It remains on the US’s IP watch list, but a major update to Canada’s copyright laws (its first since 1997) could happen before Christmas. Against this, a lack of domestic and subscription-based rivals means the digital market remains both dominated and restricted by iTunes – for now.

Recorded music sales totalled USD $375 million in 2010 in trade value; though seemingly stabilising, actual sales in Canadian dollars fell 10% year-on-year. Physical and digital formats accounted for 70% and 30% of the market’s value, respectively.

Despite being neighbours, Canada was again deemed a serious IP threat in May by the US Trade Representative – up there in the “priority watch list” alongside China and Russia. This is somewhat alarming given the country is the sixth biggest global market in terms of digital sales and the seventh biggest in terms of physical sales.

This could, however, all change as a re- tabled bill slowly makes its way through the country’s parliament and may make it into legislation by Christmas, bringing the country’s copyright laws (which have not been revised since 1997) finally up to date for the digital age.

A change of government in the Spring (where a Conservative government was re-elected as a majority after several parliaments of minority governments had eventually derailed the original C-32 bill) is pushing hard for the C-11 bill (aka The Copyright Modernization Act) to be implemented before the end of the year.

The bill has been through a protracted review process already but the government remains open to technical changes, although some debate over the language and measures in the bill has still to be smoothed over. It will target what are deemed “bad actors” (sites that infringe copyright for commercial gain or aim to negatively disrupt the market).

Music Canada’s VP of Public Affairs Amy Terrill explains this revision is long overdue, as technology and the market have shifted dramatically in the past 14 years.

“Our laws haven’t been updated since 1997 and there are a lot of practices where there are no reference in law to them,” she says. “It does make it clear what consumers can do – including transferring a CD to an iPod, format- shifting, PVR-ing, that sort of thing. It will take away a lot of the uncertainty that exists in Canada in terms of consumer use.”

Beyond this, other wheels are in motion to update the country’s laws with regard to digital music. In May, the Canadian Private Copying Collective called the Copyright Board of Canada to add a tax of $0.50-3 on flash memory cards sold in the country to compensate artists, publishers and labels. Meanwhile, the next month publisher body SOCAN filed an application with the Copyright Board of Canada to impose an interim tariff on websites using webcasting and UGC.

According to Pro-Music, there are 18 legal services in Canada, putting it far behind many European markets in terms of diversity and consumer choice. Inevitably, Apple dominates which has so far set the temperature for the overall market (and Canada could be the second country after the US to get the iTunes Match service). Tracks downloads dominate but subscription services are struggling to make an impact.

“With the domination of iTunes, that’s a very specific model – the download model,” explains Terrill. “Rdio is active here offering a subscription model and has just done a deal with the Telus carrier. Where people are familiar with Rdio, they are getting a good uptick. But most Canadians aren’t too familiar with subscription models just yet.”

The steady rise of Netflix, however, could have an indirect impact of music services here, putting the idea of an open access subscription service in front of many consumers for the first time. The trickle down effect for music, however, will not be immediate and so non-download services will either have to hold their nerve or have very deep pockets to last the distance.

The freefall in the physical market (still not being offset by digital which makes up around 29% of total sales now) is illustrated most by the fact that HMV, having been in the Canadian market since 1986, sold off its 121 stores to Hilco UK in June this year. The need for the digital market, in a diverse form, to fly has never been greater.

Some interesting local services are starting to emerge, most notably Galaxie Mobile, set up by Stingray Digital in August this year with content from, 1,500 labels. It is an ad-free streaming service that costs $4.99 a month (and had an opening discount of $39.99 for a year) and is compatible with iOS and Android devices.

The biggest problem for Canada is arguably the gulf between the licensing/regulatory framework and evolving technology and consumer trends. Closing that gap will be critical for not just its growth – but also its survival.

“One of the challenges in our marketplace is the regulatory environment as it tends to be a rather slow licensing process,” concludes Terrill. “That’s not very conducive to services that want to take advantage of the market and start up quickly.”

 

This is an example of a country profile from our Music Ally Reports. These are published every two weeks and also include the latest deals, insight reports into global industry issues, and data, comment and trends from the digital music space. You can sign up for a free trial of our Reports service here and you will also receive our other insight publication – Sandbox – which examines the latest tools, tips and trends from the digital music marketing arena.