EU-Funded Study On The Cost Of Copyright Infringement Dismisses Key Real-World Factor As 'Outside Its Scope'
from the fantasy-economics dept
One of the less well-known outposts of the European Commission is the EUIPO Observatory. Here?s how it describes its objectives:
Provide evidence-based contributions and data to enable EU policymakers to shape effective IP enforcement policies and to support innovation and creativity
Provide data, tools and databases to support the fight against IP infringement
Provide knowledge and learning programmes for IP and enforcement authorities as well as for businesses and IP practitioners
Develop initiatives to help innovators, creators and businesses (especially SMEs) protect their IP rights
Design campaigns to raise awareness of the value of IP and the negative consequences of IP infringement
You may notice a certain one-sidedness there: this is all about infringement and enforcement, with nothing about whether the current copyright laws are part of the problem, or whether they are even fit for the digital age. Given that bias, the subject of the Observatory’s latest report will come as no great surprise: “The economic cost of IPR infringement in the recorded music industry.” Here are the main results:
In 2014, the recorded music industry lost approximately €170 million of sales revenue in the EU as a consequence of the consumption of recorded music from illegal sources. This total corresponds to 5.2% of the sector’s revenues from physical and digital sales. These lost sales are estimated to result in direct employment losses of 829 jobs.
If the knock-on effects on other industries and on government revenue are added, when both direct and indirect effects are considered, infringement of IPR in this sector causes approximately €336 million of lost sales to the EU economy, which in turn leads to employment losses of 2,155 jobs and a loss of €63 million in government revenue.
I predict we’ll be seeing these numbers a lot in the future, because the music industry will be quick to seize on them as “objective” figures that are above suspicion, unlike industry-sponsored analyses. But of course, things are not always what they seem, and it’s worth reading the full report in order to find out what is really going on here. Nearly half of the 48-page is taken up with appendices outlining the forecasting model used to calculate those “lost sales.” The mathematics there is pretty enough, but ultimately undermined by the following admission made earlier in the report:
It is important to note that the lost sales estimated in this report represent hypothetical additional revenue that the recorded music sector would have earned, had infringement not taken place. It is not an estimate of the value of the illegally acquired music recordings; nor is it an estimate of the substitution effect — that is, the question of the extent to which the illegally consumed music would have been bought from legal sources had piracy not been possible, which is outside the scope of this study.
Thus it is taken as axiomatic that every lost sale would have converted to a real sale if a magic wand had been waved, and piracy had become impossible. No justification is offered for this huge assumption, and that’s not surprising, since it doesn’t exist: in the real world only a fraction of those “lost sales” would ever be converted to actual sales. So even if we accept the modelling in the appendices is correct, the figures that result must be reduced by some factor to take account of this. It’s hard to say what that factor is, but it affects all the headline figures — the 5.2%, the 2,155 jobs, and the €63 million in government revenue. Actually, things are even worse than they seem, because the study doesn’t explore the possibility that online sharing boosts sales, rather than reduces them. It only mentions that crucial issue right at the end, where it says:
The question of whether piracy reduces sales of recorded music has been the subject of many studies, sometimes with contradictory results. Some authors have claimed that piracy actually increases sales by allowing consumers to sample music they would not otherwise have considered purchasing. However, a recent literature survey by Danaher et. al. (2016) shows that out of 25 studies reviewed, 22 found that piracy reduced the revenue of the legal industry. Thus, the results of the present study are in line with the prevailing consensus, albeit utilising a completely different methodology.
However, the methodology adopted by the report may be skewing the results by removing perhaps the most “advanced” digital market — Sweden, the home of Spotify — from the modelling because it is viewed as an outlier. And as for that 2016 study by Danaher et al., here are some of the 22 datasets showing that piracy “reduced the revenue of the legal industry”:
1994-98 IFPI worldwide CD sales data and physical piracy rates
1998-2002 worldwide CD sales, IPSOS survey data for piracy downloads
1997-2002 country-level data on music sales and broadband usage.
1990-2004 consumer spending on cassette tapes, LPs, and CDs.
It seems unlikely that the analog world of cassette tapes and LPs tell us very much about what young people are doing online with digital files today. Of course, there’s more recent data in the list, for example, this set:
2008-2011 iTunes music sales in France and other European countries
Which apparently showed the HADOPI anti-piracy law “caused iTunes music sales to increase by 22-25% [in France] relative to changes in the control group [countries].” Except that it didn’t, as Techdirt noted at the time.
This quick run-through of the cited datasets is not meant to be a rigorous rebuttal, but it does indicate the superficial nature of the new report’s analysis, which accepts uncritically the Danaher paper, instead of exploring properly the really important question of whether piracy drives or depresses sales. Coupled with a failure to consider substitution effects, that renders the EUIPO report’s results of little value. What makes things worse is that the music industry will doubtless use them anyway to foist its copyright maximalist agenda on policymakers, who may mistakenly assume the Observatory’s work can be relied upon.
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Filed Under: copyright, infringement, lost sales, studies
Comments on “EU-Funded Study On The Cost Of Copyright Infringement Dismisses Key Real-World Factor As 'Outside Its Scope'”
Sounds like more dissertations from the same sort of people who believe that a music file downloaded halfway across the planet means that an entire chain of supermarkets is irreparably ruined, because “IP intensive industries”.
"Infringement" != Loss
People like music.
People don’t like wasting money.
People will listen to music when it’s free or when they feel it is worth the cost to purchase.
This hasn’t changed over the decades and the same people that recorded radio broadcasts on their tape decks, dubbed vinyl albums onto reel-to-reel or 8-track recorders, updated to cassette (if you’d call that an upgrade) and later DAT and finally CDs.
Someone downloading music, or ripping a friends CD to digital form doesn’t equate to a “loss”, in that if they couldn’t do either, they just would have gone without.
There’s no 1 to 1 relationship between download and purchase.
I might believe there’s a 10000 to 1 – for every 10 thousand downloads or copies, 1 of those might have made a purchase if the cost wasn’t too high.
Re: "Infringement" != Loss
There’s also going to be an unknown number of legal purchases caused by piracy. It’s at least as much advertising for the music as radio.
Re: "Infringement" != Loss
In summary
t is important to note that the lost sales estimated in this report represent hypothetical additional revenue that the recorded music sector would have earned, had infringement not taken place.
I can give an accurate figure for that!
A big fat ZERO.
If the infringement had not taken place then the infringement would not have taken place – but that does not mean that anything else would necessarily have happened at all – and speially not anything that would have generated revenue.
Homer Simpson said it best
“People can come up with statistics to prove anything, Kent. 14% of people know that.”
Re: Homer Simpson said it best
That was either a typo or an error in the script
— everyone knows that the correct number is 24%.
😛
How can there be any “loss of jobs” when industry revenues have actually grown, which means the number of jobs actually increased?
This “loss of jobs” argument here only makes sense in the hypothetical “if all those pirated copies would’ve been converted into sales” scenario, but because they weren’t, that means there’s a “potential loss of jobs that could’ve otherwise existed”.
Very weird assumptions indeed.
330 million euros, isnt that just one less shitty blockbuster that wouldnt have made a profit anyway ?
Re: Re:
Unless those millions went to the pockets of politicians.
I can hear it now:
“It looks good.”
“No, something’s missing”
“What are you talking about? It’s perfect!”
“Oh, I know. ‘…and to support innovation and creativity.'”
“DUUUUUUUDE!”
“I know, right?”
There is a slight error in the statement:
“It is important to note that the lost sales estimated in this report represent hypothetical additional revenue that the recorded music sector would have earned, had infringement not taken place”
They mean the revenue they would have earned not just had the infringement not taken place, but had it been substituted with the purchase of a non-infringing copy. That’s a massive difference.
In other words ...
… it takes about 10 years of piracy to offset the profits Apple and major book publishers cheated out of e-book consumers with their illegal price fixing cartel.
When data just isn’t there they start assuming. The assumptions are based on widely accepted fairytales in the heavily lobbied field while ignoring facts (outliers). Hail to the ip gods.
Legislators for hire
When you hire legislators, they make the investigations fit your narrative, of course.
I have currently about 17 thousand song files in my library. Some of them extracted from games directly, some of them recorded from some source or downloaded from the likes of Youtube and the vast majority downloaded from varied stuff (Napster, Gnutella, Emule, IRC channels, torrents, direct downloads, usenet etc). You usually download whole albums because it’s easier and forget in your disks because who cares about space when you have 8Tb HDD nowadays? I really listen to about 1000 of them and own about 400 legally. And I’m not the only one that ‘hoards’ music.
So, yes, this study is bullshit.
Re: Re:
you probably seeded at least one or two but they cant tell which ones so a 100k$ of damages*17k$ you just harmed the industry for 1.7 billion, thats 5 times the entirety of europes piracy harm.
Without figuring out where the money went, it is not possible to say what its overall effects on jobs and government income was. If it was spent on say alcohol, the governments may have gained income due to high taxation on the products actually brought.
Re: Re:
In fact, it’s not as if there was a substitution effect, but rather an addition one.
You allocate your monthly budget and well, before you might have kept a part of it for entertainment.
Now, as you can get your entertainment “free”, you just allocate that money on something else that is also good for your economy.
So the overall effect for the economy is the same. The only thing that changes is where you spend your money.
Also, regarding the EU, considering that most of the downloaded stuff comes from the US or other foreign countries, actually, it’s better for the EU economy if you pirate, as the money, instead of going to US based companies and studios, has more chances of remaining in EU based companies (instead of buying a DVD with a movie, you buy a shirt at your local shop, for example).
https://torrentfreak.com/top-10-pirated-movies-week-053016/
Most of them are US related in one or other way.
The fun part is when you see “artists” in your country complaining that piracy is hurting their sales and you ask yourself: “do people actually pirate that shit?”.
Re: Re: Re:
About the only thing that USA has left to sell is copies of works produced elsewhere in the world, or licenses to make things that their companies designed. Why else are they concentrating on IP in trade treaties.
Re: Re: Re:
Yeah, it’s always funny seeing them try to extrapolate ‘lost’ sales in one industry to losses to the economy in general, as if they think that when people download a song or movie they light the money they would have spent on fire and just watch it burn.
No, if they’re not spending the money in one place that means it’s being spent somewhere else, ‘losses’ in one industry almost certainly mean gains elsewhere.
Innovation? HOW?
Its interesting that IP is given to CORPS rather then to PERSONS..
And it LASTS LONGER for corps..
Corp IP mentality and Thought on HOW they add up numbers…
DOES EVERY ONE HAVE A PAID COPY?
NO?
Then we AINT MADE A PROFIT..
They're not /entirely/ wrong...
Piracy, or to be more specific the reaction to it has most certainly led to me spending as little money as possible(can’t always tell where your money’s going to with a purchase after all) in the only field of music that counts to groups like that, label music, so if you squint really hard and tilt you head just right piracy has indeed had a harmful effect on the recorded music industry, even if a small one.
IP losses....
“EU funded” under what programme, when was the call for offers, etc.?