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Wednesday, 14 March 2012

Private copying levies on digital media make less sense today than ever

A private copying levy is similar to a tax which is required by law to be collected at the point of sale when certain goods capable of storing copyrighted content are purchased.

But it's not a tax because the cash doesn't go to government, it goes usually to one or more collecting societies to be distributed amongst its members.

Members receiving a portion of the levy are typically the creators who contribute to the type of copyrighted work capable of being stored, so e.g. the levy on old school VHS cassettes would go to TV/Film content makers and audio cassettes to musicians.

Digital media is complicated by the fact it can be used to store printed, audio or visual works, but that doesn't stop a levy being imposed and then distributed via multiple societies.

Most EU countries have some kind of blank media levy, as do many countries worldwide.  Notable EU exceptions are UK and Luxembourg.

The principle is sound to a point. Manufacturers of such goods typically profit from consumer demand driven in many cases by private copying of copyrighted films, songs, books etc - so why shouldn't the artists, authors, writers and musicians share in these profits?

The case was perhaps stronger for analogue media because there really was very little else one could do with a C90 cassette.

My own collection is mainly recordings from the radio (time shifting, as legalised by Margaret Thatcher) with two notable exceptions: an interview with my grandma as part of a school project on wartime memories and a cringeworthy tape where I pretend to be a talk-show radio presenter.

So case well made - demand for cassettes was driven mainly by private copying of copyrighted work, manufacturers profit from this, so hand over the dosh.

Today levies are applied in varying countries on most digital storage and reprographic consumables: hard disks, USB memory sticks, printer cartridges, toner... Pretty much anything that could potentially be used for copyright infringement.

However the lines are blurred because of a massive increase in non-infringing use for digital media and printers stemming from:

  • The emergence of "direct to digital" legal download purchasing.  When I buy a song from iTunes or an ebook from Amazon I'm paying for a license when I buy the book.  Every ebook I own is legally purchased. It makes about as much sense to tax my ebook reader as it would to tax my bookshelf when I bought physical books.
  • User-generated content. Often spun as a myth by vested interests trying to overplay the harm from private copying, user generated content now accounts for a significant proportion of storage or printer output in some sectors.  E.g. most people use their colour printers to print their own digital photographs, why should the members of a collecting society be rewarded for each printer cartridge I use to print my own photographs, just because I could be printing someone else's downloaded from the internet?
In countries such as France there's a levy on mobile phones. In Italy the levy only applies to phones with mp3 capabilities [refs].  Either way it's a bit galling for the likes of me, as I use my phone mainly for recording video clips of my son and audio of interviews I conduct.

That said, despite a rebalancing of infringing vs non-infringing use there is still significant infringement in some categories, e.g. the storage of music on hard disks and flash memory.

There is an argument that private copying is driving demand for memory but to a lesser extent than e.g. with audio cassettes.

But the fact hardware manufacturers are profiting doesn't answer the other important question: is the profit coming at the expense of money lost to legitimate rights holders?

Recital 35 of the EU Copyright Directive encourages assessment of harm as a 'valuable criterion' when evaluating a fair compensation payable to cover lawful exemptions such as private copying, noting: 'In certain situations where the prejudice to the rightholder would be minimal, no obligation for payment may arise.'

Harm is important because a collective licensing approach brings its own problems. It is therefore important to ensure any levy collected remains proportional to the reward due because a reward structure based heavily on collective licensing can skew the creative market, encouraging quantity over quality.

Collecting societies are often criticised for the opaque way that funds are distributed amongst members.  It's a complex equation to try and ensure creators are rewarded based on the importance and value of their output.

Whilst it's relatively easy when dealing with popular works such as songs and films to judge popularity from e.g. box office takings and sales, it's far harder to work out a fair share for so-called 'stock' items such as photographs, general purpose incidental music/'beds' etc.

Many jobbing photographers and musicians rely on collective royalties to make their career pay, but such arguments aren't easy to make to many new media creators whose output falls completely under the radar.

Take this blog - you're reading it, but will I get paid for my creative output? Should computer, smartphone and tablet manufacturers be rewarding me and oodles of other amateur creators of video, animation, art and software?

Of course not - it's a simple case of value, supply and demand. Plenty of us do it, the output on a whole is of minimum value to society and demand is tepid - it's taken 2 years on here plus 3 years on this blog's forerunners to build up a worthy audience ~4k unique visitors per week.

Yes there is still the argument that my and others' creative output is fuelling demand for internet-enabled devices and, specifically, making profits for service providers such as Google and other platform owners hosting user-generated content.

But there is also no quantifiable harm.  People reading my stuff on those devices and Google providing a free hosting platform in order to make money doesn't infringe on my legitimate right to commercially exploit my copyright.

In fact there is only benefit, since without computers blogs wouldn't exist and without platforms like Blogger and YouTube many content creators simply wouldn't have an audience.

But there is still one lingering question around sustainability and equity.  There is simply no model for many to make a sustainable living from online content.

Take advertising on this blog - estimate $1.91 per day, which actually turned out to be £1.71 per week when I ran adverts all last week.

Today the only viable advertising model comes from high volume low value content.  Pull in millions of visitors to view content that is hideously cheap to create or curate and you have a sustainable income for an individual or small company.

Facebook make around 2 cents per active user per day. Not much.

Online funding models are in their infancy but are massively unfair when they allow pirate website operators to rake in around £150,000 per year merely from hosting categorised links to infringing content elsewhere.

At the same time, the online equivalent of a weekly local newspaper is an absolute non-starter, commercially speaking.

I find it a bit odd that advertising can fund the physical production and distribution of a free local newspaper yet it is not possible for many (anyone?) to make an ad-funded return on a weekly online readership of say 10,000 with no print or distribution costs and all the creative input coming from one person or a small number of people.

Why, when UK advertisers now spend more money on online advertising than print advertising doesn't the online equivalent work?

Yes I know physical newspaper circulation has a different ad value to digital pageviews, but the ad returns are an order of magnitude smaller.

It's in all our interests to ensure abuses of the system such as pirate websites making money from advertising are minimised as this will probably allow those ad revenues to find their way to other, legitimate, causes.

There are no easy answers here.  Collective licensing can skew the market. Collective licensing won't reward many of today's digital creators.  Collective licensing won't stop unfair distribution of advertising returns.  Collective licensing will penalise legitimate direct-to-digital purchases and home-made content.

And I don't favour censorship either. Stamping out piracy is only part of the problem. The whole creative industry needed the bolt up the arse provided by digital piracy to remind everyone of a step-change in the supply/demand equation.

Just as amateur bloggers don't expect to get paid much, if anything; many amateur musicians or photographers are just happy for their work to be used in a podcast or on a website.  The value of many photographs or music as a commodity has dropped dramatically now anyone can produce and distribute.  But as my friend and professional musician Steve Lawson put it: Music is worthless. The meaning we invest in music is priceless.  

Now go Read Steve's excellent blog on that.



  1. This comment has been removed by the author.

  2. This strikes me as being a bit similar to the arguments around democracy. Democracy isn't fair. It's gamed by pressure groups, some of us get more value out of it than others. If we know what we're doing or can pay for the lobbyists, we can get government to chuck a few favours our way.

    If we own enough newspapers, we can expect all kinds of vetoes. Similarly, we all vote to disburse funds that we don't benefit from, or over-draw upon. The healthy middle-aged childless illiterate pays for the health service, libraries, schools, and so on.

    Sure, the right and left will bicker about how all-encompassing this should be, but unless you're a ultra-libertarian (benefit cheat!) like Ayn Rand, you're in broad agreement that an unfair settlement is better than none.

    But we're back to the social contract argument. It's tax or 'the state of nature' where life is nasty, brutish and short.

    Now let’s look at the marketplace for content and hardware. It’s absolutely huge. $Billions made from Advertising, Pay-TV subs, music sales, sales of TV sets, tablets, MP3 players, set-top boxes and recording devices, cable services, satellite dishes, the increased demand that ISPs meet (and charge for). And then there’s PCs, USB sticks and the other things you mentioned.

    At the moment, most of those product-peddlars are making hundreds of $billions because – at least in part – content-generators have provided the media that make it worth having. No-one will buy a TV PVR box unless they can record PSB-generated content in the UK. Really, almost no-one. I will shortly buy an iPad, partly because of the business use I can put it to (ta Evernote!), but mainly – if I’m honest – because it’s a great lifestyle addition to my life. Spotify, iPlayer, Safari, loads of games. My iPod is my most valued possession as it is for many people who are completely open about the fact that theirs is full of music they never paid for.

    Remember, we were all told to lay off the regulation of all things internet because ‘content would be king’. We have to break a few rights eggs to make the omelette offered by a vibrant free market in content. But musicians, TV programme directors and producers haven’t had a sniff of this omelette yet. The creative industries are more class-bound than ever before – if you want to make it in the music industry these days, make sure you’ve got a rich dad and loads of public school connections. This is getting worse because the marketplace is skipping the creatives when it’s deviding up a hugely-expanding pie.

    Most newspapers can’t find any money in their business plans to even pay journalists any more. ‘Internships’ are the norm rather than the exception in large parts of the creative sector these days. If nothing else, this is a class issue.

    Levies won’t be perfectly fair. Some people will find themselves been stiffed for a few pence on an 8GB memory stick that they totally don’t use to carry MP3s or pictures they downloaded from the internet.

    But levies will only ever provide a tiny fraction of the reward that creators are really entitled to. Or, to put it more succinctly, a fraction of what they would get if they were as capable of asserting their copyright as software and firmware makers are of asserting theirs. So, like that healthy middle-aged childless illiterate who is paying for the health service, libraries, schools, and so on, our memory-stick buyer has to just suck it up. Because we’re in an equilvalent position. Pay taxes or go back to cannibalism. Pay levies or forget anything other than Ron Paul’s version of ‘culture.’

    In the end, we would all will pay a fraction of the value that we reap. Some of us will chose products or use them in ways that are inefficient in that context. But that’s life. It’s like what Churchill said about Democracy (paraphrasing): It’s the worst way of doing things – apart from all of the others.

  3. Thanks Paulie - you say "musicians, TV programme directors and producers haven’t had a sniff of this omelette yet." but this isn't strictly true.

    It might not be a fair slice but musicians are making returns from iTunes. Self-published authors are making decent returns - at least four more than $300,000 dollars - from eBooks on Amazon.

    Even TV programme makers are benefiting in a bizarre volte-face as online advertisers such as comparison websites return a slice of the online advertising pie to TV sector.

    And through online outlets selling DVDs. And, once rights holders get over their fear of piracy and realise audience is worth more than the risk and embrace streaming services - as they're slowly starting to do - there will be a huge new market.

    I'd watch a film for 99p on my iPad tonight, maybe 5 nights a week. Charge £3.99 and I may only watch once.

    It will take time for businesses to adapt to content models with ultra low delivery costs and no exhaustion/scarcity in supply.

    My worry is that collective licensing is a fudge that may prevent better more equitable funding models emerge but I agree - as is my own frustration right now - that it's a painful time for many.

    That said - am amazingly optimistic when you look at (a) the total size of the ad spend and (b) the willingness of consumers to buy when the terms are right (iTunes, Amazon, Netflix etc).

    1. All fair points James. But I remember in the mid-1990s, arguing with BSkyB lobbyists about how broadcasting regs needed watering down entirely because 'convergence' would result in Sky investing more than you could ever imagine in content origination.

      It's always jam-tomorrow. Any creator with any sense should be jumping up and down and demanding the best thing that's currently on the table.

      BTW, I can't really imagine anyone watching films on their iPad *every night* ;-)

  4. Apple Airplay? Sends output of an iPad 2 wirelessly to the telly. Other tablets are available, sometimes wires required!

    The difference between me and a BSkyB lobbyist is that I'm not being paid to push any one commercial organisation's agenda.

    Yes no-one really knows and yes there are some vested commercial interests even with Open Digital, which is structured so that I don't simply push the interests of my paymasters, but I really believe the market needs time to settle *before* interventions like levies - which might still be needed.

  5. The point here is captured in harm. Even if I am printing others stuff from the internet why should printer cartridge manufacturers be taxed when the site I'm downloading it from already licensed the content for online publication?

    I don't print stuff out for fun, or as a replacement for buying a physical print. You do it for convenience to read on the go or show someone else. But you can do that online anyway with these ipads you're all talking about, you can connect to the internet and read the content from its licensed home.

  6. James - apologies - I wasn't in any way suggesting you were like a BSkyB lobbyist, apart from saying that people who create things shouldn't buy the 'jam tomorrow' argument.

    Thing is, if you wait for the market to 'settle' it will be too late. I really don't want participation in professional creativity to be the preserve of people with a private income. People tend to forget that The Labour Party wasn't set up by socialists or any other kind of 'ists' - it was set up to solve the problem caused by the way a way of life was regarded as the preserve of amateurs and volunteers. Only rich people could enter Parliament because it didn't pay.

    Unless there is a way of funding creativity and not making it beholden to patronage, you can wave goodbye to pluralism. And all of these arguments come before we even introduce the unfairness of people having their work appropriated to sell other people's products with little or no compensation.

    I see what you mean about Apple Airplay.

    A Thorpe: And why should anyone be taxed to pay for streetlights outside your house? Photocopiers have had levies associated with them for a long time.

  7. Paulie - totally with you on the aims. There has to be fairness, opportunity, social mobility in all sectors of the economy.

    I'm more optimistic about the opportunities from digital, don't think the time frames will be too long - just comparable with the time it takes to change the law re levies etc and accept collective licensing will play a role in some cases.

    I am for instance worried about journalism, particularly investigative and local. Local "democracy" goes under the radar of most residents and I blame decline in depth of local coverage for some of that.

  8. "But it's not a tax because the cash doesn't go to government, it goes usually to one or more collecting societies to be distributed amongst its members"

    Unfortunately you need to do your homework. If a levy is legally unavoidable (can only be avoided illegally) then it is a tax and should appear in the national accounts as such. How do I know? Because I've read the Treasury briefing note:

    cropped up in our world here


    and here's the briefing note


  9. James, there is very good cause to be worried about the impact on local democracy. It's been devastating in many ways, and it illustrates the dangers of dispersed lobbies being trumped by corporate ones.

    If nothing else, 'Newtonian Politics' (that policy is the product of a tug-of-war) requires that somebody, somewhere, does something slightly arbitrary and game-changing to redress a clear injustice that arises from the way policy is made.

    Most of the value that is extracted from creative work is extracted by people who are effectively its administrators - the people who control the delivery mechanisms or delivery platforms. This is *massively* wrong - it's a huge injustice, but it's not felt by the people who own newspapers, are able to combine effectively to hire lawyers or lobbyists (indeed, it's perpetrated by them). It is also against the public interest - particularly if your general view is that incentives are important drivers of economic growth.

    Mine is, in some ways, more of a pro-market argument than many of the soi-disant pro-market positions that are struck by others.

    But I really don’t think it’s defensible to be relaxed about this anymore. At every stage, creators have been promised ‘jam tomorrow.’ We’ve seen local newspapers largely collapse as useful entities (they’re mainly ad-sheets these days). Do we have to wait for British broadcasting to go the same way? My point is that you’re dismissing private copy levies on the grounds that they perpetrate a minor injustice. That’s fine – as long as you have a better proposal to deal with the much bigger injustice that is being inflicted upon people who create the media products that sell the telly-boxes and the connectivity.

    @OpnSrcCons Are you saying that this can be opposed because the concept can be reified into being a tax, therefore a populist anti-tax sentiment can be mobilised and ... job done!?

    Do PRS revenues appear in the national accounts as a tax btw? And do other collecting schemes that have, from time to time, applied to libraries and photocopiers also appear in the national accounts?


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