One of my first tasks when I moved to Canada was to get an overview of digital music services in this country. I also wanted to figure out which of the big international services have launched in Canada and how well they are performing. Disappointingly I realized that other than a few players such as 7digital, Slacker and of course iTunes there aren’t many local digital music companies for a country that strongly supports its music industry: grants are a common way for indie labels to stay afloat and radio stations have to play a certain amount of Canadian artists.
Just like there is no lack of music fans in Canada there is no shortage of talented programmers and entrepreneurs – other digital businesses (e.g. games, advertising, movies) seem to be quite healthy. Companies like Pandora, Spotify, MOG and Rhapsody however have never launched their service in Canada and others like Last.fm only have a limited service in the second largest country in the world. Also, looking at the new players that have seen some hype recently (such as mFlow, Thumbplay and rdio) have not announced any plans for a Canadian launch.
After speaking to a range of people about the lack of access to legal digital music in Canada there seem to be different explanations:
1. Licensing difficulties (1) – it is complex and expensive to license content from record labels for Canada
I find that hard to believe. When licensing reordings from labels or aggregators you will often strike multi-territory deals so there is not a lot of additional work needed when including Canada as a territory as part of a launch (for example) in the US. However, depending on the label, you might not be able to license content for all of North America under one deal but you have to go through two offices. There might be one department dealing with the US and one with the Rest of World.
Nevertheless, when launching an international music service it shouldn’t be too hard to include Canada as a territory from a label licensing point of view.
2. Licensing difficulties (2) – getting publishing rights is a nightmare
Yes it is. But it is everywhere. At least in Canada there is only one collection society dealing with the rights of the music composers whereby in the US you have to go to a bunch. In Europe you will (normally) still have to deal with a different organization in each country which is slowly changing so pan-European licensing should be easily possible at some point.
3. Canadian copyright law is in limbo
Whereby this is true it shouldn’t stop anyone from launching a music service in Canada. Without wanting to go in too much detail this is the deal: many people say that the Canadian copyright law is outdated and needs modernisation. This was suppose to happen for years but whenever there is a new government the proposed changes are being put ‘on hold’ (read: ‘thrown away’).
The international music community is actually quite upset about the lack of movement in Canadian copyright law calling it a “major source of the world’s [music] piracy problem” (IFPI). Ouch.
Again, this should not stop anyone to launch a digital music company in Canada since the changes in copyright law are unlikely to affect consumer facing music delivery services.
4. Canada is too small to make an investment like starting a music service worth-while
This is probably the excuse I hear most often: It seems that companies feel their investment will not be returned because the music market in Canada is too small. And starting a music service is a rather big investment with the largest cost being music licensing.
I think this is a fair argument but doesn’t explain why services are being launched in the smaller countries in Europe (just one example here). So starting up a service in an English speaking country that has a similar music taste to its big neighbour shouldn’t be so hard then, right? After all, Canada is the seventh biggest music market in the world (2005).
‘Big neighbour’ are two very important words here. It’s a psychological issue that the US (population: 309m) is so big and suddenly makes Canada (population 34m)seem so small. Living here now for a few months I can see that Canada has a complex about being the ‘small neighbour’ and everything has to be compared with the US. And of course everyone has to agree that when it comes to starting any business, given the choice, one would have to go to the US as the market is simply larger.
But this is not what it’s about: Canada needs digital music companies that have already proven success in other big territories to launch locally or alternatively a new breed of Canadian companies that can move music fans away from unlicensed music usage.