Music Canada Demands a $160 Million Bailout From the Government

Canada’s RIAA, Music Canada, has asked the Canadian government for a free $160 million handout. Says it’s how to fairly compensate artists for their work.

It is a move that is being described as “brazen”. Music Canada, formerly the Canadian Recording Industry Association (CRIA), through its president Graham Henderson, asked the Canadian government for a $160 million bailout. The request was made at the Standing Committee on Canadian Heritage. The bailout request says that the money should be paid out over the course of four years. From Music Canada:

4. Private Copying: Renew Support for Music Creators
The private copying levy, originally intended to be technologically neutral, has been limited by various decisions to media that are effectively obsolete. This important source of earned income for over 100,000 music creators is now in jeopardy unless the regime is updated. Music creators are asking for the creation of an interim four-year fund of $40 million per year. This will ensure that music creators continue to receive fair compensation for private copies made until a more permanent, long-term solution can be enacted.

Now, keep in mind, this is an organization that already receives subsidies from the Canadian government. In addition, they get free handouts from businesses who play music at the workplace. In addition, they also get free handouts from radio royalties. On top of it all, they get free handouts from blank media through the private copying levy. So, this is an organization that is used to getting free handouts. Of course, a lot of these handouts are in response for some perceived benefit to someone else in the process. In this case, there is literally no added value being created with a bailout like this.

On top of that, this comes on the heals of news that Sony bought a controlling stake in EMI for $2.3 billion. Music Canada largely represents the big four, now big three, record labels in Canada. That move is already sparking fears about competition in the music industry.

The move comes at a politically awkward time, however. Already, the Canadian government issued a $4.5 billion bailout to Texas based oil company Kinder Morgan. That is a company that, as the NDP charges, pays very little in Canadian taxes. So, the Canadian government has already spent a lot of political capital bailing out a foreign company as it is. The idea of bailing out an organization that represents foreign corporate interests right after again just doesn’t seem to be politically wise at this stage.

To be fair, however, it’s unlikely that Music Canada could have predicted that when they put together their proposal. This all seems to be little more than bad timing. Still, it does suggest political headwind for a request like that.

Michael Geist responded to the request, saying that the move is “brazen” and that the industry is already in a state of growth:

This represents a brazen request for an annual $40 million handout for no reason other than the industry wants it. Indeed, as the industry predicted, the consumer shift to subscription services such as Spotify means there is a less and less private copying taking place. Music Canada (formerly the Canadian Recording Industry Association) was once the lead proponent of the private copying levy, but it dropped its support on the expansion of the levy to iPods in 2007, fearing it “broadens the scope of the private copying exception to avoid making illegal file sharers liable for infringement.” The industry was similarly reluctant to embrace private copying in 2010.

The demand for an annual $40 million taxpayer handout makes sense from the industry’s perspective when you review how the CPCC, the collective responsible for administering the system, distributes its revenues. First, last year a hefty 28% of its revenues went toward administration, meaning that more than $11 million would go toward administrative costs, not musicians. Second, the CPCC’s distribution framework allocates 18% of the remaining revenues to record companies, not authors, publishers or performers. That means millions to record labels, not musicians. In fact, the percentage allocated to record companies has grown significantly: it was 11.3% in 2000, 15.1% from 2001-2007, and now 18%. One hopes the committee will recognize the annual $40 million handout request – $160 million over four years – has nothing to do with business models or the state of industry, which has been growing dramatically in recent years.

Some might look at this and say, “Hey, at least they aren’t lobbying to sue people or impose ridiculously bad copyright laws.”

Unfortunately, that isn’t exactly the case. As we reported back in April, Music Canada was seen lobbying for Internet Censorship in the halls of the Canadian government. In fact, if you look at the lobbying registry, Music Canada has had 16 “communications” with the Canadian government in the last 12 months. A vast majority of those communications were related to “Arts and Culture, Intellectual Property”. So, although they haven’t made the news much these days, it’s not as though they are inactive all this time.

Either way, this is basically a lose lose situation for the industry. If they don’t get the money, they will cry foul. If they do get the money, it’ll make it that much harder to lobby for anything else because people will remember that they basically are getting free money from the Canadian government for no real reason. We’ll continue to monitor the situation for any developments on this.

Drew Wilson on Twitter: @icecube85 and Google+.

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