Economic impact of copyright infringement

Organizations disagree on the scope and magnitude of copyright infringement's free rider economic effects and public support for the copyright regime.

The European Commission funded a study to analyze "the extent to which unauthorised online consumption of copyrighted materials (music, audiovisual, books and video games) displaces sales of online and offline legal content", across Germany, the United Kingdom, Spain, France, Poland and Sweden; the public funding behind the study provided a necessary basis for its neutrality. 30,000 users, including minors between 14 and 17 years, were surveyed among September and October 2014. While a negative impact was found for the film industry, videogame sales were positively affected by illegal consumption, possibly due to "the industry being successful in converting illegal users to paying users" and employing player-oriented strategies (for example, by providing additional bonus levels or items in the gameplay for a fee); finally, no evidence was found for any claims of sales displacement in the other market sectors. According to the European Digital Rights association, the study may have been censored: specifically, as of 2018, the European Commission has not published the results, except in the part where the film industry was found to be adversely affected by illegal content consumption. Access to the study was requested and obtained by Member of the European Parliament Julia Reda.

In relation to computer software, the Business Software Alliance (BSA) claimed in its 2011 piracy study: "Public opinion continues to support intellectual property (IP) rights: Seven PC users in 10 support paying innovators to promote more technological advances."

Following consultation with experts on copyright infringement, the United States Government Accountability Office (GAO) clarified in 2010 that "estimating the economic impact of IP intellectual property infringements is extremely difficult, and assumptions must be used due to the absence of data", while "it is difficult, if not impossible, to quantify the net effect of counterfeiting and piracy on the economy as a whole."

The U.S. GAO's 2010 findings regarding the great difficulty of accurately gauging the economic impact of copyright infringement was reinforced within the same report by the body's research into three commonly cited estimates that had previously been provided to U.S. agencies. The GAO report explained that the sources – a Federal Bureau of Investigation (FBI) estimate, a Customs and Border Protection (CBP) press release and a Motor and Equipment Manufacturers Association estimate – "cannot be substantiated or traced back to an underlying data source or methodology."

Deaner explained the importance of rewarding the "investment risk" taken by motion picture studios in 2014:

Usually movies are hot because a distributor has spent hundreds of thousands of dollars promoting the product in print and TV and other forms of advertising. The major Hollywood studios spend millions on this process with marketing costs rivalling the costs of production. They are attempting then to monetise through returns that can justify the investment in both the costs of promotion and production.

Motion picture industry estimatesedit

In 2008, the Motion Picture Association of America (MPAA) reported that its six major member companies lost US$6.1 billion to piracy. A 2009 Los Angeles Daily News article then cited a loss figure of "roughly $20 billion a year" for Hollywood studios. According to a 2013 Wall Street Journal article, industry estimates in the United States range between $6.1B to $18.5B per year.

In an early May 2014 Guardian article, an annual loss figure of US$20.5 billion was cited for the movie industry. The article's basis is the results of a University of Portsmouth study that only involved Finnish participants, aged between seven and 84. The researchers, who worked with 6,000 participants, stated: "Movie pirates are also more likely to cut down their piracy if they feel they are harming the industry compared with people who illegally download music".

However, a study conducted on data from sixteen countries between 2005 and 2013, many of which had enacted anti-piracy measures to increase box office revenues of movies, found no significant increases in any markets attributable to policy interventions, which calls into doubt the claimed negative economic effects of digital piracy on the film industry.

Software industry estimatesedit

Psion Software claimed in 1983 that software piracy cost it £2.9 million a year, 30% of its revenue. Will Wright said that Raid on Bungeling Bay sold 20,000 copies for the Commodore 64 in the US, but 800,000 cartridges for the Nintendo Famicom with a comparable installed base in Japan, "because it's a cartridge system so there's virtually no piracy".

According to a 2007 BSA and International Data Corporation (IDC) study, the five countries with the highest rates of software piracy were: 1. Armenia (93%); 2. Bangladesh (92%); 3. Azerbaijan (92%); 4. Moldova (92%); and 5. Zimbabwe (91%). According to the study's results, the five countries with the lowest piracy rates were: 1. the U.S. (20%); 2. Luxembourg (21%); 3. New Zealand (22%); 4. Japan (23%); and 5. Austria (25%). The 2007 report showed that the Asia-Pacific region was associated with the highest amount of loss, in terms of U.S. dollars, with $14,090,000, followed by the European Union, with a loss of $12,383,000; the lowest amount of U.S. dollars was lost in the Middle East/Africa region, where $2,446,000 was documented.

In its 2011 report, conducted in partnership with IDC and Ipsos Public Affairs, the BSA stated: "Over half of the world's personal computer users – 57 percent – admit to pirating software." The ninth annual "BSA Global Software Piracy Study" claims that the "commercial value of this shadow market of pirated software" was worth US$63.4 billion in 2011, with the highest commercial value of pirated PC software existent in the U.S. during that time period (US$9,773,000). According to the 2011 study, Zimbabwe was the nation with the highest piracy rate, at 92%, while the lowest piracy rate was present in the U.S., at 19%.

The GAO noted in 2010 that the BSA's research up until that year defined "piracy as the difference between total installed software and legitimate software sold, and its scope involved only packaged physical software."

Music industry estimatesedit

In 2007, the Institute for Policy Innovation (IPI) reported that music piracy took $12.5 billion from the U.S. economy. According to the study, musicians and those involved in the recording industry are not the only ones who experience losses attributed to music piracy. Retailers have lost over a billion dollars, while piracy has resulted in 46,000 fewer production-level jobs and almost 25,000 retail jobs. The U.S. government was also reported to suffer from music piracy, losing $422 million in tax revenue.

A 2007 study in the Journal of Political Economy found that the effect of music downloads on legal music sales was "statistically indistinguishable from zero".

A report from 2013, released by the European Commission Joint Research Centre suggests that illegal music downloads have almost no effect on the number of legal music downloads. The study analyzed the behavior of 16,000 European music consumers and found that although music piracy negatively affects offline music sales, illegal music downloads had a positive effect on legal music purchases. Without illegal downloading, legal purchases were about two percent lower.

The study has received criticism, particularly from the International Federation of the Phonographic Industry, which believes the study is flawed and misleading. One argument against the research is that many music consumers only download music illegally. The IFPI also points out that music piracy affects not only online music sales but also multiple facets of the music industry, which is not addressed in the study.

Media industry estimatesedit

In March 2019, a New York Times article reported that the Qatar-based beIN Media Group suffered "billions of dollars" of losses, following the unilateral cancellation of an exclusive contract it shared with the Asian Football Confederation (AFC) for the past 10 years. The decision by the AFC to invalidate its license for broadcasting rights to air games in Saudi Arabia came after the kingdom was accused of leading a piracy operation through its television broadcaster, beoutQ, misappropriating sports content owned by beIN Sports since 2017, worth billions of dollars.

In January 2020, the European Commission released a report on protection and enforcement of intellectual property rights in third countries. The report named as many as 13 countries, including Argentina, Brazil, China, Ecuador, India, Indonesia, and Saudi Arabia, the last being included for the first time. The report said piracy is "causing considerable harm to EU businesses" and high economic losses have occurred in Argentina, China, Ecuador and India. It also informed Saudi Arabia has not "taken sufficient steps to stop the infringement" caused via BeoutQ, like other countries have, to minimize the extent of financial and economic loss.

Criticism of industry estimatesedit

The methodology of studies utilized by industry spokespeople has been heavily criticized. Inflated claims for damages and allegations of economic harm are common in copyright disputes. Some studies and figures, including those cited by the MPAA and RIAA with regards to the economic effects of film and music downloads, have been widely disputed as based on questionable assumptions which resulted in statistically unsound numbers.

In one extreme example, the RIAA claimed damages against LimeWire totaling $75 trillion – more than the global GDP – and "respectfully" disagreed with the judge's ruling that such claims were "absurd".

However, this $75 trillion figure is obtained through one specific interpretation of copyright law that would count each song downloaded as an infringement of copyright. After the conclusion of the case, LimeWire agreed to pay $105 million to RIAA.

The judicial system has also found flaws in industry estimates and calculations. In one decision, US District Court Judge James P. Jones found that the "RIAA's request problematically assumes that every illegal download resulted in a lost sale", indicating profit/loss estimates were likely extremely off.

Other critics of industry estimates argue that those who use peer-to-peer sharing services, or practice "piracy" are actually more likely to pay for music. A Jupiter Research study in 2000 found that "Napster users were 45 percent more likely to have increased their music purchasing habits than online music fans who don't use the software were." This indicated that users of peer-to-peer sharing did not hurt the profits of the music industry, but in fact may have increased it.

Professor Aram Sinnreich, in his book The Piracy Crusade, states that the connection between declining music sales and the creation of peer to peer file sharing sites such as Napster is tenuous, based on correlation rather than causation. He argues that the industry at the time was undergoing artificial expansion, what he describes as a "'perfect bubble'—a confluence of economic, political, and technological forces that drove the aggregate value of music sales to unprecedented heights at the end of the twentieth century".

Sinnreich cites multiple causes for the economic bubble, including the CD format replacement cycle; the shift from music specialty stores to wholesale suppliers of music and 'minimum advertised pricing'; and the economic expansion of 1991–2001. He believes that with the introduction of new digital technologies, the bubble burst, and the industry suffered as a result.

Economic impact of infringement in emerging marketsedit

The 2011 Business Software Alliance Piracy Study Standard estimates the total commercial value of illegally copied software to be at $59 billion in 2010, with emerging markets accounting for $31.9 billion, over half of the total. Furthermore, mature markets for the first time received fewer PC shipments than emerging economies in 2010. In addition with software infringement rates of 68 percent comparing to 24 percent of mature markets, emerging markets thus possess the majority of the global increase in the commercial value of counterfeit software. China continues to have the highest commercial value of such software at $8.9 billion among developing countries and second in the world behind the US at $9.7 billion in 2011. In 2011, the Business Software Alliance announced that 83 percent of software deployed on PCs in Africa has been pirated (excluding South Africa).

Some countries distinguish corporate piracy from private use, which is tolerated as a welfare service.citation needed This is the leading reason developing countries refuse to accept or respect copyright laws. Traian Băsescu, the president of Romania, stated that "piracy helped the young generation discover computers. It set off the development of the IT industry in Romania."