Japanese Biz's 'iPod Tax' Faces Opposition From Consumers.

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Author: McClure, Steve

GLOBAL

Dateline: TOKYO

The Japanese music industry is lobbying government for a levy on sales of portable digital music playersâ€"dubbed the "iPod tax" by local media.

The controversial proposal has attracted widespread attention. Public-interest groups such as the Consumers Union of Japan have been swift to voice their opposition to the idea.

The Japanese Society for Rights of Authors, Composers and Publishers (JASRAC), the Recording Industry Assn. of Japan and the Japan Council of Performers' Organizations (which collects performers' royalties) have joined in favor of the initiative.

The bodies recently presented a joint report to the government's Cultural Affairs Agency subcommittee on legal systems for copyrights. In it, they outlined ways of compensating rights holders for income lost through illegal copying on digital players.

The report suggests adding digital audio players to the list of devices subject to an existing compulsory levy.

It also offers an alternative, whereby it would become mandatory for users of digital music players to get permission from rights holders to make copies of music, through a license fee system.

They estimate that under the first scenario, rights holders would stand to gain 1.8 billion yen ($15.7 million) annually, while the second proposal would raise 48.5 billion yen ($424.3 million).

A levy of 1% of retail price currently applies to sales of MiniDisc players, DAT players and DVD recorders. However, it is not applicable to digital players such as Apple Computer's iPod.

A levy of 1.5% of retail price also applies to recordable digital media such as MiniDiscs and CD-Rs. The monies collected are administered by the Society for Administration of Remuneration for Audio Home Recording.

SARAH says it collected 2.3 billion yen ($20.5 million) in the year ending March 2005, down from 2.8 billion yen ($24.7 million) the previous year.

The three music industry groups claim that this decline is due to a shift away from MiniDisc to portable digital audio players.

"With this situation in mind, it is imperative that portable digital audio players be designated as taxable under the current system," JASRAC says in a statement.

"It is an appropriate request," says Ichiro Asatsuma, chairman of leading Japanese publisher Fujipacific Music. "If MD players are taxed, why shouldn't iPods be taxed as well?"

Criticism of the trade bodies' proposals has come from across the digital technology field. "This appears to be another case of a powerful industry group lobbying the government for a 'quick-and-easy' subsidy to deal with shifting technology," says Steve Myers, president of Tokyo-based software developer Theta Music Technologies.

"Rather than seeking additional interference from the government, [they] would do better to refine their existing systems," he adds.

"The so-called iPod tax is counterintuitive," says equity analyst John Yang of Standard & Poor's in Tokyo. "I don't see recording on an iPod as any different from a CD player with a tape deck. It's a bad idea."

Apple Japan declines to comment on the proposals. A Toshiba representative also declined comment.

The industry bodies' proposals have drawn some backing, however, from Sony Corp. A statement from the company says: "Sony is supporting the activities of related [music] industry bodies regarding the re-examination of the remuneration system."

The subcommittee is expected to make a formal recommendation to government concerning the proposals by the end of 2005.

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By Steve McClure