Irate over the Pirate

Creative destruction is the label that early 20^th century economist Joseph Schumpeter applied to destroying old business models and technologies followed by the birth and evolution of new ones. The very recent bankruptcy filing of Eastman Kodak is a sad reminder of that constant state of evolution, in this case where a chemical-process film company was “creatively” destroyed in a world of digital imaging. Like businesses, statutes and judicial decisions morph as conditions and circumstances dictate new alternatives. There was a time when automobiles were banned from many cities, because their engines backfired and scared the horses. Wiretapping was once determined by the U.S. Supreme Court not to be an unreasonable search and seizure (which are banned under the Constitution) because direct access to the subject property was not involved, only to reverse itself as telephony replaced goin’ next door for a chat.

And as the digital universe triumphs over hard copy analog formats, connected by the worldwide Web and a panoply of mobile wireless services, there has been and is inevitably going to be a massive conflict between changing social patterns of content consumption, a notion of “free if you can find it” among the younger generations and a “make them stop ripping off our expensively-manufactured copyrighted content” mantra of older established creators and purveyors of commercial quality content. Content-industries want to control when, where and how the fruits of their investments are consumed, an old-world, a top-down “we make it and you buy it when we give it to you” world. Consumers want content whenever, however and wherever they want it, free if they can, a bottom-up consumption control model. Boom!

For those old enough to remember (in the mid-to-late 1980s) when the only way you could use a mobile phone was to pay for calls (incoming and outgoing) by the minute, even when the calls were dropped. A lot of us threw those huge walkie-talkie-like phones in the trash when we saw those initial bills! A thousand dollars, particularly back then, was not that usual for a monthly charge. Then the telecos fell back to a market-friendly subscription service (partially based on volume), and the industry exploded. Content providers hated that structure (even as it became increasingly the future), because it was hard to measure how funds should be allocated to content. New stuff was seen as more valuable than catalog stuff, pricing wars kept lots of folks (particularly in the music business) from finding a legitimate digital format, and the young just shrugged their shoulders and traded songs and movies online without the slightest concern that they were “stealing.” Further, issues arose between new world Web companies and the content creators about exactly how much could be put online (as in a search function) before the line between fair use and infringement was crossed.

Unfortunately for the entertainment and news business, a whole lot of companies got mega-huge and rich by laying down the pipes (in the ground or in the ether), search engines, social networks and portals through which all traffic, licit and illicit, passed. Because their technologies were so cool, and the new hardware was now simply in everyone’s hands, that this tech world grew to a size that dwarfed the creators and purveyors of creative content. Read: they have a whole lot more money to spend on political advertising and political campaigns and have a “message delivery system” that simply blows old-line record companies, movies studios, book publishers and news organizations out of the water.

Old-line content companies were having a devil of a time protecting their content, tracking infringers and stopping piracy. Without those controlling the pipes and platforms exercising more stringent control over the content that flowed through their systems, the efforts to stop piracy seemed to be profoundly ineffectual to these traditional companies. I have to admit that my living has been substantially generated from this content world. The “pipes and platform” companies, protected by law in a safe harbor where they had no affirmative obligation to check all that content and had to respond only when specific infringements were identified by the content folks, have always maintained that they do not want to incur the cost (or the risk of “censorship”) of being anti-piracy enforcers.

But Hollywood was losing billions, much to overseas content bandits who sat in safe havens, particularly in Russia and China, and dealt rather freely with U.S.-produced commercial content. It needed Congress to step up enforcement to protect this major U.S. export. Almost everyone agreed that these overseas pirate were “bad” and should be stopped. But on the other side, big questions were being asked, all stemming from the question of exactly what the Silicon Valley was willing to sacrifice to stop these “bad” prirates. Was copyright law outmoded? Shouldn’t the notion of “fair use” be expanded to reflect most of consumers’ new social practices? Were there other ways to monetize content creation that would still fund commercial production (and generate profits that motivate some to create)? And were we willing to limit the tech sector in order to enhance the commercial content industry?

“When the powerful world of old media mobilized to win passage of an online anti-piracy bill, it marshaled the reliable giants of K Street — the United States Chamber of Commerce, the Recording Industry Association of America and, of course, the motion picture lobby [the Motion Picture Association of America], with its new chairman, former Senator Christopher J. Dodd, the Connecticut Democrat and an insider’s insider.

“Yet on [January 18^th] this formidable old guard was forced to make way for the new as Web powerhouses backed by Internet activists rallied opposition to the legislation through Internet blackouts and cascading criticism, sending an unmistakable message to lawmakers grappling with new media issues: Don’t mess with the Internet… As a result, the legislative battle over two once-obscure bills to combat the piracy of American movies, music, books and writing on the World Wide Web may prove to be a turning point for the way business is done in Washington. It represented a moment when the new economy rose up against the old.” New York Times, January 18^th.

January 18^th sparked a massive litany of reduced or suspended service and anti-legislation messages through tech-driven networks – at least 7,000 commercial sites – that sent a collective voice loud and clear: the tech world will not tolerate this commercial content world’s attempt to restrict their operations to protect copyrights, no matter the cost to the content industry. Oh, there will be some negotiations and perhaps another bill to apply at least some better protections for copyrighted material that might pass, but the signal as to who controls the political system was brilliantly clear. After Twitter tweeted, Google slowed its searches and Wikipedia went dark, the President expressed his doubts and even one of the sponsors of one of the two pending copyright bills, Florida Republican Senator Marco Rubio, withdrew his support for the legislation.

“Legislation that just weeks ago had overwhelming bipartisan support and had provoked little scrutiny generated a grass-roots coalition on the left and the right. Wikipedia made its English-language content unavailable, replaced with a warning: ‘Right now, the U.S. Congress is considering legislation that could fatally damage the free and open Internet.’[see above image] Visitors to Reddit found the site offline in protest. Google’s home page was scarred by a black swatch that covered the search engine’s label… Phone calls and e-mail messages poured in to Congressional offices against the Stop Online Piracy Act in the House and the Protect I.P. Act in the Senate. One by one, prominent backers of the bills dropped off.” NY Times.

Content is still the driving force that makes the pipes and platforms valuable. Despite the images of Hollywood glitz and glitter, the content world has been contracting, shedding jobs like a wooly hound at the beginning of a hot summer season. Newspapers are a dying industry, book publishers folding, the recorded music business is a tiny fraction of its former self, fewer mainstream movies are being produced and television, while pervasive, is cheaper in production value than in many decades.

Strangely, it is this economic contraction that has actually reduced “Hollywood’s clout” on Capitol Hill. Obviously, solutions are out there, probably (contrary to what most people in the industry believe) more in the world of economics than in technologically-driven systems, but certainly a combination of both. Somewhere between the lines of these feuding behemoths, an answer must be found… but some forms of commercial content will inevitably follow Kodak into the history books. And whatever else is said and done, entertaining people will always be a viable industry; we just have to be smart about it.

I’m Peter Dekom, and in the clash between northern and southern California, it does seem as if the Silicon Valley has just trounced the Silicone Alley.