Universities Struggling To Deal With Law Requiring Them To Fight File Sharing

from the what-a-waste dept

For years, Hollywood pushed Congress to pass laws that would hold colleges and universities responsible for cracking down on unauthorized file sharing that happened on campus. The threat was that if universities didn't stop file sharing, Congress could withold federal financial aid funds from students. That's quite a big stick. What justified it? Well, the MPAA put out a report claiming that 44% of "losses" from file sharing came from college campuses. Of course, the number (like so many out of entertainment industry lobbyists) was entirely made up. In fact, it was so ridiculous that even the MPAA came out and publicly admitted the numbers were bogus and apologized!

You would think, after that, Congress would think twice about passing a law that was written based on such bogus numbers. Think again. Congress had no problem rushing it through and getting it signed by the President.

So now what's happening? Well, universities and colleges are wasting a ton of time, money and effort to try to comply (found via Michael Scott, who notes, "what a waste of resources."). The article talks about how universities feel punished for something that isn't even a problem:

"We have not received one complaint about one student. Yet now we have to go out and incur the cost to solve a problem that we didn't really have.... Tying actually capital and operating dollars to it in this economy to solve a problem we don't really have at our scale has been an issue."

Thanks, Hollywood and all those politicians who approved this. Now you're taking away important resources from our educational institutions for a problem that isn't even a problem.

40 Comments | Leave a Comment..

UK DVD, CD Retailers Give More Bogus Predictions About Lost Jobs Due To Piracy

from the buggy-whips dept

It appears that the latest group to whine and complain about totally bogus "losses" from piracy are CD and DVD retailers in the UK, who have commissioned their own study claiming that 30,000 jobs may be lost to piracy. This is from the UK's Entertainment Retailers Association (ERA), though the group doesn't seem to make any indication of its methodology (its own website doesn't even list the study at this point). However, from what's in the article, it certainly sounds like the usual tricks for presenting bogus stats on piracy. It only counts the changes in one direction, ignores the fact that the shift (not loss) in jobs is due to a variety of factors that go well beyond "piracy," and ignores all of the new jobs created due to the shift to digital distribution of content. But, of course, that doesn't make for nearly as interesting a story... especially when the ERA is teaming up with a bunch of famous actors to whine about how they are too incompetent to learn how to adapt to the changing market. If these folks ran the buggy whip industry a century ago, we'd all still be driving around in horse drawn carriages. Markets change, and it creates new opportunities. Stop whining about the the way things used to be, and focus on taking advantage of all of those new opportunities.

18 Comments | Leave a Comment..

The Ridiculous History Of The Job And Dollar Loss Numbers Cited By IP Proponents

from the pulled-out-of-nowhere dept

Earlier this week, we talked about how the US Chamber of Commerce was citing the totally bogus stat that 750,000 jobs are lost in the US due to intellectual property violations. The original article tried to track down the source of the number and found a tangled web of government agencies all pointing at each other. Julian Sanchez has apparently been hot on the trail of the real source of that number, along with the equally bogus claim of $250 billion lost to IP infringement in the US. While it took plenty of digging, he seems to have found the origin of each number -- and they're both basically completely made up.

The 750,000 job number actually dates back to 1986, when then-Commerce Secretary Malcom Baldridge, in promoting a stronger copyright bill from the Reagan era, mentioned to a newspaper reporter that infringement cost anywhere from 125,000 to 750,000 jobs. That quickly morphed into "up to 750,000 jobs" and eventually just became "750,000 jobs" with no actual backing data. It's almost surprising that the industry hasn't tried to expand that number since, surely, infringement has become a bigger issue in the intervening 22 years. Of course, doing that might require actual proof, of which there is none, so that might present a problem.

As for the $250 billion, well, that's even weaker. It's gone through a number of versions of the game "telephone," and while it's often attributed to the FBI, they don't do studies like that. Instead, Sanchez eventually tracked it down to a brief aside in a 1993 Forbes article, where it wasn't even talking about losses in the US. Hell, it wasn't even talking about losses. It was talking about the size of the counterfeit market (which, as you know, does not equal losses) in the world. But, the number has been passed around over and over again -- and has been included in various government publications, so the industry (and politicians) take it as fact.

13 Comments | Leave a Comment..

Commerce Dept Cites Bogus Stats, Chamber Of Commerce Uses Them To Ask Bush To Accept Copyright Czar

from the bogus-stats-are-fun dept

We've seen it time and time again, where totally bogus stats about the "costs" of "piracy" are floated (usually by lobbyists) and then suddenly accepted as fact. It's even worse when it's government officials citing the stats as fact. Yet, we've got that happening again. In urging President Bush to sign into law the ProIP bill, which would give him a copyright czar (something the Justice Department had said it it doesn't want), the US Chamber of Commerce is claiming that 750,000 American jobs have been lost to piracy. Yet, it doesn't cite where that number comes from.

Wired's David Kravets tries to track down the source but finds no one can quite figure it out. Instead, they each point to different gov't organizations which have all quoted the number -- often citing each other, but no one pointing out where it actually came from. Chances are, of course, that the stat comes from a variety of reports, like the easily debunked piracy impact report from the BSA, put together by IDG. That lists out a number for job losses in the software industry that's simply untrue, and is based on only the negative impact of "piracy" impacting jobs, leaving out any positive impact (i.e., if a company used only pirated software, it could hire more people). That's not to defend piracy, but to note that the job loss claim is completely made up -- and now repeated by a variety of different government officials based on... nothing.

21 Comments | Leave a Comment..

A Detailed Explanation Of How The BSA Misleads With Piracy Stats

from the and-on-and-on-it-goes dept

A couple months ago, when the Business Software Alliance (BSA) released its latest stats on "piracy," it's VP of anti-piracy, Neil MacBride, gave me a call to discuss my earlier complaints about the organizations methodology. Needless to say, we did not see eye-to-eye, and the phone call did little to resolve our differences. I'm still hopeful that eventually the BSA will recognize that it's doing more damage to its own position by publishing obviously bogus numbers. So, with the organization releasing another bogus stat today, it's time to explain why it's wrong and misleading.

Today's report is an attempt to get the government involved in protecting BSA member companies' business model, by claiming that the US is losing out on $1.7 billion in tax revenue due to "pirated" software. And, of course, it comes with a lovely quote from Mr. MacBride: "The most tragic aspect is that the lost revenues to tech companies and local governments could be supporting thousands of good jobs and much-needed social services in our communities." And the BSA is even so kind as to quantify what that (not really) lost tax revenue could do: "For example, the lost tax revenues to state and local governments -- an estimated $1.7 billion -- would have been enough to build 100 middle schools or 10,831 affordable housing units; hire 24,395 experienced police officers; or purchase 6,335 propane-powered transit buses to reduce greenhouse gas emissions."

Except that this is almost entirely incorrect and it's relatively easy to show why:

1. The report counts every unauthorized piece of software as a lost sale. You have to dig through separate PDFs to find this info, but when you finally get to the methodology it states:

   The software losses are based on the piracy rate and equal the value of software installed not paid for.

   That's a huge, and obviously incorrect assumption. Many of the folks using the software likely would not have paid for it otherwise, or would have used cheaper or open source options instead.
2. The report makes no effort to count the positive impact of unauthorized use of software in leading to future software sales. This is something that even Microsoft has admitted has helped the company grow over time. But according to the BSA's report, this doesn't matter.
3. The report also proudly notes: "Software piracy also has ripple effects in local communities." However, "ripple effects" are easily disproved as double or triple counting the same dollar. Using ripple effects like that inflates the final number by two or three times. In the link here, Tim Lee explains this (in reference to an MPAA study done by IPI, but it applies here to the BSA study done by IDC as well):

   If a foreigner gives me $1, and I turn around and buy an apple from you for a dollar, and then you turn around and buy an orange from another friend for a dollar, we haven't thereby increased our national wealth by $3. At the beginning of the sequence, we have an apple and an orange. At the end, we have an apple, an orange, and a dollar. Difference: one dollar. No matter how many times that dollar changes hands, there's still only one dollar that wasn't there before.
   
   Yet in IPI-land, when a movie studio makes $10 selling a DVD to a Canadian, and then gives $7 to the company that manufactured the DVD and $2 to the guy who shipped it to Canada, society has benefited by $10+$7+$2=$19. Yet some simple math shows that this is nonsense: the studio is $1 richer, the trucker is $2, and the manufacturer is $7. Shockingly enough, that adds up to $10. What each participant cares about is his profits, not his revenues.

   This is a huge fallacy that the BSA an IDC refuse to acknowledge. When I discussed it with them in May, they insisted that they only wanted to talk about piracy rates, not the loss number. I wonder why...
4. Next, if they're going to count ripple effects in one direction, it's only fair to also count them in the other direction. That is, they complain that:

   Lost revenue to technology companies also puts a strain on their ability to invest in new jobs and new technologies. For example, the $11.4 billion in piracy losses to software vendors and service providers in the eight states would have been enough to fund more than 54,000 tech industry jobs.

   But what they don't acknowledge is the ripple effects in the other direction. That is, if (going by their assumption, remember) every company that uses an unauthorized copy of software had to pay for it, that would represent $11.4 billion in money that all of those other companies could not use to fund jobs at those companies. What about all of those jobs?
5. The BSA/IDC stat on lost tax revenue also miscounts on the point above, since it includes the lost income tax revenue from those 54,000 lost jobs, but does not count the equivalent income tax revenue from those other jobs. In fact, in the fine print, the report notes:

   "Employment losses are calculated from revenue losses, and only apply to employment in the IT industry, not IT professionals in end-user organizations. Tax revenue losses are calculated from revenue losses (VAT and corporate income tax) and employment losses (income and social taxes)."

   In other words, the income tax losses only count one side of the equation and totally ignore the lost income tax revenue from the lost jobs on the other side of the equation. Oops.
6. It seems likely that the eventual tax benefits of the unauthorized use of software is most likely to greatly outweigh the lost tax revenue elsewhere. That's because the use of software within industries is a productivity tool that increases overall productivity and output, which would increase taxes beyond just the income taxes of the employees. The study, of course, ignores this point.
7. Worst of all, the report seems to assume that direct software sales are the only business model for the software industry, ignoring plenty of evidence from companies that have adopted business models that embrace free software -- generating billions of dollars for the economy (and in taxes). And that's what this really comes down to. It's a business model issue. If others started adopting these business models as well, there wouldn't be any "losses" at all.

Oh, and just for good measure, the report also falsely claims that: "What many don't realize or don't think about is that when you purchase software, you are actually purchasing a license to use it, not the actual software." That's not exactly true and goes directly against a recent court ruling that said the opposite and goes through a detailed explanation for why a piece of sold software is a sale with restrictions, rather than a license, using previous court precedents.

Most of these points have been made to the BSA and IDC in the past, and both organizations chose not to address them. The fact that they're continuing to use these obviously false numbers and methodology to now push for the government to prop up an obsolete business model should be seen as troubling not just for the dishonesty of it, but for the negative impact it will have on the software industry and our economy as a whole.

144 Comments | Leave a Comment..

MPAA Actually Admits That Some Of Its Piracy Stats Are Bogus

from the not-going-far-enough dept

For years, we've pointed to the bogus stats claimed by the MPAA concerning what kind of impact "piracy" is having. The stats incorrectly count "ripple effects" in a rather troubling manner. First, they only look at the ripple effects in one direction (those that hurt the movie studios). They don't bother to count ripple effects that go the other way (such as cheaper movies for everyone, allowing them to spend more money elsewhere, helping the economy). More importantly, though, using ripple effects is merely double, triple or quadruple-counting the actual losses, as Tim Lee brilliantly explained. Of course, that hasn't stopped reporters from citing these bogus stats as fact or politicians from using those stats to justify ridiculously awful legislation. Given all that, it's rather shocking to hear the MPAA finally admit that the stats in a recent report are bogus -- but only one specific number. Apparently, via some unexplained "human error," an MPAA study reported that 44% of "losses" due to piracy came from college campuses -- which explains the recent efforts to get new legislation forcing colleges to filter internet connections. However, the MPAA is now admitting that the real number is actually just 15%. The MPAA insists all the other numbers are perfectly fine, but didn't bother to address all of the criticisms of the methodology. This likely means that the mistake made here was so egregious that even the MPAA couldn't wait for the new legislation to pass before admitting the error. That alone, is fairly surprising. Hopefully, though, this will start convincing the press and politicians to be at least a little skeptical of numbers coming from biased industry associations.

15 Comments | Leave a Comment..

How Bogus Counterfeiting Stats Become Fact

from the watch-the-process-at-work dept

We've seen in the past how easily bogus stats from a biased industry can suddenly become "fact" as the press uses the stats without questioning the assumptions or even noting the inherent bias in the numbers. Michael Geist is examining exactly how that has happened in Canada in the debate over what to do concerning counterfeit goods. Apparently, many pushing for stronger anti-counterfeiting legislation in Canada point to the RCMP's supposed claim that counterfeiting is costing Canada $30 billion. The problem is that the number the RCMP is using wasn't based on a careful study or anything -- it was based on some random claims they found online, that were actually numbers thrown around by lobbyists paid to pump up the supposed threat to (yes, you guessed it) push for stronger protective laws. Yet, because the RCMP used those numbers without bothering to explain that they just plucked them off the internet with no effort to research the actual situation, many are now assuming that the numbers are accurate. In the meantime, two separate recent studies by neutral parties have shown that the claims over losses from counterfeiting have been grossly exaggerated. Unfortunately, no one seems to have paid that much attention to either study... not when the RCMP is showing the cost as $30 billion.

6 Comments | Leave a Comment..

Latest Bogus Stats On Music Piracy Losses

from the do-we-really-need-to-go-through-this-again? dept

It's getting rather tiresome to need to debunk the bogus stats that come out every few months about the impact of "piracy" on one of the various copyright industries -- alternating between music, movies and software. What's most frustrating is that the press continues to take these studies at face value, and never once questions the most basic (and ridiculous) assumptions used to create the numbers. Take, for example, this report on the supposed impact on the economy of music piracy, put together by The Institute for Policy Innovation (IPI). It, like many of these reports, counts every pirated song as a loss (Update: turns out it doesn't count every copied song as a lost sale, but does make some random assumptions using a totally-pulled-out-of-the-air conversion factor), and never bothers to count back in the promotional impact of unauthorized music sharing, that helps get more attention for certain bands. Actual economic studies tend to show little, if any, impact in either direction to music sales. Yet, this report ignores all of that. Even worse, it wades into ridiculous territory by adding in the supposed "ripple effect," claiming that music piracy hurts the rest of the economy by killing 46,000 production-level jobs and nearly 25,000 retail jobs. Of course, the supposed experts at IPI don't seem to consider that ripple effects go in multiple directions. Those people may be working in other jobs that are more productive for the economy. Also, in effectively lowering the price of music, people then have more money to spend on other areas of the economy, some of which may be more worthwhile. This isn't to say that there might not be some net negatives to unauthorized music downloads -- but the study from IPI isn't worth taking seriously, and it would be nice if reporters started calling them out on this whenever they (and others) release these reports.

69 Comments | Leave a Comment..