You had to know this was going to happen. Now that the US Trade Rep (USTR) has fast track authority after Congress caved in and passed the Trade Promotion Authority bill, efforts have ramped up to complete the Trans Pacific Partnership Agreement with meetings in Hawaii this week. Of course, with fast track in hand, the USTR doesn't need to concern itself at all with things like the "public interest" anymore and can focus on the real agenda: big corporate interests. Reports from the negotiations include one from the legal policy adviser from Doctors Without Borders, noting that the USTR organized a briefing for "US stakeholders," but only invited industry representatives. Oh, and the US Chamber of Commerce (the main lobbyists for SOPA) was allowed to book a room next to the negotiating room and got a private briefing from the USTR. Meanwhile, James Love from KEI notes that in a USTR briefing, USTR staffers are deliberately ignoring anyone representing the public interest.
You know who they are listening to, however? You guessed it: Hollywood. Politico notes that now that fast track is in hand and the USTR has more or less free rein in completing the negotiations, Hollywood has jumped in with a bunch of demands to expand copyright laws via TPP:
We've seen the Hollywood versus tech copyright fight play out over everything from SOPA to the Library of Congress. Now the major movie studios are pushing for key items on their wish list as negotiators hammer out the final details of an Asia-Pacific trade agreement. The studios hope the 12 countries working on the pact will agree to copyright protections that, in many cases, last longer than what’s currently in place, Pro Trade’s Doug Palmer reports.
The movie studios also want stricter penalties on piracy, especially as Internet access expands throughout the region.
And, because the USTR almost always gives in to Hollywood (it helps that the MPAA hired the top USTR negotiator on IP last year, so the current negotiators recognize that their next jobs are on the line with this agreement), it appears that the US has convinced a bunch of other countries -- who should know better -- to agree to lock in a life + 70-year copyright term, even as the US Copyright Office has suggested that current copyright terms are too long and should be scaled back.
There is no way to explain this as anything but selling out the public interest to appease corporate interests of Hollywood. It's a fairly disgusting display of the kind of "dealmaking" that the USTR has been pushing for more quietly for years, but now that it has fast track, it knows it can play hardball to help its friends in Hollywood. Fuck the public domain, Hollywood wants to keep getting paid for works from decades ago.
If you talk to the reporters who work for various big media companies, they insist that they have true editorial independence from the business side of their companies. They insist that the news coverage isn't designed to reflect the business interests of their owners. Of course, most people have always suspected this was bullshit -- and you could see evidence of this in things like the fact that the big TV networks refused to cover the SOPA protests. But -- until now -- there's never necessarily been a smoking gun with evidence of how such business interests influences the editorial side.
Earlier this month, we noted that the Hollywood studios were all resisting subpoenas from Google concerning their super cozy relationship with Mississippi Attorney General Jim Hood, whose highly questionable "investigation" of Google appeared to actually be run by the MPAA and the studios themselves. The entire "investigation" seemed to clearly be an attempt to mislead the public into believing that it was somehow illegal for Google's search engine to find stuff that people didn't like online. A court has already ruled that Hood pretty clearly acted in bad faith to deprive Google of its First Amendment rights. As the case has continued, Google has sought much more detail on just how much of the investigation was run by the MPAA and the studios -- and Hollywood has vigorously resisted, claiming that they really had nothing to do with all of this, which was a laughable assertion.
However, in a filing on Thursday, Google revealed one of the few emails that they have been able to get access to so far, and it's stunning. It's an email between the MPAA and two of Jim Hood's top lawyers in the Mississippi AG's office, discussing the big plan to "hurt" Google. Beyond influencing other Attorneys General (using misleading fake "setups" of searches for "bad" material) and paying for fake anti-Google research, the lawyers from Hood's office flat out admit that they're expecting the MPAA and the major studios to have its media arms run a coordinated propaganda campaign of bogus anti-Google stories:
Media: We want to make sure that the media is at the NAAG meeting. We propose working with MPAA (Vans), Comcast, and NewsCorp (Bill Guidera) to see about working with a PR firm to create an attack on Google (and others who are resisting AG efforts to address online piracy). This PR firm can be funded through a nonprofit dedicated to IP issues. The "live buys" should be available for the media to see, followed by a segment the next day on the Today Show (David green can help with this). After the Today Show segment, you want to have a large investor of Google (George can help us determine that) come forward and say that Google needs to change its behavior/demand reform. Next, you want NewsCorp to develop and place an editorial in the WSJ emphasizing that Google's stock will lose value in the face of a sustained attack by AGs and noting some of the possible causes of action we have developed.
In other words, Jim Hood and the MPAA were out and out planning a coordinated media attack on Google using the editorial properties that supposedly claim to have editorial independence from the business side. Notice that with the WSJ piece, they flat out admit that the editorial will be based on the ideas that "we" have developed. If you work for the WSJ, your editorial independence just got shot down. Remember when CBS stepped in and interfered editorially with CNET for giving an award to Dish at the same time that CBS was in a legal fight over that same device? That resulted in reporters quitting.
This is worse.
This is an out and out case where the MPAA is admitting to a plan whereby it will use mainstream media properties to run bogus and misleading stories to "attack" Google, to further the MPAA's (believed, but misleadingly so) business interests. Is this really how the Today Show and the WSJ pick their editorial topics?
The "plan" goes even further after that, getting the MPAA to find (and almost certainly pay for) a lawyer to work with the "shareholder" previously identified to file legal filings against Google.
Following the media blitz, you want Bill Guidera and Rick Smotkin to work with the PR firm to identify a lawyer specializing in SEC matters to work with a stockholder. This lawyer should be able to the [sic] identify the appropriate regulatory filing to be made against Google.
As Google notes in its legal filing about this email, the "plan" states that if this effort fails, then the next step will be to file the subpoena (technically a CID or "civil investigatory demand") on Google, written by the MPAA but signed by Hood. As Google points out, this makes it pretty clear (1) that the MPAA, studios and Hood were working hand in hand in all of this and (2) that the subpoena had no legitimate purpose behind it, but rather was the final step in a coordinated media campaign to pressure Google to change the way its search engine works. It's pretty damning:
The document thus shows that the CID was not the foundation of a legitimate
investigation—rather, it was a “final step” that would be issued only “if necessary” to further
pressure Google to capitulate to the demands of AG Hood and his supporters.
The court has yet to rule on what else Hollywood needs to turn over, but just from what's coming out already, serious questions are being raised (1) about Jim Hood and his office and what they were up to as well as (2) the editorial independence of the media arms of the MPAA studios, including both NBCUniversal ("the Today Show") and NewsCorp. (the Wall Street Journal).
Hollywood's efforts to win political clout have always stretched across the country, from glitzy campaign fundraisers in Beverly Hills to cocktail parties with power brokers in Washington.
Last year, the film industry staked out another zone of influence: U.S. embassies. Its lobbying arm paid to renovate screening rooms in at least four overseas outposts, hoping the new theaters would help ambassadors and their foreign guests "keep U.S. cultural interests top of mind," according to an internal email.
That was the same year that the Motion Picture Association of America, which represents the six biggest studios, reported it was lobbying the State Department on issues including piracy and online content distribution. Hollywood's interests – including its push for tougher copyright rules in the Trans-Pacific Partnership trade pact – often put the industry at odds with Silicon Valley.
The only public indication of the embassy-theater initiative was a February 2015 press release from American officials in Madrid, titled "U.S. Embassy Launches State-of-the-Art Screening Room." It credited "a generous donation" from the MPAA.
Asked about its gifts to the State Department, the lobby group declined to say how many embassies got donations or how much they were worth.
"Because film is a great ambassador for U.S. culture around the world, MPAA assisted with the upgrade of some embassy theater facilities," said spokeswoman Kate Bedingfield. "All gifts complied with the law as well as with State Department ethics guidelines."
Nicole Thompson, a State Department spokeswoman, said at least three embassies besides Madrid received between $20,000 and $50,000 in entertainment upgrades last year – London, Paris and Rome. The revamped screening rooms, she said, aren't intended to entertain U.S. officials, but rather to help them host screenings to promote an American industry and sow goodwill.
Thompson said the donations were proper and that all gifts to the department are reviewed to avoid even the appearance of a conflict of interest. "The department has explicit authorities to accept gifts made for its benefit or for carrying out any of its functions," she said.
The State Department routinely accepts gifts from outside groups, Thompson said. She couldn't provide any other examples of major gifts from groups that simultaneously lobby the agency. Thompson declined to list the items given by the MPAA or their total value, and wouldn't say whether the group had made similar gifts in the past.
There was at least one precedent. A spokesman for Warner Bros. Entertainment said the studio helped pay for the refurbishment of the screening room at the U.S. ambassador's home in Paris in 2011. "This donation was coordinated with the State Department and complied with all appropriate rules and regulations," the spokesman said.
State Department policies posted online specifically permit gifts from individuals, groups or corporations for "embassy refurbishment, " provided that the donors are vetted to ensure there's no conflict or possible "embarrassment or harm" to the agency. The posted policies include no caps on the value of donations, nor any requirements for public disclosure of foreign or American donors. The rules also say that the donations can't come with a promise or expectation of "any advantage or preference from the U.S. Government."
Obtaining an advantage, albeit a nonspecific one, sounded like the goal when a Sony Pictures Entertainment official wrote to the studio's chief executive officer, Michael Lynton, to relay a request to fund the screening rooms from Chris Dodd, the former U.S. senator who heads the MPAA. The executive writing the note – Keith Weaver – sought to assure the CEO that such a donation wouldn't be improper.
"The rationale being that key Ambassadors will keep U.S. cultural interests top of mind, as they screen American movies for high level officials where they are stationed," reads the message, included in a cache of emails hacked from Sony and which were posted online by the website WikiLeaks.
"The cost implication is estimated to be $165k (aggregate of $$$/in-kind) per embassy/per studio. Apparently, donations of this kind are permissible."
Besides Sony, the MPAA represents Disney, Paramount, Twentieth Century Fox, Universal Studios and Warner Bros. Entertainment. The e-mails suggest that Sony executives decided against contributing to the project for budget reasons.
The MPAA has long been a powerful presence in the nation's capital, spending $1.34 million on federal lobbying last year, according to data compiled by the Center for Responsive Politics. One of its flashier tools has been to host exclusive gatherings at its Washington screening room, two blocks from the White House, where lawmakers get to watch blockbuster films, rub elbows with celebrities, and up until several years ago, enjoy dinner – a perk scuttled because of stricter rules on congressional lobbying.
Hollywood studios depend on foreign markets for much of their profit but the MPAA's interests don't always align with those of other major American constituencies. For example, Hollywood studios have moved some film production to Canada to cut costs. American film workers have tried to get the federal government to stop the outsourcing of jobs, but have been met with resistance from the MPAA.
The trade group has also pushed federal officials to pressure foreign governments into adopting stricter copyright laws. An MPAA-funded study found that in 2005 worldwide piracy cost American studios $6.1 billion in revenue. That number has been disputed by digital rights advocates.
For the TPP trade deal, the MPAA has discouraged the American government from exporting "fair use" protections to other countries. In a hacked message from Dodd to the U.S. Trade Representative, the MPAA chief warned that including such provisions, which in American law allow limited use of copyrighted materials without permission, would be "extremely controversial and divisive." Digital rights activists have characterized the efforts as overzealous.
"They're basically encouraging other countries to adopt the most draconian parts of U.S. copyright law and even to reinterpret U.S. copyright law to make it more stringent," said Mitch Stoltz, an attorney for the Electronic Frontier Foundation. "Broadly speaking broadening copyright law harms free speech in many cases by creating a mechanism for censorship."
The state-of-the-art screening rooms are a relatively minimal investment by Hollywood as it works to strengthen connections abroad.
This spring, the U.S. ambassador to Spain, James Costos, brought a group of foreign officials to Los Angeles for a meeting hosted by the MPAA. Among them were representatives from the Canary Islands, who came prepared to discuss filming opportunities and tax incentives for American studios in the Spanish territory. The State Department touted the trip as an opportunity to "expand bilateral trade and investment, including through ties between the entertainment industries."
It's not known whether the path to that particular meeting was eased by the new screening room in Madrid. At the theater's debut in February, the ambassador's guests were treated to a dark tale of corruption, lobbying and double-dealing in Washington – the Netflix series "House of Cards."
We've already covered some of the details coming out in the flurry of legal filings in the dispute between Google and Mississippi Attorney General Jim Hood (helped along by the MPAA which financed and ran Hood's investigation). However, there is one little tidbit mentioned towards the end in one of the MPAA's many filings resisting subpoenas from Google to turn over internal documents. The MPAA's lawyers at Jenner & Block not only argue that much of the material being requested is "privileged," and thus allowing the requests will lead to lawsuits over the legality of those requests, but further argues that the emails in the Sony hack are similarly privileged and should not be available for use in lawsuits:
Quite apart from the policy concerns that arise if lawyers are allowed to use confidential
documents first obtained by hackers, the fact that some privileged documents were published in
the wake of the Sony hack will trigger subsequent litigation over privilege assertions. Privileged
documents obtained by hackers and later published nevertheless remain privileged. Presumably,
given Google’s apparent interest in the documents, Google will contest the privilege assertions.
This seems like a pretty longshot legal argument. It's pretty typical in business settings that once documents are out there in the public, any legal restrictions on them vanish. The idea that these documents, widely discussed publicly and in the press, would magically be banned from use in a legal case that was brought on because of those revelations is a huge stretch.
The whole legal fight between Google and Mississippi Attorney General Jim Hood has been pretty nasty from the very beginning, but it's been getting even nastier as it drags on. Even in many high stakes lawsuits involving large companies and the government, the filings tend to remain somewhat bland and low key. But this particular fight seems personal to many of the parties involved (going beyond just Google and Jim Hood to the MPAA and the studios it represents). If you don't recall, for a few years now, Hood has been bizarrely blaming Google for the fact that people do bad stuff online, rather than understanding that a search engine isn't responsible for the content that it finds. The reasons for Hood's ignorance became a lot more clear after the Sony Hack, when internal emails revealed that Hood was acting as a puppet for the MPAA whose hand was shoved so far up Hood's behind that it was a bit unseemly.
The MPAA's lawyers ran the entirety of Hood's "investigation." Those lawyers actually wrote the subpoena that Hood sent Google (Hood merely added the opening and his signature). The studios paid for the investigation, and the program itself was explicitly designed not to protect anyone online but to bring down Google (dubbed "Goliath" in the documents). The MPAA hired Hood's best friend, mentor and predecessor to lobby Hood on this... and (coincidentally, I'm sure), Hood hired the very same guy, Mike Moore, to help with the investigation -- which should raise serious conflict of interest questions. As these details were revealed, Hood launched into a bizarre anti-Google rant that was both ill-informed and often flat out incorrect. He insisted perfectly legal things (a news site about dark markets) were completely illegal, he blamed Google for not doing things it actually had done, and he couldn't seem to figure out the first thing about how the internet -- or the First Amendment -- actually work.
With this new info in hand, Google went to court to argue that Hood's demands were illegal, and a clear attempt of abusing the power of his office to attack a business. The courts have overwhelmingly sided with Google up to this point -- putting his demands (written by the MPAA) on hold and saying that it was clear Hood unconstitutionally acted in bad faith in violation of the First Amendment.
The judge also ordered Hood to cough up his communications with the MPAA -- something Hood was refusing to do the last time we checked in on this case about two months ago.
Since then, there has been a flurry of activity in multiple courts as Google, Hood and the MPAA fight it out in increasingly emotional terms. As Hood tried to resist, Google opened up another front in this and sent subpoenas to the Hollywood studios directly for those same communications and more. The studios have resisted strongly, claiming that their own documents are unrelated and they're not a party to the lawsuit. Google, however, has pointed out that since the MPAA was running the government's investigation almost entirely, it seems reasonable to argue that that information should be disclosed:
Each Subpoenaed Party asserts "work
product protection," but none can identify any litigation they contemplated at the time the
requested documents were created. They claim there is a "First Amendment privilege"
shielding their activities from discovery, but they cannot explain how it applies here where they
are engaged in lobbying government officials, where that lobbying is a matter of public record,
and where their conduct is in no way likely to meet with government reprisal. And they assert
"common and joint interest privileges" but cannot articulate any valid "interest" that creates or
preserves a privilege. While some responsive documents might theoretically be subject to the
attorney-client privilege, the Subpoenaed Parties have not collected or reviewed such
documents, let alone provided a privilege log for them.
The studios then hit back angrily at these requests arguing that Google is going way overboard in asking for basically all of its anti-Google documents, even those it never actually sent to Hood (after finally agreeing that they would produce its communications with Hood):
The MPAA and Jenner have already agreed to produce all responsive documents they
exchanged with Attorney General Hood prior to Google’s lawsuit; after all, only documents that
Attorney General Hood actually saw could conceivably influence him. That should suffice if
Google wants to probe the Attorney General’s motives.
Google filed the present motion because it insists on more. Google demands documents
that the Attorney General never saw, and that instead include the internal deliberations of the
MPAA, its communications with its members, and the legal advice of Jenner, as well as
communications with others similarly aggrieved by Google’s conduct, on the misguided theory
that such documents somehow are probative of Attorney General Hood’s intent. Moreover,
Google’s demands impose very substantial burdens on the subpoenaed parties, not only because
they require a wide-ranging search for documents, but more importantly because many of the
documents are protected by the attorney-client and First Amendment associational privileges.
Not only would the MPAA and Jenner be required to devote countless hours to the creation of
privilege logs, but further time-consuming and expensive litigation with Google over the
privilege assertions would be a near certainty.
Then, last week, Google hit back in a flurry of additional filings concerning the MPAA and Hood. Many repeat the same basic points, but it's clear that the battle is getting angrier and angrier on all sides. You can sense the exasperation on the part of Google's lawyers as they explain, again, that the studios are clearly trying to hide the details of their plan to use Hood to attack their company in violation of the Constitution:
The Honorable Judge Henry T. Wingate has ruled that Google is likely to succeed against AG Hood under Constitutional and federal law.
It is undisputed that the parties before the Court on this motion — Twenty-First Century Fox, Inc. (“Fox”), NBCUniversal Media, Inc. (“NBC”), and Viacom, Inc. (“Viacom”) (collectively “the Subpoenaed Parties” or “the Studios”) — played key roles in AG Hood’s unlawful conduct. The record already shows that as part of a secret plan called “Project Goliath,” they spent hundreds of thousands of dollars lobbying state attorneys general to pressure Google to alter its search results and other products in service of their agenda on federal copyright issues. In connection with Project Goliath, lobbyists for the Subpoenaed Parties formulated AG Hood’s demands to Google and ghost wrote AG Hood’s talking points, letters and even the CID that prompted Google’s lawsuit and Judge Wingate’s injunction.
Despite this extensive involvement in the events giving rise to the underlying litigation, the Subpoenaed Parties claim here that: (a) documents regarding Project Goliath, beyond their direct communications with AG Hood, are irrelevant; (b) they should not, in any event, be burdened to produce what they have; and (c) that such materials might be privileged — but it is “premature” to assess that issue. None of these arguments has merit.
And then, after the MPAA revealed some of the requested documents, Google went back to court to highlight that what's been emailed only serves to more strongly support the claims of a questionable relationship between Hood and the studios, which should support their arguments for more information. It starts out with Google outright mocking the MPAA's argument that it's unfair to force them to hand over documents to a court in Mississippi, since they're NY-based companies not operating in Mississippi. Google points out that the MPAA and the studios seemed to have no problem at all going to Mississippi to hang out with Hood, so it seems odd for them to suddenly act as if Mississippi is out of the way.
The MPAA and Jenner claim that Google somehow “dragged [them] into its dispute with [the] Attorney General.” ... The DCA portrays itself as a mere amicus of the Mississippi court, and reassures this Court that it “does not do business in Mississippi.” ... Their rhetoric does not match reality.
The Subpoenaed Parties sought out Mississippi when they co-opted the state’s Attorney General for their anti-Google campaign. Documents withheld by the MPAA until last week reveal a stunning level of involvement in Mississippi’s affairs. The MPAA and Jenner repeatedly travelled to the state to meet with the attorney general; they hosted campaign fundraisers and made contributions for Attorney General Hood (“AG Hood”); and they controlled the pen used to draft AG Hood’s illicit demands and threats to Google. The DCA (funded by the MPAA) likewise visited with AG Hood in Mississippi, established a presence on the ground, and regularly communicated with him — retaining Mississippi’s former attorney-general, Mike Moore, to lobby AG Hood as part of “Project Goliath.” It was Google that was “dragged” into this dispute by the Subpoenaed Parties, and not the other way around.
And then there's more:
The Subpoenaed Parties have made clear that they have no problem acting in Mississippi when it suits their ends. After their years of direct involvement there, litigating objections to a single subpoena in the state could not be an undue burden.
The filing notes that while the MPAA revealed its communications with Hood to Google, it did so only if Google promised to keep them confidential. Google notes that there is no legal reason to do so, but for now it agrees to do so. However, it does reveal the nature of what's in some of them. And what it shows is the MPAA and Attorney General Hood working hand in hand, with the MPAA basically calling the shots.
The Subpoenaed Parties and their representatives made repeated visits to AG Hood’s office in Mississippi to guide his anti-Google work. Even when they weren’t physically at AG Hood’s office, they may as well have been, getting together with him in Denver and Santa Monica and holding a fundraising dinner for him in New Orleans. But those interactions only scratch the surface, as the documents reveal remarkably cozy and constant communications between the Subpoenaed Parties and AG Hood... (MPAA’s Brian Cohen greeting one of AG Hood’s staffers with “Hello my favorite” and offering to send her pictures of his vacation in New Zealand); .... (discussing a meeting with AG Hood’s staff the MPAA’s Cohen gushed “OMG we spent 3 hours.”). This pattern of sustained, intimate contact is hardly the mark of a party that merely “communicated with Attorney General Hood” “previously” as the MPAA characterizes itself.
Despite protesting that Google has “inappropriately grouped” it with the MPAA and Jenner ..., the DCA is no different. It retained Mike Moore, Mississippi’s former attorney general, as a lobbyist to influence AG Hood regarding his Google investigation, even while Moore was serving as a deputized agent of AG Hood in connection with that same investigation. Alongside the MPAA lobbyists, Moore too was in constant contact with AG Hood regarding Google. And he co-hosted the campaign dinner for him that the MPAA put on. ... Similarly, the DCA’s Executive Director, Tom Galvin, was personally involved in discussions with AG Hood, also traveling to Mississippi to meet with him.... Although the DCA claims it “does not do business in Mississippi” ..., its “business” is lobbying and manufacturing press at the behest of the MPAA which heavily funds it. It was extremely active in that regard in Mississippi. The Subpoenaed Parties did not act alone in animating AG Hood with respect to Google, they coordinated their efforts with the major Hollywood studios who make up the MPAA, including Fox, NBCU and Viacom (collectively the “NY Parties”). That coordination continues to this day — the NY Parties are using the same law firm, Jenner, to resist subpoenas from Google, and in the Southern District of New York, they have made relevance, burden and privilege arguments that are virtually identical to those that the Subpoenaed Parties have advanced here.
There's a lot more in the documents being filed (some of which we'll cover in other posts), but suffice it to say this fight is getting even nastier as it continues, and it sounds like the contacts between the MPAA and Jim Hood (the same emails that wanted a ridiculous amount of money to reveal following our public records request) show that the relationship was even tighter than was revealed from the leaked Sony emails.
There's that old joke that you've probably heard (in part because we've mentioned it in other contexts), about the drunk man searching for his keys under a streetlight, while admitting that he lost them further down the street. When asked why he's looking over by the light instead, he says "because that's where the light is." People even refer to this as the streetlight effect. And you can see it in all sorts of odd places.
These spots will be showing in theaters across the country, because that's exactly what people who just paid huge sums of money to watch a movie want to see: an extra commercial before the film they paid to see telling them them to stop being dirty pirates, with the usual claptrap about all of the poor workers that piracy impacts (leaving aside that those people aren't paid based on movie revenue...).
It's the streetlight effect all over again. The incompetent and ineffective Chris Dodd-run MPAA feels the need to do something, so they fall back on the same old game plan:
"Hey, let's advertise to try to make people feel guilty!"
"That's never worked before despite us trying for decades."
"This time it will work! It must work! Because they must all feel guilty! And once they see how guilty they should really feel, they'll stop pirating! Because I have no other ideas!"
"Okay, but where will we best place these advertisements to reach the right people?"
"I've got that one all planned out! We'll get them in the best possible spot: in the movie theaters! The theaters will show those ads for free and we've got a real captive audience!"
"But it's a captive audience who has already shown that they're willing to pay. Why should we advertise to them?"
"Didn't you hear me!?!? It's a captive audience and the theaters will let us do it for free! Piracy is solved!"
Good luck, guys. Once again, if you're looking for better ideas, maybe fire the content protection team, and hire some folks who actually get the internet.
For many years, we've written about what an incredible scam state tax subsidies to filmmakers are. Various states shove each other aside trying to throw more money at Hollywood, if they just agree to make their films locally. Hollywood insists that these subsidies are good for the states, because they "create jobs." But the details almost always show otherwise. They are almost always a massive loss to the taxpayers. What jobs are created are temporary -- and often filled by people who fly in from out of town. What "downstream" economic benefits are created are marginal at best. Almost every study of these subsidies has found that they lose money overall. And yet, the states keep expanding these programs, sometimes betting pension funds on them.
So the big question has to be: why do states keep throwing money at Hollywood this way?
The answer, it appears, may have an awful lot to do with out and out corruption.
In the past few years, film programs across the country have been wracked with criminal charges and convictions. Louisiana is in the midst of a criminal trial against individuals charged with fraudulently collecting more than $1 million in state film tax credits for the creation of a film studio in New Orleans. Massachusetts has faced its own criminal trials over tax credit fraud. And in Iowa, a state audit found $26 million in improperly issued tax credits, and a subsequent investigation resulted in 10 criminal cases and 7 convictions. The state ultimately suspended its program in 2009. Nearly six years later, the state is still in the midst of sorting out the criminal trials surrounding its program.
This corruption has also extended to those in positions of determining how these programs work and who receives the available funds. California is currently in the midst of its own film-subsidy scandal involving a state senator, Ron Calderon, who headed the select committee on film and television and was a member of the California Film Commission. Indicted on 24 felony charges, and facing a maximum sentence of 396 years in federal prison, Calderon is accused of accepted cash bribes from an undercover FBI agent who he thought was associated with an independent film studio. In exchange, he agreed to advocate for an extension of the film tax credits.
And then, of course, there's the fund-raising hook. Hollywood scratches a politician's back? The politician scratches Hollywood's back:
Politicians also use their support for incentives, or the threat of removing them, to induce political contributions for Hollywood beneficiaries. For example, in another Sony an email dated January 6, 2014, NY Governor Andrew Cuomo’s “people” request Sony commit to raising $50k by July of 2014. The email continues, “$50k is a heavy lift since most of it needs to come from individual contributions (only $5k can come from corp.)” There are then severalotheremails from Sony’s head of government affairs soliciting contributions. In one of them he notes “Thanks to Governor Cuomo, we have a great production incentive environment in NY…Because of all of this, I think it’s important to significantly support his reelection efforts…”
So, notice that there are three parties at work here -- but only two of whom are actually represented. Cuomo gets campaign funds he wants. Hollywood gets tax breaks they want. It's just the taxpayers who aren't represented and get shafted.
And, as Koopman notes, each year the MPAA sends out a celebratory email highlighting just how much the studios have been able to fleece from taxpayers:
As you have requested annually, attached is the State Government Affairs Department Annual Report for 2013. As you will read, this year MPAA saved the member companies collectively an estimated $110.08 million in corporate tax liability on an annual basis and approximately $86 million in potential regulatory, administrative, compliance and legal fees, also annualized, as a result of accomplishing legislative objectives in the states.
Since 2007, the aggregate annual savings secured by MPAA for the member companies in connection with key corporate state tax legislation is approximately $439.08 million. This is a result of the enactment of single sales factor apportionment in California, and New York City as well as favorable advertising and licensing corporate tax sourcing formulas adopted in North Carolina, Michigan, Illinois and Louisiana.
In addition, states awarded an estimated $1.5 billion in production tax credits in 2013, according to the Los Angeles Times, which MPAA either was engaged in enacting or keeping in place. The majority of those credits went to MPAA member companies as a result of motion picture and television location production in various states, with per project savings ranging from 10 to 30 per cent.
We had another successful year thanks to the hard work of Melissa Patack, Angela Miele, Sarah Walsh, Brian Cohen and Carlin Scrudato, as well as all of your tremendous support, engagement, and encouragement. Also, special thanks to the executives on the state tax, legal and IP working groups, whose expertise and involvement is invaluable. As you know, our contract advocates in the 50 states, who are critical to our success, work tirelessly for MPAA and the member companies. Our coalition partners also played major contributing roles, in particular NATO, DGA, SAG, IATSE and Teamsters.
I don't begrudge the MPAA/studios doing this. Of course, they're going to scrounge for free money from the states who are willing to give it. But it seems problematic given how these programs time after time after time have been shown to be massive failures, often leaving states in serious trouble. At the very least, it seems to deserve deeper scrutiny by the public and government officials as to exactly why states are so ready to hand out this kind of money.
Last we had checked in on the ongoing legal wrangling between Google and Mississippi Attorney General Jim Hood, a court had ruled pretty strongly against Hood, accusing him of acting in "bad faith," for "the purpose of harassing" Google in violation of its First Amendment rights. Checking back in on the case to see what's been going on, it appears that things have continued to get more and more heated. A little while after that ruling slamming Hood, Wingate ordered Hood to provide a bunch of information to Google as part of the discovery process for the case -- including, bizarrely, responses to Techdirt's FOIA request, which we had declined to continue after Hood's office demanded over $2,000 and made it clear that they still likely wouldn't give us anything. However, Judge Wingate thought that Hood's office should turn that info over to Google:
Any documents already gathered in connection with the Techdirt
Mississippi Public Records Act request that are responsive to Google’s
But, more importantly, Judge Wingate ordered Hood to turn over the documents that the MPAA/movie studios and their lawyers at Jenner & Block had written for Hood, as well as emails with the MPAA's government affairs boss, Vans Stevenson:
Any draft subpoenas provided to the Attorney General by the third parties
identified in Google’s request.
Attorney General Hood’s November 13, 2013 email to Vans Stevenson,
and any replies or responses thereto;
Attorney General Hood’s August 28, 2014 letter to the Attorneys General
in all 50 states regarding setting up a working group;
The Attorney General has withheld most of the
documents called for by the Court’s order. But there is no valid basis to assert privilege. Most
of the documents in question were prepared by third parties lobbying the Attorney General to
take action against Google. Neither the attorney-client privilege nor the work product doctrine
permits public officials to shield such interactions from scrutiny. The privilege log provided by
the Attorney General confirms that there is no basis to withhold the documents.
According to Google's filing:
On April 15, the Attorney General served his responses and objections for the five
priority document categories, along with a privilege log and 65 pages of heavily redacted
documents.... He produced no documents at all within the fifth category
specified by the Court, later explaining that while documents had been “identified” in relation to
the Techdirt Mississippi Public Records Act request, none had been “gathered.” He also refused
to produce much of the responsive material in his possession, claiming that the documents are
protected by the attorney-client privilege, the work product doctrine, the common interest
doctrine, or some combination thereof.
And, Google points out that the idea that Hood has attorney-client privilege over this material makes no sense, as he does not have such a relationship with the people in question:
It also concedes that the
Attorney General does not know who drafted many of the withheld documents and instead states,
“on information and belief,” that they “were prepared by or at the direction of” one of two or
three named lawyers in private practice, at the law firms Jenner & Block LLP (“Jenner”), Orrick,
Herrington & Sutcliffe LLP (“Orrick”), and SNR Denton US LLP (“Denton”).... The Attorney
General confirmed that he had no attorney-client relationship with these firms. Published
accounts indicate that, in connection with lobbying activities, Orrick represents Microsoft and
Jenner represents the MPAA.
There's a lot more in that filing that absolutely destroys the arguments that Hood is making as to how these documents, prepared by the MPAA's lawyers, could possibly be privileged material, blocked from discovery.
A week later, Hood responded to Google's filing seemingly spending about half of the space simply reiterating one of his misguided rants about how evil Google must be -- none of which seems even remotely relevant to the question at hand, concerning whether or not Hood needs to produce these documents, including the emails from the MPAA and its lawyers, as they plotted to use Hood in their plan to take down Google, a company they don't like. After that, it basically just repeats "attorney-client privilege" and "work product" as frequently as possible, insisting that revealing any of this to Google would completely undermine all that is good and holy by revealing to Google what Hood and his staff were thinking. That, of course, leaves out the fact that it wasn't what Hood was thinking, but rather what the MPAA -- an organization that has made it clear it wants to harm Google -- was thinking in terms of how it could use Hood's office to that end.
Allowing Google access to these documents and communications would reveal the nature of the Attorney General’s mental impressions and strategy regarding future litigation against Google.
Or, you know, the MPAA's "mental impressions and strategy" which apparently include funding/hiring one of Hood's closest friends (who Hood himself then hired to help with the subpoenas to Google), Mike Moore (the previous Attorney General who helped get Hood elected). The whole reason why the judge ordered Hood to turn this over was to find out about those "impressions and strategy," as Judge Wingate believed that those "impressions and strategy" show a "bad faith" plan to attack Google in violation of the First Amendment. Hiding behind a bogus attorney-client privilege claim (when Hood has no such relationship here) is incredibly weak.
Finally, earlier this month, Google responded again and laid out the situation in a fairly straightforward manner:
The Attorney General served the 79-page subpoena at the heart of this case after sustained lobbying from the MPAA. The Court has found that Google is likely to succeed on the merits of its claims, including its claim that the Attorney General conducted his investigation in bad faith. The Attorney General is now trying to throw a veil of secrecy over his interactions with the MPAA and other lobbyists during his investigation, refusing to produce the draft subpoenas the lobbyists wrote, and the multiple policy memos (with titles like “Google must change its behavior”) that the lobbyists sent him. He asserts, for example, that documents created by the MPAA’s lawyers are somehow his work product, and thus beyond the scope of discovery absent a showing of substantial need, simply because he read them. That is flatly wrong. The work product doctrine exists to shield from discovery an attorney’s thoughts and impressions developed in preparation for litigation. It does not protect a trade association’s communications with a government official, aimed at inducing the official to pressure a business rival.
It further explains how all those chants of "attorney-client privilege" and "work product" make no sense at all:
The draft subpoenas, CIDs, and white papers do not constitute the work product of the Attorney General because they were not created by his counsel or agent, but instead by private third-parties seeking to influence his official conduct.
The same documents do not constitute the work product of private counsel because their clients (the MPAA, Microsoft, and others) were not anticipating litigation as a party. And any protection was waived when the documents were provided to the Attorney General to encourage an attack.
The letter to attorneys general is not work product because the unredacted portion of the document makes clear its primary purpose was to form a working group to induce Google to change its policies, not to prepare for litigation. And the common interest doctrine does not include unsolicited invitations to join such an effort.
Oh, and the Google filing also highlights the fact that both the MPAA and Hood appeared to employ Mike Moore separately to work on this same project, and this also further undermines the attempts to keep these communications a secret:
The record also suggests that any privilege was waived by the Mike Moore Law Firm’s parallel representation of the Attorney General and a private lobbying group, as well as Mr. Moore’s repeated disclosures of confidential information to outside interests.
This back and forth is kind of fascinating. The Judge has already made it quite clear that he's not buying Hood's story, and it seems pretty obvious from the Sony leaks and deeper reporting from the NY Times last year, that Hood's fishing expedition was based almost entirely on the MPAA's big plan to hamstring Google just because the MPAA really, really doesn't like Google. That Hood would use his office as a state Attorney General to assist in such an action does not speak very well of Hood. That he's now scrambling to hide the details of his relationship with the MPAA only serves to call more attention to that relationship.
If you go all the way back to when the RIAA shut down Napster, you may recall that within just a short while, Gnutella launched, providing a more distributed system that became the core of a number of file sharing programs, which ended up growing much, much larger than Napster. It's the classic hydra situation: you cut off one head, and eight more (or even more than that) come back in return. It's a message that has been obvious since the days of Napster... and yet it's one that the legacy entertainment industry and its friendly politicians still can't seem to grasp. It's why we've always said that the industry would have been so much better off looking for ways to embrace and work with the leading providers in the space, rather than shutting them down.
But, clearly, they don't get it. As the Sony email leaks showed, "site blocking" is still considered a top priority for Hollywood, even though it doesn't take a genius to realize that it doesn't work.
Now we can add some more evidence: the European Commission itself decided to do a study looking at what happened after the website kino.to was shut down, and shows that it was a complete failure if the industry was looking to stop people from consuming unauthorized videos. As we've seen before with other site blocking efforts and over-enforcement, there is a very brief impact in decreasing access to infringing works, and a very, very small increase in sending traffic to licensed offerings -- but that only lasts until alternatives come along, usually within weeks.
The overall impact on stopping access to unauthorized videos? Basically none whatsoever. And, by scattering users out to a variety of new sites, it made it even harder for the industry to track what people were doing. In the case of Kino.to, it took all of four weeks for people to find new places to go:
The results from our empirical analysis show that the shutdown of kino.to led to a
significant but short-lived decrease in the usage of unlicensed video streaming websites.
Unsurprisingly, this effect is particularly large for individuals who were using kino.to
previous to its shutdown, with decreases of more than 30% in overall piracy consumption
during the four weeks directly following the intervention. We nevertheless observe that
consumption of pirated content increases again following the fourth week after the shutdown.
This increase is driven both by substitution towards existing alternative unlicensed
platforms and by the entry of new platforms following the shutdown.
You can see how this works pretty easily in the following graph. Yes, there's a very brief decline in unauthorized streaming, but then it goes right back to about the same level... and appears to be generally climbing upward:
As for helping convince the users to suddenly start paying for content? A tiny, tiny effect that also does not seem to last:
Second, we find limited substitution into consumption of licensed offline video content,
proxied by visits to specific types of websites. Our results show that consumers do not
increase their visits to websites of movie theaters or to DVD-related Amazon webpages.
However, we find a small increase in clicks to licensed online video services (such as Maxdome,
Lovefilm, and iTunes) after the shutdown, providing evidence that the intervention
was successful in converting part of kino.to's users toward legitimate video consumption.
Perhaps more importantly, we also find that heavy kino.to users disproportionately
increase their visits to websites of licensed video services. This substitution was nevertheless
undermined by the existence of alternative unlicensed streaming websites, which
allowed consumers to rapidly transfer their consumption of copyright infringing videos
from kino.to to other platforms. In particular, we document a large increase in clicks
to the second-most popular platform - movie2k.to - directly after kino.to disappears.
Only five weeks after the intervention, we also observe the entry of a new platform -
kinoX.to - which manages to quickly appropriate a significant share of the unlicensed
video streaming market at the expense of movie2k.to and the other smaller platforms.
These results reflect both the high elasticity of supply to the shutdown, and the fact that
consumers face little difficulty in switching from one platform to another.
And, the end result is the basic hydra effect, where the audience fragments:
Third, we assess how the shutdown affected the overall structure of the market for unlicensed
video streaming. While the market was largely dominated by kino.to before its
seizure, the intervention triggered an increase in competition between alternative platforms,
ultimately resulting in a much more fragmented market. After the shutdown, the
market was evenly split between movie2k.to (the second largest player at the time of
the shutown), kinoX.to (kino.to's substitute), and a remainder of 12 websites which
cumulatively account for one third of the market. We also observe that concentration
of demand decreases after the shutdown, and that consumers diversify their unlicensed
movie consumption more as opposed to concentrating it on a single platform.
Again, you can see the impact of this hydra effect right here:
Some may argue that this is the intended impact, and that if these sites have a smaller audience it makes them less sustainable, though there's little evidence to support that.
It seems that a much clearer message from this study is what many of us have been saying all along: taking down sites does not change what people want. And if the industry itself is failing to serve the public and music and movie fans in a compelling and convenient manner, then other providers will come in and do it instead, whether or not it's legal. And that's where the audience will go. The more the industry fights against this, the harder it becomes for the legacy industry to figure out ways to work with the leading providers to build a legitimate service. Instead, it just pisses off people and sends them further and further away. That can't be good for business.
Given that, it seems like it would make a hell of a lot more sense for the industry to focus on providing what people want rather than wasting so much time, effort and money into trying to shut down the sites they don't like.
When the entertainment and broadband industries' "six strikes" anti-piracy regime first launched a few years ago, most people (outside of Hollywood) realized it wouldn't work for a number of reasons. One, data has pretty consistently shown that such graduated response anti-piracy systems -- whether three "strikes" or six -- don't work, and in fact may actually make things worse. Two, even partner ISP execs I spoke to ahead of the program's launch made it clear they knew the program wouldn't do much, with most infringers simply hiding their behavior behind proxy servers of VPNs.
Publicly, the firm created to run the program (the Center for Copyright Information) has frequently tried to claim the program is a smashing success, often using unreliable, contradictory evidence to try and suggest pushing ISPs into the role of content nannies was a wonderful idea. But privately, Hollywood and the MPAA have acknowledged the program isn't doing much, though they're quick to argue that this is only because it hasn't yet been "brought up to scale."
Amusingly, some of the very same Hollywood voices that pushed so hard for six strikes and ignored warnings that it wouldn't work, are now calling the program an abject failure. The Internet Security Task Force, a coalition of smaller studios, which counts copyright troll Voltage Pictures among its members, has come out swinging this week against six strikes in a press release, calling the program a "sham":
"We’ve always known the Copyright Alert System was ineffective, as it allows people to steal six movies from us before they get an educational leaflet. But now we have the data to prove that it’s a sham," Gill comments. "On our film ‘Expendables 3,’ which has been illegally viewed more than 60 million times, the CAS only allowed 0.3% of our infringement notices through to their customers. The other 99.7% of the time, the notices went in the trash,” he adds."
One, ISTF doesn't appear to know how the program Hollywood pushed for actually works, since users receive an "educational leaflet" the first time they're found to infringe. Steps two through six then include "mitigation measures" that may involve having your connection throttled or finding your broadband access temporarily suspended until you've clearly acknowledged you've been naughty. Users then have the honor of paying a $35 fee if they'd like to fight the accusation. After the sixth strike nothing happens, and nobody tracks offenders between ISPs, something Hollywood is surely eager to "remedy" with program updates.
ISTF notes that the five major ISPs participating in six strikes (AT&T U-verse, Cablevision, Comcast, Time Warner Cable and Verizon FiOS), saw a 4.54% increase in infringements during the fourth quarter of last year. Two non-participating ISPs, Charter and Cox (the latter of which is being sued by BMG for allegedly ignoring piracy), saw a 25.47% decrease in infringements during that same period. Assuming you can trust Hollywood math here (never a wise bet), the ISTF claims this is proof of the fact that ISPs aren't taking piracy seriously:
"These alarming numbers show that the CAS is little more than talking point utilized to suggest these five ISPs are doing something to combat piracy when in actuality, their customers are free to continue pirating content with absolutely no consequences," said ISTF member Nicolas Chartier, CEO of Voltage. "As for its laughable six strikes policy, would any American retailer wait for someone to rob them six times before handing them an educational leaflet? Of course not, they call the cops the first time around."
Of course if non-participating ISPs are seeing infringement drop massively while participating ISPs are seeing a slight rise, that would seem to suggest that graduated response programs actually make things worse, which is what data Hollywood ignored said in the first place. The ISTF's solution for the States is to implement an uglier version of Canada's Copyright Modernization Act, which gives ISPs safe harbor only if they agree to pass on all infringement notices. While the Canadian law caps damages, it hasn't done much to thwart copyright trolls, who appear to just be making up for the income reduction by shaking down Canadian users on greater scale.
While these smaller studios are solely focused on greasing the rails for their "settlement-o-matic" shake downs, it's only a matter of time before the MPAA and the larger studios start pushing for "improvements" to six strikes as well, whether that's an organization that tracks offenders between ISPs, or a frontal assault on VPNs and proxy services. And that's just it, these studios consistently whine about the need for aggressive enforcement policies that have been proven not to work, and when they fail the answer isn't adaptation of the business models to the modern age, it's an expansion of already-bad ideas that clearly aren't working. It's a bottomless well of dysfunction. Unfortunately for Hollywood, any expansion of six strikes is going to have a steeper uphill climb in the post SOPA era, which may hinder the program from mutating into something truly monstrous.