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19 April 2009
A Penny For Your Thoughts The Pirate Bay judgement in Sweden last week, in which the four leaders of
the download facilitation site were sentenced to one year in prison and ordered
to pay SEK30mn (USD3.56mn) in damages (they have appealed), is a victory for
the established music distribution industry, but it is just one skirmish in
a long-term war which the old-style providers cannot win. A much more significant
event during the week was the French National Assembly's rejection, against
the wishes of the government, of the 'three strikes and you're out' law which
would have required ISPs to switch off persistent download offenders. Just as
French parliamentarians refused to bow to the authoritarian agenda of the old
guard, so in New Zealand recently a popular outcry stopped the government from
bringing in a similar law.
It was time that the received wisdom of the sanctity of 'the rights of copyright
holders' received a jolt. In recent years, legislators around the world have
been gaily extending copyright periods, introducing 'droits d'auteur', slapping
fees (taxes) on the re-sale of art works and so on. These rules are anti-democratic
and anti-cultural, on a level with book-burning, and are testament to nothing
other than the lobbying power of the established publishing and distribution
industries.
Copyright and royalty laws and structures are mostly of very modern provenance,
and are a direct result and reflection of the particular distribution systems
that have grown up. Although the Romans issued copyright-style privileges to
booksellers, copyright in the written word didn't really have much of an impact
until well after the invention of printing, and composers didn't start getting
royalties until the mid-19th century. Recent as they are, however, it is absurd
to try to translate these out-dated concepts into the new world of Internet
distribution.
That is not to deny the rights of originators, and even to some extent distributors,
to be rewarded for their labours; it is just to say that the current model is
dead, and needs to be thrown out, lock, stock and barrel.
As in so many other spheres of economic activity, the Internet is disintermediating
the middle-men, giving the end-consumer direct ways of accessing and enjoying
the words and music she wants. That much is obvious: what is missing, or at
least unclear, is the mechanism by which a market discovery mechanism can be
set up through which consumers can reward originators. And originators themselves
will find that the destruction of the old models of content marketing will be
creative for them. There are substantial barriers to entry in many branches
of publishing, as anyone knows who has tried to find a publisher for a book,
or a recording company for a new group.
In the last analysis, words (literature), the graphic arts and music are types
of entertainment, and the Internet will enable direct delivery of a far greater
range of types of entertainment to users. Already in the first decade of the
21st century entertainment and sport are perceptibly merging into one another,
and this process will continue at a rapid pace during the decades to come, as
the world gets richer, and elective activities gradually come to replace more
and more of what had been known (for only 400 years after all) as 'work'.
Another notable feature of the ossification of the delivery of cultural entertainment
that has accompanied the growth of the copyright phenomenon in the last two
hundred years is the distinction between 'professional' and 'amateur'. Amateurs
might indeed sing at karaoke bars, but only professionals get paid for singing.
This distinction will break down during the next 20 years as content becomes
universally available through the Internet. Early examples of universal providers
such as YouTube have run into copyright problems, not surprisingly, but by 2020
technology will routinely enable commercial relationships to be set up between
any willing performer/consumer pair.
We can label such technology KISS (Kontent Identification and Subscription
System), which will come into universal use, even in China, with the value of
any given piece of content, regardless of its origin, calculated in real time
based on its audience, and charged to the (compulsory) account of the user.
Content providers (call them musicians, writers, artists, or whatever) will
still able to put their own price on a work, and to withhold it unless the price
was paid, but hardly anyone will do so, due to the difficulty of marketing what
cannot be seen or experienced in advance. Under the KISS system, the cost of
experiencing a piece of content is incurred incrementally during the experience,
so that if after two seconds you know you hate what you are experiencing, you
just switch it off, and it has cost you very little or even nothing.
KISS technology can be applied to all forms of entertainment, including music,
books, magazines, blogs, news, football, painting, and a range of new art-sport-forms
which will develop under the stimulus of the new media, such as virtual beach
volley-ball, which can be either watched (you pay), or participated in (you
get paid).
One useful by-product of KISS will be the creation of an objective measure
of an individual's 'contribution' to the common weal; and if couch potatoes
come under attack in due course in the way that first smokers and now drinkers
and fatties are being ostracized, it will be those individuals with high KISS
ratings who get the best treatment in society and privileged access to the scarce
resources of our threatened planet. Scary? Not really: it's just a way of redefining
money for the coming post-capitalist world.
You have been
reading an entry on the following blog:
The British government is now face to face with the consequences of the mistakes
it has made over the last ten years in regulating and taxing its gaming sector.
It is scarcely the only country to have trodden the same error-strewn path,
but in the case of the UK the damage is greater because of the highly profitable
industry which the government's policies have now almost destroyed.
'For many reasons, increasingly few companies active in the British market
are now regulated by the Commission,' bleats Minister for Sport Gerry Sutcliffe.
So what has happened?
In 2001 the Government replaced its age-old system of taxing punters with a
15% tax on gaming gross profits (and operators also have to pay VAT plus corporation
tax plus a super contribution on any horse-racing turnover to a superannuated,
cosy old industry nag called the Betting Levy Board). This step wouldn't necessarily
have been fatal on its own, but when Internet betting started to supersede the
betting-shop kind, and UK-based operators began to desert in droves to Malta,
Gibraltar, Costa Rica and the Channel Islands, the government imposed a 15%
tax on Internet gaming profits for all those firms which it licensed, and created
a tough licensing regime under the Gaming Commission. But it could only license
firms on its own territory and was forced to allow in all EU-based firms, without
being able to tax them.
Now, with gaming tax revenues disappearing down a black hole, it is having
a King Canute tantrum and wants to impose licensing (and hence taxation) on
all the firms that operate in the UK (ie advertise there for punters). But why
should the EU permit this? There are perfectly adequate regulatory, licensing
and taxation regimes in Ireland, Malta and Gibraltar, all EU Member States,
and where the ex-UK betting firms now prosper. Under what circumstances are
they going to allow the UK to steal their revenues, or to replace their rules
with a new set? And under what law can the UK forbid another properly-licensed
EU operator from advertising freely throughout the EU?
The ECJ's Gambelli ruling in 2003 was unequivocal: gambling is a service and
is subject to EU freedom of establishment rules. There is no way in which one
EU Member State is going to be able to impose its own legislative practices
on another one. The EU Commission has already attacked France on this issue.
It is a mystery how Minister Sutcliffe could be so badly advised as even to
try.
What the government should have done was to accept the inevitable and offer
a light-touch, low-tax regime to compete with Malta et al, instead of hiding
benhind a hypocritical ('protect our children') smokescreen. All it really cares
about is the tax, and now it has lost that along with the gaming industry. The
existing law is a dead letter, as the government is implicity acknowledging:
you can ban a foreign firm from advertising on the Internet, but Berkshire is
not Beijing, and if a 16-year old wants to place bets with a Costa Rica poker
site using his father's Swiss credit card and bank account, who is going to
stop him?
Even now it is not too late for the government to come to its senses, but under
Pastor Gordon Brown's presbyterian theocracy, and faced with the Treasury's
emptying treasure-chest, what chance is there of that? The few remaining British
gaming firms will now pack their bags and leave. 'Mene, mene, tekel upharsin'.
Reciprocity. It sounds so fair and reasonable, doesn't it? Argentina is applying
the principle in its new border tax: if my country charges Argentinians 83.795
sea shells for a visa, then that's what Argentina will charge me to go there.
Sorry; wrong! Go the the bottom of the class. The Bible's Old Testament is
big on reciprocity: 'an eye for an eye and a tooth for a tooth'; but Jesus knew
better, saying that you should 'turn the other cheek'.
Reciprocity is what leads to trade wars and protectionism. You put a duty of
50% on my bananas, so I put a duty of 50% on your beef, and before you know
it, trade volumes have slumped away to nothing. These sort of duties are especially
popular – and damaging – in the EU, where they are frequently termed
'countervailing' duties. They are closely related to 'anti-dumping' duties,
which should really be called anti-consumer duties.
If another country, or a manufacturer in another country, wants to sell off
its surplus production at cost into my country, in order to help its cash flow,
then the right response is for my country to say thank you very much and allow
consumers (or manufacturers wanting that type of input) to take advantage of
the lower prices that result. But of course that isn't what happens: the over-priced
and usually highly unionized firms in my country which are damaged by the extra
competition go wailing to the government (or the Commission in the case of the
EU) and demand an anti-dumping duty to set them right. And they often get it,
thus putting off the day when they might have to do something about their antiquated
methods and under-skilled work-force.
'Social dumping' and its cousin 'fair trade' are other forms of reciprocity
and are equally damaging to long-term competitivity and the interests of consumers.
'Social dumping' is when your country exports products to mine which have been
made by workers who don't have the gold-plated working conditions that make
my country uncompetitive. Taken to its logical conclusion, the principle of
fair trade would ensure that all manufacturers around the world are equally
uncompetitive, and indeed this is what its woolly-minded proponents do actually
want. Unfortunately for them, that's not how human nature or the markets work.
There are better ways of protecting the interests of young children and oppressed
working populations than with the sledgehammer of reciprocity, although they
require long-term effort and investment on the part of developed countries.
But it is seldom in the interests of politicians to look to the long term, and
consumers are not educated to understand their own best interests – they
are economically illiterate in most cases – so that the electorally popular
sledgehammer continues to be used, to everybody's disadvantage other than the
narrow mercantile class that called it down.
Sorry to be a bore. I promise not to preach this sermon again for another 12
months!
Penelope Wise
Penny Wise but not Pound Foolish! But remember: I am not offering investment advice. My comments are just for your general information; I do not recommend investments, and you should take professional advice before entering any investment contract.
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