Saturday, July 04, 2009

The SAC Double Negative Option Celestial Jukebox

Eddie Schwartz/

The quest for a viable "Alternative Compensation System" to deal with perceived problems involving P2P downloading and file sharing lives on.

The Songwriters Association of Canada (“SAC”), led by Eddie Schwartz, was in Ottawa on the Hill on June 3, 2009 and at the University of Ottawa, in an event organized by CIPPIC. Too bad there weren’t more people there because it was very revealing - though frankly not very convincing.

Here is the latest version of SAC’s proposal.

On the plus side, the SAC is to be complimented for daring to think outside the box. Unlike the power brokers in the music industry establishment, they don’t want to kill file sharing technology and they don’t want to sue their fans. They say that they really like P2P technology. And their fans. That much is good, but after that there are some probably fatal devilish details to consider.

The essence of the SAC’s proposal is that it's a negative option for both consumers and rights owners. For $5 a month, every Canadian household that doesn't opt out of the scheme (and "sign and undertaking to pay a predetermined amount of damages if they are caught file sharing") would get the right to download and share all the music authorized by the rights holders that choose not to opt out.

Here is the essential wording of the SAC proposal:
7. While at least 70% of Canadians regularly use the Internet to file share music, and 90% of them use it occasionally, naturally not all Canadian Internet users use the Internet for that purpose. We propose that they should be allowed to opt out of the payment of the fee. Broadband internet and wireless subscribers will be able to opt out of the licence fee if they do not share music files and if they sign an undertaking to pay a predetermined amount of damages if they are caught file sharing.

Payment of this fee would remove the stigma of illegality from file sharing. In addition, it would represent excellent value to the consumer, since this fee would grant access to the majority of the world’s repertoire of music. Existing download subscription offer a mere fraction of the file-sharing repertoire.

Creators or other persons entitled by by this system to claim a portion of the licensing fees but who nevertheless do not wish to be compensated under such a system could similarly opt out. Acceptance of license fees would amount to a waiver of the right to sue for the unauthorized transmission by Canadian users.
(footnote omitted)

Leaving aside the accuracy and provenance of those figures about the percentage of Canadians who file share, the obvious problem with this is that it's a negative option "tax" (or so it will be called) on consumers - with the prospect that exercise of that negative option would give rise to invasive snooping and liquidated and presumably high damages payable by Daddy or Mommy if one of the kids downloads something and gets "caught". And maybe even the additional prospect of litigation at the suit of any of the rights owners who do opt out.

I get the feeling that SAC doesn't want to highlight the "negative option" aspects of this proposal. Somehow I can't see the prospect of a a negative option "tax" for the benefit of the music industry with the alternative being significant fines payable to the music industry being attractive or vote-catching in the eyes of politicians. While Canadians may be passive and polite about many things, the juxtaposition of something that looks and walks, and smells like a tax with a negative option and for the benefit of mostly foreign and mostly wealthy corporate interests may not escape controversy, to put it mildly.

And the negative option for the music industry won't sit well either. If this is backed by legislation, it could be seen, among other things, as a mandatory "formality" that would be contrary to the Berne Convention. There are millions of mostly untraceable rights holders around the world who enjoy copyright rights in Canada. Must they "opt out" if they don't want to be part of this? If they don't opt out, how are they going to get paid? Through their national collectives, who will have no similar reciprocal scheme in place. The mind begins to boggle.

This apparently modest fee - less than a pint of draft beer these days - would be added to their ISP bill. It would generate about $900 million a year in Canada, based upon SAC's admittedly “back of the envelope” calculations. (BTW, that’s about 4.5 times more than what SOCAN now collects - and it’s taken SOCAN and its predecessors more than 80 years to get to that level). Sure - SAC admits that $5 is just a figure for discussion purposes and they could cut back to $3 a month - a mere $600 million. Sometimes, you gotta walk before you can run.

This is apparently so simple and straightforward, according to SAC, that all the details and MOUs can be worked out by this September, just in time for a new bill that would put it into effect. The few remaining matters could presumably be dealt with by the Copyright Board. (BTW, the Copyright Board and the Courts are still struggling with SOCAN’s notorious Tariff 22 for music via the internet, which is now about 14 years old and potentially still years and another trip to the Supreme Court away from fruition. That tariff was filed years before Napster, iTunes, YouTube and Facebook even existed. In fact, many users of the latter two services in particular weren’t even born when Tariff 22 was first filed.

Anyway, I hate to be negative. However, if I had a positive solution to the problems of the music industry that those in power could understand and would act upon, I wouldn’t be counting time at stop lights every morning. I’d be counting grains of sand and composing fugues on my own island in the Mediterranean.

That said, here are a baker’s dozen specific serious problems with SAC’s proposal, any one of which could prove fatal:

1. We already have a levy scheme in Canada that the Copyright Board itself and a Federal Court Judge suggest would cover downloading onto computer hard drives. It’s called the private copying levy (most people call it a “tax”, even if the Board and the Courts don’t) and it has generated more than $250 million to date (based upon extrapolation from 2007 published figures, which are, as usual, out of date), much if not most of which comes from people who never copy music - but never mind that inconvenient truth. The major record companies, i.e. CRIA, got what they asked for, i.e. legalized private copying regime with a levy. That this turned out, effectively, to be a legalized downloading regime recalls the maxim about being careful what you wish for. This speaks volumes about short sighted solutions to doubtfully serious or even relevant problems and the credibility of the industry’s current wish list of copyright “cure-alls” for all the various industry problems that have much to do with bad management and little or nothing to do with copyright law. In any case, the SAC scheme would encourage technology and architecture that would allow for downloading that is already legal, but not permit uploading or sharing - and thus would thus encourage avoidance.

2. Similar schemes to SAC’s have been touted in the past - indeed for years. Paul Hoffert of Canada and Terry Fisher of Harvard has been pushing NOANK for a long time - but the world seems to be largely saying “No Thanks”. True, there are differences with the SAC scheme - but they are not that obvious or important overall. The bottom line is that neither scheme will work unless all major copyright owners agree to it. So far as I known, none have.

3. There are significant potential privacy concerns. For the scheme to be viable and fair to creators, it must be accurate in its measurements of usage. Do you really want CRIA members to know what you are downloading and sharing? What if your tastes run to Tiny Tim, or Liberace? Or Falun Gong Favourites?

4. There are treaty concerns. A massive blanket/compulsory license of the reproduction and communication rights imposed by legislation on the basis of a “negative option” regime raises lots of obvious treaty issues even under Canada’s existing obligations, not to mention the 1996 WIPO treaties to which Canada is not bound but has signed.

5. The scheme is inherently socialistic. I have to agree with Graham Henderson on this, who famously referred to Harvard’s Terry Fisher (co-proponent of NOANK) as “Comrade Fisher” at a conference. It’s true that the many SOCAN members make only a few hundred bucks a year, if that, from royalties - though some earn much, much more. Anyone who has “created a musical work or part of a musical work” that is performed anywhere (e.g. a bar or in the subway) can join SOCAN for free. Nobody guarantees self proclaimed musicians an income in Canada. Copyright law rewards success, not simply membership and not necessarily merit. Only failed car manufactures and unsuccessful investment bankers can count on legislated bailouts these days.

6. We already have about three dozen collectives in Canada. This more than anywhere else in the world, I believe. We would need a giant new collective and maybe even several sub-collectives here - resulting in a mechanism that would make the CPCC look like child’s play in comparison.

7. We would need counterpart international schemes - otherwise Canada would be shovelling almost all that $900 million across the border to the USA and over to Europe with virtually nothing coming back. Even if we get our full share back, it’s going to be trivial. Despite the celebrity of a few performers and success of a few songwriters, we have only about 2% of the international music publishing market. Most of the money from this scheme would leave Canada, and almost nothing would come in. Especially so if the propose scheme is fully "national treatment" in nature, as appears to be the case.

8. This scheme wouldn’t work for emerging artists, who don’t show up reliably in any of the current methods used to measure downloading and sharing behaviour. SAC admits that Big Champagne is only “70% accurate” - which, whatever that may means. isn’t very impressive if you are in a garage band and on the margin. Air play and CD sales (what CD sales?, some may ask) are a poor proxy for downloading and sharing behaviour. However, that’s what the CPCC has been using. The long tail theory may work at Amazon - but won’t work here.

9. Unless virtually all of the major record companies, music publishers and performers go along with this, there would still be threats of litigation against individuals - so Canadians would have multiple levies, digital locks and litigation.

10. We would need significant buy in by ISPs - who would have to keep track of which subscribers are “in” or “out” and when - and transmit that information to the collective. More privacy issues and much more expense to ISPs. Not to mention that the perceived “tax” - even if “voluntary” - will be seen as an add-on to the ever expanding monthly bills from Bell and Rogers, etc. that will further alienate customers and result in other “optional” and more profitable service being dropped. And if there’s enough of a financial incentive to the ISPs from the new collective to let them swallow this scheme, consumers and artists may see it as a kick-back and react accordingly.

11. If this works, which it likely won’t, we would likely see similar schemes touted by movie distributors, book publishers, newspapers publishers, knitting pattern publishers and every other sector that claims to be a "victim of piracy” on the internet. Will Canadian consumers greet the add-on of another $20, $50, or $100 a month or more to their ISP bill with flowers? I doubt it.

12. We will see the largest copyright tribunal anywhere (Canada's Copyright Board) get even larger, and full employment for lots of copyright lawyers - which some readers of this blog might regard as a good thing. However, how this will serve actual Canadian creators or consumers remains rather unclear.

13. Last but not least, if this scheme works, it would surely kill or seriously wound virtually all remaining retail store and online iTunes-type activity in Canada, and stifle any innovation in the business end of the music industry for a long time to come.

The bottom line is this. If there is a problem out there that requires a copyright solution - and that remains to be proven - a bad solution enacted in haste could be worse than no solution.

As CRIA well knows, or at least ought to know by now, be careful what you wish for.



  1. The presumption of any litigation is based on traceable and trackable services. P2P has and will evolve to make it extremely hard for industry to interfere. A "negative tax" would be virtually impossible to implement at this time.

    Darknets and VPN's are starting to become the norm, and are also being used by many in the artistic community as a means of promotions since the publishers and labels are refusing to adapt to this. The industry is effectively driving file sharing deeper underground and is getting harder and harder to track, if not impossible in the very near future.

    The big 4 labels like to use comparisons on stuff that is not relevant to make their point. MJ’s album “Dangerous” didn’t do as well as “Thriller” did in the 80’s, and most certainly would have been blamed on P2P for its problems if P2P was a factor back then. Those of us that work in the industry know how much of a sham this file sharing debate has come within side the industry. It’s so sick to see artists career’s being pissed down the tube so quickly when the labels and publishers are ignoring the very basic need of market penetration. Sales will always continue to be about promotion and designing that promotion to fit the market. You don’t change the market to force people to buy, you adapt and follow it.

    Industry always measures the successes based on previous sales etc, and then blames the falling number on P2P and piracy, meanwhile the artists and songwriters are not being properly promoted online the way they should be to ensure a return on investment. Often artists are left to pay out of pocket to get a professional e-business solutions company to head up their numerous profiles and online content, which should be handled by the labels. And when the artists try and reach their fans they are often met with heavy resistance from their own publishers (if in the mainstream) with respect to DMCA as we continue to see with Warner Music and other publishers in the very recent past. It's almost like the publishers/labels are deliberately trying to offset the progression and innovation in this industry for their own agenda's. Needs in this and many other Industries are not being actively met to ensure return on investment and to help spur innovation. As long as we remain deadlocked in progression we will remain in a very unstable economic situation. Governments need to rethink what’s going on here, and look at just how locked up society has become with respect to copyright law, and how that’s effecting innovation (the driving force in industry).

  2. Apple’s iTunes Store gave labels much-needed succor after its launch in 2003, slowing down big losses by replicating physical’s per-track purchase paradigm in digital. But now, even after many such services have abandoned copy locks, growth in downloads has largely flatlined, or even worse.

    More on this:’s-who-in-the-new-music-gold-rush/