A California Civil War Over Internet Piracy

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There's a civil war going on in California. It's the north vs. the south — Hollywood vs. Silicon Valley. And much like that other American Civil War, there are two different economic worldviews at stake. One of the highest-profile battles was fought last month, when large Internet sites like Wikipedia staged an online blackout to protest anti-piracy bills in Congress.

The north won that battle, and for now, the legislation is on hold. But the war between Hollywood and Silicon Valley over how to deal with intellectual property is far from over.

In the south, Hollywood, there are the people making their livings off of music, movies and TV. Southerner Gavin Polone is an executive producer on such shows as Gilmore Girls and Curb Your Enthusiasm.

"What is the key element is that a movie or a television show or a song or a book is actually someone's property," he says.

And to Polone and other southerners, taking that property without permission is a criminal act. That's why Hollywood has used the law to try to shut down the revolving door of sites that traffic in music, movies, television and film, from Napster to Megaupload.

But up north in Silicon Valley, in the hub of technological innovation and newly minted millionaires and billionaires, techies like Tim O'Reilly have a different view.

If things are being pirated, people want them, and I would far rather have one of my products, discover that it's highly pirated than that it isn't, because what that tells me is that a lot of people want it.

"I'm a creature of a technology world where you accept a high level of competition and you don't have a lot of respect for business protecting their turf, except by innovating," O'Reilly says.

He is founder of a publishing company that's part of O'Reilly Media. It publishes technology-oriented e-books on topics like how to get the most out of your iPad 2 or how to program iOS 5.

"If things are being pirated, people want them, and I would far rather have one of my products, discover that it's highly pirated than that it isn't, because what that tells me is a lot of people want it," O'Reilly says.

Take First, Pay Later

In fact, he says a study of his customers proved that many later paid for what they, at first, took. "We found that the people who pirated were actually also the people who paid us more. They had a budget," O'Reilly says.

But e-books are also advertisements for O'Reilly's other products — tech classes and business conferences. Less than half of his company's income comes from the e-books.

Making a movie is another kind of project altogether. Take an independent film like Suing the Devil, starring Malcolm McDowell as the devil himself. Tim Chey directed the film, and he knows exactly what it cost to make.

"Each camera cost $150,000 with all the setups and everything," he says. "So we're talking $300,000, just on the camera. Then we have sound, we have special effects."

And the list goes on. Chey has a law degree from Harvard, but he's not rich and he doesn't spend his time thinking about business models. He and his colleagues put their innovations into their films.

"We do it for the art, we do it because we want to tell our stories, express our stories," Chey says. "I, as a filmmaker, am not in it for the money."

'It Can Make You Cry'

But he's got to pay his bills. So he was not happy when he saw his film up on the Internet for free before it was even released. "It can make you cry, as a filmmaker. It can make you cry. I mean, all of that work," Chey says.

It can make you cry, as a filmmaker. It can make you cry. I mean, all of that work.

What made him want to take legal action, however, was when he asked the website Pirate Bay to take down his film. "The guy wrote back and said this: 'We've never taken any of our movies off of our site, why would we take yours off?' " Chey says.

Appropriation of intellectual property has always existed. The Internet just makes it easier. Ben Huh is the chief executive of Cheezburger Network, a company that runs a group of popular sites, one of which features amateur humor like "lolcats" — funny captions over pictures of cats. He says content creators and the government need to start thinking differently.

"It's almost like we're entering prohibition again, where the public perception towards copyright no longer matches the legal perception of copyright," Huh says.

Like most techies, he starts talking about business models and giving customers what they want to minimize the number of people who steal. If people don't want to go to the movie theater to see the latest film, Huh says, they should be able to see it at home, legally.

"And I'll pay you extra so I don't have to schlep my butt out in the snow, sit with a bunch of teenagers who talk behind me and use their cellphone. Why does that not exist?" Huh says.

Will The North Become More Like The South?

In the end, these two industries may need each other more than they currently realize. This year, Google's YouTube commissioned professionals in Hollywood and New York to create channels on the site because the folks at Google didn't have the talent or expertise.

Southerner Gavin Polone thinks eventually, the northerners will start to see the situation differently as they see how much it costs to make high-quality content.

"They'll be the same as these media companies that they're rallying against right now. And they will also start to look at this very expensive property as property, and they're not going to want to have it stolen from them," Polone says.

But both sides continue to wage war using the weapons they know best, whether it's the courts or the Internet.