The CPCC’s heavy iPod levy

The Canadian Private Copying Collective (CPCC) continues to set forth its proposal of a levy on iPods and other digital audio recording devices.

The CPCC is a non-profit agency that collects and distributes the private copying royalties to songwriters, performers, publishers and producers. Since 2000, the CPCC has been collecting levies ranging between 21 and 29 cents on recordable media (Cassette tapes, CD-R/Ws, MiniDiscs) to compensate the musicians for the value of the copies of recordings. Its proposal of a new levy on iPods and other MP3 players would, as the CPCC argues, help compensate the artists in a way that reflects the change in music copying technology.

Although the levy proposal was previously rejected by a Federal Court of Appeals decision in 2003, the CPCC has returned with new survey statistics taken in 2006 that show that iPods and other “Digital Audio Recorders” are predominantly used for copying pre-recorded music – over 90%. As argued by the CPCC, these Digital Audio Recorders now exist with integrated audio recording media. According to the Canadian Copyright Act under s.82, any manufacturers of blank audio recording media for sale in Canada are subject to CPCC’s copying levies.

Controversy over the levy centres mostly on the amount of the levy. The most recent revision of the proposal asked for a graduated pricing scheme that begins at 1.08¢ per MB for the first 1GB, and ends at $1.93 per GB for the 21st GB and onwards. So for an iPod Classic (160 GB) that retails for $279 CDN, the proposed levy would add an additional $379.97 to the total cost.

In a recent debate between CPCC president, David Basskin, and Ottawa lawyer, Howard Knopf, many of the policy concerns with the high price of the levy have been raised. Basskin readily defended the levy, stating that the purpose of the levy was to “compensate the people who create the music for the value of the copies”. Not only is this form of compensation intuitive, it was also widely acceptable. According to a 2006 survey conducted by the CPCC, 79% of Canadians who copy music said that a levy of $40 on an iPod or other Digital Audio Recorder with a capacity of 30 GB would be “fair and reasonable”.

CPCC surveys also show that the majority of copied music on these players come from sources other than iTunes, which come with the right to copy when purchased. According to Basskin, the CPCC has taken the percentages into account when creating the graduated levy scheme. As the CPCC has been able to distribute over $160 million to over 100,000 songwriters, publishers, etc. since 2000, Basskin and the CPCC hope that the approval of the new levy will put more money into the hands of those that make the music happen.

In opposition, Howard Knopf was much more cynical of the CPCC’s proposals. Not only will such a levy be negatively perceived as a steep tax by consumers, purchasers of these devices may also perceive the paid levy as a “wide-open, happy hunting licence” to download whatever music they choose. Since they have already compensated the artists through the levy, they would be less inclined to ‘doubly’ compensate the artists by also purchasing music from legitimate sources.

Knopf also argued that the application of a heavy levy onto popular items such as the iPod would make it almost impossible for Canada to ratify the WIPO treaty. Under the national treatment obligation of the treaty, the levy price would effectively double for the end-consumer if WIPO is ratified and put into practice. As no minister would be willing to make such a move, the Conservative Government has even talked about eliminating the levy on blank recording materials.

It should be noted that the CPCC’s proposal also includes a levy on removable memory cards over 256 MB (e.g. Secure Digital, MultiMedia, and Memory Stick). According to CPCC’s surveys, 25% of content copied onto these memory cards is music, with 14% of respondents copying only music. However, with such a low percentage of copied audio content being used on these memory cards, how effective or fair is it to set a general levy on these items?

I can understand how iPods and other MP3 playing devices, which have the main purpose of copying and playing music, can have a levy applied to them that effectively compensates artists for copied music. Even for users who only get their music from iTunes and argue that they will never need to make use of the levy compensation, there is a counter-argument akin to the farmer who pays taxes for roads he will never use, but nonetheless benefits from the economic advantages of a developed urban centre. However, the levy on removable memory sticks seems like a bit of a stretch. The CPCC argues that since most MP3 players and music cell phones use these memory cards, they should be levied as well. However, there are plenty of foreseeable uses for these memory cards that are completely unrelated to the copying of pre-recorded audio.

For example, my digital camera uses SD cards exclusively for the storage for the photos that I take. Never will my photographic endeavours or enjoyment of photography with this SD card suffer from the recorded music industry’s plight (the only concession being photographing music industry related subjects).  Perhaps the CPCC overstretched on this one.

One last point of interest regarding the obligation to pay the levy: the current law only requires manufacturers to pay the levy on blank audio recording media (defined as “medium onto which no sounds have ever been fixed”). Even if levies on Digital Audio Recorders extended to iPods, MP3 players, and even cell phones, manufacturers could bypass the levy by simply pre-loading audio onto the storage space of these devices (i.e. non-blank media). The consumers could then overwrite the device in its entire capacity with whatever material they choose after they purchased the item. The CPCC would be sure to get this loophole fixed too if the iPod levy ever gets passed.

  1. Nathan Fan’s article “The CPCC’s heavy iPod levy”, (iPigram, September 15) contains several factual errors.

    The CPCC continues to believe that the application of the Private Copying Levy to Digital Audio Recorders (DARs), such as the iPod, is both necessary and well within the scope of Parliament’s intentions in creating the levy in the first place.

    Mr. Fan says that the most recent proposal by the CPCC would levy a 160 GB iPod classic at over $300. This is not correct. The CPCC’s 2007 proposal argued for a levy on DARs based on a sliding scale that started at $5 for a DAR with 1 gigabyte of storage and topped out at $75 for DARs over 30 gigabytes. Given that a 160gb iPod can hold copies of tens of thousands of songs, $75 is hardly an unreasonable amount.

    The CPCC formerly proposed levies on removable memory cards, but that proposal was withdrawn. The tariff proposed by the CPCC for the 2010 Private Copying Tariff is only for audio cassettes, CD-Rs and Minidiscs.

    The process that decides the private coping levy is often misunderstood. Part VIII of the Copyright Act requires rights holders to propose rates to the Copyright Board of Canada for levies on media that is ordinarily used to make private copies. Once the proposal is made, the Board must publish the proposal and invite other parties to object. A public hearing follows, with evidence and argument being presented by all sides. The Board takes into consideration such things as other uses for the media, whether or not is in fact ordinarily used for the private copying of music and value of the music being copied. The Board then publishes its decision and the tariff.

    Finally, there is no evidence that supports Mr. Knopf’s assertion that the implementation of the WIPO treaties would have any effect on the collection or distribution of the private copying levy. His views are speculative and alarmist.

  2. My apologies for my misunderstanding of the sliding scale levy. My understanding, as well as many others, was that it was a cumulative and per gb effect. Thank you for the clarification, Mr. Basskin.

    I was never in opposition to a levy on DARs. It seems economically and morally sensible – and a flat $75 on an iPod is much more reasonable than the previous numbers thrown around.

    Still, I wonder if the general public will be able to maintain the distinction between the levy for the value of copies being made and the value of mp3 downloads, especially for those who purchase mp3s mainly for the purpose of putting it on the iPod.

    I hope I’m right in thinking that the decrease in the proposed levy amount over the years is somewhat reflective of this concern (at least in part) and would partially address this concern. However, when consumers see a sudden increase in DARs across the board and catch wind that the $75 will be going to the artists, it’s unclear whether the moral and intuitive deterrent from illegal downloading will be enough.

    But perhaps this is also a good way of transitioning into the growing movement of accepting the fact that illegal downloading exists and will continue to persist. Instead of putting all efforts into fighting the situation, adapting and developing creative ways of working around the problem and getting to the bottom line of compensating those who deserve to be compensated is what is needed.

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