News

PIRATE DIPLOMACY

1/30/2012 12:01 AM Eastern

Michael O’Leary, EVP of global policy and external affairs,
MPAA:

MCN: Is there any hope for PIPA or SOPA, or do you have to start
over?

Michael O’Leary: We want to fi nd a resolution and are not necessarily
wedded to any specific form of that resolution, but we would like to
come up with something that helps us deal with this problem because
it is a very real one. Th at may not be a great answer, but it is the truth of
the matter.

MCN: Whichever way you go, what are the must-haves in an antipiracy
bill?

MO: We are evaluating the situation and reaching out to people who
are interested in getting something done. I am not sure it serves anybody’s
purpose to start issuing ultimatums through the press.

MCN: We talked to Markham Erickson of NetCoalition, and he said
he is ready to talk with your side if you guys make the fi rst call. So,
are you willing to reach out?

MO: I think we have been very clear since the middle of last summer
that we are more than willing to sit down and talk to people who have
legitimate concerns and constructive solutions for addressing those
concerns but still addressing the underlying problem of content theft.
So, yes.

MCN: Have you launched an ad campaign to continue to push for
anti-piracy legislation?

Howard Gantman: We haven’t. Creative America launched a campaign,
but we don’t have a campaign right now. [Creative America is a group
launched last fall to drum up rank-and-fi le support for the bills. Its
members include both creative unions and many of the MPAA member
studios, including NBCUniversal, Sony Pictures Entertainment, 20th
Century Fox, Warner Bros., Viacom and Th e Walt Disney Co.]

MCN: Given the success of the Web “blackout” protest, did the studios underestimate
the power of the Web?

HG: I think it was certainly successful in achieving their underlying goal, which was to not
do anything about this problem.

MCN: Do you think the talk of the bills destroying the open Internet was a red herring,
or were there some legitimate issues, like the lack of due process?

MO: Specifically, since you raise it, I don’t think there is a due-process beef. Th e dueprocess
provisions in this bill are the same ones that apply in existing law today. I think
what you saw here was a very eff ective campaign that motivated people through misrepresentation
and distortion.

I think if you throw around loaded words like censorship, there is no one that can point
to any part of this bill that equates with censorship. Due process is a part of the bill. The
problem is that it became about the rhetoric and not about the substance.

Our hope as we move forward is that we can set that aside. If people have legitimate
concerns that they can articulate, then we are more than happy to discuss that. Simply
stepping back and saying something is going to, quote-unquote, break the Internet is not
a substantive discussion that is going to lead to any type of cogent policy.

I think that a lot of their stated concerns are not supported, but they were never forced
to articulate the basis for their concerns.
Th at is unfortunate, but we are
looking forward and we are happy to
have discussions that can resolve any
legitimate concerns that exist.

MCN: Opponents of the bill say the
issue may only boil down to a few
dozen sites, and they are not sure
how big the issue is. How big do you
think the piracy threat is?

MO: It seems that argument presumes that, as an industry, we just have to accept the fact that a certain number
of people are going to steal from us. They always say the job loss isn’t
as big as we say it is. Well, at what point does it become big enough? Do
we have to lose any jobs because people are stealing from us?

I don’t know any other industry in the United States that when they go
to the government and ask them to enforce the laws to stop people from
stealing from them, they’re faced with this type of response. I think it
is nonsensical to say you have to absorb a certain amount of loss. Th at
is not the way our system works.

MCN: Obviously, you don’t feel there is enough protection in current
law or enforcement.

MO: No, and stopping these bills dead in their tracks, rather than
debating them, is furthering a safe haven overseas. Criminals are smart;
they adapt. When you enforce against them in one area, they move into
another where enforcement isn’t as strong. This is clearly a very profi table
business because you look at the gentleman running Megaupload,
who was indicted last week, he was living a life of affluence that most
people in the U.S. can’t comprehend, and it was built specifi cally on the
back of criminal activity and piracy. So the notion that there is not harm
or [it is] not worthy of attention is just not born out by the facts.

MCN: And if the SOPA and PIPA legislation had been in place?

MO: His access to the U.S. would have been cut off years ago. What is
happening to him now is a criminal investigation, which frankly, based
on his conduct, probably was warranted. But criminal investigations
take a long time to build a case and an enormous amount of resources.
So, over the pendency of that investigation, which probably took three
or four years, he continued to steal and profi t from it.

What we were trying to do is create a new tool that would basically
say to criminals around the world, “You can go ahead and be a criminal,
but you are not going to tap the U.S. market.” It would have been an
eff ective tool that could have cut him off three or four years ago.

MCN: So, what is the impact of not having passed these bills on
industry and the consumer?

MO: I think a couple of things will happen. One is that consumers will continue to be
exposed to fraudulent goods, not just movies and music, but fraudulent consumer products,
like drugs and medicine that impact safety. So the consumer will continue to be exposed
to these. A black market overseas will be perpetuated. And the U.S. will have taken
a step back in terms of being a world leader in protecting intellectual property, which is
the lifeblood of most economies — and this at a time with unemployment at an all-time
high and a global recession.

Inaction on protecting intellectual property sends a very strong signal to the rest
of the world that, for the first time, the United States has not stepped up and met a
very serious challenge, and [that] hurts our overall ability to have strong intellectual
property protections.

MCN: Why wouldn’t Google be just as interested in preserving content rights, since it
clearly has TV aspirations beyond homemade kitten videos?

MO: Th at is better asked of them, but I think they profi t an awful lot from the current environment
with advertising money and people who pay to move up in the search rankings.
They certainly have a business model that they profit from. In terms of why they don’t
want to deal with content theft, that is a question you will have to ask them.

WASHINGTON— Anti-piracy legislation with bipartisan support and apparent momentum
behind it was put on the back burner after pushback from Silicon Valley dot-coms succeeded in
convincing lawmakers to table the bills.

Markham Erickson is executive director of NetCoalition, which has been battling the
PROTECT IP Act (PIPA) and the Stop Online Protection Act (SOPA) on behalf of a membership
that includes Web giants Google and Yahoo! Erickson said he is ready to talk directly with the
Hollywood studios that advocate for the bills, designed to prevent off-shore websites from
stealing copyrighted content, but said they need to make the first move.

For its part, the Motion Picture Association of America, which supported the anti-piracy bills,
said it is willing to talk with anyone who has constructive suggestions and a willingness to address
what the MPAA describes as a serious problem.

Michael O’Leary, senior executive vice president of global policy and external affairs for the
MPAA, took the lead for the studios on the push for anti-piracy legislation, a push he suggests
remains key to protecting digital content in an over-the-top future.

Erickson was not ready to declare victory over PIPA and SOPA last week, but said even he
was surprised by the success of the Web blackout that appeared to help turn the tide against
the legislation, which has essentially been tabled.

In separate interviews, the two key players in the PIPA/SOPA soap opera that has been
playing out for nearly two years talked with Multichannel News Washington bureau chief John
Eggerton about what happened, what’s next and why it still matters. (MPAA spokesman
Howard Gantman also participated in the O’Leary call).

Edited transcripts follow.

Markham Erickson, executive director, NetCoalition:

MCN: Are you ready to declare victory over SOPA and PIPA?

Markham Erickson: We have read in the papers today that the [Motion Picture
Association of America] has launched a $3 million national ad campaign
to promote SOPA and PIPA. [Th e MPAA says the campaign is from Creative
America, a group that includes the MPAA’s major studio members, plus
unions.] So, I don’t believe that the other side is ready for us to declare victory
but is going to continue to push. And I think that is unfortunate, because we
remain willing to talk to the other side as partners in how we try to deal with
the issue of illegal content on the Internet.

The other side appears to want to double down and take a run at this, and
that will keep the issue going. We will have to continue to work to educate members
about why we think the proposals, as currently drafted, go way too far.

MCN: MPAA president Chris Dodd has suggested he wanted to get
together with your side.

ME: He said he wanted the White House to convene a summit, and the
White House has said they are not interested in doing that. We have already
provided MPAA and members our position and we are ready to engage with
them if they are willing to engage to talk about that, and hopefully they are
willing to do that.

I think we would be very willing to sit down and try to get a handle on what
is at stake, defining the scope of the problem and how many websites we’re
talking about, where the theft is occurring, and discussing whether there are
private-sector solutions, as well as the possibility of federal legislative activity.

MCN: And if Chris Dodd calls, you are willing to talk?

ME: Absolutely.

MCN: You talk about defi ning the scope of the problem. Don’t you agree
that piracy is a huge problem?

ME: Well, piracy is obviously a problem. How big the problem is has never
been defi ned by an independent body. The Government Accountabilty Office, which investigates issues for the Congress, put out a report about a year
and a half ago saying that the MPAA’s piracy numbers were overblown and unverifiable.

The MPAA’s website says nine out of 10 instances of movies that are pirated and put on the
Internet are being stolen out of movie theaters from people who are camcording them in the
movie theater, and that there are only 19 sites that they are concerned about. It depends on what
you define as a huge problem. Nineteen sites is a fairly small part of the World Wide Web. And if
nine out of 10 instances of piracy are happening in movie theaters, maybe there might be solutions
in terms of putting more responsibility on theaters to be proactive that could stop the piracy
from happening in the first place.

We ought to have a data-driven process to look at how big a problem piracy is and how we
work as partners with the content industry to tackle that issue.

MCN: So, would your argument be that there should be no new legislation until you can
defi ne the scope of the problem?

ME: I think that is an argument that policymakers might want to make. Whether you are talking
about clean-air legislation or clean-water legislation, ideally in Washington you would want no
dirty air and no dirty water and pristine rivers and no illegal activity.
You have to make determinations about the scope of the problem to understand that regulation
that you impose that is going to cost companies and may deprive some people of some civil
liberties and have some impact on the First Amendment and free speech.

MCN: Why shouldn’t cable operators support
this bill? Why is it not in their interest?

ME: Some of them have. Comcast, one of
the biggest ISPs, which is also one of the biggest
content providers with the merger with
[NBCUniversal], has been supportive. I represent
edge-based Internet companies and
technology companies, and the calculation
that [cable companies] make is hard to calibrate
because they have a diff erent business
model. But I know that in speaking to many
of the people within ISPs, they thought [the] PIPA and SOPA proposals were not workable and would cause more harm
than good.

MCN: Did the rhetoric get a little too heated during this process?

ME: Probably, but at the same time this was being driven, there was a
vote that was going to happen in the Senate [on Jan. 24], and both sides
wanted to get the attention of senators, and that artifi cial timing was really
unfortunate because it did cause people to be very vigorous in how
they spoke about these issues.

MCN: I know some supporters of the bills in Congress took umbrage at
being characterized as Internet killers. Do you really think that is what
these bills would do?

ME: Both proposals would have fundamentally changed the way the Internet
works and how they experience it. How you want to characterize that I
will leave to others. Our organization never said they were Internet killers.
But we did say that both bills would impose a significant drag on innovation,
be a dramatic reversal of federal policy in terms of regulating the Internet
and harm free speech.

MCN: Why were so many unions supportive of SOPA and PIPA?

ME: I don’t know, but about a week ago the authors of Freakonomics said
that they believed that the correlation between piracy and jobs is likely not
accurate. It becomes classic Washington rhetoric to try to talk about jobs or
the person who is the key grip or sweeping the floors. If that were what was
mainly motivating the content community then Viacom’s CEO would not
have made $78 million last year.

I’m not saying he shouldn’t make whatever salary his board is willing to
pay him. But this is about improving the bottom lines of the companies, and
Congress has to fi gure out whether the public-policy goals are in sync with
the private-sector goals of each company offering their different approaches.

MCN: What about the argument that Google and Yahoo! are just trying to
protect profi ts from ads on pirate sites?

ME: It is absolutely ridiculous. There is just no amount of money that is even
a blip in terms of revenue that the companies care about where they are making money off illegal
content. They don’t want to make money from illegal advertisements. They all have policies
that reflect that. That is one of the most cynical and ridiculous arguments in this whole business.

MCN: So, do you think that current legislation already takes care of piracy?

ME: We all want to encourage a world with more and more lawful choices for consumers and
less and less unlawful ones. I’m not sure we ever get to a world where there is zero unlawful
content. But I think to improve the situation requires content creators to make a better product
available to consumers in ways that make sense to them. For instance, we have seen the recording
industry shift in that space in ways that now allow them to make money from individual
song downloads. It may be the case that the movie industry is going to have to look at diff erent
policies. Today, they say, rent a video and it expires after 24 hours, and maybe that is not the
most consumer-friendly way to approach that issue.

They are going to have to look at their issues. But we are going to have to look at addressing
some illegal content on the Internet. And that may require both legislative action and privatesector
partnership. I don’t think there is one solution.

MCN: We would think that with video moving online, and Google having aspirations in that
space beyond home videos, Web companies should be interested in fi ghting online video
piracy?

ME: Absolutely. We struggled to get licenses from the content creators and, hopefully, we will
get to a point where they have a better ability to cut deals to distribute their content.

MCN: What is the takeaway from all that has happened with SOPA and PIPA in the past few
months?

ME: Last week marks the end of a back-room deal that got jammed through Congress without
people paying attention. That is where we were headed. If you remember, even in the Senate
Judiciary Committee, chairman Patrick Leahy [D-Vt.] held the markup in private, off the Senate
floor, where the public was not allowed to view that process. I think there was some sense on
their side that if they promoted it in this way they could sort of sneak it by. Maybe, I don’t know,
but that is how it was viewed by many who were watching the process. I think the end of that era
is probably highlighted by what happened two weeks ago.

March