Antipiracy Numbers Don't Add Up

Even as antipiracy forces step up their war on copyright violations, the economic impact of software and media piracy remain questionable. Without credible estimates of the true scope of piracy, efforts to thwart file sharing will lack credibility as well.

File sharing represents a huge proprotion of traffic online, and much of that activity is devoted to unauthorized distribution of copyrighted material, including application software, music, and movies. But how much economic impact does it really have?

Don't ask the antipiracy advocates. The intellectual property industry likes to trumpet large numbers representing the losses incurred by file sharing. In May, the Business Software Alliance (BSA), a U.S.-based software trade organization, reported that "software piracy cost the industry a record $63.4 billion globally in 2011 with emerging economies listed as the main culprits."

That's a sizeable sum, but it doesn't carry any weight.

The method behind such assessments goes like this: First, estimate the average amount of software installed on PCs within a given country, using data from surveys and the like. Next, subtract the amount of software known to have been sold in that country. The difference is the rate of piracy. Multiply that figure by the revenue software companies would get if the software were sold at its commercial value, and you get a figure like $63.4 billion.

There are multiple problems with this line of reasoning:

• It uses surveys to determine the amount and types of software installed on PCs. Doing this with any statistical significance requires a sample size far larger than researchers tend to muster.

• It supposes that, if piracy were not an option, the same software would be purchased and installed. But people indiscriminately grab free stuff they don't really want or need simply because it's fun or satisfying, whereas they deliberate over purchases.

• It assumes that consumers pay the same commercial rates for the software whether they reside in a developing nation or a Western country. But, in fact, prices in the U.S. and Europe are substantially higher than those in emerging markets.

"Almost every year BSA's total 'commercial value' estimate grows, generating headlines about piracy and fostering wrongheaded policies like those we saw in SOPA and PIPA," wrote Josh Mendelsohn in a blog post for Hattery Labs, a firm that specializes in marketing, branding, and product and business development. "What's missing from this conversation is unbiased, statistically sound research that shows the true nature of online piracy."

No one is denying that software piracy is a concern, not even critics of the BSA. The same is true for media piracy, which generates similarly inflated estimates of lost revenue by organizations like the Motion Picture Association of America (MPAA) or the Recording Industry Association of America (RIAA). But the scope of the problem has not been examined honestly. Until antipiracy forces undertake research designed to discover the true impact of file sharing, antipiracy forces will look like their aim is scare lawmakers into enacting protectionist laws rather than solve real problems.