3. Profile of the Canada Music Fund

3.1 Overview

The provision of direct funding by the Government of Canada to the Canadian music industry dates back to 1986 with the introduction of the Sound Recording Development Program (SRDP). The SRDP provided early career assistance to many Canadian music producers and creators to strengthen the sector's capacity to produce diverse Canadian content musical works in order to improve Canadians' access to sound recordings with Canadian content.

In 2001, following a period of evaluation and outside consultation, the Canada Music Fund (CMF) was established. In its initial phase, the CMF consisted of eight programs that targeted different aspects of the music industry, while providing a comprehensive policy framework that invests in the Canadian sound recording sector at every level, "from creators to audience."

At the time of the last renewal in 2005, changes were brought to the CMF. It is now defined as a single program made up of seven distinct components, which are:

  • New Musical Works (NMW)
  • Music Entrepreneurs (MEP/MEC)
  • Canadian Musical Diversity (CMD)
  • Collective Initiatives (CI)
  • Creators' Assistance (CA)
  • Support to Sector Associations (SSA)
  • Canadian Music Memories (CMM).

The objectives of the CMF are to:

  • Enhance Canadians' access to a diverse range of Canadian music choices.
  • Increase the opportunities available for Canadian music artists and entrepreneurs.
  • Ensure that Canadian music artists and entrepreneurs have the skills and means to succeed in a global and digital environment.

In pursuing these objectives, which are derived from the Canadian Sound Recording Policy announced in 2001, the CMF transfers funding to music artists, entrepreneurs and industry organizations that are involved in the creation, publishing, production, promotion, distribution and preservation of Canadian musical sound recordings.[6] The CMF also undertakes monitoring and analysis of major trends likely to affect the performance of Canada's sound recording industry.

3.2 Rationale

Music plays a major role in the formation and expression of a Canadian national identity. Canadians are proud of the international success achieved by a multitude of Canadian music artists over the past several decades. Sustaining the creation of Canadian works so that Canadians and the world can see, hear and experience diverse Canadian culture is a strategic priority of Canadian Heritage. A key element of the CMF's rationale was the decision to support the development of independent Canadian record companies, due to the important role these companies play in producing and marketing the sound recordings of Canadian artists.

In addition, the 1999 Speech from the Throne recognized the specific need to help all of the Canadian cultural media make the necessary transformation to the digital economy. Government documents pertaining to the approval of the CMF noted that while large multinational record companies had the necessary resources to successfully make this transformation, this transition would be much more difficult for the much smaller, Canadian-owned sector.

The Canadian sound recording industry is dominated by four major labels owned by multinational corporations.[7] These "majors" account for about 85 per cent of total industry revenue in Canada, control distribution to most retail outlets (except in Quebec), and derive most of their Canadian revenue from foreign album releases. Their involvement with Canadian artists is generally limited to the most commercially successful music stars, including those with significant international profile. In 2003, the foreign labels accounted for only 11 per cent of new releases by Canadian artists, but they captured 40 per cent of the sales of Canadian artists.

As noted in the RMAF/RBAF prepared for the CMF in 2005, the vast majority of Canada's approximately 25,000 songwriters, composers and lyricists are never likely to have access to the services of the major labels for the production and promotion of their musical works. Approximately 90 per cent of new Canadian releases are produced by 300 independent Canadian record labels.[8] Releases by Canadian artists account for approximately 90 per cent of the revenue of the smallest Canadian labels (those earning less than $1 million annually) and 77 per cent of the revenues of those earning more than $1 million.[9] These Canadian-owned and operated labels typically survive on very thin profit margins.

There is thus an important mutual interdependence between emerging and lesser-known Canadian music artists and the independent Canadian labels. The artists need the independent labels in order for their work to be produced and reach audiences in Canada and abroad, and the labels need a pool of Canadian artists to work with. The CMF RMAF/RBAF stated that stakeholders in the Canadian sound-recording industry acknowledged that it is unlikely - given the economics of the industry globally and in Canada - that market forces alone would sustain this relationship. Government intervention was required in order to ensure the continued production of a diverse range of Canadian sound recordings, as well as to enable Canadians to access those recordings.

In view of this, the CMF was designed to address both the artistic and business sides of the industry. The CMF works both to enhance opportunities for Canadian music artists to have their work produced and distributed, and to strengthen the viability of Canadian music enterprises - primarily recording labels - that have the proven expertise to produce and bring to market the work of the vast majority of Canadian performers and songwriters. Note that these two aspects of the program can sometimes be in conflict; for example, supporting new and emerging artists (the focus of the NMW component) may not support the development of profitable companies (the focus of the MEP/MEC component), since many new artists may not achieve significant sales for some years.

The latter aspect of the CMF's work - its support to music enterprises - is especially significant in light of the sustained decline in Canada's retail market for physical formats of sound recordings. As noted in the industry overview section presented elsewhere, retail sales of sound recordings in Canada have declined since 1999. Here as in other countries, the music industry was the first cultural sector to face the complex realities of the internet when it became a new medium for accessing recorded music. The CMF recognizes that Canada's sound recording entrepreneurs must be equipped to make a smooth transition to the digital environment. This transition is expected to last for several more years.


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3.3 CMF Components and Clientele

The CMF comprises seven components that each has its own objectives and targets various stakeholders within the Canadian music industry. PCH provides contributions to the third-party administrators, while these administrators provide, for most of their programs, contributions that are not repayable.

The following is a summary of each component, which lists the administrator (in parentheses), overall objectives and targeted clientele:

  • New Musical Works (FACTOR/MUSICACTION) - Invests in Canadian sound recording creators, artists and entrepreneurs by funding the production of demo or full-length recordings or music videos, as well as the promotion of new albums and artists and touring costs. Under the NMW banner, the two administrators offer a larger number of "sub-components", which comprise a mix of repayable loans and grant-type support. This assistance helps recipients to develop their profile, talent, craft and expertise. The emphasis tends to be on the development of new Canadian talent and the creation of new Canadian-content musical works. NMW funding is a combination of CMF funding together with funding from private broadcasters (known as "Canadian Talent Development").

  • Music Entrepreneur (was Telefilm Canada until March 31, 2005, now PCH) - Helps to ensure that Canadian music entrepreneurs build a strong, sustainable industry capable of contributing to the Canadian musical experience over the long term. It supports Canadian record labels in developing Canadian talent while making the transition to the digital economy. The program provides conditionally repayable contributions to eligible established sound-recording firms with viable multi-year business plans, giving them assistance to consolidate and develop their human, financial, and technological resource base. Previously known as the Music Entrepreneur Program (MEP), it was re-designed in 2005-2006. Now administered by PCH, the re-named Music Entrepreneur Component (MEC) - "Aid to Canadian Sound Recording Firms" provides assistance on an annual basis to eligible Canadian sound recording firms using a funding formula based on an applicant's recent Canadian artists' sales. The objectives of the component remain the same. MEC recipients are no longer able to receive funding from other CMF components, most notably New Musical Works. The evaluation study covered both the previous MEP and the current MEC, although due the recent formation of MEC, it was premature to assess its results.

  • Canadian Musical Diversity (Canada Council for the Arts) - Provides resources for the production, distribution and promotion of specialized music recordings that reflect the diversity of Canadian voices. "Specialized music" is music that falls outside the realm of mainstream music because it emphasizes artistic considerations - creativity, self-expression and/or experimentation - in ways that do not meet the demands and format expectations of the popular music market. This component has two sub-programs. The first is Grants for Specialized Sound Recording, which supports the production of specialized music. The program's clientele includes Canadian music professionals who are: individual music artists; ensembles, groups and bands; independent record producers; and record companies. The second is Grants for Specialized Music Distribution, which supports the distribution of specialized music by Canadian distribution companies.

  • Collective Initiatives (FACTOR/MUSICACTION) - Provides contributions to help create opportunities for Canadian creators and music entrepreneurs to gain greater profile and showcase their excellence and creativity. It is targeted to not-for-profit organizations, as well as Canadian-owned and controlled firms, and supports conferences and award shows, physical and online musical showcases, as well as market development initiatives that offer participants in the sound recording industry opportunities to share best practices, inspire young artists and entrepreneurs, and attract media attention.

  • Creators' Assistance (SOCAN Foundation) - Provides contributions to projects carried out by Canadian not-for-profit music sector organizations and associations related to the craft or business of songwriting, the creative process and the promotion of musical works. By supporting training and career opportunities for young and new Canadian composers, the program helps to ensure that Canadian performers and producers continue to have access to quality Canadian musical compositions.

  • Support to Sector Associations (PCH) - Provides contributions to not-for-profit sound-recording industry associations, with a view to building the capacity of these associations to provide their members with professional advice and representation, undertake analysis of public policy initiatives and monitor industry trends.

  • Canadian Musical Memories (Library and Archives Canada/PCH) - Supports initiatives related to the acquisition, preservation and storage of, as well as access to, Canadian musical works. It also supports efforts aimed at raising Canadians' awareness of Canada's recorded musical heritage.

3.4 Government Policies Relevant to the Sound Recording Industry

As noted previously, the Government of Canada's principal policy statement on its role in maintaining a strong Canadian sound recording industry is the Canadian Sound Recording Policy announced in 2001. This policy represented an evolution from project-based support to a comprehensive policy framework that invests in the Canadian sound recording sector at every level - from "creator to audience."

The CMF falls within the government's commitment, under Tomorrow Starts Today, to invest in Canadian arts and culture. In 2001, Tomorrow Starts Today allocated approximately $500 million to encourage excellence among Canadian artists, supporting Canada's cultural industries and promoting arts and heritage among the general population. Additional funding of $192 million for Tomorrow Starts Today, including $10 million for the CMF, was announced in December 2004 for 2005-2006. Further, Budget 2005 saw the Tomorrow Starts Today initiative extended through 2009-2010, with $10 million annually allocated to the CMF.

The CMF is one element of a broad range of formal instruments and institutions aimed, directly or indirectly, at supporting the development and promotion of Canadian music works. The Broadcasting Act, for example, affirms the government's commitment to a Canadian-owned broadcasting system that ensures the presence of Canadian music and the development of Canadian artists and Canadian expression. Based on the Act, the Canadian Radio-television and Telecommunications Commission (CRTC) implements policies and regulations including:

  • Requiring that a minimum of 35 per cent of popular music broadcast on the radio be of Canadian origin, and that 65 per cent of music broadcast on French-language radio stations be French-language recordings.

  • Financial support for the creation of Canadian content by way of commitments to Canadian talent development (CTD) as part of three regulatory processes: licence renewals; the transfer of ownership or control of radio undertakings; and, a part of applications for new licences. Starting in 1998, the CRTC required that parties seeking to acquire ownership or control of profitable radio undertakings make CTD commitments of no less than 6 per cent of the value of transactions. These benefits were to be distributed as follows:

    • 3 per cent to a new Canadian music marketing and promotion fund.
    • 2 per cent to FACTOR or MUSICACTION.
    • 1 per cent to either of the above initiatives, to other CTD initiatives, or to other eligible third parties.

The broadcasting industry subsequently established the Radio Starmaker Fund and Fonds Radiostar in 2000 to fill the role of the music marketing and promotion fund.

Contributions to CTD from radio broadcasters totalled $20.87 million in 2005, of which $6.72 million were transferred to FACTOR and MUSICACTION. [10]

The CRTC's December 2006 Commercial Radio Policy Review re-affirmed these minimum levels, and introduced new minimum content requirements for Canadian concert music (25 per cent) and Canadian jazz (20 per cent). [11] It also announced that broadcasters will continue to make contributions to support FACTOR and MUSICACTION. Under a new Canadian Content Development (CCD) system (which will be based on a radio station's revenues, rather than on the size of the market in which it operates), it is estimated that total contributions from radio broadcasters would have risen by some $3 million to $4 million per year, based on 2005-2006 figures.

The Copyright Act is another key legislative instrument that recognizes and protects the rights of Canadian music creators and other rights-holders in relation to Canadian sound recordings. Copyright law gives Canadian music creators and rights-holders the right to control the usage, duplication and commercialization of their works.

Others include the Investment Review Act, the Canadian Broadcasting Corporation (CBC) and la Société Radio Canada, and the Canada Council for the Arts. The Canada Council for the Arts provides support for the development of individuals, groups, small ensembles, orchestras and other professionals working in the Canadian music community. In addition to tours, concert production, sound recordings and festival programming, the Council's Music Section funds a variety of related activities such as residencies and the commissioning of Canadian compositions.


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3.5 Resources

Between 2001-2002 and 2005-2006, some $125.5 million were allocated to the CMF as follows:

  • 2001-2002: $18 million.
  • 2002-2003: $24 million.
  • 2003-2004: $28 million.
  • 2004-2005: $27.75 million.
  • 2005-2006: $27.75 million.

For the period 2006-2007 to 2009-2010, the annual budget of the CMF is $27.75 million. Of this amount, $1 million is set aside for follow-up activities of the Sound Recording Policy, and $1.19 million is set aside for administrative costs.

A total of 16 FTEs are devoted to the CMF in 2005-2006, of which 8.38 FTEs were related to CMF program delivery and program development.

Table 2 shows the CMF expenditures for the individual components, for FYs 2001-2002 to 2005-2006. Note that the expenditures for each year are less than the budget listed above. The annual budget figure represents the total federal government allocation authorized to PCH for the CMF. From this budgeted amount, a PCH source deduction is made from each CMF component to cover departmental administration costs. The amount, net of this deduction, is the yearly contribution made available by PCH for all CMF components. The difference between the budget available and the amounts used by each component may be explained by the fact that the full contribution might not be used in a given year.

Table 2 CMF Expenditures, by Component, 2001-2002 to 2005-2006 ($)
Component 2001-2002[12] 2002-2003 2003-2004 2004-2005 2005-2006 Total $
(%)
MEP/MEC $0 $5,740,000 $9,559,999 $5,875,116 $3,047,112 $24,222,227
(21.8%)
Creators' Assistance Program $918,990 $889,974 $884,126 $880,801 $892,125 $24,222,227
(4.0%)
Canadian Musical Diversity $1,373,642 $1,399,450 $1,435,230 $1,381,370 $1,252,050 $6,841,742
(6.2%)
New Musical Works $12,598,640 $10,446,973 $10,446,974 $11,754,084 $15,214,559 $60,461,230
(54.5%)
Support to Sector Associations $502,000 $525,000 $571,955 $650,998 $566,263 $2,816,216
(2.5%)
Collective Initiatives $1,374,741 $1,987,563 $1,955,564 $2,588,453 $2,130,563 $10,036,884
(9.0%)
Canadian Music Memories $351,500 $527,887 $164,060 $546,455 $546,455 $2,136,357
(1.9%)
Totals $17,119,513 $21,516,847 $25,017,908 $23,677,277 $23,649,127 $110,980,672
(100.0%)

3.6 Governance

Responsibility for overall coordination and management of the CMF rests with the Director General, Cultural Industries Branch, PCH.

Two components, Support to Sector Associations and Music Entrepreneur are managed by the Director, Music Policy and Programs Directorate, Cultural Industries Branch, within the Cultural Affairs sector at PCH. As noted earlier, the other five components are not delivered by PCH.

The external organizations are responsible for the operation and the execution of those five components. In particular, the main activities include: advertising the opportunities to eventual recipients; reviewing and approving applications; disbursing the money; and, supplying to PCH the data required to measure the results of the CMF.

The relationships between the Department and FACTOR, MUSICACTION and the SOCAN Foundation are specified in contribution agreements, while parliamentary appropriations are directly allocated to Library and Archives Canada, and a portion of the funds allocated to the Canada Council for the Arts is provided through parliamentary appropriations. In both cases, a memorandum of understanding governs the relationships between these organisations and the Department. The contribution agreements and memoranda of understanding define the parameters intrinsic to each component, such as eligibility criteria, target populations, funds allocated, and reporting requirements.

The Canada Music Council (CMC) was created in 2002 to advise the Minister of Canadian Heritage on the evolution of the Canada Music Fund. Its mandate was amended in 2004 to confer a more strategic policy role to the CMC. An evaluation of the CMC was conducted between December 2004 and May 2005. [13] The evaluation noted that the Council had played a key role in the establishment of common administrative practices amongst the CMF administrators and had contributed to more efficient communications between the various sectors of the industry. However, it also raised several issues and challenges, including CMC members' constant concerns about the lack of opportunities to work more closely and directly with the Minister and what they saw as a lack of clarity with respect to the CMC mandate and ministerial expectations. The CMC was dissolved in July 2005, and the Minister made the commitment to explore other more cost-effective consultation mechanisms.

3.7 Intended Results

The CMF RMAF/RBAF developed a logic model for the CMF, which is shown in Figure 1.

The Canada Music Fund RMAF/RBAF logic model.

Notes

  • [6] The 2001 Canadian Sound Recording Policy is available at: From Creators to Audience - New Policy Directions for Canadian Sound Recording (2001)

  • [7] The four multinationals are EMI, Sony/BMG, Universal and Warner

  • [8] Statistics Canada, 2003 Sound Recording Survey, available at: Statistics Canada, 2003 Sound Recording Survey

  • [9] Telefilm Canada, Profile of the Sound Recording Industry in Canada, prepared by Nordicity Group Ltd., September 30, 2004; available at: Profile of the Sound Recording Industry in Canada

  • [10] Canadian Radio and Telecommunications Commission, Broadcasting Policy Monitoring Report 2006, pp. 26-27

  • [11] Broadcasting Public Notice CRTC 2006-158, Ottawa, 15 December 2006, "Commercial Radio Policy 2006", accessible at: Broadcasting Public Notice CRTC 2006-158

  • [12] The CMF was launched during FY 2001-2002. As a result, the total PCH contribution to the Canadian sound recording industry was a mix of SRDP and CMF funding. Of the total expenditures ($17,119,513), $9,027,000 came from SRDP ($8,525,000 to NMW and $502,000 to SSA) and $8,092,513 from the CMF.

  • [13] Evaluation of the Canada Music Council, prepared on behalf of the Department of Canadian Heritage by Kelly Sears Consulting Group, May 18, 2005.

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