Wednesday, January 4, 2012

SOPA, Incumbents and Fearing Change

In my last post, I wrote about a cycle of disruption put to pen by Michael Lewis.  I'd like to expand a bit on his model by applying it to recent, real world developments.

The Stop Online Piracy Act (SOPA) is a bill, which on it's face, endeavors to simply protect copyrighted material from online piracy.  The details of its implementation, however, are much more insidious. Critics from across the political spectrum, most notably Nancy Pelosi and Ron Paul, have noted the bill would cause "an explosion of innovation-killing lawsuits and litigation."

Behind the bill is the incumbent entertainment powerhouse, The Motion Picture Association of America.   As we recall from Lewis' model:
 6.  Incumbents are in denial until their profits are really threatened and/or market share begins to erode meaningfully.
7.  Chaos ensues; fringe players are threatened with lawsuits, government regulation, public shaming, etc.
This is exactly what we've seen happen over the past decades.  Truth be told, innovation in the industry has been occurring ever since the inception of the motion picture.  However, it has truly accelerated with the emergence of digital and do-it-yourself media.  Steve Blank does an outstanding job of outlining this progression, and the Industry's attempts to thwart innovation at every turn -- usually turning to legislative action. 

Fear from disruption in entertainment isn't limited to movies.  The Napster battles of the late 1990's led to a revolution in how music was transmitted and sold.  The graph to the left illustrates the evolution, and subsequent decline, of established music firms. (h/t ars technica)

The Economist did a sweeping survey of the decline of traditional media and the rise of digital alternatives this past year.  DVD and rental sales have plummeted (see chart on right).  The disruptions wrought by savvy Millennials at the expense of less adaptable brick and mortar institutions have finally caused the panic foretold by many technologists. 

It seems that to protect their waning profits, Hollywood moguls are leveraging their considerable K Street clout to ensure continuation of the status quo.

The battle lines are quite stark:  On the one side are established firms like Viacom, Time Warner, the Recording Industry Association of America and Disney who claim piracy is preventing them from reaping the rewards of their creations (despite a record-profit year in 2010).  Former Senator Chris Dodd, and the current MPAA chairman, went so far as to imply China's actions are the model for this legislation.

On the other are the most innovative and explosive firms of our generation:  Google, Facebook, Twitter, and eBay.  They have also been joined by non-profits such as Human Rights watch who worry that government meddling would be so broad, it would inhibit the type of communication that birthed the Arab Spring.  To be sure, the companies involved in the fight against SOPA have an incredible financial stake in its defeat.  But in this case, their call for less restriction rings sweet.

Intellectual property rights are important to uphold.  When done in a manner that only benefits incumbent firms, however, it leaves much to be desired.  Especially, as Blank points out, when that same government has been spearheading the worldwide Internet Freedom Initiative.

It should be expected that monolithic, ancient regimes fight the usurpation of their authority.  Yet, America's always been the one place where the underdog, armed with a good idea and the support of grassroots supporters, can beat Goliath.  We shouldn't let that end.   

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