Here in the UK a recent ‘Digital Britain’ report by Lord Carter, the minister for communications, technology and broadcasting, was unveiled. Started in October 2008, it was to be the definitive word on digital media, communications and government policy. In it was a number of pronouncements, including this one;
In relation to rights, the Government believes piracy of intellectual property for profit is theft and will be pursued as such through the criminal law. The civil infringement of taking someone else’s intellectual property or passing it on to others through file-sharing without any compensating payment is, in plain English, wrong. However, the Government also believes, and the evidence suggests, that most people, given a reasonable choice would much prefer not to do wrong or break the law. The objective of the Government’s policy is therefore three-fold. Firstly, to provide a framework that encourages the growth of legal markets for downloading that are inexpensive, convenient and easily accessible for consumers.
This came on the back of another report about online piracy by the Centre for Information Behaviour and the Evaluation of Research, which generated a slew of stories and lurid headlines;
“Estimates as to the overall lost revenues if we include all creative industries whose products can be copied digitally, or counterfeited, reach £10bn (IP rights, 2004), conservatively, as our figure is from 2004, and a loss of 4,000 jobs.”
The convergent summary of these two reports appears to be that copyright violation is wrong and is costing the creative industries money. But it appears to me on both of these points that there are fundamental assumptions being made here that are incorrect. Thankfully, in regard to the Centre for Information Behaviour and the Evaluation of Research, blogger Ben Goldacre took them to task for both sloppy reporting and unproven claims;
“What is the origin of this conservative figure? I hunted down the full Ciber documents, found the references section, and followed the web link, which led to a 2004 press release from a private legal firm called Rouse who specialise in intellectual property law. This press release was not about the £10bn figure. It was, in fact, a one-page document, which simply welcomed the government setting up an intellectual property theft strategy. In a short section headed ‘background’, among five other points, it says: ‘Rights owners have estimated that last year alone counterfeiting and piracy cost the UK economy £10bn and 4,000 jobs.’ An industry estimate, as an aside, in a press release. Genius.”
Ben also challenged the claims over the lost per illegal download; the research makes huge assumptions – each download is equivalent to a lost sale, not only a lost sale, but a full price one worth around £25. Indeed, to take this point further, is it not an assumption that an illegal download is a loss at all?
Interestingly a new draft study by Oberholzer-Gee & Strumpf of Harvard Business School challenges these assumptions too;
As our survey indicates, the empirical evidence on sales displacement is mixed. While some studies find evidence of a substitution effect, other findings, in particular the papers using actual file-sharing data, suggest that piracy and music sales are largely unrelated.
In addition, that leads us to ask that if the assumptions around lost sales are both over-priced and incorrect, what about Lord Carter’s basic statement that filesharing is simply ‘wrong’? Here again, Oberholzer-Gee & Strump’s paper suggests that it is not quite that simple;
[We] do not yet have a full understanding of the mechanisms by which file sharing may have altered the incentives to produce entertainment. However, in the industry with the largest purported impact – music – consumer access to recordings has vastly improved since the advent of file haring. Since 2000, the number of recordings produced has more than doubled. In our view, this makes it difficult to argue that weaker copyright protection has had a negative impact on artists’ incentives to be creative.
The study also notes the same outcome being observed for films, books and games – if filesharing impacted production, then as p2p grew, productions would fall – and that is simply not shown by the data. In all areas of media the number of productions is growing. The authors note that digital technology, while raising the issue of piracy, also lowers production and distribution costs.
This suggests that Lord Carter is wrong; that filesharing is not ‘wrong’, that indeed something dramatic is happening to media production that peer-involvement in, even at a distributive level, is leading to a dramatic increase in output.