Extortion (12 page)

Ever since the Internet exploded as a platform for pirating songs, movies, and television programming, the problem had festered. And Joe Biden, back when he was still in the Senate, had discovered that it was both an important issue
and
a lucrative tool for fund-raising (which is not true of every important issue, to be sure). As chairman of the Senate Judiciary Committee, he had been considered a good friend of Hollywood. When he became vice president, he amped up his support. And why not? Piracy was unquestionably illegal, and Hollywood had contributed massive sums of money that had helped buoy the Obama-Biden ticket in 2008.

In December 2009, Biden convened a meeting in the White House Conference Center with twenty-five titans from the entertainment industry to make a serious push to combat online piracy. The high-wattage meeting included Edgar Bronfman of Warner Music Group, Michael Lynton of Sony Pictures, Warner Brothers’ Barry Meyer, and Jeff Zucker from NBC Universal. For good measure, Biden had Attorney General Eric Holder, Commerce Secretary Gary Locke, and the head of Homeland Security make appearances to lend their support. But this was Biden’s show. He pledged that the Obama administration would be more aggressive on the issue. “It offends me that the international community has treated this as a mild irritant. It’s flat unadulterated theft, and it must be dealt with,” he said.
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The Obama administration installed lawyers in the Department of Justice who had litigated for the Recording Industry Association of America, and the president appointed a new and aggressive intellectual property enforcement coordinator to fight for Hollywood. Biden showed up regularly at board meetings of the Motion Picture Association of America (MPAA), the industry-lobbying group, something that had never previously been done by such a senior government official.
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Online piracy, he told the MPAA, “is pure theft, stolen from the artists and quite frankly from the American people.”
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Biden was not one to mince words. He declared that copyright theft was like “smashing the window at Tiffany’s and reaching in and grabbing what’s in the store.”
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The VP took the same message overseas, pressing foreign governments to crack down on pirates. From Russia to China, he chided foreign leaders.
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Back at home, on June 23, 2010, Biden announced an interagency strategy to protect intellectual property rights.
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The studio bosses and the Hollywood unions wanted more than talk. They wanted a federal law with teeth. Instead of trying to get the Chinese government to do something, they wanted to force U.S. search engines like Google and Yahoo to block access to websites that allowed illegal downloading of pirated materials. And they wanted Internet service providers to be responsible for doing the same. Legislation on the subject, introduced in 2009 and 2010, had gone nowhere. Now, working closely with Biden’s office and politicians from both sides on Capitol Hill, the studios helped craft two bills—one introduced in the House on October 26, 2011, called the Stop Online Piracy Act (SOPA), and another introduced in the Senate on May 12, 2011, called the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011 (PIPA)—and vowed to make a full-court press to pass them in 2011.
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In February 2011, Biden invited industry leaders to the White House again to plot strategy.
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All of this took place as the Obama administration was gearing up for the 2012 election. And there were concerns that they might have trouble raising money. As the
Washington Post
put it in April 2011, “There were some signs that fervor for Obama in Hollywood and Silicon Valley has ebbed.”
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The
Hollywood Reporter
explained, “As the 2012 election fund-raising cycle heats up, the one-time darling [Obama] is finding far less enthusiasm from showbiz donors.” The “disenchantment is incredibly palpable.”
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The concern was less about Hollywood celebrities and performers—they tended to donate to candidates based on ideology or beliefs—than about the studio “suits” and their khaki-wearing, high-tech-firm counterparts who were troubled by the slow-growing economy. And enthusiasm had ebbed among the vast base of middle-class customers of these industries. There was a lot of concern within the campaign that smaller online donations might not match what had happened in 2008. The
New York Times
was reporting that many small Obama donors were “disgruntled.”
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The campaign needed the “suits” and the “khakis” to step up. Wall Street firms had given generously in 2008, but they too were much less motivated to give for the 2012 election. In short, online piracy presented the perfect double-milker. Pitting the suits against the khakis meant that Team Obama could extract more money from both industries at a time when fund-raising was proving to be more difficult than expected.

The Obama campaign began in April 2011 by holding fund-raising events in California, targeting those who were on both sides of the online piracy bill.

The president boarded Air Force One and headed to San Francisco for a series of fund-raisers in the Bay Area with the khakis, who were opposed to the antipiracy legislation. Along with a visit to the Palo Alto headquarters of Facebook, where he cohosted a town-hall-style meeting with Facebook founder and CEO Mark Zuckerberg, the president attended two fund-raisers.
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The next day, the president held two events at Sony Pictures, where the chairman and CEO was an Obama supporter and a huge advocate of cracking down on Internet piracy. (“I’m a guy who doesn’t see anything good having come from the Internet,” he told one conference.
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) The first event was a classic merging of Hollywood and politics. One thousand people crowded into Lot 30, where the studio had just finished filming
The Amazing Spider-Man
(the fourth installment in the successful franchise). Actor Jamie Foxx got up onstage to rev up the crowd.
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When President Obama walked out, it was with U2’s “City of Blinding Light” blasting out of the audio system. After a speech, the president slipped offstage for a small dinner at the Sony Commissary hosted by Michael and Jamie Lynton. Admission to the dinner cost $35,800 a pop.
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Then it was off to another fund-raiser with Hollywood executives at the Tavern in nearby Brentwood. There film producer Jeffrey Katzenberg of DreamWorks introduced the president before he spoke.
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White House officials were interspersed with the studio execs. White House senior adviser David Plouffe sat next to Katzenberg. White House press secretary Jay Carney broke bread with filmmaker Steven Spielberg. Actor and producer Tom Hanks was in attendance. “Hey, this is a private event,” he quipped to the gathered media.

Thanks to that trip, April 2011 ended up being a very good month. The DNC bagged $12.4 million, largely from big checks donated to the Obama Victory Fund. It was twice what the Republicans raised.
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The timing of these April fund-raisers was perfect. PIPA, the Senate version of the online piracy bill, was being drafted in Washington at that very moment with the help of lobbyists from the MPAA. Just weeks later, on May 12, it was introduced in the Senate Judiciary Committee.
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With key support from Senate Judiciary Committee chairman Patrick Leahy and ten others, the bill gained momentum quickly. By the end of the year, the bill would boast forty cosponsors. The suits in Hollywood were pleased.

PIPA had clear bipartisan support. Some of the cosponsors were obvious: Senator Al Franken had been in show business for decades, and Senators Dianne Feinstein and Barbara Boxer represented the state of California. Republican supporters included Senator Lamar Alexander from Tennessee (home of the country music industry) and Senator John McCain. It didn’t take long for the bill to start moving. By May 26, the antipiracy bill had cleared the Senate Judiciary Committee with a unanimous vote.
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That’s when the real battle began.

For online companies Google, Microsoft, eBay, Yahoo, and others, the Senate antipiracy bill and its House counterpart posed an enormous threat. Eric Schmidt, the executive chairman of Google, warned that antipiracy bills would “criminalize linking and the fundamental structure of the Internet itself.”
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Google’s Policy Counsel told a congressional committee that the law would “undermine the legal, commercial, and cultural architecture” of the Internet.
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The tech publication
CNet News
declared that the bills amounted to a “death penalty” for websites.
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Now the milking could begin in earnest. Hollywood had already been squeezed. When PIPA passed the Senate, two deep-pocketed cash cows found themselves in a kind of arms race that the Permanent Political Class could only have dreamed about until then. For the extraction industry in Washington, it was boom time.

Particularly exciting for the Permanent Political Class was the fact that Silicon Valley was suddenly fully engaged. Getting tech nerds to pay tribute to Washington had always been a difficult proposition. Many in the high-tech field tend to be libertarians—they just want to be left alone. And given the intensely competitive nature of the industry and the fast pace of innovation, politics is largely seen as a distraction. “They would rather be innovating,” Bob Herbold, the former COO of Microsoft, told me. The Permanent Political Class was offended by this fact. “The [tech] industry had an attitude that government should do what it needs to do but leave us alone,” one Hill staffer told
BusinessWeek
. “Their hands-off approach to Washington will come back to haunt them.”
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When Microsoft emerged in the 1990s as one of America’s richest companies, it embodied this tech-nerd attitude. It had only a small group of lobbyists who worked out of Microsoft’s local sales office in Chevy Chase, Maryland, and campaign contributions from Microsoft execs were a rare occurrence. “Bill [Gates] was proud of both of these facts,” Herbold, who was COO at the time, told me.

As far as the Permanent Political Class was concerned, that simply would not do. The tech nerds needed to be put in their place. One lobbyist at the time told author Gary Rivlin, “You look at a guy like [Bill] Gates, who’s been arrogant and cheap and incredibly naïve about politics. He genuinely believed that because he was creating jobs or whatever, that’d be enough.”
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The company changed its tune when the Department of Justice brought an antitrust case against Microsoft. At the time, virtually all PC users relied on Microsoft’s operating system, which gave the company the leverage of a platform. When they used that leverage to nudge users toward their own Internet browser and away from an initially popular competitor from Netscape, the government pounced. Microsoft soon had to ramp up its lobbying and donations. “We had to set up operations in Washington, and Bill hated that sort of thing,” recalls Herbold. “So I had to do it.” They were directed to hire certain well-connected advisers and lobbyists in Washington. “You hear about bribery in China,” says Herbold. “They have nothing on us. We are just more sophisticated about it.”

Campaign contributions started to flow. Microsoft even began hosting an annual “Capitol Hill Family Game Night” for politicians and their families.
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With a fleet of Xbox 360s and a stack of the latest games, the event allowed lawmakers and staffers to learn about the latest game developments—for “educational purposes,” of course. But the event also provided another small way to keep Washington entertained and off Microsoft’s back. Not to be outdone in their attempts to entertain and influence the political class, the Motion Picture Association of America gives free screenings at its Washington headquarters for politicians and bureaucrats, arguing that these screenings were not social events but part of important intellectual endeavors for the Permanent Political Class. “The substantive content of the movie may be relevant, while to others it might be the opportunity to see in action the latest movie making techniques, or to put into context what they are learning regarding the challenges facing the industry.”
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Of course.

With the emergence of many other high-tech firms as fat cash cows waiting to be milked, politicians started advising the tech nerds to pay attention to Washington. Senator Orrin Hatch, who was then chairman of the powerful Senate Judiciary Committee, spoke for many in Washington, D.C., when he told tech company executives at a conference, “If you want to get involved in business, you should get involved in politics.”
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When Microsoft decided it didn’t want to play the conventional Washington game, Hatch called the company “knuckle-headed and hard-nosed,” according to
Wired
magazine. “I have given [Microsoft] advice and they don’t pay any attention to it.”
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Getting involved in politics includes, of course, making campaign contributions, as well as hiring family members and allies in the influence industry. It means doing favors for elected and unelected government officials. To make that happen here, Congress needed to put fear in the hearts of high-tech executives. “Members [of Congress] see a high-growth industry and they automatically think we have a lot more money to give,” one lobbyist told
Roll Call
. “I think they are always surprised with how little money is out there for them. This is not the banks, or the pharmaceutical industry, or transportation, which are highly regulated. Tech is not highly regulated.”
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