Over at CNet News.com today, Daniel Terdiman reports that “IRS taxation of online game virtual assets [seems] inevitable”:
That’s because game publishers may well in the not-too-distant future have to send the forms–which individuals receive when earning nonemployee income from companies or institutions–to virtual world players engaging in transactions for valuable items like Ultima Online castles, EverQuest weapons or Second Life currency, even when those players don’t convert the assets into cash. Most governments are only beginning to become aware of the substantial economic activity in online games, but the games’ rapid growth and the substantial value of the many virtual assets changing hands in them is almost certain to bring them into the popular consciousness. “Given growth rates of 10 to 15 percent a month, the question is when, not if, Congress and IRS start paying attention to these issues,” said Dan Miller, a senior economist with the Congress’ Joint Economic Committee, who is also a fan of virtual worlds. “So it is incumbent on us to set the terms and the debate so we have a shaped tax policy toward virtual worlds and virtual economies in a favorable way.”
My problem with all this is not just that I am a rabid, anti-tax libertarian. It’s that we’re putting the cart before the horse in the sense that we haven’t even figured out what sort of governance structures will be imposed within most of these virtual worlds yet. Despite that, we’re already having a discussion about how “Meat Space” (tangible world) taxes should be to applied cyberspace worlds. Sounds like old fashion “taxation without representation” to me.
We first need to figure out a lot of other basic things about virtual world governance before rushing to impose real world taxes. What sort of property rights will apply? What about copyrights? (See my previous essay on that issue here). How will contracts be enforced? Etc, etc. And, to the maximum extent possible, these things should be decided by the Net-izens living in those virtual worlds before any Congress critters or IRS bureaucrats try to impose taxes on virtual worlds they likely have never even visited.
This week I appeared on C-SPAN’s weekly program “The Communicators” and discussed a wide variety of communications and media policy issues including: the outlook for telecom & media legislation in the new Democratic Congress, the First Amendment treatment of new media technologies, Net neutrality regulation and the need for universal service and spectrum policy reform.
The video can be viewed here and I apologize in advance if I put you to sleep!
I’ve just finished reading a new report by a research firm called Ramp Rate about Net neutrality and the online gaming market. Now I’m accustomed to Net neutrality supporters employing gloom-and-doom, Chicken Little-esque rhetoric in support of government regulation of broadband networks, but I was shocked to see the same rhetoric laid on so thick in a study by industry consultants.
The sky-is-falling rhetoric kicks off with the very title of their piece: “Every Time You Vote against Net Neutrality, Your ISP Kills a Night Elf.” The authors go on to paint a picture of the coming apocalypse if we do not adopt Net neutrality regs right away:
“What will be murdered with no fallback or replacement is the nascent market of interactive entertainment–particularly online gaming. Companies like Blizzard Entertainment, Electronic Arts, Sony Online Entertainment, and countless others, have built a business on the fundamental assumption of relatively low latency bandwidth being available to large numbers of consumers. … Killing off these blossoming networks, with their own economies (potentially taxable when converted into real-world cash), would result in drastic, irreparable harm to consumers, technology developers, the economy and tax revenue–and even the ISPs themselves.”
Murdered? Killed off? Oh my, who knew the end was so near?! Of course, the end is not upon us and the online gaming market is not about to be “murdered” because of a lack of Net neutrality regulation. In fact, just the opposite could be the case as I will explain below the fold.
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Communications Daily (subscription) reported Monday that Clear Channel’s upcoming sale of 448 stations will likely be structured in big blocks of licenses–with only about a dozen transactions in all. One reason, according to Comm Daily, is the FCC approval process. With big batches, the article reports, quoting a broadcast property appraiser: “They are not going to want to be involved in 400+ transactions. It would become a nightmare in terms of documentation.”
One consequence of this is that minority owners and small businesses would find it harder to buy acquire licenses, at least in the initial round. In other words, the FCC ownership rules–justified as a way to increase diversity in media–may actually be hindering minority ownership.
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Back in Part 5 of this series last April, I discussed the looming breakup of radio giant Clear Channel. And now that day is here. According to Frank Ahrens of the Washington Post, Clear Channel “has agreed to sell the company to a consortium of private-equity firms and plans to shear off more than one-third of its 1,150 radio stations, dismantling a giant that dominated the industry and became the bogyman of media consolidation for the past half-decade.” Moreover, “In a separate transaction also announced yesterday, Clear Channel said it would seek buyers for all of its television stations and 448 of its smaller radio stations,” mostly in smaller markets.
Again, don’t expect the Chicken Little media critics to acknowledge any of this. As I’ve said again and again in this ongoing series, this is an example of a well-functioning, competitive marketplace at work. Media critics think every merger or acquisition is all just part of some sort of grand conspiracy to destroy democracy or competition. But when the opposite happens and firms reorganize or downsize, the critics never say a peep.
In the end, regardless of what ownership patterns and structures look like, markets sort things out and we end up with an ever-expanding universe of media options at our disposal. In sum, despite what the Chicken Littles predict, the sky never falls. Seriously, ask yourself a simple question: Do you have more media options and outlets at your disposal today than you did 5 to 10 years ago? Read my last book if you want to see the evidence.
I have come across some very silly applications of antitrust principles in my time, but this one has just moved up to the top of my list. Over on Business Week.com, Jason Brightman argues that video game retailers such as Game Stop are “forcing” consumers to commit to expensive product bundles in order to get their hands on a new PlayStation 3 or Nintendo Wii gaming console.
Mr. Brightman apparently thinks there is some sort of grave cosmic injustice at work when retailers bundle together gaming consoles with games or other products and require that users agree to purchase that bundle in order to be one of the first people to get their hands on a hot new console. He argues:
“Unfortunately it’s become all too common in recent years for retailers, particularly specialty stores like GameStop/EB, to pull a fast one on consumers who are all too eager to get the newest consoles at launch–remember last year’s $1,000+ Xbox 360 bundles? While it’s true that pre-order campaigns for brick-and-mortar locations allowed customers to pre-order nothing but the console, why should online consumers get the shaft? And is this even legal?… [U]nfortunately, it looks like this ‘predatory packaging’ is legal, but why the heck are consumers getting these console bundles shoved down their throats?”
Oh, come on! You have got to be kidding me. This is called capitalism, buddy. You know… supply-and-demand… rationale pricing of scarce goods… efficient market allocation, etc, etc. In fact, I want to make the exact opposite point that Brightman makes: I think the folks that are selling these consoles on a conditional basis or for a large mark-up are doing society a great service because they are ensuring that those of us who really want these scarce consoles the most can get are hands on them right away.
Unless he wants to make the argument that video game consoles have suddenly become life essential goods on par with food and water, his argument is just plain silly. After all, would anyone die if they had to wait a few weeks before they bought a stand-alone video game console at regular retail prices? How spoiled are we as a culture when we’re even having a debate about fair video game console allocation!?!
Incidentally, what about all those people on eBay selling the extra consoles they bought for major mark-ups? Should they all be in jail? Or perhaps the DOJ or FCC should regulate the video game console marketplace to determine fair prices and efficient distribution of video game consoles to the masses. Perhaps the rallying cry for this new regulatory movement can be “From each according to his [gaming] abilities, to each according to his [gaming] needs.”
Ridiculous.
In the latest issue of Heartland’s IT&T News, S.T. Karnick has an excellent article about the decline of media consolidation fears:
Leftist critics complained about the corporatization and consolidation of the media as an unwelcome phenomenon in the ’60s and thereafter, and they were correct to point out there would be deleterious effects. There may indeed have been an initial increase in sameness of movie and TV productions and a loss of creativity and vitality in the book publishing industry, especially in the fiction section.
Market-oriented analysts simply replied by saying the consolidation was good because it was what people wanted and they wouldn’t do it if it didn’t make sense. That was not the correct response, however. People do stupid things, and corporations do stupid things too.
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Over at my other blog, my friend Amy Phillips has a funny comment about the blurring of nipples on those plastic surgery reality shows:
I watch a lot of plastic surgery, and while they always blur out women’s nipples, they never blur men’s (even when the men in question have boobs bigger than some of the pre-surgery women).
This leads to very weird results in shows about the plastic surgery that transgendered people undergo. When giving breast implants to a M-to-F transgendered person, the nipples are never blurred out at the beginning of the show, but about halfway through the surgery, once the implants are inflated, they pixelate the nipples. Same nipples, but when they sit on a rounder chest, they become indecent.
On F-to-M transgendered people, they blur out the nipples at the beginning of the surgery, but once a sufficient amount of breast tissue has been removed to make the chest look male, out come the nipples. Again, the same nipples that were once obscene become perfectly okay to look at once the chest is flattened out.
This happens without fail, regardless of what gender the patient in question considers her/himself, regardless of what genitalia the patient possesses, and regardless of the person’s legal gender. Context is everything, apparently.
Given that these are usually cable shows, we probably can’t blame the FCC for this one. We just live in a strange country.
Last week I wrote about how excited I was to learn that Microsoft would soon be announcing an eagerly awaited movie / video downloading service for its XBOX 360 gaming console. And now we have the details of their new business model. And, in my opinion, it looks like a winner for MS, content developers and consumers alike.
Beginning on November 22nd–the second anniversery of the XBOX 360 launch–XBOX users will be able to use their “Microsoft Points,” which can be earned or purchased on the XBOX Marketplace, to download movies and TV shows from affiliated partners. The first round of deals MS cut were with CBS, MTV Networks, Paramount Pictures, Turner Broadcasting System Inc., Ultimate Fighting Championship (UFC), and Warner Bros. Home Entertainment.
More deals are sure to follow, but that’s quite a bit of content already. I look forward to downloading Comedy Central and VH1 shows in particular, in addition to all the movies they’ll be offering. And my kids will love all the Nickelodeon and Nicktoons stuff that is on there. (A list of all the content companies involved in the deal can be found here).
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New York Times media business reporter Richard Siklos penned an excellent column yesterday entitled “In a Blurry World, Ownership Is Yesterday’s News.” “It is hard to find any public policy question that feels less relevant by the minute than whether one person or company should be permitted to own television stations and newspapers in the same market,” he argued.
That’s because, as I pointed out in my book on media ownership last year, Media Myths: Making the Debate over Media Ownership, there has been an explosion of media competition and diversity that makes this entire debate seem somewhat silly and even bizarre at times. Critics want us to believe that a handful of puppet-masters in New York or Hollywood are pulling all the strings and force-feeding us propaganda. It’s all a bunch of hooey. And even the traditional media sectors where some of the media “barons” have more control of ownership, it really doesn’t amount to a hill of beans. As Siklos points out:
“[W]hat does it say about the appeal of cross-ownership that The [New York] Post has lost money since the News Corporation’s chairman, Rupert Murdoch, acquired it for the second time, in 1993, and that Mr. Murdoch, whose roots are in ink and paper, has otherwise quit the newspaper business in the United States in favor of television, cable channels and the Internet?”
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.