Amazon | Lawrence van Rijn - Law Lord to be

We are 12 days from the beginning of a new war, an all-out war, it is the war of the consoles and this war will start now and will go on until past Christmas. Yes, Christmas is the new center of these war efforts.

On the left side we have the one, and on the right side, the other. It is Sony versus Microsoft and it does not matter who you choose or support, you the gamer will make at some point a choice. Some with get neither and some will get both, 4 groups! From my view, I choose the Sony side, as the PlayStation 4 is stated by them as a system for gamers! Yet, both sides made the same mistake, even though Sony had an optional alternative, both systems come with a 500 Gb drive. The PS4 allows for the system to be upgraded with a bigger drive. What I do not understand is why they did not install a 1Tb drive for a mere $20 more. There is a lot more to this, but about that part more a little later.

I will mention at this point, right now, that part of the view that follows has bias. I want to be completely impartial, but to claim impartiality when a person’s passion is attacked is at times way to ludicrous!

My issue with the Xbox One, the Microsoft (aka Micro$oft) product had issues from the very beginning. First, they (Microsoft via Don Mattrick) announced on the need for a once a day login to the Microsoft system. I discussed that in my blog called ‘Discrimination or Segmentation in gaming? (UPDATED!)‘ In June 2013, that part was later recalled, which is why I updated the blog. I do believe in keeping people abreast of the correct information. Microsoft made the blog again in August 2013 in my blog called ‘Tax evasion, copyrighted by Vodafone?‘ This was all about ‘pay as little as taxation as possible‘, which will link to this later. Then in September 2013 we get the blog ‘The marks of trade‘ which again links Microsoft. So, why are these linked to the console war?

The last article has the mayor link to what the consumers of their choice in the console wars are not getting informed about. “When the digital world is entering the field where more and more possible ‘new’ consumers are updated through the net, it seems that their marketing and party lines need to get a massive overhaul and it should all get a much better mentor system then it currently seems to have.” There is a side that had been hidden, even from me. This side is not on the up and up and even game sites like Gamespot have until now been silent about it. The latter one is silent about it as they might not be aware at all, which would be fair enough.

So what is going on?

The next generation of consoles will evolve into a new world that is all about DRM (Digital Rights Management). Even though you think that this was off the table, certain changes are now becoming visible doubting that all no matter what some executives claim to be the case. In case of Microsoft, for their system, as this is not a gaming system, but it has been labelled as an ‘entertainment system’ this all will become a much bigger issue. Do not think that Sony is off the hook here, they will be part of all this down the road too!

The issue came to light when I was made aware to an article called “TPP ‘A Substantial Threat To Australian Sovereignty’” (at https://newmatilda.com/2013/11/14/tpp-serious-threat-australian-sovereignty). If we ignore mentions like ‘secret law‘ for now and concentrate on “a law that will override the High Court of Australia” as quoted, then we see that our attention was pulled away from lawmaking that will have a massive influence on global users of all forms of entertainment.

Suelette Dreyfus a research fellow from the University of Melbourne states “At its heart the TPP is basically a grab for money. It will take money out of the pockets of average Australians and give it to large corporations in the US“. She also makes a mention on how illegal movies will now have to be policed by the ISP’s, even though the high Court of Australia had already ruled in ‘Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16‘ in this matter. The law changes would influence future events. I dealt with the initial issues of illegal downloads somewhere during the year, but the change might, if enforced mean that, should illegal downloads stop (I am not against that), that the economic fallout would be enormous. Consider that Telco’s would see a bandwidth drop of two marks, which would mean that the consumer bill would lower an average of $30 a month, with over 7 million users this amounts to 210 million revenue per month less (spread over several providers), this would have a massive consequence, but the effect would soon be global if this path continues. To be frank, it does not affect me, I never download movies. I prefer the quality of a DVD/Blu-Ray on my TV screen, whenever I want it.

Brendan Molloy, the Information freedom activist and Councillor for Pirate Party Australia has an interesting view on other changes. “Perhaps the most shocking inclusion in the TPP IP chapter is criminalisation of non-commercial copyright infringement.” The Australian patent law changes, discussed in what is referred to as the ‘raising the bar act 2013‘, is all about promoting innovation. These events change everything. His quote “The text even attempts to consider temporary copies to be copyright infringement!” is an interesting (read dangerous) change. It implies that personal owned transfers (like CD to MP3) could be affected. A final quote is “There is language that would lower global standards on medical patents and potentially extend patents beyond 20 years, all supported by the United States.” This means that there steps in place to thwart innovation and strangle hold commerce. This means that only the big boys will be able to dictate progress for the next few decades, which means innovation goes out the window for a long time to come.

Angela Mitropoulos, Researcher at the University of Sydney has the following to say “The biggest winners in the TPP are the largest global corporations and, with the proliferation of mechanisms proposed, they intend to fully harness the infrastructures of the internet and the full force of the law in order to capture and extract even larger profits and a wider share of the world market.”

Basically, the new world terrorists will be the large corporations, if these reported events are true. So how does this strike back to the console war of Sony and Microsoft?

First of all, games and consoles are ALL about innovation. A console is only as good as its games and without innovation a console dies fast. Sometimes reverse engineering is the only way to get true progress. Consider the parts mentioned earlier, and if you have a console (either Wii, Xbox 360 or PS3), look at all the parts you have and how many of these parts were not an official Sony, Nintendo or Microsoft product. Items like recharge-able batteries, controllers and head sets. All that could stop! The issue goes a lot further, if we consider the quote from Brendan Molloy “article QQ.G.10 reinforces one of the worst parts of our current IP regime, which consists of legal protections for technical protection measures. Why should it be illegal to jailbreak your iPhone?”

So products like Blu-Ray’s and DVD regions and Smartphones. All of it treated under scrutiny of big business! Consider that due to these changes the new iPhone 6 could then only be there for the Telstra (or Vodafone) customers (presumption). These changes would make these events possible. Smaller firms would quickly be pushed out of existence, giving even more power to big Telco’s. This could also have an effect on consoles. If we consider the implications, then the danger becomes ever more apparent that the innovation that we desire to see gaming go forward is also in danger as a sizeable part of the indie developers are in the Czech Republic, Finland, Germany and a few others, who are not part of this agreement. So, if Sony and Microsoft set their IP stranglehold to such an extent to drive these developers away, then what happens to innovation?

The TPP seems to be about segregation not about innovation (as far as I saw the information pass by), which means that whatever happens will be under complete control for Sony and Microsoft for their respective consoles. Is this bad or is this good?

I think it is a bad thing, if we consider innovation in gaming. I am not against Activision protecting themselves against a reverse engineered version of Skylanders on one side, but to strangle hold a market will never lead to innovation, which translates in our case to better and new original games.

The next part is on Microsoft specifically. This is because they ‘wanted’ to label their system as an ‘entertainment system’ as such; the changes that the TPP is trying to push through will have additional consequences for the Xbox One.

The initial TPP article made the following mention, which came from Brendan Molloy “The United States has proposed several provisions that are anti-innovation. One such provision is a blanket ban on the retransmission of TV signals over the Internet in Article QQ.H.12, regardless of purpose, without permission of the rights holder.” This is where I get back to that small drive in the Xbox One. There are two sides. If we cannot store too much on the Xbox One, then we must either park it on the cloud (where we can be monitored), or we download it again and again (costing us bandwidth). That was ‘yesterday’, when the TPP comes into play, the retransmission of a movie from the cloud might come with additional limitations where any additional ‘replay’ could be charged. I am not stating that it will, yet the changes are ALL about economic control, so it could happen. This reflects back to the part in ‘Tax evasion, copyrighted by Vodafone?‘, because even though we are all charged, the provider is likely to pay a lot less taxation on these services, so not only will local commerce get hurt, those local governments will collect a lot less corporate taxation because of this all. We saw that in cases of Apple, Amazon, Google and a few others.

That means that the digital movie and TV options from Microsoft would go through very specific bans and very tight rules. This means that picking up the Swedish or the Dutch newscasts online might not be possible. You see, QQ.H.12 is one step away from WHICH stations your entertainment system will receive, all set in a nice package pushed through by a nation that is one step away from bankruptcy, desperately in need of money! You still feel safe with your Xbox One?

So, as we see the interaction of QQ.G.10 (jail breaking) and QQ.H.12 (retransmission) we see that in the broadest sense of the word that Microsoft could decide what we see and when we see it. Is this the global, shared world we were supposed to move forward to?

The site ‘Business Spectator’ quoted the following in regards to the TPP. “Besides the United States, the pact would include 11 other nations, among them Australia, Japan, Malaysia and Mexico, though it excludes regional powerhouse China as well as Indonesia, Southeast Asia’s largest economy.” So, it seems that the IP world is no longer about making a global effort in moving forward, with these different trade pacts we will get a new war, not on resources, but on who gets to play with what, when and how and the new consoles are smack in the middle of this changing landscape.

So if your console does more then play games, the question will soon become ‘at what price‘ will it do what it does?

Philip Dorling from the Sydney Morning Herald reported this 2 days ago “Australians could pay more for drugs and medicines, movies, computer games and software” so even though we get to pay 30%-60% more on games at present and 60% more for movies, we might end up paying even more then that? I am not even touching medication, which is a hot iron on several levels. To read that Tony Abbott is quoted in the article with “Prime Minister Tony Abbott has indicated he is keen to see the trade talks pushed to a successful conclusion next month” gives us further pause for concern. The man just got elected and it looks like he sold us out to the Americans within 80 days of his election, this must be a new world record!

So the choice of your new console could come with an additional price tag, one that the politicians will happily leave to big business to decide. I have not known ANY instance EVER, where greed driven entities EVER decided in favour of the consumer! It is an expensive lesson gamers might soon be forced to learn again soon.

Have a great holiday and don’t let that new console hit you too hard in the Credit Card on the way out of the shop.

If we look at copyright in the UK, then according to the UK copyright service, which states that “In the case of business ideas, it is again the recorded work rather than an intangible idea that is protected. Copyright would apply to items such as written documents, artwork, etc. – i.e. a Business plan, promotional literature, website, logo, and such items could certainly be registered.”

From that point of view, the creative tax efforts by Vodafone could be seen as an original work of ‘art’ (by lack of a better word), yet are they alone and are they really the first?

Yes, there is so much frustration in voices of people all around me as I hear them complain about the too fast rising cost of living. The fact that I saw an article last week in a newspaper stating that the minimum income for getting a mortgage in London now exceeds a million pounds, which I reckon is some new record to fight. So as many, who dream of a place around Swiss Cottage or Bond street (to keep the Lord’s Cricket grounds within walking distance), we see that this new price tag makes London an affordable place, mainly for Bankers and dealers in amphetamine based chemicals and that is pretty much it. So when these realities hit us and we see that a deal is struck with Vodafone for hundreds of millions of revenue (for the goal of non-taxability) made by what was described as an empty office in Ireland, waves of anger hit many people. This could be seen as a sign that the rich will get richer, at the expense of everyone else.

But is that the actual truth? It seems more a sign of the time than anything else. Vodafone is in pretty good company. They are actually one of the smaller players when we consider grocery shop sized companies like Google and Amazon. It gets to be a lot more hilarious listening to MP Margaret Hodge complaining about it to Google (in May 2013), whilst she is directly connected through family to Stemcor who is having the very same artistic approach to the payment of taxation (or lack thereof). The Telegraph in November 2012 reported that Stemcor, which reported revenue around 2.1 billion with a reported profit of 65 million paid a mere 163,000 pounds in taxation.

Whoever came up with that idea was worth his weight in gold and gemstones in the eye of these corporations.

It does not end there and it goes far beyond the borders of the UK. Consider the following. A software company has an item prices at ‘X’ and then adds consultancy valued at ‘Y’ and the total being ‘Z’ is charged.

So let us take a basic approach. The customer wants the package which requires software and a consultant and is willing to pay 100, consultancy is set at the basic price of 80, which means if the disc could be valued at 20, the price is met, and as such the customer is a new and happy customer. Yet, the books would reveal that even though 100 is truly placed in the books (as a package deal), the disc value is now set at 70 and the consultants at 30, 100 remains the fixed set price. It is interesting that the 70 is set towards the foreign owner of the program and a value of 30 remains behind. Of course the consultant was more (a lot more) expensive, and as this is all within one corporation the consultant will get his monthly income. Yet, was there a case of tax evasion?

It becomes an interesting debate, more important, it becomes the environment of global corporations and even more interesting is where the revenue and taxable revenue should be placed. I would share the view that this is more than a sign of the times; it is now fast becoming THE sign of the future.

In the age of technology today, many government types (PM, MP’s and exchequers alike) might look at certain developments of ‘new technology’ moves, as corporations go to the cloud and digital distribution, yet there seems an apparent lack of ‘comprehension’ is not the right word, perhaps it is ‘realisation’ that all these revenues would no longer be taxable and Microsoft is not even close to being a frontrunner. At present Adobe is far in the lead there. Consider all these advertising and publications houses, they are in abundance in the UK and those houses have moved to some extent, or are largely moving to the Adobe creative cloud, software, that is no longer sold in the UK, costs that are paid for in the UK and are therefore tax deductable revenue, which is shrinking the UK government revenue pie chart by a lot, especially as revenue from the other side of that equation is no longer in the UK for any level of taxation.

Whether we realise it or not, the old tax deduction scheme was designed on some level of equilibrium. We had tax deductions on one side, because we bought certain items like hardware and software. Hardware is now no longer the expensive post it used to be and the software part that is still steep in some cases is no longer bought, it is leased. As such the equilibrium is gone and a nation cannot continue on one side to hand out deductions as the other side of the scale no longer exists. This gives us two dangers. The first is that certain parts would lose deductibility as the other side stops existing; this should be seen in the light that the cost of business is going up, whilst revenues will not get better. This approach is set by the bulk of cloud providing ‘solutions’ and that group is growing really fast. If the UK government (not just them) loses out on taxable revenues exceeding 15 billion pounds on software alone, where will they get the money from? When we consider the trillion pound debt, then we should worry about such changes and it is not just the UK who is facing them. These companies as mentioned before are doing this on a global scale, which means that Europe is getting hit hard all over the place and it is not unlikely that as cloud servers are placed all over the planet these companies will move into new group that could be labelled as ‘the global non-taxable core of corporations’.

In the past I proclaimed strongly that when we saw the information about Microsoft with their Xbox One approach and the cloud was not about gamers. Gamers do not warrant the implementations of over 300,000 servers. Yet, add the earlier mentioned events to the equation and we end up with a global customer base of software and as Microsoft stated it themselves, an entertainment provider of TV, Movies and Software, all in the cloud! As we see the situation now, likely less than one tenth of a percent might end up being taxable. In that same light should you wonder why NTT DoCoMo was so happy to get into the Indian market, then here is the evidence. Out of a very rough estimation (by me) of a total value of entertainment products that is cloud distributable which exceeds 350 billion (business and entertainment products), consider that these products would in future yield less than 0.5 billion in tax revenue on a global scale. This means that national infrastructures on a global scale are about to get hit really hard (unlikely before 2014). So as NTT DoCoMo starts streaming 4G based entertainment solutions, a massive amount of taxable revenue would no longer end up being taxable at all. So long Tax department of India!

It was exactly for these reasons that I advocated an approach where taxability of services are charged on the consumers side, to avoid the pitfall many governments are about to get faced with. That approach would end the dangers of Google, Amazon, Vodafone et al to walk away with a ‘non-taxability’ based commission solution.

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