Bournemouth University

Private Copying and Fair Compensation: An empirical study of copyright levies in Europe

ESRC/IPO report

Professor Martin Kretschmer has produced a report on the legal basis, rationale and economic effects of copyright levies as part of his ESRC Fellowship at the UK Intellectual Property Office (grant: RES-173-27-0220). This research reports a large amount of new empirical data, including three product level studies of printer/scanners, portable music/video/game devices, and tablet computers. The relationship between VAT, levy tariffs and retail prices is analysed for 20 countries.

A summary of the findings as well as the underlying empirical data were made available to the Hargreaves Review of Intellectual Property and Growth, and published in April 2011 as a working paper on this website. The Hargreaves Review cites the research in developing a recommendation to introduce a limited private copying exception without compensation. Digital Opportunity, A Review of IP and Growth, section 5.30: “As right holders are well aware of consumers’ behaviour in this respect, our view is that the benefit of being able to do this is already factored into the price that right holders are charging. A limited private copying exception which corresponds to the expectations of buyers and sellers of copyright content, and is therefore already priced into the purchase, will by definition not entail a loss for right holders.”

The report is also cited in the Government’s response to Hargreaves, in the BIS Impact Assessments (BIS1055), and in the Public Consultation (closed 21 March 2012), proposing the introduction of an exception for private copying.

The full report is available for download from the IPO website:

Presentation slides from the launch on 19 October 2011 are available here:

Abstract

Following the Information Society Directive of 2001 (introducing the concept of “fair compensation” for private copying into EU Law), total collection from levies on copying media and equipment in the EU tripled, from about €170m to more than €500m per annum. Levy schemes exist now in 22 out of 27 Member States (with only the UK, Ireland, Malta, Cyprus and Luxembourg remaining outside). Despite their wide adoption, levy systems are little understood, both in respect of their rationale and their economic consequences. Tariffs are increasingly contested in court, leading to a large gap between claimed and collected revenues. The European Commission has announced “comprehensive legislative action” for 2012.

This report offers the first independent empirical assessment of the European levy system as a whole. The research consolidates the evidence on levy setting, collection and distribution; reviews the scope of consumer permissions associated with levy payments; and reports the results of three product level studies (printer/scanners, portable music/video/game devices, and tablet computers), analysing the relationship between VAT, levy tariffs and retail prices in 20 levy and non–levy countries.


Key findings:

  • There are dramatic differences between countries in the methodology used for identifying leviable devices, setting tariffs, and allocating beneficiaries of the levy. There are levies on blank media in 22 EU countries, on MP3 players in 18 countries, on printers in 12 countries, on personal computers in 4 countries. Revenues collected per capita vary between €0.02 (Romania) and €2.6 (France). The distribution of levy revenues to recording artists is less than €0.01 per album
  • These variations cannot be explained by an underlying concept of economic harm to rightholders from private copying
  • The scope of consumer permissions under the statutory exceptions for private copying within the EU vary, and generally do not match with what consumers ordinarily understand as private activities
  • In levy countries, the costs of levies as an indirect tax are not always passed on to the consumer. In competitive markets, such as those for printers, manufacturers of levied goods appear to absorb the levy. There appears to be a pan-European retail price range for many consumer devices regardless of levy schemes (with the exception of Scandinavia).
  • In non-levy countries, such as the UK, a certain amount of private copying is already priced into retail purchases. For example, right holders have either explicitly permitted acts of format shifting, or decided not to enforce their exclusive rights. Commercial practice will not change as a result of introducing a narrowly conceived private copying exception.
  • A more widely conceived exception that would cover private activities that take place in digital networks (such as downloading for personal use, or non-commercial adaptation and distribution within networks of friends) may be best understood not as an exception but as a statutory licence. Such a licence could include state regulated payments with levy characteristics as part of a wider overhaul of the copyright system, facilitating the growth of new digital services.

The report’s findings have been widely, and controversially reported. See Kretschmer’s response to the public debate (April 2012).

Earlier versions of the report, published for peer-review, have been archived here (June 2011).


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