1. The Copyright Levies Reform Alliance Formed to push for urgent legislative action to freeze and phase out EU copyright levies

2. The Alliance The Alliance represents the European information and telecommunications technology, consumer electronics and digital media industries The Alliance members are: Business Software Alliance (BSA), European American Business Council (EABC), European Digital Media Association (EDiMA), European Information & Communications Technology and Consumer Electronics Association (EICTA) and the Recording-media Industry Association of Europe (RIAE).

3. Alliance Objective Improve fairness and transparency in the collection of copyright levies in the European Union, and provide fair treatment for consumers and fair compensation for content creators. Urgent reform on copyright levies in the EU through the effective enforcement of the existing EU Copyright Directive. Establish efficient and transparent collection of levies, and phase out levies as Digital Rights Management (DRM) become increasingly available. Support European Commission to adopt legislation to reform the levy systems in the member States.

4. Copyright Levies What are levies? Levies are sums of money, similar to a tax, which are added to the purchase price of a range of electronic equipment as a means of compensating copyright owners for the legitimate private copying of an object or service. How are they applied? They are set by national collecting societies on a largely arbitrary and non-transparent basis. How much are they and how do they vary? Levies are a “rough-justice” system of remunerating right holders for use of their copyright. Looking at a 30GB iPod the variation is extreme: UK: 0 €; Germany: 2,56 €; Italy: 9,87 €; Sweden: 13,5 €, Finland: 15 €; Austria: 18€; Spain: 90,6 €

5. Why do Copyright Levies matter? Consumers: Levies are a hidden tax on consumers, and represent a high proportion of the sales price to consumers in some Member States. Industry: Uncertainty and risk imposes a huge financial burden on companies. In addition to almost € 2bn of levies paid anually, many companies have to hold large contingency funds as reserve against disputed levy claims. It is estimated that there was €500m of disputed levy claims in 2004. The economy: Funds are diverted from innovation. Some companies have chosen not to make products available in specific member states because the uncertainty and cost is too high. Diverging levies distort the European market. Information Society products are more expensive in the EU than elsewhere in the world. Right Holders: The system is not transparent, it is not known how much of the levies, if any, are distributed to right holders.

6. Impact on Consumers Inflating retail prices: Taking Multi-functional devices (MFDs, e.g. photocopier/scanner/printer) as an example, the net retail price of a low end MFD in Spain is around € 79 (including 16 % VAT) and the levy on a MFD with a capacity to make 1-9 copies per minute is € 45.08 + 16% VAT, increasing the final price paid by the consumer for these devices to around € 131. The levy amounts to 66% of the price of the device without the levy. Multiple payments: The consumer often pays twice, sometimes more. –Example 1 : Consumers who use legitimate on-line services to download music against payment, effectively pay twice, since they have to pay (equipment/media) levies as well. –Example 2: In the case of a PC with peripherals like a CD burner, scanner, and printer the consumer pays a levy on each piece of equipment separately as well as on the blank media (CDs) and so ends up paying several times over. –Example 3: In the case of multi-purpose devices like a printer/scanner/copier the full levy for a copier is charged even if the consumer does not use the device for private copying at all.

7. Total Levies Collection 2001-2009

8. Levies Forecast (includes claimed but disputed levies)

9. Impact on Right Holders Lack of transparency – there is little transparency or accountability for how the collecting societies distribute to right holders the monies collected through the levy system Holding back innovation in digital content – the growth in the legitimate music download market has taken considerable time to evolve due in part to the difficulty of dealing with the levy system Digital media are a huge opportunity for dissemination of culture – with the growth of Digital Rights Management (DRM) systems, right holders can benefit directly from the distribution of their content in digital formats

10. The Way Forward Adoption of Digital Rights Management (DRM) systems enables consumers to pay a fair price on demand for the content they use. Take up of DRMs will allow for copyright levies to be frozen and phased out as per the 2001 Copyright Directive. Adoption of a strong European Commission Recommendation is a first step, including proposals to determine when and how the availability of DRMs should trigger the phase-out of the levy system.