“Sharing the Sandbox”

By Dan McPheeters and Michael D. Stein

In our previous posts, we covered the pitched-battle between content producers on the one hand, and content distributors and access providers on the other. Specifically, we focused on an element in the enforcement provision of the Stop Online Piracy Act that was almost singularly responsible for the outrage among the latter group and spurred the internet blackout on January 18th. Roots of this battle date back to the middle of the last decade, and SOPA itself may have been the direct result of the enormously influential decision from the Southern District of New York in Viacom v. YouTube. In our fourth and final post (for now) on this topic, we look to whether this battle shows any signs of abating, and whether that would be a good thing for consumers.

One of the truly unique features to the outcome of the SOPA debate (at least thus far) has been the identity of the losers: the “Hollywood” lobby is, to put it bluntly, not used to losing. This is an important place to start when evaluating possible “next steps.” SOPA (and PIPA) supporters are a who’s who of D.C.’s powerful lobbies, including the RIAA, MPAA, and the U.S. Chamber of Commerce, to name but a few. A measure of their commitment can been seen not only in their pursuit of this specific goal since at least 2005 (or, according to some, even earlier than that), but in the fact that the U.S. Chamber of Commerce was willing to lose the likes of Yahoo! as a member and square off against another member, Google, in order to support these two bills. Let there be no doubt: supporters of these two bills are not simply going to fold up and walk away from this issue. However, given the sheer muscle displayed by the content distributors, it would seem likely that a détente may be the only option from both perspectives.

There are many ways in which the parties can find a way to coexist in the boundless space of the internet. Whether devising new ways of segmenting content into greater parts (thus creating a windfall for both parties by increasing both the amount of product and the amount of product requiring access), ramping up direct-to-consumer distribution channels, or outright collaboration in a way that exploits the comparative advantages of each group, there is most certainly room for the two parties to work together and generate enormous value.

However, the first step has to be an end to the types of legislative provisions and rhetorical battles that threaten the distributors’ business models, and with it the modern internet itself (see the comments from the President of the RIAA). And it is precisely the magnitude of this threat that may prolong this battle for the foreseeable future, with all the value of harmony lost with it. People locked in a Mexican stand-off on Monday are highly unlikely to play squash together on Tuesday. But is this a bad thing?

The crux of the internet blackout, and the tremendous level of support it received from average users, was not the result of some sinister smear campaign by the Snidely Whiplashes employed by Facebook and Google. The beauty of Web 2.0 centers around the ability of users to participate in the creation of content, whether by creating YouTube videos that fall within fair use, or the ability of talented but disconnected artists to better market their work (Justin Bieber, anyone?). Regulating when a Twilight spoof on YouTube crosses the line from fair use to infringement is a worthy goal, and pursuing clearer lines and easier enforcement rules are goals for which content producers can hardly be begrudged. But SOPA and Viacom went further, and in a way that made it facially apparent that other motives were at play. In overreaching, the high-ground was forfeited and the vox populi responded.

The response by consumers and the parties themselves suggests two positives arising from the aftermath of this issue. First, as with any market, the fact of near- and medium-term competition between producers and distributors will result in innovations by both parties that increase content production and drive down prices. Whether direct-to-consumer marketing that bypasses the overhead of the traditional broadcasters, or a wider variety of producers in general as distributors realize they can exploit their built-in access advantages by financing an increase in the amount of content, consumers will gain from this fight as more content is delivered at reduced costs. Second, and more importantly, the likelihood that Hollywood will try an access-killing approach such as the enforcement provisions of SOPA and the primary argument in Viacom has to be seen as remote, at least in the near-term. What this means is refocusing on the goal of clarifying the lines of copyright infringement itself. Because Web 2.0 is inherently about the democratization of content creation, this focus on clarifying the associated property rights will benefit everyone by reducing the ambiguities and uncertainties in the law, the effect being to strengthen the value of those rights to the creators. The result is an enormous increase in wealth to everyone involved.

The modern internet saved itself by defeating SOPA, but content producers have no shortage of Megaupload-type cases to bandy about as examples in the next round. Meanwhile, the public appears unwilling to sacrifice the greater access that Web 2.0 provides them; whether the reasons are economic or expressive, it seems unlikely that content distributors will have imposed on them the type of contributory infringement liability argued for in Viacom. All of which is to say that consolidation may be the next and best step to take for both parties. Clearly, distributors like Google need to demonstrate that the notice and takedown feature of the DMCA works as an effective means to police piracy, if for no other reason than winning the political debate over whether “enough” is done to protect IP. Producers likewise need to regroup and abandon the contradictory argument that vigorous ownership rights should be supported by collective enforcement duties. Instead, producers should focus on developing better means of preemptive protection and engage in a concerted effort to clarify the rules surrounding property rights, especially rights concerning active distribution and derivative works.

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