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