Copyright Board quadruples levies

Much to the ire of software manufacturers, independent musicians and just about any other entity or individual that purchases or uses blank CD-ROMs, the Canadian Copyright Board increased the private copying levy from 5.2 cents to 21 cents per CD-R and CD-RW.

The Dec. 15 decision came into effect on Jan. 1, and is projected to raise $59 million for Canada’s music industry over the next two years. The federal government’s Copyright Office mandated the increase as a means of protecting those Canadian artists that are signed to major record deals. The Canadian music industry has been lobbying the feds for months for some form of protection from being robbed of potential income due to the popularity of peer-to-peer audio file sharing software such as Napster, and the ability for individuals to copy recorded music from a CD onto a CD-R or CD-RW.

David Paterson, executive director of the CATA Alliance in Ottawa – Canada’s entrepreneurial technology group – said they’ve advised their 600 member companies to avoid paying the levy by importing CDs from other countries, rather than purchasing them from Canadian suppliers.

“Given the fact that if you buy the discs in bulk you’re paying about 60 cents each, this is one hell of a high (increase),” Paterson told ComputerWorld Canada. “There’s nothing we can do about it since it’s written into the Copyright Act, which means the Copyright Board is legally required to impose a levy.”

Paterson explained the levy is meant to deter music pirates from illegally duplicating recorded works. Although the majority of CATA’s membership is software companies, they are still subject to the tariff.

“We conducted a survey of our members in 1999 to determine how many CD-Rs are being used solely for internal use,” he said. “We found somewhere in the neighbourhood of two million CD-Rs are used each year by our members. This levy affects any business and anyone that wants to use CD-Rs.”

Paterson said CATA had attended most of the Copyright Board’s hearings in 1999 debating the proposed increase. CATA also launched an advocacy campaign objecting to the increased fee but their concerns evidently fell on deaf ears.

“The CPCC (Canadian Private Copying Collective) hired a major law firm to represent them during the hearings,” Paterson recalled. “However we dropped out of the process because it was becoming ridiculously complex…at one point the CPCC wanted our members to fill out a rather long questionnaire that required our members to disclose financial statements, business and marketing strategies. This is not something, as private entities, our members are required by law to reveal.”

Claude Majeau, the secretary-general for the Copyright Board in Ottawa, defended the Board’s decision as being proactive without disrupting the flow of business for Canadian suppliers.

“The legislation is made in a very specific way and the Board is not entitled to grant exemptions,” he said. “The decision to extend the rate was actually reduced (from $3 to 21 cents) to take into account that not all users of this medium are going to be copying music.”

Increased tariffs were also imposed on blank audio cassettes (from 23.3 cents to 29 cents) and on CD-R Audio, CD-RW Audio and MiniDiscs (from 60.8 cents to 77 cents). Majeau added the only allowable exemptions are granted to media designed to aid those with perceptual disabilities.

When it rendered its decision, the Board stated, “The increases in the levies reflect, among other things, the significant changes in private copying behaviour since last year (1999), especially the increased use of digital media, such as CD-Rs for copying recorded music”.

Competitive rates

Majeau added the Board acknowledged that the new levy rates are higher than the rates established the previous year, especially in the case of CD-R/RWs. But he said the new fees are competitive with rates in other countries that have a similar regime.

“The Board feels that the new rates fairly and equitably reflect the remuneration that should flow to eligible rights-holders from private copying based on the evidence provided during the recently-completed proceeding,” he explained. “In addition, given the rapid decline in prices for digital blank media over the last year or more, especially in the case of CD-R/RWs, the Board believes that the new levies will not be disruptive to the market for blank recording media. For this same reason, the Board also does not believe that the new rates will stimulate grey marketing of these media.”

Brian Cheter, a spokesperson with the CPCC in Toronto, described the new tariff as a valuable measure which protects artists.

“It’s a good start. We thought we made our case to the Board,” he said. “After two years we’ll all get together to argue again.”

The CPCC is a non-profit umbrella collecting body established in 1998 to receive revenues from the levy on blank audio recording media. It is comprised of four artist organizations: the Canadian Musical Rights Reproduction Agency; the Society of Composers, Authors and Music Publishers of Canada; the Neighbouring Rights Agency of Canada; and the Society for Reproduction Rights of Authors, Composers and Publishers in Canada.

“We’ll enforce the levy as much as we can (at the wholesale distributor level),” Cheter explained. “Two-thirds of the moneys will go to writers, composers, and publishers, while one-third will go to the record companies.”

But musician/sound engineer Adrian Lawryshyn took another view. The Terra Cotta, Ont.-based artist said the levy is designed to protect wealth-laden performers and record companies and offers little compensation for independent artists, the likes of which he frequently records in his home-built recording facility.

“I think they have good intentions to put a levy on CD-Rs, but from my perspective it’s a paradox…we need to use this medium,” Lawryshyn remarked. “From a studio perspective, I don’t think it’ll have a monetary effect on me as the levy will only be absorbed by the artist.”

IDC Canada research director Kevin Restivo in Toronto criticized the levy as an attempt by the federal government to make a tax grab by quantifying the costs associated with CD-Rs.

“Technology is ahead of public institutions,” he said. “CD-Rs will be outdated eventually, and with the rise of e-software, it’ll become increasingly difficult for the government to impose such a tax.”

Other independent studio owners have endorsed the increased fee as proactive. “If I notice a significant rise in the cost of CDs it’d be transferred in the mark-up cost to my clients,” said Giles Collins, an owner/sound engineer at the Planet Underground Recording Studio in Holland Landing, Ont. “[The levy is] a glimmer of hope for independent artists…for anyone who sells their own recordings, it will help recoup the loss of potential revenue due to piracy.”

Majeau made clear that the federal government is responsible for the Copyright Act and that any perceived changes would have to come from Parliament first.