SOPA OPERA

Since he turned on SOPA, an anti-piracy bill supported by the movie studios and detested by the tech industry, President Obama has found himself between a rock and a hard place—that is the 344 miles separating two big donors, Hollywood and Silicon Valley

Vanessa Grigoriadis

When President Obama visits Los Angeles, he's whisked in his Secret Service detail from black-tie galas to intimate hilltop events in Bel Air, hands outstretched everywhere he goes. Of the $222 million raised last year for his reelection campaign, entertainment contributed more than any other industry, and this year, talk-show host Bill Maher donated $1 million to Obama's SuperPac in February; Steven Spielberg had given $100,000 to it last year.

At small gatherings, Obama speaks frankly to the Hollywood set. "This time we've got to grind it out a little bit," he has said. "But the cause is the same, my passion is the same, and my commitment is the same." But these days many in Hollywood are questioning his conviction and not just on the big, hot-button issues like tax cuts for the wealthy. The issue at hand is Obama's perceived lack of commitment in lighting digital piracy, which might seem terrific when one is in search of free episodes of Homeland, but statistics put out by the Motion Picture Association of America (and so to be read with a grain of salt) estimate that $58 billion in profits, 373,000 American jobs, and $3 billion in taxes are lost in the U.S. each year as a result.

To resolve this increasingly dismal situation for their industry, entertainment companies placed much hope last year in a congressional bill called the Stop Online Piracy Act, or SOPA. It was primarily designed to combat the rise of locker services, such as Megaupload, which advertise themselves as digital storage for professionals who want to share large hies, like PowerPoint presentations, but are in fact made up of TV shows and movies that infringe on copyrights. (Some say about 90 percent of these sites' content is illegal.) Cyberlocker and peer-to-peer sites, many of which are based overseas—the better to evade U.S. authorities—reportedly generate one-fourth of all Internet traffic, and they are very fast. One can download a two-hour movie in three minutes.

At first, it seemed as if Hollywood had a lot of support, including Obama's, in this endeavor. "Hollywood folks have backed the president so strongly," says Jodi Kantor, author of The Obamas, a recent book on the president and First Lady. "They didn't waiver or jump ship the way, say, the Wall Street crowd did. So top donors have a strong expectation that they will be heard by the administration." But ultimately the president chose to turn away, and as a result, at least in part, SOPA was shelved indefinitely in late January.

Media titans were outraged; News Corp. chairman Rupert Murdoch tweeted, "Big bipartisan majorities both houses sold out by POTUS for search engines. How about 2.2 m workers in entertainment industry?" The director Steven Soderbergh says now, "It was fascinating to find out that the administration is pro-theft. I didn't know that. If the Ford Motor Company went to the Justice Department and said, 'You know, between the assembly line and the showroom, 25 percent of our cars are disappearing,' someone would do something about it." Even those in the industry who take a conciliatory tone have been firm. "At some point, the rights of actors, directors, tech-support people and all those who make their living creating and distributing content have to be reconciled with the freedom and entrepreneurial spirit of the Internet," says Les Moonves, president and C.E.O. of CBS.

For Obama, though, supporting SOPA came with risk—alienating donors in Silicon Valley, particularly Google, which has by far the most well-established lobbying outfit in the tech world. Everyone in the Valley opposes SOPA. Facebook founder Mark Zuckerberg, who once tried to buy Twitter, almost never uses the service, but he put out his first tweet in three years, on the subject. "Hollywood appears to have peaked," Paul Graham, founder of the start-up incubator Y Combinator, wrote on the company's Web site. "[But] the people who run it are so mean and so politically connected that they could do a lot of damage to civil liberties and the world economy on the way down."

How could Hollywood, with so much at stake, lose this war? It seems incredible that a group which has historically held so much power in D.C. could be trounced by newcomers like Silicon Valley CONTINUED ON PAGE 206 CONTINUED FROM PAGE 184 lobbyists, but the inside game that Hollywood knows how to play was no match for the tech world's P.R. game, which used propaganda, fear, and some decent logical reasoning (a free Internet means a democratic society, and it can be hard to remove infringing content from non-infringing sites without compromising this freedom) to scare legislators. Plus, the finer points about all of this are hard to understand, particularly if you're a congressman in your 60s. At the hearings, some on the Hill pleaded for mercy by saying they were confused—one said he was "just an old country boy"—and begged for a new hearing where they could "ask some nerds what this thing really does."

They're right at least that SOPA, or this thing, as they called it, is pretty complicated. What it does is add to current digital copyright law, as set forth in the Digital Millennium Copyright Act, which was passed 16 years ago, during the Clinton administration. That law isn't great for Hollywood: it pits them against the little-guy user, with the tech companies sidestepping the whole mess. Under the D.M.C.A., Web sites are allowed to link to content, regardless of whether it is copyrighted, as long as they claim they don't know whether it is copyrighted. Want them to take it down? Send a legal letter, sometimes a few, until the content is taken down. Want to sue someone? The only party who is on the hook, in most cases, is the guy who actually uploaded the content—the dude sitting at home in his sweatshirt. (Viacom's $1 billion case against YouTube aims to clarify this.)

Suing him, though, is terrible P.R. for the entertainment business, with headlines like LAWSUIT HITS 10-YEAR-OLD GIRL WITH DISABLED MOM; PUPPY NEXT. Plus, as we all know, it hasn't exactly stopped the average BitTorrcnt user from hitting the upload key. So, a couple of years ago, the M.P.A.A. began turning to the government to assign the liability for pirated content from foreign sites somewhere else.

Motion-Picture Sickness

The M.P.A.A. is made up of the six major film studios, but Fox, Paramount, and NBC Universal are the ones that consistently rattle their sabers the loudest on the copyright issue, vowing to duel the pirates to the death. The six banded together to push for an alphabet soup of bills, and they were joined by some new friends: the Chamber of Commerce, the A.F.L.-C.I.O., sports organizations like the N.F.L. (wary of losing media-rights deals if live games continue to stream on the Internet), plus Pfizer, which benefits from reining in illegal prescription-drug sales online.

Things seemed to progress smoothly for this odd coalition during Act I of this battle, with their advocate, Vermont senator Patrick Leahy, introducing PIPA, the Senate version of SOPA, to the Judiciary Committee in the spring of 2011. The point of the bill was to make the government, with Hollywood's prodding, go after foreign cyberlockers, like Megaupload, by squeezing the U.S-based companies that do business with them, like Google, Yahoo, and MasterCard. Now they'd be on the hook for doing business with pirates, with requirements to remove finks to pirate sites, cut off foreign accounts, and stop placing ads when the government got a court order.

Hollywood might have won if they'd just stopped there. But in May 2011, as the bill passed the Senate Judiciary Committee with unanimous consent, they sensed that the opposition was weak and angled for an even better deal—after all, why have a pistol in this fight when you could have a bazooka? Suddenly, all sorts of provisions started flying into the House bill—most notably, that the government didn't even need a court order to make MasterCard or Google do what it wanted, such as axing pirate sites from search results. (Some industry observers counter that Hollywood was not as involved in putting these provisions on the bill as is perceived.) "The studios tried to be too clever by half and started wilting things out of the sunlight, which is not unlike how they normally do their business—this is how they do businessaffairs contracts too," says a producer. "They became imperious and overwrote the rules. And when you overwrite the rules, you lose."

Five months later, in October 2011, when the new bill (SOPA) was published, the tech community was aghast. Google, eBay, Twitter, and Zynga, along with the A.C.L.U., went into high gear: SOPA, they said to any reporter within earshot, would stifle "innovation," because tech companies would be tasked with monitoring Web sites. Furthermore, the very notion of screwing with Google search results at all constituted censorship. Google's Sergey Brin and AOL's Arianna Huffington even released a letter saying that SOPA endorsed censorship techniques "similar to those used by China, Malaysia, and Iran."

In December 2011, the entertainment guys started a whisper campaign that claimed the opposition to SOPA was just about protecting Google's interests—and, in fact, some of the nonprofits and advocacy groups that were making trouble about the bill are funded by Google, which also spent $9.7 million on lobbying last year. ("Never underestimate the ability of a monopoly to defend itself," says U2 manager Paul McGuinness, who has been outspoken on the issue.) But what no one knew was that the entire tech industry was about to launch their equivalent of a nuclear weapon: the power of their consumers. Not only was this easy to harness, it cost almost nothing to do: according to Brad Burnham of Union Square Ventures, the $10,000 spent by David Karp, the young tech visionary who founded Tumblr, to create a social device for calling congressmen was one of the biggest expenses.

And what a return on investment! According to SOPA protest organizers Fight for the Future, 10 million people signed an online petition against SOPA (4.5 million of these were on Google). Eight million calls were made to congressmen. Four million e-mails were sent to the government. And an estimated one billion people could not access their favorite Web sites on January 18, "Blackout Day," when more than 115,000 sites shut down, including even Wikipedia, which replaced its home screen with a black page and the inauspicious message "Imagine a World Without Free Knowledge."

This uprising was a mean trick, Hollywood thought. "We all own news outlets, but promoting your corporate interests on those platforms, like TV news or radio, is unheard of," says an executive.

It's a fair point. Says Robert Levine, author of Free Ride: How Digital Parasites Are Destroying the Culture Business and How the Culture Business Can Fight Back, "If NBC told MSNBC to run 24 hours of programming with a red bar at the bottom of the screen that said 'Support SOPA,' people would be outraged, and rightly so. But when Google does it, it's activism?"

The world may have been distracted by this mass protest, but according to insiders, the real punch in the gut for the bill came from the White House. Without telling any of the Hollywood guys, the administration issued a statement in the patois of the tech opposition, saying that it "could not support legislation that reduces freedom of expression, increases cyber security risk or undermines the dynamic, innovative global Internet." This is what really killed SOPA. Hollywood hadn't put out a story line that gave the administration any cover besides a few op-eds about how many American jobs are lost to piracy. Young, techsavvy voters are among the most disillusioned parts of President Obama's base, and here was an opportunity to re-invigorate them.

Silicon Valley Forge

Piracy is only the beginning of the entertainment business's clash with the tech world: experts say the fuss over SOPA is actually the first skirmish of a coming battle between the tech companies and studios over cable TV.

Just as the tech industry came for music and newspapers, it's coming soon for cable TV, with "over the top" systems that many TV and the Web—like Google TV, Boxee, and whatever Apple has up its sleeve. "Hollywood wants to artificially keep control of cable," says Mo Koyfman, a general partner at Spark Capital, a venture-capital hrm that invests in technology companies. "They can try to legislate protective moats around their antiquated business model, but it's never going to work."

Nevertheless, Obama seems optimistic that he can keep Hollywood happy in the face of this debacle, even mentioning the need to right digital piracy in China in his State of the Union address. M.P.A.A. chairman and C.E.O. Chris Dodd initially said some harsh things, hinting that Hollywood might pull financial support for the president—"Don't ask me to write a check for you when you think your job is at risk, and then not pay any attention to me when my job is at stake," in particular—but lately he has become more quiet.

In fact, those in Hollywood who have vowed not to support the president are an exception. Jeffrey Katzenberg says, "There may of course be disagreements or even disappointments over some specific policies. But virtually all of my friends and associates feel strongly that President Obama has been good for our industry and, much more importantly, good for our country. For this reason, there's zero issue about his getting our financial support." Veteran producer Lynda Obst agrees: "Hollywood votes with their hearts, not their pocketbooks."

Now Hollywood is counting on a compromise after the election, one that protects everyone's interests. "After the election will be a very good time to bring Silicon Valley and media content providers into a room to talk out the issues," says Harvey Weinstein. "We need to study places like France, where tough laws are enforced in this area. This will allow us to see whether or not there is an economic benefit, and if it affected the Internet companies or if those businesses did just as well. Emotions are too high right now."