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CPCC Goes For Broke, Part One

A remarkable week in music that started with the Steve Jobs call to drop DRM, followed by speculation that EMI will drop DRM, concluded with another critically important development – the Canadian Private Copying Collective, which administers the private copying levy, has asked the Copyright Board to increase the levy on blank CDs and add levies to electronic media cards (storage media) such as SD cards as well as digital audio players such as the Apple iPod.  There is much to consider here, which I will divide between the specific issues raised by the tariff application and the bigger story that is at work.

On the specific tariff application, I think the CPCC is going to have a tough time convincing the Copyright Board (and almost certainly the federal court) that the levy increases and extensions to other media are warranted.  The blank CD increase represents an astonishing request as the CPCC is now openly asking that more than half of the retail price of blank CDs to be comprised of levy costs.  A backgrounder on the CPCC notes that blank CDs cost about 50 cents and that the levy currently comprises 21 cents of that cost.  That is an enormous cost – 42 percent – and the collective wants to increase that by an additional 28 percent.  This is a staggering market distortion that will obviously face very stiff opposition.

The proposal to extend the levy to storage media and Apple iPods also face an uphill climb. The storage media usage data simply does not come close to supporting a levy.  The CPCC's FAQ says that its surveys suggest that 25 percent of content copied onto these cards is music and that 20 percent of people say that the last time they copied onto an electronic memory card, the content was music.   Put another way, 75 percent of content copied onto these cards is not music and 80 percent of people say that the content they last copied onto these cards was not music.  These results are obvious to anyone who owns a digital camera, but apparently not to the CPCC.  While the Copyright Board's definition of ordinary use opens the door to considering storage media, this represents bad, market-distorting policy that (if approved) would force the 80 percent of non-music copiers to subsidize the 20 percent of music copiers.

The attempt to extend the levy to Apple iPods is similarly flawed.  

Leaving aside the fact that a court already struck down that levy, the CPCC argues that its revised definition of a digital audio recorder "is intended to excluded cellular phones, PDAs (such as Palm Pilots), or personal computers that also have embedded memory and can record and play music. However, the definition is intented to include Digital Audio Recorders that may also have secondary uses, such as calendar or address book functions, radio reception, data storage, etc."  The CPCC then argues that iPods would be subject to the tariff because they are music focused even though they store photos and play videos.  These distinctions appear to be me to be fatally flawed – is the Apple iPhone captured by the levy?  the Blackberry Pearl?  All of these offer music functionality but are not the primary use (I would argue that in my own experience music is no longer the primary use of the Video iPod either).

Much has changed since Palm last called their PDA's "Palm Pilots" (that would be 1998) and with the rapid convergence of devices, just about everything can be used to play music, record music, and do dozens of other things.  Establishing a levy on these devices is likely to regularly miss the target as the tariff definition – "a medium that is designed, manufactured, advertised and primarily used for copying sound recordings of musical works and is capable of being used to play sound recordings of musical works" – will catch devices it shouldn't and miss those that it should. 

The CPCC claims that there is broad public support for the levy increases, but this is based on dubious survey data from Environics.  As I pointed out when the survey was first reported, the majority of survey respondents had never even copied music and were therefore ill-suited to render informed opinions about the levy.  Further, the survey left so many questions unanswered that it does nothing to improve our understanding of these issues.  Indeed, there is no doubt that the opposition to this levy will be fierce as every major device, cellphone, and camera manufacturer will join forces with retailers and storage manufacturers to oppose the levy.

There will understandably be considerable hand wringing over this latest proposal, yet it is only the opening salvo in what is likely to be years of hearings before the Copyright Board and the courts.  In my view, far more important is the bigger story at work here, as faced with the possible pressure of eliminating the levy altogether and the mounting desire for an alternative compensation system for P2P file sharing, the CPCC has chosen to go for broke and ask for millions more in levies over the likely objection of some its own board members.  More on this part of the story tomorrow.

14 Comments

  1. Greed…
    I wrote my MP as soon as I read the story: [ link ]

    I’m blown away that they’d try this on flash memory cards. I suppose I shouldn’t be surprised though. They’re selling like mad, and if people aren’t using them for music, the CPCC would still take a piece of the lucrative pie with no qualms…

  2. Michael,

    I just want to say thank you for taking up these issues, and bringing them to light. It is refreshing to see some one caring and pouring their energy into helping fight back against the various forms of insanity going on.

  3. \”Click\”
    …Next the CPCC will want to be remunerated for the \”click\” sound your camera makes! Lets see a fraction of a cent per click? Er, which of the 4 major record companies has the copyright on that again…?

  4. Vincent Clement says:

    Disgusted
    I am disgusted that every time I buy a blank CD, that I am paying roughly a 40% tax – then I pay GST and PST on top of that levy. So the government makes some extra cash along the way. Guess I’ll have to start buying my blank CDs on my various trips to the Detroit area.

  5. Chowarmaan
    Why do I have to pay a piracy fee when I am doing nothing of the sort? Did they not take enough money already on the blank media, that as a Software Developer, I never store music on? You buy a phone with email and camera options, and need a memory card to store the information, and contacts. They want a levy on that. I place a memory card in hardware device to hold software to run only on that device, and the CPCC wants a royalty on that too! These people need to get clue and come back to reality. It is time the rest of us should show that 80% is not a majority, and therefore the levy is not needed. This is getting ridiculous from the music companies. They should try to get their act together before the backlash comes where no one buys anything legitimately from them, since they assume they have already paid the fees to get a \’copy\’.

  6. Sorry, the previous should have indicated that 80% is a majority, and the levy should not be imposed since only 20% of people who responded may have copied music to the media in question.

  7. Designer
    I was thouroughly ticked-off when this was introduced initially, and foolishly thought the courts had put an end to this last year. It now appears however that the rampant greed of the CPCC, combined with the blatant incompetence of our elected officials, will have us all paying a hidden tax for something we haven’t done. Aside from having been deemed guilty (of copying music) without any evidence, I am compelled to pay a fine to a self -interest group without recourse.
    If there is any Piracy here, it is the public who are the victims, not the CPCC with their multi million booty. I think the time has come for a complete (public) review of this practice, including a thourough audit of the CPCC and a clear and transparent accounting of all the monies collected to date. Then perhaps we can devise a fair process to duly compensate the artists involved without penalizing the innocent majority of Canadians.

  8. More of the smae
    All I can say is, I hope the government remembers that its the duty of government to assume a citizen is law-abiding until proven otherwise. Governments acting as if their citizens are criminals is the sure path to either a) citizen unrest/revolts/revolutions or b) a 1984’ish society, depending on how much power the government can or choses to wield.

  9. What MP3 playes use flash cards?
    I am hard pressed to think of a MP3/music player that uses flash cards (SD, CF, etc.) The lion share of flash cards are used in Digital Cameras, so the CPCC is going after photographers who oddly enough hold the copyright on every picture they take.

  10. AIB, there are actually an increasing number of portable players that use removeable memory cards – primarily to keep the cost of the players down, but also to allow users to upgrade their capacity cheaply. It’s still a stupid idea to levy flash memory though – will they require you to fill in an exemption form to buy cards for your cameras? Asinine!

    Secondly, I don’t know where the CPCC is buying their blank CDs, but I can’t recall the last time I paid 50 cents for one. I suppose if you just went to Future Shop and bought them singly you might pay that, but anyone who’s regularly buying disks wouldn’t pay more than 30 or 40 cents in quantities of 50, and even less in higher amounts. And that includes the levy – the last quote I got for blank CDs was 21 cents each for 50 or more, if I applied for the CPCC’s levy exemption. At that cost, the levy was an additional 21 cents per disk, thus making up HALF the retail price. HALF! That is insane.

    Next thing those idiots will want to do is levy my brain, since it can be used to store music as well.

  11. Rufus Polson says:

    Nice article, typo
    Nice article, these issues need more attention than they’re getting.
    I think you missed a key little word in the third paragraph:
    “The storage media usage data simply does come close to supporting a levy.”

    Shouldn’t that be “does NOT come close”?

  12. “The first rule any scam is to pay off
    I just checked the price of 100 Maxcell CD-Rs at Future Shop. It’s $38 or $0.38 per CD. So 21 cents of 38 cents is more like 55% of the cost. The cost to produce CDs will drop over time and retailers will hold sales. Thus the percentage will increase over time. However, the tariff (tax) is fixed and will restrict those loss-leader or blow-out sales.

    It’s been said countless times that it isn’t fair that the many subsidize the few, or that people storing non-music related data have to pay a tax to the music industry. It doesn’t matter. The music industry is behaving far worse than the pirates because the music industry is stealing from _everyone_ who uses the taxed media for non-music purposes. And they think there’s nothing wrong with that.

    I predict that the government will authorize the unjust tax increase because it’s in their best interests. Both federal and provincial governments collect sales tax on the post-tariff price. You can quote me on this, “The first rule of any scam is to pay off the government.”

  13. fair_n_hite_451 says:

    Man, you go to Mexico for a week’s vacation and look what you miss!

    I think the point of the over-arching request from the CPCC is to get the levy challenged in court and tossed. The CRIA has recently changed it’s position on the levy (because it’s been used against them to justify doing nothing to increase the penalties for p2p in Canada) and they would like nothing more than to see it gone now.

    Then, they are free to go back to their “Canada is a wretched hive of scum and villany” rant that is their new public policy tune.

  14. There are cheaper way to get CDs
    If you want to buy blank media without paying the insane taxes, it’s best to go to stores that specializes on selling refurb/liqudated items. Last time I checked, I can get 50 52x CD-Rs for $10, which translates to 20 cents a disc. There is no way CPCC can possibly collect 21 cents for such price. ­čÖé