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Gary Shapiro

Gary Shapiro

Posted: June 8, 2010 04:22 PM

How a Government Tax Could Kill Media's Chance to Innovate

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Every now and then, Washington advances a policy idea that is so preposterous one would think that medical marijuana has seeped into the corridors of our government buildings and altered our lawmaker's perceptions. A recent Federal Trade Commission proposal to save newspapers and local news providers by implementing a five percent tax on consumer electronics products, cell phones and Internet service is classic absurdity.

Would you donate nine bucks to your local newspaper when you purchase an iPod? Or, could you spare 15 dollars the next time you buy an Xbox to give to your local broadcast news station? The FTC proposal suggests the only way to save these media dinosaurs, many of which have failed to innovate for years, is to add a tax to the consumer that would flow to these media outlets.

Why are local news outlets in such dire straits? Because they let the innovation movement pass them by. Any newspaper could have gotten on board earlier and used new technologies, but they were comfortable and complacent. Most news outlets sat back and let Google, Craigslist, and other online entrepreneurs create innovations instead of innovating themselves.

So now, these news businesses want to tax America's most innovative industry in order to support its least. Put another way, they want to tax the owners and customers of the Huffington Post, the Drudge Report, iPads, Androids and other digital innovators to subsidize an industry whose 2010 business plan involves cutting down trees, slathering them with ink, and hauling them around the city on trucks.

Imagine if this had occurred with other historic technology shifts. If this were the 1600s, Guttenberg would be taxed to give money to the monks. In the 1800s, Edison would be taxed to pay whale oil processors. A century ago car producers would be taxed to support horse and buggy makers.

This battle between the old and the new is not recent. Innovation is by nature disruptive -- it disrupts existing expectations, ways of doing things and well-established business models. As a result, disrupted industries are quick to run to government to demand that the offending new technology be legislated, regulated and taxed into submission.

Thankfully, American government has no tradition of protecting old-line businesses. Innovation is what makes us the world's leading economic power. Innovation creates jobs and drives our economy. And while innovation may disrupt incumbent industries, it empowers and improves the lives of millions of people around the globe.

Every day, we exist in a competitive marketplace and must respond to changing technologies and consumer demands. Some business models succeed, others fail, and the old style news industry has no special right to immunity from creative destruction.

So FTC, here's an idea: tell traditional media to forget about handouts, adapt to the digital age, and create new business models that will delight consumers. If not, they will fail in the marketplace - and that's not a bad thing.

Demand for newspapers may be declining, but demand for journalism remains strong. If consumers reject some news delivery systems, others will move forward to fill the void. And history shows that what comes next will likely be an improvement - cheaper, more compelling, and more consumer friendly; a result that should be embraced by consumers and those who claim to represent them.

Gary Shapiro is the president and CEO of the Consumer Electronics Association, which represents more than 2,000 technology companies.

 
 
 

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