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Mar 7, 2011

Data download: lies, damned lies and piracy reports

Illegal downloading will cost the industry over $5 billion by 2016 and "8000 fewer jobs in the core content industries last year", according to a report in Fairfax papers. But that's not telling the whole story.

Always keen to advertise how downloading of content is a serious crime, the copyright industry got some great free publicity in the Sunday papers when Fairfax covered a report claiming that downloading music, movies and software was costing us $900 million a year. According to the report — or, at least, the article about the report — that cost would rise to over $5 billion in 2016 and there were “8000 fewer jobs in the core content industries last year” because of downloading.

The advertising came complete with a case study of one, now suitably remorseful,  “pirate”, James Burt, and the suggestion that “it seems we’re all James Burt now”. The one problem with that was that Burt was convicted of uploading a pre-release copy of a new game, not downloading anything, but as we know from NBN media coverage the whole upload/download difference is a problem for some.

Now, if you’re thinking that there’s something familiar about claims about the cost of internet piracy, you’re right. They’re a bit of a staple of the copyright industry and its operatives. The Australian Federation Against Copyright Theft — a front group for the major Hollywood studios — has for some time cited an LEK report from 2006 showing piracy costs the movie industry $230 million annually in Australia. That was part of an international study that costed piracy at $6 billion globally, although the report itself wasn’t released, and eventually the Motion Picture Association of American admitted problems with it.

But in 2008, Home Affairs Minister Bob Debus claimed that a report to state and federal police ministers showed DVD piracy was costing $1.7 billion a year. This was allegedly only the cost of pirated DVDs, not of downloading as well. How did we get from all piracy costing $230 million annually in 2006 to just one, rather quaint, form of piracy costing seven times that in 2008? Good question.

Debus stood up in parliament and used the figure, saying DVD counterfeiting operations were linked to “illegal weapons, drugs and child p-rnography”. “I do urge the public,” Debus, um, urged, “to stop and think where their money might really be going next time they pay 10 bucks for a cheap DVD.”

Last month there was another report commissioned by the big studios, this time from IpsosMediaCT and Oxford Economics. It concluded movie piracy cost the economy $551 million, cost taxpayers $193 million and cost more than 6000 jobs.

For a long time one of the basic criticisms of these claims has been that one download does not equal one lost sale. People download things they would never buy — they try out new bands or watch films they wouldn’t see at the cinema. And they download things they can’t buy — Australians are enthusiastic downloaders of TV programs our TV networks won’t broadcast, or won’t broadcast until months or years after they’ve been screened in the US or UK.

The IpsosMediaCT/Oxford report, to be fair, actually tries to deal with this by removing from their modelling both people who downloaded or otherwise obtained a film and then saw it legally anyway, and people who would not have seen the legal version regardless. The number for the latter looks a little underdone — just 23% — but the number for the former looks quite high — it assumed 32% of people who watch a pirated version subsequently watch the real thing. But regardless of how realistic those numbers are, give the authors of the report some credit for trying. There’s so much rubbish-in-rubbish-out modelling coming out of “independent” consultants these days it’s nice to see someone trying a bit of rigour.

That’s not to say there aren’t problems with the report. It’s unclear how it costs a lost sale — whether at the exorbitant price our cinema cartel is allowed to charge if you go to the movies, or at the $1 or $2 you might pay to rent a DVD months later. More problematically, when it moves beyond the cost to the industry and tries to estimate a wider cost, it appears to assume that lost sales are, literally, lost, in space and time, out of the economy.

In reality, money not spent on a movie ticket or hiring a DVD simply goes elsewhere in the economy, offsetting any lost jobs with jobs elsewhere, and offsetting any lost tax revenue with revenue elsewhere. Unless the copyright industry has some magically greater multiplier effect than other industries, it’s hard to see how piracy costs any net jobs at all.

And sharp-eyed readers will already have spotted another problem with the report: the AFACT report says movie piracy alone costs $190 million in tax and 6000 jobs; the “Sphere Analysis” report cited in yesterday’s papers says piracy of all kinds also costs $190 million in lost revenue, and 8000 jobs in total. Is the AFACT report wildly overstated, or is the ACIS paper undercooked?

Well, it’s hard to tell, because the ACIS report isn’t available, except of course to Fairfax journalists. I’ve contacted Music Industry Piracy Investigations twice to get a copy of the report but haven’t received a response.

It’s a pity there isn’t an independent arbiter here who could make an objective assessment of all this. Except … there is, kinda. Two years ago, the Australian Institute of Criminology looked at intellectual property crime. Looking at industry claims about the extent and impact of piracy, the Institute concluded: “…the validity of the data is open to some debate. The methodology used in some industry research is not publicly available and details of samples surveyed and precise methods of calculation are often not disclosed.”

The Institute went on to raise specific questions about the 2005 LEK study. It concluded: “Based on international research, most sectors in Australia experience relatively low levels of piracy and counterfeiting, with the exception of online pirated television show.” And overall:

“…while it is recognised that piracy and counterfeiting are serious issues affecting IP rights owners and the Australian economy as a whole, the impact on legitimate business cannot be quantified reliably nor is it calculated consistently by industry-instigated research across sectors.”

Except, of course, at Fairfax.

As you might have guessed by now, the numbers themselves don’t matter, any more than actual connections between piracy and drug trafficking, terrorism and pedophilia matter. This is about trying to slowly change the view of millions of Australians that downloading content is acceptable, by repeatedly insisting that it is a serious crime with real victims and a high cost.

As many commenters on yesterday’s article pointed out before Fairfax shut off the torrent of criticism by closing comments, Australians’ attitudes are unlikely to change while they are so ill-served by content providers who refuse to provide legal, accessible, timely content free of restrictions on how they can use it and free of mechanisms to invade their privacy. This is particularly the case for Australian televisions networks who continue to treat viewers as mugs happy to be dictated to about what they’ll watch and when and how they’ll watch it. That’s why, as the Institute of Criminology noted, we have such a healthy appetite for downloading TV shows.

We’re well over a decade into this, and the transnational companies who make up the copyright mafia still think they can sue and propagandise their way to victory. But that’s only the visible part of the war they’re waging. Tomorrow, we’ll look at some of the remarkable power wielded by the copyright industry across the world.

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27 comments

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27 thoughts on “Data download: lies, damned lies and piracy reports

  1. Altakoi

    What the consumer wants is content. There is no part of that economic proposition which says that the consumer also wants advertising content, a requirement to be in a particular place at a particular time or a requirement to watch or listen to whatever a few corporations decided they were going to distrubute that year. It is therefore not content providers who are challenged by piracy, it is those who make money from the means of distribution which allow these hangers on to take a cut. I will pay for TV I want to watch, when I want to watch it, ad free. I will pay in money, not in eye-ball-on-screen time which allows my time to be sold at vast profit to whoever is selling whatever crap I don’t want to know about. The exhange rate of AUD:tedium is now far too high for the current funding model to continue to make a buck.

  2. AR

    To quote Yogi -“it’s deja vu all over again”. From the daze of the first cassette recorders, circa 1970, the music moguls were warning, in dire terms, of their inability to fund new bands (as IF!!) if wicked teenagers taped LPs.
    Let the dying bury the dead.

  3. MLF

    The UKs ‘creative industries’ reckon they lose 1.2 billion pounds annually through piracy etc. So influential is this industry that UK Gov passed the Digital Economy Act in their favour. The Act is now being repealed on the basis of, amongst other things, breaches of privacy and human rights concerns.

    I’m against piracy on principle. But i agree Altakoi, people will generally pay for decent content that they want – if they can restrict it to only what they want and not all the advertising crap that goes along with it.

    Although saying that, the ‘kids’ today have grown up thinking they don’t have to pay for anything (music, movies etc.) It’s like news – when everyone can get it for free, they do, and they forget there is a difference between good and bad. So we end up with mass produced, homogenous, bland everything.

  4. Sir Lunchalot

    I think the Australian consumer is sick of paying a higher price that overseas content buyers. Even apple could not explain why we pay higher.

    We are being ripped off.

  5. arty

    Bernard, so why do I have to pay Crikey to get a password? Surely you blokes (and sheilas) would happily produce it for free.

  6. freecountry

    [More problematically, when it moves beyond the cost to the industry and tries to estimate a wider cost, it appears to assume that lost sales are, literally, lost, in space and time, out of the economy. In reality, money not spent on a movie ticket or hiring a DVD simply goes elsewhere in the economy, offsetting any lost jobs with jobs elsewhere, and offsetting any lost tax revenue with revenue elsewhere.]
    A pity you didn’t ask a similar Laffer-curve question about naive claims that the MRRT would miss out on $60 billion revenue compared to RSPT.

  7. Arena1234

    meh like when South Park covered this issue in one of their episodes…”OMG poor Britney Spears can’t afford to Upgrade her G-5 Private Jet to a G-61″ Artists are still getting their money..Studios are still getting their money, movies are still being made, music is still being written and produced by…. and Justin Bieber is still on the Radio? Why are we talking about this at all, just realise it is a war that cannot be won..Technology in this case is impeding the ability for the Studios and the Archaic Industy Associations to be able to do anything about it anytime soon and as soon as they can something new will come out that will make it easier….note: after Napster fell Kazaa rose, and after Kazaa fell PirateBay rose!

  8. Elan

    “Although saying that, the ‘kids’ today have grown up thinking they don’t have to pay for anything (music, movies etc.) It’s like news – when everyone can get it for free, they do, and they forget there is a difference between good and bad. So we end up with mass produced, homogenous, bland everything.”

    Here we go again MLF..!!

    Kids have this attitude because profit driven (a new gadget everyday), has given them the tools to do so! When those who get themselves upset about piracy look at cause and not effect, them maybe I will have a tad more sympathy.

    When my grandson was twelve-he was happily swap/selling games/DVDs. He was visited by someone with an interest to purchase. That man was an agent.

    My daughter received a letter from lawyers representing Sony with an enclosed ‘contract’ that the kid would give a written assurance that he would never indulge in this heinous behaviour again. Or else.

    They were scared; very scared. It took some strong questioning of my lad-and reducing him to tears-to establish beyond any doubt that he had no damn clue about pirated ware. I didn’t think so. I had to be sure though.

    My daughter faxed that document to me-a very interesting read….

    I phoned that lawyer. We had a very meaningful discussion. No ‘contract’ was signed. And my family was left alone. Sony lawyers thought it prudent to back off. Good call.

    Is he more careful now? Well of course he is!!

    I have little sympathy for these whining organisations whose own technological expertise is starting to bite them on their own a.rse.

    …………and for the record I have absolutely no problem with expecting some quality in free content. I am not a subscribed member of Crikey. Neither do I intend to be. But I do not expect to see less quality content in articles written here that all can access.

    They don’t do that; neither should they.

    Though this is not my problem, this ‘you get what you pay for’ rationale makes absolutely no allowance for those who cannot afford to pay. (And yes I DO know that if some people gave up smokes etc..,etc.,).

    If we accept this as a working model, then we will split society neatly into haves and have nots < who should be grateful for any damn thing that is thrown their way.

    Be buggered to it.

  9. MLF

    You may have misinterpreted me about free/good/bad. I wasn’t commenting on how the quality SHOULD be, I was saying if you grow up only reading news.com, then you’re not going to understand what ‘good’ news, i.e. investigative news, is. You are going to be accustomed to what you know, your world view will be formed on that basis etc.

    I don’t agree with piracy – its stealing. I also don’t agree with a generation of kids growing up who don’t/ cant/ won’t value the work of someone else because society no longer places a value on creativity, only profit and ‘me’.

  10. Elan

    And you may have misinterpreted me.

    What constitutes ‘good’ news? Who decides? What quality are we actually getting in this morass that is considered to be in some? (who decides?) cases, ‘good’ news? Most of it is opinionated pap, and it’s getting worse.

    How can we expect the younger generation to select this so-called good (quality) news when we are so bereft of same? What choice have we left them?

    The world is shaped by those who have gone before. It is changed by those who come.

    But just as you cannot expect to make a gateau from just flour and water, you cannot expect great change from those who have been set no example!

    I am tired of listening to comments (you haven’t said it, granted), that the young/younger have ‘ never had it so good’. What utter rubbish!

    It’s all very well to expect good standards from the next generation, if those standards have been set; if those standards are apparent. They are NOT!

    I don’t agree with piracy either, but I don’t stop there. I don’t agree with Corporate Piracy, I don’t agree with Corporate stealing that is ‘sanctioned’ by opinion that seems to revere the ‘all powerful’, the ‘successful’ ,- and even laws that can be ‘utilised’ to protect the powerful and adroit.

    I’ve had it with the view that concentrates on just one part of such problems, but does not look at its cause.

    You are talking about ‘SHOULD’ MLF.

    When we set a far better example than we have done, THEN we can expect more from our children.