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Case
Outline
Formal Objection
Radio Talk
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Outline of Objection
to the proposed Blank audio recording media levy for 2002-2004.
Due to the nature of the process of formally objecting, the document
I've created is a bit daunting to the average reader. Since I've been
asked several times to boil it down to something resembling a sound bite,
I've taken the time here to summarize the points I make and the reason for
the objection in the first place.
 | Government of Canada changes the Copyright Act to make copying of
music for private use "not... and infringement of the copyright
in the musical work" and adds a provision for a levy to be placed
on blank audio recording media to remunerate the artists and musicians
"in respect of the reproduction for private use..." to be
administered by a private collective which turns out to be CPCC in
this case. |
| 1999 - current levy proposal is submitted and approved by the
Copyright Board (who act, in their own words, as a "referee"
in this matter)
 | CPCC bases their levy calculations on their estimates of the
number of each medium used to copy music, and construes that every
copy of such music must be counted and accounted for by the levy
with an allowance for copying authorized through some other means
than retail sale of music copies (tape and CD, vinyl having been
largely replaced by this time). The total levy is calculated at
$0.10 per song copied for each and every copy, regardless of
whether it is of a CD purchased, or of a song downloaded from the
Internet or borrowed from a friend. This levy is then spread
across the total number of levied media sold, based on figures
CPCC is mandated to get from importers and manufacturers in
Canada. |
| The 2000-2002 levy amounts are: $0.21 per blank CD-R,
CD-RW, |
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| March 2002 - CPCC must put in a new proposal to cover the period
from 2003-2004. This is the current levy proposal in question |
| May 2, 2002 - my objection sent via e-mail to the Copyright board |
| May 8, 2002 - deadline for submission of formal objection to the
levy proposal |
| May 28, 2002 - preliminary hearing (in Ottawa) for discussion of
timeline and details for final hearing to be held some time after
Summer, 2002 but before the end of 2002. |
| May 31, 2002 - Filing of "Interrogatories" (questions) by
CPCC and CSMA (the two major players in this round) to all parties
(formal objectors, including me) |
| June 7, 2002 - Filing of Interrogatories by all the rest of the
formal objectors - here is mine to CPCC
(the only one I filed). Here is CPCC's
and CSMA's (the only ones I
received) |
| June 14, 2002 - Filing of objections to interrogatories (CPCC
objected to many of mine) |
| June 21, 2002 - Filing of replies to objections to interrogatories. Here's
mine to CPCC |
| Ruling of the Copyright Board
on objections to interrogatories (CPCC lost on many of their
objections to my questions) |
| July 5, 2002 - Filing of objectors' preliminary statements of position (I've told
them that my original objection, which was more detailed than it
needed to be, is to also be considered my preliminary statement of position) |
| July 12, 2002 - Filing of responses to interrogatories (date was pushed back a week due to request from CPCC who are under extreme load
with all the questions they have been asked); I've filed mine: CPCC
and CSMA. (pushed back
from July 5) |
| July 19, 2002 - Filing of motions re: unsatisfactory/incomplete
responses to interrogatories. (pushed back from July 12) |
| July 24, 2002 - Filing of replies to motions (pushed back from July
17) |
| Ruling of the Copyright board on motions |
| August 2, 2002 - Filing of complete/satisfactory responses to
interrogatories. (pushed back from July 26) |
A Copyright Board ruling on a request by CPCC for an extension of their
case preparation time has pushed the final segments of this process back.
The ruling came out on August 29, 2002.
| October 4, 2002 (was August 30, 2002) - Filing of CPCC's case |
| November 22, 2002 (was October 4, 2002) - Filing of objectors' cases |
| December 13, 2002 - Filing of CPCC's Supplementary Case |
| January 21, 2003 (was October 15, 2002) - final hearing in Ottawa prior to Copyright
board passing on the levy's amounts. |
My Objection Grounds
| The change in the Copyright act regarding "private
copying" makes the fact of copying (and therefore the number of
copies made) irrelevant in calculating the "lost
income". What may have been a relatively reasonable first
approximation for the first application's amount of the levy, (a
question I don't address) is no longer even close to the free market
value of the lost sales. |
| Copying is now part of the act of "playing" music. This is
the main reason for the removal of private copying from relevance to
the copyright holder by the new Act. Again, this means that the number
of copies is not relevant in calculating the lost income. |
| Use of re-recordable media (CD-RW, DVD-RW, Flash RAM, RAM, and
micro-hard disk drives by their very nature (re-recordable) makes them
part of the playing process, nothing to do with "copying". |
| Application of the proposed levy amounts will make purchase over the
Internet from outside of Canada of the levied items much more
attractive. Since this activity is now very easy and natural to a
large and growing segment of the Canadian population, this will hurt
Canadian resellers and not help the musicians (since there is no levy
collectable on items imported for personal use.) |
| Only by using a "free market" value for the "lost
income" will the levied amounts be reasonable, and the effect
minimal on all sectors of the market of these levied items.
| There is no justification for the musicians to receive orders of
magnitude more money than they used to, just because the Canadian
public makes orders of magnitude more copies than they used to while
playing music. |
| Many of the copies made are destroyed after only one or two
plays because the listener only copied them to exercise their
right to "private study" to determine whether the music
was worth purchasing. |
| Many of the copies are destroyed either through carelessness,
because the value of them is so much less than that of a $20+
album, or because the compilation they form a part of is not
"perfect", and the ability to copy allows the consumer
to try to achieve perfection. Copies on re-recordable media are
recorded over, sometimes many times in the search for the perfect
mix. |
| The music industry, by its failure to change its sales marketing
and delivery methods has forced Canadians to copy music in order
to play it using today's technologies such as MP3 players. |
| People today create their own "compilations" because:
 | They can |
| The music industry has used "tied selling"
(illegal in other sectors) to force the public to purchase
music they don't want, along with the music they do want
(albums typically contain 1 or 2 hit songs, and 10-15 songs
few people want, yet the industry has effectively stopped
selling the old "singles".) |
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| People must copy (or rip) from purchased CDs to MP3 in order to
play their music where they wish, in the order they wish, in the
quantity they are technically able to, without carrying around a
CD changer stocked with hundreds of CDs. |
| People are not purchasing as many CDs as they used to because
the quality of the music is less than they are willing to pay
retail prices for. In the words of Luke Lewis, record industry
executive (article, ppA19C The Province, Sunday April 7, 2002)
"... I think what's wrong is that the music sucks" |
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| Even if the levy total calculation based on number of copies is
upheld, there is no legal reason, and every reason not, to levy the
same amount on retail quantities of an item verses industrial
quantities of the same item not packaged for retail use (i.e. levy
$1.00 each on retail package of CD-R but levy $0.01 each on cartons of
1000 CD-R not packaged for retail use - no jewel case and no
printing). |
| There is no justification for having no ceiling on the amount of
levy on large storage media such as hard disks. There is a finite
amount of music that any one person will record or listen to,
regardless of whether the disk is 10 Gigabytes or 1000 Gigabytes
(technically feasible within the term of the levy proposal). It may be
that a MP3 player manufacturer in 2004 will not be able to buy
micro-hard disk drives smaller than 100 Gigabytes - on which
the proposed levy would be $2100.00 which is ridiculous (and would not
be paid by anyone). |
All of these objections point to a complete failure of the Copyright
board and CPCC to deal with the fact of changes in the market for music
and changes in the use patterns of the levied media. By failing to
recognize that CPCC's imputed value of $0.10 per song per copy is
outrageously overblown, the Board is in danger of impacting the Canadian
technology sector out of all proportion to the possible value the music
industry might gain.
At first look, the change from (for example) $0.21 to $0.53 per CD-R
might not look like too much, and in small retail quantities, the general
public may in fact simply hold their noses and pay. At the point where the
amount per CD adds up to a few dollars (say bundles of more than 10) it
makes economic sense to fire up the Internet connected computer and order
from a US based retailer for delivery by courier the next day (or maybe 2
days).
When you talk about the cost difference for a MP3 player with a 10
Gigabyte hard disk in it, the amount of the levy is enough ($210.00) that
nobody in their right mind will purchase such a device from a Canadian
reseller. This is especially so since not only is the levy likely to be
increased by some retail markup (remember, it is applied at import or
manufacture) but it is subject to Provincial and Federal taxes as well.
The amount of difference is more likely to be $400.00 or more.
The problem for Canadian industries which use the levied goods for
their own use is even worse. They, being resellers themselves, cannot
bypass the levy by importing. This would put them in the chain to be
levied too. The amount of the levy must be included in the cost of their
final products, and this will put them out of the running when selling in
today's international market. In effect, the levy will force
purchasers of re-manufactured goods containing the levied items to go to
sources outside of Canada.
In the case of add-on items such as Flash RAM, RAM cards, and
micro-hard disks, all of which are used not only in MP3 players but in
Personal Digital Assistants, portable computers, and digital cameras, the
effect will be to drive the sales of these items to sources outside of
Canada as well. This will get worse as the minimum size of these items
increases, since the levy is directly proportional to the size of the
device. At $8.00 per Gigabyte, devices anywhere near or over 1 Gigabyte
are prime candidates for purchase from offshore since $8.00 is about what
the shipping charge is for such an item.
| No matter what the levy is set at, the Canadian public will not pay
much, if anything, more in total than the musicians would get if they
completely controlled the distribution and sale of every single copy
of their music on its way to the public's hands - this is the fact of
the free market. |
| If the levy skews the cost of the levied goods too much (out of the
consumer's comfort zone), the consumer will do something to avoid it -
purchase from the US (or other countries,) use some other technology
not yet levied, or purchase from illegal sources. |
| If the levy skews the cost of the levied goods too much for
industries and technologies that use it for re-manufacture (such as
publishing companies putting sales data, presentations, software, etc.
on CD-R or DVD-R as is already the case) then those businesses will
have to either move out of Canada or face extinction because their
customers will not pay the additional amounts the levy adds, they will
take their custom elsewhere - i.e. to the US. |
All of the above will mean that CPCC and thus the musicians will not
get the money the levy proposes to collect. All of them will also have
tremendous impacts on Canadian society and business, and therefore the
economy.
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