Posted on Jan 25 2012 06:21 PM
Here's a piece by a well-respected economist that appeared in yesterday's WSJ. (I'm not posting it b/c I agree with it, incidentally - I just don't know. He does raise some important points.)
The Wall Street Journal
OPINION
JANUARY 24, 2012
Internet to Artists: Drop Dead
Contrary to myth, providing consumers with convenient downloads at reasonable prices, as iTunes did, does not appear to have ameliorated piracy at all.
By STAN LIEBOWITZ
You may have noticed last Wednesday's blackout of Wikipedia or Google's strange blindfolded-logo screen. These were attempts to kill the Protect IP Act and the Stop Online Piracy Act, proposed legislation intended to hinder piracy and counterfeiting. The laws now before Congress may not be perfect, and they can still be amended. But to do nothing and stay with the status quo is to keep our creative industries at risk by failing to enforce their property rights.
Critics of these proposed laws claim that they are unnecessary and will lead to frivolous claims, reduce innovation and stifle free speech. Those are gross exaggerations. The same critics have been making these claims about every previous attempt to rein in piracy, including the Digital Millennium Copyright Act that was called a draconian antipiracy measure at the time of its passage in 1998. As we all know, the DMCA did not kill the Internet, or even do any noticeable damage to freedom—or to pirates.
What have been damaged are industries susceptible to piracy—that is the unlicensed reproduction and/or sale of music, movies, books and other products that belong by law to the people who made them. For example, my analysis of statistics from the Radio Industry Association of America clearly reveals the decimation of the sound-recording industry since 1999. The cumulative sales losses, since the ascendancy of the music-sharing site Napster, amount to $70 billion (inflation adjusted) in the U.S. and about twice that amount for the entire world. In percentage terms, inflation-adjusted yearly sales are down more than 50% in the U.S. and the rest of the world. Any industry experiencing a decline of this magnitude would consider it a catastrophe. And it has been brought about by theft, not creative destruction from a superior product.
Scads of Internet pundits and bloggers have vehemently argued that piracy is really a sales-promoting activity—because it gives people a free sample that might lead to a purchase—or that any piracy problems have been due to a failure of industry to embrace the Internet. Yet these claims are little more than wishful thinking. Some reflect a hostility to commercial activities—think Occupy Wall Street, or self-interest. Others make "freedom" claims on behalf of sites that profit by helping individuals find pirate sites, makers of complementary hardware, or companies that benefit from Internet usage and collect revenues whether the material being accessed was legally obtained or not.
In my examination of peer-reviewed studies, the great majority have results that conform to common sense: Piracy harms copyright owners. I was also somewhat surprised to discover that the typical finding of such academic studies was that the entire enormous decline that has occurred is due to piracy.
Contrary to an often-repeated myth, providing consumers with convenient downloads at reasonable prices, as iTunes did, does not appear to have ameliorated piracy at all. The sales decline after iTunes exploded on the scene was about the same as the decline before iTunes existed. Apparently it really is difficult to compete with free. Is that really such a surprise?
Although music has been the canary in the coal mine, movies and software have suffered as well, and books are likely to follow once digitization becomes more common. These are products that we export, that we have had a comparative advantage at producing, and for which we are known throughout the world. Do we really want to further endanger these industries?
Although the proposed laws focus on foreign sites, we have plenty of pirate sites at home. One of the ironies of the DMCA is that it unintentionally provided protection for pirates. The DMCA created a "safe harbor" provision allowing an Internet service provider (ISP) to avoid liability if, upon being advised of copyright infringement (by a so-called a "takedown" request), they removed the infringing material. But there's a huge flaw.
With millions of uploading users at work, copyrighted materials can be uploaded faster than takedown requests can have them removed, so that the pirated materials are always available. YouTube was an early beneficiary of this practice—although it now filters out infringing material before it is requested to do so, for which it is to be commended.
Other sites, however, systematically traffic in pirated material—either openly or in effect soliciting uploads of copyrighted materials and then hiding behind the safe-harbor provision to avoid copyright liability—while they collect advertising and subscription revenues from users of their pirated material. Such practices, which are widespread, constitute a terrible injustice to those copyright owners who do not wish to make their works available to any of these unauthorized parties.
A balancing of competing legitimate interests is always required for good legislation. So far, the balance has favored the pirates—in spite of extravagant protests to the contrary. The real and massive losses of copyright owners need to be rebalanced against any hypothetical losses that stronger protection might impose.
Mr. Liebowitz is an economist in the Management School at the University of Texas at Dallas. His recent research paper "The Metric is the Message," available at SSRN.com, examines the published studies of piracy.
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Ivan
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