Milestones in Canada’s Music Levy - The Journey to Extinction

September 30, 2013 was the deadline for the Canadian Private Copyright Collective (“CPCC”) to file a Notice of Application for judicial review (in layperson’s terms, an “appeal”) of the Copyright Board’s decision of August 30, 2013 not to proceed with a hearing process that could have resulted in a retroactive levy for the first 10 months or so of 2012 on microSDs. That deadline came and went, with nothing from the CPCC.

This effectively means that that, absent some extremely unlikely legislation, the CPCC’s only source of revenues henceforth will be from the sale of blank CDs, which are falling off very quickly. Indeed, the last publicly reported revenue figures for CPCC are for 2012, and were less than $10 million, presumably virtually all of which was from the sale of blank CDs, and falling fast. Blank CDs are a legacy medium that will soon be an obsolete and virtually unavailable medium. One of the ironies of the private copying scheme is that these CD products now often cost much more than blank DVDs, which hold about 7 times more data – but which are not encumbered with a $0.29 a piece levy. And hardly anyone uses blank CDs anymore because they only make any sense if one has a very old computer that doesn’t even have a DVD burner.  Moreover, storage in the cloud, on internal or external hard drives, thumb drives, SD or microSD cards, or on smart phones is either free or incredibly cheap and vastly more convenient for almost all purposes than the awkward and clunky CD format.

This Government has made is abundantly clear that it will not impose any new “tax” on storage devices. As Minister Moore said on September 22, 2010 when he was Heritage Minister:

This idea of imposing a new tax on iPods and MP3 players is not a new idea because there are very few new ideas, unfortunately, that come from the opposition on the issues of copyright and taxes. However, this idea is really toxic and, frankly, really dumb. This would punish consumers if we were to put in place a tax of up to $75 on iPods, Blackberries, cell phones, laptops, computers, memory sticks and automobiles, anything that is capable of playing digital music. (Emphasis added)

Here's a link to the whole exchange with BQ member Carolyn Lavallée.

Also and by interesting coincidence, David Basskin retired as President and CEO of the Canadian Musical Reproduction Rights Agency Ltd. (CMRRA) on the same date, September 30, 2013.  Mr. Basskin had been a key driving force and spokesperson for the levy scheme from its very beginning.

It will be interesting to see what happens now to the CPCC, as its revenues rapidly evaporate with no new source in sight. The private copying levy scheme was established by its own special sui generis scheme set out in a completely self-standing and easily severable part of the Copyright Act. But technology and economics have made that scheme obsolete and rendered it all but extinct. Moreover, the scheme became highly problematic and divisive even within the music industry when it was realized – and confirmed by the Copyright Board and the Courts – that it rendered private copying based upon downloading, even from “illegal” sources on the internet, perfectly legal as long as it was done onto an “audio recording medium” and regardless of whether a levy had been sought for such medium. Both the Court and the Government have made it clear that the scheme cannot be extended by the Board to cover unintended products, such as iPods, smartphones, etc. that don’t qualify as an “audio recording medium”.

Other collectives also now face an uncertain future as users begin to realize that, in light of recent technological change, legislation and Supreme Court of Canada jurisprudence, it is no longer necessary to obtain licenses that are based on non-existent rights or rights that are greatly over-priced and which can be cleared more efficiently in other ways than through a blanket license – whether or not that license is in the form of a certified tariff. We will no doubt hear much more on this subject in the weeks and months to come.

I should disclose that I have been involved as counsel acting for various opponents of the CPCC since approximately 1999.

HPK