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Summary:

An economist argues that “three myths” are driving the popular notion that online piracy is inevitable and can’t be stopped. Here’s a quick summary of those “myths” and why dispelling them is important to having a more nuanced discussion about how to handle unauthorized online content.

Pirate

In a recent column, “Internet pirates will always win,” New York Times writer Nick Bilton suggested that stopping online piracy is futile because the pirates’ techniques evolve faster than efforts to stop them. This view is an article of faith for many in the tech community but that doesn’t mean it’s true.

Michael Smith, an economist from Carnegie Mellon, is one person who doesn’t buy the “pirates always win” meme. At a legal seminar in New York last week, Smith pointed to empirical data that paints a more nuanced picture of the piracy situation. He also called out “three myths” he says are clouding the debate:

Myth #1: You can’t compete with free

This myth is often invoked by content owners to justify heavy-handed enforcement measures against piracy sites and individual consumers. After all, why buy a song or movie when you can simply download it for free at a pirate site?

A quick look at the thriving content markets at Amazon, iTunes and elsewhere shows this notion is bunk. All of these sites are competing with free very successfully. As Smith points out, the lowest cost (including free) is not the only determinant of consumer purchases. Factors like reliability, convenience, service and quality also have a very big impact on how we buy content online.

The point here is that paid sites can thrive without snuffing out every single piracy site.

Myth #2: Piracy doesn’t harm sales

This myth holds that that people who use content-sharing (“stealing” if you prefer) sites will never pay for the content in the first place so what’s the harm? Meanwhile, “honest” consumers will never turn to piracy.

Smith pointed to evidence that piracy sites are not benign. In one prominent example, he said that when NBC removed shows from on-demand site Hulu, piracy spiked not only for NBC shows but for other networks as well. Meanwhile, no one went out and bought DVD’s as a substitute for the shows that were no longer available on Hulu.

The bottom line is that piracy sites do affect the market for authorized content.

Myth #3: Anti-piracy initiatives don’t work

Laws that target file-sharing are reviled not just as oppressive — but as ineffective too. The first part of the claim is debatable but the second part is blatantly untrue.

Smith points to a recent study of France’s HADOPI (a new enforcement regime) to argue that anti-piracy laws do work. He noted that the advent of HADOPI coincided with a big rise in legal online music purchases, particularly in genres like rap and hip-hop that experience high rates of piracy. At the same time, much of this increases took place before the law even went into effect; it appears that news about the law caused people to seek out legal alternatives.

The point is that laws like HADOPI (and presumably America’s impending “6-strikes” initiatives) can provide a clear deterrent to piracy. (Whether America can implement a sensible one is up to Congress to figure out.)

So what’s the moral of the story?

People like Smith are not making bold new arguments — they’re simply showing how the piracy debate is still driven by ideology not facts. Both sides in the debate are to blame. On one hand, apologists for illicit file-sharing sites pretend that piracy is inconsequential or inevitable. And on the other, content owners too often rely on lies and fear to protect outdated business models.

Internet pirates don’t always win. And neither do content owners. It’s a complicated back and forth we have yet to figure out.

Smith spoke at NARM’s Entertainment and Technology Law Conference.

  1. Reblogged this on drndark.

  2. Yeah, Anti-pirate laws work soooo well… Is that why traffic to the Pirate Bay increased after the block in the UK?

    http://www.techdirt.com/articles/20120706/04233719601/dutch-isp-shows-that-bittorrent-traffic-increased-after-pirate-bay-ban.shtml

    Yeah, uh huh looks effective to me…

    Any pirate worth his booty will use a VPN to get past any blocks, or 3,6 strike laws.

    THE ONLY WAY to get someone to pay for content is to make it just as easier to pay for it than it is to download it for free.

    That means EVERYTHING available for streaming the day of DVD release and don’t take 8 months to go from theater to DVD maybe a couple weeks. Stop trying to milk your customers for all they got and give them a service they will enjoy and want to use.

    You want the consumers on your side, you want them to like you. Multi-million dollar law suits against people who shared a few songs they liked online is NOT the way to get that consumer affection.

    1. They don’t have to be 100% effective to be worth the trouble. If they help people stay honest, then they’re doing their job. I’m sure that if Pirate Bay were 100% legal, few would bother to pay money at Amazon, iTunes or any legit spot. Is that what you’re claiming?

      1. If theses programs are costing taxpayers money, they better sure as hell be effective.

      2. You appear to be ignoring Myth1.

        If Pirate Bay was 100% legal, and had the range of products and guaranteed quality that Amazon or iTunes have, then yes, people would flock to it.

        But the quality of products from piratebay is hit or miss, the range of products on offer is minimal, and the speed of access is slow for all but the most popular items (no more than 200). For piratebay to be able to compete in product range, quality and bandwidth, they would have to start charging.

      3. “I’m sure that if Pirate Bay were 100% legal, few would bother to pay money at Amazon, iTunes or any legit spot. Is that what you’re claiming?”

        B.S., Bob. Pirate Bay is pretty close to 100% legal now in that there are no legal consequences for using it. Amazon and Itunes are FAR more convenient and easy to use that torrent sites. You save the money you pay in labor. Throw in the MORAL desire to compensate artists and you have a huge demand for buying digital if digital is sold.

        The problem with antipiracy activity is that it negates my Point 2 (nobody feels moral responsibility to compensate bullies?) and it diverts attention from satisfying Point 1 (we could go all out to sell digital but instead we’ll put half those resources into punishing digital customers)

    1. Usually when someone references Tech Dirt it is clear where the discussion will go, but out of deference to Bob I did go to the link. I was not disappointed, because at the end of the day, their best and most valid proposition for not supporting artists was that people can.

      My question is when will people realize that well produced, professional content costs money to produce.

      1. Will, your comment was well produced and professional but I read it without compensating you.

        That’s the difference between using the Internet and buying a DVD. If you own a radio, you get the concept of “free” Internet content. Why are you pretending to be obtuse?

        Your assumption that people who “don’t pay” for something broadcast into their home do so because they “choose” not to makes no sense.

      2. “proposition for not supporting artists”

        Assuming you really did read it it’s clear from drivel like this you certainly didn’t understand it. It’s nice that you’d so proudly dismiss something out of hand without consideration though, it makes it real clear that you’re close minded and not interested in any real discussion that challenges your assumptions.

  3. “America’s six-strikes law”? There is no such thing. Major American ISPs have [maybe] made a purely voluntary arrangement with major content stakeholders. Certainly the copyright laws inform the deal and, ultimately, the threat of infringement actions is what [might] make it work, but it shouldn’t be confused with a law.

    And whether the linked study supports the proposition that “anti-piracy laws work” depends on what how you define “working.” The study shows that digital sales have increased significantly relative to a control group in post-Hadopi France. It says nothing about a decrease in piracy (a proposition reached only by inference) and doesn’t foreclose other causal explanations for the increase in sales.

    And the policy question shouldn’t be forgotten — anti-piracy laws have costs. Significant ones. Hadopi costs the French Government 12 million euros a year, to say nothing of the costs to content owners, ISPs, and, ultimately, end users. If we take the Danaher study at face value (which, given the speculation on this particular point, is questionable) then that 12+ million in costs creates 13.8 million in iTunes sales. Is this desirable?

    1. Jeff John Roberts miriw Monday, September 17, 2012

      Thanks for the thoughtful comment, miriw. You’re right, reports about “6-strikes” suggest it’s more likely to be an industry scheme rather than a formal law. I’ve amended the story to clarify.

      Re Hadopi, the increase is legal purchases is high enough that at least part of it is causal.

      More broadly, I’m not calling for the US to introduce Hadopi (France itself appears to be scaling back on the law) which, as you point out, risks creating an expensive new bureaucracy. I’m just pointing out that these type of initiatives do appear to have an effect on piracy. I don’t think content owners are unreasonable to propose them; I do worry that what they do they propose (such as $150K statutory damages) can be worse than the underlying problem.

  4. It’s called balance, it has always been there. what the Anti-Piracy lobbyists would like to do is upset that balance. So the little guy can’t enjoy what he can’t afford.

  5. It’s called balance and it has been around a long time. What the anti-piracy lobbyists would like to do, is upset that balance… so the little guy can no longer enjoy that which he can’t afford. This is in turn seen as greed by the majority.

    Which in a sense is true, because until things became digital they didn’t know how much they were loosing out on. Pirate Bay and the rest of the torrent sites put a number on it by displaying the Seeds and Leechers.

    The big Corporations then take those numbers and apply dollar signs to it. Then Joe Smoah who has been needing that raise so desperately so that he doesn’t have to foreclose on the house he couldn’t afford in the first place, goes running to his boss showing him this great loss.

    Now we sit where we sit… its stupid and a waste of a lot of money and time.

    1. Waaaah. I can’t afford a new yacht. Should I be able to “enjoy” it just because you say it’s okay?

      Authors and artists need health insurance, food and shelter. What’s wrong with forcing people to contribute a fair share — if they choose to enjoy the work?

      I would feel differently if books were like yachts and only folks with tens of millions of pounds could afford them, but they’re not. There are plenty of cheap alternative books. If someone can’t afford one book, there are plenty of others and they’re probably just as good.

      1. “What’s wrong with forcing people to contribute a fair share — if they choose to enjoy the work?”

        Because the government can’t force you to pay for reading, watching or listening to something. That’s a violation of the First Amendment, not to mention the private property rights of the person showing it to you.

        Do you really want police bursting in on a family watching a DVD and making head counts?

        People can and always will legally “enjoy work” without paying. The only question here is whether file-sharing will be one of those ways.

        You can also enjoy a yacht without paying for it … if someone shares it with you. Derp.

      2. A couple problems with your absurd analogy, people don’t need yachts to participate in their own culture and yachts don’t have a marginal production cost of zero or virtually zero.

      3. ? So it’s ok to steal food because you need it? If you go to the guy at a hot dog stand and say “$1.00 is too much and unfair so I’m just going to take the hot dog” ? If you don’t like the price of a movie, or don’t like the window, you have two choices, morally. Don’t go or make one of your own and make it available earlier or cheaper. But the world doesn’t magically make things appear because you want them. And it’s outrageous to tell an artist that it’s ok if his hard work is taken against his will because the public “needs” the artist to work for free.

  6. I fail to see he your example of Hulu dispels your Myth #2. People who watch tv shows on Hulu don’t buy them on DVD; streaming offers a much different convenience. So people get used to Hulu’s convenience, and Hulu pulls the plug. It’s Hulu who is the actor here, not the pirates. And of course pirated downloads go up when hulu acted, and of course no one bought DVDs, since DVDs do NOT offer equivalent convenience to online streams or downloads.

    1. Was coming here to say the same thing, Myth #2’s title doesn’t follow from the example used at all. The example shows removing legal options can increase infringement, not that infringement can decrease sales.

  7. Jeff John Roberts Monday, September 17, 2012

    Smith’s point, I think, is that piracy can undercut sales — but, as you suggest, the content owners can have a big role in mitigating this by ensuring that legal options are available how and when they want.

  8. Greg Golebiewski Tuesday, September 18, 2012

    Finally someone with brains (and training in economy) took on the fallacy of several popular beliefs, including one that cripples the Internet the most: free always wins with paid
    Kudos to Michael Smith!

  9. I have to agree with the previous comments. The stats offered do not really go against myths 2 & 3:
    The issue with Hulugoing down or similar services never being offered in the first place is that a broad new technology has been offered and not adopted by the industry, so customers go and set it up themselves. The servers, the software, the bandwidth, has all be completely created and funded outside the industry while they sat on their hands. The wrong move was made 15 years ago and they still have not learned. Offer it, they will come, take it away and other solutions will be attract attention.
    In terms of directly harming sales, few have said there is NO effect, but most have said that the effect is much smaller than the industry is making it out to be. And to agree with murphine, a large part of what is today seen as pirating, was simply part of the equation 20 years ago, and a RIGHT by law. So not only has the industry not added new value, they took away a big chunk of previous value. Not the right direction.
    And a serious criticism has to be levelled at only citing HADOPI. They have a very strong vested interest in making their work valuable, or they’d be out of a job. Please site something less partisan!

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