CPCC Goes For Broke, Part Two

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.


  1. Darryl Moore says:

    No levy is a good levy
    Michael, I agree with all your observations and arguments. However I think your conclusion misses the mark.

    Your proposed solution of a network access levy is little better than the current blank media one. Raw network bandwidth usage also bares little relation to P2P activity. Between video blogs, remote backup sites, open source and shareware software, streaming radio, and many other high bandwidth uses besides P2P filesharing, it is very difficult to identify P2P activity based on solely on network usage. To try to differentiate P2P from other uses will only cause a cat and mouse game as p2p networks attempt to disguise there presence as they already do to avoid bandwidth throttling practiced by some ISPs.

    Your analogy with cable is also flawed because the rational for the cable levies themselves is flawed. There is no good reason that the cable companies should be paying any money at all to the networks when they are providing a service to the networks as much as they are providing a service to the consumers. By distributing the content to a wider audience they are in fact increasing the value of commercial time on the networks.

    Russell McOrmond, in a recent post, summarized the available options very well:

    a) Copyright abolished for private activities (private copies,
    private communication)
    b) Copyright abolished for non-commercial activities
    c) Extended/compulsory licensing for private and/or non-commercial activities (AKA: Levies)
    d) Lawsuits against children and grandparents for activities many people think aren’t harmful, but which require permission and/or payment on a per-transaction basis (AKA: the status-quo)
    e) Outlawing communications technology that is under the control of anyone not approved by the government as a “professional” (IE: the DRM/Broadcast Flag/Analog Hole debate — where the major cultural industry associations want to bring us — note that CRIA isn’t a fan of levy systems as they counter their lobbying for DRM)
    f) Outlaw the activities entirely (IE: recordable CDs, portable media players and personal computers outlawed).

    I strongly feel that the only viable long term solution is (a) legalizing all private communications for ANY purpose, of which P2P file sharing would be one example. All other possible solutions either have irreconcilable issues or are inconsistent with a free and democratic society.

  2. It’s also worth noting that there are many Canadian musicians who want you to share their music as much as possible over the p2p networks.

    A levy to legitimize p2p would be against their interests, too. Of course, they may be happy to get paid for their advertising, just as the majors are happy to get paid for their advertising (radio airplay).

  3. Russel McOrmond says:

    Convert on levies…
    The article that Darryl Moore mentioned is at [ link ] . It starts by documenting that I’m a convert on this issue from someone who opposed any of the levy systems to someone who now supports it as a “lesser of the available evils”.

    Of any of the existing organizations, my views are closest to the CMCC (Canadian Music Creators Coalition) which oppose DRM and lawsuits, and believe that levies are a better option. If not levies, then I’d prefer lawsuits than DRM given how much harm DRM causes to creators and audiences (the relevant stakeholders in copyright), but worry that politicians and policy makers misunderstand DRM.

    Alphabet soup of acronyms: TPM, DRM, TCPA, RMS, RMI
    [ link ]


    I’m wondering if there is an additional dynamic happening. As an influential member of CPCC, CRIA may be trying to make the levy so unjustifiable that it will cause the Conservative government to follow through on its platform promise of abolishing the levy. I suspect that all MPs are getting letters opposed to this levy, and given few seem to understand the benefits when compared to the even worse alternatives it may be that this is what we will see.

  4. Jim Wilson
    Let’s see, the CD levy has generated $150 million in income, and 80% of memory card users don’t copy music onto them. While CDs and memory cards are obviously not the same, surely it’s not illogical to assume that there’s a similar mis-taxing going on for CD users.

    Personally, I use maybe a hundred CDs or DVDs a year, and put music on perhaps half a dozen of them so that I don’t wreck the original in my car’s CD player. The rest are used for graphics, photography (also my excclusive use for memory cards) and text purposes.

    What might happen if we started a class action lawsuit against the CPCC to prove our innocence and to claim back our 80% (or whatever) of the $150 million that has been wrongfully charged to us? All they’d have left is $30 million, which perhaps puts the greed- and fantasy-based illogic of their position on CDs, memory cards and hardware devices in context.

  5. BCDD and music lover says:

    CPCC weres the moeny going
    I think a levy on memory cards is wrong I just have them for my Digital camera. Next up will be laptops/portable then Hard disks.

    What i would like some one like Michael Geist do is.
    One simple act.

    Get the accouting books off the CPCC and look at the payables and tell us were the money went.

    I think its time we the public paying a levy on our work.
    To see were the CCPC is realy putting the money

    My 2 Watts

  6. Private Copying Levy
    I have had this discussion with Stephen Callary, who was with RES before joining the Copyright Board, as to how broadly defined was the “private copying” for which eligible recipients are to be compensated, and how the loss should be calculated. I tend to take the narrow view that private copying losses only cover the cases where the individual licensed for one copy chooses to make rather than purchasing a second copy in order to use
    both. I also reject the popular notion that the levy is to compensate for pirating or other illegal infringements of copyright, although that has crept into the calculation of the levies.

    Since people with more expertise seem to disagree, I may be wrong but I don’t see why.