Canadian Private Copying Collective (CPCC)

Introduction

The Canadian Private Copying Collective (CPCC) is an umbrella organization whose member collectives represent recording artists, composers, songwriters, music publishers and record companies. Under the Copyright Act, manufacturers and importers of blank audio recording media pay the CPCC a small levy for each unit imported and sold in Canada, to compensate music creators for unlicensed private copying of their work. Private copying refers to the act of making copies of your music collection for your own personal use, anywhere, anytime.

The CPCC appreciates the opportunity to provide a written submission to the Consultation on a Modern Copyright Framework for Online Intermediaries. The CPCC, alongside its member collective organizations and other key music industry stakeholders, were strong advocates during the 2017-2019 Statutory Review of the Copyright Act for the legislative changes required to update Canada’s private copying regime. Our comments here follow our earlier submissions made to both the Standing Committee on Canadian Heritage (see submission here) and the Standing Committee on Industry, Science and Technology (see submission here), as well as our recent pre-budget submission (see submission here).

The Government’s consultation paper is focused primarily on licensing and enforcement issues affecting the online marketplace, but importantly, regardless of how these issues are addressed within the Copyright Act, a modern private copying regime is needed to address the gap between enforcement and licensing. Technology keeps making it easier for consumers to copy music, but it is not always possible for rights-holders to license or enforce against those copies. This is precisely why Canada’s Copyright Act was changed in 1997 to allow Canadians to copy music onto audio recording media for private use and, in return, to require remuneration for creators and music companies for that unlicensed use of their work. Now, Canada’s private copying regime must be made technologically-neutral so that remuneration can keep up with the evolving digital marketplace.

Background

For many years since its creation in 1997, the private copying regime was an important source of earned income, generating a total of over $300 million in revenue for over 100,000 music creators and the companies that invest in them. Unfortunately, the regime has been limited since 2010 to a single audio recording medium, now virtually obsolete: recordable CDs. That means compensation for rights-holders has plummeted from $38 million in 2004 to $1.1 million in 2019 – even as annual copying activity more than doubled.

The reason for that limitation to CDs can be found in the specific wording of Part VIII of the Copyright Act, which established the regime for copies of recorded music made on ‘audio recording media’ for private use. When MP3 players emerged and consumers used them to store an unprecedented number of such copies, the Copyright Board certified the CPCC’s proposed tariff on the non-removable memory permanently embedded in those devices^{Footnote 1}. However, that 2003 decision was appealed, and made its way to the Federal Court of Appeals. The Court actually affirmed the desirability of levying MP3 players (a technology that Parliament could not have envisioned when enacting Part VIII), but stated that Parliament would have to adjust the Act’s wording to permit it. From Canadian Private Copying Collective v. Canadian Storage Media Alliance (F.C.A.) [2005] 2 F.C. 654:

[153] One can readily understand why the Board wanted to go as far as it could to bring MP3 players within the ambit of Part VIII. The evidence establishes that these recorders allow for extensive private copying by individuals. Their use can potentially inflict on rightsholders harm beyond any "blank audio recording medium" as this phrase has been understood to date. However, as desirable as bringing such devices within the ambit of part VIII might seem, the authority for doing so still has to be found in the Act.
[…]
[164] …it is for Parliament to decide whether digital audio recorders such as MP3 players are to be brought within the class of items that can be levied under Part VIII.^{Footnote 2}

The harm inflicted on rights-holders by this outdated terminology in the Act, as the Court identified, is real and ongoing: they have never been paid for the billions of unlicensed private copies Canadians make on MP3 players or any other device designed to store those copies. Every stream of income from copyrighted music is essential to cobble together a living from music, particularly for Canada’s many up-and-coming artists and small music companies. Private copying levies are payment for a use of music that is different from any other use. Rights-holders are remunerated when (for example) their music is recorded, streamed, or performed at a festival, but they must also be remunerated when people make copies for their own use. Copies have value or no one would make them. Now this income source is on the verge of disappearing entirely, which is fully and completely at odds with the reality of private copying activity in Canada, and increasingly out of step with international norms.

Current situation

Streaming may have taken over from the days of mixed tapes and burning CDs, but Canadians still make billions of private copies for listening offline. Wherever possible, rights-holders license the streaming, downloading and other copying of their music, but the reality is still that not all copying activity can be licensed.

Our most recent research shows that there are 5.95 billion tracks of music currently stored on Canadians’ phones and tablets, and that half of those copies are unlicensed.^{Footnote 3} Unlicensed, and no levy – that is a lot of revenue out of the pockets of music rights-holders.

As the country grapples with recovery from a global pandemic, it has never been more important for recording artists, composers, songwriters, music publishers and labels to be able to earn income from their intellectual property. The pandemic has laid bare just how difficult it is to join the middle class if you work in any part of the music industry. Government emergency relief measures have been essential to minimizing the immediate impacts of COVID-19 on Canada’s music industry, but it is imperative to map out now the necessary approaches to recovery and resilience. A functioning copyright framework is a critical building block – rights-holders with predictable, healthy royalty streams produce both cultural riches and employment and investment opportunities for creators, labels, publishers, managers, recording engineers, live music venues, and thousands of other Canadians from coast to coast to coast.

Solution

The CPCC asks that the government amend the Copyright Act to make the private copying regime technologically-neutral; the focus of these amendments would be to allow the regime to apply to both audio recording media and devices.

With minimal revisions to the Copyright Act, the private copying regime would be restored to what it was originally intended to be – a flexible, technologically-neutral system that monetizes private copying that cannot be controlled by rights-holders.

The CPCC also proposes minor revisions to the Act to clarify that this exception to copyright infringement does not extend to offering or obtaining music illegally, whether through an unlicensed online service, stream-ripping, or by stealing an album from a store – such activity remains illegal. The private copying regime is for copying that cannot be controlled.

Legislative change was vital for a functioning, world-class music sector in Canada long before the arrival of COVID-19.  Now, in conjunction with short-term direct government supports aimed at sustaining the sector, copyright reform will be more essential than ever to a music industry faced with re-building.

In the medium-to-long term, marketplace solutions like a technologically-neutral private copying regime will be critical to the music sector’s recovery. Updated copyright legislation will put lost revenues back into the system, and back into the pockets of the creators and music companies that earned them, instead of just relying on government-funded support measures. 

Passage of these amendments would make it possible for the CPCC to ask the Copyright Board of Canada to approve a levy on the smartphones and tablets where Canadians now make their private copies. For two decades, the CPCC has represented its members before the Copyright Board in trial-like public hearings where experts – representing music rights-holders, consumers, and the businesses that sell leviable media – present evidence and are cross-examined. 

The stated goal of this consultation is to “help the Government ensure that Canada’s copyright framework for online intermediaries reflects this evolving digital world.”  In the case of private copying, the Copyright Act has simply not kept pace with technology, leaving rights-holders uncompensated. When the private copying exception and remuneration were added to the Copyright Act in 1997, Parliamentarians could not possibly have imagined the myriad of technologies and services available to consumers today to facilitate the copying of music for personal use. Making the private copying regime technologically-neutral serves this Government’s goal by ensuring that Canada’s Copyright Act can keep up with a rapidly and constantly evolving digital marketplace for music.

Industry-Wide Support

During the Statutory Review of the Copyright Act, undertaken in the last Parliament, private copying reform was among the issues most widely supported – and least opposed – in submissions from any sector, leading to a recommendation from the Standing Committee on Industry, Science and Technology that the government should “extensively assess the opportunity to extend the private copying regime to digital devices”.

Private copying reform remains a priority across the music industry. Appended to this submission is a July 2020 letter addressed to Minister of Canadian Heritage, Steven Guilbeault and former Minister of Innovation, Science and Industry, Navdeep Bains, signed by the CPCC and 19 other music-industry organizations, urging the government to amend the Copyright Act to bring technological neutrality to the private copying regime.

Moreover, a recent national campaign showcases extensive support for private copying reform from individual rights-holders. In December 2020, the CPCC launched the Stand on Guard for Music Campaign, a bilingual grassroots campaign to allow individual music rights-holders to let federal political officials know that it’s time to make the private copying regime technologically-neutral, by making the necessary legislative changes to the Copyright Act. The campaign generated responses from 1,575 Canadians. Please see some highlights on that campaign’s reach in the infographic below.

Myths & Facts About Private Copying

In public consultations like this one, the Government often receives submissions that are not backed up by evidence, or are misleading, even if unintentionally so. The reports from the Standing Committees describing what they heard in the Statutory Review of Copyright include some of the more common myths and misperceptions about private copying that bear correcting with the relevant facts.

Myth #1: No one is even copying music anymore.

A very common myth about private copying is that, because of the rise of streaming, Canadians simply aren’t making private copies anymore. This could not be further from the truth. The reality is that Canadians are still making billions of copies for listening offline – for example, when their data plans are maxed out, or there is no Wi-Fi available.

In 2019, the CPCC collected data from almost 10,000 Canadians aged 13+ through an online survey, to answer this specific question about the extent of private copying activity in the streaming age.^{Footnote 4} The findings:

• 5.95 billion tracks of music are currently stored on Canadians’ phones & tablets
• 1/2 of the copies were made in the prior 12 months
• 1/2 of the copies WERE paid for through LICENSED DOWNLOADING AND streaming services
• 1/2 of the copies were unlicensed

When Canada’s first levies were certified by the Copyright Board of Canada in 1999, there were 2 million private copies made onto blank CDs that year.^{Footnote 5} Our research demonstrates that the current level of unlicensed private copying onto phones and tablets is exponentially higher per year – over a billion in 2018.

Some critics of private copying levies have made the argument that devices like phones and tablets are multi-functional, and not everyone uses them to store music. These discussions are not new – CDs and audio-cassettes were always used for other purposes as well – and the Copyright Board process takes account of this factor already. The CPCC must present evidence that a specific type of media is ordinarily used to copy music, and the extent to which it is also used for other purposes. The levies set by the Copyright Board have always been adjusted to account for the fact that media have other uses, such as data storage.

Myth #2: A private copying levy would be harmful to consumers.

The truth is that, while the Copyright Board would ultimately determine the value of any approved levy on devices, the CPCC has been transparent that its proposed levies would be a minute fraction of the cost of a smartphone or tablet, comparable to the average levy payable on a smartphone in Europe: around CDN$3, or the price of a cup of coffee.^{Footnote 6} As always, the levy would be payable by manufacturers and importers of the device, and in the case of many smartphones and tablets, that cost is amortized over the life of consumers’ multi-year contracts with intermediary companies that provide these devices in a bundle with other mobile network services. It is not certain that a levy on these devices would be passed on to consumers at all, and if it were, it would be barely noticeable.

Canada’s private copying regime was supposed to work to the benefit of all players in the system. As demonstrated by the graphic below, in a functioning private copying system, consumers, tech companies and music creators and their business partners all benefit from the levy system. For many years now, Canada’s system has been out of balance: tech companies’ profits have grown from sales of music-enabled devices, and consumers make more and more private copies on these devices without authorization from rights-holders, but music creators and their business partners are not being compensated for these unlicensed copies.

It was always understood that balance is an essential component of a private copying regime, and that compensation to rights-holders is essential if we want them to be able to continue making the music Canadians love. From the Copyright Board decision on the inaugural 1999-2000 CPCC Private Copying Tariff:^{Footnote 7}

The scheme is also meant to affect behaviour. Knowing that copying musical works for their own use is now allowed may well encourage individual consumers to do so. This would result in the wider dissemination of musical works, in an increase in the sale of audio recording media, and in increased creative efforts on the part of creators, artists and producers as a result of the possibility of equitable compensation.

Finally, those who are most directly concerned with the scheme benefit from it and caused the need for it. By selling and actively marketing blank audio recording media, manufacturers and importers encouraged the now legalized activity and directly profited from it. They contributed to the need for the regulation. They now stand to benefit from the scheme if, as just stated, the legalization of the activity leads to an increase in the sale of their products.

In the Statutory Review of the Copyright Act: Report of the Standing Committee on Industry, Science and Technology report, the Committee Observations and Recommendation section highlights that the Government should “extensively assess the opportunity to extend the private copying regime to digital devices...”This lens of opportunity is important – an updated, technologically-neutral private copying regime is an opportunity to restore balance by ensuring that music rights-holders are compensated for a valuable use of their work that cannot be licensed or prevented.

Myth #3: Private copying levies are of diminishing importance globally.

The Private Copying Global Study, produced jointly by CISAC, BIEM and Dutch society Stichting de Thuiskopie in 2020, provides the most current and comprehensive analysis of the state of private copying globally across 194 countries and 5 continents. Canada’s private copying regime is highlighted in several places in the report as one of a small handful of outliers around the world, because our regime remains limited to recordable CDs.^{Footnote 8}

In contrast to the situation in Canada, the 2020 study reports that global collections for private copying rose from €669 million in 2015 to €1.046 million in 2018. Moreover, most of the countries around the world with functioning private copying regimes – including Austria, Belgium, Croatia, France, Germany, Hungary, Italy, Morocco, Netherlands, Paraguay, Portugal and Switzerland – extend levies to a wide variety of devices.

Private copying levies continue to be recognized internationally as the best solution to provide compensation to rights-holders for this ongoing and valuable use of their work that cannot be controlled.

Included in the Appendix to this submission, please find a letter from CISAC’s Director General, and testimonials from international creators underscoring the importance of a modern private copying regime.

Conclusion

Canada’s private copying regime is a proven tool to facilitate compensation of rights-holders for private copies that cannot otherwise be licensed or prevented. However, only a technologically-neutral private copying regime can ensure that rights-holders are actually compensated regardless of how technology changes. This simple update to the Copyright Act will allow the regime to live up to its original promise for creators and their partners in the recorded music industry.

For years now, consumers and technology companies have been enjoying the benefits of making unlicensed copies of music on devices while rights-holders go unpaid for this valuable use of their intellectual property. We urge the Government to right this imbalance, to ensure that its copyright framework can keep up with a rapidly evolving digital marketplace so that rights-holders are not left behind.