“This generation is going to give you massacres in the domestic environment and in the work environment,” he predicted, with unrestrained outrage, after ticking off a sobering list of mass murders -- particularly those that have occurred on school grounds and university campuses -- which have plagued American society in recent years.

“There is a generation of vicious, vicious killers out there,” he told his audience. “The video games are their trainers. They’ve been playing Grand Theft Auto every spare moment since they were six years old.”

His views were no more subtle when he turned his sights to the international scene. A dozen years after the 9/11 terrorist attacks, the energetic and charismatic speaker sees life-threatening threats emanating from Pakistan, Russia, North Korea and Iran. What will the next 9/11 look like, he wondered aloud, before answering his own rhetorical question: “We’re going to get nuked.”

1. 2012 - 3 incidents, 9 killed
2. 2002 - 14 incidents, 15 killed (note: the beltway sniper is counted as 11 separate incidents, which is stupid. This number should be 3 incidents total.)
3. 1992 - 2 incidents, 1 killed
4. 1982 - 6 incidents, 3 killed
5. 1972 - 7 incidents, 6 killed
6. 1962 - 1 incident, 44 killed
7. 1952 - 0 incidents, 0 killed

Now, my use of 2012 as a starting point certainly is convenient in leaving out 9/11, but it's useful to note that outliers don't dominate the statistics. I should also note that this list ignores Pearl Harbor as the site of a terrorist attack, which seems incorrect in a way. The idea isn't that we can't be concerned about terrorism of any kind, be it Islamic fundementalist or the home-grown Aryan Nation variety, but if you make it your business to go around scaring people like Grossman does, you shouldn't leave out the more comforting facts simply because it is inconvenient to your narrative.

The next generation is not one of killers, this generation is not having to deal with terrorism in a way never before required, but it may be true that the media is more like Grossman and less like myself in that they enjoy scaring you for profit. Beware the man or woman who makes simple proclamations, because they're usually forgetting to tell you something.

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.

"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%)."

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.

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.

“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.

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.”

“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.”

"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.)"

"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.

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.

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.

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%.

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.

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.

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

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.

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.

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

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.

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.

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

1. techdirt
2. sopa
3. tech dirt

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...]
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8. NY Times & LA Times Both Come Out Against SOPA & PIPA
9. EU Officially Seizes The Public Domain, Retroactively Extends Copyright
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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)

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"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."

"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.'"

"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."

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 benefitted 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.

I've been trying to come up with a scenario that would warrant this 80%, but most would be too far-fetched for a non-fiction blog like Techdirt. The existence of these locker services would have to lead to governments deciding there is no reason to keep downloading illegal. Then either new 'pirate' platforms would have to start outcompeting already existing platforms or most legitimate platforms would have to decide there is no value in having good relations with the artists and labels their users adore. Then most users must stop spending money on music. Why is this not realistic? Despite the increasing convenience of unauthorized downloads, authorized platforms such as Netflix are beating piracy in terms of traffic. If the suggested 80% decline would be realistic, it would have already happened. It didn't.

He further stated that:

“We are at a turning point. Either the internet becomes an economically viable replacement to CDs or else there is an admission you can’t get fair value from the internet, which would lead to lasting damage to the music industry.”

No, just no. Either the internet becomes an economically viable replacement to CDs or else? The internet is a revolution in computer networking and communication - it was never intended to be a replacement to CDs. The internet is a disruptive technology which among many great things has helped thousands (if not millions) of artists and musicians reach global audiences they would otherwise not have reached. It has helped artists gain exposure and popularity to generate the licensing revenue which helps pay for the salary of collection societies' staff. For this reason the new generation doesn't blame the internet (although sometimes they forget where they came from). Just recently I interviewed Para One, a successful French electro producer, who said:

“I personally see the internet as a blessing. It would be unfair to hate it, since it pretty much kickstarted our careers through forums, then MySpace, etc, a while ago.”

Let's just label the part where he says that the internet should be a CD replacement "or else" as the FUD that it is and move on. Actual research into this suggests there's actually money to be made for the music industry. Of course that remains to be seen and depends on a few factors such as how good consumers are at predicting their own behaviour. It's also dependent on the moves of other competing platforms such as Spotify and Google Music.

However, these are intelligent platforms, built in a reality where they have to compete with free and in which they must convert 'free users' into paying users. This is why I cringe when I hear people from a less reality-based side of the business say "piracy" needs to be stopped in order for these startups to succeed. A piracy-free internet would have to be so restricted (three strikes is not enough) that it would devastate these startups and most other future innovation along with human rights.

In the digital world, it seems, there are two certainties: that every year the Business Software Alliance will put out a report that claims huge amounts of software are being “stolen”; and that the methodology employed by that report is deeply flawed.

So, here we go again:

The commercial value of software piracy grew 14 percent globally last year to a record total of $58.8 billion, according to the 2010 BSA Global Software Piracy Study.

Just six years ago, the commercial value of the PC software that was being pirated in emerging economies accounted for less than a third of the world total. Last year, it accounted for more than half — $31.9 billion.

Notice that immediately we have the phrase “commercial value”; just in case you had any doubts what this might mean, it is explained in the methodology section:

The commercial value of pirated software is the value of unlicensed software installed in a given year, as if it had been sold in the market.

“As if it had been sold in the market”: this is, of course, a meaningless figure. The very reason that people pirate software in developing countries - the main focus of the BSA report - is that they cannot afford Western-level prices. So there is no way that pirated software could ever be converted to sales at those prices - it is economically impossible. Using it as a measure is pure fantasy.

A more sophisticated study would attempt to establish at what price people would actually choose to buy from dealers rather than other sources: then that could be used to calculate a realistic estimate of how much revenue is lost in developing countries. To do that, a good place to start would be the recently-published Media Piracy in Emerging Economies, whose results can be summarised thus:

Based on three years of work by some thirty-five researchers, Media Piracy in Emerging Economies tells two overarching stories: one tracing the explosive growth of piracy as digital technologies became cheap and ubiquitous around the world, and another following the growth of industry lobbies that have reshaped laws and law enforcement around copyright protection. The report argues that these efforts have largely failed, and that the problem of piracy is better conceived as a failure of affordable access to media in legal markets.

Exactly the same forces are at work in the world of software: this is a market failure, not a failure of enforcement.

But even if the BSA report had attempted this more realistic analysis, it would still draw the wrong conclusions from its results. Summarised in a section called rather risibly “Anti-piracy equity” - as if Western holders of intellectual monopolies really cared about “equity” when it came to exploiting developing countries:

Reductions in software piracy produce widespread economic benefits. For example, the BSA-IDC Piracy Impact Study found in 2010 that reducing the global piracy rate for PC software by 10 percentage points — 2.5 points per year for four years — would create $142 billion in new economic activity globally by 2013 while adding nearly 500,000 new high-tech jobs and generating $32 billion in new tax revenues for governments. On average, more than 80 percent of these benefits would accrue to local economies.

I debunked this erroneous argument last year:

One thing that is always omitted in these analyses is the fact that the money not paid for software licences does not disappear, but is almost certainly spent elsewhere in the economy (I doubt whether people are banking all these "savings" that they are not even aware of.) As a result, it too creates jobs, local revenues and taxes.

Put another way, if people had to pay for their unlicensed copies of software, they would need to find the money by reducing their expenditure in other sectors. So in looking at the possible benefit of moving people to licensed copies of software, it is also necessary to take into account the losses that would accrue by eliminating these other economic inputs.

Thus the BSA's hypocritical plea for “equity” - how equitable is it trying to extract a month's wages from someone for a copy of Windows whose marginal cost is close to zero, say? - simply doesn't stand up to scrutiny. Eradicating piracy won't generate “new economic activity globally”, nor will it generate new tax revenues for governments. Again, as I pointed out last year:

One important factor is that proprietary software is mainly produced by US companies. So moving to licensed software will tend to move profits and jobs out of local, non-US economies.

...

Another factor that would tend to exacerbate these problems is that software has generally had a higher profit margin than most other kinds of goods: this means any switching from buying non-software goods locally to buying licensed copies of software would reduce the amount represented by costs (because the price is fixed and profits are now higher). So even if these were mostly incurred locally, switching from unlicensed to licensed copies would still represent a net loss for the local economy.

Similarly, it is probably the case that those working in the IT industry earn more than those in other sectors of the economy, and so switching a given amount of money from industries with lower pay to IT, with its higher wages, would again reduce the overall number of jobs, not increase them, as the report claims.

So, as expected, this year's BSA report rehashes all its old errors, simply introducing even more unrealistic figures in an attempt to frighten governments into even more disproportionate and unjustified attempts to enforce intellectual monopolies.

But to be fair, the 2010 report does sport one novelty:

this year’s study also adds a new dimension: Deeper and richer surveys of PC users in 32 countries, conducted by Ipsos Public Affairs, one of the world’s leading public-opinion research firms.

Here's the context to the first questions:

“The laws that give someone who invents a new product or technology the right to decide how it is sold are called intellectual property rights. Which comes closer to your view...”

Two options were then presented:

“Intellectual property rights benefit people like me by creating jobs and improving the economy.”

or

“Intellectual property rights hurt people like me by making products I need too expensive.”

Notice how this is framed in terms of “rights” - the word is used twice. This is a biased term, of course - it suggests that it is “right” to have that right. But really the question should have been:

“The laws that give someone who invents a new product or technology a monopoly on how it is sold are called intellectual monopoly rights. Which comes closer to your view...”

Similarly, the questions already bias the response by hammering home the idea that these are “rights”. Reframing the questions as

“Intellectual monopolies benefit people like me by creating jobs and improving the economy.”

or

“Intellectual monopnolies hurt people like me by making products I need too expensive.”

might well have produced results less favourable to the report's position. Nonetheless, it's interesting that only 61% thought intellectual monopolies benefitted ordinary people, while 37% thought they harmed them - hardly a resounding vote of confidence.

Another question gave these alternatives:

“Intellectual property rights allow companies to generate profits which in turn benefit local economies.”

or

“Intellectual property rights concentrate wealth in the hands of multinational companies that do not deliver significant local economic benefits.”

Here, there was even more scepticism about the benefits - only 59% agreed with the first, while 40% chose the second option. Imagine what the results would have been had they been phrased thus:

“Intellectual monopolies allow companies to generate profits which in turn benefit local economies.”

or

“Intellectual monopolies concentrate wealth in the hands of multinational companies that do not deliver significant local economic benefits.”

Here's a third set of alternatives:

“It is important for people who invent new products or technologies to be paid for them, because it creates an incentive for people to produce more innovations. That is good for society because it drives technological progress and economic growth.”

or

“No company or individual should be allowed to control a product or technology that could benefit the rest of society. Laws like that limit the free flow of ideas, stifle innovation, and give too much power to too few people.”

Of course, the first question is loaded: who doesn't think that it's important for people who create new products or technologies should be paid for them? No wonder 79% chose this option. But that's not the issue: the issue is whether Western companies can charge unrealistic prices for their products in developing countries - prices that are literally unaffordable by the majority of the population there - and expect them to be enforced by local governments against the interests of their citizens.

Despite the bias of these questions, it is, however, interesting that BSA is trying to bolster its case with this supposed support for monopoly-friendly policies from ordinary citizens. It suggests that it knows that the days of its old approach - claiming implausibly large damage to economies based on flawed methodologies - are numbered, and that it must find an alternative soon. Otherwise we may have to forgo the pleasure of reading those entertaining annual reports...

Cross-posted from Computerworld UK.

Data that we collected for the titles O'Reilly put out showed a net lift in sales for books that had been pirated. So, it actually spurred, not hurt, sales.

1. Best Buy Firing Employee Because He Makes A Funny Video That Doesn't Even Mention Best Buy - July 2nd
2. The 19 Senators Who Voted To Censor The Internet - November 18th
3. 'Hollywood Accounting' Losing In The Courts - July 8th
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6. Guy Building A Working (Yes, Working) Computer Inside A Video Game - September 29th
7. RIAA Accounting: Why Even Major Label Musicians Rarely Make Money From Album Sales - July 13th
8. Why The Wikileaks Document Release Is Key To A Functioning Democracy - December 1st
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One thing that is always omitted in these analyses is the fact that the money *not* paid for software licenses does not disappear, but is almost certainly spent elsewhere in the economy (I doubt whether people are banking all these "savings" that they are not even aware of.) As a result, it too creates jobs, local revenues and taxes.

Put another way, if people had to pay for their unlicensed copies of software, they would need to find the money by reducing their expenditure in other sectors. So in looking at the possible benefit of moving people to licensed copies of software, it is also necessary to take into account the *losses* that would accrue by eliminating these other economic inputs.

One important factor is that proprietary software is mainly produced by US companies. So moving to licensed software will tend to move profits and jobs *out* of local, non-US economies. Taxes may be paid on that licensed software, but remember that Microsoft, for example, minimises its tax bill in most European countries by locating its EU headquarters in Ireland, which has a particularly low corporate tax rate....

So in addition to causing money to be taken out of the country (and hence the local economy), licensed software would probably also bring in far less tax than money previously spent on local goods and services, which would generally pay the full local taxes.

Another factor that would tend to exacerbate these problems is that software has generally had a higher profit margin than most other kinds of goods: this means any switching from buying non-software goods locally to buying licensed copies of software would reduce the amount represented by costs (because the price is fixed and profits are now higher). So even if these were mostly incurred locally, switching from unlicensed to licensed copies would still represent a net loss for the local economy.

Similarly, it is probably the case that those working in the IT industry earn more than those in other sectors of the economy, and so switching a given amount of money from industries with lower pay to IT, with its higher wages, would again *reduce* the overall number of jobs, not increase them, as the report claims.

How was the 35 percent rate arrived at? It's a guess, or rather, a combination of guesses combined with some market data and presented as a final authoritative percentage.

South Africa wasn't surveyed at all for the current report.

The BSA says surveys were conducted in 28 countries representing "a mix of geographies, levels of IT sophistication, and geographic and cultural diversity". These included, among others, China, India, Pakistan, Thailand, Taiwan, Vietnam, Hungary, Poland, Russia, Germany and Italy.

IDC extrapolates numbers from the 28 countries to form conclusions about the 111 that appear in the final report. But even for those countries that are surveyed, the sample size is woefully small given the number of PCs there are in the world: just 6 000 consumers and 4 300 business respondents are the world's global proxy for the final results. This works out to 150 businesses per four countries.

What's the statistical error and standard deviation of this sample? The BSA in the UK told Brainstorm that the study "is not a statistical estimation or survey that lends itself to probability analysis, so there is no standard deviation."

How then is the number of applications per South African PC calculated? Using, er, statistical analysis.

Andrew Rens, an intellectual property lawyer with the Shuttleworth Foundation, is unimpressed with the proposed changes.

"Over the last five months lawyers for the BSA, as well as the BSA chairperson, have been quite vocal about changes that the BSA wants made to South African law," he says. "Those changes would shift the onus of proof so that when the BSA brings a case against someone, that person would have the onus of proof on him. They claim that these changes are necessary to combat the allegedly high level of software infringement in South Africa. But now it emerges that the claims themselves are suspect...."

1. Every infringing download is counted as a lost sale
2. CESA took the numbers for Japanese handheld game piracy and multiplied it by four to get the worldwide numbers, because CESA "believes" Japan represents 1/4 of the market
3. Deviations in piracy levels in different world regions were not taken into account
4. Pricing for games per unauthorized copies were ALL based on the initial release price, not taking into account pricing fluctuations of games over time

"estimates of piracy rates are based mostly on inferences and the 'gut feeling' of the BSA's research organisation IDC;

A year in the making, the coalition to fight film piracy in India will work with movie theaters to crack down on camcorder piracy -- the source of 90 percent of all pirated DVDs -- with police to tighten enforcement, with Internet service providers to fight Internet piracy and with politicians to create more effective laws.