MPAA: Bad At Math & Bad At Economics

from the sigh dept

We recently noted that the MPAA was passing around a silly infographic chock full of bogus stats, and pointed out that someone had noticed that if you took the MPAA’s “losses” claim seriously, it would mean that downloaders were buying 200 more DVDs per year. The MPAA folks were apparently not happy that people called them on their misleading stats, and have come out with a statement, which it claims is about “correcting the record.”

If only that were true. Instead, we get more misleading bunk from the Masters of Propaganda.

First off, the MPAA admits that perhaps (just perhaps) their original graphic may have been a little misleading, and have put out a new version that moves away from implying that they were losing $58 billion, and now merely suggests that it’s the US economy that loses this much money from the combined infringement on movies, music, packaged software and video games. This is complete and utter bunk — and the MPAA folks either know this and are lying… or they’re idiots. Take your pick.

The $58 billion claim comes from a study from The Institute for Policy Innovation that has been debunked so many times over, the fact that the MPAA would even bring it up is a laugh. And it’s based on a very questionable analysis of the broadly defined “copyright industry.” Of course, as we’ve noted in the past, the definition of “the copyright industry” for such studies includes all sorts of goods and services that do not rely on copyright at all, but are force-lumped into this study. So, if we’re talking about actual products that rely on copyright, you probably have to ratchet down the scale by an order of magnitude. And that’s just to start. From there, you have to realize that IPI’s numbers use completely bogus math.

Tim Lee did an excellent job explaining the economic and mathematical fallacies of their methodology years ago (for which IPI kindly tried to get him fired from his job). The key issue is how the IPI counts “losses.”

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.

Furthermore, in IPI and MPAA fantasy-land, dollars not spent on movies simply disappear from the economy. And yet, anyone can tell you that’s simply not true. That money continues to be spent elsewhere, and plenty of studies have shown that, despite growing infringement online, the amount of money that individuals spend on entertainment continues to rise.

So why would the MPAA rely on this number, which is so obviously false? Because it doesn’t care about the truth or accuracy or “correcting the record.” The MPAA’s job is to get Congress to pass laws that divert money from what the market wants to its legacy studios who are slow to adapt. So it will use any number it can get its hands on, no matter how ridiculous. It’s just that this time it got called on it, so it had to scramble to try to make the number look even a little bit legit…

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Companies: ipi, mpaa

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Comments on “MPAA: Bad At Math & Bad At Economics”

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147 Comments
ASTROBOI says:

Put it in perspective.

The best estimate I’ve seen of the financial strength of the movie business in the USA says that boxoffice gross is about 10 billion with 30 billion for secondary markets such as dvds, cable tv, whatever. Guess who else is worth 40 billion a year. The PET SUPPLIES industry! That figure courtesy of FEMA. Yes, sale of dog leads, bird cages, kibble and kitty litter contributes as much to the economy as the loudmouth movie industry. Put in that perspective, why does the MPAA have such a disproportionate influence? Is hanging around with movie stars THAT big a perk? If ever the tail wagged the dog…….

velox says:

Re: Put it in perspective.

why does the MPAA have such a disproportionate influence?

Because unlike the MPAA, the Pet Supplies Industry sees no need to hire people like Stephen E. Siwek. He is the DC consultant at Economists Incorporated who authored the report which spews these nonsense numbers. His webpage boasts that he’s authored 12 such reports over the years. As a bonus he will offer testimony as an expert witness before regulatory bodies and courts on IP issues. If you appreciate his work you can let him know at siwek.s@ei.com.The sad part is, people like this have years of their life invested in creating malarky. They can never admit that what they’ve been serving up just doesn’t bear close inspection, because to do so would be like throwing out the last 2 decades of their career. No doubt this guy’s livelihood has been dependent for a long time on the ability to keep coming up with more claptrap.

Someantimalwareguy (profile) says:

Velocity vs. recession

Looks like they are trying to equate their losses with the drop in velocity (loosely: how quickly money received is then turned around and spent) with piracy rather than (more appropriately) as a consequence of the recession.

If I have $10 to spend but am not certain or confident in where the economy is going I would tend to be more cautious and targeted as to where I spent that $10 bill. While the Entertainment Industry would be highly unlikely to get that money, other portions of the economy would continue to get that money as I spent it on essential, rather than nonessential goods and services.

This does however mean that less money would be circulating in the economy at any given moment (and thus a partial reason for lower velocity in the currency) as I reined in or lost access to disposable income…which is where the Entertainment Industry actually makes its money.

out_of_the_blue says:

Arguing exact figure just admits there are losses.

You’re just trying to divert by quibbling over a number that you can’t pin down, either. I don’t much care what the level of losses are any more, not when you freetards* claim that piracy /actually/ helps promote movies and increase profits! That’s just factually wrong, not a matter of exactitude.

* I was under the impression that regulars had embraced the “freetard” label (to reduce its effect) and so stated when began using, but if annoys some here, fine.

Rikuo (profile) says:

Re: Arguing exact figure just admits there are losses.

The main point being bandied about here is the MPAA saying that $58 billion disappears from the economy, which simply doesn’t happen. Even if that number is somehow correct, its money being spent elsewhere. For it to actually disappear, “pirates” would have to literally be physically destroying the money, and I can’t recall the last time I lit a paper bill on fire to light my big fat cigar.

blaktron (profile) says:

Re: Re: Arguing exact figure just admits there are losses.

Destroying a paper bill also wouldn’t really affect the economy since money has been made unconvertible into physical means since ’71. The idea that this would affect anything is based on the (faulty) premise that there is cash made for every dollar created. When the Fed ‘creates’ 700 billion dollars and hands it to banks it doesn’t print it all, it just tells them they have more.

Gabriel Tane (profile) says:

Re: Arguing exact figure just admits there are losses.

Nice try there OOTB. Can I call you OohtBee? Cool.

The original argument had nothing to do with the figures other than calling the RIAA out again for relying on reports whose figures have been proven to be wrong. The point of the article was the claim that the economy loses the money.

Just because you try to swing the argument over to the figures does not mean that there really are losses. I’m not saying that there’s not some kind of loss somewhere… personally, I think it gets washed out be the net gain from how ‘pirates’ do support the industry.

But you can’t twist an argument into a whole new thing that we weren’t even talking about and then claim that we’re admitting something because of that twist. Nice try though.

Anonymous Coward says:

Re: Arguing exact figure just admits there are losses.

well, the reason they are shooting for a big number is that its harder to convince Congress to take away our rights to save a small amount of money.

Personally, no matter how big it is, i think rights should come first, however, we’ve seen how the government responds to this.

JMT says:

Re: Arguing exact figure just admits there are losses.

“I don’t much care what the level of losses are any more, not when you freetards* claim that piracy /actually/ helps promote movies and increase profits! That’s just factually wrong, not a matter of exactitude.”

Every time you make this claim you make yourself look just a bit more clueless than the last time. I know for a fact that “piracy” has helped promote movies and increase profits because I have personally paid for movies in the cinema and on DVD that I first saw in unauthorised form. I’m sure many, many other people will tell you the same thing.

So making this claim again would be calling me a liar. Are you so confident in your beliefs that you’ll do that?

Anonymous Coward says:

The MPAA and the RIAA should both be charged with RICO LAWS for the criminal enterprises they have been running for decades.I do everything I can possibly do to not pay a dime of my money towards any MAFIAA content.I prefer to not go to any cinemas and not do any kind of ITUNES,AMAZON,NETFLIX as that will still give them a buck.I only buy used products online or in a local store.I may have to wait a bit to see something but it does not matter.The point is they get NOTHING FROM ME.
I am doing my part to not feed the eneemy of all of us who dream of freedom.These shysters have been throwing around their money here and overseas and you can see the asshole results.
But no one seems to care about how many times these fuckers have ripped off the artists and crews and people who work in that whole slimeball industry.
the film and music industry are the most backstabbing cutthroat industry you would ever know in your life.I DO KNOW !!!
I have been a rock n roller playing in bands since 1972 and I am one of the oldest punk rockers in the state of Maine.
I am Jordan leader and singer of Big Meat Hammer
Join the Boycott now !!!

fogbugzd (profile) says:

There is one silver lining in all this. Reporters tend to play follow the leader and follow the trend. Once upon a time we had one person go before the Senate for confirmation and it turned out they hadn’t withheld social security tax on a housekeeper/nanny. That got a lot of headlines, so now every single candidate that goes up before the Senate has newspaper reporters searching for less than legal housekeepers and nannies.

The MPAA and RIAA have been foisting bogus statistics on the media for years, and the media has routinely accepted it. Now reporters have seen that there are headlines to be made in debunking MPAA stats, and it is usually easy picking.

I actually feel just a tiny bit sorry for people who write reports for the entertainment industry. Their jobs just got a lot harder.

out_of_the_blue says:

The MPAA promoted Techdirt, and Mike has only invective for them.

Since some began lectures today on how objectors should — must, actually — comport themselves, let’s look at Mike’s word usage as a measure of his persuasive powers. Condensed version of lead paragraphs: silly — chock full of bogus stats — if took claim seriously — misleading stats — claims — If only that were true — misleading bunk — Masters of Propaganda — admits — perhaps (just perhaps) — a little misleading — moves away from — merely suggests — This is complete and utter bunk — and the MPAA folks either know this and are lying… or they’re idiots. — claim debunked so many times over — is a laugh — very questionable — use completely bogus math.

I’d say that’s intended to please the fanboy-trolls here, and ineffective on those who start neutral, let alone those decided. So the MPAA is winning the propaganda war too, managing to limit pejoratives to a few mild ones necessary to state disagreement. Mike would do better to not spew venom — but won’t.

Anonymous Coward says:

What amazes me Mike is that you have a business degree, and still post this sh-t with a straight face.

The point the MPAA is making is that they take in $10, and then they pay out $7 and $2, which means there is $19 of economic activity.

When you don’t buy the DVD, 19 dollars of economic activity is lost.

I read crap like this on here, and I wonder why you are trying so hard to discredit them, when your motivations are so transparent.

*shakes head*

Anonymous Coward says:

Re: Re: Re:

No, you don’t have 15 apples.

But if you spent $10 to buy 10 apples, and sold 5 apples for $5, you generates a total of $15 of economic activity.

Total economic activity is the total of all transactions that happen. The profit and loss at the end tells you if anyone made any money on it.

Net profit is gross revenue minus expenses. What is being expressed here is the gross revenue of the MPAA member, plus the gross revenue of the manufacturing company, plus the gross revenue of the shipping company. That the MPAAA member only nets $1 at the end doesn’t change the fact that they grossed $10. That the trucking company many netting nothing isn’t important, because they had $2 gross income (and the oil companies probably got it all!), and so on.

Economic activity doesn’t magically generate new product – but each step along the way does generate income and expenses.

Anonymous Coward says:

Re: Re: Re: Re:

I’m not an student of economics, but I don’t see the point.

I could see this ‘economic activity’ being a useful number to congress if each transaction was a fully taxable event. But because the middleman can write off the expense of the apples he sold, the economic activity number doesn’t seem that exciting.

What’s it good for? (other than being a big number for lobbyists to wave around)

Anonymous Coward says:

Re: Re: Re:2 Re:

What’s the point is only that each company in the chain measures it’s economic activity not just on net profits, but also on what it bills out. On the retail side (the people who buy the DVDs to sell at retail) count each say as significant, even if they don’t make very much profit on each one. They are very sensitive not just to net profits, but also to gross sales.

The most important indication is that when a DVD isn’t sold, there is a ripple effect, all the way through the economy. All these companies gross sales are hurt as a result.

Anonymous Coward says:

Re: Re: Re:3 Re:

OK. I think I’m beginning to understand what you are saying. So if you’re a policy maker, what do you do with that number by itself? If people aren’t spending their ten dollars on DVDs, how do I know what they are spending it on (e.g. cheap dinners, watches, car-washes, etc.)? Does that other thing(s) produce a more or less ripples?

Perhaps it would be more useful if we also had the actual amount lost by the first ripple (i.e. analogous to the $10 Mike uses). Then we could ask what the economic activity from some comparables with similar sized initial ripples. Who knows? Once they see all the alternatives, maybe they’ll find they should be discouraging the purchase of dvds, and encouraging the purchase of anchovies instead. 😉

Anonymous Coward says:

Re: Re: Re:4 Re:

Ah – found the original IPI report. Forgive my disjointed thoughts as I look it over.

They say the original loss (borrowed from the USTR 301 report) to Movie, Music, and Software is ~ 17 billion worldwide (5.6 billion if you only count movies and music). The report admits that they count each count of piracy as equating to the loss of the full retail price of their product.

* It’s curious that while the software industry accounts for the lion’s share of the losses to piracy, software engineers are among the loudest people calling for a loosening of intellectual property rules.

Anonymous Coward says:

Re: Re: Re:2 Re:

Economic activity which it is the total transactions inside an economy independ of gain or not have a strong correlation to profits, interest and other economic variables.

If it grows others indexes also grow, if it goes down those indexes also go down, but here is the thing, everything he told you is BS, you don’t magically create money from thin air unless you want to create numbers not founded in reality, those numbers must account for what goes in or they loose the capacity to indicate anything and what the moronic AC said there is probably outright fraud if you do it, because others use those numbers to plan for things.

The focking gross income must have the cost of revenue streams deduced to have even start to resemble reality and not fiction.

Anonymous Coward says:

Re: Re: Re: Re:

Exactly muppet and the gross was $1 for the studio, $2 for the shipping guy and $7 which totals $10 of gross income total for the 3 or even less since they have to deduce the costs of the good or service from it.

Quote:
Gross income in United States tax law is receipts and gains from all sources less cost of goods sold

http://en.wikipedia.org/wiki/Main_Page

Anonymous Coward says:

Re: Re: Re:2 Re:

Gross income in tax law is not the game as gross sales.

Gross income is “income after expenses”. If you are going to do that, you would need to remove the expenses from the shipping and manufacturing guy as well.

For $10 of sales, the gross income for the three of them isn’t $10 – it’s probably not even $3.

However, the gross sales, the top line, you know, money in… is $10 + $7 + $2.

You know that.

Anonymous Coward says:

Re: Re: Re:3 Re:

http://en.wikipedia.org/wiki/Gross_sales

So let get this straight, using gross-sales to claim losses in revenue is ok now?

Because MPAA didn’t say that they lost movement of money around in their sector, they claimed direct production loses in the whole economy for which they have no data to support that fact since they don’t have the numbers from other industries and could not tell if the gross-sales for the country did go up or down.

So basically what you have here is pure and simple dishonesty.

Anonymous Coward says:

Re: Re: Re:

Let’s take it one step further, and look at the quote Mike uses and understand why it is bullshit from end to end.

“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.”

Here’s the rub though, which explains why he is wrong:

The manufacturing company took in $7, but shockingly, it cost them $6 to produce the goods (they had to buy supplies, power, equipment, and pay for staff) and the trucking company took in $2, but after expenses such as fuel, equipment, and staff might only net 10 cents a piece.

So if you do Apples with Apples, the $10 DVD only generated $2.10 ($1 + $1 + $0.10).

See the trick? He is using net profits for the MPAA, and gross revenue for the others. Apples and oranges.

Now, if you add up the GROSS revenue from each ($10+$7+$2) you get $19 of gross income over the three companies, and $2.10 of net profits over the three companies.

It’s absolutely insane that Mike let something as simple as this walk past his nose. It’s a bullshit piece of “debunking” that is so full of bunk itself as to be laughable.

Anonymous Coward says:

Re: Re: Re: Re:

So if you do Apples with Apples, the $10 DVD only generated $2.10

I don’t think so. Mike (Tim?) has added a level of generalization is all.

the trucking company took in $2, but after expenses such as fuel, equipment, and staff might only net 10 cents a piece.

The other $1.90 becomes the profit of the staff, diesel companies, and equipment manufacturers. It still adds up to $2 for all the someones involved.

You could take it out to even more detail – part of the truck driver’s pay went to pay for his Mountain Dew, etc. Saying that $2 went to the trucking company seems an acceptable level of generalization to make the point that the $10 transaction does not produce $19 of wealth.

Anonymous Coward says:

Re: Re: Re:2 Re:

They aren’t claiming that it makes $19 of wealth. Don’t you get it? They aren’t claiming $19 of profit.

The worst part is you actually made my point for me, and you still don’t get it.

“The other $1.90 becomes the profit of the staff, diesel companies, and equipment manufacturers. It still adds up to $2 for all the someones involved.”

The problem is that at the trucking company level, the money is “gross revenue”. What is the gross revenue at the MPAA member company? $10. After all, the $1 of profit plus the $7 and the $2 adds up to $10 – and we have the same math at the manufacturing company and a the trucking company.

The MPAA member company as $10 of gross. The trucking company has $2 of gross. The manufacturing company has $7 of gross. How much total gross for all 3 companies? $19.

How much profit? $1 for the MPAA member, $1 for the manufacturing company and 10 cents for the trucking company.

Either it is one side or the other. The numbers presented mix gross sales for the trucking company and manufacturing company, and the profit for the MPAA. What it does is ignore the economic activity generated at each step. It’s “bunk” of a very high quality indeed.

Anonymous Coward says:

Re: Re: Re:4 Re:

More money is circulating.

If I have $1 and hold onto it, no money circulates.
If I have $1 and give it to you, $1 has circulated.
If you give the $1 to the next person, there is $2 of money circulated.

No new money was created or lost. Just that each transaction is a gross revenue, a movement.

Let’s put it another way. I have a small store, and I buy a widget from the warehouse for $1. They have $1 of gross income, right? Now, if I sell it to you for $1, I also have $1 of economic activity. Guess what? There is a total of $2 of economic activity going on, because $2 changed hands. That your $1 to me is in replacement for $1 that I sent out isn’t material. I made a transaction for $1 to buy, and you made a transaction for $1 to buy. Two transactions, total value of transactions is $2.

Now, if you want to look at net profits or value added, my situation would be zero. I made nothing. I added no value, I made no profit. The money however did circulate.

Anonymous Coward says:

Re: Re: Re:5 Re:

Your argument might be more compelling if the MPAA had claimed that there were 58 billion fewer dollars circulated due to piracy but they didn’t, they said $58 billion in lost economic output.

Economic output isn’t really a “word” but the only thing it can reasonably mean is that $58 billion dollars of goods were not produced. By your logic that means that even more than $58 billion would have been circulated and considering how many goods go into making a movie you could easily reach into the trillions of dollars in circulation.

All that BS aside, no one can possibly determine how much money would or wouldn’t be circulating throughout the economy if piracy didn’t exist so your entire argument is irrelevant.

Anonymous Coward says:

Re: Re: Re:6 Re:

” no one can possibly determine how much money would or wouldn’t be circulating throughout the economy if piracy didn’t exist so your entire argument is irrelevant.”

Because of what we have seen in the decline of recorded music and movie sales (but not the consumption of recorded music and movies, at an all time high right now) it is clear that piracy has hurt the industry. You would have to have your head in the sand to think otherwise.

The question is how much pain.

What the MPAA is trying to show is not only how much has been lost directly to them, but how much as a result they are not paying out, and how that lack of a payout touches other parts of the economy.

The echo of money through the economy is clear, and they are only trying to point out that they have less to “echo around”, as it were.

it is an equally stupid claim that there is no effect. That doesn’t stop Mike from trying to make it at every turn.

Chosen Reject (profile) says:

Re: Re: Re:7 Re:

Because of what we have seen in the decline of recorded music and movie sales (but not the consumption of recorded music and movies, at an all time high right now) it is clear that piracy has hurt the industry. You would have to have your head in the sand to think otherwise.

On the contrary, you would have to have your head in the sand to see that correlation is not causation.

Nearly every year in the last decade has seen record breaking box office takes.

It wasn’t until a global recession that video game sales flat lined.

The music industry (not the recording industry) is also seeing growth.

It also wasn’t until the recession that comic book sales started dropping.

Book sales are going up as well.

Nearly every content industry in the last decade has been getting bigger until a global recession, and even still, several of them have seen record takes through that recession.

All of that ignores that increased competition for dollars and time. Restaurant sales are growing (competition for dollars), social networking, microblogging, and since we’re looking back 10 years, even blogging has taken people’s time.

There’s Netflix’s growth, the advent of Hulu, Youtube Spotify, and Pandora, etc. People have more things to fill their time with than ever before, are already spending more money on entertainment than ever before, even through a recession, and you think that it’s a foregone conclusion that piracy is the only explanation for dropping sales of shiny plastic discs?

Anonymous Coward says:

Re: Re: Re:8 Re:

You must read more closely grasshopper to understand reality.

Ticket sales for theaters? Way off. Way way way off.

http://www.the-numbers.com/market/

Since a peak in 2002, ticket sales are down 240 million, and only a significant increase in ticket price (attributed mostly to Imax and 3D surcharges) has managed to keep thing on an even keel. (ticket prices are up a couple of bucks).

DVD sales are plunging equally as badly, if not more:

http://www.guardian.co.uk/business/2011/may/03/film-industry-turmoil-as-dvd-sales-drop

The only bright spot is online rentals, but much like Itunes was for the music industry, it is picking up pennies after the dollars were lost elsewhere.

All of your “competition for dollars” would make sense if the content was so widely pirated and consumed anyway. Clearly there is demand for the product, and just as clearly, people feel entitled to just take it.

Chosen Reject (profile) says:

Re: Re: Re:9 Re:

Ticket sales might be off, but the industry is still making record numbers off of ticket sales. It’s not like movie tickets are inelastic. Clearly it’s paying off for them to have significantly raised ticket prices. You can’t complain that not as many people are paying for your shows, when you decided to significantly raise prices to get more revenue. What is you want, more money or more people seeing the shows? If the former, you got it; if the latter, then piracy would be in your favor, no?

Now let’s talk DVD sales using the article you linked to. The only mention of piracy in that article is that piracy is declining and has been since 2008. The rest of the article states that problems were partly the industry (withholding titles, a weak lineup) and party consumer behavior (using Netflix et al instead of buying). The industry can’t complain when they are at fault, and when consumer behavior changes, you have to change with them in order to survive. What the article didn’t mention was the revenue they are generating from services like Netflix, only that sales of shiny plastic discs are down and rentals from brick and mortar stores are down. From the article, a couple of weeks after Easter and they were only down a bit, from usual and the article still doesn’t include revenue from services like Netflix. It doesn’t look as dire as you make it out to be.

I’ll grant that you acknowledge that online rentals are a bright spot, but you don’t provide any evidence that the industry is “picking up pennies after the dollars were lost elsewhere”. In fact, from your linked article, it shows that after the industry’s corrected its course, the dollars were only slightly down. It looks instead like they are picking up the same dollars they used to and picking up some more dollars where there wasn’t any before.

All of your “competition for dollars” would make sense if the content was so widely pirated and consumed anyway

I assume you were instead referring to competition for time. If so, then it still holds true; how do you know anyone actually watched the whole movie once it was downloaded? Maybe they wanted to see one part, or didn’t watch it but wanted in case they did have time? Not that I’m condoning the piracy, I’m just saying that just because someone downloaded it, doesn’t mean they actually watched it.

Togashi (profile) says:

Re: Re: Re:7 Re:

In the past 2 years, my consumption of recorded music and movies has risen sharply, while recorded music and movie sales to me have declined. I might even go so far as to say that my consumption is “at an all time high right now” personally.

Yes, I hear you shouting over there. “Damn, dirty pirate! Stop stealing millions from our beloved content producers!”

But wait… what’s that? I don’t pirate at all? How can that be possible?

You see, I subscribe to Netflix and Microsoft’s Zune Pass. So for movies I’m paying $8 a month, where before Netflix I would have had to pay that much to watch 1 or 2 movies per month instead of one every other night or so. For music, I pay $15 a month, which gets me 10 DRM-free mp3s per month plus as many DRMed files as I can get my grubby little paws on, which I can play on either my computer or my Zune. I know I listen to at least 15 new songs per month, so again there’s higher consumption with less purchasing.

The marketplace is changing. So no, it is not clear that piracy has hurt the industry because of the crazy number of variables to account for. And that’s without even starting to get into the whole argument of whether economic movement with no net change matters or not…

Mike Masnick (profile) says:

Re: Re: Re:5 Re:

More money is circulating.

Bullshit. You’re assuming — totally without proof — that the money doesn’t circulate elsewhere. By your argument when you buy pizza for lunch, you’ve created untold economic “losses” by not letting money circulate elsewhere. The money circulates either way — which is why that’s a meaningless number for this purpose.

IPI only looked at the money circulating in one direction, and ignored how it circulated otherwise.

Tim’s analysis just showed that *if* you’re going to only look at one direction on the rippled effect, then you shouldn’t double count — which is what IPI did.

Anonymous Coward says:

Re: Re: Re:6 Re:

Mike, please:

http://www.techdirt.com/articles/20110817/12213915561/motorola-deal-showing-massive-loss-to-innovation-caused-patents.shtml

I am not getting it here. If the movie studio takes in $10, and then pays out $9 of it, don’t we have a total of $19 of economic activity, even in a single direction? After all, the movie company doesn’t only count profits, it counts sales. Even without considering what happens further down the line, the activity of selling the DVD generates not $10 but in fact $19 of economic activity.

If an economic activity doesn’t happen at all, and as a result the number of people circulating the money shrinks, then the economy gets smaller.

Buying the Pizza doesn’t shrink the economy by itself, but if the pizza guy and you both download movies and don’t pay for them, you left all the people in the movie industry out of the economy. It is important because there is a chance that rather than choosing to spend money on “this” or “that”, they choose neither, and the economy slows.

So please explain why in your other example, money is “taken out of the economy”, and yet in this case it is not.

Anonymous Coward says:

Re: Re: Re:7 Re:

It is just dishonest to claim shrinking economy activity for one sector means the whole economy shrinked that is not true at all.

Is like claiming the amount of sun light that hits the earth is equal to the amount of sun light that was collected in one small part of the earth.

Lets assume that what you dishonestly is claiming the industry is doing is claiming loss of economic activity which was not what they said there, but for the sake of argument lets take your false statements and assume they are true the industry in fact is claiming losses for economic activity, how did they calculate that for the entire economy?

Do they have the numbers for all those other industry sectors?

The US has not seem a decline in economic activity since the 70’s or should I say the new-great-depression of the 00’s?, the money in circulation today measure by economic activity didn’t dwindle did they?

Did the truck driver not find new goods to transport, is he only able to transport DVD’s?

Of course not, why the dishonest statement then?

Anonymous Coward says:

Re: Re: Re:8 Re:

By your logic, the economy would always stay the same, because there is some sort of weird law that says that it is always equal, not matter what happens. We all know this just is not the case, otherwise we would have no recession (and no good times either). Reality disproves that theory.

I am still waiting for Mike to explain why in one example, money disappears out of the economy, and in another, it does not. I would like to know which side he is on, and to admit either that his comments here are bullshit, or the other post is bullshit.

Anonymous Coward says:

Re: Re: Re:7 Re:

Translation of what this dishonest person is saying for everybody who don’t know economics:

The MPAA has a solar collector that produces 19 watts of energy and because a cloud its over it, they are claiming all energy everywhere will be reduced by 19 watts because of course they are the only ones that produce energy and only in one spot.

Of course that is absurd, other places can and do produce energy and are not affected by the conditions where the MPAA is.

Anonymous Coward says:

Re: Re: Re:5 Re:

The worst spindoctor ever.

“Motion picture and video piracy exact a heavy toll not only on the U.S. motion picture industry, but the overall U.S. economy as well: $20.5 billion annually in total lost output among all industries, $5.5 billion annually in lost earnings for all U.S. workers and 141,030 jobs that would otherwise have been created are lost. In addition, as a result of piracy, governments at the federal, state, and local levels are deprived of $837 million in tax revenues each year.”

That is lost revenues right there that is not some fictional interpretation of gross income that you are implying.

Anonymous Coward says:

Re: Re: Re:5 Re:

You know how economic activity is measure?
Using receipts minus the costs of goods and services, what about that simple fact you don’t understand?

So, you have to deduce the cost of the focking widget and declare that as your gross income which is $0 and that is totality dishonest for the MPAA to claim economic activity as “losses” nothing was lost and they can’t possibly claim that the overall economy suffered a reduction in the economic activity with a strait face, do you wanna know why?

Because they don’t have access to the numbers of others, they are not the government and they can’t possibly trace what happens with that money that wasn’t spent on them, it could have gone to other places, nobody is saving any money so that money is obviously circulating already just not maybe directly to the studios which doesn’t mean the painter is not working, the guy who sold shoes and apparel is not selling anything.

Richard (profile) says:

Re: Re:

The point the MPAA is making is that they take in $10, and then they pay out $7 and $2, which means there is $19 of economic activity.

On that basis I can save the world economy for ?1.

I ‘ll get my daughter to go down to the shops for me on the way home from school. For this I’ll pay her ?2. However rather than just pay her directly I’ll subcontract her through every one of the ?5 Billion plus people on the planet 1 million times each one getting a markup of 1 5 trillionth of a pound on each occasion that the “business” passes through their hands.

That will generate ?5 Trillion of economic activity – which should just about do it.

Anonymous Coward says:

Re: Re:

Paul, most piracy at that level generally wasn’t significant because of the signal loss per copy. You copy it once, I copy your copy, and the signal quality has already degraded enough that the music isn’t very good, or the movie image is crap. Third or fourth generation video you might as well have been looking at a cartoon. Useless.

It was also “sneakernet”, and limited by physical copy speed – the speed to copy a 2 hour movie was, remarkably, 2 hours per copy. The progress of trying to give away enough copies was so slow as to be meaningless.

Anonymous Coward says:

Re: Re: Re:

Keep saying that, maybe eventually someone will believe in you, just not ordinary people who grow up pirating everything since the introduction of recording media that was wide spread, with a market value in the past in the billions of dollars, that is bigger than anything the entertainment industry could ever achieve.

Anonymous Coward says:

For a moment I will take the math at face value since that is not what I wish to comment on. I will even assume for the sake of argument that each pirated piece of content equals a lost sale. (This is entirely without merit, but that is not my current focus) The point I wish to focus on is the IPI’s assertion that “piracy … costs the U.S. economy $58.0 billion in total output”.

The fallacy here is that the money that would’ve been spent by the consumer during that sale will not ever be spent at all. There is no actual cost to the U.S. economy at all because that money has not been removed from the system. It is more accurate to say the “IP industry” does not gain the money and the U.S. economy does not gain or lose a single dollar because the money will likely be spent on a different product.

The Logician says:

Re: Re: New Meanings for MPAA and RIAA??

The fact that you continually fall back upon insults and fallacies undermines your position, AC #114, as do the flaws in your computations. It has been explained to you multiple times that money not spent on DVDs does not simply disappear from the economy. It is merely spent elsewhere. You fail to understand that with the advance of technology, certain shifts inevitably occur.

We are in the midst of one such shift at this time, the move from physical media for digital content to non-physical media. This, of course, terrifies those whose livelihood depends on physical media. They live in such deep myopia that they cannot see beyond their own inability to adapt, and so in their continuing irrelevance they will be left behind much as buggy whip manufacturers were early in the last century.

Anonymous Coward says:

Re: Re: Re: New Meanings for MPAA and RIAA??

I don’t think anyone is “terrified” about the passing of physical media. Rather, they are “terrified” about the shift in mentality and morals that has an entire generation thinking they are just entitled to take whatever they want without issue.

The whole buggy whip thing would be appropriate if the buggy was going away, but in fact these buggies are more popular than ever. It would only make sense if people were not consuming the very goods that the pirate like mad.

Jay (profile) says:

Re: Re: Re:2 New Meanings for MPAA and RIAA??

“Rather, they are “terrified” about the shift in mentality and morals that has an entire generation thinking they are just entitled to take whatever they want without issue.”

For the love of everything that is decent…

NO ONE IS SAYING THEY WANT EVERYTHING FOR FREE!

People want decent pricing for digital goods that doesn’t bankrupt them. They want content that conforms to THEIR lives and THEIR lifestyles.

People will not pay $795 for a pdf in mass numbers, but they will pay $1 to $10 based on perceived value

Musicians can make money on mp3s, no question since iTunes is still around. HOWEVER, musicians can make money on other scarcities depending on how THEY want to promote themselves.

Finally movies. People will pay for access to authorized alternatives even if there are free alternatives.

In conclusion, people aren’t using the buggy whip as much. That doesn’t mean it isn’t useful to a small niche. They traded it in for a Mustang and are zooming down the highway faster than the industry can keep up. If they can’t adapt, they can very well die and have new industries take their place.

THAT is the truth of the matter.

CommonSense (profile) says:

Re: Re: Re:2 New Meanings for MPAA and RIAA??

The buggy is the physical media, and it is going away. What didn’t go away back then, and isn’t going away now, was the increased speed of travel allowed by buggys, and the content being produced. What did happen, is that people got what the buggys gave them, only better and more efficient, so buggys went away. This is happening again, because digital media is better and more efficient than physical media. The movies aren’t getting any better, so the price shouldn’t be going up. The efficiency is getting better, which should bring price down. People realize this, companies are trying hard not to.

chris (profile) says:

MPAA

viewership on DVDs must be weighted since they never know how many times or how many people watch the save DVD. this is an understatement of viewership and may overstate criminal behavior.

moreover, it is unknown how many times a DVD is purchased because one is scratched. this causes duplicate purchases and overstatement of distribution.

finally, resale of used DVDs takes a bite from the market. It undermines market counts.

trailers may delay good DVDs, or decrease purchases of bad DVDs because they prime customers good or bad.

either way, the econometric models MPAA uses are neither transparent or accurate.

“monkeys with wings are flying…” economics are typical of self-satisfying monopolists lobbying for favoritism.

Someguy who knows stuff says:

summary

Ok, so after reading this article/blog/debate/battletothedeath, it seems that metaphorically the whole “movie industry” could be compared to a fat kid at maccy D’s (some random restaurant name), with tons of food in front of him looks over to his brother who opens up his Shappy meal, points his stubby finger at it and screams “WHY DON’T I HAVE ONE!!”………

Money not spent on this industry will be spent by a consumer on something else. The movie industry is a huge commodity, which means everyone would be willing to spend the money elsewhere and not do something non-‘expenditury’, ie banking (or firing downloads everytime money makes movies with lol-katz). It seems to me that the bigheads running the movie industry are jealous that there is this potential wealth they are not getting that they consider to be theirs, anyway isn’t it better for an economy if less money gets spent on commodities? Like lowering inflation and creating more jobs as commodities tend to be overprices, particularly the movie industry (who gets paid 9 mil for 1 months work :/ ).

So i say thank you pirates for curbing inflation and getting our economy out of this rut….

Someguy who knows stuff says:

summary

Ok, so after reading this article/blog/debate/battletothedeath, it seems that metaphorically the whole “movie industry” could be compared to a fat kid at maccy D’s (some random restaurant name), with tons of food in front of him looks over to his brother who opens up his Shappy meal, points his stubby finger at it and screams “WHY DON’T I HAVE ONE!!”………

Money not spent on this industry will be spent by a consumer on something else. The movie industry is a huge commodity, which means everyone would be willing to spend the money elsewhere and not do something non-‘expenditury’, ie banking (or firing downloads everytime money makes movies with lol-katz). It seems to me that the bigheads running the movie industry are jealous that there is this potential wealth they are not getting that they consider to be theirs, anyway isn’t it better for an economy if less money gets spent on commodities? Like lowering inflation and creating more jobs as commodities tend to be overprices, particularly the movie industry (who gets paid 9 mil for 1 months work :/ ).

So i say thank you pirates for curbing inflation and getting our economy out of this rut….

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