EVIDENCE

[Recorded by Electronic Apparatus

Tuesday, October 22, 1996

.1837

[English]

The Chairman: Could we come to order, please.

[Translation]

Order please.

We have concluded the committee's working session. We will now hear the witnesses on Bill C-32,

[English]

An Act to amend the Copyright Act.

[Translation]

This evening we will hear four groups. I will ask each group to stick to the time allocated for there presentation.

[English]

There are four groups tonight. We are pleased to greet, first, the Canadian Recording Media Association, Mr. John Clarry of BASF Canada Inc.

Mr. Clarry, would you introduce your colleagues, please.

Mr. John Clarry (Canadian Recording Media Association): Thank you, Mr. Chairman.

I am with BASF Canada and I am chairperson of the Canadian Recording Media Association. With me this evening are Brian Peterson, of Maxell Canada; Richard Singerman, representing the Canadian distributor of TDK; and our legal counsel from Stikeman Elliott, Randall Hofley and Stuart McCormack.

Collectively, the CRMA represents the major manufacturers, importers, and distributors of blank audio recording media in Canada. The members are Sony of Canada, Maxell Canada, Memorex Canada, TDK, Fuji Photo Film, and BASF. Collectively we represent about 90% of the Canadian recording media market annually.

Through you, Mr. Chairman, we would like to thank the committee for the opportunity to appear this evening - and admittedly we are here late in the day - to express our strong objection to the proposed private copying levy in Bill C-32. We are late because our industry was not consulted by the government with respect to the levy proposal. We feel it is a good thing we are here because it seems that everyone who has been before the committee so far has glossed over the private copying provisions. To them, the levy is a transition; to us, it really is an issue of the life and death of an industry.

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While we do support the encouragement of Canadian music, had we been consulted our industry would have warned that a levy scheme as proposed will not accomplish the government's laudable goal of compensating Canadian musicians. Moreover, the scheme is detrimental to Canadian consumers, governments and industry. We are here to issue the same warning.

Careful study of Bill C-32's levy proposal, its factual foundation, the experience with levies in other countries, and the fragile state of the magnetic audio recording media industry leads our association to ask that this committee postpone the passage of Bill C-32's private copying provisions and, with further consultation, determine a just and effective means to compensate musicians. In asking you to do this, we also give you our commitment to work with all interested organizations, parties and government to devise a workable scheme that will benefit or provide meaningful support for Canadian artists.

Our presentation is divided into three sections: the problems associated with the proposal; the winners and losers under the proposal; and how the government should move forward on this issue.

Mr. Brian Peterson (General Manager, Maxell Canada; Representative, Canadian Recording Media Association): Bill C-32 has many problems. We feel it is necessary to begin by clearing up a misconception of the Minister of Canadian Heritage. Home recording is not piracy, nor does it in many cases involve copyright infringement. Piracy is unauthorized copying for commercial gain. Private copying is copying for personal use. Rather than contributing to the legitimate battle against piracy, Bill C-32 adds yet another incentive for parties to engage in black market activity.

From the consumer's perspective the levy amounts to a tax that adds additional cost to each purchase. The Consumers' Association of Canada has indicated that if Minister Copps's estimate of a 37¢ levy is imposed on a 60-minute audio cassette tape, then the price to the consumer would increase between 50% and 60%.

The levy proposal's negative impact is not limited to the consumer alone. A significant increase in the price of blank media will lead to a dramatic increase in the sale of levy-free, grey market and black market products, as evidenced by the European experience.

Using Minister Copps's 37¢ levy, we estimate that the sales of grey market, and therefore levy-free, products could reach 40% to 50% of our total market. The sale of levy-free products will of course result in a significant reduction in the levies collected. It will also result in a reduction of the corporate income and sales tax as well as customs duties paid by legitimate manufacturers and importers.

When one delves further into Bill C-32's proposal, still more problems can be identified. From a standpoint of fairness, we note that many purchasers of blank media who do not record copyrighted materials will be required to pay the levy. These purchasers include governments who record proceedings of Parliament, such as this committee proceeding tonight, and also courtroom proceedings. It will also include the use of recording media by medical personnel, religious groups who record sermons, and independent musicians who record themselves.

I will now ask Richard to summarize the winners and losers of this proposal.

[Translation]

Mr. Richard Singerman (AVS Technologies, Canadian Recording Media Association): Who are the winners and losers? In view of what we just discussed, the answer to this question should be of no surprise to you.

The winners are the following: multinationals who publish and record music; those who engage in parallel operations and smuggling activities whose sales and sales opportunities will increase; collecting bodies and companies who manage copyrights will benefit from another source of income; successful artists and established artists who will be the only individuals to receive an appreciable part of the amounts levied.

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If the bill is passed, there will, however, be many losers. Canadian consumers will be affected because of increased prices and double taxation. Consumers who do not record works that are copyright protected will have to pay the levy without benefitting from any other advantage. Companies that are members of the CRMA will be particularly affected because they will have to remit and administer the levy. New Canadian musicians and those who are relatively unknown will receive almost nothing from the amounts collected if they receive anything at all.

What is even more important, if we reduce copies for private use, is that these artists will lose the advertising that was theirs through home recording.

Retailers will incur direct losses, a drop in sales and profit margins and most probably indirect losses.

The federal government as well as provincial and municipal governments will receive less revenue in the form of taxes and customs duties.

Moreover, as they buy large quantities of these products, governments will see their own costs increase.

[English]

Mr. Clarry: We must ask what should be done. The CRMA is proposing that a working group representing all stakeholders be convened as soon as possible to consider alternate means to compensate musicians. Alternatives could include a refundable tax investment credit, similar to the credit proposed by the music task force, or a discount voucher scheme similar to that proposed by the 1982 federal-provincial cultural policy review committee. In fact, there are other alternatives, and they all should be discussed and reviewed. The important point is that we would be willing to participate in the process to design a workable scheme that benefits all and harms none.

In summary, over the past decade the major music, publishing, and recording companies have lobbied intensely in Canada and abroad for the imposition of levies on blank audio recording media and hardware. Why? Because it is these companies that will enjoy the majority of the levy funds as holders of artists' copyrights and as producers of sound recordings.

The timing of the Bill C-32 levy proposal is particularly ironic when one compares the state of the blank audio recording industry with that of the music industry. This can be seen in the dramatic differences shown on the charts to my right. One chart indicates the sales of pre-recorded music, indexed to 1992. That is the top line. It is vastly in excess of gross domestic product growth. The line representing blank audio tape sales is in decline. It's less than GDP. I ask, is this symptomatic of an industry that's in crisis?

If we compare sales levels, the chart on the right demonstrates the sales line for the pre-recorded music industry at fifteen times the revenues of blank audio cassettes. If we compare the profits of the pre-recorded music industry, the profits are three times the sales revenues of the blank audio cassette market.

I think the fundamental issue here is this: is this an industry in crisis? I think not.

Our industry is mature, and it is in decline. A number of companies...within the last three months 3M has exited the market, and most recently my own company, BASF, has announced it will be withdrawing from the market on December 31, 1996. Jobs will be lost and they will not be compensated for by other companies in this industry, I can assure you of that.

The CRMA opposes the Bill C-32 levy proposal because it is neither just nor an effective means of accomplishing the government's goals. We are here to ask that this committee and Parliament please put on the brakes. If this is not done, then we predict when the private copying scheme comes up for review in five years' time there will be nothing left to discuss. Our industry will have vanished and there will be no funds to discuss with you. It is our hope that such an eventuality can be avoided through dialogue and consultation.

Again, we thank you for considering our brief and the opportunity to present our views this evening. We would be pleased to respond to your questions individually or collectively.

The Chairman: Mr. Clarry, thank you.

[Translation]

Mr. Plamondon.

Mr. Plamondon (Richelieu): I have a short question. The working group on the Canadian music industry which was created by the Canadian government, stated in its report, that 44 million blank tapes were sold in 1995 in Canada and estimated that 39 million of these were blank tapes used to copy sound recordings. These figures do not seem to coincide with those you mentioned today. What have you to say about those figures?

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[English]

Mr. Clarry: Our statistics are compiled from an industry association called the International Tape/Disc Association. It represents all members of the CRMA with the exception of Memorex. Collectively we feel that our statistics represent about 80% of the industry. We add in non-members such as Memorex and we make an estimate for the grey market, which we estimate at about 10% of the total, to derive our total numbers. So it's a combination of industry statistics, estimate for non-reporting large members, and grey market. It has an 80% factual foundation.

[Translation]

Mr. Plamondon: But that report said that 39 million tapes out of 44 million were used to copy recordings. Earlier you spoke of exceptions. What use is a blank tape, if not to copy something? It seems to me the best way to defeat any attempt to sell on the black market is to charge a small amount on the sale of the cassette. I don't understand how an amount of 30¢, 35¢ or 15¢ - the amount has not yet been established - can hinder the sale of a blank tape especially since this will somewhat compensate the authors whose work has been plagiarized. For those who intend to use these for resale or to plagiarize, I can't see how 30¢ would prevent them from doing so. I can't understand that such a small amount paid at the retail level could be such a nuisance for your industry.

[English]

Mr. Clarry: I think we should clearly define what the grey market is and how it could affect our business. The grey market occurs when there is a price differential between two regions, two countries. In the case of the grey market, it is often referred to as ``parallel importation''. Quite often these parallel importers can source, for example, the United States product that would be levy-free. They would be able to import that into Canada. Because of the fact that they are quite often one-person, fly-by-night operations - they operate from a single truck, a small warehouse - they would not be liable, nor would it be possible for the collective to collect the levy from them. As a result, they will enjoy a significant price advantage in the Canadian marketplace over legitimate distributors and manufacturers such as the CRMA members.

In the situation where, for example, there was a 37¢ levy, as Minister Copps has referenced, that would create a gigantic price differential between the BASF product that we would be selling, or the TDK or Memorex or Sony that we would be marketing to Canadian consumers - a 37¢ differential. If I was a competitive retailer, it wouldn't take me very long to identify that I could buy from this person significantly cheaper. I'd have a competitive retail advantage.

By that projection - and we've seen this in the past - we estimate that 40% to 50% of our sales will be diverted into parallel importation, upon which no levy will be collected.

If the collectives do try to collect the levy, they will find it's very easy for these one- or two-person companies to shut their doors, disappear, and open up the next day under another name, another title.

Mr. Peterson: I'd like to also reference the earlier point that our numbers don't match up with the SOCAN numbers. The Industry Tape Association of all the member companies reports that 29,600,000 units of blank audio tape were sold in Canada during 1996. This is quite different from the projected figure outlined by Minister Copps of 44 million.

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We're looking at potentially up to 50% of the market being affected here, which is $20 million. I don't think it's reasonable for any industry to accept that type of loss and continue to operate.

[Translation]

Mr. Plamondon: Let us say that I agree with everything you have told us. You say in your description of the situation that it would be better to pay the artists through some type of intervention other than a levy of blank cassette tapes and that the amounts levied should be paid directly to artists by the importers and the manufacturers. Can you tell me in concrete and practical terms what it is you are saying? What would you be prepared to give and how would you do so?

[English]

Mr. Clarry: One of the fundamental issues is the potential loss in revenues and operating income to the blank tape manufacturers and distributors. The system of an importation- or manufacturer-imposed levy puts it two or three steps away from the consumer, in many cases. What we are proposing is not the definitive answer but the need to sit down, discuss, and implement a system that will put the collective organization body system as close to the end user, the consumer, as possible. Thereby we eliminate parallel importation and we ensure maximum revenues are collected, because they will be collected at the retail level; that is our recommendation. Thereby all moneys will be available for disbursement to Canadian artists, the rightful owners, and other people who may be able to make claim to those funds.

The Chairman: Mr. Abbott.

Mr. Abbott (Kootenay East): Just to quantify it, we're talking about 35 million to 44 million tapes. How many dollars are we talking about at the importation level and how many dollars at the retail level?

Mr. Clarry: At the wholesale level we are talking about $38 million, currently. The number in 1995 was exactly -

Mr. Abbott: Just to differentiate; this isn't nit-picking.

Mr. Clarry: - $37 million.

Mr. Abbott: So $37 million would be the cost of the tapes that have now landed in Canada.

Mr. Clarry: At the wholesale level.

Mr. Abbott: I'm just concerned about that. I want to be very clear we're talking about apples and apples, not apples and oranges. The importer could sell to the wholesale level. So that's what I'm trying to define. I'm trying to define the value of the tapes at the import level. Is that the number?

Mr. Clarry: No, it is not.

Mr. Abbott: So approximately...?

Mr. Clarry: That is a difficult thing to answer, in that do I not have access to the costs of my competitors.

Mr. Abbott: Would you guess? Would an industry standard be 40%, for the sake of argument?

Mr. Clarry: No. That is extremely high.

Mr. Abbott: Would it be 25%? I just need a number for us to work with.

Mr. Clarry: Depending on the product, I would say 10% to 20%.

Mr. Abbott: Okay. At the retail level, what would the value of business be?

Mr. Clarry: Retail margins generally operate day in, day out, at probably about 35%. On promotion it is significantly less, however, because they will go down to 10% to 15% on promotional pricing.

Mr. Abbott: I'm not totally clear, but I understand the application of the 37¢ would be at the import level.

Mr. Clarry: That is correct. For example, if we took the average wholesale value of a C-60 one-hour ferric audio cassette, at about 82¢ - that's an ITA number - 37¢ on 82¢ represents a significant increase.

Mr. Abbott: But again we're getting mixed up. I don't want to talk about the wholesale level, because that's one step up in the feeding chain. I want to start at the bottom, where it's coming into Canada. If we're applying 37¢ and we have, for the sake of argument, a 20% margin at 80¢, then we're really talking about 60¢ plus 37¢. Is that correct?

Mr. Clarry: Yes.

Mr. Abbott: So if we take the starting point at 60¢ and add 37¢, reaching 97¢, for the sake of argument, we've gone from 60¢ to $1.

Mr. Clarry: Correct.

Mr. Abbott: What would the retail price point be for a tape like that?

Mr. Clarry: For a ferric C-60 type I audio cassette that is wholesaling at 82¢ and being featured at as low as 99¢, that could move it up to as high as $1.59. That would represent to the consumer about a 50% to 60% increase.

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Mr. Abbott: If you apply the 37¢ at the starting point as opposed to the retail sale, there's a very substantial difference, isn't there?

Mr. Clarry: Yes, there's a multiplier effect at every step of the process. There would be manufacturer margins. We have to lay out that money so there has to be a return on that investment. There will be the retailer market, and then of course there will be GST and PST that gets added on to the levy at the retail level. So throughout the multiplier process the potential increase to the consumer will be between 50% and 60%.

Mr. Abbott: So in an imperfect world, where you don't get anything you want and the 37¢ is applied.... Let's assume that the decision is that the 37¢ should be going into this pot for the artists. Whether that 37¢ is applied when it comes into the country or at the retail sale doesn't make any difference; it's still 37¢. But where it's applied makes all the difference in the world to the retail value of the tape.

Mr. Clarry: Yes, that's absolutely correct. The higher in the system it's applied, the less impact on the consumer. So if it was applied at the retail level, the impact....

Mr. Peterson: There's a presumption that there will be tax levies collected. We're saying there won't be tax levies collected because they will be bypassed. Therefore, there won't be any moneys to be disbursed.

Mr. Abbott: Just in passing, what is the total number of employees represented in your association - just roughly?

Mr. Clarry: We have approximately, collectively, 2,500 employees within our organizations in Canada.

Mr. Abbott: Okay.

I understand the cigarette comparison. In other words, because of the fact that the Liberals couldn't enforce the laws at Akwesasne, they had to lower the cigarette prices because of the differential, and this stopped the grey market smuggling and so on. I understand your point about grey markets, but where do you come up with this 40%? That's an awfully high number.

Mr. Clarry: Yes, it is a very high number. This goes back to a couple of instances; for instance, the Quebec videotape levy back in the 1980s. We saw market diversions in that range - basically a major decline in legitimate retailer sales into St. Lawrence Street grey market activity. We have seen times in the recent past when the price differential between Canada and the U.S. increased for various reasons. The grey market activity exceeded 30% to 40% on many occasions.

Mr. Abbott: Thank you.

The Chairman: Mr. Bélanger.

Mr. Bélanger (Ottawa - Vanier): I want to continue on that for a little bit.

What other products do your agencies or companies sell other than blank audio tapes?

Mr. Clarry: We're quite broadly based. Some of us are into video cassettes, some of us are into diskettes and data storage products. Also, some of us are suppliers to the music and broadcast industry as well.

Mr. Bélanger: On that chart, if you were to chart the other products, would it be similar or would it take a different turn?

Mr. Clarry: In terms of revenues -

Mr. Bélanger: In terms of growth or -

Mr. Clarry: This is not a growing industry.

Mr. Bélanger: No, but the other products, are they all going down? Have sales of video cassettes, for instance, increased in the last five years?

Mr. Clarry: No, they have not. Units are stable. Prices are down significantly.

Mr. Bélanger: The number of units is stable?

Mr. Clarry: It's stable in video cassettes.

Mr. Bélanger: Diskettes?

Mr. Clarry: Revenues are down, and collectively, without knowing the intimate details of all my competitors and their products, I would hazard a guess, based on my broad knowledge of the industry and having spent about a decade in it, that very few of us have seen dollar growth, revenue growth. We may have seen units go up, but we sure have not seen revenues increase.

Mr. Bélanger: What about diskettes?

Mr. Peterson: For diskettes I would say there's been significant price erosion and -

Mr. Bélanger: What about numbers?

Mr. Clarry: The market is in decline.

Mr. Peterson: That's right, it's declining.

Mr. Clarry: It has matured and will be replaced by other technologies.

Mr. Bélanger: So there are other technologies that will be emerging?

Mr. Clarry: Yes, many of which we do not participate in.

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Mr. Bélanger: I want to go back to this estimate of 40% based on previous experiments that Quebec charged as a levy. What would have happened then? Would the tapes have been coming into Quebec from other provinces?

Mr. Clarry: Basically, it was coming in from the U.S.

Mr. Bélanger: So not from other provinces.

Mr. Clarry: It could, but most of the activity appeared to be coming from the U.S. Again, it was the proximity to Montreal versus....

Mr. Bélanger: And there was no tariff at the border on that.

Mr. Clarry: There was no tariff.

Mr. Bélanger: If there is to be a tariff or levy...if we're getting those at the border, at the producers' level, are you then saying this 40% would all be smuggled into Canada?

Mr. Clarry: No, it would be imported into Canada, but because the importers tend to be small, one-person operations with no permanent place of business in many cases, they would not be identifiable by a collective, and even if they were identifiable they could simply close up shop and open under another name the next day.

Mr. Bélanger: It's not imposed at the border as a tariff; it's imposed on the importer. If it were imposed at the border, would that solve the problem?

Mr. Peterson: We don't think so.

Mr. Bélanger: I'm just asking questions here.

Mr. Clarry: The differential is such that we believe that would lead to the black market.

Mr. Bélanger: I have to take exception to it. If I'm a retailer and every other retailer has the same mark-up on a levy, be it 37 or 25 or whatever - it hasn't been set yet - do you really expect us to believe that I would actually charge a mark-up on that levy?

Mr. Clarry: You might very well.

Mr. Bélanger: If you were competing with me, wouldn't you not charge a mark-up on that levy in order to gather a larger market share, and then wouldn't I react to it? Come on, you can't expect us to believe that.

Mr. Abbott: You've never been a retailer.

Mr. Bélanger: Yes, I have.

Mr. Clarry: This is a commodity product. To the retailer the levy is an increase in cost, and the buyer of that product - his management has to justify a return on every dollar they invest.

Mr. Bélanger: If the levy is 37¢ or 25¢ or whatever, I'd transfer that to my purchasers, my clients, but I wouldn't necessarily put a mark-up on it. Are you suggesting that all retailers would put a mark-up on the levy?

Mr. Clarry: I can't speak for all retailers.

Mr. Bélanger: Do you believe there would be enough competition in the marketplace for that not to happen?

Mr. Clarry: I'll put it this way. I think the greater risk is not a retailer taking a margin on the levy or not; it is the retailer who would buy from one of the big market sources.

Mr. Bélanger: That's fine, but is there not enough competition in the industry to make sure the retailer wouldn't have a mark-up on the levy?

Mr. Clarry: Unfortunately, we don't have any retailers as part of our association, so we really cannot say.

Mr. Bélanger: We'll introduce a little more competition.

Thank you.

The Chairman: For the next round of questions

[Translation]

Mr. Plamondon, if you have any questions.

Mr. Plamondon: No, thank you.

[English]

The Chairman: Mr. Abbott - briefly.

Mr. Abbott: Having spent many years in retail, I know about the cost of goods sold, and if something is added to the cost of goods sold, I take my mark-up off the landed price at my back door. It's that simple.

I'm curious about the numbers because they've been bandied around a lot here. I have sought out information and I have some in front of me, but have you presented to the committee any numbers that refute this $44 million and $39 million?

Mr. Clarry: In our brief we submitted ITA numbers plus estimates that gross up the market to account for non-reporting members and grey market activity.

Mr. Abbott: I'm trying to get a completely clear handle on how much pre-recorded music would actually be displaced.

Mr. Clarry: If we reference some of the other studies, such as the OTA study, it's difficult to define how much is really displaced.

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We do recognize the fact that place-shifting does take place. People make purchases and copy them for use in their car for their own personal use. It's that type of thing. The extent to which that displaces purchases of pre-recorded cassettes, I can only surmise. Frankly, I'm not going to own two copies of anything. My tummy tells me that it's fairly minimal, regardless of what the studies say. It's very hard to quantify and define.

Mr. Peterson: The OTA states that 84% of blank media is used for the purpose of taping music. It further notes that sales are only displaced by a maximum of 22% as a result of home copying. That's their estimate.

Mr. Abbott: If we're looking at a projected revenue, income, tax or whatever we want to call it, of $12 million to $14 million under the legislation that's proposed, do you believe you could sit down...? You were talking about alternative methods. Without describing the alternative methods, do you feel comfortable that you would be able to come up with a way of producing the $12 million to $14 million within your industry with alternative methods to that which is proposed in Bill C-32?

Mr. Clarry: I think the rate is something that has to be discussed between all parties. I think we could develop a workable system that would harm no one and hopefully benefit the entire industry.

Mr. Abbott: But you wouldn't necessarily think you could hit the $12 million to $14 million mark?

Mr. Clarry: Not on our own, certainly not.

Mr. Abbott: Okay.

Mr. Arseneault (Restigouche - Chaleur): I have a couple of points that I want to make sure people understand.

The witnesses mentioned the word ``piracy''. I want to clarify things right now. Is it not illegal now to take a blank cassette and tape copyrighted music on it? Is it not illegal to do that now in Canada?

Mr. Clarry: Home copying is not piracy.

Mr. Arseneault: I'm not talking about piracy. Is it legal or not?

Say I had a cassette player now. I go into a store and buy a cassette. Then I come here and tape it. Say there were a couple of police officers and artists over there. Say the artists went to the police officers and lodged a complaint. Would it be legal or not?

Mr. Stuart McCormack (Canadian Counsel, Canadian Recording Media Association): It's not clear as to whether or not there's anything illegal in making a private copy for home use.

If you're aware of a decision that's been made by the courts with respect to that, I'd be happy to consider it.

Mr. Arseneault: Are you saying it could be legal then?

Mr. McCormack: It's possible.

Mr. Arseneault: So we'll have to clarify that a little more.

Mr. McCormack: Absolutely.

Mr. Arseneault: Is that what you're saying?

Mr. McCormack: Yes.

Mr. Arseneault: Okay. That's very debatable, because that's not the understanding of most people who have appeared here before the committee.

Mr. McCormack: I'm glad you said that's debatable.

Mr. Arseneault: Let's go back to the next point of 44 million tapes, which was brought up by Mr. Abbott. I should point out that the minister quoted that figure from a task force report. The minister did not go out to do that statistical study or whatever. That's where the minister got that report.

You mentioned 29 million, which is your estimate. But correspond that to the sales - matching the price of tapes - you have and all of that. This would seem to indicate that the figure of around 40 million would be more accurate than the one of 29 million.

In answering that, would you also give me the following indication then, since the minister gave an indication of how many tapes would be used for copying music? Out of the 29 million, would there be any tapes used for copying music, or would they be for other uses? What percentage would it be?

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Mr. Peterson: I think there are estimates as far as what the pre-recorded copying percentage is. One of the numbers is an OTA number of 84%. The CROP provided an estimate of 86%. But I guess there are no further indications, other than those numbers, that are represented by the surveys themselves.

Mr. Arseneault: How about your sales?

Mr. Peterson: Sales are declining. We're looking at about -

Mr. Arseneault: I'm not talking about declining; I'm talking about sale units. Your numbers are 29 million, but your sales seem to indicate they're more around the 40 million range.

Mr. Peterson: Revenues have gone in 1994 from $40.3 million to $36.8 million. That's a decline of 8.7%, so not only have units declined, but dollars have declined as well.

Mr. Arseneault: I'm not arguing that the units have declined.

Mr. Peterson: Dollar revenue has declined as well.

Mr. Arseneault: So you don't want to comment on the discrepancy between the sales figures and your 29 million estimate?

Mr. Peterson: We don't see a discrepancy.

Mr. Arseneault: You don't see a discrepancy. That's fine. Thank you.

The Chairman: Ms Phinney.

Ms Phinney (Hamilton Mountain): I have rather an odd question. There are so many industries in the world, in the last ten years particularly, that have just sort of disappeared because of the advancement of technology. It's unfortunate for the people who are involved in it. Most of the groups that have come here have been talking about how technology is moving so rapidly and how it is so advanced - past things like tapes, which I understand. They are talking about other things like mini CDs, digital technology, and things that are changing so quickly.

The Copyright Board right now, I think, has the right to make decisions on these different products. Has your industry kept up with this? Are you moving into something else? Nobody is going to make a record now because nobody uses records. Are you moving into something else? Are you trying to get into some of this more advanced technology so that you will have another area to...?

Mr. Clarry: Technologies are changing. However, I believe the ultimate decision-maker in this whole process is the consumer, and at the present time, for home recording, there is no economically acceptable means of recording except audio cassette.

Ms Phinney: That's today, but in two years from now there could be something else altogether. Are you looking towards that?

Mr. Clarry: Yes. In the past decade I've seen many different formats come to market. Some have lasted, such as CD. It replaced vinyl. Others have not. My competitors have launched new products, some of them fantastically new products, but as consumer acceptable mediums, they just have not gained a level of market acceptance to displace what's there currently. Ultimately it is the consumer who decides what format will or will not be adopted.

As media people, all we can do is keep abreast of and participate in those media developments to the greatest of our ability so that we can move with the market, but generally speaking we're at the mercy of the consumer.

Ms Phinney: Since your sales of tapes have levelled off or have gone down.... You're talking about the consumer. Have you done any studies to show and to ask consumers that if the price had to go up 50¢ or $1...? If there is no other technology, as you're saying, to replace the tapes.... You say all of a sudden people are going to stop using tapes, period -

Mr. Clarry: No, we're not saying -

Ms Phinney: - just because it's more expensive. Why would business be less, then, if they're going to keep on using them, even though it's $1 more?

Mr. Clarry: The fundamental issue becomes one of the grey market activity that will create a differential between the CRMA members' selling price and other selling prices available in the market. As a consumer, if I can walk into a store and see a CRMA member sell a product that retails at $1.59 versus one that is a non-levied product retailing at 99¢, I guarantee as a consumer I'll go for the 99¢ product. That's the fundamental issue, regardless.

Another example I'd like to bring forward in that regard is the cable industry. In proposing many of its new stations with Canadian content, it has fantastic surveys that demonstrate that consumers will buy this particular service. It gets approved. However, when it comes time to pay out the $2.45 per month or whatever it may be, the acceptance of those is much lower.

Ms Phinney: Thanks, Mr. Chairman.

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The Chairman: Before we close, I'll allow two brief questions - one to Mr. McTeague and one to Mr. Peric.

Mr. McTeague (Ontario): Thank you, Mr. Chairman.

Earlier today you suggested that there is an approximately 10% grey market within your industry. Am I to understand that is from the United States? If so, given the different currencies that exist, could you tell me what is the percentage or difference in the cost of tapes in the United States relative to Canada that contributes to that 10%?

Mr. Clarry: Yes. A number of the grey marketers operate on currency fluctuations, so it can be as small as the difference in a movement between the Canadian and U.S. dollar. What we're talking about is fractions of pennies or pennies. With no overheads, the grey marketers are able to subsist on very small profit margins. It's in and out in that business, so there's no ongoing responsibility for product warranty liability or anything like that.

Mr. McTeague: But if you're suggesting that it's currency, would it not be an advantage to purchase any product in Canada, given the valuation of our dollar versus the American product?

Mr. Clarry: Under normal circumstances you'd consider the U.S. and Canadian markets very close to parity. Costs are the same.

Mr. McTeague: Thank you, Mr. Chairman.

The Chairman: Mr. Peric.

Mr. Peric (Cambridge): Last year, 1995, your company - who was the largest consumer of your product?

The Chairman: You're talking about...?

Mr. Peric: It's to Mr. Clarry - not your organization, just your company.

Mr. Clarry: I would like to, but I'm not authorized to release that information. I have competitors in the room and....

Mr. Peric: Okay. Who was the largest customer of your product?

Mr. Clarry: The Canadian consumer. As a group -

Mr. Peric: Would there be one single consumer that you could point out?

Mr. Clarry: Most of the large mass merchants, the electronics chains -

Mr. Peric: Which one? Could you name them?

Mr. Clarry: In the mass merchant category it's wide open. There is Zellers, K Mart, Wal-Mart and The Bay. In electronics chains you have Aventure, Future Shop, and a host of electronics stores, some national and some regional. Those are the consumers in the main channels.

Mr. Peric: Where is the manufacturer of your product?

Mr. Clarry: It varies, depending on the CRMA member.

Mr. Peric: Name two.

Mr. Clarry: It could be Europe, South America, Japan or the United States.

Mr. Peric: Thank you.

The Chairman: Mr. Clarry, thank you very much. You've been very forthright about your position and I think you've made it quite clear. We appreciate your coming.

Mr. Clarry: Thank you.

.1925

The Chairman: We now welcome, from the European Tape Industry Council, le Conseil Européen de l'Industrie de la Bande Magnétique, Mr. Bill Andriessen, president, and Mr. Randall Hofley, Canadian counsel. Mr. Andriessen, the floor is yours.

Mr. Bill Andriessen (President, European Tape Industry Council): Thank you very much. Thank you, Mr. Chairman and committee members, for giving me an opportunity to provide the committee with information on the European experience with levies on blank recording media. My name is Wilhellmus Andriessen and I am the current president of the European Tape Industry Council or ETIC.

ETIC was formed in 1984 to represent the major manufacturers and importers of blank recording media in Europe. I have been involved in the debates surrounding the proposal, implementation and assessment of levies on audio and video recording media and equipment since that time. I was also the author of a recent study on the impact of the levies imposed in the various European countries, which is found at appendix A to ETIC's submission to the committee.

European countries have addressed the issue of private copying in vastly different ways. Some countries have rejected the call for a levy; other countries have attempted the levy only to have it fail. Two more countries impose the levy in varying amounts and on varying types of recording media and equipment. ETIC was asked by its sister companies in the CRMA to provide information to this committee concerning the European experience with private copying levies.

It was hoped that you would find this information of interest. ETIC does not intend to suggest policies to the Canadian government or to this committee. I will keep my presentation brief so the committee may ask questions it believes are of importance to its ongoing review.

With your permission, I would like first to provide you with a brief overview of the levy situation in Europe. Second, I intend to address the impact of the levies on internal and cross-border trade in Europe. Third, I will address the question of who in Europe is benefiting from the levy moneys that are managed to be collected. Finally, I hope to provide you with a brief description of the European Commission's ongoing study of the levy situation.

I'll start with the levy situation in Europe. In the early 1980s the European music industry was suffering slow or flat gross. As a consequence, it began in earnest a campaign for the imposition of levies on blank audio and video recording media and equipment. This campaign was led by the International Federation of Phonogram and Videogram Producers and the most powerful copyright collective societies in Europe. While Germany was the first country to impose a levy on recording equipment in 1967, levies thereafter were only proposed and accepted or rejected beginning in the mid-1980s. Today Austria, Belgium, Denmark, France, Germany, Italy, the Netherlands, Switzerland and Spain have some form of private copying levy.

Greece and Portugal are attempting to implement levies; Sweden attempted to impose a cultural tax but has suspended this tax because of its impact on the Swedish marketplace. Ireland, Luxembourg and the United Kingdom have resisted the music industry's call for levies. The levies range substantially in amount from country to country. Generally, where levies are imposed they are imposed on both audio and video recording media.

The European music industry and the copyright collective societies have clearly had some success in convincing governments that they deserve remuneration for the losses they claim are associated with home recording.

.1930

It has likewise been successful in deflecting attention from the fact that it has been unable to provide evidence establishing that the net effect of the sale of blank audio recording media is to injure authors, performers and producers of music.

The European music industry, as I understand is the case in Canada, is dominated by the major music publishing and recording companies. It has never been more prosperous than in the era of home recording technology, despite the alleged effects of this technology. Sales have grown at a record pace over the last decade, regardless of the presence or absence of levies in a given country. Indeed, the European music industry has been unable to provide any evidence to establish that the levy encourages sales of prerecorded music, as it has traditionally claimed.

Talking about the impact of the levy and the sources of trade, what has been the impact of the levy in the countries that have adopted such a scheme? The markets in these countries have reacted as one would expect. Substantial and in some cases epidemic bypassing of the levy, mainly at the retail level, has occurred. Consumers are able to purchase non-levy-paid products in their home countries. Alternatively, consumers in the levy countries are purchasing these products in the non-levy countries or in countries with lower levies.

Major manufacturers and importers have, as a result, been forced to maintain prices at levels in existence prior to the imposition of levies. Regardless of these efforts, ETIC's members' sales of these products have declined significantly. Consequently, the yields from the levies have declined as retailers selling non-levy products are able to evade enforcement of the levy regimes.

The decrease in levies that has resulted has prompted copyright collectives to demand higher and higher levies. Higher levies led to increased levy evasion. As you can see, the result is a vicious circle that is in no one's interest.

Despite their best efforts, ETIC's present and past members have suffered substantial losses in the form of declining sales revenues, profit erosion and loss of market share. A number of companies such as EMI Tape, Agfa, JVC, PDM Magnetics and 3M have, as a result, withdrawn from the European market. Most recently, BASF has announced it will sell its interest in blank audio recording media. The companies that have remained have declared significant losses in the blank recording media area.

About the way forward, the European Commission began a detailed study of the levy situation in the mid-1980s. It is presently in the process of preparing a proposal for the harmonization of levy rates and the imposition of the levies at the level as near as possible to the consumer. We call this the first purchaser liability principle as opposed to the source liability principle.

The European Commission continues to study copy management or licensing alternatives on the assumption that traditional remuneration schemes, such as the levies, cannot provide the answer to the copyright protection challenges posed by digital technology. The European Commission is working with all stakeholders to address in a single policy the issue of private copying.

Let me summarize. If I had to summarize the lessons to be learned from the European experience, they would be the following.

1. In order to determine if a levy is necessary, and if so at what amount, legislators should be careful to undertake a detailed analysis of the injury the music industry claims it has suffered as a result of the home recording of copyright material.

2. Legislators should also be careful to undertake a detailed analysis of the impact of the levy at various amounts on the yield and on the affected industry in order to ensure the levy scheme is not frustrated from the outset, resulting in a net social loss.

3. Mechanisms must be established to ensure against the distortion of trade that will occur where trading countries have differing levy systems.

.1935

Perhaps the European experience provides one even more important lesson. Neither legislators nor administrative bodies seem to be able to set and enforce fair levies. As can be seen from the European experience, each country has a different view of what is fair or equitable. The result has been chaos of application, the destruction of an industry, and the failure to achieve the objectives the levy hoped to achieve.

I would be pleased to answer any questions you might have on these or other matters involving the European experience.

Thank you very much, Mr. Chairman.

The Chairman: Thank you, Mr. Andriessen. Thank you for coming all this way from Europe to tell us your story, which is of great interest to us.

[Translation]

Mr. Plamondon.

Mr. Plamondon: I have three short questions. In your brief, you say that the basic principle of levies applied to blank audio media is a mistake. You give three reasons in support of your position. First, you say that a levy system is unfair in principle. I would like you to explain that to me. Second, you say that collection for distribution purposes entails levying. I find it difficult to understand your argument. Third, you say that levy systems fall short of the objectives set for them. What were the objectives of the levy system in Europe and which of those objectives were not attained?

[English]

Mr. Andriessen: As I already said, you can see from the different amounts in the various countries of Europe that it was extremely difficult to find a modus or a key for calculating or for deciding levy amounts. The reason is there is no clear link between what people are using for home recording, or home copying if you prefer to call it this, and the value of the work.

This is one element. There is also the question of whether they are using copyright material they have already purchased. In other words, are they copying a CD they have purchased because they would like to make their own compilation of music? Is it a situation where each consumer will understand he has the right to use it as many times as he likes? Or is he is just using his own carrier for a change in the carrier, which is the case because a CD is an excellent source for copying but the cassette is an ideal tool for portable use. He may like to use his music this way.

So there are a number of questions that we never find an answer to and that make the levy, by its very nature, a kind of rough justice that can never be clearly defined. It is a compensation, but a compensation with big and many questions.

There is automatically, also, the matter of rough justice, because it is part of this. For instance, many people like to call it a royalty, but a royalty is always clearly related to the value of a work, which is clearly defined and is known.

Once again, in the case of cassettes, or in the case of home recordings, it is used for works that can even be copyright free. This is also a point, because they are out of the year of the period of protection. So it is very unclear. Or is it provided free of charge by the broadcast? It could be, say, a broadcast recording of their own musicians, which they offer free of charge or almost free of charge to the consumer. So this is all very vague and very unclear.

.1940

The third issue, namely the objectives, is more or less related to the first two points. If the objective is to create compensation for supposed wrong use or misuse of copyright material and there is no clear and calculable relationship, you are missing the objective of the principle, or at least you cannot define it clearly and you have a very vague type of system.

Mr. Abbott: If we were to select at random three countries in Europe of approximately the same proportion of GDP and population to say, Ireland, Luxembourg, and Great Britain and do a comparison of the per capita purchases of blank cassettes, would we see in those three countries that don't have a levy that the per capita purchases are significantly higher? In other words, in fact these are the sources for the grey market?

Mr. Andriessen: Yes, it is to quite a degree one of the sources, but there are many ways of bypassing the levy once you have differences in the various member states of the European Union, because as you know, the markets are at present open, so the words ``importation'' or ``exportation'' are not valid any more in Europe and goods should be able to move freely. That is indeed one of the targets of the European Union.

For instance, a German retailer has a chance to export to Poland. In reality, though, the goods do not go to Poland, but the declaration is made. There is very little control by the customs officers over these kinds of activities, and the goods stay in Germany and appear again in shops, only now without the levy. That is one element.

Another element is that, as I have explained before, our industry was forced, in many cases, to adjust the prices we give to retail in such a way that the final consumer price was not too different from other countries within Europe - in other words, at a lower level. This, of course, attracts retail to export this type of material to get the paid levy in the country where the lower prices do exist to retail, to get it back from the collecting organization because they can prove that it is indeed export. They export to, for instance, Germany, or other countries like Denmark, where you have a very high amount of levy.

Finally, indeed, there is also the exportation from countries that do not have a levy, and that is another massive source of bypassing levies.

Mr. Abbott: What is the highest level of levies? We'll have to come to some kind of a common denominator here - pounds sterling or marks or dollars or whatever.

Mr. Andriessen: May I mention it in ECUs, or do you prefer -

Mr. Abbott: You're going to have to convert that to Canadian dollars.

Mr. Andriessen: We have it in Canadian dollars. The highest is Denmark, which is the equivalent of 58¢ Canadian, according to this translation.

A voice: That's for 60 minutes.

Mr. Abbott: And what would the lowest be, approximately?

Mr. Andriessen: The lowest is Belgium. It's not in this list, but it's equal to 10 Deutschmark cents, which means about 8¢ or 9¢.

Mr. Abbott: So 8¢ or 9¢ to 58¢.

Mr. Andriessen: Yes.

Mr. Abbott: At what level is the levy applied? Is it applied where they're imported into the country? I'm talking about the straight product that reaches retail, obviously - that isn't in the grey market.

Mr. Andriessen: In principle, it should be paid at the point of importation.

Mr. Abbott: Is it, though? Is it normally paid that way in the countries?

Mr. Andriessen: In Europe we have at present the same system as is proposed in Canada - namely the importers of the large tape companies, their own importers, having the liability for payment, as well as the manufacturers. For instance, if BASF is the manufacturer in Germany, he pays to the collecting organization for what is sold in Germany, but the importer for TDK or Sony or whoever has to pay it also.

.1945

In principle, any other importer should also pay, but since the definition of importation has been almost eliminated in Europe, it is very easy to move the goods at retail level, and that is no longer called importation.

Mr. Abbott: Maybe you could act as a referee between myself and Mr. Bélanger on this issue of passing along the mark-up, or passing along the levy through the mark-up. Is that occurring? In other words, if we say the tape costs $1 landed and there's a 50¢ levy, so it's now a $1.50 tape, is that the starting point? Is the mark-up based on $1.50 or on $1 and then the 50¢ kind of rides on the side? Do you understand my question?

Mr. Andriessen: Do you mean the margin that the retailer is...?

Mr. Abbott: Would they apply the margin to the $1.50 or to the $1?

Mr. Andriessen: If the retailer is part of the bypassing, he will find some kind of compromise in order to be not too far away and too clearly identifiable in the bypassing. If the difference at the consumer level is just the amount of the levy plus the margin of that retailer, then he can be identified quite easily, and that is what he doesn't want. So usually there is a kind of compromise so that it is not clearly identifiable.

Mr. Abbott: He does that because there is a grey market product.

Mr. Andriessen: That's right, yes.

Mr. Abbott: That's the point.

Mr. Andriessen: That's the point. Of course.

Mr. Abbott: The competition is the grey market product. That's a very important point.

The Chairman: Last question.

Mr. Abbott: Okay.

Your brief states ``all indications are that the levy funds have gone predominantly to the major publishing and recording companies''. Could you expand on that? My understanding is that we're trying for broader dissemination and you're saying that the levy funds have just gone to the major publishing and recording companies.

Mr. Andriessen: Usually they are the copyright owners, so even if the artist has been the creative person, he will sell his products on an almost exclusive basis, including the copyright for that material, and for that reason the copyright owner is the one who ultimately has the right on the money.

The split-up of the distribution of the levies is not clear for every country in Europe. There are a number of countries where you have a split of 50% for authors or composers, 25% for performing artists, and 25% for the music industry. But a lot of the authors or performing artists sold their rights completely to the music industry, so it has to go to the large organizations again, although theoretically the artists are the ones who receive it.

The Chairman: Mr. Arseneault.

Mr. Arseneault: In your brief you go through a number of countries and you indicate where there are countries experiencing problems with the levy. In reading the brief, the problem seems to be not necessarily with having a levy, but with having a mechanism to make sure the levy can be collected properly. Is that summarizing your brief properly?

Mr. Andriessen: Yes, although in principle we still have the opinion about the levies, which we feel are old-fashioned and soon to be substituted by technical means of remuneration. But given the fact that in Europe we have levies in so many countries, we decided not to play any more and to live with the facts as they are and try to make the best of it, and that's why we are very cooperative with the European Union. We put the finger on the fact that the present system, especially the mechanics by which the manufacturers and importers are liable for the payment, necessarily results in bypassing, affecting us very dramatically.

.1950

Our point is that the control system must be improved, and since the collecting organizations do not have the tools and the means - they are not police organizations - to exercise a very effective control, as we used to say, and this has been adopted by the European Commission, the only way to have a really effective control is if the liability for the payment of the levy is at the retail level, as close as possible to the consumer and not as far as possible away from the consumer. That is our problem.

We are in the situation.... The business of tape, we have heard, for Canada is now very much in the hands of giant retailers, and the number of them in most European countries is even lower than the number of people who are importing tapes. This is just to make it clear that it does not make things more complex than the present situation, whereby the importers and the manufacturers are liable for the payment.

Once the liability is at the retail level, you will see two phenomena. First, there will be the effect of the self control and the mutual control by the retailers, because they are competitors. If they see differences in prices that are due to bypassing of the levy, they come to us and say they have to lower their price, because their neighbour has better prices, etc. But once the liability for the payment is at the retail level, they can watch each other.

Mr. Arseneault: It seems to work quite well, for instance, in France and Germany.

Mr. Andriessen: It works in France but not in Germany. In France there is a very big difference from all other European countries and all other countries in the world, even compared to your own bill.

In France the control is exercised by the tax authorities. That's of course a big difference. It is also exercised at the retail level, and this is a big difference. There are legal reasons why this is possible in France and not in Germany, for instance.

Indeed, in Germany, because the levy is not so high as in other countries, the problem of bypassing is not as dramatic; nevertheless, we have bypassing. As has been said before by my colleagues from Canada, the tape business is a question of very small amounts of difference that are already disturbing the market. We talk about parts of cents when we are doing business with the retail market. That is the type of competitive situation in which we are involved. For that reason, an effective control can be done only at the retail level.

As a first step, some of the European countries have introduced the retail industry's liability for information about whether or not the levy has been paid. But that is already such a big step that it is a very small step forward to say they should also be liable for the payment.

Mr. Arseneault: In regard to Sweden, it's full of problems, and you seem to indicate that it's going to wait for harmonization. What's that harmonization going to do to all of the countries in the European Union? Is there going to be a levy applied throughout the European Union? Are all of the countries that are not involved now going to get on side? Is there going to be one levy right across the board?

You mentioned the other idea of technical means of remuneration. Could you just explain whether they are related?

Mr. Andriessen: We indeed hope it will come so far that there will be harmonized rates. We feel this is one of the very important elements to make sure that business can go on. Let me say it very simply.

However, it may quite well be that it is too difficult because of the differences between the member states. You remember that in Maastricht and after Maastricht, the subsidiarity principle was increased again, which means that what can be done at the national level will preferably be done at the national level.

So there are many skeptical people in the European Union, at the commission level, who feel that it will not come to this kind of harmonization. However, especially because of the fact that there may be no harmonization of the levy rates, they are very much in favour of harmonization of the mechanism. There we have, as I said before, so much response and resonance at the commission level that it is absolutely necessary that retail is liable for the payment. The reason is that one of the intentions of the European Union is that trade shall be as easy as possible and the movement of goods should take place at any level and especially at the retail level. This is what the commission wants, and it is one of the intentions of the European Union.

.1955

Mr. Arseneault: But the first priority is to have a levy.

Mr. Andriessen: That's for us surely one of the first priorities, but given the practical reality in Europe, it may well be that it will not come to a harmonized rate, but it will probably come to a harmonized mechanism of collecting that will indeed be the first purchaser principle, as we see it right now.

Talking about the technical means of payment, as we have already heard this morning from the gentlemen from the music recording industry in Canada, the digital technology is going to provide possibilities of combining access to programs with modes for payment. In other words, a consumer can only have access to a program that is provided by an electronic means if he is paying the commercial value of the program of one or another channel.

If downloading is requested, and this is probably a very likely way of purchasing music and other software in the future, then the downloading is included in the price. Of course, with that such things as arbitrary payments become obsolete and absolutely unnecessary.

Mr. Arseneault: Thank you.

The Chairman: Just before we close, Mr. Andriessen, I'd like to ask you a brief question. In your paper you have listed fifteen countries, out of which ten have a levy and five have either none or have withdrawn. With a new study by the commission, can you tell me if the countries that have legislated levies now - in other words, France, Austria, Germany and so forth - intend to keep their legislation, in any event from what you know?

Secondly, are the other countries - the five that have withdrawn or have no legislation now - cooperating with the union? What is the intention of these countries with regard to waiting for the proposal? Are they going to legislate, as far as you know? What is the position regarding these five?

Mr. Andriessen: In regard to the first question about the countries with the levy, I do not think any country is looking for levies as an infinite way of solving this problem. In other words, if the not-too-far future is going to present other ways, for instance, technical means of payment, they may well give up the levy system.

Combined with this matter there is also some willingness to compromise when it comes to a harmonized rate.

As far as the countries that do not have a levy are concerned, although right now politically speaking it looks as if they are not very willing to introduce levies, we feel it might well be a compromise on the issue. For instance, if harmonized levy rates were reasonable - whatever that means - fair, etc., it would be a compromise between their position of having no levies and the ultimate, say the highest.

I would draw to your attention the very interesting fact that in Europe it is particularly the very small countries with low populations that have the highest levies. This is a very remarkable phenomenon.

Mr. Bélanger: I noticed in the annex provided in your brief that all countries that have a levy on audio tapes also have a levy on videotapes.

Mr. Andriessen: That's right, yes.

Mr. Bélanger: In most instances, except perhaps for Belgium, the levy on videotapes is significantly higher.

Mr. Andriessen: Yes.

Mr. Bélanger: I'd like you to make a comment on that. Are there any countries that have a levy on other media, such as diskettes, that you know of?

Mr. Andriessen: To answer your last question, no. At the moment no one has rates or levies on diskettes. Maybe this will change when CDR becomes a major product. That may happen.

.2000

The logic is very much against video, because it really is not a matter of discussion but a matter of fact that the main use of video home recording is time shifting. That means at the consumer level, where finally the value of a work is not the question of whether it is a copy but to enjoy the program, time shifting is felt in general to not really be a damaging or difficult use of software in the case of video. That is appreciated.

I think video started with the fact that with video is audio, and audio was already understood to be a subject for this kind of composition through the audio channel that came into the video.

I don't want to mention names, but some countries saw a very nice possibility of subsidizing their national movie industry by means of the levy. That's how things developed very quickly and why video then ultimately became the summation of composition for the picture, for the video and for the audio.

The Chairman: Mr. Andriessen, we would like to thank you for coming all the way from Europe to give us the benefit of your obviously extensive knowledge of your subject. It really adds to our knowledge of ourselves. We appreciate it very much. Have a safe trip home, whenever that is.

Mr. Andriessen: Thank you very much for your hospitality. Next time you don't have to overdo the hospitality by having a western type of Holland in Canada.

Some hon. members: Oh, oh!

The Chairman: I'd like to welcome the Canadian Booksellers Association, l'association des éditeurs canadiens. Ms Jane Cooney is the president, Mr. Ron Johnson the first vice-president, and Mr. John J. Finlay, executive director. Ms Cooney, you have the floor.

Ms Jane Cooney (President, Canadian Booksellers Association): Thank you very much. Good evening everyone. Bonsoir, mesdames et messièurs.

.2005

As you've just heard, I am the president of the Canadian Booksellers Association. I also run a business in Toronto called Books for Business. Ron Johnson, who is the vice-president of the Canadian Booksellers Association, is also the manager of the University of Toronto Bookstore, and John Finlay, our executive director, in addition to providing us with all kinds of support for events like this, makes it his business to help Canadian booksellers do their jobs better. They're both much smarter than me on a lot of things, so they're here to help me answer your questions later.

We do thank you very much for hearing us. We know this is a very complicated and decidedly unsexy bill, so we doubly appreciate your attention to it.

We are very supportive of your interest in developing a very balanced bill here that not only protects the creators of copyright material, but also addresses fairness on behalf of people who use it.

We know that you're working in terms of themes, and I guess we're the first on a theme. I don't know what you call it, but it must have something to do with books. We hope you can switch gears tonight, because I know for the rest of the day you've been hearing about quite different things.

You will be hearing very strong representations from our colleagues who write books and publish them, but we're the ones who sell them. I hope to just take a few moments to set that stage for you and then leave time for you to ask questions about our brief, which I know you all have.

The Canadian Booksellers Association is a national trade association representing about 1,250 independent and campus bookstores in all the provinces and territories of Canada. An independent can be a general bookstore that carries a little bit of everything, a specialty bookstore such as the one I have, or some that you've probably all been in, such as children's bookstores, travel bookstores, cookbook stores, Canadiana, or literature - you name it.

Our campus stores exist in the universities and colleges across the country, and their purpose is primarily to support the curriculum that is being taught in these organizations. They range in size from the very small - for instance, the campus stores in your local community college or CEGEP - to the larger ones in larger institutions, such as at Laval, UBC, or, as Ron represents, the University of Toronto.

On the whole, though, we're the little guys in the business, the mom and pop operations, the dépanneurs, if you wish, of the book business, who are there when you need us. We provide Canadians of all ages and in all places with access to a wide variety of reading material, whether it's for your educational needs, your personal growth, for business purposes, culture or for recreation. For the most part, we're the small and medium-sized enterprises, which we know the government is committed to supporting.

Like the government, as booksellers we are also extremely committed to supporting the work of our Canadian authors. We've been renowned for stocking their works, for encouraging their purchase through pretty innovative marketing activities, and for generally acting like the farm teams by introducing them to the Canadian public before they're very well known. It's only later that the big guys get interested in them.

We're a little bit different from other organizations in the book trade in that we make it our business to know our customers very well, to focus on serving them and providing them with the books they need when they need them. Probably the most valued thing we do is provide those special orders for you at Christmas time, for birthdays, and all the other special occasions in your life when you think a book is an appropriate gift.

In short, we're a very integral part of the Canadian book industry, and I think you would find that most of the books in this country are sold through our bookstores. Without a thriving independent trade and campus book-selling community, the whole Canadian book industry would be in serious jeopardy.

I'd just like to take a moment to set the stage a little bit for the setting that we are working in and the conditions we're working under right now. I guess it could be summarized by saying it's one of constant change.

.2010

In 1995 the government approved a merger of the two largest bookstore chains in Canada, which created one giant competitor to the independent and campus bookstores. While the terms of trade of this giant are being monitored by the mergers branch for a short period of time, this chain is in a position to strongly influence what gets published in this country, and because of their market dominance they can influence where the shipping priorities of publishers lie.

Recently you may have read in the paper that a 20% ownership stake has been purchased by a giant U.S. book retailer, whose cash injection has certainly helped our major competitor to grow pretty rapidly.

Fierce competition is also developing with the proliferation of superstore category killers, as they're known in the retail business, who because of their size are also able to negotiate good deals with suppliers and whose strategy appears to be to get working on wiping out smaller independents through pricing discounts.

There have also been a number of changes in the academic markets. Technology has certainly changed the way universities operate. Enrolments in courses are only known at the very last minute. Class sizes, therefore, are only known at the last minute and books have to be ordered at the last minute to satisfy a student for a semester. You can appreciate that even a week's delay in getting a book has a profound influence on a student who has to pass the course before Christmas.

Finishing with that kind of competition - the large superstores and chains - we have to let you know that our second biggest competitor is the Canadian publishing industry itself. Our very own suppliers, who through Bill C-32 are actually seeking protection and the closing of the market for their own benefit, at the same time are selling direct to consumers through very lively direct mail promotions, book clubs, Internet sites and toll-free telephone numbers for the public's use. Publishers direct sales to the public account for about 25% of the sales of books in Canada.

Our only weapon in this changing environment is staying close to our customers, ensuring that we have on our shelves what they need and, when we don't have it, making sure that we can quickly provide them with the special books they want.

We're dealing with the realities of the market. We know it's changing. We're working very hard to meet the challenges, but we're not asking for protection in the law against our competitors.

This brings me to the proposed sections of Bill C-32 that are of most concern to the independent and campus bookstores. Those I refer to are proposed sections 27 and 45, both of which are related to the matter of parallel importation and exceptions to the rule.

The intent of parallel importation, or the intent of the law as it's proposed in Bill C-32, as we understand it, is to protect the distributor of foreign books in Canada. But what it will do to us is really turn us into criminals for trying to provide excellent service to our clientele.

We don't believe this has anything whatsoever to do with Canadian culture. This is strictly a matter of distribution and service. In fact, the objectives of the government may be self-defeating if this bill passes or if this section of the bill passes as it is. We're very disappointed that the government's policy is to enshrine what we see as a distribution service and contract issue in copyright legislation. Our members have not been able to support this particular aspect of the bill.

What the bill does is provide a huge level of protection to one sector of the book trade that at the same time, as I've just pointed out, benefits from operating in an open market where it can sell direct to the public.

.2015

I will give you an example that you will probably all understand, so I can illustrate the problem with the parallel importation aspects of Bill C-32.

If you come into a bookstore because you want to buy a gift for your mother-in-law's birthday, you know that she wants this particular book and isn't going to be happy without it, and we unfortunately don't have it in the store, we will call the distributor for that book. We'll assume this is a foreign-published book, because it's a whole different story if it's a Canadian book and it's not relevant. If it's a foreign-published book, we will call the local agent for that book. If the local agent does not have it in stock, and chances are it won't because most of the local agents are Canadian branches of U.S. multinationals who don't warehouse their books in Canada, the likelihood is that you will have to wait from four to eight weeks to get that book from that source. However, since the birthday is in three weeks and you need the book much sooner, we would call a wholesaler in the U.S. whom we can guarantee will deliver that book to us within 48 hours, and if not 48 then 72 hours.

We consider this to be the kind of service we want to give, and it's the kind of service that we know the Canadian public wants.

Similarly, when we move on to proposed section 45 of the bill, we need to take a look at the limited exceptions that are in that part of the act. We support them because we believe it is in the best interests of the Canadian consumer to be able to get a book.

However, what does concern us is that the only people in the whole world who don't seem to be able to order a book from the U.S. under this section are booksellers, and yet we're the people who do most of the selling of books in Canada.

We would ask, in terms of proposed 45, that there be an amendment that would state that all the parties listed in proposed paragraphs 45(1)(a) through (e) have the right to transfer their exemptions to any other Canadian person or corporation. The intent of this amendment would be to enable booksellers, on behalf of all the other people who have exceptions, to get those books for them.

Looking backwards to proposed section 27, as we've stated, we're not in favour of this section going through at all. Should it be approved, it is essential to us that proposed subsection 27.1(5) regarding notice requirements remain in the statute as it is so that there will be absolute clarity for those selling books in this country as to who the exclusive agent is at any given time for any particular title.

One of the problems we face is that the agencies change all the time. We never can be sure who is representing what, and we would hate to find ourselves in a position of being taken to court by one of our distributors because we happen to own a book for which they had an exclusive right that we didn't know about.

The Canadian Library Association in their brief has certainly supported us in our intent to ask for the amendments to proposed section 45. You will be hearing from them later.

We have been told by the Consumers' Association of Canada that they will support anything that is going to benefit the consumer. We believe if that modification is made the consumer will benefit. The only people who are going to be the big losers in all this, if proposed section 27 passes as is, are Canadian consumers.

This concludes our brief presentation. I hope I've provided some useful background to you. I know it's all very complicated. I look forward to your questions.

The Chairman: Thank you very much, Ms Cooney.

Monsieur Plamondon.

.2020

[Translation]

Mr. Plamondon: I must say that I had a different viewpoint from yours before you spoke to us about distribution networks. I must admit that you have shaken my beliefs. I would like to look at the services aspect. I am a consumer, often purchasing books from a small bookseller in my neighbourhood and asking him for specific books. He always gets them for me in 24 or 48 hours. If he had to go through the distribution network in Toronto, Vancouver or some other Canadian city, I wonder whether he might not need one month to obtain them for me.

However, this type of distribution system exists for movies and the impact of it is to bring investments of $95 to $100 million to the Canadian cinema industry. Distribution networks have had a beneficial impact.

What comparison can be made here? That is my only question. What comparison would you make with the movie industry? Are you saying that was good for movies, that would be bad for books? Could you clarify that for me?

[English]

Ms Cooney: I'd be glad to, but Mr. Finlay has asked to answer that question.

Mr. John Finlay (Executive Director, Canadian Booksellers Association): I think you'd have to put into perspective, when you're measuring against cinema, how many Canadian films are distributed. I believe that fewer than 5% of the films that are shown within our cinemas are Canadian. I don't think it really follows that because those dollars are there, you're necessarily going to get the results you're expecting at the end level, which is really at the consumer level or the cinema level.

I don't know whether that really answers what you're asking, but I don't think that measurement is really relevant.

The Chairman: Ms Cooney, if you want to add something, feel free.

Ms Cooney: I don't know too much about the cinema business myself. I don't know if the point you were getting at was that if these distributors of foreign books have all the business, then they can put more money into their Canadian publishing program. Was that what I was hearing?

[Translation]

Mr. Plamondon: Yes, and also to help authors. If, on the basis of your advice, a good, well controlled distribution network were to be built, with standards regarding deadlines and service, could such networks not contribute to the development of Canadian books and help to support authors? That was the effect on the movie industry, even if it concerned only 5% of Canadian films. What would be the figure if we did not have the $98 million going into this area? It would perhaps be less than 5%.

That is my question and I would be grateful if you could enlighten me.

Would that have the same impact as regards books? That is my question, and you can try to convince me of your viewpoint.

[English]

Ms Cooney: I'm not sure of the answer to the question, but one thing we would certainly welcome in this country is a very effective distribution network for books. We don't have that right now.

The situation in the U.S. is very different, where the books are sold primarily by wholesalers rather than by the publishers directly, or an agent of a publisher. Here we have to order from an agent, who is usually a publisher carrying a foreign line of books as well as publishing Canadian books.

These people are not effective distributors, and that's our big problem. We have to get things quickly. We try them first always, but we feel that we ought to have the right to source our books where we can get the best service.

Mr. Arseneault: Or where you can get the best price.

Ms Cooney: A question was raised about the best price. Price really has very little to do with it, because when we're importing books from the U.S., it's costly, but we're doing it to provide the service.

The Chairman: Mr. Abbott.

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Mr. Abbott: As with my colleague, I found your presentation very compelling, but let me just balance your presentation, to which I'm very sympathetic, against my understanding of the situation in Canada, where there is a desire on the part of all of us to see that Canadian authors not just survive, but thrive. It's my understanding that the publishers actually augment their income, so to speak, by entering into these relationships with what we'll call the American publishers, just for simplicity.

That being the case, you've presented a very compelling case. But on the other side of the coin, I can visualize a situation in which Chapters or Borders, or any of these other people, would simply bypass the Canadian publisher who is getting the revenue from the distribution of a very popular American book, whatever it may be. That feeds into the publishing industry, thereby helping our Canadian authors.

All of a sudden, we now have Chapters, without this legislation, being able to reach across the border into Ann Arbor, Michigan, or wherever they're going to go, and we see Borders coming in and doing the same thing. We'll see that source of revenue for the publishing business, which in turn is supporting the Canadian authors, disappearing.

So I think we have two concerns here, don't we?

Ms Cooney: Yes.

Mr. Abbott: How do we resolve that?

Ms Cooney: I see your point, for sure. I'm not certain that this legislation is going to resolve the issue. There is nothing to prevent Chapters, which has a huge market dominance here, from negotiating a separate deal with any supplier in the U.S. This is all a matter of contract. It's all open to negotiation.

At any time, whether it's now or after this bill has passed, Chapters, a large organization, because it has so much buying power, will be able to go straight to Random House, for instance, in the United States. They'll say they want to be excluded from any agency business that's done up in Canada because they want to order direct from them.

We believe this is what is going to happen. There's nothing in the law that will prevent anybody from doing that. It's our very strong belief that, if this law passes as is, this is what's going to happen.

Right now, the agency system kind of works. We work on the honour system. We call them first. We hope they're going to have the book, and we take it from them if they do. But overall, it's not totally efficient. We feel we need to have the right to go where we need to go to get what you need.

Mr. Finlay: I think the feelings among booksellers are that in fact if Bill C-32 is enacted as it stands at the present time, it will hasten the end of the agency system. What it really comes down to is this. Say you have a system that exists in the marketplace with which people generally comply to varying degrees. Then you introduce a legislated solution or thing within that to say that now you must do this. Immediately, the response that comes back is that people will now look for ways around that. That's because now they're totally tied. The option isn't there at all to do anything differently, so they're going to search for ways to get around it.

Look at the U.S. publisher. There is nothing whatsoever saying that Simon & Schuster, for instance, cannot negotiate a deal with, if you like, Stoddart Publishing. Say they're only going to negotiate it for a certain segment of the market. Then this other segment, which is Chapters or whomever, must be excluded. It could be any group you like.

You don't even have to go that far, because really, you can get into the argument then of saying that maybe we can legislate to stop that happening. But look at it on a purely market basis whereby you, as a supplier to that Canadian company, are told that if you don't get around this for us, we're going to be looking elsewhere for wherever we can source our books and so on. I think then you're going to try to accommodate that very large player.

So what we see coming out of all of this is that ultimately it will in fact destroy the agency system, and you will get people getting around it, whether it's Chapters, groups of large independent retailers, or whomever.

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Mr. Abbott: I accept the goodwill you came here with. I must say that I find it very interesting. As you indicated, this is an exceptionally complex bill. I've only just barely scratched the surface. I was given the impression that this particular provision we're talking about in Bill C-32 was to indeed close the door that you're saying the bill in fact is going to open. Is that your position?

Mr. Finlay: We think it will.

Mr. Abbott: Very interesting.

Mr. Bélanger: It is rather interesting. We're just getting away from television for a while.

When the bill was introduced, there was a date, I believe it was mid-June, that was to kick in any exclusive arrangements and so forth. Would you know if there's been movement in the industry because of that particular announcement?

Ms Cooney: You're speaking of this unexpected bonus that publishers got in the bill. It was retroactive to June 1996.

Mr. Bélanger: If the bill passes as is, it would be retroactive then, but the bill was tabled in March or April. They'll give a little warning that you have until then. After that, any deal would be -

Ms Cooney: It was any book that you still have in stock that you got 60 days after June 1996, after the bill has been proclaimed.

We're not aware of people sort of rushing out and stocking up -

Mr. Bélanger: They're not signing up deals? Okay.

Ms Cooney: No, we don't have the time, space, or dollars to hold books in inventory.

Mr. Bélanger: Would you be aware if the publishers have been doing that?

Ms Cooney: I haven't got a clue. You'll have to ask them.

Mr. Bélanger: Okay. What about this notion? Again, this is new ground. At one of our briefings there was an indication that there would have to be certain standards set by which the people who owned the exclusive rights would have to meet requirements of people like you. Would you have any thoughts as to what those should look like?

Ms Cooney: Sure.

Mr. Bélanger: Would you care to share any with us?

Ms Cooney: This has been a large issue in our industry. We have worked very hard all along to try to develop voluntary standards so that we didn't have standards in the law. We have no reason to believe that our colleagues in the publishing business are going to be willing to meet the standards we would like to see.

I guess we have a pretty good standard to go by, which is what our U.S. suppliers are able to do. We figure that if we can get a book up here from Tennessee in 24 hours, we should be able to get one across town in Toronto in the same amount of time.

If we have to deal with this issue in this way, we will be expecting very stringent standards, far more stringent than we would expect through a voluntary system, for sure.

Mr. Bélanger: My final question is on this interesting proposal you have: the right to transfer an exemption. Does that mean a bookseller could basically accumulate exemptions?

Ms Cooney: I don't think so. We want to make it easy for you to get a book. I think it would be a lot easier for you to visit your friendly bookseller than to try to figure out how to get it yourself if you couldn't get it locally.

Mr. Bélanger: So this would apply not generically, but for each particular book as a special order?

Ms Cooney: I think we see it as a special order. When you need something that we can't supply locally, then you should be able to ask us to get it for you.

Mr. Bélanger: This wouldn't be a school, say, or a library.

Ms Cooney: It could be, because -

Mr. Bélanger: Let me finish here. Say I go to you as the favoured bookseller. Here's my blanket transfer of exemptions, so whenever there's a book on the market, order it for us. They'd have to come to you every time with a particular order for a particular book. I want to know what it is you're suggesting, exactly.

Ms Cooney: It's one book. We're talking here about when we have to import it. Of course, a school can say they want you to order everything for them. We do that for schools and other educational institutions, but we're talking here about that one-off, special time when you need something and you need it in a hurry.

Mr. Bélanger: That's not what I'm talking about. I'm talking about libraries that will always buy the popular novels, for instance. The bulk of those are published in the United States.

Are you proposing that this library in whatever little town in the country would have the ability to give a blanket transfer of an exemption to the bookseller of that town, or would they have to make a request every time they want to purchase a particular novel?

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Ms Cooney: I don't think we were looking for blanket kinds of exemptions. I think - you can correct me if I'm wrong - we were looking at those times, because here we are talking about importation only. We're not talking about the ordering of books generally. We see it as one at a time.

Mr. Finlay: Just to add to that, the way the act - the exemptions are in the act now.

Mr. Ron Johnson (First Vice-President, Canadian Booksellers Association): The exemptions are there for libraries regardless.

Mr. Finlay: But for virtually everybody except booksellers. They're there for the government, for education and for the library.

Mr. Bélanger: They have to order it themselves.

Mr. Finlay: Yes.

Mr. Bélanger: They're asking that they give you the ability to order it for them.

Mr. Finlay: Yes, but it's more for the special order, and if you look at the independent bookstore, that is probably one of the strongest things it does. If you take that away from the independents - as we said, we already have tremendous competitive pressures on the industry - the ability to special order, now there are some really major problems.

Mr. Johnson: It's also the case that a single customer - for example, a graduate student may come into one of my stores and wish to order three books on a particular topic. Those three books may come from three separate sources. None of those three books may be available within the time he's taking to complete his degree. If he orders them separately by himself, he will pay shipping costs for each one, plus he will have to go to each one of those people separately. If he comes to me and I have the ability to order a single copy for him, then he comes to one source and I will place the orders for him. So he's not managing those three or incurring the triple cost.

The Chairman: Mr. Arseneault.

Mr. Arseneault: On parallel importation and the idea that after the bill has passed the big sellers will be able to reach over the border and grab the books, I'm of the opinion that the Canadian book distribution system is very important to Canadian authors. If that disappears, we could have some major problems with access to the domestic market.

My understanding is that the book distributors pay for the right to distribute books in Canada. So they have to recoup that money. They pay for a certain amount of money, and what's happening is that some book dealers are going into the United States, dealing with the American distributor, bringing it into the country and not paying our Canadian book distributor. It's legal now.

The bill proposes to stop that. So if a Canadian distributor - correct me if I'm wrong - has a right on a certain book, there's no way one of those big sellers will be able to buy over there and bring it back. That's possible now, but after the bill, if the rights are held by a Canadian distributor, that will not be possible.

Ms Cooney: This is what makes this whole business so complicated, because you're still only talking about a contract between two business entities - a Canadian distributor and an American producer, for instance. There is nothing in the legislation or presumably in a contract - unless the contract is so airtight that this can't happen - that would prevent anybody from negotiating a separate, exclusive or non-exclusive distribution right from any publisher. It's a hard thing to explain.

Can you be clearer than I am?

Mr. Finlay: We'll use America as an example, but it's any foreign book. If an American publisher decided to make a deal with even two Canadian publishers, saying Douglas & McIntyre can distribute our book in western Canada, and McClelland & Stewart can distribute it in the rest of Canada - this would be very unlikely, but theoretically it could happen. There's nothing to stop a contract being drawn up like that. In the same sense, there is nothing to stop McClelland & Stewart going to Simon & Schuster and saying we'll buy the rights to this book. There's nothing to stop Simon & Schuster from saying we'll agree to that, but we're going to exclude Chapters from that. We're going to exclude a particular group, or we're going to exclude a particular region or whatever else. That's allowed in the act.

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You are correct, the rights of the Canadian distributor right now are protected in law. They own copyright. They have the right to go to court for somebody who is doing something they shouldn't be doing, such as selling a book they don't have the right to sell, but that has to be done through the normal legal process. We're looking for another legislated solution to give more muscle to that particular situation.

Our fear is that the losers in the long run will be Canadian authors, because if the whole distribution system comes apart, which we think it has a very good chance of doing, you will have a totally open market and you will not have the support, and you will not have Canadian publishers being able to market and subsidize their Canadian publishing programs.

If you look at the market now, we've grown. I think the figures are something like 10% of books being carried in Canadian bookstores in the mid-1960s being Canadian-authored, but that now is about 30%. That's come about under our existing system. Are we prepared to put that at risk and turn around and do something else that may work in exactly the opposite way?

Mr. Arseneault: But with the provisions in the bill, if a Canadian distributor or two Canadian distributors hold the rights to a certain book, an American book for instance, that American book cannot be imported into Canada by other than those two distributors.

Mr. Finlay: But we're just saying....

You go ahead.

Mr. Johnson: Let me try to put it this way.

Let us suppose that I and six other campuses with a first-year course like Psych 100, Gleitman's Psychology - you're talking about thousands of copies on a major campus. Those six stores are dealing in an issue where the Canadian distributor may or may not carry sufficient quantities to fulfil the orders at the time the courses start.

Mr. Arseneault: There's a standard of service.

Mr. Johnson: The chances are that they will not, because they don't want to be carrying a lot of a high price-point item. It makes sense and it's reasonably good business practice. However, when those orders go in from those six campuses repeatedly, we experience delays in the copies arriving at the store, which means faculty members and students don't have the materials at the start of the course. So we have a problem.

There's nothing to prevent those six campus stores from going to whomever, let's say Prentice-Hall U.S., and saying, you have to stop this exclusive distribution business because we are having a hell of a time servicing our faculty members; you guys are going to lose this adoption if you're not careful. What will carry weight with the U.S. publisher is the words ``loss of adoption''. They will say, why don't we simply change your agreement and the next time we'll look at how we set up for distribution?

If this happens sufficiently, and I'm just taking one campus as an example.... You can see this happening with superstores and others, because the thing we share with the large operators is that our spread of titles is great - greater than the average corner store. So we have a much larger range of titles that are not currently stocked by suppliers distributing in Canada.

Mr. Arseneault: But if you can get it from the American supplier in 48 hours or a week - say you want 1,000 of those psychology books - why are you having a problem calling your Canadian distributor and saying you need 1,000 books? Why can't they call and get those books delivered in 48 hours?

Mr. Johnson: Our order goes from us to them. They then determine whether they're in or out of stock. Then their order goes to the U.S. supplier. Then the goods go from the U.S. supplier to the Canadian distributor. Then the books go from the Canadian distributor to the Canadian source, who then sells it to the poor student.

Mr. Arseneault: So it's a matter of efficiencies.

Mr. Johnson: Absolutely.

Mr. Finlay: To add to that, this bill is going to protect those books. If you take a Random House, an American company with a Canadian branch, or a Bantam, Doubleday or so forth, most of their books are actually warehoused in the U.S. So when you order a book from them, they're ordered out of the U.S.

As I think we mentioned in our brief, you're giving American publishers a protection they don't have in their own market. They would have the protection that you can't go down and buy from the sources there, so you have to buy from the Canadian source, which in turn then goes down to the U.S. and gets its book.

.2045

As Jane said, we feel that the real problem in the industry is a distribution issue. It's distribution and service standards, and the problem is that we don't have the kind of warehouse or wholesaling system the U.S. has.

There is a new thing happening in the U.S. that we think may in fact be a partial answer for what we're looking for here. I'm trying to remember the term for it.

Mr. Johnson: VOR.

Ms Cooney: Vendor of record.

Mr. Finlay: It's being done by a company called Ingram in the States, one of the major wholesalers there. They in fact are proposing that they will reimburse the publishers and the representatives and so forth for the sales they make. If we could get some way of adopting that same kind of system here, maybe it would be an answer.

Mr. Bélanger: Have a warehouse in Canada.

Mr. Finlay: Yes.

The Chairman: Thank you very much, Ms Cooney. Thank you, Mr. Finlay, Mr. Johnson.

Ms Cooney: Thank you very much.

Mr. Finlay: Thank you very much.

[Translation]

The Chairman: I would like to welcome some very well known personalities from the Union des artistes: Mr. Serge Turgeon, President; Ms Marie-Denise Pelletier, singer and member of the administrative council; Ms Katherine Sand, Secretary General of the Fédération internationale des acteurs; and Ms Lucie Beauchemin, Consultant.

Mr. Turgeon.

Mr. Serge Turgeon (President, Union des artistes): Good evening, Mr. Chairman, members of the committee.

First, I must say that I thought that only artists worked late into the evening. I now realize that members of Parliament do also.

Mr. Arseneault: We are artists!

Mr. Turgeon: As you say, it is no doubt because you have the soul of an artist, and, in that regard, we will certainly understand one another very well and you will understand what we are saying.

Mr. Plamondon: We perform during the day.

.2050

Mr. Turgeon: Mr. Chairman, you have introduced the people accompanying me.

When this Bill was first tabled, the Union des artistes commented favourably on the introduction in Canadian legislation of the principle of rights for performers. However, a careful reading of the Bill has proven to be a tremendous disappointment to us.

Why? Because of the exceptions. There may of course be 13 pages of exceptions, but as regards what is on the table, we consider the major exception to be broadcasters who, for all practical purposes, seem to be excluded from this bill.

In order to understand our reaction, I would ask committee members to consider the following facts. You must understand that we, the Union des artistes, represent the 5000 French-speaking stage, television, cinema and recording artists of Canada.

Over 75% of our membership, and that is an enormous proportion earn less than $13,700 a year. A good year of $33,000 can be followed by three lean years, or by nothing at all. That's the reality confronting artists.

Artists fare with these difficulties, inherent in their status as autonomous workers. Of course, culture to them is not their only livelihood. It is also a duty and a passion, fortunately.

Their main employers, public television and theatre notably, are subjected to the draconian cuts that you know. Emerging production and distribution methods ignore everything in terms of respect for our rights.

In order to face the future under these circumstances, artists are not asking for special treatment - simply that the law recognize that they are the owners of their works and their performances which cannot be used without their consent and without negotiating the conditions for their use, as is the case in all other areas.

First disappointment for 80% of our members; there is no recognition of rights on their audiovisual performances, and no levies for private copies on audiovisual tapes. However, we are living in an audiovisual world.

Second disappointment: The 20% of our members who are mainly singers will have no rights on musical clips or on any other fixation where their song would be accompanied by a picture. However, we live in a world of pictures.

On the brink of the 21st century with audiovisual performances dominating the planet, the Canadian government is not ready to think about is. With all due respect, do we live in the same world, ladies and gentlemen?

Artists wanted a law without exceptions. After all, you are an owner or you are not.

Third disappointment: They discover that the government has tabled a bill from which it exempts even itself. Libraries and national archives will not have to comply with it and neither will any association describing itself as "fraternal" or" charitable".

As for schools, how is it that those institutions responsible for teaching youngsters love and respect for works of the mind are the first to obtain the right to use these works without benefit to their authors, their performers, their editors or their producers?

Is there any good news in all of this? I would still say yes. The bill contains the principle of artists' rights on their vocal performances. Thirty five years after the Rome Convention, Canada takes the step. Thirty five years later!

Artists reacted by saying: "Well, at least it's something. At least broadcasters will finally do what they should have done a long time ago, that is pay what they owe us for using our works."

.2055

Fourth disappointment: The principle is there, but in practice it's another matter. You know as well as I do that the principle of a payment has never put food on the table. Perhaps members don't know this, but when the time comes to pay us, broadcasters have always had "problems". The older ones among us recall that in 1937, when the Union des artistes was created, singers worked live on radio. The CBC will celebrate its 60th birthday this year, and it's also the 60th birthday of the Union des artistes. Those were the beginnings of the UDA.

When these singers unionized simply in order to get paid for what they were doing, at that time, 60 years ago, radio stations cried that they couldn't afford it as they still do today. But our archives relate that individual artists - and please take note of this - were offered up to $10,000 60 years ago in order to break the union. Ten thousand dollars in 1937-1938, for a singer whose dream was to negotiate a big $10 for his or her live broadcast! Just think about it for a moment.

Others remember that a little later in 1951, some radio stations in Montreal were signing on singers to exclusive contracts at $30 a week. In those days, a secretary at the UDA was paid $45 a week, more than the singers who were paying her salary, because times were hard for broadcasters.

Seeing that times are still as hard for them today in 1996, some others wondered why the licenses provided by the CRTC are still finding takers.

Members might well remember that a few months ago, news that such a license would be available for the Montreal market lead to a near stampede. On the basis of privileged information, I know that at least one of the applicants invested over $100,000 in the hope of acquiring the precious licence. And we are talking a business which apparently is not doing very well. A high price to pay for something that is, if we can believe the broadcasters, on the verge of bankruptcy don't you think?

Artists are indignant that the government is announcing the recognition of their rights on their vocal performances while providing the main users of these with made-to-measure conditions so that they won't have to pay for them.

Broadcasters have always considered that our expropriation was part of their business plan. Is the Government of Canada now telling us that through fear or ignorance it will be their accomplice?

Considering the figures I quoted earlier, we are the first to know that times are hard. And not only in Canada. So how is it that for 35 years, since 1961, about 50 countries around the world have applied a regime of rights for the benefit of their artists and producers of sound recordings? Are we being told that the broadcasting industry of one of the G-7 countries could not face up to its obligations for fear of going bankrupt? Is that what we should understand?

No private Canadian radio station, no matter what its revenue, would be in a position to pay out more than $100 in annual royalties to recording artists and producers, on their first $1.25 million in advertising revenue without being driven into bankruptcy? Is that the case?

This sum of $100 will be divided equally between performers and producers, as is to be expected. Do the same calculations as we are doing. Distribute it over the 365 days of annual broadcast, this represents a payment of 13¢ per day, thirteen red cents, for all eligible musicians and singers heard on that radio station that particular day. Since this amount of 13¢ must be divided equally between musicians and performers, that means that only six and a half percent a day will be paid to use the works of all performers on that particular day. That is shameful! Performers will not be receiving even a fraction of a cent, but only crumbs.

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The Canadian Association of Broadcasters invites you to believe that beyond the payment of 13¢ a day per radio station, an incalculable number of its members will go bankrupt. That is indeed what can be described as a precarious economic situation, if you want my opinion.

Sixty six percent of the radio stations in Canada would discharge themselves of their royalty obligations towards performers through this symbolic payment of 13¢ a day. As for the remaining 33% of radio stations, 13¢ per day would suffice to discharge them of their royalty obligations towards performers on the first $1,250,000 of yearly advertising revenue.

We therefore asked ourselves the reason for this generosity on the part of the government, and finally decided that it must be in recognition of the fact that the first million is the hardest to earn. This then is the message we receive. The Government of Canada assesses that the recognition of the principle of their rights entitles performers to a symbolic payment of 13¢. That's a high price for the principle. Obviously, that's what they mean when they say that a principle is priceless.

There remains the portion of advertising revenue beyond $1.25 million which will be subject to a rate established by the Copyright Board. Can we at least hope that in this matter the Board will have entire freedom in the exercise of its mandate? The answer is no. The Board, although qualified to hear broadcasters and authors with minimal directives, become suddenly incapable of distinguishing top from bottom in the case of performers and producers, at least not without guiding principles, limitative criteria, progressive application of the regime; in other words without the government personally ensuring that it does not drive the broadcasters to bankruptcy.

But does the government really believe that broadcasters, so clever when it comes to convincing the policy makers, will be incapable of defending their arguments before the Board? Must the government protect them from a board with no understanding of market realities? A reading of a compilation of the Board's decisions indicates, on the contrary, a keen understanding of its responsibilities in balancing the forces in presence.

Must we fear then that the Board will be seduced by the demands from irresponsible artists? We, artists at UDA, have a solid experience of both individual and collective bargaining. Every day, for the past 60 years, we have talked business with business people. And 60 years later, they are still in business.

The truth of the matter is that broadcasters have benefitted from a period of grace since the introduction of radio in this country. They consider themselves lucky and everybody understands that. But for the Canadian government to associate itself with the unjustifiable prolongation of our expropriation, for it to do so under cover of recognizing our rights transforms that very recognition into a parody. A parody that not a single artist in our country, and certainly no one at UDA, can accept.

I can assure committee members that even without guiding criteria for the Copyright Board, they may rest easy: we are perfectly able to engage in free discussions with broadcasters. And for some reason I think that they're also able to bring forward their own arguments.

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Removal of such criteria would have the added advantage of dissociating the government in the minds of artists, from that indefensible notion of "free promotion", which broadcasters claim they provide to us.

Broadcasters love this argument so much that they were already using it in the days when radio producers did not even bother to mention the name of the song being played...let alone the name of the performer! The free promotion argument is illogical. Why then do broadcasters pay royalties to authors?

If they are offering free promotion, they are offering it to everyone. Or if they are making payments to some, they must make payments to all. In fact, what they are talking about are the ties between service providers and users with the notable difference that in other commercial sectors, these ties do not imply in any way the expropriation of the rights of the former for the benefit of the latter. Commercial use of another's property must be paid for. That is what the normal situation is. Why should it be any different in the case of performers?

And what should one think of the argument that states that our rights will threaten the survival of local content on the radio? When performers and producers fought for the presence of local content in the form of Canadian songs, broadcasters claimed that they would go bankrupt: the quotas were too high, there weren't enough good songs in Canada, the listeners would stop listening, bankruptcies would ensue, there was no end to it.

Now they brandish local content before you and tell you that without it, they are sure to go bankrupt. And that is why they cannot pay for what guarantees their success. Will be government be convinced with this logic? Some of you may think that if performers have done without the payment of their rights for all these years, it's because they don't really need them.

When you listen to a song on the radio, the last thing you think about is the performer's financial problems. And that's normal, you enjoy the song. We prefer to imagine that those who help us dream have it better than we do. But the reality is quite different. The fact is that an artist's life is hard, both emotionally and financially. Countless artists live in the shadows, sometimes in poverty.

For some, success will last literally no longer than a song. Out of respect for the dignity of its members, the Union des artistes have always refused to delve publicly into their financial problems and we certainly won't start this evening. Suffice it to say that we must regularly provide emergency assistance to performers whose state of need is shameful. To ask whether it is necessary to pay for the use of their performances is downright incomprehensible.

When success knocks at the door, whether it be for a month, a year or for an entire career, why should performers, unlike other members of society, not be allowed to benefit from it?

I'm accompanied this evening by my colleague Marie-Denise Pelletier. She's a popular singer, very popular throughout the country. I've asked Marie-Denise to come here this evening so that she can tell you a bit about her daily life and her experience as one of the most frequently heard French language performers on radio.

Ms Marie-Denise Pelletier (singer, member of the Board of Directors, Union des artistes): Good evening, ladies and gentlemen, Mr. Chairman. Before making my statement, I'd like to tell you about something that happened this afternoon.

I was in a store and chatting with the saleswoman who asked me whether I was here in Ottawa to give a show and I explained the reasons for my appearance. I told her that every time one of my songs was played on the radio, I received no payment.

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If you'd seen the expression on her face, I think you would have understood a lot. This lady was really surprised to find out that I was not paid. For most people, copyright implies a recognition of performers' rights. Most people just take it for granted. I've talked to lots of people and they think that it is obvious that all those who are responsible for a song's success, and notably the performers, should be paid.

Personally, I consider myself lucky because I'm able to make a fairly decent living. I sell records. But this is not true for the majority. Most performers do not sell records but are heard a lot on radio. As for myself, as Serge mentioned, I've played a great deal in the past ten years and if there had been any royalty during that period, I would certainly have been very very happy to get that little bit of extra money in my bank account.

I am a songwriter-composer-performer. So I'm familiar with the creative process of writing as well as the process of interpreting a song. The two things are totally different. When we listen to the same song sung by different performers, we hear completely different interpretations.

So we must recognize the creative process of the performer, the interpreter. We must give this individual recognition. It must be done in an equitable manner. I'm told that I am recognized as a creator but I do not receive anything in value in relation to the value of what I provide. There is a great deal of work to be done on that score.

We are asking the government to finally acknowledge our contribution as performers, as creators of the work. For me it's an ethical question above all else, but also a question of fairness.

Mr. Turgeon: Thank you, Marie-Denise. Mr. Chairman, members of the committee, the decisions the government makes will have a ripple effect at the international level. Many people throughout the world are watching Canada closely at the moment to see what it does with respect to its creative artists.

That is why I invited Ms Katherine Sand to join us here today. The Union des artistes and our friends are part of this international federation, which is made up of the unions representing performing artists in some 50 countries. Katherine is therefore in a very good position to tell you what is going on internationally with respect to the recognition of performer's neighbouring rights.

[English]

Ms Katherine Sand (Secretary General, Fédération internationale des acteurs): Merci.

Mr. Chairman, I've only recently arrived from London, and this is my first trip to Canada. I've been rather surprised to learn, even in these few days, that Canadians seem to be under the impression that their actions are not taken into account in the rest of the world. In terms of artists' rights and this legislation, nothing could be further from the truth.

The difficulties in reconciling copyright and droit d'auteur traditions are something we in FIA, my organization, understand only too well, as we represent 73 unions of performers in 5 continents, from emerging democracies in eastern Europe and Latin America, as well as from North America and European and Asian countries.

Our members also have the experience, over decades of the successful administration of performers' rights in many countries, in such a way as to secure the needs of all parties: broadcasters, consumers, producers, authors, and finally, performers.

[Translation]

Today, co-productions and international distribution of works are growing realities. We must find practical and ingenious solutions to bridge the two great traditions of copyright and droit d'auteur in the area of intellectual property.

[English]

We think that because of its history, Canada now has a very unique opportunity to thread together these two important traditions, which will open new vistas for performers all over the world. On this matter, the eyes of the world are definitely turned towards Canada.

Thank you.

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[Translation]

Mr. Turgeon: Thank you, Katherine. I don't think we should forget that. It is true that Canada's image is at stake here.

In 1937, singers worked live on radio for miserly fees. Sixty years later, broadcasters pay a mere pittance or nothing at all for the use of our songs. That to is pitiful - 13¢ a day divided by 100 or 150 singers and musicians. Are we truly on the verge of the 21st century in Canada?

We ask for no favour or preferential treatment. We are simply asking for the recognition of our property rights and the freedom to negotiate the use of this unique property of which we are the authors and that we so willingly share with all. The government has the power to place Canada in the ranks of those countries which have recognized and which apply these elementary principles of equity and justice.

Thus, on behalf of Canada's 5,000 French-speaking performers, we ask the government, through this committee, to implement immediately measures leading to the recognition of rights on all our performances before the year 2002, for audiovisual performances before the year 2002, to abolish the regime of exceptions introduced in the bill, or at the very least, to provide for a limitation of these exceptions where there exists a body for the collective administration of the rights in question.

We all have a social conscience. We are asking that the government allow for the full collective administration of rights conferred to performers. We ask that the government remove from the bill the special regime favouring broadcasters or, failing this, to implement a regime meeting those guidelines set out superbly for you this morning by our friends from ADISQ, with whom we worked on this project.

It was in 1974 that the Union des artistes first started on its campaign for the recognition of performers' rights in Canada. More than 20 years later, we remain at the ready to work with you so that this bill can be something that Canadian performers, the Canadian government and individual members of this committee may be proud of. Thank you very much indeed.

The Chairman: You are as eloquent as ever, Mr. Turgeon. I would like to thank you, Ms Pelletier and Ms Sand for your presentation.

Mr. Plamondon.

Mr. Plamondon: I had somewhat the same impression when the bill was tabled in the House. The initial reaction on the part of the Official Opposition was one of satisfaction, when we heard that neighbouring rights would finally be recognized. In fact, I said in my speech in response to the official presentation of the bill in the House, that we were satisfied, but that we felt as though we were telling a particular group that we recognized their rights but that we were doing everything possible to ensure they would receive no payment. The bill was a little like that.

Some might think that there is some bad faith here, but I don't think so. I think that any government, of any stripe, always tries is a bill to respond to a historical demand or to a need felt by people. However, often it gets bad advice and rushes to table bills that require many improvements.

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You have described the problem very well and pointed very clearly the irritants.

The other witnesses we have heard from, chiefly those from ADISQ, this morning, did a very good job of dissecting the acceptable amendments with respect to the much mentioned figure of $1.250.000. As I said earlier, if you own a car, you own it 100 per cent. When you have a copyright, it should also be 100 per cent.

Nevertheless, I think ADISQ's proposal is very valid, because it said that artists should agree to lower their sights during a certain transition period. Actually, I think they lowered them quite a bit.

With respect to the famous list of exceptions, you put forward a new idea that we have not heard before: that of a collective society. I would like you to give us some more details on that, if possible. You are also the first witness to speak about sound recording rates. I would like to hear a little more about that as well.

I will end my opening comments here. This morning, the members of the committee were impressed by the presentations we heard, particularly the one by ADISQ, with its tables. We should certainly recommend that the Minister amend the bill in keeping with ADISQ's suggestion regarding the $1.250.000.

As far as the exceptions go, I find your solution very acceptable. Rights to sound recordings and audio visual material should be included as well.

Neighbouring rights apply only to sound recordings, whereas you would like them to apply as well to...

Mr. Turgeon: We asked that they apply to the audio visual material as well.

Mr. Plamondon: In any case, you know what I mean.

Mr. Turgeon: Yes.

Mr. Plamondon: I would like you to give us some more information so that we can draft some amendments to the bill.

Mr. Turgeon: In a number of countries throughout the world, and this is the fundamental point, the rights of artists are recognized in all areas in which they perform.

In our case, that covers both sound recordings and audio visual material - in other words everything on television and everything that goes out of it in the audiovisual sphere, everything with respect to multimedia. The 21st century is fast approaching. How many years has it taken us? Thirty-five! The Rome Convention has been in place for 35 years. How many years did it take us to finally come up with this all too timid bill? How long will it take us to get in step with reality? That's a fundamental issue for us.

I will ask Ms Beauchemin to give you some further information about collective societies, Mr. Plamondon. Before doing that, however, I would like to come back to something you said earlier. You said, with reference to any government, and in particular to the Liberal government, that you did not think there was any bad faith. I agree with you on that: there is no bad faith here. I think the Liberal government has shown some political will in his attempt to recognize the principle of neighbouring rights. There is no bad faith, but there may be some misunderstanding of what we are. There may be some misinformation going around, and that is what we are trying to correct.

I can tell you that our government, the government of Canada is taken as a model because of what it did, particularly in the case of Quebec, as regards the status of the artist. That was the first time a government had focused specifically on the fate of the country's artists. I'm referring to the Status of the Artist legislation. Since the government did that, why would it take a different approach to recognizing neighbouring rights for performers?

Sooner or later, this will have to be done, as it has been in 50 other countries. So why not take advantage of the fact that you are in power at the moment? Why not go down in history and take this last remaining steps?

With that, I will turn the floor over to Ms Beauchemin.

Ms Lucie Beauchemin (Consultant, Union des artistes): Since you mentioned sound recording rights in passing, I would just like to add a point. The famous distinction between audiovisual and sound creates problems at all levels.

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Of course, we want recognition of all our rights with respect to all our performances. In seeking to limit that to sound, Parliament had a problem trying to define what is and what is not a sound recording. With current technology, sound works, even songs, are more and more linked to images, whether in the form of videoclips or new technologies such as CD-ROMs, in which images of the artist's life or other images are shown with the song.

This creates a problem. The current definition of sound recordings is limited to sound only. Artists will not even be paid for some things because of this definition. So there is a problem there.

As regards exceptions and collective societies, it goes without saying that we do not want any exceptions. That is clear. As you were saying, we are either the owners of the rights or we are not. However, there is a way of negotiating the use of works, which is the collective society.

If there is a particular problem in a specific area, we might, in extreme cases, understand that there would be an exception made, if there is no collective society to negotiate with the user in this specific field.

However, where collective societies exist, there is no reason for exceptions, because the society is the body with which the user can negotiate the use of works. I would remind you that in some very specific cases, for example that of the handicapped, existing societies show common sense, a sense of social responsibility and negotiate very reasonable agreements.

So if there is a collective society, there should be no exceptions. If there is no collective society, then, in extreme cases, we might understand that some exceptions would be made, until such time as a collective is established to manage that particular field.

[English]

The Chairman: Mr. Abbott.

Mr. Abbott: I too would like to compliment you on your presentation. I think I'm approaching my fifteenth hour at work today, and in spite of the fact that I'm unilingual, which is very unfortunate, I enjoyed your presentation en français, so that says something about your presentation.

I want to ask a brief question, because I really want to turn you loose on those guys; they're the guys in charge.

Some hon. members: Oh, oh!

Mr. Abbott: My question has to do with ephemeral exemptions. When one of your artists goes to a radio station with a CD, perhaps accompanied by an agent, and plays certain cuts from the CD, and the radio station says it likes certain ones and makes a copy of them onto some kind of digital format.... Perhaps there will be other copies. Before it ever reaches broadcast, there will be other computerized, digitized copies of that. My understanding of your position is that this should attract a royalty. Why? In other words, there has not been one penny of revenue realized for that yet and it has never been broadcast publicly. Why should there be a royalty realized because we have seen the radio station alter or change format?

Ms Beauchemin: I'll very briefly answer that. I think you are already aware of the existence in Quebec of a collective society called SODRAC. It has negotiated agreements.

[Translation]

SODRAC negotiated some agreements that allow for use of works as you described, but under controlled conditions.

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That is exactly why we say it is necessary to deal with collectives, which, since they are experienced in a particular field, can reach agreements with users that take into account current technology and changes and that work out responsible conditions for the use of the work, so that everyone is satisfied.

However, we are totally opposed to adding another exception to the bill, because we think there are already too many of them. We must ensure that existing societies can negotiate with users, whoever they may be, and come up with an agreement for the responsible use of works that protects everyone's rights.

[English]

Mr. Abbott: So we could assume the reaction of the UDA would be rather hostile if the government was going to add that to the bill.

[Translation]

Ms Beauchemin: All I can tell you is that we have already said that we are opposed to the existing exceptions. We find it unthinkable that the government could add more. We are already asking that it withdraws those that are there at the moment. So I fail to see why we would agree to more exceptions.

Mr. Turgeon: One good thing about the proposed legislation, is that there are no exceptions.

[English]

The Chairman: Ms Phinney.

Ms Phinney: Thank you, Mr. Chair.

We had a presentation this morning, as one of you already spoke about, from ADISQ. It was obviously a presentation they spent a long time working on. They came up with what they thought was a fair system. Do you agree with what they presented to us this morning?

[Translation]

Mr. Turgeon: If often happens that artists and producers speak the same language and are on the same side of an issue. That is true of ADISQ. We worked together on preparing our briefs and we fully support the proposals made by ADISQ this morning. We agree with them 100%.

However, there's one thing you must understand: artists have no interest in forcing any broadcaster into bankruptcy. Whether broadcasters are small medium or large, their disappearance is something that happens among themselves. For business reasons, a larger one may have taken over a smaller one. Artists have never caused the bankruptcy of any broadcaster, and no artist would certainly ever intend to do that. That point must be understood.

[English]

Ms Phinney: Thank you.

I'd like to ask Katherine Sand a question. Welcome to Canada, by the way.

Ms Sand: Thank you.

Ms Phinney: We should have provided some snow for you.

Ms Sand: There's been plenty of rain, though. I'm used to that.

Mr. Bélanger: Let's not be that hospitable. Come on.

Ms Phinney: I'd like to talk a little bit about exemptions and ask if there are exemptions in other countries. What kind of exemptions do they have? What are the problems? You said you represent a lot of unions and a lot of countries.

Ms Sand: That's right. We represent a lot of organizations. We've had a great deal of experience with these rights.

Of course, there are exemptions built into laws from time to time. We resist those. There are fair-use exceptions, which are well understood in copyright law, and those are, I think, accepted.

What is more problematic is when the exemptions are pushed to the limit perhaps. Your colleague referred earlier to the use of ephemeral reproductions, as we call them. As Lucie has explained, when those are part of an agreed process with a collecting society, an agreed set of uses, those are acceptable.

What we see happening more and more in the European countries are those exceptions being stretched to the limit, used as an excuse not to pay the performers. That's what we object to. We feel, I think, that the exceptions to the law rather cloud the issue. As Mr. Turgeon has said, these matters are negotiated in good faith daily by performers' organizations and broadcasters as part of their collective agreement and their mutual negotiations.

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The Chairman: Mr. Peric.

Mr. Peric: Thank you, Mr. Chairman. I'll have short questions for Ms Pelletier, and I would appreciate short answers because it's getting late.

First of all, when did you start your career?

Ms Pelletier: About fifteen years ago, but my record career began ten years ago.

Mr. Peric: How did you start it? Who was your first contact? Your agent? Recording companies?

Ms Pelletier: My first contact with the record industry was through a contest, so I met people from the industry, but I met my first manager through a contest.

Mr. Peric: So you signed an agreement with a record company and then you started that. Right?

Ms Pelletier: Yes.

Mr. Peric: Who was your record company?

Ms Pelletier: Right now?

Mr. Peric: No, when you started.

Ms Pelletier: At the time it was Kébec-Disque and Trans-Canada.

Mr. Peric: Could you describe to us what kind of deal you signed with them?

The Chairman: You don't want to know secrets, do you?

Mr. Peric: No secrets, but the past is like -

Ms Pelletier: What do you want to know, exactly?

Mr. Peric: Did you sign the neighbouring rights to the company - royalties? What was the deal? Fifty-fifty?

Ms Pelletier: At that time, ten years ago, I don't know exactly what the issue was of the.... Of course, I had a certain percentage of the sales. I can't put figures on the table right now because it's very different from one artist to another, but I can tell you that maybe at that time I would have made about 50¢ an album. That's for the singer that I was - that I am.

Mr. Peric: At that time you had an agent. Right?

Ms Pelletier: Yes.

Mr. Peric: So your agent was doing his job. He went to the radio stations and he promoted you. Or did a record company do that? Who did it?

Ms Pelletier: Who did it? A promotion guy we pay to do it.

Mr. Peric: You pay from your own profits?

Ms Pelletier: Yes.

Mr. Peric: He went to the radio station, to broadcasters?

Ms Pelletier: Yes.

Mr. Peric: He bought time from broadcasters?

Ms Pelletier: No.

Mr. Peric: So they play free of charge?

Ms Pelletier: I'm sorry?

Mr. Peric: They played your -

Ms Pelletier: My music, yes. It was playing on the radio, yes.

Mr. Peric: Free of charge?

Ms Pelletier: Free of charge?

Mr. Peric: You didn't have to pay for that.

Ms Pelletier: No!

Mr. Peric: Okay.

A voice: She didn't charge them either.

Ms Pelletier: That's right, I didn't charge them either.

Mr. Peric: Do you think radio broadcasters play a really important role in your career?

Ms Pelletier: Yes, just as we play a big role in their career.

Mr. Peric: It's mutual.

Ms Pelletier: Yes. I think people are listening to the radio, not because of publicity.... First of all, it's because they want to listen to music. Of course, it's a nice exchange.

Every time I have sung on TV, on stage, I've been paid for that, and I think it's just natural that a radio station should do the same thing.

[Translation]

It is a business matter. You know it's just like...

The question does not even come up. Every time I sing or perform in public, I'm paid as a performer, because I am an artist. When I perform a song, as I was explaining earlier, there is a creative element involved.

So, I just don't see why radio stations do not do it. I believe that they have not been doing this for a number of years. I'm sure they had their reasons, but today, we are seeking equity. We want this to be done once and for all, because everyone else but radio pays. What is the reason for this? Is it because they provide advertising for us? As far as that goes, when we appear on television, we are getting advertising there as well.

First and foremost, artists are on the radio not to support it, but rather because they have something to say and because there are people who want to listen to them. And our performances are carried on the radio. So obviously radio should be paying us for that.

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[English]

Mr. Peric: I agree with you. Now -

The Chairman: Two questions.

An hon member: Two long ones or four short ones?

Mr. Peric: Who played a more important role in your career, the record company or the radio?

[Translation]

Ms Pelletier: Neither was really more important than the other. The individual who plays the most important role in my career is myself. Then it is a team effort. When I hire promotional people, I pay them. When I hire musicians to work on my album, I pay them. I have sometimes acted as the producer and paid myself as a performer, because that is something different. So when radio stations use my voice in their programming, in most cases, they should pay.

[English]

Mr. Peric: Do you feel that without the radio you could be more successful, or less?

Ms Pelletier: I think that without us the radio couldn't even exist.

Mr. Peric: No, I'm not asking about radio now; I'm asking about you as an artist.

[Translation]

Ms Pelletier: There's no doubt that it is a team effort, that everything comes together and that we need each other. However, there must be some equity somewhere. And there is no equity for us as regards broadcasting. Authors are paid. Composers are paid. Publishers are paid. Quite a few people are paid, but not performers. As a performer, I want to be paid.

[English]

Mr. Peric: Thank you.

[Translation]

The Chairman: You held up your end well, Ms Pelletier.

[English]

Some hon. members: Oh, oh!

Ms Pelletier: I like those kinds of questions. Thank you.

Mr. Peric: One last one....

The Chairman: Just hold it a minute.

[Translation]

First of all, we have gone over our time. I would be prepared to stay longer, because I think that this is very important. Mr. Bélanger would like to ask a question. Are there any others?

[English]

Okay, Mr. Peric, I'll make a deal with you. I'll let Mr. Bélanger ask a question and then Mr. Plamondon. I'll come back to you, but you'd better be short and sweet.

[Translation]

Mr. Bélanger.

Mr. Bélanger: I would like to congratulate you on your presentation, Mr. Turgeon, and thank you for it. If possible, I would like to get a copy of your remarks. I listened to you very carefully, and I think it would be difficult to find any fault in your logic. Personally, I tend to agree with you. You describe an ideal, and it would be good if the country as a whole were to move towards this ideal.

There's no doubt in my mind. People are not just artists. Sometimes they are figure skaters. They skate well, and as politicians we often have to do that as well, because there are conflicting wishes involved. Sometimes, we try to find a balanced approach. There's a move towards this ideal, and I think that as members of the committee, we should be moving towards this ideal as well.

I would like to ask you a question, and this is not a trick question. I will ask it of Ms Sand or of you, Mr. Turgeon, if you prefer to answer it. In all honesty, if the bill were passed in its present form, would this not be a little step forward after all?

Mr. Turgeon: I will let Ms Sand answer as well. Personally, I would say that if we want to do something, Mr. Bélanger, we should do it in the way it should have been done from the beginning. Fifty countries in the world have done this correctly. Why would Canada, a member of the G-7, not do so as well? Ms Sand, with her international experience, can add to my answer.

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[English]

Ms Sand: For us this is perhaps the most classic right of all, and the principle of its operation in the European countries, which I know best, is so well founded and the management systems are so smooth that it is not a matter for controversy. I come from a country - I'm from Great Britain, as you might have guessed from my accent - that is now only this year, in fact this week, introducing a bill to make this right a law so the performers enjoy the same rights as their colleagues in other European countries. This for us is not an ideal; it is an actual situation that is experienced in many countries very efficiently, and has been for many years.

[Translation]

Mr. Turgeon: It is good to get beyond the phase of ancient history, Mr. Bélanger, but we are approaching the 21st century. We should not stop in the Middle Ages in our efforts to move forward.

Mr. Bélanger: As far as audiovisual material goes, I am convinced. There is no doubt about that.

[English]

An hon. member: Could you send us a copy of that bill?

Ms Sand: Yes.

The Chairman: Please send it to the clerk of the committee and she will make sure that all members have it.

Ms Sand: With pleasure.

[Translation]

The Chairman: Mr. Plamondon.

Mr. Plamondon: With respect to the $1,250,000 figure, what would ADISQ's proposal amount to in percentage terms? What percentage of the volume, of commercial revenue on radio would it represent?

Ms Pelletier: It would amount to a little over 1%, I think.

Mr. Plamondon: Isn't it 1.5%? A little less than 1%.

Mr. Turgeon: That's for the raw material on which radio depends. We should not forget that.

Mr. Plamondon: That's what I was going to say. I have some experience in several businesses. I still own four. I know that for furniture manufacturers, the cost of the raw material amounts to 25%. In the restaurant business, raw materials cost 30%. The figure for summer theatre is sometimes 50%. For golf, the figure is at least 30%. I know of no businesses in which the raw material required to manufacture something, or sell something, cost less than 20% of the total.

For the raw material of broadcast, you were asking for 1.5%.

Mr. Turgeon: Absolutely.

Mr. Plamondon: That's what I find surprising when people are concerned about the survival... If a radio station's survival depends on 1%, then it should close down right away. It will never survive.

Mr. Turgeon: That's what we maintain. We spoke earlier about expropriation, but it is also usurpation. That is what must be understood, that is what is intolerable, and our government should not be involved in any such act.

Ms Beauchemin: I would just like to add a brief comment, because I think it might be helpful to your colleague on the other side of the table.

In all commercial sectors, we must start by looking at the costs of the raw material. In all commercial sectors, there are also relationships established between suppliers and service users. These relationships are established in a normal context in which both services and payments are exchanged, because there must be a commercial advantage for both parties.

At the moment, the problem is that the commercial advantage goes to the user of the service only. We would be only too pleased to have a mutual advantage, but we want this mutual advantage to be recognized in a commercial agreement between suppliers and the users of the service.

The Chairman: Thank you very much. When he is fully enlightened, we will let ask him one final brief question.

[English]

Please make it short and sweet.

Mr. Peric: Ms Pelletier, I hope you are going to agree with me. If you do, just say yes or no.

[Translation]

The Chairman: I think he likes you, Ms Pelletier.

Mr. Turgeon: Yes, we will bring you a record.

[English]

Ms Pelletier: Buy a new record.

.2150

Mr. Peric: In my opinion, any good, professional singer can sing without music. What do you think?

Ms Pelletier: Can a good singer sing without music? Yes, of course.

Mr. Peric: Then do it for us.

Some hon. members: Oh, oh!

[Translation]

Ms Pelletier: That is a good one.

Mr. Turgeon: That is a good question. Do you have a contract for her?

The Chairman: Before adjourning the meeting, Mr. Turgeon, we would like to thank you, Ms Pelletier, Ms Sand and Ms Beauchemin very much for your truly eloquent and interesting presentation. You managed to keep committee members here until 9:50 p.m. That is quite a feat.

Mr. Turgeon: In closing, I would just like to say that this has been a long day for many people here. That means that tonight artists and some members of Parliament will be going to bed at the same time. When I do so, I will keep in mind that my government is certainly not the cause of my problems, but rather the solution to them.

Thank you very much.

The Chairman: The meeting is adjourned.

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