Netflix and Digital Piracy Legislation

Netflix's shares fell 35% last Tuesday after the popular movie streaming and DVD rental company reported losing over 800,000 subscribers since last July. After changing their price model last summer, splitting up their streaming and delivery services and raising fees by as much as 60 percent, the company was heavily criticized by customers, leading to the mass exodus. To make matters worse, Netflix predicts that their expansion into the United Kingdom and Ireland, which they plan to pursue this fall, will cause the overall company to be unprofitable for “a few quarters”, according to their third quarter report. As a legal and very widely used internet movie and TV provider, this subscriber emigration from Netflix will likely lead to an increase in intellectual property violations in the coming months, as individuals begin downloading and streaming content from less legal sources.

This has led to concern amongst a number of interest groups, including the Motion Picture Association of America. Such concerns have caused the MPAA, led by former presidential candidate Chris Dodd, to push for a new bill dubbed the Stop Online Piracy Act. The bill, proposed in the House Judiciary Committee last Wednesday, is designed primarily to combat “rogue” websites which violate copyright laws. If the bill passes, the U.S. government will not only be able to prosecute domestic and foreign providers of illegal content, but will also be able to prosecute any company or individual advertising on the sites as well. This wide-ranging bill, decried as draconian by consumer advocacy groups, also strips away the legal protection the Digital Millennium Copyright Act guaranteed to sites such as Youtube that host user-generated content which may have violated copyright laws, known as the “safe harbor” provision.

The future of the Stop Online Piracy Act is still uncertain, as Sen. Ron Wyden (D-OR) and other lawmakers request that it meet the same fate as the similar PROTECT IP Act, which stalled in a Senate committee last May. The conflict between content creating companies and consumer rights groups is decades old, yet as this particular case proves, new technology and content platforms are constantly adding complexities to the issue. As the legislation awaits its fate in the senate, the cat and mouse game between content companies and individuals illegally downloading their content continues.