Business models and market harm

10.58 Some private uses of copyright material are unlikely to have any significant effect on the market for the material, provided the original or copies are not sold or given away. Members of the public may be unlikely to seek licences for purely private, non-commercial uses of copyright material that they may feel they have already paid to use as they please. ACCAN submitted that it was:

not merely ‘unlikely’ that the public would seek out the fine print governing non-commercial use of content already paid for in order to find out what kind of private copying is allowed—it is entirely unrealistic.^[51]

10.59 However, some unlicensed private uses of copyright material may well harm a market that rights holders alone should be able to exploit. Copyright owners may offer licences for making multiple copies, or license access to copyright material from multiple computers, phones, tablets and other devices. For example, subscription music services may allow users to stream music to multiple devices. Films sold on DVD and Blu-ray discs are sometimes sold with a digital file that may be stored and played on computers and tablets. Similar licensed services are available for ebooks and other copyright material.

10.60 Some argue that if the market for private copying had ever failed, it has now been corrected, and that exceptions for private copying will undermine existing and emerging business models. Such arguments were made by many rights holders and others in submissions to this Inquiry.^[52] The Australian Copyright Council submitted that ‘business models are reducing the need to engage in private copying’ and that there was no need to extend the private copying exceptions.^[53] The iGEA said that a new fairness exception

would interfere with the development and continued operation of a number of technology driven licensing models that satisfy consumer demand for format shifting and backup as well as innovative business models for game content delivery.^[54]

10.61 BSA—The Software Alliance submitted that ‘a wide variety of rights to copy legally acquired computer programs for private and domestic use is currently provided for in the applicable license agreements for the programs’.^[55]

10.62 ARIA referred to Apple’s iTunes as an example of a program that ‘allows customers to store downloads on five authorized devices at any time, and burn an audio playlist up to seven times for personal non commercial use’. Not only should new exceptions not be introduced, but the existing exception for copying music in s 109A of the Act is now ‘of limited utility as many acts of copying are now covered under licensing provisions’.^[56]

10.63 Discussing the time shifting of broadcast television content, the Australian Film and TV Bodies submitted that the commercial development of legitimate online business models, including ‘licensed cloud based services, online video or demand, and catch-up online television … are already enabling consumers to watch copyright material at a time that suits them’. New exceptions would diminish the capacity for rights holders to extract value in online environments.^[57]

10.64 Foxtel submitted that it was ‘very concerned’ that any loosening of the existing provisions will undermine its ability to market and benefit from the catch-up television services it offers its customers.^[58]

10.65 The ALRC does not recommend a blanket exception for private use, or an exception that treats all copyright material and all copyright markets in the same way. The recommended fair use exception is better suited to account for the effect of a given use on the market for copyright material than specific, closed-ended exceptions. Fair use is a flexible exception that, unlike the existing Australian time and format shifting exceptions, requires consideration of the ‘effect of the use upon the potential market for, or value of, the copyright material’. Where the market offers properly licensed copies, then it may be less likely that making private copies will be fair. Where a television station offers an online catch-up service, for example, then a competing service that makes copies of broadcasts for consumers may be less likely to be fair.

10.66 Many of the other factors that rights holders said should affect the scope of copyright exceptions can also be considered in determining whether a use is fair. For example, in deciding whether a particular private use is fair, under fair use, consideration might be given to whether the content was provided with advertising, or upon payment of a fee. Whether the consumer purchased a permanent copy, or whether they were only entitled to have access to the content for a limited period of time, will also be relevant.

Different markets

10.67 Others stressed that private copying may harm the market for some works more than others. Recorded music, sheet music, films and books all have considerably different markets. For some stakeholders this suggested that a single technology-neutral exception for private use would be inequitable, and that specific exceptions are needed to ensure no substantial harm is caused to any particular market.^[59] For example, it was submitted that exceptions for private copying might particularly harm the audiovisual sector^[60] and publishers of printed music.^[61]

10.68 Concerns about the differing effects of exceptions on different markets also informed the conclusions of a 2008 review of the format shifting exceptions. The Australian Government Attorney-General’s Department stated that it recognised the advantages of consistency and simplicity, but also that:

The test of financial harm must be applied to particular markets. Markets for digital music, photographs and films are very different. This will produce differences in exceptions unless they are drafted in a common form which causes no substantial harm to any copyright market.^[62]

10.69 The ALRC appreciates these concerns of copyright owners, but considers that the fair use and new fair dealing exceptions can account for these differences in markets, copyright materials and technologies. This is one important reason the ALRC prefers these fairness exceptions to a new specific exception that does not allow for a proper consideration of the likely effect of a use on a rights holder’s interests.

10.70 The flexibility of the fairness exceptions recommended in this Report allow for a use of one type of content to be fair, and another unfair, because the two uses have different effects on rights holders’ markets. This is one of the benefits of fair use and fair dealing. The Act need not distinguish between the markets, because the exceptions are flexible and can distinguish between types of copyright material in their application.

10.71 Much of the discussion of the ALRC’s proposal about private and domestic use seemed to ignore the fact that, for the exception to apply, a particular use would have to be fair, having regard to fairness factors which include any harm to the rights holder’s market. Some stakeholders seemed almost to suggest that all a user would need to establish was that their use was private, for the exception to apply. This is not how fair use or fair dealing work. These exceptions are not blanket exceptions for private use.