The Canadian market features at least three legal issues – licensing, levies, and the lack of legal flexibility – each of which could create a significant entry barrier.
There is nothing to stop the major record labels from licensing a similar service in Canada, yet experience to date suggests it won’t happen quickly. Pandora, a popular U.S. online music service, has indicated that it wants to enter the Canadian market, but that the exorbitant licensing pricing make entry an economic impossibility. Given the current demands of multiple rights holders, the Canadian costs could keep iTunes Match out of the country for the foreseeable future.
Cloud based music services are based on users storing copies of their music on company computer servers. Since that requires additional “copies” of the music, Canadian copyright collectives will likely adopt the position that without a license, they are entitled to additional compensation for each copy. Collectives already receive compensation from radio stations for format shifting music files from CDs to computer hard drives and the Canadian Private Copying Collective (CPCC) recently announced that it is seeking to extend the private copying levy to memory cards that are widely used in digital cameras.
Cloud-based copies could be next, given that the CPCC has argued “the economic value of reproducing music in order to make it portable must be recognized. Rights holders deserve to be compensated for all private copies made of their work, regardless of how a copy is made.”
Even if the levy issue can be overcome, the lack of flexibility within the current Canadian law would create a significant barrier to the Amazon and Google cloud music services. Both of those services rely on fair use, yet Canadian law in this area is far more restrictive than the U.S. The companies would be hard pressed to argue that the Canadian fair dealing provision could be extended to cover this form of copying. The same is true for other emerging cloud-based applications, such as remote storage digital video recorders offered by some U.S. cable companies.
To open the door to these kinds of services, Canada needs Industry Minister Christian Paradis and Canadian Heritage Minister James Moore to focus on greater flexibility in the law by implementing a flexible fair dealing model or establishing a specific exception to allow for backup copies and subsequent streaming access.