A special edition of my Law Bytes column (Ottawa Citizen version, homepage version) reports on a recent Canadian Heritage commissioned study on the economic impact of the copyright industries. The Connectus Consulting report, entitled The Economic Impact of Canadian Copyright Industries – Sectoral Analysis, has yet to be publicly released. However, I recently obtained a copy of the final report dated March 31, 2006, under an Access to Information Act request.
The report, which spans 1997 to 2004, finds that the copyright industries comprise 4.5 percent of the Canadian economy and contribute 5.5 percent of total Canadian employment. While that is expected to increase in the coming years (the copyright industries are growing at a faster rate than the overall economy), it pales in comparison to sectors such as finance, manufacturing, agriculture, education, and health care.
More interesting is a case study on the sound recording industry that contradicts both the industry claims and the expectations of the report's authors. It begins by stating that "there is little doubt that the Canadian sound recording sector has undergone significant change in the past several years, primarily as a result of illegal music downloading (or peer to peer file sharing) and the consequent impact on the sale of recorded music."
Incredibly, the report's authors marshal no economic evidence to support this unequivocal assertion nor do they offer any legal analysis to back up the claim that peer-to-peer downloading is illegal in Canada. In fact, the study undermines its own credibility by ignoring evidence that the changes in retail distribution channels, the decline of radio, and competition from other consumer entertainment products such as DVDs and video games are primarily to blame for dropping sales.
Regardless of the reason, the report's authors were clearly surprised when the economic data contradicted their stated thesis. Warning that "these findings should be treated with caution", the study reports that the Canadian sound recording industry grew steadily from 1999 to 2004, with the GDP contribution jumping from $243 million to $387 million.
The report implausibly attributes the increase to reduced employment, noting that there may be greater efficiencies due to a reduction in the number of record labels and the consolidation of the major multinationals.
Given that a ten percent reduction in employment is unlikely to inject an extra $150 million into the Canadian economy, the report's authors might instead have considered the fact that Canadian music labels have enjoyed unprecedented success in recent years. With the major foreign multinationals reporting 20 percent employment reductions, the data suggests that Canadian record companies, who are responsible for 90 percent of new Canadian releases, are providing a counterbalance to the multinationals' struggles.
The 93-page report should be required reading for those involved in the copyright reform – hopefully Canadian Heritage will move quickly to make the full study readily available on its website.