Reflecting on SOPA/PIPA – Why Should Hollywood Get Protectionism?

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In 2000 I became the general counsel of a multi-national two billion dollar printing company.  The plan of the board of directors and executive team was to ride the irrepressible growth of printing since the advent of the Gutenberg Bible in the 15th Century.  But it was bad timing.

The Internet killed printing as a growth business.  Over 500 years of expansion ended in less than a decade.  By and large we printed advertising and the retailers who sent us ads  moved rapidly to web pages, email campaigns, and social media.  We had to lower prices to hold onto revenue and eventually margin squeeze led to industry-wide bankruptcy with only a few players hanging onto an uncertain future.

But the Internet did not just kill printing, it changed the retailers as well.  Many of them, particularly in consumer electronics and books went bankrupt or shrank dramatically as on-line competitors dropped prices and added convenience to consumers benefit.   It was a revolutionary change.

The Internet changed the distribution of knowledge.  No longer did it rely on capital intensive manufacturing to produce newspapers, catalogues, magazines or as we shall see CDs or DVDs.  Companies might still need a distribution center with truck bays and rail links, but a Cloud connected computer with a fraction of the employees replaced manufacturing.  And with the promise of e-books, e-magazines, and online newspapers the days of the distribution center are numbered.

But the music and movie industry opted for a counter-revolution.  Despite consumer preferences, the counter-revolutionaries first refused to deliver digital files across the Web.  Then when consumers forced a change, they adopted licensing regimes that kept for themselves the vast majority of the revenue in the new Web business model.  And they did this by twisting the copyright code designed for the old world into a monopoly worthy of a divine right monarchy to dictate to the consumers of the new world.

Article 1, Section 8, Clause 8 of US Constitution states:  “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  For purposes of the counter-revolutionaries the clause grants to the US Congress the power to grant monopolies to authors and in this case to the companies who traditionally controlled the distribution of music and movies.  And upon these monopolies the music and movie houses have intentionally sought to retard the revolution that has creatively destroyed much of modern industry and commerce to the benefit of today’s consumer.

Unwilling to pursue “pirates” who make available music and movies in digital format over the Internet from safe havens overseas, the counter-revolutionaries advanced PIPA/SOPA to rework the Internet in an expansion of their copyrights.  It was if the printers had gone to Congress and asked Congress provide to printers a monopoly on the manufacture and distribution of books, magazines, and newspapers.  Who cares about what the consumer wants or promoting “the Progress of Science and useful Arts”.

The counter-revolutionaries angrily sputter about “piracy”, but the truth is their reluctance to license the companies distributing on the Web or to license under terms that reflect the new economics of the Internet or to provide their own distribution drives the “piracy”.   No one has suggested they not sue whoever they wish for copyright violation.  But unable to stop the Internet onslaught via copyright they want the right to sue the Internet distribution companies simply for existing on the Web.  Why should Congress grant them in preference to every other industry more protection from the Internet?

The counter-revolutionaries have positioned the debate as piracy versus property rights.  But what it really is a declaration that we will let consumers “eat cake”.  Consumers may want digital files in innumerable formats at a reasonable Internet driven price, but they can have it as we dictate.

What Congress should do is not grant the music and movie businesses more rights.  It should revisit whether the copyright code is retarding the “Progress of Science and the useful Arts”.  Perhaps a mandatory licensing regime similar to radio but available to consumers upon Internet economics payable to the counter-revolutionaries is the answer.  But what makes no sense is to  empower the knuckle-dragging monopolists to twist the Internet into vinyl, 8-tracks, cassettes, CDs, DVDs, and grimy movie theaters.

 

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