Finnish politician Henna Virkkunen is the new EU Commissioner-designate with responsibility for tech, meaning she will oversee tech policy within the European Commission. That has prompted DigitalEurope to publish a white paper advocating for a change to the private copy levy across Europe, supporting the model already employed in Finland.
That’s the model that has been heavily criticised by the music industry, because it means that - rather than benefiting from a levy that’s applied to device sales - copyright owners are compensated for the private copying of their work by a fund controlled by the Finnish government. Which recently cut the fund in half.
Private copy levies that were traditionally applied to things like blank cassette tapes and CDRs to compensate copyright owners for people making private copies of their works - for example creating a copy of a cassette tape to play in the car or burning music downloads to a blank CD - have, says DigitalEurope, “ballooned into a complex and outdated system applied to most electronic devices”.
In doing so, the levies “stifle the single market and unfairly tax consumers”. While admitting that “fair compensation for creators and a thriving cultural sector are essential”, the tech sector trade group adds, “the current levy system is ineffective and urgently requires profound reform”.
But that’s simply not true, according to GESAC, the organisation representing songwriter collecting societies across Europe. Private copy levies generally have “no impact on consumers”, GESAC told CMU earlier today, pointing out that the prices of devices on which the levies apply are, in fact. “usually higher in the UK where there is no private copy compensation scheme”.
The only real opponents of the levies, GESAC says, are the major device manufacturers, which are mainly American or South-East Asian businesses, including DigitalEurope members like Apple, Samsung, Huwaei and Amazon, which all boast “huge skyrocketing revenues”.
Meanwhile, GESAC adds, the beneficiaries of the levies are creators and the creative industries which “represent more than 8 million jobs in Europe, contribute hugely to GDP, and make Europe a world-renowned hub for culture and creativity”.
IMPALA, the pan-European organisation for indie labels agrees. Its Executive Chair Helen Smith tells CMU, “Every now and then, this topic pops up again, put back on the table by manufacturers, who are among the main beneficiaries of the market for the copies of copyrighted works but want to shift the payment to other parts of the chain”. Each time, she adds, their proposals are rejected.
Evolution of the private copy levy
Most copyright systems allow individuals to legally make private copies of copyright protected works without getting permission from, and directly paying any money to, the copyright owner.
However, the system compensates rightsholders for that exception to copyright law by providing a private copy levy, which is usually distributed via collecting societies. As private copying shifted away from blank tapes, each country had to come up with an alternative levy system.
In most cases that involved applying the levy to digital storage media - like USB sticks and hard drives - and then subsequently extending it to devices such as mobile phones and tablets that may also be used to make copies. Which devices the levy applies to and quite how it works differs from country to country, and continues to evolve as digital consumption evolves, and new digital products and platforms launch.
“The vastly different national systems across the EU discourage cross-border trade, distort prices and availability, and impose a huge administrative burden on businesses”, Digital Europe claims. And more recent proposals that the levies be extended “to cloud services, refurbished products and offline downloads from streaming services only worsens the problem”.
As on-demand digital content services have become prevalent, there is an argument from some quarters that people make fewer private copies than in the past.
However, some of those services are themselves creating copies of copyright protected works as they are buffered for streaming or downloaded for offline consumption. Although, the digital sector would argue that those copies are covered by the licences secured by the platforms and are not directly accessible by consumers, so they don’t fit the criteria of a private copy.
That said, at the same time, people increasingly create content on their digital devices that may exploit another person’s copyright, and upload third party content to cloud storage, social media or user-generated content platforms - for example, recording a video of a performance at a festival and subsequently sharing it to a short form video platform. And at least some of that activity could be seen as private copying.
Either way, DigitalEurope’s white paper argues that private copying is “drastically declining” and, on that basis, “it is crucial to shift to alternative models that can benefit consumers, Europe’s digital transformation and rightsholders alike”. These models, it says, “should be technologically neutral, avoid market distortion and reduce administrative burden”.
GESAC counters that the levy model has already successfully adapted to modern consumption trends, and that the EU courts have “clarified all aspects of the issue” and “confirmed” an approach that has “evolved, improved and adapted over the years reflecting the needs of all stakeholders”.
Claiming that DigitalEurope’s white paper is “full of inaccurate, misleading and outdated elements”, GESAC adds that “the only missing element” of the current approach across Europe “is the willingness of the giant manufacturers and their distributors to comply with EU law”.
The tech sector’s proposals for change
DigitalEurope’s white paper proposes four alternative models for private copy compensation.
That includes a “household cultural contribution” that “would be linked to the potential use of devices in private households rather than individual device ownership”. Or a levy charged when a creative work is sold. Or a totally new system where individuals making private copies make a micro-payment for each copy, an approach which, DigitalEurope says, could be powered by the blockchain.
The other alternative model proposed is that already adopted in Finland, where the government simply provides a set fund to compensate rightsholders for private copying. This, DigitalEurope argues, “offers stable payments to rightsholders and significantly reduces administrative costs”.
Rightsholders, including in the music industry, have long expressed concerns about that approach, where the fund is not directly linked to the sale of media and devices used for private copying, and is therefore vulnerable to sudden changes resulting from politics rather than market trends.
Those concerns turned out to be justified when the Finnish government announced it was cutting the private copy fund from €11 million to €5.5 million. An assortment of organisations representing the copyright industries, including GESAC, strongly criticised that move back in August, urging the Finnish government to reinstate the €11 million fund.
There are other reasons for opposing the Finnish approach, which the music industry doesn’t want to see extended into other countries. IMPALA’s Helen Smith continues, “State-funded models would make all taxpayers contribute to the compensation for private copying, rather than the people who carry out the reproduction of protected works for private use as required by EU legislation”.
A state-funded system, therefore, Smith adds, “would cut the link between the act of private copying and the payment of fair compensation due to rightsholders, which doesn’t make sense and isn’t fair for the general public”.
Any radical change to the levy system is undesirable as far as the music industry is concerned. Smith continues, “Private copying provides vital remuneration for creators and their business partners. Of course any system is open to improvement as the fees are very low in some countries, but the principle of compensation on blank media and recording equipment is the fairest way to implement such an exception to copyright while remunerating rightholders appropriately”.
GESAC agrees. Stressing that money currently raised by Europe’s private copy compensation schemes supports festivals, grassroots events and emerging artists, it cautions against EU lawmakers seeking to overhaul a system that the music industry and other copyright industries believe is working fine.
“Hundreds of thousands, if not millions, of creators receive direct revenues from private copy compensation schemes”, GESAC goes on, “significantly contributing to their professional careers as creators”.
“The choice for policymakers should be clear”, it concludes. “Why should they change a system which would only benefit the pockets of US and South-East Asian device manufacturers and platforms and put extra cost and burden on European consumers, while significantly harming the cultural and creative sector, which is one of EU’s key ecosystems?”