The Failed Case For New ‘Piracy’ Laws

It's hard not to feel sorry for Al Perry these days.  As Paramount Picture's vp for worldwide content protection and outreach, he has been on the road a lot, mostly to law schools. The past few weeks, he's been to the University of Michigan, the University of North Carolina, Yale, Brooklyn Law School, the University of Virginia (UVA).  Next month, at least, he will be able to stick close to home for once, speaking to a group at UCLA. But he also goes to the University of Chicago.  That’s a lot of miles to hit up generally unsympathetic audiences.

It's not only the traveling, which is bad enough, and for which he deserves great sympathy.  The reason he's on the road so much is that he's trying to connect with (mostly) law students to impress on them the harm that "content theft" is doing to his industry.  In his presentation at UVA (at which I was the respondent) he talked about the evils of cyberlockers, the fabulous lifestyle of Megaupload founder Kim Dotcom, the losses of jobs to his industry, the lowered output of the film studios (albeit only the six making up the Motion Picture Association of America).  He warned about dangers to consumers of Web sites with unauthorized movies and criticized those sites selling ads around those movies.  (Note: there is no audio or video of these sessions because Paramount didn't want them recorded.)

He also defended the Stop Online Piracy Act (SOPA) and Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act (PIPA) as necessary.  In other words, it was a fairly standard industry presentation, given multiple times to audiences that, to varying degrees of skepticism and civility, weren't buying what Perry was selling.  The frustruation is best illustrated in this Oatmeal cartoon.

Perry is doing his best, but he’s been dealt a very weak hand.  The crucial question is not whether unauthorized viewing takes place.  We know that it does.  The question is whether said viewing justifies a continuing campaign with ever more Draconian legislation that threatens the working of the Internet while giving private companies quasi-official police powers.  The answer is clearly no, but the content industry doesn’t see that.  The corollary question is whether the industry is adapting to the needs of consumers, as this cartoon illustrates and as many students in the sessions with Perry demonstrated, that answer, unfortunately, is “no” also.

Bad Movies Lead To Bad Results

The content industry’s basic, unavoidable, problem is that things happen for a variety of reasons.  At any given time, businesses do well, and businesses do poorly.  To say that “piracy” or “content theft” is driving the results is just not realistic on any level.  The movie industry is looking forward to a “record summer” this year, with lots of blockbuster films that people will want to see – a new Men In Black, a new Spiderman, and the Avengers superhero confab.  If projections hold, the results will be spectacular, but even then, the industry will carp.

Last year, 2011, was a different story.  Movie attendance was down, box office receipts were off.  Was it “piracy” that caused the decline?  Not according to any industry analyst.  At mid-year, The Wrap quoted one key analyst, Vincent Bruzzese, president of the Worldwide Motion Picture Group:  "For moviegoers this age, it's not the ticket prices, it's not streaming or piracy, it's that there was nothing they wanted to see. Studies show that low on the list of reasons people don't go to the movies are alternative forms of entertainment."  Or, as he put it more bluntly, "It's the product, stupid." 

 “Forget pirates, the film industry has plundered itself,” was the headline on another story. Greg Jericho looked at the all-time top 100 films, saw some declines after 2002, well before Pirate Bay and other sites.  The “plunder” came as the industry changed its business strategy, to make movies that made most of their money in one weekend, but which left a lot of people out in the cold.  His bottom line:   “The key for the industry is: Don't make crap, and don't treat your audience like crap either. Can't be that hard.”Two words – John Carter.  Disney lost $200 million on that one picture and the head of the studio quit.  No piracy needed.  (Dare we say that maybe some piracy would have helped it?)

Economic Losses Questionable

The industry likes to talk about all the economic losses from piracy, but those, too, are built on a very shaky foundation.  The Motion Picture Association of America (MPAA) claims that $58 billion is lost to the economy every year from “content theft.”  As Rob Reid, founder of listen.com and Rhapsody said in a TED talk on “copyright math,” that total is equal to the entire American corn crop and all fruit, tobacco, rice, sorghum, wheat. To put it another way, the MPAA reported on March 22 that global box office receipts for all films released around the world reached $32.6 billion. So the industry is claiming losses to the economy greater than worldwide box office ticket sales.   

When the industry claims that 373,000 jobs are lost each year due to “piracy,” it’s hard to believe given that there are only about 400,000 people who work in the industry all together.  While they want to claim collateral damage to florists and others, there’s no way to prove that.  It’s like NBC claiming that corn farmers are being hurt by piracy because theatres won’t sell as much popcorn. (Not true, BTW.)

The definitive word came from the Government Accountability Office (GAO), which did a study that came out a couple of years ago.  The April 12, 2010 GAO report:  “Intellectual Property:  Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods,” found that: “Most experts we spoke with and the literature we reviewed observed that despite significant efforts, it is difficult, if not impossible, to quantify the net effect of counterfeiting and piracy on the economy as a whole.”

The GAO also noted: 

Another example of the use of surveys is the study by the Motion Picture Association, which relied on a consumer survey conducted in several countries. This study found that U.S. motion picture studios lost $6.1 billion to piracy in 2005.  It is difficult, based on the information provided in the study, to determine how the authors handled key assumptions such as extrapolation rates and extrapolation from the survey sample to the broader population.

Study after study has found that the effects of “piracy” are vastly overstated.  Mike Masnick found that consumer spending is shifting out of movies into other parts of the entertainment universe as consumers alter their spending habits.  Ispos MediaCT, a market research firm, found in 2009 that the people who the industry sees as pirates (whether for music or video) can be seen in another light:  as fans.  Their study found that, "Again on a monthly basis, those using unofficial sites are more likely than average to also use official sites (90 percent vs. 53 percent), pay to stream or download (82 percent vs. 55 percent) or buy DVDs in a store (67 percent vs. 44 percent)."  Ispos recommended that "the industry needs to find ways to meet the needs of the valuable audience."

Academics Felix Oberholzer-Gee and Koleman Strumpf have made a career out of poking holes in the industry "piracy" alarms.  In the face of industry claims that continued "piracy" will mean that creators won't have an incentive to create, they note that since 2000, the annual release of new music albums has more than doubled, and worldwide feature film production is up by more than 30% since 2003.  Confronted with those statistics, Perry (from Paramount) cited only production stats from the big six studios who are the members of MPAA.  And there are lots of reasons why productions are down, unrelated to allegations of theft.  The threats to general entertainment welfare are old, and are getting older.  A University of Minnesota study similarly found little harms from 'piracy.'

MPAA Chairman Christopher Dodd is fond of talking about the truck drivers and others who aren't big movie stars who lose their jobs due to "content theft." Perhaps if his members moved production back to U.S., would get some of those truck driver jobs back.  In British Columbia alone in 2011, there were 58 movies, 24 TV series, 11 movies of the week, and 11 TV pilots filmed.  While it's true that the industry spreads their money around to states, studies also show that the incentives states give out in no way compensate for the losses of revenue, putting more strain on state budgets.

Attacks Continue Anyway

And yet, even with the flimsy foundation, the content industry continues with its plan of attack on technology and innovation.  Mistaken take-down notices of Web sites are legion, in part because there are no penalties for filing them.  The latest industry targets are the cyberlockers, where millions of people store work or other materials, as the industry simply sees them as havens of piracy rather than a new business that makes things more convenient for people to store and ship big files. 

In going after these businesses, the industry uses automated techniques that simply scan file names.  In the case against Hotfile, Warner Brothers admitted it didn't know what material it was telling the company to take down.  Because there is a movie, "2012," any file with that string of numbers was deemed to be potentially infringing. TorrentFreak published emails from Disney to Megaupload in 2009 inquiring about "offering opportunities to syndicate our exciting entertainment content (e.g. Dark Knight, Harry Potter, Sex and the City clips and trailer) for your users."  Perhaps they didn't get the answer they wanted.

At the end of the day, the case for any harms caused by whatever the industry wants to call it is sufficiently questionable that it’s time to call a halt on the industry’s perpetual campaign for new legislation.   It’s time also for the industry to start listening to what they have been told by their audience – that there have to be new, better and more convenient ways to get access to content -- so that all of Al Perry’s travels won’t have been in vain.

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