A Solution to Piracy? “iPod Tax” Gathers Steam

With the British recording industry suffering from dwindling CD sales and an upsurge in P2P file sharing, support is growing among members of the U.K. music business community for an ‘iPod tax’–a copyright levy to be added to the price of every MP3 player  sold.

Revenues would then be passed on to authors and rights holders. According to Doug D’Arcy, former head of Chrysalis and BMG, “The illegal digital download market is in danger of crippling the British music industry and unless something is done to address this quickly, it will spell disaster for thousands of artists and independent record labels.” Legislators in Holland recently came to a similar conclusion,
authorizing a similar levy that could add as much as 180 euros ($227) to the price of Apple’s priciest iPod.

Are we witnessing a shift in industry response to the challenge posed by file sharing? Like the RIAA in the United States, the British Phonographic Industry (BPI) endorses the use of Digital Rights Management technology to prevent consumers from copying music in
the first place. However, this approach has spawned a backlash among music buyers frustrated by limitations on their rights of ownership.
Organizations like downhillbattle.org have voiced that frustration, rallying disaffected music fans with a “Don’t Buy Major Label Music”

Meanwhile, some industry analysts are attempting to frame the explosion in P2P file sharing as a source for new revenue streams, rather than an assault on existing ones. In their book, “The Future of Music”, authors Gerd Leonhard and Dave Kusek point out that levies or taxes have been effective responses to the rise of disruptive technologies in the past, such as player pianos and cable television. Surcharges on MP3 players, digital storage media or ISP services could monetize P2P trading and legitimize what many have deemed “pirate” behavior.

Unsurprisingly, this regulatory approach has its detractors, whose criticisms were bolstered by a recent Canadian court decision in which a federal judge threw out an iPod tax, ruling that no authority to levy a surcharge on MP3 players had yet been found in that country’s laws. Though the anti-regulatory climate in the United States would seem to rule out an iPod tax for the foreseeable future, many in the American music business will be watching the overseas action with great interest.

Story by news analyst Michael Baker.