by Mike Masnick

Filed Under:
economics, losses, stats

ipi, mpaa

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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  1. icon
    Jay (profile), 12 Sep 2011 @ 8:29pm

    Re: Re: Re: Re: 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...


    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.

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