Madam Chair, members of the committee, and committee clerk, thank you for the opportunity to testify before you today on this important subject.

My name is Graham Davies. I'm president and CEO of the Digital Media Association, or DiMA. I'm sorry that the timing has meant that I'm unable to be with you in person today.

DiMA is the voice of music streaming, representing the world's leading audio streaming companies, the economic engine of the modern music industry. With a membership that includes Amazon Music, Apple Music, Pandora, Spotify and YouTube, DiMA promotes and protects the ability of music fans to legally access and engage with music whenever and wherever they want, and for artists to reach fans and make new ones more easily.

It's not that long ago that the music industry was in serious decline. DiMA's members have in large part rescued it from the harms of piracy by establishing a new sustainable business model that is quite different from broadcasting and other forms of entertainment. In music streaming, around 70% of the money from consumers is paid through to music labels, music publishers and collective rights management organizations. By way of a comparison, a commercial radio station in Canada is likely to pay less than 9% to the music rights holders.

In exchange for the large proportion of music streaming revenues being paid through to the rights holders, our members rightly expect those rights holders to not only—of course—fairly and appropriately pay the songwriters and performing artists they represent, but also to invest in the search for and development and promotion of a diverse and talented pipeline of new Canadian creative talent.

Investment in creative output has always been the role of record labels and music publishers in Canada and everywhere else in the world. Again, that role justifies the large proportion of revenues paid through to those entities. Nonetheless, streaming services have taken it upon themselves to improve upon the prior model. DiMA's members also invest in local teams and resources that discover, develop and promote Canadian artists. This has resulted in a great success story for Canada, with artists like Charlotte Cardin from Montreal and Tate McRae from Calgary developing domestic and global followings through the power and reach of streaming.

I've explained these economics to provide context to the government's implementation of the Online Streaming Act. As you may know, earlier this week the CRTC introduced an unprecedented and discriminatory 5% tax on music streaming services. We are concerned that this action will undermine the investments made by DiMA's members in the Canadian music industry and may also have unintended consequences to consumers, particularly younger Canadians, who are the predominant users of music streaming services in Canada. In general, rising costs can lead to rising prices, and we have identified nothing in the new regulations to soften the impact of this economic rule.

To add to these negative impacts, the CRTC decision is now forcing U.S. and international companies to pay large sums into a fund they cannot access. In addition to the upward pressure on consumer affordability, we believe this is a discriminatory trade policy that comes on top of other digital trade-related concerns.

Leading trade commentators are warning that the cultural exemption in the current agreement does not apply. Even if it did, it explicitly allows the U.S. to countervail for equivalent value in such situations. Why, then, given the other members of today's panel, should Canadian beef farmers or the auto sector, for example, be expected to pay the price for this misguided and onerous regulation?

The U.S. Secretary of the Treasury and the U.S. ambassador to Canada have expressed strong opposition to any discriminatory taxes against U.S. firms. On the same day the CRTC announced this 5% tax, the American Chamber of Commerce in Canada declared that it violates Canada's obligations under the trade agreement. The U.S. chamber has strongly objected also.

DiMA and its members have worked tirelessly to inform and educate the Canadian government and the CRTC as to why the Online Streaming Act is bad for Canada. This has been to no avail, though we continue to encourage them to change course. My intention today is to raise awareness of this developing situation with the honourable members of this committee and encourage you to keep close scrutiny on the implementation of this legislation.

DiMA and its members wish to continue supporting and investing in Canadian music and culture. We are concerned that the implementation of this legislation jeopardizes the ability for us to meaningfully do so.

Thank you. I look forward to your questions.