Lies, damned lies, and piracy statistics

Julian Sanchez is on fire in this Ars Technica article on the funny accountancy and outright lies that underlie the harms-from-piracy stats cited in policy debates about Internet censorship and surveillance proposals like SOPA and PIPA:

As a rough analogy, since antipiracy crusaders are fond of equating filesharing with shoplifting: suppose the CEO of Wal-Mart came to Congress demanding a $50 million program to deploy FBI agents to frisk suspicious-looking teens in towns near Wal-Marts. A lawmaker might, without for one instant doubting that shoplifting is a bad thing, question whether this is really the optimal use of federal law enforcement resources. The CEO indignantly points out that shoplifting kills one million adorable towheaded orphans each year. The proof is right here in this study by the Wal-Mart Institute for Anti-Shoplifting Studies. The study sources this dramatic claim to a newspaper article, which quotes the CEO of Wal-Mart asserting (on the basis of private data you can't see) that shoplifting kills hundreds of orphans annually. And as a footnote explains, it seemed prudent to round up to a million. I wish this were just a joke, but as readers of my previous post will recognize, that's literally about the level of evidence we're dealing with here.

In short, piracy is certainly one problem in a world filled with problems. But politicians and journalists seem to have been persuaded to take it largely on faith that it's a uniquely dire and pressing problem that demands dramatic remedies with little time for deliberation. On the data available so far, though, reports of the death of the industry seem much exaggerated.

SOPA, Internet regulation, and the economics of piracy


      1. correct… they want the net to be like cable where they get to shovel “premium content” AKA sh1t at you and have you pay for the privilege… the last thing they want is for you to be able to make your own content and share it with your friends without them getting a slice… oh noes…

  1. If the media would leave last century’s content delivery system and move into this century with the rest of us, we would not be having this discussion.

    1. Bandcamp has a fantastic way of delivering media. Everyone who’s gotten something from bandcamp has fallen in love with how it works. Honestly, they’re choosing to lose money, there’s systems that people would be very pleased with that are already in place…

    1. Publishers have made that case through Chris Dodd’s perfect publishing world compatriot, Patricia Schroeder. In Europe, libraries pay fees to authors (through a clearinghouse, I think) for lending. Harper Collins allows libraries to loan an ebook only 26 times before it “expires.”

      1. I wish Apple the best of luck on their iBook2 initiative because they will end this kind of shake down of public libraries.

        The initiative will forever alter the book acquisition process by the buyer and the book creation process by the authors.

        They’re already embedded into the movie creation process. Virtually all movie studios use Apple products.

        They’re already embedded into the music creation process. 

        They’re doing it again with books by lifting the book into something interactive and making books into apps.

        They’ve done it with the music industry. iTunes Music Store is the biggest musical distributor in the world and Amazon is not far behind. Meanwhile the old model has already died. along with Tower records.

        Apple is going to get away with it because they are NOT a monopoly, they are a single player and they are only trying to get people to provide content for their platform.

        The iBook2 initiative is not to create mere books but interactive apps with part of the app content being comparable to a book.

        They will not restrict Amazon’s Kindle app in the least. (They’re trying to make their profit on the hardware.)

        That is why they are using computer programming tools and releasing everything for free.

        1. Although I hate how people give Apple too much credit for things they didn’t do, this is one of the things that Apple should be given credit for. Honestly, iTunes coming stopped that huge scare a few years back, when pirating music from your computer first started to become popular. To be honest, a lot of people still use iTunes. I don’t know nearly as many people who use TPB, Frostwire, etc. And it’s done wonders for the music.

          I will argue however, with Apple not being a monopoly. When it comes to delivering a content you are very right, since they even removed DRM’s on music files from iTunes. They realize that monopolies on delivering media content will /never/ work. But when it comes down to their products and such, it’s very much like a failed monopoly… needing a mac to program an iPhone is a good example.

          1. I liked your reply. But I disagree, the Mac is not a monopoly.

            You can write your app for Android which is a larger market with many more options and hardware manufacturers.

            Apple is just one hardware company.

            They might arguably be making the best selling hardware out there, but that is for the market to decide.

            It is recommended to use X-Code, DashCode, InterfaceBuilder, the emulators, the hardware and software that is tightly integrated and is produced for the Mac platform because it makes development, debugging and testing of apps for the iPhone, iPad, iPod touch, Apple TV and the Mac computer so much simpler.

            The reason why CodeWorks no longer makes its compilers for any Apple architecture is that it simply wasn’t worth the time and effort to maintain it.

            It also makes acceptance, distribution, installation so much easier and they provide the use of their app stores and do regression testing to insure that you will not have problems from some idiots code trying to write in your space.

            While I agree that the Apple approach is to silo all of the hardware they produce and all of the software they produce, they do make it possible for anyone who can develop hardware and/or software which plays in predictable ways (which will not wreck their user experience.)

            Or you can develop for Apple’s ample competition using the tools they develop.

          2. @msbpodcast:disqus Funny how we always focus on “monopoly” when in reality the laws talk about abuse of market position. For instance, Microsoft did not get slapped for simply being a majority OS vendor on X86. They got slapped because they used that position as leverage against Netscape by bundling a competing software product with their OS. Similarly, Apple have long been leveraging their vertical integration of hardware and software.

          3. Needing a Mac to program an iOS app is not all that abnormal if you compare it to how you program for the XBox or the PlayStation or for Nintendo devices. The biggest difference is that instead of charging an arm and a leg for the dev tools and license, they simply require you to use hardware that they know will work for sure, and don’t bother testing hardware from other manufacturers. Even then, the current developer agreement no longer demands only XCode, so in theory you could use a Windows or Linux computer to develop for the iPhone.

            Apple in its current incarnation is a firm believer in open files but closed tools. It’s the idea that the information is free to roam from device to device, but how you manipulate it is tied to the device.

  2. Want to note that Julian is connected with the Cato Institute, a right-wing think tank which sometimes appears like an echo chamber for a thought-free regurgitation of deregulation and other moves that favor industry and put consumers’ financial interests, democracy, and health at risk. But they are mercifully light on that kind of thing as opposed to, say the Heritage Institute.

    In this area, Cato is acting in the best conservative tradition, in which impediments to the level playing field on which business operates should be removed. In this case, copyright holders distortion of the market (especially in manufacturing statistics) is the problem. I’m so used to Republicans (not conservatives as such) pushing multi-national big businesses which offshore jobs and money while suppressing free speech, that I sometimes have to take a deep breath before clicking on a link like Cato’s to accept that I’m getting a fair-minded analysis.

    (Ars Technica, to which you link, reprinted the article from Cato.)

    1. Either way, though, and regardless of its source – this article puts a superb argument, possibly the best I’ve yet seen.

      Does need beefing up with graphs that show the various trends, patterns and effects it describes, though.

    2. I’m also, as it happens, connected with The Economist’s blogs; was a regular contributor to Democracy in America for some years.  Hope you don’t feel tainted as a fellow Economist blogger!

    3. The Cato Institute is much more libertarian than right-wing.  Julian Sanchez being associated with them only increases his credibility.  

      Personally, I don’t equate “fair-minded analysis” with “shit that I agree with”.  Yes, it’s possible to be both fair-minded and to come to a different conclusion.

      1. Libertarians could do with a cleanup of their stance tho, as it seems as often economically bat shit insane as the US bible belt do about religion.

  3. Contrary to what the industry says, a downloaded song does NOT represent a lost sale!

    Remember when you could go into a “record store” and sample a record or CD?  Sampling in the store did NOT represent a lost sale, and neither does sampling a song off the internet represent a lost sale! So to say all downloads are lost sales is simply not true.

    1. In some cases it does.  Certainly there are people that download albums instead of buying them.  And, if you took away the option to download them, they’d actually purchase them at a store.

      That said, I do believe the RIAA, etc. numbers are terribly inflated and all this effort to thwart piracy would be better spent finding more good artists and increasingly easier and cheaper ways to buy music, so less people desire pirated music.

      Apple (despite its serious failings) has lead the way in this regard with its iTunes music distribution.  It’s the failings of the music industry to not allow for more content providers that there’s not more competition, not Apple’s.

      The greedy, corporatist music industry only has itself to blame, not consumers at large.

      1. Yes, some people will download things that they otherwise would have bought, causing lost sales.. However….

        A lot of people who torrent, pirate etc, before they began downloading they bought n0 music, n0 dvds, n0 books… So in fact their acts of piracy affect the industry not at all… They never bought any of it, and they wouldn’t buy now if piracy wasn’t available… 
        Others will buy what they like, as they have always done, even if they have also got a pirated copy… Which again has no real affect on any industry or company…

        Still others who don’t like taking risks will download a pirated copy of something, love it and will then go out and buy the original version, whereas they never would have bought it if piracy wasn’t available… This actually increases sales for the industry or company…

        That is 4 different types of people who pirate stuff… Only one of these types has an adverse affect on the industry…

        1. I was going to point out things you didn’t mention, but then I realized there wasn’t anything you hadn’t mentioned. I agree with everything you’ve said, and it’s amazing music companies refuse to understand this.

      2. If one look at demographics one will find that those that download the most are those that has the most free time but the least discretionary spending ability. With that i mean that most downloaders are students or people that can barely keep the cheapest net connection going (and such a connection provides much more than simply the ability to download entertainment). Once people have a job that provide more than basic food and shelter they usually appear to cut back on the downloading.

        1. Yeah, that makes sense.  There must be some way we can bridge things that make sense with coke-head music executives.

          Maybe we can cut their coke with the text in your post somehow?

  4. I was having an email debate with a SOPA-inclined friend the other day that covered a bit of this ground and may be of interest…

    A range of broader principles [beyond moral concerns that stealing is wrong] come into play when the state wishes to impose a legal framework that purports to solve a problem through the introduction of sanctions on its citizens such as the SOPA legislation.

    A few that come to mind are: 1. Efficacy – is it effective? 2. Proportionality – is the framework and its effects (intended or otherwise) commensurate with the scale and impact of the problem? 3. Does it encroach on, or create tensions with, other competing rights? e.g. do the processes by which infractions are found to have occurred and for imposing sanctions preserve existing common law protections such as presumption of innocence, procedural fairness, natural justice etc?

    In regards to SOPA the answers are quite unambiguously – 1. No; 2. No; 3. Yes.  

    Let’s move from bits and bytes to atoms and adopt an analogy of the local store which is suffering regular $1-$5 thefts. We agree without much discussion that this is undesirable, that property rights are being quite egregiously infringed and that protection at law is important. To address this problem we develop the slightly-more-chunkily named “SPOLSA” – the Stop Pilfering of Local Stores Act — which mirrors its SOPA cousin.

    What this wondrous legal construction does is to establish a framework where the following scenario would be par for the course.

    . A baked beans manufacturer receives a report from a store owner that stock he has received on consignment is going missing either on the way to the store or at the store premises itself

    . The manufacturer conducts a world wide search to locate the stolen beans as it still owns the property (the store owner is merely an agent)

    . In conducting his exhaustive search (perhaps the stolen items have RFID chips installed and he is the proud owner of a very a powerful location detection system, a sort of find-my-iphone for legume-based products ;-)) the manufacturer discovers a can of stolen baked beans in the store room of a post office in a different jurisdiction some 20,000kms away and another can of baked beans sitting in the foyer of a hotel down which is in the same jurisdiction (SPOLSA does not presume that a naughty guest at the hotel and a rogue user of the foreign postal service have furnished these organisations with the stolen the property but that the hotel and the post office are actually complicit in the theft)

    . Having itself identified the stolen baked beans, the manufacturer is then able to make a complaint to the duly established authority to the effect that the hotel and the post office are in possession of its stolen property (no independent verification of this assertion is required)

    . The duly established authority is, in the case of the foreign post office, then able to issue a fiat that the domestic postal service must prevent the sending of packages to and the receipt of packages from this particular post office ever again. This will all happen generally within a five day period of a ‘removal order’ having been received by the domestic postal service – there is no burden of evidence, no judicial process, no appeals process and items posted to or from this particular foreign post office become, so far as the SPOLSA-enacting country is concerned, mail non grata.

    . In the case of the local hotel found to have offered brief and inadvertent accommodations for the baked beans, the duly established authority would mandate that travel agents across the nation must never again make bookings on behalf of its clients for this particular hotel and that a gigantic chain link fence must be built around the hotel so that no one can gain access to its services – the slightly oxymoronic hospitium non grata comes to pass.

    . Under SPOLSA, the domestic postal service is also required to open all packages (incoming and outgoing) to ensure that no purloined baked beans are being smuggled.
    Despite fencing off the domestic hotel and blacklisting it with travel agents, the embargo against the foreign post office and the inspection of all packages at the cost of both the speed of the mail and in $$ terms, unsurprisingly the manufacturer still finds that its products are going missing – both from the stores themselves and in transit to the stores.

    So… in the process of attempting to protect the manufacturer’s property rights: privacy rights are merrily pissed away; the property rights and due process rights of the hotel and the post office count for naught; and the amenity of all hotel goers and postal service customers is greatly degraded. Now repeat this process a billion times and see what happens to domestic commerce and international free trade in a fairly short period of time. To more closely parallel with the digital world and to further stress the already strained metaphor let’s imagine that to add insult to injury the baked beans manufacturer has a bean replication device, which, defying the laws of thermodynamics, is able to reproduce baked beans ad infinitum at zero time or cost.

    From a consequentialist perspective the damage caused by the regime far outweighs any conceivable benefit – that is, the consequence of baked bean theft (a product that can be infinitely replenished following the initial investment in the tricky business of baked beans R&D) is simply worth less than the loss of privacy, breakdown in supply chains, crippling of international trade and commerce, the introduction of collective punishment, abolition of due process/procedural fairness, etc etc. To mention these facts does not condone the theft of the baked beans or advocate that people go out to pilfer baked beans at every opportunity.
    It just means that the solution sucks bad arse a whole lot more than the problem itself does.    

    We need not hypothesise about this, we have in SOPA just such an arrangement only:-

    . instead of baked beans we are talking 0s and 1s
    . instead of the domestic hotel and foreign post office we are talking about web services, sites and hosts
    . instead of travel agents and the domestic postal service we have ISPs,
    . instead of package inspection we’ll have packet inspection

    I’ve always been attracted to the notion that the internet is adaptive in the same way that a biological organism is:- “the net interprets censorship as damage and routes around it”
    Even with all the silly sorts of heavy handedness that are embodied in SOPA, an extremely adaptive and innovative user base will see them circumvented in mere nano seconds.
    These state-based attempts to prevent piracy and unauthorised access to IP are, in my view, destined to fail, unlikely to reduce the extent of the problem or to improve the bottom lines of the companies that seek these sorts of remedy.

    I suspect that these companies themselves need to look more closely at concept of adaptation and to develop new business models that present compelling value propositions to their customers in terms of quality, cost, ease of use and so on. I think this is the reason for the success of things like ebook platforms, Amazon and the entire vertically integrated plug-and-play Apple business model.

    Simple, elegant, quality, price competitive, easy to use products and modes of delivery can be so compelling so as to make the piracy option simply less attractive on the merits alone.  
    In the case of Apple there are a range of entry points in which the user becomes involved in the product suite, becomes captive of/to the platform and then becomes gleefully reliant on sourcing music, videos and software through these ‘legitimate’ value chains.
    The cost-benefit calculus undertaken by Apple users generally results in a high “can’t be fucked” factor vis-à-vis thieving IP products because it’s simply too easy and too attractive to behave. This isn’t because of a moral choice on the part of users but simple utilitarianism.

    If more companies relied on quality as THE basis for competitive advantage, priced their goods sensibly, innovated with their distribution and delivery methods and generally engineered compelling value propositions for their customer; while piracy would not disappear, it would become largely irrelevant.

    This is how the ‘war on piracy’ will be won, not through the leviathan of the state attempting to centrally manage the internet.

    Rather than innovating and adapting, a select group of Palaeolithic content publishers have chosen to preserve their dying business models and outmoded distribution paradigms by coopting the coercive impulses of the state with amongst the most well funded lobbying efforts known to Washington. Citizens/customers absolutely loathe this type of heavy handedness and I believe it contributes significantly to damaging companies’ brands and, to a lesser extent, creates questions in citizens’ minds about the legitimacy of government actions in other spheres of their lives (in the same way that I think the futility of the war on drugs does).

    Wikileaks is a slightly better comparison [in terms of the value of information that is shareable but that should be] but serves to confirm that it is unauthorised access to information that is at the heart of piracy, not theft. The value of owning or having possession of a legitimate state secret is in exercising rights as to who must definitely not have access to it.Therefore ‘theft’ of a state secret is irrelevant until that secret is divulged to those from whom it is desired that it be kept. So, for instance, Bradley Manning, could have quite harmlessly stolen a DVD-ROM from a defence establishment premises, taken the DVD-ROM home and left it in his desk drawer for a hundred years and no harm would have been done despite that information having been physically appropriated without permission.Whilst technically a theft took place, the integrity of the secret was not breached and the secrets’ owner would be more relaxed than would have been the case had the information been made available to the public through a back door being purposefully left open on its network to allow universal unauthorised access (which while not a technical theft would fundamentally undermine the value of ownership of the secret). IP ownership too essentially confers the right to determine who has access to a bit of IP and under what circumstances the access might be granted. Access can be unlawfully obtained but it is simply not theft.   

    I am more attracted to the magic pudding comparison [a very famous Australian children’s book about a pudding that can regenerate itself ad infinitum]– while Barnacle Bill and Bunyip Bluegum [the pudding’s owners] are reluctant to see the source of the never ending pudding, Albert, stolen, they are far more relaxed about sharing the particular pudding spawned by Albert because it is in infinite supply. What is not in infinite supply is Albert himself. This metaphor works best as Albert the recording artist behind a song, the director and collaborators behind a movie, the coders behind a piece of software. The digital copies of these works have value but in freely sharing that value, the original material is not degraded or destroyed and nor is the owner deprived the thing of value. Instead they are deprived of a fee claimed by them for access.  

    You might this the deprivation of property view of theft to be specious but I think it must be acknowledged that there is indeed a moral difference between stealing my new car which permanently deprives me of my means for travelling from Point A to Point B versus the illicit procurement of an infinitely replicable virtual product that deprives no one of anything. While the former brings with it considerable hardship and loss of amenity, the latter brings with it no comparable hardship or loss of amenity. 

    One can still say it is wrong and still say that it should not be condoned but it is a category
    category error to pretend unauthorised access to bits and bytes by way of pirated videos, music or software is the moral equivalent of stealing my car, DVD unit or lunch money.

    error to pretend unauthorised access to bits and bytes by way of pirated videos, music or software is the moral equivalent of stealing my car, DVD unit or lunch money.

  5. I still haven’t seen the movie industry making any attempt to offer a more pleasant legitimate viewing experience. I cuss at my DVD player every time it forces me to watch previews for other, uninteresting movies before I can see the one I paid to watch.

    The music industry was dragged kicking and screaming into Apple’s world, because they had no interest in producing a pleasant way to obtain music online legally. They could have bought Napster 10 years ago and monetized it; instead they started a legal war against their customer base which they’ve been losing ever since.

      1. Napster in name only, just like Atari and Commodore keeps on showing up as trademarks to this day. But neither has much to do with the historic roots of those trademarks.

      2. yes, but they’d trashed the name and any possible goodwill with their actions against the original Napster…

  6. Demand Progress and off course Reddit, Wiki,  BoingBoing and others  amassed something like 13-million people to put SOPA and PIPA on hold. Unfortunately it was a defensive measure rather than an offensive measure. 

    An offensive measure would be to summarily get these well bribed shills out of office with surgically delivered voting blocks.

  7. I think the government will find plenty of money for jobs in Hollywood if they would just look more closely into Hollywood’s contracts and accounting practices. Besides, Hollywood’s spending more money in Canada than the United States.

  8. Why am I the only worried about the killing of orphans by shoplifters? I am writing my Representative tonight!

  9. So by RIAA maths, anyone who steals or copies a single $1 bill is costing the economy millions, from all the missed transactions that would have occurred using a legitimate $1 bill. 

  10. As I just recently tweeted, people who call copyright infringers “pirates” need a similarly inaccurate and unfair denigration; I propose we call them “murderers”.

    The RIAA and the MPAA are headed by murderers. Many senators and representatives in the house, as well as all too many journalists, are murderers. You wouldn’t condone someone murdering babies, right? So why do we condone these people murdering average citizens?

    When I proposed this to my friend, he said, “But what they’re doing is nothing like murder”. To which I answered, “Exactly”.


    1. Before the Internet, this kind of piracy was common – it was called kids making mix tapes of their favorite songs and sharing the cassettes with their friends.

      The technology of the internet has made sharing far easier and a more complete possibility. That does change the situation to some degree – but at the root, its point of origin is still the same thing. One suspects that the average person who shares media online, isn’t a grubby lowlife who also shoplifts material goods. The internet is a tool for sharing information, and people will use that tool to its potential.

      By invoking the language of piracy, and reiterating analogies to stealing real merchandise off store shelves, corporations have done their best to warp public and government perception of what’s really going on, rather than expect their efforts on finding a real solution to the problem.

      An example: a digital streaming account for Netflix is so cheap that nearly anyone can afford it. It’s convenient too. So why, one muses, isn’t every movie ever on Netflix or a similar service where copyright holders can be making money off it?

      Gabe Newell, founder of Valve software, has said numerous times that what keeps getting called piracy is merely a matter of convenience and value. Valve’s software download service, Steam, fights “piracy” by offering an extremely convenient, easy to use platform for download and maintaining software, and offers value by actually adjusting pricing and sales to reflect what people want to see. Result? Steam is a resounding success. To make an analogy to music and movies, merely the fact that Steam allows users to permanently own and download their content anywhere for life, and keeps that content updated without the end user having to scour the internet, is enough to win loyalty and make Steam users never think of pirating a piece of software. iTunes has shown the power of this model for music. Now, the public awaits a similar, fully comprehensive service for motion pictures and television shows. The current services are still hampered by the industry dragging its feet towards the inevitable.

      The companies that complain the most about piracy are the ones whose business practices are behind the times.

  11. I think this is ripe for paraphrasing: if the RIAA and MPAA ran malls, they would be clamouring for governments to let them strip search customers and commandeer sheriffs’ departments to erect roadblocks, all to stop the heinous crime of shoplifting.

  12. Thing is, most of the people who write or decide on these issue don’t have the foggiest idea what the Internet is, how it works and how people use it.  That’s why I’m not surprised that legislators support such nonsense: they just don’t grasp the consequence of their action.

  13. I still buy DVDs and CDs because I want to support the people who made the stuff I enjoy, however many of them still sit, shrinkwrapped upon my shelves, because the pirated versions of the things I buy are far easier to use, and there’s no enforced ads on the movies and TV I want to enjoy.

    I imagine despite being a customer and owning the original, the big companies would still like to criminalise me if they could without it being a PR disaster, as they’ve lost the CONTROL over my use of their product that they so love, and I’m not watching their ads after paying them for it.

    Also, they need to realise that only paying customers ever have to watch anti piracy ads, and it pisses us all the hell off.

    As someone above me stated in a longer and more eloquent form, take all the money spent on SOPA, and instead invest it in laws that allow worldwide releases of entertainment simultaenously.  If we in the UK can BUY US TV and movies on the day of release, and if US citizens can buy access to british TV shows, for a reasonable price, not locked under multiple layers of DRM, damn, these companies would be drowning in cash.

    Charge  a dollar or two an episode for ‘Dr Who’ or ‘The Walking Dead’ and you’d see piracy drop overnight.  It’s not about the money for many pirates, it’s about wanting to see what their online friends have access to.

  14. It’s not like there’s a shortage of voodoo economics on the “Piracy is not a serious problem (for mass market entertainment with low fixed costs to produce aimed at very large market segments)” side of the debate. Proposed successful models of distribution in the hypothetical world of unlimited free sharing always seem to overlook intellectual property with high development costs and no mass market appeal. There’s quite a lot of intellectual property work that cannot be successfully sustained by operating as an internet busker. I don’t think the world where only people who own the cables or make the future equivalent of “Two and a Half Men” have the prospect of making a living is really a wise choice.

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