The Stop Online Piracy Act (SOPA) and Protect Intellectual Property Act (PIPA) have received much attention recently. As is often the case with large-scale debate on proposed legislation, the facts and underlying issues can be obscured by emotion and shallow sound-bites. The issues are real but the current proposals to solve the problem are reactive in nature and do not fully address the fundamental challenge.
[Disclaimer: I currently am employed by Technicolor, a major post-production firm that derives substantial income from the motion-picture industry and associated content owners / distributors. These entities, as well as my employer itself, experience tangible losses from piracy and other methods of intellectual property theft. However, the comments that follow are my personal opinions and do not reflect in any way the position of my employer or any other firm with which I do business.]
For those that need a brief introduction to these two bills that are currently in legislative process: both bills are similar, and – if enacted – would allow enforcement of the following actions to reduce piracy of goods and services offered via the internet, primarily from off-shore companies.
- In one way or another, US-based Internet Service Providers (ISPs) would be required to block the links to any foreign-based server entity that had been identified as infringing on copyrighted material.
- Payment providers, advertisers and search engines would be required to cease doing business with foreign-based server sites that infringed on copyrighted material.
The intent behind this legislation is to block access to the sites for US-based consumers, and to remove or substantially reduce the economic returns that could be generated from US-based consumers on behalf of the offending web sites.
For further details on the bills, with some fairly objective comments on both the pros and cons of the bills, check this link. [I have no endorsement of this site, just found it to be reasonable and factual when compared with the wording of the bills themselves.]
The issues surrounding “piracy” (aka theft of intellectual or physical property) are complex. The practice of piracy has been with us since inter-cultural commerce began, with the first documented case being the exploits of the Sea Peoples who threatened the Aegean and Mediterranean seas in the 14th century BC.
With the historical definition of piracy constrained to theft ‘on the high seas’ – i.e. areas of ocean that are international, or beyond the jurisdiction of any one nation-state – the extension of the term ‘piracy’ to describe theft based within the international ocean of the internet is entirely appropriate.
While the SOPA and PIPA bills are focused on ‘virtual’ property (movies, software, games and other forms of property that can be downloaded from the internet), modern piracy also affects many physical goods, from oil and other raw materials seized by Somali pirates off the east coast of Africa to stolen or counterfeit perfume, clothing and other tangibles offered for sale over the internet. The worst form of piracy today takes the form of human kidnapping on the high seas for ransom. More than 1,100 people were kidnapped by pirates in 2010, with over 300 people currently being held hostage for ransom by pirates at the time of this article (Jan 2012). The larger issue of piracy is of major international concern, and will require proactive and persistent efforts to mitigate this threat.
While the solutions brought forward by these two bills are well-intentioned, they are reactive in nature and fall short of a practical solution. In addition, they suffer from the same heavy-handed methods that often accompany legislative attempts to modify human behavior. Without regard to any of the underlying issues, and taking no sides in terms of this commentary, governmental attempts to legislate alcohol and drug consumption, reproductive behavior and cohabitation lifestyles have all been either outright failures or fraught with difficulty and have produced little or none of the desired results.
Each side in this current debate has exaggerated both the risks and rewards of the proposed legislation. From the content owner’s side the statements of financial losses are overblown and are in fact very difficult to quantify. One of the most erroneous bases for financial computation of losses is the assumption that every pirated transaction would have been money that the studio or other content owner would have received if the content had been legally purchased. This is not supported by fact. Unfortunately many pirated transactions are motivated by cost (either very low or free) – if the user had to pay for the content they simply would choose not to purchase. It is very difficult to assess the amount of pirated transactions, although many attempts are made to quantify this value.
What certainly can be said is that real losses due occur and they are substantial. However, it would better serve both the content owners, and those that desire to assist these rightsholders, to pursue a more conservative and accurate assessment of losses. To achieve a practical solution to the challenge of Intellectual Property (IP) theft, this must be treated as a business use case, and set aside the moral aspects of this issue. The history of humanity is littered with the carcasses of failed attempts to legislate morality. Judgments of behavior do not generate cash, collection of revenue is the only mechanism that factually puts money in the bank.
Any action in commerce has a financial cost. In order to make an informed choice on the efficacy of a proposed action, the cost must be known, as well as the potential profit or loss. If a retail store wants to reduce the assumed losses due to shoplifting, the cost of the losses must be known as well as the cost of additional security measures in order to make a rational decision on what to spend to resolve the problem. If the cost of securing the merchandise is higher than the losses, then it makes no sense to embark on additional measures.
Overstating the amount of losses due to piracy could appear to justify expensive measures to counteract this theft – if implemented the results may in fact only add to the overall financial loss. In addition, costs to implement security are real, while unearned revenue is potential, not actual.
On the side of the detractors to the SOPA and PIPA legislation, the claims of disruption to the fabric of the internet, as well as potential security breaches if link blocking was enabled are also overstated. As an example, China currently practices large scale link blocking, DNS (Domain Name Server) re-routing and other technical practices that are similar in many respects to the proposed technical solutions of the proposed Acts – and none of this has broken the internet – even internally within China.
The real issue here is that these methods don’t work well. The very nature of the internet (a highly redundant, robust and reliable fabric of connectivity) works against attempts to thwart connections from a client to a server. We have seen many recent attempts by governments to restrict internet connectivity to users within China, the Arab states, Libya, etc – and all have essentially failed.
For both sides of this discussion, a more appropriate direction for legislation, funding and focus of energy is to treat this issue for what it is factually: a criminal activity that requires mitigation from the public sector through police and judicial efforts, and from the private sector through specific and proven security measures. Again, the analogy of current practices in retail merchandising may be useful: the various technologies of RFI scanners at store exits, barcoded ‘return authorization tags’ and other measures have proven to substantially reduce property and financial loss without unduly penalizing the majority of honest consumers.
Coupled with specific laws and the policy of prosecuting all shoplifters this two-pronged approach (from both public and private sector) has made substantial inroads to merchandise loss in the retail industry.
Content protection is a complex issue and cannot be solved with just one or two simple acts no matter how much that may be desired. In addition, the actual financial threat posed by piracy of movies and other content must be honestly addressed: it is sometimes convenient to point to perceived losses due to piracy rather than other reasons – for instance poor returns due to simply that no one liked the movie… or distribution costs that are higher than ideal, etc.
A part of the overall landscape of content protection is to look at both the demand side as well as the supply side of the equation. Both the SOPA and PIPA proposals only address the supply side – they attempt to reduce access to, or disrupt payment for – the supply of assets. Most consumers make purchase choices based on a cost/benefit model, even if unconsciously so: therefore at first glance, the attractiveness of downloading a movie for ‘free’ as opposed to paying $5-$25 for the content is high.
However, there are a number of mitigating factors that make the choice more complex:
- Quality of the product
- Ease of use (for both getting and playing the content)
- Ease of re-use or sharing the content
- Flexibility of devices on which the content may be consumed
- Potential of consequences for use of pirated material
With careful attention to the above factors (and more), it is possible for legal content to become potentially more attractive than pirated content, at least for a percentage of consumers. It is impossible to prevent piracy from occurring – the most that is reasonable to expect is a reduction to the point where the financial losses are tolerable. This is the same tactic taken with retail merchandise security – a cost/benefit analysis helps determine the appropriate level of security cost in relation to the losses.
In terms of the factors listed above:
- Legal commercial content is almost always of substantially higher quality than pirated content, raising the attractiveness of the product.
- For most consumers (i.e. excluding teenage geeks that have endless time and patience!) a properly designed portal or other download experience CAN be much easier to operate than linking to a pirate site, determining which files to download, uncompressing, etc. etc.Unfortunately, many commercial sites are not well designed, and often are as frustrating to operate as some pirate sites. Attention to this issue is very important, as this is a low cost method to retain legal customers.
- Depending on the rights purchased, and whether the content was streamed or downloaded, the re-use or legal sharing of purchased content (i.e. within the home or on mobile devices owned by the content purchaser) should ideally be straightforward.Again, this is often not the case, and again motivates consumers to potentially consider pirated material as it is often easier to consume on multiple devices and share with others. This is a very big issue and is only beginning to be substantially addressed by such technologies as UltraViolet, Keychest and others.Another issue that often complicates this factor is the enormously complex and inconsistent legal rights to copyrighted material. Music, books, movies, etc. all have highly divergent rules that govern the distribution and sale of the material. The level of complexity and cost of administering these rights, and the resultant inequities in availability make pirated material much more available and attractive than it should be.
- With the recent explosion of types of devices available to consume digital content (whether books, movies, tv, music, newspapers, etc.) the consumer rightly desires a seamless consumption model across the devices of their choice. This is often not provided legally, or is available only at significant cost. This is yet another area that can be addressed by content owners and distributors to lower the attractiveness of pirated material.
- The issue of consequences for end-users that may be held accountable for downloading and consumption of pirated material is complex and fraught with potential backlash to content owners that attempt enforcement in this area. Several recent cases within the music industry have shown that the adverse publicity garnered by content owners suing end users has had a high cost and is generally perceived to be counter-productive.The bulk of legal enforcement at this time is concentrated on the providers of pirated material all through the supply chain, as opposed to the final consumer. This is also a more efficient use of resources, as the effort to identify and legally prosecute potentially millions of consumers of pirated material would be impractical compared to degrading the supply chain itself – often operated by a few hundreds of individuals.There have been recent attempts by some governments and ISPs to monitor and identify the connections from an end consumer to a known pirate site and then mete out some level of punishment for this practice. This usually takes the form of multiple warnings to a user followed by some degradation or interruption of their internet service. There are several factors that complicate the enforcement of this type of policy:
- This action potentially comes up against privacy concerns, and the level and invasiveness of monitoring of a user’s habits and what they download vary greatly by country and culture.
- Many so-called ‘pirate’ sites offer a mix of both legally obtained material, illegally obtained material, and storage for user generated content. It is usually impossible to precisely determine which of these content types a user has actually downloaded, so the risk is high that a user could be punished for a perfectly innocent behavior.
- It is too easy for a pirate site to keep one (or several) steps ahead of this kind of enforcement activity with changing names, ip addresses, and other obfuscating tactics.
In summary, it should be understood that piracy of copyrighted material is a real and serious threat to the financial well-being of content producers throughout the world. What is called for to mitigate this threat is a combined approach that is rational, efficient and affordable. Emotional rhetoric and draconian measures will not solve the problem, but only exacerbate tensions and divert resources from the real problem. A parallel approach of improving the rights management, distribution methodology and security measures associated with legal content – aided by consistent application of law and streamlined judicial and police procedure world-wide – is the most effective method for reducing the trafficking of stolen intellectual property.
Education of the consumer will also help. Although, as stated earlier, one cannot legislate morality – and in the ‘privacy’ of the consumer’s internet connection many will take all they can get for ‘free’ – it cannot hurt to repeatedly describe the knock-on effects of large scale piracy on the content creation sector. The bottom line is that the costs of producing high quality entertainment are significant, and without sufficient financial return this cannot be sustained. The music industry is a prime example of this: more labels and music studios have gone out of business than remain in business today – as measured from 1970 to 2011. While it is true that the lowered bar of cost due to modern technology has allowed many to ‘self-produce’ it is also true that some of the great recording studios that have gone out of business due to decreased demand and funding have cost us – and future generations – the unique sound that was only possible in those physical rooms. These intangible costs can be very high.
One last fact that should be added to the public awareness concerning online piracy: the majority of these sites today are either run by or funded by organized criminal cartels. For instance, in Mexico the production and sale of counterfeit DVDs is used primarily as a method of laundering drug money, in addition to the profitable nature of the business itself (since no revenues are returned to the studios whose content is being duplicated). The fact that the subscription fees for the online pirate site of choice is very likely funding human trafficking, sexual slavery, drug distribution and other criminal activity on a large scale should not be ignored. Everyone is free to make a choice. The industry, and collective governments, need to provide thoughtful, useful and practical measures to help consumers make the right choice.