European consumers are paying music labels and artists twice when downloading digital content on the internet, which is set to lead to a sharp increase in double taxation, according to a new study.
Most European countries have added special levies on electronic storage items such as recordable compact discs, DVD discs, MP3 players, hard disk recorders and computers, to compensate artists for uncontrolled copying of their work over the Internet.
However, consumers are increasingly buying music and other digital content on the Internet in shops such as Apple's iTunes Music Store where a percentage of the price flows directly to the music publisher and artists.
"That means European consumers are forced to pay usage rights multiple times for the same music: at the download point, and through taxes imposed on their equipment," the Business Software Alliance (BSA) said in a statement.
Special anti-piracy software known as Digital Rights Management (DRM) software restricts consumers' ability to copy or forward these legally acquired songs and videos.
"With DRM technology's expanding role in the market, levies have become a superfluous double tax on consumers," said Francisco Mingorance, director of public policy in Europe for the BSA.
"Levies were designed to compensate for unpoliceable private copying, but with DRMs the rationale for levies disappears," he added.
According to German trade association Bitkom, consumers pay up to 150 euros in private copy levies for a typical home or small office setup with a PC, scanner, printer and CD or DVD burner, even if they purchase copyprotected digital content such as online music.
A previous study conducted for the BSA forecast a 500 per cent increase in private copy levies from 2002 to 2006 in France, Spain, Germany, the Netherlands and Italy. They could approach 1.1 billion euros in those countries by 2008.
Copyright levies exist in most countries in Europe, with the exception of Britain, Ireland and Luxembourg.
The European Union has adopted a copyright law which tells the 25 member states they need to adjust the special levies when online music is better protected, but the study said that so far hardly anything has been done to address it.
"Governments have an opportunity to bring real consumer benefits by applying the European copyright directive rules and phasing out the outdated levies system," Mingorance said.
Separately, the BSA expects the size of the DRM-enabled online music market in the United States and Europe to reach approximately 1.86 billion euros in 2008, a near eightfold rise from about 235 million euros in 2004.
In western Europe alone, the market is forecast to grow by more than 500 per cent to 559.1 million euros.
The online trading of digital content no longer only applies just to music either. Video is playing an increasing role.