Takes into account losses not only to the owners of intellectual property, but also to US consumers and taxpayers.
We regularly read stories about studies in which economic losses due to music piracy are quantified and then trumpeted before the press and elected representatives in order to paint a dark and gloomy picture of the effects that file-sharing is having on the US music industry.
Well, a new study just released again tries to emphasize the effects on music piracy, but this time it uses a different approach by taking into account losses to the entire US economy by incorporating among other things, the number of jobs lost and thereby the amount of lost tax revenue that would have otherwise been gen federal and state governments.
You gotta love it.
It even uses the model of an “interlocking economy” in which record labels would be able to use increased profits if there were no music piracy to in turn cause increased sound recording employment and earnings, and also an increase in the purchases of goods and services from other industries. The latter is then expected to then cause increased employment and earnings in other industries as well as additional purchases of goods and services.
You get the picture. It’s a sort of new-fangled “trickle down economics” theory in which if the music industry were only allowed to earn more money then everybody else would benefit as a result via more jobs and available government revenue.
Now this sounds fine and dandy and all, I mean nobody likes unemployment or empty government coffers, but is digital music piracy really costing the US economy a reported $8.7 billion USD in total output annually as the study claims?
It first makes the distinction that there are some 20 billion illegal downloads worldwide, though how it calculates this is a matter of dispute, and that 66% of all illegal downloads represent downloads of U.S. recorded music. It is then assumed that only 20% (1 in 5) of these downloaded songs would have been purchased legitimately if piracy did not exist.
From these figures comes the following data:
- 49,337 lost jobs, of which 18,649 for the sound recording industry and 30,688 for other US industries as a result.
- $1.87 billion is lost by US workers in earnings annually. Of this, $771 million would have been earned by workers in the sound recording industry or in downstream retail industries while $1.11 billion would have been earned by workers in other U.S. industries.
- As a consequence of illegal music downloads, US federal, state and local governments lose a minimum of $293 million in tax revenues annually. Of this amount, $202 million represents lost personal income taxes while $91 million is lost corporate income and production taxes.
But, is this really the case? The crux of the whole study’s argument seeking to define the total US economic losses as a result of a digital music piracy rests on the assumption that 20% of song illegally downloaded would have been purchased legitimately if piracy did not exist.
With previous studies showing that the effect of file-sharing on legal music sales is “not statistically distinguishable from zero” it makes one wonder if once again we have a study before us that is simply trying to prove predetermined conclusions as set forth by its sponsors.
“Using detailed records of transfers of digital music files, we find that file sharing has had no statistically significant effect on purchases of the average album in our sample,” the study reports. “Even our most negative point estimate implies that a one-standard-deviation increase in file sharing reduces an album’s weekly sales by a mere 368 copies, an effect that is too small to be statistically distinguishable from zero.”
So for all its fancy data correlation and derived conclusions, I daresay that this latest study is simply more of the same attempts by the RIAA and the IFPI to scare legislators into action to eliminate file-sharing piracy.
The study’s beginning statements even note that it’s purpose is to “…alert policy makers to the magnitude of these ripple effects(on the US economy),” and that if “policy makers” really care about the “…viability of the U.S. economy in the global marketplace, it seems obvious that the problem of music piracy should be afforded a high place on the policy agenda in coming years.”
So it seems fairly obvious what the study is trying to accomplish, that it’s merely a biased concoction of numbers meant to play upon the worries of declining employment and US economic output. By lumping physical piracy with digital piracy, it seemingly even tries to tie the two together so that necessary action will seem indistinguishable and any solution put forth, even if its only a college campus P2P crackdown, will then appear to be appropriate.
This is why study’s statement that “…the U.S. economy loses $12.5 billion in total output annually” is worrisome because its not based on all the facts, tells only half the story, and yet is what will stick most in the minds of policy makers when it comes time to vote for or against legislation affecting the internet.
Let’s just hope that some of those who read it actually take the time to take a look at the numbers and what they really mean.
digg_url = ‘http://digg.com/tech_news/New_Study_Illegal_File_Sharing_Costs_the_US_8_7_Billion_Annually’;
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What a lame study they assume that these same people would buy this music if they couldnt get it for free and i can say without a doubt that there is no new music i download so why would i pay for it if i dont even want it for free.
HAHAHAHA
GOOD
The study seems to be missing the fact that if you took $8B from the file sharers and gave it to the recording industry the file sharers wouldn’t have the $8B to spend any more which would cause a correspond shrinkage in the economy. I’m sure that millions of file sharers are spending this $8B more efficiently than the government and the recording industry ever would.
Taking money from the file sharers and giving it to the recording industry does not create any new value in the economy. It is wealth redistribution. Value is created when new music is produced.
@jonsmirlsed on the assumption that 20% of illegal downloads would otherwise have been legal download purchases.
Plus that $8 billion is ba
Mind that it is POTENTIAL industry revenue gained NOT ACTUAL. Jesus! Who are they fooling?
Hmmm…Now how much does this bullshit war in Iraq costing the US? Maybe they need to spend less time on studies about P2P and focus on how many lives and how much money wars cost!
The real question is are members of Congress smart enough to see through it?
@ axlman
Yeah like the war on filesharing
i dont know why we are talking about the war in this thread but im sure to congress compared to the war 8B$ isnt that much. spilt milk.
Well my comment was not to talk about the war itself but basically to say that they shouldn’t be worried about the so called lost cash due to P2P but should be worried about the lost cash do to bush!
They fail at critical thinking. This is a clear case of the slippery slope formula as you can’t prove one outcome would affect the next. How sad it is when people don’t even know how to formulate a valid argument.
These guys will vilify anyone if they think it “helps” their “cause” – wrap it in the flag associate it with the “war on drugs” the taliban you name it. If a song movie software etc. is any good it will sell and make money. In my opinion they waste more time and money devising DRM protection schemes (that are cracked *every* single time) and trying to “prosecute the offenders” than the alledged revenue lost. Besides you can’t kill the whole nest by stepping on a few ants – there’s a billion more where they came from.
These people are idiots! They think that if they pull a number out of the air….which is basically what they have done…everyone should just believe them.
What is sad is that a lot of people DO…even if it is not true.
There is NO justification for the numbers they give….all are based on projections. Nothing more.
Personally I don’t think illegal downloads are causing the problem.
Right now any indie artist for under $10 a month can register a domain and put up their music to download *free*.
Or if you like you can put your music up on several hundred free sites like myspace last.fm etc. *for free*
If that’s not good enough you can put all your music in a torrent start a tracker seed it yourself and encourage your fans to seed it and share the torrent with various sites like mininova.
So in the end I think that the record industry is loosing money just because they are not the only game in town.
You can now have the chance to reach millions of perspective fans compared to the “good ol’ days” where the RIAA ran everything.
Last but not least if you run linux you can run giftd connect to gnutella open nap fast track and share your music that way.
New study beastiality is costing the us economy 10 trillion dollars. This was found by the fact that during acts of beastiality people are less likely to use a condom. This allows people to release their urges without buying condoms affecting the condom manufacturers the rubber makers and the rubber fairies. This in turn affects the sales of other products as they don’t have money to make purchases. If further has grave effects as they end up on the street scrounging off of taxpayer dollars costing the US economy greatly. Lets end animal sex for the greater good of the country.
irak war has cost $478 BILLION SO FAR.
see irak war costs in google.
who funded the study?
You can tell the conclusion of a study just by looking at the funding or employment of the researchers.
98% studies support the sponsers viewpoint.
a study conducted recently found that the economy is losing $20 billion due to teddy bears lasting too long and new ones not being bought as a result.
the ospery tilt rotor aircraft has cost $40 billion and killed 50 people when being tested.
This is ridiculous. We don’t need record companies anymore. I stopped buying so many compact audio discs a few years ago because I was running out of storage space for them. These days I buy a few discs here and there because I haven’t gotten over the gasp of what MP3 players cost however when I do buy CDs these days I usually buy a used cd because the used cd market has a much better selection and they cost 66% less. The record industry doesn’t make any money off of used cds
Perhaps if the industry started paying attention to most of what they’ve been releasing then perhaps they’d start turning profits again. Not everyone is into rap and hip hop. The fickle and narrow music tastes of the United States don’t speak for the whole world.
They also seem to be ignoring the fact that most people these days don’t want their music on cds they want it as an electronic file DUH!! Giving the original Napster the middle finger was beyond one of the dumbest things they did.
Out here in California I remember going to see a band that used to do the shopping mall circuit a few years ago. They are very good. Now they play the big time at concert halls and what not throughout the world and guess what? They distribute their own compact discs. They don’t have a record company. We don’t need record companies anymore.
Quite frankly this is a plus because we’re no longer forced as consumers to deal with their Milli Vanilli debacles or forced to deal with their half talent sexy pop tarts with electronically altered voices (e.g. Britney Spears)
let assume that nobody download without legalage paying for it. most people wouldn’t listing to about 50% that mean that some songs wouldn’t be heard by anyone because they don’t have the funds to buy it.
They should do a study on how much money they loose with everyone breathing free air. They should be charging people to breath oxygen too.
Money is always spent. It’s WHAT it’s spent on that is the issue.
HAHA! Wait one second let me just catch my breath… HAHAHAHAHA! Thats rich! Are they so desperate to stop it!? The RIAA and MPAA make me laugh with all the bullshit they put out these days. The record companies make enough already from concerts shows and many sponsers who do some other type of profession. Dont even give me that shit RIAA the record companies are making enough to sustain their food on the table. Pirate Away Boys YAARG!
Lets do a study on how many lame tactics the RIAA and MPAA have taken to stop file sharing which they never will. Okie dokie lets all count them to infinity.
1 2 3 4 Pie… yum.
Just out of curiosity where did this study come from. It would be nice if you plan on counter arguing something that you cite your source.