iPod tax: Would you pay a $75 levy to compensate music artists?

Can you imagine paying an extra $75 "levy" on top of the sticker price of your next iPod or iPhone, to compensate artists for revenue lost to illegal file-sharing? The question itself may sound ridiculous, but to a Canadian trade group, it's no laughing matter.

Canada is weighing whether to impose such a levy -- or "tax," if you prefer -- on top of the base price of any mobile device that plays music as a way of compensating songwriters, publishers, producers and other artists. Of course, nothing like this could happen in the U.S. Could it?
It could. Canada's proposed levy recalls various "collective licensing" schemes floated in the U.S., such as a $5-per-month internet service fee, aimed at creating a pool of money to compensate rights-holders for digital piracy. A levy like the one being debated in Canada would most likely be illegal under U.S. law -- but that doesn't mean Congress couldn't establish one by passing legislation.

A few years ago, Universal Music honcho Doug Morris lobbied unsuccessfully for a similar fee. US Code Title 17, (17 U.S.C. § 1008), established by the Audio Home Recording Act of 1992, holds that non-commercial copying by consumers of digital and analog musical recordings is not copyright infringement. Section 1004 provides for a royalty of 3 percent of the initial price for CDs labeled and sold for music use, as well as a 2 percent royalty for standalone CD recorders. A 1998 legal battle involving an early MP3 player, Rio's PMP300, established that such "computer peripherals" are not subject to this type of royalty in the U.S.

But in Canada, David Basskin, who runs the Canadian Private Copying Collective, "a non-profit agency charged with collecting and distributing private copying royalties," advocates for such a levy. Canadians already pay 24- and 29-cent levies (worth 23 and 27 U.S. cents) on blank cassettes and CDs. Canadian legislators are currently weighing the iPod levy, and Basskin says it would take many months for Canada's copyright board to hold a hearing to set the amount of the levy.

The issue erupted during a heated exchange on Canada's Business News Network last week, when Basskin argued that Canadian law should require anyone who uses a "digital audio recorder" -- anything that can copy a sound recording, like an iPod or iPhone -- to pay a levy on top of the base sticker price. The levy would be priced according to storage: a 64GB iPhone would face a higher levy than a 16GB model. On BNN, Basskin disavowed his group's call for a $75 levy on "high-capacity units" as far from a sure thing. "While that may be a wonderful thing in some people's eyes -- probably mine," he says, "it's not going to happen, and certainly not any time soon."

An opponent blasted the proposed levy as a tax that would force music pirates further underground. "If it looks like a tax, and it sounds like a tax, and it walks like a tax, then you know people are going to call it a tax, even if the courts say that it isn't technically a tax," countered Howard Knopf, an Ottawa-based attorney at Macera & Jarzyna, a firm that has criticized the levy. "People will see it for what it really is, which is a bailout of a dying collective that has outlived its usefulness -- if it ever had any -- and only ever did a good job serving its lawyers and consultants." Basskin, in the background, dismissed Knopf's charge as "just nonsense."

Canada's levy on blank CDs, Baskin says, has generated more than $160 million and has been distributed to 97,000 rights-holders, "most of whom would not be able to continue their careers without this revenue," the CPCC says.

But some simple math puts the blank-CD levy in perspective. $160 million distributed over 10 years to about 100,000 rights-holders works out to about $160 annually on average -- hardly a sum that could sustain a career for "most" rights-holders getting these proceeds -- as Techdirt's Mike Masnick observes. Or, as Knopf noted: "That's less than about half of the cost of pint of beer a week at a typical Canadian pub."

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