New study says online piracy isn’t hurting entertainment industry

By Eric Pfeiffer, Yahoo News October 3, 2013

For years, the entertainment industry has argued that online piracy has devastated business for movies, music and gaming.

But a new policy brief from the London School of Economics and Political Science (LSE) says that not only does piracy not hurt the creative industry but it is actually helping.

Millions of people across the globe illegally access copyrighted material on a daily basis. The most common method of digital pirating is through torrent sites, which let an individual download and upload content through a peer-to-peer file-sharing system.

Individuals in the U.S. who are found guilty of violating digital piracy laws can face severe legal penalties, including a felony record, five years in prison and $250,000 in penalties.

In the briefing, authors Bart Cammaerts, Robin Mansell and Bingchun Meng call on governments to re-evaluate their antipiracy laws to include data from studies beyond those directly sponsored by the entertainment industry itself.

“Contrary to the industry claims, the music industry is not in terminal decline, but still holding ground and showing healthy profits. Revenues from digital sales, subscription services, streaming and live performances compensate for the decline in revenues from the sale of CDs or records,” Cammaerts said in report carried by the site TorrrentFreak.

In a separate story, TorrentFreak says that independent data actually suggests that those who pirate content are also more likely to spend their money on film, music and gaming content.

A June 2013 study found that roughly 45 percent of all Americans pirate copyrighted content on a regular basis, including 70 percent of those under 30.

In the LSE report’s key messages, the authors say that evidence does not back up claims that individual cases of copyright infringement are affecting entertainment industry revenues, that antipiracy laws around the world are not achieving their desired impacts and that governments should update their policies to include more evidence from a diverse set of sources.

“Despite the Motion Picture Association of America’s (MPAA) claim that online piracy is devastating the movie industry, Hollywood achieved record-breaking global box office revenues of $35 billion in 2012, a 6% increase over 2011,” the report states.

And while music sales have faced steeper declines in recent years, the authors say those numbers have largely been balanced out by increased sales in live performance and other outlets.

“The music industry may be stagnating, but the drastic decline in revenues warned of by the lobby associations of record labels is not in evidence,” the authors write.

Interestingly, in the same Columbia University study, which found that nearly half of all U.S. Internet users pirate copyrighted material, nearly half of those individuals say they would willingly pay a monthly fee for unlimited access to multimedia content.

And the LSE study authors say that is one possible solution for the entertainment industry going forward as a way to bridge the gap between content providers and consumers.

“Within the creative industries there is a variety of views on the best way to benefit from online sharing practices, and how to innovate to generate revenue streams in ways that do not fit within the existing copyright enforcement regime,” the authors conclude.

“When both [the creative industries and citizens] can exploit the full potential of the Internet, this will maximize innovative content creation for the benefit of all stakeholders.”

Research paper finds music piracy ‘benefits’ album sales

By Stephen C. Webster - RAW Story
Friday, May 18, 2012

 

Illegally downloading pre-release leaks of major artists’ albums actually “benefits” first week sales, and if used properly these types of leaks could even work as an effective promotional tool for the largest record labels going forward, according to findings in the first draft of a working paper put out this month by an assistant professor at North Carolina State University.

However, the study (PDF) is not necessarily the godsent revelation advocates of file sharing and copyright reform may have been hoping for. Speaking to Raw Story on Friday, Asst. Prof. Robert Hammond, a Ph.D. graduate of Vanderbilt, cautioned that his results should not be construed to contradict the economic analyses put forward by music industry lobbyists in discussions with lawmakers.

Nevertheless, his study does pack a punch: “The findings suggest that file sharing of an album benefits it’s sales. I don’t find any evidence of a negative effect [from piracy] in any specification, using any instrument,” he wrote.

In fact, his study found that effect goes in the opposite direction: Hammond noted that the sales-boosting effect of piracy was most pronounced in cases where a major band’s album had been leaked online ahead of the official release. However, the overall amplification effect was relatively small, producing about 60 additional purchases in cases where an album was leaked to pirates up to 30 days before its official release.

“My results suggest that it’s possible to think of leaks as promotional activity, but more work needs to be done to understand how general that result is,” he told Raw Story.

He also noted that download data he used came from a “very small” BitTorrent tracker, and that the sales boosting effects could be more pronounced if data from some of the larger trackers were examined. Despite the size of his download tracker, Hammond told Raw Story that it actually offered him more detailed data than any other prior studies on the subject, revealing a previously unidentified correlation between downloads and sales.

Cross referencing that download data with music industry sales figures, Hammond was able to pinpoint key similarities. Namely, major bands are always downloaded the most, and they almost always see the biggest sales. Hammond found that these artists also saw the greatest benefit from pre-release file sharing. While that benefit may be relatively small, the popularity trend carried over to the genre level, with with pop albums seeing the greatest benefit, whereas independent artists or newly released groups saw none.

But that’s where the good news for copyright reform advocates ends: “What I find are individual downloads of an individual album are not harmful to individual sales,” he said. “That does not imply that if we aggregate all the downloading and all the sales, that more downloading, for the industry, means more sales for the industry.”

Hammond continued: “So much of the [recent] failed [Internet] legislation was driven by lobbying activities at the industry level. Nothing in my paper says those lobbyists and those industry level organizations are wrong in their claims. There has certainly been a steep drop in profitability in that industry. My results are on a very different question and so my ability to inform policy in that regard is somewhat limited.”

That steep drop-off in profitability remains a prescient reality for record companies even despite the emergence of online services like iTunes and Spotify, which have seen subscription numbers soar in recent years. Even in countries like France, where U.S.-supported Internet restrictions have significantly cut down on piracy, the music industry’s profits have continued to shrink year to year.

Explaining that the “appropriate” role of copyright is not a topic he’d care to address, Hammond added that his study simply does not address the “industry-level question” of the potential for harm posed by piracy.

Some of those industry analyses, however, seem to inflate the overall damages of piracy by attributing direct losses per download, as if to assume that the downloader would have otherwise purchased the item that is being shared with them. Rob Reid, creator of the online music service Rhapsody, explained in March during a speech to TED Talks why this is actually rather absurd.

“These days, an iPod classic can hold 40,000 songs… Which is to say, eight billion dollars worth of stolen media, or about 75,000 jobs,” Reid said. “Now you might find copyright math strange, but that’s because it’s a field that’s best left to experts.”

“So, putting my work in that context says that what’s good for an individual artist seems to be very different than what’s good for the industry,” Hammond concluded. “I imagine policy makers are more concerned with the industry than the individual artists.”