Why a download levy is a really bad idea
In the Netherlands a ‘download ban’ is currently being discussed in Parliament. For those readers who are not familiar with the Dutch situation, some explanation is in order. In the Netherlands we have a peculiar situation whereby downloading from an illegal source (e.g., file sharing – of course downloading is not only file sharing – and file sharing is not only downloading) is considered, according to the Government’s interpretation of the Copyright Act (and the issue is currently before the Supreme Court), to fall within the scope of the home (private) copying exception. This means that consumers do not infringe copyright if they download copyrighted music or movies from the Internet. You are not allowed to upload files though, because that is considered publishing (making available), which is not covered by the home (private) copying exception.
So, if you want to watch The Hangover II, you can buy a legal copy in your local store for 15 euros, rent/download it legally via VOD for a few euros, or you can go to the Pirate Bay and grab your copy from an illegal source for free. In all three cases you act within the boundaries of the law according to the Dutch government. You can imagine that this is a strange and unattainable situation and that something needs to change. Therefore, the Ministry of Justice has presented a plan to limit the home copying exception to copying from a legal source. This would bring the Dutch situation in line with the rest of the world and the international copyright treaties. This idea has come to be known as a ‘download ban’, which is a distortion of the factual situation, but is more easy to use than the explanation above.
Since downloading from an illegal source is Holland’s favourite pastime (it is estimated that some 5 million people out of 16 million regularly download from an illegal source), many politicians do not want to introduce a download ban. In fact, this week a majority of Parliament voted against a download ban by adopting an amendment stating that alternatives to a download ban need to be found.
Politicians and pressure groups argue that enforcement of a download ban will be costly and ‘criminalises’ the consumer. In particular the right to privacy will come under strong pressure because the internet traffic of consumers needs to be analysed. But at the same time politicians do feel that authors and rightsholders need some kind of compensation. Most politicians opposed to a download ban feel that a general levy (a tax) on internet access used to compensate authors and rightsholders is a viable alternative.
But while an Internet levy might sound like a simple and convenient solution, it is my strong opinion that an Internet levy for downloading and streaming (download levy for short) is a dangerous and stupid idea. Why?
1. Unlimited downloads for 10 euros per month? You wish!
What would be a fair price for downloading all the entertainment you want for free? Most of the proponents of a levy seem to think that 10 euros per month sounds about right. But can you really expect to download all the entertainment you want for a mere 10 euros? No way. In discussing a download levy everybody focuses on music, which is a big mistake. Sure, maybe you can get all the music you want for 10 euros a month (just look at Spotify Premium), but there are more (expensive) categories of entertainment that also need to be covered: books, movies and games. An average book is 20 euros. An average movie 15 euros and an average game 60 euros. Can you really expect to download all forms of entertainment for just 10 euros a month? Of course not! 100 euros seems more realistic.
2. The end of legal business models (and content)
Will services like Spotify and iTunes continue to exist if everybody needs to pay a download levy? Unlikely. Nobody wants to pay double for their content (both the levy and the price of downloading/streaming), so a download levy will effectively be the end of all legal business models. The question is who is going to invest in new, high quality content and services when you have to compete with services like the Pirate Bay who do not create content, do not have to pay taxes and do not have to create a safe environment for consumers. The simple answer: nobody.
3. A national system is illegal and unattainable
A national system of download levies is unattainable in an international context. By ‘legalising’ illegal downloading through the home copying exception, the exception will be stretched way beyond the boundaries set by the Berne/TRIPs three step test. Furthermore, it is likely that the international entertainment industry will find it increasingly hard to make content available for the Dutch market, because it will no longer be possible to make any money.
4. The REAL end of privacy
But for me the most important reason to oppose a download levy is that it will be the end of online privacy. Funnily enough, the biggest argument of those in favour of a download levy is that a download ban will infringe on the privacy of Internet users. But what about a download levy? The possible privacy infringement of a download ban pales in comparison to the Orwellian system necessary for a download levy. Why? First of all, because in order to distribute the money fairly amongst authors and rightsholders, it is necessary to know what was downloaded by users. It is not enough to know the most popular files, because small authors and artists also have their right to a fair share. So every download needs to be monitored. While it might be possible to use polls, surveys and other methods currently used by collecting societies, it is questionable if these will be effective. Particularly when it is unlikely that file sharing sites will cooperate. Furthermore, for a voluntary download levy system to be effective we need to ensure that those who do not pay the levy actually do not download. This problem is exacerbated by the fact that most file sharing services do their best to obfuscate traffic, making it necessary to check ALL internet traffic with, you guessed it, Deep Packet Inspection. Oh the irony!

Comments(19)
phulshof
I respectfully disagree with the article, and for the following reasons (I hope you've finally fixed the CR/LF on this site, or my reaction will be practically unreadable):
1) Since a download /= sale, the price of individual media isn't of much importance. The more important question is: how much does the Netherlands currently spend on multimedia per year? Compare that to about 6M internet connections x 12 months x 10 Euro = 720M in levies per year.
2) Those illegal services you mention are already being used despite the lack of levies, and yet the industry's still making good profits in a time when most businesses are suffering severely from the economic crisis.
3) You might have a point here, though considering this situation has existed without the new levies for some time now (and the Netherlands isn't the only country that has them), we'll have to wait and see what the European courts have to say about the matter.
4) Why would we need more intrusive measures for distribution than is currently used for the copyright levies? It's not like we currently invade every household to see what they used their writeable cds and dvds for.
Bart Schermer
Dear Phulsof, the issue was fixed, but apparently it has returned,.. we are looking into it.
1) The total entertainment market in the Netherlands is currently about 850 million euros (this is audio, video and games). This excludes books, magazines and newspapers. Taking into account that not all internet subscribers will want to participate (I for one), and there is always significant overhead, 10 euros falls way short of the mark. I think that anything above 20-25 euros is simply too much for most people.
2) The fact that the industry can still make a profit does not mean that this will remain so over time, in particular when downloading is formally 'legalized' through a levy system.
3) Because the current methods depend on the participation of all actors involved in the consumption and distribution of content (radiostations, retailers et cetera). Furthermore, the home copying levy is (in parts) based on the consumption in the legal market. Without a reference point (I argue that the legal market will dissapear) and without the cooperation of all actors in the value chain it will be impossible to distribute money in a fair way. The result is likely that small artists and creators will suffer because they do not feature in the top 50 downloads.
phulshof
1) The current levy system doesn't take into account that some people don't use their empty media for "thuiskopie" purposes either. It also doesn't need to cover software, and of course uploading will also remain illegal under current European law. Even under current legality Dutch citizens seem quite willing to pay for good services, and physical media.
2) It's already formally legalized; we'd just be replacing the currently reducing levy system with a different one. Just like the former "kijk-en-luistergeld" it could even simply be included within our tax system.
4) Since it's simply a replacement of the old levy system, I don't see that's any more of an issue than it currently is. Unknown artists are very unlikely to be downloaded too, so they should get a smaller piece of the pie as well.
All in all, I still think it's a much better alternative than the illegal downloading system like they have in the US, where they keep introducing worse laws in order to try and enforce it.
Bart Schermer
1) yes, and therefore it is an unfair and ineffective mechanism. It does need to cover software because people wont' distinguish between different types of content for which they pay their download levy.
2) Giving the government control over culture and entertainment through taxation is very, very, dangerous.
3) A download ban is not just about enforcement, it is about giving a signal to people that content is not created for free.
phulshof
1) It's certainly more effective to cover fair compensation over home copying than any of the alternatives, which is probably why Ntb and FNV KIEM support it over a download ban.
2) The government does not control culture and entertainment; it just handles the levy system like the former kijk-en-luistergeld.
4) To what end? As you yourself state: most countries in the world have such a ban, and it's not doing one bit of good for the artists. I don't really like a levy system either, but under the circumstances it's a lot better than any of the alternatives, both for society and for artists.
Copyright is not a goal in itself; it's a means to make sure artists get paid so they have an incentive to produce more art and culture. If we can find better means than copyright to achieve that goal, we shouldn't shy away from them by making copyright itself into a goal.
Bart Schermer
1) The problem is that a levy system will most likely not have that desired effect: the levy will likely be to low and will 'legalise' a practice that is still considered illegal (i.e. not in line with international copyright law). 2) not yet, but a levy may certainly increase their influence. 3) In many other countries the uptake of digital content is higher than in the Netherlands, despite our superhigh broadband penetration. I agree with you copyright is a means, not an end. But a download levy is not a viable alternative.
phulshof
1) Current EU law does not require owning an original for the home copy; we have had this levy system for many years now, without legal challenges. In this proposal we would just change the target of what to place it on. As such, it doesn't need to be much higher than the current levies either, which considering the 6M internet connections in the Netherlands should not be problematic.
2) Why? In what way? There have been levies for ages now without additional control. Why would this suddenly change in your opinion?
4) In many other countries, the availability of legal content, needed credit cards to buy them, etc. is higher too. You can't directly compare the two under current circumstances. Also: when Dutch people buy from Amazon UK, because the prices are about 50% lower there than in the Netherlands, how does that show up on your statistics? All in all: I doubt that artists have ever managed to get more out of a download ban than they do from levies. Ntb and FNV KIEM sure don't seem to think so. What economic study has been done to show that a download levy is not a viable alternative, considering the huge amount of internet connections in the world?
Bart Schermer
1) Yes, because it is in line with the Berne 3-step test. A general download levy would _definitely_ be a violation of the three step test 2) I'm not saying it will, I'm just against any possible government control over culture by definition. 4) There are no economic studies because it can't be researched. Furhermore, I have explained that through levies less money will come in than through the free market. I think destroying what is left of this free marketis is not a solution. I understand ntb and kiem are in favour, they benefit directly from the levy. However, eventhough artists are extremely important, they are by no means the only actors involved in creating content (especially in movies and games). Therefore, their opinion is not a final argument.
phulshof
1) I was under the impression that the Berne 3-step test dealt with new exceptions to copyright, not already existing ones. I also fail to see what this would be a violation of such a test while our decision to embed kijk-en-luistergeld into the general tax system does not.
2) We agree there; I just doubt that this decision would have any impact on that.
4) I think the 720M in levies I mentioned for a part of the 850M you mentioned (since e.g. games don't need to be covered under this levy) seems pretty even, and that's under the assumption that this would completely wipe out the market for sales (which I seriously doubt, because basically nothing changes compared to the current situation). If the market stays normal (which is to be expected), then it should only have to be compared to the current levy system. How much is that on an annual basis?
PS: Please fix this annoying lack of CR/LF on the comments...
Bart
1) I would call this one a new one, but regardless of that, any exception to copyright must not interfere with the normal exploitation (which a levy most definitely will). 4) I feel a levy can't be a serious option for the general public if you exclude software / games and possibly other forms of content. It is hard to explain why you are not allowed to download a game, but you do pay a download levy.
It is hard to predict the future, but I expect that it will wipe out all sales and rental, particularly if it is mandatory. So it would be more a replacement. The current system of levies is not representative because it taxes carriers that no one uses anymore... I do not have the exact figures, they should be up at stichting de thuiskopie.
phulshof
1) How is the new system different from the current system in that regard? What part(s) of the three step test will be failed by the change, and why? 4) For the same reason you're currently not allowed to make a copy of software you don't own: software is expected to carry its own protection. As said again: nothing changes in that regard to the current situation, so why would it suddenly not be legal?
Bart
I believe all the steps in fact :-): STEP1: any exception must be limited to special/specific cases. The exception is too broad in my opinion. STEP2: normal exploitation. If the levy becomes mandatory, than people have no incentive (and right they are) to buy 'legal' content. So a levy system will likely 'break' the nromal exploitation models (note: I believe that the levy will be mandatory, if not it is not much use, because freeriders will remain in such a system. STEP3: exception must not unfairly prejudice the rights of the authors. It will, because it denies them any possibilty to exploit their content in a different way
phulshof
Once again: how is that different from what it is now?
STEP 1) The exception doesn't change; the law doesn't define where the levy comes from.
STEP 2) The levy's currently mandatory on empty carriers, many of which aren't used for thuiskopie purposes either. What's the difference with a levy on internet connections?
STEP 3) It doesn't do that in any other way than it currently does.
Bart
The scale is totally different, thus changing the entire contents of the exception.
phulshof
Downloading is currently legal under the "thuiskopieregeling". It will still be legal under the proposed solution. The only thing that changes is the source of the levies needed for the "billijke vergoeding". How does that change the scale of the exception?
Bart
Let's start of by saying that the current interpretation by the Minister, whereby downloading from an illegal source is considered 'legal' is of course totally bonkers. The Court of Appeal in the Hague for instance has also stated in ACI vs. Thuiskopie that 'the limits of the interpretation of the Directive (2001/29/EC) have been reached'. So the current INTERPRETATION of the exception is already highly questionable. If this intepretation would be stretched any further by further stimulating downloading from an illegal source through a government sanctioned system of internet levies, the limits of the three step test would definitely be reached. So it is not so much a new exception, rather the interpretation and real world effect of the current exception.
phulshof
How would confirming the current policy simply by changing the source of the levy stretch the interpretation? Why don't I hear your concerns echoed by experts like e.g. Prof. Hugenholtz?
Bart
I have explained this several times: a download levy will kill the legal market in my opinion, which makes it a violation of the three step test. I do not see why it is relevant that my concern is not echoed by Hugenholtz.
phulshof
You have never managed to explain why the source of the download levy matters to the three step test. If the current situation is illegal under EU law, then let the EU courts speak on the matter. If not, then the source of the download levy should have no impact whatsoever on the legal market, nor on the scope of the exception. It's merely a continuance of current law, with a different source of payment.
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