Canadian Coalition for Fair Digital Access

The Canadian Coalition for Fair Digital Access (CCFDA) was established to advocate the concerns of Canadian businesses, consumers and individuals affected by the copyright levy regime Canada. CCFDA members include major Canadian retailers, consumer product manufacturers and technology companies.

The companies represented in the coalition believe that the private copy levy regime is fundamentally flawed, too broad in scope and should be repealed. Canada needs an approach that is fair to all parties, ensures transparency and accountability, protects copyright holders, does not slow the introduction of new technologies, and encourages flexibility to be responsive to consumer practices and to new technologies.

The Facts

1. Canada's private copying regime hurts consumers, businesses and artists.
   
   Consumers
   • Levies are hidden charges that unfairly increase costs.
     Levies sharply increase costs. Moreover, consumers are forced to pay these extra costs even when the products are not used to record music. Levies applied to other widely-used technologies such as personal computers, consumer electronics and storage media would increase costs further.
     
     Most consumers are unaware that levies are embedded in the price of many products capable of recording music. These levies are fixed and therefore account for a disproportionate amount of the purchase price. For example, the average cost of 100 blank CDs is around $45.00. Of this total purchase price, a consumer pays a hidden charge of $21 in levies. That means 46% of the average purchase price goes to the CPCC. When consumers purchase an MP3 player with greater than 10 gigabytes, they'll pay $25 which is embedded in the total purchase price.
     
     
   • Consumers are forced to pay twice.
     Legitimate purchasers of music online may actually be paying the CPCC twice for essentially the same right to copy - first, at the point of sale with the on-line music service - and then, a second time, when they pay levies on the purchase of blank media. For example, users of legitimate Canadian on-line music stores such as Puretracks, Archambaultzix and Sympatico are forced to pay for their music twice!
     
     
   Artists
   • Canadian artists have voiced their opposition.
     Independent Canadian artists have voiced their opposition to the private copying regime. For example, independent artists who purchase blank recoding media to record their music for promotional purposes are forced to pay the levy. Not only is the levy offering no assistance to these artists, it is hindering their ability to promote themselves.
     
     
   • Levy systems are inefficient and not transparent.
     It is difficult to determine what portion of levies collected is ultimately paid to artists and what portion is used to subsidize administrative overhead associated with collecting activities, or for legal and other professional fees. The levy is collected by a private collective representing artists and the record labels – the Canadian Private Copying Collective. There is no public oversight mechanism for consumers and businesses who pay the levy to examine whether the levies collected are actually making it to the artists intended to benefit from the regime. The collective is only accountable to its members, not those who pay the levy.
     
     
   • The existing levy regime creates no incentive for change.
     Canada's existing private copying regime actually acts as a disincentive for the music industry to adopt new technologies and business models for digital distribution even as they are becoming widely available throughout the world.
     
     
   • The current regime does not provide direct copyright protection.
     One of the objectives of Canada's private copying regime is to provide copyright holders with compensation for the legal copying of their musical works. The levy regime, however, has no means of knowing that a copyright holder whose music is copied is actually the person receiving compensation.
     
     By contrast, digital technology in the form of technical protection measures (TPMs) and Digital Rights Management systems (DRMs) coupled with on-line music services, makes it possible for copyright holders to receive direct, market-priced, compensation. Canada's copyright laws should encourage the take-up of these technologies. The levy regime is a disincentive to this uptake.
     
     
   Business
   • Levies on new technologies increase costs to business.
     Most businesses don't use storage media for copying music – but they are still forced to pay the levy. This adds costs and reduces competitiveness. Many business owners have voiced strong opposition at being forced to subsidize the music industry.
     
     
   • Levies may prevent new products from being introduced in Canada.
     The imposition of levies on a broader range of products may also deter suppliers from introducing new technologies into Canada. In a global economy where businesses need every advantage they can get, Canadian companies could be denied access to new technologies that they need to innovate and remain competitive.
     
     
   • Levies encourage grey markets.
     Canadian businesses stand to lose sales if consumers "vote with their wallets" by purchasing products in the U.S., where comparable levies do not exist. This not only harms Canadian businesses, but also leads to reduced government tax revenues.
     
     
2. Canada's private copying regime is fundamentally flawed.
   
   
   • Levy regime is indiscriminate and penalizes consumers who don't copy music.
     The current system is indiscriminate. It forces purchasers of audio recording and storage media to pay a "copyright tax" even if they don't use the media to copy music. So those who do not use technology for recording music subsidize those who do.
     
     
   • Levy regime legitimizes and encourages unauthorized copying of music.
     Applying a blanket tax on blank recording media sends the message to consumers that they can download indiscriminately. Recent court decisions have suggested that the private copying levy may actually provide a legal basis for this perception. It is in no one's interests to have a regime in place that encourages the unauthorized copying of music.
     
     
   • The scope of the levy regime has already been widened well beyond what was originally envisioned.
     While in 1997 the regime originally only applied to cassette tapes, the CPCC has successfully lobbied to have it expanded to a variety of digital media including blank CDs and MiniDisks and most recently, digital audio recorders (MP3 players). Other products including PCs, PDAs, cameras, servers and other technology -- that are capable of recording music, although this is not their primary function -- run the risk of having levies applied to them in the future.
     
     
   • The Copyright Board itself supports the need to send the levy regime back to Parliament for review - on a priority basis.
     The time for review is long overdue. While we regret the Board's December 2003 decision to expand the scope of the levy to include new storage products, we fully agree with the Board's repeated calls for legislators to re-examine the private copying levy regime.
     
     
3. Levy rates could skyrocket if the private copying levy is not repealed as part of the government's short-term copyright reform package.
   
   
   • If the levy regime is not repealed, levy rates may double.
     The government of Canada's short term priority is to ratify the World Intellectual Property Treaties (WIPO). These treaties are largely intended to grant copyright holders more control, in a digital or on-line environment, over their own content. If these treaties are ratified without repealing the levy regime, however, the levy rates on CD's, cassettes, MiniDisks and MP3 players in Canada could double to meet the treaty's requirement for national treatment. This provision requires that Canada distribute collected levies to foreign musicians.
     
     
   • Government has acknowledged the problem.
     The government of Canada is aware that the private copying regime will be a problem in the context of WIPO ratification. In a report issued by Canadian Heritage last year, they admit that the private copying regime may not be compliant with the WIPO Internet treaties.
     
     
   • Canadians will be forced to foot an even bigger bill.
     This means that artists, consumers and business, who are already being unfairly penalized by an outdated regime, will have to shoulder skyrocketing levy rates to compensate for national treatment requirements.
     
     
   • Canadian artists will not benefit.
     Not only would this create an additional burden on Canadian consumers and businesses, it would also provide no new assistance to Canadian songwriters or composers since a large portion of levy revenues would flow outside of Canada, not to Canadian artists.
     
     
4. Advances in technology have rendered the levy regime obsolete.
   
   
   • Canada's music industry must change.
     The recording industry must change to keep up with rapid technology advances in its market. On-line music services provide the opportunity to ensure more direct and fair compensation to copyright holders. The levy regime is discouraging the introduction of services in Canada.
     
     
   • Canada's legislative regime should not penalize those who choose legitimate on-line services over "free music."
     According to a 2003 Statistics Canada survey, there was a 36-per-cent increase in the number of households that purchased music online. Canada's private copying levy should not result in consumers paying twice for the music they copy, effectively subsidizing the behavior of those who participate in unauthorized downloading.
     
     
   • On-line music services continue to grow.
     With over 200 on-line music services now in operation, consumers are able to access the music they want, while artists' maintain control over the distribution of their content and are fairly compensated at the point of sale. For example, Apple's extremely popular iTunes on-line music store has sold over 150,000,000 songs since its inception and boasts an average of 4,000,000 songs downloaded per month.
     
     
   • Our companies are leading the way in protecting copyright.
     A number of our member companies are leading the way in content protection and rights-holder compensation strategies that resonate with consumers. Notably, Apple has launched iTunes, which continues to be the most popular on-line music service in the world and Wal-Mart has also launched its own digital music store. Other member companies including Hewlett Packard and Intel are leading the way in advancing digital entertainment solutions through digital rights management (DRM) systems.
     
     
   The Bottom Line
   
   • Levy regime must be included in 1^st tier copyright reform legislation.
     As part of a mandatory review of Canada's Copyright Act, the government has identified the private copying regime as a medium term priority. This is unacceptable for Canadian businesses, consumers and artists who have been suffering under this flawed regime for far too long. The government must place immediate priority on repealing the private copying regime.