Senate Committee — TRCM — Brief — sm-c-11_brief_nettwerkmusicgroup_e

TRCM / Brief / sm-c-11_brief_nettwerkmusicgroup_e

Senate Committees

1 Nettwerk Music Group Inc. 1675 West 2nd Ave, 2nd Floor Vancouver, British Columbia V6J 1H3 Email: paldous@nettwerk.com Date: August 17th, 2022 Via Email Standing Senate Committee on Transport and Communication The Senate of Canada Ottawa, Ontario Canada, K1A 0A4 Email: TRCM@sen.parl.gc.ca Attention: Clerk of the Committee Dear Honourable Committee Members: Re: Nettwerk Music Group Inc. – Bill C-11 I am writing to you regarding the proposed Bill C-11 currently before the Standing Senate Committee on Transport and Communication (the “Committee”).

Nettwerk Music Group Inc. (“Nettwerk”) was founded in Vancouver, BC in 1984 and is a full-service record label, music publisher, and music management company dedicated to artist development and music intellectual property brand building. With its head office located in Vancouver, Nettwerk is a global organization with offices in Los Angeles, London, and Hamburg, and remote staff working in Toronto, New York, Sidney, Nashville, and many other cities throughout the world. Nettwerk is one of Canada’s largest and widest-reaching music companies.

While we have artists signed to Nettwerk from all around the world, we currently have twenty-three (23) domestic Canadian artists on our “active” roster (i.e., artists who are still under contract to deliver new music to us). When we add-in our catalogue roster (i.e., artists whose recordings we control but who are no longer actively under contract with us), our roster reaches one hundred thirty-eight

(138) Canadian artists. At Nettwerk, we pride ourselves on our ability to anticipate shifts in music consumer behaviour and to effectively leverage technology to develop our artists’ careers and to place their music in the hands of the largest possible audience around the world. As such, Nettwerk has long been on the cutting edge of the digital music revolution. We at Nettwerk believe we are well-positioned to provide constructive input into the Committee’s deliberations regarding the proposed Bill C-11.

We are writing to respectfully request to be added to the witness list for the Committee’s hearings with respect to Bill C-11. At Nettwerk, we wish to express our concerns with the potential negative effects this proposed legislation would have on not only Nettwerk’s business and that of its artists, but on the businesses of many other Canadian artists, record labels, and music rights holders. 2 Our concerns with Bill C-11 are as follows. 1) Bill C-11 is an attempt to insert legislation/regulation into private, commercial relationships between Nettwerk and its distribution partners.

Nettwerk negotiated its first direct license with Spotify Limited in 2009, long before digital streaming became the dominant form of global music consumption. Currently, Nettwerk is one of the very few independent record labels, globally, that has direct distribution relationships with each of Spotify, Apple Music, and Amazon Music (meaning there is no third-party distributor, such as a multi-national so-called “major” record company in between Nettwerk and the digital music service providers).

Nettwerk has worked diligently over the past decade to develop and refine its relationships with these digital music services. Bill C-11 would interfere with those relationships, to the detriment of Nettwerk and its artists, by inserting a regulatory regime into those carefully negotiated and long-fostered private relationships. Effectively, Bill C-11 would make the CRTC a party to our private commercial agreements, with no measurable benefit to either Canadian artists or Canadian music consumers.

Perhaps most concerning, this interference could include the implementation of cultural contribution rules, the costs of which we believe would ultimately be borne not by the online service providers but by Canadian service users, record labels, and artists. We believe the digital music service providers would simply find ways to account for these costs in their agreements with Canadian entities, leaving the Canadian music community with the responsibility of subsidizing itself.

Simply put, Nettwerk’s relationships with the digital music service providers do not require legislative or regulatory input in order to allow Nettwerk to best serve the interests of our Canadian artists. 2) Bill C-11 appears to be founded in a traditional radio regulatory approach that has little relevance to the way Nettwerk’s artists are discovered by their audience.

This traditional radio regulatory approach ignores the borderless mentality that our Canadian artists apply to their creative collaborations and ignores the multitude of ways that Canadian artists are discovered, and their fan bases are built, in a digital world. The model that Nettwerk uses for artist discovery is based on a global reach, and we use digital streaming services to maximize this reach. While we do occasionally use Canadian terrestrial radio campaigns for some of our artists when we believe it to be beneficial, it is fair to say that is very much the exception rather than the rule.

Simply put, we do not rely on Canadian content regulation as part of our business model for building the careers of our Canadian artists. At best, a so-called “MAPL” based system of Canadian content regulation imposed on our digital music service provider partners would be completely irrelevant Nettwerk’s artist discovery strategy. At worst, it could significantly damage it. 3) Nettwerk is a global music company with a focus on finding global markets for our artists. C-11 could seriously damage our business strategy in this regard.

Nettwerk’s goal is to help all of our artists, including our Canadian artists, to compete on the international stage. Approximately ninety-two percent (92%) of Nettwerk’s streaming revenue comes from outside of Canada. One of our Quebec-based artists has approximately ninety-eight percent (98%) of his streaming activity occurring outside of Canada.

So, while Canada remains a very important market for Nettwerk and its artists, our goal is to find a global audience for all of our artists, including those who form our Canadian roster. 3 We currently employ an extensive in-house data science and analytics team who study the streaming listening patterns we observe on the digital music service providers.

Our extensive research, analysis, and experience in this area over the last decade tells us confidently that imposing a Can-Con style regulatory regime on the digital music service providers risks hurting the domestic Canadian music economy and seriously damaging the ability of Canadian music companies to export Canadian musical artists.

What we have observed, not just for our Canadian artists but also for our Australian artists and other artists from relatively smaller music markets, is that there is a significant danger of artists becoming locked within their own domestic territories when it comes to digital streaming. Internally at Nettwerk, we refer to this as “Geo-Fencing”. As an artist becomes successful solely or primarily within a relatively small music market, it creates an impression within the streaming environment that the artist is only regionally meaningful to listeners.

That makes it increasingly difficult over time for that artist to break-out of that domestic market, significantly restricting that artist’s ability to find a global audience. We believe Bill C-11, as drafted, would amplify this effect on an exponential basis, resulting in most Canadian artists being “Geo-Fenced” within Canada, with minimal reach beyond the Canadian borders. To avoid this, Canadian artists would be incentivized to sign to record labels based in larger markets such as the U.S.A., the United Kingdom, or France.

These record labels would focus on developing these Canadian artists’ careers outside of Canada. However, the opportunities for Canadian artists to sign with international record labels would likely decrease due to concern amongst those labels that such artists may experience geographically “fenced” or “locked” success within Canada.

Therefore, this proposed regulation of digital music service providers would create both a disincentive for Canadian artists to sign with Canadian record labels, but also apply significant downward pressure on the number of Canadian artists who would otherwise have the ability to have a meaningful global music career in an unencumbered music market. A separate but related concern we have with the contents of Bill C-11 is the potential so-called “copycat” effect that may result. Nettwerk often sees its artists first gain streaming traction in smaller international music markets.

Our colleagues in other countries tell us that the eyes of the world are on Canada with respect to Bill C-11. We worry that if Canada passes legislation that imposes a Can-Con style regulatory regime on digital music service providers, that other governments around the world will follow suit, making it much more difficult for Nettwerk to gain streaming traction for its artists in international markets. We worry that a regime designed to protect domestic content will result in protectionist digital music markets around the world.

This could ultimately result in fracturing the operations of the digital music service providers along national lines. That could be very damaging to Nettwerk’s global-facing business model, and significantly reduce our ability to export our artists and develop their careers. We also have considerable concerns with Bill C-11’s approach to so-called “user-generated content” online. One of the tools that Nettwerk uses with a significant degree of success is the leveraging of so-called “viral moments” our artists enjoy on social media through user-generated content on services such as YouTube and Tik Tok.

This type of direct fan engagement with our artists’ music can be one of the most significant accelerants of international success for our artists. It is the fan-driven, unregulated nature of this type of direct engagement that makes it so effective.

We strongly believe that any attempt in Bill C-11 to regulate user-generated content online would be highly detrimental to the phenomenon of so-called “viral” successes within our business and would result in the loss of a significant tool in the marketing of Canadian music internationally. 4 Conclusion In the current international music streaming economy, Canadian artists perform disproportionately well, relative to the size of Canada’s music market. We believe that this current success of Canadian artists should be fostered and developed, using the borderless tools that the streaming economy already provides.

We believe that some of the attempts to regulate this economy represented within Bill C-11 would create the opposite effect, and close doors of opportunity to Canadian artists that are currently open. We believe this approach would ultimately decrease the number of Canadian artists who are able to have sustainable careers and reduce the prominence of Canadian artists around the world. It should go without saying that Nettwerk is an unwavering champion of Canadian music and Canadian artists.

Despite its extensive international success, and its satellite offices and staff around the world, Nettwerk’s head office and its founders and executive staff remain in Vancouver. Nettwerk is highly committed to Canada and the Canadian music community. Nettwerk deeply appreciates all that the Government of Canada has done, and continues to do, to support the Canadian music community, and Canadian culture generally.

Nettwerk is a direct beneficiary of funding support provided by the Government of Canada, and this funding has greatly assisted Nettwerk in investing in its infrastructure and has helped Nettwerk to compete globally, while retaining its intellectual property rights in Canada. We recognize that Bill C-11 is a well-intentioned attempt to develop, support, and enhance opportunities for Canadian musicians and music industry professionals. However, our concerns are focused on the potential unintended consequences that may arise as a result of this legislation.

While we applaud the government’s efforts in to use legislation to assist in its efforts to support the Canadian music economy, we believe that Bill C-11 will have the opposite effect for much of the next generation of Canadian musicians and music professionals, for the reasons described above. If you have any questions or concerns about anything contained in this letter, please do not hesitate to contact us. We would be more than happy to discuss this matter with the Committee in more detail. Please note, we are providing a copy of this letter to the Honourable Leo Housakos, Senator, the Chair of the Committee.

Best regards, Nettwerk Music Group Inc. Patrick Aldous, Senior Vice President, Business and Legal Affairs cc. The Honourable Leo Housakos, Senator Chair of the Standing Senate Committee on Transport and Communication The Senate of Canada Ottawa, Ontario Canada, K1A 0A4 Email: leo.housakos@sen.parl.gc.ca

Document details

Collection	Senate Committees
Citation	TRCM / Brief / sm-c-11_brief_nettwerkmusicgroup_e
Type	committee
Volume / chapter	441 / Brief / sm-c-11_brief_nettwerkmusicgroup_e
Language	en
Format	pdf
Source	COMM_SEN
Identifier	edd0f3806aa40588fecf21d3770ba97e590bd103

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