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Game Changing Study Puts Piracy in Perspective

Posted: 11 Mar 2011 12:39 PM PST

The majority of the reports on piracy have one thing in common – they are funded by the entertainment industries to provide ammunition for political lobbying efforts. The downside of these reports, aside from the biased outcome, is that they tend to focus on just one area – the alleged losses for the industry caused by piracy.

Instead of focusing on the consequences, however, it might be much more constructive to also look at the causes of piracy. After all, the solution to a problem can often be found by looking at its origins.

To fill this gap, a coalition of academic researchers under the flag of the Social Science Research Counsel (SSRC) took up the task of providing a more neutral and deeper overview of what drives piracy. For several years they looked at the current piracy landscape, the past efforts of the entertainment industries to curb it, and with a strong focus on emerging economies.

This week the final report was released. Although it is impossible to summarize more than 400 pages of analysis in a single article, we’ll highlight some of the key findings, starting with some comments on the purpose of the study as put forward by director Joe Karaganis.

An honest look at piracy

“What we know about media piracy usually begins, and often ends, with industry-sponsored research. There is good reason for this. US software, film, and music industry associations have funded extensive research efforts on global piracy over the past two decades and, for the most part, have had the topic to themselves. Despite its ubiquity, piracy has been fallow terrain for independent research,” Karaganis writes.

“Industry research consequently casts a long shadow on the piracy conversation—as it was intended to do. Our study is not envisioned as an alternative to that work but as an effort to articulate a wider framework for understanding piracy in relation to economic development and changing media economies,” he adds.

This type of research and honest analysis is much needed according to the project’s director. For too long piracy research has been little more than a political tool to warm legislators up to the implementation of harsh anti-piracy measures, despite the poor quality of the research itself.

“At the risk of over generalizing, we see a serious and increasingly sophisticated industry research enterprise embedded in a lobbying effort with a historically very loose relationship to evidence. Criticizing RIAA, MPAA, and BSA claims about piracy has become a cottage industry in the past few years, driven by the relative ease with which headline piracy numbers have been shown to be wrong or impossible to source.”

What losses?

The researchers wisely stay away from calculating the losses piracy may cause to the various industries, but the report does hint that it is not always as bad as the messenger suggests. The movie industry for example has seen its revenues rise drastically in recent years.

“The message from Hollywood consequently has a schizophrenic quality: the movie business is in crisis; the movie business is thriving. Since 2002, the US movie industry has been a $9–10.5 billion business in domestic box office revenues, with successive record-setting years in 2007, 2008, and 2009. International distribution brought in some $16.6 billion in 2007, $18.1 billion in 2008, and $19.3 billion in 2009,” the report reads.

Other industries, such as gaming software, have fared well too. Entertainment software sales have gone through the roof in recent years and surpassed that of movie ticket sales and CD sales, the report explains. The researchers further note that games such as World of Warcraft are immune to piracy because of their business model, and that game consumers are often very loyal to game developers, and on average more hesitant to pirate.

Pricing and competition

Moving on to what’s causing piracy, particularly in emerging economies, the report suggest that pricing is an important issue.

“High prices for media goods, low incomes, and cheap digital technologies are the main ingredients of global media piracy. Relative to local incomes in Brazil, Russia, or South Africa, the retail price of a CD, DVD, or copy of Microsoft Office is five to ten times higher than in the US or Europe. Legal media markets are correspondingly tiny and underdeveloped.”

Prices are so high because there is a lack of competition, the report suggests. This is certainly true for emerging economies but one can also translate this to the United States, where licensing deals and copyright restrictions often hold back competition.

“The chief predictor of low prices in legal media markets is the presence of strong domestic companies that compete for local audiences and consumers. In the developing world, where global film, music, and software companies dominate the market, such conditions are largely absent.”

Piracy enforcement is futile

Looking at the efforts of anti-piracy outfits to slow down online piracy, the report’s authors note that they have largely failed. Online piracy is hard to stop through enforcement, and lawsuits against individual users have not had the deterrent effect hoped for by the industry.

“Despite the stream of lawsuits and site closures, we see no evidence—and indeed very few claims—that these efforts have had any measurable impact on online piracy. The costs and technical requirements of running a torrent tracker or indexing site are modest, and new sites have quickly emerged to replace old ones.”

The amount of Internet traffic associated with online piracy grows year after year, the report reads. As a result, the copyright lobby has focused more extensively on tracking down users alongside threats to disconnect them from the Internet through so called “three-strikes” deals with ISPs. It is questionable, however, whether this new approach will be effective.

“Over the longer term, stronger consumer-directed enforcement is certain to produce an arms race between encrypted, anonymized services and industry detection techniques. Although the industry currently presents graduated response as an effective response to consumer piracy, it far from clear that it will prove legally or politically viable, or do more than shift users to other forms of distribution.”

Even more worrying, the report warns that it may lead to increased surveillance of Internet usage, a path that is against the best interests of the public.

“As recent MPAA and RIAA comments on enforcement submitted to the US government make clear, however, three-strikes is not the end of the digital enforcement fight but the beginning. The next steps down the path include preemptive content-filtering by ISPs, the inclusion of home-based monitoring software in ISP contracts,” it reads.

Education and crime

The report further suggests that the millions of dollars that have been spent on anti-piracy education have not resulted in much change in public opinion. “The authors find no significant stigma attached to piracy in any of the countries examined. Rather, piracy is part of the daily media practices of large and growing portions of the population.”

“What do these efforts to shape public discourse achieve? If dissuading consumers is the primary goal, the answer appears to be: very little.” Among other things, the report states “that pragmatic issues of price and availability nearly always win out over moral considerations.”

Finally, the authors of the report challenge the often recurring argument that piracy funds criminal organizations and terrorists.

“The study finds no systematic links between media piracy and organized crime or terrorism in any of the countries examined. Today, commercial pirates and transnational smugglers face the same dilemma as the legal industry: how to compete with free.”

The future?

One of the main conclusions of the report is that competition rather than enforcement is the key to dealing with piracy. Implementing harsh and restrictive anti-piracy measures is useless if the causes of piracy are ignored. Gradually, the entertainment industries will start to realize this.

In interviews in 2009, MPAA special projects director Robert Bauer, sketched out a different agenda for the industry group: "to isolate the forms of piracy that compete with legitimate sales, treat those as a proxy for unmet consumer demand, and then find a way to meet that demand."

In this regard, it is only fitting to end with the very first words of the report.

“Media piracy has been called ‘a global scourge,’ ‘an international plague,’ and ‘nirvana for criminals,’ but it is probably better described as a global pricing problem. High prices for media goods, low incomes, and cheap digital technologies are the main ingredients of global media piracy.”

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