[p2p-research] Why p2p internet music funding proposals make no sense

Paul D. Fernhout pdfernhout at kurtz-fernhout.com
Tue Nov 3 14:03:08 CET 2009

Michel Bauwens wrote:
> On Tue, Nov 3, 2009 at 12:05 PM, Paul D. Fernhout <
> pdfernhout at kurtz-fernhout.com> wrote:
>> Something I wrote today to someone else, but thought I'd post here.
>> It is common in some countries to have a tax on media or internet to fund
>> musicians. It's been proposed in other countries, even for the USA.
> Can you name a single country where this is actually the case?

"A blank media levy was introduced in Canada in 1997, by the addition of 
Part VII, "Private Copying", to the Canadian Copyright Act . The power to 
set rates and distribute the returns is vested in the Copyright Board of 
Canada . The Copyright Board has handed the task of distributing the funds 
to the Canadian Private Copying Collective , which is a private 
organisation. The Copyright Board has retained the task of setting the rate 
of the levy. "

More from:

Australia does not have a private copying levy. Although legislation to 
create one was passed in 1989, it was declared unconstitutional in 
Australian Tape Manufacturers Association Ltd v Commonwealth.
[edit] Belgium

In Belgium a fee is charged on both blank media and recording equipment 
which is passed on to "Auvibel", which is in charge of distributing the funds.

     * Audio
           o Audio recording equipment, such as a tape recorder: 3% of the 
sales price
           o Integrated audio equipment, such as a Radio-tape recorder or 
HIFI: 1.5% of the sales price
           o Analogue media, such as an Audio tape: € 0.10/hour
           o Digital media, such as an Audio CD or Minidisc: € 0.23/hour
     * Video
           o Video recording equipment, such as a VHS or DVD-Recorder: 3% of 
the sales price
           o Integrated video equipment, such as a DVD player with video 
recorder: 1.5% of the sales price
           o Analogue media, such as a video tape: € 0.10/hour
           o Digital media, such as digital tape (Digital8, DV, etc): € 
     * Multimedia
           o blank CD-R, CD-RW: € 0.12/disc
           o blank DVD-R, DVD+R, etc: € 0.59/disc

[edit] Canada

A blank media levy was introduced in Canada in 1997, by the addition of Part 
VIII, "Private Copying", to the Canadian Copyright Act. The power to set 
rates and to set the distribution allocation is vested in the Copyright 
Board of Canada. The Copyright Board has handed the task of collecting and 
distributing the funds to the Canadian Private Copying Collective, which is 
a non-profit private organization.

In Canada:

     * The levy applies to "blank audio recording media", such as CD-Rs.
     * The levy is paid by importers and manufacturers of such media sold 
within Canada (and typically passed on to the retailer, and passed on to the 
     * The levy is collected regardless of the purchaser's end use of the media.
     * The private copying levy is distributed as per the Copyright Board's 
allocation as: 66% to eligible authors and publishers,18.9% to eligible 
performers and 15.1% to eligible record companies.
     * The Canadian Private Copying Collective has developed a methodology 
by which the proceeds are distributed to rights holders based on commercial 
radio airplay and commercial sales samples, ignoring radio/college airplay 
and independent record sales not logged by Soundscan. This methodology has 
been criticized as favouring major-label artists at the expense of the 
long-tail. As of September 7, 2007 over one hundred million dollars has been 
     * In conjunction with the levy, the Copyright Act allows individuals to 
make copies of sound recordings for their own private, non-commercial use. 
They may not distribute the copy.
     * On December 17, 2004, a Canadian judge ruled that the blank media tax 
no longer applied to MP3 players such as Apple Inc.'s iPod. Before this, the 
rates were $2 for players with less than 1 GB of capacity, $15 for players 
up to 15 GB, and $25 for players 15 GB and over.
     * On 2007-2-12, CPCC asked the Copyright Board of Canada to reintroduce 
the levy of $5 to $75 into the sale price of MP3 players in Canada.[1] In 
addition, CPCC also proposed levies of $2 to $10 for memory cards (since 
withdrawn), 8 cent increases to CD, CD-R Audio, CD-RW Audio and MiniDiscs.[2]
     * On 2007-9, Canadian Recording Industry Association filed lawsuit to 
Federal Court of Appeal to repeal private copying levy, claiming it 
legalizes copying for the private use of the person making the copy, 
regardless of whether the source is non-infringing or not.[3] On 2007-10-26, 
the court granted CRIA's request to intervene in the private copying/iPod 
levy judicial review.[4]
     * On 2008-01-11, The Federal Court of Appeal rejected the Copyright 
Board of Canada's proposed new levy on MP3 players, stating that the board 
erred in law, ruling that they do not have the regulatory authority to 
impose such levies. [5]

Canada's current levies are as follows: $0.24 per unit for Audio Cassette 
tape (40min or longer); $0.21 per unit for CD-R Audio, CD-RW-Audio & 
MiniDisc; $0.21 per unit for CD-R, CD-RW (non audio). In 2009 the levy on 
CDs and MiniDiscs will rise to $0.29.[3]
[edit] Finland

It has been said that Finland's blank media fee is one of the highest. As of 
2008, the fees are (in Euros):

     * €0.005/min for analog audio tapes (e.g. €0.30 for a 60 minute cassette)
     * €0.0076/min for analog video tapes (e.g. €1.37 for an E180 tape)
     * €0.20 per disk for CD and MiniDisc (capacity: up to 1 GB)
     * €0.60 per disk for DVD, DVD-RAM, DVD-R DL and DVD+R DL (capacity: 
from 1 GB to 10 GB)
     * €1.20 per disk for Blu-ray Disc and HD DVD (capacity: over 10 GB to 
25 GB)
     * €1.80 per disk for Blu-ray Disc and HD DVD (capacity: over 25 GB)
     * €4 to €21 depending on capacity of digital audio players or personal 
video recorders.
           o €4, memory up to 512 MB
           o €7, over 512 MB to 1 GB
           o €10, over 1 GB to 20 GB
           o €12, over 20 GB to 50 GB
           o €15, over 50 GB to 150 GB
           o €18, over 150 GB to 250 GB
           o €21, over 250 GB

There is no levy fee on mobile phones, computers, memory cards, USB memory 
and 8 cm (3 in) CD/DVD disks.
[edit] Germany

The world's first private copying system was created in Germany in the 
1960s. It was a result of earlier successful litigation by GEMA against an 
audio equipment manufacturer in GEMA v. Grundig.
[edit] Luxembourg

Luxembourg is the only EU member state on the continent without a private 
copying levy,[4] making it a popular “copying levy haven” for blank media 
buyers from countries such as France and Germany.
[edit] Netherlands

In the Netherlands a fee is charged on blank media which is passed on to 
"Stichting Thuiskopie" (Foundation Homecopy), which is in charge of 
distributing the funds. Fees for February 17, 2007 until January 1, 2010 are 
as follows;

     * Data CD-R/RW: € 0.14 per disc
     * Audio CD-R/RW: € 0.42 per hour (€ 0.52 per 74 minutes)
     * Blank DVD-R/RW: € 0.60 per 4.7 gigabyte
     * Blank DVD+R/RW: € 0.40 per 4.7 gigabyte
     * Blank DVD-RAM: exempt
     * Video analog (video tapes): € 0.33 per hour
     * Audio analog (cassette tapes) € 0.23 per hour
     * MiniDisc: € 0.32 per hour
     * HI-MD: € 1.10 per carrier

[edit] Sweden

In Sweden there is a fee called "privatkopieringsersättning" (private copy 
retribution) earlier called "kassettersättning" (cassette tape retribution) 
on compact cassettes, blank CDs, blank minidiscs and other storage media. 
The fee is 2.5 öre (0.025 SEK) per minute of storage for analog media or 0.4 
öre per MB for re-recordable media or 0.25 öre per MB for write once media. 
The money collected (224436151 SEK as of 2005) is handled by Copyswede.
[edit] United States
[edit] Audio home recording in general

17 U.S.C. § 1008, as legislated by the Audio Home Recording Act of 1992, 
says that non-commercial copying by consumers of digital and analog musical 
recordings is not copyright infringement. Non-commercial includes such 
things as resale not in the course of business, perhaps of normal use 
working copies which are no longer wanted. It's unlikely to include resale 
of copies in bulk and Napster tried to use the Section 1008 defense but was 
rejected because it was a business.

 From House Report No. 102-873(I), September 17, 1992: "In the case of home 
taping, the [Section 1008] exemption protects all noncommercial copying by 
consumers of digital and analog musical recordings" .

 From House Report No. 102-780(I), August 4, 1992: "In short, the reported 
legislation [Section 1008] would clearly establish that consumers cannot be 
sued for making analog or digital audio copies for private noncommercial use".

The United States music industry[citation needed] administers the Audio Home 
Recording Act and foreign hometaping royalties for artists on US sound 
recordings as well as US record labels. These royalties are administered by 
The Alliance of Artists and Recording Companies for featured artists and 
copyright owners, ASCAP/BMI/SESAC for writers, and Harry Fox Agency for 
publishers. AFM and AFTRA also contribute to retrieving foreign funds.
[edit] Blank music CDs and recorders

17 U.S.C. § 1008 bars copyright infringement action and 17 U.S.C. 
[http://www.law.cornell.edu/uscode/17/1003.html § 1003] provides for a 
royalty of 3% of the initial transfer price. The royalty rate in Section 
1004 was established by the Fairness in Music Licensing Act of 1998. This 
only applies to CDs which are labeled and sold for music use; they do not 
apply to blank computer CDs, even though they can be (and often are) used to 
record or "burn" music from the computer to CD. A similar royalty applies to 
stand-alone CD recorders, but not to CD burners used with computers.

Thanks to a precedent established in a 1998 lawsuit involving the Rio PMP300 
player, MP3 players are deemed "computer peripherals" and are not subject to 
a royalty of this type in the U.S.

On a national internet tax, you'd be right to say I'm wrong. :-)

More on this, showing that US states tax internet access:
"From the inception of the Internet until the late 1990s, the Internet was 
free of regulation by government in the United States at all levels, and 
also free of any specially targeted tax levies, duties, imposts, or license 
fees.[citation needed] By 1996, however, that began to change, as several 
U.S. states and municipalities began to see Internet services as a potential 
source of tax revenue. The 1998 Internet Tax Freedom Act halted the 
expansion of direct taxation of the Internet, grandfathering existing taxes 
in ten states. ... Under the grandfather clause included in the Internet Tax 
Freedom Act, Texas is currently collecting a tax on Internet access charges 
over $25.00 per month."

But I don't see that any of that tax money goes directly to musicians.

More recent US attempts to tax the internet:
"La. House Backs 15-Cent Charge on Internet Access "
"BATON ROUGE, La. -- A 15-cent monthly surcharge should be levied on 
Internet access across Louisiana to fight online criminal activity, the 
House voted 81-9 Thursday, over the opposition of Gov. Bobby Jindal. ... 
While White called it a usage fee, opponents called the charge a tax on 
Internet access. They also have questioned whether it would violate a 
federal law that prohibits states from taxing Internet services and would be 
challenged in court. ..."

But again, not directly for music.

I thought France had one, but it was just proposed and not for only music:
"President Nicolas Sarkozy confirmed Wednesday his government will tax 
Internet and telephone providers to offset lost revenue after it scraps 
advertising on French public television next year. Speaking after receiving 
a parliamentary report on the plans, which he first floated early this year, 
Sarkozy confirmed advertising would be stopped on all France Televisions 
channels after 8:00 pm from January. Advertising would be scrapped 
altogether by the end of 2011. New taxes on telephone operators as well as a 
levy on additional private television advertising revenue -- expected to 
mechanically increase -- would be brought in to compensate for the lost 
funds, Sarkozy told a press conference."

And people don't like the idea:
"EU telecommunications director not solidly behind Internet tax"
     “I believe the taxation of the new technology might not be the right 
way in order to arrive at the goal of seamless use of new communication by 
all citizens,” Reding said during an interview. She characterized Sarkozy’s 
proposal as “the beginning, not the end of the discussion.”
     There has been a wide range of reaction to Sarkozy’s unprecedented 
proposal, part of a plan to use the new revenue to counterbalance a ban on 
advertising on French public broadcasters. Reding has been unexpectedly 
successful in moving her pro-consumer proposals through the political 
process, much to the dismay of many of the largest telecommunications 
companies in Europe. Withholding her support for what could amount to 
another cost to the industry should allay some corporate anxiety.

Still, this is indirectly a music industry subsidy: :-(
"France approves broadside to digital pirates"
PARIS (AFP) - – France will send out the first warnings to digital pirates 
early next year after passing tough legislation allowing for Internet access 
to be cut for those who illegally download movies and music, a minister 
said. The Constitutional Court passed the law on Thursday to the joy of 
President Nicolas Sarkozy and anger of Internet libertarians in France and 
other countries which are considering copying the French example.
   Culture Minister Frederic Mitterrand said the members of a watchdog to 
oversee application of the digital clampdown would be named in November and 
the first warnings would go out "from the start of 2010."
   The law sets up an agency that will send out an email warning to people 
found to be illegally downloading films or music.
   A written warning is sent if a second offence is registered in six months 
and after a third, a judge will be able to order a one-year Internet rights 
suspension or a fine.
   Mitterrand called the law an "innovative and educational mechanism to 
prevent piracy".
   Sarkozy said: "France now has a very innovative system to protect the 
rights of authors, artists and their partners in the Internet universe.

Maybe more of the sort of thing for the origins of my mistaken recollection:
Musicians themselves may just be crazy, but the music labels are dangerously 
stupid, and need to be stopped before they can do any further damage to the 
music industry. Case in point: Warner Music, fully aware that the days of 
charging for recorded music are coming to an end, is now pushing for a music 
tax. This isn’t the first time someone has called for a music tax. Peter 
Jenner argued for it in Europe in 2006. Trent Reznor said the same thing 
last year (as did the Songwriters Association of Canada). Mathew Ingram has 
other examples. But Warner Music is doing more than just talking about a 
music tax. They’ve hired industry veteran Jim Griffin to create a new entity 
that would create a pool of money from user fees to be distributed to 
artists and copyright holders. Lawsuits against their customers aren’t 
working (The RIAA sent out 5,400 letters in the last year, says Portfolio, 
settling with 2,300 of those individuals and suing 2,465 who didn’t 
respond). The goal? $5 per month from everyone, or fees of $20 billion per 
year. That’s double the current size of the recorded music industry ($10 

Other related points:
"And what if such a fee is instituted — what about the movie companies, and 
other media companies? What about photographers? And what about the billions 
of dollars in software that is pirated online? After you add all the fees 
for those content creators, we’ll all be paying $100 for our Internet access 
(which of course the ISPs have started filtering and shaping because of all 
the downloading). And then there’s the goat rodeo that would be involved in 
figuring out who gets the money collected. Or maybe we could just let the 
ISPs and the music labels work all that out — I’m sure they would do it 
fairly, right? ... Comment: Of course, Canadians already pay for the CBC 
through their income taxes regardless of whether they watch or listen to it, 
so it's not like this is unprecedented. The difference is that the CBC is a 
crown-corporation, so we're subsidizing salaries of performers and 
producers, not a for-profit business entity. ..."

License fees are being built into US universities related to internet access 
for students, but it is still an ongoing negotiation, and somewhat 
"voluntary" under threat of lawsuits; examples:

"As we've discussed previously, Choruss is the name of the new entity, 
backed by three major record labels, that is interested in granting blanket 
licenses to universities (and someday residential ISPs) to authorize the 
music swapping (on P2P and otherwise) that has become a fact of digital 
life. As a big fan of voluntary collective licensing,
EFF is following the development of Choruss closely and with great hopes. At 
the same time, there are many devils in the details."

"Tens Of Thousands Of Students Have Signed Up For Choruss... Even Though No 
One Knows What It Is?"

"Choruss: legal file sharing on campus"

"Online music at UC: Berkeley students offered low fees for Rhapsody list"

But signing up for Rhapsody and Choruss is still not the same as a national 
internet tax.

The BBC has a television tax that pays for the development of new media 
(some with music), but it's not an internet tax.

I had thought the UK had more, but it is just proposed:
"Digital Britain: A tax, a quango and ISP snooping"
"First things first. The purpose of the new ISP tax, according to the 
review, is "to fund... a new approach to civil enforcement of copyright". 
Note the emphasis on enforcement. The purpose of this, Carter suggests, is 
to "cover the need for innovative legitimate services to meet consumer 
demand, and education and information". There's no explanation as to why the 
private sector can't come up with innovative legitimate services by itself. 
We know it can - and one such game-changing service which legalised P2P file 
sharing was weeks away from launch before being scuppered by two major 
record labels last week. But perhaps we now have an an explanation for why 
Virgin Music Unlimited didn't make it to market - it would jeopardise the 
education and information programs some in the music business see as of 
paramount importance."

Sorry, I misremembered the French initiative and some others, and in the 
context of knowing about physical media fees, I thought this was farther 
along than it was. I should not have lumped the two together (media fees, 
which there are some that go directly to music, and internet tax fees, which 
there are some but not directly towards music). My mistake to overgeneralize 
there. Glad you are so knowledgeable to catch my errors, especially about 
Europe. :-)

Hope this is not distracting you from the ongoing conference. Thanks.

And thanks for your other note on styles. :-)

=== back to the main point

Others have posted why a "music tax" is bad, but they mostly revolve around 
allocation of royalties (which was only one of my points):
"Why A Music Tax Is A Bad Idea"
"Debunking The Idea Of A Music Tax For The Creation Of New Music"

But as above by Mathew Ingram, some people talk about how a tax just for 
music is unfair in the sense of all the other media people use (pictures, 
programs, etc.). But usually it is in the context of reimbursing for 
copyright infringement. As I see it, why should musicians or other artists 
or programmers get reimbursed from a general tax just because they want 
money for access to their works? Why should not all creators, even those who 
give stuff away, get part of it?

The issue should not be about a legal shakedown for those who want to make 
money from rents on copyrights, as much as being about sending money to 
create the self-directed free time so people can create value for society. 
Still, then why stop at online music and digital works, and why discount 
things like child raising or helping sick neighbors? Why is helping make 
some new music more worthy of reimbursement that helping make a new person? 
A basic income is fairer in that case.

There are many ways to fund one, but conceptually, one could just tax 33% of 
all income to provide a basic income for everyone (so, one third of the GDP 
goes to every person in the country, evenly distributed, with two thirds 
left for market competition related reimbursement), and many of these issues 
go away. :-) Programmers can program. Mimes can mime. Parents can parent. 
Neighbors can neighbor. Reporters can report. Musicians can music. :-) And 
so on. :-) And the people who do have extra money to spend by not being 
satisfied with a "basic income" don't have to spend their extra money on a 
lot of digital stuff they would now get for free (music, videos, art, news, 
programs, blueprints, recipes, etc.), as well as some other things (mime, 
live music, child care help by friendly neighbors, etc.) so even they may 
come out ahead through all these new public goods as we see the end of 
various forms of artificial scarcity.

--Paul Fernhout

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