OTTAWA – Late Monday afternoon, the Standing Committee on Industry, Science and Technology heard from digital giants Facebook, Google, Spotify, as well as some interesting testimony from a fellow named Jeff Price during its mandatory review of the Copyright Act.
It appeared at first the witnesses were guarded – as if expecting fireworks, but there was little of that as the members of the committee stayed focused and stuck to the subject at hand. The words Cambridge Analytica were not heard.
The witnesses were Kevin Chan, head of public policy, Canada, for Facebook (screen-capped from ParlVu), Probir Mehta, head of global intellectual property policy at Facebook, Jason J. Kee, public policy and government relations counsel at Google Canada, Darren Schmidt, senior counsel at Spotify and Price, CEO and founder of Audiam, a digital reproduction collection agency whose investors include artists, record producers, composers and software engineers.
The odd man out, Price could be described as passionate about creators’ proper compensation and angry about the fact that too often, artist's royalties are not paid due to negligence, malice or expediency. That is why he set up his company which primarily helps songwriters get paid for their work (Jimmy Buffet and Jason Mraz are among the investors).
“We discovered, in the United States and in Canada, massive infringement of the digital music services were using these compositions – these lyrics and melodies without licences – and they were doing it without any payments either. We embarked on a way to help remove that friction in licence and work with many of the people I’m sitting here with,” said Price.
“But the things that have really stuck with me that I want to drive home to you as a committee is the majority of copyrights that are being produced, created, distributed today in music come from everybody else. They come from outside of that traditional industry. Their market share is growing… while the major music record labels’ market share is declining,” Price said.
“We just landed a Rover on Mars today, for god’s sakes, and we can’t figure out who owns copyrights? Come on.” – Jeff Price, Audiam
So it has become more difficult to identify the rights holder due to the fragmentation but as he said: “We just landed the Rover on Mars today, for God’s sakes, and we can’t figure out who owns copyrights? Come on.”
The other issue at play is the rights protection efforts of the likes of Facebook and Google’s YouTube. Software is used to identify potential infringement and according to Chan, “during the first half of 2018, on Facebook and Instagram we took down nearly three million pieces of content based on nearly half a million copyright reports.” (Ed note: Given the sheer size of those two platforms and the amount of content being posted every second, these sound to us like small numbers.)
The difficulty lies in distinguishing between a genuine copyright infringement and what is now described as fair dealing, an exemption that allows user-generated, non-commercial use of copywritten material, such as a baby dancing to a Prince song. Some groups have asked the removal of that exemption but Google’s Kee wants an extension to it.
“Limitations and exceptions in the Act, such as fair dealing, provide critical balancing by limiting the exclusive rights granted so as to encourage access to copyrighted works and allow for reasonable uses,” he said. “One of these uses is information analytics, also referred to as text and data mining. In order for machine learning systems to learn, they need data-based training examples, and it is often necessary for the datasets to be copied, processed and repurposed. In some cases, these datasets may include material protected by copyright.
“Unless there is an exception to allow this technical copying, processing and storage, machine learning could infringe copyright, even though the algorithm is merely learning from the data and not interfering with any market for that data, or impacting the use by the authors. It is unclear whether this activity would fall within existing exceptions, putting the Canadian government’s substantial investments in artificial intelligence, and Canada’s significant competitive advantage in this field, at risk. We strongly recommend the inclusion of a flexible copyright exception that would permit these types of processes and give much needed certainty,” said Kee.
(Ed note: it seems worth noting here that radio stations must pay a fee simply to copy songs within their own systems for playout. They don’t sell that copy or otherwise profit from it other than making it easier to run a radio station, but they still have to pay a royalty – and this reference sounds pretty similar on the face of it.)
Spotify is a different model than the social media, search and video giants. It gets the rights of a large quantity of music and offers it to subscribers. They share their revenues with the rights holders and very rarely provide direct payments to creators.
“A million streams on Spotify generated in the United States, and somewhat commensurate in Canada, (provides) somewhere in the neighbourhood of approximately $200. That does not make a living,” said Audiam’s Price.
“What’s interesting is the value of getting a million streams is you probably have at least 100,000 people streaming your music. How much would you pay as a technology company to hire someone to bring you 100,000 users? What is the financial value of that to an investor or an IPO? This is unfortunately where we have a diversion of interests.
“Pandora has never made money. Spotify, market capital over $25 billion, has never made money. YouTube, before it was acquired for $1 billion, never made money. The value of those entities was predicated on their market share, (but) it’s the musicians’ music that attracted the users to utilize the technology which was rewarded by finance and Wall Street in the form of IPOs and sales, and there’s nothing wrong with that.
“What I do have an issue with is when I hear these companies getting upwards of a trillion-dollar market cap, a half a trillion dollar market cap, who have aggregated the world under the umbrellas that we’re sitting with here—Facebook Google, Spotify, wonderful companies, hundreds of millions, billions of users aggregated under those umbrellas with market caps up in the tens or hundreds of billions and you’re turning around and giving someone—this is a real royalty rate, in the United States – $0.0001 per stream on their ad-supported platform. Something’s not right.
“What I have a problem with is this presumption that creators were put on this planet to create content for technology companies to utilize to achieve their business goals.” – Price
“What I have a problem with is this presumption that creators were put on this planet to create content for technology companies to utilize to achieve their business goals,” added Price.
“I think the approach we need to take is an artist-first approach. For example, let’s extend that copyright to 70 years to get in line with the rest of the world…. Let’s rule more quickly on what the rates are so that when these companies have to put together their P&Ls and people are determining how they can make a living doing this, they’re able to figure out how much money they’re making more quickly, ahead of time, as opposed to waiting five, six, or seven years before a ruling will come down.
“I’m a big fan of the free market. I think government should remove itself from regulating music, and allow there to be a true and straight-up negotiation. Frankly, that creates the symbiotic relationship—they need them as much as they need them. Through that balance, you end up with the right tension, which will then allow for the right royalty rates to emerge,” concluded Price.
The good news is the emergence of these giants has reduced outright music piracy, but the challenge is to create a model to ensure money flows to creators. Are amendments to the Copyright Act the solution?
We’ll see.
