"iPod Tax" in Japan? (AAPL, SNE)

The Japanese music industry is lobbying hard for the implementation of a surcharge on retail digital music players including the Apple (ticker: AAPL) iPod and Sony's (ticker: SNE) Walkman series. A powerful lobby officially known as the JASRAC (Japanese Society for Rights of Authors, Composers and Publishers) assumed it would be granted the right to recoup potential loses from illegal and/or excessive music copying by applying surcharges to electronics hardware. So far the proposed bill has been tied up in red-tape. Here's a summary of the issue (from an International Herald Tribune article via the New York Times) followed by analysis and comments:

• Japanese music industry seeking 2 to 5% surcharge on portable digital music players

• Japanese recording companies playing catch-up similar to their US and EU counterparts

• Battle: Japanese public and consumer rights groups vs. the music industry

• The music industry wields considerable power and already succeeded in delaying intro of Apple iTunes by failing to agree on licensing fees

• Apple iTunes Japan finally debuted in August, 2-years later than scheduled

• iTunes Japan achieved one million song sales in just four days

• US music industry is seeking higher song prices in next licensing agreement negotiation in SP ‘06

• Japan music industry claims it is losing revenue because CD and MD (mini-disc) users are converting to flash and hard disk-based players

• A 2% surcharge already exists on CD and MD recorders

Comments:

I side with the consumer but feel inevitably that the Japanese government will approve this surcharge. A concern is whether iTunes and other digital download sites will increase their prices. If so, then the consumer ultimately loses twice. Note the cost per song downloaded is higher in Japan than in the US. Why -- Because they can get away with it.

I would like to see an economic analysis done (I am sure there is one out there) as to which is better for the consumer: higher price of the hardware or higher price of the media (songs). My guess would be the initial higher cost on the music player would be a smaller setback than it would cost the consumer paying higher download prices, especially in the long-run and for high volume downloaders. Also, new entrants could attempt to compete on price and drive download prices downward, which they couldn't necessarily do with the hardware because of the surcharge.

The Japanese media is referring to the proposed surcharge as the “iPod tax.