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Erik Kain Contributor


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Does Online Piracy Hurt The Entertainment Industry?

A stereotypical caricature of a pirate.

Reports of the entertainment industry's death seem much exaggerated. (Image via Wikipedia)

Julian Sanchez has an excellent piece in Ars Technica which takes a look at the claim that content creators are being discouraged from creative pursuits due to online piracy – a claim that has fueled the recently stalled anti-piracy legislation in congress.

Whether SOPA and PIPA would have actually worked is an open question, but whether they were ever even necessary to begin with is even more important.

Sanchez looks at the music and movies industry and finds that, relative to many other struggling industries, these entertainment industries have done far better on average during the recession:

Since the core function of copyright is to incentivize the production of creative works, it’s also worth looking for signs of declining output associated with filesharing. Empirically, it’s surprisingly hard to find an effect. Rather, a recent survey study by Felix Oberholzer-Gee of the Harvard Business School concluded that “data on the supply of new works are consistent with the argument that file sharing did not discourage authors and publishers” from producing more works, at least in the US market.

So, for instance, Nielsen SoundScan data shows new album releases stood at 35,516 in 2000, peaked at 106,000 in 2008, and (amidst a general recession) fell back to mid-decade levels of about 75,000 for 2010. That’s against a general background of falling sales since 2004—mostly explained by factors unrelated to piracy—which finally seems to have reversed in 2011. The actual picture is probably somewhat better than that, because SoundScan data is markedly incomplete when it comes to the releases by indie artists who have benefited most from the rise of digital distribution.

If we look at movies, the numbers compiled by the industry statistics site Box Office Mojo show an average of 558 releases from American studios over the past decade, which rises to 578 if you focus on just the past five years. The average for the previous decade—before illicit movie downloads were even an option on most people’s radar—is 472 releases per year. (As we learn from a recent Congressional Research Service report, it’s weirdly hard to detect a strong overall correlation between output and employment in the motion picture industry, which actually fell slightly from 1998 to 2008, even as profits and CEO pay soared. One reason is the growing trend in recent decades for “Hollywood” features to actually be produced in Canada or Australia.)

But wouldn’t these numbers be even higher minus piracy? Well, not necessarily, Sanchez argues. He points out that the top pirated movies also tend to be at the top of the box office.

The whole thing is worth the read. Sanchez concludes that much of the furor over piracy is inflated by industry studies:

As a rough analogy, since antipiracy crusaders are fond of equating filesharing with shoplifting: suppose the CEO of Wal-Mart came to Congress demanding a $50 million program to deploy FBI agents to frisk suspicious-looking teens in towns near Wal-Marts. A lawmaker might, without for one instant doubting that shoplifiting is a bad thing, question whether this is really the optimal use of federal law enforcement resources. The CEO indignantly points out that shoplifting kills one million adorable towheaded orphans each year. The proof is right here in this study by the Wal-Mart Institute for Anti-Shoplifting Studies. The study sources this dramatic claim to a newspaper article, which quotes the CEO of Wal-Mart asserting (on the basis of private data you can’t see) that shoplifting kills hundreds of orphans annually. And as a footnote explains, it seemed prudent to round up to a million. I wish this were just a joke, but as readers of my previous post will recognize, that’s literally about the level of evidence we’re dealing with here.

As Sanchez concludes, “On the data available so far, though, reports of the death of the industry seem much exaggerated.”


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  • dls3141 dls3141 3 years ago

    ” We all knew that content placed on public access servers was supposed to be for non-profit sharing and free to access.”

    That’s just nonsense. I was online then and I knew enough not to take something of someone else’s without permission.

    ” I personally believe, and think the great majority of people also do, that what ever is on the net is free to use and no need to pay anyone for such, that’s the way it was built.”

    Just because you or any number of like minded individuals believes something, that doesn’t make it so. People used to believe that the earth was the center of the universe and the heavens revolved around it.

    You have no more right to take things off the internet as your own than you do to drive away in someone’s car simply because the door’s unlocked.

  • Arttie-JT Arttie-JT 3 years ago

    unlike you i state facts from experience, your opinions on solid goods are fine, but non physical goods and services are a different story.
    and like i said the internet was not invented it simply happened. a car is a manufactured good, the internet is a service so tell me how does copyright benefit the internet and its users as a whole? all it does is state you have to pay to learn anything about other people and their ideas. if companies want private property they need to learn about private access networks and how to use them properly. then again we are getting off topic, piracy does not hurt the economy as a WHOLE, small parts maybe, and i cant say it matters much, no one should base their entire career on something without a backup that is simple business strategic placement of resources.

  • tbmay tbmay 3 years ago

    I would only add the Internet is both a marketplace and a means of sharing information, both free and non-free. You said so in the details of your post indirectly, but I wanted to make it simple.

    There is a stong sense of digital entitlement in the American culture that has occurred because of the ubiquity of computers and the web. I’m not completely sure what the answer is to provide a profitable business model to content providers in the broadband age is; however, I most definitely DO NOT want to give the government censorship powers.

  • Quinn Wood Quinn Wood 2 years ago

    Woah, woah, woah!

    Thread necromancy incoming.

    Constitutionally protected right to WHAT? Profit, property? Neither exist in any implicit or explicit location in the constitution. I live in a state where one has a right to property, but that’s never been a federal convention.

    Perhaps you should have waited to respond until you knew what you were talking about.

  • xexon xexon 3 years ago

    Bah. These media companies have been overcharging us for decades. I see piracy as delayed justice. YOU created this for yourselves. Because you’re greedy.

    Music artists are leaving big name companies and doing their own productions now. It’s not so much about name and fame as it once was. It’s about artistic freedom and expression without somebody breathing down your neck. Musicians as a whole are an ornery lot to begin with. They don’t like authority. The money maker here is in concert sales, not CD sales.

    As for movies, people still like going to the theater and seeing something on the big screen. Pirated movies don’t affect that money maker. Even people who obtain a pirated copy will often go on to buy their favorites because of stuff that doesn’t come with pirated copies.

    Quite frankly, for every good movie made, there’s about 50 crappy ones that come along as riders. That’s not our fault, it’s the studios. Don’t bitch about your bottom line being eaten away by pirates. You’re as much at fault as they are. Make better movies. You’ve allowed computer graphics to substitute for good acting and people are tired of it.

    The media companies have employed some very nazi-ish tactics to deal with filesharers in the past and there’s no reason to believe they won’t do it again. You’ve even got the Department of Homeland Security chasing after pirates. At OUR expense.

    It was my understanding when we formed that department, it was to protect us against terrorism and not be the muscle for an industry that can’t adjust to changing times.

    The beauty of the internet is it has the ability to build around any damage. So shut down any site you want. There will be two more to take it’s place before the sun rises.

    And your bleeding will continue. And you’ve really got nobody to blame for piracy but your own legacy of greed.


  • E.D. Kain E.D. Kain, Contributor 3 years ago

    Not so much delayed “justice” as a price normalization. The market is speaking.

  • I assume from the way you talk that you work in the industry and know where the money comes from and goes. So I therefore also assume you realize that the box office numbers you see are on average double the amount the studios actually take in as the other half goes to third parties. Considering that movies are usually completely in the red financially until about a month in the theaters, I’m sure you can understand that every movie is a failure until proven a success. There’s a similar situation surrounding television; until syndication 5 seasons in (or 100 eps), television shows are consistently losing money. Studios can’t afford to invest in new projects without taking money from previous movie profits. Just because they play with bigger numbers doesn’t mean they always have those massive numbers at their disposal. A lot of it is invested in future projects.

    I would say something about how you can’t really talk about the “50 crappy ones that come along as riders” because that’s an opinion, but let’s say I give you the benefit of the doubt and say they are objectively crappy movies. Considering that the movie industry is losing money (or is claiming to be losing money), it kind of makes more sense than ever that it is your (here I mean your in an all pirates sense) fault, NOT the studios. Have you considered that they keep on going back to origin stories and transformers sequels and terrible reboots because they NEED to invest in a project they know will make money? They can’t take risks anymore; they can’t afford it if they don’t get as much profit anymore. And the pirates aren’t “casting an economic vote” like they love to pretentiously presume; they still pirate many of those “crappy” blockbuster movies. If they simply chose not to watch it, that would be a vote. All pirating does is show consumers want that content, they just don’t want to pay for it. Studios aren’t going to think that means the content is bad, they’ll just think consumers, especially the pirate demographic, are cheap. It’s just a justification for a crime. Honestly, I’ve pirated before and used those excuses, but when I stopped to think for literally a second, I realized how dumb those excuses sound. I don’t pirate anymore, but I hope the people who are pirating can stop pretending they have any moral superior reason to pirating and just admit they’re cheap bastards. At least there’s honesty in that.

    I know that sounds harsh, but I just don’t feel there are really precedents proving the pro-piracy case. Everyone bitched about music and said the same reasons for pirating, but even now with spotify and pandora and ALL THOSE FREE SERVERS the amount of pirating remains the same and the music industry is losing a ton of revenue. And let’s crush the “I wouldn’t have bought it anyway” worm before it gets out – then don’t have it. You can’t just have things you don’t pay for. The world doesn’t work that way. If you wouldn’t have bought it, you shouldn’t have it at all. That’s lame.

    More and more people are using Netflix and HBOgo etc, and movie/tv show streaming and pirating are still rising fast. It’s just not viable to say the consumers just want an easier way at this point. They don’t. They want things for free.

    PS. Theaters have their own thing going on, yes, but it’s undeniable that their revenues have been affected by pirating. It’s still an experience that people pay for, but there’s a vicious cycle in theaters that can’t be broken – people say it’s too expensive and won’t go, but theaters need that revenue to stay open so they raise prices to meet the same level of profit as before, which makes more people say it’s too expensive and won’t go. Unfortunate business practive on the theater end.

    PPS. My argument mainly pertains to the film and tv industry – I think the music industry is just too far gone at this point. It’s sad, but also exciting I suppose. At the same time, I believe music can be made with a lot less money than most quality film, which puts it in a different situation. Some super talented dude with good equipment can rival a studio track in my opinion, but a talented college student with a camera can’t normally really compete with a studio backed movie.

  • Is it possible that entertainment spending tends to be anti-cyclical? I wouldn’t be the first person to propose this theory. If so, than this entire analysis is irrlevant.

    Furthermore, the purpose of these laws is not to incentivize production, it is to protect someone’s property. Having thrown out that assertion, the rest of it becomes quite irrelevant.

    We need to find a way to stop piracy and protect intellectual property. SOPA and PIPA weren’t at all the way to do it, but shutting down MegaVideo is probably a good idea.

  • jppaquin jppaquin 3 years ago

    Right on, unfortunately. In fact, piracy steals money mostly from media executives. This industry has benefited for a long time of a protected environment that allowed it to reap unsustainable margins, mostly to the benefit of its executives and its blockbuster artists in a “winner takes all” mentality. Contrary to another of their fallacious claims (the killed-orphans kind of claims), smaller acts did not get their share then, and probably have a better chance to get their share in a digital world.

  • mpri mpri 3 years ago

    “I suspect a great deal of piracy stems from either people who already spend their budget on entertainment goods and simply can’t afford more – and thus would have no additional economic benefit sans their piracy – or from people who don’t have access to those goods online without resorting to piracy.”

    The entire article’s argument is based on this one assumption, which I know for certain is inaccurate. I know many people, friends whom I constantly argue with over the legality and morality of their downloading, who pirate because it’s free and they “simply” don’t want to pay for it. That’s the many of my few, which used as a microcosm means that the general reasoning is likely multiplied a few million times over.

    Moreover, the assertion that they “spend their budget on entertainment goods and simply can’t afford more” does not provide some justification for their using protected content without authorization. Just because they blow their paychecks on content (which, as I stated, is not always the case) does not mean they have a right to the material they can’t afford thereafter. What’s the argument here, that because it was their decision to spend their money over here, they have earned the right to steal the product over there? Congratulations, Mr. Sanchez, you just overtly sanctioned larceny.