In Canada, it has been a long-standing policy to place a levy on recordable devices such as tapes and blank CDs and redistribute those proceeds to recording companies and the artists that they represent. The core purpose of this practice is to compensate artist for private copying that these blank media enable. However, technology has evolved and new digital media is now responsible for enabling private copying. While a practical solution would be to just extend levies to these devices, there are many confounding issues with the new devices that call into question the levy system all together. Most importantly the multiplicity of uses of the devices and the idea that the levies themselves make private copying legal make the current system of taxing the media an unreasonable and inefficient way to deal with protecting copyright.

The recent confluence of technologies now means that mp3 players, iPods, storage disks, computers and even cell phones can be used to copy music. These digital storage devices come in many different forms and are not exclusively for copying music. The problem with applying levies on these devices is that it would effectively tax all users of the devices even though a small percentage of them are actually used for private and peer to peer copying. This overbroad application of a levy is what has retailers and consumers alike so upset about the proposed levy.

Another problem with the levies is that it legitimizes private and peer to peer copying in Canada by providing a compensation process in the hundreds of millions of dollars. Many people including the federal court and the Canadian Recording Industry Association (CRIA) have realized and acknowledged this fact. The CRIA is actually going so far as to lobby against the levy so to not legalize these forms of infringement. Unfortunately the industry backers of the levy do not realize that applying the levy system and still claiming that private copying is illegal is like having their cake and eating it too.

As Michael Geist has pointed out in a number of columns on the issue, the music industry has been full of innovations over the past several years, however none of them have been led by major record companies. The system of levies and stronger copyright laws has not held up to the changes in the industry. While record companies have spent an enormous amount of resources trying to close technological loopholes through litigation and government lobbying, they have made enemies of their own consumers (in some cases suing them) and more importantly let opportunities for innovation pass them by.

The tide has now shifted definitively towards consumers. Digital Rights Management schemes have been abandoned as overly restrictive for consumers and levies have shown to be overbroad and highly inefficient. The big record companies, who also face rabid competition to drop their prices from big box stores, have been left behind by failing to recognize and adapt to new innovations. While nobody wants to deny artists and the companies that invest in their development their fair share, clearly both parties have to become more creative in the ways in which they distribute music and profit from their success.

New phenomena are emerging. A recent Radiohead record sale privately over the Internet may be an indication of where the market is headed. Companies like Apple and Amazon have shown that Internet distribution can go hand in hand with adequate compensation. Other artists are either focusing on live performance or trying to sell their music privately through exclusive distributors or over the Internet themselves. What is clear is that the shifts in technology of distribution is devoid of leadership from the big record companies. Market forces have eliminated their role in music transactions – a result of relying on levies that did nothing to promote productivity and market innovation. I would argue that market forces should be allowed to prevail without distorting levies on players; hopefully this will convince music companies to think of new and innovative ways to recapture their market share.