The 3 myths behind “Internet pirates always win”

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 (s amzn), 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.