SOPA and PIPA are bad industrial policy

The solution to piracy must be a market solution, not a government intervention.

This post originally appeared in Tim O’Reilly’s Google+ feed.

There are many arguments against SOPA and PIPA that are based on the potential harm they will do to the Internet. (There’s a comprehensive outline of those arguments here.) At O’Reilly, we argue that they are also bad for the content industries that have proposed them, and bad industrial policy as a whole.

The term “piracy” implies that the wide availability of unauthorized copies of copyrighted content is the result of bad actors preying on the legitimate market. But history teaches us that it is primarily a
result of market failure, the unwillingness or inability of existing companies to provide their product at a price or in a manner that potential customers want. In the 19th century, British authors like
Charles Dickens and Anthony Trollope railed against piracy by American publishers, who republished their works by re-typesetting “early sheets” obtained by whatever method possible. Sometimes these works were authorized, sometimes not. In an 1862 letter to the Athenaeum, Fletcher Harper, co-founder of American publisher Harper Brothers, writing in reply to Anthony Trollope’s complaint that his company had published an unauthorized edition of Trollope’s novel Orley Farm,noted:

“In the absence of an international copyright, a system has grown up in this country which though it may not be perfect still secures to authors more money than any other system that can be devised in the present state of the law…. We cannot consent to its overthrow till some better plan shall have been devised.”

America went on to become the largest market in the world for copyrighted content.

That is exactly the situation today. At O’Reilly, we have published ebooks DRM-free for the better part of two decades. We’ve watched the growth of this market from its halting early stages to its robust growth today. More than half of our ebook sales now come from overseas, in markets we were completely unable to serve in print. While our books appear widely on unauthorized download sites, our legitimate sales are exploding. The greatest force in reporting unauthorized copies to us is our customers, who value what we do and want us to succeed. Yes, there is piracy, but our embrace of the internet’s unparalleled ability to reach new customers “though it may not be perfect still secures to authors more money than any other system that can be devised.”

The solution to piracy must be a market solution, not a government intervention, especially not one as ill-targeted as SOPA and PIPA. We already have laws that prohibit unauthorized resale of copyrighted material, and forward-looking content providers are developing products, business models, pricing, and channels that can and will eventually drive pirates out of business by making content readily available at a price consumers want to pay, and that ends up growing
the market.

Policies designed to protect industry players who are unwilling or unable to address unmet market needs are always bad policies. They retard the growth of new business models, and prop up inefficient companies. But in the end, they don’t even help the companies they try to protect. Because those companies are trying to preserve old business models and pricing power rather than trying to reach new customers, they ultimately cede the market not to pirates but to
legitimate players who have more fully embraced the new opportunity. We’ve already seen this story play out in the success of Apple and Amazon. While the existing music companies were focused on fighting file sharing, Apple went on to provide a compelling new way to buy and enjoy music, and became the largest music retailer in the world. While book publishers have been fighting the imagined threat of piracy, Amazon, not pirates, has become the biggest threat to their business by offering authors an alternative way to reach the market without recourse to their former gatekeepers.

Hollywood too, has a history of fighting technologies, such as the VCR, which developed into a larger market than the one the industry was originally trying to protect.

In short, SOPA and PIPA not only harm the internet, they support existing content companies in their attempt to hold back innovative business models that will actually grow the market and deliver new
value to consumers.

See comments and join the conversation about this topic at Google+.

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This work is licensed under a Creative Commons Attribution 3.0 Unported License.

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  • http://www.cathey.co Robert Cathey

    Sanity may be gaining traction, Tim. Keep up the effort.

  • TSL

    I completely agree with you, If your bring down the price of the products people want there would not be any need for pirate copies as people would buy them. Sopa is a joke after I had read about sopa you can clearly see that It could possibly hurt and un fairly penalise legitimate business, i don’t agree with the hacking group anonnoymous but in some ways i see there point about sopa.

  • http://www.ddmcd.com Dennis D. McDonald

    It’s really very simple — SOPA and PIPA would be bad for business.

  • Pat

    Senator Orrin Hatch co-Authored PIPA and co-sponsored SOPA. He’s made tens of thousands of dollars for trying to push them through:
    http://blog.experts-exchange.com/ee-tech-news/sopa-update-blackouts-pacs-and-a-little-bit-of-irony/

    He even said he’d support destroying people’s computers without due process if he found them dishonoring copyright law.

    http://www.dethronehatch.com/orrin-hatch-is-no-friend-of-the-internet/

  • http://nerd.cx William

    Please update your commenting software to prune duplicate comments. The echo chamber above is a result of poor UI – you don’t have to fix it to improve the reader experience, however. Just impose some echo cancellation and your poor UI can be happily ignored for years.

  • http://www.dregstudios.com Brandt Hardin

    Two frightening pieces of controversial legislation, SOPA and The NDAA only go to further stifle our Constitutional Rights without the approval of the Americans, just as the Patriot Act was adopted WITHOUT public approval or vote just weeks after the events of 9/11. A mere 3 criminal charges of terrorism a year are attributed to this act, which is mainly used for no-knock raids leading to drug-related arrests without proper cause for search and seizure. The laws are simply a means to spy on our own citizens and to detain and censor public opinion without trial or a right to council. You can read much more about living in this Orwellian society of fear and see my visual response to these measures on my artist’s blog at http://dregstudiosart.blogspot.com/2011/09/living-in-society-of-fear-ten-years.html

  • bob

    A market solution? Gosh it’s easy for me to compete and beat my competitors when I don’t pay the people who do the work.

    The reason we need government is to make sure everyone is playing by the same set of rules.

    The only reason that IsoHunt, Pirate Bay or any of the others exist at all is that they don’t play by the same rules. They don’t pay editors, they don’t pay writers, they don’t pay cinematographers, etc. They don’t pay for health insurance. They don’t pay for anything.

    What a naive and foolish solution. I hope Google “shares” all of your books and sends you a $60 check. That’s the market solution they’re working on already.

  • Rich Rosen

    It’s all about an imaginary right today’s large corporations believe they have: THE RIGHT TO MAKE MONEY.

    Conservatives and libertarians are quick to remind the rest of us that there is no “right to happiness” designated by our Founding Fathers – there is a right to PURSUE happiness, not to have it guaranteed. Yet “the right to make money” is something these companies WANT guaranteed to them.

    So your business model failed you and new technology makes it so you are now earning less money than you hoped to earn? Clearly the solution is… not to innovate, to grow, to change with the times, to do what the creative upper management of a corporation ought to be doing… no, the solution (according to these people) is to make it illegal for people to find other ways of getting their resources other than paying YOU for them, because they’re seeking alternatives to you is “taking money out of your pockets!” So that you aren’t penalized in the marketplace for your stagnant shortsighted attitude.

  • http://wwww.stus.com/techwars Stu Rees

    We have five new SOPA cartoons at http://www.stus.com/techwars that anyone can use to raise awareness.

  • JD

    I agree with your letter Tim, as well as with the remark of TSL. As an example: I am not located in the continental USA, I pay inflated prices for example an iPad. Yet I am not allowed to download music, games for the device as iStore do not want to service my region for those functions. So all what is left if you really want to use your device fully is to jailbreak it. I would like to make use of the official channel to utilize these devices, yet the rule sets devised by the companies as well as the way they DRM manage the content, do not allow me to do so. And to bob – (the US) government is not playing by the same rules it should be advocating for everyone, that is why we have this outcry.