In case you missed it, last week CRIA was back in the news claiming that Canadian copyright law is in need of reform, arguing that Canadian digital download sales have not met expectations. The copyright lobby group chose to focus on sales of Gwen Stefani's Hollaback Girl. In the U.S., the song has become the first to reach one million paid downloads. By comparison, in Canada it has hit 20,000 paid downloads. CRIA argues that based on population and broadband penetration rates, the Canadian figure should be 150,000.
I find this argument rather remarkable. CRIA is obviously hoping to convince Canadian Heritage Minister Bev Oda and Industry Minister Maxime Bernier that the Canadian digital music market has been hurt by the absence of anti-circumvention legislation, yet the notion that music sales are a function of population size and broadband access is certainly subject to challenge.
Canada trails behind the U.S. in online sales in many sectors – clothes, jewelry, toys – to name three. Why? To start, broadband access is a minor factor in e-commerce. Far more important is choice. In the U.S., the market for clothes, jewelry, and toys is far more developed with consumers enjoying much more choice and competition. With better choice, consumers are more willing to buy online.
The same is true for online music sales. The Canadian online music market was slower develop, with services such as iTunes taking months to establish a Canadian version. Indeed, Canadian sales have followed a similar path to that experienced in the U.S. as it always takes time for new products and services to find their market. The similarities exist despite the fact that the U.S. version of iTunes has more than two million songs along with videos and television shows. The Canadian iTunes has half as much music (a paltry Canadian content selection with virtually no French language music) and no television shows.
In the broader online music market, the industry's own website lists six Canadian services offering 1.2 million songs. In the U.S., there are 38 services offering 22.1 million songs. This is not a legal issue. With Apple, Napster, and Bell's recent purchase of Puretracks, there are big names involved in the Canadian market, however, the smaller market has clearly left consumers with a much less choice and correspondingly fewer sales.
Moreover, the focus on a foreign artist such as Stefani is truly puzzling. Canadian cultural policy is full of initiatives to promote Canadian music. The notion that Canadians should buy the same music as people in the U.S. runs counter to everything that Canadian Heritage is trying to achieve. In fact, Canadian tastes in music are not the same as those in the U.S. Consider the top downloads on Apple iTunes. As of Friday, there were only three songs that appeared on both lists, reflecting the different cultural choices between our two countries.
Governments should always be skeptical when they are told what sales should be since this typically amounts to little more than one industry seeking government assistance to intervene in the free market. The Canadian online music market could be better but it should be up to the industry, not government, to get that done.
More Music and Markets: In my haste to simply respond to CRIA's obviously flawed analysis, I neglected to add an important point. No doubt some may argue that the weak Canadian online music services (any service that offers half as much as its American cousin and neglects the Quebec music market as iTunes does can hardly be considered good) is a result of the absence of anti-circumvention legislation (ie. competitors will not enter the market without additional legal protections). While the same argument was made by CRIA years ago when Brian Robertson claimed that no one would enter the market without copyright reform, history has clearly shown that to be false. The delays in entering the Canadian market were due to licensing issues, not the law.
Moreover, if there is a problem with the Canadian online music market it is not the lack of anti-circumvention legislation but rather the debilitating effect of SOCAN, CMRRA, and the copyright collectives who are demanding at least 40 percent of the gross revenues of such services. As I wrote nearly a year ago, "the true threat to that future [the development of an economically viable download market] does not come from peer-to-peer downloads that is already subject to compensation through the private copying levy but rather from collectives that seem determined to receive a very large share of a very tiny market." The full effect of the collective cash grab is beginning to emerge as some music services have dropped out of Copyright Board proceedings. If the government really wants to address the online music market, addressing the copyright collective problem would be a good place to start.