Lighter Penalties for Illegal Streaming Reduces Artists’ Revenue and Hurts Consumers

A loophole in federal law treats some forms of online copyright infringement far more leniently than others, hurting both producers and consumers of music, movies, TV shows, and other creative content.

Under current law, downloading copyright-infringing digital material is a federal felony punishable by up to five years in prison and a $250,000 fine, while streaming the same movie, TV show, or music file is merely a misdemeanor punishable by up to a year in prison and a $100,000 fine.

While misdemeanor penalties might dissuade casual infringers, those who traffic in large-scale piracy are rarely deterred. Given their limited resources, federal prosecutors are often reluctant to pursue misdemeanor charges at all – and operators of illicit websites know it.

This discrepancy in how the law treats illicit streaming and downloading has no principled basis. When it comes to protecting the intellectual property rights of content creators, there is no meaningful distinction between downloading and streaming a misappropriated work. The Department of Justice has been urging Congress to increase the penalties for illegal streaming for years, but so far the requests have fallen on deaf ears.

Since the 19th century, Congress has periodically updated copyright laws and penalties to adapt to new technologies and respond to emerging infringement threats. Yet it’s been more than 20 years since lawmakers enacted the last significant revision of the criminal laws for online copyright infringement, despite rapid improvements in connection speeds and the growing popularity of internet streaming.

And if you think rich Hollywood studios are the only ones harmed by illegal streaming, think again. About one-third of websites that stream copyrighted content for free hide malware in their files that bombards users with ads, takes over their computer, and can potentially steal personal information, researchers have found. Since malicious software can infect a computer just by visiting a site, users are often unaware of their data is at risk.

In addition, piracy results in staggering losses to copyright owners, cutting into the entertainment industry’s profitability, reducing its creative output, and depriving consumers of high-quality content. The global value of digital piracy in movies and music was estimated to be $189 billion in 2015, and forecasters predict that by 2022 that figure could quadruple to $761 billion.

Illicit streaming websites already account for the majority of pirated content, and their popularity is expected to increase steadily as high-speed internet becomes more widely available.

The legitimate streaming marketplace, where Hulu, Amazon, Netflix, and other companies have unleashed an explosion of innovation and creativity, is increasingly threatened as streaming piracy spreads.

As another example, consider the film industry. Piracy can result in massive losses in box office revenues and digital sales. For instance, it’s estimated that Expendables 3, which was leaked online a few weeks before its release in 2014, lost about $100 million dollars due to piracy.

Although we mostly hear of blockbuster movies that generate hundreds of millions of dollars in profit, the reality is that many filmmakers struggle to finance their projects; for them, piracy can mean the difference between earning a small profit or losing money. Studios are increasingly reluctant to fund innovative films with a small chance of commercial success, and independent productions are finding it harder to attract investors.The data bears this out. A 2017 study in the George Mason University Law Review found that the number of Academy Award-winning films financed by higher piracy countries has decreased relative to the number of Academy Award-winning films financed by lower piracy countries, suggesting that piracy can cause a decline in film quality. Research has also found that the growth in piracy in India from 1985 to 2000 led to a marked drop in the number of new movies released from Bollywood.

Legislation pending before Congress would increase the criminal penalties for illegal streaming, giving prosecutors the tools to go after willful, large-scale infringers – like commercial piracy device sellers and illicit website operators – without affecting average YouTube creators and internet users.

To strengthen the financial incentives for artists to create the works we all enjoy, and protect consumers from malware, Congress needs to act. When those who facilitate large-scale infringement are held accountable, we all win.

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