Canada called out for weak copyright laws by IFPI and at the Heritage Committee

Digital piracy remains one of the biggest obstacles for the recording industry. It is an especially significant problem here in Canada. A major contributor is weak copyright protection which limits the development of new business models for music in Canada. These are the conclusions of the IFPI which just published a report setting out a comprehensive picture of the key trends in today’s music business including key trends in Canada. It is also the opinion of representatives of the recording industry who appeared before the Standing Committee on Canadian Heritage last week.

Reasonable people should be able to discuss civilly what should be done about the problem of digital piracy in Canada. Attacks against CRIA and Minister Moore by Prof. Geist this week suggest, however, that the debates over copyright reform this spring are not going to turn out that way.

The IFPI report and the Heritge Committee

According to the IFPI, digital piracy remained one of the biggest obstacles for the recording industry in its efforts to grow the online music business. The availability of free unauthorised music undermined the incentive to buy legal products. Nearly one in four people who download music illegally never buy music. This has lead to significant losses in revenues and jobs.

According to the IFPI, weak IP protection in Canada has limited the development of new business models here. It claims that Canada has seen one of the biggest declines in music sales among the major music markets, with sales more than halving since 1998. This decrease is higher than that of any other top 10 market during this period, except for Spain. The major reason given for the decline is the inability of the digital sector to offset the drop in the CD business with digital sales. According to the report:

“Canada has one of the most advanced broadband markets and one of the highest per capita GDP rates in the world. Traditionally, the value of Canada’s physical market has been the equivalent of around 10% of the US physical market. Yet, its digital music market is only around 4% of the size of the US digital market and less than a third of the UK’s digital market size. This unfulfilled potential in the digital sector is a direct result of the lack of new entrants in the market, an extremely high online piracy rate and the lack of modern and robust IP protection for the digital space.”

The IFPI claims that Canada’s digital piracy rate is estimated at 96%, one of the highest levels of online piracy in the world. This translated into much lower per digital capita revenue than in other countries. It also claimed that Canada is a major source of the world’s digital piracy problem, with a disproportionate number of illegal sites being in Canada. The IFPI attributes this, in large part to, the fact that Canada has weak and ineffective laws to protect creative products including our failure to enact legislation to enable Canada to ratify the WIPO Treaties.

The IFPI also linked Canada’s weak IP frameworks to the failure of digital retailers to launch innovative services desired by consumers in Canada such as AmazaonMP3, MySpace Music, Nokia Come with Music, Spotify and Deezer.

The IFPI report echoed many of the submissions made to the Heritage Committee last week by Darlene Gilliland director of business development for Universal Music Canada, Charlie Millar the director of digital business development for Warner Music, Loreena McKennitt a world famous artist and an owner of a Canadian independent label, and Graham Henderson the president of CRIA.

Darlene Gilliland told the committee about the problems that digital piracy were causing to the Canadian music business:

“Despite our efforts, despite managing to grow our digital business slightly every year, our digital marketplace in Canada is on track to cap out well below our market potential, and well below the level that other developed markets will reach…

We attribute it, in large part, to the lack of a robust copyright regime and protection for creators’ works in our country, especially when we stack Canada up beside our international peers. Our peers have had these protections for a long time.

When technology companies see the piracy that flourishes here in Canada, and the uncertainty in our laws, they are apt to invest elsewhere-and they do. The result is that Canadian creators and consumers miss out on innovative music services that are launching elsewhere in the UK, in France, in Sweden, and in the United States. We miss out on the jobs, revenue, taxes, and consumer choice that come with them.”

She also pointed out that her label invests in music and in Canadian talent and culture. But our laws create a climate in which the product of our investment competes with “free”. She stressed that the industry can’t compete without the government assistance in “making sure creators’ work product receives the same level of protection through copyright as a technology company receives through the patent on its touch screen on their phone.” That is because “All intellectual property industries depend on mechanisms put in place by government to foster innovation, encourage investment, and protect creators. We are no different.”

Charlie Millar advocated for creating a legal environment to deter piracy and to facilitate doing business digitally. He said:

“In summary, how can government help? From a sales perspective, from a digital business development perspective, assistance with deterring pirate lean forward behaviour. Two, implementing ubiquitous government deterrent measures so that Canada and all its provinces can become an environment for digital entrepreneurship and service. Specifically, creating a location for foreign direct investment and/or domestic next generation technology. And I hope we can do it so it’s export ready.

From a free market perspective, industry is willing and able to sell Canada to the world, but it is essential for government to set up appropriate ground rules for the digital business, the digital music business, to be successful.” He also told the Committee that “Because of the lack of copyright reform in this country we’re watching foreign direct investment diminish. We’re watching technology at the next generation level go elsewhere.”

Loreena McKennitt discussed the difficulties with making investments in Canada given our weak copyright laws and described the impacts of piracy on the cultural industries and the wider economy. Talking about her own personal experience she stated:

“In my company, we confront the new realities every day, and we have been hard at work trying to offer new products in new ways and fully leverage the new technologies, but I am here to tell you that making predictions and investments is impossible without some stability in the fundamental recognition and protection of intellectual property.

And it is not just my own revenue stream that is affected, but the jobs of many talented people I have employed over the years. I would like to just give you a sample. They include many recording studios that no longer exist, engineers who specialize in recording classical or acoustic instruments, technicians, their suppliers and administrative staff, graphic artists, photographers, makeup artists, mastering companies, CD manufacturers such as Americ Disc in Quebec, retailers large and small, many now defunct such as Sam the Record Man, or printers such as the Stratford Beacon Herald, publicists, travel agents, airlines, musical equipment suppliers, insurance companies, and local media advertising outlets, caterers, and on it goes….

It may be fashionable in some corners to say the arts don’t really provide much employment or revenue to society, but when I look at my small company which once had 15 employees and now has 5, and then extrapolate that to the whole industry, the scope of this calamity which presently exists cannot be underestimated.”

She also warned against buying into the “free culture” mentality being advocated by those sitting in ivory towers and creating public confusion about what really is at stake:

“It is essential that Canada not be considered a pirate nation when it comes to both regulating and realizing the full advantage of all the advantages of new media…

Nor must we allow clever manipulation of language and media to create confusion in the minds of the public as to what the real issues are, especially by those who have hidden vested interests, or who operate in theory and not in the reality of actual business.

The watchdogs must be able to see through the smokescreen created by those who operate, not by permission, not even by forgiveness, but from a strategy of taking what they can get away with before someone gives notice and takes them down.”

Graham Henderson also criticized the view espoused by opponents of effective copyright reform that we don’t need new or effective measures to help our digital businesses. He called for the Government to support “the sort of rule based environment that practically everybody else in the world has.”

Attacks against CRIA and Minister Moore by Prof. Geist

In response to Mr. Henderson’s appearance before the Heritage Committee, Prof. Geist posted a blog in which he accused CRIA of refusing “to actually specify what reforms it supports” and that it said “virtually nothing specific about what it actually seeks”at the Committee.

This is an unfounded claim since Mr Henderson actually did discuss what reforms CRIA believed are needed at the Committee. He talked about notice and notice, graduated response, notice and takedown, implementation of the WIPO Treaties, and the pros and cons of further copyright levies. For example:

Expanded Copyright Levies: Mr Henderson stated that his members were not against an expanded levy, but did not want to see it expanded in a way that would undermine “a thriving, legitimate digital music market in Canada in which everybody can be fairly compensated.” He stated that “We do not support levies that have the effect of laundering illegally acquired music into legal copies which would have the effect of destroying our marketplace.”

WIPO Treaties: Mr Henderson advocated that Canada should implement the WIPO Treaties. He said, referring to the World Intellectual Property Organization Treaties, “One solution–the best solution… is to implement a set of laws or rules which will provide an environment that will encourage creation and investment.That is what the intellectual property organization treaties were designed to do,and when you see them implemented then you very clearly see a migration from illegal back to legal”. (emphasis added) He reiterated the need to implement the WIPO Treaties again when discussing graduated response. (See below)

Notice and Notice: Mr. Henderson stated that notice and notice is useful as an educational tool, but is not effective by itself to stem online piracy. He said: “So do I like notice and notice regimes? I think they could be a fantastic educational tool. Are they the solution? Do they work? Practice has shown that they simply don’t work.” What is needed is a system of giving notices that have consequences for not stopping illegal behaviour: “Notice and notice can be a fabulous educational tool, but without consequences it can pose a long-term problem”.

Graduated Response: Mr Henderson stated that we are “at a stage in our copyright evolution that contemplating something like a graduated response” is necessary. He specifically referred to the developments in other countries like France, South Korea, and England which “are taking very aggressive stances to protect their creators.” He then stated that the first step is to complete the agenda started with Bills C-60 and C-61. “We’re nowhere near taking the steps that France has to protect its creative class and, in fact, its business community. But I would argue that to simply, as a very baseline, implement the intellectual properties treaties as contemplated by, for example, C-61, or before that Bill C-60 is the first step on that road.”

Notice and Takedown: Mr Henderson also endorsed notice and takedown as an important tool for dealing with infringing content hosted by service providers. He said: “As for notice and take-down…everybody else in the world seems to have it and they don’t seem to have a problem with it.”

Based on his claim that CRIA was not forthcoming before the Committee, Prof. Geist then accused CRIA of relying “on the sort of backdoor, lobbyist-inspired meetings that are the talk of Ottawa due to the Rahim Jaffer situation.” Comments on this statement on his blog expressed amazement at the offensiveness of the allegation. One commentator said “Wow, a mudslide.” Another said “I think the Rahim Jaffer/backroom deal reference in Mr. Geist’s piece is sleazy.” Chris Castle also did a specific blog post on the statement ,Geist goes after Canadian labels group for “access”.

This week Prof. Geist also launched a broadside against Minister Moore suggesting he might be called the The iPadLock Minister. This attack was supported by nothing more than his claim that “according to the scuttlebutt throughout the copyright community, Moore may be less iPod and more iPadlock”. No particulars were given as to what lead Prof. Geist to come to this conclusion or the source of the scuttlebutt.

The attack on Minister Moore also is also unfounded. Minister Moore along with Minister Clement worked tirelessly throughout the copyright reform consultations last summer to understand the issues and listen to Canadians. They attended rountables and townhalls. They were genuinly engaged. After such devotion to the process does Minister Moore deserve to be attacked based on mere “scuttlebutt”?

If the attacks on CRIA and Minister Moore this week are any indication, it sure looks like the dialog about copyright this spring is going to be unpleasant.

For more information about the Copyright Modernization Act or Bill C-11 or copyright reform, see Change and the Copyright Modernization Act.

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