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SOPA and PIPA are bad industrial policy

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.
For instance, an Internet service provider could block DNS requests for a website offering online video that competed with its cable television offerings, based upon “credible evidence” that the site ...
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SOPA may be dead in the House. PIPA still going in the Senate, however.
That's really the fundamental irony here: The big content industries arguing against their own self interest. But, hey, it's their absolute right to defend business models and structures that will ensure their demise, as long as they commit no collateral damage. And SOPA and PIPA are all about the collateral damage.
+Marty Fischlin the wash monthly piece looks like a case of "famn you autocorrect!". It talk about the battle against online privacy when they meant piracy
I have to wonder about the upsides to the industry of piracy, that never seem to be mentioned. It acts as a free promotional tool for their products and exposes the long tail of their content to a wider audience. What is the ROI to the industry from greater network effects from recommendations from a wider audience base? How many people go out and rent or buy something that was recommended by a friend who initially pirated the product? Perhaps the piracy model is exposing the quality offerings in the market as people, having been often burnt by mediocre films at the cinema, try before they buy. I know a number of people who have pirated films and then go to see the ones they like best on the big screen for instance.

There is also the point that people who use a product a lot are likely to get into the habit and use it more. Many of the occasions they do may well be social occasions at the cinema or a trip to watch their favourite band play a live gig. These industries are doing all that they can to undermine one of their most effective promotional tools and a medium of frictionless, global, cost effective distribution that they should actually be employing fully.

Provide a frictionless purchase process, stop treating paying customers like criminals (yes, that does mean remove the annoying forced anti pirating messages at the beginning of films I have paid for), price the product to suit the market demand rather than a cosy little cartel agreement, stop delineating product releases by artificial national boundaries and likely the industry can prosper.
Copyright isn't property. It's a bargain. We agree to not copy creative works for a limited period of time. They've broken their end of the bargain by removing the limits.

SOPA/PIPA is bad economic policy as well. We shouldn't let corporations put a finger on the scale. Competition for everyone is good for customers.
Also, competition in a free market only really works with quality goods, that's their real fear. They know that they would loose.
At least this SOPA bill can be put behind us for now. When and if it returns I hope things will be better off in it's creation.
I am FOR SOPA. It will make things SO much easier when I find a website, or even a comment post, that mildly annoys me, and I want it "nuked" off the web. With SOPA I would just have to post a link to an illegal torrent or instruction on DVD ripping and ol' Uncle Sam will do the heavy lifting. In short, GOODBYE STUPID CAT VIDEOS, GOODBYE JESUS FREAKS, and GOODBYE PICTURES OF UGLY FOOD ON FACEBOOK and TO ANYTHING ELSE on the internet.
There is already that to some extent now Dave.
This is all pretty much horse manure. If napster was still running, Itunes, Spotify and the like would never be able to compete with it. It's only because of government intervention that those markets had a place to flourish. Same with movies. If piracy is as easy as it is now, many, many people will not pay for what they can get for free, no matter how well content-providers step up their delivery game. It's pretty simple.

Content providers shouldn't be responsible for policing piracy themselves via innovations. Yes, such innovations can reduce piracy, but such innovations + vigilant, good laws and enforcement can and do reduce it even more. Even if it wouldn't be that effective (though there's no reason to think that it won't be), that still isn't an argument against it.

All of these "complaints" about SOPA are not actual arguments at all.
+Nathan Duffy
"If piracy is as easy as it is now, many, many people will not pay for what they can get for free, no matter how well content-providers step up their delivery game. It's pretty simple."

However even more people will. That´s been proven over and over again. It´s a game of statistics. That´s why Tim says "though it may not be perfect still secures to authors more money than any other system that can be devised."

Also your argument with napster is moot imvho. I´d argue that an average user would still rather pay 9.99 USD and get a music album of guaranteed quality while supporting the artist (well, at least some of that money goes to them), than be forced to download several copies to get something close to same quality while also having to think about other security issues that crop up on file sharing sites.
+Mark Miklič "However even more people will. That´s been proven over and over again. " - Yep. And? Therefore? Therefore we don't need legislation? No, this is a non-sequitur. Just as content-providers improving the quality of their product decreases piracy, so does legislation. Similar legislative measures in some other country (I forget which, but it was referenced by Richard Cotton on the +MSNBC TV clip on SOPA) reduced traffic to PirateBay by 80%. Increased quality of delivery will never cut into a central hub of piracy in such a way. Even if Netflix et. al. had a much more massive selection, was cheaper, faster, easier etc. it still wouldn't have such an effect. Of course this doesn't solve the problem, because piracy can just mutate and adapt, but that's no argument for not fighting it directly at all.

As for Napster, I'm not saying the online-music market would be non-existent, but the free-music market would be much more massive and the size of Itunes sales would be exponentially smaller than they currently are. This is simple economic reality.
+Marty Fischlin +Luis Carvalho +Michael Tiemann Hey, y'all: for those wondering, SOPA's prospects in the House are damaged but the legislation is not "dead." I am 99% sure that the Examiner and Guardian sourced Rep. Darrell Issa's statement from late Friday night when they write about Rep. Cantor making a "statement" when they've run headlines about SOPA being "shelved" or "dead."

Here it is: "Majority Leader Cantor has assured me that we will continue to work to address outstanding concerns and work to build consensus prior to any anti-piracy legislation coming before the House for a vote"-Rep. Issa.

In the absence of clearer guidance from the House Majority Leader's office on what's acceptable in the bill, it remains possible that a deal could still be made which legislative leaders then feel represents "consensus" -- Rep. Smith has said he'll pull the DNS provisions, for instance -- and then SOPA could be brought to a vote. In the meantime, the PROTECT IP Act is set for a vote on 1/24. cc +Boing Boing.
One can always think Napster was bad in an evolutionary step of distribution, while it inspired the invention of iTunes and others that are now successful, but without that step where would we be now? You can theorize, but it doesn't change how history has played out so it's not important now.

Those who want to stop SOPA want innovation to continue spurring new ideas, both good and bad, to work toward something better. Laws should be made at the right time and correctly in order for the RIAA and MPAA to profit most, not shoot themselves in the foot as they do so well.
SOPA would also affect virtually every company and industry, not just "Free Speech". Have you ever considered how many entities use the internet for its basic functions? When you write a check to a company, they do an instant transfer - across the internet. Any time you use your credit/debit cards, they work instantly - across the internet. When the people you work for have problems with their heat and air conditioning, ever increasingly this is handled - across the internet. What about power plants? Chemical plants? Refineries? The media? Are any of them independent of the internet? I doubt it. I would suggest that none of them have their own dedicated cross-country or international networks, and at least part of the time utilize the internet for operations/control. They could easily have the switches turned off of them as well - at the will of whoever gives the orders. Which providers/ISPs do they use? Would/could they be shut down because someone in their traceroute chain has been shut down? Think about it. And if you support SOPA, ask yourselves if you'd like "the other guys" to have that switch in their hands. Personally, I don't want anybody to have it.

Food for thought.
Thank you for sharing these very important lines. Here in latin america PIPA and SOPA are still not well understood although our governments and the politicians (left, in our case) are trying to silence freedom of speech.
+Davidlee Willson I will agree that I don't know the details of the complex structure of movie industry contracts. But I will also point out that you know nothing of the complicated structure of publishing contracts, many of which, like movie contracts, didn't take into account the digital future. I spent years in the 1990s trying to persuade the publishing industry to think about the future then. They waited too long, and new players without the baggage of the past are leaving them behind.

If the movie industry suffers from contracts that make it difficult to embrace the future, they will lose.

This is the general story of many businesses: they have labor contracts, business practices, cost structures, that once worked but no longer do. What happens? They fail and are replaced. Why should Hollywood be different?
+Nathan Duffy Based on your 12;46 posting, I cannot but conclude that you are a feeble-minded idiot -- and that's insulting to idiots everywhere because they're smarter than you.

I would have used logic rather than ridicule but you don't seem to have used any logic to come to your opinions, so I doubt that logic would change your mind.
Fair enough. Let me try again: +Nathan Duffy, I was unable to detect any use of logic or evidence in your comment, so I will not be using any logic or evidence to refute you. So there, pththththththththth!

Is that better?
The government needs to stay out of private industry and pay attention to the real problems of the world. Corporations have the ability to protect themselves from these problems if they really want to but millions of dollars in profit is never enough for them they have to squeeze every drop out....
+Nathan Duffy The "free music market?" When I was a lad, we called it stealing.

I'm not sure legislation put the original napster out of business so much as innovation: someone at a technology company finding a way to sell/enjoy content that allowed people to enjoy and expand their collections of music, content providers to make money, and tech companies to design new products. Yes, they were sued into oblivion but were replaced by a business model that seems to work for everyone.

In the music business, they cut their own throats by releasing a format that was easily and perfectly duplicated at inflated prices without adding any reason to buy into it, i.e. value. They essentially switched to digital music without realizing it, as the physical artifacts — covers, lyric sheets, liner notes — all went away.

What some call piracy could actually be called a market failure, as content may not be available legally where someone wants it. What should they do? What would the creators (not the studio or copyright holder) want them to do?

And you may recall when Apple's iTunes store used DRM to limit the enjoyment of music, not out of any desire to punish its customers but at the insistence of the record companies. That went away of course but it was always frustrating to me that Apple was labelled the villain when the real target was the recording industry. The same people who misread that seemed to be arguing that until all media content could be freely available, we shouldn't have any (legal) access to digital media. No gradualism for them…
+Russell Nelson - I know you have no argument against my argument, as there is no possible rebuttal to make. But thanks for admitting as much.

+paul beard "The "free music market?" When I was a lad, we called it stealing. " - Indeed, I was just being ironic.
+Nathan Duffy

I don't remember writing that legislation is not needed and neither did Tim afair. I personally believe that good legislation is one of the main cornerstones of any society. I do however agree with Tim that in absence of good legislation that will foster business model development and progress the current state of affairs is a better option than the introduction of legislation that would focus on trying to maintain the industry status quo while actively strangling the Internet, both socially and technically.
+Mark Miklič "I do however agree with Tim that in absence of good legislation that will foster business model development and progress the current state of affairs" - Only this is not the job of legislation.

" the current state of affairs is a better option than the introduction of legislation that would focus on trying to maintain the industry status quo while actively strangling the Internet, both socially and technically." - Cool, only this is not what SOPA would do.
SOPA or PIPA pass it will fundamentally change the 'net.
+Nathan Duffy

a) It is a much deeper debate we would need to get into to define what "jobs" legislation is meant to do and I I believe neither you nor me are qualified for that. In this particular case however, not stepping on the foundations of a new mainstream communication and distribution medium would be a good start.

b) SOPA/PIPA would:
- directly endanger the operation of sites such as Wikipedia (in the US) by holding them directly accountable for content placed on them by their users
- break and violate the cornerstone of the Internet technology, the DNS (Domain Name System). I can tell you more about this if you want or point you to a really well written piece by Paul Vixie (who wrote BIND).
Here in the Netherlands it is actually legal to download movies and music for free, it is only illegal to share it. Consumers pay a premium here on recordables of which the return is distributed amongst content providers. It's not a perfect system, but quite a liberal one. Therefore, the term "illegal downloading" certainly isn't a universal term since over here there is no such thing.
+Davidlee Willson the comparison of contractual complexity between books and film is interesting. Would you say music is more like books or film in that respect (for sake of argument, let's use the example of a band rather than a singer/songwriter as being more common)?
Agree! SOPA is bad for the industry, for innovation and entrepreneurs! We need to stop this and similar attempts to undermine a free internet! Thanks for sharing!
There's even more fun on the horizon: once we're done with SOPA and PIPA, there's the Research Works Act, which is a similar power grab by academic publishers to prevent the public from being able to read about the research they funded:

It's raining shitty legislation over here.
Lets all thank Wikipedia by donating $5 to them on January 19th - the day after the blackout.
Not only does the Wikimedia provide us with an amazing service, but if Wikipedia gets rewarded, it will encourage other internet organizations to fight for our rights and protect free speech and prevent congress from ruining the internet. It could be as important as boycotting companies that did exactly the opposite; like GoDaddy.

I'm donating $5 at least, but I'd like to encourage others to do so as well.
Consider sharing or +1ing my G+ post to encourage others to do so as well?

Or write your own.. if you like and share it with your feed....
I just want to get the idea planted.
Amen, Mr. O'Reilly. The truth is, services like Hulu are so hampered by old business model restrictions, it's very hard to watch legal content. But we do it anyways in many cases. I'd happily pay triple what I pay for Hulu Plus right now, if I had access to CBS shows, and all shows I watch on the night they air.
I will protest tomorrow! Only anti SOPA and anti PIPA posts on FB, Twitter and G+ #StopSOPA #StopPIPA. I send tweets and posts around and ask people to follow me. I will try to put anti SOPA protest on my webpages!
+Hakan ÜÇOK, in case you haven't noticed, the US has a habit of making its own problems the rest of the world's problem (in this case, largely through WIPO).
Funny - I just bought a copy of O'Reilly's BIg Data Glossary, even though I had a free (and licensed) eBook available to me through my University's library. Demonstrates just what Tim is saying about market failure driving this bad public policy.
SOPA and PIPA are bad industrial policy!!!!!!!!
I'm underwhelmed by Wikipedia today. Google is a little better, but not much. I was hoping for a lot more. People will barely notice. :-(

stopping napster did nothing to stop downloading of music. that is false. it's readily available. still, once the market realized that it needed to find solutions, i-tunes came along and offered a better solution and a better value to the consumer. everyone wins.

it's amazing to me to see people like rupert murdoch sitting on his fortune complaining that he isn't getting enough fortune. he represents excess and demands that he make the same amount when the costs of production with the digital age have diminished.

meanwhile, he controls one of the largest media empires, a pillar in society which is supposed to be opposed to censorship, and has no problem using it as a weapon to further it's implementation while manipulating the truth to serve his own selfish interests.

lest we's mr. murdoch who values his fortune over individual rights, such as the right to privacy. if there are any law breakers here, i would say that he is the worse of the bunch.

this is not the america that we believe in folks. i am so proud of all of you who are making a stand not just on this, but on inequity and heavy handed corporate greed everywhere which benefits so very few. good on us. good on you. stand tall.
One look at Rupert Murdoch's Twitter, and you know you're on the right side of this fight, lol.
he's way out of his league on twitter. if he's actually reading his responses, he knows that by know.
My comment at 08:05 about Wikipedia this morning was in error. My script blockers didn't allow the complete page to show. My apologies. It looks good!
I for one hope that PIPA gets passed or SOPA comes back into play. It may make the American people open their eyes to the problems with the American govt.
+Dylan O'Byrne Oh, we know what the problems are with our government. SOPA and PIPA are two of them.
+Dale Stanton Yes they are, and I for one think that if they are passed maybe more American people would see whats going on, since most people can't live without their daily dose of the internet, and maybe just maybe they'll care instead of going about their lives like everything is peachy in the US govt. not to bring other ridicules acts that have been passed into this .
+Mark Holmes - This would be relevant if your concern were really the money you were making off of direct sales. But this is not really the concern.

These companies have made their living by owning the distribution channel. They engage in coordinated marketing efforts designed to maximize the profit this control gives them.

What they are really upset about is the existence of competing distribution channels which they do not control. If you can't flood your whole distribution channel with your marketing message, how can you be sure that your investment in a particular artist is going to pay off? If you have to depend on fickle consumer taste rather than being able to use your control of distribution to exercise some control over that taste then you can't push things, you have to be ready for them to be pulled. You have to make quality things and hope that people will see the quality that you perceive and be willing to pay for them.

This is why big players tend to be far more concerned with piracy than small players. Small players tend to be concerned with other people plagiarizing or otherwise profiting off their work. The existence of competitive distribution channels on the other hand is a net win because it exposes more people to your stuff.

Justin Bieber's popularity is no accident. It is an orchestrated marketing campaign and relies extensively on control over distribution channels to pull off effectively.

These large media interests are desperately afraid of losing the control they have. They don't actually care about piracy at all.
+Dylan O'Byrne No thanks. Bills are never un-passed - extremely rare, if at all. If they're passed, we're stuck with them. Letting a pit viper into your house isn't a very good idea. Bringing awareness is better served by.....all those against, shutting down their servers for a period.
+Dale Stanton yes good point there, but you can't say that most of the new generation could care less about what goes on with our country.
It takes only a few minutes to contact the staff of your elected representatives by phone. I spoke to mine today about SOPA and PIPA. You can find out the phone numbers of your representatives on many sites, for example here: . Make sure you know their position on SOPA and PIPA, and thank them (important!) if they oppose the bills.
I read an article in the FT today backing SOPA and arguing against Tim O'Reilly's view in particular. It's all very well the MPAA saying 'oooo but people are stealing our stuff' but why aren't they providing a service modern consumers want?

One of the well worn arguments is that the people downloading are probably not the ones who would buy anyway so minimal sales are lost. This is actually not an entirely accurate portrayal. I, for example, am mainly watching Chuck at the moment. It's a show which can't be purchased in the UK on Blu-Ray and season 5 is not being aired at all on British TV. What choice do I have? The same situation exists with many of the best American shows and there's no other way around it.

Companies like LoveFilm and Netflix are on the right track but the TV networks are way behind. They need to realise that separating the world up in to regions is not longer viable in terms of distribution. THey can still set prices independently but there needs to be a one-stop shop where one can pay by either subscription for unlimited viewing or on a full purchase per season or episode basis. I imagine the uptake would be tremendous. What's good for the consumer should ultimately be good for their revenue. Imagine being able to have one service where you could find your favourite BBC, C4, ABC, NBC, HBO etc. content. That's the future. Why's it not here yet?
"...most of the new generation could care less about what goes on with our country." I don't think they could care less much of the time. All they care about is what they want, without any regard for what it takes to get it or what the ramifications are. They certainly don't know much of anything about our history.
+Dale Stanton - I'm old enough to have heard this lament spoken at least 3 times about three different demographic bulges. Strangely, nobody seems to remember the history of when it was said about them.
+Dale Stanton yes that plus as you said lacking knowledge in our nation's history, I'm know far less than most of the people on this, considering I'm a minor with lack of experience and knowledge, but I see first hand how dumb, and ignorant my peers are. They seem to think we live in a perfect little world and that nothing is wrong. The only reason that they care in the slightest about these two acts is because it could eliminate their precious tumbr's, facebook's, ect. not that it infringes on our rights.
I very much agree with Tim that piracy is a market failure, and the solution is a change in the markets. I go further to suggest a radically new model for content sales on the Internet, which I call FairPay, which works as an alternative to conventional pricing in the context of an ongoing relationship. It relies on a structured balance of powers in which the consumer sets an individualized price they think fair, and the business continues to permit FairPay transactions as long as they agree that consumer is "fair" about the price. That can improve profits and efficiency, and empower relationships based on fair value exchange. Think of a privilege that is earned and maintained -- a zone of pricing freedom, a "FairPay Zone."

How this can solve the problems of piracy is suggested in the following portions of my 1/17 blog post on "PIPA and SOPA -- FairPay and the Death of Piracy" (at

Fairness and Piracy:

Robert Levine's [book] "Free Ride" provides a nice summary of many of the issues of piracy, and makes it clear that some level of piracy is inevitable, with a level that depends on a number of factors, including:
1. The ease and effectiveness of piracy relative to any issues of quality and risk.
2. The ease and effectiveness of legitimate sources.
3. The cost of legitimate access (relative to piracy)
4. Social and ethical factors relating to the legitimacy of the IP owner, and the fairness of stealing from them (stealing service, not bits).

It is well known that the Internet has shifted at least #1 and #4 toward piracy.

I suggest the real solution is not laws and other efforts to shift #1 (although some modest improvement may be gained), but to shift #2-4, and especially #4. The value of shifting #2 and #3 are well known, and summarized by Levine. What is less clear is how important #4, fairness, is.

Robin Hood, FairPay, and the death of piracy

As described elsewhere on this blog, FairPay is a new model for transactions related to copyrighted content that lets buyers pay what they think fair, within limits.
--When buyers can buy legitimately for a price they accept as fair, the cost becomes a non-issue. Those who have limited means or get little value can still buy for a price that considers those factors fairly.
--When buyers can buy legitimately for a price they accept as fair, the fairness of piracy becomes clearly insupportable for all but the most sociopathic. It is hard to argue that "information wants to be free" (as in free beer), when it is free enough.

Piracy is a tax imposed by the people on sellers of IP, a Robin Hood tax. When the price of content seems onerous, people feel they should not have to pay for it, and piracy appears justified. It is seen as noble for the poor to steal from the oppressive rich.

Killing the demand for piracy, not the supply

As with any illegitimate product, it is generally easier and more effective to reduce demand, not to choke off supply. That is best done not by legislation, but by making the legitimate alternative more attractive.

There are a number of interrelated levers to move in that direction:
--FairPay pricing is a significant step in the right direction, one that also supports the following steps. It makes prices more suited to individual buyers needs, values, and ability to pay. Copyright owners are given the right to extract "monopoly rents," but must balance that with the quid pro quo of society's desire to benefit from their creations.
--Making sellers more legitimate in the eyes of consumers is also a major factor. To the extent the IP owners are seen as evil and rigid, faceless corporations that exploit their consumers (and their creators), it is easy to justify stealing from them. Showing that they listen to consumers and can be flexible in pricing will greatly increase perceived legitimacy and deservedness.
--Getting sellers to be more clearly respectful of creators can also have a big effect. Many studios (such as music labels) are perceived as sharing little of their profit with their artists. While they do have real costs of nurturing, marketing, and managing, clearly the Internet is shifting that toward what Seth Godin calls "skinnier" models. IP aggregators must either get skinny, or demonstrate why they deserve the share they get, and be transparent about how much they share with the creators.

FairPay is not essential to all of these levers, but it can contribute significantly to all of them.

When buyers set prices, no man will be a pirate. That may not be true in every case, but it is true enough.
I wish to block Tim O'Reilly but did not find how to do it. can some one help me?
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