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The CCA’s $126 Million Wheel of Fortune: Guessing at Bill C-32’s Costs

The financial impact of Bill C-32 has been one of the key issues throughout the recent rounds of the copyright reform hearings. Numbers have been bandied about, but when challenged by MPs such as Dean Del Mastro and Mike Lake, the evidence for claimed losses has been lacking. The Canadian Conference of the Arts recently attempted to address the issue by floating a figure of $126 million that is says is “at serious risk of disappearing” for artists and rights holders as a result of Bill C-32. While it is good to see the CCA effort to quantify a number, the $126 million does not stand up to even mild scrutiny.

So how does it arrive the $126 million? Start with the two elements that appear to be accurate. First, the CCA says that changes to the ephemeral recordings provisions will mean that broadcasters will save $29.8 million in payments (while this may be correct, the broadcasters now claim that the savings are needed to “save local radio” and the cost does not speak to the issue of whether radio station format shifting merits nearly $30 million in compensation).

Second, the elimination of $25 million for public performance of videos in Canadian schools is likely accurate. These licensing revenues are collected by Audio Cinรƒยฉ Film (ACF) and Criterion, which primarily promote U.S. films. U.S. schools are exempt from similar payments due to an exception in their Copyright Act. Given that the dollars flow primarily to U.S. studios (though not exclusively – there is some revenue that goes to Canadian films) and that U.S. schools are exempt from similar payments, this seems like good policy.

Nevertheless, there is no reason to question the CCA claim that the combined value of these two sources of revenue is $54.8 million and that both are at risk if C-32 is passed in its current form.

The two other key sources of “losses” are simply fabrications. The CCA says that the failure to extend the private copying levy to digital devices such as iPods results in a $30 million loss. It arrives at this figure by calculating the average amount generated by the levy from 2001 – 2009.  It should be obvious to anyone that the $30 million figure is a guess since the average amount generated by the levy over the past decade is an irrelevant number when trying to calculate the cost of an iPod levy.

If the CCA was serious about generating an estimated cost, it would identify the number of digital devices subject to the levy that are sold in Canada each year and then multiply that by the proposed levy amount. While that approach would provide a more realistic figure, those lobbying for an extension of the levy have been evasive about how broadly it would apply and how much the levy would cost. Developing a realistic figure would require the CCA to come clean on these issues.

The CCA also says that the extension of fair dealing to include education as a category puts $41.4 million at risk, the overwhelming majority of which stems from collective licensing for copying and course packs. This number is a massive exaggeration. First, there is no one that realistically argues that the education exception will cover all copying such that schools could rely on fair dealing to avoid any further payments. As has been discussed repeatedly, any fair dealing claim is subject to the Supreme Court of Canada’s six factor test.

Second, while collective licensing revenues may indeed decline in the years ahead – I have argued universities should consider walking away from Access Copyright – fair dealing reform will have very little to do with it. Instead, it is the emergence of open access, open educational resources, and licenced databases that provide alternative access to materials. Note that the licenced databases create a significant new stream of revenue for creators – over $100 million from the Canadian Knowledge Research Network alone – that is rarely discussed as part of the overall financial picture.

Third, even if there are some small reductions in payments owing to fair dealing, it is very likely that the savings will be used to pay for increased database access or to acquire new books since libraries will seek to ensure that there are no reductions in their overall budgets. In other words, even the prospect of a small reduction in the collectives revenues due to fair dealing will be offset by new revenues that go to authors and publishers. The net effect is a wash, not the irresponsible claims of a $41 million dollar loss.

Not only is over half of the CCA $126 million estimate inaccurate, but it fails to account for revenue increases that will be generated for artists by new rights that are included in Bill C-32.  For example, new photographer rights could generate millions of dollars for those creators.  During the 2009 copyright consultation, photographer groups claimed that the changes that later made their way into the bill could be worth between $50,000 to $100,000 per photographer based on new revenues from the sale of stock photography images worldwide (it cited survey data that found that 40% of photographers earned income from stock photography in that range). 

Given the 14,000 professional photographers in Canada, this suggests gains of hundreds of millions of dollars. Even assuming that the photographers may have been exaggerating, if only 20% of photographers are able to generate half of the low end of the estimate, the provisions are worth $70 million in new revenue (2,800 photographers generating an average of $25,000 in additional revenue per year). In addition to the photographer provisions, there is a new making available right of sound recordings for performers that will undoubtedly be the subject of a future tariff before the Copyright Board as well as new performers rights that address term of protection and moral rights. 

All of these new rights should be included in any estimate of the “costs” of Bill C-32.  For the CCA to have excluded this information – as well as to have relied on questionable data with respect to private copying and fair dealing – renders their estimate little better than Del Mastro’s proverbial wheel of fortune.

32 Comments

  1. Unclear to me how an additional fair dealing exemption for education will result in lost copying or royalty revenue. The amount of commercially copied & royalty paid materials in course packs wont be the reduced with an additional education exemption.

    Seems to me that the same rules/tests already for apply for materials exempted by the private study exemption and access copyright didn’t disappear nor have the numbers of expensive course packs i see around our college campus.

  2. Ahh, the photographers…
    I think this may be the first time I’ve seen you mention the changes for photographers in C-32. I’d be interested if you could peer a little closer.

    Some of what I’ve heard suggests that with these changes, it may become impossible for the average person to ever gain control of their personal portraits or wedding pictures if they employ a professional photographer to generate those images. The suggestions are that the changes swing so heavily to the photographers, that they will forever after own your image. The individual just won’t have the clout to negotiate anything in their own favour – or even a balance.

    Now, I’ve also heard that there is a ‘personal use’ exemption for such photos, but, like the TPM-override, it’s not clear how this would work. If you don’t own the images, the photographer is never going to give you original images (either files or negatives) to work from. So you could go to your nearest photographic place, but unless *they* adopt changes in policy, they are so afraid of liability that they will simply refuse to work with professional images, no matter what you tell them.

    It could thus become much like the TPM scenario. You have all of these rights enshrined in law, but none in practice.

  3. I bet you can increase the loss of revenue if people just start listening to and supporting artists that release their music with the Creative Commons license. If you don’t plan on making money form your creation why not just CC licensed music. Sure you won’t have the best manufactured crap playing in your videos background but you’ll exposing people to new music.

    http://www.jamendo.com/en/
    http://www.ektoplazm.com/
    http://creativecommons.org/audio/
    http://ccmixter.org/
    http://freemusicarchive.org/curator/creative_commons
    https://creativecommons.org/legalmusicforvideos

  4. Hmmm, so revenue from rights photographers claim they should gain must be subtracted from the revenue losses resulting from rights losses by other artists? Apples? Oranges?

    Are you a math professor now too?

  5. James Gannon says:

    “All of these new rights should be included in any estimate of the “costs” of Bill C-32.”

    Why is revenue to artists considered a “cost”? Maybe a photographer making $25,000 should be considered “making a living” instead? I know the idea of earning a living off of creative works has gone out of fashion, but just maybe that’s what these groups are fighting for.

  6. #C32: McTeaugue is so aggressive at the Committee making speeches on behalf of the music industry that he won’t even let the witnesses he is supposedly questioning get a word in edgewise to respond to his industry fed propaganda. His party should immediately replace him on this committee before he does more damage to everyone and to the process itself.

  7. Broadcast execs at least have the courtesy to wear ties to Committee hearings. Record industry execs don’t – or maybe it’s their way to demonstrate how impoverished they are.

  8. The numbers put forward by the CCA only attempt to address losses. They don’t consider new sources of revenue for the arts industry except where it is advantageous to them.

    For instance, the inclusion of a loss as a result of a failure to include an “iPod” levy. Since there is no such levy at this time, I don’t see how they can claim a loss… after all, there is currently no revenue from that so wouldn’t the loss be zero? I can see a paper loss of revenue, based on revenue projections which incorporated revenues from the levy, but to base your plans around that, well, I’ve got a bridge I can sell them cheap.

    @Degen: if you are accounting for the revenues for the industry, which they claim to be doing (as demonstrated by the statement, from the CCA’s own website, “has prepared a list of revenue sources for artists and rights holders which are at risk unless Bill C-32 is amended”). Unless, of course, they don’t consider photographers to be artists or rights holders. In which case you would be correct.

  9. A characteristic of this blog is belittling your opponents. CCA claims do stand up to quite strong scrutiny, and far more so than the suggestion that photographers will make at least $70 million. But even if they do, that isn’t very helpful to quite different groups who will lose. Just as it’s no comfort to students to know that their loss through higher tution fees will help finance higher faculty salaries.

  10. Where does it say on the CCA website they are calculating a net loss?

    What is this over here… an economists convention?

  11. @Degen
    Hmmm, so revenue from rights photographers claim they should gain must be subtracted from the revenue losses resulting from rights losses by other artists?

    —–

    That is correct John, because the revenue all comes from one place. The consumer! And all I see are the media industry hands going deeper and deeper into my pocket, while at the same time tying my hands by further restricting what I can do with my property. Perhaps if the other artists are worried about the money they will lose (another debate), they should be negotiating with the photographers instead of trying to have their cake and eat it too.

  12. And I didn’t win the Lotto 649 $50 million prize. I consider that a serious “loss”. I felt so entitled to win that I even bought a ticket.

    So I can understand how the music industry will feel if they don’t win their iPod tax grab, to which they feel entitled. A huge “loss”, I’m sure.

  13. Yes Darryl, when artists get together as a big group, pretty much all we talk about is the inside of your pocket.

    Thanks for making Geist’s logic explicit. Writers and musicians losing revenue under Bill C-32 should try to get that money back from photographers. What could be simpler, or more “fair”?

  14. A Ha, I thought as much John. Seriously, can’t they find something better to talk about. Talk about being depraved.

    Regarding getting the money back from photographers. Keep in mind that photographers have no more ‘right’ to the extended copyright protection they will enjoy under this bill than other creators have a ‘right’ to extend their copyright protection either. If society is going to give one group more protection/money then it is only fair to give less to the other groups. If the other groups don’t like that, then their beef is with the first group. Not me.

    There is only one pie, which is already far too big. I’ll be damned if I’m going to let them make it any bigger at my expense. They need to figure out how they want to divide it (at its current size) without costing me more money!

  15. Truth in advertising …
    I think the come away thought from all this is that income sources & related expenses are going through a huge shift due technological, policy and market changes. To specify losses without accounting for gains is just spin. Yes, some sectors, organizations or individuals may see loss of income sources but of course others will see gains. It is unfortunate for those who will come out with a shorter stick but that is the reality of the free market we are born into. Deal with it, like so many others have had to, and innovate your way out. Lobbying for the status quo, which often produces short term gains, in the long term is neither healthy to the individual nor the economy as a whole.


  16. @Bob: “CCA claims do stand up to quite strong scrutiny, and far more so than the suggestion that photographers will make at least $70 million. But even if they do, that isn’t very helpful to quite different groups who will lose. Just as it’s no comfort to students to know that their loss through higher tution fees will help finance higher faculty salaries. ”

    It is also of no comfort for me to know that my loss through higher prices and levies will help finance higher CRIA execs bonuses.

    Nap.

  17. why are critical comments not being posted?

  18. Grab your tinfoil hat …
    @Bob “why are critical comments not being posted?”

    Whoops, there’s one now!

    Seriously, sometimes my posts (whether you consider them pro or critical) gets delayed or not shown. There is a word filter in place to watch for Spam and it, like anything else, sometimes does not work as intended. For instance for the longest time some of my posts were not going up until I discovered the use of the word ‘WOW’ sent it to the trash heap. Seems World of Warcraft is to blame.

    I doubt there is a conspiracy here Bob, I see enough ‘critical’ posts on the board, even some from Degen ๐Ÿ˜‰

  19. Now that was silly, I just used a word as an example of filtering in my post about forum post filtering. And it got filtered, lol on me. You’ll see what I mean when it shows up ๐Ÿ˜‰

  20. And for some irony ..
    Hey Bob,

    The following post I just submitted to John Degen’s blog. Now John is usually pretty good at having an open forum, and good on him for it, but for some reason my post there has disappeared. It seems the blogosphere is not the perfect place we all wish.

    @Crockett “I think it is obvious that business will look for any way to decrease costs and increase profits. That is the natural order of business practices.

    For example, Access Copyright (referenced in this article), is in essence a business to generate profits for it’s clients. In it’s submission last year it significantly increased it’s fee proposal before the copyright board. Now true, there was exaggeration and inaccuracies from some critics, but it is still evident that the increase was substantial as well as it, possibly, being overreaching in scope.

    So why did Access Copyright put in for these increases instead of continuing with it’s old model? Well, to be fair in some regard to address changes in the marketplace, but also obviously to increase their income.

    Is there much functional difference in trying to increase your income over decreasing your costs? That is a loaded question, but in the business world I would have to say not really.

    The take away from this is no one is all pearly white in their motivations or tactics. Regardless I support both AC and the Universities to make their distinctive cases before government committee and the copyright board then let it fall where it may.”

  21. Crockett,

    No comment filtering on my blog, unlike both here and on Boing Boing (which actively censors the opinions of those who disagree with the hive mind).

    Your comment showed in my e-mail alerts just fine, and is on the blog right now.

  22. Filtering
    @Degen said: No comment filtering on my blog, unlike both here

    Yes there is filtering here but no post removal. I’m pretty sure its just a spam post trigger. My post with link in it go filtered but showed up shortly afterwards. If the was censorship I’m pretty sure Degans and those astroturfing posts would be deleted.

  23. @Degen “Your comment showed in my e-mail alerts just fine, and is on the blog right now.”

    Yes, I see that it is. Although this is the chain of events:

    – Posted message
    – Appeared right away, showed up no problem
    – Went back a few minutes later and it was gone
    – Waited 30 minutes but it still was gone
    – Reposted the comment and it seems to have stayed now

    Not sure what was going on there John, might have been a server glitch?


  24. @Crockett: “Is there much functional difference in trying to increase your income over decreasing your costs? That is a loaded question, but in the business world I would have to say not really. ”

    Decreasing costs = crappier product / offshoring
    Increasing income = jacking up prices / increasing customer base

    On short term (next quarter result / CEO bonus) there’s no difference and the first one is much easier to do.

    On long term you guess.

    Nap.

  25. Crockett,

    I think the problem you experienced with my blog might be that you just don’t understand the technology.

    Also, Access Copyright is a non-profit collective tasked with licensing actual use and collecting royalties. It is exactly NOT a business generating profits.

    That’s where the wrongness starts. It continues in your discussion of the tariff proposal. The tariff proposal is based on new technological uses and increased usage in general. Again, royalties are tied to actual usage. If income rises (a terrible thing for artists, I know, shameful), it’s because use has increased as well.

    I expect immediate and ideological disagreement everytime I post something on my blog, just as I can count on a Geistian chorus of “yes professor” everytime something new pops up here.

    I’d appreciate it if you would TRY to be accurate at least. The copyright discussion has enough Darryls.

  26. LOL, Crockett didn’t say AC was in business to create its own profits. He said “is in essence a business to generate profits for it’s clients”. Do you really deny this?

    As you say, you should “TRY to be accurate at least”.

    I think there are sufficient Degen’s in this debate as well.

  27. Degen wrote “Hmmm, so revenue from rights photographers claim they should gain must be subtracted from the revenue losses resulting from rights losses by other artists? Apples? Oranges?”

    How is this any different than CCA accruing total “losses” or “potential” revenue over the wide spectrum of the creative community? Does the removal of the radio tariff affect authors? Will doing away with the film licensing impoverish sculptors or photographers? How many songwriters will feel the pinch of the extension of fair dealing in education?


  28. @Degen: “I expect immediate and ideological disagreement everytime I post something on my blog, just as I can count on a Geistian chorus of “yes professor” everytime something new pops up here.”

    Did it ever cross your mind that if people are in strong disagreement with your opinions on copyright, no matter where or how you express them, there might be some problem with said opinions?

    Nap.

  29. Napalm, is that a rhetorical question?

  30. Where’s that towel …
    @Degen “I think the problem you experienced with my blog might be that you just don’t understand the technology.”

    I don’t understand the technology? Heh, thanks John you made me spill my coffee I was laughing so hard. I was making a point to your one line wonder supporter “Bob” that there ‘really are’ secret Orwellian conspiracies everywhere to silence dissenting thought 0_o

    And now onto semantics, it is true that AC itself is incorporated as a ‘non-profit’ but it, with it’s proposed increased tariff, is attempting to increase the income of it’s clients. Now basic the question is .. does the proposed tariff reflect increased use of AC licensed materials to justify the significant increase in the fee? This taking into account the increased use of open source and other paid sources of information? A valid question that I would be interested [sincerely] to see some data on, because on the surface it doesn’t seem to track.

    And just to be balanced on this, if it is as you say, that educational institutions are thinking ‘push c-32 through so we will not have to pay for materials at all anymore’ then that is a attitude that must be countered. Greed comes in many forms.

  31. Has anyone read what the CCA said in response to this? http://www.ccarts.ca/en/advocacy/bulletins/2011/0911.htm

  32. Has anyone read what the CCA had to say in response to this? http://www.ccarts.ca/en/advocacy/bulletins/2011/0911.htm