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should be repealed.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 CCFDA believes Canada's system of private
copying levies must be repealed. This regime is punitive to consumers,
businesses and artists – a situation that could become dramatically
worse if it is not dealt with as an immediate priority.
Background to Canada's Private Copying Regime
In 1997, the Government of Canada passed legislation allowing for a
hidden charge, or "levy," initially applied to audio cassette tapes in
an attempt to help compensate artists for the copying of their musical
works. The levy is collected by the Canadian Private Copying Collective
(CPCC), a recording industry association representing Canadian artists.
Since that time, vigorous efforts by the CPCC before the Copyright
Board have expanded a regime intended for tapes to a host of digital
products. As a result, the levy now applies to blank CD's, Mini Disks
and personal digital audio recorders (MP3 players). The CPCC has also
requested levies on memory cards and recordable DVD media, fortunately
the Board did not agree and, for the time being, no levies apply to
The levy regime is indiscriminate and unfair. Canadian consumers are
forced to pay levies whether or not they use blank media to copy music.
In addition to costing businesses, consumers and independent artists
millions of dollars every year, the levy has become an anachronism –
out of step with fast-moving technological developments.
Currently, all Canadians pay a hidden charge of $0.29 on blank audio
cassettes, $0.21 on blank CDs, $0.77 on blank audio CDs and Mini Disks
and up to $25.00 on MP3 players. Worse yet, these rates could soon
double if the levy regime is not eliminated.
The CCFDA believes that the private copying levy regime must be
repealed. More effective ways to compensate copyright holders for the
copying of their works are widely available, notably in the form of
Digital Rights Management (DRM) technologies coupled with legitimate
on-line music services. These technologies also protect content to
ensure that consumers have clear rights associated with their
The CCFDA is not alone in its opposition to this punitive regime. On
top of overwhelming support from consumers, business owners and
independent artists, the Copyright Board itself has acknowledged the
levy regime is seriously flawed.
Although the Copyright Board decided to levy digital audio recording
devices (MP3 players), they then froze existing levy rates and strongly
recommended that Parliament closely examine whether the regime should
stay in place. The government, however, has been slow to respond and
Canadians continue to suffer under this outdated and obsolete regime.
- Canada's private copying regime hurts consumers, businesses and artists.
- Levies are hidden charges that unfairly increase costs.
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!
- 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
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.
- 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.
- 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
- 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.
- Levy rates could skyrocket if the private copying levy is not
repealed as part of the government's short-term copyright
- 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
- 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.
- Advances in technology have rendered the levy regime
The Bottom Line
- 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)
- Levy regime must be included in 1st 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