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New copyright tariffs should be fair for authors and not burdensome for legal importers and consumers

17/ 09/ 2021
  On September 17, the Ukrinform news agency held a presentation of economically feasible calculations of the level of fees for private copying and reprography, considering the actual downloading of content by the Ukrainian consumer. The Kyiv School of Economics, commissioned by the European Business Association, presented the study on Assessment of the optimal parameters of the economic system of fees designed to protect copyright and related rights. The KSE experts have researched the system of copyright protection and estimation of the fair amount of fees charged from the equipment for copying the copyrighted works within personal use. According to the Law of Ukraine on collective management of property rights in the sphere of copyright, the list of equipment and interest deductions (tariffs) on imported and manufactured equipment in Ukraine should be established during the negotiations between importers and collective copyright management organizations (CMOs) and should be economically feasible, Viktoria Kulykova, EBA Regulatory & Consumer Electronics Committee Senior Manager, explained. “But since Ukraine has never conducted an economic study of the actual copying of content by Ukrainians and damage done to authors by private copying ­­– the negotiators went into a deadlock. Therefore, the economists had to solve this crisis by providing recommendations on the level of such tariffs which should consider the following: 1) the authors’ losses from possible copying of their works with the help of equipment; 2) the risks to the competitiveness of legal importers of consumer electronics as 30% of this market is in the shadow; 3) the fairness in relation to consumers and their real content downloading behavior. The results of the study were presented by Yurii Sholomytskyi, Honorary Head of the Center of Macroeconomic Modeling of the Kyiv School of Economics. He confirmed that the tariff rate in Ukraine is currently the subject of significant disputes, first of all, initiated by collective management organizations. Therefore, the purpose of the research was to create a methodology that could assess the compliance of the current size of fees from equipment, imported and manufactured on the territory of Ukraine, with fair compensation to authors for private copying of their works (audio, video, and printed products). The main value of the study lies in the emergence of a new methodology, that might change the proposed tariffs in case if the circumstances change, Yurii Sholomytskyi said. - Our approach generally corresponds to the idea of determining the cost of the content copied on the device. But it also expands the methodology by taking into account the level of income of the population, the habits of Ukrainian consumers (the level of piracy and the use of streaming services), as well as the latest available data on the world and domestic benchmarks of the cost of audio, video, paper copying, and the data collected on patterns of the copyright content use in Ukraine. The study on the content consumption by Ukrainians was carried out by sociologists of the Gradus Research company. Its results serve as the basis for the correctness of the formula deduced by KSE economists In August this year, 1000 respondents were interviewed with self-completion questionnaires in the mobile application, the sample reproduced the structure of Ukraine’s urban population of, said Evgeniya Bliznyuk, Founder and CEO of the Gradus Research. - The results show that about a quarter of the polled Ukrainians currently pay for both music and video content. Almost half of the respondents (42%) declare that they consume the music content copied to a personal device or other media. Meanwhile, 27% consume the content purchased on official media or downloaded for a fee, 24% use streaming services. The monthly consumption structure is dominated by the consumption of music downloaded to the private device and on streaming services. The survey demonstrates that 43% of respondents are not in any way engaged in the practices of copying paper content, 26% often copy educational literature and relevant materials, 12% - professional literature, 12% - various images. Regarding video content, 35% of respondents declare that they consume it free by copying, 29% - through streaming services, 27% through paid downloads or purchases on official media. At the same time, watching videos on YouTube is prevalent in the structure of video consumption. “These indicators are important because they demonstrate the share of legally obtained content since world practice shows that the fees should not be used to combat piracy, as they impose a precedent to liability on law-abiding consumers for actions they do not do,” Yurii Sholomytskyi said. ­– The demonstrated shifts in the way Ukrainians access copyrighted works, namely the streaming services, imply the right to temporary use, but not possess and then copy the content. And this also affected the calculation. It is important to understand that the share of streaming services, shown by the example of the UK will only increase over time, and therefore may reduce the share of legal content copied within the definition of private copying. Such a conclusion, made by economists, gives reason to claim that if the act of copying did not occur, then fees from equipment should not be charged. So, it is critical to observe the balance between the compensation for the authors losses and the maintenance of the optimal burden on consumers. In the table of the proposed fees, we calculated the rate with which this balance can be reached, Yurii Sholomytskyi specified.  According to the table, the charge rate on equipment (mobile phones, smartphones, TVs with recording function, laptops, computers, etc.) ranges from 0.1 to 0.3%, and on clean information carriers (drives, memory cards, etc.) - 1.3%, said Hennadii Smorzhevskyi, Head of the Intellectual Property Committee, APITU. - These tariffs are quite logical because the equipment is an integrated system and is not used only for copying, while clean information carriers are used only for copying and dissemination. We believe that the proposed tariffs are economically feasible, their values are close to the rates of the CMU Resolution #992 and those that consider all the economic realities of Ukraine. At the same time, 3-4 times increase in charges for private copying which is proposed by the CMO is economically unfeasible. Hennadii Smorzhevskyi noted that this trend on differentiation of tariffs as clean information carriers and equipment is considered in draft law №4537, which in 2021 was supported by 5 profile business associations of Ukraine. Reference: Private copying is, in fact, an exception to the ban on the reproduction of the copyrighted work and allows the act of transferring it to other media provided that the author is fairly compensated for the damage caused. The concepts of private copying and reprography do exist in the legal field of Ukraine. The same concerns the principle of compensation which currently implies the imposition of fees on equipment that can be used to copy and play audio, video, and paper content.   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

On September 17, the Ukrinform news agency held a presentation of economically feasible calculations of the level of fees for private copying and reprography, considering the actual downloading of content by the Ukrainian consumer. The Kyiv School of Economics, commissioned by the European Business Association, presented the study on “Assessment of the optimal parameters of the economic system of fees designed to protect copyright and related rights”. The KSE experts have researched the system of copyright protection and estimation of the fair amount of fees charged from the equipment for copying the copyrighted works within personal use.

“According to the Law of Ukraine on collective management of property rights in the sphere of copyright, the list of equipment and interest deductions (tariffs) on imported and manufactured equipment in Ukraine should be established during the negotiations between importers and collective copyright management organizations (CMOs) and should be economically feasible,” Viktoria Kulykova, EBA Regulatory & Consumer Electronics Committee Senior Manager, explained. “But since Ukraine has never conducted an economic study of the actual copying of content by Ukrainians and damage done to authors by private copying ­­– the negotiators went into a deadlock. Therefore, the economists had to solve this crisis by providing recommendations on the level of such tariffs which should consider the following: 1) the authors’ losses from possible copying of their works with the help of equipment; 2) the risks to the competitiveness of legal importers of consumer electronics as 30% of this market is in the shadow; 3) the fairness in relation to consumers and their real content downloading behavior.”

The results of the study were presented by Yurii Sholomytskyi, Honorary Head of the Center of Macroeconomic Modeling of the Kyiv School of Economics. He confirmed that the tariff rate in Ukraine is currently the subject of significant disputes, first of all, initiated by collective management organizations. Therefore, the purpose of the research was to create a methodology that could assess the compliance of the current size of fees from equipment, imported and manufactured on the territory of Ukraine, with fair compensation to authors for private copying of their works (audio, video, and printed products).

“The main value of the study lies in the emergence of a new methodology, that might change the proposed tariffs in case if the circumstances change,” Yurii Sholomytskyi said. – Our approach generally corresponds to the idea of determining the cost of the content copied on the device. But it also expands the methodology by taking into account the level of income of the population, the habits of Ukrainian consumers (the level of piracy and the use of streaming services), as well as the latest available data on the world and domestic benchmarks of the cost of audio, video, paper copying, and the data collected on patterns of the copyright content use in Ukraine.”

The study on the content consumption by Ukrainians was carried out by sociologists of the Gradus Research company. Its results serve as the basis for the correctness of the formula deduced by KSE economists

“In August this year, 1000 respondents were interviewed with self-completion questionnaires in the mobile application, the sample reproduced the structure of Ukraine’s urban population of,” said Evgeniya Bliznyuk, Founder and CEO of the Gradus Research. – The results show that about a quarter of the polled Ukrainians currently pay for both music and video content. Almost half of the respondents (42%) declare that they consume the music content copied to a personal device or other media. Meanwhile, 27% consume the content purchased on official media or downloaded for a fee, 24% use streaming services. The monthly consumption structure is dominated by the consumption of music downloaded to the private device and on streaming services.”

The survey demonstrates that 43% of respondents are not in any way engaged in the practices of copying paper content, 26% often copy educational literature and relevant materials, 12% – professional literature, 12% – various images.

Regarding video content, 35% of respondents declare that they consume it free by copying, 29% – through streaming services, 27% through paid downloads or purchases on official media. At the same time, watching videos on YouTube is prevalent in the structure of video consumption.

“These indicators are important because they demonstrate the share of legally obtained content since world practice shows that the fees should not be used to combat piracy, as they impose a precedent to liability on law-abiding consumers for actions they do not do,” Yurii Sholomytskyi said. ­– The demonstrated shifts in the way Ukrainians access copyrighted works, namely the streaming services, imply the right to temporary use, but not possess and then copy the content. And this also affected the calculation. It is important to understand that the share of streaming services, shown by the example of the UK will only increase over time, and therefore may reduce the share of legal content copied within the definition of private copying.”

Such a conclusion, made by economists, gives reason to claim that if the act of copying did not occur, then fees from equipment should not be charged. So, it is critical to observe the balance between the compensation for the authors’ losses and the maintenance of the optimal burden on consumers.

“In the table of the proposed fees, we calculated the rate with which this balance can be reached,” Yurii Sholomytskyi specified. 

“According to the table, the charge rate on equipment (mobile phones, smartphones, TVs with recording function, laptops, computers, etc.) ranges from 0.1 to 0.3%, and on clean information carriers (drives, memory cards, etc.) – 1.3%,” said Hennadii Smorzhevskyi, Head of the Intellectual Property Committee, APITU. – These tariffs are quite logical because the equipment is an integrated system and is not used only for copying, while clean information carriers are used only for copying and dissemination. We believe that the proposed tariffs are economically feasible, their values are close to the rates of the CMU Resolution #992 and those that consider all the economic realities of Ukraine. At the same time, 3-4 times increase in charges for private copying which is proposed by the CMO is economically unfeasible.”

Hennadii Smorzhevskyi noted that this trend on differentiation of tariffs as clean information carriers and equipment is considered in draft law №4537, which in 2021 was supported by 5 profile business associations of Ukraine.

Reference: Private copying is, in fact, an exception to the ban on the reproduction of the copyrighted work and allows the act of transferring it to other media provided that the author is fairly compensated for the damage caused. The concepts of private copying and reprography do exist in the legal field of Ukraine. The same concerns the principle of compensation which currently implies the imposition of fees on equipment that can be used to copy and play audio, video, and paper content.

 

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