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08TOKYO1779 2008-06-27 09:57:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Tokyo
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1. (SBU) Summary: The Cultural Affairs Agency (Bunkacho) and
the Ministry of Economy, Trade and Industry (METI) announced
June 17 a compromise on the contentious issue of copy levies.
The agencies decided not to wait for the conclusions of a
study group that had become deadlocked over the differing
views of intellectual property (IP) rights holders, consumer
electronic device makers, and content providers. This
agreement allowed another compromise, announced June 19, to
adopt the "dubbing 10" proposal to loosen current constraints
on copying content for personal use within the home.
Broadcasters announced June 23 they will launch a new
"dubbing 10" system July 4, in time to allow time-shifted
viewing of the Olympic Games. End summary.

2. (SBU) Bunkacho and METI announced June 17 a compromise
agreement to expand modestly the scope of Japan's copy levy
system. The new copy levy system will add blu-ray recorders
and media to the list of covered products, but will not
include devices with integrated or non-detachable storage
media such as MP3 players, IPods, and HDD players. Device
makers had resisted expanding the levy system, while IP
rights holders had argued they needed the expansion,
especially if Japan moves to loosen current rules to allow
consumers to record more than one copy.

1992 Copy Levy System Needs Changing


3. (SBU) Copy levies are a quasi-tax on select audio and
audio-visual devices and media to remunerate rights holders
for anticipated infringement. Proponents for expanding the
system, established in 1992, argued it is outdated and
inadequate. Levy collections dropped steadily over the past
several years, in part because migration to newer
technologies gradually eroded the scope of covered products.
However, over the same period, risks of online infringement
and piracy grew.

4. (SBU) Critics argue the current system is neither
market-based nor effective, and feeds a bureaucracy built on
the collections. Critics object as well to a plan they see
expanding and further entrenching the system. They argue
efforts should be made to improve TPMs (technical protection
measures) and DRM (digital rights management) systems that
would support sustainable business models to capture revenue
based on consumption of content.

5. (SBU) The scope of products covered was also contentious.
Makers of devices such as MP3 players and IPods opposed
Bunkacho's plan to impose levies on those devices, but not on
cell phones. A recent study of Japan's market showed net
music industry revenues for distribution over the internet to
PCs were USD 330 million in 2006, while distribution to
mobile phones was valued at USD 1602 million. Industry is
also concerned about a proposed "evaluation organization"
that would review and revise the scope each year, making the
entire system less predictable.

6. (SBU) Analysts note levies, while offering modest
remuneration, do not establish incentives to promote
development of TPMs. Rather, they can impede their
advancement and adoption. One GOJ official commented Japan
faces a pivotal decision: "whether to follow an EU model by
expanding and further entrenching the levy system, or rely on
an approach like that of the U.S. by promoting market
mechanisms and seeking technical solutions.

Japan's "Dubbing 10" Proposal


7. (SBU) The "dubbing 10" proposal would loosen rules that
currently allow only a single copy of digital content,
supported by technical copy-protections on Japanese broadcast
digital content. These rules do not accommodate the
principle of "fair use" and inhibit legal copying for
personal use on distributed devices within a home or family.
The proposal to allow up to nine additional copies is
intended to approximate fair use and accommodate the
widespread demand for content on distributed electronic

TOKYO 00001779 002.2 OF 002

8. (SBU) The "dubbing 10" proposal has been under study for
some time but was held up by IP rights holders' concerns that
their rights and IPR enforcement were being eroded. Revising
levies therefore was a move to overcome objections to
introducing "dubbing 10."

9. (SBU) The push to reach a compromise now reportedly
resulted from the need to deal with time-shifted viewing of
broadcasts before the start of the Beijing Olympics. The
ministries' compromises break the deadlock and give Japanese
consumers additional flexibility in handling digital content.
However, they are not likely to satisfy fully any of the
concerned stakeholders. The horse trading required to
achieve even this fairly minor compromise may be a sign of
what to expect as the GOJ works to consolidate
telecommunications and broadcasting laws over the next few