'The Creative Middle Class Is Being Annihilated': Music Canada's New Report Calls for Closing the Value Gap

 Amy Harris/Invision/AP
Miranda Mulholland performs the Rock Boat cruise on Feb. 11, 2017 in Miami.

The trade organization wants to “rebalance the music marketplace" in service of creators.

At a luncheon at the Fairmont Royal York Hotel in Toronto hosted by the Economic Club of Canada on Wednesday (June 26), Music Canada president and CEO Graham Henderson gave a detailed overview on the ongoing fight for artists to receive fair compensation for their work in the digital age. In his speech, made ahead of his onstage chat with Julie Dabrusin, Member of Parliament for Toronto-Danforth and chair of the standing committee on Canadian Heritage, he was blunt in his assessment of the problem: “The creative middle class is being annihilated.”
 
The true reason for the sold-out gathering of some 300 people -- including representatives from major labels, music associations and government agencies, plus entertainment lawyers and accountants, a table full of artists and students from Humber College and the University of Toronto music program -- was the release of Music Canada’s latest report, called "Closing the Value Gap: How to Fix Safe Harbours & Save the Creative Middle Class," which was printed for those to take home (it can also be downloaded online).

“You are our future and those of you who are going forward with careers in music or film or television or whatever it is, we feel an obligation to build a world in which you can earn a living in your chosen profession,” Henderson told the students.

In the new report, Music Canada -- the non-profit trade and lobby group representing the major record companies in Canada that works to support and develop the music sector -- is calling for the Canadian government to “rebalance the music marketplace and restore fairness to the creators of music,” as stated in a press release released after the event. The titular, problematic "value gap" refers to the discrepancy between the revenue online platforms (like digital service providers, or DSPs), broadcasters and other third parties receive from the commercial use of creative content, and the revenue returned to those who create it. 

“Closing the Value Gap” follows what Music Canada calls its “groundbreaking” predecessor, 2017’s “The Value Gap: Its Origins, Impacts and a Made-in-Canada Approach,” which Henderson said was used as “something of a handbook for copyright reform in Canada.” Its publication led to two parliamentary committees reviewing the Canadian Copyright Act of 2012, its use worldwide by various governments to identify their respective value gaps, and more content creators speaking up about wanting to be fairly compensated when their work is used by others commercially. 

In May of this year, the Heritage Committee confirmed broad recognition of the value gap with a report entitled "Shifting Paradigms," which identified why artists were losing the ability to earn a middle-class income. Its findings led to calls for a review of the 2012 Copyright Act to make sure digital entities were held accountable for fair distribution of revenue to content creators. 

“A broken copyright framework, ill-adapted to the challenges of the digital age, is now generally recognized as the cause of the value gap,” states the release. “New economic evidence confirms that the value gap in Canada continues to grow, with staggering figures that show the discrepancy between what artists make and what they create.” Henderson told the room that “the report chronicles the challenges that artists face as a direct result of the value gap.”

Dr. George Barker of the London School of Economics and Australian National University found three significant numbers illustrating that the value gap is wider than previously believed, and that it continues to grow. The report lists $19.3 billion (USD $14.7 billion) as the cumulative Canadian recorded music industry value gap since 1997 and $1.6 billion (USD $1.22B) as the music industry value gap in Canada in 2017 alone; additionally, it notes that the average annual increase in the music industry value gap in Canada between 1997 and 2017 is $82 million (USD $62.5M).

The last time Henderson spoke at the Economic Club of Canada was in 2016, he recalled, noting the subject was “broken promises of the golden age" -- essentially what tech companies and their promoters promised creators in the early 2000s that did not come to fruition.  “The digital era did not usher in a utopia in which artists would earn more money by dealing directly with consumers," he said. Instead, artists saw career opportunities implode, as “tech behemoths took an ever-greater slice of a shrinking pie.”

At that time, they had not yet applied the name “value gap” to what was developing: The gulf between the revenue third parties receive by their use (some might say exploitation) of creative content and the disproportionate compensation they pay to its copyright holders.

He recalled how the 2016 speech was “part of a grand movement that was getting underway in Canada, and perhaps most crucially artists found their voices and began actively speaking out.” Most notably, exceptions (for the use of creative works) were built into the government's Copyright Act, which “might make a difference between a life as professional creator or that of a hobbyist.” 

Although momentum is high for copyright reforms, Canadians will head to the polls in October for a federal election and legislation will “have to wait,” Henderson said, before Music Canada returns to the frontlines.


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