The cost of piracy

Though things are getting better, big content (see: RIAA, MPAA) still seems preoccupied with the golden times of yore when only tangible technologies were used to encapsulate their precious media. But like it or not (and they most certainly do not), the world has changed, and digital mediums are fast becoming the norm for content distribution, delivery, and storage. CD sales are down and digital sales are on the rise, with the latter likely to overtake physical format purchases sometime within the next year or so. After all, who wants pesky discs lying around when you’ve a perfectly good hard drive sitting inside your computer? This is good news, right?

Wrong, at least if you’re the recording industry. As usual, executives are still trying to lay the blame for falling revenues on the big bad wolf of the industry: illegal file sharing (and, by extension, swappers). As the International Federation of the Phonographic Industry (the UK’s version of the RIAA) states rather straightforwardly:

…the net effect of file-sharing on music purchasing is overwhelmingly negative as evidenced by numerous third party studies around the world.

By which they mean to imply that illegally downloaded files equate to lost sales. But is this logic sound?

Let’s ignore whether or not downloading music is correct in an ethical sense; while that’s a part of big content’s overall message, it’s not a component of this individual argument. Instead, let’s focus on the one thing we know: an illegally downloaded file generates no direct revenue for the content owner. (I say “direct revenue” because it’s quite possible an illegal download might spur legitimate purchases in some cases.) And that’s it. We don’t know, for instance, if the downloading individual will further distribute a file once acquired. We don’t know if the individual will keep the file or discard it. And we don’t know whether the one downloading an item illegally would purchase said item if file sharing avenues were not available or accessible.

That last point is the kicker. You can’t assume that every download represents a necessary choice between “I will purchase this” and “I will illegally download this.” This has even been backed up in the courts. In fact, my guess is that such is rarely the case. Consider if you will these other possible scenarios, in order from what I consider least to most likely:

• Downloader is acquiring music he already owns in another, non-digital format for ease of use and portability
• Downloader is employing a “try before you buy” strategy
• Downloader is actively choosing to acquire content illegally, but might acquire content legally given a comparably convenient legal alternative
• Downloader is actively choosing to acquire content illegally, and would not buy said content even if it were not available through illicit channels

In all of these cases, while big content might be able to argue that downloads represent “deserved” revenue (though that too is debatable), you cannot state with certainty that file sharing results in lost sales. A person who at no point had any intent to purchase the content he is acquiring is not a potential customer.

So why are recording industry revenues declining? There are a number of theories, but one of the most likely reasons is outlined by William Patry in his Moral Panics and the Copyright Wars:

The problems in the Copyright Wars are not caused by technologies or by consumers acting badly, and they cannot therefore be solved by laws, and certainly not by more draconian laws. The problems—such as the decline in sales of CDs and DVDs—are the result of the copyright industries’ many and considerable failures to focus on satisfying consumers’ desires as opposed to stifling those desires out of a woefully misguided view that copyright equals control and that control equals profits.

And though it’s somewhat beside the point of this post, this logic may help explain some of the actual lost sales that come about because of file sharing (for, certainly, there will be some users who fit this bill). Which is to say, a lack of desirable or user-friendly legal alternatives may act as a sort positive reinforcement for piracy. The availability and quality of such alternatives is improving, but the continued machinations of big content belie a still extant distrust of digital distribution avenues.