The Blank Media Levy - Not In The Interests of Artists or Record Companies

A number of interest groups, including some groups representing copyright owners, have recently urged the Federal Government to introduce a blank media levy - in effect, an additional fee added to the price of various forms of blank recording media (such as CDRs) which would be paid to copyright owners as compensation for the copying of copyright material (such as music) for private and domestic purposes.   This proposal is strongly opposed by the record industry, both here in Australia and internationally.  

The fundamental propositions on which the blank media levy proposal appear to be based are:

  • That private copying is occurring in any event;
  • That there is little that can be done to control or prevent that copying given current technology; and
  • That, irrespective of the rights of copyright owners and creators, the only effective "solution" is to compulsorily license the activity in return for the payment of some form of levy or royalty.

As a matter of principle, the record industry does not accept that the rights of copyright owners and creators should be compromised on these grounds.   This is why the record industry believes that copyright policy makers internationally should continue to focus their efforts on finding ways to improve copyright laws to better deal with the challenges presented by new technologies.

In any event, the record industry sees many practical problems with the proposal, which would make it very difficult to devise a scheme that would operate equitably.   In our view, implementing this proposal would be contrary to the interests of all relevant stakeholders including record companies, recording artists and consumers.  

The industry's practical concerns in relation to such a scheme include the following:

Variety of uses

Unlike cassette tapes (which were, in a practical sense, the only storage media for music up until the mid-1990s), digital storage media are used to store many different types of copyright material (not just music, but also films, software, publications and the like).   In addition, they are used by consumers for many non-infringing purposes (such as personal photo libraries and general data storage or back up).  

Our understanding of the proposal submitted to government is that a consumer who purchased a digital storage medium for non-infringing uses would be entitled to obtain a refund on application to the body collecting the levy.   This appears to us to be a cumbersome approach to protecting the rights of non-infringing consumers.   In practice, given the time and cost involved, it is likely that many consumers who are legitimately entitled to the refund will be discouraged from applying for it.  

As to the wide variety of relevant copyright holders who would be entitled to a share of the levy, it is not clear how a meaningful allocation of a levy would be made between the various copyright interest groups.   Any scheme that is used (such as some form of survey evidence) would at best be a gross approximation, but could conceivably bear no relationship whatsoever to the nature of use of the various blank recording media by consumers.   Further, any attempt to survey end consumers may be unreasonably intrusive, and may raise privacy concerns.

 

Diverse media and formats

 

There are many forms of recordable media.   Apart from a variety of portable media (such as recordable CDs and DVDs, memory sticks and external storage devices), there is also a wide range of non-portable recordable media such as, most obviously, hard drives in personal computers.   In addition, there is a growing range of portable media players (such as the Apple iPod) that are used to store and play thousands of recordings.

 

In order to ensure that the levy did not have an anti-competitive effect (by creating either a competitive disadvantage or a competitive advantage for particular forms of recordable media), it would have to be applied to all possible recordable media, both fixed and portable.   The levy may also have to be applied at different rates, in recognition of the most common uses of the various forms of recordable media (ie. some media are more likely than others to be used for the reproduction and storage of copyright protected works).   That said, it would seem to the record industry to be impossible, at a practical level, to devise a levy scheme that could be applied across all current (and future) recordable media in a fair and equitable manner.  

Inadequate financial return

The amount of any levy received in respect of the private copying of sound recordings (including the recording artist's share) is likely to be relatively low.   Given the substantial investment typically required to make and market commercial sound recordings, it is unlikely that the amount of the levy would even approach a fair measure of compensation for the almost unfettered and prejudicial use of such recordings.

 

It is relevant in this context to note one of the key findings from the ARIA research study of 2003 [1] .   That survey found that 82% of those who had received a burnt CD reported that they either never or very rarely went on to buy a copy of the original recording.   One of the key conclusions to be drawn from that finding is that, in the minds of consumers, a "burnt" CD is an effective substitute for a legitimate copy of the recording (unlike the position with cassette tapes a decade or more ago).   As such, the extent of the substitution effect, whilst very unlikely to be one for one, is nonetheless likely to be substantial.   It would simply not be feasible to impose a levy that compensated copyright owners and recording artists for this substitution effect.

No credible basis for distribution

 

One of the record industry's key concerns in relation to a blank media levy relates to the difficulty of developing a credible basis for distributing the levy income to sound recording copyright owners and recording artists.   Even if it were possible to develop a justifiable basis for allocating a proportion of the levy to sound recording interests (as distinct from the interests of other copyright based industries, such as software companies, film producers and computer game developers), it is clear that no information could be gathered as to the actual recordings being copied and how many times each was copied.   As such, any distribution of income to those entitled would be, at best, an educated guess.   The industry considers this to be an extremely unsatisfactory outcome, particularly given advances in technology in the last 10-15 years.  

One of the benefits of supporting and encouraging the use by consumers of legitimate download services is that income received can be linked directly to the copies being made.   As such, in respect of each track downloaded, income can be specifically attributed to the relevant copyright owner and recording artist.   A blank media levy would, by definition, be incapable of providing any sort of meaningful distribution data and, in those circumstances, is likely to be highly prejudicial to both copyright owners and recording artists who would be otherwise entitled to receive income.

Contractual relationships

 

The introduction of a blank media levy scheme would be at odds with the contractual relationships between consumers and those companies selling licensed downloads.  

Typically, consumers who purchase licensed downloads from such services are authorised to make a limited number of copies of the recording on to other devices and other media such as blank recordable CDs.   In short, the purchase price paid by the consumer includes a licence to make a certain number of copies.   On that basis, there could be no justification for the consumer having to pay a levy on blank recordable media to exercise a right already granted to them under contract from the online retailer.  

Infringing source copies

Proposals for a blank media levy are typically predicated on the explicit or implicit proposition that the source copy (from which the private copy is made) is a legitimate or authorised copy.   Of course, given current technology and, in particular, the enormous number of unauthorised copies of recordings which are currently sourced from the internet, that proposition is simply untrue in many cases.

Given the substantial concerns expressed by the record industry in relation to the adverse impact of file sharing services, the industry would be strongly opposed to any measure which sought to legitimise the copying of infringing copies of recordings.  

Of course, any legislation could be expressed in terms that only allowed private copies to be made from authorised copies of recordings.   However, any provision that seeks to distinguish between infringing and non-infringing sources would be almost impossible to enforce, and would be likely to create uncertainty amongst consumers and rightsholders alike.

Conclusion

It is important to note that the industry acknowledges and confirms the extent and effect of private copying (being the underlying premise of the proposal submitted by those advocating the introduction of a blank media levy scheme).   As such, where we differ from them is not in the identification of the problem.   Rather, our difference with them is in relation to the best method of addressing that problem.   In short, we regard the proposal for the introduction of a blank media levy as being a flawed, cumbersome and very unsatisfactory "solution" which, in all likelihood, could exacerbate the very problem that it is seeking to address.

The record industry is committed to addressing this problem through a combination of the following measures:

  • the use of technology to prevent or inhibit the making of unauthorised copies and/or to control the making of licensed copies.
  • the continued support of legitimate online businesses which enable consumers to make copies of recordings under licence (ensuring that revenues are received by those whose recordings are actually copied).
  • education programs to highlight the fact that unauthorised copying is an infringement of copyright and that such copying is not a "victimless" activity (given that it denies revenue to the creators of music).
 
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