Canada to Charge Music Royalties on MP3s

[Cyxeris]

Canada to Charge Music Royalties on MP3s
Fri Dec 12, 5:47 PM ET

By COLIN McCLELLAND, Associated Press Writer

TORONTO - The cost of an MP3 player will increase in Canada after the government's copyright agency decided Friday to charge a tax of up to $19 per unit to reimburse singers and songwriters.

The new levy on MP3s will use a sliding scale depending on memory size: $1.50 for units with up to 1 gigabyte, $11.25 for 1 to 10 gigabytes, and $19 for devices of more than 10 gigabytes. Apple Computer Inc.'s iPod player, for example, comes with 10, 20 or 40 gigabytes.

The tax applies to importers and manufacturers, so consumers may not feel the pinch until retailers have to restock.

More than 40 countries charge consumers extra for blank tapes and CDs to help artists make up for the revenue lost when consumers get a copy of something rather than buying it new. Canada has been doing it since 2000; the United States does not.

The Canadian Private Copying Collective, which collects and distributes the copyright fees to artists, performers, producers and recording companies, said Austria, Finland, France, Germany, Italy, Poland, Spain and Sweden also tax MP3s and several other countries are considering it.

Despite adding the MP3 tax Friday, the Canadian Copyright Board dismissed a call to charge royalties on blank DVDs, removable memory cards and removable micro hard drives.

A group representing merchants that lobbied against the taxes said they would be bad for business and could drive shoppers across the border.

"They will shop in the United States where the products are generally levy-free," said Diane Brisebois, president and CEO of the Retail Council of Canada.

She said the MP3 ruling is "double-dipping" because consumers have begun to pay for downloading music from the Internet, and she said the decision would be a "disincentive for the music industry to adopt new technology."

The ruling could affect a case heard last month by Canada's Supreme Court that would force Internet service providers to pay royalties on downloaded music files. The court is also to rule on whether to extend the nation's copyright law to offshore Web sites that serve Canadians.

A decision is expected in 2004. Analysts say the case could have far-reaching implications worth billions of dollars, especially as the music industry tries to rebound from declining sales in traditional stores.