Innovation, Startups and Venture Capital in Iceland

Bullshit taxes and Icelanders abroad

The following post is from The Northstack Memo, our weekly commentary newsletter on everything startups and tech in Iceland. You can sign up here.

Bullshit taxes incoming

It continues to amaze me how politicians can be bullied by lobby groups that are at the brink of total irrelevancy. The newest death-spasm by music rightsholders is interesting to say the least. The ministry for education and culture put forward a law bill that requires the state to pay upward of $2 million every year to rightsholders. These taxes were already there, but outdated, and paid around $70K to rightsholders in 2015. So they’re basically increasing it by a magnitude of ~30x.

The state will pay 1% of the tollprice (CIF: cost, insurance, and freight) of all computers and smartphones imported to Iceland, and 4% of USB memory, datastorages and SD cards. (mbl.is)

Basically, smartphone users and photographers, will be paying music rightsholding organisations, because they’re using these devices.

We’re witnessing a clash of world views. Rightsholders think they should be compansated (through taxes, no less) because technology has allowed people to copy everything, all the time.

The world, however, is changing. Music and entertainment is no longer a limited good. Through the internet, it’s unlimited, and things that are unlimited will always approach zero cost to the user.

In the appendix to the bill, the lawmaker notes:

Due to this, a reduction in “damages” of rightsholders because of copying of music and movies is foreseeable in the future. It’s therefore unavoidable that the payments of compensation for copying will be revisited. (Althingi.is)

It’s good to see that the state is looking to the future. However, I think they’re underestimating how far we’ve come already, at least according to the data.

The RIAA (Record Industry Association of America) released a report on music industry sales for the first half of 2016. Paid subscriptions in the US have doubled in one year (from ~9 million to 18 million). More importantly, the report states:

The revenue growth from subscriptions alone more than offset the declines from physical sales and permanent digital downloads. (RIAA report)

Basically, the times where the record industry can hide behind declining sales are over. Everyone in the industry should know this (if not, they’re probably in denial). Selling copies of music or movies isn’t how these industries will make money. They’ll find other ways, and many already have.

All this will die soon. It’s just annoying that they’re picking death by a thousand cuts, instead of just realising their demise and calling it quits.

Icelanders abroad

To end the Memo on a high note: Last week Google shipped its new AI driven messaging app Allo. Most of the big tech media wrote about the app and how Google assistant is integrated into the messenger to assist people at the tap of a button.

Fewer might know that one of the drivers behind this product is Guðmundur Hafsteinsson, formerly of Siri (acquired by Apple) and Emu Messenger (acquired by Google). His role is Product Management Director.

Although he might not be very well known outside of Iceland’s (tiny) techy group, he’s probably one of Iceland’s most successful technologists. Acquisitions and stints following them, at both Apple and Google, are feats few (if any) Icelanders can tout.

A heartfelt congratulations from Northstack to Gummi & his team for shipping Allo!

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