Kill Hollywood? Here's a better approach

Last week, partially in reaction to the SOPA/PIPA debacle, Paul Graham of Y Combinator issued a "Request for Startups" under the title "Kill Hollywood". Graham argued that the fact that entertainment companies are relying on legislation rather than competition and innovation is a sign that they can be displaced. Graham's right about the industry's ham-handed reliance on legislation, but segments of the entertainment industry have gone through extinction-level crises many times in the past. Here are a few examples:

• The music industry was threatened by radio starting in the 1920s, but radio stations eventually chose to play recorded music because it was cheaper than producing original shows. Radio became the primary mechanism for promoting records for decades, until MTV.
• An entire generation of movie distributors and studios, most of which were affiliated with Edison's patent pool, went out of business in the first two decades of the 20th Century. Companies such as Essanay, Kalem, Selig Polyscope, Mutual and Biograph disappeared and were replaced with the progenitors of the movie studios we know today.
• In the 1950s, movie studios were forced to divest themselves of ownership of theaters in the U.S., but independent theaters quickly picked up the slack.
• Television also threatened the movie industry in the 1950s, but the major studios started producing television shows and licensed their movies to television stations and networks.
• Some movie studios went bankrupt or experienced painful reorganizations in the 1960s and 1970s, thanks to massive cost overruns on unpopular films. The industry was saved by the "independent movement", which was where many of today's most successful directors began their careers.
• File sharing and digital distribution has led to consolidation of the biggest record companies. For example, who would have believed that RCA Victor and Columbia, once the world's two largest record companies and fierce competitors, would eventually both come to be owned by Sony?

It's really hard to "kill Hollywood", even when Hollywood seemed to be dead set on killing itself. Industries die when they become obsolete or are replaced by something better. Movie theater attendance is declining, as are DVD sales, but the movie business itself isn't obsolete. The record industry has been struggling, but it's still surviving. The commercial television networks' audiences are declining, but cable networks have been growing for years.

What's needed is a two-part approach:

1. First, take on the entertainment companies head-to-head with lobbying. As distasteful as lobbying is to most technology companies, they can't let their opponents have the battlefield to themselves. A strong, coordinated approach to lobbying would counter the efforts of the entertainment companies, which are certainly vulnerable, especially in the "Red States".
2. Second, invest in technologies and content that appeal to consumers during their leisure time. Don't worry about what the effect will be on entertainment companies; if consumers like it and are willing to pay for it, that's all that matters.

SOPA and PIPA: Dead? Well, maybe...

Wednesday's Internet blackout by Wikipedia, Reddit and many other sites was the last straw in a battle of wills between the entertainment and technology industries. As of now, the technology companies have won: Mashable reports that Texas Representative Lamar Smith, the chief sponsor of the Stop Internet Piracy Act (SOPA) in the U.S. House of Representatives, has at least temporarily tabled the bill, as has Senate Majority Leader Harry Reid with the PROTECT-IP Act (PIPA), the U.S. Senate's version of the bill. Of course, in Hollywood terms, we can't be sure that SOPA and PIPA are dead unless someone has hammered a stake into their hearts, and they've turned to ash. (That doesn't stop the studios from reviving them as SOPA II, Son of PIPA, etc.)

In Thursday's New York Times, MPAA Chairman Christopher Dodd is quoted as saying that he wants to meet with Silicon Valley executives to draft an anti-piracy bill that both industries can agree to. Of course, we don't know if the Senator Dodd who would fly to Northern California would be the conciliatory one interviewed on Thursday, or the one quoted by the MPAA on Tuesday saying "...some technology business interests are resorting to stunts that punish their users or turn them into their corporate pawns..." and "It is an irresponsible response and a disservice to people who rely on them for information and use their services. It is also an abuse of power given the freedoms these companies enjoy in the marketplace today. It’s a dangerous and troubling development when the platforms that serve as gateways to information intentionally skew the facts to incite their users in order to further their corporate interests." I suspect that it will be the latter, and I'm not sure that Senator Dodd and his employers have learned anything from this debacle.

Update, January 21st, 2012: The Hill reports that last Thursday, Senator Dodd said the following on Fox News: "Those who count on quote 'Hollywood' for support need to understand that this industry is watching very carefully who's going to stand up for them when their job is at stake. Don't ask me to write a check for you when you think your job is at risk and then don't pay any attention to me when my job is at stake." It's even more clear to me that nothing has changed and no lessons have been learned.

In the New York Times article, Dodd admitted that he was responsible for the legislative strategy that introduced both bills into the House and Senate, with the objective of ramming them through before technology companies had any chance to respond. He didn't admit that he proposed, but was almost assuredly responsible for, Representative Smith's decision not to allow any opponents of the bills to testify in front of the House. The MPAA and its allies did everything they could to prevent any opponents of the bill from making their positions known. Even on the last day before the blackout, Senator Dodd was trying to intimidate Internet sites into dropping their blackouts.

Had Senator Dodd and his allies simply opened the process to full discussion from the beginning, there would have been no need for the technology companies and individuals to take the action that they did. It also would have saved the entertainment industry a lot of time and money, as well as its reputation. There's no opposition to stopping piracy from international sites, so long as due process is accorded to all parties and domestic sites aren't under a continuous threat of being shut down due to actions that they didn't instigate or encourage.

I would suggest that Senator Dodd sold the MPAA's board a bill of goods: He most likely told his bosses that he could get legislation through that would allow them to take down any website they wanted, at little or no cost, and with virtually no recourse. "Trust me", he likely said: "I got through the Dodd/Frank Bill". Yes, he did, in a greatly watered-down form, when the House, Senate and White House were all controlled by the Democrats, and when the American public was strongly in favor of increased legislation of the financial industry.  That's a little like being appointed a General for the Allies after the Germans had already been pushed back behind the Rhine. Your tactical skill was probably not what won the War.

It's time for the entertainment and technology industries to negotiate as equal partners in order to craft an anti-piracy bill that helps to stop piracy without killing off legitimate businesses. Personally, I wouldn't trust Senator Dodd to be part of those negotiations, but I'm not going to be making that decision.

Stop SOPA

Many websites, including Wikipedia, BoingBoing, Mozilla, WordPress.org and Reddit, are going to go black tomorrow to protest the Stop Online Piracy Act (SOPA) under consideration in the U.S. House of Representatives, and the Protect Intellectual Property Act (PIPA) that's being considered by the U.S. Senate. Mashable has posted an excellent summary of SOPA, and rather than rehash those arguments, I've linked to it for your reference.

The stated purpose of SOPA is to cripple non-U.S. websites that distribute unlicensed copyrighted content, and to prevent U.S.-based sites from hosting, or even linking to, unlicensed content. The problem with SOPA is that it imposes a "death sentence" on websites that haven't been proven to have done any infringement whatsoever. SOPA front-loads the prosecution and punishment of copyright infringement cases. In the case of foreign websites, the U. S. Justice Department can request a court order to seize their domain name(s), order advertising networks and financial processing services to stop doing business with them, order search engines such as Google and Bing to drop them from their indices, and order Internet Service Providers to stop connecting to them. All of this is supposed to take place within five days after the court gives the order, and most importantly, without any notice given to the website. In short, the website can be put out of business before it has any opportunity to defend itself.

SOPA gives content owners the power to do the same things to domestic websites that encourage or facilitate copyright infringement. The Justice Department doesn't need to be involved at all. This part of the bill imposes the same "death penalty" on domestic websites, and doesn't require them to be informed until the penalty has been imposed. Even worse, the owner or operator of the site isn't required to have been the one who posted the infringing content. Infringing content could be in the form of a comment or an uploaded video posted to a user-generated content site like YouTube. It could even be a link to another website that posts infringing content.

SOPA means that every website that allows any kind of third-party content or comments would have to review everything before it's posted. It would make a service such as YouTube, which receives 24 hours of uploaded content every minute, impossible to operate. (Correction, January 23, 2012: According to its blog, YouTube is actually receiving 60 hours of video every minute.) Content providers would no longer need to give notice of infringement as required under the Digital Millennium Copyright Act, and websites would no longer be protected by the law's "safe harbor" provision if they don't knowingly encourage or participate in copyright infringement.

Let me be clear: I defend content companies' right to protect their property. However, SOPA effectively eliminates due process for website operators and creates a poisonous climate of prior restraint, where every post has to be considered infringing unless proven otherwise. An analogy would be if I, believing that a movie used some of my intellectual property, could get a court order seizing every copy of the movie from every theater playing it, or from every store and service distributing it, without giving notice to the film's distributor. By the time the studio answered the charges and got the movie back into theaters and stores, the financial damage would be incalculable.

SOPA would be fair if it required the Justice Department and content owners to give notice to the website operator before any action was taken. It would be fair if it allowed website operators to remedy the infringement, if it exists, without court action. It would be fair if it allowed website operators to defend themselves in open court before they lost their income, domain name and audience. As written, SOPA tilts the playing field decisively in favor of the content providers, most of which already have a massive advantage in legal and financial resources over website operators.