When the Solution Turns into the Problem

November 13, 2007 by Sasha Hochman

In an unexpected move, the Canadian Recording Industry Association (CRIA) filed documents in the Federal Court of Appeal recently in a fight to eliminate the application of the private copying levy to MP3 players. The irony of this is apparent as the CRIA has advocated for the private copying levy for many years and makes millions of dollars each year from it.

With this new approach, the Canadian recording industry has lost its credibility. Their change of position weakens the CRIA’s arguments against the private copying levy. The industry has finally realized that they have more to gain by opposing the extension of the private copying level to MP3 players because this extension would, in effect, legalize file sharing in Canada. However, this proves that the CRIA’s only concern is maximizing profits and when they think of a better way to do so, they will change their position again. By filing these documents, the CRIA is publicly acknowledging the argument for legalized P2P (peer-to-peer) file sharing in Canada which discredits all of their arguments against it. Finally, if the CRIA’s arguments are accepted, it would amount to American record labels having a significant influence over Copyright Law in Canada as the CRIA is controlled by American record labels.

While the Canadian recording industry should not have changed their position, there are reasons to doubt the effectiveness of the private copying levy. This levy is not without its own problems. The private copying levy is essentially a government mandated scheme where the government is imposing a tax in support of a private industry. However, the government does not take the initiative to impose taxes for other private industries. Every industry should be responsible for finding profitable methods of sustaining itself without assistance from the government. Additionally, the levy can be a significant percentage of the retail price. While the cost of blank CD’s keeps dropping, the tariff is staying the same. Consumers are not only being charged astronomical prices for CD’s but moreover, the levy is collected regardless of the purchasers’ end use of the media. Even if the purchaser is not using the media to copy music, they will still be paying for it. Ultimately, this will confuse consumers’ understanding of legal forms of copying in Canada and they will be more likely to download because they want some benefit to result from the extra expenditure.

The limits to the private copying levy pose additional difficulties. Devices that perform multiple functions are problematic as it is unclear whether they should be subjected to the levy. It is also ambiguous how far the levy will be extended. Will it be extended to computers as well? And finally, how important is it to come to a conclusion on the limits of taxation when there are larger issues? The monies collected under this government scheme often go to the record labels and not the artists, thereby creating uncertainty around the question of the legitimacy of a private copying levy altogether.

When Albert Einstein stated “intellectuals solve problems, geniuses prevent them,” he was obviously not referring to the CRIA. The Canadian recording industry are not intellectuals nor are they geniuses. The industry has not tried to solve this problem internally nor have they thought sufficiently about the future of the industry to prevent problems from occurring. Instead of changing their position on the private copying levy, the Canadian recording industry should be looking towards new and innovative solutions. The industry itself should find alternative sources of income instead of relying on the judicial system to resolve their inability to adapt their own business model to a changing marketplace. Creative ideas, not new technology is essential to increasing profits. With a service like SpiralFrog, the music industry and other right’s holders would collect two-thirds of the profits of advertisements run on its pages. Additionally, artists can choose to sell their albums directly to the consumers. Radiohead recently decided to try direct-to-customer record sales which should increase their overall profits even though their album is being sold on a pay-what-you-can basis. While the album is essentially “free,” it will help Radiohead sell more concert ticket and increase merchandise sales. While both of these proposed solutions have their own drawbacks, they represent a new direction for the Canadian music industry. The way the industry conducts business needs to change. Now that the solution has turned into the problem, new remedies must be sought.