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Workin' on the Levy:
Andrew Marshall finds himself viewing political theatre of the absurd
CD-R Disc

(see the sidebar for the legal details and fine print)

       It's December 31st as I write, and tomorrow, my Canadian friends, Sheila Copps and her chain gang at the Canadian Heritage department of the Federal government have a little surprise for you: A levy on all consumer recording media. Yep, another tax to fuel our bureaucratically encouraged culture.

       It's not quite a secret, though the legislation for it was whiffed through as part of the copyright bill, C-32, last March. And, as a story in today's Globe And Mail notes, knowing cassette and CD-R fans have been buying up all the media they could, clearing out stores on lower Yonge Street in Toronto, and the stock of A&B sound in downtown Vancouver. How did they find out, with so little publicity in the press before today? Apparently, there's been some buzz on the Internet, and word has been leaking out in the audiophile community, as well as in the trade.

       I've been interested in this story for a couple of months, and have been conferring with some of those in the trade who will be affected, but more on that later. First we have to describe this beast, before we can unravel some of the extraordinary absurdities enshrined in this legislation, which in this particular aspect of copyright, seems to be driven by ideology and ignorance, with the active encouragement of record industry greed.

       "Drove My Chevy To The Levy, But The Levy Was Dry..."

       My first call to ascertain the facts in this story was a few weeks back, since some of the building paranoia in the pro audio business seemed a little apocalyptic, and it went to a gentleman named Claude Majeau, secretary to the board dealing with shaping this levy, the Candian Copyright Board. He did not return my call, but I did get a prompt response from Mario Bouchard, counsel for the board. We discussed the broader aspects of the legislation and its coming implementation. Even here, in our brief conversation, the whiff of Catch 22 was getting stronger. He promised to E-mail me the relevant parts of the bill and recommendations for how to implement it (see sidebar).

       Manufacturers and importers of any recording media that could be used by consumers to copy musical performances that are copyright will have to pay the levy starting January 1st, 1999. However, the exact nature of this levy, that is, how much it will be, and to what proportion of cassette tapes, CD-Rs (the consumer versions of which already contain copyright fees, and are therefore about four times the price of pro CD-Rs), Mini-Discs and whatever else comes along in the future, it will cover, are both yet to be determined. It could also apply to DAT tapes, but it's pretty hard to make the case for these as a consumer format. Mr. Bouchard noted that the levy could be as much as the proposed $.25 per 15 minutes on analog media, and $.50 for the same period on digital. And since these fees are collected at the source, manufacture or importation, their effect at retail is likely to be triple these amounts. Or as the wise counsel said to me, "...or, it could be pennies."

       But before I even get into the implications of this (as you do a little math in your head), consider this: as you read, this levy is in legal force without manufacturers, importers, or consumers knowing what media it will cover, or how much it will be. The bloody thing is retroactive, even if they don't decide on these parameters until after 2000! Talk about your Y2K, eh?

       The Canadian Way

       You'd think these bozos at Heritage would learn, wouldn't you. Well, let me tell you a little story about the AIG experience with the Copps gang, who've already been belted by the WTO for their trade legislation about magazines. Two years ago we were offered, and bought the Sound & Vision subscriber list when Paul Hellyer, who owned it, decided to shut it down. As a Canadian magazine, they qualified for the Heritage postal subsidy. So should we, I surmised, and applied for this relatively new aid to domestic publications. After months of form filling, phone consultations, and general bureaucratic stuff, we were turned down for Heritage postal status and its reduced rates. And do you want to know why our application was refused?

       Well, it was because we'd bought the Sound & Vision subscription reader base! Their reasoning was that, since I hadn't gone out and, I suppose, knocked on doors myself to get all those many thousand readers, they were not our own paid readership, even though we'd legitimately bought them, and paid a pretty good price, too. Catch 22? You bet! Maybe you're one of those readers.

       Bureaucracy is the Canadian way, it seems, and the bureaucracy of taxes and subsidies is an essential element of Liberal politics. We may be a mouse in the shadow of an elephant, but our cultural bureaucracy is more like a hippopotamus. And this recording media levy is another absurd result of hippo thought. It is a retroactive tax of undefined amount on undefined goods!

       So, How are Tape and CD-R Manufacturers Going to Deal With This?

       The obvious answer is that they'll have to raise prices by some amount, gambling that they can come close to what they'll eventually have to pay the government. What if it's less? Will they refund money to the individual consumers who bought media? Will they reap windfall profits? What do you think?

       What if it's more, and the manufacturers have to pay millions of dollars in levies to the government? Will they go bankrupt? Withdraw from the Canadian market? What happens then? Well, I can tell you what people in the trade think. This levy may be the biggest encouragement to a vibrant grey market ever conceived. If aliens, cigarettes, and booze can cross borders freely and illegally, how about cassettes and CD-Rs? And I think I smell the growth of yet another bureaucracy: enforcement! Not only will we pay more for the Copps Tapes, but we'll also be paying more for the Tape Cops!

       Who Gets The Goodies At The New Year's Levy?

       Given the nature of this rough beast slouching back to Ottawa to be born again some time this year (if we're lucky; it'll probably take longer), it's hard to figure out at this point who pays what to whom for what. It appears the levy will be collected by the new Neighbouring Rights Collective of Canada (NRCC), and turned over to several groups that already administer musical copyright payments for airplay and other copyright uses, including SOCAN, the Society of Composers, Authors and Music Publishers of Canada. These societies are "free to distribute what they receive as they wish", according to M. Bouchard, something I find astonishing, expecially in view of the Draconian enforcement mechanisms involved in the collection process.

       Recordable media manufacturers and importers will be required to keep 6-year records with respect to the levies, and will be subject to audit, with a possible penalty of up to 5 times the amount of levy owing. Measures have been taken to give the bill teeth, only to seemingly scatter the proceeds to the wind, or at best, give the money back the same existing players rather than to the starving artists the measures were naively intended to help..

       I suspect that much of the proceeds, if not most, will go into the pockets of the multi-national record companies that control musical entertainment in this country, and thereby expand and deepen their control of our media. They already control recorded media, and now it seems they are being handed recordable media on a platter. Gee, thanks, Sheila.

       How those people who are not already in the recording/airplay loop will be helped by this levy is quite unclear. There seems no provision for enabling musicians to make recordings, in fact, the taxing of their media if they are not deemed professionals, will make it harder, or, at least, more expensive for aspiring recording artists to get started. Gee, thanks, Sheila.

       The Grey Market & The Black Hole

       If a grey market in recordable media is not turned into a booming industry, other things will almost certainly occur. One of these is the absolute death of the cassette as a consumer recording medium. It's been in decline for years, anyway. Most of the tapes sold for consumer use are low bias types, and many of these are used for copying of non-copyright materials. Consider, for example, the number used for telephone answering machines.

       In fact, in a study prepared by CEMC, the Consumer Electronic Marketers of Canada, and presented to the federal government in 1987, sales statistics showed that pre-recorded music tape sales were more almost 3 times those of consumer blank cassettes. Though tape sales have declined in the decade since, one would not expect much change in these ratios. This study, by the way, argued persuasively against a levy with real industry statistics, while the opposing presentation by the record industry was based on a consumer study, a "highly representative random sample of 500 respondents" giving (according to the pollster) "a level of confidence of 95 percent with a margin of error of 4.5 percent."

       Sure. It's a Good Thing We Don't Elect Governments This Way.

       Naturally, their study found that just about everybody made tapes to save money on buying albums. Of course, this was 1987, just a year or two after the record companies had introduced the CD, and were in the process of killing the LP in the face of still-strong demand. It is no surprise that they would do this when they'd introduced CDs selling at more than twice the price of a record or a pre-recorded tape.

       I have both studies, and there is no doubt that the CEMAC one uses real facts, while the Canadian Independent Record Production Association (CIRPA) one is 3 times as thick and based mostly on the words of 500 people on the phone. I guess with government, size matters.

       Will Any Common Sense Prevail?

       Who knows. The tape and CD-R importers don't even know what prices to put on the products. And the impact of any price increase is likely to rev up the grey market or utterly and finally kill the cassette format, and cause major headaches for anyone who even thinks about CD-Rs. And, dear consumer, dear Canadian so beloved and protected by our Department of Heritage, are you going to buy a mini-disc player this year to replace your cassette deck?

       I doubt it, with these price increases on media, especially the massive ones that will be required for the importing companies to effectively cover their asses, given the numbers provided by the Copps crew (and very especially in view of the Draconian penalties for non-payment).

       We may well be looking soon at $15 C-90 cassettes, $20 consumer CD-Rs, and $30 mini-discs at retail. And, guess what, the Federal and provincial governments in Ontario and many other provinces will still add another 15% to what you pay at retail.

       In the case of this levy and current taxes, you get shafted both coming and going. Thanks, Sheila! Thanks a lot!

Andrew Marshall

(see the sidebar for the legal details and fine print)