BRIEF TO CANADIAN HERITAGE STANDING COMMITTEE RE

In 1992 I created a record label, Songlines, and have been producing and releasing innovative jazz and world music from Canada, the US and Europe. I have received support from the Canada Council but not FACTOR. Specifically, I’ve received grants to do recordings with jazz pianists Andy Milne, Paul Plimley and Chris Gestrin, guitarists Gordon Grdina and Ron Samworth, Indian percussionist Trichy Sankaran, Persian singer-instrumentalist Amir Koushkani, and the world music group Safa (Amir Koushkani, François Houle and Sal Ferreras). A few musicians such as saxophonist Quinsin Nachoff and composer-bagpiper Michael O’Neill also received CCA funding for their recordings on Songlines.

My comments reflect a knowledge of the jazz and creative music scene in Vancouver, across Canada and internationally, but I’m also interested in and familiar with other genres – many kinds of world music, folk/singer-songwriter, folk, classical and contemporary classical, post-rock and experimental, etc. I am also a musician, having been a member of Vancouver’s Javanese gamelan group Gamelan Madu Sari since 1987 and touring with the group across Canada and to Indonesia, as well as being president or treasurer over many years of the Vancouver Community Gamelan Society.

As well as making the general argument that culture matters and that the Canadian Musical Diversity program has been essential support for the cutting edge of musical creativity in Canada, I think it’s important to look at the financial facts of the matter. After learning about the cuts I felt the need to educate myself about FACTOR and the Canada Music Fund. I have studied attempted to analyze publicly available information about the Council’s Specialized Music Sound Recording program and about FACTOR’s loan and grant programs, information I’ve taken or extrapolated from FACTOR’s 2008-2009 annual report, which can be downloaded at their website. (By the way, no such information is available on the Musicaction website.) I have also read relevant sections of a lengthy study prepared by consultants for Canadian Heritage called Summative Evaluation of the Canada Music Fund. I have talked informally with colleagues in the music business and with an officer of the Canada Council, and have read and listened to the Minister’s interviews, trying to piece together a picture of how things work and why these cuts were made, I may have made errors in my interpretation of the available information, particularly regarding FACTOR, but I have done my best to weed out any gross misconceptions. I hope the Committee will find my comments useful and will dig deeper in their questions to get some answers.


FACTOR AND CANADA COUNCIL FUNDING COMPARED

The total amount of Canada Council grants to individual artists/applicants in all disciplines in 2007-2008 was $23.4 million (2,369 grants), which is about 15% of the total CCA funding, the other 85% went to organizations. The total funding for music (to individual applicants and organizations) was $34 million – I do not have a figure for funding just to individuals, but 15% of that would be $5.1 million. As the result of the spring and fall 2008 competitions, $1.045 million (103 grants) was disbursed by the Sound Recording program, so it is obviously a significant program, apparently accounting for about 20% of all direct funding to individuals (musicians, producers, labels).

When James Moore talks about the independent producers who are supporting his decision to cut this program, he’s talking mainly I imagine about the rock, pop, alternative, roots and urban music world, because that’s where most of the government funding to FACTOR goes. (FACTOR does have a program called Cultural Diversity, which funds genres such as urban, jazz, world music, classical and aboriginal, but its budget only accounts for 19% of total funding offered, and urban accounts for 38% of that 19%.) This is a very contentious, potentially divisive decision, because it is causing resentment among musicians working at the creative edge, pitting their interests and indeed their livelihood against those of musicians and their representatives (labels, managers etc.) who are working in more commercial styles and in a more industry-connected way. This is not to say of course that there is no artistic merit in the popular music world. However, it is very unbalanced and irresponsible of PCH to prioritize commercial viability in this way at the expense of innovation and long-term cultural development.

And I think we should also ask (and try to gets answers for) this question: how commercially viable is the music that FACTOR supports – the music that will mainly benefit, it seems, from the new programs that are being set up with that $1.35 million taken away from the Council? And what kind of bang for their buck are taxpayers getting for the money that government provides FACTOR? Where does the money go?

Here are some relevant facts about FACTOR, as far as I have been able to determine them from their annual report.

FACTOR received $18,107,000 in income in the 2008-2009 fiscal year, of which $8,466,000 came from Canadian Heritage through the Canada Music Fund; $6,968,000 of that was for the New Musical Works program, i.e. went to supporting recording, promotion/marketing and touring through loans and grants to musicians, labels, producers and managers. FACTOR’s breakdown of their distribution of funds for these programs is: recording loans, $4,668,000; video grants, $462,000; marketing/promotion loans, $3,931,000; touring and showcasing grants, $2,467,000, for a total of $11,528,000. It seems therefore that 60% of FACTOR’s funding for these programs in 2008-2009 came from the government; another approximately 36% would in that case come from the radio industry, mainly pursuant to CanCon regulations and a recent CRTC decision allowing ownership of more than one station in a single market. Less than 4% ($434,000) came from repayment of FACTOR recording and marketing loans.

This last figure is interesting because, using it and the statement that FACTOR-supported recordings sold “in excess of” 1,000,000 units in fiscal year 2008-2009, as well as the number of FACTOR-supported applications in the 2007-2008 fiscal year (1327), we might infer a very rough average sales figure per record of just 1500 units in the first two years of release, the period during which loans are normally to be repaid (at $.50/unit sold). However, this would be quite incorrect. Elsewhere the annual report clarifies that only 170 “sound recordings for commercial release” were actually funded in 2007-2008 (another 149 artist demo projects received funding). In that case, the average sales figure could be somewhere around 12,000 units in the first two years. (It would be useful to get detailed figures from FACTOR, including the actual total sales figure, since “in excess of” 1,000,000 is vague). However, FACTOR also offers marketing loans to recordings that did not receive production funding. The annual report states that 137 “marketing for audio recording” loans were made in 2007-2008: since it appears that this is at least partially in addition to the 170 that received production funding, that would reduce the average sales figure. (Of course, their most popular recordings sell 50,000 or more, so some certainly sell much fewer than the average, whatever it is.)

One can also divide the government’s $6,968,000 contribution in 2008-2009 to New Musical Works by 1534, the total number of applications offered support, for an average of about $4,542/application Or, looked at in terms of a subsidy to the music business per unit sold, if you divide 1,000,000 by the previous year’s New Music Works funding of $6,367,000, you get $6.36. As that $6.367 million actually represents 73% of the total funds FACTOR offered to New Music Works applicants in 2007-2008, the total FACTOR subsidy per unit sold would be around $8.50. That is approximately equal to the price a distributor normally pays a producer per CD sold, and considerably more than the producer would receive for an album download from iTunes for example (probably around $6-$7) – in other words, we’re talking about a 50% + industry subsidy, of which 60-70% is generally provided by government. (On top of that, government provided another $1.5 million to FACTOR in 2008-2009 for industry programs not tied to specific artists or recording projects.)

Some more figures from the 2008-2009 annual report, showing support for particular genres:

Of total grants/loans of $14,985,000 offered in all genres, $245,000 went to classical (17 out of 37 applications), $664,000 to jazz (54 out of 154), $396,000 to world music (34 out of 104), for a total of $1,305,000. As mentioned, there were 1534 successful applications in all genres (out of 3648 submitted).

Note however that only 77% of this $14.985,000 ($11,528,000) actually went to directly support sound recording, videos, promotion/marketing, and touring/showcasing. The other 23% went to industry support through the Label, Manager and Distributor Business Development program, the Domestic & International Business Development program (travel support), and Collective Initiatives, which supports music business and non-profit organizations. So one can conclude that the total amount of support for jazz, classical and world music recording, marketing and touring was probably around $1,000,000 for these 105 applications, or under 9% of the total. And of that amount, about half ($512,000) was awarded to 34 of 151 applicants (23% success rate) in the sound recording loan programs – an average award of $15,000, about one and a half times the average Canada Council award (this average presumably does not include any marketing loans that these recordings might subsequently have received.)

As mentioned, the Council awarded $1,045,000 in 2008 to 103 projects (an average of $10,100/grant) in its recording program – which of course only covers recording and marketing, not touring (touring funding comes from the Council’s core funding, not through the Canadian Musical Diversity program). Comparing these figures shows how significant, indeed devastating, the elimination of this program will be in these genres (jazz in particular has been receiving a very large number of applications) as well as for some aboriginal music, avant-rock, folk/singer-songwriter, and other non market-driven types of projects supported by the Council.

There are no sales figures available for Canada Council supported recordings, but if the average were 1,000 units over the life of the record (a not unreasonable assumption), that would be a subsidy of about $10/unit sold ¬– not much more than the average FACTOR support for records that, for the most part after all, are considered to be more commercially oriented and more capable of generating sales. (To be fair, this comparison doesn’t take into account the additional CCA touring funding that a CCA recording recipient might also receive.)

It also seems clear that a larger number of applicants to FACTOR are funded than are funded by the Council’s sound recording program. Leaving aside touring grants, in 2008-2009, 229 out of 1031 applicants for FACTOR sound recording loans were successful, about 22%. However, 217 out of 389 applicants for marketing loans were successful. Again, it’s not clear how many of these are for recordings that did not receive recording, but if it was a significant number it would bring the average up. Compare this to 1 in 5 or 6 applicants for the CCA sound recording program (as stated by the officer in charge of the program), i.e. around 20% or less.

Adding up the FACTOR figures above for just jazz, classical and world music applications in 2008-2009, we see that 105 out of 295 were successful, or 36%. However, as mentioned, if we only include recording loans (not marketing loans and touring grants, etc.), the figures are 34 out of 151 (23%). (The overlap between these different FACTOR programs is not known, although no doubt this information could be provided. And overlap is a major issue – see below.)

Another relevant fact: Council has typically not been able to fund all applicants “highly recommended” for support by its juries in thir program, even by making across-the-board reductions in the amounts actually awarded, as usually happens. If such reductions were not made, the officer estimates that the number of successful applicants would be more like 1 in 8 or 10. FACTOR on the other hand does not reduce funding requests in this way – if funding is offered, the full amount requested is normally provided.

In short, we must conclude that, almost every way you look at it, the recording industry has been supporting itself, largely through government funding, far more generously than the Council has been able to support deserving artists with the funding government has provided it. But this FACTOR money is not spread around evenly – as we’ll see later, the more successful you are, the more support you get.

In any case, this separation of art and commerce in favour of commerce at the expense of art is contentious. It implies (as the Minister recently asserted to the media) that artists/Canada Council recipients are not business people and are not doing their best to market their music just like everyone else. This is unfair and in general I think quite unjustified, even if their commercial prospects may be much lower than the average FACTOR recipient.

It is also worth comparing the process involved in awarding CCA grants and FACTOR funding.Both do support music based on artistic merit, as they judge it (despite James Moore’s comment in his September 24th Q interview with Jian Ghomeshi that “it’s not my job as a minister to make judgments about what is artistic merit or not, nor is it yours, nor is it anybody’s”). At least, artistic merit is a major consideration for FACTOR juried loans (Direct Board Access decision-making is opaque). One difference is that Council juries are small (3 people) and consist of peers, usually musicians. FACTOR’s lengthy and presumably expensive three-stage process of two regional juries and a national “superjury” for each intake involves, I believe, juries of up to 10 industry “experts” (some musicians, many probably not). Whereas CCA jurors’ names are available for each jury, FACTOR jurors’ names are not associated with a particular jury, so there is less transparency or accountability. Nevertheless, someone is deciding whether your music has merit, as well as how strong your marketing plan is and what kind of track record you have. The Council selects jurors based on the applications actually received, trying to choose people who are qualified to judge the range of music presented. I don’t know who selects FACTOR jurors, but I’ve heard that sometimes one or two strong supporters of an application can convince a jury. This could sometimes be an advantage for some less commercial, more unconventional projects. But in any case the final decision is made by a national “superjury” which examines from scratch each applicant that has made it through the two regional juries; there’s no prior ranking system of applicants to influence the superjury, and superjuries do not look at any comments the regional juries may have made. They decide how the available money available. If, for example, there were three similar applicants from different parts of the country, the superjury might choose one, they would not try to spread the money around. So it all really depends on the value judgments and biases of those jurors. It is difficult to imagine how such a process could readily be adapted to make fair and balanced judgments about art music.

By the way, in 2008-2009 the total amount of funding that FACTOR juries awarded for commercial sound recording was only $1,182,000. The rest, $4,377,000, was decided by the Board through its Direct Board Access and Emerging Artists programs. Another $3,931,000 was awarded for marketing/promotion, but I don’t know what percentage of that was juried – probably less than 25%.

Direct Board Approval funding can’t be entirely value-free either, though presumably artistic merit is not a major consideration. It’s predicated on supporting and furthering proven commercial success: to qualify for DBA funding, applicants must have sold at least 5,000 units of their previous recording (2,500 for classical). Obviously that effectively eliminates support to less established artists and more innovative/less popular types of music. Only 179 of 895 DBA applications were funded in 2008-2009; however, if we look only at sound recording loans, 103 out of 120 were approved! Extrapolating from figures in the 2008-2009 annual report, government would appear to have provided about $1,800,000 of the total DBA funding. But only the people inside the system would know exactly what the considerations leading to success were. Some artists continue to get funding year after year, in one case at least (Metric) purportedly receiving everything they’ve asked for. Here are the top 10 earners since 2005 (this analysis was provided by a small indie-rock label owner and I have not verified it, but it is available on the FACTOR website:

Metric - $377,207 - Last Gang/Universal
Trews - $309,193 - Bumstead/Universal
Midway State - $249,865 - Interscope/Universal
Young Galaxy - $215,508 - Arts & Crafts
Sophie Milman - $214,431 - Linus/Universal
Most Serene Republic - $212,807 - Arts & Crafts
Justin Hines - $209,486 - Orange Lounge/Universal
Aaron Pritchett - $192,636 - 604/Universal
Stills - $191,491 - Arts & Crafts
Dears - $188,071 - Arts & Crafts

(A musician colleague of mine who also knows the indie-rock world commented: “Look how many artists were on Arts and Crafts, which could bankroll their entire roster with revenues generated by Feist alone, I suspect.”)

Although this level of funding is of course far beyond the amounts available from the Council (the maximum grant is $20,000, the average, as we’ve seen, $10,000), for our selected “culturally diverse” genres (jazz, world and classical) I would guess DBA funding is probably very limited, as few projects would have the required sales to apply. Although no breakdown by genre is provided, for all genres combined the breakdown of funding for recording loans in 2008-2009 was:

DBA: $1,841,000 for 103 successful applicants out of 120 ($18,000 average loan)

Emerging Artists: $1,355,000 for 50 applicants out of 136 ($27,000 average)
Note: this is a recently introduced Board approval program which is entirely funded by private radio broadcasters, not by government, and which has lower minimum sales requirements for one’s previous release – 1,500 for jazz, classical or worldbeat; nevertheless, there were only 3 successful jazz applicants, 1 worldbeat, and no classical.

Factor Loan and Independent Loan (juried) funding combined: $1,182,000 for 76 applicants out 775 ($15,500 average). Note the low success rate of these two juried programs.


THE BIG OVERLAP QUESTION

There’s another justification, apart from the bias in favour of “independent entrepreneurs” rather than artists, that I understand has been used by Canadian Heritage to justify “streamlining” support to recordings through FACTOR and eliminating the Canadian Musical Diversity program. PCH apparently claims that 60% of Council recipients have also received FACTOR funding. This appears to be quite unbelievable on the face of it, even if Heritage is tallying not recipients not only of specialized sound recording grants but also of CCA touring and showcase funding, and correlating that total with any FACTOR recipients of funding for recording/marketing, marketing alone, video grants and/or touring. One would very much like to see this list – if PCH can’t or won’t provide it, I believe that the Council should be able to provide their own analysis. It has been suggested to me that the overlap, at least if touring is not included, would be 15% or less.

In Heritage’s own commissioned study, Summative Evaluation of the Canada Music Fund (October 2007), its consultants write that Canadian Heritage “stated that few applicants apply to both programs.” (section 5.3.2, Overlap and Duplications). This study can be found here:

www.pch.gc.ca/pgm/em-cr/evaltn/2007/2007-04/index-eng.cfm

or can be downloaded as a pdf:

www.pch.gc.ca/pgm/em-cr/evaltn/2007/2007-04/2007-04-eng.pdf

Of course we could all make up our own lists by searching on recipients’ names at the FACTOR and CCA websites, and decide for ourselves whether FACTOR has offered much support to the innovative, visionary cutting edge of Canada’s music culture.

In any case, from the figures I’ve presented I think it’s clear that without very significant additional funding for FACTOR’s Cultural Diversity program – about half of whose support goes to jazz, world, classical and aboriginal recordings – there’s no way that FACTOR could even pretend to replace the Canadian Musical Diversity program. (As we’ve seen, in 2008-2009 Cultural Diversity accounted for 19% or $2,863,000 of total FACTOR support, but only an estimated $1,000,000 would have actually gone to recording/marketing/touring for jazz, world and classical, and only $512,000 in recording loans.) And as far as I know there is no additional funding being allocated to this program.


SO WHERE IS THE NEW MONEY GOING, AND WHY?

What are we going to get for that $1,350,000 the government is redirecting to the new programs? $500,000 is going to international market development and showcases – which used to be funded I believe by programs such as Trade Winds and PromArt that the government eliminated in the last couple of years. $900,000 is going to music entrepreneurs and businesses for digital market development ¬– it remains to be seen what form this will take. But anyone who can get their record to CD Baby can also thereby get it on iTunes, and a small label like Songlines (with some 55 releases at the time) had no trouble getting international digital distribution through an aggregator such as IODA back in 2004.

What’s really needed are new ways of promoting Canadian music on the internet and getting it noticed ¬– and not just the industry’s music, all of it. I could see the value for example of a centralized Canada Music website and clearing house for information, with interesting features and links to labels, artists, videos, etc., but something like that could be designed and maintained by one person working for Canadian Heritage, and it certainly wouldn’t cost $900,000 a year.

The Summative Evaluation is probably the source of the idea to increase support for digital market development. In Section 5.3.5, Alternatives, it states:

“Several key informants stated that the CMF should add a new component that helps smaller record labels to successfully make the transformation from a world that relied on the distribution of physical CDs to the online environment. Smaller record labels recognize that they must increase their new media capabilities as they continue the transformation to digital distribution (e.g., to sign business deals with aggregators and on-line music stores), but lack the resources and expertise to do so. Record labels are already in discussions with telecommunication companies (e.g., cable companies, internet providers), and must develop new competencies to market music within a digital environment. The sorts of expertise identified as lacking including [sic] both technical and business skills (information technology, digital rights management, negotiation of business deals, etc.).

“One key informant stated that most of the smaller labels had not been able to upload their catalogue to on-line music stores, as much of their music has not yet been digitally encoded. This could be addressed by PCH if it were to contract with an IT company to digitally encode the catalogues of record labels. Another option would be to provide funding via NMW.

“Some key informants suggested that the federal government should offer a labour support program, whereby record companies could access a subsidy to help pay the salary of new media personnel.”

I seriously question whether time and necessity haven’t overtaken these views (which are based on research conducted in 2006-2007) and rendered most of them outdated. What record labels have not digitized their catalogue by now? Digital recording has been with us since the 1980s, and every CD of course is already a digital master. Aggregators like IODA rip files for their client labels from CDs and prepare them in any format (CD quality, MP3 etc.) that their customers such as iTunes want, normally at no cost to the label – all the labels have to do is provide the metadata. And every label that is paying someone to promote their releases, whether an in-house publicist or an outside contractor, is already reaching bloggers and podcasters and probably Twitter and Facebook too, because professional publicists must have these skills and contacts these days to be hirable. Every artist that used to maintain a website (some still do) have a MySpace page to promote themselves, and many are uploading concert videos shot by their friends to YouTube. It would be helpful to have a little extra money to be able to pay people something for this work, and sometimes it’s really necessary to do so, but it’s a DIY ethic out there, and many musicians, especially the young, have the skills to do it themselves.

I myself, a sole proprietor with no business training, as well as lots of musicians who have to manage their own careers, could always use some updating of business skills, but I am sure that the real record industry, the one that FACTOR primarily funds, has already addressed these issues and does not really need new funding to manage digital rights and negotiate business deals in the internet age. Either they’ve learned how to do it themselves or, as in the past, they hire professionals (lawyers, bookkeepers) who know how to do it. No, the main problem I see is invisibility: we’re constantly inundated with music and information about music, and the good gets lost in a sea of mediocrity. The Summative Evaluation notes in Section 5.1.1, Does the CMF meet a persistent need:

“Regarding the question of the types of support required, support for marketing and promotion was a constant theme. One expert panel member summed up the situation:

“The name of the game today is getting exposure and creating effective promotion amid the “fire hose” of music being produced. Getting known, as always, is crucial to success. However, there is so much more music being made and consumed today, so that the challenges of promotion and exposure have become more difficult, by orders of magnitude, compared to just ten years ago. The game has fundamentally changed and the new game is not quite clear.

“The expert panel recommended that the CMF funding should continue, but that it should be re-directed to the pressure points of today’s challenges, rather than continuing with the business models of the past. Recording is not the challenge anymore; getting heard is.”

I agree, and thus my suggestion of a central site of information that would, for example, come up at or near the top of Google searches on “Canadian music” or “Canadian jazz” or any number of relevant keywords. Such a collaborative effort, in my opinion, would be money much better spent than providing additional money to industry players to try and out-promote each other. They are already doing that anyway with FACTOR marketing loans and video grants, and the more visibility they already have, the less they need additional support. The people who could most benefit are the ones who are most invisible. But, as I think I’ve shown (and as everybody knows anyway), with FACTOR the priority is the other way around.

Where I disagree with the Summative Evaluation is on the question of reducing funding for the recording process. One of its recommendations (6.2.1, PCH should re-design the Canada Music Fund and consult with the music industry as part of the re-design process) is this:

“Shift resources from production to online distribution and marketing. The costs of production are declining due to technology. However, it is one thing to make Canadian music available on-line; it is quite another to get noticed in the digital world.”

My response: before any digital market development can take place the music still has to be recorded. The Summative Evaluation also concluded that 42% of Canadian Musical Diversity (CCA) funded recordings “would not have gone ahead without this funding, and another 34 % would have gone ahead but significantly reduced in scope.” (5.2.1, New Music is produced, marketed, distributed). And it would is a gross exaggeration to suggest that current digital technology has reduce recording costs to relative insignificance. But, if one does accept this view, and also believes that the cutting-edge of our music culture is largely irrelevant to Canadians, and that the Council’s sound recording program is lavishing support self-indulgently on the recording of non-commercial music which is either unmarketable or not properly marketed (since most of the funding is spent on production as well as paying the musicians for their work), well, one might conclude that its program is expendable. Note however that neither the Summative Evaluation in its recommendations, nor any of the experts and informants they include in the study, suggest reducing it, much less eliminating it.

It’s true that almost anyone can throw up a few mics in their living room or at a live gig and get sound files into their computer, but we’re talking about art, and the art of music is sound itself. To represent the music properly, especially the acoustic and amplified instruments and vocals of classical, jazz, world, folk etc., recordings still need to be made in the right space (studio or hall), with high-quality equipment (mics, pre-amps, converters etc.) that is beyond the means of most musicians, and by engineers who really know what they’re doing. Like other label owners who are in it for the love of music rather than making a profit, when I produce a recording I’m not mainly thinking about when or if I’m going to recoup my investment (although of coure that has to be a consideration), I’m thinking of how to make it the best recording I possibly can for now and for posterity without wasting money on extravagances. Studio time is typically two days, and another two days to mix, one day to master. Sometimes it takes longer to get things right. This costs money, and professional musicians also need to be paid something for their time and their art.

When the music industry as such needs massive subsidies to survive, how are music artists going to pursue their vision without adequate support? In his Q interview the Minister said:

“There are still other funding envelopes available, the Canada Council amends and adjusts its funding envelopes all the time to reflect where they think the other government programs have altered and changed and where they might want to fill gaps and fill holes, there’s existing funding at the Canada Council for this kind of thing.”

That’s easy for him to say, but the reality is that the money would have to be taken away from other music programs, none of which I think are exactly over-funded. I hope the Council itself will make this point forcefully.

Other witnesses will certainly make the point that a recording is not only a work of art and artistry in itself but a key, essential element of a musician’s livelihood, greatly affecting their touring possibilities and ability to promote themselves. Unless the Council gets its program back – hopefully better funded than it has been, and preferably, in my opinion, as part of their core funding, without the need to account directly to the Canada Music Fund for their priorities and way of doing things – I’m certain that many exciting, innovative projects that might have been just won’t happen, and others will not thrive and won’t be preserved for posterity in the form they deserve.


Tony Reif
Songlines Recordings
www.songlines.com


October 22, 2009