File this under Three Cheers for Doing the Right Thing: GroupM, the unit of advertising, marketing and communications giant WPP, has announced that they will no longer place ads on websites illegally distributing stolen movies, TV shows or music.  As AdAge reported today:

"Great content fuels the web, and if that is being illicitly distributed, we feel it's a problem for the long term," said Group M Interaction Chief Operating Officer John Montgomery.

Some rogue websites do not sell the content they steal, and instead use online advertising to make money from their illegal activity.  If advertisers boycott these sites, their profits dry up and it becomes harder for the criminals who operate them to pay for server space and other costs. 

This means that any efforts to dry up rogue sites’ advertising dollars is one of the keys to stopping online content theft, not unlike working to get payment processors to refuse to handle rogue sites’ financial transactions.  Register of Copyrights Maria Pallante testified that cutting off advertising revenues to rogue sites “combat their very existence, or at least substantially decrease their impact on the market for legitimate copyrighted content.”

And GroupM is no drop in the bucket.  According to AdAge, its agencies spend $6 billion each year on digital advertising.  Working with content owners, some of whom are its clients, GroupM is assembling a list of rogue websites to ensure that none of that money will go to support content theft.  That's great news for creators.

Pure and simple: film and tax incentives create jobs, expand revenue pools and stimulate local economies.  That’s why a study released by the Tax Foundation yesterday strained credulity and provided a host of prejudged conclusions about the value of film and television tax credits in bolstering jobs and local economic development.

With no real understanding of film and television financing, nor the incentives it argues against, this out-of-touch think tank was simply driving its own tax policy agenda and produced a report to back up its positions, peddling it as unbiased research.

I think we all would agree that during this recession, keeping middle-class jobs in the U.S. and generating local economic development is crucial, and that is exactly what these tax credits do in states all across our nation.

At the end of the day, this is a report produced by an organization that makes its opposition to tax incentives clear in its own mission statement, and unfortunately, the political slant of the foundation seems to have dictated the outcome of its research.

The film and television industry contributes in a very real way to the economies of all 50 states and the District of Columbia through on-location production and infrastructure development.  More than 115,000 businesses – 81 percent of which employ fewer than 10 people - and over 2.4 million American workers depend on the film and television industry for their jobs.  The industry generates roughly $13 billion in state taxes and $40 billion in payments to vendors, suppliers and others nationwide.

These jobs provide an immediate opportunity to expand local employment during a difficult economy and the state has the benefit of current time value of money: employ now- pay later.  The time value of money makes these incentives extremely valuable to the states where production incentives are utilized.

Even as many states are facing budget deficits, new and expanded production tax credits continue to emerge because they have proven effective in reinvigorating state economies by providing rapid relief to local businesses and replenishing shrinking state revenue pools.

States that recently created or expanded film and television production tax incentives:

• In Florida, the state recently increased by $12 million, their $242 million transferable film and digital media tax credit   program established in 2010.
• New York’s production incentive program enacted last year was sustained, and that includes $2.1 billion in funding to the New York production tax credit for five years.
• Connecticut adjusted their 30% film and digital media tax credit this year keeping the centerpiece of the incentive, and retaining the competitiveness of the program, which will continue to make the state an attractive production location.
• North Carolina bolstered their film tax credit (which is uncapped) and created a new digital media tax credit program as well.
• Mississippi increased their incentive.
• Maryland created a new film production activity credit this year.
• Utah’s program was expanded. 
• Virginia has a new film tax credit.

States that have recently overcome adverse legislative initiatives to reduce or eliminate production incentive programs:

• Georgia
• Pennsylvania
• New Mexico
• Illinois
• Louisiana
• North Carolina
• Massachusetts
• South Carolina

The states that have terminated their production incentives were not competitive.  Kansas’ suspended film incentive program only applied to in-state companies and was not designed to attract out-of-state filmmakers.

Iowa’s film credit program was suspended due to corruption and inadequate program oversight. Iowa is looking to revive the production tax credit program and the Governor has been supportive of a vibrant film production tax credit program in Wisconsin.

There were several proposed legislative eliminations and cut backs of state film production tax credit programs in 2010, which were all defeated. These include initiatives in Massachusetts, Michigan, New Mexico, Pennsylvania, Rhode Island and South Carolina.

Two recent studies that performed cost/benefit analyses confirmed the economic benefits of production tax incentives to New York and Michigan.  Michigan’s report, sponsored by the Detroit, Ann Arbor, Traverse City and Grand Rapids Convention & Visitors Bureaus indicated that the incentive created nearly 4,000 full-time equivalent jobs for Michigan residents in 2010 at an average salary of $53,700 per year, and generated roughly $6 per dollar of net credit cost. The New York report showed a 1.9 return on the state’s investment (ROI).

In locations with uninterrupted film tax credit programs there have been continuing investment and job growth. In Massachusetts, for example, only 10 films were produced over seven years with $67 million of direct investment.  Once the credit was enacted the Commonwealth had 26 films in three years with a startling $676 million of direct investment to the state.

The film and television incentive programs can do wonders and are a robust economic stimulus. In the short term, it generates substantial tax revenues with credit claims paid 18 to 24 months after production has wrapped.  New investment in film and digital media production is, on balance, revenue positive. 

The union representing film technicians, stagehands, projectionists and many other entertainment industry workers took Senator Ron Wyden (D-OR) to task yesterday for saying he plans to hold up the PROTECT IP Act. 

Here’s the statement from Matthew D. Loeb, international president of the International Alliance of Theatrical Stage Employees (IATSE), courtesy of Oregon Film and TV Dollars, a website run by Portland-area actor Harold Phillips:

“We are disappointed that Senator Wyden has used a petty political maneuver in an attempt to derail a bill focused on foreign rogue websites that steal copyrighted content from US companies and cost tens of thousands of good middle-class American jobs every year. The Protect IP Act was voted unanimously out of committee and is co-sponsored by a dozen-and-a-half of the most distinguished members of the Senate. It’s one thing to oppose a bill, debate it vigorously and vote against it. But it’s another thing entirely to resort to a cheap parlor trick, to thwart the opportunity to debate and discuss the merits of a proposed law. We’re frankly baffled that Senator Wyden would pervert the democratic process like this, particularly knowing that his own constituents in Oregon working on “Leverage,” “Portlandia” and other shows are being victimized by rogue sites. This bill will also combat bogus medications and counterfeit auto parts from being unleashed on unsuspecting American consumers. Senator Wyden ought not to be playing political games with a bill with such widespread consumer safety and jobs implications.”

The presidents of four unions representing workers in the entertainment business have sent a message to millions of AFL-CIO members asking them to stand up against content theft. 

In a DPE (AFL-CIO Department for Professional Employees) Alert today, Ray Hair, International President, American Federation of Musicians of the United States and Canada, Roberta Reardon, National President, American Federation of Television and Radio Artists, Matthew D. Loeb, International President, Theatrical Stage Employees, and Ken Howard, President, Screen Actors, wrote:

"Ever watch TV, see a movie or listen to recorded music? Then we thank you—because your entertainment is our work.

"Not too long ago, the ways to connect to entertainment were limited. People watched TV on a television set, went to a theater for a movie and listened to recorded music on the radio (or even a record-player).

"Then came digitization and the Internet—and like other powerful tools, people have used them for good things and bad.

"We’re asking you to help counter the bad: digital theft—illegal downloads and streaming—that hurts U.S. workers, jobs, incomes and benefits. We would like you to support legislation that will help the people whom our unions represent, and many other U.S. workers, who have jobs and earn livings. And we hope you’ll ask your family and friends to steer clear of digital theft."

A House subcommittee took a closer look today at a loophole in federal law that makes it more difficult to prosecute theft of films, TV shows, and other creative works. 

Here’s the problem: although criminals use both illegal downloading and streaming to distribute stolen online content, current federal law makes only one of those methods – downloading – a felony. 

When rogue websites steal and stream a motion picture, a TV program, or a live sports broadcast, the creators of that content are just as badly harmed, if not more, but the penalty to the thief might be substantially weaker because the lack of clarity in the law leaves prosecutors reluctant to pursue felony charges. 

Today, the House Judiciary Subcommittee on Intellectual Property, Competition, and the Internet heard testimony from Register of Copyrights Maria Pallante, Copyright Alliance Executive Director Sandra Aistars, and our own Michael O’Leary on the serious threat illegal streaming poses to content creators and the need for Congress to take action. 

Some highlights from their prepared testimony:

Ms. Pallante said:

“Although streaming can implicate various exclusive rights, our current law could potentially apply vastly different penalties to this conduct simply based on the unique technology involved and regardless of the ultimate result – the illegal and unauthorized dissemination of copyrighted works. The Copyright Office believes that this disparity deserves consideration as Congress considers whether to amend the criminal copyright statutes to address streaming that causes serious harm to the legitimate market for performances of works of authorship.

“… Copyright policy is never finished. As technology makes it possible for authors to deliver their creative works in new formats and through new platforms, nefarious actors devise new ways to play the spoiler, sometimes seeking to divert profits and amass wealth illegally, other times merely to bask in the glory of interfering with and doing great harm to the investments of others. Congress has repeatedly legislated to confine these bad actors and hold them accountable, including giving prosecutors the tools necessary to do their jobs. By updating the law, Congress ensures the constitutional bargain that promotes the progress of our culture by giving authors the exclusive rights to their works for limited times.”

Ms. Aistars said:

“At a narrow level, the issue of making illegal streaming a felony crime is simply a technical clarification. Illegally disseminating other people's works without their permission should be punished the same way under law regardless of the technology used to accomplish such dissemination.

“On a grander scale, this issue is another phase in the battle between creators and lawful distributors of copyrighted works on one hand, and on the other parasitic websites that expropriate their property, diminish the compensation and pension and health benefits of creators and workers, and harm communities across the United States by depriving them of jobs and diminishing their tax revenues.”

Michael said:

“In addressing the subject of illegal streaming, it is important to note what this debate is not about. It is not a debate between technology and innovation and the creation of content. That is a false choice raised by too many people. This issue is really about favoring legitimacy over theft – about promoting and preserving creativity and production and punishing people who seek to profit through stealing the hard work of others. … The activity that is the subject of today’s hearing is not innovation, it is theft.”

Read the rest of Michael's prepared testimony here.

The Commercial Felony and Streaming Act (S. 978), introduced last month by Senators Amy Klobuchar (D-MN) and John Cornyn (R-TX), would classify the illegal streaming of copyrighted works as a felony, thereby standardizing its criminal classification with that of illegal P2P downloading.  Visit our Rogue Websites page at http://www.mpaa.org/roguewebsites for more information on this bill and the PROTECT IP Act, which would deter, prevent and root out websites that profit from trafficking in stolen content.

What do spam and stolen movies have in common?  We think: a way to prevent them.

The New York Times published a great editorial over the weekend arguing that one way to stem the flood of spam choking our inboxes would be to get banks and other financial services companies to refuse to process payments to spammers. 

A study of close to a billion spam messages and 120 purchases, presented last week at the IEEE Symposium on Security and Privacy, found that 95 percent of credit card transactions were processed by only three overseas banks.  

The Times editorialized: “This suggests that if banks or credit card companies refused to settle payments for some transactions with these banks, they could deliver a blow to the spam economy. … The concentration of business in three banks suggests there aren’t that many willing to deal with spammers. It’s certainly worth pursuing.”

The same holds true for rogue websites that host stolen films and other creative content.  Many of these sites look legitimate and charge consumers for the content they provide, not only harming the millions of Americans who work in the creative industry, but also exposing consumers to identity theft and other harms.  If credit card processors and other financial services companies refused to handle transactions for stolen content, it would make it a lot harder for thieves to operate.

In a communiqué released today, world leaders recognized the crucial role intellectual property (IP) plays in advancing the global digital economy and the need for international cooperation to protect it.

This commitment is an important step forward not only for the legitimate online marketplace, but also for transnational trade and the millions of Americans whose creativity is constantly driving innovation in this country. 

The G8 statement calls for the implementation of an international framework to effectively address IP theft and enforce the rights of owners online:

With regard to the protection of intellectual property, in particular copyright, trademarks, trade secrets and patents, we recognize the need to have national laws and frameworks for improved enforcement. We are thus renewing our commitment to ensuring effective action against violations of intellectual property rights in the digital arena, including action that addresses present and future infringements. We recognize that the effective implementation of intellectual property rules requires suitable international cooperation of relevant stakeholders, including with the private sector.

Calling the Internet “essential to our societies, economies and their growth,” the G8 leaders affirmed that “respect for the rule of law, human rights and fundamental freedoms, the protection of intellectual property rights, which inspire life in every democratic society for the benefit of all citizens…must receive the same protection, with the same guarantees, on the Internet as everywhere else.”

The Internet has presented tremendous opportunities for exchanging information and ideas quickly – aid workers are utilizing online social media networks to facilitate rescue missions; researchers are developing digital databases to rapidly share discoveries; businesses are connecting with a global base of potential customers, offering consumers choices like never before.  No one could have predicted the societal good that has come from the worldwide interconnectivity afforded by the Internet.

Unfortunately, the laws and regulations put in place to protect consumers and innovation in the physical marketplace have not kept pace with the growth of illegal conduct online. The anonymous theft and ubiquitous, illegal distribution of American-made content places at risk the livelihoods of the 2.4 million U.S. workers in the film and television industry who invest time and energy to create entertainment enjoyed by millions. To the largely middle class workforce that makes up our creative community, digital theft means declining incomes, lost jobs, and reduced health and retirement benefits.

Enforcing the rule of law on the Internet ensures a safe environment for all users and fosters economic growth.  All countries have a stake in this fight; the harm perpetuated by content theft and other cyber crimes transcends national borders.

We commend the G8 leaders for recognizing that the global nature of the Internet requires an international framework for effectively addressing online content theft, and we look forward to working with them to implement strong, enforceable standards to protect our creative community here and abroad.

When it comes to protecting creative expression in America, where do our leaders stand?  Some of the answers may surprise you.   

Yesterday, U.S. Senator Ron Wyden (D-OR) announced a plan to obstruct the PROTECT IP Act, a bipartisan bill sponsored by Senate Judiciary Committee Chairman Patrick Leahy (D-VT), leading Judiciary Committee Republicans Orrin Hatch (R-UT) and Chuck Grassley (R-IA), and 13 other Republicans and Democrats, which was approved yesterday – unanimously – by the Judiciary Committee. 

Senator Wyden has stated that he will try to prevent the full Senate from debating or voting on this critical legislation,  claiming that it would “muzzle speech and stifle innovation and economic growth.”

We respectfully disagree – and so do American workers.  In a recent blog post, the AFL-CIO, which represents 12.2 million working men and women in this country, praised the PROTECT IP Act, saying it would preserve jobs and strengthen intellectual property rights. 

As AFL-CIO President Richard Trumka wrote:

The economic well-being of workers in the United States—jobs, income, and benefits—turns more and more on our protecting the creativity and innovation that yield world-class entertainment, cutting-edge and sustainable manufacturing and construction, and disease-ending pharmaceuticals. In a tough economic time, the PROTECT IP Act will help to protect U.S. workers and consumers against digital thieves and counterfeit scammers.

Paul Almeida, President of the AFL-CIO Department of Professional Employees (DPE), added:

Digital theft costs the arts, entertainment, and media industries billions of dollars and hundreds of thousands of jobs. For these skilled professionals, online infringement is wage theft.

The PROTECT IP Act will also be an important safeguard of free speech.  As Constitutional expert Floyd Abrams has written:

It is one thing to say that the Internet must be free; it is something else to say that it must be lawless.  Even the Wild West had sheriffs, and even those who use the Internet must obey duly adopted laws. …

Copyright violations are not protected by the First Amendment … [The PROTECT IP Act] does not impair or overcome the constitutional right to engage in speech; it protects creators of speech, as Congress has since this Nation was founded, by combating its theft.

The truth couldn’t be clearer.  Foreign based rogue websites that steal and sell or give away American movies, TV shows, and other creative products endanger jobs, cut into our GDP, and put the consumers who use them at risk of identity theft or credit card fraud.  

We know where we stand, and we know where the 16 bipartisan sponsors and co-sponsors of the PROTECT IP Act stand: with the millions of Americans working in entertainment, the arts, and media whose jobs are threatened by content theft.  Where does Senator Wyden stand?