DIARY

March 5, 2003

Turning a disadvantage into an advantage

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Email from Pieter to Steven
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Steven,

Yesterday I was not totally clear on the payment model we will be using. It probably is good if we issue information on how this will work. I have written an advisory. I will have in on the web site a.s.a.p.

Pieter


Advisory
Going Dutch: The Honest Thief’s Payment Model
by Pieter Plass

ARNHEM, The Netherlands, March 12, 2003 – As a nation, Holland has long been known for its rogue entrepreneurial ways. In part, because we’re a small nation, we continually take large leaps.

In Holland about 50% of the price of a CD goes to the music store, 12% to 14 % is for the musician, 5% is for Buma/Stemra, the Dutch version of the U.S.’s RIAA, and the rest, a respectable 31%, is for the record company. With the cost of a CD ranging between euro 12.5 to 25.00 it is no wonder that people become creative and it is not just the consumer. Within the European Union it is estimated that 25% to 50% of the CDs sold are illegal.

However, as I wrote in my book, The Honest Thief, “an individual's character is defined by the actions he or she takes when not observed by others.” And we Dutch, though a smallish country, have a big respect for the individual and our laws. We generally assume that people will behave.

Since 1912 it has been legal in the Netherlands to make copies of copyrighted works of music for home usage. After the introduction of the cassette player in 1948 it became clear that lawmakers needed to address copyright issues within a larger framework. The most remarkable change came about in 1972 when a Dutch law came in effect that established a system whereby copyright owners would be compensated for home copying via a tax on carriers of music. Initially this was based on blank cassette tapes but burnable CDs nowadays are also taxed.

Besides the carrier-based tax Buma/Stemra taxes the public use of music and movies. Effectively, various systems, direct and indirect, are in place to compensate copyright owners.

Indirect revenues, not linked to the sale of specific works of music, is in many ways unique to Holland.

The Honest Thief file-sharing business model is in part based on the Dutch compensation system. A portion of proceeds from the file-sharing business will be made available to compensate musicians, via lump some payments to the International Federation of the Phonographic Industry (IFPI).

The Honest Thief is an honest attempt to establish a fair system that should form the basis for the next generation in file-sharing.

Whether the IFPI will welcome our initiative remains to be seen.



While Pieter was working on the Going Dutch advisory he received word that Reuters would actually run the ThankYou story.