For decades now, we keep hearing various "copyright intensive" companies whining to the press and politicians about how the "biggest threat" they face is continued copyright infringement. We hear about how it's undermining not just their business, but entire economic sectors, the basis of capitalism and the fundamental rule of law. Copyright infringement, we are told, is one of the largest risks to the economy and society that you could possibly imagine. We've long questioned the validity of those claims, especially since history has shown that the industry cries wolf fairly frequently and has always been wrong
. Most famously, of course, the MPAA's Jack Valenti told Congress
that "the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone." That was in 1982. In 1986, the home video market -- which the VCR created -- made more money for the MPAA's studios than the box office did. It's tough to believe the "threat" claims when they're always wrong.
But, the "copyright intensive" industries just keep on making those claims, and there's always some in the press and among elected officials who either don't know or don't care about the past (or technology or reality) and automatically believe those claims. They just assume that of course copyright infringement must be a huge threat because these companies say so.
A new study, however, found a pretty good way to evaluate the reality of that threat. Jonathan Band and Jonathan Gerafi realized that a good "independent" third party to evaluate the risk and threat of copyright infringement would be investment analysts
. Their only stake in the game is whether or not the company is going to do well or poorly. If the perceived risk and threat was real, they'd certainly be letting everyone know. So, Band and Gerafi have produced a new research report studying equity research reports
issued over the last quarter for eight of the top companies in the so-called "copyright intensive industries."
The choice of companies is interesting, because all eight are among those that regularly scream the loudest about the "threats" of infringement: Sony (owner of Sony Music and Sony Pictures), Vivendi (owner of Universal Music), Disney, Viacom (who also owns Paramount), Microsoft, Adobe, Pearson and Reed Elsevier. If you're keeping track, that's basically three of the largest movie studios, two of the largest music labels, two of the largest software companies and two of the largest publishers. If copyright infringement was really this existential threat they've all been screaming about, certainly it would show up in the equity analysts' reports, right?
Well, let's take a look at the findings:
- None of the 14 reports for Reed Elsevier and 18 reports for Pearson identified copyright infringement as a risk factor.
- Only 13% of the 15 reports for Sony and 22% of the 23 reports for Vivendi mentioned copyright infringement as a potential risk.
- Just 8% of the 26 reports for Viacom and 27% of the 26 reports for Disney referred to copyright infringement as a risk factor.
- 26% of the 19 reports concerning Adobe and 41% of the 27 reports concerning Microsoft identified copyright infringement as a risk factor.
- Cumulatively, only 19% (32) of the 168 reports referred to copyright infringement as a possible risk; 81% did not.
And, in case you were wondering, the reports that didn't list copyright infringement as a risk (i.e., nearly all of them) did
list out a variety of other factors. It wasn't just a case where they weren't covering risks at all. They carefully looked at the market, and didn't seem to think infringement was a real risk at all.
And, it's important to note that since these are all public companies, the execs at those companies often spend a lot of time "educating" the analysts about the state of their business. In fact, in the annual reports for six of the eight companies listed, the companies themselves do list infringement as a major risk. It just looks like the analysts looked at the detail and simply didn't see any legitimate threat in most of the cases.