Questionable 'Piracy' Study Found; Details Show It's Even More Ridiculous Than Expected

from the that's-not-research dept

Thanks to G Thompson for pointing us to where the BSA has stashed a copy of that mysterious "piracy" research report we were just talking about, which was apparently written by someone named Emilio Ferrer. It's embedded below, and it's even more ridiculous than we had initially expected. First, the entire thing is based on the massively and completely debunked TERA report from last year, that used such outrageous assumptions as to not even pass the most basic sniff test. The researchers here appear to have made no attempt to determine the accuracy of the TERA report, nor to respond to any of the debunked points.

Digging into what little details there are suggests that this study just gets worse and worse and worse. It takes bad assumptions, then piles on more bad assumptions and then extrapolates out to get totally unsubstantiated conclusions. For example, it assumes that the volume of online infringement grows at the same rate as IP traffic and assumes the rate at which the industry will grow. That last one is particularly silly. Since it's making up a number for what the total jobs "should" be, it can just create whatever justification that it wants.. and can claim any job loss number it wants to name. The whole thing is a house of cards built on nothing.

Of course, it's worth pointing out that there was another report, this time from AFACT (the Australian anti-piracy group) just a few weeks before that some have confused this report with. The AFACT report can be seen here (pdf). It's even worse than the other study in some cases. Check out some of the assumptions in that report: including the laughable claim that "just under half of all pirate consumers would have paid." There have been various attempts to quantify that number, and I've never seen any unbiased source come anywhere close to 50%. At best, I've seen 10% claims. The only concession the report makes is that maybe some people use unauthorized copies to "sample," and make a legit purchase later. But they only count this if the person says they would pay for that legit product, not if it resulted in them buying other authorized products or services.

It also does a laughable job with "ripple effects." It's pretty sad. We've debunked "ripple effects" reports over and over and over again. They all seem to make the same mistakes. First, it ignores that ripple effects are really ways to count the same dollar over and over and over again. Second, they only count the ripple effects in one direction. So, for example, they say movie industry people lose their jobs, and that means less taxes. But what they don't say is that any money not being spent on the movies doesn't disappear from the economy, but is spent on something else -- and that something else might actually be even more productive or value generating. In fact, looking at this report, it appears they don't even consider this point, and assume that all the money "not" spent on movies disappears from the economy.

So there you have it. Two separate reports released within weeks of each other in Australia by the entertainment industry. Each one seems to be trying to outdo the other one in questionable assumptions and extrapolations.

Filed Under: assumptions, australia, impact, studies

A Tale Of Two Studies On File Sharing...

from the guess-who-paid-for-the-terrorism-one? dept

I've recently come across two separate studies concerning file sharing -- that seem to come to vastly different conclusions. The first, as pointed out by Michael Scott, is a very long (128 pages), but very thorough research report analyzing pretty much everything having to do with file sharing in the Netherlands, commissioned by the government. It studies the economic angles, the legal angles, the cultural angles -- and then compares the local results to international results. While you might quibble with some of the methodology here or there, the overall conclusions of the report are pretty strong and clear: file sharing is not a problem for the overall industry. File sharing has, in fact, created a net benefit to the economy and society in both the short and long term, and that will likely continue. The direct impact on sales of file sharing is minimal (though it depends on the category). In fact, the only areas actually in trouble right now may be the sale of plastic discs (CDs and DVDs), but much of the damage has nothing to do with file sharing, and there are indications that the "lost" money can be made up in other ways. The report recommends moving away from criminalizing user activities, and focusing instead on encouraging new business model development. A quick excerpt from the conclusions:

The short-term net welfare effects of file sharing are strongly positive given that it is practised by consumers whose demand is driven by a lack of purchasing power. To the extent that file sharing results in a decline in sales, we see a transfer of welfare from operators/producers to consumers, with no net welfare effect.

The market for CDs and the market for DVD/VHS rentals are the only sectors of the entertainment industry that are suffering from a slump in sales. Whereas this may be attributed in part to file-sharing activity, file sharing is not solely to blame for the decline. The markets for DVDs and console games continued grow impressively after P2P services were introduced, and the cinema market showed sustained growth between 1999 and 2007. The total entertainment market has remained more or less constant, suggesting budget competition among the various products.

As long as the markets for games and films are on the rise or remain stable, there is little reason for concern that the diversity and accessibility of content is at stake. File sharing has significantly enhanced access to a wide and diverse range of products, albeit that access tends not to have the approval of the copyright holders.

In other words, pretty much everything that plenty of folks around here have been saying for a better part of a decade is pretty much true. File sharing isn't damaging -- and, in fact, can represent a net economic improvement, and the business troubles faced by a few small parts of the industry are really business model challenges, rather than legal ones. The report makes it clear that focusing on legal solutions to dealing with file sharing is a big mistake that tends to only backfire and seems to be totally misdirected.

So, what's the other study? It's also quite long, but is full of fear mongering about piracy. It just so happens to be funded by the movie studios claiming that piracy is helping to promote terrorism -- and because of that, the US government needs to devote stunning levels of new resources to stopping piracy at all costs. So what does this report recommend?

• Fully funding and implementing the PRO-IP Act (PL 110-403), which toughens civil and criminal laws against counterfeiting and piracy, provides enhanced IP enforcement and prosecutorial resources, and improves IP coordination within the executive branch.
• Supporting the introduction, passage and enactment of a Customs and Border Protection Reauthorization bill to better address trafficking in illicit goods.
• Supporting the Baucus-Hatch legislative improvements to the USTR's Special 301 process to help deal with other countries that fail to live up to their international IP obligations.
• Concluding negotiations for a substantive and enforceable Anti-Counterfeiting Trade Agreement (ACTA) with major trading partners.
• Pursuing trade agreements with strong global IP protections.
• Expanding U.S. leadership on IP protection within the G8, the Security and Prosperity Partnership for North America, and other bilateral and multilateral frameworks.
• Building coalitions in favor of strong IP protections at international organizations, such as the World Health Organization, World Intellectual Property Organization, and U.N. Framework Convention on Climate Change (UNFCCC).
• Engaging Beijing to improve China's IP legal and regulatory regimes through the implementation of new patent, trademark and copyright laws.
• Pursuing reforms on data exclusivity, incremental innovation and optical discs legislation in India.
• Working towards improved retail and copyright enforcement in Russia, as well as the successful implementation of IP reform through Part IV of its Civil Code. 

Which of the two reports is more credible? Which do you think will have more impact on government policy in the next year or so? The answers to both questions are unfortunately obvious and extremely disappointing.

Filed Under: business models, economics, file sharing, impact, netherlands, research, studies, terrorism

What Would Pushing Back The Digital TV Transition Mean?

from the on-hold dept

As the deadline for the shutdown of analog TV broadcasts and the transition to digital draws closer, calls for a delay in the switchover grow louder, thanks largely to poor management of the converter subsidy program and inadequate education. But while consumer groups and politicians fret over the few million people who will need converters but haven't gotten them, Kevin Fitchard over at Telephony Online has a nice roundup of the wireless and mobile companies that will feel the effects of any delay in the transition.

The reason for the digital switchover is to free up the 700MHz spectrum that's used by analog broadcasts. The spectrum's low frequency gives it great propagation characteristics for mobile broadband, while the sheer quantity of it the TV broadcasts occupy translates into a lot of capacity for next-generation mobile networks. Also, keep in mind that the government has already auctioned off the licenses to this spectrum, so companies like Qualcomm and Verizon Wireless, which have already shelled out billions of dollars to set up shop in it, will have to push back their investments and rollouts. This could have a carry-on effect on consumers. For instance, Cox Communications bought 700MHz licenses in many of the markets in which it offers cable TV service with the intention of setting up its own mobile networks, introducing new competition for incumbents. One other group that stands to lose out if the transition is delayed: public safety agencies, which were allocated 700MHz spectrum in order to build interoperable, unified communications systems. This transition has been pushed back for years; it's important now that the hard deadline stands, and that the vast amount of spectrum used by the analog broadcasts -- broadcasts that relatively few people rely on -- can be refarmed and put to a more valuable use.

Filed Under: conversion, digital tv, impact

How Reliable Are Industry Announced Piracy Statistics?

from the depends-on-your-definition-of-reliable dept

Eric Goldman sent in a link to a recent research paper that aimed to look at the reliability of industry-released reports on piracy. That sounded interesting, as we've spent plenty of posts picking apart why almost all of their released numbers are bogus. In particular, we've pointed out how incredibly bogus the BSA's statistics are. So, it was somewhat surprising to have the study say that the BSA's were the most reliable, when compared to other groups like the RIAA and MPAA. If anything, though, that really just suggested that the RIAA's and MPAA's stats were even more bogus (remember, things actually got so bad for the MPAA that it had to admit how bogus its own stats were). That actually seems likely, as the BSA is the most upfront about the methodology used.

However, reading through the actual report, it does little to vindicate the piracy numbers that the industry reports always trumpet. That's because the report actually focuses on the rate of unauthorized use, rather than the cost or impact of that unauthorized use -- which is the key point to come out of these reports. The rate of unauthorized use is fairly meaningless, so it doesn't matter that much who is the most accurate. It's the impact that matters. While reports used to do silly things like count every unauthorized copy as a lost sale, most have stopped that, and now use a multiplier. Some have started using a questionable ripple effect that counts the same loss multiple times and ignores the "ripple effects" in the other direction that benefit the industry. So, yes, perhaps the BSA is the best of a bad bunch, but even if the rate of unauthorized use is somewhat accurate, that has little bearing on the actual impact of those unauthorized copies.

Filed Under: copyright, impact, piracy stats, reliability
Companies: bsa, mpaa, riaa