The Music Business Group (MBG) has called for the government to couple format shifting with a levy to compensate rights holders, as is common in other EU member states such as Denmark, France and Germany.

The MBG – an informal coalition of a number of high-profile trade bodies in the music industry, including the British Phonographic Industry, the MCPS-PRS Alliance, Phonographic Performance Limited and the Musicians’ Union – has called for a tax on devices such as Apple’s iPod, which it says would compensate artists. The EU Copyright Directive gives member states the option of charging a levy, stating that either they can ban private copying, or they can allow it provided that they introduce a system that ensures fair compensation for rights holders.

Many EU member states allow private copying, but have coupled this with a levy on blank media such as CDs, DVDs and other recordable storage media. In February 2008 EU Internal Market Commissioner Charlie McCreevy stated: “There can be no question of calling into doubt the entitlement of rights holders to compensation for private copying.”

At present, the United Kingdom has no private copying exception – but this may change. The 2006 Gowers Review suggested the introduction of a new “format-shifting” exception to copyright protection, which would allow consumers to copy works for which they have paid in order to transfer them from one format to another - for example, from a CD to an MP3 file, or from video to DVD. However, it rejected the imposition of any accompanying levies for consumers. Its rationale was that rights holders can include in the sale price the economic cost of the right to copy, thus complying with the ‘fair compensation’ requirement under the directive.

As a symptom of the increasingly digital music market, major UK retailer Woolworths has ceased selling CD singles, pointing out that just 8 million CD singles were sold in the United Kingdom in 2007, compared with 55 million in 2000. In support of its argument, the MBG cited data from Music Ally that in 2007 over 20 million MP3-capable portable devices were sold in the United Kingdom, and over 90% of music on the average MP3 player has been copied. On closer analysis, Music Ally’s data reveals that: 

  • 51% of the music on the average MP3 player is from a person’s own CD collection; 
  • 40% is copied from non-paid-for sources (27% from free downloads and 13% from friends); and 
  • 9% is from paid downloads.

Thus, the Gowers recommendation would apply only to the 51% for which the individual has already paid. The government does not view this as a breach of EU law and points out that a recital to the directive states that “in certain situations, where the prejudice to the rights holder would be minimal, no obligation for payment may arise”.

It is not just the UK music industry that faces obstacles to imposing such a levy. The Dutch courts recently denied an attempt by Dutch artists to force a levy to be imposed on iPods, MP3 players and blank optical media, and the Canadian Private Copyright Collective has failed to convince the Canadian government to force iPod buyers to pay a copyright levy.

The format-shifting exception looks likely to be introduced in the United Kingdom in order to legitimize consumers’ existing activity, to which the music industry has already turned a blind eye.

However, the proposal to introduce a levy on blank media, including iPods, has not found favour with the UK government.