Hollywood vs. Silicon Valley: The Piracy Showdown

6:00 AM PST 12/06/2011 by THR Staff

California's two sexiest industries are at odds as new legislation in Congress looks to grant U.S. law enforcement unprecedented access to fight rogue piracy sites abroad.

PRO REFORM -- Taylor Hackford: An esteemed director slams Google's opposition and warns of the "devastating effect" of ongoing content theft.

It's not every day that labor and business -- two groups that traditionally face each other across a negotiating table -- join forces, and yet that is exactly what is happening in Hollywood and across the country in support of legislation to fight foreign rogue websites.

These websites are unethical, illegitimate and criminal enterprises that are dedicated to stealing copyrighted content and redistributing it for a profit. The sites play no role whatsoever in financing or creating the content they steal; they merely set up their sites offshore to avoid the reach of U.S. law enforcement while they rake in hundreds of millions of dollars and destroy the markets that provide crucial jobs and life-sustaining benefits to the working men and women of our creative community. 

To help combat this scurrilous practice, new legislation is being considered in Congress that would give U.S. law enforcement, with court-sanctioned approval, the ability to block these rogue sites from accessing American consumers, who are often unaware of the illegal nature of these sites. The PROTECT IP Act in the Senate, as well as the Stop Online Piracy Act in the House, would compel such payment processors as Visa, MasterCard and PayPal, ad networks like Google's AdWords and ISPs and search engines to cut off the services that enable rogue websites to thrive -- but only if so directed by a court order. 

The entertainment business is not the only American industry to strongly support this legislation. The bills are backed by companies ranging from pharmaceuticals to apparel to publishers; chambers of commerce; mayors and governors; public safety organizations; and unions across the country. What's more, the bills are among the only pieces of legislation in Congress these days to have widespread bipartisan support.

You would think that stopping the outright theft of the films, TV programs and music we create would be obvious. You would think that protecting hundreds of thousands of jobs in this afflicted economy would be obvious. Apparently not. Super-powerful Internet companies that are profiting hugely from these illegal rogue sites are ratcheting up a smear campaign in an all-out attempt to derail the legislation. They fund "public interest" groups that have no compunction about spreading mistruths and using hot-button, alarmist rhetoric to aid their cause. 

Google has become a vociferous opponent of rogue-sites legislation. Google's CEO has even said publicly that if the bills become law, his company simply won't comply. In fact, Google just paid a $500 million fine for taking ads from rogue pharmacies selling counterfeit drugs, and news reports say the company is now under investigation for placing ads promoting mortgage scams. It's not that Google doesn't understand that supporting rogue sites is unethical, it simply has too much profit at stake from its advertising and search businesses to do what's right. Is it any wonder that Google and other self-interested companies are throwing everything they have toward defeating rogue-sites legislation, so they can maintain their very profitable status quo, regardless of the cost to content creators? 

Digital content theft is one of the greatest threats our industry will ever face. It threatens our jobs, diminishes the aftermarkets that generate our residuals and constrains the vital financing for movies and television shows. It not only makes it much more difficult to make a living today, it erodes the possibilities for future generations to become professional filmmakers.

Worse yet, digital content theft devalues creativity and cheapens innovation. It says that the content created by professionals has no value because it can be stolen at the click of a button, with no regard for the months or years of labor by the human beings responsible for its creation. And if talented artists cannot support themselves or their families by creating content, they just won't make it anymore. Think of the devastating effect on our culture.

Our community cannot stand by while foreign, profiteering criminals and our own domestic Internet superpowers are profiting from the wholesale theft of our work and levying wild accusations in an ever more hysterical effort to derail rogue-sites legislation. Protect our work -- protect our community -- support rogue-sites legislation.

Taylor Hackford, a feature film and documentary director, writer and producer, is serving his second term as president of the Directors Guild of America.

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AGAINST REFORM -- Mike MasnickHollywood should join Silicon Valley in finding new ways to reach consumers.

The fight over the so-called rogue websites acts in Congress -- SOPA and PROTECT IP -- is described as a fight between Hollywood and Silicon Valley. If this is a fight, then it's an odd one in that the tech community really wants Hollywood to win. Tech companies don't want these bills to pass, but they do want Hollywood to succeed. They want to supply the tools, technologies and services for there to be a healthy ecosystem for content -- just as they have in the past. The relationship shouldn't be antagonistic, but collaborative.

That's why Hollywood should actually be fighting against these bills.

The history is clear. Every time a new technology comes along that represents a market shift in content, the entertainment industry has reacted poorly. The player piano, radio, TV, cable TV, the photocopier, the VCR, the DVR, the MP3 player and online video -- all of these were decried at one point as "dedicated to infringing activity." Yet each and every one of them actually opened up new markets, new opportunities and new profits. The most famous case, of course, is the VCR -- which former MPAA head Jack Valenti famously declared was "the Boston strangler to the movie industry." In reality, it created the home video market, which has become so central to Hollywood's profits that today the main complaint is how copyright infringement is killing home video. Yet this market likely wouldn't have existed if Valenti had prevailed in the 1980s.

A recent, three-plus-year Social Science Research Council study concerning "media piracy" consistently found the same two things: Neither stronger enforcement nor "education campaigns" decreased infringement. Instead, the only effective way to do so was to offer convenient, comprehensive and reasonably priced legitimate services. Netflix sends more traffic over the Internet than the piracy site BitTorrent. In Sweden, the home of The Pirate Bay [a file-sharing website], piracy rates for music fell off a cliff when Spotify debuted. Both are examples of convenient, useful and reasonably priced services.

SOPA/PROTECT IP ratchets up enforcement, but at a cost: It makes it that much more difficult for these new legitimate services to be built. The private rights of action in both bills significantly increase the risk of starting an online entertainment service. Even companies that bend over backward to try to be legal may find their revenue completely cut off based on the complaints of a single rightsholder.

Separately, while the bills allow the attorney general to only look at foreign sites as targets, the method by which they do so puts the entire compliance cost on U.S. tech companies. For a start-up, that is likely to be quite costly both technically and legally. A recent Booz Allen survey of start-up investors found that they would invest significantly less in companies if the two bills pass, and that they'd need a much higher ROI to take on that risk.

The end result? Ratcheted-up enforcement won't decrease infringement and won't drive anyone to buy more. Instead, it will likely kill off, or even prevent from launching, the next series of services and tools that Hollywood could use as the new iteration of the VCR. 

The tech industry is trying to help. Hollywood should be working with it, not trying to kneecap the setup that allows the next generation of useful services and platforms to be created.

Mike Masnick is the founder and CEO of Techdirt, a leading news and analysis website about the technology industry.

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