Sound Numbers

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.


  1. So …
    the major labels are clearly having sales issues, as Mr. Henderson of the CRIA is so fast to point out at every possible opportunity. Yet, the music industry as a whole is clearly doing better, even if there is a small problem with the numbers. The difference of $150 million might be high, or low, but at least its an estimate.

    That means that our purchases of independent music are actually HELPING, as we had hoped? My wife and I avoid the “big labels” whenever possible, and our sales with them are well under 10% of what we bought in the 90s. Yet, we still buy music, but we buy more directly from the artists. We want our money to go to them, and not to lawyers and lobbyists who force themselves in between.

    You mentioned several reasons for the decrease in sales expectations, but one other one is that people replaced LP’s and tapes with CDs in the 90s, but probably do far less of that today.

    Either way, I think this is super news for the independent music scene, and some numbers that indicate that Canadians DO support their musicians … in fact we strongly prefer them to offerings from foreign national firms. That doesn’t make us pirates, it makes us honest, smart, and efficient.

  2. Oh yes,
    and someone should point out that the stories on Canadian students stealing copyrighted goods using internet is also 50% more suspect than it was before. The students are clearly NOT pirating music, they are doing exactly what they always claimed to be doing … they use peer-to-peer as a way to communicate their love of music, and when they like music THEY BUY IT. They buy 50% more now than they did before.

    We should stop calling them names for that, there is proof now that they spend their hard earned (and short supply) funds honestly. Its in poor taste for politicians to speak otherwise. It costs them nothing to assume their voters are honest, and now they have proof.

  3. Call me a pessimist, but
    I get this knot in my stomach that Canadians will end up downloading crap artists from one of teh four Major Labels paying a premium per megabyte amount given the download started during peak hours, only to have to pay extra if youwant to listen to it more than once, before everyone realises what freedoms they have lost.

    here’s hoping That calmer heads will prevail.

  4. nexxtech says:

    copyright industries
    I doubt the copyright “industry” is as important to the economy as they would like you to believe.

    Entertainment, like tourism, industries are recirculation, not creation, of wealth.

    Of course art is valuable, but not in the economic sense, unless you are pulling in “recirculation” dollars from another country.

    The big labels have to justify their importance now that you buy music off the artists directly, and in-home studios are possible.

  5. Concerned Citizen says:

    Hey, Geist, if you’re such a believer in access to information, why don’t you make the draft study available to your readers instead of clutching it to your chest? Or are you getting all this stuff under the Gee I’m Special Michael Geist Access To Information Act?

  6. Michael Geist says:

    Copy of Report
    Unfortunately, the report is 93 pages in paper format. It can be requested from the Canadian Heritage ATIP office. The request number (someone else actually launched the initial request) is PCH2005000284.

  7. Concerned Citizen says:

    Big Deal.
    Ever heard of a scanner. You don’t have to do it yourself. Get one of your dozens of student acolytes to make a pdf of the report.

  8. senatorhung says:

    hey ‘Concerned Citizen’, are you familiar with ‘crown copyright’ ? Mr. Giest has posted previously on why the government should get out of the copyright business, but until it does, he would still breaking the law by re-publishing a government document. and you do remember that he’s a lawyer, right ?

    me, i’m not surprised that canadian heritage refuses to release a report that contradicts everything that the department has been saying about how the music industry is being hurt by P2P (echoing the CRIA standard line). we’ll probably only see this report in the open once someone at CRIA has figured out how CH can spin it to their benefit 🙁

  9. sounding numbers
    You know it’s too bad…
    I’ve been working with a number of startup labels for the last few years.. none of which have a clue as to who the CIRA is, and to the fact that a forum like this exists.

    It is exceedingly difficult for a young artist to find a trustworthy counsel to advise him or her to protect themselves. It is, however, easier to find a representative of a record label (some that we consider innocent “indie” labels seem to have leart some tricks from the big boys) to “take care of it” for them.

    For fun, I installed a pc with some peer to peer software to see what comes up. It seems that it’s easy to download any hit single out there (usually watermarked or re-edited for the purpose), but absolutely impossible to uncover new talent.

    This only shows that the larger record labels have quite capably turned this “threat” into a marketing tool.

    There’s no reason to marked’ly avoid the big labels, they might have some amazing talent to present. The problem lays in the distribution of power.

    And through all of history, when one builds a tower, others aim to topple it.

    Anyways.. you guys probably take me for off topic, but here is what I want to ask.

    Why don’t any of the major bodies (SOCAN, http://WWW.GC.CA, even CIRA) offer a resource pool for artists in canada to find legal resources (at minimum a list of availiable services) in a comrehensible format.

    Also, create incentives in programs such as FACTOR to involve students of entertainment law, before they are sucked into a lifetime of contract review.

    Instead of fighting the record labels on the store shelves (they WILL make more money than you even without HMV) we should be preventing the large corporations from recruiting on our campuses. If you can take steps to prevent stonewalling and shelving of ideas, then you can get to building a better community.

    while all kinds of talk goes on about who’s owed what, can any of the people who claim to represent the artists lend a hand?

    I understand, from my own work, that few would be interested in a “charity” cause, in which case, the interest earned on the amounts of money due by SOCAN to artists that fell beneath the quarterly minimum can finally be put to good use.

    This is first post, and I tried not to rant… but the higher and more tightly the pile of legal paper, the hotter the fire.

    Thank you, Mr. Geist, for opening the lid.

  10. Seems copyright industries are “very”
    Intresting that the biggest always cry loudest. Clearly growth by $150 is pretty solid and something the big foreign music companies cannot easily dispute (although certain they’ll TRY). The concept of counterbalance is likely the most accurate interpretation. The market seems to have a way to balance things out when they reach a tipping point of being way out of wack, and someone’s loss is often someone else’s gain. Once the limosine-driven music giants got comfortable there it was highly predictable they wouldn’t want to change things much. Their lack of flexibility to change things caused them to become ever more entrenched in order to maintain the gigantic overheads (and defend that turf, legally). On the other side of the balance scale was in fact a keen desire to “right” the balance (some suggest it has always been there but until the internet opened the chains it could not make it to market). Once that desire was in flight, together with a high degree of flexibility and motivation many entrepreneurial Canadian artists, musicians and managers have quite literally “taken off”. This report seems to suggest that “balance” which is decades over due is becoming more of a reality for Canadian artists. Of course while the limo-riders complain, the balance are doing quite well. Some historians call this a redistribution of wealth.