Editorial Board

It’s Time Hollywood Faced the Music Over Internet Piracy: View

After the payroll tax cut, the hottest issue animating Washington these days is online piracy. Legislation to curb overseas Internet sites that purvey pirated copies of movies, television shows and other creative content is steadily advancing.

Arms are being twisted, campaign checks written and competing experts trotted out in a Titanic struggle between the film industry (in favor of cracking down on the pirates) and technology companies (against anything that blocks the free flow of information over the Internet).

Under existing law, television networks and film studios can simply request that websites remove pirated videos. Sites must quickly take down the content to avoid a lawsuit. The system works -- without stifling anyone’s Internet use.

But because some overseas websites exist solely to distribute bootleg content, and are beyond the reach of U.S. law, Hollywood is seeking stronger protections. In essence, it wants the right to require American companies to stop doing business with entire websites.

There are two legislative approaches, both claiming broad support -- and both flawed. The House and Senate Judiciary committees are moving measures that would let the Justice Department obtain court orders to certify sites as dedicated to theft, at which point the entire online ecosystem -- search engines, Internet service providers, payment processors and advertising networks -- could be told to block the sites. Google Inc., for example, could be required to remove a link to a site so that it doesn’t come up in search results.

Financial Lifelines

Both bills would also let copyright holders obtain court orders to choke off a site’s financial lifelines to advertisers, credit-card companies and payment processors such as PayPal.

A more Internet-friendly House-Senate collaboration would let copyright owners petition the U.S. International Trade Commission to investigate foreign websites linked to piracy. The ITC could issue cease-and-desist orders against rogue sites that “primarily” and “willfully” violate copyright -- in other words, only the most blatant infringers -- at which point U.S. companies would have to cut ties to them.

Both approaches risk violating free-speech principles by snuffing out entire websites, no matter how much the film industry insists its sole aim is to shut down only purposeful copyright theft. One example: It’s doubtful that the early YouTube, indispensable to hundreds of millions of digerati today, would be allowed to exist under the stiffer House version, called SOPA, for the Stop Online Piracy Act.

SOPA and its Senate cousin, the Protect Intellectual Property Act, could also prove overly disruptive -- Google Chairman Eric Schmidt says they would “break the Internet” -- by allowing the film industry or, if that doesn’t work, the U.S. to give domain-name registrars and advertising networks just five days to cease directing traffic to a site or starve it of ad revenue. It’s not hard to imagine how that might chill free speech or be abused by a politically ambitious U.S. attorney general.

The measure that relies on the International Trade Commission, for its part, is impractical. It would require that individual artists and content creators hire lawyers who practice before the ITC to litigate cases that could cost millions of dollars and more than a year to complete. Only large companies could afford their day in the ITC court.

But the more fundamental problem is that SOPA and its ilk are too late. Anti-piracy legislation would only put a finger in the digital dike. If the film industry thinks Congress can stop nimble code-writing entrepreneurs (OK, hackers) from replacing any movie-streaming sites the U.S. manages to shut down, it hasn’t been paying attention.

Obliterated Sales

We sympathize with Hollywood, which is frantic to cut off websites like Sweden’s thepiratebay.org, where bootleg films can be downloaded free by anyone with a laptop and a broadband connection. The film business, which says it loses more than $6 billion a year to piracy, doesn’t want to end up like the music industry, whose sales were obliterated once music-lovers learned to download songs from file-sharing services.

But Hollywood can’t prevent that by trying to strangle pirates. Its greater threat is its own antiquated business model. The reality is that moviegoers, couch potatoes and Net surfers want to download videos to laptops, tablets and smartphones. They want to watch the latest Harry Potter movie or “Modern Family” episode when and where it’s convenient.

The film industry can no longer expect to control distribution to theaters, cable TV, network TV, overseas venues and streaming services such as Netflix -- each one a separate revenue source.

Music labels thought they lost control of their destiny when Apple Inc.’s iTunes came along. In many ways, they did, but music sales are on the upswing again because the convenience, low cost and accessibility of iTunes, Spotify and similar services have turned would-be music thieves into paying customers. The film industry should take note.

    To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net .

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