Conclusion

Internet piracy does have some negative effects to E-commerce, but probably not as bad as the Motion Picture Association of America and Recording Industry Association of America have led people to believe.  While many users have downloaded thousands of songs and movies illegally, it's extremely unlikely that any of these pirates would have actually spent thousands of dollars on these products if they weren't available in pirated form.  Websites such as Mega-Upload (before it was shut down) may have even improved E-commerce from the ads displayed on their websites, considering Mega-Upload and its sister sites had about 11% of all global traffic.  In fact, after Mega-Upload was shut down, global internet traffic immediately decreased by 3%  (http://www.bgr.com/2012/02/09/megaupload-shutdown-did-nothing-to-slow-piracy-study-finds/).  Less ads viewed means less products sold.

Without complete control over the content on the internet, it seems impossible for the government to make sure there is no copy-write infringement.  Pirates will always find a way around these barriers, which makes it seem inevitable that there will be government regulation of the internet as a whole, someday.  Until then, it is hard to say how piracy effects E-commerce.  The simply black and white answer is that it negatively effects E-commerce because it allows people to get free music, movies, and software without paying for it.  However when you look at the increase in internet traffic directly related to piracy, it is very possible that these advertisements lead to a high volume of sales in other sectors outside of the entertainment and software industries.

The recent failures of SOPA and PIPA lead me to believe that the internet as we know it will stay the same for some time.  However, this will probably not last forever.  Hopefully the government can come up with a better anti-piracy bill that will actually stop criminals, without effecting other honest websites.

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