Streaming services need certainty to thrive: Songza exec

OTTAWA — Canada’s regulatory environment doesn’t promote technological innovation in the music industry, and that’s part of the reason why streaming services here are lagging behind their U.S. counterparts, said Vanessa Thomas, managing director for Canada at Songza Media Inc. Thomas made the remarks Tuesday while speaking by video link to a House of Commons heritage committee meeting, which is undertaking a review of the Canadian music industry. “The environment is not built to let digital companies thrive and succeed,” she said. “The regulatory framework in Canada doesn’t foster innovation. The rate-setting process through the Copyright Board takes far too long, up to four to five years for an industry where business models are changing rapidly.” Thomas said it’s “hard to build a business model without certainty as to how much you have to pay for the main inputs to your business,” noting the willingness of people to invest in such businesses is affected by this as well. She said an agreement with copyright collective Re:Sound gave the company the certainty it needed to launch in Canada in August 2012, “without having to wait for years for a decision from the Copyright Board.” Songza opened offices in Canada in 2013 and currently has 2.7 million listeners in the country, she said. “Canada continues to be among the most challenging countries to strike digital-rights agreements with the publishers,” she said, adding that as a result, many entities have been dissuaded from operating in Canada. In 2012, Pandora Media Inc. said it would not enter the Canadian market if the Copyright Board approved music royalties on a “per play rate” as proposed by Re:Sound. The Copyright Board is currently considering royalty rates and how they might apply to music streaming services, and is expected to issue a decision in mid-to-late 2014. “Streaming music companies are paying more per stream in royalties than we are actually making in revenue, even with dedicated sales teams, at this early stage of our development,” Thomas said. She said royalties were the biggest cost for digital music services, and suggested the government could develop a subsidy system for royalties. Greg Johnson, vice-president of the Songwriters Association of Canada, who also testified Tuesday, told the committee that songwriters are suffering from the popularity of illegal music downloading, and the emergence of online streaming sites is so far not necessarily filling in the gap. “Although pundits and experts alike expect new streaming models of consumption to reach $40-billion mark globally within five years, creators must be represented fairly in the value chain,” he said. Johnson gave the example of one artist who reported 2013 earnings of $808 from streaming service Spotify AB from 201,402 streams, and that “there is still much work to do on the sustainability of the streaming model.” He said that songwriters are often left out of the conversation between the record labels and the streaming services. “It’s increasingly looking like it’s really just not possible for us to function in this environment,” he said. “There’s been a lot of questions on whether there needs to be more regulation on this business, or there needs to be more cooperation with the government,” he said. “It’s time to have some serious discussions about this because this type of activity could be the collapse of the creator side of the business. It’s very dire,” he said. Representatives from Sirius XM Canada Holdings Inc., who also appeared at the committee, called for regulation of online music services. Andréanne Sasseville, director of Canadian content development and industry relations at the satellite radio company, said broadcasters must adapt to an “ever-changing environment” and must do so “within an unfair competitive environment” that involves competing with unregulated music-streaming services. “Internet- and mobile-streaming companies currently pay nothing toward the Canadian industry related to artist awareness and growth, nor do they currently have any requirements that they feature Canadian content,” she said. Paul Cunningham, vice-president at Sirius XM Canada, also asked the government for a “fair and equal” regulatory playing field for all sources of music content in the country, which he said would allow the company to “be able to compete with everybody in the marketplace.” “If you put on a fair and equal playing field when it comes to Canadian content and Canadian content development rules, everybody should be able to survive in that environment. If you can’t make money, then raise your price,” he said. Speaking at the same committee last week, Scott Hutton, the CRTC’s executive director of broadcasting, backed away from licensing as a way to regulate music-streaming services, while suggesting other regulatory tools could be used in the future. In response to a question about applying Canadian content quotas on new technologies, Hutton told the committee that it’s important to be careful not to extend “old methods to the new world.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Streaming services need certainty to thrive: Songza exec

Broadcast | April 1, 2014

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Streaming services need certainty to thrive: Songza exec

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