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The Recording Industry's Digital Strategy Out of Tune

Monday February 19, 2007

My weekly Law Bytes column (Toronto Star version, homepage version) begins with the following:

Ten years ago, as the Internet began to mushroom in popularity and emerging technologies enabled consumers to make near-perfect copies of digital content, the recording industry emphasized a two-pronged strategy in response to the changing business environment.  First, it focused on copy-control technologies, often referred to as digital rights management (DRM), that many in the industry believed would allow it re-assert control over music copying.  Second, it lobbied the Canadian government for a private copying levy to compensate for the music copying that it could not control.

While the industry’s approach proved successful on the legal front - the 1996 World Intellectual Property Organization’s Internet Treaties established legal protections for DRM and Ottawa introduced a private copying levy on blank media such as cassettes and CDs in 1997 - the strategy’s effectiveness has long been subject to debate.  The week of February 5th  may ultimately be viewed as the beginning of the end of that debate.  That week, which began with Apple CEO Steve Jobs calling on the industry to drop DRM and concluded with the Canadian Private Copying Collective (CPCC), the collective that administers the private copying levy, applying for its dramatic expansion, leaves little doubt that the recording industry got it wrong.

The column proceeds to discuss the failure of DRM and the mounting pressure on the industry to drop it.

On the DRM issue, it concludes that "given the rising chorus against DRM, it is seemingly only a matter of time before the industry backs away from its locks-first strategy. EMI, the world's third largest music label, is rumoured to be ready to do so and should one of the majors move in that direction, it is likely that the others will soon follow suit."

The column then focuses on the CPCC private copying levy, echoing many of the comments I posted last week (part one, part two).  On that issue, I conclude that the latest CPCC filing may well herald the end of the private copying levy.  Unpopular with the public and targeted for elimination by the Conservative party, the levy has been overtaken by the prevailing view that consumers should be entitled to make copies of their store-bought music without further compensation.  While there may be a need for an alternative compensation system for peer-to-peer file sharing, the private copying levy is ill-suited for this role since it does not legalize the making available of content on peer-to-peer systems and the purchase of blank media bears little relation to P2P activity.  Indeed, there are better solutions out there - levies tied to network providers make more sense (and are already replicated by cable television levies for retransmission of content) and there is a need to cover both peer-to-peer and the non-commercial use of content in user-generated content.  Those approaches will require the recording industry to play a new tune - one that includes the abandonment of the 1990s strategy of DRM and the private copying levy.

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