The Stop Online Piracy Act: A cure worse than the disease

SOPA (Stop Online Piracy Act) and PIPA (Protect IP Act) are misbegotten bits of legislation that fight the wrong war to protect the wrong industry.

NATCHITOCHES, La., January 18, 2012—Congressional efforts to fight online piracy have run into strong resistance and are being derailed.

Key sponsors of the Senate’s Protect IP Act (PIPA) withdrew their support today, including Marco Rubio (R-Fla.), John Cornyn (R-Tx.), and John Boozman (R-Ark.). The House version, the Stop Online Piracy Act (SOPA), is likewise losing critical support.

There is general agreement that online piracy is a serious issue. Estimates of the financial losses to Hollywood and other providers of pirated content are highly variable, but the reported figure of $50 billion per year is probably at least in the right neighborhood. It’s difficult to determine exactly how much content is pirated, and estimates rely on some self-reporting. Not everyone who downloads an illegal copy of a movie would have bought it otherwise, so an estimate of how many illegal copies have been downloaded overestimates the actual loss to the studio.

The purpose of copyright is to encourage creative efforts by ensuring that artists, producers, studios, and others in the creative chain will be able to claim the fruits of their efforts. People are less likely to invest in creative efforts if their work can be copied and resold by third parties, who then make all the profits. It can cost tens of millions of dollars to make a movie, but it costs only pennies to make copies of it from a digital master. The studio has to sell their copies at a price high enough to recoup the millions invested, while a pirate can sell copies at a fraction of the cost and still make a profit.

Whether creative efforts are being reduced by online piracy is an open question. If piracy is as bad as Hollywood claims, we should see a decrease in the numbers of movies, musical recordings, and other content in response to it. Yet the numbers of musical artists recording, books published, and movies made seem to push ever upward.

Were we inclined to be snide, we might observe that Hollywood hasn’t made a new movie in years, preferring instead to remake the same movies and TV shows over and over again, so perhaps piracy has killed creativity after all. But accepting that Halloween 32 is a new artistic creation, Hollywood seems to be as active as ever.

And more profitable than ever. Last year it earned $30 billion in box office revenues, and a further $57 billion from sources it has at times wanted to kill: movies on demand, video rentals, digital downloads, and so on. At one time the studios argued that VCRs would kill them, just as recording companies once complained that radio would put them out of business (“you can’t compete with free”).

Hollywood has for a long time been politically active, and its executives think in political terms. Innovation and individuality scare them silly. They want their world to be orderly and controlled, the very antithesis of Silicon Valley. Capitalism scares them, unregulated markets scare them, and so they want to “bring order” to a digital world that looks to them like chaos.

Silicon Valley has not been so politically inclined as Hollywood, reveling instead in creative destruction and the free-for-all that can make and wipe out fortunes overnight. But with SOPA, politics has come pounding on Silicon Valley doors. It will be a shock to both Hollywood and Washington to learn that Silicon Valley (shorthand here for the Internet and the economic ecology it’s created) is enormously powerful, and vastly more important than Hollywood.

Even so, piracy should be fought. It is theft, and theft is destructive to markets and society. The problem with SOPA and PIPA is that they do it in the clumsiest, most destructive ways.

The worst of SOPA is that allows the government to censor the Internet. Hollywood favors this approach to fighting piracy because it’s easier than going to court to force websites to remove unauthorized content.

Under SOPA’s provisions, the government would have the power to shut down websites and entire domains for linking to websites that contain unauthorized content. It could do this without demonstrating intent to harm or defraud, without demonstrating actual harm at all. A blogger’s link to a website containing even a minor infraction of copyright could shut down a newspaper’s domain, imposing punishment without establishing guilt.

Shutting down legal content by court order threatens the very foundations of our new information economy. The threat of doing so would be a knife at the throat of the digital town square, an important new instrument of democracy. By allowing private rights of action with little chance for appeal, SOPA and PIPA would allow private firms to use the government as a weapon against the rest of us.

Its potential as a tool of censorship is only the most noxious aspect of SOPA. The House and Senate bills contain provisions that would reduce Internet security, making us more vulnerable to malicious attacks on vital networks than we are. And they do it fighting a losing battle. Hollywood should learn that operating in the digital world is dangerous, but also highly profitable, and in trying to control it they will only limit their own potential for growth. They should embrace it, not try to control it.

Washington has been doing what Washington does, trying to further regulate and tame what seems like a competing instrument of influence and power. For the sake of our ability to charge into the 21st century, they should step back.

If censorship is the only cure for piracy, we’d be better off with the disease.

James Picht is the Senior Editor for Communities Politics and teaches economics at the Louisiana Scholars’ College in Natchitoches, La., where he went to take a break from working in Moscow and Washington. But he fell in love with the town and with the professor of Romance languages, so there he stayed. Now he teaches, annoys his children, and makes jalapeno lemonade. He thinks his students rely too much on Wikipedia. He tweets, hangs out on Facebook, and has a blog he totally neglects at


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Jim Picht

James Picht is the Senior Editor for Communities Politics and teaches economics and Russian at the Louisiana Scholars' College in Natchitoches, La. After earning his doctorate in economics, he spent several years working in Moscow and the new independent states of the former Soviet Union for the U.S. government, the Asian Development Bank, and as a private contractor. He returned to Ukraine recently to teach principles of constitutional law and criminal procedure at several Ukrainian law schools for a USAID legal development project. He has been writing at the Communities since 2009.

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