SOPA Fallout: Is Lobbying a Core Competency for Web Companies?

A group of large media conglomerates banded together to lobby against a bill pushed by another large group of media conglomerates. In a victory for democracy, one of these enormous self-interested groups got exactly what it wanted from Congress.

That’s not great news.

At best, it’s the status quo: whenever two large interest groups collide, someone has to win. The problem here is twofold: first, Internet companies won a decisive victory over SOPA and PIPA, at least in the short term. But more worryingly, they won a PR victory—outside observers are treating this like a grassroots backlash against corporate overreach, rather than a corporate backlash against other companies’ overreach. This presents the disturbing possibility that online companies are better at lobbying that the MPAA and RIAA.

In one sense, the web companies were entirely right. As conceived, SOPA and PIPA were very poorly thought-out solutions to the problem of IP and piracy. DNS censorship of sites accused of piracy is an extremely blunt instrument. But that provision was dropped nearly a week before the protests reached a fever pitch.

The general narrative behind a bill looks like this: a profitable segment of the media industry is threatened by new distribution models which make it hard for them to price things the way they’re used to. Rather than adapt, they try to legislate their old business model into a permanent existence.

But that’s also what SOPA opponents are doing. Google, in particular benefits from the piracy status quo: it’s hard for copyright owners to defend their IP on Youtube, and it’s trivial for searchers to find illegal copies of songs and books. (Movies are harder.) In a world where the marginal cost of copying is basically zero, and a world where providing a good outcome to any search is a necessary competitive advantage for Google (and other online media companies), it’s a legal regime that screws up incentives. Online companies bear a small percentage of the economic cost of piracy, but IP owners don’t have a good way to assert their own interests.

If technological shifts happen too fast for laws to change, we won’t get an optimal outcome simply because technology has improved—we’ll just end up with smaller economic incentives for high-quality content production. Which doesn’t make technology the problem; it just means that the optimal outcome means adapting laws around changes in technology. In the early days of the automobile, buggy whip manufacturers could have hypothetically legislated cars out of existence—a possibility which shouldn’t make e.g. speed limit legislation suspect.

Usually, we determine the contours of new property rights (or new norms in general) through the interactions of interested parties on both the status quo and revolutionary side. The kink here is that the revolutionaries happen to be very good at manipulating public opinion—Google and Facebook have built valuable empires on their ability to convince people to buy stuff, so they happen to be very good at convincing these people to do things like calling their legislators or donating to favored candidates.

In a situation like that, there’s no good reason for them to hope for compromise. Internet companies have a much bigger incentive to run roughshod over property rights in general; when legacy media is weakly protected or unprotected by property rights, it’s a great raw material for building new online businesses. (Just look at the volume of copyrighted content that’s still available on e.g. Youtube and Tumblr. The sites provide a valuable service, but it’s a whole lot more valuable thanks to the work of other people.) And if they can profit from preserving legacy legal structures, why stop there?

The SOPA and PIPA debate had the right outcome in the short term: some poorly constructed bills were scrapped. But the result of this is going to attract all of the wrong kinds of people to web companies, and that won’t be good for consumers or taxpayers.

Other comments:

• BetaBeat nearly nails it when they argue that we should ignore SOPA opponents with money on the line. That’s not fair at all, though: plenty of people arrange their lives so they can profit from doing what they consider morally just. Better to note those biases when investigating what slant they use. (Incidentally, can SOPA opponents articulate the case being made for SOPA? I’m not so sure.)
• Joel Spolsky and Marco Arment both understand the political angle; Spolsky wants the software industry to (more explicitly) lobby for their interests; Arment asks to centralize the whole process of fundraising, which will not exactly make it easier for the political system to adopt to necessary but radical changes.
• YCombinator is seeking startups that will help kill Hollywood, which is the most constructive response. Since these startups will likely push for a legal regime that does recognize the reality of fielsharing and cheap copying, while still finding ways to enforce intellectual property where it makes economic sense.
• Cody Littlewood advances the “we the people” narrative. Which is an interesting theory: SOPA’s a bad idea, but it’s probably not the most evil thing happening right now. Just the most evil thing threatening Google’s margins.
• Votizen’s CEO touts the party line. Since Votizen’s model is to mobilize activists in exactly this kind of way, he has reason to be happy. (Like plenty of activists, he’s more dangerous for not being craven—finding a more efficient way to run the usual political infighting probably feels like progress.)
• An anonymous movie executive wants to stop funding Obama because he picked the wrong side on SOPA.