While the substantive shortcomings of the latest attempt to add a levy to the Apple iPod and SD cards are important (not to mention legal questions of res judicata and political questions surrounding the Conservatives policy commitment to eliminate the levy), there is a bigger story at work. Ten years ago, the music industry's vision of what the market would look like today focused on two things – DRM and the private copying levy. DRM formed the key provisions in the WIPO Internet Treaties that were concluded in 1996, while CRIA celebrated the culmination of a 15 year lobbying effort to create a levy on blank media in 1997.
Fast forward to 2007 and it is clear that the industry got it completely wrong. DRM faces a consumer and regulatory backlash, with a growing number of leading digital music vendors – Yahoo, Real, and Apple – all calling on the industry to drop the restrictions. They are joined by independent labels who are successfully promoting their music through eMusic, the number two online music seller, and by the artists themselves. With the rumours of EMI dropping DRM, it looks like it is only a matter of time before the DRM-focused strategy is abandoned.
The private copying levy has gone through similar challenges. The levy has succeeded in generating an enormous amount of income (over $150 million), yet some believe it has become a roadblock to WIPO ratification (national treatment concerns associated with the levy), it is far more market distorting that its advocates anticipated, and much to CRIA's dismay, it has provided peer-to-peer file sharers with a legitimate argument that downloading for personal, non-commercial purposes is lawful in Canada.
At the same time, the emerging view worldwide is that some of the copying it compensates – device shifting from CDs to iPods – should not be compensated. For example:
- in the U.S., the recording industry told the U.S. Supreme Court during the Grokster hearings that "the record companies, my clients, have said, for some time now, and it's been on their website for some time now, that it's perfectly lawful to take a CD that you've purchased, upload it onto your computer, put it onto your iPod."
- the recent UK Gowers Report on IP recommended reform to that would permit such copying without the introduction of a new levy
- last year Australia passed legislation to allow for uncompensated device shifting
- New Zealand has proposed legislation that would allow for uncompensated device shifting
Given this history – and the fact that CRIA has pledged to not sue fans who copy music onto their iPods since they are the "good guys" – the CPCC decision to ask for an increase in the levy and an expansion of the levied media runs counter to what is happening around the world. This obviously begs the question – why?
I would argue that there are two important forces at work here. One is the isolation of CRIA within the Canadian music scene. The decision of the major indie labels last year to leave CRIA, along with emergence of the CMCC, reduced the CRIA's importance (though perhaps not yet with the Canadian Heritage Minister). The CPCC's decision to push forward with an expanded levy, when CRIA had already mused about dropping the levy, must have surely led to a vocal board meeting given that CRIA's General Counsel Richard Pfohl still maintains a position on the CPCC board. With the CPCC headed for years of hearing and litigation on the private copying levy, it will be interesting to see whether CRIA sticks it out or decides to abandon any pretense of supporting the levy altogether.
The second force – indeed the elephant in the room – is peer-to-peer file sharing. Leaving aside the arguments that P2P benefits the artists and has not had a negative impact on the industry, compensating for such copying may still make sense. The levy arguably already covers P2P and an expansion of the levy in the manner advocated by CPCC strengthens that argument. Moreover, the funds generated by the levy are clearly not just compensating CD copying – it is peer-to-peer file sharing that now sits at the heart of this scheme. The problem is that the levy doesn't work particularly well as a P2P alternative compensation system since it doesn't legalize the making available of content on peer-to-peer systems and the purchase of blank media bears little relation to P2P activity.
That said, this might be the CPCC's attempt to stay relevant in a world where P2P levies will likely get more attention in the months ahead. Indeed, if the trend is toward no levies for device shifting, the CPCC has little reason to exist other than P2P. I think there are better solutions out there – levies tied to network providers make more sense (and are already replicated by cable television levies for retransmission of content) and there is a need to cover both P2P and the non-commercial use of content in user-generated content – however, a discussion about P2P levies is one worth having. It might be that the CPCC just bet its future existence on it.