Taxing the Net Won’t Stop the Media Meltdown

A new French government sponsored study has recommended taxing online advertising revenues to help compensate the French creative industries for copyright infringement.  The study proposes taxing the large online players Google, Facebook, Microsoft, AOL and Yahoo, but not ISPs, which are more traditionally seen as the key conduit for online media piracy. The sharp eyed among you will have noticed that these are all American companies and that the French ISPs are, well, French. 

Parochialism aside, there is a major flaw in the logic here: if these large companies are deemed responsible in part for illegal content consumption, then so are the ISPs (arguably more so).  And indeed the French Hadopi (Three Strikes) bill which this study is intended to complement, expressly apportions responsibility to the ISPs, making them partners in anti-piracy enforcement.  So if they are deemed responsible under French law, shouldn’t they also be subject to a levy, if one is implemented?

The so called ‘Google Tax’ proposals also suggest that the tax should be paid regardless of whether the publishers have offices in France, based instead on whether French consumers view the ads.  So this would mean, for example, that Google would have to make payment to support the French media industries if a French consumer clicked on a sponsored link, say, for washing machines in Seattle.

The bottom line is that media levies are a clumsy and blunt instrument that create more problems than they solve.  They also risk making media companies lazy, relying on tax income instead of product innovation to drive revenue growth.  If a levy is raised, who gets paid, and how much?  Many many industries could make a strong case for revenue loss due to piracy.  Where is the line drawn? Music? Movies? TV? Books? Games? Software? News? Magazines? Software? Pornography?  Is revenue share based on how much the industries have lost? Or on how big a portion of their revenue has declined?  Or on how many files are downloaded? For example, music companies have lost a larger share of revenue to piracy than movies, but the absolute loss for movies is probably larger.  Who gets paid more?  Movie studios or record labels?

The additional problem with taxing the giants of the Internet is that many of these companies already play important roles in discovery for consumers, and that role is going to grow exponentially.  The likes of Google and Facebook are crucial partners for media companies.  Yes they should be doing more, but they should be encouraged to cooperate as key business partners, not alienated and made enemies of with levies.

Comments

re: Taxing the Net Won’t Stop the Media Meltdown

I don't think this is so much about the media space. The French government is actually spending a great deal of money to built out Internet infrastructure and also in some cases to subsidize content.

The main issue is that Google can get a "free ride" versus local companies and basically suck money from French companies into their coffers and the taxes get contributed to the US treasury.

Even though what ends up happening will probably be a total mess and not at all in the right spirit but the ideas is simply to tax local revenue and profits on a level basis and not give a foreign provider a huge advantage.