CANADIAN MUSIC PUBLISHERS ASSOCIATION

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Canadian Music Policy Coalition’s Copyright Board Consultations SubmissionSep 29 2017

VIA EMAIL: cbconsultations@canada.ca

Department of Innovation, Science and Economic Development
Department of Canadian Heritage
Copyright Board of Canada

To Whom It May Concern:

Re:  Copyright Board Consultations

The Canadian Music Policy Coalition (CMPC) is a coalition of Canadian music professional organizations and music rights organizations representing a cross-section of the entire Canadian music industry. Our groups represent over 150,000 English and French-Canadian songwriters, composers and publishers, over 621,000 performers and record labels domestically and internationally, and 280 Canadian professional and trade organizations.

We believe that Copyright Board reform is urgently needed and are pleased that ISED, PCH, and the Board have jointly launched this consultation.

Of the 13 possibilities identified as potential reform options, the CMPC would like to focus on the following:

  • Create new deadlines or shorten existing deadlines in respect of Board proceedings;
  • Codify and clarify specific Board procedures through regulations; and
  • Specify decision-making criteria that the Board is to consider.
  1. Create new deadlines or shorten existing deadlines in respect of Board proceedings.

With the advent of the digital age, tariff certification processes that worked before the digital revolution no longer keep pace today as consumers enjoy content in new, creative and rapidly changing ways.

The entire process from filing a tariff to Board certification routinely takes up to six years and sometimes longer, including two to three years for a decision to be released after a hearing ends.  Even settled tariffs, which are jointly submitted to the Board by the parties for certification, can take the Board over three years to certify.  By the time decisions are rendered, they apply to past periods, which creates significant uncertainty for businesses planning and budgeting for the cost of music and for creators seeking financial certainty and stability.  We believe that this uncertainty has also influenced businesses’ decisions to refrain from offering services in Canada to the detriment of music rights holders and users alike.

A delay of two or more years from the end of a hearing until a decision can mean that the decision is based on business models and evidence that are outdated or no longer exist by the time the tariff is determined.  Music streaming is a good and highly topical example.  In 2012, the Board held a hearing for Re:Sound’s simulcasting and webcasting tariff (for the years 2009-2012)[1] and semi-interactive webcasting (for the years 2011-2012).[2]  By the time of the Board’s decision in 2014, music consumption had changed dramatically. Specifically, consumption by CDs dropped by one-third, from 54% from 36%; permanent downloads (buying songs on iTunes) increased from 21% to 24%; and streaming jumped 500%, from 3% to 15%.[3]  These figures are of course also drastically different today: CDs have dropped to 34% of the market, permanent downloads are down to 15%, and streaming now constitutes 29% of the music market, almost double its share in 2014.[4]

These music streaming tariffs are only a sample of the tariff certifications that have been subject to significant Board delays.  For example, on August 25, 2017, the Board rendered a decision certifying the SOCAN/CMRRA-SODRAC Inc. (CSI) online music services tariff for the years 2011-2013, almost three and a half years after the hearing ended in May 2014.[5]  Additionally, the Board took close to five years to certify the SOCAN-CBC settled tariff, for which certification was sought on November 28, 2012 and granted by the Board on May 19, 2017.[6]

It is clear from these figures that decisions can be drastically out of date by the time they are rendered.  This was also acknowledged by the Standing Committee on Canadian Heritage in its 2014 review of the Canadian music industry, in which its top recommendation was for the Government of Canada to examine the time that it takes for decisions to be rendered by the Copyright Board ahead of the 2017 review of the Copyright Act.[7]

Recommendation:

The CMPC submits that (a) deadlines must be imposed on Copyright Board decisions, requiring, for example, that tariffs be certified no more than 12 months after the end of a hearing; and (b) an expedited approval process must be imposed for settled and unopposed tariffs, requiring that they be approved six months following their joint or unopposed submission to the Board.

Many copyright tribunals around the world have fixed deadlines for decisions, and some tribunals that are not subject to a prescribed timeframe are used only as a last resort where creators and music users are unable to settle as much as possible between themselves.  The chart below highlights a number of tribunals that (i) have prescribed timelines for issuing decisions following tariff hearings, (ii) are used only as a last resort, and/or (iii) must follow expedited approval processes for settled tariffs.

Country Timeline for Decision following Tribunal Proceeding Tribunal as Last Resort Expedited Approval Process for Settled Tariffs
Canada Not specified by legislation. In practice, two years or more for a decision after a proceeding. Involvement of Copyright Board is mandatory in most cases; majority of rates must be fixed by the Board before taking effect. No expedited approval process; settled tariffs still have to be approved.
United States Decisions must be issued no more than (i) 11 months after the post-discovery settlement conference (if agreement is not reached at that time), or (ii) in the case of a renewal tariff, 15 days before the expiration of the tariff’s current term. Rates can be established either by agreement or by the tribunal. No approval required for rates established by agreement pursuant to the Webcaster Settlement Act.
Germany Tribunal Proposal for an agreement must be issued within one year of initiation of the proceeding. Tribunal is last resort: Tribunal settles disputes only where agreements cannot be reached. No approval required for settled tariffs.
United Kingdom N/A Tribunal is last resort: Tribunal settles disputes only where agreements cannot be reached. No approval required for settled tariffs.
Australia N/A Tribunal is last resort: Tribunal settles disputes only where agreements cannot be reached. No approval required for settled tariffs.
New Zealand N/A Tribunal is last resort: Tribunal settles disputes only where agreements cannot be reached. No approval required for settled tariffs.
The Netherlands N/A There is no tribunal: rates are determined only by agreement.  If agreement cannot be reached, matter must go to the Dutch Court of First Instance in the Hague. No approval required for settled tariffs.
France N/A There is no tribunal: rates are determined only by agreement. No approval required for settled tariffs.
Italy N/A IP Courts are last resort: IP Courts settle disputes only where agreements cannot be reached. No approval required for settled tariffs.
Denmark, Finland, Iceland, Sweden & Norway N/A N/A No approval required for settled tariffs.

 

Impact of the Recommendation:

Imposing deadlines on Board decisions will have a tremendous positive impact on creative industries and broader business in general.  Reducing the time for decisions will reduce uncertainty by providing music creators with income certainty and stability and allowing music users to budget for the cost to use music so that they can properly run their businesses.  The proposed solutions will also incentivize creators and users to negotiate terms and avoid lengthy and expensive hearings before the Copyright Board, which would also allow for better use of Board resources.

  1. Codify and clarify specific Board procedures through regulations

Not only are business models evolving to meet changes in the form of music consumption, but so too are business models reaching across boundaries as users access music online from other jurisdictions. Canada’s copyright regime must respond to changing realities in a timely and fair manner, and in order to do so the Board must have a clear and consistent set of practices. It is clear that detailed rules of procedure would be preferable to the current approach of a general and unclear directive, however the CMPC is not yet in a position to identify what those rules should contain. In determining the best approach, it is important that Canada looks to examples of working domestic tribunals and that the best practices on copyright from other jurisdictions be studied and considered by all stakeholders in developing a system that is appropriate for Canada.

Recommendation:

The CMPC recommends that attention should be paid to tribunals in Canada and copyright tribunals around the world.  In particular, notable practices of other countries’ copyright tribunals include:

  • The U.S. Copyright Royalty Board consists of three full-time judges: one is the chief judge, one has copyright expertise, and one has economics expertise. The judges serve staggered six-year terms and are supported by three full-time staff members.  The U.S. Board has an annual budget of $5.3 million, $1.8 million of which is just for personnel expenses such as salaries, awards and benefits.[8]
  • In many countries, the copyright tribunal is seen as a last resort. The aim is to have creators and music users settle as much as they can between themselves.

Impact of the Recommendation:

By considering and implementing the best practices of copyright tribunals around the world, the Canadian regime will reflect the borderless reality of the digital music industry and place our creators on equal footing with their international counterparts.

  1. Specify decision-making criteria that the Board is to consider

The only guiding criterion of general application for the Copyright Board in setting tariffs is set out in Section 66.91 of the Copyright Act, which requires that royalties be “fair and equitable”. Canada is unique in its lack of guidance for its copyright tribunal. In the U.S., U.K., Australia and New Zealand, the tribunals have mandated criteria to consider in setting tariff rates.

As a result of this limited guidance, the Board’s decisions are not always based on objective criteria, such as market agreement, rates for substantially the same rights in other jurisdictions, or even the best evidence proffered at the hearing.  The Board often ignores and dismisses evidence put forward by the parties in favour of its own economic methodologies and the advice of its in-house economists and legal counsel.  These efforts are duplicative of the cost and efforts undertaken by all parties to a proceeding in proferring evidence, including that of highly regarded experts who frequently provide evidence that is considered credible by tribunals in other jurisdictions. Moreover, because the Board is not even bound by its own precedent, its decisions have become increasingly unpredictable, making it more and more difficult for stakeholders to plan their affairs – especially since tariffs are routinely certified years after their expiration dates.

Recommendation:

The CMPC recommends well-defined mandated guidance for the Copyright Board in setting tariff rates.

Impact of the Recommendation:

If the Board had clear, enumerated guidance for its rate-setting, parties would focus on collecting the best and most persuasive evidence with a view to satisfying these criteria.  This would in turn ensure proceedings are focused and efficient, assist the Board in rendering decisions more promptly, and avoid uncertainties that may lead to judicial review of Board decisions.

Conclusion

The CMPC looks forward to the outcome of the Copyright Board consultations, and would be pleased to offer our further suggestions and comments.

Sincerely,

The Canadian Music Policy Coalition

ACTRA Recording Artists’ Collecting Society

Association Québécoise de L’industrie du Disque, du Spectacle et de la Vidéo Inc. (ADISQ)

Association des professionnels de l’édition musicale (APEM)

Artisti

Canadian Federation of Musicians (CFM)

Canadian Council of Music Industry Associations (CCMIA)

Canadian Independent Music Association (CIMA)

Canadian Music Publishers Association (CMPA)

Canadian Musical Reproduction Rights Agency (CMRRA)

La Guilde des Musiciens and Musciennes du Quebec (GMMQ)

Music Managers Forum (MMF)

Re:Sound

Songwriters Association of Canada (SAC)

Screen Composers Guild of Canada (SCGC)

Society of Composers, Authors and Music Publishers of Canada (SOCAN)

Société du Droit de Reproduction des Auteurs, Compositeurs et Éditeurs au Canada (SODRAC)

Société de Gestion Collective des Droits des Producteurs de Phonogrammes et de Vidéogrammes du Québec (SOPROQ)

Société Professionnelle des Auteurs et des Compositeurs du Québec (SPACQ)

 

[1] Re:Sound Tariff 8.A (2009-2012) – Simulcasting and Webcasting.

[2] Re:Sound Tariff 8.B (2011-2012) – Semi-Interactive Webcasting.

[3] International Federation of the Phonographic Industry, Recording Industry in Numbers, April 2015, at page 28.

[4] International Federation of the Phonographic Industry, Global Music Report 2017, April 2017, at page 48.

[5] SOCAN Tariff 22.A (2011-2013) – Online Music Services; SODRAC Tariff 6 (2010-2013) – Online Music Services, Music Videos; CSI Online Music Services Tariff (2011-2013).

[6] SOCAN Tariff 1.C (2012-2014) – Radio – Canadian Broadcasting Corporation; SOCAN Tariff 22.E (2007-2013) – Internet – Canadian Broadcasting Corporation.

[7] Review of the Canadian Music Industry, 2014, at page 25.

[8] Library of Congress, U.S. Copyright Office Licensing Division Operating Costs as of 06/30/2016, at page 1, accessed at: https://www.copyright.gov/licensing/financial-statements/operating/jun2016.pdf.

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