January 23, 2012 7:15 pm

Online piracy causes rift between media and technology

Last week’s defeat of proposed legislation to combat online piracy was a victory for the technology companies like Google and Facebook that argued the bill would stifle innovation.

However, media companies, which had backed the legislation and argued that new measures are needed to combat rogue websites based overseas, are unlikely to drop the issue here. And Friday’s crackdown on MegaUpload, the file-sharing site, will certainly shape any future debate.

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The bills exposed a deep rift between the media and technology industries. Until the last minute, SOPA and its counterpart, the Protect IP Act in the Senate, appeared headed for approval by Congress. But despite having outspent the technology industry on lobbying the issue, the media industry was swiftly outflanked by a loosely organised coalition that included Wikipedia, Google and thousands of internet users.

Though it is difficult to calculate the precise costs of piracy, and such figures are often accused of being inflated, experts agree that it results in meaningful losses of dollars and jobs.

“On the media side, there is real displacement of revenue from piracy,” said Shane Greenstein, professor at Northwestern University’s Kellogg School of Management in Chicago. “Long term, we’re headed towards less revenue for big media whether we like or not.”

In the wake of last week’s scrapping of SOPA and PIPA, media groups put on a brave face, signalling they would continue to push for new measures to combat online piracy.

“This issue is too important, too vital to our economy, to let misleading demagoguery have a veto over meaningful reforms,” said Cary Sherman, chief executive of the Recording Industry Association of America.

The very fact that online piracy became part of the national discussion should be counted as a victory, media executives said. “The big step forward is that everyone has recognised the scale of the threat from digital theft and physical counterfeiting to the economic future of the US economy,” said Rick Cotton, general counsel of NBCUniversal. “That should provide big momentum going forward.”

Contraband, the new film from Universal Pictures, is among those currently popular on illegal file-sharing sites.

Yet on a tactical level, it remained unclear exactly what the next steps would be for media groups. Executives at media companies said it was unlikely that anything would get passed before the elections in November.

Meanwhile, technology groups are newly emboldened by the defeat of the bills, which was a victory for tech companies who have a relatively small presence in Washington, compared to the entertainment industry’s lobbying might.

Google is the most visible among the Silicon Valley tech companies, with about 20 staff in DC, and has rowed with regulators frequently in recent years. But participants in last week’s online blackout protests insist that the movement is “leaderless”.

“That was literally a grassroots response that companies decided to take up on their own,” said Markham Erickson, executive director of Net Coalition. “It was really driven by the users. It was not some massive top-down organisation.”

Mr Erickson said now tech companies hope legislators will start again, listen to Silicon Valley more, consider a data-driven approach to drafting anti-piracy laws and be more transparent about negotiating around the details of the bill.

For younger tech entrepreneurs, the SOPA and PIPA bills served as a political wake-up call. Alexis Ohanian, the founder of Reddit, which participated in the blackout, said he will get more involved with not only the next phase of the anti-piracy legislation, but also campaign finance reform, “so we can put an end to lobbying dollars dictating policy in Washington”.

“We in the tech sector are much more aware of what we’re getting into in DC, but we’re also much more aware of our strengths,” he said. “Not just the strengths of the tech sector, but strength of the internet.”

Legislators sympathetic with the technology community have introduced new legislation that they say would protect intellectual property rights without introducing burdensome new regulations for web companies.

The Online Protection and Enforcement of Digital Trade Act, proposed in both the House and Senate last week, would empower the International Trade Commission to enforce new online piracy laws.

But media groups are unlikely to support the bills. Responding to an early draft of the legislation, the MPAA said it “goes easy on internet piracy”.

And media companies stress that the issue they are most concerned about, and the issue SOPA and PIPA were designed to address, is foreign-based sites that host illegal content. “The whole point of the bills was to go after foreign, rogue websites,” said DeDe Lea, head of global government relations for Viacom. “Under US law the government has the authority to go after US based websites, and they do.”

Media groups are citing the shutdown of MegaUpload, the file-sharing site, as evidence of the scale of the problem they face. But technology companies may say that it is evidence that enforcement can be done without new laws.

Between all the back and forth, there has been little opportunity for a reasoned discussion between the media and technology industries. And that, some say, is what is most needed next.

“We have been told repeatedly that the tech community agrees that something needs to be done,” Mr Sherman said. “We take them at their word and continue to hope that we can sit down with responsible leaders from that community to devise a solution that will address counterfeiting and theft and, yes, bring the rule of law to the internet.”

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