(Photo: Srikrishna K)
Supporters of stronger intellectual property enforcement — such as those behind the proposed new Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA) bills in Congress — argue that online piracy is a huge problem, one which costs the U.S. economy between $200 and $250 billion per year, and is responsible for the loss of 750,000 American jobs.
These numbers seem truly dire: a $250 billion per year loss would be almost $800 for every man, woman, and child in America. And 750,000 jobs – that’s twice the number of those employed in the entire motion picture industry in 2010.
The good news is that the numbers are wrong — as this post by the Cato Institute’s Julian Sanchez explains. In 2010, the Government Accountability Office released a report noting that these figures “cannot be substantiated or traced back to an underlying data source or methodology,” which is polite government-speak for “these figures were made up out of thin air.”
More recently, a smaller estimate — $58 billion – was produced by the Institute for Policy Innovation (IPI). But that IPI estimate, as both Sanchez and tech journalist Tim Lee have pointed out, is replete with methodological problems, including double- and triple-counting, that swell the estimate of piracy losses considerably.
So what’s the real number? At this point, we simply don’t know. And this leads us to a second problem: one which is not so much about data, as about actual economic effects. There are certainly a lot of people who download music and movies without paying. It’s clear that, at least in some cases, piracy substitutes for a legitimate transaction — for example, a person who would have bought the DVD of the new Kate Beckinsale vampire film (who is that, actually?) but instead downloads it for free on Bit Torrent. In other cases, the person pirating the movie or song would never have bought it. This is especially true if the consumer lives in a relatively poor country, like China, and is simply unable to afford to pay for the films and music he downloads.
Do we count this latter category of downloads as “lost sales”? Not if we’re honest.
And there’s another problem: even in the instances where Internet piracy results in a lost sale, how does that lost sale affect the job market? While jobs may be lost in the movie or music industry, they might be created in another. Money that a pirate doesn’t spend on movies and songs is almost certain to be spent elsewhere. Let’s say it gets spent on skateboards — the same dollar lost by Sony Pictures may be gained by Alien Workshop, a company that makes skateboards.
As Mark Twain once wrote, there are three kinds of lies: lies, damned lies, and statistics. However true that may be in general, statistics can be particularly tricky when they are used to assess the effects of IP piracy. Unlike stealing a car, copying a song doesn’t necessarily inflict a tangible loss on another. Estimating that loss requires counterfactual assumptions about what the world would have been like if the piracy had never happened — and, no surprise, those most affected tend to assume the worst.
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Thank you for writing this. It echoes much of my thinking on “IP Piracy” and the assumptions of how much damage it does to the economy and even individuals.
Interestingly, it may create some free rider issues, but on the whole the fundamental assumptions that are made in estimating the damage to the economy are highly suspect, and likening IP infringement to theft is equally disengenous.
Thank you, for putting the spotlight on some of the Industry assumptions which are clearly erroneous.
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This link from the Swiss Government is in German (but Google will translate it for you if you don’t know German).
http://www.ejpd.admin.ch/content/ejpd/de/home/dokumentation/mi/2011/2011-11-30.html
The interest part is they concluded that piracy doesn’t change the spending on media very much, though it probably shuffles the winners and losers a bit.
My own thought is that a lot of improperly copied material is stuff that would not have been purchased at full price anyway, and that there is a significant marketing component to downloaded material. I also believe that a lot of such material is downloaded either because it is otherwise unavailable, or because the legal packaging is inappropriate. There are also derived works of merit that aren’t properly licensed but that bring value as derived works, and may prompt sales of the original.
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Of course there has been counter research in recent years that shows bittorent users actually being higher spenders on music and movies than none users. ie: there could well be a trend of ‘try before you buy’ or even that they are supplementing an already large content spending habit that probably couldn’t have been stretched much larger.
For balance I would love to know whether the counter research is just as bogus and flawed or what the reality really is (I would guess somewhere in the middle?)
Rather than just dismantling the flawed measures and data of the SOPA lobbyists (which is just too easy a target), what should be the measures both for and against by which the pros and cons of a world with or without privacy can be compared?
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Great article, and oh so true!
My family ‘pirates’ a great deal of media because we live outside our native culture and it is simply not available where we live. I recently sat down and worked out how much money we had ‘saved’ by pirating, vs. how much we’d spent on merchandise (talking a lot of kids’ stuff here), books, theme park visits when back in country etc. – all directly related to the ‘pirated’ content. Unsurprisingly, the ‘piracy’ victims have received more from our subsequent investment in their products as a result of our ‘piracy’ than they would have had we not known about their product or engaged with it so by downloading it. Add on top of that the technology investment in connection, software & hardware and flights back to our country to visit related museums and theme parks etc and it is abundantly clear that our piracy has not only not harmed anyone at all, but it has hugely benefitted the pirated parties and a host of other industries and entities.
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While everyone attempts to justify their beliefs/actions, by using analogies of whether something is actually lost or not, there’s still one factor that they choose to ignore. No matter how you look at it, piracy is still theft and under copyright laws, it’s still illegal.
I wonder how many would feel the same way, if it was their time, effort, money and other work that went into the development, production and distribution of the “work” and had people stealing their product?
With that said, I certainly don’t support SOPA or the Protect IP act. We already have laws that govern the theft of copyrights and I don’t need big brother to protect me.
Hot debate. What do you think?
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Actually, (IP) piracy is NOT theft. It may still be illegal under copyright law, but having the statutory framework that protects IP owners is a fairly arbitrary law in the first place.
The problem is that you call it ‘stealing’ and ‘theft’ when it actually isnt. Those words carry ver specific legal connotations with them, deriving from the common law CRIME of larceny.
Now, Larceny has several elements to it, two of them being “asportation” (moving the object) and “intent to deprive the true owner of possession permanently.” The problem, when using theft or stealing or larceny to describe IP theft is that there is no way to deprive the true owner of possession, or use, or anything when the thing you’re talking about stealing is not a tangible object.
At best, you are depriving them of a ‘opportunity’ for a sale, under the assumption that one who pirates will not buy something or has not bought it (which may not even be a valid assumption).
In the end, the effort to define IP piracy as a “Crime” is one engineered and manufactured by the content lobbies (RIAA, MPAA, ESA). In reality, there is very little criminal action when it comes to user level piracy.
Yes, it’s illegal, but to call user level piracy theft, or stealing, or even a “crime” is not accurate.
For the record, if you want to go back it’s actually closer to the common law tort of Conversion, but suffers from a similar problem because intellectual property doesn’t have the same property rights attatched as “chattles” which were the things originally intended to be governed by conversion.
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When a majority or significant minority engages in an activity that is illegal, and do not feel it is wrong, you have a different problem.
There is no doubt some people download instead of buying. In other cases, the music or movie is unavailable. Try to buy the Star Wars Christmas Special or the soundtrack for obscure movies. How is IP worth anything if it is not available for sale? It’s worthless. Worse yet are debacles like the movie “Sita Sings The Blues”. The director used an obscure torch singer from the 30s thinking the music was in public domain. One her heirs showed up and sued for more money than the film was worth. The director finally agreed to hand over all profits then released the film to public domain. The film was pretty much spoiled and no one made any money except the lawyers. It was stupid. A successful film could have rekindled interest in the singer and made money for the rights holder.
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Jim, as a person who works pretty heavily in the open source software field, it makes me extraordinarily happy when people copy the work of my associates and I. The more our work is copied, the more popular we become, which in turn opens up massive new opportunities. Right now, our software is used by about a million people. That is INTENSELY awesome. My general opinion, therefore, is that, if I can make a living (and maybe even potentially become pretty well off) while people are using and copying my work for free, then hooray! Does that answer your question?
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Think of piracy as a market issue. People want content, but it is made difficult (or impossible) to obtain that content legally. There are country codes, and unskippable commercials on DVDs. There is DRM on some music, etc. Some places media simply is not available because you live in the wrong country, or the content owner doesn’t make it available.
If it were as simple and easy to obtain media legally as it is to pirate it, people will purchase it. Take a look at iTunes, or Netflix, or any other legal media outlet. Make things simple, quick and easy to access, without all the headaches that are currently attached, and piracy will go down on its own.