What Stocks Benefit Most From SOPA?
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The Stop Online Piracy Act, otherwise known as SOPA is stirring up controversy in Washington and if passed, it could shift things around on Wall Street. There has already been a public outcry against the bill backed by protests by Wikipedia, Google (NASDAQ: GOOG) and other businesses which would be directly affected by the legislation. Putting aside the ramifications that the bill would have on Americans’ freedoms and the precedent that would be set, how would the bill affect the major players in the entertainment and tech industries? Who wins and who loses if the Stop Online Piracy act is passed?
Companies such as Walt Disney (NYSE: DIS), Time Warner Cable (NYSE: TWC) and Liberty Media (NASDAQ: STRZA) seem to have plenty to gain from this legislation. Their claim is that internet piracy cuts into the profits of every entertainment company due to the illegal distribution of movies, music, television shows and other copyrighted media. I feel that the entertainment industry has overlooked just how powerful the internet has become for generating its own profit, however, and if companies such as Google were to withdraw from media ventures such as YouTube and other video streaming services, the results could very well be catastrophic for the entertainment industry as a whole.
Newspapers, television stations and musicians have all been turning to the internet as the source of their survival over the past decade as the world relies more heavily on the internet to obtain its information, shop for goods, listen to music and rent or buy films. Traditional media has seen a steady, if not rapid decline over the last ten years and the internet has become a highly effective and efficient marketing tool. Google owned YouTube passed 3 billion views per day in 2011 to show just how valuable advertising space is on the site as it is incorporated into the beginning or end of videos.
YouTube has been one of the main targets of the entertainment industry because it gives users the ability to upload their own content— some of which is copyrighted material. The site has been sued in the past by companies such as Viacom (NYSE: VIA-B) over copyright infringement and Google has implemented policies designed to detect and remove copyrighted content, but the sheer amount of uploads to the site makes it impossible to police every video and prevent all incidents of copyright infringement. According to current copyright laws, websites must take down material that infringes on creative license and copyright when it is discovered but SOPA would allow sites that had offending material to be blacklisted and removed from search engines such as Google and Yahoo! (NASDAQ: YHOO).
Google’s previous stances on internet censorship suggest that the company won’t go down without a fight. It may flat out refuse to censor the internet and it wouldn’t want to police the vast amount of YouTube videos that are uploaded on a daily basis. It is my belief that Google would wash its hands of YouTube in its entirety in the event SOPA was signed into law out of the fear of litigation and others would begin to follow in the Google’s wake. Apple (AAPL) would need to change how its iPhone operated and spend an exorbitant amount of time policing its apps in order to be sure no copyrighted material was being accessed over its devices.
A SOPA law would also greatly change the way the public used the internet in general. Netflix (NASDAQ: NFLX), an already embattled company, would lose subscribers who decided that it wasn’t worth it to rely on the internet for media anymore for fear of legal action. The chaos that SOPA would bring to the technology market would be unprecedented and there would be a major shift in how companies continued to do business both online and offline as the chips began to land. I don’t feel that any of the players we see currently in the game would benefit from the new internet that would result, however.
There already exists a growing public disdain toward the entertainment industry that has existed for a long time now. Consumers have expressed anger toward Walt Disney’s price manipulation of its movies through limited releases before throwing them back into the vault and they have been so displeased with Time Warner that one man took out an ad in two major newspapers to display an angry letter that compared the company to a dictator and a serial killer. The implementation of SOPA will change the internet and a lot of people will be looking for someone to blame. The entertainment industry will take that fall and consumers will do anything they can to walk away from the very companies that pushed for SOPA.
Soon after Wikipedia and Google protested the SOPA bill, law makers were met with an outpouring of public opposition toward the legislation from constituents who wrote their Senators and Representatives. The amount of lawmakers opposed to the legislation has increased since then but the battle is not over and much is undecided. We can only hope that the bill is not passed into law because the effects will be widespread across the entertainment and technology industries. Who benefits most and who loses? No one benefits and everyone loses.
Motley Fool newsletter services recommend Walt Disney, Google, Netflix and Yahoo!. The Motley Fool owns shares of Google and Yahoo!. IUMFool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.