AfterDawn: Tech news

US government using made up piracy figures says GAO report

Written by Rich Fiscus (Google+) @ 14 Apr 2010 7:30 User comments (14)

US government using made up piracy figures says GAO report Last year in the US the PRO-IP bill was signed into law. It created a new head of copyright enforcement in the Justice Department and called for public input on ways to address intellectual property infringement.
It also mandated that the GAO (Government Accountability Office) identify and quantify the presumed harm to the US economy from IP infringement. In a report issued on Monday they were critical of both government agencies and industry groups for promoting facts and figures.

On the government side they looked at three figures which have been widely used to argue in favor of increased IP enforcement. According to the GAO, none of the numbers stand up to scrutiny because they, "cannot be substantiated or traced back to an underlying data source or methodology."

These include a FBI estimate that US businesses lose $200 to $250 billion annually due to counterfeiting. These figures were originally found in a FBI press release, but the agency, "has no record of source data or methodology for generating the estimate."

Other reports from US Customs and Border Protection and the Federal Trade Commission were similarly criticized for being short on facts, and even discredited by the agencies themselves.

However, the report also noted that this hasn't stopped other government agencies and a number of trade groups from citing them as fact.

And how do government officials actually arrive at these figures since they appear not to be collecting any data on the subject? According to the GAO they rely heavily on numbers supplied by various industry groups, even though those groups, "do not always disclose their proprietary data sources and methods, making it difficult to verify their estimates."

The industry provided information GAO auditors were able to examine didn't hold up very well to serious scrutiny. This should come as no surprise to anyone who has examined the assumptions used by organizations like the BSA (Busines Software Alliance) and MPAA.

Of BSA numbers, which are revised annually, the report noted, "it uses assumptions that have raised concerns among experts we interviewed, including the assumption of a one-to-one rate of substitution."

The rate of substitution is how many people who have a pirated or counterfeit good would have bought the legitimate good. A one-to-one rate of substitution means every piece of pirated software installed is counted as a lost sale.

A 2005 report issued by the MPAA is also mentioned, although that organization's later admission of errors in their conclusions interestingly isn't.

The GAO does note that "It is difficult, based on the information provided in the study, to determine how the authors handled key assumptions such as substitution rates and extrapolation from the survey sample to the broader population."

Unfortunately none of this is really new information. Criticism of the various figures and studies used to promote stronger IP protection is easy to find if you are looking.

And it was just as easy to find when PRO-IP was passed. The bigger question is who Justice Department officials will be listening to.

Given the number of high ranking officials at the Department of Justice who have been integral to RIAA and MPAA lawsuit campaigns it's probably not the GAO.

They've already increased DOJ's involvement in RIAA lawsuits by arguing in favor of ludicrous copyright infringement damages for file sharing.

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14 user comments

114.4.2010 10:10

No you think? All piracy numbers are made up you either believe in the general range or you do not.

I say 30% of all consumption is sharing, downloading and bootlegs. Illicit sale only makes up 1/3rd of that and I am talking world wide scale here, the rest is information sharing of some kind.

What we need to do is focus on illicit profit derived from the flow of information instead of distribution and copies.

214.4.2010 16:14

One problem is that piracy estimates (at least for losses to industry) assume every instance of piracy is a lost legit sale, when it's more like 75-90% of of people who pirate stuff would have never paid otherwise.

314.4.2010 17:24

The CEOs and CFOs would have another $200 to $250 billion to spend. You can sell a song for about 1 dollar. You can extort 10,000 dollars, attorney fees and court costs from a grandmother who did not download anything. Her five year old grandchild committed the crime. Throw her five year old grandchild in jail for 1 day and have her pay the copyright holder 1 dollar for the song. I bet this would never happen again.

414.4.2010 17:57

Originally posted by xnonsuchx:
One problem is that piracy estimates (at least for losses to industry) assume every instance of piracy is a lost legit sale, when it's more like 75-90% of of people who pirate stuff would have never paid otherwise.
I'd say 30% of the world will not pay in any which what shape or form.

514.4.2010 18:11

your right im part of the 30 percent , and i would never pay anymore for this stuff , i used to pay all the time when i was a kid, all the crapy movies i'd buy a whole cd to get one song i'd buy a video game to beat it in 7 hours, well now its my time to get it all back and then some, they want me to stop downloading this fine make QUALITY movies , songs ,games and sale them at a fair price, not this crap where you have to budget for these items, its entertainment not a cure for cancer.

614.4.2010 21:12

Originally posted by VENOM79:
your right im part of the 30 percent , and i would never pay anymore for this stuff , i used to pay all the time when i was a kid, all the crapy movies i'd buy a whole cd to get one song i'd buy a video game to beat it in 7 hours, well now its my time to get it all back and then some, they want me to stop downloading this fine make QUALITY movies , songs ,games and sale them at a fair price, not this crap where you have to budget for these items, its entertainment not a cure for cancer.
You just wait copyright date plus 95 years and download. Then it is legal to download unless the copyright law changes again to protect Mickey Mouse.

714.4.2010 23:12
Jose_X
Unverified new user

http://www.freesoftwaremagazine.com/colu...Meme+animations

http://www.againstmonopoly.org/index.php?perm=593056000000002845

Of course, the horribly broken and unfair patent system is becoming another significant problem because, since copyright is not strong enough apparently, the unethical and greediest among us have been exploiting patents to gain monopolies on not just works they created but on ideas that impact a great many works that hardly resemble their so called ("nonobvious") "inventions". And they are starting to get bolder and bolder about seeking enforcement, even against small entities.

I hope more people become acquainted with the problems in the patent system. If not, patents will be used to effectively prevent a great many copyright works from even existing in the first place. Our US patent system is that broken.. and is one reason (via gene and drug patent monopolies) why health care costs have gone up so much in these last few decades. These monopolists benefit from technology growth and science that came from society and then exploit the 20 year super monopoly government subsidy that is given to the first that rings the patent office's doorbell no matter how many others were near making the same or improved but related discovery or had made it already but had not sought a patent fast enough.

Patent authors that enforce are leeches. And the patent system completely spits at all the innovation done by those that don't have the money, sophistication, or sleaziness to take out "process" patents (eg, most open source software developers).

Hopefully, the court cases in the pipeline will help fix this situation somewhat, but it seems Congress is just waiting for the court rulings to then try to add back anything the courts strike down.

815.4.2010 6:13

Originally posted by ZippyDSM:
No you think? All piracy numbers are made up you either believe in the general range or you do not.

Estimates of piracy aren't actually that hard to come by. What's more difficult to establish is the conversion rate. If eliminating the unauthorized content doesn't result in an authorized sale you can't legitimately count it as a loss.

Quote:
I say 30% of all consumption is sharing, downloading and bootlegs. Illicit sale only makes up 1/3rd of that and I am talking world wide scale here, the rest is information sharing of some kind.

What we need to do is focus on illicit profit derived from the flow of information instead of distribution and copies.

I think a better response to claims of piracy losses is to simply examine home entertainment spending over the last few years and analyze how much there is and what people are buying. In 2004 DVD revenue (sales and rental) and DVD player revenue in the US both peaked. Total revenue from home video sales/rental, DVD player sales, recorded music sales, video game sales, and game console sales were about $84 billion. 5 years later they were about $81 billion even though DVD player sales alone fell more than $10 billion. During that period, the Xbox 360, Wii and PS3 were all introduced. And that doesn't count the spending in movie theaters or on mobile phones, internet service, live music, or some game revenue such as subscription games like WoW or game rentals, all of which increased during the same period. If you include them I'm sure you'd end up with a net increase.

In other words the effect of piracy on the economy is negligible. What has happened is a series of spending shifts, which are completely predictable. Going back to the 1990's, in the middle of the decade saturation of catalog titles resulted in a slow stagnation of CD sales. This was happening before Napster ever existed. In 1999, when Napster appeared, the CD's days were already numbered. By 2008 the labels were seeing record numbers of sales. They just happened to be smaller sales than they were used to. Ironically they could probably solve all their problems by simply lowering prices to about 10% - 25% of what they are now and get back to the days of making money hand over fist. The only losses they have are from a poor understanding of economics and an addiction to government mandated monopoly powers.

Starting in 1999 DVD sales took off. Just like the labels with CDs, the studios made a lot of money selling catalog titles. Also like the CD, DVD sales eventually plateaued as the market was saturated. From 2004 on there's a trend toward new releases dominating the market. This also results in fewer sales but more rentals. The studios didn't get the boost they expected from Blu-ray because most people aren't looking to upgrade their existing collections to the new format when they're still happy with DVD. Once again like the record labels, the studios are under the mistaken impression they can dictate what the next mainstream format will be. They opted for Blu-ray. Consumers are slowly opting for internet provided (downloaded or streamed) video. Blu-ray will never be as big a success as DVD and it's unrealistic to expect that. DVD was a unique phenomena which you can't just repeat at will.

In 2000 and 2001 the PS2 and original Xbox were released, effectively reinventing the console gaming industry in more of a generic home entertainment mold. Sales steadily increased for a few years and then exploded in 2007 when the Wii was introduced. Right now gaming is the hot market, and with all the new smartphones being introduced you can expect that trend to continue for a while.

The only real piracy losses you can distinctly identify are from big criminal syndicates who sell large quantities of unauthorized DVDs and CDs. Those operations are already the target of law enforcement efforts, and can be handled more effectively using organized crime statutes rather than IP law. Including them in a report on piracy losses is fine, but it's not significant if you're looking at what more should be done from a copyright protection POV.

915.4.2010 6:23

Originally posted by Jose_X:
http://www.freesoftwaremagazine.com/columns/interview_nina_paley_author_Sita_Sings_the_Blues_and_two_Minute+Meme+animations

http://www.againstmonopoly.org/index.php?perm=593056000000002845

Of course, the horribly broken and unfair patent system is becoming another significant problem because, since copyright is not strong enough apparently, the unethical and greediest among us have been exploiting patents to gain monopolies on not just works they created but on ideas that impact a great many works that hardly resemble their so called ("nonobvious") "inventions". And they are starting to get bolder and bolder about seeking enforcement, even against small entities.

I hope more people become acquainted with the problems in the patent system. If not, patents will be used to effectively prevent a great many copyright works from even existing in the first place. Our US patent system is that broken.. and is one reason (via gene and drug patent monopolies) why health care costs have gone up so much in these last few decades. These monopolists benefit from technology growth and science that came from society and then exploit the 20 year super monopoly government subsidy that is given to the first that rings the patent office's doorbell no matter how many others were near making the same or improved but related discovery or had made it already but had not sought a patent fast enough.

Patent authors that enforce are leeches. And the patent system completely spits at all the innovation done by those that don't have the money, sophistication, or sleaziness to take out "process" patents (eg, most open source software developers).

Hopefully, the court cases in the pipeline will help fix this situation somewhat, but it seems Congress is just waiting for the court rulings to then try to add back anything the courts strike down.


There is some good news on the patent front. If the Supreme Court upholds the appeals court decision in the Bilski case it could put most software and business process patents in jeapordy, as well as a lot of patents in traditional areas, which have also gotten exceedingly vague in the last decade.

The Patent and Trademark Office also has a Chief Economist for the first time ever. His entire job is to perform studies of the economic impact of patents and make policy recommendations based on them. In the past there's always been an assumption that more patent protection was automatically a good thing economically. The Georgia Tech economics professor they hired to do the studies has written multiple papers questioning this assumption.

Of course the actual laws are ultimately still up to Congress. There's no reason to assume they will listen to the USPTO any more than they do the GAO when it comes to the actual facts. Their understanding of the patent system, and IP in general, isn't based on the facts, but rather an ingrained, almost religious belief that if some is good more must be better. Evidence that it's not is counter intuitive to them and will therefore be ignored.

1015.4.2010 9:41

Originally posted by vurbal:
Originally posted by ZippyDSM:
No you think? All piracy numbers are made up you either believe in the general range or you do not.

Estimates of piracy aren't actually that hard to come by. What's more difficult to establish is the conversion rate. If eliminating the unauthorized content doesn't result in an authorized sale you can't legitimately count it as a loss.

Quote:
I say 30% of all consumption is sharing, downloading and bootlegs. Illicit sale only makes up 1/3rd of that and I am talking world wide scale here, the rest is information sharing of some kind.

What we need to do is focus on illicit profit derived from the flow of information instead of distribution and copies.

I think a better response to claims of piracy losses is to simply examine home entertainment spending over the last few years and analyze how much there is and what people are buying. In 2004 DVD revenue (sales and rental) and DVD player revenue in the US both peaked. Total revenue from home video sales/rental, DVD player sales, recorded music sales, video game sales, and game console sales were about $84 billion. 5 years later they were about $81 billion even though DVD player sales alone fell more than $10 billion. During that period, the Xbox 360, Wii and PS3 were all introduced. And that doesn't count the spending in movie theaters or on mobile phones, internet service, live music, or some game revenue such as subscription games like WoW or game rentals, all of which increased during the same period. If you include them I'm sure you'd end up with a net increase.

In other words the effect of piracy on the economy is negligible. What has happened is a series of spending shifts, which are completely predictable. Going back to the 1990's, in the middle of the decade saturation of catalog titles resulted in a slow stagnation of CD sales. This was happening before Napster ever existed. In 1999, when Napster appeared, the CD's days were already numbered. By 2008 the labels were seeing record numbers of sales. They just happened to be smaller sales than they were used to. Ironically they could probably solve all their problems by simply lowering prices to about 10% - 25% of what they are now and get back to the days of making money hand over fist. The only losses they have are from a poor understanding of economics and an addiction to government mandated monopoly powers.

Starting in 1999 DVD sales took off. Just like the labels with CDs, the studios made a lot of money selling catalog titles. Also like the CD, DVD sales eventually plateaued as the market was saturated. From 2004 on there's a trend toward new releases dominating the market. This also results in fewer sales but more rentals. The studios didn't get the boost they expected from Blu-ray because most people aren't looking to upgrade their existing collections to the new format when they're still happy with DVD. Once again like the record labels, the studios are under the mistaken impression they can dictate what the next mainstream format will be. They opted for Blu-ray. Consumers are slowly opting for internet provided (downloaded or streamed) video. Blu-ray will never be as big a success as DVD and it's unrealistic to expect that. DVD was a unique phenomena which you can't just repeat at will.

In 2000 and 2001 the PS2 and original Xbox were released, effectively reinventing the console gaming industry in more of a generic home entertainment mold. Sales steadily increased for a few years and then exploded in 2007 when the Wii was introduced. Right now gaming is the hot market, and with all the new smartphones being introduced you can expect that trend to continue for a while.

The only real piracy losses you can distinctly identify are from big criminal syndicates who sell large quantities of unauthorized DVDs and CDs. Those operations are already the target of law enforcement efforts, and can be handled more effectively using organized crime statutes rather than IP law. Including them in a report on piracy losses is fine, but it's not significant if you're looking at what more should be done from a copyright protection POV.
Loses<Numbers they make assumptions that there is a reliable profit loss from the general numbers they gather.

As I have said before bootlegging and trying to make a profit off unlicensed copyrighted goods should be treated the same, while bootlegging has been doing the majority of damage ad rev and other profit revenue streams is growing by the year. While individualize profit may well be non exsistant the point of it should be only the copyright owner and licensed process to distribute copyrighted items for profit should be exclusive to the licensed process.
This message has been edited since its posting. Latest edit was made on 15 Apr 2010 @ 9:48

1115.4.2010 12:19

Well ... since the government seems to like making up "creditable" information about individual citizens crimes, I should be able to do the same about corporations.
My information reports that their are more senators than you can count on your hands driving new cars to their $3 million dollar homes because of under table deals or by motivation from "PACs". You known what a "PAC" is right? "Pirates Abolishing the Constitution" They are the strong arm of powerful corporations that our government allows to vote as a single entity to sway laws that keep individual citizens "in their place". "PACs" are made up of people who once worked at places like oh, the "RIAA & BSA". You know butt kissers who make a lot of money duping "government officials" into believing whatever comes out of their mouths. I wouldn't put it past them to be trying the same with elected judges but I would not want to be put on the record as saying that comment has any truth. I am just voicing a concern. :)
My information comes from a reliable source just like the "BSA", from my a$$.

This message has been edited since its posting. Latest edit was made on 15 Apr 2010 @ 12:22

1215.4.2010 20:30

Originally posted by editmon:
Well ... since the government seems to like making up "creditable" information about individual citizens crimes, I should be able to do the same about corporations.
My information reports that their are more senators than you can count on your hands driving new cars to their $3 million dollar homes because of under table deals or by motivation from "PACs". You known what a "PAC" is right? "Pirates Abolishing the Constitution" They are the strong arm of powerful corporations that our government allows to vote as a single entity to sway laws that keep individual citizens "in their place". "PACs" are made up of people who once worked at places like oh, the "RIAA & BSA". You know butt kissers who make a lot of money duping "government officials" into believing whatever comes out of their mouths. I wouldn't put it past them to be trying the same with elected judges but I would not want to be put on the record as saying that comment has any truth. I am just voicing a concern. :)
My information comes from a reliable source just like the "BSA", from my a$$.
Try "honest politicians" with your favorite search engine.
Try "dishonest politicians" with your favorite search engine.

Which one has the most hits?

1316.4.2010 3:49

Let me show you my surprised face.



That was it.

1416.4.2010 21:58

Nah there is no way these departments would inflate their figures, just impossible. They are an hoest upstanding departments and would never lie in anyway shape or form.

Shiet now I gotta go to church and repent.

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