Back in 2003, a famous Canadian recording artist had this to say when he was asked about his prospects in the new digital economy: “We are entering a golden age. A golden age.” This idea was embraced by some artists, the media, pundits, professors and, most importantly, policy-makers around the globe.

Their heady optimism stemmed from the seismic events then unfolding in the online distribution and consumption of creative content. Digital technologies allowed instant global distribution at what was somewhat optimistically touted as no marginal cost, and the iPod had taken mobile digital music into the mainstream.

The artist who praised the unfolding of this golden age believed that the digital era would usher in a utopia for both musicians and the consumer. Artists would gain access on the Internet to a larger audience than ever before and, in return for the collapse of their traditional marketplaces, they would make more money from the sale of concert tickets, merchandise and other sources. This was an epic leap of faith, and virtually everything was riding on one thing – the promise of digital technology.

The passage of time has taught us that we would have benefited from a judicious skepticism; that we should have questioned the extraordinary promises being made and the extravagant assumptions upon which those promises were based.

Nearly 15 years later, we can say with certainty that the promised golden age did not materialize for the creative class. Today, more music is consumed, in more ways and by more people, than ever before. It is streamed for personal use, it plays in the background nearly everywhere, and it provides intensity and emotion to our favourite television shows, movies and video games. And yet, artists today are worse off than they were 20 years ago – perhaps the first creative generation in hundreds of years to experience such a dramatic degradation in their standards of living. This mess has resulted from what we now call the “value gap.”

The value gap is an international phenomenon. Music Canada defines it as “the gross mismatch between the volume of music being enjoyed by consumers and the revenues being returned to the music community.” In fact, all cultural industries are experiencing a value gap, including publishing, film and television and journalism. The end result? Within the span of a single generation, the creative middle class has almost ceased to exist.

Where has the money has gone? What needs to be done to restore balance to the system? How can the mandated five-year review of the Copyright Act help Canada’s cultural industries before it is too late?

How did we get here?

In order to truly comprehend the magnitude of the value gap, we must understand that it is about more than changing consumer habits. The value gap is a product of decisions made by governments around the world that have allowed cultural content to be distributed, made available, consumed and monetized by others without proper payment to creators. Creators today are living in a world they did not create. This new world order is perpetuated by out of date rules and regulations based on faulty assumptions and promises.

For instance, 20 years ago, exemptions were created in the Copyright Act to protect Canada’s struggling locally owned and operated radio stations. Today, the vast majority of radio stations are owned by major, vertically integrated media corporations, and much of their programming is centrally controlled, making Canada’s radio industry more profitable than ever. Similarly, Internet service providers — also owned by massive media conglomerates — were protected from liability on the Internet to allow them to grow.

Exemptions like these have been implemented around the world. The French economist Olivier Bomsel was among the first to call this arrangement out for what it was — a massive system of cross-subsidies. Forced by law to forego money otherwise payable to them, the creative community has directly subsidized the development of the technology infrastructure.

At least for musicians, a key component of the promise of the golden age was that while the market for the sale of music might decline, new and different income sources would arise. Infamously, this came to be associated with the idea that touring and merchandise income would supplant the sale of music products. It has not. According to a study commissioned by the Canadian Independent Music Association, the average artist in Canada earned about $7,200 per year from music in 2011.

Musicians are not alone in this: according to a 2015 survey by the Writers’ Union of Canada, authors are earning 27 percent less from their craft than they did in 1998, while median net income from writing was less than $5,000. In a recent speech to the Economic Club of Canada, artist-activist Miranda Mulholland poured scorn on the idea that touring could be a panacea.

As the government undertakes to review and reflect upon the last two decades of digital policy in Canada, it should take a clear-eyed look at the market distortions that the legislation it enacted 20 years ago has created. The government must help to restore a functioning marketplace. It should hold itself accountable for the rules it enacted — rules founded on assumptions that we now know were wrong. The upcoming review of the Copyright Act must level the playing field. It needs to examine each instance within the Act where creators are cross-subsidizing major media corporations and end those cross-subsidies.

What can be done now?

Music Canada is just one of many creators’ groups now calling for reforms. This year in Europe and the United States thousands of artists petitioned their governments to address the value gap and rebalance the rules. In Canada, the Focus On Creators campaign has united to send a joint letter to Minister of Canadian Heritage Mélanie Joly, urging her to put creators at the heart of future policy.

The Canadian government has made it clear that it wants a new toolkit to confront the challenges facing Canada’s creators and has at its disposal a number of different levers it can pull as part of a robust review of the Copyright Act. Actions it should take include the following:

  • There must be an end to all the cross-subsidies paid by creators. The corporations that benefit from these cross-subsidies have become wealthy beyond imagination over the years. As a starting point, the government should end the $1.25 million radio royalty exemption.
  • The federal government should consider designing policies to attract foreign direct investment in the domestic music economy, as Ontario, British Columbia and municipalities across Canada have done.
  • While the federal government has taken some positive steps, such as increasing funding for the CBC and the Canada Council for the Arts, it should also examine another institution that is vital to the cultural industries: the Copyright Board of Canada. This reform is long overdue – in fact, the Senate of Canada conducted hearings into the operation of the board, concluding in its report that it is “dated, dysfunctional and in dire need of reform” – that is how serious the problem has become. The government needs to turn the Copyright Board into a true business development office for the creative and user communities.

Beware of inaction

While cultural stakeholders wait for information from officials and politicians on the details of the 2017 review, there is foreboding that meaningful reform will either be pushed off or given a cursory pass.

For years, copyright stakeholders have been met with a firm response from government officials on all matters relating to copyright. They tell us “you’ll have to wait for the 2017 review.” A full and meaningful review that identifies and recommends necessary amendments to the entire Copyright Act is the only way to ensure trust and fairness on this file.

The mandated five-year review of the Copyright Act scheduled to begin at the end of 2017 must be comprehensive and must lead to meaningful reforms to the Act. Creators are asking that the entire Act be examined to ensure that they are fairly compensated for the use of their creations. The only way the government can restore integrity to the marketplace is to curtail all cross-subsidies and the outdated exemptions on which they are based.

This article is part of the Reviewing Canadian Copyright Policy special feature.

Photo: Shutterstock/Tatiana Popova

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Graham Henderson
Graham Henderson is president and CEO of Music Canada, which promotes the interests of the Canadian music community. He is chair of the Ontario Chamber of Commerce and copyright rapporteur for the International Chamber’s Intellectual Property Commission.

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