January 7 2014

The Real Story Behind Hollywood's Villain

Sabrina Schaeffer

CBS’s 60 Minutes ran a human interest story Sunday night on “Hollywood’s Villain,” also known as Kim Dotcom, the founder of the $2.5 billion file sharing company Megaupload. The story was an interesting, voyeuristic view into DotCom’s background and lavish lifestyle; but it missed an important opportunity to explain why the case against DotCom and Megaupload is really so serious.

The story is simple: Kim DotCom (formerly Schmitz) is originally from Germany, a hacking genius, and Internet entrepreneur. In 2005 he founded the file sharing company Megaupload, which allowed it’s more than 180 million registered users a chance to share content that was too large to send by email (e.g. a wedding video, as referenced by CBS). It also allowed users to share copyrighted material like full-length movies, television shows, and music. And files released by the Justice Department revealed it was this illegal side of Megaupload that was the real source of revenue and resulted in indictments against Dotcom with crimes related to online piracy, including racketeering, conspiring to commit copyright infringement, and money laundering. Shortly after there was a dramatic raid on Dotcom’s home in Auckland, New Zealand where $17 million worth of assets were seized and bank accounts frozen.

To be fair, CBS didn’t portray Dotcom in a positive light – in fact, they turned him into an almost laughable, comic-book style villain poised to take over the world. But still they had an opportunity to do more – to reveal his real damage.

When Megaupload was in business an average of 50 million users visited the site daily. It accounted for approximately 4% of total internet traffic.  And the film industry charged Megaupload cost them $500 million in lost movie sales.

Perhaps it’s easy for many to shrug off Megaupload as just the “cost of doing business” for the behemoth film industry, but it’s much more than that. For starters, making a movie costs a lot of money – upfront, with no guarantee of a return on investment. From movie rights, to lawyers and contracts, to site scouting, set building, catering, and advertising there is a huge amount of investment that goes into creating a film. And pirated material doesn’t just impact the multi-million dollar actor, it affects the carpenter and the florist and the food deliveryman, as well.

But as Carrie has written here before, copyright law is an important tool that we have to protect innovation, creativity, and economic growth. And a failure to protect intellectual property rights has serious consequences for individual Americans, businesses large and small, as well as the economy at large.

I’m glad 60 Minutes shed some light on this story, but beyond all the glitz and glamour of Dotcom’s lifestyle is a serious criminal leaving a lot of damage in his wake.

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