New Music Canada Report Recommends a Path for Closing the Value Gap

At a speech for the Economic Club of Canada and other recording industry and music rights representatives, Music Canada President and CEO Graham Henderson announced the release of a new report, entitled Closing the Value Gap: How to Fix Safe Harbours and Save the Creative Middle Class. In it, Music Canada says its calling for the Government of Canada to rebalance the music marketplace and restore fairness to the creators of music.

The report builds on Music Canada's previous findings from the 2017 report, The Value Gap: Its Origins, Impacts and a Made-in-Canada Approach, which identified the existence of a gap in value of creative content and the revenues returned to the artists who create it. According to Music Canada, an inadequate copyright framework that has not adapted to the challenges of the digital age is now generally recognized as the cause of the Value Gap.

The Value Gap, says Music Canada, is the difference between the revenues derived by online platforms, broadcasters and other third parties from the commercial use of creative content (such as music, books, news, TV shows and movies), and the revenues returned to the artists, journalists and businesses who create it.

"The origins of the Value Gap can be found more than 20 years ago. It was the dawning of the digital marketplace, and countries around the world struggled to reinterpret copyright laws that were designed for an analog age," says Henderson. "They wanted to protect creators, but they also wanted to give a boost to young technological start-ups. Inevitably, perhaps understandably, mistakes were made."

Music Canada says that the cumulative Canadian recorded music industry Value Gap over 20 years since 1997 is $19.3 billion. In 2017 alone, the gap was $1.6 billion. As well, the organization says the average annual increase in the music industry Value Gap in Canada between 1997 and 2017 is $82 million.

In the new report, Music Canada provides five recommendations for fixing the Value Gap:

  1. Limit and Clarify Safe Harbours

    • Safe harbours should:
    • Be limited to true “innocent intermediaries” that are genuinely technical, automated and passive, with no knowledge of alleged infringement and unaware of circumstances to put them on notice of infringement;
    • Not apply to online user-upload services that optimize and profit from user-uploaded content;
    • Be limited to intermediaries that have a policy to address repeat infringers and comply with all requirements on them; and
    • Not shield service providers (including search engines) where they have actual or constructive knowledge of infringement (without requiring rights holders to sue end users), and require that where they do, they must take reasonable steps to prevent infringement and to ensure that infringing works stay down.
  2. Address the Role of User-Upload Services in Creating the Value Gap

    • The Copyright Act should include measures to guarantee that user-upload platforms such as YouTube: Negotiate fair and appropriate licensing agreements with rights holders, and; Ensure that unauthorized protected works or other subject matter are not available on their services, and are not uploaded in the future.
  3. Eliminate the $1.25 radio royalty exemption, which Music Canada says would end the approximately $8 million a year subsidy to major telecommunications conglomerates by artists and record labels.

  4. Amend the definition of a “Sound Recording” in the Copyright Act so that performers and record labels earn royalties from film and TV soundtracks

  5. Create a temporary $40-million fund to compensate artists and rights holders for the value lost to private copying

"Canadian artists deserve a sustainable and working marketplace for their work," says artist and record label owner Miranda Mulholland, who also serves as Chair of Music Canada's Advisory Council. "Artists have been speaking up about the need to close the Value Gap, and our industry speaks in a unified voice on this issue. We need to end broad safe harbours and stop subsidizing billionaires who are commercializing the work of others without fair compensation. This report lays out the steps to fix our broken copyright framework and restore fairness to the creators of music."

"Closing the Value Gap definitively sets out the economic evidence surrounding the size and growth of the Value Gap and provides clear, achievable recommendations to fix it," Henderson adds. "The report draws focus to the main cause of the Value Gap in Canada: broad safe harbour laws in the Copyright Act. Two Parliamentary Committees in Canada have recommended reviewing Canada's safe harbour laws. Now is the time to rebalance the ledger and restore fairness to the marketplace for creators."

The full report can be downloaded HERE.

Graham Henderson's speech can be watched on the Economic Club of Canada's Facebook page HERE.

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Michael Raine is the Editor-in-Chief at Canadian Musician and Canadian Music Trade magazines. He also hosts the Canadian Musician Podcast.
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