Darwin Tells the Democrats to Dump Hollywood

Brendan I. Koerner writes in the Washinton Monthly that Democrats are smooching entertainment industry glute to their own and the country’s detriment:

These proposed laws are bad enough for consumers. But the greater evil is their long-term impact on economic growth. By yielding to Big Entertainment’s every whim, Democrats are harming an industry that promises to be a much greater engine of growth–Silicon Valley. Consumers demand such high-tech hardware as computers and TiVos precisely because they want to be able to take advantage of new technology and record TV shows, burn CDs, and swap MP3s, regardless of whether Hollywood deems such activities predatory. To give an idea of the promise this holds for new businesses, MP3 vendor SONICBlue, for example, had sales of $300 million in 2001 (without spending a penny on advertising). What Democrats tout as “anti-piracy measures” would strip these devices of their most marketable qualities, or at least make it illegal for consumers to use them to their hearts’ content. “Any attempt to inject a regulatory process into the design of our products will irreparably damage the high-tech industry,” testified Intel vice president Leslie Vadasz before the Senate Commerce Committee last March. “It will substantially retard innovation, investment in new technologies, and will reduce the usefulness of our products.”

Though there’s an element of Hollywood hyperbole to Vasdasz’s alarms, it’s worth noting that Silicon Valley’s economic health is more vital to the nation than its relatively modest Beltway presence might indicate. The tech industry’s annual revenues are more than 10 times those of Hollywood’s, and it creates jobs across a much wider spread of the country. While Big Entertainment continues to be centralized in New York and Los Angeles, high-tech has roamed much farther afield from its Northern California roots, from Washington (Microsoft) to Texas (Dell) to Virginia (AOL).

Just as important, Silicon Valley has its own crusade, and one that inevitably conflicts with Hollywood’s: the widespread adoption of high-speed Internet connections, which just 12 percent of American homes have today. The rationale is simple: Faster connections mean more productivity, and thus more demand for software and services. As Robert Crandall of the Brookings Institution noted in a report last year, even a modest upsurge in the number of homes equipped with broadband access would add $500 billion to the gross domestic product. So far, however, consumers are balking–because there’s no “killer app” yet to convince them to spend $50 month on broadband access. What kind of killer app do consumers want? Movie and music downloads, the report concludes, that are “readily available, easily understood, and offered at reasonable prices.”

….Instead of blindly kowtowing to the anti-competitive demands of Hollywood, the Democrats could make real political gains by encouraging innovative compromises that recognize the crucial role that content can play in promoting broadband. One idea that merits further study is the Intellectual Property User Fee (IPUF), a small surcharge on ISP accounts akin to the taxes on telephone bills that support universal phone service. This money could then be used to compensate Hollywood for its “generosity” in letting flourish the file-sharing services that will drive broadband’s growth–growth that, in turn, will eventually provide a new market for Hollywood’s content. Economically, it’s a win-win situation.

….The last time the Democrats triumphed, it was all about the economy, stupid. That message could still work in 2004, but only if the party wises up to Hollywood’s self-serving role in curbing broadband and, in turn, stifling greater economic prosperity for those living outside the 90210 zip code. Hollywood, in its attempts to outlaw digital technology, has been compared to a dinosaur shaking its claw at the approaching comet. Note to the Democrats: The dinosaurs got creamed.