[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. "
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.
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.
o Audio recording equipment, such as a tape recorder: 3% of the
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
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): €
o blank CD-R, CD-RW: € 0.12/disc
o blank DVD-R, DVD+R, etc: € 0.59/disc
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.
* 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. 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.
* 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. On 2007-10-26,
the court granted CRIA's request to intervene in the private copying/iPod
levy judicial review.
* 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. 
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.
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
* €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
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.
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.
Luxembourg is the only EU member state on the continent without a private
copying levy, making it a popular “copying levy haven” for blank media
buyers from countries such as France and Germany.
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
* 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
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.
 United States
 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 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.
 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. 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
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
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
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
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.
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