Last night I came home to read some news that Finland is considering adding a copyright tariff on external hard drives. A similar tariff is added to all different empty media, in this case empty CDs, DVDs, cassette tapes and so on. Now, the Finnish parliament is discussing the possibility of adding this tariff to all external hard drives. It’s plain stupidity that will offer artists comfort for a year or so, before it begins to both hurt them and businesses selling hard disks.

Many sources online cited that for an average hard drive, the additional cost would be around 21 euros plus value added tax. It’s not a lot, but for goods that are in the range of 100 to 200 euros, that’s 10 to 20 percent increase in price. Mind you, many external hard drives are also bought by companies who seldom use them to copy music.

Update (17th December, 12.30 GMT): The correct compensation prices are 5 euros for hard drives between 250Gb and 950Gb and 10 euros for hard drives above 950 Gb all the way until 3 Tb. So you’d be best off getting a large 3Tb hard disk where there is no compensation included.

Anssi Kela, a well known Finnish artist, has written in his blog how different sources of income create the overall revenue of an artist for their work. According to him, 16% of his income comes from live performances, 12% from royalties, 47% from Teosto (they collect the copyright tariffs), 22% from Gramex and 3% from other sources.

Teosto is a non-profit Finnish organisation created by artists for the artists. The organisation collects royalty payments in the form of different licensing products. One of these is the copyright tariff in empty media, like CDs and DVDs. The reasoning behind this is that copying music to these platforms reduces music sales and thus a small tax should be collected to pay the artists for the lost sales.

To make things complicated, the tariff is basically in place to compensate artists for copying under fair use. In Finland, consumers are able create copies of music they borrow from libraries. The payment does not essentially compensate for illegal copying or copying from CDs you might own already. This was stated by the Finnish Minister of Culture and Sport, Stefan Wallin.

Teosto stated on their website that in 2009 they collected licensing revenues of about 41 million euros. Copyright tariffs are about 6 million euros, according Anssi Kela. These have fallen from 12 million euros a few years ago to 6 million euros last year. 6 million euros is a lot of money lost and when 47% of an artist’s income is distributed from a pool of 41 million less expenses – it’s natural that they want to defend that source of income.

However, there’s a problem in all this. The Finnish political system, if it passes the law to allow copyright tariffs on external harddrives, is essentially teaching artists to avoid innovating and looking for new sources of revenue when consumer behavior changes. All they have to do is fight for status quo and the right to tax consumers on something they might be able to do through new technology.

A decade or so ago, there was a similar discussion in Finland on putting the same tariff on empty CDs. After a few years the law was passed and the tariff approved, the purchasing of empty CDs has mostly moved to foreign online stores – some even operated by Finnish companies – to avoid paying the so called “cassette fee” or the copyright tariff. If the law passes, the same will happen to external hard drives – consumers will buy them from overseas in increasing quantities, not only hurting the artists the very tariff was supposed to help, but also Finnish companies selling hard drives.

People, no matter what their profession, should be compensated in a market economy for their efforts accordingly – in a way where the consumer is able to pay for that compensation directly. When the government enables entities such as Teosto to increase their reach to other goods mostly outside of their domain – consumers are being financially punished just in case they decide to act in a way that potentially might harm an industry.

If this same logic was applied to other tools of creation, such as a blog carrying the name ArcticStartup, they all should be similarly taxed just in case they decide to reproduce copyrighted work.

Teaching profit seeking entities, be it startups or artists, to earn revenue through different gimmicks that no open market economy would naturally support is harmful in the long run. Why? It teaches that there are other, easier sources of income than the route of innovating, over delivering and truly adding enough value so a client or consumer would be willing to pay for it.

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