Bogus Piracy Numbers

The Government Accountability Office took a swat at bogus piracy numbers this week. Ars Technica reports:

We've all seen the studies trumpeting massive losses to the US economy from piracy. One famous figure, used literally for decades by rightsholders and the government, said that 750,000 jobs and up to $250 billion a year could be lost in the US economy thanks to IP infringement. A couple years ago, we thoroughly debunked that figure. For years, Business Software Alliance reports on software piracy assumed that each illicit copy was a lost sale. And the MPAA's own commissioned study on movie piracy turned out to overstate collegiate downloading by a factor of three.

Can we trust any of these claims about piracy?

The US doesn't think so. In a new report out yesterday, the government's own internal watchdog took a close look at "efforts to quantify the economic effects of counterfeit and pirated goods." After examining all the data and consulting with numerous experts inside and outside of government, the Government Accountability Office concluded (PDF) that it is "difficult, if not impossible, to quantify the economy-wide impacts."

Of special interest to our class, Music Law in the Digital Age cites piracy numbers on page 105 from the Institute for Policy Innovation. Although these numbers are more conservative that the most ridiculed numbers above, Ars Technica does not have kind words for the Institute:

The content industries basically punted, pointing to three surveys done by a single guy, Stephen Siwek of the Institute for Policy Innovation. GAO looked specifically at Siwek's work, all of which seeks to model effects of piracy on the entire US economy. 

The government concluded that "most of the experts we interviewed" were reluctant to embrace Siwek's methodology; his approach comes from the Commerce Department, but it simply wasn't designed to measure what's being measured here. For instance, these studies ignore the obvious points that pirating goods leaves consumers with more disposable income, which is likely spent elsewhere in the economy. Effects on the economy as a whole, then, are terribly speculative and seem more likely to be simply redistributive.

I'm sure Bargfrede and Mak will fix p. 105 in the next edition. ;)