The "iPod tax" - CPCC's proposed levy on devices capable of storing digital audio, and a better way forward

I was called yesterday morning to ask for an interview later in the day about the latest CPCC levy. Since that interview didn't happen, I want to post some of my thoughts on the levy. What I want to say is far more than could have been in an interview anyway.

(See also: p2pnet republishing of article)

It is important to separate a recognition of the problem that certain copyright holders find themselves in from the proposed solutions. Music composers and performers have a legitimate interest in being paid when their music is enjoyed. As people move away from the purchase of tangible media such as tapes and CDs, alternative compensation mechanisms need to be used.

The problem is, the proposed levy does nothing to address the problem, and only makes current problems worse.

It is important to realize this is not a tax only on devices like the "iPod". I have a cell phone with a built-in audio player which I load MP3 and AAC files onto which are lawfully acquired. It is mostly audio BLOGs such as , and Cory Doctorow's audio BLOG, but I also have a subscription to eMusic.

If this levy is allowed on portable audio players, it won't stop there as the precedent will be set to allow the levy on all devices and storage platforms capable of storing audio: which is all digital hardware!

Should I be paying a levy to music composers and performers for every piece of digital hardware I purchase from my home computer, my home theater to my cell phone? Emphatically NO.

If such a levy exists, it will increase peoples perception that music is already bought-and-paid-for when they purchase their hardware, and thus they don't need to pay again for music. While this is a reasonable idea, this is not in fact what the law says. While the Private Copying Regime that the CPCC levy is based on authorizes the reception and private copying of recorded music, it does not authorize sharing in any way (P2P or giving away CD's), nor does it authorize mashups.

What would a better solution look like?

  • The levy should not only be collected for music composers and music performers, but also copyright holders of video (movies, television).
  • The compulsory license would apply to the non-commercial distribution of these works. Commercial distribution would retain traditional copyright allowing contracts and negotiations between commercial entities. We need to move away from the "one size fits all" concept of copyright which has simply not been working.
  • The levy should apply not only to verbatim sharing of music/video, but also to performances and mash-ups. Individuals who pay the levy should be free to share music or video verbatim, include music as soundtracks in their personal videos, be able to perform music themselves, or create mashups of other multimedia.
  • There needs to be a closer link between those benefiting and those paying the levy. Rather than attaching the levy to purchasers of audio recording media or multi-purpose hardware, the levy should be attached to those who wish to share music or mashups. The logical organization to collect this levy is the ISP, on behalf of their customers, as part of their monthly service charge. It would be the person and not the ISP that is responsible for paying the levy.
  • Truly private copying/communicating should not be regulated by copyright at all. Once a copyrighted work is legally acquired, any copies, communications or format conversations (space, device, or time shifting) within the privacy of someone's home or between privately owned devices should not be regulated or levied at all. Only if these works are made available to third parties (communicated by telecommunications, distributed in tangible form) would copyright apply. Copyright holders had no business in the bedrooms of the nation

Political possibilities from current activities

The idea that the private copying levy might be applied to devices is extremely controversial, and is getting a lot of media attention. The current governing conservative party states in their policy that, "A Conservative Government will eliminate the levy on blank recording materials."

A likely outcome of the current political antics is that the private copying regime could be repealed, and the CPCC disbanded. Canadians are not supportive of this levy and are getting upset with this levy being proposed over and over again. This is something that the courts have already ruled on, suggesting that the current copyright act does not allow for this type of levy. This suggests to me that the tactic is intended to have political consequences.

The CPCC being disbanded is not what I believe is intended by many of the participants in the CPCC. David Basskin, President of the Canadian Musical Reproduction Rights Agency Ltd. (CMRRA), is often quoted as also representing the CPCC and he is a strong supporter of collective licensing systems.

Mr Basskin may not have intended this as it would harm the composers and publishers he represents, but is this what is intended by the major labels? While many outsiders perceive the "music industry" as being one happy family, this could not be further from the truth. We have songwriters not happy with their publishers, we have performers not happy with labels, major labels are often trying to screw independents, unsigned performers are often left in the cold, and the publishing arm and the labels have taken each other to court on a number of occasions.

To understand what is happing in the music industry you always need to separate these different players from each other, and recognize that sometimes things are being done to screw others in the music industry and not to benefit the industry as a whole.

If the CPCC was disbanded, what might happen?

I see this as similar to what is happening in the USA around royalty rates for Internet Radio.

(Leaving Canada for a moment -- remember that our laws around Copyright are quite different...)

Here is the scenario in the USA. A compulsory licensing scheme for music exists for US radio, but is entirely technology dependent.

  • Terrestrial radio only pays licensing fees to composers, not performers.
  • Satellite radio pays fees to both composers and performers
  • Internet radio pays fees to both composers and performers, but at a much higher proposed rate than satellite.

A compulsory license in the USA is similar to a Creative Commons license in many ways. If what you are wanting to do is already covered by the license, then you can use the license. If you want to do something different, then you can negotiate with the copyright holder for something different. This means that radio stations can negotiate with copyright holders for lower fees.

This is what appears to be happening: Internet radio fees are being set so high such that nobody can afford to pay them. The major labels then step in and say they will offer lower fees with various inappropriate conditions (such as mandating DRM, exclusive arrangements, etc). Independents and unsigned artists, which make up the majority of the industry, don't have the same negotiating power so are largely left out in the cold. Some radio stations are proposing that independents/unsigned can have their music played only on the condition that they offer a royalty-free license.

This seems like yet another form of Payola where the major labels are manipulating the system to push out competition. Artists are left with the choice of signing up to a draconian contract with a major label or not making money at all.

I think this system needs to be made more fair. Rather than being technology dependent, the compulsory license must be technologically neutral. This will mean a change for terrestrial radio to also pay performers as with other radio technology, but this is a change that is past due. It is appropriate to have a tiered levy system that is dependent on the type of organization communicating the music: private citizens pay a tiny flat-fee levy, non-profits a bit more, and commercial entities based on revenue. Being technologically neutral includes neutrality on reception equipment, meaning that a license cannot mandate specific brands of reception technology (IE: must be based on DRM-free distribution)

(Back to Canada....)

The CPCC has not been a great solution. The levy system they use is based on an outdated music distribution mechanism (physical media), and the organization itself has a lot of room for improvement in transparency and accountability both to the public that pays the levy as well as the composers and performers that receive the levy.

That said, it is better than the option of not having a CPCC-like organization at all which would further allow the legacy major foreign recording labels to manipulate the Canadian music industry. The CPCC brought in composers, publishers and their collectives in a much more powerful negotiating position than they would in other scenarios, and allowed the majority of performers a piece of action as well (the majority of performers are unsigned or independents, with only a tiny few signed by the big-4 foreign major labels).

Objections to compulsory licensing, and why I support this system for multimedia (music, movies, television)

As someone who is often representing the software community in my roll as policy coordinator for CLUE, I often have to speak my own mind separate from that community. In general the consensus in the software community is that the music levy should be outright appealed.

If there were a levy proposed for the software industry, it would decimate much of the industry. But software and multimedia content exist in extremely different economic environments, and copyright can never be thought of as a "one size fits all" system given different types of works are extremely different.

While traditional commercial distribution mechanisms will continue to exist such as sales of mechanical media (Physical CDs and DVD's), the percentage of the marketplace will continue to decrease. The new marketplaces opening up are very different than the old ones, and need to be analyzed differently.

As someone involved in copyright revision since 2001, I have realized that I'm left with needing to decide among the lesser of a few available evils to solve the problem of multimedia content being shared non-commercially without permission over the Internet and other new media.

  • levies
  • lawsuits
  • lawful and/or legally protected DRM
  • creators don't get paid

In my mind, by far the worst "solution" is legally protected DRM which circumvents the property rights of technology owners (including creators who depend on this technology to create and distribute their works) and circumvent a fundamental right of software authors (the right of our potential users to choose our software). I also recognize that the use of this harmful technology only reduces sales of music as it makes DRM-encumbered music less valuable, and provides an additional incentive to infringe copyright and source music from infringing DRM-free sources.

If this abuse of technology remains lawful, but not legally protected, it will at least only harm those copyright holders who make the wrong choice to use this technology rather than harming all of us. If this abuse of technology is allowed to remain legal then it, and the anti-competitive marketplaces it creates, must be adequately regulated.

I consider the suing of music fans option and the "artists don't get paid" option as being largely the same. Lawsuits don't encourage people to purchase music, and only makes potential customers upset at the music industry (and not even that tiny major label component that is launching the lawsuits). As Steven Page of the Barenaked Ladies, and spokesperson for the Canadian Music Creators Coalition has said:

we can’t expect to tell our fans “see you in court” and then “see you at Massey Hall next fall” – we have to choose one, and I choose the latter.

As a creator copyright holder myself, I believe artists should be compensated for their work, meaning both of these options are not workable for me.

This really leaves the last option, which is compulsory licensing systems.

There are wrong ways to create a compulsory license system, and there are right ways. I believe that our best chance at solving the current problems is to investigate better compulsory licensing systems which ensure that creators are adequately compensated in a way that audiences and follow-on creators are also fairly treated. I strongly believe that a vast majority of people want to pay artists, assuming they are treated fairly.

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Levies still unworkable and creators can still be paid

Good post Russell, but I disagree with some of it.

Your proposed solutions is not any more workable than the big media companies.

How do you get the ISPs to fairly charge the levy only for people distributing, without authorization, copyrighted works? Or would the levy be charged to everybody regardless of how they are using the internet. I do a certain amount of Multimedia P2P downloads myself, but I also download Linux distros, stream video content, and work through a virtual network to a remote office. How does the ISP distinguish these activities? How does the ISP prevent people from hiding there activities through encrypted connections? Some of the content I get via P2P is from the BBC. How in your scheme would the BBC be compensated for this?

You claim software is a very different animal then A/V media content and that levies would harm software creation, yet you do not qualify this statement. I do not see how these levies can be proposed for A/V data, but not at the same time also apply to software and books.

You also write off your 4th option "creators don't get paid" as unworkable. Agreed, as you put it, it sounds quite bad for creators, but keep in mind we are only talking about private (or semi-private in the case of P2P) sharing of data. All commercial uses of the content would still require licencing. I believe that this is actually the ideal option. Rather than the creators not getting paid, it would be more that the source of the creators income is shifted from private sales to commercial derivations, and yes possibly somewhat reduced as well, but I think this reduction would only be significant for the mega rich corporate content anyway. The result of which would be to open the field up more for the smaller creators. This would be a net benefit for CANCON.

I agree artists should be compensatated for their work. However just because they have always been compensated for every individual copy of their recording does not mean that this is the way it should always be. A levy is a way to try to maintain that system in a world that is not really compatible with it.

The big media would love to say that every time you play music on your own instrument you should play a royalty. That would be sort of fair. After all you would be making a copy. The only reason they are not pushing for this is because it is not technically feasible.

In the same way compensation for every prerecording is also no longer feasible. The levy is a system to try to maintain some sort of compensation based on distribution of individual copies. Unfortunately it is a blunt instrument and cannot be focused well enough without large sacrifices to privacy. Therefore it should be discarded as unworkable just as collecting royalties from you strumming "Hotel California" on your guitar is not seriously considered by anyone.

I think you over estimate the negative consequences of this option and you do not give sufficient weight to the positive long term benefits.

The bottom line for me is, the only acts of copying which should be regulated by the government via the copyright act are those acts which can be regulated WITHOUT sacrificing privacy or freedom of the end user.

Realo vs Fundie....

Your last paragraph is great in that it provides an answer to your question: Copyright should only regulate "those acts which can be regulated WITHOUT sacrificing privacy or freedom of the end user".

This is why true private copying shouldn't be regulated, why public non-commercial P2P of multimedia should be levied and not need permission, and why commercial distribution should use traditional copyright.

You seem to suggest that P2P is a private activity. If that were the case, then there wouldn't be a problem. While there will be those who will try to avoid being part of any public non-commercial distribution statistics (connecting only to people they already know anyway), I don't agree that there will be a sufficient number of people doing this for us to care. An underground will always exist, and is largely irrelevant to the discussion.

Any compulsory licensing system is lossy, and it isn't intended to be accurate as to exactly what works are being used by everyone. Compulsory licensing is the system already in place for commercial uses such as cable television, radio airplay, and other public uses such as photocopying in libraries and schools. Yes, it is lossy, but to try to be accurate would "sacrifice privacy and freedom of end user".

Multimedia content is different in the economic analysis. I didn't qualify that in this article as I've been writing about it in nearly every other article I write on the site. There are types of works that lend themselves to peer production (software, non-fiction educational texts, scientific/medical journals, etc), and there are types of works that do not (music, movies, television).

For types of works where peer production is a viable option, compulsory licensing (the imposition of lossy royalty-based business models) would decimate the business models for peer production. Peer production relies on funding the development of the first copy, and allowing the marginal price per copy to be equal to the marginal cost to the developer of zero. How this first copy is financed is the subject of every paper on FLOSS, Open Access or related business models.

While there is a tiny number of people in multimedia that might use peer production, there are not enough using this method to exclude the possibility of using compulsory licensing to get away from the alternatives (nobody gets paid, or we infringe the rights of tech owners and/or audiences).

If the compulsory license is set low enough then most people (not all) will happily pay it to have the piece of mind. If rather than a levy on CDs we have a $10/month levy on Internet connections I would simply pay it even if I didn't ever share multimedia (which is currently the case). I have an eMusic account that offers me 40 songs a month, and there are months where I have downloaded absolutely nothing. Do I feel ripped off because I paid for 40 songs I didn't receive? Not at all. There was one month where I even downloaded a bunch of Nettwerk music that I already had on CD simply as a way to support that Canadian label.

If we weren't in a battle-to-the-death with the old-multimedia companies who have *ZERO* respect for property and other rights, we would also not feel as ripped off with the possibility of our current arch-enemies getting any money from us. If compulsory licensing entirely removed the DRM and lawsuits option off the table, I think everyone would be much happier.

I did couch my letter with the suggestion that other people in the technical community disagree with me. I disagree with the "nobody gets paid" option for a number of reasons: I don't think it is fair as I mentioned in the article, but even more important I don't believe it is politically viable.

If you go to a politician and tell them that of the 4 options to deal with unauthorized non-commercial sharing of multimedia that your answer is "it should be free/gratis", that will pretty much end your conversation with them. You may continue speaking, but what they will hear is "blah, blah, blah". They are only interested in solutions out of the other three, with the key debate really being between compulsory licensing and full-on DRM++ (IE: anti-circumvention, broadcast flag, plug the A-Hole, criminalize private ownership of a camcorder, etc)

While you may want to pick that they don't get paid for this public non-commercial usage, this option isn't politically on the table. Even if you could convince enough Canadian politicians that this is a good idea (good luck with that ;-), you would then have to go to WIPO/etc to change pretty much every existing treaty on copyright. I sometimes suspect full global implementation of the next level of KYOTO and a permanent solution to issues in the middle-east to be more likely.

So with that in mind, of the two politically realistic options, do you choose DRM or compulsory licensing?

Free/Libre and Open Source Software (FLOSS) consultant.

isp music levy legal p2p back on royalty agenda

UK royalties collector PRS For Music has resurrected the idea ISPs should pay for copyrighted content that their networks transfer without authorisation.
“With the introduction of the Digital Economy Act, the harm caused by the problem of piracy has to be measured, and if a problem can be measured it can be priced”