Randy Bachman, the well-known Canadian musician, found himself embroiled in a public fight with Prime Minister Stephen Harper last year when Harper used his song “Takin’ Care of Business” as a theme song for a major speech. Bachman said he probably would not have granted permission to use the song, since “I don’t think he’s taking care of business for the right people or the right reasons.” Bachman was singing a different tune yesterday as the government released its budget and apparently took care of the right people – record companies. Despite no study, no public demands, and the potential cost to the public of millions of dollars, the government announced that it will extend the term of copyright for sound recordings and performances from 50 to 70 years. For that giveaway, Bachman was quoted as saying “thanks for the term extension PM Harper, you really are taking care of business.”
While the government lined up industry supporters to praise the term extension, the decision is unexpected and unnecessary (it also announced that it will accede to the Marrakesh copyright treaty for the blind, but that should not require significant domestic reforms). The music industry did not raise term extension as a key concern during either the 2012 copyright reform bill or the 2014 Canadian Heritage committee study on the industry. Experience elsewhere suggests that the extension is a windfall for record companies, with little benefit to artists or the public. In fact, many countries that have implemented the extension have been forced to do so through trade or political agreements, while signalling their opposition along the way.
Canada will extend term without any public discussion or consultation, yet other studies have found that retroactive extension does not lead to increased creation and that the optimal term length should enable performers and record labels to recoup their investment, not extend into near-unlimited terms to the detriment of the public. For Canadian consumers, the extension could cost millions of dollars as works that were scheduled to come into the public domain will now remain locked down for decades.
For example, the 2006 Gowers Report on Intellectual Property, a wide ranging and well respected government-sponsored review in the UK, came out against term extension for sound recordings and performances:
In conclusion, the Review finds the arguments in favour of term extension unconvincing. The evidence suggests that extending the term of protection for sound recordings or performers’ rights prospectively would not increase the incentives to invest, would not increase the number of works created or made available, and would negatively impact upon consumers and industry. Furthermore, by increasing the period of protection, future creators would have to wait an additional length of time to build upon past works to create new products and those wishing to revive protected but forgotten material would be unable to do so for a longer period of time. The CIPIL report indicates that the overall impact of term extension on welfare would be a net loss in present value terms of 7.8 per cent of current revenue, approximately £155 million.
A Dutch study on intellectual property reached the same conclusion, noting that the arguments in favour of extension were unconvincing and that the extension would create significant costs for consumers and society as a whole. It concluded:
To conclude, the arguments made in favour of a term extension are not convincing. Many arguments already fall outside the objectives of related rights protection for phonograms. The fact that some recordings still have economic value as rights therein expire, cannot in itself provide a justification for extending the term of protection. Related rights were designed as incentives to invest, without unduly restricting competition, not as full-fledged property rights aimed at preserving ‘value’ in perpetuity. Other arguments do not convince because a term extension would either be ineffective in addressing the concerns in question, because there are other, better remedies available or advisable, or because the costs of an extension would outweigh its eventual benefits. The term of related rights must reflect a balance between incentives, market freedom and costs for society. This balance will be upset when terms are extended for the mere reason that content subject to expiration still has market value. The public domain is not merely a graveyard of recordings that have lost all value in the market place. It is also an essential source of inspiration to subsequent creators, innovators and distributors.
With many more studies and reports reaching the same conclusion (see here, here, here, and here) – some estimating that the costs to the public would exceed one billion euros with 72 percent of the benefits going to record labels – the issue unsurprisingly proved very controversial in Europe. The European Union ultimately passed an extension from 50 to 70 years in 2011, but not without significant opposition from member states. Eight countries – Belgium, Czech Republic, Luxembourg, Netherlands, Romania, Slovakia, Slovenia and Sweden – all voted against, while Austria and Estonia abstained. Sweden argued that the extension was “neither fair nor balanced”, while Belgium argued that it would mainly benefit record producers and negatively affect access to cultural materials in libraries and archives.
Belgium’s concern regarding the lack of benefit for artists was also reflected in the Gowers report, which noted:
If the purpose of extension is to increase revenue to artists, given the low number of recordings still making money 50 years after release, it seems that a more sensible starting point would be to review the contractual arrangements for the percentages artists receive.
While the European experience on term extension for sound recordings and performances is instructive, there have been Canadian studies that have reached similar conclusions. Industry Canada commissioned University of Montreal economist Abraham Hollander to examine the issue in 2005. Hollander’s study found that the economic value of a term extension to the recording industry was very small:
[Sound recordings] are protected for a period of 50 years from fixation. Adding 20 years of protection would contribute 2.3% to the present value of royalties under a 7% discount rate, assuming that the flow of royalties remains unchanged during the whole period. Under identical assumptions, extending the protection period to 100 years would contribute a mere 3.0% to the present value. This, however, is true only if the royalty flow remains constant over time. When the annual royalties decline rapidly over time, as is typical, the increase in present value would be considerably smaller.
Not only have the studies come out against term extension, but copyright stakeholders have not publicly emphasized the issue. Term extension for sound recordings and performances was nowhere to be found among the thousands of submissions to the 2010 copyright consultation, it was not discussed in the 2002 Canadian roadmap for copyright reform, and groups like the Canadian Independent Record Production Association and the American Federation of Musicians of the United States and Canada did not raise it in their submissions on copyright reform. The music industry’s form letter did not discuss term extension and it was not an issue that was prominently raised in the 2012 copyright reforms. In fact, just last year the Standing Committee on Canadian Heritage conducted a major review of the music industry in Canada with dozens of witnesses taking the time to appear or submit briefs. The final report and the government’s response never raise the term of protection for sound recordings and performances as a concern.
Why is the government using the budget to enact copyright term extension that primarily benefits foreign record labels, has proven controversial elsewhere, has been largely dismissed by numerous studies (including one funded by the government), was not the subject of a major public campaign from stakeholders, and that could cost Canadians millions of dollars?
My best guess is the Trans Pacific Partnership agreement. The TPP is nearing the end game and the U.S. is still demanding many changes to Canadian copyright law, including copyright term extension for all works (not just sound recordings). The Canadian government’s strategy in recent years has been to enact reforms before the trade agreements are finalized in order to enhance its bargaining position. For example, it moved forward with notice-and-notice rules for Internet providers without the necessary regulations in order to have the system in place and protect it at the TPP talks. It may be trying to do the same here by extending term on sound recordings and hoping that that concession satisfies U.S. copyright demands. Yet the concession comes at a significant price – locked down works and increased costs to consumers - while providing another reminder that too often Canadian copyright law is effectively written by U.S. lobby groups who do not have Canadian interests in mind.