September 11, 2009

The Honourable Tony Clement
Minister of Industry
Industry Canada
11^th Floor, East Tower
235 Queen Street
Ottawa, Ontario
K1A 0H5

The Honourable James Moore
Minister of Canadian Heritage
Department of Canadian Heritage
12^th Floor, 15 Eddy Street
Gatineau, Quebec
K1A 0M5

Dear Mr. Clement and Mr. Moore:

Re: Government's 2009 Copyright Consultations

1. CTVglobemedia Inc. ("CTVgm") is pleased to submit the following comments in response to the above-referenced Copyright Consultations (the "Consultations").

2. CTVgm is Canada's leading broadcaster, with 25 over-the-air television stations, 30 specialty services and 34 radio stations. Given our interest as both users and creators of copyright, the result of this proceeding is of great importance to us.

3. At the outset, and as Canada's largest broadcasting company, we would like to express our surprise that we were not invited to attend one of the Government's round table discussions which were held involving key stakeholders. We would have appreciated the opportunity to provide input to the Ministers in that setting.

Modernizing Canada's Copyright Act While Ensuring Competitiveness and Innovation

4. In launching the Consultations, the Government has signaled its intent to modernize Canada's copyright laws and to ensure that they are sufficiently flexible to adapt to new technologies. The Government has also indicated that any amendments to our existing copyright legislation should foster innovation and competition and ultimately position Canada as a leader in today's global digital economy. CTVgm applauds the Government's efforts to do so; copyright reforrn is no small task.

5. In the past, copyright reform has proven to be a contentious matter, serving to polarize stakeholders depending on whether they are users or creators of copyright material. However, as noted above, CTVgm is both a creator and a user of copyright-protected content. As users, we can speak to copyright issues affecting Canada's digital economy and as creators, we have an interest in ensuring that our works are show-cased with appropriate protection. We believe that this perspective permits us to bring a balanced view to copyright reform, having experience on both sides of the copyright spectrum.

6. CTVgm has read the wide-ranging submission of the Canadian Association of Broadcasters (the "CAB"). We are highly supportive of the CAB's submission and participated fully in its development. However, we have outlined below three key areas of reform which we believe are critical in this process and meet the Government's above-referenced objectives for copyright reform.

• Providing broadcasters with an exemption from digital reproduction liability for activities that are incidental to the act of broadcasting;
• Streamlining the collective administration process; and
• Expanding the existing signal right for broadcasters.

7. Each of these issues is discussed below.

An Effective Exemption from Reproduction Liability is Urgently Required

8. Among the goals expressed by the Government during the Consultations is the desire to ensure that Canada becomes a leader in the global digital economy. In CTVgm's view, this entails in part ensuring that the use of technology does not impede or unduly penalize its users.

9. In this regard, CTVgm urges the Government to amend sections 30.8 and 30.9 of the Copyright Act (the "Act"). Enacted in 1997 under Bill C-32, these sections granted programming undertakings (i.e., television and radio broadcasters) an exemption from copyright liability where certain types of reproductions were made of sounds recordings. However, at the eleventh hour before Bill C-32 was passed, an exception to the exemption was added, effectively negating the broadcasters' exemption from liability where a copyright collective society applied to administer the reproduction right on behalf of its members.

10. Fast forward to today where one collective society has been collecting reproduction royalties amounting to approximately $8 million per year from the Canadian radio industry since 2001¹ and where three additional collective societies have filed proposed tariffs with the Copyright Board for royalties.² All told, radio broadcasters face an estimated $90 million per year royalty payment for the simple act of an incidental digital reproduction that is ancillary to the actual broadcast of music.

11. In effect, the reproduction right penalizes our radio stations for using technology to get music on-air by storing music on a computer hard drive or network server. When our stations receive digital music files from the record labels, we use digital technology to transfer them to a usable broadcast-ready form and store them on our servers. In addition, more and more, we have no choice in doing so as record labels now exclusively provide us with new music through secure downloads; the days of music representatives dropping off CDs of new music at radio stations are gone.

12. To be clear, CTVgm does not take issue with the recognition of copyrights. However, any compensation for those copyrights must be fair. In our view, compensation for the reproduction right in any amount is not tenable where no new use is made of the reproduced music and where we are not deriving any additional financial value through making the reproduction. Broadcasters should not have to pay for reproductions as they only make them for the purpose of getting a music file ready for broadcast. Moreover, that transmission over-the-air is already paid for under the performance right payments. Performance rights royalties alone currently amount to approximately a $70 million payment for the Canadian radio industry.

13. Should the reproduction liability not be removed, it sends a conflicting message to Canada's broadcasting sector and its investors. On one hand, the Government wants Canada to be a leader in the global digital economy, but on the other hand, the Government sanctions a penalty for using digital technology. Therefore, CTVgm urges the Government to provide a true exemption to broadcasters from the reproduction right liability.

An Efficient Process is Needed for Collective Administration

14. The Government has expressed a desire to ensure that our copyright legislation fosters competitiveness and investment in Canada. In CTVgm's view, the current process of collective administration is a competitive disadvantage to achieving this goal.

15. In particular, both the increasing financial burden for copyright royalty payments as well as the inefficient system of tariff hearings is a matter of concern. Copyright payments are the single most expensive programming input and are exceeding the rate of growth for revenue or expenses. In addition, the copyright regime is administratively difficult and tariff proceedings can take years to conclude. Further, retroactive payments are common, causing uncertainty in business planning.

16. The Copyright Board (the "Board"), being the economic regulatory body responsible for approving copyright tariffs, has responded positively to requests from the CAB for consolidated tariff hearings such that tariffs related to the same use are heard together. For example, at a hearing held in December 2008, rather than holding individual tariff hearings, the Board ordered five copyright collectives administering the music performance and reproduction rights on behalf of their various members to appear together to argue for approval of their respective tariff proposals. However, a consolidated hearing does not translate into a consolidated tariff, which if implemented, would provide for a more efficient collective administrative process.

17. In CTVgm's view, it is now time to take a more holistic approach to copyright reform. In this regard, we support the CAB's recommendation for an independent review of collective administration wherein a fair and effective structure is implemented to administer copyright valuation and payments. A new streamlined process is critical in order to facilitate the use of copyright-protected works in the digital environment.

18. As part of this streamlined process, we also recommend that a new valuation approach be instituted wherein the overall value of the copyright-protected work is determined first, then the portion of the overall value each right should be accorded. In particular, the Act establishes several layers of rights for musical works, including performance rights, neighbouring rights, and reproduction rights. For example, a musical artist who is both a composer and a performer currently has three different rights to compensation for the use of a single song when aired on the radio:

• As the performer, she has the right to authorize the public performance of the song;
• As the composer, she has the right to authorize the public performance of the song; and
• As the composer, she has the right to authorize the reproduction of the song.

19. To date, the Board has valued each of these above-noted rights separately. This is a result of the piecemeal legislative reform efforts whereby right after right has been added. While CTVgm recognizes that this is a consequence of adhering to Canada's international copyright obligations, we believe that the current reform process provides an opportunity to conduct a holistic review of Canada's copyright legislation.

20. A streamlined and transparent collective administration process will encourage new investment in Canada's cultural sector. As an example, until the Board certified the Internet tariffs,³ many radio stations did not engage in streaming their terrestrial radio station signals on-line as for over a decade, it was very uncertain what liability would be incurred.

21. Moreover, the Board's decisions are affecting more activities and more Canadians, both from an individual basis as well as from a business perspective. A streamlined copyright administration process would be to the benefit of many and promote Canada as an efficient place to conduct business.

An Expanded Signal Right for Broadcasters

22. CTVgm recommends that an expanded broadcast signal right be part of the Government's copyright reform package. In our view, the existing signal right is inadequate in today's communication environment as it does not provide broadcasters with exclusive rights to authorize or prohibit any reproduction of broadcasts or any transmissions thereof.

23. Broadcasters require expanded rights to control their signal in order to survive and thrive in the digital era, to continue to have their programming meet the needs and viewing habits of Canadian consumers, and to preserve a unique Canadian broadcasting system which supports the creation of Canadian content. Moreover, an expanded signal right would be consistent with the underlying philosophy of the Act that creators have rights over what they create.

24. A full signal right has been of interest to Canadian broadcasters since before the passage of Bill C-32 in 1997. At that time, a very limited right was adopted⁴ as the minimum requirement for Canada's accession to WIPO's 1961 Rome Convention. In addition, WIPO's Standing Committee of Copyright and Related Rights (the "SCCR") has convened multiple times since 1998 to consider proposals for new rights for broadcasters. The SCCR most recently met in May 2009 and international interest remains in ensuring the protection of broadcast signals.⁵

25. Technology has clearly advanced since the Rome Convention and developments in communication technologies have made the need for an expanded signal right more pressing. In today's communication environment, broadcast signals can be cheaply stored, and easily reproduced, altered and retransmitted. And the current broadcast signal right enshrined in the Act does not contain the tools for us to respond to this unfair and illegal competition.

26. Examples of signal piracy include the distribution of pre-broadcast signals and black market satellite activities, where illegal decoders permit the unauthorized access to encrypted television services. The problem of signal theft due the satellite black market has been well documented in recent years and this type of piracy alone is estimated to siphon over $400 million a year from the Canadian broadcasting system. With respect to the retransmission and distribution of broadcasters programming via the Internet, forms of this kind of piracy that pose a risk to Canadian broadcasters include unauthorized Internet retransmission of broadcasts; user-generated content sites that host infringing content; linked sites that aggregate links to infringing video content hosted elsewhere; peer-to-peer ("P2P") sites that facilitate the use of P2P users to locate and download infringing content; and circumvention of geo-filtering and/or technological protection measures.

27. It is important to take cognizance of the fact that the business of broadcasting, particularly television broadcasting, is predicated on the ability to acquire and maintain exclusive broadcast rights to programming, which are bought and sold on a geographic basis. In addition, broadcasters work hard to put together the right mix of programming that is attractive to our audiences — we plan, we produce and/or acquire, we schedule and finally, we transmit. It is a creative process, just like any other. And when broadcast signals are pirated, it represents the misappropriation of our creative, technical, financial and organizational investment.

28. Canadian content creation is another crucial aspect to the business of television broadcasting. When viewers access pirated content, this means that there are fewer viewers to legitimate content sources. Smaller audiences equals lower advertising dollars, and lower advertising dollars equals less money for the production of Canadian content as well as the acquisition of popular U.S. programming which helps support the creation of Canadian content. Signal piracy has the potential to cause U.S. content licensors to lose confidence in our ability to effectively police infringement which could further undermine the preservation of an independent rights market.

29. Moreover, it is crucial that our exclusive rights market is preserved as it is the basis for attracting advertising revenues, which in the case of traditional, over-the-air broadcasting is their only source of revenue. But as noted above, preserving our unique Canadian rights market has become increasingly challenging given the permeability of our communications environment.

30. Given the exclusive nature of our acquired programs and the value of the first transmission of all our programs — both created and acquired — any infringement of our program rights will have a detrimental impact on our ability to guarantee to our advertisers exclusivity of viewers to our programs. As noted above, this results in a reduction of our advertising revenues and affects our ability to maintain our commitments. As well, if advertising revenues are reduced for major sports or national cultural events such as the Junos or the Olympics, then our ability to produce such shows is at risk. Such programs, along with national and local news, serve to enhance our national identity and are an important part of the social fabric of our country. These programs are valued by Canadians and are worth ensuring their continuation. Moreover, signal piracy undermines the international marketplace for our shows — crucial market given the huge challenges to recouping production costs in a single market — particularly a relatively small market like Canada.

31. In addition, as we move rapidly towards a broadcasting environment where it is increasingly the norm rather than the exception to stream broadcast signals on the Internet, the need to clarify broadcasters copyright in their signals continues to be pressing. Nearly all of CHUM Radio's stations — CTVgm's radio division — now stream their over-the-air signals online, and for certain special events as well as news coverage, our television signals are also streamed live over the Internet. An upcoming example of this will be the 2010 Vancouver Olympic Games, where as part of the official broadcast team, both CTVgm's sports services, TSN and RDS, will provide unprecedented 100% coverage streamed over the Internet.

32. From CTVgm's perspective, a full signal right is essential to provide broadcasters greater rights to control the distribution of their signal, protect our exclusively obtained program rights and enforce our copyright. This is particularly important in the digital era and in the face of Internet piracy threats where programming can essentially be redistributed at the push of a couple buttons. It is worthwhile to note that prior to the amendment to Section 31 of the Act in 2002, unauthorized Internet retransmitters would not have been able to exploit a loophole in the Act and gain traction — albeit temporarily — if a full signal right for broadcasters existed at that time.

33. There is currently a lack of recourse in the Act for prompt enforcement in regards to unlawful retransmission and distribution of programming. In particular, timely injunctions to stop signal piracy are very difficult to obtain given that broadcasters do not have exclusive rights in their signals (and therefore have to prove their right to bring an action in the first place). By the time legal recourse is obtained, it is often too late to undue to the damage as the exclusive value of the program has already been lost. Expanding the signal right to grant broadcasters exclusive rights in their signals will provide the basis for broadcasters to obtain prompt enforcement.

34. With respect to Internet piracy, infringing websites need strong legal incentives to remove infringing content and/or prevent uploads of infringing content and/or remove links to or files of infringing content. Amendments to the Act should ensure that infringing material is removed from distribution to the public once notice of infringement is provided.

35. In addition to the piracy of our broadcast signals, a second significant concern for CTVgm is our inability to authorize retransmission of any of our broadcast signals, including our local and distant television signals. Rather, the Act contains a retransmission consent regime by which we are partially compensated but only for our distant signals and not our local signals (as defined by regulation⁶) through a tariff approved by the Board. However, CTVgm sees no reason why there should only be compensation for one type of signal and not the other. From a public policy perspective, local television signals should not be valued any less than distant signals.

36. Moreover, Bill C-61 as proposed would have carved out an exception to the broadcasters' signal right in that it granted a "time-shifting" exception to consumers to allow them to record television and radio programs for personal use.⁷ CTVgm does not oppose a time-shifting exception for consumers as such a provision would simply legalize what is already wide-spread consumer behaviour. To attempt to curb this behaviour would be akin to shutting the barn door after the horses have already bolted. However, CTVgm submits that the broadcasters' signal right should be properly defined before any exceptions to it are granted, otherwise it becomes a slippery slope for further whittling away our signal right.

Conclusion

37. In conclusion, CTVgm recommends that the Government's copyright reform include:

• Providing broadcasters with an exemption from digital reproduction liability for activities that are incidental to the act of broadcasting;
• Streamlining the collective administration process; and
• Expanding the existing signal right for broadcasters.

38. CTVgm appreciates the opportunity to make these submissions, and looks forward to the introduction of a copyright bill this fall. We look forward to providing specific comments on the proposed bill through the parliamentary committee process once amendments are tabled.

Yours truly,

David Goldstein
Senior Vice-President, Regulatory Affairs
CTVglobemedia Inc.

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¹ CMRRA/SODRAC Inc. (CSI) was the first reproduction right collective to file for a tariff after the passage of Bill C-32.

² These are AVLA/SOPROQ, Artistl and ACTRA-AFM.

³ SOCAN Tariffs 22.B to 22.G (1996-2006), October 25, 2008

⁴ Section 21(1) of the Copyright Act provides that: (1) Subject to subsection (2), a broadcaster has a copyright in the communication signals that it broadcasts, consisting of the sole right to do the following in relation to the communication signal or any substantial part thereof: (a) to fix it, (b) to reproduce any fixation of it that was made without the broadcaster's consent, (c) to authoriz another broadcaster to retransmit it to the public simultaneously with its broadcast, and (d) in the case of a television communication signal, to perfom it in a place open to the public on payment of an entrance fee, and to authorize any act described in paragraph (a), (b) or (d).

⁵ http://www.wipo.int/meetings/en/doc_details.jsp?doc_id=123192 (Conclusions of the 18^th Session of the SCCR, May 29, 2009).

⁶ Local Signal and Distant Signal Regulations, SOR/89-254.

⁷ Bill C-61, Section 29.23.