The PRO-IP Act and Movies and Music

This week's Law of the Game on Joystiq (link) covers the new PRO-IP Act as it applies to video games. As a sidenote to that column, I wanted to discuss my thoughts on the PRO-IP Act as it applies to movies and music, where I also think the Act is as much a detriment to producers as it is to consumers. I would again like to reiterate that the Act has not been signed into law as yet, but has been passed by both the House and Senate at this time. The final text of the Act is here.

In short, the PRO-IP Act does the following three things:

1. It increases the penalties for infringement by expanding what is considered a ‘work;’
2. It broadens the ability of the government to permanently seize goods; and
3. It creates an Intellectual Property Enforcement Coordinator, a new cabinet position whose sole job is to increase intellectual property enforcement.

This bill was passed based on the theory that intellectual property is under a drastic attack in the US by, seemingly, everyone. There is an element of truth to this, as CD sales have certainly been down, and it's clear the music industry is trying to find a new model, though I'm not sure it's truly broken, or at least waiting for digital sales to catch up. On the other end, the movie industry is certainly losing something to campus piracy, but there is still growth, even if it's short of the gaming industry as of late. In fact, the gaming industry, which is experiencing the most growth, also takes a much different stance on piracy, rarely going after the customers rather than professional pirates. It should also be noted that the biggest dent in piracy could likely be made if enforcement on piracy of physical copies were greater in certain countries outside the United States that I won't name, as tourists have been bringing back stacks of VHS tapes, audio cassettes, VCDs, DVDs, and CDs bought for next to nothing from street vendors for decades. You can even find these pretty easily in many major cities in the US.

Movies

The MPAA is newer to the anti-online piracy front than the RIAA, but online piracy is a convenient scapegoat for box office sales not living up to all expectations. Campus piracy was one of the convenient ones that was eventually brought back to reality from the absurd estimates of 40% of revenue loss (linked above). While there is still sales growth, I expect many executives are concerned about the sudden rise of game sales. I have often wondered if that is, in part, driven by the economics of entrainment hours per dollar spent, as so many games offer a much greater amount of entertainment per dollar spent than a movie ticket.

The movie really has three potential downsides to the PRO-IP Act. The first and most obvious being the negative publicity that the RIAA has enjoyed, which could lead to a further alienation of Hollywood and the general public. The second is what I discuss for game developers in the Joystiq piece, specifically the issues that arise under the new definition of a 'work' and how the overlap may play out and 'force their hand' on suits they don't wish to file. Finally, there's an issue that all media shares with respect to enforcement: many of the people who are sued don't have anywhere near the resources to pay these fines. The end result is you've successfully entered a judgment someone can't pay, had property seized that is at most tangential to the actual piracy, and received a large amount of negative press in the process. Not to mention, you've likely lost a customer, as I can imagine people who are sued by the MPAA aren't likely to head down to the movie theater on a regular basis anymore.

Music

From what I understand from many reports, the music industry, more specifically the RIAA, was one of the key backers of this legislation, but in my opinion, it seems they are the least likely to see any benefit from it. In fact, the enforcement strategy utilized by the RIAA to date has probably done more to alienate their own customers than it has to reduce piracy.

What sets the music industry apart from movies and games is there's no way to experience a song at little to no cost without risk. I think most people would love the opportunity to listen to a song or album one time before deciding whether to purchase it or not. There's no way to rent an album, and those 20 second samples on iTunes or Amazon don't do the full piece justice. Some might say that's changing, as more subscription services become available, but there isn't yet one that offers a complete catalog across all labels. Then there's the simple fact that there are other, potentially larger sources of income for musicians than record sales. The video game industry has no equivalent to a concert; disk sales are more or less all there is to it other than cross-licensing. Movies have more in common, between the box office, DVD, showings on TV, etc., but music is even far more ubiquitous than movies are, as they're in the background of pretty much every other medium, as well as most all venues and events.

And that's why the RIAA's strategy of going after the average Joe who downloads an album once in a while to try to find something new to listen to doesn't make sense. That average Joe probably has spent quite a bit on music over the course of his life, be it buying CDs or merchandise or concert tickets. And I'm sure there are many artists who would rather have people download their album in order to determine if they want to be a fan of the work rather than have no exposure as a result of their label or the RIAA suing their customer.

Ultimately, the way this hurts the music industry isn't in practical enforcement. They backed this bill because it helps their enforcement. It's an issue of image, and as the bad publicity keeps falling on the RIAA, more and more consumers are taking their entertainment dollars elsewhere. It's insulting to the consumer that the RIAA would even suggest that ripping a CD you purchased so you can put it on your iPod is illegal, even though they haven't tried to enforce that idea at this time. Ultimately, this only hurts the artists, which only serves to hurt the development of music in the US, especially for artists who can't or don't get radio time or for listeners who don't listen to what's played on the radio.

Solution?

I've long held the theory that attacking the supply is far more effective than attacking the demand in piracy situations, especially given that the demand are also often the customers you rely on to keep your business going. I'm not saying ignore every consumer. If a consumer is also sharing thousands of files that have been downloaded millions of times, then they're a distributor as much as anything else. But it seems obvious that the thresholds for enforcement need to be well above downloading one work once. The court has imposed reasonableness standards on many other areas of the law, and perhaps a reasonableness standard needs to be used here.

The goal of intellectual property rights was the balance the interests of producers and consumers so that the arts would grow and artists could prosper, and in many ways many people have lost sight of that goal. As we move further into the future, we all need to be prepared to change with the times, and acts like the PRO-IP Act attempt to bind us to business models and methodologies that don't make sense in the digital reality. By the same token, those decrying all intellectual property rights need to understand that without them, much of the media you enjoy today simply would not exist because those who produce it would have no means by which to profit from it. In a perfect world, we would have no need for intellectual property rights because there would be no piracy but there would also be unlimited exposure to new media. In our imperfect world, we need to keep sight of the balance between what both consumers and producers need to coexist in the most reasonable way. It's unfortunate that the PRO-IP Act takes a step backward rather than a step forward in achieving that balance.