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Getting a handle on piracy

Hot on the Web

This column originally ran in ComputorEdge on September 20, 2002
(Issue 2038, Computer Controversy)

To listen to the suits tell it, it's a miracle the nation is able to survive at all what with all the software, music and video piracy going on — especially online.

The Motion Picture Association of America's web site ( says that Hollywood loses $3 billion a year to film and video piracy, and that much of this piracy is happening over the Internet.

The Business Software Alliance goes even more overboard in its estimates of the cost of piracy: their Web site claims that software piracy costs $5.7 billion in lost wages ever year.

The Digital Software Association says that video game piracy alone costs almost $2 billion each year around the world.

And the Recording Industry Association of America recently released a study claiming that music piracy is costing its member companies gazillions of dollars in losses ever year. (We weren't able to get into the RIAA site to pull up specific figures because they were being targeted by yet another denial-of-service attack in the wake of news of an RIAA-backed bill in Congress to let music companies hack into anyone's computer looking for pirated music.)

A cool reception

There are more billions in the above claims than Carl Sagan could have gotten his head around.

 And yet no matter how high the p.r. flacks jack up their estimates of the cost of piracy, the public's reaction is a giant yawn.

Which no doubt infuriates the suits.

Poll after poll shows that the public is opposed to further efforts to crack down on those who deal in trading copies of music, videos and software.

In fact, public support for the very concept of copyright is slipping. And the more the music, movie and software industries try to convince the public that something must be done, the more the public says "no."

Hype out of control

And so the various publishing concerns continue to elevate their estimates of the costs of piracy — trying to convince the rest of us that we have a stake in seeing our neighbors locked up for giving friends copies of the latest Mariah Carey release rather than buying a gift certificate. (Actually, anyone who would give a Mariah Carey CD for a gift just might deserve punishment ...)

But the constant inflation of the supposed costs of piracy undermines the anti-piracy effort in two ways: First, when independent studies show a much lower cost, it hurts the credibility of the trade groups; and second, at some point the numbers get so out of control that they lose any relevance to the average person. I mean, how many of us working stiffs can really comprehend what a billion dollars is?

Calculating the true costs

The various estimates of what piracy costs at the top of this column are arrived it in the following manner: The industry trade groups estimate how many illegal copies of their product are floating around, and then multiply that number against the full retail price. Voila, your cost of piracy.

But such a formula ignores several factors that mean the actual cost is significantly less.

The most important factor overlooked is that most of those illegal copies would never have been purchased in the first place. The plain truth is that if Joe Schmoe couldn't have gotten his copy of, say, "PhotoShop" for free, he'd have used something else or nothing at all rather than plopping down $500 for a legal copy.

And in music piracy, every study but the RIAA's has found that most folks trading music files online end up spending more money on buying legal CDs than they would have otherwise. Many times, the availability of free songs encourages listeners to try something new — and in that process, they discover artists they would never have encountered otherwise. Won't find that reality in the RIAA study, of course.

Another fact the music, video and software publishers want us to overlook is that very few copies of any of their products actually sell for full retail. In the software industry, especially, most piracy is conducted by large businesses — they pay for, say, 100 licenses of Microsoft Office and then install it on 250 PCs. But while you or I might pay a couple hundred dollars for a copy of Office, for some big corporation to add another PC to an existing site license costs much less (how much less depends on the size of the company in question).

If you've ever been to a video or music store, you know that once a new release has been out a few months, it's price typically drops by 50 percent or more.

So using the full retail price to calculate piracy costs is a bit less than truthful.

What to do?

Whether online music piracy benefits or costs the music industry remains in dispute. However, there's little doubt that software and video piracy does cost those industries lost sales — especially in places like China, where wholesale piracy often owns the local markets (including the CDs found in the local music shop).

But the massive over-inflated figures tossed about as the cost of piracy is having the opposite of intended effect, causing the public to tune out the industry warnings.

And the publishing industries' massive crackdowns on those trading in pirated materials seems to be creating public sympathy for those targeted rather than the aggrieved industries.

All of which leads us inexorably to the question of whether it's possible to heal the rift between those who create music, videos and software — and the public that uses them.

Next week: Is the publishing industry's zealous prosecution of pirates creating a backlash?