CNM Newsmakers

The following is an excerpt from the March 3 keynote address by Graham Henderson, president, Canadian Recording Industry Association at Canadian Music Week. In the address, Henderson expresses optimism for the future of the music industry in a digital environment, but calls on Ottawa to ratify the World Intellectual Property Organization’s Internet treaties and for it to follow through on its own copyright reform process. …Like many of you, I have sat through countless keynotes at successive Canadian Music Weeks at which pundits and futurists, self-proclaimed prophets of our doom, propounded their idiosyncratic visions of the future. Many of these people had absolutely no familiarity with our business; some of them were, of all things, law professors fresh from the tenured, sheltered corridors of academe. But what they all had in common was this. They were, for the most part, wrong. …There is considerable evidence that some of the illusions about the “e” world are wearing off and that the old rules are re-asserting themselves. What do I mean by “old rules?” One of the first things we were told was that the Internet was going to shatter artificial boundaries. That it did not respect borders. For an industry based on rights that vary from territory to territory – this was a confusing prospect. But in actual fact, the prognostication turned out to be at best only partly correct. Through the simple expedient of reverse IP look up or checking the address of the credit card holder, you can, in effect, control who buys what from whom in what country. But even beyond this, what we have discovered is that people, by and large, prefer to buy at home. Echoing similar studies elsewhere in the world, a recent and as yet unpublished Pollara Inc. study found that 75% of Canadians were now aware you could buy music on the Internet. But here’s what’s new and surprising. 75% said they would prefer to buy from a Canadian service (25% were able to name Puretracks) assuming price and quality were similar. 75% said a Canadian service would do better at equally supporting French and English speaking services and 53% felt that a Canadian company would do a better job supporting Canadian artists by making their songs available (with 32% saying it would make no difference). …The record industry has been plagued by what the economists call the free rider problem – which is their term for unpaid file swapping. One of the principal economic effects of the free riding problem is that copyrights become less valuable. Devaluation of copyright also means price erosion. In the music industry, pricing is as much related to the existence of the illegal “free” marketplace as it is to the intrinsic value of the product. Now that a legitimate marketplace is developing, it only makes sense that pricing will follow demand. I want to briefly address the issue of “disintermediation.” This is one of the goals ardently sought by some academics and also by some paid opponents of our industry – just get rid of the record companies. The idea is to put the creator directly in contact with the consumer – our opponents are oblivious of the need for investment in production and distribution and the need for money to market the product produced. In their view creators would interact directly with consumers in a sort of anarcho-syndicalist’s paradise. And, as for getting paid? These folks regard the idea that there needs to be some sort of transaction between the seller and the buyer in a free marketplace as a quaint anachronism. In its place will be a form of centralized, government-run, collectivized, compulsory licensing system. This is fundamentally at variance with a free market economy. It discourages investment and innovation. And it removes from the equation something that is of vital importance – you can disintermediate the record labels, but you cannot disintermediate the functions that they perform. Now let me be clear, there is nothing wrong with disintermediation per se. But there needs to be room in the world for both models. And our current legal system simply does not respect the principle of choice. It takes choice out of the hands of the creators and rights holders and puts it in the hands of hackers and thieves. If creators want to do it in order to connect with audiences they should be able to do so – but it must be their choice, not a choice made for them by the expropriators. …Copyright reform offers us the chance to change all of this. Now some academics will tell you this is because we want to sue, as one of them snidely put it, “teenagers and dead grandmothers.” Nothing could be farther from the truth. Copyright reform will create a set of rules so that Canadians who want to play by the rules can play by the rules. And it offers rights holders of all stripes the opportunity to engage in a national conversation on the value of intellectual property. …From my perspective, working together, we must initiate a national conversation – a dialogue that should take place in our marketplaces, our places of work, our schools and our homes – a dialogue about the nature and importance of products of the mind. And while this conversation can start today, in order for it to be truly effective, our government simply has to move to ratify. Well, we are almost there. The federal government is at last moving to modernize our outdated analog copyright legislation. This legislation will provide the legal framework necessary to allow the digital marketplace (the industry in general) to flourish. It will bring Canadian law into line with the rest of the technologically sophisticated nations of the world. It will give labels and artist’s choice: it will mean the end of expropriation and the dawn of remuneration.

CNM Newsmakers

News | 03/14/2005 5:00 am EST

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