmakers.

In the bill, the government finally includes a provision under which a levy will be imposed on blank sound media such as cassettes. This levy will be collected from wholesalers and importers, and will be subsequently distributed among authors, producers and performers.

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The Guilde supports this intention in the legislation. However, here again, the bill makes no reference to copying for private use of audiovisual media, videocassettes, etc.

Furthermore, the system currently provided for seems to us to be based on an exception rather than on the right to make a copy.

Finally, the wording of certain provisions would make it difficult to effectively implement the system established under the legislation, particularly as regards the definitions of medias used by consumers.

I would refer you to chapter V of our brief, which explains our request to have clause 79 amended and subclause 83(9) repealed.

We also object to other provisions of the bill, which it would take too much time to describe here. For further information on these points, we would ask you to read or reread our brief.

In conclusion, we ask the government to reconsider its decision to exclude audiovisual performance from the scope of copyright, and we would request the government to correct this serious shortcoming as soon as possible. This omission represents a serious injustice to performers,including musicians.

However, the Guilde des musiciens du Québec is opposed to any hierarchy of copyright provided for under this bill. We therefore believe that it would be advisable to amend the wording of clause 90 which, according to certain interpretations, might suggest that copyright over works has a legal value greater than copyright over performances or sound recordings.

Members of the Standing Committee on Heritage, as we approach the 21st century it is time for Canada to finally join the ranks of modern societies which respect their artists and performers.

Thank you for your attention. We would be pleased to answer any questions you may have.

The Chairman: Ms. Fréchette, in your 22-page brief and your presentation, you have summarized your position in a number of areas of particular interest to us. You spoke about audiovisual performance, exceptions, definitions, remuneration and tariffs. We are here to listen, not to take sides. You have done an excellent job in presenting your viewpoint to us. We are very interested in pursuing it. I would now ask Mr. Leroux to begin the question period.

Mr. Leroux: We very much appreciate the work you've done and the brief you presented. I will go a little further than the chairman. I agree with some of your recommendations.

In your brief, you talk about exceptions. You say that you cannot accept an exemption for radio broadcasters on the first 1.25 million dollars in advertising revenue. You completely reject the ceiling set by the legislator which seeks to give broadcasters a preferential tariff.

In their brief, television and radio broadcasters, among others, spoke to us at length about the economic situation and the possible danger faced by some stations if such an exemption were not granted, as well as the impact that could have on the radio market, particularly in terms of closures, etc.

I would also refer to the report which stated that it might be appropriate to consider exempting certain small radio stations and others. In a brief, the music industry itself stated that there could be a minimum tariff, etc. It seems to me that you are the first witnesses to tell us that a minimum tariff is not needed. I would like you to explain to me why we should not consider the possibility of problems arising as the result of the non-imposition of a minimum tariff.

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Ms. Fréchette: Perhaps the very small radio stations have a real problem. But what we find most objectionable in this bill in this regard, is that even the vast majority of radio stations are exempted for the first 1.25 million dollars. For that amount of revenue, they pay only a tiny amount, namely $50, which would be distributed to performers.

It's really ridiculous to exempt these major stations which are making big profits. However, we might be prepared to allow this provision for small stations in difficulty.

Mr. Leroux: If I understand your answer correctly, you would agree that a certain number of stations might be exempted, but there are some bigger stations which could not be exempted, regardless of their advertising revenue.

Ms. Fréchette: Exactly.

Mr. Leroux: That is in fact what you are saying?

Ms. Fréchette: Exactly.

Mr. Leroux: That's slightly different, because the way you present it in your report is that you totally reject the exemption.

Ms. Fréchette: If you listen to the radio broadcasters, even the stations making big profits claim to be in major difficulty. It is against that approach that we reacted.

Mr. Leroux: You were very cautious.

In chapter III, which deals with exceptions, you recommend that the government add provisions to prevent such exceptions. The bill says that a collective society is created or exists in order to manage copyright affected by the exception. What happens when there is no such copyright?

Mr. Éric Lefebvre (Vice-President, Guilde des musiciens du Québec): Either we have a Copyright Act or we don't. Therefore, once you have a piece of legislation which creates a right, you try to ensure that the right is as effective as possible.

Once there is a wide range of exceptions which reduce the right substantially, then you have to ask serious questions about the effect of the right.

We argue that by creating a collective society to manage the exception as such, you ensure that the right exists permanently and that it is remunerated on the basis of negotiations between the users and the collective society. You can then be sure that the existing right is in fact protected. That was the main point we wanted to make.

Ms. Fréchette: If I correctly understood your question, you are asking what happens when there is no collective society to manage the right.

Mr. Leroux: In the case where there might not be one.

Ms. Fréchette: Where there is not one, there will be one. When such a right exists, there will be a collective society to manage it.

Mr. Lefebvre: Our primary wish is that there be no exceptions in the legislation. If there are no exceptions, there will be negotiations between the collective society and the users. If there are exceptions with no possibility of negotiating a right, there are no royalties.

I know that there were negotiations, for example, between SODRAC and INCA, I think that the fees paid to SODRAC were approximately $500 as a result of negotiations between the collective society and the particular group of users. That is not an enormous amount. It is rather a token amount, but it does retain the right of reproduction for authors and composers. In the case of performers, we want this same principle to apply.

There has to be a right provided for in the legislation. If it is absolutely essential to include certain exceptions, we could retain the exceptions currently provided for in the legislation, but at the very least in the case of collective societies which exist when there is an exception, the right must be usable de facto and collective societies must be able to negotiate with users.

Ms. Fréchette: The current bill provides exceptions which did not exist in 1924. Therefore, this is clearly a step backwards. We have to show more trust in collective societies, which will be able to negotiate in a way which shows consideration and respect for anyone asking for exceptions.

Mr. Leroux: We clearly understand that from your brief. You are saying that the Copyright Act manages the exception more than the rule, and more effectively safeguards free circulation of the subjects of copyright rather than the establishment of a system to protect copyright.

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We have seen that societies to manage rights do not exist everywhere. There are places where they do not exist. We have seen differences between Quebec and the rest of Canada. I asked you: What is happening? You tell me that they are being created. But it is not magic.

Ms. Fréchette: But it's not very complicated.

Mr. Lefebvre: In the case of exceptions, what is particularly harmful is that agreements which have already been negotiated, as you pointed out, are based on the existence of a right. Once the law provides an exception, what happens to such agreements?

Mr. Leroux: Every group has told us that such agreements would become obsolete. Do you agree with that?

Mr. Lefebvre: Yes, absolutely.

Mr. Leroux: I would like to address the point which you raised, namely the extension of neighbouring rights to audiovisual works. Can you tell us first whether that exists in other legislation? In the absence of neighbouring rights, could you tell us more about that particular issue and what it would mean to you if it were implemented or not implemented.

Ms. Lefebvre: One third of the fees paid to musicians come from television broadcasters. Therefore, anything affecting audiovisual works is important to our members. We can refer to French legislation, where a neighbouring right is not a copyright as is understood here, but a neighbouring right on audiovisual works.

As is the case with the right to remuneration provided for under clause 19, for example, when a phonogram is made in public, this would enable musicians and phonogram producers to receive royalties for the use of audiovisual works. A right is provided for the public performance of a phonogram. Why would it not be provided in the case of audiovisual works, since this is actually the rule in several European countries?

[English]

The Chairman: Mr. Abbott.

Mr. Abbott: There are two basic schools of thought here. Let us accept your argument completely at face value about the fact the performers, etc., should be receiving remuneration, recognition of the fact they were the creators of the work. Let us accept that without discussion.

Let's talk about the exceptions for educational institutions, museums and libraries. They are public institutions funded by the taxpayer. Is it fair, in your judgment, to suggest that if these exceptions did not exist and these publicly funded institutions were paying, what we're really talking about here is the taxpayer paying the artist for the use of their work?

[Translation]

Ms. Fréchette: I would ask you the question in turn: do you think it is unfair and inequitable for taxpayers to pay for the wood used to make the desks of students in schools?

[English]

Mr. Abbott: No. That's a fair response. I just wanted to define that. It's just that whenever we.... I think we have a tendency to take a look at faceless people or faceless organizations, or a tendency not to relate to whoever any new fees or whatever are going to relate to. I'm just suggesting that we have to be clear. I take your point: the taxpayer does pay for the wood in the desk or does pay for the building or does pay for the teachers. I take that point. However, I'm just wondering how many additional dollars we would be looking at, in your best guess, in additional fees that would flow from taxpayers to artists through this if there were not these exceptions.

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[Translation]

Ms. Fréchette: I cannot give you the figures, but I think that collective societies would be authorized to negotiate intelligently such rights with educational institutions.

[English]

Mr. Abbott: Thank you. I really respect your answer very much.

Let's take a look at the issue of the royalties on tapes. You have referred.... The English translation was ``authors, makers, and performers''. You are representing performers, I understand. What percentage of the royalty, in your judgment, should be going to the performers?

[Translation]

Ms. Fréchette: In our view, it would be one third, one third, one third.

[English]

Mr. Abbot: About how many performers does your organization represent?

[Translation]

Ms. Fréchette: Between 3,500 and 4,000.

[English]

Mr. Abbott: So if we said 4,000 for your organization, are there other artists who would potentially be copied and who would not have anything to do with your organization? Again, we're just guessing. Would we simply double that number, just so we have a number we could be talking about this morning?

[Translation]

Ms. Fréchette: At least.

[English]

Mr. Abbott: Okay. So let's round it up to 10,000, just for the sake of argument. If we have 25% of the population in the province of Quebec, we're talking about 30,000 or 40,000 performers this money should be flowing to.

[Translation]

Ms. Fréchette: I can talk mainly about the figures for Quebec. The American Federation has between 20,000 and 24,000 members. I think the figure is 24,000.

[English]

Mr. Abbott: Here's what I'm driving at. If we apply approximately a 35¢ charge on 44 million tapes, we're talking about a revenue of $1 million per month, give or take. So what we're talking about here is to share $1 million a month among 30,000 or 40,000 people, which then begs the question, because that's so minuscule....

You don't follow my mathematics?

[Translation]

Ms. Fréchette: No, I don't follow you. Are you basing that on $3 million a month in levies?

[English]

Mr. Abbott: I'm suggesting that if I multiply 35¢ per tape by 44 million tapes, it comes out to $12 million or $13 million.

[Translation]

Ms. Fréchette: A month? Ah, 12 to 13 million dollars. All right.

[English]

Mr. Abbott: No, no. According to the figures we're working with on this committee, 44 million tapes are sold in Canada each year. So we're talking about $12 million or $13 million or $14 million of income.

[Translation]

Ms. Fréchette: All right.

[English]

Mr. Abbott: If, for the sake of argument, I divide the $12 million by your one-third, I'm now down to $4 million. If I divide that by a further twelve months, we're down to pennies per artist, aren't we? The question I have, then, is this. Is 35¢ per tape actually an adequate number to make it worth while going through the effort in the first place?

[Translation]

M. Lefebvre: First, it was not 35,000. Those who registered are musicians and performers who registered a musical work which was the subject of a sound recording. Therefore, these are registered works. We are not talking here about all musicians and performers, who may or may not have registered a musical work on a phonogram.

Second, I see what you are getting at. You want to show, basically, that 35 cents is too little and that we will no doubt ask for a further levy so as to make the right effective.

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First, I am not at all sure about the figures presented here. The figure of 35,000 musicians was given, but it is far lower in reality.

Second, you cannot presume beforehand what rate will be established. If my memory is correct, the legislation provides that it is the Copyright Board which sets the levy on copying for private use, that is 35 cents, unless you perhaps have other information. We cannot tell you that this is an illusory right, nor can we say that this will bring in a lot of money.

[English]

Mr. Abbott: But you see, with respect, that's exactly my point, that we're working with a blank cheque here. We don't know what the amount is going to be. We've been given the figure of 37¢, I believe it was, by the minister. I'm just asking, if we apply these numbers, even if we just take a look the numbers and forget the number of performers, if we're talking about sharing $400,000 a month at 35¢ over all of the performers in Canada, it becomes so small per member that it doesn't really make any sense to do it. Either that, or that we should increase it from 37¢ to a dollar or two dollars to make it worth while.

[Translation]

Mr. Lefebvre: No. First, it is not 40,000 musicians. There are not 40,000 musicians registered, who have carried out a musical performance fixed on a sound recording. That figure is obviously too high.

There are about 2,000 members in SODRAC. I cannot give you the exact figure for SOCAN but, subject to correction, I would say that it is more than 5,000. I don't have the exact figures, but we are not talking about 35,000 musicians. Even at 35 cents a cassette, this would be very welcome for all performers.

Earlier, I answered that if the role of the Copyright Board was in fact to establish a levy on blank media, it would certainly take into account a number of factors. We should point out that we are against such factors or criteria being included in the legislation. We believe that the Copyright Board can easily set its own criteria for determining the applicable levy. Our position is that it is a right, and we maintain that position.

The Chairman: Mr. Bélanger.

Mr. Bélanger: Madame Fréchette, if I understand correctly, my colleague was trying to establish an average figure. We can do that quickly.

Take the 35 cents and multiply that amount by 44,000. That comes to approximately $12 million a year, or $1 million a month. If you divide that amount even by 30,000, that gives an annual average income of about $400; I would make it clear that this is an average. Therefore, in some cases, it would be considerably higher, whereas in other cases it would be lower. If you take the average income of performers, that might be equivalent to 5 or 15 or 20% of their income. It should not perhaps be completely disregarded. If you want to play with figures, then you have to accept that also.

I would also like to look at the question of the hierarchy of rights. I asked a question earlier and was given an answer. However, I don't think you would agree, and I would like to check that.

Yesterday, SODRAC and the ALAI told us in no uncertain terms that they wanted it to be really understood that there is copyright and there are also neighbouring rights, and that they are not the same thing. Without putting it that way, they did see a hierarchy. Would you agree with that? I would like you to elaborate on that if you could please.

Ms. Fréchette: No, we do not agree about that. When everyone has a shared right over a work, the right cannot be exercised if there is no consensus. As regards rental rights, for example, where the positions of all these people are considered together and there is a possibility of hierarchy, if the maker and the performer are against allowing the recording to be rented even though the author would agree to it, it would be somewhat ridiculous to give priority to the author's right.

Mr. Bélanger: You were suggesting that the performer also has the right to refuse?

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Mr. Lefebvre: Yes. He or she already have that right. The right to rent, which is provided for under clause 15, is an exclusive right. Once there is a right to rent and there are three exclusive rights, the maker's, the performer's and the author's, everyone has a veto right.

We object to the author having a positive right which could be used against the negative right held by the two other holders of rights. We particularly don't want, and I think that the authors agree on that point, for the royalty of one party to be determined by the assessment of the royalty of the other.

The royalty received by authors is determined by the Copyright Board. We do not want the royalty received by the performer to affect the royalty of the author, nor would we want the royalty provided for the author-composer to affect our royalty, namely that of performers.

In short, we want the Copyright Board to evaluate each royalty within the specific field of each of the colleges, each of the groups of copyright holders. We do not want there to be any lowering of the royalty of one party because the royalty of another is higher.

Mr. Bélanger: My colleague referred to English Canada. I think it should be pointed out that he was referring to the other Canadian provinces.

To clarify the issue of copies made by audio cassettes, would you want that tariff also to apply to copies made with other materials, such as video cassettes, cassettes, computer discs, etc.?

Ms. Fréchette: Soon it will be possible to copy from a CD-Rom. If the legislation did not provide the possibility of collecting royalties on that... As time goes on, the more technology will evolve.

Mr. Bélanger: Have groups of performers, copyright holders, estimated the amount involved with video cassettes, computer discs, etc.? Has someone, in one of your groups, begun to do that work?

Mr. Lefebvre: No, not in our group, video cassette sales are perhaps a smaller market than audio cassettes but, with technological advances, the medium changes almost every...

We moved from vinyl discs to CDs in a record time, what will the next format be? Some people are talking about DAT mini cassettes. Some people are talking about a different format. There is talk about computers which can hold audio visual information on their hard disc. People are talking about the information highway, downloading of works from a server to another computer.

I couldn't predict immediately what the next medium will be or the next form of presenting works. Technology is changing and moving forward at the present time. There are several types of media and forms of presentation which are being developed.

Increasingly, the area of audiovisual works will blend into that of radio works. We will end up with a single vehicle, a single medium, a single way of putting into material form both sound and audiovisual works.

Ms. Fréchette: We asked for a technologically neutral bill that would include any new medium in future that we might not even be able to imagine at the moment.

Mr. Bélanger: The government could proceed by way of regulations at that point.

Ms. Fréchette: If we had a technologically neutral bill, it would not distinguish between the various mediums. Any new medium would be automatically included in the Act.

Mr. Lefebvre: At the moment, the definition of "sound recording" states that only the sounds can be defined as sound recordings as such. The fact is, as Ms. Fréchette was saying earlier, some mediums include both sound and images. So the definition should be brought up to date.

We are already hearing about a new instrument that the World Intellectual Property Organization is drafting. It is to be discussed in Geneva in December. The Rome Convention is already out of date in this respect.

We will accede to the Rome Convention just as it is expiring, just when a new instrument is to be introduced.

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We should perhaps bring the legislation up to date now on the basis of what happens internationally.

The Chairman: Thank you, Mr. Bélanger. Thank you very much, Ms. Fréchette and Mr. Lefebvre.

[English]

We're now pleased to welcome the Canadian Restaurant and Foodservices Association, with representatives Mr. David Harris, senior vice-president, and Mr. Tony Pollard, president of the Hotel Association of Canada.

Mr. Harris and Mr. Pollard, the floor is yours.

Mr. David Harris (Senior Vice-president, Canadian Restaurant and Foodservices Association): Thank you.

Mr. Chairman and members of the committee, good afternoon. My name is David Harris and I'm the senior vice-president of the Canadian Restaurant and Foodservices Association. Joining me this afternoon is my colleague Tony Pollard, who is president of the Hotel Association of Canada. Our joint submission is from the hospitality industry, which is dominated by restaurants and hotels. I will provide a restaurant perspective and my colleague will provide a perspective from the hotel side.

This is an important issue, which could potentially have a negative impact on the industry. Both Tony and I appreciate the opportunity to discuss this matter with the committee. I'll assume you've had a chance to read our brief; as such, I'll focus my remarks on the situation today and the consequences of applying a second royalty for background music when performed by Canadian artists.

As a 13,000-member organization, the Canadian Restaurant and Foodservices Association is one of the largest trade associations in the country and it represents restaurants in every community in Canada. The $31 billion industry is a huge employer, with 844,000 Canadians on the payroll. The industry is dominated by small, independent operators who have struggled throughout the 1990s with the poor economy, fierce competition and a crushing tax regime.

The result is predictable. Bankruptcies are at record levels, sales are anemic and sales in the average restaurant have declined every single year for the past five. Profits, if there are any, are razor-thin. In exact terms, total industry sales advanced a paltry 0.04% in 1995 and are projected to advance 0.06% this year. These gains have been achieved because more units have opened, creating a classic situation of more retailers chasing fewer dollars. The results are not a pretty picture.

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The hospitality industry currently remits almost $8 million or 11% of all royalties generated in Canada, with only television and radio stations paying more. Industry pays for six different uses of music under the following tariffs: 3a - live music; 3b - recorded music in a live performance; 8 - receptions; 15 - background music; 18 - recorded music for dancing; and 20 - karaoke music. Of these tariffs, Bill C-32 would affect background music and recorded music for dancing.

This committee should be aware of an incident that happened in 1992 to fully appreciate our position as copyright users. If you turned back the clock to 1991 you'd find the introduction of the GST, a worldwide economic downturn, and extraordinarily low consumer confidence. This produced a financial bloodbath in the industry and its worst performance since the Great Depression.

Against this backdrop there was a proposal to increase royalty fees 85% in some instances, an action that shows no appreciation for what's happening in the real world. As a result, new royalties and the administration of existing royalties are viewed with a great deal of suspicion.

In addition, the industry perceives that it is being penalized under the current royalty structure. As previously noted, we get an $8 million invoice annually, which is our reward for providing venues and exposure for musicians and their works. On the flip side, if these situations weren't provided, it would reduce the opportunities for new artists, reduce exposure to recorded music, and ultimately reduce sales.

In the current climate, as you can imagine, this proposal has been greeted with open hostility. It has already created a huge negative reaction, since it increases costs with no corresponding benefit. Bill C-32, a proposal that introduces a second royalty for the use of recorded music by Canadian performers, will backfire in this environment.

Under this proposal, one royalty would be payable for the use of recorded music by American performers. However, recorded music by Canadian performers would attract an additional royalty. This means that the industry would have to pay extra for the privilege of playing music performed by Canadians. The implication for the cost-conscious industry is clear: play American music or pay higher fees. This is the message from Ottawa, and as public policy it leaves a lot to be desired.

Unlike the broadcast industry, there are no Canadian content regulations, which gives the industry free rein to choose its music. Bill C-32 will tilt this decision in favour of American artists. As noted, the industry currently perceives that it is being penalized for using music, and this proposal will force the industry to play American performers to contain its costs.

So what's the result? Fewer Canadian performers will receive exposure. This will inhibit sales and could ultimately reduce the power of Canadian performers to negotiate more lucrative contracts, where an artist can make real financial gains. As an example, let's say an operator has a choice of playing two pieces of music - Céline Dion or Madonna. Since there's a penalty for playing Céline, Madonna wins by default. That's the product of Bill C-32.

The industry is seeking an exemption from this proposal because it will not produce the desired results. It is flawed public policy and it's an embarrassment to the Government of Canada. It's intended to provide revenue for performers, but in this instance actually succeeds in doing the opposite.

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What happens if Ottawa proceeds with this misguided proposal? It will increase costs for the hospitality industry with no corresponding benefits. To contain costs, the industry will have no alternative but to avoid Canadian artists. A lack of exposure will inhibit sales for local artists. It will provide an incentive to play American music at the expense of Canadian performers, and ultimately it will weaken Canadian culture.

There's an enormous amount of background music used in Canada. If music users find they have to pay more for Canadian music, the situation will be magnified greatly beyond the hospitality industry and will include airlines, skating rinks, exhibitions, fairs, fitness centres, amusement parks, theme parks, conventions, fashion shows.... It would be a major disadvantage to Canadian artists.

Ladies and gentlemen, as members of a committee that has a mandate to preserve and enhance Canadian culture, I urge you to carefully consider the practical reality of this proposed legislation. The hospitality industry has requested an exemption because, at best, hospitality venues will avoid Canadian music to control costs. At worst, it provides an incentive to play American music. If you proceed, your message to the hospitality industry will be don't play Canadian performers.

Thank you for allowing me to participate in this consultative process. I'll now turn it over to my colleague, Tony Pollard.

Mr. Tony Pollard (President, Hotel Association of Canada): Mr. Chairman and members of the committee, thank you for this opportunity to appear before you today to provide our views on Bill C-32.

In order to make the most effective use of your valuable time, I would like to say at the outset that the Hotel Association of Canada totally agrees with the views so eloquently presented by my colleague, Mr. David Harris, of the Canadian Restaurant and Foodservices Association.

The hotel industry is firmly opposed to any new royalty on music. We already contribute nearly $8 million, or 11% of all royalties. We already pay for six different uses of music. It is nonsensical and in fact ludicrous that one royalty would be payable for recorded music by American performers while recorded music by Canadian performers would attract an additional royalty.

What is the outcome for the hotel industry, which frequently believes it is no more than a glorified tax collector for all levels of government? We will play American music to avoid paying the higher royalty.

Most hotels already pay up to 50 percent of gross revenue in 32 different taxes, levies and surcharges at the federal, provincial and municipal levels. This is according to the federal government in the 1995 human resources study of the Canadian accommodation industry report.

Our industry, which employs 215,000 people, last year earned $8.1 billion. That's $8.1 billion injected into the Canadian economy. However, we paid out more than $4 billion in taxes. We are still running occupancy rates of 61%, which means that 39% of our bedrooms and the corresponding food and beverage outlets, lounges, bars, and so on, are empty. We can ill afford another taxation hit.

Allow me to put forward a financial snapshot of our industry: fifty percent of gross revenue goes to taxes; thirty percent is for wages and benefits; and fifteen percent, typically, is for debt servicing. This leaves five percent for ``the fruits of our labours,'' as Paul Martin, the honourable Minister of Finance, said yesterday before the finance committee. Permit us in the hospitality industry to begin to enjoy those fruits as well.

Mr. Chairman, last night we saw how a twelve-year-old boy stole a ball game from the Baltimore Orioles. The umpire has now admitted he made a bad call, yet the damage is done; the Yankees unfairly won the game. We have the opportunity here in Canada to prevent a bad call.

Thank you for this opportunity.

Mr. O'Brien: Listening to game one....

Mr. Harris: Take our word for it.

The Chairman: I guess we'll have to watch the replay.

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We'll start with questions from members. Since there are additional requests for questions, we'll start with five minutes this time.

[Translation]

Mr. Leroux: Thank you for your brief. You have a hard time in your field, don't you? I'm wondering what investors are doing there. I think that in the restaurant and hotel industry, the competition is brutal. In some areas, new restaurants spring up like mushrooms.

I think we must acknowledge that the music played in restaurants is part of your business's marketing strategy, just as the atmosphere in your restaurant is part of the strategy. You pay for the plants, the art works on the walls, the tables, the chairs, the tablecloths and the dishes you have in your restaurant. They are all part of your marketing strategy to attract clients.

I think music should also be seen as part of your marketing strategy, unless you don't want the musical environment to be considered. That is an option. But the other option must be to see music as part of your marketing costs, I imagine. I'm having trouble understanding why you don't see music as part of marketing in the same way as all the other items for which you pay.

What is the tariff set by the Copyright Board for you at the moment?

[English]

Mr. Harris: In terms of which tariff?

[Translation]

Mr. Leroux: Does the Copyright Board not charge you approximately 11 cents per square foot for royalties?

[English]

Mr. Harris: For background music, that's correct - tariff 15.

[Translation]

Mr. Leroux: Eleven cents. What does that amount to? You say $8 million?

[English]

Mr. Harris: Yes, for the minimum, that would require a $90 fee.

[Translation]

Mr. Leroux: Ninety dollars is a minimum. For your market as a whole, the figure is $8 million. Do the $8 million come from there?

[English]

Mr. Harris: No, it doesn't. The $8 million is all tariffs. We pay under six tariffs. Under the tariffs we would be paying under, which is recorded music, our background music, and recorded music for dancing, tariff 18, it comes to about $900,000. That's the last time I looked. That's what it's worth, just on background music.

[Translation]

Mr. Leroux: So the $8 million is made up of various things. Out of a turnover of $31 billion... That is what you said, is it not? Your turnover is in fact $31 billion?

[English]

Mr. Harris: That's in sales.

[Translation]

Mr. Leroux: Your view is that if the bill were to provide for neighbouring rights, which could, from what we can see, amount to half of this figure, the cost would be absolutely prohibitive for you. Hotels and restaurants would close down and the number of bankruptcies would increase. You have sketched a rather gloomy picture for us. You say that things are going badly and that if you have to pay $120 more on average more each year, there will be bankruptcies, and so on.

I will leave it to my colleagues to call you to order as regards culture and Canadian works, because you clearly seem to be suggesting that we are moving into the American market. I would like you to explain to me the dangers which will result from that and the bankruptcies and closures it will bring about.

[English]

Mr. Harris: I don't think any bankruptcies will come about with this. That's not the point I'm making.

First, the point I made was that already the existing royalties are viewed with suspicion because of the kinds of costs that are attracted to them. There are always alternatives - you can turn off the music. What will come of this is that people will stop playing Canadian music in favour of American music in order to control their costs.

Yes, it is a fierce competition. Yes, music is part of the marketing. Yes, we believe in the concept of copyright, but this is not fair. There is no corresponding benefit with an increase.

The main point is, if you believe in providing more money to Canadians to support Canadian culture, then what you should do is apply that royalty right at the counter. When somebody buys an album by Céline Dion, you charge them 10% more because it's Canadian and watch what happens to sales.

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If you had two houses and one was made by Canadians and had all Canadian material in it, and the other had material from another country, and you said you were going to charge 10% more because the first one is creating jobs, you'd pay $20,000 more on a $200,000 house because it was built all-Canadian. I couldn't afford that. If you took a piece of pie that costs $2.25 in one of the restaurants - this is a little closer to home - but it's made with American apples, and you made one with Canadian apples that cost say $2.75, you'd pay more for the benefit of buying Canadian. That's not going to happen in this environment because price is king.

In the 1980s they used to say location, location, location. Now, in the 1990s, they're saying price, price, price. If you believe it's worth while to charge extra for Canadian culture, then you apply that right at the beginning, as somebody buys it over the counter. When we buy it over the counter, we'll pay, but everybody else will pay too, and I guarantee that the purchases will go down.

CBC is in trouble. Why not charge 10% more for playing CBC? I doubt if they'd enjoy the popularity they have today. That's the principle we're against. There's not a lot of money on the table for the individual restaurateur. There's no question about that. So what we're saying is that if you're going to penalize the industry for playing Canadian, then they'll play American. How is that going to help Canadian culture?

[Translation]

Mr. Leroux: We understand that but...

The Chairman: Mr. Leroux, we will come back to you.

[English]

Mr. Abbott: I need some quick clarification on one thing.

In Mr. Pollard's presentation, at the bottom of page 2 he stated: ``Allow me to put forward a financial snap-shot of our industry. Fifty percent of gross revenue goes to taxes....'' So you're saying that if I pay $100 for a room, $50 of that goes to taxes.

Mr. Pollard: That is correct.

Mr. Abbott: I think it would be helpful if you could detail that for us. We don't need pages of detail, but it would be helpful to me, and I think it might be of interest to the rest of the....

Mr. Pollard: Certainly. First of all, those are taxes at the federal, provincial and municipal levels.

Mr. Abbott: I understand that.

Mr. Pollard: So they are at all different levels. They include everything from payroll taxes to your fire protection taxes and garbage taxes to your tariffs, such as your SOCAN tariffs; they are right across the board, including taxes in every single area. We're one of the most highly taxed areas of any industry. One of the reasons for this is that public policy makers frequently view the hotel industry as being non-threatening when one imposes a new tax or surcharge. That's simply because they believe the majority of people who are paying those taxes do not reside in that municipality or in that community. Therefore, ``they can get away with it''. As a result, we have taxation that is typically at 50% of gross revenues before we even start making any money.

Mr. Abbott: I'd like to jump into this business of Canadian versus American artists, and I'll see if I can be very precise on this. Without Bill C-32, when you make the choice between Madonna and Céline Dion - and I don't have any difficulty in making that choice myself -

Some hon. members: Oh, oh!

Mr. Abbott: - what percentage of royalty, or what royalty, is collected. How are the fees collected for either the American or the Canadian artist, or are they collected equally?

Mr. Harris: They're collected equally.

Mr. Pollard: It's right across the board.

Mr. Harris: The Society of Composers, Authors and Music Publishers of Canada collects for background music. They do not distinguish whether it's a Canadian, American or Bulgarian. They collect for background music, period. If this royalty goes in under Bill C-32, there'll be this royalty that's already payable, plus an extra royalty for the use of Canadian performers. You're going to tax our industry for the benefit of playing Canadian music.

Mr. Abbott: Again, I'm trying to be really precise on this thing. With the proposed neighbouring rights for Canadian artists, you're suggesting that you would potentially see restaurant and hotel owners making the conscious choice to switch their entire audio repertoire to American artists so as to avoid the additional up-charge.

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Mr. Harris: Absolutely, there's no question in my mind. I've already talked to a number of operators, and they've said they will just throw out the Canadian stuff. Why would they have to pay extra for playing Canadian? They're not in business to increase their costs. They're in business to increase their bottom line. If they can do that by throwing out Canadian, they'll do it.

Mr. Abbott: Just in conclusion, what about the argument for other things, particularly dances? I understand Bill C-32 would cover that too, according to your presentation here.

Mr. Harris: Yes.

Mr. Abbott: How would you handle the argument that when a nightclub owner is making a choice between paying $500 a night for somebody to come in to put on a live performance versus running with whatever tapes he or she chooses to use for the dance, he or she is still going to be achieving a $1,000 or $1,500 gross revenue for the night - or maybe it's $5,000 for that matter? The point is that this owner is making money off either the live performance or the recordings. How do you counter the argument that the artist...? In other words, by making this choice, basically what's going on is that the live artist is being done out of a job. Why shouldn't the recording artist therefore be getting some kind of benefit from the fact that the nightclub is going to be taking in some revenue that night?

Mr. Harris: As Canadians, I think we'd all like to support things that happen in Canada, whether it's manufacturing or whether it's culture. I don't think there's any argument to that. But what you're saying to me is that if we play an American artist, our costs are lower than when we are playing a Canadian artist. There's no contest. You throw out the Canadian because you're in business to keep your costs low, period.

If it's a level playing field, then it's an easy choice. We can all be patriotic, we can all support our Canadian performers, and that's a good thing. But as soon as you start tilting the playing field, all of a sudden things like cost come into play. And if you can reduce your costs, you're going to do it.

Mr. Abbott: What would you think if the government came forward with an amendment to the legislation that suggested that when these neighbouring rights come in, whether you play American or Canadian, this is going to be an up-charge? What would your reaction to that be?

Mr. Harris: It won't happen. In America, they've already looked at the issue of neighbouring rights and they've discounted it. They're not going to go through it. They've already gone through one set of copyright hearings and it never even made the table.

The Chairman: Ms Phinney.

Ms Phinney (Hamilton Mountain): This sounds pretty bad. Can we take it back to a mom-and-pop restaurant in Hamilton Mountain, since I happen to be from there? If they want to put music in, who or how do they pay for that? What do they do? Do they apply to somebody to do this? Do they go out and buy cassettes?

Mr. Harris: No, the music police come around.

Ms Phinney: So on the first day that they open the door, the music police come in. What if we said this was before the police come in?

Mr. Harris: I'm being a little facetious, but -

Ms Phinney: In Hamilton Mountain they're very honest folk. They would do this before they opened their doors. People of Hamilton Mountain don't -

Mr. Harris: What happens is they would first decide if they want to play music. That's the first choice. They would then decide if they wanted to buy a service like Muzak. The alternative to the service would be just to go out, to buy CDs and to play them. If they went out and bought CDs, when they opened their doors the Society of Composers, Authors and Music Publishers of Canada, SOCAN, would have people on the ground making sure that everybody who used their music in a commercial situation would pay a royalty. So representatives from SOCAN would go into that restaurant, they'd hear the music, and they'd tell mom and pop that they have to pay a royalty. They'd send them information that forces them to pay for use of that music. Regardless of what kind of music they're using, they're forced to pay for it. If they don't, they're taken to court and they're sued. So they have to pay it.

Ms Phinney: Okay, but now this bill comes along. What will the difference be?

Mr. Harris: The difference is right there. For Céline Dion they pay more, for Madonna they pay less. For a Canadian -

Ms Phinney: Will that be on the SOCAN form? Will it ask whether they use American or Canadian?

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Mr. Harris: It won't be on the SOCAN form, because I'm not sure they would be the collector of this. I think another group would be the collector. Regardless, if they are identified as Canadian, or if the person who is a representative from that group heard Canadian music, then bang, you pay for Canadian artists. There's no choice.

Ms Phinney: SOCAN couldn't collect for the Canadian artists.

Mr. Harris: SOCAN could. What I'm saying is that I'm not sure whether they're going to be the collector on this one or not, but if they are, and the representative of SOCAN heard Canadian music, then there's no choice but for you to pay for the Canadian stuff, as well as everybody else.

Ms Phinney: That's if they're the ones doing it. Right now, you just pay a set fee no matter what you're playing, right?

Mr. Harris: For background music.

Ms Phinney: Do you have any idea how much Canadian music is being played in restaurants across Canada?

Mr. Harris: No, I'm sorry, I don't.

Ms Phinney: Do you have a guess? I'm trying to think of the last time I went in and heard any Canadian music being played.

Mr. Harris: Why don't we say 10% for the sake of argument?

Ms Phinney: Okay, say 10%. So as for mom and pop's restaurant in Hamilton Mountain, what would they be charged per year by SOCAN?

Mr. Harris: If it's a small place, let's say $100.

Ms Phinney: So if they decided to play Canadian music particularly, it would be $110?

Mr. Harris: We were talking about that 10% being something else. If the Copyright Board sets a tariff, it'll be between 0% and 40%. We don't know what it's going to be.

Ms Phinney: Of what?

Mr. Harris: It's of what they're already paying.

Ms Phinney: So it might be $110 or it might $140.

Mr. Harris: That's right.

Ms Phinney: Is it simply because you have your campaign going, because you have an organization, that's going to make people resent paying $10 a year more? Is it just because they'd be mad? I'm just wondering what your feeling is. Would people really stop playing the music they really like for $10? I know there's a principle behind it too, but I'm just wondering if they really are going to stop playing it everywhere. Are you going to charge them more if they don't stop playing Canadian music, or something? That's in their fee to you.

Mr. Pollard: I'd like to be able to have the members of the committee understand that in the hospitality industry, we are already being so heavily hit -

Ms Phinney: We understand that.

Mr. Pollard: - with so many different charges and taxes. The new thing that's happening in a lot of jurisdictions - I'm speaking now more provincially that nationally - is user fees. User fees is a wonderful euphemism for a tax. So when an operator, be it a hotelier or a restaurateur, is suddenly presented with another charge, call it whatever you will.

Ms Phinney: I call it $10.

Mr. Pollard: Whatever that charge is, he or she immediately responds with a great deal of antagonism, because in the hotel and restaurant business we have not been making money over the course of the last six or seven years, so there is an immediate gut reaction that says: how can we lower our costs?

All of us are in business to make money, so yes, one could argue that the charge is $10, $50, or $100, and amortize it out over the course of the year. When one looks at it in the larger picture of an $8-billion, $20-billion, or $30-billion industry, this is really small potatoes, but when you look at it from the point of view of the operator who wonders where the added value is and where we are getting something more, the response is very negative.

So yes, the reaction will typically be that they just won't pay it.

Ms Phinney: You said that you haven't been making money. We understand that. We understand the economics of your business, but there's another group of people not making any money either, which includes the artists and performers.

Mr. Pollard: So we should subsidize them?

Ms Phinney: No.

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Mr. Pollard: We're already paying copyright. We're happily paying that. We accept copyright. We accept the whole -

Ms Phinney: Most Canadians, I think, feel for the artists. They also feel for you people. There are two groups here that aren't making any money.

I just don't think that in mom and pop's restaurant in Hamilton Mountain the owners would stand at the door and ask people to come to their restaurant because they won't be charging an extra $10 because they won't be playing Canadian music.

Maybe you can suggest some way we can do this. You're going to say we shouldn't have the tax, but how can we at the same time have Canadian artists making a living and you people making a living?

Mr. Pollard: What you need to do is charge it right at the gate. Charge it when the person goes in to purchase their CDs or cassettes or whatever it is. In fact, the hotel and restaurant industries buy them. Everybody has a level playing field then. But by penalizing the venues where we are showcasing these artists, frankly....

Let's be very clear, we have no difficulty with the Copyright Act, paying royalties, and going out and supporting the music community. They go hand in hand; it's very difficult to go dancing without music. We have no difficulty with that at all. What we want to do is ensure that we have a level playing field and that everybody is being assessed in an equitable fashion.

Mr. Harris: I get about three calls a week dealing with restaurant operators who have to pay these royalties. They're incensed that they have to pay a royalty for providing these venues, exposing these musical works and helping these performers sell albums or discs.

Ms Phinney: That helps them get clients. It brings people to the restaurants. They're benefiting too.

Mr. Harris: You said that one would think most Canadians wouldn't mind paying a little bit extra, but most Canadians I talked to about how they were going to pay extra for playing Canadian material while paying less for American material played said that this is a fairly simple concept. They wondered why nobody understood it. They're in business to keep their costs as low as possible. They're already incensed that they have to pay these royalties. They'll take the Canadian stuff and chuck it.

Ms Phinney: Do you think the government will ever put Canadian content on music played in restaurants?

Mr. Harris: No, it couldn't regulate it. There are 52,000 -

The Chairman: The last questioner will be Mr. Bélanger.

Mr. Bélanger: First, I sympathize with you gentlemen, because you have a job to do.

I want to get a sense of two things. What is it you are protecting your employer from here? The $8 million you pay in royalties is 10.9% of the total royalties. What percentage is it of the $35 billion that the industry represents in revenues? Have you figured that out?

Mr. Harris: No, I haven't. It's not much. It's not a lot.

Mr. Bélanger: Could it be 0.002%?

Mr. Harris: It's not a lot.

Mr. Bélanger: All right. How much is it per hotel? There are a few hotels downtown. Take the Chateau Laurier. It's in the riding. How much do they pay on a yearly basis for fees?

Mr. Pollard: What I would prefer to do is answer what an average hotel pays.

Mr. Bélanger: Fine.

Mr. Pollard: An average hotel will typically pay about $250 a year. It depends upon volume. It depends upon the number of outlets.

Mr. Bélanger: That's per year for everything?

Mr. Pollard: That's correct.

Mr. Bélanger: How much more do you think this could be per year per hotel?

Mr. Pollard: It could be, depending again on volumes, anywhere between $10, $50 or $100. Bear in mind that we do not know this; no assessment has been made.

Mr. Bélanger: That's what you're protecting your employers from: maybe $50 a year.

Second, do you agree that there's a symbiotic relationship between the hotel industry and the music industry?

Mr. Pollard: Yes.

Mr. Bélanger: Consider the hotel that welcomed all the people who went to the Canadian western music awards show last month in Calgary.

Mr. Pollard: There's no question at all.

Mr. Bélanger: Do you think they would cease to play Canadian music because of this $50 a year? Do you really believe that?

Mr. Pollard: Okay, I answered your question prematurely. You have to go back to what the honourable member for Hamilton Mountain was speaking about, Mr. Bélanger. Our industry - I'm speaking on behalf of both hotels and restaurants - is getting fed up with another tax, another user fee, another increase here and another increase there.

Mr. Bélanger: I understand that.

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Mr. Pollard: It is not the issue of whether it's $10 or $50 or $100. The issue here is why we should have to go out and pay more fees such as this, with no added value.

Mr. Bélanger: I have a final question, Mr. Chairman. I would like these gentlemen, before they go on their campaign about.... It's not simple. It's rather simplistic, if I may....

Before you go on that campaign, would you do the homework of finding out how many people in the music industry - directly and indirectly related to that industry - use hotels and restaurants every year? And how much revenue of that $35 billion is generated from that industry? And can you find out whether or not helping that industry will help you in the long run in that symbiotic relationship?

Thank you.

A voice: Whew.

Mr. Harris: That was an interesting point, but I think it misses the boat, which is that we have a choice. If it were only $1...if they had to pay only $1 more, you're still tilting the playing field in favour of American music over Canadian music.

Mr. Bélanger: No. There never were Canadians -

Mr. Harris: If you thought it -

Mr. Bélanger: - 0.002% -

Mr. Harris: - was such a great idea, why not apply it right at the counter, where you and I buy this music? If you think it's a great idea, put it right on the counter so that when the restaurant operator buys it he'll have to pay it too. But -

Mr. Bélanger: It's in the -

Mr. Harris: - why centre out one industry?

Mr. Bélanger: We're not.

The Chairman: Mr. O'Brien, very briefly.

Mr. O'Brien: This is a very quick question, Mr. Chairman.

It's an interesting debate. Surely there are going to be some negotiations between SOCAN, the people you mentioned earlier, and your industry to try to resolve this. Are negotiations under way? Is there any possibility of a negotiated settlement?

Mr. Harris: I don't see the opportunity at this stage, sir.

Mr. O'Brien: Are there no negotiations?

Mr. Harris: I have had conversations, but I don't see anything on the table. I don't see a light at the end of the tunnel.

Mr. O'Brien: Why would you enter into negotiations if you didn't see any possibility of success?

Mr. Harris: I entered because I was hoping. I was hopeful at the time. I didn't go in with a negative attitude. I went in with a positive attitude and I came out with a negative attitude.

Mr. O'Brien: So have they ceased? Or are you not hopeful that they'll bear fruit?

Mr. Harris: I'm not hopeful. I'd love to negotiate an exemption with our friends from the recording industries, but I don't see that as being a hope at this stage.

Mr. O'Brien: But are there some talks ongoing?

Mr. Harris: Yes, but it's a telephone conversation and that's about it.

Mr. O'Brien: At least you're talking. That's better than not talking. Thank you.

The Chairman: Just before we close, two quick thoughts occurred to me as I was listening to this very interesting debate. The first one was that I wonder how Muzak, yourselves and your industry are going to, at one point or another - maybe daily - separate the Canadian stuff from the American so that it will be totally American.

Also, what consequences will there be for your patrons when they find out that one or the other or all restaurants have decided, because of a few dollars, to exclude Canadian performers?

I think of my own reaction. I wouldn't be too pleased if I knew that this was deliberately being done, because I think people might go to a restaurant and be attracted by the fact that it's more Canadian and that there's a Canadian content, or if it's in Quebec, that Quebec artists are being promoted and so forth. Does that thought occur to you? Does it occur to you that this could be possible and that it could cause you just as much trouble to separate them as it is to pay the additional copyright?

Mr. Harris: It's not a lot of trouble to separate them. People know who is from what country.

You asked a question about Muzak as a music supplier. I phoned Muzak and asked how they view Bill C-32. They said to me something like I said to you: we're in a fiercely competitive industry. I asked them if it costs the end user more to play Canadian music as opposed to American music, what would happen? He said they'd offer a service that's exclusively American for those people who want to keep their costs down.

Second, what happens if a patron goes into a restaurant and doesn't hear any Canadian music? Patrons don't go into restaurants to hear music. It creates an ambience, but I don't think they recognize who the artists are and I don't think it makes a big impact. What makes a big impact is the food, the beverages, the services.

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[Translation]

Mr. Leroux: Earlier, you said that you helped to sell records.

[English]

Mr. Harris: They're not listening to a lot of American music or a lot of Canadian music. If it got thrown out, they wouldn't know the difference.

[Translation]

Mr. Leroux: Earlier, you said that you helped to sell records.

[English]

The Chairman: We shouldn't be debating. Our witnesses have come here to.... Excuse me, Mr. Bélanger.

Mr. Abbott's point is well taken. I don't think we came here to have a debate with you. We came to listen to you, politely and carefully. You have made your point, and yours is one amongst many. It is valid from your standpoint and you are an important industry, so we are listening to it and you have registered it.

I am very pleased that you took the trouble to come and talk to us. Thank you very much.

Mr. Harris: I appreciate the opportunity to address the committee. Thank you.

The Chairman: This meeting is adjourned.

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