Music Biz Would Rather Tax iPods Than Legitimise Format Shifting

The record industry has challenged a UK government proposal that would legalise “format shifting” from CD to gadgets like iPods – and instead demanded portable music device makers pay a levy to support the practice.

The Music Business Group (MBG) – representing pretty much the whole of the business – criticised January’s proposal from Lord Triesman that copyright law should be amended to decriminalise personal copying. Instead, it wants a license under which format shifting could take place and for which technology makers would pay fees via the PPL and MCPS-PRS royalty collection societies. Call it an “iPod tax“.

MBG: “Unquestionably, there is a value produced by the ability to format shift. It is imperative that creators and performers should benefit directly from this value. At present, this value is enjoyed by both consumers and technology companies while creators and right holders are effectively excluded from any value. This constitutes market failure.”

But the MBG doesn’t want government to set the levy: “The licence fee would be determined by commercial negotiations between creators and right holders and manufacturers and distributors of devices substantially used or marketed for making copies of music.” In other words, record labels reckon they can convince gadget makers like Apple (NSDQ: AAPL) to pay them a tax set at a rate they determine, for the privilege of having consumers use their product.

Amongst stats put forward to support its case – over 20 million portable players are sold in the UK annually, and nine in 10 youngsters engage in some form of copying. But these numbers may only serve to illustrate how difficult such a tax would be to implement.

Triesman’s proposal had come in a UK Intellectual Property Office response to Andrew Gowers’ 2007 digital copyright review and would close a loophole that essentially criminalises millions of music lovers. It’s estimated over 90 percent of tunes on portable music players are transferred from CDs. The industry has traditionally turned a blind eye to the practice and Triesman wanted to enshrine the right to copy by amending the Copyright, Designs and Patents Act 1988.

But MBG said Triesman’s recommendation would merely “enshrine market failure in national legislation”. It agreed to the law change if its levy is implemented, if music could only be copied by its original owner, for private use, only from a physical format and not for redistribution.