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Who Needs an iPhone Tax: Canadian Music Industry Instead Calls for $40 Million Annual Handout

As the Standing Committee on Industry, Science and Technology continues its copyright review, the Canadian Heritage committee has launched its study on remuneration models for artists and creative industries. Yesterday, Music Canada’s Graham Henderson appeared before the committee to make his case for copyright reform (the organization will presumably make the same case in the coming weeks at the Industry committee). The industry is garnering record-setting Internet revenues, but it reverted to claims of a “value gap” that doesn’t fit within the Canadian legislative experience and demands for a copyright term extension that would cost Canadians millions of dollars and that was rejected by the government in the TPP.

Most notably, after privately lobbying for a new tax on all smartphones and other devices, the group is shifting toward an even bigger cash haul. Rather than apply a tax on all smartphones, the industry is spinning for a tax on everyone by simply calling for an annual $40 million handout:

The private copying levy, originally intended to be technologically neutral, has been limited by various decisions to media that are effectively obsolete.  This important source of earned income for over 100,000 music creators is now in jeopardy unless the regime is updated. Music creators are asking for the creation of an interim four-year fund of $40 million per year. This will ensure that music creators continue to receive fair compensation for private copies made until a more permanent, long-term solution can be enacted.

This represents a brazen request for an annual $40 million handout for no reason other than the industry wants it. Indeed, as the industry predicted, the consumer shift to subscription services such as Spotify means there is a less and less private copying taking place. Music Canada (formerly the Canadian Recording Industry Association) was once the lead proponent of the private copying levy, but it dropped its support on the expansion of the levy to iPods in 2007, fearing it “broadens the scope of the private copying exception to avoid making illegal file sharers liable for infringement.” The industry was similarly reluctant to embrace private copying in 2010.

The demand for an annual $40 million taxpayer handout makes sense from the industry’s perspective when you review how the CPCC, the collective responsible for administering the system, distributes its revenues. First, last year a hefty 28% of its revenues went toward administration, meaning that more than $11 million would go toward administrative costs, not musicians. Second, the CPCC’s distribution framework allocates 18% of the remaining revenues to record companies, not authors, publishers or performers. That means millions to record labels, not musicians. In fact, the percentage allocated to record companies has grown significantly: it was 11.3% in 2000, 15.1% from 2001-2007, and now 18%. One hopes the committee will recognize the annual $40 million handout request – $160 million over four years – has nothing to do with business models or the state of industry, which has been growing dramatically in recent years.

7 Comments

  1. Brilliant strategy…we should each demand $40 million, just ‘cause! Wow…

  2. Chris Brand says:

    Perhaps it’s time to amend the Copyright Act to just say that “as long as you keep it private, that’s fair dealing”. Copying without distribution should not be covered by copyright at all (when copyright was first conceived, it required a printing press, which was a significant investment and therefore a good indication that distribution would also happen, but that is no longer true).

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  4. So let me get this straight. My smartphone which is only used for web search over wifi will have a tax that goes to something that does not even concern me? Nice! Now you don’t even have to leave home for some bum to be asking for a handout. The wonders of technology!

    I’d be donating gladly if the money actually went to someone needy, but a corporation dressed up as a homeless person really gets my goat.

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