It will come as a suprise to many readers, but there are those that still watch, free to air television.

Those that do, tend to watch the programming on TV and use the advertising segments as convenient toilet or coffee breaks.

But those of us that think that advertising is an inconvenient distraction from observing our chosen content stream – don’t quite “Grok” how Mass Media operates.

If one counts the number of minutes of advertising per 60 minutes of TV, one quickly realizes that the programming including movies, series, news, documentaries and other entertainment are there in order to capture audiences for the advertisers.

Think of it as the invisible taxation of your leisure time.

There is no such thing as free entertainment.

But all that programming is licensed and the media owners and the movie and CD distributors all have to pay licensing fees, or royalties, to the original owner of the content, which means that the vast majority of the purchase price of the ticket, CD and the taxation of your leisure time through ads goes to the USA.

In 1958, the amount of licensing fees being moved out of Australian hands and into American bank accounts was so high for movies alone that the Australian Government redesigned the CPI around those very license fees. They gave films their own unique special category. That year films actually cost  Australian taxpayers 2.6% of the national Balance of Payments. (Page 373 Aus Yearbook 1958).

To place this into perspective – In 1958 Australia’s foreign debt represented only 1.6 % of the GDP in comparison. Films were the only product imported or exported from Australia that by the quantity of money involved, deserved their very own special category by name. Everyhting else was labelled Agriculture or Machinery or dry Goods.

These days the entire industry does it slightly differently. Last year Foxtel Licensing fees were $645 million dollars and the proceeds of virtually every movie ticket sold and every digital copy of music sold went straight into overseas bank accounts – outside of Australia’s economy and ironically also largly invisible to the USA economy.

Great paragraph, but I didn’t write it.  It was written not last week, but in 2001by William F. Wechsler In July/August 2001 in an article entitled, “Secrets and Lies”.

His article went on to say:

What does this have to do with Advertising, Television or Movies?

Lets start with Google who came under pressure recently for their corporate taxation structuring.

"Well well well, what do we have here?"

OK - Let's see if Hollywood fair any better? For a moment, lets review Hollywood Accounting and some if its example pushback casestudies.

You my dear reader will no doubt say, “So what! That’s just normal large company business practice. But what do you call it when Government gets in the act to aid the industry.

Lets review some US Government documents…..

From The Department of Commerce - THE BALANCE OF PAYMENTS OF THE UNITED STATES Concepts, Data Sources, and Estimating Procedures, May 1990  Table I-3.—BEA Balance of Payments Surveys—Continued (Page 13)

 

Survey title and number (Annual Survey of Royalties, License Fees, and Other Receipts and Payments for Intangible Rights Between U.S. and Unaffiliated Foreign Persons (BE-93). Types of information Sale and purchase of rights relating to industrial processes and products; books, records, audio tapes; trademarks; motion picture and TV tapes; broadcast and recording of live performances and events; business format franchising; and other intangibles.

In 2005, the BEA decided to cancel this survey http://edocket.access.gpo.gov/2005/05-8976.htm

Because

The Department is proposing to remove the reporting requirements 

for these five annual surveys because the information collected is now 

being collected on four separate quarterly surveys. Specifically, ……the 
BE-25, Quarterly Survey of Transactions Between U.S. and Unaffiliated 
Foreign Persons in Selected Services and in Intangible Assets, replaces 
the BE-47 and BE-93 surveys; ……………….
BEA began collecting data on these quarterly surveys in 2004.

Because….

Paperwork Reduction Act

    The surveys that would be discontinued by this rule have been 

approved by the Office of Management and Budget (OMB) under the 

Paperwork Reduction Act under the following OMB control numbers: 0608-

0013 (BE-36 survey), 0608-0015 (BE-47 survey), 0608-0016 (BE-48 

survey), 0608-0017 (BE-93 survey), and 0608-0063 (BE-82 survey). OMB 

approved the quarterly surveys under the following OMB control numbers: 

0608-0068 (BE-9 survey); 0608-0067 (BE-25 survey); 0608-0066 (BE-45 

survey); and 0608-0065 (BE-85 survey).

List of Subjects in 15 CFR Part 801

    International transactions, Economic statistics, Foreign trade, 

Penalties, Reporting and recordkeeping requirements.

    Dated: March 30, 2005.

Rosemary D. Marcuss,

Acting Director, Bureau of Economic Analysis.

I would have thought that requiring companies to file quarterly reports would increase the paperwork and not decrease it.

An example of a licensing organisation, existing solely to accept foreign movie licence fees.(Without the Stichting entities displayed).

Source: http://fraser.stlouisfed.org/publications/scb/page/10642/2008/download/10642.pdf

And from the official BE-25 FAQ (http://www.bea.gov/international/pdf/be25faq.pdf)

In other words – if a service “affiliate” company has lots of “collection” overheads – e.g.: royalty payments – then the small amounts under 4 million – do not need to be reported. An interesting option if the service company has 200 shareholders due 3.9% royalty on every 100 million dollars of revenue from license fees.

We are dumbfounded.

And of course, not one penny of which was payable in taxation by American (or American Affiliate Corporations (Stichting)) corporations to the Australian government.

Government used to be about governing for the benefit of the taxpayers, the constituents, the voters.

The Australian government used to balance the books by the simple mechanism of the purchase or sale of gold.

Australia is a gold rich country – and in times of shortage we were still capable of balancing our international accounts by funding additional mining exploration and extraction of the precious mineral.

But then the government was hoodwinked in the seventies into accepting an alternative to the gold standard. And the balance of payments has been getting worse ever since.

Just review the folowing comparison between US Dollar bonds and Gold. An interesting story.

Now, on the back of the greenback – our future is no longer our own to determine. Every point the greenback nosedives increases the cost of our standard of living - Unless we stop using US Dollars to settle our overseas trade accounts..

The United States is bankrupt. Everyone in the world knows it, except a couple of policy advisors in Canberra. Consequently, to keep up with the Joneses (the USA) - the government has no choice but to tax every part of our lifestyle.

Interestingly enough – there doesn’t yet appear to be a way of actively taxing P2P.

That means that every time a file is downloaded via P2P – no money leaves Australia, making our economy stronger.

Yes – I know that you, my disbelieving reader, will immediately retort – “Hah! What about GST on DSL connections” and my response will be – that you are quite correct – DSL which is taxed, does enable one form of P2P.

(And I blogged about this the other day...... http://www.perceptric.com/blog/_archives/2009/5/29/4203779.html)

But at least that GST is payable to the Australian Government and not an offshore entity that routes the payment through Stichtings in Austria and the Netherlands designed to ensure that licensing revenue isn’t taxed by Uncle Sam.

http://www.sec.gov/divisions/corpfin/cf-noaction/stichting050704.htm

What You Can Do....

What can you my dear reader do to right this travesty of justice resulting in the legal quagmire imbalance that we have at the moment with ACTA and various other attempts of legislation by litigation instigated by the law-breaking Hollywood industry ? (Or maybe it's not law-breaking if the US Administration are in on it. After all, the Government is never wrong, it's the Government.)

Well if you are a P2P user and insist on downloading files illegally, then could I at least appeal to your patriotic side.  (Don’t download any Australian content - Australian artists are one of us – they need to eat. If you download their music and movies, then they’ll be on the dole and your taxes will be paying for it. – Besides Australian film and music producers don’t use Hollywood Accounting and they all pay their taxes and artists royalties.)

Be a Patriotic Australian, do your bit for the economy, download an American product; (movie or music track) makes no difference.

After all, how can you be breaking the law if the Studios that created the content in the first place are hiding their income from their Government.

If the movie didnt break even, then you cant be damaging it.

Their argument is what’s ours is ours and what’s yours is ours also – but no, we don’t pay tax and no we don’t pay dividends – but yes we will sue you because that adds to our personal bottom line and doesn’t get added to the movie or music revenue – so the artists never see it.

At most Universities in Australia today, when one looks around the cafeteria, study halls or lecture rooms, one notices a predominance of Chinese faces peering back intently.

Australia is a multicultural society so this is good. We are merging through our education system with our largest trading partner.

But does the average Australian understand what the Chinese contingent represent.  To get here the competition in China is tremendous. The top 1% of the country’s students vie for an overseas scholarship and every year 850,000 eager young students go forth to learn the ways of the West.

It is a great honour to be chosen and the chosen may select which country and what area of study they wish to apply themselves too.

The pressure to excel, once enrolled in our academic infrastructure is high and Chinese students often lead the way with honours in both pre and post graduate studies.

This entire system of sociological engineering has been designed by the Chinese Government, not to keep our universities full of paying (non-hex) students but to give China a long term intellectual advantage on a global basis.

Social engineering can be likened to sheep farming, we’ve written about sheep farming before.

Shepherds like their flock well fed and calm.

The better fed the flock are, the more fleece can be removed.

The more fleece that is removed, the better fed the shepherd is.

It’s the cycle of Life, Business and Government.

It’s a reasonably well known fact that if your flock regeneration rate (birth rate) falls below 2.1% the financial viability of the flock is called into question.

It may be that the pure Merino Flock needs some Romney stock to beef up the numbers.

But of course, a good sheep farmer will know that mixing Romney with Merino produces coarse unmanageable wool that is not so popular with the wool buyers. In fact, it would appear that the more one indiscriminately mixes the various breeding stock, the more unknown problems are introduced into the final quantities of mutton and wool.

Therefore the economic argument is – either maintain the purity of the flock and suffer eventual extinction, or, import new breeding stock to increase numbers and reproduction.

This was the problem in Australia during WWII, and again in the eighties.

Zero Population growth.

So the Government opened the doors to immigration. After all, a tax payer is a tax payer.

Unfortunately, PhD’s were given Taxi driver jobs, qualified Doctors became nurses and generally, the immigrants were treated as if they were all blue collar labour.

Is that what Australia needs to move ahead economicaly? More blue collar labourers? Or do we need high IQ educated people of all nationalities to create a utopian multi-cultural society that will gain widespread acceptance in a global market looking for kindred spirits to trade with.

But then the Government in it’s wisdom decided to start paying for babies.

The question we have to ask ourselves is; "Who does the idea of being paid for babies appeal too"?

Is it the same young people that don't realise that $4,000 dollars is only a very small part of the $280,000 needed to rear a child?

In the UK, the “have five babies before you’re thirty will put you on easy street”, is an established societal norm in certain parts of the country.

The parts of the country, that seem to turn out the lowest numbers of “O” and “A” levels and subsequent degrees.

In Australia we are close to encouraging the same sociological mistake created in the UK.

The poorer suburbs churning out the next generation, with no infrastructure assured to be in place to mould the next generation into high output individuals.

Actually, whilst I don’t necessarily agree with the concept of paying for babies in preference to immigration; I do consider that if we have to pay for them, let’s try to do so with an outcome in mind.

On that basis, I suggest a sliding scale, for the quality of the offspring based on the IQ of the father (blue) and the mother (pink)

Combined with acceptances at Australians leading academic institutions for the offspring in the green zone from Kindy – through Uni.

We should take a leaf out of the Chinese education system and take the 1% of the best of the best and give them exactly the same thing that the Chinese Government has given their brightest young stars. The education that they want, anywhere in the world.

If we implemented  a system of social population engineering, we would become not just the lucky country, but the clever one as well.

From the Tongue in cheek department – but again, only just.

We have all heard the following mantra.....

Don’t download movies using P2P.

Om Mani Padme Hum.....

Downloading is a crime

Om Mani Padme Hum.....

Stealing movies is a crime

Om Mani Padme Hum.......

Stealing Music is a crime

omph........

But is it? Or do P2P activities in Australia represent 5% of the country’s GDP.

Lets first see where you, our reader fits into the picture..

Are you an Ipod owner?

Do you have an MP3 player?

Do you have a computer?

Are you connected to the Internet?

Do you have a smartphone with x GB storage for movies and music?

Do you have a CD-burner in your computer?

Is your phone connected to the Internet?

If you answered yes to more than three of the above, then you have probably at some time or other downloaded copyrighted content that you have not paid for and/or copied that content ontop a device, a CD-ROM, DVD or Ipod illegally, making you by default,

A) A Pirate

B) A Criminal

But we here at Perceptric, being not quite so judgemental of your actions actually think that congratulations are in order.

You are now (by your own admission) officially part of the 57% of Australians that utilize 87% of the internet infrastructure and bandwidth in this country to download music, movies and other items without paying for it.

So if 57% of Australians download files, how does that help the economy?

Well, let’s look at it another way.

In other words, in Australia P2P is worth more than the entire combined revenue base of the member companies of the various industry bodies trying to stop P2P. (i.e.: EMI, Warner, MGM, Sony)

Now multiple those figures by the population of the rest of the world and you have an industry globally that adds up to

Notes:

Assumptions.

The cost of the telecommunications infrastructure in Australia is “A”

The cost of maintaining that infrastructure is “B”

That infrastructure generates “C” in wages, PAYE tax and individual taxation.

To utilize that infrastructure you require termination CPE (Customer Premises Equipment).

CPE includes, Telephone handsets, Modems (dial-up/ADSL), Nat routers, satellite dishes, WiFi devices. Items “F” through “I”

If fifty percent of Australians have a computer – let’s call that “D”

Most computers are cycled every thirty six months. Therefore Annual replacement of “D” is valued at $330.00 on the basis that the purchase price is $1000.00

We assume 20% of Australians have a laptop. “E”

If 100% percent of Australians have a mobile Phone – let’s call that “J”

If 5.5 million homes of 7.2 million are connected to the internet, that generates a monthly subscriber value of “F” (For this exercise, we assume a monthly total of $39.95 per sub.)  “K”

44% of Mobile Phones have data plans and approximately 24% of those phones utilize their internet connection.

The average mobile phone data consumption is therefore worth approx. $18.00 per month. “L”

All services are billed between the wholesale carrier and the retail Service Provider. “M”

Sources: Telstra, ACMA, ABS, Various industry sales results.

These people snapping up everything from water purification tablets to thermal blankets shatter the survivalist stereotype: they are mostly urban professionals with mortgages, SUVs, solid jobs and a twinge of embarrassment about their newfound hobby.

From teachers to real estate agents, these budding emergency gurus say the dismal economy has made them prepare for financial collapse as if it were an oncoming Category 5 hurricane. They worry about rampant inflation, runs on banks, bare grocery shelves and widespread power failures that could make taps run dry.

These people snapping up everything from water purification tablets to thermal blankets shatter the survivalist stereotype: they are mostly urban professionals with mortgages, SUVs, solid jobs and a twinge of embarrassment about their newfound hobby.