The road to hell truly is paved with good intentions. Because few of us are ever born chess masters and even fewer ever take the time to learn we tend, as people, to always fall back on our evolutionary hardwiring which was intended to enable us to deal with a crisis exploding in our faces in a step-by-step basis.

The failure of crops, the drying of a river bed, the arrival of a predator and the all-time favourite, the marauding hoard silhouetted on the ridge, were all threats we had to deal with and which developed traits that allowed the survivors who made the right choices to continue to make the right choices. All this is important because when it comes to long-term planning and ramifications we are really, really bad.

By nature we are hardwired to minimise the possibility of risk, or ignore it completely and focus on the positives, many of which are short-term. What has any of this got to do with SOPA? Everything.

SOPA is Not About Protecting Intellectual Property Rights

The moment you mention the words ‘Intellectual Property Rights’ you will always get someone reacting in a kneejerk way. The words conjure passionate artists starving in garrets being ripped off by unscrupulous merchants of their work and faceless corporations. They appeal to the entrepreneurial instinct in each of us who wants to feel that should there be a good idea, they need the means to protect it so that they can benefit from it.

The proposed SOPA Act, in its entirety, can be summarized as the intention to: “protect the intellectual property market and corresponding industry, jobs and revenue”. These are lofty ideals which in a tough economy and the build-up to the US elections, are finding fertile ground.

We could, if we really tried, sit down and analyse this exhaustively, going through each of the 751 pages of the proposed Act (its language, as expected makes perfect sense in most of them) and running what-if scenarios until the universe begins to get a little colder and the sun moves close enough to the Earth to evaporate its atmosphere, and we might, still, not succeed in covering every eventuality, good or bad.

Fortunately, we have, been in similar situations many times before. History tends to be a good guide because it can show up fallacies and throw into light unexpected twists.

Piracy is Not the Problem

In order to understand the fundamental flaws of SOPA it is necessary to look at other areas where copyright protection has been in effect and where fears of piracy and loss of revenue and jobs have been frequently cited as excuses. One of these areas, and arguably, one of the earliest areas where the notions of copyright and copyright theft came into being is books.

In 1998 the US government, then under President Clinton, passed into law an extension of current copyright by 20 years in what is popularly known as the Sonny Bono Act. No one, anywhere, will argue against the need to protect the intellectual property rights of a book. Everyone intuitively understands that an intellectual work has to bring some benefits to its creator and his dependants. An extension of the protection period which, at the time of the signing, already protected the copyright of a book for the “…life of the author plus 70 years and for works of corporate authorship to 120 years after creation or 95 years after publication...” by a further 20 years makes less sense.

If we were undiscerning we would, naturally enough, suppose that the extension had something to do with the loss of jobs and earnings, all of which reflect upon the public good. Author and speaker, Lawrence Lessig, has something to say about that.

In the video below in the 6th minute of an hour-long talk he gave at GooglePlex he covers just that.

http://www.youtube.com/watch?v=Ik1AK56FtVc

The argument Lessig makes, and it is compelling, is that when Congress unanimously passed the bill extending the protection of Copyright by 20 years what was at stake, really, was more than $6million in direct contributions made by Disney and other corporations seeking the extension of their valuable copyrights in what can only be seen to be a corporate attempt to safeguard ‘bottom line profits’ and ‘shareholder value’.

These two sacred cows feature increasingly in statements made to justify decisions which go against the broader common sense or the public good (and frequently both), throughout the 20th century.

 "Home Taping Is Killing Music" was the slogan of a 1980s anti-copyright infringement campaign by the British Phonographic Industry (BPI), a British music industry trade group.  In January 2011 Bain and Company released a 20-page report on ‘Publishing in the Digital Age’ which featured the chart shown below taken from the Recording Industry Association of America (RIAA) site  [BAIN Chart] which shows that in raw figures and despite the introduction of increasingly sophisticated means of illegally copying and distributing music (from the magnetic tape so feared by the BPI to today’s mp3 format) the music industry turnover has actually increased.

You would think that the music industry, for one, would be too busy ferrying all its sacks of loot to the bank to have time and energy to waste fighting online piracy of music. Yet it is still crying foul. Why?

Music Industry Profits are down!

If we take the raw figures and adjust them for inflation and population we will see that shockingly:

10 years ago the average American spent almost 3 times as much on recorded music products as they do today.

26 years ago they spent almost twice as much as they do today.

Here you can rightly ask what happened and, possibly, blame online piracy for the decline. But that’s not it. It turns out, unsurprisingly, that the music industry made most of its money on albums and album buying has been in steady decline. The freedom to copy works we own, provided by digital technology, has also killed the Golden Goose trick of getting consumers to buy the same albums they had into a new format, something which was repeated as the transition was made from vinyl to tape to CD.

The purchase of singles in download format has been growing but the profit margin is not sufficient anymore to offset the gap, which means, that back then the music industry was really ripping consumers off and making huge profits.

Similar trends can be witnessed in the movie industry. Not only did VHS not kill the cinema, but as the chart below indicates the annual number of ticket sales, despite the increased sophistication of personal entertainment devices and home entertainment systems (not to mention the spread of peer-to-peer networks) has remained, from 1995 to the present day, relatively stable.

For a full report on this go to: http://www.the-numbers.com/market/

In a pattern similar to that experienced by the music industry the takings seem to have gone through the roof with Harry Potter and the Deathly Hallows, Part II (Year Total: $381,011,219 ) in 2011 taking more than double what Batman Forever (Year Total: $183,997,904) took in 1995. Yet, just like in the music industry the moment we adjust the figures for population and inflation to today we see a different picture. Batman Forever, adjusted took $333,734,131, placing it virtually on a par with Harry Potter.

This means that Hollywood Studio profits are down. Way down. But that is only the picture when we compare ticket sales with dollars adjusted between then and now. Income from sources such as DVDs (now inevitably in decline) and streaming, as Apple's iCloud seems to suggest are on the rise. Yet, just like with the music industry the income stream coming from these sources is not rising fast enough, nor is it profitable enough, to make up for losses from traditional sources and the narrowing profit margins due to rising operating costs (why is it that the average Holywood film suddenly costs $200 million to make?).

Social Media and new technologies challenge traditional marketing methods

To understand why such large industries are now failing you need to consider the fact that we are in a paradigm shift era where technology and social media are not only reducing the cost of delivery of creative works, they also make it harder to market traditionally.

In the 90s Hollywood could churn out a summer blockbuster, attach a $50 million promotional budget to it and end up with a global hit, even if the film was mediocre. Such traditional marketing does not work any more. Social media makes the spread of  news about a film practically instant and impossible to either manage or control.

While the demand from audiences for higher production values and the increased use of CGI in films have pushed production budgets through the roof, the uncertainty surrounding the commercial success of a film has only increased. A side-effect of this is the remake mania that’s gripped Hollywood (trying to desperately guarantee some kind of audience base for a film) and its tendency to make films which already have a following in a previous format (books or video games). For an intelligent argument on why Hollywood is experiencing a drop in revenues I urge you to check out Roger Ebert's take on this.

Enter SOPA

Hollywood is one of the strongest supporters of SOPA with a powerful lobbying wing in Washington and (possibly, still) considerable contributions to Capitol Hill re-election budgets.

While the argument about the intention to protect intellectual property rights, save revenue and jobs and fight piracy which must be damaging sounds reasonable enough we have already seen that the real reason behind it is protectionism of existing set ups, business models and profit margins of the kind which most of our capitalist systems were set up to smash.

Piracy may be a legal problem, a law is certainly broken, but it is not a financial one, or at least nowhere near the extent to which it is being painted.

Let’s look at books. If I pass a physical book I bought to my brother (I have done this countless times through my life) I am technically breaking in violation of my purchase agreement and, potentially, I am taking a sale away from the publisher and the author. Yet this is not how it works. My brother barely has the time to read five books a year. He buys only books from authors he knows and, left to his own devices, would probably, thanks to his busy lifestyle, end up reading the same authors again and again.

My passing a book opens up his horizons, helps him discover new authors and creates a customer where one would not exist before. Funnily enough we have a real case here with Paulo Coelho who was actively involved in the pirating of his own books, an action which led to him becoming a bset-selling author in Russia (a country his publishers had reputedly found hard to cracck). Read about it here.

The sharing of music by fans, the downloading of films, arguably plays the same role. In a risk-free way creative works are sampled and artists find new followers. Add to this the price point incentive and we could argue, quite successfully that relatively few people who illegally download a book they want to read or a film they want to see or even a music single they want to listen to, would make the decision to part with money in order to buy it and read it, see it in the cinema or download it from iTunes.

Much of the illegal download market consists of people who do not have the disposable income to engage in this but who, yet, thirst for the experience. Without a survey and solid figures to back this I am going out an intuitive limb here, but we all understand that there is a certain amount of effort, skill and talent involved in creating something which enamours us and none of us are adverse to the artist being compensated.

This is backed further by a recent BBC report which shows that there is strong correlation between illegally downloaded films and their box-office takings which does not support Hollywood’s loss of revenue contention. The fifth instalment to the vin Diesel ‘Fast and Furious’ franchise, for instance was both the most (illegally) downloaded film and the top-grossing one and Hangover II, in second place followed suit in both categories.



My contention is that piracy does not significantly impact upon profits for publishers, music studios or Hollywood. A changing online world, the way it accesses information and the way it operates, is. Piracy has always been perceived as the unfortunate side-effect of the freeing of technology and its being take out of the controlling hands of the few (i.e. publishers, recording studios, Hollywood) and placed in the hands of the many.

Does this lead to an increase in digital copying? – Yes

Does this hurt jobs? – No. Increased channels and technologies as iTunes, NetFlix and Amazon’s Kindle Store have shown lead to the creation of new jobs, new positions and new opportunities.

Does this lead to a reduction in profits – No. Provided you are willing to challenge the way you operate and find new ways to generate income, connect with your potential customers, educate them and get them to buy your products, you should have access to more buyers than ever before.

All of this, however, requires a way of thinking and operating which focuses on the constantly evolving interface of online communications. The increased use of social media in order to foster a conversation and expand market share and a decreasing reliance in direct methods of marketing.

From a Hollywood perspective this must be anathema. It’s much easier to go after the new technology itself (the Luddite response) than to change. I am pretty sure that the Dinosaurs, faced with declining resources, a changing climate and the evolution of increasingly active mammalian competitors, would have much preferred to nuke the sea the latter came from than adapt to compete with them.

What Can You Do?

Should SOPA become law it will not stop the continued decline of Hollywood Studio profits, but articles, like this, could potentially be blocked. Although this is not the intention of the Act it does amount to censorship. It is ironic perhaps that the very freedom of speech which is driving the social media success of some creative works and is, rightly, dooming others, less artistically worthy, is now in danger of being taken away.

Infographic courtesy AmericanCensorship.net.

Find companies which support SOPA and urge them to reconsider. As the GoDaddy story indicated we, as consumers do have power.

Be aware of which companies and public individuals are against SOPA.

Understand how free speech legislation and encryption, affects you.
 

15.01.11 Update: Thanks to pressure applied on legislators through Social Media and other channels in the first round of talks SOPA supporters suffered a defeat and an amendment was made to the proposed legislation. Read about it here.