U.S. Government Recognizes Benefits of Piracy

A report released by the Government Accountability Office questions Hollywood's billion dollar losses claims, citing a lack of evidence as the main reason for the doubts. On the other hand, the Congress-commissioned report emphasizes that piracy may also benefit the entertainment industries and third parties.

The PRO-IP Act is a United Stated law that aims to combat copyright infringement by increasing civil and criminal penalties for offenders. As part of the Act, Congress has instructed the Government Accountability Office (GAO) to quantify the impact of piracy on the economy. The results of this investigation have now been published in a report.

The report puts the claimed ‘massive losses’ by the entertainment industries in a different light. After having interviewed many experts and plowed through the relevant literature, GAO writes that it cannot make any solid conclusions about the financial effect piracy has on the economy as a whole.

“Lack of data hinders efforts to quantify impacts of counterfeiting and piracy,” is one of the main conclusions from the report.

One of the problems signaled by the GAO is that government officials admit that they simply reply on statistics and reports from the entertainment industries without conducting research on their own. These reports naturally lack transparency about the source of the figures and are often written to sell a political agenda through lobbying efforts.

Although the GAO report cannot make any strong conclusions on the financial impact of piracy and counterfeiting on the economy, the writers do note that piracy can have several benefits for consumers and businesses.

“Some authors have argued that companies that experience revenue losses in one line of business—such as movies—may also increase revenues in related or complementary businesses due to increased brand awareness,” the report states.

“For instance, companies may experience increased revenues due to the sales of merchandise that are based on movie characters whose popularity is enhanced by sales of pirated movies.”

Another aspect that was mentioned is the positive impact piracy has on the revenues of third party companies. The example of routers is given in the report, but it is not hard to see that Apple’s iPod might also have benefited from the availability of pirated music.

“One expert also observed that some industries may experience an increase in demand for their products because of piracy in other industries. This expert identified Internet infrastructure manufacturers (e.g., companies that make routers) as possible beneficiaries of digital piracy, because of the bandwidth demands related to the transfer of pirated digital content,” the report reads.

One of the most interesting benefits of piracy mentioned in the report is that it encourages innovation, since this is the exact opposite of what copyright holders always argue. Unfortunately for consumers, this innovation is not always aimed at making a better product.

“While competitive pressure to keep one step ahead of counterfeiters may spur innovation in some cases, some of this innovation may be oriented toward anticounterfeiting and antipiracy efforts, rather than enhancing the product for consumers.”

The overall conclusion of the GAO is that they can’t put a number on what the financial consequences of piracy are for the economy. However, blindly trusting statics and reports from the entertainment industry is probably not a good idea, they say.

It is unclear at this point what impact the report will have on the legislation and anti-piracy measures as proposed by the PRO-IP Act.

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