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UK music industry demands an iPod tax

The UK music industry has rejected the Government's proposal to legalise the transfer of music from CDs to MP3 players without a levy. It has asked for a tax on devices like Apple iPods which it says should compensate artists for the transfer.15 Apr 2008

The Government has proposed legalising the format shifting of music to computers or MP3 players as long as the CD was paid for, the transfer happens just once and is for personal use only. Currently the practice, which is near ubiquitous amongst MP3 player owners, infringes copyright.

The Music Business Group (MBG) is an umbrella group of trade bodies representing music managers, songwriters, publishers and performers. It comprises organisations like BPI, AIM and MCPS-PRS. It has rejected plans contained in a consultation document issued by the UK Intellectual Property Office (UK-IPO) to allow the transfer without any extra charge being levied.

"Enormous value is derived from the transferability of music," it said in its submission. "Last year alone, over 20 million MP3-capable portable devices were sold in the UK, and over 90% of music on the average MP3 player is music that has been copied."

"UK creators and right holders are legally entitled to benefit from this value. At present, this value is enjoyed by both consumers and technology companies while creators and right holders are effectively excluded from any value. This constitutes market failure," it said.

Copyright law in the UK currently does not allow users to copy music to their MP3 players from previously bought CDs. The European Union's Copyright Directive gives countries two options on private copying. They can ban it or they can allow it on condition that they introduce a system that ensures "fair compensation" for rights holders. Many countries charge a levy on blank media and devices as a form of compensation.

The exemption for format shifting for private use is one of the recommendations of the report into copyright reform produced in 2006 by former Financial Times editor Andrew Gowers.

The MBG has proposed a levy on the devices that might play transferred music, principally MP3 players. That levy, or licence, would be set not by the Government but by industry in negotiations.

"The licence fee would be determined by commercial negotiations between creators and right holders and manufacturers and distributors of devices substantially used or marketed for making copies of music," said the MBG's submission to the UK-IPO.

"We need to redress the balance which underpins copyright – one that allows consumers to enjoy their music, drives technological innovation, yet recognises music creators’ and right holders’ place in this market," said the MBG. "Our proposal creates an easily-implemented, flexible, future-proofed and transparent solution."

In producing his report and recommendation that format shifting be permitted, Andrew Gowers suggested that if rights holders wanted compensation for the practice they should raise their prices.

The Government in its proposal said that it does not believe that the levy-free exemption would break the EU's laws. It said that it was a "fair balance between the interests of consumers and those of right holders".

The Government pointed to the Copyright Directive's introductory wording, which said that "in certain situations, where the prejudice to the right holder would be minimal, no obligation for payment may arise".

The consultation said: "The exception proposed in this paper is very narrow in scope and, therefore, we consider that there would be no obligation for payment under the Copyright Directive for a limited format shifting exception, as there is no significant harm to the right holder which would need to be compensated."