Making up for lost sales by taxing
the Internet
23 January 2003
"We will hold ISPs more accountable,"
said Hillary Rosen, chairman and CEO the
Recording Industry Association of America (RIAA), in her keynote speech at
the Midem music conference on the French Riviera."
[...]
"Rosen suggested one possible scenario for recouping lost sales from online
piracy would be to impose a type of fee on ISPs that could be passed on to
their customers who frequent these file-swapping services."
[...]1
The music industry argues that it loses money because of new technologies. That they would make more money except that certain things exist - like home audio recording machines - and now, the Internet. They want to tax these things, to make up for the theoretical difference between actual sales and the sales that they MIGHT have made if these various things didn't exist.
The music industry started this with cassette tapes. Every blank cassette tape, video tape, cassette recorder, and VCR sold pays a fee to the music industry.2 Similar "fees" (which are really private taxes) were later mandated for digital audio tape and recordable compact discs.3 Compact discs even have a digital key embedded in each disc to allow tracking - the United States has threatened a trade war with the Ukraine over the latter's' omission of this keying in a manufacturing plant located in the Ukraine.4
So let's extend the reasoning. The precedent is clear; those who can reasonably demonstrate that they have lost potential sales because of a new technology can impose a tax on these new affordances.
Who has lost sales - who has been economically hurt - by the Internet?
Well, catalog sales. If you can buy something over the Internet you obviously didn't buy it from a glossy bulk mail catalog delivered to your door. So every catalog operator should get a fee from ISPs, based on an estimate of lost catalog sales - which Jupiter estimated to be 6% in the fall of 20015. Surely it is higher, now.
Of course, we should discount part of that fee for operators that have started their own online e-commerce operations; Victoria's Secret for example. Maybe they should only get 50%. I'm sure lobbyists can help lawmakers figure out the correct vigorish, err, percentage.
Who else has been hurt by the Internet?
Television. Americans are watching less television - for the first time the number of hours of television viewed per day has declined - in lock step with the amount of time people spend surfing the Internet. In 2001 the average Internet user watched 4.5 hours per week less television than non-users.6
So clearly television stations, networks, and advertisers have all been hurt by the Internet. People aren't watching as many commercials (let's not even start on Tivo and Replay and how they enable skipping commercials in playback...), and something must be done.
Every television station, network, and indeed every corporation that places a television ad should get a fee from ISPs, compensating them for the lost eyeballs.
Let's proceed. Who else?
Hmm. Newspapers... people are reading news and classified ads online (newspaper classified ad readership has declined by 11%)7, and getting sources that aren't owned by the local newspaper monopoly. Gotta recompense for THAT. Come to think of it, many of those media comglomerates own local television, too - so they validly can double-dip on an Internet tax. Kinda cool, don't you think? Better include radio stations, too.
So it seems there are a lot of people who are hurting from the Internet.
Well, not people, exactly, but corporations. Fictive persons.
Are there any people who are hurt?
I think there is one class of people hurt... politicians.
You see, now the public has access to the Internet, countering the concentration of the media - what does this mean, in practice? That people can organize - so that the choices of who you donate political campaign money to become more than which of two candidates you want to vote against - just as television watching declines when your choice of leisure time is no longer channel flipping to what is the least boring channel... Now everyone can talk to other people in chat rooms organized around their own interests - everyone can search the Web to find organizations of affiliation - some of them exceedingly narrow - people can affiliate with small demographics spread across states and continents and the entire world in ways never before possible.
It seems obvious that politicians from the two major parties just aren't going to get the kind of donations they are used to.
So they should pass an Internet tax that goes to political parties... of course, only to the parties that got at least 10% of the vote in the last election (thus cutting out the Green Party)...
...don't you think?
Footnotes
(1) "RIAA: ISPs should pay for music swapping", By ReutersJanuary 18, 2003, 10:10 AM P, from www.news.com: <http://news.com.com/2100-1023-981281.html?tag=fd_top>
(2), (3) "Aug 1991 Senator DeConcini and Representatives Brooks and Hughes introduce the Audio Home Recording Act guaranteeing right to tape, mandating a serial copy management system, and requiring manufacturers of digital audio equipment and media to pay a small royalty on their products."
[...]
"Oct 1992 Congress passes landmark Audio Home Recording Act. President Bush signs the bill into law."
Quoted from "Home Recording Rights Coalition: Chronology", from www.hrrc.org: <http://www.hrrc.org/history/chronology.asp>
(4) "Recording industry deplores ineffective Ukraine CD plant law",
London, January 17, 2002, from www.site-content.com:
<http://www.ifpi.org/site-content/press/20020117.html>
(5) "Catalog companies that have yet to go online may have lost 6 percent of their business and seen critical market share erode, a Jupiter analyst said", from www.ecommercetimes.com:
<http://www.ecommercetimes.com/perl/story/14274.html>
(6) UCLA Center for Communication Policy, from www.ccp.ucla.edu,:
<http://ccp.ucla.edu/pages/newsTopics.asp?Id=29>
(7) "Newspapers Losing Classified Readership To Job Sites", February 7, 2002, from www.writenews.com
<http://www.writenews.com/2002/020702_newspapers_websites_jobads.htm>
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