The Role of Levies in Canada's Digital Music Market

Parties not directly involved in the use of copyright-protected music have increasingly become the targets of established or proposed schemes to provide revenues for the music industry. It has been suggested that rather than obtaining payments directly from consumers or distributors of digital music in exchange for licenses to use or transmit that music, levies should be imposed on the goods and services of third parties, such as recording media, digital devices and/or Internet access. This paper considers whether levies are an appropriate way to deal with the challenges and opportunities that are arising in Canada's digital music market. Traditional business models in the music industry have been built mostly upon the voluntary exchange of rights in a free market. Arguably, however, exclusive copyrights are pragmatically difficult to monitor and enforce. Enforcement may also be objectionable for privacy reasons. Copyright markets might be relatively inefficient, and can lead to a concentration of revenue and market power in the hands of foreign corporations at the expense of Canadian artists. In light of all these concerns, it is not surprising that both copyright-holders and consumers sometimes advocate a greater role for levies. I argue that tariffs or levies on the goods and services of third parties are not the best method to support the Canadian music industry in the digital environment. Although copyright markets are far from perfect, the appropriate response is to simplify market exchanges rather than undermine them through an expanded exemption/levy scheme. The concept of substituting third party liabilities for free-market transactions suffers from numerous flaws. This paper canvasses possible philosophical objections, constitutional constraints, international treaty issues, cross-subsidization concerns and outdated assumptions, all of which must be dealt with before a broad exemption/levy scheme would be viable in Canada. On balance, I argue that the downside of levies outweighs any benefits. In the long term, the whole idea of exclusive copyrights may require some fundamental rethinking. But in the near term, proposals for radical reform will likely lead to compromise solutions and half-measures, which are neither conceptually justifiable nor practically workable. Therefore, it is best to simply tweak the existing system of exclusive copyrights and free markets by promoting and streamlining voluntary collective licensing models, where necessary. These should be supplemented with stable and generous public funding programs targeted directly at Canadian artists and music consumers.

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