The Tera Report and its Commissioners BASCAP

(BASCAP Business Action to Stop Counterfeiting and Piracy)

Regular readers would realise that I have a “thing” for the Tera report.

The report claimed that;

1. Objectives of the study The production and distribution of works by creative industries, including movies, music, television programmes and software, has been recognised as having a positive effect on economic growth and the creation of jobs. Unfortunately, over the last decade digital piracy (copyright infringement of digital media) has increasingly threatened the economic performance of the industries responsible for these creative works. For this reason, stemming the rising tide of digital piracy should be at the top of the agenda of policymakers in the European Union and elsewhere. But to make well-informed decisions in this area, policymakers would benefit from understanding the extent of the economic contributions of these industries and of the losses resulting from digital piracy.

The lack of accuracy of it’s selected data sets.

The deliberate omission of growth segments of the publishing industry in Europe (e,g.: Computer Database business software but not the growing area of 3D film graphics or video games.)

The deliberate use of out of date (pre 2008) EU NACE industry codes (1.1 vs NACE V2.0)

The deliberate inclusion of only sunset industry business models (like jukeboxes and newspapers).

The deliberate use of terminology that implies that the report was more comprehensive than other similar studies and therefore conclusive, when in fact the report was not more comprehensive and even added up the data incorrectly (e.g.: showing a total minus growth in UK film admissions when in fact the numbers clearly showed a positive growth.) (The list goes on, please search for Tera Report on kovtr.com to read some of the other articles on the topic.)

One has to ask when one finds such a poorly researched and badly prepared, misleading document, who does it serve? Let’s follow the money…..

To do that we have to understand the motivation of the persons whom paid for it’s creation. i.e.: WHY does the Tera Report exist???

Last year we explained that unfortunately, the nature of today’s company directors, CEO’s and shareholders was to expect and demand a return on investment today and not tomorrow. Shareholders would only reward directors for results NOW, not in five years time. As many directorships are of a limited tenure nature, 3 years as opposed to five, ten or more, it is understandable that the short term view is given a higher preference than the long term view.

“How can I make sure I get my Christmas bonus this year?”

BASCAP, is an organistion of (CEO’s) people, composed of persons, who’s principle concern is the welfare of their families;  “How can I get the most out of my tenure in this job? I may not be here next year or the year after that.” The members of BASCAP have a short term need. The organisation itself, has a longer term need. It, [BASCAP] the organisation needs to continue to source funding from it’s membership to survive. If there is no reason for it to have a membership, then it would no longer survive. Therefore BASCAP, like any consultant, or organisation, requires to continually reinvent itself and align itself with popular issues that are emotionally powerfully enough to elicit donations, subscriptions, sponsorships or commissions from it’s rank and file membership.

The Carrot and the Donkey.

For manufacturing companies, the nineties was a time of opportunity, of providing delegates to Asian countries on Trade missions and small commercial successes. Many western companies starting out on Department of Trade initiated marketing exhibitions, that eventuated initially with healthy consultancies and an opportunity to save costs and earn increased margins by extending their manufacturing to these Asian countries due to lower labour rates and longer working hours. The Asian centred Western Companies did well and the economy in the late nineties boomed. Unfortunately the carrot and Donkey approach only works when the Donkey can’t espy the carrot field next to the road on which it is traveling. Today, those same Asian companies are now creating knock-off clones of virtually everything. BASCAP was formed in an attempt to shut-down these manufacturing pirates. ACTA, is an extension of BASCAP’s efforts internationally to attempt to right a wrong that occurred because Directors of Yesteryear were only interested in the profits that they could extract at that time, with little thought of the long term consequences.

From Bascaps about page….. What is BASCAP? (Please note the caption under the photo)

Counterfeiting and piracy impact virtually every product category. The days when only luxury goods were counterfeited, or when unauthorized music CDs and movies DVDs were sold only on street corners are long past. Today, counterfeiters are producing fake foods and beverages, pharmaceuticals, electronics and electrical supplies, auto parts and everyday household products. And, copyright pirates have created multi-million networks to produce, transport and sell their unauthorized copies of music, video and software.

That seems like an eminently worthwhile aim. Surely however, BASCAP is referring to only commercial Piracy operations and not home consumers. Because if they are referring to home consumers, then unfortunately, as persons who read our article yesterday about Vivendi would realise, the multi-million dollar networks constructed for consumer file sharing of online content actually in some cases belong to the companies that own the content being shared by the consumers. In which case, as we said last year, it’s no longer piracy, merely a new content delivery methodology. And the physical goods piracy? Let’s stop all these horrible counterfeiters from stealing our business. We have to put those people in their place. It was OK when we paid them a pittance to create our products for us so that we could resell them at extremely high margins, but now that they have learnt how to manufacture the stuff, they find that they can make more money by doing it themselves and selling the output directly. Unfortunately, the Asian countries did far too well at creating cheap products. Consumers all over the world now expect their LCD screens to cost $500.00 and not $10,000. Consumers are not unfortunately economists. They fail to connect the impact of low priced

(Note the phone on right is spelt iphQne)

consumer articles available in the discount stores with the fact that their next door neighbour who used to work at the Sydney [quality brand] LCD assembly plant at Silverwater was laid of last week.

The problem unfortunately is not even that simple, which of course if it were,  could be fixed by trade restrictions on certain products to save the local employment economy. Tariffs are normally an anathema to any economist, yet, when I consider the alternative to be a global corporation dictating terms to our customs agents, our judges, courts and civil servants,  (ACTA) then possibly the tariff protection method is far preferable.

I think it appropriate to quote Bill Gates on the subject of protectionism vs innovation: “If people had understood how patents would be granted when most of today’s ideas were invented, and had taken out patents, the industry would be at a complete standstill today.” —Bill Gates In a memo to his senior executives (1991) referring to software patents.

The Tera report was commissioned to influence Governments to pass restrictions on the exchange of information between academics, commercial entities and the worlds consumers. The result of such legislation may have some short term benefits to  legacy companies that are no longer the centres of new innovations, however in the longer term (3-5 years) I predict that such restrictive legislation will slow down the development of new products and cause the economy to be severely and mortally wounded. Although, this is not the first instance of corporations convincing Governments to protect their industry.

Here is a portion of an article that I published last October, which gives an interesting insight into how forward thinking men (ok, one man, Frédéric Bastiat) thought of the protectionism sought by the dying tallow industry in the occasion of the introduction of kerosene/gas lighting.

To Protect OR to Innovate – That is the Question.

by Tom Koltai at 03:07PM (EST) on October 31, 2009 Isn’t interesting that industries that use outdated business models tend to die. In the 1800’s Candle and Tallow makers were fearful of their futures and even in two hundred years ago, there were people that paid out on the protectionist industry. The following is copied in toto from http://www.panarchy.org/bastiat/petition.eng.1845.html

Frédéric Bastiat

A Petition

(1845)

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Note This is the famous text through which Bastiat, with a ferocious sarcasm, exposes to ridicule the protectionist State and all those who are in favour of protectionism. In times of anti-globalization, a text to be read and re-read paying to it full attention.

Petition

presented by the Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps, Snuffers, and Extinguishers, and from Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.

To the Honourable Members of the Chamber of Deputies

Gentlemen: You are on the right track. You reject abstract theories and little regard for abundance and low prices. You concern yourselves mainly with the fate of the producer. You wish to free him from foreign competition, that is, to reserve the domestic market for domestic industry.

We come to offer you a wonderful opportunity for your — what shall we call it? Your theory? No, nothing is more deceptive than theory. Your doctrine? Your system? Your principle? But you dislike doctrines, you have a horror of systems, as for principles, you deny that there are any in political economy; therefore we shall call it your practice — your practice without theory and without principle. We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a consideration that he does not show for us. [A reference to Britain’s reputation as a foggy island]. We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights, and blinds — in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat. Be good enough, honourable deputies, to take our request seriously, and do not reject it without at least hearing the reasons that we have to advance in its support. First, if you shut off as much as possible all access to natural light, and thereby create a need for artificial light, what industry in France will not ultimately be encouraged? If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth. If France consumes more oil, we shall see an expansion in the cultivation of the poppy, the olive, and rapeseed. These rich yet soil-exhausting plants will come at just the right time to enable us to put to profitable use the increased fertility that the breeding of cattle will impart to the land. Our moors will be covered with resinous trees. Numerous swarms of bees will gather from our mountains the perfumed treasures that today waste their fragrance, like the flowers from which they emanate. Thus, there is not one branch of agriculture that would not undergo a great expansion. The same holds true of shipping. Thousands of vessels will engage in whaling, and in a short time we shall have a fleet capable of upholding the honour of France and of gratifying the patriotic aspirations of the undersigned petitioners, chandlers, etc. But what shall we say of Paris itself? Henceforth you will behold gilding, bronze, and crystal in candlesticks, in lamps, in chandeliers, in candelabra sparkling in spacious emporia compared with which those of today are but stalls. There is no needy resin-collector on the heights of his sand dunes, no poor miner in the depths of his black pit, who will not receive higher wages and enjoy increased prosperity. It needs but a little reflection, gentlemen, to be convinced that there is perhaps not one Frenchman, from the wealthy stockholder of the Anzin Company to the humblest vendor of matches, whose condition would not be improved by the success of our petition. We anticipate your objections, gentlemen; but there is not a single one of them that you have not picked up from the musty old books of the advocates of free trade. We defy you to utter a word against us that will not instantly rebound against yourselves and the principle that guides all of your policy. Will you tell us that, though we may gain by this protection, France will not gain at all, because the consumer will bear the expense? We have our answer ready: You no longer have the right to invoke the interests of the consumer. You have sacrificed him whenever you have found his interests opposed to those of the producer. You have done so in order to encourage industry and to increase employment. For the same reason you ought to do so this time too. Indeed, you yourselves have anticipated this objection. When told that the consumer has a stake in the free entry of iron, coal, sesame, wheat, and textiles. – Yes, you reply, but the producer has a stake in their exclusion.- Very well, surely if consumers have a stake in the admission of natural light, producers have a stake in its interdiction. – But, you may still say, the producer and the consumer are one and the same person. If the manufacturer profits by protection, he will make the farmer prosperous. Contrariwise, if agriculture is prosperous, it will open markets for manufactured goods. – Very well, If you grant us a monopoly over the production of lighting during the day, first of all we shall buy large amounts of tallow, charcoal, oil, resin, wax, alcohol, silver, iron, bronze, and crystal, to supply our industry; and, moreover, we and our numerous suppliers, having become rich, will consume a great deal and spread prosperity into all areas of domestic industry. Will you say that the light of the sun is a gratuitous gift of Nature, and that to reject such gifts would be to reject wealth itself under the pretext of encouraging the means of acquiring it? But if you take this position, you strike a mortal blow at your own policy; remember that up to now you have always excluded foreign goods because and in proportion as they approximate gratuitous gifts. You have only half as good a reason for complying with the demands of other monopolists as you have for granting our petition, which is in complete accord with your established policy; and to reject our demands precisely because they are better founded than anyone else’s would be tantamount to accepting the equation: + x + =  – ; in other words, it would be to heap absurdity upon absurdity. Labour and Nature collaborate in varying proportions, depending upon the country and the climate, in the production of a commodity. The part that Nature contributes is always free of charge; it is the part contributed by human labour that constitutes value and is paid for. If an orange from Lisbon sells for half the price of an orange from Paris, it is because the natural heat of the sun, which is, of course, free of charge, does for the former what the latter owes to artificial heating, which necessarily has to be paid for in the market. Thus, when an orange reaches us from Portugal, one can say that it is given to us half free of charge, or, in other words, at half price as compared with those from Paris. Now, it is precisely on the basis of its being semigratuitous (pardon the word) that you advocate it should be barred. – You ask: How can French labour withstand the competition of foreign labour when the former has to do all the work, whereas the latter has to do only half, the sun taking care of the rest? – But if the fact that a product is half free of charge leads you to exclude it from competition, how can its being totally free of charge induce you to admit it into competition? Either you are not consistent, or you should, after excluding what is half free of charge as harmful to our domestic industry, exclude what is totally gratuitous with all the more reason and with twice the zeal. To take another example: When a product — coal, iron, wheat, or textiles — comes to us from abroad, and when we can acquire it for less labour than if we produced it ourselves, the difference is a gratuitous gift that is conferred up on us. The size of this gift is proportionate to the extent of this difference. It is a quarter, a half, or three-quarters of the value of the product if the foreigner asks of us only three-quarters, one-half, or one-quarter as high a price. It is as compl
ete as it can be when the donor, like the sun in providing us with light, asks nothing from us. The question, and we pose it formally, is whether what you desire for France is the benefit of consumption free of charge or the alleged advantages of onerous production. Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat, and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long!

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It would appear that little changes in 200 years. Free versus protectionism.

The question people should be asking themselves is WHY?

Why do we need to legislate against something that has been this way for 26,000 years of human evolution.

Monkey see, monkey do. Clever monkey. So why do we need to either put the monkey in jail or bankrupt him when it is obvious that the large CCI industries are not losing any money at all from file sharing.

References:

Lee T. (June 9, 2007)  A Patent Lie – NY Times http://www.nytimes.com/2007/06/09/opinion/09lee.html?_r=3&oref=slogin