MPAA Starts Backing Away, Slowly, From Bogus Piracy Stats (But New Bogus Stats Are On Their Way)

from the about-time dept

We've been among the many, many people who have highlighted the MPAA's penchant for using totally bogus "piracy" numbers in arguing for why it needs ever stronger copyright laws and enforcement. Others have stepped in with thorough debunkings as well, including its favorite "$58 billion" in losses that was bandied about regularly during the SOPA fight. The Government Accountability Office famously mocked the MPAA's piracy claims as totally unsubstantiated, in part because the MPAA wouldn't even explain the basis for the numbers it used.

It appears that so many people now realize that the MPAA's claims on "losses" from piracy are so ridiculous that even the MPAA has decided not to use those numbers any more. Buried in a longer Wall Street Journal piece by Carl Bialik is this tidbit:

But the MPAA is focusing elsewhere, and no longer citing the earlier studies, after an internal review that followed the SOPA debate, MPAA spokesman Howard Gantman said. “At the current time we do not actively cite the figures directly relating to movie piracy, as the landscape has changed significantly since these studies were conducted both regarding the growth of broadband and the development of streaming technology, as well as the introduction of hundreds of new sites world-wide for viewing legal online content,” Gantman said.

That's not to say that the MPAA has suddenly become reasonable. The rest of that article highlights other, highly questionable, attempts by the MPAA to justify its maximalist agenda, including new research, some of which seems to rely on similarly questionable methodology. But, at the very least, it appears that the "old" bogus numbers have been so discredited that even the MPAA won't use them any more.

Filed Under: piracy, stats
Companies: mpaa

RIAA's Bogus Math Strikes Again: Claimed 41% Decline In Musicians... Not Even Close To True

from the well,-look-at-that dept

Hey, it's time for some bogus stat debunking, thanks to Matthew Lasar at Ars Technica, showing that, once again, "RIAA math" is something more closely aligned with stuff we made up that people might actually believe.

There have been a variety of similar stats being thrown around these days in debates around what's happening in the music industry from defenders of the old way of doing things, arguing that there's been a massive decline in the number of musicians out there. The stat pops up in different forms, but keeps coming back up. We first saw a version of it back in 2010 when the RIAA put up a blog post claiming that "illegal downloading = fewer musicians." While we appreciate them finally realizing that unauthorized downloading isn't "theft," the chart claims to have posted data from the Bureau of Labor statistics, showing a correlation between the number of "musicians and artists" and the decline in recorded music: Even leaving aside the "correlation =/= causation" argument that could be made, the chart itself plays with numbers a bit. Note that the scales are different, meaning that the data was "fitted" to make it look like a direct correlation when that's not actually the case. RIAA math, as per usual, tends to be all about lies.

But, that chart seems to have taken on a life of its own in bizarre and ridiculous ways. Back in April, class warrior Timberg, claimed that BLS data showed a 45% decline of people employed in "musical groups and artists" from 2002 to 2011. That number has become a key touchstone for the rabid defenders of the old way. Not a week goes by without someone claiming something like it in our comments -- usually even messing up what was said. For example, that comment says that the 45% represented a decline in wages -- which is not actually what any of the numbers have shown.

In June, the RIAA's Cary Sherman gave a talk at PDF, in which he cited BLS data claiming a decline in artists of 41% from 1999 to 2011. That number was then picked up by Paul Resnikoff who posted the RIAA's updated version of the graphic and, again, insisted that BLS data says there are 41% "fewer paid musicians" since 1999. Once again, that's not actually what the chart says. It's not about "paid musicians." It's about how many people claim to be "musicians or artists on a full time basis." There are plenty of "paid musicians" who aren't full time.

Either way... Matthew Lasar, over at Ars Technica digs into the numbers to find that the RIAA's and others' claims... are completely bogus. First off, it appears that they failed the "how to calculate percentage change" test. Lasar also finds that the actual change based on the source data appears to be maybe a decline of a little over 8%. As he notes "8.4 percent, I'm sure most readers will agree, is a long way from 41 percent."

When confronted about this, first the RIAA admitted to playing some games with the numbers, not by using more stable yearly data, like Lasar did, but rather by using monthly data... and by selectively choosing which months to use.

"As far as the 41%, from that data set," came Friedlander's reply, "if you look at any of a variety of months between late 1999 and 2011 and 2012 (such as July '99 vs Aug '11) you can see declines around the 41% level (different months yield different figures, but some are even higher than 41%)."

In other words, it fluctuates pretty drastically. Anyone who wanted to reasonably show a change, would at the very least choose the same month in different years -- since there is likely to be significant seasonal fluctuation in musician employment (for example, July is a big month for weddings, which might mean more musicians who play weddings are "full time" musicians for July). As Lasar notes, this calls into serious question why the RIAA and others are making categorical statements that just don't appear to be supported by the data. Furthermore, even if the RIAA's bogus claim of 41% is based on monthly data... that chart that it's been spreading around shows yearly data, but implies, incorrectly, that it shows a 41% decline:

The problem with this response was that Sherman's categorical statement that we've seen a 41 percent drop in the number of musicians and artists since 1999 wasn't based on a monthly chart. It was based on the yearly table that he showed the Personal Democracy conference.

Finally, Lasar notes that the Bureau of Labor Statistics is actually pretty optimistic for employment among musicians to grow at about 10% over the next decade:

The number of people attending musical performances, such as orchestra, opera, and rock concerts, is expected to increase from 2010 to 2020. As a result, more musicians and singers will be needed to play at these performances.

There will be additional demand for musicians to serve as session musicians and backup artists for recordings and to go on tour. Singers will be needed to sing backup and to make recordings for commercials, films, and television.

That said, I don't think a slight and temporary decline in full time musicians should be all that surprising. It's true that labels funded a bunch of musicians for many years -- but often for short periods of time and with very questionable accounting practices. The problem, of course, is that many musicians came to believe, incorrectly, that the major labels were the only way to make money in music, and so they did little to cultivate new business models. These days, however, that's happening more and more, but we don't have enough experience for people to know what really works and what doesn't. So it's an era of experimentation -- and that means that an awful lot more musicians are making some money, whereas before they made none. That's good for all of those musicians -- and might (in fact) mean that more money overall is going to musicians -- it's just more spread out. But we haven't yet reached the point where things have developed enough to match the number of full time musicians, though as people become more comfortable with these new models, that seems almost certain to happen.

Either way, it looks like RIAA math has once again been shown to be a complete fabrication, relied on by people who want to continue to support the ridiculous story that artists need labels to make money. It's sad that so many people cling to an obviously false tale, but it's good to see the numbers debunked. Hopefully we can now move on from that silly narrative and focus on new business models that do help artists get paid -- rather than ones that just help the RIAA divert money from artists.

Filed Under: musicians, stats
Companies: riaa

The Stats Used To Support Cybercrime 'Threats' Just As Bogus As Hollywood's 'Loss' Claims

from the but-of-course... dept

While the latest attempt to pass a cybersecurity bill may be on ice for now, it'll be back... and with it there will be a lot more hyperbole about how urgent this is because of various massive "losses" already happening due to cybersecurity problems. Of course, nearly all of the numbers and claims you hear will be 100% bogus.

For years, we've highlighted stories about how the claims of "losses" from the entertainment industry due to infringement are completely fictitious. In the past, we've seen Julian Sanchez go on a hunt to find the origin of some of the numbers being thrown around, and come up with evidence that they're based on nothing. For example, claims of $200 billion in losses due to counterfeiting... came from a 1993 Forbes article that just makes that claim with no citation and no backing info. But it became gospel among those arguing there was as problem.

With Congress and the President continuing to insist that we need a cybersecurity bill, politicians have been tossing around all sorts of questionable numbers. Just a few weeks ago, we noted that General Keith Alexander, the head of the NSA, had tossed out some numbers and claimed that cybersecurity was the "greatest transfer of wealth in history." Considering that we're living through the aftermath of a financial meltdown that involved a massive transfer of wealth, I find the original claim difficult to believe. Plus, as we noted, he seemed to only cite studies from McAfee and Symantec, two companies who have a massive vested interest in keeping the cybersecurity FUD going, because it helps them sell stuff.

Thankfully, the folks over at Pro Publica decided to take a much closer look at the numbers politicians are relying on in support of the massive "harm" that is already being caused by online security issues... and discovered that the numbers are completely and totally bogus. In fact, the full story (which is fascinating) parallels (very closely) the story with "piracy" stats from the industry.

One popular number is "$1 trillion" in losses due to cybersecurity breaches. That number gets thrown around a lot by politicians (and many in the press who merely parrot such numbers unquestioningly, even as that gives those politicians more cover to claim that there's a reputable source supporting the number). Yet, the Pro Publica report highlights that, not only is this number bogus, but the (quite well respected) researchers who put together the original report for McAfee did not use that number and, more importantly, many of them spoke out publicly with surprise that McAfee put out a press release with such a number -- which they thought was questionable and not supported by their data.

In fact, there were a number of methodological problems, including that the data was based on a self-reported "average" amount of the "worth of sensitive information stored in offshore computer systems." Who knows if the respondents are being accurate, first of all, but even more to the point, the "worth" of such information is a highly subjective number. People can find something "worthwhile" without paying for it, but by focusing on the "worth," they obscure the fact that the market price may be quite different than what people think something is worth. And, what people think something is worth has zero impact on any actual losses. But, from a very small number, McAfee just sprinkled some magic pixie dust on the already questionable number, and proceeded to extrapolate, massively:

“The companies surveyed estimated they lost a combined $4.6 billion worth of intellectual property last year alone, and spent approximately $600 million repairing damage from data breaches,” the release said. “Based on these numbers, McAfee projects that companies worldwide lost more than $1 trillion last year.” The release contained a quote from McAfee’s then-president and chief executive David DeWalt, in which he repeated the $1 trillion estimate. The headline of the news release was “Businesses Lose More than $1 Trillion in Intellectual Property Due to Data Theft and Cybercrime.”

The trillion-dollar estimate was picked up by the media, including Bloomberg and CNET, which expressed no skepticism.

Now, remember, this $1 trillion number is just in the press release. It's not in the report at all. And the report's researchers were just as baffled (and even more concerned) about this:

Among [the study's researchers] was Ross Anderson, a security engineering professor at University of Cambridge, who told ProPublica that he did not know about the $1 trillion estimate before it was announced. “I would have objected at the time had I known about it,” he said. “The intellectual quality of this ($1 trillion number) is below abysmal.”

.... The company’s method did not meet the standards of the Purdue researchers whom it had engaged to analyze the survey responses and help write the report. In phone interviews and emails to ProPublica, associate professor Jackie Rees Ulmer said she was disconcerted when, a few days before the report’s unveiling, she received a draft of the news release that contained the $1 trillion figure. “I expressed my concern with the number as we did not generate it,” Rees Ulmer said in an email. She added that although she couldn’t recall the particulars of the phone conversation in which she made her concerns known, “It is almost certainly the case that I would have told them the number was unsupportable.”

...The news stories got the worried attention of some of the report’s contributors because McAfee was connecting their names to an estimate they had no previous knowledge of and were skeptical about. One of the contributors, Augusto Paes de Barros, a Brazilian security consultant, blogged a week after the news release that although he was glad to have been involved in the report, “I could not find any data in that report that could lead into that number.... I’d like to see how they found this number.”

I don't know about you, but when a super well respected security researcher tells you that the basis of a particular claim is based on a number whose "intellectual quality ... is below abysmal," that's the point at which you should probably stop using the number. But, instead, politicians and the press continue to parrot the line over and over again.

The slightly smaller number, from Symantec, is still equally questionable. They go with $250 billion... but the number has almost no support. It does come from a real Symantec report, but not from Symatec employees. Instead, they hired another firm to magically come up with the number, and it sounds like magic would have been equally as effective as what was eventually done. It raised concerns from actual experts in the field:

“Far from being broadly-based estimates of losses across the population, the cyber-crime estimates that we have appear to be largely the answers of a handful of people extrapolated to the whole population.”

Furthermore, even if we take these numbers at face value, the original reports on both of them say these numbers represent the value of the attacks in question, and not what was actually "lost" or how much it cost to deal with. However, when a politician quotes them, they almost always do so by at least suggesting that these made up "values" are very real "losses" to companies. In other words, the numbers (shocker, shocker) are being twisted by cybersecurity law supporters. For example, just recently, Senator Collins said that General Alexander "believes American companies have lost about $250 billion a year," but that's not true. Already, we know the number is suspect -- but even if we accepted the number, it only represents the "value" that various companies have put on things harmed by security issues, not any sense of actual losses. Claiming that these are losses isn't just misleading, it's wrong.

We've argued for years that actual data should inform the debate on these things -- but that data needs to be accurate and supportable. Unfortunately, with cybersecurity threats, the claims that are being thrown around have no basis in reality. If politicians really want to discuss the "threat" of cybersecurity, the least they can do is get some accurate research on the scope of the problem. Trusting a number from a McAfee press release is not credible and it's certainly no basis for passing a law that wipes out privacy rights of the public.

Filed Under: cybersecurity, fud, hype, losses, stats
Companies: mcafee, symantec

The Economist Shreds BSA Cloud Credentials Piracy Numbers

from the more-bs-from-the-bsa dept

If my time at Techdirt has taught me anything, it's that anti-piracy groups will pull more numbers out of their collective behinds than The Count from Sesame Street. It's a strange tactic, if only because once they are caught cow-pooping their own figures it seems to indicate that the problem is not nearly what they're claiming and therefore their response and policy recommendations no longer worth considering. Unfortunately, many members of the esteemed 4th Branch are inclined to simply parrot these fudged stats and report them as news.

Fortunately, The Economist is willing to call out the BS the BSA put out about the scary uber-dangers of cloud piracy (ooooooooh!).

Let's start with the BSA claims, shall we? Did you realize that 30% of people in wealthy nations and 45% of people in less-wealthy nations "have a liklihood of sharing log-in credentials for paid [cloud] services?" That's the conclusion drawn by the BSA's latest study. And if that seems like a lofty number to you, it may be because it's utter bullshit.

The Economist begins by correcting the BSA's pretend numbers:

"The percentages come from a question in which people were asked if they had ever shared their log-in details for paid services. Some 15% of people in rich countries and 34% in poor countries said they had for personal use. For business use, it was 30% and 45% respectively...Moreover the respondents were only those who had paid for cloud services, which was a fraction of users. Cloud services are generally based on a “freemium” model, whereby basic use costs nothing and a premium version is paid for. According to the BSA's own data, only half of computer users tap cloud services, of which only one-third use it for business, of which two-thirds pay. Of the small subset that remain, the minority share log-ins. This changes things considerably. If the BSA figures were adjusted for all this, the potential piracy figures could be as low as between 2% and 6% of users—as much as 20 times less than the group claims. (The BSA's data is online here.)"

In other words, through the magic of pretending like only a small subset of data is the entire data, the BSA has magically turned the number two into the number thirty. This would be laudable if those numbers were fish, the readers were hungry, and the BSA was trying to claim it had perfected what I lovingly refer to as "Jesus' Fish Fry Miracle", but they aren't, dear readers. No, they're going to policy makers with this nonsense.

And that isn't even the end of the story. The piece also points out that the BSA's survey failed to ask what might just be an important question: does sharing log-in credentials with a friend violate that service's TOS? If it doesn't, that isn't piracy. But the BSA doesn't bother to ask that question because they don't care, they're just looking for numbers that support their conclusions, here.

The article then points out a couple of other ommissions on the BSA's part:

"There are other anomalies. The BSA only considered PC use, when many people use cloud services over tablets and mobile phones, especially in poor places. And the survey, of 14,702 people in 33 countries, presumes to speak with confidence about the “developing” world but not a single African country is represented—an odd omission, since it is a fast growing market."

In short, these BSA claims are a "study" in the same way that snake-handling is a "religion": it isn't.

Filed Under: copyright, economist, losses, piracy, software, stats
Companies: bsa

RIAA Insists That, Really, The Music Industry Is Collapsing; Reality Shows It's Just The RIAA That's Collapsing

from the data-disagrees dept

I'm honored to see that the folks at the RIAA have taken the time to read our Sky is Rising report. Unfortunately, they don't seem to like hearing the news that the wider music industry is actually thriving -- because it doesn't work well with their legislative strategy (and, remember, the RIAA's main focus is on passing new legislation to help legacy gatekeeper record labels -- not in helping artists). And, this is understandable. As we detailed in the report, as well as in my talk at Midem, a popular music industry conference, the real story of the report is that the market is thriving for artists and consumers, but is much more challenging for big, lumbering legacy players. That would basically be the RIAA's membership.

Either way, I have to take issue with some of the RIAA's "criticisms" of the report, because they're pretty laughable.

The one problem? The study is highly misleading and doesn’t present an accurate or complete view of what has been really occurring in the United States in recent years.

Want proof? Instead of looking at actual sales data that is widely available, the paper looks at a global sales metric that includes a much wider range of industries outside of music.

Actually, people should read the full report for themselves, where they'll see that we looked at a variety of different data sources to see what the data said, and noted the various caveats with each of them. Oh, and that "global sales metric" that the RIAA complains about? That's directly from the IFPI -- the sister organization of the RIAA, who basically represents the RIAA's views around the world. If the RIAA does not like the IFPI's own numbers, perhaps it should have a talk within its own organization.

Moreover, we see real world examples that consistently show the importance of the “traditional” metrics for working artists. For example, although the industry has embraced the concept of broadening revenue platforms, recent work by the Future of Music Coalition show that few artists are benefitting significantly from these complementary revenue sources.

First of all, we've been huge supporters of FMC's work here and have urged musicians to take part in FMC's survey. I don't recall the RIAA helping out. But, really, the problem is how incredibly misleading the RIAA is here, and how it's deliberately misreading the results of FMC's report. The details -- as we said in our own discussion -- are that there is a lot more competition. So, for those who do not adapt or do not embrace new opportunities, it's no surprise that they face more struggles. But for those who do adapt, things are better. Even more important is that, thanks to these new technologies, services and revenue streams, we have more people who are actually able to make money from their music.

The real problem here is that the RIAA ignores the zeros. In the past, under the old system, if you weren't some hugely successful label musician, you generally weren't a musician at all. You made zero and you dropped out of the market entirely. So you didn't count. But thanks to the new opportunities, many more people can make music, release music and make money from music. But that means a lot more competition. So, sure, if you don't compete with that wider base of competition, perhaps you're going to make less. But that's not a sign indicating a decline in health of the overall market. It's exactly the opposite.

I'm reminded of the early studies when computers were first introduced into the workplace. For about a decade afterwards, there were studies that showed that, on average, offices that had computers on every desk saw productivity decline. So, some argued, companies shouldn't computerize. But that's a misunderstanding of statistics. The problem was that many companies didn't know how to properly use computers. Those that did were thriving. Those that didn't had negative results -- and when you netted it out, early on, the negative results outweighed the positive, but that turned the corner once people started to figure things out.

The same thing is happening in the music industry. Many artists are so used to the way things were that they don't quite understand how to embrace and use these new offerings. For them, life is definitely more difficult. But as more and more tools have made life easier, there's more and more opportunity, and those who do understand these things are seeing success.

And, the FMC's results seem to support that. Many artists they surveyed have seen new revenue streams from these sources, creating new forms of success. Others, have not. But it's not that the technology or some nefarious "piracy" threat is the problem. It's that they haven't fully understood the opportunities presented by the tools.

As for touring, the paper does accurately state that over a period, revenues from touring did increase. But it oddly omitted the important fact that concert revenues have actually declined since 2009. In fact, in 2010, North American concert ticket sales dropped 15%, according to Pollstar. And in 2011, despite U2 setting a record for the highest grossing tour in history, North American concert sales contracted another 4%.

First of all, the paper didn't just point out that touring revenue "increased," it points out that it tripled. In other words it grew massively at the very same time that the recording industry insisted that the "music industry" was dying. Cute of the RIAA to leave out the scale by which it grew. It is true that we did not include 2010 or 2011 numbers -- and that's simply a function of the fact that we didn't have them. The latest detailed report we had was the 2010 report showing the numbers up until 2009. And we finished the report before the 2011 numbers came out (we finished it before the end of 2011). Furthermore, it's worth pointing out that Pollstar's numbers are not the be all, end all, as they focus on the bigger venues and leave out an awful lot of interesting things happening among smaller venues. We have been working on ways to get better data there as well, but didn't have enough solid data to put anything into the report (contrary to the RIAA's claims, we were quite careful to focus on data that was highly credible, and rejected a number of reports that we saw that were less than trustworthy, even if they supported what we saw in the other data).

As for the decline in concert revenue, that would be an issue if the entire point of our report was "all the money is moving to concerts!" But it wasn't. The report was looking at the overall industry, and showing how consumers are spending more money overall, and that the industry is healthy. Frankly a decline in concert revenue over the past couple years is neither surprising nor a major concern. Some of the bigger touring acts have been experimenting with increasingly high prices for concert tickets, and eventually they were going to hit a ceiling and face some pushback. The latest Pollstar numbers suggest they may have found that ceiling. Separately, the data corresponds with a global recession (remember that?) where people may have decided to hold back on what seems like more of a "luxury" -- which includes things like going out to an expensive concert.

Finally, the original paper by Mr. Masnick included factual errors about SoundScan data. The increase in the number of new album releases only reflects the ease with which sales even in very low numbers can be tracked today (only a single copy needs to be sold to be counted). For example, of the approximately 75,000 new albums released in 2010, about 60,000 sold less than 100 copies each, and a mere 1200 of them (less than 2% of the total) accounted for 87% of all new release sales.

Notice the RIAA does not actually say what "factual errors" were in the paper. And that's because they can't. To claim that the increase in new releases is only because of better counting by Soundscan defies reason. For example, TuneCore does not report results to Nielsen Soundscan and it puts out a hell of a lot of releases. Similarly, CDBaby/Disc Makers points out that Soundscan doesn't count its releases either -- which number around 50,000. But even looking at just the Soundscan data, it's foolish to believe that the increase "only" comes from better counting. The ability to record and release an album today is easier than ever before, and with more musicians doing exactly that, pretending that there isn't more music being made today than in the past is just silly.

As for the "low sales" of certain albums, I'm not quite sure what point the RIAA thinks it's proving there. As we noted, much of the opportunity was in moving away from record sales, and in encouraging other business models. That artists are recognizing that, by relying less on direct music sales, seems to support our position, not go against it.

The problem is that the RIAA is, once again, focusing solely on the revenue stream that the labels earn on, rather than what's actually happening in the wider industry.

Regardless of the metrics you choose, the trends in the United States have been clear, with a market less than half as large as it was 10 years ago and 60% fewer employees in the music business.

Um, but that's wrong. First of all, the "market" that is "less than half" is merely the market for recorded music sales. As the paper shows -- and the RIAA does not dispute -- the overall market and the amount of money being spent, has continued to increase. It's just that it's going into different parts of the industry. The parts the RIAA doesn't control. The 60% fewer employees number we debunked a few weeks ago, when the RIAA made the same claim. It represents employees at the legacy gatekeepers: the major record labels only. The major labels have decreased employment from 25,000 to 10,000 people total. First of all, note just how small this is. And this is all of the major record labels. But that does not represent all employment in "the music industry" not by a long shot.

Also, over this same period, the major labels went from the "Big Six" to the "Big Five" (UMG buying Polygram) to the "Big Four" (Sony and BMG merging) to the "Big Three" of today (Universal buying EMI). With so much consolidation, is it really any surprise that overlapping positions might get killed off? Furthermore, as was the point of the entire report, the music industry is changing. The sale of recorded music is no longer the primary driver, and much of that revenue has moved elsewhere. So, um, duh, there will be fewer jobs at the buggy whip makers major labels. But that's a problem for the major labels. It's not a policy problem for the government nor is it a problem for the wider music industry.

Virtually every neutral academic study (overview here) has concluded that there is real harm to the music community when people download music illegally. 

First of all, that is not a summary of "every neutral academic study." It's become the new go-to talking point for the industry to point to that Liebowitz paper and I've been spending a lot of time going through the details for a future post, but rest assured that it's a joke. And, at best, even if you take many of the claims in that paper at face value (and you shouldn't, because they're laughable), all it discusses is the impact on record sales, which again is just one part of the market. With the money shifting to other parts of the market, the only ones this is a problem for... are the major labels who make up the RIAA.

Either way, we're glad that the RIAA decided to check out our study. If they had attended Midem, they could have enjoyed the rather enthusiastic response the report received from numerous musicians and independent labels I spoke to. Lots of folks are excited about the opportunities the world enables today. It's just too bad the RIAA is looking backwards, rather than forward.

Filed Under: music industry, recording industry, sky is rising, stats

NY Times: RIAA & MPAA Exaggerate Piracy Impact Stats... But We're Going To Assume They're True Anyway

from the really? dept

Sometimes you have to wonder if the NY Times is simply trying to hurt its own credibility. That's the only conclusion I can come to after reading the editorial by Eduardo Porter concerning the impact of unauthorized file sharing on the economics of the creative industries. While he admits that the RIAA and MPAA have "tended to exaggerate piracy's economic costs and threat to jobs," he then goes on to more or less repeat their arguments anyway. But the editorial is a classic case of how one misleads with statistics in a variety of ways. First, he shows the declines in recorded music sales and in-home movie sales, as if that's proof that the industry has been harmed by infringement. But, as we just recently showed with our The Sky Is Rising report, people are still spending more on entertainment -- it's just that some of the money has gone elsewhere.

And is it really any surprise at all that money has moved away from direct sales? It's not a piracy problem, it's a market adjustment thanks to the shift in the ability to buy singles in music, combined with the more efficient means of distribution, meaning that people no longer have to pay $20 for a CD to get the one or two songs they want. In the meantime, all of that money stayed in the wider industry (something that Porter completely ignores -- why?!?). The amount of money that's gone to concert tickets has gone way up. The amount of money from publishing? Up. The amount of money from licensing? Up. And here's the key part that Porter totally and completely ignores: those other areas of the business which are all up? Those are the areas that give much bigger cuts to actual artists. Artists rarely made any money from direct music sales in the past anyway. So, today more people are making more money from music than ever before... but you wouldn't know that from Porter's laughable analysis.

The top album in 1999, “Millennium” by the Backstreet Boys, sold 9.4 million copies. The top 2011 album, Adele’s “21,” sold 5.8 million.

Two things on this: (1) again, while not everyone is buying the music, the money is still going to the artists -- in fact I'd bet that Adele made out nicely on the live side. (2) What Porter completely ignores is that there's a lot more competition today. So of course the top selling album sells less. Because unlike in 1999, not everyone is being pressured into listening to just one or two superstars, but we can all find our own niches. Some of us think this is a good thing. And then there's Porter.

Hollywood was hit by piracy somewhat later because movie files are bigger and require more Internet bandwidth. But home entertainment sales -- a huge chunk of movie revenues -- fell every year from 2004 to 2010.

Perhaps we should stop here to mention that if Hollywood had had its way 30 years ago, there would be no home movie business. That's because the MPAA fought hard to ban the VCR as an evil tool of piracy -- just like torrent search engines and cyberlockers today. So, forgive me for not exactly caring when Hollywood whines about this particular bit of revenue going away.

But, once again, let's look at what really happened here. The key reason why the sales fell over that time was because as most people shifted online, the studios fought as hard as possible to keep movies from being sold online. Instead, they focused on a ridiculous, years-long fight over which would be the new physical disc standard: HD-DVD or Blu-ray. That fight is what killed sales more than anything else. People didn't want to buy because they didn't want to commit to a standard that only had some movies, and which might go away, leaving people stranded. By the time Blu-ray finally won, there was enough bandwidth that people just wanted their movies online... but Hollywood had no interest in delivering it. When Netflix finally was able to start offering some movies online, the massive success of that setup caused Hollywood to freak out, and spend the next few years trying to either limit Netflix (and any competitors) or jack up the prices on Netflix to make it hard for Netflix to make money without raising its own prices.

So, sorry, but the problems Hollywood has with home theater revenue? That's got nothing to do with piracy.

While box-office revenues have benefited from rising ticket prices, movie attendance has been steadily declining.

I've seen this point made a few times, and all I can think is who cares? I mean, honestly, the whole point is to maximize revenue, not to maximize attendance. If the goal was to maximize attendance, then that's easy: just throw the doors open for free and you'll have maximum attendance. But, of course, that's not the goal. As for fewer people going, once again, we're talking about a market with much more competition, especially from the internet (legally!) and video games.

Of course, not every pirated download displaces the sale of a book, album or movie. But when it comes to music, most economic studies have concluded that piracy accounts for the vast majority or even entirety of the sales decline.

Sorry, but we have to call bull on this one. "Most" economic studies? I've never seen any. In this case, the study points to a recent study done by Stan Liebowitz, the entertainment industry's favorite economist. He's been making the same claims for years, and I've yet to see a single other economist agree with him. So I have no idea where this "most" comes from. Most of the economic evidence I've seen suggests otherwise.

From there, Porter just gets downright insulting. He dismisses all of the tons of new content being produced by claiming that it's just hobbyists, and somehow those people don't count:

Many Internet enthusiasts say that this change isn’t unhealthy, and that the Web makes more ventures possible. They point out that while piracy may be cutting the pay of record label executives, it doesn’t seem to have stopped musicians from making new music. According to Nielsen, 75,300 albums were released in 2010, 25 percent more than in 2005. But new releases that sold more than 1,000 copies fell to about 4,700 from 8,000 during that time. The wave of creation that is more hobby than profession has little to do with piracy, and would likely be unaffected by laws to curb illicit downloads.

This isn't just insulting, it's missing the point. First, Nielsen numbers are hardly complete, as Jeff Price at TuneCore constantly reminds the world (apparently Porter doesn't pay much attention to anyone outside of Nielsen). But, more importantly, Porter once again seems to assume that the only way to make money is through selling music. That's wrong.

But if professional musicians, movie directors and writers can’t make money from their art, they will probably make less of it.

Probably? The evidence says two things: (1) they're actually making more money -- perhaps just not from "selling their art," and (2) they seem to be making more of it, not less. Instead of Porter's "probably" why don't we go with reality? Independent producers say piracy is already making it harder to raise money for small and mid-budget movies. And yet, as was just reported in the NY Times (the paper Porter writes for), new technologies and services are popping up every day to help finance small and mid-budget movies... such as Kickstarter.

The big problem with Porter's analysis is he assumes a static world in which no one can change or adapt. What we've seen, out here in reality, is that content creators are adapting. So, sure, as we've said, infringement will hurt your business if you're stupid and don't adapt. But if you actually take the time to understand what the market wants, and then embrace your fans, the artists who do that are finding that they're making more money than they were before. So, yes, piracy harms you: if you're stupid. That's no reason to change the law.

Filed Under: eduardo porter, infringement, piracy, stats
Companies: mpaa, riaa

Techdirt 2011: The Numbers.

from the not-the-end-of-the-world-yet dept

Happy New Year everyone! Last year's "The Numbers" post proved to be quite popular, so we decided to do it again. 2011 was yet another banner year for Techdirt.

We handled around 14.7 million visits last year (up from 2009's 11M). Those visitors checked out the 3,923 stories that we posted and submitted 205,129 comments. Oddly, the #1 story for 2011 was one that was actually written in 2010, about the ubiquitous "Free Public WiFi" mystery. It turns out that a lot of people remain curious about all those "free public WiFi" ad hoc networks you see. Two stories about SOPA/PIPA graced the top ten, as well as the harrowing censorship tale of dajaz1.com. It appears that you folks are concerned about government censorship.

2011 was also a great year for the comment voting system. Congrats to Marcus Carab and Dark Helmet, who garnered the highest cumulative scores for insightful and funniest comments, respectively -- and, amazingly, each came in second place to the other in the category they didn't come in first. I sense a growing rivalry...

The top browser used by Techdirt readers was still Firefox (35%). Chrome, which lost by a narrow margin to IE last year, blew past IE's 15% to 30%. And there are still nearly 100,000 that are, despite all of the best efforts of Microsoft to convince you otherwise, still inexplicably using IE6.

Mobile usage jumped up to 1.6M visits this year, which is nearly a 200% increase from 2010. 615k of those visits came from iPhones, versus 566k for Android and 322k from iPad. In aggregate, Apple devices did beat Android. iPhone beat out Android last year by nearly 2:1, so clearly that gap is quickly closing.

Where did this year's traffic come from? Reddit jumped in the charts this year, referring 2.1M visits, up 277% from last year's 557k. I'm a little saddened to see that Slashdot is definitely not what it used to be -- referrals from them dropped by nearly a third last year. I suppose getting Slashdotted is no longer what it used to be. Continuing to perform quite well, however, are both StumbleUpon and HackerNews. Facebook also sent a decent amount of traffic.

To hear some of Google's enemies (including politicians in Congress) tell the story, the only way sites get traffic is via search engines -- and Google specifically. They act as though, if Google isn't sending you tons of traffic, you don't exist. Google definitely does send us a fair bit of traffic, but only about 20% of our actual traffic came from searches. We certainly value that 20%, but it definitely shows that you don't have to rely on search traffic to get traffic. Even more telling, here are the top three search terms that brought people to Techdirt in 2011:

1. techdirt
2. sopa
3. tech dirt

Where are you all coming from? It's really not that different than in 2010. The vast majority of you are from the US. Canada is second, followed closely by the UK. After that, there's a pretty sharp drop off to Australia, then Germany, the Netherlands and Sweden. France, India and New Zealand round out the top 10. Last year, we noted that Japan narrowly beat out China to follow India as the leading Asian countries. This year (despite stories of how we're sometimes blocked in China), China jumped into second place in Asia, followed by South Korea, who leap-frogged Japan. Brazil was tops in South America and South Africa was tops in Africa -- same as in 2010.

All in all, people from 230 countries or territories visited Techdirt. Just like last year, there was a single visit from Christmas Island -- though, last year, we had someone in our comments suggest that the single Christmas Island visit may have been him, and not really from Christmas Island.

Last year, we noted that the only countries that we appeared to get absolutely no visits from were... North Korea, Western Sahara & Chad. Western Sahara and Chad, once again, failed to send any visitors... but, in a stunning development, we got two visitors from North Korea. And, in case you were wondering, Belarus, whose new laws will make it difficult for people there to access many websites, actually sent over 1,000 visitors last year. Also, I have no idea why, but the nearly 1,000 visitors from Gibraltar spent the highest average time on the site of visitors from any other country/territory -- averaging nearly 20 minutes per visit. People from Macedonia actually visited the most pages (on average) per visit -- at just under 6 on average from over 3,500 visitors.

And, of course, this isn't just about the odd facts, but about the overall community -- with many of you being quite loyal, which we appreciate to no end. 1.5 million of the visits -- or just over 10% came from people who visited Techdirt more than 100 times last year -- and the vast majority of those (just under 1 million) actually visited the site more than 200 times. You people rock.

Anyway, thanks again to everyone for making yet another year of Techdirt awesome. Here's to a fantastic 2012.

Top Ten Stories, by Unique Pageviews, on Techdirt for 2011:

1. The History Of The (Fake) 'Free Public WiFi' You Always See At Airports
2. SOPA Markup Runs Out Of Time; Likely Delayed Until 2012 [Update: Or Not...]
3. Apple Continues To Insist Only It Can Use An Apple In A Logo; Threatens Small German Cafe
4. Guy Who Created The TSA Says It's Failed, And It's Time To Dismantle It
5. Craigslist Trying To Destroy The Life Of Someone Who Made Posting To Craigslist Easier
6. Breaking News: Feds Falsely Censor Popular Blog For Over A Year, Deny All Due Process, Hide All Details...
7. Company Thanks Guy Who Alerted Them To Big Security Flaw By Sending The Cops... And The Bill
8. NY Times & LA Times Both Come Out Against SOPA & PIPA
9. EU Officially Seizes The Public Domain, Retroactively Extends Copyright
10. PROTECT IP Renamed E-PARASITES Act; Would Create The Great Firewall Of America

2011's Top Ten Stories, by comment volume

1. If You're Arguing That Someone 'Deserves' Copyright, Your Argument Is Wrong (823 comments)
2. Do A Little Dance, Make A Little Love...Get Bodyslammed Tonight (At The Jefferson Memorial) (457 comments)
3. Judge Bans Handing (Factual) Pamphlets To Jurors; Raising First Amendment Issues (429 comments)
4. TSA Agent Threatens Woman With Defamation, Demands $500k For Calling Intrusive Search 'Rape' (403 comments)
5. Revisiting The Question Of Who Deserves Copyright (376 comments)
6. PROTECT IP Renamed E-PARASITES Act; Would Create The Great Firewall Of America (376 comments)
7. Senators Want To Put People In Jail For Embedding YouTube Videos (374 comments)
8. Monkeys Don't Do Fair Use; News Agency Tells Techdirt To Remove Photos (372 comments)
9. Why Is The Justice Department Pretending US Copyright Laws Apply In The UK? (351 comments)
10. Breaking News: Feds Falsely Censor Popular Blog For Over A Year, Deny All Due Process, Hide All Details... (341 comments)

* Note that only 2 of the most commented stories were also among the top 10 most visited stories, once again showing that traffic and the number of comments don't necessarily correlate.

2011's Top Users, by comment volume

1. The eejit - 3,963 comments
2. Jay - 3,433 comments
3. Marcus Carab - 2,255 comments
4. Richard - 2,209 comments
5. PaulT - 1,841 comments
6. Hephaestus - 1,662 comments
7. nasch - 1,456 comments
8. Dark Helmet - 1,426 comments
9. abc gum - 1,357 comments
10. HothMonster - 1,313 comments

2011's Most Insightful Users, as voted by the community

1. Marcus Carab
2. Dark Helmet
3. Karl
4. Richard
5. Jay
6. Chris Rhodes
7. The eejit
8. PaulT
9. That Anonymous Coward
10. E. Zachary Knight

2011's Funniest Users, as voted by the community

1. Dark Helmet
2. Marcus Carab
3. Capitalist Lion Tamer
4. The eejit
5. :Lobo Santo
6. Chris Rhodes
7. Gwiz
8. Hephaestus
9. ChurchHatesTucker
10. That Anonymous Coward

Filed Under: community, numbers, stats, techdirt, traffic

Video Detailing How US Chamber Of Commerce Deceives The Public In Its Support Of SOPA & PROTECT IP

from the lies,-damned-lies,-and-the-us-chamber-of-commerce dept

A few weeks ago, we did a step-by-step detailed debunking of the claims by the US Chamber of Commerce's Steve Tepp. He had gone on PBS News Hour to defend the illegal domain name seizures, as well as the plans for SOPA and PROTECT IP. He made claims about how "huge" a problem "rogue sites" are, and quoted some big sounding numbers in a very serious voice. We went through the details for where those numbers came from and discovered (spoilers!) that he was being extremely disingenuous in presenting the numbers. The details actually showed that he was conflating a few different issues, using ridiculously shoddy methodology, and mixing in a few dodgy assumptions on top of that. In fact, the actual numbers suggested the real problem -- that of dangerous counterfeit goods being sold, was a fairly tiny problem.

Techdirt reader Nick Dynice thought that the post would work well as a short documentary, and took it upon himself to use the post as a script to create the following video about how Steve Tepp and the US Chamber of Commerce mislead with statistics in a dishonest way to garner support for the illegal domain seizures, as well as the unconstitutional proposals for SOPA and PROTECT IP. Thanks to Nick for putting this together.

Filed Under: copyright, domain seizures, misleading, sopa, stats, steve tepp
Companies: us chamber of commerce

A Step By Step Debunking Of US Chamber Of Commerce's Dishonest Stats About 'Rogue Sites'

from the let's-go-through-this dept

The issues of SOPA/PROTECT IP and censoring the internet are slowly creeping into more mainstream news sources. PBS Newshour hosted a brief debate, mostly focused on the recent domain seizures. The debate was between Steven Tepp, the former Copyright Office official, who jumped ship to the world's largest lobbying organization, the US Chamber of Commerce (who, along with the MPAA has been leading the charge in getting SOPA and PROTECT IP approved) and Larry Downes, author and consultant, whose excellent work on both the domain seizures and SOPA/PIPA we've mentioned repeatedly. Unfortunately, as you might expect in 10 minutes, it's hard for anyone to get into much depth. I think Downes made a key point early on in noting that these domain seizures are almost entirely "symbolic," since the sites themselves aren't seized.

But what I really wanted to focus on was how Tepp misleads with statistics. This is a specialty of the US Chamber of Commerce, and Tepp plays exactly to expectations here. First, you can watch the full 9 minute video, if you'd like: And let's call out the specific examples of how Tepp misleads with stats:

"The scope of the problem is unbelievably huge. Rogue websites -- those dedicated to the theft of American intellectual property, our creative and innovative products -- get over 53 billion visits every year. That's 9 visits for every human being on the face of the earth. And they've been estimated to do at least $135 billion in harm to legitimate businesses. The products they sell are made in completely unregulated facilities, and can often be, not only shoddy, but harmful to consumers' health."

So much misleading in one little paragraph. Lets start with the 53 billion claim. Guess what? It's from a US Chamber of Commerce-funded study by an anti-piracy monitoring company called MarkMonitor. And the details suggest serious problems with the study. First, the study itself was based on Alexa, widely considered the least accurate web traffic measuring tool out there. Second, the number of "visits" to any site is an especially meaningless number -- especially when trying to discuss the actual economic impact of such visits. Who cares how many visits there are if we don't know anything about what people do on those sites?

Third, a large percentage of those visits all come from three sites: RapidShare, Megavideo and Megaupload. These are three cyberlockers that the industry has declared as "rogue," but which have significant legitimate purposes. Rapidshare, in particular, has been repeatedly ruled to be perfectly legal, both in Europe and in the US. The company follows DMCA takedown rules and has plenty of legitimate uses. Including Rapidshare in these calculations makes the whole thing a joke. And none of those sites are involved in "selling" counterfeit goods that put US citizens in harm's way.

Fourth, that "estimated to do at least $135 billion in harm," is a totally made up number. The US Chamber of Commerce cites a different MarkMonitor report to support that. But it's not actually a report or a study or anything like that at all. Instead, it's promotional "white paper" (read: sales pitch) from MarkMonitor entitled "Seven Best Practices for Fighting Counterfeit Sales Online." That report does say that "criminals" setting up ecommerce storefronts "will likely cost legitimate businesses $135 billion in lost revenue this year." But it doesn't source that number. Notably, other statistics in the report are sourced. Which makes you realize that the $135 billion is basically made up. But Tepp doesn't mention that.

Fifth, he focuses on "the products they sell." This is the really slimy part, for which Tepp should be ashamed (if the man had any shame at all). The obvious implication of all of this is that when you tie together these disparate numbers -- you've got 53 billion visits to sites selling counterfeit goods that may be harmful to consumers. We've already pointed out that the 53 billion is bogus -- but it's even more bogus when combined with this final sentence. That's because that same MarkMonitor report that gave us the 53 billion, also notes that the traffic to sites selling counterfeit goods is a minuscule percentage of the 53 billion. Specifically, the same report says that the sites selling counterfeit goods receive merely 87 million per year... or 0.1642%. That's not 16.42%. Or even 1.642%. It's 0.1642% of the total. In other words, the sites actually selling counterfeits... seem pretty small.

Sixth: even that exaggerates the problem -- because even then you'd have to assume that every one of those sites involves selling counterfeits that are shoddy or harmful. But that's crazy. Most counterfeits are merely replica versions, that are passable. They're not harmful in any way. So now we're talking about significantly less than 0.1642% of the big scary 53 billion he's talking about. Basically, the 53 billion, besides being meaningless in general, has no connection to the rest of the claims about losses and harm to consumers. It's complete and utter bunk.

What you have here is that Tepp and others are taking a real, but tiny problem: mainly an exceptionally small number of counterfeit drugs, and then pretending that the "harm" is broad and applying it to sites already judged to be perfectly legal, because some people use them for copyright infringement. The reports he relies on actually show what a tiny problem this is, but tries to mask that by lumping a bunch of totally disparate things together, from the tiny percentage of fake drugs out there... to the already judged to be legal cyberlockers like Rapidshare.

Tepp's misleading bogosity doesn't stop there. He then goes on to claim that these sites "steal jobs." Um, how? But beyond the rhetoric, lets get back to the misleading numbers. Later on he states:

"Another study, earlier this year, showed that 19 million Americans have jobs that rely on 'IP-intensive industries.' This is a huge part of the American economy. 60% of US exports are from 'IP-intensive industries' and $7.7 trillion dollars are output from 'IP-intensive industries.'"

This one we've attacked head on before. The intellectually dishonest bit here is easy to spot. It's the reliance on "IP-intensive industries." Not IP. The "study," if you can call it that, involves the biggest maximalists teaming up to fund a report that defines "IP-intensive industries" extremely broadly and then pretends that everything that comes from such industries... is because of strong IP laws. That's ridiculous, because you know who's included in the "IP intensive industries"? Basically every tech company -- including all of those which are fighting against these crazy new laws.

Tepp is being intellectually dishonest in the extreme here, suggesting that the only reason that the broadly defined "IP-intensive industries" are so successful is because of IP law. But that's showed to be bogus quite simply. As CCIA has done for years, it uses the very same methodology to show that exceptions to IP contribute more to the economy than IP laws themselves. You can't except one report without accepting the other since the methodologies are identical. There are only two logical conclusions from this: (1) the suggestion that those jobs, exports and output numbers are due to IP are complete bunk or (2) Tepp and the US Chamber of Commerce really believe we should do away with IP completely, since his own favored methodology shows that the less IP laws we have, the greater the output. So which is it, Steve?

Either way, Tepp is being painfully intellectually dishonest throughout the entire interview, citing facts and figures that are misleading in the extreme, if not completely bogus. What's unfortunate is that none of the press that lets Tepp speak his mind ever calls him on these ridiculous claims.

Filed Under: bogus data, domain seizures, rogue sites, stats, steve tepp
Companies: us chamber of commerce

Former 'Anti-Piracy Investigator' Explains How He Fed Police Cases, Inflated 'Piracy' Stats

from the but-of-course dept

None of this will come as much of a surprise, but a former "anti-piracy" private investigator who worked for the MPAA's anti-piracy shell operation in Australia, AFACT, has explained to Torrentfreak how he helped inflate "piracy" numbers, was used to imply a non-existent link between infringement and drug trafficking, and how he basically handed police targets for raids. The guy was focused on physical counterfeiting of movies, and actually lost his job as the MPAA/AFACT started focusing more on online, rather than physical. But, still there are some tidbits that highlight pretty much how the MPAA twists things:

"He was adamant that we needed to boost our statistics to make the media sit up and take notice and that the large numbers would make it easier to get the local Police interested. This was especially difficult to do as local police had no jurisdiction over copyright infringing product and the AFP were desperately short on manpower. We were encouraged to find links to drugs and stolen goods wherever possible."

"We discussed the formula for extrapolating the potential street value earnings of 'laboratories' and we were instructed to count all blank discs in our seizure figures as they were potential product. Mr Gane also explained that the increased loss approximation figures were derived from all forms of impacts on decreasing cinema patronage right through to the farmer who grows the corn for popping."

[....]

"Funded solely by MPAA, AFACT lobbies hard for changes to Australian law and enhance the sexiness of their case by making vague references to links to terrorism. Sometimes not so vague. I was instructed to tell police officers that the profit margins were greater than dealing heroin. It was bizarre. A twisted logic that AFACT spewed out with monotonous regularity," Warren says.

One of the examples Warren gives is that they assumed that all burners and DVD replicators would run 24/7, making these operations appear very lucrative.

"Each burner cranking out ten discs an hour, multiplied by ten dollars per disc is potentially a hundred dollars an hour, multiplied by number of burners by hours in a year gives a yearly potential…. Very pumped up statistics."

There's a lot more in the story -- none of which is particularly surprising, but just interesting to see someone who was there come out and admit what most people knew already.

Filed Under: anti-piracy, australia, stats
Companies: afact, mpaa