New Study From Booz & Co. Shows That SOPA/PROTECT IP Will Chill Investment In Innovation

from the indeed dept

Booz & Co., which is one of the most respected consulting/research firms around, has come out with the results of a new study, looking into how venture capital and angel investors will respond to new laws like PROTECT IP and SOPA, and found that a large majority of them would avoid investing in user generated content sites over fear concerning the liability.

  • A large majority of the angel investors and venture capitalists who took part in a Booz & Company study say they will not put their money in digital content intermediaries (DCIs) if governments pass tough new rules allowing websites to be sued or fined for pirated digital content posted by users.
  • More than 70% of angel investors reported they would be deterred from investing if anti-piracy regulations against ?user uploaded? websites were increased.

In fact, the survey found that investors actually would prefer to invest in a weaker economy than a stronger economy with SOPA/PROTECT IP in place. But if the definitions were actually narrowed to not impact so many legitimate startups, they’d invest again:

  • More than 80 percent of the angel investors would prefer to invest in a risky, weak economy (with the current internet regulations) vs. a strong economy (but with the new, more stringent proposed regulations on copyright infringement).
  • If the legal framework for digital content was clarified, and penalties on copyright infringement were limited for content providers acting in good faith, the pool of angels interested in investing would increase by nearly 115 percent.

Hollywood can continue to pretend that only its jobs are the ones that matter, but repeated studies have shown that job growth comes from new startups, and VCs and angels are what make new startups possible. Chilling investment is no way to help create jobs.

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Comments on “New Study From Booz & Co. Shows That SOPA/PROTECT IP Will Chill Investment In Innovation”

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Anonymous Coward says:

Unfortunately and ironically, the tech community bought these over reaching measures on themselves by rejecting ANY copyright based potential business models for the future. That left the old school copyright based industries no choice but to fight for its survival. You guys should have compromised and used your “intellect” to incorporate the new with the old – instead you said “screw copyrights” – BIG mistake.

out_of_the_blue says:

Answer to "Why should the tech community..."

Anonymous Coward, Nov 16th, 2011 @ 12:54pm

Why should the tech community have to accept an IP based business model?

Because the “tech community” /relies/ on IP that they don’t produce. If you don’t /pay/ for the production of content, then you /don’t/ get to use it to make money.

IF producing “content” is SO easy and profitable, then why isn’t everyone in THAT business instead of “tech”?

Anonymous Coward says:


“We the people” aren’t pirates. A small minority of users who cause disruption of services for others will result in punishment by “We the people”. It has happened time and time again, how many people have tried to fight copyright issues in court before a jury of their peers and lost? The fines suggested by the jurors is usually higher than the judge levies. “We the People” are tired of pirates – this is your notice – stop stealing content or face the consequences of your actions.

Anonymous Coward says:

Couldn't this be used as a metric for SOPA?

There is one pretty big problem with this study: It didn’t ask the angel investors what they would do instead. These guys don’t sit on their money and wait for it to rain gold, they go out and get involved in things. If they aren’t invest in DCI, they will look somewhere else.

Perhaps the smart ones will look for DCIs that have legal or supportable models, and be able to actually attract an audience and thrive.

It’s hard to measure the “chill” in this case, because a lack of investment in A doesn’t preclude them from doing B.

I would say that the study is a little bit one sided.

Oh yeah, let’s play fair here:

“This report was financed by Google Inc.”

Smells like they got the result they were looking for.

out_of_the_blue says:

"venture capital and angel investors" = grifters

They’re in the 1%, or trying to be. Yet again, Mike’s focus is on the already upper class, and specifically here, on a species of grifters whose notion of “business model” is EASY QUICK PROFITS by leveraging the actual work-products of others.

“VCs and angels are what make new startups possible” — Not true. Ideas plus labor to produce actual goods are what /add/ value to society. Mike simply favors those looking for easy ways to skim values. Henry Ford wasn’t under any such delusions (I don’t recall exact quote): The product pays the workers.

Mike wants to further help those who get their products FREE from someone else — whether user generated or pirated, it’s someone other than the site owner — and their income ALSO comes from someone who has REAL products: advertisers. The mentioned “VCs and angels” wish to just sit in the middle there and SKIM. That’s no way to run a “capitalist” economy, it’s JUST re-distribution!

Anonymous Coward says:


Complete bullshit.

You guys should have compromised and used your “intellect” to incorporate the new with the old

The tech industry was willing to and did engage in substantial compromises. What we didn’t do is capitulate, which is what you really want. To techs, compromise is finding an equitable balance between the needs. To old media, compromise is giving them anything and everything they ask for no matter what.

Gwiz (profile) says:

Answer to "Why should the tech community..."

Because the “tech community” /relies/ on IP that they don’t produce. If you don’t /pay/ for the production of content, then you /don’t/ get to use it to make money.

Wait. Are you saying tech companies shouldn’t get paid for providing services?

Isn’t that like saying a waitress shouldn’t get paid because she didn’t cook the food?

Anonymous Coward says:

You want to know what investors will do with their money instead of SOPA passes? They’ll sit on it and wait for something safer with less liabilities to come along.

All the money (and tax revenue) that could have been generated from Internet successes will be gone, starved in their infancy.

Just because something is worth investing in for how it’ll benefit investors/customers doesn’t mean it gets invested in. There’s ways to build coal powered plants that create energy twice as efficient as any power plant in the US (most power plants run on coal even today). No one in the US has invested in it however, why? Because the start up costs are too expensive, and back when the technology was first thought up it was viewed as too risky. Now the Russians have that more efficient coal powered plants, and American investors still aren’t willing to invest in it, since the Russians would charge them too much for using their technology, technology that was first dreamed of by an American inventor who tried and failed to get US investors and the US government to invest in his idea.

Anonymous Coward says:

Couldn't this be used as a metric for SOPA?

No, both sides would be equally full of shit, especially if they don’t ask the next logical question:

If you aren’t investing in X, what are you doing with your money?

Google wanted a specific set of answers, and paid for them. The survey has no crediblity, because it is financed by a company strongly opposed to SOPA, asking a group of people opposed to SOPA if they are actually opposed to SOPA. What the heck do you think the answer would be?

I think that there are many better questions that could have been asked, ones that would be much less slanted.

Anonymous Coward says:


That left the old school copyright based industries no choice but to fight for its survival.

there comes a time to see when you’re pretty much doomed either way, even if you win you win at a huge cost to everyone else including yourself

is it really worth living then?

might aswell make it quick and just pull the trigger yourself, end that misery

Anonymous Coward says:


so you can either have the quick loss, leaving behind hope for the future


you can have the long drawn out loss disguised as a (hollow) victory in which everybody loses world-wide

copyright based industries are doomed and they know it, i am just at loss to understand why is it exactly that they think everyone else needs to be dragged down with them

athe says:


Yes, and as people are realising that as distribution is easier and cheaper with the Internet, those same people aren’t willing to pay the exorbitant costs that the gatekeepers are still demanding.

It’s the content guys who need to compromise, no one else.

They need to provide a convenient, reasonable priced alternative to piracy, and people will pay. They just can’t expect people to buy the same thing multiple times for different platforms at what people see as an unreasonable price for the means of distribution.

The days were “big content” can command monopoly prices are gone, and if they don’t adapt, so too will they be…

Anonymous Coward says:


>The fines suggested by the jurors is usually higher than the judge levies.

The jurors in said cases are an even smaller minority. Only two cases (Thomas-Rasset and Tenebaum) have ever made it to jury, and said juries were staffed by technophobic people who lapped up the RIAA’s words like phoenix balm. Your “we the people” is a misnomer.

btrussell (profile) says:

"venture capital and angel investors" = grifters

You don’t really think everyone gets the same interest rate at the bank do you?

Banks also want that money on their books and they will compete to get it. They will pay the 1%ers more interest to get it.

Don’t think that the 99% are left out though. It works for them also. Next time you get a letter in the mail from a competing institution quoting lower mortgage/credit card rates than you are paying, take it to your bank manager and ask if they can at least match it. If they won’t, change banks.

You are the customer!

Any Mouse (profile) says:

Couldn't this be used as a metric for SOPA?

This question was not asked as it was not pertinent to the study. The study was to measure the effects of SOPA on the DCIs (Digital Content Intermediaries), which is a broad category. You do not ask ‘what would you invest in’ when you want to know how a new law would impact investments in a specific category. One question in the study was I am uncomfortable investing in business models in which the regulatory framework is ambiguous. I would really recommend you read the whole thing. It’s only 28 pages, and quite interesting. Especially the methodology.

nasch (profile) says:

VCs and jobs

Not to sound trollish or anything, but… “VCs and angels are what make new startups possible” contradicts your earlier position that “The nice thing today is that more and more businesses can be started, built and can scale without that need [for venture capital].”

You probably just weren’t very careful with your wording, and should have written something like “VCs and angels can help make new startups possible”, but things like this feed into the paranoid fantasies of Techdirt trolls about how you make stuff up to suit whatever story you’re writing at the time.

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