When the Levy Breaks...
Rivalled only by War and Peace for its length and emotional content, this article by our own Neville Unwin presents both sides of the 'blank tape levy' argument.
Recently, the question of raising a levy on blank tapes has again been raised. Exactly how much are the record companies losing through the widespread but illegal practice of home taping? How, if at all, will the home recordist be affected by this development?
Many readers will no doubt be familiar with the cassette and crossed bones symbol and the phrase 'Home taping is killing music' on the inner sleeves of records. However, home taping extends much further than to illicit recording of records on to cassettes. Video cassettes, pre-recorded cassettes as well as radio and television programmes are all involved, with the result that a great variety of companies would welcome a royalty charged on blank cassettes. They feel that the higher price would deter those who would copy an existing article rather than buy it.
When the 1956 Copyright act was introduced, home taping was a relative luxury that few could afford, but nowadays the problem is considerably more widespread. In this respect, the law has been overtaken by technology, but since the Whitford Committee Report on Copyright Reform, and a realistic and equitable answer to the problem has yet to be found.
There is sometimes confusion as to what exactly constitutes the piracy of a recording. In fact, only if the illegally recorded article is sold for profit does it become a pirate copy. However, as far as record companies are concerned, private copying is now far more of a problem than piracy. Whereas sales lost through pirate copies are estimated to be declining, private copying (for no commercial gain), has grown enormously in the last decade. In spite of a report published by the Consumers in the European Community Group, which concluded that blank tape levies were unnecessary, record companies still feel themselves to be threatened not mainly by organised counterfeiting, but by home tapers.
Nowadays, more hours of music are illegally recorded in Common Market countries than are legitimately sold by record companies. In an estimate calculated by the International Federation of Videogram Producers, legitimate record sales in Britain during 1983 made £482 million and pirate sales £7 million. The potential sales lost through private copying, however was estimated to be £325 million.
Not all of this copying would be illegal, however. Under article 9 (2) of the Berne Convention, (a copyright convention that has 76 countries as signatories) only copying that 'does not conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author'. As composers, performers and producers derive no royalties from privately made copies, they undoubtedly do prejudice their legitimate interests. A royalty charged on blank tapes would recompense artists for the lost record sales caused by piracy, bootlegging and private copying. As the law presently stands the consumer can record two LPs, which would typically cost about £12 for the cost of a blank cassette.
Many arguments against a copying royalty are based on the assumptions that the extent of private copying cannot be measured and that many people who have illegally copied records or radio programmes would not have bought legitimate recordings of the material if such a levy had been raised. However, the results of a survey carried out by the British Market Research Bureau indicate that 18 million adults are regularly copying music from records or radio broadcasts. In 1983, 21 per cent of those who recorded from records would have bought them if copying facilities had not been available and 16 per cent of those copying from the radio admitted the same. Based on this response, lost retail sales in Britain for 1983 have been put at £522 million. This figure is substantially higher in America, as a similar survey for Warner Communications Inc. showed.
Another argument used by those who oppose a levy is that the consumer will record one programme whilst watching another. This is particularly true of video taping, but there will always be a significant number of cassettes that the consumer will want to keep indefinitely. It is also true that many people make cassettes of their own records for in-car use, but the BMRB survey also showed that over half of the people making private copies borrowed records from their friends for this purpose, and that 63 per cent of all blank tapes bought are not subsequently recorded over. In the case of cassettes recorded over several times, a royalty would still be paid only once for each cassette, and would therefore not have such a significant impact.
The record industry sustains a large number of people (120,000 in EEC countries alone) including authors, composers, performers and producers. The threat that private copying poses to the industry undermines their position, which in many cases is already financially insecure and diminishes the level of available funds for investment in artists who may be potential megastars. £1.3 million pounds was invested in establishing the career of Elton John, a figure it would be impossible to consider today because of the decline in record sales.
The blank tape industry, however, is capital intensive, and a relatively small employer. It also depends for most of its sales on the fact that so many people do indulge in private copying. Without making any creative contributions itself, it relies to a large extent on those who do, as do the cassette player manufacturers. Furthermore, there are several new double-headed decks now available, many of which have a high-speed copying capability, thus facilitating multiple duplication for the consumer and blurring the distinction between private copying and piracy. The arrival of digital tapes, compact discs and digital broadcasting has had the further effect of increasing the quality of home recordings as well as the ease with which they are made.
In May 1974, a resolution of the European Parliament called on the EEC Commission to suggest grounds on which a universal European law on 'intellectual property rights' might be implemented. It concluded that a certain percentage of the cost of the relavent hardware should go to the authors and performers who would lose through the sale of this equipment. Therefore, a levy would be raised on equipment such as cassette decks, video tape recorders and photocopiers, as well as on blank tapes. The main reason behind this decision was that there is a large amount of equipment design with a view to home copying.
The royalty itself would be calculated on the manufacturers' or importers' price on sale of the hardware into the market. In the case of blank tapes, the levy would vary according to the length of the tape. The question on everybody's lips is however; exactly how much would these royalties be? It could only in fact be decided by consultation between the rights owners and the manufacturers, and suggestions have been made that an independent tribunal should assess exactly how much should be paid.
Certain tapes would be exempted from the levy, such as those used for recording talking books for the blind and those under 15 minutes in length, the assumption being that these would primarily be used for dictation or computer use.
Public support for the idea of a levy seems high. In the BMRB survey of 1984, 52% of those who owned tape recorders were in favour of a levy and only 25% thought it unfair.
Not only has it been suggested that artists are reimbursed but also that the manufacturing companies also receive some sort of compensation for lost income. Falling sales in the record industry has been consistently blamed on home taping by the companies involved. However, there are may other factors that could contribute to this. For instance, the recession has meant that many people have less money to spend on luxuries such as records, and when money is spent on items such as these, there is competition from other forms of entertainment to consider, such as video cassettes and games. Also, piracy and bootlegging has an effect on record sales, but this is regarded as comparatively insignificant by record companies. They also fail to take into account the fact that an increasing number of radio stations throughout Britain broadcast a great deal of popular music, and there is less necessity to buy so many records to keep track of the latest trends.
As far as the records themselves are concerned, the quality has deteriorated significantly. Lowering the petroleum content has meant that they are now more susceptible to warping, and this is further encouraged by the use of shrinkwrapping. The use of recycled vinyl when pressing records of popular music has affected the playing surface and has a tendency to increase crackles. Perhaps the greatest factor to contribute to the decline in record sales is the increased popularity of pre-recorded cassettes that now have better recording quality than ever before. Because many are of the opinion that the record industry has only itself to blame for its falling sales, they have no wish to subsidise it.
The figures produced by the record industry to substantiate their case are also being questioned by the Tape Manufacturers' Group (comprising Agfa, BASF, 3M, Maxell, Memorex, Sony and TDK). There is no explanation, for instance, of how the figures showing lost revenue from home taping are calculated. They would seem to be absolutely impossible to assess. Moreover, the decline in record sales has been markedly sharper than any increase in blank tape sales.
Film and television companies are also interested in raising a levy on blank video tapes for similar reasons to the record companies. As already stated, the vast majority of video tapes are only used to record programmes that would otherwise have been missed, and are recorded over again as soon as the programme has been watched. The viewer will already have paid for those programmes in the form of his television license fee, and so the fact that they are seeing the programme (and any adverts) at a more convenient time is irrelevant to the amount they pay for the programme. This view is further substantiated by the fact that only one licence per household is necessary regardless of the number televisions on the premises. A levy on video tapes would mean in fact that they are paying twice for the same programme. The TMG therefore believes that people who record programmes merely to watch them at another time should not find themselves breaking the law.
If (for example) film companies expect their films to be copied, compensation should be paid by the broadcasting company involved, who, after all are charging the consumer for the capability to watch it. The Tape Manufacturers' Group do, however, take the opposite attitude when it comes to piracy and bootlegging. They are in support of tougher laws surrounding these activities for the prime reason that they involve selling copied tapes for private gain and not copying tapes for private use.
Blank cassettes have proved themselves to be very useful and cost-effective in business applications, such as dictation and computing, and non-musical applications of blank tapes are growing rapidly. Education, leisure industries and medical research also make use of them and this has had the effect of increasing demand. If a levy were to be raised and paid to the record companies themselves, one industry would merely be supported at the expense of another.
With this expansion has come a corresponding increase in jobs created in manufacture, distribution and in the applications that these tapes are put to. Not least among these is of course the uses blank tapes have in recording studios, professional or amateur. The studio recordist commonly uses good quality cassettes (usually C90s). Paying a levy would mean that they would be paying a royalty to people whose music they might have taped if they hadn't used their cassette in the studio. This would hold true whether the levy raised would go towards recompensing record and film companies or towards paying royalties to artists, both of which have been suggested as being in need of lost revenue.
In the case of recompensing artists, the number of people that could legitimately claim a stake of the money available would be phenomenal, and therefore so would the price of the levy. In any case, how could such a sum be accurately divided? This is a question yet to be answered.
One of the most obvious consequences would be the effect on the tape industry if cassettes were to be sold at what is rumoured to be twice their current price. Considerably smaller levies than are suggested in Britain have been imposed on blank tapes in Norway and Sweden with considerable effect on the blank cassette and video industries. In Sweden, sales of blank cassettes fell by almost a third in 1982, and sales of video cassettes by over 90%. Similarly, companies making video recorders also had sales drop by almost two thirds. Other effects were the corresponding increase in smuggling to release cut-price, poor quality videotapes on to the market and the creation of a flourishing market for second-hand videotapes that can damage video recorders. The money gained from the tax has fallen greatly in the years following the introduction of the tax. After the first ten months of its application, income fell from 120 million krona to 16 million, a situation reflected in Norway when they imposed a tax on tapes in 1982.
Another effect of the levy would be that many royalties would be paid to artists and manufacturers overseas, resulting in a large increase in the amount of sterling leaving the country.
Moreover, the added bureaucracy involved for the retailers would be so large that many of them may well be tempted to stop selling blank tapes altogether. A similar problem would occur for the blind person who, though exempt from the levy, would need to fill in forms in order to obtain his refund.
As the cost of good quality equipment such as compact disc players and half-speed mastered records decreases, so the public will gradually get used to high quality sound reproduction and will therefore find cassettes taped at home a poor substitute.
Perhaps the most powerful argument against a levy is that most music taped at home is of temporary interest and the record would not necessarily have been bought by a consumer who tapes it. One effect of this is to promote interest in lesser-known artists whose records few people would risk spending a lot of money on.
There seems little doubt in most peoples' minds that the law should be amended with regard to the taping of records and television and radio programmes. As it stands, the law is unenforceable and outdated, but a levy on blank tapes would create more problems than it solves. Naturally tape manufacturers have no desire to see a rise in the price of cassettes and video tapes, and recommend that two other measures should be put into effect instead of a levy. Firstly, they would like to see a lifting of the law that prohibits home taping for private use. To counterbalance this, they propose heavier penalties for those involved in piracy, bootlegging and counterfeiting. In fact the Government's policy on home taping has been reversed in the last four years. The Green Paper on copyright reform published in July 1981 stated that 'The Government has... not received convincing evidence that the introduction of a levy... would provide an acceptable solution...'
The International Federation of Phonogram and Videogram Producers is a body set up by various pro-levy campaigners to promote their point of view. Their report entitled 'The Private Copying of Sound and Audio-Visual Recordings' was prepared by Gillian Davies, Associate Director and Chief Legal Advisor to the IFPI in response to a request from the European Commission. The danger of acting on this report would be that it is compiled solely by those who would directly profit from a levy and therefore reflects their interests alone. In no way should the report be considered as objective. As is in fact stated in the report, the fundamental purpose of the entire study is to clearly demonstrate the legal need and economic case for the implementation of a royalty on recording equipment and media. Nor does it take any account of the market for records actually created by having cheaper blank tapes.
Recording tape manufacturers have not been inactive in the face of this report. In response to the lead taken by British tape manufacturers, those in other member states of the EEC are now attempting to oppose the pro-levy attitude taken by the EEC. The Tape Manufacturers' Group held an international conference in Brussels last February where delegates from six other EEC states agreed to campaign against a levy in their respective countries. British manufacturers naturally fear that the British Government may simply follow the EEC's lead in imposing a levy.
In concrete terms, the report calls for levies of one EEC currency unit (equivalent to 61p Sterling) per playing hour of tape and three currency units per hour to be levied on blank video tape. In addition to this, VAT would be payable on the costs of the levies as well as the on the costs of the tape itself. The result would be to approximately double the price of both audio and video cassettes.
The TMG disagree not only with the recommendations of the IFPI, but also with the fundamental idea of a report compiled by record and video manufacturers, however, and advocate 'an impartial analysis of the situation by a totally independent body.' The TMG themselves carried out a survey that seems to contradict some of the figures put out by record companies. They claim, for instance that 22% (not 44%) of the public buy blank recording tape, and that 70% (not 50%) of it is used to record records that the consumer has already bought. Another major statistic questioned by the TMG is the claim that 230 million album tapings occur each year. This, they argue would mean that every LP sold last year would have been taped on average four times.
The arguments on both sides have been passed to and fro for years and have at times become heated, but the Government does in this case seem to have taken both viewpoints into account. According to the green paper; The Recording and Rental of Audio and Video Material, the money raised from the levy will be used to recompense all copyright holders, not to help the manufacturing industries involved. Moreover, the actual cost of the levy to the consumer will probably be much less than the record companies have been advocating. Although no price has been finally agreed upon, it is suggested in the paper that the levy could be 10% of the cassette retail price, (or 5% for video cassettes). This would represent an increase of about 12p on a typical C90. (What was all the fuss about?) This, the paper continues, should not unduly affect the blank tape industry, something the industry itself denies, and will no doubt make this point clear when consulted on the size of the levy.
Whether this will be enough to reimburse all those necessary remains to be seen.
Tapes of less than 35 minutes in length will have no levy imposed upon them as it is supposed that they will be used for dictation or computing purposes. The only exceptions made to the payment of the levy will be organisations such as those concerned with helping the blind, or others using blank tapes for legitimate purposes (presumably such as professional recording studios). Home recordists will not be exempt.
From a home studio recordists point of view, however, any type of levy (for manufacturers or artists) would appear to be unfair. By recording original music on personal equipment, he or she will be infringing no aspects of copyright, and therefore there can be absolutely no justification for them to pay the extra prices for cassettes needed for demo copies. These would usually be high quality C90s - exactly the type of tapes expected to rise highest in price following the introduction of a levy. A solution to this problem should be a necessary addition to any laws passed on the matter. If the blind will be able to claim back the extra expense, surely home recordists should also be reimbursed in some way. After all, the original point of charging a levy would be to protect artists recording original material - a category that certainly includes the home recordist.
Perhaps this amount of argument and discussion seems ridiculous when the levy involved has turned out to be such a small amount. However, it is very difficult to calculate the costs involved, and who exactly is entitled to benefit from the levy, and there is more danger of its cost going up than down. Government taxes and levies naturally tend to be unstable at Budget times. The Tape Manufacturers' Group claims that at a cost of 10p, the administration costs alone of introducing a levy would far outweigh its yield.
I expect one upshot will be a few more C30s amongst our reader's tapes now...