Wednesday, April 8, 2009

Internet Piracy, victimless? Not quite, but more than you might think.

I started writing all this in the comments of link I just posted regarding the X-Men: Origins (Wolverine) movie being leaked to the public. Incidentally (full disclosure?) I have a good friend who did post production visual effects for that film.

The point I want to make here is not that Piracy is a "good" thing... it's obviously not, and it's obviously a violation of a property owner's right to decide what they want to do with the things they own, including who they want to see it and at what cost. If you own a record, or some music - or anything else, you should be allowed to distribute that on your terms. If you want to give it away, sell it for $10 or $1 million, trade for a box of girl scout cookies, or as so many rock'n'roller's do... for bad sex with some groupies in a seedy hotel room, you should be able to do that.

I am not here to defend theft - I am however here to discuss "harm". The first order problem with theft, is the violation of someone's will regarding the things they have rightfully come to acquire (including license rights to works of art). The second order problem is the physical or economic harm done to that individual by the thief.

Material goods are easy to understand. If I take your car - I've violated your rights, yes. But in doing so, I've also robbed you of a tangible piece of property which you were using to go to work, take your kids to school, take vacations, etc. That has harmed your quality of life. In addition, I have also robbed you of the money - and thus the time (a further violation of your natural rights) to accumulate the money through working - it took you to purchase the car.

When I am caught by the police and hauled into court to make restitution for my crimes against you - the Judge will look at the value of the car, and the harm to your lifestyle that has occurred as a result of my actions and require me to compensate you accordingly.

But what if a crime that violates your right to decide what you want with your property doesn't actually harm you in any of the second order ways? How do we deal with that?

If for example, the Piracy scandal I linked above involving the X-Men movie actually doesn't result in a net loss of ticket buyers at the theatre, as I suspect, how can you justify suing anyone but the initial violator of your will? Clearly, there was a breach of contract by the individual who leaked the copy of the movie. That individual needs to be punished, but what if as a result of his actions, there is no actual financial harm done to the movie studio? How do you quantify that?

Complex questions, to be sure... But let me shift gears to talk about the RIAA - because in their case the concept of harm begins to be more clear if you do a little research.

* * * * *

RIAA parable

Back in 2002, the Recording Industry Association of America (RIAA) started suing just about everyone they could possibly think of - especially college kids and universities... I remember vividly as I was in college living in a dorm at the time!

They were shocked and dismayed that they made less money in 2002 than they did just a year or two earlier and falling into a convenient post hoc, ergo prompter hoc trap, they blamed the newfangled technology of the MP3 and internet downloads which had recently been made possible by sufficient improvements in internet speeds and sites like Napster & Kazaa.

Back in early 2002, the RIAA released this article explaining that their profits were down by about 4.1% from the previous year and which contained the following quote.

"This past year was a difficult year in the recording industry, and there is no simple explanation for the decrease in sales. The economy was slow and 9/11 interrupted the fourth quarter plans, but, a large factor contributing to the decrease in overall shipments last year is online piracy and CD-burning," said Hilary Rosen, President and CEO of the RIAA.

Hooray! The RIAA quickly and easily had a scapegoat, on which to blame their troubles...

This is great for the RIAA cause they could then also argue for government to get involved with protectionist laws, taxpayer funded anti-piracy campaigns and what really concerns me, impetus for regulating the internet. There's a shocker, the major corporations in a major industry wanting special protections against a scary new technology that might hurt their business model?? Nooo....

The problem is, what the RIAA forgot to tell anyone - and what they conveniently omitted from their reports were long-term new release data. In fact, again from the RIAA's own data, the major labels released nearly 12,000 fewer albums per year in 2000-01 (27,000) than they did in 1999 (38,900) and earlier.

To put that another way - the RIAA reduced their productive output by 11,900 units from 1999 to 2000. To put it another way still, they reduced their production by 30.6%.

AGAIN - their profits were only reduced by 4.1% over the same period!

So... think about it for a second, they dropped their output by over SEVEN TIMES the percent that they lost in revenue... If you apply the RIAA's own logic and their own numbers for 1999-2001, far from being "harmed" by Mp3 downloads, they were actually helped.

Incidentally, what got me thinking about this to begin with was the April (I think) 2003 issue of Wired Magazine discussing these same issues which I'd found in my roommate's car the other day on a drive out to the Burbank Ikea. Fun times...

At any rate, there's some serious problems with the RIAA numbers and the belie a larger point: It is very much in the RIAA's interest to cry foul and excessive harm as their sales dwindle by producing less marketable product year after year. They do release year-end reports every year with some statistics... I haven't really had the time yet to parse much of them to see whether or not the 1999-2000 trend remains the same for subsequent years. I imagine that they do however. One also has to factor in the change in the industry's overall product quality/diversity over that period too, something I'm not really capable of doing from my little computer.

RIAA critic George Ziemann compiles some data and expresses his take on this issue here.

The point is - we have to simply *TRUST* that the RIAA's claims of harm by MP3 Piracy are valid - in spite of their overwhelming incentive to protect themselves from the consequences of their own rather obviously bad business decisions. And based on the information they do provide, their numbers just aren't adding up...

* * * * *

Now, back to the MPAA... Same story, different names.

Part of the problem here is that the data is hard to collect, the industries aren't very forthcoming and the economic calculations are really rather difficult. However, as I see it, here are some facts:

1. The loss in profits, at least by the RIAA, can be fully explained by their drop in production - in fact, if their own numbers are accurate they're making a higher profit per unit sold than in the past... they're doing better, not worse, since MP3 file sharing began to increase in popularity.
2. Within the past 10-20 years technology has improved to such a degree that average people can now contribute to media in ways never before possible and people have more options than ever before. We can not only get media from the major record & film producers, but also from indie houses, unknown companies, random individual producers, international producers and virtually anyone with a camera and a computer. The major labels & studios are bound to experience some degradation of their brand from this competition. In other words, even though the net level of media content is increasing rapidly, the MPAA & RIAA are losing percentage of market-share (even while increasing their profits year to year per unit)
3. The MPAA & RIAA, as powerhouses of the media industry, are the ones losing market-share and therefore have the most incentive to protect their own asses. Historically, companies have done this by going to government and getting them to regulate, prosecute and otherwise make life miserable for smaller competitors.

Lastly, let me posit an idea through a little anecdote I told my buddy James this morning:

I recently downloaded and watched a pirated copy of a film, I won't say which one because I would rather not get sued. I'm a big ol' hypocrite - sure... Ok, but did I actually harm the makers of said film? Well... I would say... No.

Why? For two specific reasons...

First: Because I was *never* one of their customers and never would be. I had no intention of seeing the film in theatres, no intention of renting it or buying it on DVD and no intention even of watching it on TV if and when it came on. Why did I watch it? Because it was available for free and I wanted something mindless on in the background while I was working on some other projects. If it hadn't have been available... It wouldn't have mattered to me in the slightest.

Second: Because I did not, by downloading a copy, reduce the physically available supply of the film, thus preventing someone from buying or renting that movie if they had wanted to. The age of the internet and infinitely copyable content results in infinite abundance and unfortunately for some - infinitely reduced value in certain cases. I didn't want to see the movie in the theatre, and I didn't even care if I got a good copy... I really couldn't have cared less about the thing at all except that at the click of a button it was available, it did not *take away* from anyone else and I could fulfill my momentary desire to have some brainless entertainment playing as background noise.

In addition to that, I might also note that I did not do the pirating - that is kind of a technicality, sure, but I neither signed nor agreed to (by purchasing the film) implicitly any provisions on the particular film's viewing.  It was available, made so by someone else (who's relationship to the film studios and licensing provisions I am not privy to), and I don't particularly see how I'm liable for that merely as a viewer.  Likewise, if a radio station broadcast a particular song that they did not have the license to play, how could I be liable for listening to it - even if I chose to visit the radio station that was broadcasting it?  That's pretty analogous, I think, to visiting a website that is hosting movies or other music.

Now... The salient point here is that the MPAA would claim that someone like me would have gone to see the movie in the theatre or paid to rent the film if I hadn't been able to download it - this is patently untrue. And I suspect I'm not alone in this behavior... To declare damages, of course, the MPAA/RIAA would declare me as having been someone who would buy the product, but who decided to take it instead. If you multiply this by every single person who downloads movies & music, etc., you'd come up with the kinds of figures those organizations cite when trying to get laws passed. But the truth, I believe, is that they are claiming potential customers that they never had and never will have. Thus it's a largely fictitious loss in revenue!

Of course this is all speculation on everyone's part... And... what's worse, I don't have a solution to offer. I do want a world where people can protect their rights to decide what they want to do with the products of their labor - but a world where a college kid gets sued for $150,000 just for copying a file from one guy's computer over to his??

That's not good at all.

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